HRM

UNIT 1

INTRODUCTION

Human Resource Management (HRM) is an operation in companies designed to maximize employee

performance in order to meet the employer's strategic goals and objectives. More precisely, HRM focuses on
management of people within companies, emphasizing on policies and systems.
In short, HRM is the process of recruiting, selecting employees, providing proper orientation and induction,
imparting proper training and developing skills.
HRM also includes employee assessment like performance appraisal, facilitating proper compensation and
benefits, encouragement, maintaining proper relations with labor and with trade unions, and taking care of
employee safety, welfare and health by complying with labor laws of the state or country concerned.

MEAN

Human resource management (HRM) is the practice of recruiting, hiring, deploying and managing an

organization's employees. HRM is often referred to simply as human resources (HR). A company or

organization's HR department is usually responsible for creating, putting into effect and overseeing policies

governing workers and the relationship of the organization with its employees. The term human resources was

first used in the early 1900s, and then more widely in the 1960s, to describe the people who work for the

organization, in aggregate.

HRM is really employee management with an emphasis on those employees as assets of the business. In this

context, employees are sometimes referred to as human capital. As with other business assets, the goal is to

make effective use of employees, reducing risk and maximizing return on investment (ROI).

The modern HR technology term, human capital management (HCM), has come into more frequent use than the

term, HRM, with the widespread adoption by large and midsize companies and other organizations of software

to manage many HR functions.

-
DEF
Human resource management, HRM, is the department of a business organization that looks after the hiring,
management and firing of staff. HRM focuses on the function of people within the business, ensuring best work
practices are in place at all times.

The Scope / NATURE of HRM

The scope of HRM is very wide. It consists of all the functions that come under the banner of human resource
management. The different functions are as follows −

Human Resources Planning

It is the process by which a company identifies how many positions are vacant and whether the company has
excess staff or shortage of staff and subsequently deals with this need of excess or shortage.
Job Analysis Design

Job analysis can be defined as the process of noticing and regulating in detail the particular job duties and
requirements and the relative importance of these duties for a given job.
Job analysis design is a process of designing jobs where evaluations are made regarding the data collected on a
job. It gives an elaborate description about each and every job in the company.

Recruitment and Selection

With respect to the information collected from job analysis, the company prepares advertisements and
publishes them on various social media platforms. This is known as recruitment.
A number of applications are received after the advertisement is presented, interviews are conducted and the
deserving employees are selected. Thus, recruitment and selection is yet another essential area of HRM.

Orientation and Induction

After the employees are selected, an induction or orientation program is organized. The employees are
updated about the background of the company as well as culture, values, and work ethics of the company and
they are also introduced to the other employees.

Training and Development

Employees have to undergo a training program, which assists them to put up a better performance on the job.
Sometimes, training is also conducted for currently working experienced staff so as to help them improve their
skills further. This is known as refresher training.

Performance Appraisal

After the employees have put in around 1 year of service, performance appraisal is organized in order to check
their performance. On the basis of these appraisals, future promotions, incentives, and increments in salary are
decid-ed.

Compensation Planning and Remuneration

Under compensation planning and remuneration, various rules and regulations regarding compensation and
related aspects are taken care of. It is the duty of the HR department to look into remuneration and
compensation planning.
IMPORTANCE OF HRM

Importance  of HRM are:

1. Objective :-

HRM helps a company to achieve its objective from time to time by creating a positive attitude among workers.
Reducing wastage and making maximum use of resources etc.

2. Facilitates professional growth :-

Due to proper HR policies employees are trained well and this makes them ready for future promotions. Their
talent can be utilized not only in the company in which they are currently working but also in other companies
which the employees may join in the future.

3. Better relations between union and management :-

Healthy HRM practices can help the organization to maintain co-ordinal relationship with the unions. Union
members start realizing that the company is also interested in the workers and will not go against them therefore
chances of going on strike are greatly reduced.

4. Helps an individual to work in a team/group :-

Effective HR practices teach individuals team work and adjustment. The individuals are now very comfortable
while working in team thus team work improves.

5. Identifies person for the future :-

Since employees are constantly trained, they are ready to meet the job requirements. The company is also able
to identify potential employees who can be promoted in the future for the top level jobs. Thus one of the
advantages of HRM is preparing people for the future.

6. Allocating the jobs to the right person :-

If proper recruitment and selection methods are followed, the company will be able to select the right people for
the right job. When this happens the number of people leaving the job will reduce as the will be satisfied with
their job leading to decrease in labor turnover.

7. Improves the economy :

Effective HR practices lead to higher profits and better performance by companies due to this the company
achieves a chance to enter into new business and start new ventured thus industrial development increases and
the economy improves

FUNCTIONS OF HRM

Recruitment And Selection

Recruitment is the process of captivating, screening, and selecting potential and qualified candidates based on

objective criteria for a particular job. The goal of this process is to attract the qualified applicants and to

encourage the unqualified applicants to opt themselves out.

Before starting the process of recruitment, the companies must execute proper staffing plans and should grade

the number of employees they are going to need. Forecasting of the employees should depend upon the annual

budget of the organization and short-term and long-term goals of the organization.

Recruitment and selection process is very important to every organization because it reduces the costs of

mistakes such as engaging incompetent, unmotivated, and underqualified employees. Firing the unqualified

candidate and hiring the new employee is again an expensive process.

Orientation

Many organizations do not provide a thorough orientation to the new employees. This is the fundamental step to

help a new employee to adjust himself with the employer and with his new job. Employee orientation program
should include the objectives and goals of the organization and how the employee can help to achieve the long-

term and short-term goals of the organization.

Giving intensive orientation to the employee is one of the major functions of human resource management. The

program should help the employee to know his assigned duties and his exact job description, job role, and the

relationship of position to other positions in the organization. It gives clarification to the employee to take an

active role in the organization.

Related: 5 Ways to Make the Job of an HR Person Easier

Maintaining Good Working Conditions

It is the responsibility of the human resource management to provide good working conditions to the employee

so that they may like the workplace and the work environment. It is the fundamental duty of the HR department

to motivate the employees. The study has been found that employees don’t contribute to the goals of the

organization as much as they can. This is because of the lack of motivation.

Human resource management should come up with a system to provide financial and non-financial benefits to

the employee from the various departments. Employee welfare is another concept which should be managed by

HR team. Employee welfare promotes job satisfaction.

Managing Employee Relations

Employees are the pillars of any organization. Employee relationship is a very broad concept and it is one of the

crucial functions of human resource management. It also helps to foster good employee relations. They have the

ability to influence behaviors and work outputs.

Management should Organize activities which will help to know an employee at the personal and professional

level. Well-planned employee relations will promote a healthy and balanced relation between the employee and

the employer. It is the key for the organization to be successful.

Training And Development

Training and development are the indispensable functions of human resource management. It is the attempt to

improve the current or future performance of an employee by increasing the ability of an employee through

educating and increasing one’s skills or knowledge in the particular subject.

HRM POLICIES

HR Policies – Meaning

Human resource policies are the formal rules and guidelines that businesses put in place to hire, train, assess,

and reward the members of their workforce. These policies, when organised and disseminated in an easily used

form, can serve to anticipate many misunderstandings between employees and employers about their rights and

obligations in the organisation.

Human Resource practices imply the customary way of operations and behaviour, translating idea into action,

and knowledge of how something is usually done. In simple terms, it is to apply principles or policies.

Some methods utilised by human resources department staff are called “best practices,” meaning the way an

employment action is handled is the recommended way according to human resources experts. For example, a

human resources best practice is conducting an HR audit each year to determine if human resources processes

are helpful to the company.

Another best practice is providing new employees with a formal orientation session where they are fully aware

of the company, its philosophy and mission. A company known for its human resources best practices is most

likely the leader among its competition and typically has a high level of employee satisfaction.

Best practices in human resources are shared with other human resources practitioners as an industry-accepted

way of doing business from the HR perspective.

Human Resources policies are generalised guidelines on employee management, adopted by consensus in an

organisation to regulate the behaviour of employees and their managers or supervisors. As for the dichotomy

between an HR policy and a procedure, they can be compared to a human being and the shadow. Both are

inseparable and as shadows set the outlines of a human being, so do procedures set the outlines of an HR policy.

“HR policies may be defined as guidelines, procedures, codes and regulations adopted by management to guide

workplace activities within acceptable limits, which are communicated through a summarised statement called

policy statement and implemented through instructions referred to as policy directives.”

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The human resources department develops the introduction to the set of policies and guidelines and explains the

importance of the policies. Policies about performance appraisals, fair employment practices, appearance and

behaviour are just a few of the several policies contained in an employee handbook.

The handbook is distributed to new employees on the first day of work and is typically discussed during

informal or formal orientation sessions. Employers expect employees to fully understand the policies; a signed

form to acknowledge the employee has received and understands the employment policies is contained in the

employee’s personnel file.

From the above definitions and explanations, it is quite clear that HR policies outline what and how HR

professionals undertake their day to day activities in the workplace. Because every HR action and activity in the

workplace today is highly regulated and has legal, human rights and discriminatory implications, it is important

that such actions be regulated and directed strictly. This is what makes HR policies very important and

necessary in every business environment today.

Another reason why HR policies are extremely important in the workplace today is that it sets the direction an

organisation wants to take in the management of its employees. Business management practice requires that an

organisation adopts a distinct approach towards managing employees and getting the best out of them. So

surely, a solid HR policy is a must for every business today.

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Unfortunately, most HR practitioners pass off their Conditions of Service or Employee Manuals or Handbooks

as HR Policies. These documents should or are rather, derivatives of the comprehensive collection of all HR

Policies (HR Policy Manual). Contracts of Employment, Conditions of Service, Employee Handbooks are all or

should all come from the HR Policy.

In HR Operations, policies are developed to cover areas of the HR function which are considered strategic to the

achievement of specific HR and organisational objectives. These may include HR Planning and Outsourcing,

Recruitment, Training and Development, employment Contracts Negotiations and Administration, Employee

Performance and Exit/Termination Process Management.

In HR Administration, the services functions of HR become the focus of policy making. HR Services such as

employee welfare (Health and Safety) including annual leave administration, Employee Attendance, Pensions
fund Management, Logistics Administration, Cleaning and Sanitation. Sometimes, the function also covers

transportation administration, rest house management and protocol services.

In HR Governance, policies are developed to focus on compliance and enforcement of the various policies

developed. Policies are also put in place under HR Governance to evaluate performance in accordance with

agreed objectives and set targets for the HR function as a strategic business unit as well as the business as a

whole. It is based on this information that HR audit systems are developed.

Some Other Steps in Formulation of HR Policies:

1. Identify the Areas:

The areas where HR policies are needed are to be identified. Important areas of HR like recruitment, selection,

training, compensations must have specific policies clearly spelt out. If need arises, additional policies may have

to be formulated for dealing with newer HR issues.

2. Collecting Data:

After selecting the areas, relevant information should be collected for facilitating policy formulation. The

company’s records, past practices, industry practices and top management policies should be studied. The

organizational culture and employee aspirations should also be taken into account while formulating policies.

3. Evaluating Alternatives:

Once data have been collected, various alternative policies can be designed. Each alternative has to be evaluated

in terms of their contribution towards the desired objectives. The policies should be for the betterment of the

existing HR system and formulated in congruence with other organizational policies. The policies should be

finalised after discussion with those people who are directly affected by its implementation.

4. Communicating the Policy:

The policy details should be conveyed to all the workers throughout the organization. Policy manual, in-house

journals, notice boards, intranet, etc., can be used to create awareness among employees at various levels.

Special communication programmes can be conducted to inform all the concerned people about the new policy.

5. Evaluation of the Policy:

Policies should be evaluated regularly at periodic intervals to ascertain their effectiveness. The actual policy

results should be compared with predetermined standards to check if the policy was successful in achieving its

objectives. Policies may be reviewed at the organizational level, or outside experts may be invited to review it.
Assessment of existing policies is especially important during crises like labour strikes, lock outs, mass

employee grievances, labour union unrest, etc. It is also necessary when company plans to bring about large

scale changes like expansion, diversification, adoption of new technology, etc.

HR policies should be designed to promote common interest, create safe and healthy working conditions, give

proper recognition for work and accomplishment, recognize impact of change on people, encourage employees’

participation and recognize the functions and responsibilities of the trade unions.
HR Policies – 6 Important Policies in Various HR Areas 

Personnel policies must cover all areas of human resource management.

Usually policies are framed with regard to all functions of human resource management as stated below:

1. Employment Policies:

(i) Minimum hiring qualifications and experience.

(ii) Preferred sources of recruitment.

(iii) Reservation for different groups.

(iv) Employment of relations of existing personnel.

(v) Reliance on various selection devices such as tests, reference checks, and interviews.

(vi) Placement of new employees, and

(vii) Orientation of new employees.

2. Transfer and Promotion Policies:

(i) Rationale of transfer.

(ii) Periodicity of transfer.

(iii) Promotion of existing staff.

(iv) Length of service required for promotion.

(v) Qualifications and merits required for promotion.

(vi) Weightage to seniority and merit in promotion.

3. Training and Development Policies:

(i) Frequency of training and development programs.

{ii) Basis for training.

(iii) Types of training, viz., on-the-job or off-the-job.

(iv) Programs of executive development.

(v) Care er advancement.

4. Compensation Policies:

(i) Minimum wages and salaries.

(ii) Methods of wage payments.

(iii) Individual incentive plans.

(iv) Group incentive plans.

(v) Employee Stock Option Plan (ESOP).

(vi) Profit sharing.

(vii) Non-monetary rewards.

5. Integration and Human Relations Policies:

(i) Employee discipline.

(ii) Handling of grievances.

(iii) Recognition of employees’ unions.

(iv) Employees’ participation in management.

(v) Suggestion scheme.

6. Working Conditions and Welfare Policies:

(i) Kinds and standards of working conditions.

(ii) Number and duration of rest intervals.

(iii) Overtime.

(iv) Types of leaves.

(v) Safety program.

(vi) Types of welfare services.

(vii) Financing of employee service

HRM PROCEDURES

Processes in Human Resource Management

Each organization works towards the realization of one vision. The same is achieved by formulation of certain
strategies and execution of the same, which is done by the HR department. At the base of this strategy
formulation lie various processes and the effectiveness of the former lies in the meticulous design of these
processes. But what exactly are and entails these processes? Let’s read further and explore.

The following are the various HR processes:

 1. Human resource planning (Recruitment, Selecting, Hiring, Training, Induction, Orientation,
Evaluation, Promotion and Layoff).
2. Employee remuneration and Benefits Administration
3. Performance Management.
4. Employee Relations.

The efficient designing of these processes apart from other things depends upon the degree of correspondence of
each of these. This means that each process is subservient to other. You start from Human resource Planning
and there is a continual value addition at each step. To exemplify, the PMS (performance Management System)
of an organization like Infosys would different from an organization like Walmart. Lets study each process
separately.

Human Resource Planning: Generally, we consider Human Resource Planning as the process of people
forecasting. Right but incomplete! It also involves the processes of Evaluation, Promotion and Layoff.

 Recruitment: It aims at attracting applicants that match a certain Job criteria.

 Selection: The next level of filtration. Aims at short listing candidates who are the nearest match in
terms qualifications, expertise and potential for a certain job.
 Hiring: Deciding upon the final candidate who gets the job.
 Training and Development: Those processes that work on an employee onboard for his skills and
abilities upgradation.

Employee Remuneration and Benefits Administration: The process involves deciding upon salaries and
wages, Incentives, Fringe Benefits and Perquisites etc. Money is the prime motivator in any job and therefore
the importance of this process. Performing employees seek raises, better salaries and bonuses.

Performance Management: It is meant to help the organization train, motivate and reward workers. It is also
meant to ensure that the organizational goals are met with efficiency. The process not only includes the
employees but can also be for a department, product, service or customer process; all towards enhancing or
adding value to them.

Nowadays there is an automated performance management system (PMS) that carries all the information to help
managers evaluate the performance of the employees and assess them accordingly on their training and
development needs.

Employee Relations: Employee retention is a nuisance with organizations especially in industries that are
hugely competitive in nature. Though there are myriad factors that motivate an individual to stick to or leave an
organization, but certainly few are under our control.

Employee relations include Labor Law and Relations, Working Environment, Employee heath and safety,
Employee- Employee conflict management, Employee- Employee Conflict Management, Quality of Work Life,
Workers Compensation, Employee Wellness and assistance programs, Counseling for occupational stress. All
these are critical to employee retention apart from the money which is only a hygiene factor.

All processes are integral to the survival and success of HR strategies and no single process can work in
isolation; there has to be a high level of conformity and cohesiveness between the same.

PRACTICES OF HRM

1. Providing security to employees

The first Human Resource best practice is employment security. Life is unpredictable and work is a stable factor
that is very important to most people. Having an empoloyer who enables the employee to provide for
themselves and their family is, in essence, the number one reason why people come to work.
There is both a formal contract (labor for money) and an informal contract (you put in some extra effort, we take
good care for you) between the employee and the employer. Employment security enables employees to go
home after work and provide for themselves and their families. This concept of security is essential and
underpins almost everything HR does.

When this employment security is threatened, for example when there is a restructuring or a layoff, you see this
immediately ripple through the organization.

Employment security also benefits organizations because it helps them retain their people. When employees are
laid off, for example, it’s usually the organization that pays the price. They are the ones who have invested in
the selection, training, and development of these employees. This is a costly process. If the organization doesn’t
work on retaining its people, they are more likely to leave and work for the competition.

2. Selective hiring: Hiring the right people

The second HR best practice is selective hiring. This enables an organization to bring in employees who add
value.

You can’t just hire anyone; you want people who are fit for the job. Companies do their utmost best to hire
exceptional people because they add the most value to the business.

Research shows that the difference in performance between an average performer and a high performer can be
as high as 400%! This holds true for different industries and job types, including researchers, entertainers, and
athletes.
Bringing in the right people is, therefore, a key to building a competitive advantage.

In today’s digital world, there are a lot of different recruitment tools we can use to make the right selection.
More and more companies vigorously keep track of their recruitment metrics to see how well they are doing in
this regard.
Commonly used selection instruments are structured and unstructured interviews, IQ tests, personality
assessments, work tests, peer assessments, and reference checks. These (pre-employment) assessments are used
to uncover three key candidate characteristics.

1. Ability:
is the person able to do the job? Does the person have the right technical and soft skills? Is the person
smart enough to do the job well?
2. Trainability:
can we train this person to improve his/her skills? Has the person the aptitude to learn and keep
developing?
3. Commitment:
will the person commit to his/her work and to the organization? Will we be able to retain this person
once he/she is up to speed and fully productive?
3. Self-managed and effective teams
We all know that teamwork is crucial in achieving goals. High-performance teams are crucial for any company
when it comes to achieving success.

Teams provide value because they consist of people who are and think differently but are working towards a
common goal. This means that different ideas are generated to help achieve the goal. These ideas are then
processed and combined, resulting in the best ones being selected.
The best teams are cognitively diverse and psychologically safe. This means that team members can generate
ideas that are different while feeling comfortable bringing these up and discussing them.
Creating and nurturing high-performance teams is one of HRs key responsibilities. Belbin’s Team Role
Inventory is a commonly used tool for team creation and cooperation.
Individual personality assessments are also often used as they help to understand how other team members think
and behave. Understanding these processes is one of the main responsibilities of a manager. This is the reason
why a lot of management courses focus on it.

There are different tools that facilitate teamwork. Examples include communication software, feedback tools,
project management tools, and other task and goal setting software. These can facilitate communication and help
teams be more efficient.

Finally, HR needs to encourage different teams to work together in the organization. A team is usually part of a
larger entity, like another team or a department. These larger entities also need to work together. Facilitating this
helps to build an efficient and effective organization. One of the tools that can be used for this is Organizational
Network Analysis.
4. Fair and performance-based compensation
Contingent compensation is the fourth Human Resource best practice. It has everything to do with compensation
and benefits.

First of all, if you hire the right people, you want to compensate them above average. These are the people that
will add the most value to your company so you want to retain them and pay them fairly. This is an example that
shows how different best practices work together to provide more value than they would alone, in this case,
selective hiring, contingent compensation, and employment security.

Paying people above the norm also has a number of potential disadvantages. For instance, it discourages bad
employees to leave. However, if you’re consistently hiring world-class performers, an above average
compensation is a must.

This sort of compensation can take the form of financial (base) pay and employee benefits.
Secondly, you want to couple individual rewards with the different types of contributions that employees make.
These are performance-related rewards.

By coupling organizational performance outcomes with individual rewards the individual is incentivized to
maximize this outcome. It also creates a sense of ownership for the employee.

Think of profit sharing, shared ownership, or stock options for instance. These are great ways to create
employee commitment to the company’s long-term vision and retain high potentials. Compensation is a key
element for successful talent management.
 

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In line with the previous, this type of co-ownership is usually not meant for all employees. Lepak & Snell
(2002) offer a good model to assess how important individual employees are.

As an organization, you want to specifically retain your “Criticals”. They are people with unique skills (i.e. hard
to replace) who are very valuable to the business. That’s why senior managers, most of which fit this category,
are often offered these benefits.

5. Training in relevant skills

This HR best practice states that companies should invest heavily in training time and budget for its employees.

After recruiting the best people, you need to ensure that they remain the frontrunners in the field. This has
become even more relevant today as the rate at which technology is developing is growing exponentially. This
is where learning and development come in.

How do we create an organization in which the rate of learning matches the pace of change? Learning has
become a way to stay innovative, grow faster, and sustain a competitive advantage.

Employers increasingly invest in skills-specific forms of training. According to the Economist’s Lifelong
Learning special report, the number of on-demand courses has grown exponentially. Thanks to the internet,
everyone is connected and can learn anything, anytime, anywhere.
In addition to formal learning, on-the-job learning also plays an important role. Increased focus on feedback,
coaching, and peer learning plays into this. This is part of the often quoted 70|20|10 rule:
 70% of learning is from challenging assignments
 20% of learning is from developmental relationships
 10% of learning is from formal coursework and training
Learning is also becoming increasingly important for the latest generations, such as the Millennials
and Generation Z. According to Gallup, younger employees rate learning and personal growth as much more
important compared to older generations.
The next generation of workers is actively looking for development opportunities and sees these as a way to
grow in their profession. Not offering these opportunities is related to higher levels of employee turnover.
Learning is, of course, also important for HR. To stay up to date and learn the skills needed to do HR in the 21st
century, check out our courses at the Academy to Innovate HR!
6. Creating a flat and egalitarian organization
This best practice in HR is rooted in the egalitarian practices of Japanese management. Although we just saw
that some employees are more critical than others for the organization’s success, this shouldn’t be
communicated in such a way. Every employee is a valuable member of the organization and should be treated as
such.

In Japanese organizations, this is expressed with common canteens, company uniforms, and similar sickness and
holiday entitlement. Such an egalitarian culture shows that everyone deserves equal respect and could help in
promoting the sharing of ideas.

7. Making information easily accessible to those who need it

Information sharing is essential. This is an area where a lot of large companies struggle: How do you keep track
of who knows what, so you know where to go to with your questions?

According to Pfeffer, there are two reasons why information sharing is so important.

Firstly, open communication about strategy, financials, and operations creates a culture in which people feel
they are trusted. It truly involves employees in the business. As an additional effect, it discourages hear-say and
negative informal chatter.

Secondly, if you want your people to share their ideas, they need to have an informed understanding of what’s
going on in the business.

Being informed about the business is also something that employees often mention as something they find
important in attitude surveys, as well as having a chance to contribute to and influence decisions affecting their
working life.

What is HR management in an organisation?

HRD Connect examines the role of HR management within organisations of all kinds, and why it is essential to
As a practice, businesses and organizations depend on three key resources: physical resources, such as materials
and equipment; financial resources, including cash, credit, and debt; and people. There can be no doubt that
people play a vital role in an organization or business as a resource.Having a thorough strategy, a marketable
product or service, and efficient processes are all important. But all of this depends on the ability of the people
within the organization to execute strategies, plans, and processes to make a business successful.Every part of
the business boils down to people. And by managing people, organizations can be more profitable, lead more
effectively, create brand loyalty and do better work.The human resource function of every defines their success
as an organization. An organisation’s HR function plays a major role in the growth of its bottom line and the
success of its business strategy. The very nature of a company is in its people, and giving direction to people is
what human resource management (HRM) is all about. HRM provides an organization with the best services
and systems drive both profit and team synergy.Let’s dig deep into this and understand – What is HRM?

What is HRM?
According to The Harvard Model of Human Resource Management, created by Michael Beer, Human Resource

Management is a strategic approach to the employment, development and wellbeing of the people working in an

organization. Human resources management involves all management decisions and actions that affect the

relationship between the organization and its employees – in other words, its human resources.

HRM refers to the management of all decisions within an organization that are related to people.

It concentrates on making the most of the human resources that are at the disposal of the organization and

enhances the performance of employees to achieve the organization’s objectives. HRM ensures the seamless and

effective application of policies and processes in the business. HRM is there to keep the balance between

employee needs and satisfaction and an organization’s profitability and capability to reach its objectives.

In practice, however, HRM is a tool used to try to make optimum use of human resources, to foster individual

development, and to comply with government mandates. Larger organizations typically have an HRM

department and its primary objective is making company goals compatible with employee goals. For a company

to attain its goals, it must have employees who will help it attain them.

An efficiently functional HRM aids the workforce of an organization to contribute efficiently and effectively

towards the overall achievement of an organization’s goals.

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To understand HRM, the functions of HRM must be taken into consideration. The functions of HRM are

managerial, operative and advisory.

 Managerial functions include:

 Planning: The planning function of HRM ensures the best fit between employees and jobs while

avoiding manpower shortages or surpluses for the organization. There are four key steps of the HRP process:

Analysing present human resource supply, forecasting human resource demand, balancing projected the human

resource demand with supply, and aligning the first three steps to the organizational goals.

 Organizing: Organizing is the function of HRM that involves developing an organizational structure to

ensure the accomplishment of the organizational goals. The structure is usually represented by an organization

chart, which provides a graphic representation of the chain of command within an organization.

 Directing: This includes activating employees at different levels and making them contribute maximum

towards organizational goal. Tapping maximum potentialities of an employee via constant motivation and

command is a prime focus for this function of HRM.

 Controlling: Post planning, organizing and directing, performance of an employee is to be evaluated,

verified and compared with organizational goals. If performance is found to be deviating from the plan, control

measures are to be taken.

Operative function Includes:

 Recruitment and Selection: Recruitment and selection creates a pool of prospective candidates and

selects the right candidates from that pool. According to a study by the Allegis Group, 83% of organizations

believe attracting and retaining talent is a growing challenge.

 Job Analysis & Design: This HRM function includes describing nature of the job, including the

requisite qualifications, skills, and work experience for a specific position within an organisation. This function

is crucial in helping to combining tasks, duties and responsibilities into a single work unit to achieve

organizational goals.

 Performance management: Checking and analysing employee performance is another important

function that HRM performs. According to Deloitte’s Global Human Capital Trends study, 79% of executives

rate redesign of performance management system and practices to incorporate elements like continuous

feedback, goal-setting, and employee-driven communication as a high priority.

 Learning & Development (L&D): This HRM function allows employees to acquire new skills and

knowledge to perform their job effectively. L&D also prepares employees for taking up higher level of
 responsibilities. According to the Association for Talent Development (ATD), organizations that offer

comprehensive training programs have 218% higher income per employee than organizations without

formalized training.

 Compensation management: HRM also includes determining pays for different job types and

compensations, incentives, bonuses and benefits related to a job function. According to Jobvite, most people

(19%) left their jobs for compensation reasons.

 Policies: HRM functions by drafting, revising, publishing and implementing the organizational

policies, which are essential for the fair treatment for all the employees.

 Employee Welfare: This function takes care of numerous services, benefits and facilities provided to an

employee for their wellbeing. According to a study by MetLife, 51% of employers say using health and

wellness benefits to maintain employee loyalty and retain talent will become even more important in the next 3

to 5 years.

 HRMS: This function involves recording, maintaining and retrieving employee related information

including employment history, work hours, earning history etc.

Advisory function includes:

 Top Management Advice: One of the critical HRM functions is to advise the top management in

formulating policies and procedures. The advisory function of HRM also advise the top management on

appraisal of manpower. This function also involves advice regarding maintaining high-quality human relations

and improving employee morale.

 Departmental Head advice: Under this HRM function, HRM advises the heads of various departments

on policies related to job design, job description, recruitment, selection, appraisals.

What is the importance of HRM?

The following reasons highlight the importance of HRM.

Recognizing and valuing individuals: HRM acknowledges every employee’s worth within the organization,

suggesting that the organization recognize and value individual contributions. The empathy monitor study by the

Businessolver states that 93% of employees say they’re more likely to stay at an organization with an
empathetic employer. Also, the happywork study by Ultimate Software says that 75% of employees would stay

longer at an organization that listens to and addresses their concerns.

People bring ideas: HRM manages people, and people bring new new skills and ideas into the organization and

fuel the growth of business.

Quality of work life: Quality of work life is a legitimate concern, and that employees have a right to safe, clean,

and pleasant surroundings, which is one of the responsibilities of HRM. According to ‘Global Productivity

Hinges on Human Capital Development’, a study by Gallup, 85% of employees worldwide feel disengaged at

work and only 15% derive fulfillment from their work.

Upskilling is a long-term interest: HRM recognizes the need for continuous learning; talents and skills must be

continually refined in the long-term interests of the organization.

Facilitate continual worker adaptation: Opportunities are constantly changing. Organizations need methods to

facilitate continual worker adaptation and HRM provides the organization with those methods.

Employee satisfaction: People have a right to be satisfied by their work, and organizations have a responsibility,

and a profit motivation, to try to match their skills with their job. According to DecisionWise via Human

Resources Today, 64% of workers globally feel their job gives them a sense of meaning and purpose.

Beyond technical training: HRM has a much broader scope than technical training—employees need to know

more than the requirements of a specific task in order to make their maximum contribution.

Benefits of HRM

HRM bridges the gap between the employees and the management of an organization. Operating a successful

organization requires a good HRM which is dedicated to the progress and growth of the organization. A

balanced HRM is critical to the productivity and synergy of the organization.

An effective HRM allows organizations to tackle human resource issues strategically. HRM supports in

attracting and retaining competent employees, helps the organization’s leaders and employees in adapting to
 organizational change, and enables the adoption of technology. HRM play a critical role in managing

employees, helping them to work effectively and creatively to help their organisation to attain a competitive

advantage in their market.

The question ‘What is the importance of HRM?’ can be answered by considering all the ways that HRM helps

organizations to meet their competitive challenges and create value. These facets of HRM include how an

organization manages the human resource environment and acquires, trains, assesses, develops and compensates

its employees.

The importance of HRM goes unnoticed in the organization with the routine hustle and bustle in the workplace,

but without the effective HRM contributions, the organization might not be able to achieve its fullest potential

and expand its horizons.

Here are the benefits of HRM:

 Strategic Management: HRM enhances the company’s bottom-line by triggering positive output,

leading to organizational success. Leaders with expertise in HRM participate in corporate decision-making that

underlies human resource decisions.

 Mission,  vision,  values, and goals: HRM when handled strategically contributes to an organization’s

mission, vision, values, and goals. This, in turn, enables employees to see where they fit within the organization

and helps to shape and define their roles.

 Branding internally: Creating a positive brand about the organization for its employees and internal

stakeholders is an important responsibility of HRM. According to a study by CultureIQ, Building an employer

brand and company culture helps companies increase qualified candidates (49%), increase diverse candidates

(32%), increase employee referrals (41%), and hire the right people (55%).

 Creating awareness for employees: HRM builds workplace awareness by providing complete

information to employees of their functioning and governance.

 Maintaining a conducive work environment: A favourable work environment within the organization

where the employees can have both hygiene factors and motivators is taken care of by HRM. One of the top

employer attributes that jobseekers value most is a pleasant working atmosphere, according to a study by

Ranstand.
 Talent management: This is one of the important responsibilities of HRM. HRM remains committed to

recruitment and selection, on-boarding, training, management development, performance management,

succession planning, career paths, and other aspects of talent management.

 Organizational culture: HRM impacts the culture of the organization and has a key role to play in

ensuring that an organization’s culture continues to be supportive and effective. The culture of an organization

never solidifies — it changes with changing demographics, workplace norms, industry forces and other factors.

HRM moulds the organization’s culture, and the organization’s culture is reflected in the HRM – so they are

interlinked. According to another study by CultureIQ, 73% of employers believe a great corporate culture gives

their organizations a competitive edge.

 Conflict management: Conflicts are part of any healthy and robust organization. Not everyone always

feels the same way, but they need to develop effective working relationships for contributions and productivity.

HRM helps by knowing the personalities of each of the employees and taking on the necessary role of advocate,

coach or mediator.

LINE AND STAFF RESPONSIBILITY IN HRM

Line and Staff Functions | Management

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After reading this article you will learn about the line and staff functions in an organization.

Line and staff functions indicate the pattern of distribution of authority in an organization. Simply stated,

authority is the right to act. According to Koontz and others (1984), AUTHORITY in an organization is the

power in a position to exercise discretion in making decisions affecting others.

In an organization there may be four sources of authority:

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1. Legal:

Legal-authority granted by law, e.g. authority of the Director of a department, institution or an organization.
2. Financial:

Financial-authority to handle finance and financial matters, e.g. authority of the Comptroller, Finance Officer

etc.

3. Operational:

Operational-limited to the implementation or operation of some specific tasks, e.g. authority of the Project

Director, Team Leader etc.

4. Technical:

Technical-authority which generates from expert or specialist knowledge, e.g. authority of the Entomologist,

Soil Chemist etc. In an organization, the authority is exercised by the line.

Staff personnel in two different ways:

i. Line Function:

Line function is one in which a superior exercises authority directly over a subordinate. In a Directorate of

Agriculture, the Director of Agriculture is the head of the organization. The agricultural officers at the zonal,

district, sub-division and block levels are the line personnel.

In general, the line personnel have independent offices through which they function and maintain their separate

identity. The advantages of line personnel are that they have technical knowledge and are closer to the

operational area.

ii. Staff Function:

Staff function is advisory in nature and is meant to assist the line personnel. They think for the head of the

organization/office and give necessary support and advice. In the Directorate of Agriculture, the Additional

Directors of Agriculture, Joint Directors of Agriculture at the headquarters and the State levels specialists like

Entomologist, Plant Pathologist, Soil Chemist, Statistician etc. are the staff of the Director of Agriculture.

Except the State level technical staff, others generally do not have independent office and do not maintain their

separate identity. They work for the head of the organization or office.
There may be three categories of staff-technical i.e. those who deal with technical matters; officers i.e., those

who deal with general administration, personnel, finance, audit, purchase etc. and office staff i.e., those who

exclusively work in the office and assist the above mentioned staff and line personnel.

For effective functioning of a technical department it is necessary for the technical staff to have good expertise

and exposure to the field conditions. To ensure coordination, the officers should also have good understanding

of the purposes and objectives of the organization.

The size of the staff should be determined on the basis of how big is the organization, how big is the budget,

what are its responsibilities and how busy is the chief executive and other line personnel. The size of the staff in

an organization should, however, the kept to the optimum level, as superfluous staff may be a financial and

administrative liability to it.

STAFF RESPONSIBILITY

Responsibility 1: Participate in Planning and Development

In the modern marketplace, human resource executives serve as strategic partners. They participate in the
identification, development and execution of corporate objectives. In this capacity, HR executives align the
work of their business unit to achieve company goals. The participation in company planning allows human
resource leaders to gain a profound understanding of the organizational activities needed to aid in the
sustainable growth of the enterprise.

Responsibility 2: Provide Employees With Career Assistance

Periodically, human resource leaders conduct staff member evaluations. Today, HR professionals take an active
role in helping employees advance their careers. Instead of simply grading employees on a checklist of
performance points, modern human resource specialists help workers identify areas for improvement and
develop specific action steps.

By helping employees with career development, modern HR professionals gain deeper insight into available
human capital and the availability of internal candidates for potential role succession. This helps organizations
gain a marked advantage in filling future roles and meeting forthcoming market demands.

Responsibility 3: Find and Recruit Employees That Advance Company Objectives

Today’s human resource executives do more than post ads and interview job candidates to fill open positions.
Modern HR executives formulate employer brands designed to attract the right job candidates.

In this responsibility, human resource leaders work to promote their respective firms as highly favorable
workplaces. HR executives often earn this kind of accolade for organizations by creating a positive culture and
providing satisfactory compensation and benefits as ways to attract ideal work candidates.

Responsibility 4: Serve as Leaders of Change

Modern human resource leaders frequently lead change initiatives for their organizations. As a result, current
HR executives yield strong project management skills in their corporate toolboxes. The professionals are skilled
at helping organizational stakeholders make the connection between change initiatives and strategic needs,
minimizing change resistance and employee unrest.
Shaping organizational culture, managing staff member satisfaction and weighing the success of change
initiatives are all a part of the human resource professional’s scope of responsibility in the modern workplace.

Responsibility 5: Advocate for Employees

While fulfilling their roles as employee advocates, HR executives play an integral part in the success of
organizations. In this regard, human resource professionals contribute to building a work environment where
employees feel satisfied and motivated.

To promote this outcome, HR leaders deploy effective practices such as employee empowerment, goal setting
and open communication, resulting in a positive culture that leads to the workforce delivering better consumer
experiences.

Responsibility 6: Provide Support for Domestic Violence Victims

The Centers for Disease Control (CDC) forecasts that domestic violence can affect 1 in 4 women and 1 in 7
men in the United States. The issue has grown so prevalent that employers can no longer afford to think of
domestic violence as a matter best left to the local authorities. As a result, today’s HR professionals encourage
those who’ve experienced domestic violence to seek help in the workplace.

To encourage this, human resource professionals promote an organizational culture where staff members do not
feel intimidated or ashamed to approach to HR employees with domestic violence concerns.

Responsibility 7: Ensure No Cyberbullying At Work

Traditionally, workplace intimidation took place solely in the office. Today, however, the connectivity of the
Internet extends the influence of bullies to victims’ personal workstations and homes, an activity called
cyberbullying. Employees and supervisors know that this can happen in the workplace, yet dealing with office
cyberbullying may prove challenging. Despite this, contemporary human resource executives strive to eliminate
this kind of negative activity in the workplace.

Modern HR professionals are leaders in their organizations. The specialists sponsor the organizational mission,
vision, values and goals among staff members, and they monitor and adjust organizational activities to ensure
the success of various initiatives. Human resource specialists contribute to enterprises by managing the most
important asset of any organization, the people who complete the daily tasks that result in productive outcomes.
Their work aids in the global success of their organizations.

ROLE OF PERSONNEL MANAGER

Personnel Manager: Role # 1. Advisory Role:

The personnel department has functional relationship with other departments/managers in the total organisation.

As a specialist, the personnel manager advises the heads of different functional departments on various aspects

of human resource management e.g., manpower planning, recruitment, selection, training, appraisal,

compensation etc.

He represents management in many of the relationships that affect the organisation as a whole. He is also

responsible for conveying the problems, grievances or simply opinions of workers to management.
The personnel manager should provide suggestions and assistance very tactfully, in order to win the confidence

and cooperation of all the line managers. Staff assistance is likely to be effective when it is wanted rather than

imposed. He has to persuade the line managers to work with staff specialists and not against them.

Personnel Manager: Role # 2. Counselling Role:

The personnel manager plays the role of a counseller with the employees also. He discusses the various

problems of the employees relating to work, career, their supervisors, colleagues, health, family, financial, social

etc. and suggests them means to minimise and overcome those problems.

Personnel Manager: Role # 3. Role of a Change Agent:

Personnel manager works as a change agent regarding personnel areas. To be an effective consultant, he should

be familiar with the needs and changing environment of the business. He should initiate and spearhead

necessary improvement in human resource policies.

As a consultant, he can provide necessary infrastructure and support for organisation development. He helps in

introducing and implementing major institutional changes in the organisation.

Personnel Manager: Role # 4. The Conscience Role:

While playing the conscious role, the personnel manager informs the management about the humanitarian

approach. He should advise the management about the moral and ethical obligations towards the employees.

Personnel Manager: Role # 5. Mediator’s Role:

The personnel manager often acts as a mediator in the organisation. Whenever there is a friction between two

employees, two groups of employees, superiors and subordinates and employees and management, the

personnel manager has to act as a mediator, so as to maintain industrial harmony.

Personnel Manager: Role # 6. Liaison Role:

The personnel manager acts as a representative of the organisation so as to give an overall picture of the

organisational operations to the employees particularly in case of industrial disputes or grievance redressal.

Similarly, he acts as employees’ representative in representing their problems to the management particularly in

concerns where trade unions are not there.

Personnel Manager: Role # 7. Legal Role:

The personnel manager plays this fire fighting role of grievance handling, settlement of disputes, handling

disciplinary cases, collective bargaining, joint consultation, interpretation and implementation of various labour

laws, contacting lawyers regarding court cases, filing suits in labour courts, industrial tribunals, civil courts and

the like.

Personnel Manager: Role # 8. Welfare Role:

Under Section 49 of the Factories Act, a welfare officer has to be appointed in specific factories. Personnel

manager is expected to be the welfare officer of the company. As a welfare officer, he provides and maintains

(on behalf of the company) canteens, hospitals, creches, educational institutions, clubs, libraries, conveyance

facilities; cooperative credit societies, consumer stores etc.

Personnel Manager: Role # 9. Controller’s Role:

The personnel manager assists the line managers in effective implementation of personnel policies and

programmes. His advice and service is essential for monitoring and controlling the progress. As an arm of the

top management, the personnel manager ensures that the personnel policies and procedures approved and

adopted by the management are being consistently carried out in all the departments.

Personnel Manager: Role # 10. Human Relations Role:

Personnel manager is supposed to be an expert in human relations. He is expected to improve productivity by

fulfilling the economic, social and psychological needs and aspirations of employees. Personnel manager also

has to meet the challenge of a fast changing postindustrial society..

Definition: Personnel Manager
A personnel manager is a manager responsible for administrative works such as recruitment, job analysis, job
evaluation, managing wages and salaries, training administration, resolving disputes, labor law compliance and
related tasks.

MEAN

Being a manager, he is primarily responsible for the overall management of the department and performs basic
managerial functions like planning, organizing, directing, and controlling. ... A personnel manager plays an
integral role in effective personnel management and making human relations in the organization better.

ROLE OF HR MANAGER

1) Professional Development
 Closely related to training, developing your employees professionally is an added bonus for the employee
as well as the organization. Enrolling the employee to attend conferences, trade shows, seminars etc that
may be in his personal interest will make the employee feel cared-for and a vital part of the organization,
thus increasing employee engagement. It will be beneficial to the organization by way of the employee’s
added skill set.
In short, it is a win-win. It is the HR head’s job to get to know the employee’s hobbies and areas of
interest and lookout for opportunities that will help them build onto those hobbies. For example, if an
employee wants to master the technique of SEO, HR could enroll him for seminars and conferences that
talk on the same. However, this should not turn out to be a selfish attempt that benefits the organization
only.

2) Appraisals
Since HRM is a body meant for the employees, carrying out timely performance appraisals is a given.
Performance appraisals help in employee motivation by encouraging them to work to their fullest
potential. It also enables to give them feedback on their work and suggest necessary measures for the
same. This helps employees to have a clear view of what is expected of them and what they are delivering.
They can thus, work better towards improving their performance and achieving targets.
The role of HR (especially the HR manager) in this would be to have a policy of generating timely
appraisal reports and a review of the same by the authorities. The HR team should communicate
individually with employees and give clear feedback or suggestion on their performance. A system to
reward employees excelling at their work would help in employee motivation and thus garner a higher
degree of productivity and employee engagement.
 
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3) Maintaining Work Culture

It is the duty of the HR to maintain a healthy, safe, and fun work environment to ensure a level of
comfort amongst the employees and eliminate any stressful or awkward atmosphere that may hinder the
performance of the staff. It is vital to have an efficient work atmosphere because of an individual’s
performance largely depends on the surrounding he’s working in.
It would be great to have an open-door policy up to some extent wherein employees can freely
communicate and voice their opinions to be given consideration. The HR department’s role is to be a
friendly body with an open attitude. By communicating and treating every employee as equal, HR can
build a rapport with the employees. This goes a long way in increasing employee engagement and gives a
higher job satisfaction.

4) Resolving Conflicts
Where different people have different views, conflicts are almost inevitable. Whether the dispute is
amongst two or more employees or between the employee and the management, an HR manager has the
right to intervene and help map out a solution.
The HR should be available at the disposal of the conflicting parties and hear out their issues without
being judgmental. Prior investigations are a must before passing any judgment. The HR head is not
expected to discriminate or play favorites in this matter and always deliver an unbiased and practical
decision. A reimbursement in case of any loss caused and strict actions against the defaulter should be
practiced for effective conflict resolution by the HRM.

5) Employee Relations
Human Resources is called so because its major responsibility is dealing with the human part of the
organization and this involves having great interpersonal skills. An HR manager who sits in the office all
day will not turn out to be good at building connections with the employees and thus fail to serve the
purpose of being an HR head. As an HR person, employees should feel comfortable coming up to you
with their problems and for that, it is important that the HR team builds a good public image within the
organization.
The HR team has to be proactive and know their employees. An HR personnel’s job is not a desk job
altogether. The HR head’s role is to establish the trust and confidence of the employees and not have a
“don’t mess with me” demeanor. He should be looked upon as both an HR expert and an employee
advocate.

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6) Rewards and Incentives

Rewarding the employees for a work well done imparts motivation and at the same time induces a desire
to excel at tasks in hope of obtaining rewards. It serves as bait for inculcating a healthy competitive
environment amongst employees to achieve targets and meet deadlines. A reward need not be
materialistic always. It could just be a word of appreciation in front of all coworkers for a menial task
done with complete honesty.
However, with globalization and evolving trends, compensations like holiday packages, pay incentives,
bonuses, and promotions are taking a backseat. If as an HR manager you are wanting to reward your
employees efficiently, it’s time you adopt new ways of awarding benefits such as flexible work times,
paternity leave, extended holidays, telecommuting, etc. These non-traditional rewards will prove fruitful
not only in engaging the existing workforce but also as an added benefit to attract new talent to your
organization.
7) Legal Knowledge
This may seem the least glamorous of all, but is an important aspect of the HRM. An HR manager should
always be in compliance with the law. Whether it’s drafting new policies or writing terms of a contract, it
is the HR department’s job to build guidelines keeping the laws in mind. This ensures an organization’s
continued growth and existence. While drafting policies, the HR should always ensure to be at an upper
hand legally and keep the organization’s practices in tune with the labor laws, tax laws, permissible
working hours, minimum wages, and a no-discrimination policy.

8) Organization
An HR head is responsible for organizing all functions of the organization. To start with, it includes
employee on-boarding, i.e. welcoming new employees. It is a must for every HR head to carry out
induction for every new hire and give them an orientation regarding the company policies and rules.
The HR personnel should also introduce the new employees to their colleagues and assign them a mentor.
It also involves listing out job expectations and defining roles and responsibilities, thus getting the new
employees in tune with the working of the organization. The HR personnel is also responsible for
organizing and storing all employee data efficiently and keeping it secure.

9) Management
Management is the most important job of an HR manager. It is what defines a good HR manager.
Management extends right from managing employees to managing the employers and the whole HR
department as well.
The role of an HR manager is to manage, create, implement and supervise policies/regulations, which are
mandatory for every employee and also have knowledge of its appropriate functioning. Monitoring
attendance and tracking leaves forms a major chunk of the HR management function. There should be a
proper management of the clock-in/out time to avoid late arrivals and track overtimes and half-days. As
mentioned before, the HR as a department should also be well managed by the HR head. If the HR
department itself is in a state of chaos, it cannot serve as a peacemaker for the other departments.

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10) Payroll Management

Once all the attendance monitoring, leave tracking, clock in/outs etc is tracked and monitored, it’s time
for the most important aspect–calculating the payroll. Efficient calculation of salaries, wage-cuts,
reimbursements, and generation of pay slips amounts to the role of HR managers in payroll management.
The HR manager should maintain transparency and provide the employees with information as and
when asked. The HR should ensure not only accurate calculations of salaries but also timely transfer of
the same. They also have an obligation towards exiting employees in settlement of dues and
compensations.
MODELS OF HRM

Models of HRM
1. The hard and soft HRM models:
Storey distinguished between the ‘hard’ and ‘soft’ versions of HRM. He wrote that: ‘The hard one emphasizes
the quantitative, calculative and business-strategic aspects of managing human resources in as “rational” a way
as for any other economic factor. By contrast, the soft version traces
its roots to the human-relations school; it emphasizes communication, motivation and leadership.’
However, it was pointed out by Keenoy that ‘hard and soft HRM are complementary rather than mutually
exclusive practices’. Research in eight UK organizations by Truss indicated that the distinction between hard
and soft HRM was not as precise as some commentators have implied. Their conclusions were as follows.
2. Contextual model of HRM:
The contextual model of HRM emphasizes the importance of environmental factors by including variables such
as the influence of social, institutional and political forces that have been underestimated in other models. The
latter, at best, consider the context as a contingency variable. The contextual approach is broader, integrating the
human resource management system in the environment in which it is developed. According to Martin-Alcázar:
‘Context both conditions and is conditioned by the HRM strategy.’
A broader set of stakeholders is involved in the formulation and implementation of human resource strategies
that is referred to by Schuler and Jackson as a ‘multiple stakeholder framework’. These stakeholders may be
external as well as internal and both influence and are influenced by strategic decisions.
3. The matching model of HRM:
Fombrun proposed the ‘matching model’, which indicated that HR systems and the organization structure
should be managed in a way that is congruent with organizational strategy. This point was made in their classic
statement that: ‘The critical management task is to align the formal structure and human resource systems so
that they drive the strategic objectives of the organization’. Thus they took the first steps towards the concept of
strategic HRM.
4. European model of HRM:
Brewster described a European model of HRM as follows:
● environment – established legal framework;
● objectives – organizational objectives and social concern – people as a key resource;
● focus – cost/benefit ts analysis, also environment;
● relationship with employees – union and non-union;
● relationship with line managers – specialist/line liaison;
● role of HR specialist – specialist managers – ambiguity, tolerance, flexibility.

The main distinction between this model and what Brewster referred to as ‘the prescribed model’ was that the
latter involves deregulation (no legal framework), no trade unions and a focus on organizational objectives but
not on social concern.
As set out by Maybe the characteristics of the European model are:
● dialogue between social partners;
● emphasis on social responsibility;
● multicultural organizations;
● participation in decision-making;
● continuous learning.

5. The 5-p’s model of HRM:

Philosophy: Expressed in statements defining business values and culture. It expresses how to treat and value
people.
Policies: Expressed as shared values and guidelines. Policies establish guidelines for action on people related
business issues and HR programs.
Programs: Articulated as human resource strategy. These coordinate efforts to facilitate change to address
major people related business issues.
Practices: For leadership managerial and operational role practices motivate needed role behaviors.
Processes: For the formulation and implementation of other activities these define how activities are carried out.
HRM IN A CHANGING ENVIRONMENT

Business environment is changing environment and so is HR environment. The changing environment of HRM

includes work force diversity, economic and technological change, globalisation, organisational restructuring,

changes in the nature of jobs and work and so on.

1. Work force Diversity:

Diversity has been defined as any attribute that humans are likely to use to tell themselves, that person is

different from me and, thus, includes such factors as race, sex, age, values, and cultural norms’. The Indian

work force is characterized by such diversity that is deepening and spreading day by day.

It is likely to be more diverse as women, minority- group members, and older workers flood the work force.

With the increasing number of women entering the work force due to a combination of factors like women’s

emancipation, economic needs, greater equality of sexes, education and so on, additional pressures of managing

a different set of problems at the work place have arisen. As such, the number of women is on increase in all

walks of life i.e., teachers, lawyers, doctors, engineers, accountants, pilots, parliamentarians and so on.

However, increasing number of women in the work force has been necessitating the implementation of more

flexible work scheduling, child care facilities, maternity and now paternity leave also and transfer to location of

husband’s place of posting.

Also, as the work force ages, employers will have to grapple with greater health care costs and higher pension

contributions. On the whole, the increased diversity of work force will place tremendous demands on the HR

management function.

Further, creating unanimity from a diverse work force has also become a challenge for HR manager. This is

because, as several experts’ put it; diversity is marked by two fundamental and inconsistent realities operating

today with it. One is that organisations claim they seek to maximize diversity in the work place, and maximize

the capabilities of such a diverse work force.

The other is that traditional human resources system will not allow diversity, only similarity. These experts

emphasize that employers traditionally hire, appraise, and promote people who fit a particular employer’s image

of what employees should believe and act like. At the same time, there is corresponding tendency to screen out

those who do not fit.

2. Economic and Technological Change:

Along with time, several economic and technological changes have occurred that have altered employment and

occupational pattern. In India too, there is a perceptible shift in occupational structure from agriculture to

industry to services.

The New Economic Policy, 1991 has led to liberalization and globalization giving genesis to multinational

organisations with their multicultural dimensions having certain implications for HRM. The implications of

globalization for HRM are discussed subsequently. The Indian economy has already become an open economy

but it will be more so from April 2003 with the complete lifting of quantitative restrictions (QRs) on imports in

India.

Technology has become the hallmark of the modem organisations. As such, modem organisations have become

the technology-driven organisations. So to say, men are replaced by machinery. Manufacturing technology, for

example, has changed to automation and robotisation.

Manufacturing advances like these will eliminate many blue-collar jobs, replacing them with fewer but more

highly skilled jobs. Similar changes are taking place in office automation, where personal computers, word

processing, and management information system (MIS) continue to change the nature of office work.

The explosive growth of information technology linked to the internet has ushered in many changes throughout

the organisation. One of the major changes led by information technology is that it has hastened what experts

call the “fall of hierarchy”, i.e., managers depend less and less on yesterday’s “stick-to-the -chain-of-command

approach,” to their organising function.

This is so because earlier it used to be, if one wanted information, one had to go up, over and down through the

organisation. Now, one just taps in. That’s what broke down the hierarchy. Somuchso, now employees do not

need to be present a definite work place.

Instead, they can work from their own places/ residences through the net. This has given genesis to a new breed

of organisations, called ‘virtual organisations.’ (VO).

3. Globalization:

The New Economic Policy, 1991 has, among other things, globalised the Indian economy. There has been a

growing tendency among business firms to extend their sales or manufacturing to new markets aboard. The rate

of globalization in the past few years in India has been nothing short of phenomenal.

Globalization increases competition in the international business. Firms that formerly competed only with local

firms, now have to compete with foreign firms/competitors. Thus, the world has become a global market where

competition is a two-way street.

Globalization has given genesis to the multinational corporations (MNCs). The MNCs are characterised by their

cultural diversities, intensified competition, variations in business practices and so on. As an international

business expert puts it, ‘the bottom line is that the growing integration of the world economy into a single, huge

market place is increasing the intensity of competition in a wide range of manufacturing and service industries.

Given these conditions, from tapping the global labour force to formulating selection, training and compensation

policies for expatriate employees have posed major challenges for HRM in the next few years. This has
underlined the need for studying and understanding HRM of multinational organisations or international

organisations separately.

4. Organisational Restructuring:

Organisational restructuring is used to make the organisation competitive. From this point of view, mergers and

acquisitions of firms have become common forms of restructuring to ensure organisational competitiveness. The

mega-mergers in the banking, telecommunications and petroleum companies have been very visible in our

country. Downsizing is yet another form of organisational restructuring.

As a part of the organisational changes, many organisations have “rightsized” themselves by various ways like

eliminating layers of managers, closing facilities, merging with other organisations, or out placing workers.

There has been a practice to flatten organisations by removing several layers of management and to improve

productivity, quality, and service while also reducing costs. Whatever be the form of restructuring, jobs are

redesigned and people affected.

One of the challenges that HRM faces with organisational restructuring is dealing with the human consequences

of change. For example, the human cost associated with downsizing has been much debated and discussed in the

popular press. As such, HRM needs to focus on the changed scenario uniquely and that is not so simple. Thus,

management of HR activities has become crucial for HR managers.

5. Changing Nature of Work:

Along with changes in technology and globalization, the nature of jobs and work has also changed. For

example, technological changes like introduction of fax machines, information technology, and personal

computers have allowed companies to relocate operations to locations with lower wages. There is also a trend

toward increased use of temporary or part-time workers in organisations.

One most significant change in the nature of work is that it has changed from manual to mental/ knowledge

work. In this context, the management expert Peter Drucker’s views are worth citing. He said that the typical

business will soon bear little resemblance to the typical manufacturing company of 30 years ago.
The typical business will be knowledge-based, an organisation composed largely of specialists who direct and

discipline their own performance through organized feedback from colleagues, customers, and headquarter. For

this reason, it will be what he calls an information-based organization.

As a result, the organizations are giving and will give growing emphasis on their human capital i.e., the

knowledge, education, training, skills, and expertise of employees, the expense of physical capital like

equipment, machinery and physical plants This growing emphasis on education and human capital has, among

other things, changed the nature of economy as service-oriented economy.

In the changed economic scenario, jobs demand a certain level of expertise that is far beyond that required of

most workers 20 or 30 years ago. This means that companies are relying more on employee’s creativity and

skills, i.e., employee’s brain power.

As Fortune magazine has rightly said:

“Brain power ….has never before been so important for business. Every company depends increasingly on

knowledge-patents, processes, management skills, technologies, information about customers and suppliers, and

old-fashioned experience. Added together, this knowledge is intellectual capital”.

As such, the HR environment has changed. The challenge posed by changed environment is fostering

intellectuals or human capital needs managing these differently than those of previous generation. Here, Drucker

puts that the centre of gravity in employment is moving fast from manual or clerical workers to knowledge

workers, who resist the command and control model that business took from the military 100 years ago. Now

that the changing environment of HRM is delineated, we can conveniently present the new HR management

practices in such changing environment.

UNIT 2

PROCUREMENT

What Is Procurement?
Procurement is the act of obtaining goods or services, typically for business purposes. Procurement is most
commonly associated with businesses because companies need to solicit services or purchase goods, usually on
a relatively large scale.

Procurement generally refers to the final act of purchasing but it can also include the procurement process
overall which can be critically important for companies leading up to their final purchasing decision. Companies
can be on both sides of the procurement process as buyers or sellers though here we mainly focus on the side of
the soliciting company.

DEF

Procurement is a purchasing process that controls quantity, quality, sourcing and timing to ensure the best
possible total cost of ownership.

INTRO

Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection,
the negotiation of contracts and actual purchasing of goods. Procurement is concerned with acquiring
(procuring) all of the goods, services, and work that is vital to an organization.

HR JOB ANALYSIS

Job analysis
Job analysis is a systematic process of collecting all information about the job for preparing of job description
and job specification meant to selection of employee, satisfaction in job, and motivation etc.

Job Analysis
Job Analysis

 Job analysis
o Job Descriptions and Job Specifications
 Job Analysis and HR Activities
 Job Analysis Methods
 Stages in the Job Analysis Process

Job Design

 Job design

Methods or Techniques of Job Design

o Job Rotation
o Job Enrichment
o Job Enlargement

 Job Evaluation
o Qualitative Methods of Job Evaluation
o Quantitative Methods of Job Evaluation

What Is a Job?

A group of homogeneous tasks related by similarity of functions.

When performed by an employee in an exchange for pay, a job consists of duties, responsibilities, and tasks
(performance elements) that are (1) defined and specific, and (2) can be accomplished, quantified, measured,
and rated. From a wider perspective, a job is synonymous with a role and includes the physical and social
aspects of a work environment. Often, individuals identify themselves with their job or role (foreman,
supervisor, engineer, etc.) and derive motivation from its uniqueness or usefulness.

Job Analysis

Job analysis, contains a simple term called "analysis", which means detailed study or examination of something
(job) in order to understand more about it (job). therefore job analysis is  to understand more about a specific job
in order to optimise it. Job analysis is a systematic process of collecting complete information pertaining to a
job. Job analysis is done by job analyst who is an officer have been trained for it.

Job analysis is a procedure through which you determine the duties and responsibilities, nature of the jobs and
finally to decide qualifications, skills and knowledge to be required for an employee to perform particular job.
Job analysis helps to understand what tasks are important and how they are carried on. Job analysis forms basis
for later HR activities such as developing effective training program, selection of employees, setting up of
performance standards and assessment of employees ( performance appraisal)and employee remuneration
system or compensation plan.

One of the first industrial-organizational psychologists to introduce job analysis was Morris Viteles. In 1922, he
used job analysis in order to select employees for a trolley car
company. Refernce:http://en.wikipedia.org/wiki/Job_analysis.

The intention behind job analysis is to answer questions such as:

 what is the need of the job to exist?

 What physical and mental activities does the worker undertake?

 When is the job to be performed?

 Where is the job to be performed?

 How does the job performed by an employee?

 What qualities and qualifications are required to perform the job?

Job analysis is a detailed examination of

(1) tasks  that make up a job (employee role),

(2) conditions under which an employee performing his/her job, and
(3) what exactly a job requires in terms of aptitudes (potential for achievement), attitudes (behavior
characteristics), knowledge, skills, educational qualifications and the physical working condition of the
employee.

Its objectives include 

(a) to determine most effective methods for performing a job.

(b) to increase employee job satisfaction.
(c) to identify core areas for giving training to employees and to find out best methods of training.
(d) development of performance measurement systems, and
(e) to match job-specifications with  employee specifications while selection of an employee.

Definitions of Job Analysis

Some important definitions of job-analysis are as under :

Harry L. Wylie. "Job analysis deals with the anatomy of the job.....This is the complete study of the job
embodying every known and determinable factor, including the duties and responsibilities involved in its
performance; the conditions under which performance is carried on; the nature of the task; the qualifications
required in the worker; and the conditions of employment such as pay, hours, opportunities and privileges"

In the words of Dale Yoder. "A Job is a collection of duties, tasks and responsibilities which are assigned to an
individual and which is different from other assignment"

According to Michael J. Jucius, "Job analysis refers to the process of studying the operations, duties and
organisational aspects of jobs in order to derive specification or, as they are called by some job description"

In the words of Edwin B. Flippo, "Job analysis is the process of studying and collecting information relating to
the operations and responsibilities of a specific job "

According to Blum, "A job analysis is an accurate study of the various components of a job. It is concerned not
only with an analysis of the duties and conditions of work, but also with the individual qualifications of the
worker."

According to John A Shubin "Job analysis is the methodical compilation and study of work data in order to
define and characterise each occupation in such a manner as to distinguish it from all others."

In the words of Scott, Clothier and Spriegel, "Job analysis is the process of critically evaluating the operations,
duties and relationship of the job."

In simple words Job analysis is a formal programme which examines the tasks, duties and responsibilities
contained in an individual unit of work.

Job analysis takes place before the recruitment process.

Job Descriptions and Job Specifications >>

Facts [+]

The U.S. Department of Labor publishes The Occupational Outlook Handbook every two years. The handbook
is a nationally recognized source of career information for hundreds of various jobs. Information subjects
include required job training and education, earnings, expected job prospects, what workers do on the job, and
working conditions.

PROCEDURE FOR JOB ANALYSIS

Job analysis is done by using two approaches one is work oriented approach and second one is employee
oriented approach

1. work oriented approach

this approach focus on the actual task involved in a Job. this approach mainly concentrate on duties, functions
and responsibilities involved in a job

Example
Job of court manager at Courts (judiciary), task oriented approach of job analysis statement include

 The Court Manager shall function under the control and guidance of the Chief Justice in the High
Court, and the District Judge in the respective district Courts.
 He shall work on policies and standards, based on applicable directives of superior Courts, establish the
performance standards applicable to the Court (including on timeliness, efficiency; quality of Court
performance; infrastructure; and human resources; access to justice; as well as for systems for Court
management and case management.
 He will carry out an evaluation of the compliance of the directives of the Court with such standards;
identify deficiencies and deviations; identify steps required to achieve compliance, maintain such an
evaluation on a current basis through annual updates.
 He will in consonance with the rules and policies of the court and in consultation with the stakeholders
of the Court including litigants, the Bar, ministerial staff, Executive Agencies supporting judicial
functions such as prosecutors/police/ process service agencies prepare, submit and update annually a 5-
year court-wise Court Development Plan (CDP), for approval of the court.
 He will monitor the implementation of the approved CDP and report to the District Judge and the High
Court with the progress.
 He will ensure that statistics on all aspects of the functioning of the Court are complied and reported
accurately and promptly in accordance with systems established by the High Court.
 He will ensure that reports on statistics are duly completed and provided as required.
 He will ensure that the processes, procedures, policies and standards established by the High Court for
Court Management are complied with and that they safeguard quality, ensure efficiency and timeliness
and minimize costs to litigants and to the State; and enhance access to justice.
 He will ensure that case management systems are fully compliant with the policies and standards
established by the High Court for case management and that they address the legitimate needs of
litigants in terms of quality, efficiency and timeliness, costs to litigants and to the State. Standard
systems for case management shall be developed by the High Court time to time.
 He will ensure that the Court meets standards established by the High Court on access to justice, legal
aid, alternative dispute mechanisms and are user friendly.
 He will ensure that the Court meets quality of adjudication standards established by the High Court.
 He will ensure that Human Resource Management of ministerial staff in the court comply with the
Human Resource Management standards established by the High Court.
 He will ensure that the core systems of the court are established and function effectively
(documentation management;utilities management; infrastructure and facilities management; financial
systems management (audits, accounts, payments);
  He will ensure that the IT systems of the court comply with standards established by the High Court
and are fully functional.
 He will feed the proposed National Arrears Grid to be set up to monitor the disposal of cases in all the
Courts, as and when it is set up.
 The Court Manager shall be responsible in implementation, managing data entry initiation, services
roll-out and monitoring of the e-Court Project in the respective Districts/High Court.
 (xviii) He shall perform all other administrative functions and duties as may be assigned by the Chief
Justice in the High Court and the District Judge in the District Court from time to time.
 (xix) He shall report to the Chief Justice/ District Judge or any other Judge/ officer nominated by the
Chief Justice/ District Judge and shall perform the duties as assigned to him from time to time.

2. Employee oriented approach

this approach focus on examining of human attributes needed to perform the job perfectly. human attributes
have been classified into knowledge, skills, attitude and other characteristics. Knowledge is the information
people need in order to perform the job. Skills are the proficiencies needed to perform each task. Abilities are the
attributes that are relatively stable over time. Other characteristics are all other attributes, usually personality
factors.

Example

 The Court Manager shall have M.B.A. Degree or Advanced Diploma in General Management from a
recognised University/institution of India.
 He shall have minimum 10 years experience in the field of management, experience/training in I.T
Systems Management, H.R.Management, Financial Systems Management.
 He shall not be more than 40 years of age.
 He should have excellent communication skills.
 He should have excellent Computer application skills.

Importance of Job Analysis

Job analysis helps in analyzing the resources and establishing the strategies to accomplish the business goals
and strategic objectives. Effectively developed, employee job descriptions are communication tools that are
significant in an organization's success.

The main purpose of conducting job analysis is to prepare job description and job specification which would
help to hire skilled workforce. Job description is a statement of information about duties and responsibilities of a
particular job. whereas job specifications is a statement of information about qualifications, special qualities,
skills and knowledge required for an employee to fit for a job. Therefore job analysis enables recruiter/employer
to have a deep insight of a job, with that, recruiter can easily track candidates who have required qualifications
and qualities to perform a job.

Job Analysis can be used to identify areas where an employee needs training, since job analysis make it clear  to
understand about core duties and responsibilities of a job. Besides, it provides information to develop  suitable
training material for a job to be performed by an employee after completion of his training.

Compensation management/salary administration is one of core  HR functions. salary for a job is decided on 
skill level required, duties and responsibilities, qualification and experience level/seniority, altogether, called as
compensable factors, which could be known by job analysis only. But there is a separate method to determine
value of job that is called as job evaluation which is part of job analysis.  Job evaluation is process of valuing or
determining how much is to be paid for a job. Job evaluation is mainly used when a specific job or a single job
is to be evaluated or when there are different jobs in same Cader, or when there jobs based on projects or
piecework. However job analysis has its own  importance in concluding compensation/remuneration/ salary of
an employee.
No organisation exists without goals and objectives to achieve, performance standards to be maintained by
every employee and reviewing performance of employees. These could be cross checked with outcome of job
analysis of a job, whether outcome of job analysis of a job is in tune with goals and objectives of an organisation
or not, performance standards are being maintained or not and reviewing employee performance based on
performance standards or not.

Job Analysis can be used in performance review to identify or develop goals and objectives, performance
standards, evaluation criteria, length of probationary periods, and duties to be evaluated

An ideal job analysis should include

below listed are areas where job analyst should focus to bring out facts about a job.

Duties and Tasks: The basic unit of a job is the performance of specific tasks and duties. This segment
should include frequency, duration, effort, skill, complexity, equipment, standards, etc.

Environment: This segment identifies the working environment of a particular job. This may have a
significant impact on the physical requirements to be able to perform a job.

Tools and Equipment: Some duties and tasks are performed using specific equipment and tools. These
items need to be specified in a Job Analysis.

Relationships: The hierarchy of the organization must be clearly laid out. The employees should know
who is under them and who they have to report to.

Requirements: The knowledge, skills, and abilities required to perform the job should be clearly listed.

There are several ways to conduct a job analysis, including: interviews with incumbents and supervisors,
questionnaires (structured, open-ended, or both), observation, critical incident investigations, and
gathering background information such as duty statements or classification specifications.

The following are the benefits of job analysis. 

 1. Organizational structure and design :- Job analysis helps the organization to make suitable changes
in the organizational structure, so that it matches the needs and requirements of the organization. Duties
are either added or deleted from the job.
2. Recruitment and selection :-Job analysis provides information about what the job entails and what
human characteristics are required to perform these activities. This information, in the form of job
descriptions and specifications, helps management decide what sort of people to recruit and hire.
3. Performance appraisal and training/development :- Based on the job requirements identified in the
job analysis, the company decides a training program. Training is given in those areas which will help
to improve the performance on the job. Similarly when appraisal is conducted we check whether the
employee is able to work in a manner in which we require him to do the job.
4. Job evaluation :- Job evaluation refers to studying in detail the job performance by all individual. The
difficulty level
5.
6. s, skills required and on that basis the salary is fixed. Information regarding qualities required, skilled
levels, difficulty levels are obtained from job analysis.
7. Promotions and transfer :- When we give a promotion to an employee we need to promote him on
the basis of the skill and talent required for the future job. Similarly when we transfer an employee to
another branch the job must be very similar to what he has done before. To take these decisions we
collect information from job analysis.
8. Career path planning :- Many companies have not taken up career planning for their employees. This
is done to prevent the employee from leaving the company. When we plan the future career of the
employee, information will be collected from job analysis. Hence job analysis becomes important or
advantageous.
9. Labour relations :- When companies plan to add extra duties or delete certain duties from a job, they
require the help of job analysis, when this activity is systematically done using job analysis the number
of problems with union members reduce and labour relations will improve.
10. Health and safety :- Most companies prepare their own health and safety, plans and programs based
on job analysis. From the job analysis company identifies the risk factor on the job and based on the
risk factor safety equipments are provided.
11. Acceptance of job offer :- When a person is given an offer/appointment letter the duties to be
performed by him are clearly mentioned in it, this information is collected from job analysis, which is
why job analysis becomes important.

HUMAN RESOURCE PLANNING

What Is Human Resource Planning (HRP)?

Human resource planning (HRP) is the continuous process of systematic planning ahead to achieve optimum
use of an organization's most valuable asset—quality employees. Human resources planning ensures the best fit
between employees and jobs while avoiding manpower shortages or surpluses.

There are four key steps of the HRP process. They include analyzing present labor supply, forecasting labor
demand, balancing projected labor demand with supply, and supporting organizational goals.

HRP helps companies is an important investment for any business as it allows companies to remain both
productive and profitable.

DEF

Dale S. Beach has defined it as “a process of determining and assuring that the organisation will have an
adequate number of qualified persons available at the proper times, performing jobs which meet the needs of the
enterprise and which provide satisfaction for the individuals involved.”

INTRO

Human Resource Planning – Introduction:

Human resources undoubtedly play the most important part in the functioning of an organization. The term
‘resource’ or ‘human resource’ signifies potentials, abilities, capacities, and skills, which can be developed
through continuous interaction in an organizational setting.
The interactions, interrelationships, and activities performed all contribute in some way or other to the
development of human potential. Organizational productivity, growth of companies, and economic development
are to a large extent contingent upon the effective utilization of human capacities.
Hence, it is essential for an organization to take steps for effective utilization of these resources. In the various
stages in the growth of an organization, effective planning of human resources plays a key role. Matching the
requirements of the job with the individual is important at all stages, including the recruitment procedures, in
this endeavour.
When organizations contemplate diversification or expansion, or when employees have to be promoted, human
resource planning plays an important role. Further, the organizational plans, goals, and strategies also require
effective human resource planning.
IMPORTANTS / OBJECTIVES
I. Assessing Future Personnel Needs:
Whether it is surplus labour or labour shortage, it gives a picture of defective planning or absence of planning in
an organization. A number of organizations, especially public sector units (PSUs) in India are facing the
problem of surplus labour.
It is the result of surplus labour that the companies later on offer schemes like Voluntary Retirement Scheme
(VRS) to eliminate surplus staff. Thus, it is better to plan well about employees in advance. Through HRP, one
can ensure the employment of proper number and type of personnel.
II. Foundation for Other HRM Functions:
HRP is the first step in all HRM functions. So, HRP provides the essential information needed for the other
HRM functions like recruitment, selection, training and development, promotion, etc.
III. Coping with Change:
Changes in the business environment like competition, technology, government guidelines, global market, etc.
bring changes in the nature of the job. This means changes in the demand of personnel, content of job,
qualification and experience needed. HRP helps the organization in adjusting to new changes.
IV. Investment Perspective:
ADVERTISEMENTS:

As a result of change in the mindset of management, investment in human resources is viewed as a better
concept in the long run success of the enterprise. Human assets can increase in value as opposed to physical
assets. Thus, HRP is considered important for the proper planning of future employees.
V. Expansion and Diversification Plans:
During the expansion and diversification drives, more employees at various levels are needed. Through proper
HRP, an organization comes to know about the exact requirement of personnel in future plans.
VI. Employee Turnover:
Every organization suffers from the small turnover of labour, sometime or the other. This is high among young
graduates in the private sector. This necessitates again doing manpower planning for further recruiting and
hiring.
VII. Conformity with Government Guidelines:
In order to protect the weaker sections of the society, the Indian Government has prescribed some norms for
organizations to follow. For example, reservations for SC/ST, BC, physically handicapped, ex-servicemen, etc.
in the jobs. While planning for fresh candidates, HR manager takes into consideration all the Government
guidelines.
VIII. International Expansion Strategies:
International expansion strategies of an organization depend upon HRP. Under International Human Resource
Management (IHRM), HRP becomes more challenging. An organization may want to fill the foreign
subsidiary’s key positions from its home country employees or from host-country or from a third country. All
this demands very effective HRP.
IX. Having Highly Talented Manpower Inventory:
Due to changing business environment, jobs have become more challenging and there is an increasing need for
dynamic and ambitious employees to fill the positions. Efficient HRP is needed for attracting and retaining well
qualified, highly skilled and talented employees.

FACTORS AFFECTING HR PLANNING

Broadly these factors can be grouped under three heads:
1. The macro environmental factors,
2. The micro environmental (industry specific) factors, and
ADVERTISEMENTS:

3. Company specific factors.

1. The Macro Environmental Factors:
The Macro environmental factors could have impact in the way a company does its human resource planning.
a. Economy:
The prevailing economic conditions have an influence over human resource planning. An economy (like India)
with high GDP growth rate, a huge growing market shall mean more jobs (demand). While presently troubled
economies like US (very recently lost its AAA credit rating), Greece with high debt load, very low GDP growth
facing double dip recession may mean lesser jobs (demand) and more separation programs.
b. Labour Market:
The availability of labor, labor participation rate into the workforce, skill levels and skill availability of the
labor, all have direct or indirect impact on human resource planning.
c. Demographic Factors:
The demographic factors like average age of the working population, gender-mix etc. have an impact for
example India and Japan face two different challenges, when it comes to their demographics. India will soon
have the largest youngest population of the world, in the age group of 18-35 years. This means more and more
Gen Y in the workforce.
Companies would need to incorporate their development and ready-employability at all levels. Whereas in japan
most of the working population is ageing and with not too many young hands as replacements (traditionally
japan has been a low birthrate country by choice) keeping their ageing workforce updated on latest technology
etc. and delaying their retirement continues to a challenge.
d. Regulatory Framework:
The regulatory-framework shall have an influence on the HRP. There are countries that are highly regulated by
the government like India whereas there are economies that have low governmental interference like US.
Recently with most of the BPO jobs relinquishing the US-shores, the government attempted to take these jobs
back to US.
2. The Micro (Industry Specific) Factors:
The Micro (Industry specific) factors affecting human resource planning of a company could be identified
as primarily four:
a. Industry growth
b. Industry attractiveness
c. Technology
d. Competitive climate
a. Industry Growth:
In the Indian context, most of the industries have shown a very healthy growth over the past decade or so, driven
largely by the strong consumer demand in the domestic market. This has in turn fuelled the demand for human
capital in majority of the sectors.
b. Industry Attractiveness:
Some industries like IT, Retail have been able to attract more talent because they have become relatively more
attractive because of their growth prospective, their practices, and their offerings, etc. There have been others
who are strong string to attract manpower.
c. Technology:
Technology has today pervaded virtually into every industry. We live in a knowledge economy and almost
everything is driven by technology. This has in turn necessitated development and replenishment of new skill-
sets in people.
Employability has become a factor, only because today almost every industry looks at the readiness of the
people entering their companies in terms of technology. This has impacted the demand of human resource
making it more ‘type’ dependent rather than being number-driven, as in the past.
d. Competition Climate:
The phenomenal growth that most of the industries have seen in India has meant a cut-throat competition in
most of the industries of market-share and market-leadership. Today most of the companies are trying to see that
as much as their bottom-line grows, their top-line grows as well.
Such competition has translated in to a similar competiveness for attracting and acquiring human resources.
Talent is the barometer of any company’s success today and ability to attract them in large numbers and to do
that continuously determines the edge.
3. The Company Specific Factors:
The company-specific factors affecting the Human Resource Planning of a Company include:
a. Strategy
b. Human Resource Inventory
C. Human Resource Mobility
a. Strategy:
The strategy of any firm plays an important role in designing its human resource planning programs. Way back
in 2005, when Bharti-Airtel decided to outsource activities like IT, software etc. and focus on marketing as its
core, it changed the HRP of the company forever. The focus then was to build an excellent marketing team and
garner the maximum market-share.
And, the company was pretty much successful in such efforts. Companies like Titan that are growing and
expanding have also been forced to enlarge their HRP programs. A company which has grown from profits of
10 crores to about 1000 crores in less than 10 years, with total revenues touching the 9000 crore mark, the
company has required large number of people of various skill-sets, at a rapid pace.
b. Human Resource Inventory:
The current human resource inventory of a company has an impact on the HRP programs. Every company tries
to ensure diversity in terms of skill-sets, gender-mix etc. The current set of employees is used as the reference
set for a company’s new demand for human resource.

c. Human Resource Mobility:

The human resource mobility both within and outside the firm has an impact on its HRP programs. The internal
mobility is primarily due to growth whereas the external mobility is due to attrition. High mobility rates shall
mean the need to replenish the human resource loss rapid-pace. This mobility or rather the cause of mobility
differs from industry to industry.

Factors Affecting Human Resource Planning – 9 Important Factors: Type of Organization, Approach of
Organization towards Planning, Time Horizon and a Few Others
There are various factors, both internal and external, which affect HR planning.
These factors are as follows:
Factor # 1. Type of Organization:
Type of organization affects HR planning. Type of organization may be identified on two base- nature of
business and pattern of ownership. Nature of business of the organization determines its production/operations
process which affects ratio of operatives and supervisory and managerial personnel.
For example, this ratio tends to be different in a manufacturing organization as compared to a service
organization. On the basis of pattern of ownership, organizations may be put into two categories- organizations
which make decisions on their own and organizations whose decision making is affected by other entities.
Organizations which make decisions on their own enjoy considerable freedom in HR planning. Organizations
whose decision making is influenced by other entities have considerable restriction in HR planning because
these entities provide guidelines about how HR planning should be undertake, for example, public sector
organizations, subsidiaries of multinationals, etc.
Factor # 2. Approach of Organization towards Planning:
Approach towards HR planning in an organization depends on its approach towards overall organizational
planning. Different organizations adopt different approaches towards overall planning. These approaches may
be analyzed in two forms- proactive or reactive approach and formal or informal approach. In proactive
approach, an organization anticipates future environment and makes strategic decisions based on this
anticipation.
In reactive approach, strategic decisions are in the form of reactions to environmental changes. Since an
organization collects information for undertaking planning process and relevant part of this information is also
used in HR planning process, HR planning may be either proactive or reactive.
Similarly, if an organization undertakes overall planning on formal basis which is quite comprehensive, HR
planning tends to be comprehensive. As against this, if an organization undertakes overall planning on informal
basis which is fragmented, HR planning also tends to be fragmented and only a few HR issues are considered in
HR planning.
Factor # 3. Strategy of Organization:
Strategy of an organization considerably affects HR planning because an HR plan is derived from strategy of the
organization. An organization has different strategic option- stability, growth, and retrenchment. In stability
strategy, the focus is on incremental growth by making the existing facilities more productive. In this case,
emphasis in HR planning is more on developing existing personnel and making few adjustments of personnel.
In growth strategy, the emphasis is on making additional investments which requires additional personnel.
Therefore, the organization needs comprehensive HR plans. In retrenchment strategy, the focus is on reducing
business volume by reducing scale of business operations or divesting some businesses. Therefore, HR planning
puts emphasis on reducing number of personnel.
Factor # 4. Organizational Growth Cycle:
Organizations have a definite pattern of growth cycle- birth and infancy, adulthood, maturity, and old age. At
each stage of growth cycle, there are specific organizational objectives and strategic focus, consequently, HR
planning. At birth and infancy, organizational objectives are survival and growth to some extent; strategic focus
is on mobilizing resources (including human resources too) and defining products and markets; and focus of HR
planning is on mobilizing human resources.
At adulthood, organizational objectives are quantitative growth of business volume and qualitative growth
through product differentiation and creating niche; strategic focus is on increasing market share, product
innovation, and reaping rewards of previous and present efforts; focus of HR planning is on developing
individual, group, and organizational competency.
At maturity, organizational objectives are stabilization of business and contribution to social cause; strategic
focus is on maintaining organizational position with stability; focus of HR planning is just to continue the
pattern of previous stage. At old age, organizational objective is survival; strategic focus is on retrenching
products/businesses that are not rewarding; focus of HR planning is on pruning size of workforce.
This is a general pattern of organizational growth cycle. There is no fixed time frame for completion of each
stage. This depends how an organization is managed. For example, Tata Steel, formed in 1907, is still going
strong while many organizations formed during this period have become extinct long back.
Factor # 5. Level of Environmental Uncertainty:
Environment is dynamic and changes continuously. Rate of this change determines level of environmental
uncertainty. If rate of change is high, level of environmental uncertainty is high and the HR planning premises
on the basis of which an HR plan is formulated may not work.
Therefore, there is a need for formulating contingency HR plans. This ensures that if one HR plan is not suitable
in the changed situation, other HR plans are available. If the level of environmental uncertainty is low, only one
HR plan is sufficient.
Factor # 6. Time Horizon:
Time horizon of HR plans affects HR planning. Longer the time horizon higher is the uncertainty in HR
formulation. This is so because it is very difficult, sometimes even impossible if the environment changes on
irregular pattern, to forecast future environment precisely.
Therefore, HR plans for remote future become meaningless. Because of this limitation, most of the
organizations prepare HR plans for five years along with short- terms HR plans every year. In this case, short-
term HR plans are based on long-term HR plan. In order to make long-term HR plan flexible, many
organizations prepare yearly HR plan and recast long-term HR plan every year.
Factor # 7. Type and Quality of Information:
Quality of HR planning is based on the type and quality of information because formulation of HR plan is based
on information. If required type of information with high quality is available at right time, HR planning becomes
effective. In the alternative case, it tends to be ineffective.
Factor # 8. Nature of Human Resource Market:
Human resource market consists of people with skills and abilities from where an organization may fill its
positions. Nature of human resource market affects availability of people with requisite skills and abilities. In
India, there is a paradox so for availability of human resources is concerned.
On the one hand, there is abundant supply of people so far as their educational qualifications are concerned. On
the other hand, only a very small percentages of such people is employable because of poor quality of majority
of educational institutions. Therefore, while assessing supply of human resources, this fact must be kept in
mind.
Factor # 9. Outsourcing HRM Functions:
Some HRM functions which are of administrative nature may be outsourced instead of performing these
functions internally. To the extent HRM functions are outsourced, HR planning workload gets reduced. If an
organization adopts practice of outsourcing HRM functions, it may concentrate on core HR issues in HR
planning.

Factors Affecting Human Resource Planning

HRP is influenced by several factors, out of which the most important include:
1. Type and strategy of organization
2. Organizational growth cycles and planning
3. Emergence of new technologies
4. Uncertainties in the environment
5. Time horizons
6. Type and quality of forecasting information
7. Labour market
The type of organization is an important consideration because it determines the production processes involved,
number and type of staff needed, and the supervisory and managerial personnel required. Manufacturing
organizations are more complex in this respect than those that render services.
An organization operates in a dwindling business environment. It grows at some rate. Depending on the growth
and the growth cycle, the human resource is determined. With advancement of science, organizations are
discarding conventional systems and adopting new technology. Uncertainties in the environment have led to
changing human resources.
Time horizon emphasizes that a plan cannot go on for too long on a time horizon as the operating environment
itself may undergo changes. On one hand, there are short-term plans spanning six months to one year, whereas
on the other hand, there are long-term plans which are spread over three or more years. The exact time span
depends on the degree of uncertainty prevailing in an organization’s environment.
Information is collected from multiple sources. Manpower needs depend on type, quality, and accuracy of
forecasting information. Accordingly, organizations finalize their strategy, organizational structure, budgets,
production schedules, and so forth.
Getting people with requisite knowledge and skill might emerge as a problem. The demographic variables are
also of utmost importance.

Factors Affecting Human Resource Planning – External Factors and Internal Factors that Affect HRP
The factors that affect HRP can be classified into external factors and internal factors as under:
1. External Factors:
As it is evident from their name the external factors which affect the human resource planning externally.
These include following:
(i) Level of Economic Development:
Level of economic development determines the level of human resource development in the country and thereby
the supply of human resources in the future in the country.

(ii) International Factors:

International factors like the demand and supply of human resources in various countries also affect human
resource planning.

(iii) Business Environment:

Business environment means the internal and external factors that influence the business. Business
environmental factors influence the volume of mix of production and thereby the supply of human resources in
the future in the country.

(iv) Government Policies:

Various policies of the government like labour policy, industrial policy, policy towards reserving certain jobs for
different communities and sons-of-the-soil, etc., affect human resource planning.

(v) Level of Technology:

Technology can be interpreted as the application of knowledge to practical tasks which lead to new inventions
and discoveries. The invention of the latest technology determines the kind of human resources required.

Information technology has brought amazing shifts in the way the business operates. These shifts include the
following business process re-engineering, enterprise resource planning and supply chain management. These
changes brought radial reduction in human resource and increase in software specialists. To illustrate, Computer
Aided Design (CAD) and Computer Aided Technology (CAT) also reduced the existing requirement of human
resource.

2. Internal Factors:
These factors include following aspects:
(i) Company Policies and Strategies:
The organisation’s policies and strategies are related to expansion, diversification, etc., determines the human
resource demand in terms of quantity and quality.

(ii) Human Resource Policies:

Human resource policies of the company are about the quality of human resources, compensation level, quality
of working conditions, etc., influence human resource planning.

(iii) Company’s Production and Operational Policy:

Company’s policies regarding how much to produce and how much to purchase from outside for manufacturing
the final product influences the number and kind of people required.

(iv) Trade Unions:

In case it is declared by the unions that they will not work for more than 8 hours in a day, it affects the human
resource planning. Therefore, influence of trade unions regarding the number of working hours per week,
recruitment sources, etc., affect human resource planning and is to be kept under consideration.

(v) Organisational Growth Cycles:

At the starting stage, the organisation is small as such it is but natural that need of employees is usually smaller,
however by the passage of time as the organisation enters the growth phase more young people need to be hired.
Likewise, in the declining/recession/downturn phase human resource planning is done to retrench the
employees.

(vi) Job Analysis:

Job analysis means detailed study of the job involving the skills needed for a particular job. Human resource
planning is based on job analysis which determines the kind of employees to be procured.

(vii) Time Horizon:

Company’s planning differs according to the competitive environment, i.e., companies with stable competitive
environment can plan for the long-run whereas firms without a stable environment can only plan for short-term.
As such short-term planning is adopted in the following cases.

There are many competitors entering business/when there is swift change in social and economic conditions of
business/if there is constant change in demand patterns/when there exists poor management practice, otherwise
long term planning is adopted.

(viii) Type and Quality of Information:

Every planning process is in need of qualitative and accurate information about the following organisational
structure, capital budget, functional area objectives, level of technology being used, job analysis, recruitment
sources, retirement plans, compensation levels of employees, etc. Hence, human resource planning is
determined on the basis of the type and quality of information.

Factors Affecting Human Resource Planning – Environmental Factors, Organisational Strategy, Time
Span, Information and Offloading the Work
HRP is not quite independent. HR manager has to plan carefully after considering numerous factors. HRP may
misfire if the influencing factors are not considered.
The following factors will influence HRP:
(a) Environmental Factors:
Environment means the atmosphere where the firm is operating. This atmosphere is created by social, cultural,
political, economic, legal, technological, etc., factors. HR manager may not have stable and predictable
environment. So HR manager has to plan very carefully regarding recruitment, selection, training, etc.
Balancing of manpower is done through promotion, retirement, layoff, retrenchment, VRS, etc.
(b) Organisational Strategy:
Every organisation has been established with certain objectives and to achieve these objectives strategy has to
be formulated. The corporate strategy will affect HR strategy. A strategy for internal development refers to the
recruitment of additional employees. In case of acquisitions, amalgamation or mergers, adjustment will be made
in respect of the manpower. This will have quite a good impact on HRP.
(c) Time Span:
If the operations of the organisation are performed in unstable and unpredictable environment, the organisation
can have short-term planning. But if the organisation has a fairly stable environment, the HRP can be for a long
period. Thus HRP is different for short-term and long-term to meet organisational needs.
(d) Information:
Information provides the basis for decision making. HR needs and supply information affects HRP. Right
information regarding jobs, job specification, job description and objective would support the management to
take timely decision.
(e) Offloading the Work:
Sometimes, a part of the work is offloaded by some enterprise to outside firms either by sub-contracting or
outsourcing such a need arises, as many enterprises have excess labour force. In such cases, they do not wish to
recruit more workers, in order to maintain good industrial relations.

Factors Affecting Human Resource Planning – Type and Strategy of Organization, Environmental
Uncertainties, Time Horizons, Outsourcing and a Few Others
Human Resource Planning is influenced by several considerations.
The more important of them are:
1. Type and strategy of organization.
2. Environmental uncertainties.
3. Time horizons.
4. Type and quality of forecasting information.
5. Sufficient Lead time to recruit.
6. Outsourcing.
7. Manpower Planning methods.
Factor # 1. Types and Strategy of Organization:
The type of organization is an important consideration because it determines the production processes involved,
number and type of staff needed and the supervisory and managerial personnel required. Manufacturing
organizations are more complex than those that render services in this respect.
The strategic plan of the organization defines the organization’s human resource needs. For example, a strategy
of internal growth means that additional employees must be hired. Acquisitions or layoffs, since mergers tend to
create duplicate or overlapping positions that can be handled more efficiently with fewer employees.
Factor # 2. Environmental Uncertainties:
Human resource managers rarely have the privilege of operating in a stable and predictable environment.
Political, social and economic changes affect all organizations. Personnel and human resource planners deal
with environmental uncertainties by carefully formulating recruitment, selection, training and development
policies and programmes.
Balancing mechanisms are built into the human resource management programme through succession planning,
promotion channels, layoff, flexi time, job sharing, retirement and other personnel related issues.
Factor # 3. Time Horizons:
Yet another major factor affecting human resource planning is the time horizon. On one hand there are short-
term plans spanning six months to one year. On other hand, there are long-term plans spread over three to
twenty years. The exact time span, however, depends on the degree of uncertainty prevailing in an
organization’s environment.
For companies operating in an unstable environment, plans must be for a short period. For others where
environment is fairly stable, plan may be longer. In general, the greater the uncertainty, the shorter the plan’s
time horizon and vice versa.
Factor # 4. Type and Quality of Forecasting Information:
The information used to forecast personnel needs originates from a multitude of sources. A major issue in
Human Resource Planning is the type of information, which should be used in making forecasts.
Closely related to the type of information is the quality of data used. The quality and accuracy of information
depend upon the clarity with which the organizational decision-makers have defined their strategy, organization
structure, budgets, production schedules and so forth. In addition, the human resource department must maintain
well-developed job-analysis information and human resource information systems that provide accurate and
timely data.
Generally speaking, organizations operating in stable environments are in a better position to obtain higher-
quality (comprehensive, timely and accurate) information because of longer planning horizons, clearer
definition of strategy and objectives, and fewer disruptions.
Factor # 5. Sufficient Lead Time to Recruit:
Human resource planners must consider the nature of jobs being filled in the organization. Job vacancies arise
because of severances, promotions and expansion strategies.
It is easy to employ shop-floor workers but a lot of sourcing is necessary for hiring managerial personnel. It is,
therefore, necessary for the human resource department to anticipate vacancies, as far in advance as possible, to
provide sufficient lead time to ensure that suitable candidates are recruited.
Factor # 6. Outsourcing:
Several organizations outsource part of their work to outside parties either in the form of subcontracting or
ancillarisation. Outsourcing is a regular feature both in the public sector as well as in the private sector. Most
organizations have surplus labour and they do not want to worsen the problem by hiring more people. Hence,
the need for off-loading. Some organizations are known to carry the concept of outsourcing to ridiculous lengths
and in the process, the regular employees sit idle.
Factor # 7. Manpower Planning Methods:
The four methods generally used to determine the requirements of personnel are:
i. Annual estimate of vacancies.
ii. Long-range estimates of vacancies.
iii. Fixed minimum man-hour man specification requirements.
iv. Specific position estimations.

Factors Affecting Human Resource Planning – Nature of Organization, Organizational Structure,

Growth and Expansion, Technological Changes, Legal Factors and a Few Others
Human resource plans are affected by internal and external environmental changes. Hence the plans should be
flexible so as to adapt easily with the changing circumstances. Human resource plans may be short term or long
term depending upon the different environmental factors within which the organisation is operating.
Human resource planning depends upon the following factors:
1. Nature of Organization:
The type and size of organization influences HRP. The nature of organization, the production process involved,
the machinery used, whether the company is labour or capital intensive, extent of automation and so on defines
the planning for human resources.
2. Organizational Structure:
The organisation structure defines the hierarchical arrangement of lines of authority, the rights, powers, duties,
responsibilities of different positions and the way in which the tasks are assigned and coordinated and the modes
of operation of the firm. HRP takes into account these organisational structure issues in the planning process.
3. Growth and Expansion:
Organization’s plan for growth, expansion and diversification has a bearing on human resource requirement.
Growth, expansion and diversification plans require more manpower that may be acquired internally through
development of existing work force or may be acquired from external sources. Hence human resource need
forecast incorporates organization’s future plan of growth, expansion and diversification.
4. Technological Changes:
Technology changes at a rapid pace and incorporation of technological changes in the production process and in
other organisational functioning is essential for growth and survival of the organisation. The organisations
require workforce with the knowledge of new technology to cope up with the technological changes.
In such situation firms may provide training to existing employees to upgrade their technical knowledge or may
opt to remove existing employees and appoint new ones. Technological advancement leading towards
automation requires downsizing and layoff.
5. Demographic Changes:
Demographic factors include age, population; composition of workforce has an impact HRP. A number of
people retire every year and a new batch graduates ever year. HRP considers these demographic factors into
their planning process.
6. Labour Turnover:
Labour turnover refers to the rate at which the employees leave the employment. Some organisations may have
high labour turnover or low labour turnover. Human resource plans must be changed constantly in case of firms
having high labour turnover.
7. Economic Position:
Economic and financial position of the organisation influences the organisation’s salary and employee
compensation plans, training and development programme, recruitment policies. These factors are taken into
consideration at the time of framing human resource plans.
8. Legal Factors:
Employment laws like age of retirement, minimum age for appointment, working hours, employee
compensation rules etc., are taken into consideration in human resource plans.

Factors Affecting Human Resource Planning – 3 Main Factors that Affect Human Resource Planning:
Existing Stock of Manpower, Wastage and Future Manpower Requirements
Three main factors which affect human resource planning are as follows:
1. Existing Stock of Manpower:
The starting point of all the planned processes and the base of manpower planning is taking the stock of existing
manpower.
Following should be studied for this purpose:
(i) Total stock of manpower is divided into groups on the basis of function, qualification, level of skill,
occupation, etc.
(ii) A group wise detailed statement is prepared regarding the number of workers in the group, their age,
qualifications, date of retirement, etc.
2. Wastage:
Another factor affecting human resource planning is wastage. For effective human resource planning, the
adjustment of wastage should be made in the existing manpower stock of the organisation.
3. Future Manpower Requirements:
After analysing the existing manpower stock and analysing the various reasons of wastage, one can easily assess
the future requirements of manpower taking into account the following considerations –
(i) Future plans of the company
(ii) Government plans and programmes
(iii) Employment policy
(iv) Demand and supply of manpower in future
(v) Productivity of labour.
DEMAND FORECASTING AND PROCESS OF HR PLANNING
Human resource (HR) demand forecasting is the process of estimating the future quantity and quality of people

required. The basis of the forecast must be the annual budget and long-term corporate plan, translated into

activity levels for each function and department. In a manufacturing company, the sales budget would be

translated into a production plan giving the number and type of products to be produced in each period. From

this information, the number of hours to be worked by each skilled category to make the quota for each period,

would be computed. Once the hours are available, determining the quality and quantity of personnel will be the

logical step.

HR Demand forecasting must consider several factors-both external as well as internal. Among the external

factors are competition (foreign and domestic), economic climate, laws and regulatory bodies, changes in

technology, and social factors. Internal factors include budget constraints, production levels, new products and

services, organisational structure, and employee separations. Demand forecasting is common among

organisations, though they may not do personnel-supply forecasting.

There are several good reasons to conduct demand forecasting. It can help: (i) quantify the jobs necessary for
producing a given number of goods, or offering a given amount of services; (ii) determine what staff-mix is
desirable in the future; (iii) assess appropriate staffing levels in different parts of the organisation so as to avoid
unnecessary costs; (iv) prevent shortages of people where and when they are needed most; and (v) monitor
compliance with legal requirements with regard to reservation of jobs.

FACTORS AFFECTING HR DEMAND FORECASTING

Human Resource Demand Forecasting depends on several factors, some of which are given below.

 Employment trends;
 Replacement needs;
 Productivity;
 Absenteeism; and
 Expansion and growth.

There are number of techniques of estimating/forecasting human resources demand:

(a) Managerial Judgement

(b) Work Study Technique
(c) Ratio-trend Analysis (d) Econometric Models
(e) Delphi Model
(f) Other Techniques

(a) Managerial Judgement: Managerial judgement technique is very common technique of demand forecasting.
This approach is applied by small as well as large scale organisations. This technique involves two types of
approaches i.e. 'bottom-up approach' and 'top-down approach'. Under the 'bottom-up approach', line mangers
send their departmental requirement of human resources to top management. Top management ultimately
forecasts the human resource requirement for the overall organisation on the basis of proposals of departmental
heads. Under the Top-down approach', top management forecasts the human resource requirement for the entire
organisation and various departments. This information is supplied to various departmental heads for their
review and approval. However, a combination of both the approaches i.e. 'Participative Approach' should be
applied for demand forecasting. Under this approach, top management and departmental heads meet and decide
about the future human resource requirement. So, demand of human resources can be forecasted with unanimity
under this approach.

(b) Work-Study Technique: This technique is also known as 'work-load analysis'. This technique is suitable
where the estimated work-load is easily measureable. Under this method, estimated total production and
activities for a specific future period are predicted. This information is translated into number of man-hours
required to produce per units taking into consideration the capability of the workforce. Past-experience of the
management can help in translating the work-loads into number of man-hours required. Thus, demand of human
resources is forecasted on the basis of estimated total production and contribution of each employee in
producing each unit items. The following example gives clear idea about this technique.

Let us assume that the estimated production of an organisation is 3.00.000 units. The standard man-hours
required to produce each unit are 2 hours. The past experiences show that the work ability of each employee in
man-hours is 1500 hours per annum. The work-load and demand of human resources can be calculated as under:

 Estimated total annual production = 300000 units

 Standard man-hours needed to produce each unit = 2 hrs
 Estimated man-hours needed to meet estimated annual production (i x ii) = 600000 hrs
 Work ability/contribution per employee in terms of man-hour = 1500 units
  Estimated no. of workers needed (iii / iv) = 600000/1500 = 400 units

The above example clearly shows that 400 workers are needed for the year. Further, absenteeism rate, rate of
labour turnover, resignations, deaths, machine break-down, strikes, power-failure etc. should also be taken into
consideration while estimating future demand of human resources/ manpower.

(c) Ratio-Trend Analysis: Demand for manpower/human resources is also estimated on the basis of ratio of
production level and number of workers available. This ratio will be used to estimate demand of human
resources. The following example will help in clearly understanding this technique.

Estimated production for next year = 1,40,000 units

Estimated no. of workers needed
(on the basis of ratio-trend of 1: 200) will be = 700

(d) Econometrics Models: These models are based on mathematical and statistical techniques for estimating
future demand. Under these models relationship is established between the dependent variable to be predicted
(e.g. manpower/human resources) and the independent variables (e.g., sales, total production, work-load, etc.).
Using these models, estimated demand of human resources can be predicted.

(e) Delphi Technique: Delphi technique is also very important technique used for estimating demand of human
resources. This technique takes into consideration human resources requirements given by a group of experts i.e.
mangers. The human resource experts collect the manpower needs, summarises the various responses and
prepare a report. This process is continued until all experts agree on estimated human resources requirement.

(f) Other Techniques: The other techniques of Human Resources demand forecasting are specified as under:

(a) Following the techniques of demand forecasting of human resources used by other similar organisations
(b) Organisation-cum-succession-charts
(c) Estimation based on techniques of production
(d) Estimates based on historical records
(e) Statistical techniques e.g. co-relation and regression analysis.
Process of HRP
Six steps in human resource planning are presented in Figure 5.3.

1. Analysing Organizational Objectives:

The objective to be achieved in future in various fields such as production, marketing, finance, expansion and

sales gives the idea about the work to be done in the organization.

2. Inventory of Present Human Resources:

From the updated human resource information storage system, the current number of employees, their capacity,

performance and potential can be analysed. To fill the various job requirements, the internal sources (i.e.,

employees from within the organization) and external sources (i.e., candidates from various placement agencies)

can be estimated.

3. Forecasting Demand and Supply of Human Resource:

The human resources required at different positions according to their job profile are to be estimated. The

available internal and external sources to fulfill those requirements are also measured. There should be proper

matching of job description and job specification of one particular work, and the profile of the person should be

suitable to it.

4. Estimating Manpower Gaps:

Comparison of human resource demand and human resource supply will provide with the surplus or deficit of

human resource. Deficit represents the number of people to be employed, whereas surplus represents

termination. Extensive use of proper training and development programme can be done to upgrade the skills of

employees.

5. Formulating the Human Resource Action Plan:

The human resource plan depends on whether there is deficit or surplus in the organization. Accordingly, the

plan may be finalized either for new recruitment, training, interdepartmental transfer in case of deficit of

termination, or voluntary retirement schemes and redeployment in case of surplus.

6. Monitoring, Control and Feedback:

It mainly involves implementation of the human resource action plan. Human resources are allocated according

to the requirements, and inventories are updated over a period. The plan is monitored strictly to identify the

deficiencies and remove it. Comparison between the human resource plan and its actual implementation is done

to ensure the appropriate action and the availability of the required number of employees for various jobs.

PROBLEMS AND LIMITATIONS OF HRP

PROBLEMS
1. Inaccuracy:
Human resource planning involves forecasting the demand for and supply of human resources. Projecting
manpower needs over a period of time is risky.
It is not possible to track the current and future trends correctly and convert the same into meaningful action
guidelines.

Longer the time horizon, greater is the possibility of inaccuracy. Inaccuracy increases when departmental
forecasts are merely aggregated without critical review.

Factors such as absenteeism, labour turnover, seasonal trends in demand, competitive pressures, technological
changes and a host of other factors may turn the rest of manpower plans into fashionable, decorative pieces.

2. Uncertainties:
Technological changes and market fluctuations are uncertainties, which serve as constraints to human resource
planning. It is risky to depend upon general estimates of manpower in the face of rapid changes in environment.

3. Lack of support:
Planning is generally undertaken to improve overall efficiency. In the name of cost cutting, this may ultimately
help management weed out unwanted labour at various levels.

ADVERTISEMENTS:

The few efficient ones that survive such frequent onslaughts complain about increased workload. Support from
management is equally missing.
They are unwilling to commit funds for building an appropriate human resource information system.

The time and effort involved – with no tangible, immediate gains – often force them to look the ‘other way’.

Successful human resource planning flourishes slowly and gradually. In some cases, sophisticated technologies
are forcefully introduced just because competitors have adopted them.

These may not yield fruits unless matched with the needs and environment of the particular enterprise.

4. Numbers’ game:
In some companies, human resource planning is used as a numbers game. There is too much focus on the
quantitative aspect to ensure the flow of people in and out of the organisation. Such an exclusive focus overtakes
the more important dimension, i.e., the quality of human resources.

HR planning, in the final analysis, may suffer due to an excessive focus on the quantitative aspects.

The quality side of the coin (consisting of employee motivation, morale, career prospects, training avenues etc.)
may be discounted thoroughly.

5. Employees Resistance:
Employees and trade unions feel that due to widespread unemployment, people will be available for jobs as and
when required. Moreover they feel that human resource planning increases their workload and regulates them
through productivity bargaining.

6. Employers Resistance:
Employers may also resist human resource planning feeling that it increases the cost of manpower.

7. Lack of Purpose:
Managers and human resource specialists do not fully understand human planning process and lack a strong
sense of purpose.

8. Time and Expenses:

Manpower planning is a time-consuming and expensive exercise. A good deal of time and cost are involved in
data collection and forecasting.

LIMITATION OF HRP
1.Lack of Accuracy: projecting manpower needs over a period of time is a complex one. It’s not possible to
track the current and future trends correctly and convert the same into meaningful action guidelines. Factors
such as absenteeism, labor turnover, seasonal trends in demand, competitive pressures, technological changes
and a host of other factors may turn the rest of manpower plans as fashionable, decorative pieces.
2.Absence of Support: planning is generally undertaken to improve overall efficiency. In the mane of cost
cutting, this may ultimately help management weed out unwanted labor of several levels. The few efficient ones
that survive such frequent onslaughts complain about increased workload. Support from management is equally
missing on more than one occasion. They are unwilling to commit funds for building an appropriate human
resources information system. The time and effort involved with no tangible, immediate gains often force them
to look the other way.
3.Numbers game: HRP, in the final analysis, may suffer due to an excessive focus on the quantitative aspects.
They quality side of the coin (consisting of employee motivation, moral, career prospects, training avenues etc.)
may be discounted thoroughly.
RECRUTIMENT
Meaning:

Recruitment is a positive process of searching for prospective employees and stimulating them to apply for the

jobs in the organisation. When more persons apply for jobs then there will be a scope for recruiting better

persons.

The job-seekers too, on the other hand, are in search of organisations offering them employment. Recruitment is

a linkage activity bringing together those with jobs and those seeking jobs. In simple words, the term

recruitment refers to discovering the source from where potential employees may be selected. The scientific

recruitment process leads to higher productivity, better wages, high morale, reduction in labour turnover and

enhanced reputation. It stimulates people to apply for jobs; hence it is a positive process.

Recruitment is concerned with reaching out, attracting, and ensuring a supply of qualified personnel and making

out selection of requisite manpower both in their quantitative and qualitative aspect. It is the development and

maintenance of adequate man- power resources. This is the first stage of the process of selection and is

completed with placement.

Definition:

According to Edwin B. Flippo, “It is a process of searching for prospective employees and stimulating and

encouraging them to apply for jobs in an organisation.” He further elaborates it, terming it both negative and

positive.

He says, “It is often termed positive in that it stimulates people to apply for jobs, to increase the hiring ratio, i.e.

the number of applicants for a job. Selection, on the other hand, tends to be negative because it rejects a good

number of those who apply, leaving only the best to be hired. ”

In the words of Dale Yoder, Recruitment is the process to “discover the sources of manpower to meet the

requirements of the staffing schedule and to employ effective measures for attracting that manpower in adequate

numbers to facilitate effective selection of an efficient working force.”

Kempner writes, “Recruitment forms the first stage in the process which continues with selection and ceases

with the placement of the candidates.”

In personnel recruitment, management tries to do far more than merely fill job openings. As a routine the

formula for personnel recruitment would be simple i.e., just fill the job with any applicant who comes along.

Joseph J. Famularo has said, “However, the act of hiring a man carries with it the presumption that he will stay

with the company-that sooner or later his ability to perform his work, his capacity for job growth, and his ability

to get along in the group in which he works will become matters of first importance.” Because of this, a critical

examination of recruitment methods in use should be made, and that is the purpose of this chapter.

Process of Recruitment:

Recruitment Process Passes through the Following Stages:

(i) Searching out the sources from where required persons will be available for recruitment. If young managers

are to be recruited then institutions imparting instructions in business administration will be the best source.

(ii) Developing the techniques to attract the suitable candidates. The goodwill and reputation of an organisation

in the market may be one method. The publicity about the company being a professional employer may also

assist in stimulating candidates to apply.

(iii) Using of good techniques to attract prospective candidates. There may be offers of attractive salaries, proper

facilities for development, etc.

(iv) The next stage in this process is to stimulate as many candidates as possible to apply for jobs. In order to

select a best person, there is a need to attract more candidates.

Factors Influencing Recruitment:

All enterprises, big or small, have to engage themselves in recruitment of persons. A number of factors

influence this process.

Some Of The Main Factors Are Being Discussed Below:

1. Size of the Enterprise:

The number of persons to be recruited will depend upon the size of an enterprise. A big enterprise requires more

persons at regular intervals while a small undertaking employs only a few employees. A big business house will

always be in touch with sources of supply and shall try to attract more and more persons for making a proper

selection. It can afford to spend more amounts in locating prospective candidates. So the size of an enterprise

will affect the process of recruitment.

2. Employment Conditions:

The employment conditions in an economy greatly affect recruitment process. In under-developed economies,

employment opportunities are limited and there is no dearth of prospective candidates. At the same time suitable

candidates may not be available because of lack of educational and technical facilities. If the availability of

persons is more, then selection from large number becomes easy. On the other hand, if there is a shortage of

qualified technical persons, then it will be difficult to locate suitable persons.

3. Salary Structure and Working Conditions:

The wages offered and working conditions prevailing in an enterprise greatly influence the availability of

personnel. If higher wages are paid as compared to similar concerns, the enterprise will not face any difficulty in

making recruitments. An organisation offering low wages can face the problem of labour turnover.

The working conditions in an enterprise will determine job satisfaction of employees. An enterprise offering

good working conditions like proper sanitation, lighting, ventilation, etc. would give more job satisfaction to

employees and they may not leave their present job. On the other hand, if employees leave the jobs due to

unsatisfactory working conditions, it will lead to fresh recruitment of new persons.

4. Rate of Growth:

The growth rate of an enterprise also affects recruitment process. An expanding concern will require regular

employment of new employees. There will also be promotions of existing employees necessitating the filling up

of those vacancies. A stagnant enterprise can recruit persons only when present incumbent vacates his position

on retirement, etc.

OBJECTIVES OF RECRUITMENT
Objectives of Recruitment Policy
 Recruitment policy asserts the objectives of the recruitment and provides a framework of the implementation of
the recruitment program.

It may involve the organization system to be developed for implementing recruitment programs and procedures
to be employed.

According to Memoria, a good recruitment policy must contain elements such as

1. organization’s objective (short term and long term),

2. identification of the recruitment needs,

3. the preferred source of recruitment,

4. criteria of selection and preferences, and

5. the cost of recruitment and its financial implications of the same. Objectives are targets and goals.

According to Yoder (1996), the following are the main objectives of recruitment policy:

 To find and employ the best-qualified person for each job.

 To minimize the cost of recruitment.

 To offer promising careers and security.

 To provide facilities for growth and development.

 To retain the best and most promising ones.

 To reduce the scope of favoritism and malpractice.

SUBSYSTEMS
NOT FOUND
CENTRALISED RECRUTIEMENT

Centralized recruiting is the process whereby all direct hire creative staffing decisions are made by one human
resources team within a company. Corporate recruiters working for a centralized team oversee the entire
recruitment process for all new hires across all departments. The centralized recruitment model has become
standard practice across most large corporations for a number of reasons. According to an ERE Media
article, centralized recruitment to streamlines the process, makes hiring more cost efficient, keep recruitment
consistent across the board and even eliminates bias.

While the benefits of this model are clear, especially for large business operations, there are also a number of
downsides to consider. If your operation is small or specialized, it may be wise to decentralize the process. This
usually involves moving hiring managers to each department, so they can make these specialized hiring
decisions independently. Decentralizing recruitment may also involve the assistance of a niche staffing agency.
Below are reasons why a centralized recruiting model may not be the best option for your company:
1. Lack of Position Information

While the HR professionals working for a centralized recruitment team will likely have a wealth of knowledge
about best hiring practices, they still may lack more specific knowledge about the position they are filling. Lack
of position knowledge occurs because centralized recruiters have to fill openings across all departments, leaving
little time to understand the needs of each specific department in depth. As Chron explained, the centralized
recruiter does not work alongside the new candidate in question. Subsequently, he or she could end up selecting
and ultimately hiring a candidate who is not right for the role – either due to a personality clash with the
company culture or a lack of necessary skills.

“80% of companies enlist the services of an external agency.”

With a decentralized model, hiring managers work with a specific team or department, taking the time to learn
about its working culture and unique hiring needs. A decentralized model can even be supplemented with the
help of a recruitment firm specialized in the department, as it is able to most effectively find the right kinds of
candidates for specific needs, due to a wider pool of professional connections and a greater ability to reach
passive candidates. So, for example, if a hiring manager is looking to fill a creative position, he or she may
consult the specific expertise of a creative staffing agency. According to a survey from Novo Group, 80 percent
of companies now outsource the services of an external recruitment agency.

Identifying hiring needs across multiple departments is ambitious, but even the most seasoned recruiters might
need a hand now and again. Unsure of the hiring needs in your marketing and creative technology
departments? Contact Profiles. After a thorough consultation, we will understand your organization, determine
needs and next steps, and get to work!

2. Ineffective for Geographically Diverse Organizations

A centralized recruitment system will likely prove ineffective if your company has multiple offices across a
wide geographical area. As AzCentral pointed out, local demands and hiring conditions fluctuate from area to
area, and a decentralized hiring process will be able to respond better to the specific local needs of each
department. For example, if a job opening arises at a company office in Florida, requiring a quick fill, it is more
time-efficient and cost-effective for local hiring managers to make the decision, as opposed to a centralized team
based at the organization headquarters in, say, New York City.

 Hiring conditions change from state to state. For organizations in multiple locations, decentralized recruitment
will allow the team to tackle hiring processes in a timely manner.

3. Needs and Priorities May Shift

In a similar vein to local changes, a centralized recruitment process may not be able to keep up with fast-
changing needs and decisions. For instance, several people leave a position or are let go in one month alone.
Waiting for a centralized team to begin a job search for all the new positions across the company could prove
much less time-efficient. It’s most effective for a departmental team or recruiter, who can anticipate the unique
needs of their team, to make the call.

4. It Can Cost More Money

Chron explained that while it can be more cost-effective for a large company to have a centralized team, it is a
different story entirely for a smaller operation. Establishing an HR team dedicated solely to making hiring
decisions can be costly, and small businesses may not be able to justify such an expense if they do not routinely
make new hires.

5. Managers and Executives Left Out of the Decision

With a centralized HR team, managers and executives may feel frustrated at their inability to voice an opinion
over any new hiring decisions, Chron noted. After all, a department director will know the unique needs of the
department or company better than an HR professional who deals exclusively with general recruitment.

DECENTRALIZED RECRITMENT
Definition: Decentralization refers to the assignment of authority along with the responsibility at each level of
the organization. Distribution of the power of decision making along with the related responsibilities among the
different managerial levels is necessary for better management.

Example; A bakery manufacturer and outlet owner opened two more retail outlets in his city. The owner was
initially taking all the decisions solely and was able to manage both; the manufacturing and the retail outlet by
himself.

But now he has to plan for decentralization of his organization. This is because he has to focus more on
strategical decisions rather than on the day to day operations of the business.

The sole proprietor hired three managers for all the three outlets. He decided to manage the manufacturing unit
by himself. He also appoints the other staff for cleaning and sales to work for each outlet.

Finally, he decides to delegate the authority to the managers for making decisions related to their respective
outlet regarding stock, customer handling, order placement, worker’s leave and turnover and other operational
activities.

This decentralization practice leads to better management of each outlet as well as the manufacturing unit. It
also facilitated the owner to plan for organizational growth and development.

Content: Decentralization

1. Factors
2. Objectives
3. Limitations
4. Conclusion

Factors Influencing Decentralization

Decentralization is necessary for large organizations. Here, decision making is required at every step of the
business operations. However, every organization need not necessarily go for decentralization.

The following factors affect the decision of decentralization of the organization:

Management’s Philosophy: In the organizations where the top management wants its employees to take some
of the decisions, a decentralized system is formed.

However, if the mindset of the administration is such that they solely prefer to make all the business-related
decisions, they won’t go for decentralization.

Employees’ Efficiency and Competence: If the organization has efficient and skilled resources which it can
rely on, it opts for decentralization. Whereas in the absence of capable managers, the top management prefers to
retain the power of decision making.

Organization’s Nature and Size: If the organization is a sole proprietorship or partnership business, running on
a narrow scale with a limited number of employees, there is no need for decentralization.

However, for the corporates running on a vast scale, a decentralized system is necessary for the smooth
functioning of the business.

Diversification: For an organization which is engaged in the production of a whole range of different
products, centralization becomes difficult. Thus, the delegation of authority and division of work is essential for
the organizations involved in a diversified product line.

Geographical Dispersion: The organizations which expand over a vast geographic area, having branches in
different locations need decentralization. Since the management cannot function and take all operational
decisions solely in such cases.

Technical Complexity: While introducing new technology into the organization, the top management has to
shift some authority and responsibility to the experts in the area, i.e. the managers. They know all the in and outs
of the business operations and the new technology.

Cost and Importance of the Decisions: The top management analyzes the impact and importance of the
decisions before delegating the authority of such decision making to the managers. Mostly, the decisions related
to business operations are entrusted to the managers.

Willingness of the Subordinates: Decentralization is also influenced by the desire and initiative of the
subordinates to take responsibility for their decisions, along with its authority.

Objectives of Decentralization

Decentralization is an important strategical decision. It changes the whole organizational structure right from the
top management to the bottom level. Like other business strategies, decentralization is also purposeful.

Let us understand the various objectives for which organizations decentralize their operations:

Development of Managerial Personnel

Decentralization provides for self-learning of the managers by facing the problem, finding the solutions
themselves and taking the correct decisions. It adds on to the skills, experience and expertise of the managers in
their respective departments.

Effective Control and Supervision

The managers exercise better control over the operations of the subordinates by taking disciplinary actions.
They can make decisions related to production schedules, promotions and leaves taken by the subordinates.

Flexibility
Decentralization leads to flexibility in business operations. It also provides authority to the managers to handle
unexpected situations independently. It allows them to manage their respective departments in the way they
want to.

Motivates and Boosts Morale

It creates self-dependant managers and drives them to enhance their performance, take the initiative and develop
a problem-solving attitude. Decision making also boosts their morale and confidence.

Prompt Decision Making

There are times when the managers have to take immediate and unplanned decisions at operational levels; it is
only possible in decentralized organizations.

On the contrary, in a centralized organization, the decision-making process is quite lengthy and complicated,
which is ineffective for handling unforeseen operational problems and issues.

Reduces the Burden of Top Management

The management has to take certain crucial strategical decisions which require a lot of analysis and planning.
Decentralization releases the management from operational decision making, facilitating them to engage
themselves in future strategic planning.

Limitations of Decentralization

As we have already seen that decentralization is a useful practice for the organization operating on a large scale.
But there are certain shortcomings of decentralization too which makes it unsuitable for all type of
organizations.

To know more about these limitations of decentralization, read below:

 Increases Administrative Expenses: To practice decentralization, the top management has to appoint
well qualified and experienced managers. These managers need to be paid reasonably, thus increasing
the administrative expenses of the organization.
 High Operational Cost: When different department are formed during decentralization, the
organization incurs high cost on the day to day operations, resources, employees, etc.
 Managerial Inefficiency: At times, the managers are not efficient and skilled enough to take decisions
on their own. The decisions made by such managers may sometimes prove to be disastrous for the
organization.
 Not Suitable for Small Firms: The organizations which are small in size neither require
decentralization nor departmentation. They can be efficiently managed by the owner or the management
itself.
 Lacks Uniformity: Every manager in a decentralized organization will possess a different opinion,
individual set of actions and a unique management style which brings in non-uniformity in the
organization.
 Co-ordination Problem: Decentralization allows decision making at all levels. These decisions need
to be taken in collaboration with other departments. Sometimes there is a coordination problem among
the managers of the different departments creating loopholes in the business operations.

Conclusion

Decentralization is essential in the present business scenario where the organizations are becoming vast and
diversifying into different product lines.

The top management needs to focus on other strategical issues. For this, they have to free themselves from the
day to day operations. It is only possible through delegation of the authority and responsibility to the managerial
level.
The top management may also plan for partial decentralization of the organization. Where the managers
themselves can take certain less critical business decisions; the senior management is responsible for making
crucial decisions.

RECRUITMENT ORGANIZATION

The five steps involved in recruitment process are as follows: (i) Recruitment Planning (ii) Strategy

Development (iii) Searching (iv) Screening (v) Evaluation and Control.

These are depicted in Figure 6.2.

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Now, a brief description of these follows:

1. Recruitment Planning:

The first step involved in the recruitment process is planning. Here, planning involves to draft a comprehensive

job specification for the vacant position, outlining its major and minor responsibilities; the skills, experience and

qualifications needed; grade and level of pay; starting date; whether temporary or permanent; and mention of

special conditions, if any, attached to the job to be filled ”

2. Strategy Development:

Once it is known how many with what qualifications of candidates are required, the next step involved in this

regard is to devise a suitable strategy for recruiting the candidates in the organisation.

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The strategic considerations to be considered may include issues like whether to prepare the required candidates

themselves or hire it from outside, what type of recruitment method to be used, what geographical area be

considered for searching the candidates, which source of recruitment to be practiced, and what sequence of

activities to be followed in recruiting candidates in the organisation.

3. Searching:

This step involves attracting job seekers to the organisation. There are broadly two sources used to attract

candidates.

These are:

1. Internal Sources, and

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2. External Sources

These have been just discussed, in detail, under 6.3 Sources of Recruitment.

4. Screening:

Though some view screening as the starting point of selection, we have considered it as an integral part of

recruitment. The reason being the selection process starts only after the applications have been screened and

shortlisted. Let it be exemplified with an example.

In the Universities, applications are invited for filling the post of Professors. Applications received in response

to invitation, i.e., advertisement are screened and shortlisted on the basis of eligibility and suitability. Then, only

the screened applicants are invited for seminar presentation and personal interview. The selection process starts

from here, i.e., seminar presentation or interview.

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Job specification is invaluable in screening. Applications are screened against the qualification, knowledge,

skills, abilities, interest and experience mentioned in the job specification. Those who do not qualify are

straightway eliminated from the selection process.

The techniques used for screening candidates vary depending on the source of supply and method used for

recruiting. Preliminary applications, de-selection tests and screening interviews are common techniques used for

screening the candidates.

5. Evaluation and Control:

Given the considerable cost involved in the recruitment process, its evaluation and control is, therefore,

imperative.

The costs generally incurred in a recruitment process include:

(i) Salary of recruiters

(ii) Cost of time spent for preparing job analysis, advertisement

(iii) Administrative expenses

(iv) Cost of outsourcing or overtime while vacancies remain unfilled

(v) Cost incurred in recruiting unsuitable candidates

In view of above, it is necessary for a prudent employer to try to answer certain questions like: whether the

recruitment methods are appropriate and valid? And whether the recruitment process followed in the

organisation is effective at all or not? In case the answers to these questions are in negative, the appropriate

control measures need to be evolved and exercised to tide over the situation.

However, such an exercise seems to be only rarely carried out in practice by the organisations employers.

Having discussed recruitment process, it will be now relevant to have an idea about recruitment practices in

India. The following section delineates the same.

OR

5 REASONS WHY EVERY ORGANIZATION NEEDS A RECRUITMENT AND SELECTION

POLICY
Posted on July 11, 2018 by Guest Blogger

The recruitment process can be a hectic task for any enterprise. However, if you have an effective recruitment
and selection policy, then it significantly eliminates the employee turnover; making it easier for you to choose
the just right candidate who not only meets the work-related competencies, but also complements the core
values of your organization.
A recruitment and selection policy is a document that summarizes the guiding principles regarding how an
organization will conduct the overall recruitment and selection process. The policy has a pivotal role to hire the
most suitable candidates based on the work ethics and business goals that an organization seeks to serve.

Download this eBook to uncover three overlooked areas to get the most of your company's recruiting
dollars. 

WHY YOUR ORGANIZATION NEEDS A RECRUITMENT AND SELECTION POLICY

The primary aim of a recruitment and selection policy is to ensure a transparent and fair hiring process that can
assist the HR personnel to select the right candidate on the basis of merit and relevance with the job.

Recruiting the right people carries supreme importance for the continuation of the success of an organization.
Which is why we’ve rounded up a list of reasons that will further convince you to establish a recruitment and
selection policy for your organization.

IT ENSURES TRANSPARENCY IN THE HIRING PROCESS

A recruitment and selection policy ensures that all the procedures related to hiring and selection are performed
transparently, and all the members involved (the hiring manager, HR, etc.) are following the recruitment process
with having complete confidence over the end-result. Moreover, being transparent also means that candidates
are always informed about the status of their application and informed if they are awarded a job.

IT PAVES THE WAY FOR MERIT-BASED HIRES

An effective recruitment and selection policy ensures that the overall recruitment process is being conducted in
a fair and legitimate manner. It makes sure that discriminatory behavior is avoided at any stage of the overall
recruitment process – a candidate should never be discriminated on the basis of his gender, race, age, religion, or
nationality. A fair and authentic policy allows a candidate to take legal action if they feel they’re being
discriminated against any factor. Moreover, every job application should be should be treated in a confidential
manner.

IT PROVIDES CONSISTENCY
A recruitment and selection process that is not consistent gives inconsistent results. Thus, consistency is another
reason for having an effective recruitment and selection policy. Organizations should make sure not to set
different selection criteria for each candidate as it will then not be possible to determine the effectiveness of
each individual. To achieve consistency, a standardized process should be followed. Instead, it will be more
beneficial if organizations apply pre-determined criteria at all stages of the recruitment process as it will
eliminate the risks of bias and discrimination. Also, companies should conduct reference checks prior to making
any appointment with the candidate and should be performed in a consistent manner.

IT LENDS CREDIBILITY TO AN ORGANIZATION

Another reason for having a set recruitment and selection policy is to show that an organization is credible
enough for applying. Today, there are several job vacancies that are not genuine and many candidates get
trapped into the hands of fake companies. Hence, for gaining reliability, a company should follow specific
application procedures that will make the candidates feel confident for the position they are applying.

IT HELPS WRITE AN APPROPRIATE JOB DESCRIPTION

Having a good recruitment and selection policy is essential because it assists the organization in writing an
accurate job description. An appropriate job description is an integral part of the overall recruitment process as it
clearly describes what primary and secondary tasks will be performed along with the core competencies for a
particular role.

An effective recruitment and selection policy not only fulfills the requirements of a job but also ensures that an
organization will continue to maintain its commitment to providing equal opportunity to employees. Adherence
to such a policy will let you hire the best possible candidates for your organization.

RECRUITMENT SOURCES

Recruitment: Meaning and Sources of Recruitment (with diagram)!

Whenever there is a vacancy in the organization, generally it is to be filled. To make the candidate available for

filling those vacancies, their selection procedure and placement on a proper job comes under the purview of

recruitment.

As soon as the available vacancies are known, they are advertised through different media and accordingly the

applications are collected for the vacant posts. A group of candidates interested in doing the job and are eligible

to do, it is created through recruitment.

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It is an operative function of human resource management coming under the managerial function called

organizing. In the words of Edwin Flippo, ‘recruitment is the process of searching for prospective employees

and stimulating them to apply for jobs in the organisation’.

In short, it involves attracting and obtaining as many applications as possible from eligible job seekers.

Sources of Recruitment:

The eligible and suitable candidates required for a particular job are available through various sources. These

sources can be divided into two categories, as shown in Figure 5.5.

Internal Sources of Recruitment:

1. Promotions:

The promotion policy is followed as a motivational technique for the employees who work hard and show good

performance. Promotion results in enhancements in pay, position, responsibility and authority. The important

requirement for implementation of the promotion policy is that the terms, conditions, rules and regulations

should be well-defined.

2. Retirements:

The retired employees may be given the extension in their service in case of non-availability of suitable

candidates for the post.

3. Former employees:

Former employees who had performed well during their tenure may be called back, and higher wages and

incentives can be paid to them.

4. Transfer:

Employees may be transferred from one department to another wherever the post becomes vacant.

5. Internal advertisement:

The existing employees may be interested in taking up the vacant jobs. As they are working in the company

since long time, they know about the specification and description of the vacant job. For their benefit, the

advertisement within the company is circulated so that the employees will be intimated.

Benefits of Internal Sources of Recruitment:

1. The existing employees get motivated.

2. Cost is saved as there is no need to give advertisements about the vacancy.

3. It builds loyalty among employees towards the organization.

4. Training cost is saved as the employees already know about the nature of job to be performed.

5. It is a reliable and easy process.

Limitations of Internal Sources of Recruitment:

1. Young people with the knowledge of modem technology and innovative ideas do not get the chance.

2. The performance of the existing employees may not be as efficient as before.

3. It brings the morale down of employees who do not get promotion or selected.

4. It may leads to encouragement to favouritism.

5. It may not be always in the good interest of the organization.

External Sources of Recruitment:

1. Press advertisement:

A wide choice for selecting the appropriate candidate for the post is available through this source. It gives

publicity to the vacant posts and the details about the job in the form of job description and job specification are

made available to public in general.

2. Campus interviews:

It is the best possible method for companies to select students from various educational institutions. It is easy

and economical. The company officials personally visit various institutes and select students eligible for a

particular post through interviews. Students get a good opportunity to prove themselves and get selected for a

good job.

3. Placement agencies:
A databank of candidates is sent to organizations for their selection purpose and agencies get commission in

return.

4. Employment exchange:

People register themselves with government employment exchanges with their personal details. According to

the needs and request of the organization, the candidates are sent for interviews.

5. Walk in interviews:

These interviews are declared by companies on the specific day and time and conducted for selection.

6. E-recruitment:

Various sites such as jobs.com, naukri.com, and monster.com are the available electronic sites on which

candidates upload their resume and seek the jobs.

7. Competitors:

By offering better terms and conditions of service, the human resource managers try to get the employees

working in the competitor’s organization.

Benefits of External Sources of Recruitment:

1. New talents get the opportunity.

2. The best selection is possible as a large number of candidates apply for the job.

3. In case of unavailability of suitable candidates within the organization, it is better to select them from outside

sources.

Limitations of External Sources of Recruitment:

1. Skilled and ambitious employees may switch the job more frequently.

2. It gives a sense of insecurity among the existing candidates.

3. It increases the cost as advertisement is to be given through press and training facilities to be provided for

new candidates.
 RECRUTIEMENT PROCESS

THE RECRUITMENT PROCESS

Organizations, depending on their structure and specific needs, may have special procedures that they integrate
into their recruitment process. For purposes of discussion, however, we will take a look at the general approach
of a recruitment process, one that is used by most organizations or companies across various industries.

Many say that recruitment begins when the job description is already in place and the hiring managers begin the
process of actually looking for candidates. However, if we are looking at it more holistically, the process begins
way earlier than that.

Prior to the recruitment process, the organization must first identify the vacancy and evaluate the need for that
position. Will the organization suffer if that vacancy is not filled up? Is there really a need for that open position
to be occupied by someone? If the answer is affirmative, then you can proceed to the recruitment.

Step 1: Conduct of a job analysis

Basically, this step will allow the human resources manager, hiring manager, and other members of
management on what the new employee will be required to do in the position that is currently open for filling
up. This has to be done in a systematic manner, which is what the job analysis is for.

According to human resource managers, the position or job description is the “core of a successful recruitment
process”. After all, it is the main tool used in developing assessment tests and interview questions for the
applicants.

What does this stage entail?

a. Build a job description.

Before anything else, the organization must first know exactly what it needs. Or who it needs. It could be that
the organization deemed a need for a job that is not included in the current roster of jobs. Hence, the need to
create a new one.

Job analysis involves identification of the activities of the job, and the attributes that are needed for it. These are
the main parts that will make up the job description. This part has to be done right, since the job description will
also be used in the job advertisement when it is time to source out talents.

The job description generally includes the following:

 Title and other general information about the position

 Purpose of the position in the unit, department, and organization as whole

 Essential functions of the job or position

 Minimum requirements or basic qualifications

b. Review the job description.

Once the job description has been created, it is a good idea to review it for accuracy, and to assess whether it is
current or not. Also, in cases where job descriptions are already in place, there is a need to revisit them and
check their accuracy and applicability with respect to the status quo. What if the job description is already
outdated? A review will reveal the need to update the job description, for current applicability.

There are three positive outcomes from conducting a review of the job description:
 To ensure continuous improvement of the organizational structure. This can be an efficient way of
conducting organizational audit, to determine which jobs are redundant and thus no longer needed, and which
ones are needed.

 To evaluate competencies for each position. Jobs evolve. In as much as circumstances and work
conditions change, so will the requirements for the job. It is possible that a job may require a new competency
from the worker that it did not need before. By evaluating the competencies, the impact of the job within the
organizational structure is ensured.

 To evaluate the wages or compensation for each position. Without management knowing it, the
worker or employee performing a specific job may be undercompensated, leading to dissatisfaction. By
reviewing the job description, management can assess whether the job is getting paid an amount that is
commensurate to the skills and competencies required.
Finally, you should then have an effective job description ready for attracting talent.

[slideshare id=40302867&doc=writeeffectivejobdescriptions-141015091444-conversion-
gate02&w=710&h=400]

c. Set minimum qualifications for the employee who will do the job.

These are the basic requirements that applicants are required to have in order to be considered for the position.
These are required for the employee to be able to accomplish the essential functions of the job. Therefore, they
should be relevant and directly relate to the identified duties and responsibilities of the position.

The organization may also opt to include other preferred qualifications that they are looking for, on top of the
minimum or basic qualifications.

d. Define a salary range.

The job must belong to a salary range that is deemed commensurate to the duties and responsibilities that come
with the position. Aside from complying with legislation (such as laws on minimum wages and other
compensation required by law), the organization should also base this on prevailing industry rates.

For example, if the position is that of a computer programmer, then the salary range should be within the same
range that other companies within the same industry offer.

Step 2: Sourcing of talent

This is the stage where the organization will let it be known to everyone that there is an open position, and that
they are looking for someone to fill it up.

Before advertising, however, the organization must first know where to look for potential candidates. They
should search out the sources where the persons that can potentially fill the job are going to be available for
recruitment. That way, they will know where to direct their advertising efforts.

Various methods are employed by organizations in order to advertise the open position.

 Networking. Word-of-mouth is the best form of advertising, and when it takes the form of networking,
it becomes more effective. In recruitment, this is often done through representatives of the company attending
college and career fairs, letting them know about the opening in their organization. This is a tactic employed by
large software and tech companies that want to hire fresh, young and brilliant minds into their organization.
They personally visit colleges, targeting the top students. They also use their connections within the industry to
attract the attention of talents with the highest potential.

 Posting. Recruitment often involves the application of candidates both from within and outside the
company. Thus, in order to attract the best possible talents, it is recommended that the posting of the open
 positions be made internally and externally. Internal posting usually takes the form of the vacancy
announcement being displayed in bulletin boards and other areas within the business premises where the
employees and visitors to the company are likely to see it. Posting externally may be in the form of flyers being
distributed, or vacancy notices being displayed in other areas outside of the business premises. Companies with
websites often post open positions on their company site, while some also use job boards.

 Print and media advertising. One classic example of this would be the Classifieds section of the local
daily or weekly newspaper. Companies looking for people to fill up open positions make the announcement in
the newspapers, providing the qualifications and the contact details where prospective applicants may submit
their application documents. When trying to attract the attention of suitable candidates, the organization makes
use of various tools and techniques. If it wants to get the best candidates, then it should not be haphazard about
things.

 Developing and using proper techniques. The company may include various offerings in order to
attract the best candidates. Examples are attractive salaries, bonus and incentive packages, additional perks and
opportunities that come with the job, proper facilities at work, and various programs for development.

 Using the reputation of the company. Perhaps the best publicity that the company can use to attract
candidates is its own reputation in the market. If the company is known for being a good employer – one that
aids in its employees’ personal and professional growth and development – then it is a good point for the
company to capitalize on in advertising its open positions.

Step 3: Screening of applicants

This is most probably the part of the recruitment process that requires the most amount of work. This is where
the applicants’ skills and personalities are going to be tested and evaluated, to ascertain whether they are a good
fit for the job and its description.

 Preliminary screening. It is often the case, especially in large organizations, where one open position
will receive hundreds to thousands of applications from candidates. In an ideal world, it would be good for the
hiring managers to be able to interview each and every single one of them. However, that is also impractical,
and very tedious. Not really advisable, especially if the organization is in need of manpower in the soonest
possible time. Thus, there is a need to shorten the list of candidates, and that is done through a preliminary
screening. Usually, this is conducted by going through the submitted resumes and choosing only those that are
able to meet the minimum qualifications. It is possible that this would shorten the list of applicants, leaving a
more manageable number.

 Initial interview. The candidates who were able to pass the preliminary screening will now undergo
the initial interview. In most cases, the initial interview is done through phone. There are those who also conduct
interviews through videos using their internet connection. Often a basic interview, this may involve the
candidates being asked questions to evaluate or assess their basic skills and various personal characteristics that
are relevant to the open position.

 Conduct of various tests for recruitment. The hiring managers may conduct tests on the skills of the
candidates and how they use these skills and talents. Other tests that are often employed are behavioral tests and
personality assessment tests.

 Final interview. Usually depending on the number of candidates for the job, and the preference of the
hiring managers and senior management, a series of interviews may be conducted, gradually narrowing down
the list of candidates. This may go on until the company has finally come up with a shortlist of candidates that
will undergo a final interview. Often, the final interview requires a face-to-face meeting between the candidate
and the hiring managers, as well as other members of the organization. Top management may even be involved
during the final interview, depending on the job or position that will be filled up.

 Selection. In this stage, the hiring managers, human resources representatives, and other members of
the organization who participated in the process meet together to finally make a selection among the candidates
who underwent the final interview. During the discussion, the matters considered are:
o Qualifications of the candidates who were able to reach the last stage of the screening process
o Results of the assessments and interviews that the final pool of candidates were subjected to
There will be no problem if they have a unanimous decision on the candidate that the job will be offered to. In
case of varying opinions, the majority will prevail.

If they do not arrive at a decision, there may be a need to restart the recruiting process, until such time that they
are able to reach a decision that everyone will be satisfied with.

Step 4: Finalization of the job offer

The last step of the previous phase involves the selection of the best candidate out of the pool of applicants. It is
now time for the organization to offer the job to the selected applicant.

 Making the offer: To make things more formal, a representative of the company or of the human
resources department will contact the candidate and inform him that he has been selected for the job. In this
stage, complete details of the compensation package will also be made known to the applicant.

 Acceptance of the offer by the applicant: The applicant should also communicate his acceptance of
the offer for it to be final. Take note that, if the selected applicant does not accept the job offer and declines it,
the recruitment process will have to start all over again.

Step 5: Introduction and induction of the new employee

The moment that the applicant accepted the job offer, he has officially gone from being an applicant to an
employee of the organization. The induction process will now begin.

Usually, the beginning of the induction process is marked by the signing of the employment contract, along with
a welcome package given to the new employee. The date for the first day that the employee will have to report
for work and start working in the company will be determined and communicated to the newly hired employee.

However, it doesn’t end there. The employee will still have to undergo pre-employment screening, which often
includes background and reference checks. When all these pre-employment information have been verified, the
employee will now be introduced to the organization.

RECRUITMENT TECHNIQUES

Five Fresh Recruitment Techniques for 2020

The general context around recruitment has been evolving in light of newer inclusions of technology, changing
organizational needs, and growing candidate expectations. With that setting the backdrop, you need fresh
recruitment techniques to help you navigate the sea of talent.

Here are five fresh recruitment techniques to engage with top talent in 2020 and beyond:

1. Quicker processes: Keep it short and sweet

That we do not have very long attention spans or endless patience is a known fact. With that in mind, it would
be impractical to expect candidates to stick on and stay engaged and committed to a long-drawn recruitment
process.
An important recruitment technique to keep in mind for the near future is to keep processes as short and
meaningful as possible – no endless wait for feedback, no time spent in deciding what the next step is or who
will take the next assessment/interview, and no time invested in admin processes that can easily be managed by
the right ATS.

A 2016 survey of over 1,000 professionals across fields conducted by recruiting firm Robert Half reported that
candidates lose interest in the job opening if the process and feedback cycle takes longer than two weeks. The
technique to condense the process effectively into an engaging experience is something that you must strategize.

2. Recruitment marketing: Engage passive candidates

Candidates are customers too, and while some may be on an active job hunt, others may be passively browsing
through. The latter group could also have your ideal employee, and it would be unfortunate to miss an
opportunity to get the right candidate on board simply because they were not as desperate for a job as the others.
Recruitment marketing is as crucial as marketing the products and services that an organization has on offer.
This needs to be focused branded marketing of the organizational culture, the job, the career path ahead and the
promise of an employee experience worth investing in. 

Figure 1. Five fresh recruitment techniques for 2020

3. Increased visibility: Get seen across portals

According to studies by the HCM suite solution company ICIMS, 69% of job seekers use Google to look for
jobs. Moreover, 83% of millennials are even more dependent on Google and online portals for finding the right
job.
As a smart recruiter, engaging top talent would entail making the posting visible across different mediums and
portals. The use of effective SEO strategies would be an added bonus in ensuring that the job listings rank
higher for jobs searched on Google and other relevant search engines.

4. Engaging job descriptions: Make them want to apply

Creating organic buzz and interest around a job opening is a technique that you need to invest in. The job
description is a tool that serves a dual purpose – of informing the candidate in detail about the job opening, and
of piquing the candidates’ interest in the role and the organization.
Job descriptions are often the first piece of communication from the organization to a prospective applicant and
should be treated and tools of branded marketing to get the right information across. These intelligent job
descriptions also heave to be in a format and language that resonates with the target talent audience.

5. A well-maintained rejection pile: Re-engage second choices

Re-engaging with rejected candidates is a great technique to save time and effort. All this data should ideally be
easily accessible to you, and you would already know the reason each candidate was rejected.
Remember that there may be a few candidates who passed most of the rounds of candidate screening but might
not have been selected for some valid reason at the time. This is a useful repository of screened candidates that
could help you skip a few steps in the process. This also points to the need of effective candidate relationship
management (CRM) since rejected candidates are not only useful talent sources but also channels for
propagating the employer brand

TRENDS IN RECRUITMENT PRACTICES

1. Collaborative hiring: Referrals & Internal mobility

There’s a reason why they say two heads are better than one. When it comes to recruitment, involving your

entire team in the recruitment process can be of tremendous value.

Just think of the potential that could come out of the combined (personal) networks of your team members, for

example.

This is one of the reasons we see an increase in employee referrals and employee referral programs – and

companies that provide AI driven technology to automate your employee referral efforts.

Referred hires generally are (among other things) more productive, more engaged and less likely to leave.

Given the current market situation, it seems only natural for companies to increase their focus on collaborative

hiring even more this year.

The same thing goes for internal mobility programs.

Although not that many organizations have a (well-developed) internal mobility culture and program in place

yet, this can be a great way to meet skill shortages, decrease turnover and boost engagement.
 Did you know that referrals are one of the best sources of hires? 70% of companies offer cash referral

bonuses for successful hires. How is your company supporting employee referrals? (Image source)

2. Growing importance of recruitment marketing

As we’ve said, 21st-century recruiters need all the help they can get to find the best candidates. This explains the

rise of recruitment marketing solutions.

Recruitment marketing – also called the pre-applicant stage of talent acquisition – is the process of attracting

and nurturing talent to your organization by marketing to them.

Just like the main goal of traditional marketing is to drive individuals to buy a company’s product or service, the

primary objective of recruitment marketing is to get people to apply to your organization’s job openings.

We’ve already seen the use of certain marketing techniques in recruitment before (think of programmatic job

advertising tools, for example). Now, however, companies increasingly turn to, let’s call them full-service

recruitment marketing providers.   

This means a recruitment marketing solution that helps organizations strengthen their employer brand, reach

candidates on social media and optimize their career sites (of course, there are many other possibilities

depending on your company’s specific needs).

To stick with the marketing jargon: this year, we’ll continue to see a transition from outbound to inbound

recruitment.

3. Attracting talent with transferable skills from outside your industry

With certain industries already struggling to find skilled people and a growing number of baby boomers retiring,

recruiters have no choice but to look beyond the ‘borders’ of their industry to find people.

So rather than looking for relevant previous experience, recruiters will increasingly focus on transferable skills

and hence (considerably) expand their potential talent pool.

These are examples of transferable skills you can look for when searching for your dream candidates.
4. AI

Yes, there it is again, artificial intelligence. And yes, we know you’ve probably been inundated with AI-related

content. However, applications of AI in recruitment will become even more widespread in 2019.

This year, in one way or another, AI will become a must-have in the recruiter’s toolbox.

From automated candidate sourcing, recovery, and matching, to hiring remote workers and creating customized

employee value propositions, the number of different uses of AI in recruitment just keeps growing.

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5. Embracing the flexible workforce

For most organizations, their workforce already consists of a combination of full-timers, contractors, freelancers

and everything in-between.

In the US alone, 36% of all workers (around 57 million people) are in the gig economy, a number that is likely

to grow even more this year.

Independent workers like the fact that they can work anywhere they want, when they want and are often happier

than ‘traditional’ employees. In fact, satisfaction levels for independents have never been as high as they are

right now: 74% of independent workers say they are highly satisfied.

Technology, of course, is a big enabler of this kind of freelance work: people can use their smartphones, have

free internet available in a lot of (coffee) places, and freelance platforms like Upwork, PeoplePerHour and

Fiverr match freelancers with projects.

Especially when companies need to find skilled people urgently – and in an industry where talent is scarce –

they’ll have to turn to freelancers, contractors, etc. to meet their needs.

On a positive note, working with freelancers can be a good way for a company to find out if they’d like those

people to become full-time employees: if there is a mutual click, you may have found yourself a great new hire!

6. Diversity hiring
Like AI, diversity hiring is one of those themes that remain relevant in 2019. Diversity in the broadest sense of

the word that is; gender, ethnicity, geographical and age.

Diversity and inclusion initiatives have proven to offer many benefits, such as improved employee happiness,

productivity and retention and a positive reflection on your employer brand.

So this year, we’ll see more of said initiatives pop up – think of a digital marketplace that connects women with

employers, for example. We’ll also see an increase in the number of companies ramping up their diversity hiring

efforts.

7. Building and sharing your mission

Do like Nike did, basically. The American sportswear giant took a stand last year when it used a black and white

photograph of NFL quarterback Colin Kaepernick as a part of its advertising campaign to celebrate the 30th

anniversary of Nike’s ‘Just Do It’ slogan.

Image source

Kaepernick caused quite the controversy back in 2016 when he kneeled during the national anthem to show his

support for people of color in the United States and to bring attention to police brutality.

More than two-thirds of consumers believe that it’s important for brands to take a stance on certain political and

social issues – a number that is probably going to increase even more with the next generation of shoppers.

So, even if it meant they’d lose customers – and people did indeed boycott Nike following the Kaepernick ad –

Nike chose sides.

It’s the same for employers.

Today’s workforce is on the lookout for mission-driven employers. People want more than just a paycheck from

the organization they work for, they want to have a sense of purpose in their job.

And, just like today’s consumers, job seekers often want their own values to align with those of their company.

2019 will, therefore, see an increased focus of companies building and sharing their mission, taking stands and

creating their own version of Nike’s ‘Just Do It’ to attract talent.

8. Hiring Gen Z

They’ve been entering the global workforce for a while now, although so far, mainly in internship and entry-

level positions.
 Slowly but surely though, Generation Z (the cohort that comes after the Millennials, born somewhere between

the mid-’90s and the mid-2000s) is now finding its way into the workplace.

If your knowledge about these Digital Natives is a little rusty, you might want to bring it up to speed again,

because this year the recruitment of Gen Z will, without a doubt, accelerate.

A few elements to keep in mind when it comes to hiring Generation Z are:

 •  They are one with their smartphones
 •  Adapt to their (short) attention span
 •  It’s all about video
 •  Don’t forget about health & wellness
 •  Think about their growth

To succeed in recruitment in 2019, make sure to consider these points when creating your recruitment strategy.

Gen Zers will form a major part of the workforce in coming years, that’s why recruiters need to understand

their needs and wants.

9. Data security

After the implementation of the General Data Protection Regulation in the European Union in May last year, it’s

impossible to think of candidate (and employee) data without thinking of the protection of this data.

Whether companies like it or not, data security has now become a theme for every provider of recruitment

technology that uses people’s data.

Since a lot of providers (if not all of them) use data and analytics, this means that virtually everyone needs to

have a system in place to protect candidate data.

Why is this still relevant in 2019 you wonder?

After all, companies had to be ready when the GDPR became effective last year.

This is true, of course, but the regulation does have implications for new features, technology, and solutions that

are introduced to the market and that use data.

Which is why data security remains highly relevant this year.

10. Hiring people with future-proof (soft) skills

This one consists of two elements. On the one hand, there is an increased focus on hiring people with future-

proof skills. Think of complex problem-solving capabilities, critical thinking, cognitive flexibility, etc.

On the other hand, there has been more and more attention to people’s soft skills recently. It turns out,

companies are often struggling to find talent with good soft skills (communication, listening, empathy, etc.).
Soft skills are personality-driven and they are what makes the difference between a good and a great candidate.

After all, hard (tangible and technical) skills usually can be taught, while teaching someone how to show

empathy is almost impossible…

As developments in technology are changing many industries rapidly, the demand for people with transferable,

future-proof (as much as possible) and soft skills will rise.

Critical thinking, creativity and coordinating with others are gaining importance as the top skills of the future.

11. A shift from job description-based hiring to project-based hiring

This is a result of several of the trends we’ve seen above, like the growing gig economy and the shift from

experience-based hiring to hiring based on transferable & soft skills for instance.

Both of these developments are likely to change the way organizations manage their projects.

In a time where finding good full-time employees is hard and turnover often is high, it could make more sense to

start hiring in a different way.

Based on projects rather than job descriptions, for example.

This has, among other things, the advantage of gathering those people who are the best in their field for each

project. Instead of buying labor, organizations will actually be buying (and thus recruiting for) results.   

SELECTION

Definition: The Selection is the process of choosing the most suitable candidate for the vacant position in the

organization. In other words, selection means weeding out unsuitable applicants and selecting those individuals

with prerequisite qualifications and capabilities to fill the jobs in the organization.

Selection: Meaning and Steps Involved in Selection Procedure!

Finding the interested candidates who have submitted their profiles for a particular job is the process of

recruitment, and choosing the best and most suitable candidates among them is the process of selection. It

results in elimination of unsuitable candidates. It follows scientific techniques for the appropriate choice of a

person for the job.

The recruitment process has a wide coverage as it collects the applications of interested candidates, whereas the

selection process narrows down the scope and becomes specific when it selects the suitable candidates.
 Selection Process
Definition: The Selection is a process of picking the right candidate with prerequisite qualifications and
capabilities to fill the jobs in the organization.

The selection process is quite lengthy and complex as it involves a series of steps before making the final
selection. The procedure of selection may vary from industry to industry, company to company and even from
department to department. Every organization designs its selection process, keeping in mind the urgency of
hiring people and the prerequisites for the job vacancy.

Selection Process
The selection procedure comprises of following systematic steps:

1. Preliminary Interview: The preliminary interview is also called as a screening interview wherein

those candidates are eliminated from the further selection process who do not meet the minimum eligibility
criteria as required by the organization.

Here, the individuals are checked for their academic qualifications, skill sets, family backgrounds and their
interest in working with the firm. The preliminary interview is less formal and is basically done to weed out the
unsuitable candidates very much before proceeding with a full-fledged selection process.

2. Receiving Applications: Once the individual qualifies the preliminary interview he is required to fill
in the application form in the prescribed format. This application contains the candidate data such as age,
qualification, experience, etc. This information helps the interviewer to get the fair idea about the candidate and
formulate questions to get more information about him.
3. Screening Applications: Once the applications are received, these are screened by the screening
committee, who then prepare a list of those applicants whom they find suitable for the interviews. The
shortlisting criteria could be the age, sex, qualification, experience of an individual. Once the list is prepared, the
qualified candidates are called for the interview either through a registered mail or e-mails.
4. Employment Tests: In order to check the mental ability and skill set of an individual, several tests are
conducted. Such as intelligence tests, aptitude tests, interest tests, psychological tests, personality tests, etc.
These tests are conducted to judge the suitability of the candidate for the job.
5. Employment Interview: The one on one session with the candidate is conducted to gain more insights
about him. Here, the interviewer asks questions from the applicant to discover more about him and to give him
the accurate picture of the kind of a job he is required to perform.

Also, the briefing of certain organizational policies is done, which is crucial in the performance of the job.
Through an interview, it is easier for the employer to understand the candidate’s expectations from the job and
also his communication skills along with the confidence level can be checked at this stage.

6. Checking References: The firms usually ask for the references from the candidate to cross check the
authenticity of the information provided by him. These references could be from the education institute from
where the candidate has completed his studies or from his previous employment where he was formerly
engaged. These references are checked to know the conduct and behavior of an individual and also his potential
of learning new jobs.
7. Medical Examination: Here the physical and mental fitness of the candidate are checked to ensure
that he is capable of performing the job. In some organizations, the medical examination is done at the very
beginning of the selection process while in some cases it is done after the final selection.

Thus, this stage is not rigid and can take place anywhere in the process. The medical examination is an
important step in the selection process as it helps in ascertaining the applicant’s physical ability to fulfill the job
requirements.
8. Final Selection: Finally, the candidate who qualifies all the rounds of a selection process is given the
appointment letter to join the firm.

Thus, the selection is complex and a lengthy process as it involves several stages than an individual has to
qualify before getting finally selected for the job.

IMPORTANCE OF SELECTION

Importance of selection may be judged from the following facts:

1. Procurement of Suitable Candidate is Possible:
Only suitable candidates who are fit for the job are selected from among the prospective candidates for
employment. So, selection is a process by which only desirable candidates are hired and others are denied the
opportunity.

2. Good Selection Reduces the Cost of Training and Development:

Proper selection of candidates reduces the cost of training because qualified personnel have better grasping
power. They can understand the technique of the work better. Therefore, the organization can develop different
training programmes for different persons on the basis of their individual differences, thus reducing the time and
cost of training considerably.

3. Proper Selection Resolves Personnel Problems:

Proper selection of personnel reduces personnel problems in the organization. Many problems like labour
turnover, absenteeism and monotony shall not be experienced in their severity in the organization. Labour
relations will be better because workers will be fully satisfied by their work.

TYPES OF SELECTION

External Selection Methods

The types of recruitment process used for external hiring include:

 Employment Agencies: Employment agencies generally do all the screening and processing of

potential hires. There's a hefty fee associated with this, but also likely a satisfaction guarantee. Despite the
fee, this is a time- and money-saver, taking the pressure off the company for the intensive resume-reviewing,
interviewing and testing that may be involved.
 Advertising: A classic method, whether the newfangled way through social media, job sites or old-
school through newspapers, advertising is a great way to get the message out while improving branding and
showing the company values off to the public.
 Hiring Fairs: When there are multiple positions open or expansion is a possibility in the future, a
hiring fair is a great way to meet potential candidates. One downfall is that extroverts shine at hiring fairs
while introverts, who are often creative and can be fantastic in specific roles, tend to be overlooked.
 Direct Recruitment: When there’s a known candidate at a competing company or a notable student
graduating soon, sometimes they’re pursued and wooed to join the firm.
 Professional Organizations: For engineering, law and other careers that have professional
associations, it’s often easy to hire in concert with the organization. Perhaps they’ll refer someone specific or
post the opportunity. However it happens, it’s someone from a credible organization with a promising
background.
 ESSENTIALS OF SELECTIONPROCEDURE

The selection process can be successful if the following preliminaries are satisfied.
1. Someone should have the authority to select. This authority comes from the employment requisition as
developed by an analysis of the work-load and work-face.
2. There must be standard of personnel with which a prospective employee may be compared, i.e., there
should be available before hand, a comprehensive job descriptive and job specification as developed by a
job analysis.
3. There must be a sufficient number of applicants from whom the required number of employees may be
selected.

PLACEMENT IN SELECTION

Meaning
Placement is a process of assigning a specific job to each of the selected candidates. It involves assigning a
specific rank and responsibility to an individual. It implies matching the requirements of a job with the
qualifications of the candidate.
Placement basically refers to the system of assessment and selection by which vacancies are filled by staff
serving in an organization. Placement can also be defined as the internal filling of vacancies as distinguished
from external recruitment. Placement is a process of assigning a specific job to each of the selected candidates.
It involves assigning a specific rank and responsibility to an individual. It implies matching the requirements of
a job with the qualifications of the candidate.

Importance/Significances of placement
The significances of placement are as follows:
·          It improves employee morale.
·          It helps in reducing employee turnover.
·          It helps in reducing absenteeism.
·          It helps in reducing accident rates.
·          It avoids misfit between the candidate and the job.
·          It helps the candidate to work as per the predetermined objectives of the organization.
While taking the placement decision, the following considerations or principles must be kept in mind:
1. Job Requirements:
An employee should be placed on the job according to the requirements of the job such as physical and mental
ability, eyesight, hearing, stress, etc. The job should not be adjusted according to the qualifications and abilities
of the employee. Job placement profile charts can be used to match the workers physical and mental abilities
with the job requirements.
This profile chart displays an evaluation of both job requirements and worker abilities for key features of the job
so that management can easily determine how well a worker fits a job.
2. Suitable Qualifications:
The job should be offered to a person who is suitably qualified. Over qualified and under qualified persons
might create problems for the organisation in the long-run.
3. Adequate Information to the Job Incumbent:
The employee should be provided with complete information and facts relating to the job, including the working
conditions prevailing in the firm. He should also be informed about the rewards associated with various
performance levels.
4. Commitment and Loyalty:
 While placing the new employee, an effort should be made to develop a sense of commitment, loyalty and
cooperation in his mind so that he may realise his responsibilities better towards the job, the organisation and his
associates.
5. Flexibility:
The placement in the initial period may be temporary as changes are likely after the completion of training. The
employee may be later transferred to the job where he can do better justice.
Proper placement helps to improve employee morale. The capacity of the employee can be utilised fully if he is
placed on the job for which he is most suitable. Right placement also helps to reduce labour turnover,
absenteeism and accident rates. If a candidate adjusts himself to the job and performs as per expectations, it
would mean that the candidate is properly placed.

INDUCTION

Meaning
Once an employee is selected and placed on an appropriate job, the process of familiarizing him with the job
and the organization is known as induction.
Induction is the process of receiving and welcoming an employee when he first joins the company and giving
him basic information he needs to settle down quickly and happily and stars work.
Objectives of Induction
Induction is designed to achieve following objectives:
·          To help the new comer to overcome his shyness and overcome his shyness nervousness in meeting new
people in a new environment.
·          To give new comer necessary information such as location of a café, rest period etc.
·          To build new employee confidence in the organization.
·          It helps in reducing labor turnover and absenteeism.
·          It reduces confusion and develops healthy relations in the organization.
·          To ensure that the new comer do not form false impression and negative attitude towards the organization.
·          To develop among the new comer a sense of belonging and loyalty to the organization.
Advantages of formal induction
The advantages of formal induction are: -
·          Induction helps to build up a two-way channel of communication between management and workers.
·          Proper induction facilitates informal relation and team work among employee.
·          Effective induction helps to integrate the new employee into the organization and to develop a sense of
belonging.
·          Induction helps to develop good relation.
·          A formal induction programme proves that the company is taking interest in getting him off to good start.
·          Proper induction reduces employee grievances, absenteeism and labor turnover.
·          Induction is helpful in supplying information concerning the organization, the job and employee welfare
facilities.

Induction Process:
The following are the steps in induction process:
(1) Welcoming the New Employees:
The first fundamental step in induction is welcoming the new employees as soon as he joins the organizations
and is duly placed on the job and gives basic instruction.
(2) Induction with Immediate Superior:
After welcome of the new employees, the next step is to introduce him with his immediate superior or with his
colleagues and briefly explains his duties, responsibilities authorities, work procedure and practices.
(3) To Impart Detail Instructions:
The third and last important step in induction is to give detail information about the company such as company
policies, plans, targets objectives, goals, products services, future prospects, working environment, future
facilities, salary structure promotional opportunities, transfer facilities etc. At this stage a new comer knows his
job and forms opinion about it, of course which is positive and starts integrating himself with the organization
his job and the environment.
Induction takes place sometimes within one week to six months from the time of the initial hiring and
orientation. It is generally conducted either by foreman or a specialist. Its main purpose is to find out whether
the employee is reasonably satisfied or not.
The new comer may ask whether his working hours and pay is satisfactory or not, how he feels about his fellow
workers, he has any suggestion towards the changes in the induction procedure or in other company practices.
The interviewer records all the answer and his own comments on the employee’s progress.
At the same time the line supervisor also completes an evaluation of the new employees, everything about their
strengths and weaknesses and observes whether they are doing well or not. There is no certain duration of
induction it depends on the nature and type of job and the employee. Shree B P Billimoria observed that
induction has a greater significance in a developing country like India, where the percentage of illiteracy is very
high.
There is no model induction procedure, each organization develops its own procedure as per its needs. Induction
programme may be formal or informal. After the adequate training employees are prepared for higher position
as and when required. Adequate opportunities are provided to the employees for building up their career in the
organization itself. The personnel department plays a very vital role in this regard.

SOCIALIZATION

Socialization: Definition, Purpose, Process

Socialization
It refers to process of making the new employees get acquainted to the new environment of the organization.
This reduces the anxiety of the new hires and allows them to adjust with the other existing employees in the
company.

The purpose of Socialization can be distinctive from firm to firm. However there are certain fundamental
purposes which are discussed below.
  Employment Situation: The basic purpose of every organization would be to make the new
employees industrious as soon as possible. Hence detailed information relating to work is provided at the
initial stage itself.
 Rules and Policies: The workforce should have a good understanding of the constraints and policies of
the organization for smooth and continuous operations. Therefore, all the jobs in the company have to be
performed as per those rules and policies.
 Compensation and benefits: Although this information is made clear during the recruitment process,
an analysis of this is required during socialization process. The employees will have some interest in
knowing the rewards offered by the company.
 Corporate Culture: The organization culture affects the entire working pattern of any company. This
includes everything, from the way they dress to the way they behave with the other employees. Hence, a
glimpse of the culture should be given during Socialization.
 Working as a team: During Socialization, the importance of working as a leader is emphasized to add
value to the organization. This ability of leadership is assessed during the initial stages of selection and
training.
 Dealing with Change: Coping with change is a big challenge to the employees at all levels in the
organization. The employees must have the ability to manage or deal with change for survival in their
respective jobs. Socialization helps them in preparing for change by continuously developing and training
their skills.
Process of Socialization
The Socialization process can be divided into three stages:

1. Pre- Arrival Stage: This stage recognizes that every individual employee comes with set of values and
hope. For example, in some jobs like the managerial kind, the employee might need a substantial degree of
socialization in training. During the selection process, most organizations inform their prospective
candidates about the process of Socialization. Selection process also helps the organization in determining
the right person to fit the right job. The success here depends mostly on the degree of forecasting made by
the selection team.
2. Encounter Stage: Here the employees bump into the real working conditions of the organization. For
example, the expectations of the job, co workers, immediate seniors and the business as a whole. Here, if
the expectations confirm to be more or less correct, this stage reaffirms the employees of the perceptions
generated in past. If the reality is different, socialization helps the employees in understanding to replace
these. But socialization cannot totally resolve the differences in expectations.
3. Metamorphosis Stage: The new employees, in this stage will work out solutions to meet any
problems. Hence this stage is called the metamorphosis stage. At this stage the new employees will have
become comfortable with their jobs and the team members. New hires will feel that they have been
accepted by their superiors and peers. Not only this, they would have by now understood the organization
system as a whole. They will also know what is expected of them, how they are evaluated and how
productive they are towards the goals of the organization.
∗ There are many people involved in socializing the new hires. Let us understand who they are:

→ HRM Department: It conducts orientation programs for the new hires in order to socialize them with the
new environment. This department plays a vital role in the new employee orientation programs; it also
participates in these programs to ensure proper mechanism is in place. Prior to the arrival of new hires, the HRM
department must be sure that a proper routine is set for them.
→ Managers or Supervisors: The immediate supervisors will also play a part in socializing with the new hires
by informing them about the work culture, policies and procedures. In medium and small organizations new
hires may report directly to the supervisors who in turn introduce them to the other employees. These employees
will take them through the other
departments and make them comfortable with the teams.
→ Organizational Culture: Most of the times, the organization culture itself socializes the new hires with its
unique environment. Cultural here may comprise the rules and regulations, principles of significance and
language of communication. In a broader sense it includes the etiquette to be followed by the new hires with
their peers, supervisors and management.

UNIT 3

DEVELOPMENT AND PERFORMANCE MANAGEMENT

Def

Performance management involves more than simply providing an annual review for each employee. It is about

working together with that employee to identify strengths and weaknesses in their performance and how to help

them be a more productive and effective worker. Learn how to develop a performance management system so

that you can help everyone in your organisation work to their full potential.

Mean

Performance management involves more than simply providing an annual review for each employee. It is about

working together with that employee to identify strengths and weaknesses in their performance and how to help

them be a more productive and effective worker. Learn how to develop a performance management system so

that you can help everyone in your organization work to their full potential.

INTRO

formance Management - Definition

Performance management is an ongoing process of communication between a supervisor and an employee that
occurs throughout the year, in support of accomplishing the strategic objectives of the organization. The
communication process includes clarifying expectations, setting objectives, identifying goals, providing
feedback, and reviewing results.
What Is Performance Management?

Performance management is the process of continuous feedback and communication between managers and
their employees to ensure the achievement of the strategic objectives of the organization.

The definition of performance management has evolved since it first appeared as a concept. What was once an
annual process is now transitioning to continuous performance management. The goal is to ensure that
employees are performing efficiently throughout the year, and in the process, address any issues that may arise
along the way that affect employee performance.

"Most workers perceive their organization's performance management approach as confusing, subjective, and
infrequent," said Kathi Enderes (vice president, Talent, and Workforce Research Leader) and Matthew
Shannon (senior research analyst) at Bersin, Deloitte Consulting LLP, in an exclusive with HR Technologist.
This is the current state of performance management. However, it doesn't have to be that way. Automation now
plays a significant role in performance management, and many of the processes involved can be streamlined so
that employee performance can be strategically managed. This is the age of continuous performance
management, and here’s everything you need to know about it.
 Performance management differs from talent management in that the latter is a set of initiatives taken to
engage employees to retain them. Performance management, on the other hand, is an initiative that guides
employees towards establishing and achieving their goals in alignment with the organization's immediate and
overarching goals.

OBJECTIVES OF TRAINING

Objectives Of Performance Management System

Here are the 5 major objectives of performance management system:

1. Setting and defining goals to fulfill organizational objectives

Goal setting is the most lucrative ways for initiating better performance among employees.

It has been constantly demonstrated that effective goal setting:

 Allows employees to focus on what’s important.

 Alignment of individual objectives with the business objectives.

 Optimizes employees’ individual performance.

 Helps to identify the key result areas and work upon improving it.

An efficient performance management system will place goal setting as one of its integral requirements.

As a manager, set goals which benefit both- employee performance and business performance.

2. Setting the right expectations for managers and employees

An efficient performance management system will attempt to set clear expectations from both managers and

employees.

As a manager, it’s crucial that you place manageable expectations from your employee.
 Don’t expect a poor performer to start giving good results right away. Or a star performer to stay consistent

every other week.

Similarly holding managers to high expectations will only bring in poor management decisions.

To set expectations that’ll actually bring in some results:

 Define the expectations of your employees in clear terms. Let employees know exactly what is your

expectations from them.

 Back up the reasoning behind the expectation. Explain how these expectations will help in fulfilling

the business objectives.

 Document expectations. Don’t let it be a word by mouth interaction. Have a specific spreadsheet or

document about what to do and who is responsible for it.

 Once employees know of their own roles, responsibilities, and accountabilities they are more likely

to be more consistent and productive.

This will facilitate better business performance. Furthermore, it will encourage the personal development of the

employee.

3. Effective communication between individuals and teams

Changing workplace dynamics is bringing a cultural shift to today’s workplace.

Consequently, communication has started playing an essential part in it.

A company with a good culture of communication results in employees who are engaged and alignment of

individual objectives with business objectives.

It is essential that team members know what their other team members are up to- their objectives, succession

planning, and ideas- to fulfill the project.

 A team which lacks in communication among its team members lack the bonding that is ideally required in

a high performing team.

Some tips to build a communication active environment:

 Firstly team leaders or managers should take out the time to indulge in one-on-one interactions with

the team members.

 Continuous feedback and coaching to build a workforce with varied skills to foster further career

development. One way to do this is through performance appraisals or performance reviews.

 Additionally, conduct frequent team building activities.

 Promote collaboration and communication as an essential part of your workplace culture.

 Also, use appropriate and helpful business communication tools.

4. Set Performance Standards

The most important objectives of performance management are to set performance standards.

An organization should set performance standards and performance plans for evaluating employee performance.

Every job has a certain performance standard to be met.

Failure to accomplish the performance standards can mean the following things:

 A lack of effort on the employees’ part.

 Usually having set more unrealistic standards for the said job.

 Consequently, not enough resources were available to complete the task.

 In particular, a failure of cooperation or collaboration from the team or manager.

Here’s the thing.

You might never know what the reason for failure is without any performance management system.
 An effective performance management system will be able to highlight what’s lacking and what deserves

credit.

The strengths and weaknesses of your company will become more evident and hence easier to improve or

rectify.

5. Determining individual training and performance plans

Another essential objective of a performance management system does is to identify the training and

development needs of its workforce.

It promotes personal growth and advancement in the career of the employees by helping them acquire

the desired knowledge and skills.

A well-executed performance plan provides your employees with personal development opportunities on how to

increase their skills.

Here’s how you can create an effective employee performance plan to foster career development:

 Firstly, ask your employees on what skills, training or course they require to execute their job

perfectly.

 Then create a training plan and budget.

 Additionally, decide how can the new training skills be applied in some key result areas.

 Lastly, set up some organizational objectives to apply these new found skills.

TRAINING NEED ASSESMENT

What is Training Needs Assessment (TNA)?

Organisations depend on their employees. It’s therefore a good idea to invest in them and ensure that their
qualities don’t go unutilised. Skills can be increased by offering training and education. This will also lead to
more motivated employees. However, companies tend to go overboard when it comes to offering a wide variety
of training to their employees and even forcing it on them. That increases the likelihood that it will backfire and
will actually harm employee motivation. By first determining what they want and need in terms of training, it’s
possible to offer a relevant selection of training and education. Using a Training Needs Analysis (TNA), the gap
between the employees’ education and the related training need can be determined.
A training needs assessment identifies individuals' current level of competency, skill or knowledge in one or
more areas and compares that competency level to the required competency standard established for their
positions or other positions within the organization. The difference between the current and required
competencies can help determine training needs. Rather than assume that all employees need training or even
the same training, management can make informed decisions about the best ways to address competency gaps
among individual employees, specific job categories or groups/teams.

Assessments can be conducted at any time but are often done after hiring, during performance reviews, when
performance improvement is needed, for career development plans, for succession planning, or when changes in
an organization also involve making necessary changes to employees' jobs. It is beneficial to perform these
assessments periodically to determine the training needs of an organization, employees' knowledge and skills,
and also training program effectiveness.

Step 1: Identify the Business Need

A training assessment is the first step to any successful training program and is also a critical  aspect of
succession planning. Conducting this analysis allows an organization to focus its efforts on areas of training that
are necessary for employees to successfully carry out the organization's goals, make optimum use of the
company's training dollars and motivate employees by contributing to their career development. The person
conducting the training needs assessment must clearly understand the overall organization and department goals
and priorities, so he or she can properly assess the training options and identify which training opportunities will
contribute most to the overall success of employees, the business units and the organization as a whole.

Essentially, why is the organization conducting a training needs assessment? What is the end result that the
employee, manager or executive team is trying to accomplish? Will training contribute to this accomplishment?
Sometimes training is not the answer. There may be other organizational issues that would be best addressed
through another means—for example, through job analysis, goal clarification, reorganizing or realigning a
department, or employee engagement.

Step 2: Perform a Gap Analysis

Performing a gap analysis involves assessing the current state of a department's or employee's performance or
skills and comparing this to the desired level. The difference between the existing state and the desired state is
the gap. There are many different methods for conducting a gap analysis. The method for identifying the gap
will depend on the organization and the situation. Depending on the situation, it may be helpful to use one or
more gap analysis methods. Some gap analysis assessment tools are the following:

 HR records. HR records can include accident and safety reports, job descriptions, job competencies,
exit interviews, performance evaluations and other company records such as production, sales and cost
records. For example, if a department has a dramatic increase in workplace accidents, then it would be
important to review accident reports as part of the gap analysis prior to conducting safety training.
 Individual interviews. Individual interviews may be conducted with employees, supervisors, senior
managers and even sometimes clients/customers or outside vendors. If an organization is providing
safety training, talking with the employees who not only had the accidents but also witnessed the
accidents would be advisable. In addition, talking to employees who have never had accidents could be
useful in creating a training program that includes a standard of safe practices. If the accidents involved
equipment, it may be beneficial to talk to the vendor that manufactured or serviced the equipment. The
information gathered can identify the gaps that an organization needs to address. A company and its
employees can benefit from new training opportunities as a result of the training needs assessment.
  Focus groups. Unlike individual interviews, using focus groups involves simultaneously questioning a
number of individuals about training needs. Best results occur with a department or group of
employees who have similar training needs. The participants brainstorm about all the training needs
they can think of and write them on a flip chart. Then each person is provided perhaps five dots or
sticky notes (employers should provide the number of dots or sticky notes that will work best for the
organization). Each individual places his or her dots or sticky notes on the training ideas he or she
believes are the most important. An individual could choose to place one dot on five different items, or
all five on one training item.
 Surveys, questionnaires and self-assessments. Surveys generally use a standardized format and can
be done in writing, electronically or by phone. Depending on the situation, it may be helpful to conduct
surveys with employees as well as with customers. When conducting a customer service training needs
assessment, employers should ask employees what would help them provide better customer service.
Employers should also obtain opinions from customers about their experiences with employees.
 Observations. Sources for observation include a supervisor's direct observation and input, on-the-job
simulations of work settings, and written work samples.

Step 3: Assess Training Options

The gap analysis generates a list of training options and needs. Now the list can be assessed based on the goals
and priorities of the organization, both currently and in the future.

A scale of 1 to 3 could be used with number 1 being critical, 2 being important and 3 being not important at all.
Here are factors to consider when determining if training is a viable option.

 Solution to a problem. For example, an employee has a performance problem that has clearly been
identified as a training issue. The employee is provided with additional on-the-job training in which he
or she successfully acquires the needed skills. As a result, the company would have a fully competent
employee who is also meeting the required performance standards.

 Cost. Cost of training is a significant factor that needs to be weighed in terms of importance.

Depending on the situation, the organization may be willing to invest a significant amount in one
training but not in the others listed due to organizational priorities and finances. Here is the formula to
calculate the total cost of training:

Number of Employees Trained x Cost of Training = Total Cost of Training

 Return on investment. Return on investment (ROI) is a calculation showing the value of expenditures

related to training and development. It can also be used to show how long it will take for these
activities to pay for themselves and to provide a return on investment to the organization.  
 Legal compliance. If any of the training needs from the gap analysis are required legally (i.e., by
federal, state or industry laws) or to maintain employees' licenses or certifications, then these trainings
would be a high priority.  
 Time. Sometimes the amount of time involved to build the capacity within the organization will affect
its operational needs as it can interfere with the employees' ability to complete other job duties. In this
case, it may be more beneficial to hire the talent from outside the organization or outsource the task to
fill in the skills gaps. In other cases, like succession planning, the organization can afford a long-term
commitment to building the capacity from within.
 Remaining competitive. Perhaps there exists minimal knowledge/competencies in a new product or
service that is negatively affecting company revenue. The employer can provide the needed training to
its employees so that the new product or service generates or exceeds the desired revenue. In this
situation, the company benefits from the increase in revenue, therefore outweighing the cost of training.

After all the training needs/options have been assessed, the HR professional will have a list of training priorities
for individual employees, departments or the organization as a whole.
Step 4: Report Training Needs and Recommend Training Plans

The next step is to report the findings from the training needs assessment, and make recommendations for short-
and long-term training plans and budgets, starting with the most critical priorities from the training option list. If
there is a timeline for any of the trainings, such as a deadline to satisfy training obligations for legal compliance
purposes, then they should be budgeted and scheduled accordingly. The report should include a summary of
why and how the assessment was completed, the methods used and people involved, and the training
recommendations with a general timeline.

Considerations for the report and recommended training plans include:

 What training is already being offered, and should it continue to be offered?

 Will the training be conducted in-house or externally?
 Does it make sense to bring in a trainer to train several employees on the same subject matter, rather
than send everyone to an off-site training?
 Does the company have the subject matter expertise within HR, the training department or another
department to conduct the training?
 Can and should the training be conducted online?
 What is the learning style of the participants?
 Are all participants at one location or multiple locations, or are they decentralized? 

DESIGNING AND ADVERTISEMENT PROGRAM TRAINING

DESIGING

Training Program Framework Development

When developing your training plan, there are a number of considerations. Training is something that should be

planned and developed in advance.

Figure 8.6 Training Program Development Model

The considerations for developing a training program are as follows:

 1. Needs assessment and learning objectives. This part of the framework development asks you to

consider what kind of training is needed in your organization. Once you have determined the training

needed, you can set learning objectives to measure at the end of the training.

2. Consideration of learning styles. Making sure to teach to a variety of learning styles is important to

development of training programs.

3. Delivery mode. What is the best way to get your message across? Is web-based training more

appropriate, or should mentoring be used? Can vestibule training be used for a portion of the training

while job shadowing be used for some of the training, too? Most training programs will include a

variety of delivery methods.

4. Budget. How much money do you have to spend on this training?

5. Delivery style. Will the training be self-paced or instructor led? What kinds of discussions and

interactivity can be developed in conjunction with this training?

6. Audience. Who will be part of this training? Do you have a mix of roles, such as accounting people

and marketing people? What are the job responsibilities of these individuals, and how can you make

the training relevant to their individual jobs?

7. Content. What needs to be taught? How will you sequence the information?

8. Timelines. How long will it take to develop the training? Is there a deadline for training to be

completed?

9. Communication. How will employees know the training is available to them?

10. Measuring effectiveness of training. How will you know if your training worked? What ways will

you use to measure this?

Human Resource Recall

Can you think of a time where you received training, but the facilitator did not connect with the audience? Does

that ever happen in any of your classes (of course not this one, though)?

Needs Assessment

The first step in developing a training program is to determine what the organization needs in terms of training.

There are three levels of training needs assessment: organizational assessment, occupational (task) assessment,

and individual assessment:
 1. Organizational assessment. In this type of needs assessment, we can determine the skills, knowledge,

and abilities a company needs to meet its strategic objectives. This type of assessment considers things

such as changing demographics and technological trends. Overall, this type of assessment looks at how

the organization as a whole can handle its weaknesses while promoting strengths.

2. Occupational (task) assessment. This type of assessment looks at the specific tasks, skills knowledge,

and abilities required to do jobs within the organization.

3. Individual assessment. An individual assessment looks at the performance of an individual employee

and determines what training should be accomplished for that individual.

We can apply each of these to our training plan. First, to perform an organizational assessment, we can look at

future trends and our overall company’s strategic plan to determine training needs. We can also see how jobs

and industries are changing, and knowing this, we can better determine the occupational and individual

assessments.

Researching training needs can be done through a variety of ways. One option is to use an online tool such as

SurveyMonkey to poll employees on what types of training they would like to see offered.

As you review performance evaluations turned in by your managers, you may see a pattern developing showing

that employees are not meeting expectations. As a result, this may provide data as to where your training is

lacking.

There are also types of training that will likely be required for a job, such as technical training, safety training,

quality training, and professional training. Each of these should be viewed as separate training programs,

requiring an individual framework for each type of training. For example, an employee orientation framework

will look entirely different from an in-house technical training framework.

Training must be tied to job expectations. Any and all training developed should transfer directly to the skills of

that particular employee. Reviewing the HR strategic plan and various job analyses may help you see what kind

of training should be developed for specific job titles in your organization.

OR
 Process of Designing a Training Program

The process of designing a training program is not an easy task. Many problems occur in the process of
designing a training program. Some of the common problems are; creating training that does not support a
business goal, problems that training cannot fix, how to identify the purpose of a training program, and
sometimes all of these things.

So, how to create an effective training program for the employees? Below are the five steps that will help you to
create a more effective training program:

Step 1: Perform a Training Needs Assessment

The assessment of a training program has four-step to be followed:

 Identifying the business goal that can be supported by a training program.

 Determining the tasks that workers should perform to make the company reach its goals.
 Conducting the training activities that will help in enhancing the learning of the workers to perform the
tasks more effectively.
 Determining the learning characteristics of the workers that will make the training effective.

Step 2: Develop Learning Objectives

A learning objective address things that your employees can get to know like:

 What is the product flow?

 How to maintain the product flow cycle?
 Importance of good product lifecycle.

Step 3: Design Training Materials

While designing your materials, keep the following points in mind:

 Focus on the learning needs of your employees.

 Create training assessments that can directly relate to the learning objectives.
 Remember the adult learning philosophies.
 Include more hands-on practice or simulation as possible.
 Put the employees in control of the learning process.
 Do possible thing to let the employees talk and interact with the trainer and with each other while
attending the training.
 Make sure there is plenty of opportunity for opinions.
 Break your training materials into small pieces that are easier to understand.
 Use “blended learning” approach that includes training in various types.
 Appeal to your workers’ senses during the training.

Step 4: Implement the Training

Implementation can take different forms by moving forward to the training. It can be classroom instructions, the
completion of e-learning modules, or more.

Step 5: Evaluate the Training

This method involves evaluating the training at four levels. Those four levels of evaluation are:

 Employees’ reaction to training.

 Employees’ learning through the training.
 Employee’s job behaviour post-training.
 Beneficial business results.

ADVERTISING TRAINING PROGRAM

Steps in Advertising Process

“Mass demand has been created almost entirely through the development of Advertising”

Calvin Coolidge in the New York Public Library.

For the development of advertising and to get best results one need to follow the advertising process step by
step.

The following are the steps involved in the process of advertising:

1. Step 1 - Briefing: the advertiser needs to brief about the product or the service which has to be
advertised and doing the SWOT analysis of the company and the product.
2. Step 2 - Knowing the Objective: one should first know the objective or the purpose of advertising. i.e.
what message is to be delivered to the audience?
3. Step 3 - Research: this step involves finding out the market behavior, knowing the competitors, what
type of advertising they are using, what is the response of the consumers, availability of the resources
needed in the process, etc.
4. Step 4 - Target Audience: the next step is to identify the target consumers most likely to buy the
product. The target should be appropriately identified without any confusion. For e.g. if the product is a
health drink for growing kids, then the target customers will be the parents who are going to buy it and
not the kids who are going to drink it.
5. Step 5 - Media Selection: now that the target audience is identified, one should select an appropriate
media for advertising so that the customers who are to be informed about the product and are willing to
buy are successfully reached.
6. Step 6 - Setting the Budget: then the advertising budget has to be planned so that there is no short of
funds or excess of funds during the process of advertising and also there are no losses to the company.
7. Step 7 - Designing and Creating the Ad: first the design that is the outline of ad on papers is made by
the copywriters of the agency, then the actual creation of ad is done with help of the art directors and
the creative personnel of the agency.
8. Step 8 - Perfection: then the created ad is re-examined and the ad is redefined to make it perfect to
enter the market.
9. Step 9 - Place and Time of Ad: the next step is to decide where and when the ad will be shown.

The place will be decided according to the target customers where the ad is most visible clearly to
them. The finalization of time on which the ad will be telecasted or shown on the selected media will
be done by the traffic department of the agency.

10. Step 10 - Execution: finally the advertise is released with perfect creation, perfect placement and
perfect timing in the market.
 11. Step 11 - Performance: the last step is to judge the performance of the ad in terms of the response
from the customers, whether they are satisfied with the ad and the product, did the ad reached all the
targeted people, was the advertise capable enough to compete with the other players, etc. Every point is
studied properly and changes are made, if any.

If these steps are followed properly then there has to be a successful beginning for the product in the market.

MEAN

Advertising is any form of non-personal presentation and communication of products by an identified sponsor.

It is a cost effective way to communicate messages. In developing as advertising program, marketing

managers must always start by identifying the target market and buyers' motives.

STEPS IN ADVERTISING PROGRAMME - Developing Advertising Programme

   Posted On :  19.06.2018 06:16 am

If an organization is spending crores of rupees on advertisement, then as managers we must attempt and be able
to measure its effectiveness and delivery to find out whether we are receiving the value for money. However,
advertising is only one part of marketing mix and the final delivery in rupees terms would involve the various
marketing variables.
STEPS IN ADVERTISING PROGRAMME
 
Advertising Goals

If an organization is spending crores of rupees on advertisement, then as managers we must attempt and be able
to measure its effectiveness and delivery to find out whether we are receiving the value for money. However,
advertising is only one part of marketing mix and the final delivery in rupees terms would involve the various
marketing variables.
 
The tragedy of advertising is that if it does not lead to an increase in sales of the product, the entire blame is put
on advertising. Hence a clear definition of advertising goals in required. A successful advertising campaign can
be compared with a military campaign where goal is set as “ capture the army post No. 11” and the goal is
achieved.
 
Advertising goal can be defined as a clear and concise description of exactly what advertising is intended to
accomplish, i.e.,
 
--  To increase sales,
 
--  To establish brand equity, and
 
-- To enter the target market.

Sometimes these objectives are considered as marketing objectives instead of advertising objectives.
 

Need to set Advertising Objectives

 

Some of the possible objectives that are stressed are :

 
1.      Return on Investment ( R.O.I) Advertising involves an investment of funds. Hence, it should produce a
measurable return on the said investment in order to assess the desirability and profitability of advertising.
 
2.      Selection of media. The most effective advertising tool should be chosen in order to get the most profitable
result.
 
3.      Coordination An appropriate co-ordination and integration of marketing and advertising efforts is
imperative. Otherwise objectives of advertising are superimposed on objectives of marketing.

EXECUTIVE DEVELOPMENT PROGRAMMS

What Is an Executive Development Program?

Executive development programs are designed for business professionals. Through the executive development
program, business executives can learn to become better leaders and gain skills that can help them develop a
global business. Schools offering Application Development degrees can also be found in these
popular choices.

Executive Development Program Defined

An executive development program focuses on many aspects of leadership, business and management,
including new technological developments. Programs vary in length, but typically range between 1 and 3
weeks. The program helps professionals develop new and enhance old skills in many areas of business,
including strategy, finance and negotiations. The program also provides theory-based concepts and several
courses that give students hands-on learning opportunities to practice their leadership and management skills.
Specific skills or abilities that business professionals can acquire through an executive development program
include:

 Ability to function more adeptly in management roles by gaining additional confidence and knowledge

 Ability to apply new concepts

 Increase in leadership skills

 Stronger communication skills

 Ability to work with others, while assessing their skills and strengths

 Ability to formulate more competitive business strategies

 Skills in team building

INTRO

Concepts and objectives:

While drawing a distinction between training and development, we introduced, in brief, the concept of

development. Based on that concept, we can now elaborate it in more detail. The term ‘development’ implies

overall development in a person. Accordingly, executive development means not only improvement in job

performance, but also improvement in knowledge, personality, attitude, behaviourism of an executive, etc.

It means that executive development focuses more on the executive’s personal growth. Thus, executive

development consists of all the means that improve his/her performance and behaviour. Executive development

helps understand cause and effect relationship, synthesizes from experience, visualizes relationships or thinks

logically. That is why some behavioural scientists suggest that the executive development is predominantly an

educational process rather than a training process.

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Flippo has viewed that “executive/management development includes the process by which managers and

executives acquire not only skills and competency in their present jobs but also capabilities for future

managerial tasks of increasing difficulty and scope”.

According to S.B. Budhiraja, former Managing Director of Indian Oil Corporation. “Any activity designed to

improve the performance of existing managers and to provide for a planned growth of managers to meet future

organisational requirements is called management development”. It is now clear from the above definitions of

executive/management development that it is based on certain assumptions.

The process:

Like any learning programme, executive development also involves a process consisting o) certain steps.

Though sequencing these various steps in a chronological order is difficult, behavioural scientists have tried to

list and sequence them in six steps as shown in figure 11.1

These steps, also called the components of the executive development programme, have been- discussed in the

succeeding paragraphs.

Identifying Development Needs:

Once the launching of an executive development programme (EDP) is decided, its implementation begins with

identifying the developmental needs of the organisation concern. For this, first of all, the present and future

developmental needs for executives/ managers ascertained by identifying how many and what type of

executives will be required in the organisation at present and in future.

This needs to be seen in the context of organisational as well as individual, i.e. manager needs. While

organisational needs may be identified by making organisational analysis in terms of organisation’s growth plan,
strategies, competitive environment, etc., individual needs to be identified by the individual career planning and

appraisal.

Appraisal of Present Managerial Talent:

The second step is an appraisal of the present managerial talent for the organisation. For this purpose, a

qualitative assessment of the existing executives/managers in the organisation is made. Then, the performance

of every executive is compared with the standard expected of him.

Inventory of Executive Manpower:

Based on information gathered from human resource planning, an inventory is prepared to have complete

information about each executive in each position. Information on the executive’s age, education, experience,

health record, psychological test results, performance appraisal data, etc. is collected and the same is maintained

on cards and replacement tables.

An analysis of such inventory shows the strengths and also discloses the deficiencies and weaknesses of the

executives in certain functions relative to the future needs of the concern organisation. From this executive

inventory, we can begin the fourth step involved in the executive development process.

Developing Development Programmes:

Having delineated strengths and weaknesses of each executive, the development programmes are tailored to fill

in the deficiencies of executives. Such tailormade programmes of development focus on individual needs such

as skill development, changing attitudes, and knowledge acquisition.

Conducting Development Programmes:

At this stage, the manager actually participates in development programmes. It is worth mentioning that no

single development programme can be adequate for all managers. The reason is that each manager has a unique

set of physical, intellectual and emotional characteristics.

As such, there can be different development programmes to uniquely suit to the needs of an executive/ manager.

These development programmes may be on-the-job or off-the-job programmes organised either by the

organisation itself or by some outside agencies.

Evaluating Development Programmes:

Just as with employee training programme, executive development programme is evaluated to see changes in

behaviour and executive performance. Evaluation of programme enables to appraise programme’s effectiveness,

highlight its weaknesses and aids to determine whether the development should be continued or how it can be

improved.

Methods:

Since no single development programme can be adequate for managers, it is undertaken in a variety of methods.

Various methods/ techniques of executive/management development may be classified into two broad

categories as shown in the following figure 11.2.

EVALUATION OF TRAINING AND DEVELOPMENT PROGRAMS

The process:

Like any learning programme, executive development also involves a process consisting o) certain steps.

Though sequencing these various steps in a chronological order is difficult, behavioural scientists have tried to

list and sequence them in six steps as shown in figure 11.1

These steps, also called the components of the executive development programme, have been- discussed in the

succeeding paragraphs.

Identifying Development Needs:

Once the launching of an executive development programme (EDP) is decided, its implementation begins with

identifying the developmental needs of the organisation concern. For this, first of all, the present and future

developmental needs for executives/ managers ascertained by identifying how many and what type of

executives will be required in the organisation at present and in future.

This needs to be seen in the context of organisational as well as individual, i.e. manager needs. While

organisational needs may be identified by making organisational analysis in terms of organisation’s growth plan,

strategies, competitive environment, etc., individual needs to be identified by the individual career planning and

appraisal.

Appraisal of Present Managerial Talent:

The second step is an appraisal of the present managerial talent for the organisation. For this purpose, a

qualitative assessment of the existing executives/managers in the organisation is made. Then, the performance

of every executive is compared with the standard expected of him.

Inventory of Executive Manpower:

Based on information gathered from human resource planning, an inventory is prepared to have complete

information about each executive in each position. Information on the executive’s age, education, experience,

health record, psychological test results, performance appraisal data, etc. is collected and the same is maintained

on cards and replacement tables.

An analysis of such inventory shows the strengths and also discloses the deficiencies and weaknesses of the

executives in certain functions relative to the future needs of the concern organisation. From this executive

inventory, we can begin the fourth step involved in the executive development process.
Developing Development Programmes:

Having delineated strengths and weaknesses of each executive, the development programmes are tailored to fill

in the deficiencies of executives. Such tailormade programmes of development focus on individual needs such

as skill development, changing attitudes, and knowledge acquisition.

Conducting Development Programmes:

At this stage, the manager actually participates in development programmes. It is worth mentioning that no

single development programme can be adequate for all managers. The reason is that each manager has a unique

set of physical, intellectual and emotional characteristics.

As such, there can be different development programmes to uniquely suit to the needs of an executive/ manager.

These development programmes may be on-the-job or off-the-job programmes organised either by the

organisation itself or by some outside agencies.

Evaluating Development Programmes:

Just as with employee training programme, executive development programme is evaluated to see changes in

behaviour and executive performance. Evaluation of programme enables to appraise programme’s effectiveness,

highlight its weaknesses and aids to determine whether the development should be continued or how it can be

improved.

Methods:

Since no single development programme can be adequate for managers, it is undertaken in a variety of methods.

Various methods/ techniques of executive/management development may be classified into two broad

categories as shown in the following figure 11.2.

MEAN
 Training evaluation is a systematic process to analyze if training programs and initiatives are effective and

efficient. Trainers and human resource professionals use training evaluation to assess if the employee training

programs are aligned with the company's goals and objectives.

Introduction

Factsheet Block Body

Evaluation is considered as being an important process of a training event in order to reflect, analyse and
improve its effectiveness and efficiency. Evaluation can be defined as the following:

"Evaluation is the collection, analysis and interpretation of information about any aspect of a program of
education or training as part of a recognised process of judging its effectiveness, its efficiency and any other
outcomes it may have" (ELLINGTON et al. 1993).
Neglecting to make any attempt of evaluation reflects disinterest and lack of professionalism. Evaluation is a
must and therefore an integral part of effective training (FAO 1998) (see also planning a training). The effort
that is put into the design of any evaluation will pay rich dividends, but defining the right questions is always the
key starting point. There are degrees of correctness of definition but this should always be something that is
measurable and possible within the time and cost frame you actually have (adapted from CROMPTON 1999).

DEVELOPMENT PROGRAM IN PERFORAMANCE MANAGEMENT

MEAN

A programme theory explains how an intervention (a project, a programme, a policy, a strategy) is understood

to contribute to a chain of results that produce the intended or actual impacts. ... It can also show the other

factors which contribute to producing impacts, such as context and other projects and programmes.

1. Meaning of Management Development:

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Since 1950, Management or Executive Development has been the most prominent area of personnel or human
resources management. It is also called management revolution.

Management development is a systematic process of management training and growth by which individuals
(aspiring to rise on the ladder of management) gain and apply knowledge, skills, insights, and attitudes to
manage managers, workers and work organisations effectively.

Management development, therefore, means any planned, guided or directed activity undertaken by a manager
to help himself become more competent in his present and/or to consciously prepare himself for assuming
higher and more important managerial duties and responsibilities so that he can claim promotion by merit or
competence.
There are two ways to develop as managers:
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1. Active and intelligent participation in the formal courses of instructions and management training pro-
grammes.

2. Learning the techniques of management through actual job experiences in a work environment itself.

A company should provide the training programme and opportunities for development to its present as well as
potential managers and offer ample scope for taints to conic forward. But it should be clearly noted that training
programmes such as case studies, lectures, role playing, readings, job rotation and so on cannot automatically
guarantee, the accelerated output of managers.

Please note that no man can develop another. More important and vital counterpart of planned training
programme is the individual efforts of the person himself. In the final analysis, self-development is an important
component of any management development programme.

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The urge for advancement and development must come from within the individual and a manager has to develop
himself. In other words, self-motivation is the pivot of management development programme. Top management
must create an environment in which self-development is encouraged and facilitated.

Management development programme must be based on three principles:

1. All development is self- development,

2. Development programme should recognise individual differences, and

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3. Development programme is a long-range process and a manager cannot be produced overnight.

2. Importance of Management Development:

Executive talent is the most important asset of an organisation. It is not shown on the corporate balance sheet,
but it influences appreciably the growth, progress, profits and the share values, than any other corporate assets.

Managerial asset is not costly to acquire. It is a low-cost resource with a high-profit potential. In reality, top
management should give more thought and care to the acquisition, maintenance and growth of men and women
who possess managerial talent and calibre than the thought and care given to planning and development of a
plant or a product.

In the life of a corporation, present success is largely a product of three types of top management actions
taken in the past:
1. Scientific selection of the right people in the management cadre;

2. Placement of properly selected people in the right job;

3. Assurance that these properly placed managers could grow as per expectations and could meet both the needs
of the organisation as well as their own needs. In underdeveloped and developing countries, management is the
single factor acting as the master-key for unlocking the forces of economic development.

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No modern business can continue to be successful without planned attention to the growth and development of
its managerial staff. It is due to the unbelievably rapid expansion of technology demanding numerous
specialised and qualified employees to manage complex, sophisticated and dynamic business.

“An institution that cannot produce its own managers will die. From an overall point of view the ability of
an institution to produce managers is more important than its ability to produce goods efficiently and
cheaply”—P. Drucker.
Drucker’s statement illustrates the importance of management (executive) development. Yet we find that
industry on the whole has failed to recognise its importance, particularly in developing countries like India.

3. Nature of Management Development:

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Management or executive development is an organised and planned process and programme of training and
growth by which individual manager or executive at each level of management hierarchy gains and applies
knowledge, skills, insights and attitudes to manage workers and the work organisations effectively.

Of course, it is beyond the shadow of doubt that the company can only create the favourable climate for the
development of managers. Ultimately, in any programme of management development, self-development will
be the key-factor to determine the success of the programme of executive development.
In other words, the participants in this programme must have the capacity to learn and develop and they must be
highly motivated to achieve the planned objectives. Executive development is the guided self-discovery and
self-development.

4. Aims of Planned Management Development:

The primary aims and objectives are:
1. To ensure that the company is staffed both now and in the future with a sufficient number of managers with
necessary skills, experience and ability to secure continued” growth and profitability the right man/woman at the
right time in the right place. Thus, we will have a steady source of competent people at all levels to meet
organisational needs at all lines.

2. To check that human resources of a company are being properly and fully used, and that potential and talent
in human terms are neither wasted nor overlooked, and they are offered ample and timely scope to grow, so that
both individuals as well as organisational needs are adequately met. This will ensure optimum utilisation of
human capital.

3. To provide an opportunity for staff within a company to prepare themselves for higher assignments and to
reach their maximum capabilities. The staff should be enabled to fulfill their career expectations by training that
will enable them to do a bigger and a richer job which they can get through a sound promotion policy, viz.,
promotion from within by merit.

In addition, there are many other objectives, such as prevention of managerial obsolescence (becoming out of
date) preparation for new business and expansions, to replace old executives with younger talents, to Indianise
management, to promote a high morale and good organisational climate, to promote productivity, profits and so
on.

Management Development Programme (MDP):

The process of management development begins with top management’s recognition of the need for MDP.
Development of suitable policy guidelines and assignment of special responsibility for executing the policy
create a favourable climate of on-the-job growth, personal improvement and development of managers.

A special committee of senior executives will look after planning and guiding management development. The
personnel manager and special training staff will administer the routine of MDP.

5. Contents of Management Development:

There are three areas in which we can have management development training:
1. Knowledge,

2. Skills and

3. Attitudes, to become competent managers.

Note:
1. Lower level managers need considerable technical skills, whereas higher level executives need considerable
administrative skills.

2. There are three skills:

(i) Technical skills

(ii) Human relations skills and

(iii) Conceptual skill, i.e., a combination of vision, imagination and intelligence. These skills can be learned,

(3) Attitudes are:

(a) Thinking like an executive,

(b) Empathy, i.e., ability to put ourselves in the position of others and understand their minds,

(c) Team concept, and

(d) Recognition of human values.

6. Facilities of Management Development:

We can have the following methods of management or executives development:
1. External:
(a) Management education at University and other institutions of higher learning offering specialised courses for
interested executives, e.g., marketing management, export management, financial management, personnel
management and so on.

(b) Management seminars, conferences and workshops at management associations or educational institutions.
2. Internal:
(a) Art of delegation,

(b) Job rotation,

(c) Promotions and transfers,

(d) Understudy method,

(e) Coaching by the superior or boss, and

(f) Multiple Management, i.e., membership of committees and junior boards.

Job rotation means the transferring of executives from job to job and from plant to plant on a co-ordinated and
planned basis. It is a very popular method in many business concerns. An understudy is a person who is in
training to assume, at a future time., the full duties and responsibilities of the position, currently held by his
superior. The person under training acts as ‘Assistant to—’.

In multiple management we have senior and junior boards. The junior boards serve in an advisory capacity only.
If the recommendation of the junior board is with unanimous consent, it is usually adopted by the senior board
without modifications.

PEROFORMANCE APPRAISAL

What Is a Performance Appraisal?

A performance appraisal is a regular review of an employee's job performance and overall contribution to a
company. Also known as an "annual review," "performance review or evaluation," or "employee appraisal," a
performance appraisal evaluates an employee’s skills, achievements and growth, or lack thereof. Companies use
performance appraisals to give employees big-pict*ure feedback on their work and to justify pay increases and
bonuses, as well as termination decisions. They can be conducted at any given time but tend to be annual, semi-
annual or quarterly

Definition:

Performance appraisal is a systematic, periodic and so far as humanly possible, the impartial rating of an

employee’s excellence in matters pertaining to his present job and to his potentialities for a better job. ”

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—Edwin B, Flippo
“It is the evaluation or appraisal of the relative worth to the company of a man’s services on his jobs.” —A1

ford & Beatty

INTRO

What is Performance?
What does the term performance actually mean? Employees are performing well when they are productive.
Productivity implies both concern for effectiveness and efficiency, effectiveness refers to goal accomplishment.
However it does not speak of the costs incurred in reaching the goal. That is where efficiency comes in.
Efficiency evaluates the ratio of inputs consumed to outputs achieved. The greater the output for a given input,
the greater the efficiency. It is not desirable to have objective measures of productivity such as hard data on
effectiveness, number of units produced, or percent of crimes solved etc and hard data on efficiency (average
cost per unit or ratio of sales volume to number of calls made etc.). 

In addition to productivity as measured in terms of effectiveness and efficiency, performance also includes
personnel data such as measures of accidents, turnover, absences, and tardiness. That is a good employee is one
who not only performs well in terms of productivity but also minimizes problems for the organisation by being
to work on time, by not missing days, and by minimizing the number of work-related accidents.

What is Appraisal? 

Appraisals are judgments of the characteristics, traits and performance of others. On the basis of these

judgments we assess the worth or value of others and identify what is good or bad. In industry performance

appraisal is a systematic evaluation of employees by supervisors. Employees also wish to know their position in

the organization. Appraisals are essential for making many administrative

decisions: selection, training, promotion, transfer, wage and salary administration etc. Besides they aid in

personnel research.

Performance Appraisal thus is a systematic and objective way of judging the relative worth of ability of an

employee in performing his task. Performance appraisal helps to identify those who are performing their

assigned tasks well and those who are not and the reasons for such performance.

NEEDS OF PERFORMANCE APPRAISAL

Need for Performance Appraisal:

There are certain requirements expected from the employees for which performance appraisal are conducted.
1. Providing information about the performance ranks on which decision regarding salary fixation, promotion,

etc. are taken.

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2. Review of the performance of the subordinates.

3. Providing information that helps to counsel the subordinates.

4. Getting information to diagnose deficiency in employees regarding skills, knowledge, etc.

5. To prevent grievance and in disciplinary activities.

PURPOSE OF PERFORMANCE APPRAISAL

Providing Feedback. Providing feedback is the most common justification for an organization to have a
performance appraisal system. Through its performance appraisal process the individual learns exactly how well
she did during the previous twelve months and can then use that information to improve her performance in the
future. In this regard, performance appraisal serves another important purpose by making sure that the boss's
expectations are clearly communicated.

Facilitating Promotion Decisions. Almost everyone in an organization wants to get ahead. How should the
company decide who gets the brass rings? Performance appraisal makes it easier for the organization to make
good decisions about making sure that the most important positions are filled by the most capable individuals.

Facilitating Layoff or Downsizing Decisions. If promotions are what everybody wants, layoffs are what
everybody wishes to avoid. But when economic realities force an organization to downsize, performance
appraisal helps make sure that the most talented individuals are retained and that only the organization's
marginal performers are cut loose.

Encouraging Performance Improvement. How can anyone improve if he doesn't know how he's doing right
now? A good performance appraisal points out areas where individuals need to improve their performance.

Motivating Superior Performance. This is another classic reason for having a performance appraisal system.
Performance appraisal helps motivate people to deliver superior performance in several ways. First, the
appraisal process helps them learn just what it is that the organization considers to be "superior." Second, since
most people want to be seen as superior performers, a performance appraisal process provides them with a
means to demonstrate that they actually are. Finally, performance appraisal encourages employees to avoid
being stigmatized as inferior performers (or, often worse, as merely "average").
 Setting and Measuring Goals. Goal setting has consistently been demonstrated as a management process that
generates superior performance. The performance appraisal process is commonly used to make sure that every
member of the organization sets and achieves effective goals.

Counseling Poor Performers. Not everyone meets the organization's standards. Performance appraisal forces
managers to confront those whose performance is not meeting the company's expectations.

Determining Compensation Changes. This is another classic use of performance appraisal. Almost every
organization believes in pay for performance. But how can pay decisions be made if there is no measure of
performance? Performance appraisal provides the mechanism to make sure that those who do better work
receive more pay.

Encouraging Coaching and Mentoring. Managers are expected to be good coaches to their team members
and mentors to their protégés. Performance appraisal identifies the areas where coaching is necessary and
encourages managers to take an active coaching role.

Supporting Manpower Planning. Well-managed organizations regularly assess their bench strength to make
sure that they have the talent in their ranks that they will need for the future. Companies need to determine who
and where their most talented members are. They need to identify the departments that are rich with talent and
the ones that are suffering a talent drought. Performance appraisal gives companies the tool they need to make
sure they have the intellectual horsepower required for the future.

Determining Individual Training and Development Needs. If the performance appraisal procedure includes
a requirement that individual development plans be determined and discussed, individuals can then make good
decisions about the skills and competencies they need to acquire to make a greater contribution to the company.
As a result, they increase their chances of promotion and lower their odds of layoff.

Determining Organizational Training and Development Needs. Would the organization be better off
sending all of its managers and professionals through a customer service training program or one on effective
decision making? By reviewing the data from performance appraisals, training and development professionals
can make good decisions about where the organization should concentrate company-wide training efforts.

Validating Hiring Decisions. Is the company hiring stars, or is it filling itself with trolls? Only when the
performance of newly hired individuals is assessed can the company learn whether it is hiring the right people.

Providing Legal Defensibility for Personnel Decisions. Almost any personnel decisiontermination, denial of
a promotion, transfer to another departmentcan be subjected to legal scrutiny. If one of these is challenged, the
company must be able to demonstrate that the decision it made was not based on the individual's race or
handicap or any other protected aspect. A solid record of performance appraisals greatly facilitates legal
defensibility when a complaint about discrimination is made.

Improving Overall Organizational Performance. This is the most important reason for an organization to
have a performance appraisal system. A performance appraisal procedure allows the organization to
communicate performance expectations to every member of the team and assess exactly how well each person is
doing. When everyone is clear on the expectations and knows exactly how he is performing against them, this
will result in an overall improvement in organizational success.
OBJECTIVES

“Performance appraisal may be defined as evaluating individual job performance as a basis for making objective
personnel decisions”. – Robert Kreitner, 2004.
According to some studies PA helps in improving performance and building both job satisfaction and
organizational commitment. Alternately, this helps in lowering down the turnover levels.
From the above discussion it is clear that appraisal of employees serves several objectives such as:
1. Compensation Decisions:
On the basis of performance appraisal, managers identify employees performing at or above or below the
expected levels. Employees are being compensated accordingly on the basis of merit.
2. Promotion Decisions:
Performance appraisal plays a vital role in judging the employees to be promoted to higher positions. Because
performance appraisal considers merit as the basis of reward, the employees having adequate talent are
considered for getting promotion.
3. Training and Development Programmes:
Performance appraisal serves as one of the important criteria for assessing the training needs of the employees.
It determines which employee needs more training and evaluates the post- training effects. Through
performance appraisal employees can know their progress and various skills they need to develop in order to get
promotion and pay hike.
4. Feedback:
Performance appraisal helps the employees in knowing how well he/she is doing on the job. It can serve as a
basis for an ongoing discussion between superior and subordinate about the job-related matters. Both the
appraiser and appraise get to know each other with the help of effective interaction and feedback process.
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The appraiser gets a clear picture of what he/ she must do to enhance his/her performance and to move ahead in
the career ladder of the organization.
5. Turnover Decisions:
Performance appraisal serves as a basis for job satisfaction of employees. If employees are not satisfied with
PAs they will not seethe added value. Some other studies suggested that appraisal satisfaction is a key factor
leading to job satisfaction. Being satisfied both quantitatively and qualitatively employees stay in the
organization for a longer period of time, thereby reducing the turnover rate.
Several studies emphasized fairness of procedures used for PA. Some research findings indicate that
dissatisfaction with performance appraisal influence employees’ intention to quit through reduced job
satisfaction. Hence the evaluation system to be effective should be perceived as being fair.

CONTENTS OF PAS
Contents of PA Form:

1. Quality of work

• Consider accuracy, thoroughness, effectiveness.

• Pressure, ability to meet standards of quality.

• Use of time and volume of work accomplished.

• Work output matches the expectations established.

2. Quantity of work

• Competence, thoroughness, and efficiency of work regardless of volume.

• Neatness and accuracy.

3. Teamwork:

• Establish and maintain effective working relationship with others.

• Shares information and resources with others

• Follows instructions of supervisor and respond to requests from others in the team in a helpful manner.
• Contributing work and effort to group performance to meet agreed upon objectives and achieve team success

4. Job knowledge

• Application of appropriate level of technical and procedural knowledge in specific field

• Degree of technical competence

• Understanding of job procedures, methods, facts and information related to assignments.

• Perform duties with minimal supervision but seek guidance where and when appropriate to the job, consults

the appropriate staff

5. Initiative

• Consider the extent to which the employee sets own constructive work practice and recommends and creates

own procedures.

• Self-starter, develop and implement new methods, procedures, solutions, concepts, designs and/or applications

of existing designs or procedures.

• Accepts additional challenges and responsibilities and willingly assist others, self-reliant.

• Completes assignment on time.

6. Interpersonal relations

• Consider the extent to which the employee is cooperative, considerate, and tactful in dealing with supervisors,

subordinates, peers, faculty, students and others.

7. Health and safety compliance

• The degree to which he or she complies with or over sees the compliance with university safety rules.

• The following are also to be completed for supervisory personnel and members of the administrative staff.

8. Communications abilities

Performance appraisal of communications include elements as:

• Ability to listen and understand information;

• Presents information in a clear and concise manner.

• Knows appropriate way of communicating with immediate superiors and the management

• Demonstrates respect for all individuals in all forms of communication

• Regardless of their background or culture;

9. Planning and organizing :

• Adapting to changes and using resources effectively;

• Maintains confidentiality as appropriate.

• Setting objectives, establishing priorities, developing plans

• Arranging work schedules and prioritizing work to meet deadlines.

• Know when to ask for clarification before proceeding on a work project.

10. Problem analysis and decision making

• Anticipating problems and facilitate problem resolution.

• Willingness to make necessary and immediate decisions given incomplete information.

• Understanding practical and workable solutions.

• Recognizing when a decision is necessary, asking for input, making decisions and providing information and

feedback in a timely manner.

11. Staff development

• The extent to which the individual provides guidance and opportunities to his or her staff for their development

and advancement in the university.

12. Dependability

Performance appraisal of dependability include elements as:

• Consider the extent to which the employee completes assignments on time and carries out instructions.

• Starts work at appropriate time;

• Respects time allowed for breaks and lunch;

• Follows policies for requesting and reporting time off;

• Helps ensure work duties are covered when absent;

• Employee’s presence can be relied upon for planning purposes.

• Attendance and punctuality meets supervisor’s requirements.

APPRAISAL DIFFERENT METHODS

 TECHNIQUES / METHODS OF PERFORMANCE APPRAISALS
Numerous methods have been devised to measure the quantity and quality of performance appraisals. Each of
the methods is effective for some purposes for some organizations only. None should be dismissed or accepted
as appropriate except as they relate to the particular needs of the organization or an employee.
Broadly all methods of appraisals can be divided into two different categories.
 Past Oriented Methods
 Future Oriented Methods
Past Oriented Methods
1.    Rating Scales: Rating scales consists of several numerical scales representing job related performance
criterions such as dependability, initiative, output, attendance, attitude etc. Each scales ranges from excellent to
poor. The total numerical scores are computed and final conclusions are derived. Advantages – Adaptability,
easy to use, low cost, every type of job can be evaluated, large number of employees covered, no formal training
required. Disadvantages – Rater’s biases
2.    Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or No based
questions is prepared. Here the rater only does the reporting or checking and HR department does the actual
evaluation. Advantages – economy, ease of administration, limited training required, standardization.
Disadvantages – Raters biases, use of improper weighs by HR, does not allow rater to give relative ratings
3.    Forced Choice Method: The series of statements arranged in the blocks of two or more are given and the
rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual
assessment. Advantages – Absence of personal biases because of forced choice. Disadvantages – Statements
may be wrongly framed.
4.    Forced Distribution Method: here employees are clustered around a high point on a rating scale. Rater is
compelled to distribute the employees on all points on the scale. It is assumed that the performance is conformed
to normal distribution. Advantages – Eliminates Disadvantages – Assumption of normal distribution, unrealistic,
errors of central tendency.
5.    Critical Incidents Method: The approach is focused on certain critical behaviors of employee that makes
all the difference in the performance. Supervisors as and when they occur record such incidents. Advantages –
Evaluations are based on actual job behaviors, ratings are supported by descriptions, feedback is easy, reduces
recency biases, chances of subordinate improvement are high. Disadvantages – Negative incidents can be
prioritized, forgetting incidents, overly close supervision; feedback may be too much and may appear to be
punishment.
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6.    Behaviorally Anchored Rating Scales: statements of effective and ineffective behaviors determine the
points. They are said to be behaviorally anchored. The rater is supposed to say, which behavior describes the
employee performance. Advantages – helps overcome rating errors. Disadvantages – Suffers from distortions
inherent in most rating techniques.
7.    Field Review Method: This is an appraisal done by someone outside employees’ own department usually
from corporate or HR department. Advantages – Useful for managerial level promotions, when comparable
information is needed, Disadvantages – Outsider is generally not familiar with employees work environment,
Observation of actual behaviors not possible.
8.    Performance Tests & Observations: This is based on the test of knowledge or skills. The tests may be
written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage – Tests
may be apt to measure potential more than actual performance. Disadvantages – Tests may suffer if costs of test
development or administration are high.
9.    Confidential Records: Mostly used by government departments, however its application in industry is not
ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR) and may record ratings
with respect to following items; attendance, self expression, team work, leadership, initiative, technical ability,
reasoning ability, originality and resourcefulness etc. The system is highly secretive and confidential. Feedback
to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly subjective and ratings
can be manipulated because the evaluations are linked to HR actions like promotions etc.
10.  Essay Method: In this method the rater writes down the employee description in detail within a number of
broad categories like, overall impression of performance, promoteability of employee, existing capabilities and
 qualifications of performing jobs, strengths and weaknesses and training needs of the employee. Advantage – It
is extremely useful in filing information gaps about the employees that often occur in a better-structured
checklist. Disadvantages – It its highly dependent upon the writing skills of rater and most of them are not good
writers. They may get confused success depends on the memory power of raters.
11.  Cost Accounting Method: Here performance is evaluated from the monetary returns yields to his or her
organization. Cost to keep employee, and benefit the organization derives is ascertained. Hence it is more
dependent upon cost and benefit analysis.
12.  Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of different
methods that compare performance with that of other co-workers. The usual techniques used may be ranking
methods and paired comparison method.
 Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best
and why best are not elaborated in this method. It is easy to administer and explanation.
 Paired Comparison Methods: In this method each employee is rated with another employee in the
form of pairs. The number of comparisons may be calculated with the help of a formula as under.
N x (N-1) / 2
Future Oriented Methods
1.    Management By Objectives: It means management by objectives and the performance is rated against the
achievement of objectives stated by the management. MBO process goes as under.
 Establish goals and desired outcomes for each subordinate
 Setting performance standards
 Comparison of actual goals with goals attained by the employee
 Establish new goals and new strategies for goals not achieved in previous year.
Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-term goals rather
than important and long-term goals etc.
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2.    Psychological Appraisals: These appraisals are more directed to assess employees potential for future
performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and
discussion with supervisors and review of other evaluations. It is more focused on employees emotional,
intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow
and costly and may be useful for bright young members who may have considerable potential. However quality
of these appraisals largely depend upon the skills of psychologists who perform the evaluation.
3.    Assessment Centers: This technique was first developed in USA and UK in 1943. An assessment center is
a central location where managers may come together to have their participation in job related exercises
evaluated by trained observers. It is more focused on observation of behaviors across a series of select exercises
or work samples. Assessees are requested to participate in in-basket exercises, work groups, computer
simulations, role playing and other similar activities which require same attributes for successful performance in
actual job. The characteristics assessed in assessment center can be assertiveness, persuasive ability,
communicating ability, planning and organizational ability, self confidence, resistance to stress, energy level,
decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc. Disadvantages
– Costs of employees traveling and lodging, psychologists, ratings strongly influenced by assessee’s inter-
personal skills. Solid performers may feel suffocated in simulated situations. Those who are not selected for this
also may get affected.
Advantages – well-conducted assessment center can achieve better forecasts of future performance and
progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be
high in assessment centers. The tests also make sure that the wrong people are not hired or promoted. Finally it
clearly defines the criteria for selection and promotion.
4.    360-Degree Feedback: It is a technique which is systematic collection of performance data on an
individual group, derived from a number of stakeholders like immediate supervisors, team members, customers,
peers and self. In fact anyone who has useful information on how an employee does a job may be one of the
appraisers. This technique is highly useful in terms of broader perspective, greater self-development and multi-
source feedback is useful. 360-degree appraisals are useful to measure inter-personal skills, customer
 satisfaction and team building skills. However on the negative side, receiving feedback from multiple sources
can be intimidating, threatening etc. Multiple raters may be less adept at providing balanced and objective
feedback.

USES OF PERFORMANCE APPRAISAL

Uses of Performance Appraisal

In many organisations, an appraisal system assists in achieving numerous goals. However, in few firms
performance appraisal is used in measuring and improving individual as well as organisational performance.
The most common issue with performance appraisal is that a lot is expected from one form of performance
appraisal system plan. For instance, a plan that is strategically designed to improve and develop employee skills
may not be used in deciding wage increases. Although, if an appraisal plan is well designed it can be used in
accomplishing the set objectives as well as performance.

1. Human Resource Planning: It is important to record data/information of employees in a firm so that

it is easy to identify the potentials of who deserves to be promoted or have any area to improve. Performance
appraisal also helps in revealing if there is insufficient number of workers. An appraisal system should be
designed and planned after considering the strengths and weaknesses of the HRM of the organisation.
2. Recruitment and Selection: Through the process of performance analysis, organisations can
determine the performance potential on an applicant. Studies show that successful employees display specific
behavioral traits while performing tasks. The data processed through performance evaluation help in setting
standards for behavioral interviews. In the process of selection, the employee rating can also be used as a
variable against which test scores are compared.
3. Training and Development: Training and development is crucial for any employee as it acts as way
to communicating what is expected and how. Performance appraisal helps in drawing attention to these  specific
needs of training. For example, if an employee’s job involves the skill of creative writing and by the process of
evaluation it reveals that he or she lacks in it or has poor knowledge about it, the employee will need appropriate
training sessions. When managers of a firm lack the capability of administering disciplinary action, they need
the necessary training to deal with this problem. Hence, identifying deficiencies and obstacles can be overcome
by training and development sessions which develop and improve individual’s skills allowing them to perform
better. An appraisal process does not train and develop individuals but determines the training needed by
providing data.
4. Career Planning and Development: Career planning can be described as a never-ending cycle in
which an individual sets profession goals and means to achieve them throughout his or her lifetime.
However, career development is a more formal approach used by organisations. It involves recruiting suitable
qualified and experienced people when required. Performance appraisal can determine an employee’s potential
through assessing its weaknesses and strengths. The data is also useful to counsel junior staff member
and assisting in career plans.
5. Compensation Programs: Performance appraisal evaluations help in making decisions dealing with
wage or salary regulations. It is believed that organisations should reward employees with increase in pay when
excellent performance is achieved. In order to increase performance, an organisation should implement well
planned and designed performance appraisal systems and award the efficient workers. This not only increases
performance but also keeps employees motivated to achieve better in future.
6. Internal Employee Relations: Performance appraisal evaluation can provide crucial information
used in making decision about the internal employee relations i.e promotion, demotion, transfers and dismisses
etc. For example, performance appraisal data are also used for decisions in several areas of internal employee
relations, including promotion, demotion, termination, layoff, and transfer. Also, an employee’s performance in
one job may be useful in determining his or her ability to perform another job on the same level, as is required in
the consideration of transfers. When the performance level is unacceptable, demotion or even termination may
be appropriate.
7. Assessment of Employee Potential: Some organizations attempt to assess an employee’s potential
as they appraise his or her job performance. Although past behaviors may be a good predictor of future
behaviors in some jobs, an employee’s past performance may not accurately indicate future performance in
other jobs. The best salesperson in the company may not have what it takes to become a successful district sales
manager, where the tasks are distinctly different. Similarly, the best systems analyst may, if promoted, be a
disaster as an information technology manager. Overemphasizing technical skills and ignoring other equally
important skills is a common error in promoting employees into management jobs. Recognition of this problem
has led some firms to separate the appraisal of performance, which focuses on past behavior, from the
assessment of potential, which is future-oriented.

LIMITATIONS OF PERFORMANCE APPRAISAL

1. Bias of Appraiser:

The presence of ‘Halo Effect’ in evaluation of employees is the biggest weakness of this method.

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A high rate is given to favoured employees whereas unfriendly employees are rated low.

2. Ambiguity in Standards:

If the standards are not clear, the supervisors may follow different standards for different employees.

3. Insufficient Evidence:

An employee who can impress the boss may get a positive evaluation though his impression in his own

department may be very poor. In such cases, the performance appraisal will be superfluous.

4. Several Qualities Remain Without Appraisal:

Through performance appraisal, only few qualities of employees can be measured. All individuals differ from

each other in terms of background, values and behaviour.

5. Leniency or Strictness Tenancy:

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Every evaluator has his own valuation procedure which is regarded as his own standard for evaluation. For

example, some teachers are strict in evaluation of answer books whereas others are lenient. The lenient tendency

is known as ‘Positive Leniency Error’ whereas strict tendency is called as ‘Negative Leniency Error’. The rating

may be high or low depending upon the nature of evaluators.

6. Average Rating Problem:

In order to give very low or very high rating, the top managers are required to give reasons to justify the rating.

The most common error committed in performance appraisal is to give average rating to all employees.

Moreover, low rating antagonizes the subordinates.

7. Influence of Man’s Job:

There is a tendency to give a high rating to highly paid jobs. So a senior employee may get a higher rating than a

junior employee.

8. Similarity Error:

The evaluator tries to look those qualities in subordinates which he himself possesses. Those who show the

similar characteristics are rated high.

PROBLEMS OF PERFORMANCE APPRAISAL

1) Compare/contrast error

When appraising employees, it is important never to compare their abilities and using it to make a judgment.

Each employee is gifted in their unique way and thus has different strengths and weaknesses. When you try to
compare or contrast their abilities, it means that you will not get a fair review because high performers will
certainly make relatively low performers for particular tasks to look below average, which on some occasions is
never the case.

Of essence is to ensure that you appraise every worker by their performance against established standards and
criteria, individually.

2) Similarity error

In every organization, some employees have a resemblance of different aspects with the manager. Now some
managers usually find it easy to reward such employees highly compared to those who portray contrasting
behaviour or opinion.
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As a manager, it would be significant to ensure that you perform your employee appraisal objectively and
considering that diversity should be respected, try to carry out the appraisal process based on performance and
results that they provide and not primarily by similarity/dissimilarity that you have.

3) Bias

Bias is also one of the problems with performance appraisal managers often encounter. As a matter of fact,
everyone has some biases towards someone or something irrespective of how we portray them. However, as a
manager, it is imperative not to let the biases hinder the manner in which you approach performance evaluation
process.

Your biases can manipulate the objectivity of appraisal hence it is important to ensure that you keep it off as
much as possible to make sure that you do not compromise the results of your findings. Biases may also lead to
inconsistencies among different employees bearing in mind that the key element for attaining best results from
appraisal is consistency.

If you do not like someone it will not be right to use that feeling in making review judgment, it is
unprofessional.

4) Stereotyping

Stereotyping is closely related to biases only that in this case, you tend to make your judgment by your
predetermined mindset towards a particular employee’s race, gender, political affiliation, religious background,
culture and other characteristics.

Stereotyping is problematic when assessing employees’ performance because it implies that you will only be
able to provide judgment based on what you label the group similar to one that the particular employee belongs
to.

What you need to know is that stereotyping can also be positive or negative and thus can significantly influence
your judgment respectively. It is only ideal to look beyond the labels and evaluate the employee by set standards
and performance.

5) The Halo effect

This is also known as the horns effect. It is a situation where you let your positive or negative feelings towards
an employee to influence your evaluation easily. It is necessary to judge each criterion independently without
compromising what you feel for the employee.

You should also be careful when doing appraisal evaluations so that in the event you realize that most criterions
are coming out with similar appraisals, you should halt and check yourself for the halo effect. It is a fact that
each employee will always portray certain areas as their weakness and others as their strengths.  What you need
to do is to ensure that you do not colour the entire evaluation with a particular impression

6) Recency effect

This is majorly about carrying out an appraisal for a short period before it takes place. As stated earlier, an
appraisal is an activity that takes place continuously, which means that the focus should not only be for the short
period before it happens but rather the entire time of the year.
In many organizations, problems with performance appraisal usually arise when a manager decides to determine
results by basing their evaluation on what an employee has achieved just before the assessment. In this case, it
sounds unfair to employees who have been outstanding throughout but later faulted few days to assessment and
vice versa because the appraisal will not be able to reveal the actual reality.

7) Attribution error

This is one of the trickiest problems with performance appraisal. It involves making your independent belief
on possible causes of some behaviours or outcome and letting that influence your judgment.

It is never a good idea to develop an assumption of what transpired or made the employee behave in the manner
that he or she did and later use it as a basis for reviewing the appraisal process. It is only essential if you stick by
the stipulated standards and criterion and how the performance of each employee compares to such standards. It
only becomes a fair when the employee is judged on their performance in line with the set standards rather than
preconceived notion.

8) Leniency and Severity tendencies

These mistakes usually arise as a result of distribution errors, which imply that the overall dissemination of
appraisal does not stand firm to the classic bell. This means that some managers are too lenient and will end up
appraising all employees above average, others will give average whereas others would provide below average.

In the typical occasion, the results need to reflect the classic bell curve where some employees are graded as
high performers; others average while other poor performers. But in the unlikely event that all appraisal results
come out as similar, you need to ensure that entire performance measures are given sufficient consideration. It
helps in a great way of making sure that fair appraisal has been carried out.

POST APPRAISAL FEEDBACK

A post appraisal, also known as an employee review, is a regular interview that assesses an employee’s

performance, usually to determine whether or not the employee will receive a bonus, raise or promotion or be

retained. The key to successful employee post appraisals is setting up review parameters in advance and

communicating them to your workers.

Setting Measurements

Every employee should have a written job description. It allows an employee to review his performance on an

ongoing basis so he can make changes necessary to to meet your expectations. Work with department managers

and employees to create realistic job descriptions in order to avoid problems. As a general rule, employees

should never be surprised when they are demoted, fired or denied a bonus or raise if their performance goals

were communicated to them correctly in advance.

Tracking Real-Time Performance

Don’t wait until the end of a year to review employees. If you conduct formal, annual reviews that result in

compensation or employment changes, then schedule quarterly evaluations of each worker’s performance to see

whether or not each is keeping on track. Meeting with each employee’s supervisor or checking performance

reports, such as sales or production numbers, accomplishes the evaluations.

Preparing for a Post Appraisal

Preparation for an employee's post appraisal involves reviewing the job description she was given. Collect data

pertaining to each parameter of the job description. If, for example, the employee was given a sales goal,

checking with the sales department will determine whether or not the employee met her goal. Human resources

will have the employee’s attendance record. Gather personal observations about the employee from her co-

workers, supervisors and customers.

Conducting a Post Appraisal

During an employee's post appraisal, review your findings about the employee with him. Let him know what his

position is supposed to do for your business, and use your collected data to explain to him whether or not he

fulfilled expectations for the position. This approach lets you keep each performance review objective,

decreasing frustration on the part of employees who otherwise might feel their appraisal was based on

favoritism or other unfair parameters.

Using Post-Appraisal Information

After you give an employee the results of her post appraisal, let her know whether or not she will be retained,

promoted or given a bonus or salary increase. If you decide to retain her, conduct a re-evaluation of her expected

performance for the next review period, including a review of her job description and objective goals that must

be met.

Use the information gathered during the course of the year, as well as employee feedback during post appraisals,

to re-evaluate each position. Changing an employee’s job description and goals may be necessary based on job

performance, her explanation of why she performed at the level she did, feedback from co-workers and clients

and other data you gather, such as industry trends or forecasts.

UNIT 4

PROMOTION AND REWARD MANAGEMENT

PROMOTION

Definition of 'Promotions'

Definition: Promotions refer to the entire set of activities, which communicate the product, brand or service to
the user. The idea is to make people aware, attract and induce to buy the product, in preference over others.

Description: There are several types of promotions. Above the line promotions include advertising, press
releases, consumer promotions (schemes, discounts, contests), while below the line include trade discounts,
freebies, incentive trips, awards and so on. Sales promotion is a part of the overall promotion effort.

There are also:

1. Personal selling: one of the most effective ways of customer relationship. Such selling works best when a
good working relationship has been built up over a period of time.
This can also be expensive and time consuming, but is best for high value or premium products.

2. Sales promotions: this includes freebies, contests, discounts, free services, passes, tickets and so on, as
distinct from advertising, publicity and public relations.

3. Public relations: PR is the deliberate, planned and sustained effort to establish and maintain mutual
understanding between the company and the public.

REWARD MANAGEMENT

2.1 Introduction

Reward is the generic term for the totality of financial and non-financial compensation or total remuneration
paid to an employee in return for work or service rendered at work.

Reward, which is sometimes been refer to as compensation or remuneration, is perhaps the most important
contract term in every paid-employment. Its impact on workers (or employee’s) performance is in most instance
greatly misinterpreted. The understanding of this term is very important; this is because the incentive scheme
given to an employee will influence the behaviour and level of engagement to the organisation.

With the unique features of services provided in the First Bank Nigeria Plc, most of the employees are highly
skilled and the attractive rewards they receive are dictated by the competitive labour market, which places high
premium on requisite skills.

Reward strategy, in practice, is beyond the obligatory compensation or remuneration package it is a package of
motivational incentives that guide actions in manipulating and controlling the behaviour of employees towards
the achievement of an organisation’s goal (Armstrong and Murlis 2004 sited (Stoner, Freeman and Gilbert
1995). it is in the recognition of the importance of reward as motivational technique that most organisations
invest heavily in them (reward) in order to gain control of the behaviour of their employees. (Shields
2007).fracture

2.2 The Concept and Definition of Reward

According to Armstrong (2010) reward management is defined “as the strategies, policies and processes
required to ensure that the value of people and the contribution they make to achieving organization,
departmental and team goals is recognized and rewarded”.

PROMOTION

Promotion mean advancement in terms of job designation, salary and benefits. The employee progresses to a
better job with increased responsibility, more prestige and status.
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It is basically a reward for efficiency promotion is conferment of additional benefits, usually is the form of
higher pay, for an increase in responsibility or skill which is formalized by an increase in status or ranks which
commands better wages, prestige and higher opportunities / challenges.
Promotion and promotion from within are two different words and means, that promotion may incorporate
provisions for recruitment from the outside, to man promotional vacancies, but Promotion from within policy
strictly provides for, internal recruitment of personnel.
Promotion involves the following ingredients:
(i) Improves job, status and prestige.
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(ii) Gives more responsibility.

(iii) Brings increase in pay and perks.
A promotion may also require more work, which goes along with general increases in responsibility. This work
may be more complex or interesting, however, so most employees are happy to take it on. In recognition of the
increased workload and status of the employee, most employers offer a pay raise with a promotion, and
employees may become eligible for additional benefits.
In a ranked system like the military or a fire department, the promotion may be called an increase in rank or
grade, and the employee’s pay will be adjusted according to a rigid scale.
Not all people view promotions as cause for celebrations. Some people, for example, prefer to remain lower in
rank so that they can stay in the field in professions like policing. Others enjoy jobs with light responsibilities,
despite the lower pay. In some cases, it is possible to reject such a promotion, although an employer may be
puzzled. In others, a promotion is not an option.
When positions fall vacant in an organization, they can be filled up by internal or external candidates. Many
organizations prefer to fill up the vacancies by the external candidates through the selection procedure, in which
the internal candidates may also apply for the post and may be tested and selected for a higher level job in the
organizational hierarchy at par with external candidates. This process is called ‘selection’.
If the organization prefers to fill a vacancy only by the internal candidates, and assigns the higher level job to
the selected employee from within the organization through promotion, such upward movement is termed as
promotion.

Employee Promotion – Definitions Propounded by Various Authors and Management Thinkers Like:
Scott and Clothier, Prof. Khanka, Paul Pigors and a Few Others
“Promotion” is a term which covers a change and calls for greater responsibilities, and usually involves higher
pay and better terms and conditions of service and, therefore, a higher status or rank.
According to Scott and Clothier- “A promotion is the transfer of an employee to a job which pays more money
or one that carries some preferred status.”
A promotion may be defined as “an upward advancement of an employee in an organisation to another job,
which commands better pay / wages, better status / prestige and higher opportunities challenges and re-
sponsibility a better working environment, hours of work and facilities etc.”
A promotion may be defined as an upward advancement of an employee in an organisation to another job,
which commands better pay/wages, better status/ prestige, and higher opportunities/challenges, responsibility,
and authority, better working environment, hours of work and facilities, and a higher rank.
Promotion is a bit different from upgrading, which is concerned with minor promotions, promotions within
grade or horizontal promotions.
According to Prof. Khanka, promotion is vertical movement of an employee within the organization. In other
words, promotion refers to the upward movement of an employee from one job to another higher one, with
increase in salary, status and responsibilities.
According to Paul Pigors and Charles A. Myers, Promotion is advancement of an employee to a better job-better
in terms of greater responsibility, more prestige or status, greater skills and especially increased rate of pay or
salary.
Arun Monappa and Mirza S. Saiyadain defined promotion as “the upward reassignment of an individual in an
organisation’s hierarchy, accompanied by increased responsibilities, enhanced status and usually with increased
income though not always so.
Thus, the important conditions of promotion are:
(i) Reassignment of higher level job to an employee than what he is presently performing,
(ii) The employee will naturally be delegated with greater responsibility and authority than what he has had
earlier.
(iii) Promotion normally accompanies higher pay. It means that in some cases, the employees perform higher
level job and receive the salary related to the lower level job.
For example, if a University Professor is promoted to the next higher level of the faculty position, i.e. Dean of
the Faculty, he will not receive any increase in salary. Such promotion is called dry promotions. Promotions
may be temporary or permanent depending upon the organizational needs and employee performance.
Employee Promotion – Need: Organizational and Individual Needs
Need for promotion arises because it serves the purpose of the organization as well as that of the individuals
involved in the promotion. However, these purposes are served in different ways. Therefore, it is desirable to
analyze how a promotion serves the needs of the organization and the individual.
1. Organizational Needs:
The most important need of an organization in the context of the management of human resources is to retain its
human talents over a long period of time. One of the best way for doing this is to promote those who are
promotable, and this process is to be undertaken on regular basis.
No organization can rely on outside recruitment to fill all its requirements. It is true that certain jobs are similar
in most of the organizations but most jobs require some sort of specialization which is organization-specific.
Even the jobs which are not quite unique may require familiarity with the people, processes, policies, and most
importantly, the special characteristics of the organization which are contained in its culture and values.
Thus, the contents of a job may be similar in many organizations but its performance may differ from
organization to organization. The promotional ladders are needed to funnel upward those who have the broad
experience and requisite skills in the organization. Research findings suggest that those organizations which
have excelled in their field rely more on the internal promotions to fill-up their higher-level positions.
2. Individual Needs:
Promotion is not only needed by the organization; it is equally needed by the individuals. Need hierarchy theory
of motivation suggests that individuals attach very high importance to status and job responsibilities which they
get out of the promotion. Numerous research studies have proved this fact.
Organizations provide several benefits to their employees in order to induce them for better performance. Out of
these, promotions are highly desirable to individuals both for their intrinsic benefits as well as their symbolic
connotations of success values.
Promotion serves the organizational and individual needs in the following manner:
1. Promotion is used as a reward for better work performance and organizationally- approved form of behaviour.
People will work harder if they feel that this will lead to promotion. They will have little motivation if they feel
that better jobs are reserved for outsiders.
2. Promotion provides need satisfaction to personnel which enhances their morale, productivity, and loyalty to
the organization.
3. Because of increased loyalty which is developed among personnel through promotion, the organization is able
to retain its talented personnel which is the utmost need of any organization in this age of high competition for
human talents.
4. Promotion provides avenues for continuous learning and developing of personnel as promotion depends on
promotability which is a result of continuous learning and development. This process increases individual
effectiveness and, consequently, organizational effectiveness.
There is a flip side of promotion too. In fact, many employees do not want to be promoted on the assumption
that the promotion may affect them adversely.
This happens in the following situations:
1. Employees may feel that once they are promoted, they will lose more benefits which they enjoy in the form of
overtime payment, statutory bonus, incentive bonus, etc. than what they may derive out of promotion.
2. For some employees, settling at a particular level of position is more satisfying than attempting for promotion
which requires continuous standing on one’s toes.
3. Some employees do not want promotion because promotion may involve transfer from one place to another
place. For such employees, affiliation to a particular place is more important than the benefits associated with
promotion and career building.
However, it does not mean that promotion is not a logical exercise; indeed, it is required much more than which
have been suggested by the flip sides which are more of exceptions and not general.

Employee Promotion – Objectives and Purpose for which Organisations Promote their Employees
There are number of objectives for which organizations promote their employees:
(i) For the optimum utilization of the employees’ skill, knowledge at the appropriate level in the organizational
hierarchy resulting in organizational effectiveness and employee satisfaction.
(ii) For the development of competitive spirit and inculcate the enthusiasm in the employees to acquire the skill,
knowledge etc. needed for the higher level jobs.
(iii) To develop competent internal source of employees ready to take up jobs at higher levels in the changing
environment.
(iv) For the promotion of a feeling of content with the existing conditions of the company and a sense of
belongingness to the company.
(v) To promote employee’s self-development and be ready for the promotion as and when their turn of
promotion occurs.
(vi) To promote interest in training, development programmes and in team development areas.
(vii) To get rid of the problems created by the leaders of workers’ unions by promoting them in the officers’
levels where they are less effective in creating problems.
Purpose of Promotion:
A promotion is a vertical move in rank and responsibility.
Promotions are usually given:
(a) To put the worker in a position where he will be of greater value to the company and where he may desire
increased personal satisfaction and income from his work.
(b) To recognize and individual’s performance and reward him for his work so that he may have an incentive to
forge ahead. Employees will have little motivation of better jobs are reserved for outsiders.
(c) To increase an employee’s organizational effectiveness.
(d) To build up morale, loyalty and a sense of belonging on the part of the employees.
(e) To promote job satisfaction among the employees and sure then an opportunity for unbroken continuous
save.
(f) To create among employees a feeling of continual with their present conditions and encourages them to
succeed in the company.
(g) To attract suitable and competent workers for the organisation.

Employee Promotion – Significance: Handles the New Job Efficiently, Motivates Higher Morale, Ensures
More Efficiency, Cost in Training will be Less & Solves Personnel Problems
The important significance of promotion are as follows:
(1) Promotion Handles the New Job Efficiently:
People working in the organisation will have no problem in handling the new job because they are intimately
connected with the organisation structure, production process, products and different problems.
(2) Promotion Motivates Higher Morale:
A sound policy of promotion will keep the morale of the employees high because they know that they will be
offered senior positions as and when there are vacancies. In this way it motivates the employees.
(3) It Ensures More Efficiency:
It will ensure sincere efforts on the part of the employees. They will try to increase their efficiency in order to
get the chance for higher position.
(4) Cost in Training will be Less:
The cost to train the workers of the organisation on the senior post will be much lesser.
(5) It Solves Personnel Problems Easily and Efficiently:
If the organisation has a sound promotion policy, several personnel problems are solved easily. It creates the
sense of loyalty and confidence in the organisation resulting in faithful service, meritorious performance,
outstanding ability on job, good attendance, accident avoidance, higher production and lower turnover.

Employee Promotion – Top 11 Principles: Must be Written, Promotion Vacancies be Specified, Basis of
Promotion be Mentioned, Should be Based on Job Analysis & a Few Others
The promotion principles of any institution are a very important aspect of any organisation as it can be
studied as under:
Principle # 1. It Must be Written:
The promotion policy should be in writing. It must be understood by all employees to avoid any suspicion
regarding line or promotion in the minds of employees.
Principle # 2. Promotion Vacancies be Specified:
The promotion policy should lay down what percentages of vacancies in higher posts are to be filled up by
promotion. It is better to incorporate a statement of management intention that higher paid and better jobs will
be filled by promotion from within if possible, rather than by hiring from outside.
Principle # 3. The Basis of Promotion be Mentioned:
The promotion policy should mention the basis of promotion. A sound policy must be based on both the
considerations i.e., seniority and merit. It should emphasise the merit giving due weightage to seniority.
Seniority should be the basis of promotion of two persons who are equal in merit.
Principle # 4. Promotion should be Based on Job Analysis:
In promotion the job analysis decides the position of the jobs and their relationship to other positions. This
should be done to provide clear recognition of the natural movement from one job to another. Position may be
adjusted and arranged so that one position prepares workers for another. Natural course of advancement may be
provided throughout the organisation or within each division or department. Employees should be fully aware of
the plan so that they may prepare themselves for higher positions.
Principle # 5. Suitable Training Programme should be Developed:
A suitable training programme should be developed to prepare employees for promotion. Such programme may
include special on-the-job training, provisions of vestibule schools, night classes or vocational courses. Special
training programmes to meet fully the job requirements due to fast scientific and technological changes are
necessary to help employees to qualify themselves for better jobs.
Principle # 6. It should be Based on Scientific Procedure:
A scientific procedure for evaluating employee performance should be followed to justify the promotion or
super session. The assessment of the employee and his confidential report should be objective so that every
employee has faith in the promotion policy and is induced for better performance of work to get promotion.
Principle # 7. Promotion should be Based on Recommendation by Immediate Boss:
It will be proper and better if the supervisor or the immediate boss should recommend the promotion. This is
subject to approval by the immediate superior in the organisation. Final decision in this respect may be taken by
the top executive in the line with the advice and assistance of the personnel department in a staff capacity. This
ensures that the policy will be consistently administered.
Principle # 8. It Contains Provision for Challenge:
The promotion policy should contain provision for the challenge of a particular promotion by the employee or
union within the limits of the promotion policy to ensure fairness in management decision.
Principle # 9. For Promotion Vacancy Advance Notice be Given:
A vacancy or a would be vacancy should be notified to employees in advance so that interested employees may
apply within a specified period.
Principle # 10. Promotion Need not be Forced:
It has been seen that all people within an organisation do not want promotion. Some feel that they will leave a
congenial work group or they will not be able to handle the responsibilities of higher job or they may have
certain other reasons. Promotion should not be forced on such reluctant employees they should be allowed to
continue their present assignment.
Principle # 11. Promotion be made on Probation:
At first the promotion should be made on probation. If he works satisfactorily during the probation period, he
should be made permanent.

Employee Promotion – 4 Main Types: Horizontal, Vertical, Dry and Open versus Closed Promotion
The various types of promotions are as under:
Type # 1. Horizontal Promotion:
In this type of promotion, the position of the employee concerned has been upgraded with some pay increase but
the nature of his job remains the same. This is known as upgradation of an employee.

In universities and other academic institutions, the system of this type of promotion is in the form of lecturer-
senior lecturer-selection grade lecturer, etc. there is an increase in responsibility and pay with some change in
the designation as well.

However, there is no upgradation to a higher rant status and responsibility the job classification remains the
same. For example, a lower-division clerk is promoted as higher-division clerk.

Type # 2. Vertical Promotion:

Most of the time, the term promotion, refers to vertical promotion. In vertical promotion, there is a change in the
status, responsibilities, job classification and pay. To illustrate, the promotion of a marketing superintendent as
marketing manager.

Sometimes, this type of promotion changes the nature of job completely, e.g., a functional head is promoted as
chief executive of the organisation. The jobs involved at these two positions are completely different.

Type # 3. Dry Promotion:

An increase in responsibilities and status without any increase in pay or other financial benefits is termed as dry
promotion. For example, a professor in a university becomes Head of the Department. It is just an elevation of
the professor without any increase in monetary benefits.

Type # 4. Open Versus Closed Promotion:

An open promotion system is the system where it is willing to consider all individuals within its organisation as
potential candidates and also announces internally such position openings.

On the other hand, where an organisation does not so announce vacancies or where the candidacy is restricted
and is not open for all individuals within the organisation for the promotion openings, the company is said to
have a closed promotion system. In general course a company has a combination of these two concepts.

Employee Promotion – 2 Most Important Basis: Seniority and Merit

In order to formulate promotion policy, it is important to determine acceptable basis for promotion decisions.
Normally policies are based on either “seniority or “merit and ability and both have their own advantages and
their advocates. Seniority refers to length of service.
Basis # 1. Seniority:
Seniority means length of recognized service in an organization. If it is adopted as a basis for promotion,
promotion will be done as a matter of routine. Trade unions generally insist that years of service or seniority
should be the main criteria for making promotions.
They prefer seniority because the system assures all employees that promotion will come automatically when it
is due. So the system is simple to understand and operate. They assert that an employee who has stayed with an
organization for number of years, needs appropriate consideration. This satisfies the employee’s aspirations for
growth, builds morale and is conducive to better labour management relations.
However, although seniority rewards loyalty and long service, it in no way guarantees able management. Again,
if employees get promotion automatically as a matter of course, new employees may not be motivated to
improve their performance. Though its effects on morale may be favourable, in as much as employees are not
passed over, its effects on motivation may be less acceptable.
Seniority is considered to contribute to the employee’s ability on the assumption that the longer a person does a
job, the more he learns about it. However, this assumption also has the reverse effect that after a certain time
span learning diminishes – a phenomenon referred to as – “trained incapacity”.
For these and various other reasons Management generally prefers merit and ability as the basis for promotion
while formulating promotion policy.
Basis # 2. Promotion by Merit:
It is strongly favoured since it enhances organizational efficiency, and maximizes utilization of talent, since only
deserving employees are promoted after a thorough assessment of their abilities for a higher level job involving
greater responsibilities and status. There is no doubt that promotion on the basis of merit encourages initiative
and if the policy is consistent and fair, it would lead to efficiency and higher productivity.
However, such promotions do cause demoralization of a certain number of employees and generate conflicts in
the organization. Using merit as the sole basis for promotion is subject to criticism because there is problem of
bias in judging merit or ability. The devices used for judging ability such as performance appraisals and
confidential reports are not above subjectivity.
As a compromise between labour and management preference of seniority as against merit as a promotion basis,
middle road is suggested that both seniority and merit could be considered as the basic criteria for promotion.
Pigors and Myers’ observe- Promotions should be fairly and capably used by management to place on each job
the most competent and productive workers available. Seniority should be considered, but only when the
qualifications of two candidates for a better job are substantially equal.” Thus, “merit-cum-seniority” would
constitute a compromise solution in practice.

Employee Promotion – Role of Personnel Department

While discussing the role of personnel department in promotion the following factors may be taken into
consideration:
(1) To Give Advice:
The first and the most important role of the personnel department is to give advice. Promotion is line
responsibility. The immediate boss proposes promotions which are subject to approval by his immediate
superior in the line organisation.
The final decision is taken by the top executive with the advice and assistance of the personnel department. It
serves as a check on the fairness of promotion. It ensures that the policy is consistently administered.
(2) To Decide and Develop a Sound Promotion Policy:
In a staff capacity personnel department can assist the line authority in designing and developing a sound
promotion policy to ensure better industrial relation in the organisation. It offers the personnel administrator an
excellent opportunity to develop understanding and acceptance of management policy.
(3) To Provide Necessary Records:
The personnel department provides the line executive necessary records available with the department which
may form the basis of promotion policy.
(4) To Provide Various Tools of Promotion:
Job analysis, job description, job specification and performance appraisal are some of the tools which decide the
line of promotion and the ability of the person. The quantity and the quality of performance should be measured
periodically and should form a part of the personnel record.
(5) To Effect Communication to Workers:
All relevant changes in the organisation that affect the workers are communicated by personnel department to
them, even if the results for them are negative. Every employee expects to be informed about stages of
promotion, how they can prepare themselves for advancement and what will be expected of them on the higher
rated jobs.
(6) To Solve and Settle Disputes:
If the management’s decision on promotion is disputed by the aggrieved employees or union representatives, the
personnel manager should hold discussions with them within the limits of promotion policy. He should convey
the feelings of the representatives or the aggrieved employees to the line executive who would review the
decision in consultation with the personnel manager.
The conference between the representatives personnel manager and the executive may be useful if errors are
admitted and adjustments made. If the decision on promotion appears to be fully justified after investigations,
reasons can be more thoroughly explained, records produced and the consequences of a departure from sound
policy pointed out.
(7) To Prepare and Establish Workforce:
One of the important role and functions of the personnel department is to prepare and develop efficient
workforce in the company. New avenues for their development are recommended by the personnel department.
Persons are encouraged to train themselves on the job shouldering the responsibilities of higher posts.
This may be done by offering them opportunities to officiate on the higher positions. However, the persons who
are not interested in promotion should not be forced to hold higher positions.
In the end, it can be said that the personnel department has an important role to play in promotions by assisting
line executive in designing the promotion policy; communicating the promotion policy and the changes in the
organisation, holding talks with representatives of the employees, in connection with the disputed cases and
developing promotion avenues in the organisation.

Employee Promotion – What are the Methods Used for Promoting Employees: Promotional Examination,
Efficiency Rating and Personal Judgement of the Head of the Department
The different methods of promotion are:
(1) Promotional Examination:
The first method of judging merit is examination. In many countries written examination is taken for promotion.
It eliminates all kinds of favouritism and nepotism. It keeps the employees up-to-date about the new
developments. It gives equal chance to everybody to aspire and compete for higher positions. In many countries
departmental examinations are organised it is common in the banking services in India.
Promotional examinations are of three kinds:
(a) Open Competition:
Sometimes open competitions are held for the promotional post and any one whether in the service or not can
compete for the post of promotion.
(b) Limited Competition:
The second type of examination is a limited examination for promotional posts among those who are already in
the service. This is also known as “closed system” as opposed to the “open system” where everyone can
compete.
(c) Pass Examination:
Every department organises many promotional tests every year. In these tests those individual who have passed
the examination are qualified for promotion. Here a list of qualified candidates is prepared, and on the basis of
these lists they are promoted. Under this system chances of favouritism and corruption are very less. However,
this system of written examination cannot judge the personality of the candidate.
(2) Efficiency Rating:
It is the system under which efficiency of an employee is rated on the basis of his service records. A record of
service of the employees is kept and his capability for the performance of the job is evaluated by his superiors
on the basis of his service record. In the USA, there are three major types of efficiency rating which are
production records, the graphics rating scale and the personality inventory.
(i) Production Records:
A Production Record is applicable in such types of works, which is repetitive in nature and involve little
judgement.
(ii) The Graphics Rating Scale:
The graphic rating scale was one of the early forms of efficiency rating. The form included fifteen traits or
qualities against each of which was placed a horizontal line along which were fixed subdivisions with
appropriate adjectives under each, indicating the degree in which characteristic to be checked was possessed.
A check on each line ‘rated’ the employee on the corresponding trait For different type of work, different
combinations of four or five traits were specified for use by the rating officer, the single sheet serving for a wide
variety of occupations.
The resulting score expressed in a numerical figure carried out to two decimal places, was worked out by clerks
and was subject to review by one or more supervisor. This system was employed in the US federal government
for about a decade and then was abandoned in 1935.
(iii) The Personality Inventory System:
The personality inventory system seeks to get a record of service by different mentis. Mr. J.B. Probst, former
chief examiner of the St. Paul Civil Service Bureau, invented and developed twenty trails of human being which
is relevant to employment From among these qualities of personality the rating officer selects the particular
items descriptive of the employee in question.
From ten to twenty-five such items are picked up without difficulty. A number of special forms have been
devised for different types of employees, such as policeman, fireman, librarians and teachers, in addition to the
basic form which is adaptable to a wide variety of employment.
The rating officer has to check the presence of these qualities in the employee but has no power to evaluate
these traits qualitatively or quantitatively under the graphic scale system. There are three types of rating officers,
the immediate supervisor, and the next two higher officers. After the form has been duly checked or marked by
the three rating officers, it is ‘scored’ or valued.
The efficiency rating system is most useful for finding the most able and efficient person for promotion. It is a
fair and reliable system of rewarding the most efficient person and eliminating those who are comparatively less
competent
(3) Personal Judgement of the Head of the Department:
In the system merit is determined by the head of the department. The head of the department knows the qualities
of an employee who has worked with him for many years. This method of promotion encourages dictatorial
tendency. It is based on nepotism and favouritism.
Here only ‘yes men’ or ‘sycophants’ have good chances of promotion. Thus it was opposed by the employees.
This system of promotion is mostly followed in private business and industry, but is not very common in the
civil service.
In fee departmental promotion, we know that both on the basis of merits and seniority promotion are made. But
both these methods have some advantages and disadvantages. Therefore, we suggest a mix of both the
principles-seniority-cum-merit (length of service). It means seniority is fixed and then the meritorious person
amongst those who possess the minimum experience is selected for promotion.

Employee Promotion – Programme and Policy

A promotion programme consists of the following basic elements:
Deciding the Policy:
The management must provide realistic opportunities which will encourage promising employees to take the
risks involved in moving upward. It must not discourage valuable employees from seeking advancement by
making service in an unpopular job a prerequisite for promotion.
It must provide for employees who do outstanding work but who are unwilling to take on new and additional
responsibilities. It must provide alternatives for professionals who are reluctant to assume supervisory
responsibilities.
“Organisations that have failed to reward excellence is service, or that have relied too heavily on personal
relationships or length of service, suffer in terms of both efficiency and morale.”
Each organisation needs to strike a balance between the internal sources of personnel promotion and external
source (through recruitment) on the one hand and between merit and ability as against length of service on the
other.
“The organisation that fails to develop a satisfactory procedure is bound to pay a severe penalty in terms of
administrative costs, misallocation of personnel, low morale, and ineffectual performance, among both non-
managerial employees and their supervisors.”
Since promotions mean advancement for some, the promotional process itself must ensure that successful
candidates are sufficiently acceptable to their subordinates and others so that leadership in, and effective
administrative of organisational progress is unhindered and unhampered. A management should frame the
policy on the basis of which promotions may be made.
A sound promotion policy must satisfy the following criteria:
(a) It should enjoy consistency, i.e., it will be applied irrespective of the persons concerned. Consistency
demands that the policy should be so correlated to career planning that there should not be a sudden spurt of
promotion in the organisation conferring premature benefits on a number of persons, followed by a long period
of absence of promotion.
(b) It should be fair and impartial, i.e., the management should be able to remove all suspicion of arbitrariness,
adhocism, improvisation to suit particular individuals, nepotism, etc.
(c) Promotion should be a planned activity, i.e., the management should make a correct assessment of the
requirements or opportunities of promotion within the organisation so that there is no phenomenon of
‘bunching’ or no period of ‘promotional drought’, i.e., no overestimation or underestimation.
The promotion policy should involve six elements as follows:
1. Promotion Policy Statement, which should consider whether vacancies are primarily to be filled up from
within an organisation or by recruitment from outside. Is any preferential treatment to be given to direct
recruits?
Would it be sound to deny promotion to otherwise qualified personnel? Whether an increase in pay is to be
given? If so, when and how much? Usually, internal promotions are preferred over external recruitment and
increase is given at the time of promotion, otherwise promotion is meaningless.
2. Establish as Plan of Jobs, i.e., decide on what basis promotions are to be given. Whether on performance
appraisal, or on the basis of confidential records, or job and post-bid system. Which positions are to be filled up?
Usually, promotions are decided on the basis of performance appraisals. “Job-post and bid system”, i.e., positing
of job vacancies indicating job titles, duties, pay and qualifications on company notice boards, is also utilised.
3. Trace Transfer Routes, i.e., having some type of formal and systematic promotion channels. Ladders giving
paths of advancement, promotional charts, opportunity charts or fortune sheets clearly distinguish each job and
by lines and arrows, connect various jobs; and show the lines/routes of advancement up to and away from them.
Stepping jobs should be clearly identified and recorded on paper. Dead-end jobs should be labelled and the path
upward well marked.
4. Prepare Employees for Advancement, through the Provision of Some Training, either on the job in
professional/technical institutions, or through job rotation, multiple management, understudy and conferences.
5. Communicate the Policy, the organisation should communicate its promotion policy either in the form of a
manual or in the agreement signed with the union or in the form of a set of Standing Orders. To have a policy
and not to communicate it to the employees will only create suspicions and misgivings. However, for higher
level personnel, a precise formulation of such a policy may not be effective.
6. Detailed Personnel and Service Records are Kept Ready on the basis of which promotions may be made.
The following indices are available for judging whether candidates are suitable for promotion:
The margin of performance on his present job, i.e., does he run it with ease and with margin to spare or is he
barely able to manage his job?
Flexibility or versatility, i.e., has been successful on different types of jobs requiring different skills and
different abilities, or does he seem to be only interested in a restricted field?
Intelligence, i.e., How does he think? How has he learnt on work he has carried out?
Equipment, i.e., How compatible are his education, literacy, expression and personality with the critical needs of
the job?
Motivation, i.e., What are his wants? What is important for him? What are his goals, his objectives in work and
life?

Employee Promotion – Practice in India

In India, in some companies, promotions are made on the basis of merit, potential and seniority. Internal
Promotions are also granted, from the existing lower cadre on the basis of seniority and merit.
In public sector organisations, elaborate rules exist for regulating the seniority of employees in different service
cadres. Promotions are made from this list. But often, due to political pressures, the rules are violated and a
person standing much lower in the list is given priority over the senior-most men.
In the private sector enterprises, the promotions are generally not based upon any clear-cut rule. Efficiency is the
main consideration, unless it is a family enterprise where relationship with the proprietors or patronage might
play a part.
But even there only a limited number of posts would be filled upon the basis of relationship or by way of
patronage. Even in such firms where employees are concerned, there is generally a well-defined promotion
policy and nepotism is avoided, as far as possible, where the employees are well organised. The rule followed
is- “Promote the best man available.”
While making promotions, the management must ensure that:
(a) Proper talents are first made available by a correct programme of recruitment;
(b) Employees are enabled to satisfy their own aspirations within the framework of the company’s own
objectives and projects, and
(c) A programme of career planning, coupled with periodic assessment is followed in accordance with rules.
It is worth noting that in a developing economy like India, with rapid technological advances and need for
training and education, it is not always possible to promote the older workers who can neither be adequately
trained nor are willing to be exposed to new concepts, ideas and methods of work.
As for the higher level promotions, only in large organisation can a policy of promotions from within be
practicable; but even there such promotions cannot be confined entirely to the existing personnel of the
organisation, unless management development and career planning are an essential part of the company’s
promotion policy.

TRANSFER

INTRO

Transfer is a process of placing employees in positions where they are likely to be more effective or where they
are to get more job satisfaction.
In transfers, there is no change in the responsibility, designation, status or salary. It is a process of employee’s
adjustment with the work, time and place. Transfer may also be made as a disciplinary action.
According to Edwin Flippo, a transfer, “is a change in job where the new job is substantially equal to the old in
terms of pay, status and responsibilities”.
ADVERTISEMENTS:

Transfer is a movement of the employee from one job to another job or some other place without change in
status, responsibilities and salary.
Transfer means a change in job assignment. It refers to a horizontal or lateral movement of an employee from
one job to another in the same organization without much change in his status or pay package.
Transfer causes a shift of individual from one job to another without there being any marked change in his
responsibilities, skills and other benefits.
Transfers must be ordered based on certain company-specific principles or dogma. Transferring an employee
without adhering to policies or norms may lead to deteriorated industrial relations. The management might
think of issuing transfer orders, treating each case on its own merit.
ADVERTISEMENTS:

Even if management takes the right decisions, some employees may take exception to them. Thus, management
must frame a transfer policy and follow the same.
Transfer in HRM – Meaning
Transfer means a change in job assignment. It refers to a horizontal or lateral movement of an employee from
one job to another in the same organization without much change in his status or pay package. Transfer causes a
shift of individual from one job to another without there being any marked change in his responsibilities, skills
and other benefits.
ADVERTISEMENTS:

Transfer is the movement of an employee from one job to another. “A transfer involves a change of job without
any significant increase in responsibility or income, and a promotion involves a change in which a significant
increase in responsibility or income occurs.”

However, this difference between promotion and transfer should be treated as a broadly conceived idea only.
Sometimes, transfers may (and often do) involve some changes in responsibilities and duties.

Sometimes they may involve change in pay also. For example, in permanent personnel transfers, an employee
normally receives the rate of pay on the job to which he is transferred.

In case of production transfers rate of the earlier job, or that of the new job whichever is higher, is paid. On
temporary transfers, employees may continue receiving their usual rate.

Transfers are an important source for internal recruiting. Often the most suitable candidate for an existing
opening may be someone already working in one or the other department of the working organisation. Transfer
of such an employee to fill the job is preferred by managers of the organisation.

If a newly hired employee, assigned to a certain job at the initial stage of placement is left there in spite of his
desire for a change, it may create resentment This resentment may be expressed in terms of reduced work,
formal complaints or increased rate of labour-turnover. By transferring such an employee maladjustment
problem can be solved.

Transfers may be initiated by the organization or employee. When the organization feels that an employee is
required at another job in the same department or another, it transfers him/her there where they are likely to be
more effective. But sometimes, employees demand it on account of their ill health, change in their work load,
family issues etc. General public these days is empowered to initiate transfer if an employee’s behaviour has
been proved to be objectionable, or against the public interest.
Changes in organization structure, technology and also changes in the knowledge, skill, aptitudes and values of
employees need movement of employees from one job to another and from one place to another. This
movement, of an employee from one job to another in the same organisation without any change in the nature of
duty, responsibility and pay is called transfer.
Transfer may be permanent or temporary and it may be within the same department or across the department.
Transfer takes place due to change in work load or death, retirement or resignation of employees.
Transfer in HRM – Definition
Transfer is a process of placing employees in positions where they are likely to be more effective or where they
are to get more job satisfaction. In transfers, there is no change in the responsibility, designation, status or
salary. It is a process of employee’s adjustment with the work, time and place. Transfer may also be made as a
disciplinary action. In Government service, employees are transferred due to administrative reasons. Transfer is
a movement of the employee from one job to another job or some other place without change in status,
responsibilities and salary.
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Transfers are generally made to acquire some purposes that are as follows:
1. To Increase Productivity of Employees:
Transfer may be made for the proper utilsation of the services of an employee when he is not performing
satisfactorily and ample and when the management feels that he may be more beneficial or suitable elsewhere,
where his capacities would be better utilised.

2. To Fulfil Employee’s Request:

Sometimes transfers is made to meet an employee’s own request, when he feels uncomfortable on the job
because of his dislike of his boss or his fellow workers or because better opportunities for his future
advancement do not exist there or because of family circumstances which may compel him to change the place
of his residence.

3. To Meet Organisational Requirements:

Sometimes transfers are made to satisfy such needs of an organisation as may arise out of a change in the
quantity of production, fluctuations in work requirements and changes in the organisational structure; the
introduction of new lines of production, etc.

4. Maintenance of a Tenure System:

Transfer may be made for the maintenance of a tenure system. In senior administrative services of the
government and also in industries or where there is a system of annual intake of management trainees such
transfers are generally exist.

5. For Adjusting the Work Force:

Transfer may be made to adjust the workforce of one plant with that of another, particularly when one is closed
down for reasons beyond the control of the employer.

6. For Penalising Employees:

Transfer may be made to penalise employee under which either a difficult trade union activist or sea lawyer may
be transferred to a remote branch or office where he cannot continue his further activities.
7. For Adjusting the Employee’s Timing:
Transfer may be made at the requests of the employees to help work according to their convenience so far as
timings are concerned, e.g., an employee is transferred from night shift to morning shift or from the first to the
second shift (as in the case of women workers who may like to look after their children and do the necessary
household work in the morning hours).

8. To Make Employee’s more Versatile:

Transfer may be made to increase the versatility of the employee, by shifting him from one job to another so that
he may have sufficient chances for gaining a varied and broader experience of work.

Purposes of Transfer according to Mamoria and Gankar:

Transfers are generally purported to build up a more satisfactory work team and to achieve the following
objectives.
Transfer in HRM – 5 Types of Transfer Proposed by Aswathappa
Aswathappa (2006) proposed the following five types of transfers:
Type # 1. Production Transfer:
Employees are posted in different departments, based on their interests and qualifications. This also depends on
the work load that a department possesses. However, this load keeps fluctuating, and the demand for manpower
keeps changing with time.
For departments with surplus manpower, lay-off is a solution. However, a better solution is the
interdepartmental transfer to balance the manpower allocation. In simpler terms, production transfer refers to the
transfers ordered to avoid such unavoidable lay-offs.
Type # 2. Replacement Transfer:
When an employee leaves a department for a particular reason, the department needs a replacement. In such
scenarios, especially in demanding situations, a senior employee might have to function in place of the junior
employee, till the time a replacement is found. Senior employees are required to work in place of junior
employees even in situations of declining production. Thus, replacement transfer also helps in reducing the
organizational need for lay-off; particularly for long-service employee.
Type # 3. Versatility Transfer:
Some organizations believe that the workforce needs to have multiple skills capable to perform multiple tasks.
People can achieve multiple skills only by working in different departments. In learning organizations such as
ordnance factories, banks, and many private companies, people get the scope of working in different
departments and can learn different systems, procedures, and rules and regulations.
They gain the necessary skills to attend to the activities in the departments, and ultimately become versatile.
People who pick up their tasks quickly emerge to become the company’s assets. During rush periods, they are
able to contribute greatly to achieve business goals. Versatile transfer may comprise production transfer or
replacement transfer.
Type # 4. Shift Transfer:
In order to enhance capacity utilization, industrial organizations, operate in multiple shifts—generally morning,
evening, and night shifts. Some organizations allot employees to staggered shifts as well. Employees are
engaged in all the shifts on a rotational basis. Requests of employees for transfers on a particularly shift are also
entertained, considering the importance of ground of requests. However, conformance to law and administrative
procedures are essential requirements to avoid employee unrest.
Type # 5. Remedial Transfer:
After induction, employees are placed in a department and jobs are assigned to him/ her, and their performance
and behavioural dispositions are recorded. Some employees may emerge as good performers, while many others
may emerge as underperformers. In course of time, an employee’s inclination to work is also observed. The
objective of remedial transfer is therapeutic in nature, that is, to rectify the wrong placement.
In other words, remedial transfer is an act of transferring an employee to a more suitable job after they have
failed to perform well in their present position. Poor performance could be attributed to reasons such as an
employee being uncomfortable in his job as he may not possess good relations with his senior or suffer from ill
health.

DEMOTION

A demotion is a reduction in rank, often accompanied by lower pay and status.

There are many situations in which demotion might occur; any kind of rank systems like a police department or
military, for example, uses demotions as a disciplinary tool, while some employees are at risk due to
reorganization or substandard work.

Most people view a demotion as a punishment since it implies that the individual was incapable of performing at
a higher rank. It is opposite to promotion, an elevation in rank or status

Demotion occurs when an employee moves from one job to another that is lower in pay, responsibility, and
status. Demotion seldom holds positive outcomes for the individual.

Usually, they are associated with discipline; the individual is demoted for poor job performance or inappropriate
behavior such as excessive absenteeism or incompetence.

Demotion may also be due to organizational factors such as reduction of the workforce, market condition,
change of technology and production method, and change of product mix.

What is Demotion?

Demotion is just the opposite of promotion. It refers to the lowering down of the status, salary, and
responsibilities of an employee. Demotion is generally used as a punitive measure and is a preliminary step to
discharge. The usefulness of demotion as a punitive measure is questioned on many grounds.

Losing pay over a period of time is a long form of constant humiliation.

Moreover, a demoted employee will be always dissatisfied and his dissatisfaction may spread to co-workers
affecting adversely morale, productivity, and discipline of the work-force.
Causes of Demotion:

Demotion may take place due to the following reasons:

1. Breach of Discipline:

A breach of discipline may attract demotion as a punishment. An organisation can work only if proper discipline

is maintained. A punitive action for such breach may be necessary so that people do not flout rules, regulation

etc. of the company.

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2. Inadequacy of Knowledge:

A person may not be competent to perform his job properly. He may not be able to meet job requirements. In

such a situation demotion becomes necessary.

3. Unable To Cope With Change:

Now-a-days, there is a rapid change in technology and methods of work. The existing employees may not be

able to adjust themselves as per the new requirements. It may be due to lack of education, technical skill, ill

health, old age or other personal reasons. Under these circumstances new persons may be needed to take up such

jobs.

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4. Organisational Re-Organisation:

Sometimes there may be organisational changes. It may be necessitated by either combining the departments or

closing of some sections or departments. In such situations the number of positions is reduced and some

employees may be posted at the lower positions until normality is restored. Such demotions are not due to any

fault of the employees.

OR

Reasons to demote an employee

There are many potential reasons for demoting employees:

 The employee demonstrated poor performance.
 The employee lacks skills for their current position.
 You are eliminating the employee’s position.
 You are disciplining the employee for misconduct.

An employee might also voluntarily ask for a demotion. Here are examples of why an employee might ask you
for a demotion:

 The employee wants to reduce their responsibilities.

 The employee is transitioning out of your business.
 The employee wants to change positions.
 The employee wants to adjust their work-life balance.
 The employee wants to work remotely or from a different business location, but the current position
does not accommodate the change.

Demotion vs. termination

You might wonder if it is better to demote or terminate an employee. The choice you make depends on the
specific situation.

If an employee is valuable to your business but simply isn’t thriving in their current role, a demotion might be a
good solution. If an employee does a wrongdoing, causes disruptions, or isn’t a good addition to your business,
these might be good reasons for employment termination.

Problems of demoting employees

There are many downsides to demoting employees that might make it difficult to do.

A demotion can be an embarrassing and demoralizing event for some employees. That public shame can cause
an employee to lose morale.

If the demoted employee was a supervisor, it might be difficult for them to join the people they once managed.

You might not be able to demote an employee to a previous position if you already filled that opening. If this is
that case, you might have to move the employee to an unrelated position.

If you are disciplining, demotion might not be the best form of discipline, especially if you use it by itself.
Discipline does not necessarily fix an employee’s misconduct.
In the end, the demoted employee might leave your business for another position. If you can, create an incentive
for the employee to stay at your business.

How to demote an employee legally

You need to demote an employee legally. Before you demote an employee, make sure the demotion does not
violate any company policies or contract that you might have with the employee.

You should never demote an employee based on race, age, gender, religion, or disability.

4 steps of demoting an employee

Telling an employee that you’re demoting them can be tricky. Here are four steps to smoothly navigate a
demotion.

1. Tell the employee about the demotion

When demoting an employee, have a private conversation with them. What does demotion mean for your
employee? Clearly state the reasons you are demoting the employee, especially if they are performance related.

Express your desire to keep the employee on staff. You aren’t terminating them, after all. Explain why you think
the employee will do better in the new position.

2. Explain the new position

After you explain why you are demoting the employee, tell the employee about the new position. List the
position’s responsibilities and expectations.

If the new position comes with lower compensation, tell the employee at this time.

3. Make a transition plan

Work with the employee to create a transition plan. Set a date for when the employee will be working
completely in their new role.

If the employee needs to pass off projects or documents to another employee, include that in your plan.

4. Tell necessary people

 It might not be appropriate to announce the demotion to all your employees. However, some employees might
be affected by the demotion. For example, if the demoted employee supervised others, you should tell those
employees who they report to now.

You should also decide what you will tell employees. Employees do not need to know every detail of the
demotion.

Demotion and payroll

Sometimes a demotion comes with a reduction of pay. As the employee moves into their lower ranking position,
their pay decreases as well.

If you are reducing a demoted employee’s wages, make sure you tell the employee first. Then, make the change
in your payroll, starting the new rate on the correct date.

For your payroll needs, try Patriot Software’s online payroll software. The low-cost software lets you easily
make changes to your payroll. Once you enter pay rates and tax information, we’ll do all the math for you,
guaranteeing an accurate payroll run. Start your free trial today!

CAREER DEVELOPMENT PROCESS

Definition: Career Development

Career development is the series of activities or the on-going/lifelong process of developing one’s career. Career
development usually refers to managing one’s career in an intra-organizational or inter-organizational scenario.
It involves training on new skills, moving to higher job responsibilities, making a career change within the same
organization, moving to a different organization or starting one’s own business.
Table of Contents +

Read Next

 Career Ladder
 Career Path
 Career Centre
 Career Counselling
 Career Mobility

Career development is directly linked to the goals and objectives set by an individual. It starts with self-
actualization and self-assessment of one’s interests and capabilities. The interests are then matched with the
available options.
The individual needs to train himself to acquire the skills needed for the option or career path chosen by him.
Finally, after acquiring the desired competency, he has to perform to achieve the goals and targets set by him.
Career development is directly linked to an individual’s growth and satisfaction and hence should be managed
by the individual and not left to the employer. Career development helps an individual grow not only
professionally but also personally. Learning new skills like leadership, time management, good governance,
communication management, team management etc also help an employee develop and shape their career.

Importance of Career Development

Every employee working in an organization is looking for a career development which moves in the right
direction. Career path taken by an employee determines the growth. Career should be planned in a way that it
moves forward.
Career development provides the framework with skills, goals, awareness, assessment and performance which
helps an individual to move in the right direction and achieve the goals one has in one's career. Careful career
planning is always useful for individuals to succeed professionally and also helps to boost
employee motivation in the organization.

Career Development Strategies

The development of an individual's career is driven by several factors. Strategies to improve someone's career
can be driven either by the company through organization development or by the individual himself or herself.
Some strategies of career development are as following.
1. By Companies
Training and development by companies can help in employees learn new skills. Companies help in
providing leadership development, management development etc. This is all done through employee
training sessions or developmental counselling. Employee development in the long run helps in career
development.
2. By Employees
Individuals can themselves boost their own career. This is done through constant evaluation of their skills using
techniques like continuing professional development.
Continuous and repetitive efforts can help in the career development for an employee.
Hence, this concludes the definition of Career Development along with its overview.
Browse the definition and meaning of more terms similar to Career Development. The Management Dictionary
covers over 7000 business concepts from 6 categories. This definition and concept has been researched &
authored by our Business Concepts Team members.

Career Development Techniques and Methods

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1. Home
2. Skill Development
Skill Development
You can build skills using a variety of techniques and methods. Review the list below to determine the best
approach for you.  Some of the activities that can be helpful include:
1. On-the-job-mentoring: One of the most widely used and most efficient means of developing
employees is mentoring.  It is the day-to-day responsibility of the manager or mentor to impart skills and
knowledge, to answer questions, to review work, to discuss progress or lack of progress, and to provide
general direction.  Working through an actual problem as it develops will increase insight into how to handle
similar problems next time.
2. Guided experience: Similar to mentoring, it has an emphasis on the individual’s special development
needs. You need to provide accurate information on the developmental need and someone, usually a
manager, observes your interaction in the role while providing very specific feedback as you go.
3. Understudy training: Preparation of a person to assume the responsibilities of another individual,
either as a substitute or replacement.
4. Job rotation: Job rotation offers an excellent opportunity to broaden knowledge and experience, as
well as to gain an appreciation of viewpoints and interrelationships of various organizational groups.
5. Project, Committee, or Task Force Assignment: Giving an individual a problem to resolve is an
excellent developmental technique. Committee or task force assignments help to determine how well an
individual can work with others and identifies leadership and organizational skills.
6. Individual Assignments: Take the place of a manager on vacation, or on leave for an illness. You
might also know someone who is taking leave and ask to “fill the role” on a volunteer basis to gain
experience.
7. Management Development Programs: Formal development programs can augment by providing
both useful information and practice in a classroom setting.
8. Technical Education Programs: Formal professional programs may be available to you that are
tailored to your particular function.
9. Job Expansion: Expansion of the scope of your current job to include greater responsibility and a
wider variety of tasks will help you to acquire valuable skills and knowledge.
10. Attendance in Staff Meetings: For effective development to take place, attendance at such meetings
must occur. Such exposure will give you greater knowledge and perspective of the role.
11. Serving as an Instructor, Conference Leader, or Trainer: One of the most valuable ways to obtain
knowledge, broaden one’s scope, and clarify one’s thinking is to teach others. Such training responsibility
puts you in touch with many new operations, processes, and problems.
12. Help from Specialists in the Organization: Find opportunities to speak with knowledge experts when
additional information is needed.
13. Studying materials, books, and other documents: Seek out information to learn more about a
subject.
14. Formal Education: Pursuing formal education is also an excellent method if time and resources are
not constraints.
 

CARRER PLANNING

Everything you need to know about the process of career planning. Career Planning is the process of setting up
career objectives and determining appropriate developmental programs to further ones progress in an
organization.
Such a planning involves setting up of career objectives, and determining appropriate educational and
developmental programs to improve the skills needed to achieve short and long-range career objectives. It is an
on-going process to help an employee manage his or her work.
It is the process of setting up career objectives and determining appropriate developmental programs to further
ones progress in an organization. Such a planning involves setting up of career objectives, and determining
appropriate educational and developmental programs to improve the skills needed to achieve short and long-
range career objectives. It is an on-going process to help an employee manage his or her work.
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Career planning involves a series of steps. They are:- 1. Analysing Employee’s Needs and Aspirations 2.
Analysing Career Opportunity 3. Matching Needs and Opportunities 4. Placement on Career Path 5. Action Plan
and Periodic Review 6. Review of Career Plans.

Additionally, also learn about the process of career planning for women employees and graduate students.

Career Planning in HRM: Process, Steps and Stages

Process of Career Planning – 5 Main Stages of Career Planning
Employees join an organization to fulfill their career goals and aspirations and organizations provide
opportunities to fulfill them. Where there is a mismatch between the two, employees experience dissatisfaction
and withdraw from the organization to join another where such opportunity exists. It underlines the need for
career planning. It helps the employees to achieve a better match between their career goals and the
opportunities available in the organization.
It involves the following stages:
Stage # 1. Analysing Employee’s Needs and Aspirations:
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Traditionally, career planning was considered to be the responsibility of the employee. However, employees
may lack information required for determining career goals and skills to develop career plans. This leads to
blocked ambition, frustration and lowered morale. Therefore, organizations themselves provide resource and
support to help employees identify career path and plan accordingly.
Organizations should first analyse employee’s anchors i.e., urge to lose a particular career and aspirations. This
assessment should be based on personnel inventory. Since most employees may not have a clear knowledge
about career anchors and aspirations, the following method are used to spread career planning information.
Communication of Career Information:
i. Provides career related information and disseminates information about career opportunities and career path.
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ii. Gives information about resources available to employees such as scholarship assistance, training, etc.
Career Counselling:
Some organizations arrange counselling for employees to help them assess their personal interest, aptitude and
capabilities, and interpret their self-assessment.
Career planning workshop – Workshops are held to disseminate career planning information in order to enable
the employees know what kind of work would suit them.
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Reading materials – Employees are provided with reading materials and other media aimed at career planning.
Assessment programmes – A number of tests are conducted to help employees know what they should do to
build their skills and what personal abilities fit in with their career path. All these methods helps employee set
career goal, identify career paths and uncover specific career development activities.
Stage # 2. Analysing Career Opportunity:
Once career needs and aspirations are known, organizations have to provide career path for each position. It
indicates various positions a job holder can hold over a period of time. Career path changes overtime in tune
with employee’s needs and organizational requirements.
Stage # 3. Matching Needs and Opportunities:
This process consists of two steps. Organizations should identify the potential of the employee and undertake
career development programmes. Performance management system is a good tool to assess strength and
weakness of an employee. This tool would reveal who needs additional training and who can shoulder added
burdens. Suitable development techniques like special assignments, supervisory coaching, job enrichment, under
study, position rotation etc., can be applied after assessing the potential.
Stage # 4. Action Plan and Periodic Review:
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The matching process would reveal skill gaps which need to be bridged through individual development efforts
and organization supported efforts from time to time. Thus, this continuous appraisal reveals in which direction
an employee is going and what skills are needed to face challenges. This assessment is needed for the
organization to know the level of performance, goals and aspirations of employees and how far the career path is
in tune with individual needs and serve the overall corporate objective

Process of Career Planning – Sequential Process: From Identifying Individual Needs and Goals to
Formulating Action Plans and Performing Periodic Review
Career planning can also be termed as a process because it is carried out in a particular sequence.
The career planning process involves the following steps:
1. Identifying Individual Needs and Goals:
Refers to the reorganization of the career goals of individuals. Most individuals do not have a clear-cut idea
about their career objectives, anchors, and goals. Thus, the human resource professionals of organizations must
help the employees by providing as much information as possible. The career planning professionals should
counsel the employees on matters such as the kind of work that suits the employees, after taking into
consideration their skills, experience, and aptitude.
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Such assistance is extended through workshops or seminars, where the employees are subjected to
psychological testing and simulation exercises. The basic purpose of such exercises is to guide the employees in
determining what they should do to build and advance their careers within an organization. Workshops and
seminars may increase employees’ interest in career planning by helping them to set career goals, identify career
paths, and uncover specific career development activities.
2. Analysing Career Opportunities:
Refers to the careful examination of career paths available to employees after identifying their career
aspirations. Career paths show the possibilities of career progression and indicate the various positions that
employees can hold in the organization over a period of time, if they perform well. Career paths change over
time in tune with employees’ needs and organizational requirements.
3. Aligning Needs and Opportunities:
Refers to highlighting and aligning the gaps between the employees’ needs and the opportunities provided by
the organization. The alignment of needs and opportunities consists of two steps, namely identifying the
potential of employees and aligning employee needs with organizational opportunities.
The potential of employees can be accessed through performance appraisal, which reveals the need for further
training for some employees After identifying the potential of employees, certain development techniques, such
as special assignments, planned position rotation, supervisory coaching, job enrichment, and understudy
programs, can be undertaken to upgrade their knowledge and skills.
4. Formulating Action Plans and Performing Periodic Review:
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Refers to designing the actions plans and reviewing periodic performance for the career development of an
individual. After initiating the preceding steps, it is necessary to review the whole career plan and its
implementation.
The formulation of action plans helps the employees in determining the direction of their career paths, the
changes required in their careers and the skills needed to face new and emerging organizational challenges. It is
also necessary from an organizational standpoint to find out how employees are doing, what are their goals and
aspirations, and whether the career paths are in tune with individual needs and serve the overall corporate
objectives.

Process of Career Planning – For Employees, Women Employees and Graduating Students: With Myths
It is the process of setting up career objectives and determining appropriate developmental programs to further
ones progress in an organization. Such a planning involves setting up of career objectives, and determining
appropriate educational and developmental programs to improve the skills needed to achieve short and long-
range career objectives. It is an on-going process to help an employee manage his or her work. Career planning
involves a series of steps.
These are:
i. Knowledge of oneself- Such knowledge includes skills, likes, and dislikes preferred activities and so on.
ii. Finding out- Explaining what is available for an individual in the organization.
iii. Making Decisions- Comparing choices, opinions, and alternatives available.
iv. Taking Action- Working towards goals.
Career planning is not a one shot approach. It is an on-going process to help employees manage and adapt to
their work and work environment. It is a sub-set of career management.
Basically this management involves a series of steps such as:
i. Understanding where an individual is currently
ii. Deciding where he or she wants to be
iii. Making needed changes
Of course all career plans are not made permanently. They do change as circumstances and conditions change.
When plans are made some degree of flexibility is built into them to accommodate the changes in conditions.
How individuals manage their future within an organization from the company’s point of view, and how
employee careers are structured to assure their stay and progress in the company come under the purview of
career planning.
In recent years, many organizations in various industries are giving importance to what is known as, Succession
Planning, a new name for Career Planning. A number of research studies have been carried out to identify the
methods of retaining talented employees or people with high potential to meet business needs and changing
environmental conditions. In 2007, Canadian Pacific Railway Company launched “Career Tracks”, an
innovative career development method with a development of competency assessment to help employees
develop their skills that will allow them to achieve their performance objectives.
Marshall Goldsmith suggests four types of efficient succession planning.
These are:
1. Change the name of the process from Succession Planning to Succession Development
2. Measure outcomes, not process
3. Keep it simple
4. Stay realistic
In setting up your career plans the best advice is to be flexible but don’t be influenced yourself by the crowd. In
other words be flexible but not too rigid. As things, circumstances and environmental conditions change, one
must be prepared to make necessary adjustments accordingly. Career involves a series of decisions, continually
adding new inputs and information since conditions do change.
There are certain myths when it comes to making career plans and decisions. Some of these myths are:
1. Determining your career choice is the first choice
No, it is not really true
Start with your Education and thus create a base.
2. Your career plans once made cannot be changed
No, it is not true
The direction of your plans can be changed due to be changing conditions.
Career plans start with the self-assessment based on the information you have which are mostly educational
accomplishments, activities, experiences, and other achievements in various areas.
Based on your strengths, the individual explores career choices, and then comes placement, if you are a fresh
candidate and upward movement for an existing employee. Since women are new entrants to career planning, let
us see how career progression makes a difference in their work life. Of course, they don’t get extra help but
fairness is extended to them.
a. Career Planning for Women Employees:
For a very long time, in industry and business, women were employed only for lower level jobs in the
organizations. In banks, women were usually being seen at the counters and in retail establishments, looking
after the sales floors and merchandising areas of the store. In hospitals, at the most one can get to be a nursing
supervisor or training manager. Their roles are mostly confined to window-dressing and being secretaries
among other jobs in the lower hierarchy of the organization.
After passing legislation favourable to women in many countries, a number of managerial and other professional
jobs were opened up for them. Some progressive companies such as. Hewlett-Packard, Pepsi, and ICICI Bank,
elevated women to the Chief Executive positions in their organizations. In fact, they met up to the expectations
of the Boards, Employees, and the customers of their respective companies.
Some theorists believe that women may have an enormous advantage over men in future management
situations. Since a good framework has been established among women at all levels of management, there is a
scope as well as hope that career path will be opened up for more women to move up in the hierarchy? Thanks
for the new and emerging legislative measures undertaken in many countries across the Globe, including India.
The challenge is not just to recruit them for various levels of organizational hierarchy but to design a career path
and engage actively in career planning activities with a positive approach. The prospect of women being in
higher levels of management has changed in a decade but not to an appreciable extent.
The following are some steps companies can take to provide more opportunities for women to move into
higher levels of managerial hierarchy:
1. Make sure that women employees know the strategic goals of the company.
2. Women professionals have a clear understanding of career plans.
3. Teach, train, and develop them how to manage their time.
4. Provide them with good and open-minded mentors.
5. Arrange career seminars and discussions for potential women.
6. Enhance their community involvement and
7. Encourage them to be proactive in building their skills.
As more and more women come into the work force, not all solutions are solved; rather the situation has created
new problems for the employees, companies and the society at large, especially where it involves dual-career
couples. Many companies are trying to cope with these emerging situations with some innovative and
productive approaches by providing various kinds of activities to the younger children. Time will tell whether
such activities provide permanent solutions or postpone the existing problems.
b. Career Planning for Graduating Students:
One may wonder whether there are any such models for those who are about to graduate from colleges and
universities and other educational institutions, and planning to enter work organizations. A few models and
ideas have been developed by educational institutions, academics, and consulting agencies.
Let us look at the career planning model developed by Internship Career Center at the University of California
in Davis, California. The six step model is designed to help an individual to make career decisions not only as
one begins his or her career search but also throughout ones lifelong career path.
Let us look at these steps:
Step—I – Self-Exploration- Examine who you are where you are and what you like to do; identify your values,
interests, and skills. Describe your personality.
Step—II – World of work Research- Examine the world you want to work in and to find a career that meets
your needs. Job tide, job market trends, employers, work environments, informational interviews, asking people
who are currently employed may help.
Step—III – Experiential Education-Try to work as an intern or volunteer. Part-time jobs or serving and learning
where you can apply academic work.
Step—IV – Decision making-Prioritize your career needs, Determine goals, Set objectives, Create an action, and
plan Do reality testing (apply).
Step—V – Job Search-Once narrow the focus and set goals, prepare resume and cover better Attend on-campus
interviews apply through job-links.
Step—VI – Career Management-Ready to start your new job actively planning and managing your career will
help to be on track and lead you in the right direction you want to go.
Try to be realistic about your expectations. Over-expectations may lead you to disappointments and
discouragements. You have to earn the promotions and not to engage in politicking. Qualities such as, being
conscientious, punctuality, professionalism and sense of responsibility are preferred. Be a team player.
Participate in professional associations, clubs and meetings. Maintain high ethical standards.
What kinds of career opportunities are available for an MBA degree? Of course it can open up the door for a
number of job opportunities ranging from a senior manager in some banks to opening own enterprise.
The following list suggests a few areas generally MBA students go into:
i. Manager or Senior Manager in some business organization
ii. Investment banker
iii. Consultant – Business, Investment,
iv. Analyst – Banking, marketing, finance
v. Entrepreneur -Start or join business operated by parents

Process of Career Planning – 3 Main Steps in Creating a Career Goal: With Guidelines
From an individual’s point of view there is a number of different things that can happen in career planning. You
will be able to get an understanding of what the career you are considering has to offer. Or, if you are unsure of
what you would like to learn and do, you can take a wide variety of testing solutions that will help you to
determine what you are interested in as well as careers that you are talented for.
You will also find that in some college level classes of career planning you will be able to learn about many
different careers and test your hand at what they have to offer you. This is an excellent way to see what’s out
there. If you are a college student and planning to have a great career, you will need to develop tangible career
goals, which will enable you to reach your coveted career position.
But if someone asks you about your career goals, do you have a concrete answer for that tricky question? Most
of us have a tough time answering this dicey question. When you have a right career goal and a clear cut action
plan to achieve those goals, you are probably on your way to a career success.
How easy is to develop a career goal? With right attitude and mind, anyone can create a career goal for future
success in life. Choosing your preferred career is a dynamic decision, which is a continuously ongoing process,
demanding your dedication and attention.
You may also need to apply your knowledge of self, academic interest, professional acumen, financial
obligations and physical requirements. It also demands your power to apply some tricky logistical techniques
and work ethics to reach some sort of career goals.
The three steps in creating a career goal are:
1. Test, examine and identify all those personal values before arriving at a career goal. Check out for any
loopholes and deficiencies in your understanding of the real situation. Be specific to define any problems or
potential obstacles to reach the goal. Never deceive yourself by deducing wrong or improper conclusions.
2. Assign, identify, pool and use correct information; wrong information may create havoc at a later date. Thus
you may need to accumulate only relevant and rational data and information while choosing your career goals.
3. Develop, understand and use an effective action strategy for transforming all those information in to action.
This step is almost like the heart of your career goal setting, as you will consider all practical aspects of career
goal setting.
Once you have prepared these guidelines, you will plunge into creating a concrete action plan to achieve your
goals.
The following guidelines will help you to create a fool-proof action plan:
1. State the problem and its objectives in clear terms.
2. Define your goal in your own words.
3. Prepare a temporary action plan containing every essential step.
4. Get ready with several alternatives and choices.
5. Now develop a solid final action plan to achieve your career goals. Be prepared to change the plan midway to
suit to any changing conditions.
6. Set up midterm appraisal studies to check any deviations
7. Replace old decisions with new, more practical decisions.
When you are through the college, create excellent resume and credential reports to provide them to your future
employers. If you are not interested in a job and if you want to set up your own business, get ready for the action
as a final plunge to chase that elusive career goal.
Career planning is important because it allows you to be able to get a good idea of what you would like to do
with your life. Counsellors and teachers can help you to find the answers that you need to your questions and
give you options to consider. Career planning can help anyone, at anytime in their lives to find solutions to their
needs. Beyond being able to help you plan for the classes you will take, career planning can help you to begin
your future.

Process of Career Planning – For an Individual: Step by Step Process – Self-Assessment, Goal Setting,
Career Options, Plan of Action and Catch Hold of Opportunities
The systematic process by which one selects career goals and the path to these goals is called as career planning.
From the organisation’s viewpoint, career planning means helping the employees to plan their career in terms of
their capabilities within the context of organisation’s needs.

It requires discovery, development, planned employment and re-employment of talents. It comprises designing
an organisational system of career movement and growth opportunities for employees from the employment
stage to the retirement stage.

The individuals who can fill planned future positions are identified and prepared to take up these positions. It is
a managerial technique for mapping out the entire career of young employees.

A career planning process involves the following steps:

Process # 1. Self-Assessment:
The first and foremost step in career planning is to know and assess yourself. You need to collect information
about yourself while deciding about a particular career option. You must analyze your interests, abilities,
aptitudes, desired lifestyle, and personal traits and then study the relationship between the career opted for and
self.
Process # 2. Goal Setting:
Set your goals according to your academic qualification, work experience, priorities and expectations in life.
Once your goal is identified, then you determine the feasible ways and objectives how to realize it.
Process # 3. Academic/Career Options:
Narrow your general occupational direction to a particular one by an informatory decision making process.
Analyze the career option by keeping in mind your present educational qualifications and what more academic
degrees you need to acquire for it.
Process # 4. Plan of Action:
Recognize those industries and particular companies where you want to get into. Make the plan a detailed one so
that you can determine for how many years you are going to work in a company in order to achieve maximum
success, and then switch to another. Decide where you would like to see yourself after five years and in which
position.
Process # 5. Catch Hold of Opportunities:
Opportunity comes but once. So, whenever you get any opportunity to prove yourself and get into your desired
career, try to convert it in every way for suiting your purpose. Remember, a successful professional is also quite
opportunistic in his moves, examining every opening to turn to his favour.

Process of Career Planning – 5 Main Stages: Exploration, Establishment, Mid Career, Late Career and
Decline Stage
Career planning is the life-long process a person goes through to learn about himself (his purpose, personality,
interests, skills and talents) develop a self-concept, learn about careers, and work situations and then make a
career choice based on information gathered while developing coping and social skills.
It involves designing an organizational system of career movement and growth opportunities for employees
from the employment stage to the retirement stage. It is in fact a managerial technique for mapping out the
entire career of young employees.
The major focus of career planning is on assisting the employees achieve a better match between personal goals
and the opportunities that are available in the organization. It also includes the skills a person employs in finding
and keeping the job that is right for him or her.
The major focus of career planning should be on matching personal goals and opportunities that are realistically
available. A term worth defining is “Career Path”. A Career path is a flexible line of movement through which
an employee may move during employment with an organization.
A career includes many positions, stages and transitions just as a person’s life does.
The various stages are as follows:
i. Exploration Stage:
This stage starts after completion of formal or professional education from a college or university and involves
the transition period from academics to work life. Generally this stage covers the mid-twenties of an individual’s
life. The candidate explores relevant opportunities for a job either with the help of his/her institutions help or
those from a job consultant.
ii. Establishment Stage:
This stage begins when one individual gets his/her first job. The establishment stage is more of a preparation or
learning stage, where an individual accumulates experiences and learnings from his/her employer, colleagues,
customers etc. Although this stage might be characterized by committing mistakes; yet it forms an integral part
of the learning process of the candidate.
iii. Mid Career:
This is the stage which spans from the early or mid-30s to the 50s of an individual’s age. This stage may be
characterized either by steady and improved performance or may exhibit declining performance. In case the
organization or the peer or support groups provide counsel, help or additional training and development-the
performance may also increase leading the candidate back on his/her career track.
iv. Late Career:
Late career can be described as a maturity stage of one’s career, where an individual is characterized for
attaining a relatively good position and status in the organization where he/she is being employed. The
individual at this stage takes up the role of an elder statesperson.
v. Decline Stage:
In this the individual prepares himself/herself for retirement.

Process of Career Planning – Steps Involved

The steps in career planning are as follows:
1. Preparation of Personnel Inventory – status, duties, qualifications, age, aptitude, ability and acceptability
(surplus or shortage). HR planning forms the strong foundation of this stage.
2. Identifying Career Needs – (HR Manager may assist) – This stage involves identifying individual career
needs and assessing the potential of the candidates so as to utilize the same for identifying areas of development
and growth.
3. Identifying career opportunities in terms of responsibilities and positions within the organization based on
individual talents and capabilities.
4. Matching of Employee’s Aspirations with Career Opportunities
5. Formulating and Implementing Career Planning Strategies-
i. Changes in the career systems by creating new career paths
ii. Changing employee needs and aspirations – to help scale down unrealistic goals and/or creating new
aspirations
iii. Seeking new basis of integration through problem solving, negotiations and compromise
iv. Training and development to meet individual and organizational needs
6. Reviewing Career Plans

Process of Career Planning and Development – Steps Involved in Establishing a Career Development

System: With Policies
The various steps included in career planning and development are as follows:
1. Analysing the skills, aptitudes, knowledge, competence and so on of the employee.
2. Identifying and analysing the career opportunities available in the organisation as well as outside the
organisation.
3. Analysing career demands such as skill, knowledge and competence.
4. Relating specific jobs to different careers.
5. Working out both short-term and long-term goals.
6. Working out career strategies in the area of change or adjustment.
7. Preparing action plan and acquiring resources.
8. Executing the action plan.
Steps and Policies in Establishing a Career Development System:
A brief description of the steps and tasks involved in establishing a career development system and for
which companies formulate policies is as follows:
1. Needs:
To start with, an attempt is made to define the existing system and establish roles and responsibilities of all the
employees including managerial personnel as also of the organisation. Then needs are worked out and target
groups are identified. It is also found out that whether the company’s policies to support career development
programme are assessed. The philosophy of the career development programme is established. Thereafter,
criteria of success are established.
2. Vision:
The company then establishes the vision and objectives of the career development programme and designs
interventions for itself as well as for employees and managers. The company then organises and makes the
career information available, which is needed to support the programme.
3. Action Plan:
An action plan is formulated so as to achieve the vision. Resources and competencies available are assessed. An
advisory group is also constituted and involved in various activities such as designing the programme,
implementation, evaluation and monitoring. The company which believes in career development programme is
supposed to have a policy of supporting the programme.
4. Results:
The next step is to integrate the career development programme with the ongoing employee training and
development programmes of the organisation. The programme is evaluated and redesigned, if necessary. Future
trends and directions for the programme are examined.

Process of Career Planning – 5 Step Process: With their Functions

Career planning is a process of human resource development. It is not an end in itself. Being a process, career
planning involves certain steps.

The functions involved in each of these steps are as under:

Process # 1. Identification of Individual Needs and Aspirations:
Generally an individual joins an organisation as an employee with the aim to satisfy his own needs and fulfill his
aspirations. From the individual side, generally, personalising process works with a much greater force. The
personalising process is defined as the process through which an individual actualises himself by making the
organisation as its agent.

In this context the term actualise means to fulfill the goals of life, that is, fulfilling needs and aspirations these
may be expressed in many forms, such as earning more money, achieving status viewed highly by the society,
challenging jobs, higher responsibility, career progression and so on.
Career planning is meant for an individual that should aim at providing such a satisfaction. Therefore,
identification of these needs and aspirations may be taken as a starting point from the view of an individual.

Process # 2. Identification of Organisational Needs and Opportunities:

While going through career planning process, the organisation is concerned with own needs and the
opportunities that it can provide to individual employees. In case an organisation makes preparation of its long
term human resource plan, it will come to know what kind of opportunities it can provide to employees.

Therefore, the organisation may not be in a position to provide career desired and demanded by every individual
in the organisation. This phenomenon maybe causing frustration to both the organisation and individuals.

However, much of its frustrating impact can be reduced at the stage of employee recruitment and selection
where emphasis can be placed on matching between individual needs and aspirations and organisational needs
and opportunities. The nature of organisational jobs are changing rapidly in which people have to match jobs
with their multi-skilling rather than matching jobs with individuals.

Process # 3. Assessing Individual Strengths and Weaknesses:

It is necessary to assess his strengths and weaknesses before finalising the career plan for an individual and
placing him on career path, strengths and weaknesses. Every individual has certain strengths and weaknesses.
Specific feature of strength helps him in achieving his life’s goals (in the context of work-life, career goals).

On the contrary to it the feature of weakness produces hindrance in achieving life’s goals. While making
assessment of strengths, it should be remembered that strengths are not fixed features. Instead they go on
changing over the period of time because of continuous learning. Hence the assessment of strength should be
made both in terms of present and potential.

Process # 4. Placement on Career Path:

A career path is the logical possible sequence of positions that an individual can hold on the basis of his
performance in the organisation. Career path consists of two important elements line and ladder. Line is the field
of specialty in which an individual placed like production, marketing, finance, human resource, etc.

Within each line, there are various positions arranged in hierarchical order. Placing an individual on a career
path indicates how the individual will progress to those positions. This placing is essentially determined by the
alignment of individual needs, his strengths and weaknesses and organisational opportunities.

Process # 5. Review of Career Plans:

Career plans that emerge out of career planning exercise, have long term orientation. A career plan is developed
on the basis of assumptions about how the environment relevant to human resource management will behave in
future. However, whatever the techniques for forecasting HRM environment are set to use such a forecast may
not always match with the actual environmental happenings. Consequently, the career plans may be disturbed.
As such, Review enables the employees to know in which direction the organisation is moving, what changes
are likely to take place and what sort of skills are needed to adapt to the organisational needs. So, there must be
in-built system of reviewing the career plans periodically in the career planning itself.

A periodic review of career plans is essential for knowing whether the career plans are contributing to the
effective utilization of human resources by matching employee needs and job needs.

COMPENSATION MANAGEMENT

Types of Compensations

We have learnt about what compensation and its importance is. However, when it comes to an organization, be
it private or public, compensations are further divided into the following −

Direct Compensation

It is naturally made up of salary payments and health benefits. The creation of salary ranges and pay scales for
different positions within an organization are the central responsibility of compensation management staff.
Direct compensation that is in line with the industry standards facilitates employees with the assurance that
they are getting paid fairly. This helps the employer not to worry about the costly loss of trained staff to a
competitor.

Indirect Compensation

It focuses on the personal encouragements of each individual to work. Although salary is essential, people are
most productive in jobs where they share the company's values and priorities.
These benefits can include things like free staff development courses, subsidized day care, the chances for
promotion or transfer within the company, public recognition, the ability to effect change or bring some
changes in the workplace, and service to others.
These are the two types of compensation that need to be managed and have its own contribution in the
development of the organization. Moving forward, we will see the different components of compensation.

Components of Compensation

Compensation as a whole is made up of different components that work as an aid for an employee after
retirement or in case of some accident or injury. Now we shall see the key elements or components that make
compensation.

Wages and Salary

Wages mark hourly rates of pay, and salary marks the monthly rate of pay of an employee. It is irrelevant of
the number of hours put in by an employee working in the firm. These are subject to annual increase.

Allowances

Allowances can be defined as the amount of something that is allowed, especially within a set of rules and
regulations or for a specified purpose. Various allowances are paid in addition to basic pay.
Some of these allowances are as follows −
 Dearness Allowance − This allowance is given to protect real income of an employee against price
rise. Dearness allowance (DA) is paid as a percentage of basic pay.
  House Rent Allowance − Companies who do not provide living accommodation to their employees
pay house rent allowance (HRA) to employees. This allowance is calculated as a percentage of salary.
 City Compensatory Allowance − This allowance is paid basically to employees in metros and other
big cities where cost of living is comparatively more. City compensatory allowance (CCA) is
normally a fixed amount per month, like 30 per cent of basic pay in case of government employees.
 Transport Allowance/Conveyance Allowance − Some companies pay transport allowance (TA) that
accommodates travel from the employee’s house to the office. A fixed amount is paid every month to
cover a part of traveling expenses.

Incentives and Performance Based Pay

Incentive compensation is performance-related remuneration paid with a view to encourage employees to work
hard and do better.
Both individual incentives and group incentives are applicable in most cases. Bonus, gain-sharing,
commissions on sales are some examples of incentive compensation.

Fringe Benefits/Perquisites

Fringe benefits include employee benefits like medical care, hospitalization, accident relief, health and group
insurance, canteen, uniform, recreation and the likes.
In recent years, a great deal of attention has been directed to the development of compensation systems that go
beyond just money. We can say that all the components of compensation management play a very important
role in the life of an employee.
In particular, there has been a marked increase in the use of pay-for-performance (PrP) for management and
professional employees, especially for executive management and senior managers. Compensation is a primary
motivation for most employees.
Compensation Management
Compensation management simply means that your business is strategically managing employees’
compensation. The goal of compensation management is to ensure that you’re spending your compensation
dollars in the right areas and getting the maximum returns from your employees.
Compensation management includes things like offering pay that’s competitive for your local market and
creating bonus structures that motivate your employees. It also includes offering a benefits package that will
keep everyone—your company and your employees—happy. For a growing business, optimizing all of these
areas of compensation can feel overwhelming, which is where platforms like JUNGO come in.
Compensation Management

Posted by: Margaret Rouse

WhatIs.com
  
Contributor(s): Patrick Thibodeau

Compensation management is a critical part of talent management and employee retention. It uses financial and

nonmonetary benefits to attract recruits, reduce turnover, spur performance and boost employee engagement. It

is responsible for ensuring that salary and bonuses remain competitive and benefit programs change with the

needs of the workforce. The people in this role not only work with data, but are also keen to understanding the

complexity of benefits administration.

Compensation management, also known as wage and salary administration, remuneration management, or
reward management, is concerned with designing and implementing total compensation package.

Compensation is the human resource management function that deals with every type of reward individuals
receive in exchange for performing an organizational task.

The consideration for which labor is exchanged is called compensation.

Compensation is what employees receive in exchange for their work. It is a particular kind of price, that is, the
price of labor. Like any other price, remuneration is set at the point where the demand curve for labor crosses
the supply curve of labor.

What is Compensation and Compensation Management?

Compensation is referred to as money and other benefits received by an employee for providing services to his
employer.

Compensation refers to all forms of financial returns: tangible services and benefits employees receive as part an
employment relationship, which may be associated with employee’s service to the employer like provident fund,
gratuity, insurance scheme and any other payment which the employee receives or benefits he enjoys in lieu of
such payment.

According to Dale Yoder, “Compensation is paying people for work”.

“Compensation is what employees receive in exchange for their contribution to the organization”. – Keith Davis

In the words of Edwin B. Flippo, “The function compensation is defining as adequate and equitable
remuneration of personnel for their contributions to the organizational objectives”.

Cascio has defined compensation as follows;

 “Compensation includes direct cash payments, indirect payments in the form of employee benefits and
incentives to motivate employees to strive for higher levels of productivity”

Beach has defined wage and salary administration as follows;

“Wage and salary’ administration refers to the establishment and implementation of sound policies and practices
of employee compensation. It includes such areas as job valuation, surveys of wages and salaries, analysis of
relevant organizational problems, development, and maintenance of wage structure, establishing rules for
administering wages, wage payments, incentives, profit sharing, wage changes and adjustments, supplementary
payments, control of compensation costs and other related items.”

Compensation can be in the form of cash or kind. Compensation may be defined as money received in the
performance of works, plus the many kinds of benefits and services that organizations provide their employees.

Different Types of Compensation

There are different types of compensation. Schuler identified three major types of compensation, which are
mentioned below;

1. Non-monetary Compensation.

2. Direct Compensation.

3. Indirect Compensation.

Non-monetary Compensation

It includes any benefit that an employee receives from an employer or a job that does not involve tangible value.
Examples are career development and advancement opportunities, opportunities for recognition, as well as work
environment and conditions.

Direct Compensation

Direct Compensation comprises of the salary that is paid to the employees along with the other health benefits.

Money is included under direct compensation. It is an employee’s base wage which can be an annual salary or
hourly wage and any performance-based pay that an employee receives.

Direct compensation consisting of pay received in the form of wages, salaries, bonuses, and commissions
provided at regular and consistent intervals.

These include the basic salary, house rent allowances, medical benefits, city allowances, conveyance, provident
funds, etc. It also includes bonuses, payments for holidays, etc.

Indirect Compensation

Indirect compensation can be thought of as the nonmonetary benefits an employee gets from the organization.

It includes everything from legally required public protection programs such as Social Security to health
insurance, retirement programs, paid leave, childcare or moving expenses.

While benefits come under indirect compensation and may consist of life, accident, health insurance, the
employer’s contribution to retirement, pay for a vacation, employer’s required payment for employee welfare as
social security.
 Rewards and recognitions, promotions, responsibility, etc., are some factors that induce confidence in the
employees and motivate them to perform better. It also instills the faith in them that their good work is being
recognized and they can boost their career opportunities if they continue to work harder.

Objectives of Compensation Management

The basic objective of compensation management can be briefly termed as meeting the needs of both employees
and the organization.

Employers want to pay as little as possible to keep their costs low. Employees want to get as high as possible.

Objectives of compensation management are;

1. Acquire qualified personnel.

2. Retain current employees.

3. Ensure equity.

4. Reward desired behavior.

5. Control costs.

6. Comply with legal regulations.

7. Facilitate understanding.

8. Further administrative efficiency.

9. Motivating Personnel.

10. Consistency in Compensation.

11. To be adequate.

Compensation management tries to strike a balance between these two with specific objectives;

Acquire qualified personnel

Compensation needs to be high enough to attract applicants. Pay levels must respond to the supply and demand
of workers in the labor market since employees compare for workers.

Premium wages are sometimes needed to attract applicants working for others.

Retain current employees

Employees may quit when compensation levels are not competitive, resulting in higher turnover.

Employees serve organizations in exchange for a reward. If pay levels are not competitive, some employees quit
the firm. To retain these employees’, pay levels must be competitive with that of other employers.

Ensure equity
To retain and motivate employees, employee compensation must be fair. Fairness requires wage and salary
administration to be directed to achieving equity.

Compensation management strives for internal and external equity.

Internal equity requires that pay be related to the relative worth of a job so that similar jobs get similar pay.

External equity means paying workers what comparable workers are paid by other firms in the labor market.

Reward desired behavior

Pay should reinforce desired behaviors and act as an incentive for those behaviors to occur in the future.
Effective compensation plans reward performance, loyalty, experience, responsibility, and other behaviors.

Good performance, experience, loyalty, new responsibilities, and other behaviors can be rewarded through an
effective compensation plan.

Control costs

A rational compensation system helps the organization obtain and retain workers reasonable cost. Without
effective compensation management, workers could be overpaid or underpaid.

Comply with legal regulations

A sound wage and salary system considers the legal challenges imposed by the government and ensures
employers compliance.

Facilitate understanding

The compensation management system should be easily understood by human resource specialists, operating
managers and employees.

Further administrative efficiency

Wage and salary programs should be designed to be managed efficiently, making optimal use of the HRIS,
although this objective should be a secondary consideration with other objectives.

Motivating Personnel

Compensation management aims at motivating personnel for higher productivity.

Monetary compensation has its own limitations in motivating people for superior performance. Besides money
people also wants praise, promotion, recognition, acceptance, status, etc. for motivation.

Consistency in Compensation

Compensation management tries to achieve consistency-both internal and external in compensating employees.
Internal consistency involves payment on the basis of the criticality of jobs and employees’ performance on
jobs.

Thus, higher compensation is attached to higher-level jobs. Similarly, higher compensation is attached to higher
performers in the same job.

To be adequate
 Compensation must be sufficient so that the needs of the employee are fulfilled substantially.

Pre-requisites for Effective Compensation Management

An effective compensation system should fulfill the following criteria:

1. Adequate: Minimum governmental, union, and managerial pay level positions must be met by the
compensation system.

2. Equitable: Care should be taken so that each employee is paid fairly, in line with his/her abilities,
efforts, education, training, experiences, competencies, and so on.

3. Balanced: Pay, benefits, and other rewards must provide a reasonable compensation package.

4. Secure: Employees security needs must be adequately covered by the compensation package.

5. Cost-Effective: Pay must be neither excessive nor inadequate, considering what the enterprise can
afford to pay.

6. Incentive Providing: The compensation package should be such that it generates motivation for
effective and productive work.

7. Acceptable to all Employees: All employees understand the pay system well and feel it is reasonable
for the enterprise and the individual.

Importance of Sound Wage Structure

A sound wage policy is to adopt a job evaluation program in order to establish fair differentials in wages based
upon differences in job contents.

Besides the basic factors provided by a job description and job evaluation, those that are usually taken into
consideration for wage and salary administration are;

1. The organizations’ ability to pay.

2. Supply and demand of labor.

3. Prevailing market rate.

4. The cost of living.

5. The living wage.

6. Psychological and Social Factors.

7. Skill Levels Available in the Market.

1. The organizations’ ability to pay

Wage increases should be given by those organizations which can afford them.
Companies that have good sales and, therefore, high profits tend to pay higher those which running at a loss or
earning low profits because of a higher cost of production or low sales. In the short run, the economic influence
on the ability to pay is practically nil.

All employers, irrespective of their profits or losses, must pay no less than their competitors and need to pay no
more if they wish to attract and keep workers. In the long run, the ability to pay is important.

2. Supply and demand of labor

If the demand for certain skills is high and supply is low, the result is a rise in the price to be paid to these skills.
The other alternative is to pay higher wages if the labor supply is scarce and lower wages when it is excessive.

Similarly, if there is a great demand for labor expertise, wages rise; but if the demand for manpower skill is
minimal, the wages will be relatively low.

3. Prevailing market rate

This is known as the ‘comparable wage’ or ‘going wage rate’, and is the widely used criterion.

An organization compensation policy generally tends to conform to the wage rate payable by the industry and
the community. This is done for several reasons.

First, competition demand that competitors adhere to the same relative wage level.

Second, various government law’s and judicial decisions make the adoption of uniform wage rates an attractive
proposition.

Third, trade union encourages this practice so that their members can have equal pay, equal work, and
geographical differences may be eliminated.

Fourth, a functionally related firm in the same industry requires essentially the same quality of employees, with
the same skill and experience. This results in a considerable uniformity in wage and salary rates.

Finally, if the same or about the same general rates of wages are not paid to the employees as are paid by the
organizations’ competitors, it will not be able to attract and maintain the sufficient quantity and quality of
manpower.

4. Cost of living

The cost of living pay criterion is usually regarded as an automatic minimum equity pay criterion. This criterion
calls for pay adjustments based on increases or decreases in an acceptable cost of living index.

When the cost of living increases, workers and trade unions demand adjusted wages to offset the erosion of real
wages.

5 Living wage

The living wage criterion means that wages paid should be adequate to enable an employee to maintain himself
and his family at a reasonable level of existence.

However, employers do not generally favor using the concepts of a living wage as a guide to wage
determination because they prefer to base the wages of an employee on his contribution rather than on his need.

6. Psychological and Social Factors

 Psychologically, persons perceive the level of wages as a measure of success in life; people may feel secure;
have an inferiority complex, seem inadequate or feel the reverse of all these. They may not take pride in their
work, or in the wages they get.

Therefore, these things should not be overlooked by the management in establishing wage rate.

Sociologically and ethically, people feel that “equal work should carry equal that wages should be
commensurate with their efforts, that they are not exploited, and that no distinction is made on the basis of caste,
color, sex or religion.”

To satisfy the conditions of equity, fairness, and justice, management should take these factors into
consideration.

7. Skill Levels Available in the Market

With the rapid growth of industries business trade, there is a shortage of skilled resources. The technological
development, automation has been affecting the skill levels at faster rates.

Thus the wage levels of skilled employees are constantly changing and an organization has to keep its level up
to suit the market needs.

Challenges or Problems of Compensation Management

Even the most rational methods of determining pay must be tempered by good judgment when challenges arise.

The implications of these demands may cause analysts to make further adjustments to compensation.

1. Strategic Objectives.

2. Prevailing Wage Rates.

3. Union Power.

4. Government Constraints.

5. Comparable Worth and Equal Pay.

6. Compensation Strategies and Adjustments.

7. International Compensation Challenges.

8. Productivity and costs.

1. Strategic Objectives

Compensation management is not limited to internal and external equity. It also can be used to further an
employer’s strategy. Employee compensation might have been initially anchored by the relative worth of jobs
and the prevailing wage rates in the local market.

2. Prevailing Wage Rates

Market forces may cause some jobs to be paid more than their relative worth. Demographic shifts and relative
supply and demand relationships affect compensation.
3. Union Power

When unions represent a portion of the workforce, they may be able to obtain wage rates that are out of
proportion to the relative worth of the jobs.

Unions may also limit management’s flexibility in administering merit increases since unions often argue for
raises that are based on seniority and are applied across the board equally.

4. Government Constraints

Government sets minimum wage, overtime pay, equal pay, child labor, and record-keeping requirements. The
minimum-wage and overtime provisions require employers to pay at least a minimum hourly rate regardless of
the worth of the job.

5. Comparable Worth and Equal Pay

Beyond “equal pay for equal work” is the idea of “comparable pay for comparable work” called comparable
worth. It requires employers to pay equal wages for jobs of comparable values.

Comparable worth is used to eliminate the historical gap between the incomes of men and women.

6. Compensation Strategies and Adjustments

Most organizations have compensation strategies and policies that cause wages and salaries to be adjusted.

A common strategy is to give nonunion workers the same raises that are given to unionized employees; this
often is done to prevent further unionization.

7. International Compensation Challenges

The globalization of business affects compensation management.

Compensation analysts must focus not only on equity but on competitiveness too. The growing globalization of
business also means a greater movement of employee among countries.

As employees are relocated, compensation specialists are challenged to make adjustments that are fair to the
employee and the company while keeping competitiveness in mind.

8. Productivity and costs

Regardless of the company or social policies, employers must make a profit to survive. Without profits, they
cannot attract enough investors to remain competitive.

Therefore, a company cannot pay its workers more than the workers give back to the firm through their
productivity.

NEED FOR SOUND SALARY ADMINISTRATION

Intro

Wage and Salary Administration – Introduction

Wages constitute the major factor in the economic and social life of any community in an economic sense;
wages represent payment of compensation in return for work done. In a sociological sense, wages characterize
stratification of occupational categories. In a psychological sense, wages satisfy need directly and indirectly in
response to changing employee aspiration.
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Its constitutes one of several elements of job satisfaction and is instrumental for the satisfaction of some needs
more than others. In a legal sense, the term wages or salaries has acquired various connotations, depending on
the context and has become a subject of special law in many countries. It is most important to an industrial
worker because his standard of living and that of his family depends upon his earnings.
Wages have at least two connotations from the stand points of employers and employees in organisational
settings – (i) First, the employers perceive wages as a cost of their business efforts and are keen to reduce labour
cost per unit of output. Explicitly, wages form an important cost factor for the enterprise. Although the
employers are inclined to save this cost, they have also come to realize that it would not be possible for them to
attract and maintain an effective workforce without compensating it adequately, (ii) Second, employees consider
wages as a means for satisfying their needs in terms of an expected standard. They desire to receive at least as
much remuneration as other individuals equipped with similar skills for doing similar work.
Traditional theorists define wage and salary administration as the process by which wage and salary levels and
structures are determined in organisational settings. Wages are payments for labour services rendered frequency,
expressed in hourly rates, while a salary is a similar payment, expressed in weekly, monthly or annual rates.
Thus the term ‘wage’ frequently connote payments in terms of the number of hours worked and may fluctuate
depending upon hours actually worked.
The determination of wage rates, administration of wage policies and satisfying the employees as regards to
wages and rates of wages is an important aspect of wage administration. As a matter of fact wage and salary
administration is one of the major responsibilities of modern manpower management.
It is of course a line responsibility but continually increasing complication have demanded the attention of
specialized staff members. Hence, the experts in personnel area have to take due care of this important function
continuously.
Labour is the most important factors of production. Labour expects fair compensation for its contribution to the
process of production. The term ‘wages’ is probably the broadest of all designations applied to workers
compensation. In popular usage, it refers to payments for services, whether mutual or maintained whether based
on hours of employment, units of output or some other yardstick.
In this usage, the term includes salaries, bonus, premium and commissions, etc., in modern times; the word
‘wage’ is used in some restricted sense. In this sense, it refers to compensation paid for services of hourly-rated
or order to non-supervisory and non-clerical employees.

Wage and Salary Administration – Meaning and Definitions

In simple words wages means reward for the labourer for his services rendered to the industry. These can be
paid on per unit, per hour, daily, fortnightly, weekly, or monthly basis. Labourers render services of both types
i.e. mental and physical.
Some of the definitions of wages are as follows:
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According to Prof. Straitoff, “Wages is the reward of that labour which creates utility.”

Wage and Salary Administration – Steps Involved in Wage and Salary Survey
Wage and salary survey is conducted in varied forms depending upon the purpose, time constraints and scope.
The method, however, follows the following steps:
Step # 1. Planning:
Decide – What? Why? Where? Who? and When?
First of all, which jobs of which nature are to be compared, what class of workers’ compensation is to be
surveyed, which company and area are to be surveyed and the employee’s cadre are to be determined.
This means that at the planning stage, the management has to do a SWOT analysis to determine the appropriate
human resources and their job worth in the market to meet the challenges of possible threats and opportunities.
Then decide who and when will conduct the survey and plan the method, sample, time and tools of collecting
the data to be planned. However, these decisions may vary according to the class of survey, size of
organizations, cost and money involved, and the accuracy desired.
Step # 2. Source and Sample Selection:
Source and the sample size will again depend on the class or the type of survey, and the survey method adopted.
If it is a commissioned or packaged survey, we need to decide the institution, agency or the management
consultancy to collect the data.
In case of an external or participative survey, we need to decide the names of member industries as a sample. In
an internal survey, we need to identify which jobs details are required, and what records or information are
required. We can then decide the source and the samples.
Step # 3. Conducting Survey:
Again depending upon the type of survey, the questionnaire, the points for discussions and the format for
recording the data should be first determined. Using the predetermined tools and the formats, the required data
to be collected is disseminated and recorded.
Step # 4. Analyzing and Interpreting:
Data is then analyzed and interpreted in line with the purpose of the survey such as:
(a) Entry-level job rates,
(b) Position of the company on the market,
(c) Company pay structure in line with competitors, and
(d) Factors to be considered for designing pay structures.
In the booming business opportunity and competitive environment, every organization is striving hard to recruit
talent at all levels of employment but they are forced to compete with the market rates also. Wage and salary
surveys are, therefore, scrutinized for the above purposes to design their compensation packages to attract
employees at all levels.
Step # 5. Concluding:
The observations or findings are then summarized to have comprehensive data to design the appropriate
compensation structures.

Wage and Salary Administration – 8 Main Factors Affecting Wage and Salary Levels
The wage policies differ from organization to organization. Marginal units pay the minimum necessary to attract
the required number and kind of labour. Often, these units pay only the minimum wage rates required by labour
legislation, and recruit marginal labour.

At the other extreme, some units pay well above the going rates in the labour market. They do so to attract and
retain the highest caliber of the force. Some managers believe in the economy of higher wages. They feel that,
by paying high wages, they would attract better workers who will produce more than the average worker in the
industry.
This greater production per employee means greater output per man-hour. Hence, labour costs may turn out to
be lower than those existing in firms using marginal labour. Some units pay high wages because of a
combination of favourable product market demand, higher ability to pay and the bargaining power of a trade
union.
But a large number of them seek to be competitive in their wage program and aims at paying somewhere near
the going rate in the labour market for the various classes of labour they employ.
Most units give greater weight to two wage criteria, viz., job requirements and the prevailing rates of wages in
the labour market. Other factors, such as changes in the cost of living, the supply and demand of labour, and the
ability to pay are accorded a secondary importance.
A sound wage policy is to adopt a job evaluation programme in order to establish fair differentials in wages
based upon differences in job contents.
The main factors influencing wage or salary levels are:
1. Job Needs – Different types of jobs require different levels of both physical and mental skills. Some require
high skills so pay is high on the other hand simple, routine jobs where skill requirement is low are paid low.
2. Ability to pay – Ability to pay depends upon the profit earning capacity of the organization MNCs pay
relatively higher salaries due to their higher paying capacity.
3. Cost of living – Due to inflation, the real wages decline affecting the purchasing power of workers. Therefore,
dearness allowance is given according to change in consumer price index.
4. Prevailing wage rates – Prevailing wage rates in competing firms with in an industry are taken into account
while fixing wages & company that does not pay comparable wages may find it difficult to attract and retain
talent.
5. Union – Highly unionized sectors generally have higher wages because well-organised unions can exert
pressure on management and obtain all sorts of benefits and concession to workers.
6. Productivity – In many organizations, pay is linked to productivity or performance of workers.
7. Demand and supply of labour – The demand for and the supply of certain skills determine prevailing wage
rates. E.g. – High demand for IT Professionals ensure higher pay for them.
8. State Regulations – Wage policy and laws of the government exercise a significant influence on wage levels.
Government has enacted laws to protect the interests of the working class. No organization can violate laws
relating to minimum wages, payment of bonus, dearness allowance and other allowance etc.

Wage and Salary Administration – 6 Important  Factors Considered to Form a Sound Wage Policy
The price to be paid as wage or salary for the utilisation of services of an individual-worker or executive –
is affected by a number of factors as follows:
1. Demand and Supply:
Demand for and supply of labour and its availability will have great influence on the determination of wage
rates. If there is a shortage of labour, the wages demanded will be high. If, on the other hand, labour is plentiful,
workers will be too willing to work at low rates of wages. But in recent years both management and labour has
been becoming less and less dependent on this “law” as a basic factor.
Payment of high wages at times when labour is scarce leads to difficulties in meeting cost standards, and
reduction in wages is almost impossible. The payment of low wages when labour is abundant often causes
resentment in the long run and so saving in wages is outweighed by a sense of dissatisfaction and low
productivity.
2. “Giving Wages”:
The giving wage is usually the ruling wage, in any locality, but some companies pay higher rates in order to
foster the continued goodwill of workers in the community.
3. Cost of Living:
The cost of living or more precisely changes in the cost of living which affect the purchasing power of the wage
have been used with profit by many companies. Where, however, the employers are short sighted and ignore the
changes in the cost of living, trade unions come out with a demand for a wage rate which takes into account the
current cost of living index.
4. Union-Management Negotiations:
A well-organised labour which is directed by strong leadership is usually in a position to secure higher wage
levels through union management negotiations. Collective bargaining can be a useful method if pursued
rationally by both the managements and unions. It can give the enterprise a predictable wage burden, and the
workers the predictable income.
5. State of Competition:
The wage level is also affected by the degree of competition in the market for the products of an industry. In a
state of perfect competition (which is hardly ever present), the level of wages may be at par with the value of the
net addition made by the workers to the total output. If there is imperfect competition in the product market, the
wages are not likely to reach this level.
6. State Regulation:
Often it was found that the bargaining power of the workers was not strong enough to ensure fair wages.
Consequently, the State found it necessary to step in. To ensure the payment of a minimum wage in certain
specified industries and occupation the Minimum Wages Act was passed in 1948. Payment of bonus was made
compulsory under the Payment of Bonus Act, 1965, and fringe benefits given under the Employees State
Insurance Act, 1948, and Provident Fund Act, 1952 and so on.
Other Factors:
In addition to above factors, there are some others which influence actual wage levels in an organisation. These
may be the firm’s ability to pay, the level of national income and its distribution, the place of industry in the
national economy, e.g., in a strategic industry wage level could be quite high.

Wage and Salary Administration – Types of Wage and Salary Surveys: Commissioned/Packaged Survey,
External or Participative Survey and Internal Survey
Wage surveys are conducted in different ways depending upon the company’s objectives or purpose, the size of
the company and the time and cost constraints.
The types of survey are mostly of following types:
1. Commissioned or Packaged
2. External or Participative
3. Internal or Mutual.
These can be categorized as:
i. Generally published surveys
ii. Compensation club survey
iii. Customized surveys.
1. Commissioned /Packaged Survey:
These are also termed as generally published surveys as the data are collected from a research body or agency
that keeps on conducting such surveys and provides the data on request. However, they charge for it. These data
should, however, be scrutinized as they may be for the same industry but may not match the size or the numbers
of employees and the numbers of jobs necessary for any particular industry.
2. External or Participative Survey:
This is also referred to as a compensation club survey as in this survey member industries share the data with the
member who wishes to do the survey through questionnaires or personal meetings or phone calls.
3. Internal Survey:
This type of survey is done within the organization and involves dissemination of the internal records or
questioning personnel or employees.
In this type of survey, the surveyors extrapolate the existing secondary data of the company to work out wage
differentials.
Wage and Salary Administration – Classification of Wages: Living Wages and Minimum Wages
Classification of wages is:
1. Living wages
2. Minimum wages
1. Living Wages:
This has been defined in different ways in different countries. The most suitable definition is given by Justice
Higgin, “Living wages should be sufficient to ensure the workman’s food, shelter and clothing; frugal comfort
provision, evil days, etc., as the skill of an artisan, if he is one.”
According to the fair wages committee report, the living wages must be a le to make the male earner to provide
himself and his family not only basic necessities, viz.- food, clothing and shelter but also education for the
children and protection against ill-health and essential social needs. The living wages means provision for the
bare necessities with certain amenities considered necessary for the well-being of a worker in terms of his social
status.
This provision has the reference to Article 43 of Indian Constitution.
2. Minimum Wages:
This is the lowest wage. With this wage a worker and his family can just pull on the life; in other words, it can
provide a minimum level of subsistence. This includes food, shelter and clothing. Minimum Wage in a country
is fixed by the Government in consultation with business organisations and Trade Unions. When minimum
wages are fixed, it is the duty of the government that employers are not exploiting the work force.
The law for minimum wages is fixed from time to time by Administrative Commission of the Government with
variation in the wage rates. The very purpose of fixation of wages from time to time has become necessary due
to variation in the price level as a sequel to varying economic conditions.
Government of India passed the Minimum Wage Act in 1948. According to the Act, wage should include such
factors as local economic conditions, transportation cost and the size of units in the industry in fixing Minimum
Wages.
Minimum wage act is supposed to have the following benefits:
i. This law prevents exploitation of employees, undue advantage of employing individuals who possess very
little bargaining power.
ii. The law abolishes the competition in lower strata of workers with the upper grades and tend to prevent
depressing the wages.
iii. The productivity of industry is increased by foreign employees to use the most efficient production methods
and ultramodern equipment in order to enable employees earn their living /wages and at the same time the
worker is stimulated to increase his efficiency so as to help him hold his position.

Wage and Salary Administration – Structure of Wage/Salary Structure in India

In simple language, a salary and wage structure is a series of wage rates/grades that obtain in an organization for
compensating labor. According to Prof. Dunlop, a wage structure ‘is the complex of rates within firms
differentiated by occupation and employees and the complex of inter-firm rate structure’.
A wage structure of a plant or an office or more broadly, of a national economy, can be viewed as a series of
wage rates designed to compensate workers for varying skills and abilities required in the production process.
The most significant aspect of a wage structure is not only the number of workers or staff at each rate in the
scale of pay, but also the relative importance of each rate.
Each rate/grade is designed to pay the workers/staff for his/her skilled performance on the respective job. The
rate is for the given job/designation-wise. In PSUs, there is a well-defined wage structure for artisans,
supervisors and managers. The wage structure is designed and reviewed every five years or so, as per the terms
of the wage agreement/contract in vogue/decided through the process of collective bargaining.
Progressive employers like the Tatas, the Aditya Birla Group, Wipro and others have well designed wage
structure as per their wage policy.
In the Indian context, a wage/salary structure may be divided into four components:
(a) Basic wage,
(b) Dearness allowance,
(c) Allowances, and
(d) Fringe benefits.
(a) Basic Wage:
A basic wage is the base rate in the respective grade/scale of the wage structure developed as a result of the
agreement reached after the collective bargaining process, or on the basis of the recommendations made by the
Fair Wages Committee, 1948 as also the 15th Indian Labour Conference, 1957 and the various rulings of
tribunals and courts in the post-independence period.
The basic wage is fixed reviewed and bargained in the wage negotiation or awards, Wage Boards or Pay
Commissions. In the industry, especially in large manufacturing organizations there are normally eight to ten
wage grades applicable to workers/artisans and supervisors, with each grade having its base rate. Likewise, there
are Executive grades/scales of pay ranging between E 1 to E 8, each scale applicable to given designations or
hierarchy of executives. In fact, each organization has its own scale of pay.
In PSUs usually, there are systematically defined grades and scales of pay, ranging between E 1 to E 8 for
executives and similarly some eight or nine grades for artisans, etc. In non-executive scale, the first scale is
applicable to the lowest level of wage earner, e.g., attendant, peon or an auxiliary worker/helper (unskilled
categories). In executive grades, E 1 refers to an Executive entrance grade and E 8 refers to General Manager’s
grade.
Each scale has a different basic rate, so the question is, what is the basis of the differential in the wage structure?
To summarize, the following factors are taken into consideration in working out the wage differential:
i. Level of skill required on the job
ii. Level of training required on the job
iii. Physical and mental effort needed
iv. Level of experience needed on the job
v. Fatigue arising out of stress/strain on the job
vi. Level of responsibility the job demands.
Likewise, there are different wage grades of pay for workers/artisans operating at different levels, as say
unskilled, or semi-skilled or skilled or highly skilled categories. As of now, in PSUs, there are around ten
grades. Workers/artisans are placed in the respective grades as per the job specification/their merits.
(b) Dearness Allowance:
Dearness allowance (DA) is a part of the negotiated wage/pay agreement in an organization. The objective for
paying dearness allowance is to neutralize the rise in prices of essential commodities. Dearness allowance is
linked to the All-India Consumer Price/index AICPI. Every point rise or fall in the index is linked to money
value. And, so the dearness allowance varies according to the index.
During the course of wage negotiations, following the process of collective bargaining, the management on
behalf of the employer, and the union on behalf of the workers agree to merge a part of the existing DA to the
basic rate, thus upgrading the wage scales/grades level which provides for incremental retirement and other
benefits related to the rate/basic pay, e.g., entitlement for company housing, travel, PF contribution, etc.
DA reduces the impact of inflation in the economy on the wage earner. As per the formula, the cost of living
index takes the given year as a base year, which relates to the ongoing fluctuations in prices, in terms of
essentials to a series of numbers and index. The numbers are translated to monetary wage terms to by the HR
experts. DA is, thus, paid to neutralize the rise in prices.
(c) Allowances:
Allowances are another form of compensation to a wage earner, which are negotiated as a part of wage revision
in the collective bargaining process.
Today there are a large number of allowances paid in the variety of organizations:
i. Car allowance/conveyance reimbursement
ii. City compensatory allowance
iii. Transport allowance/subsidy for outstation workers
iv. Deputation allowance for staff on deputation
v. Education, servant, mail and cook allowance
vi. Cash allowance for staff of accounts dept. on cash disbursement
vii. Book allowance
viii. Milk allowance
ix. Hazard allowance for working in a hazardous workplace
x. Acting allowance to executives
xi. Family allowance to non-family stations
xii. Site working allowance.
(d) Fringe Benefits:
A fringe benefit is an indirect benefit and constitutes a major part of the wage and the benefit is not merely
fringe or peripheral. Some define fringe benefits as a wage cost, not directly linked to employees’ productive
efforts, sacrifice, service /performance. Fringe benefits no doubt, are non-wage benefits offered to
staff/employees in an organization.
These benefits are effective methods of attracting and retaining talent in the company. This is a supplementary
compensation to employees. It boosts the real earnings and provides extra spending money to employees. It is
also termed as an economic security to the workers/staff.
Fringe benefits also known as perks or perquisites include:
i. Providing status to an executive by giving entitlement to use company’s car with/without chauffeur, allowing
entertainment facilities, holidays, foreign travel, telephone facility at home, mobile phone, etc.,
ii. Providing security through insurance coverage and the employee medical facilities for himself, family and his
dependants, children’s education facilities/subsidies; and work benefits like air conditioner in office and
residence, secretarial services, training for development in India/abroad, company scholarship for higher
education, and
iii. Key benefits are provided which includes share scheme, profit sharing, retirement counseling and loan for
housing at nominal rates of interest.
The extent of benefits under (a), (b) and (c), provided to the employees, depend upon the company’s ability to
spend on fringe benefits. Attendance bonus, service bonus are the other fringe benefits. Most of these benefits
are non-statutory but in the case of statutory benefits, the same have to be provided by the employer.
Such benefits are under the Employees’ Provident Fund Act for all employees and ESI are good examples.
Profit sharing bonus is another statutory benefit in vogue, and the Gratuity payment scheme under the Gratuity
Payment Act are all statutory benefits for the employees. Fringe benefits are also bargainable in the collective
bargaining process.

Wage and Salary Administration – 5 Important Systems for Fixing Salary

Salary is structured, fixed, adjusted on the basis of several systems.
The important among them are:
(1) Wage Theories;
(2) Job Evaluation;
(3) Wage/Salary Survey;
(4) Various Factors Affecting Wage and Salary Levels.
(5) Wage Fixation Institutions in India

System # 1. Wage Theories:

There are a number of theories on wages.
Important among them are discussed hereunder:
(i) The Just Wage Theory – This was the first theory on wages advocated during medieval period. The essence
of this theory is that the worker should be paid on the level of maintaining himself and his family.
(ii) Subsistence Theory – According to Ricardo “the labourers are paid to enable them to subsist and perpetuate
the race without increase or diminution.”
(iii) Standard of Living Theory – Karl Marx pointed out that the “Wage of labour is determined by a traditional
standard of living, which, in turn, is determined by the mode of production of the country concerned.”
(iv) The Wage Fund Theory – According to J.S. Mill, the wages are determined on the basis of the relationship
between the amount of fund allocated for the purpose of wage payment and number of workers in a country.

(v) Residual Claimant Theory – According to Walker, the wages are determined on the basis of the amount left
after the payment of rent, profits and interest to land, entrepreneur and capital respectively out of the production
value.
The amount of wages = Production value – (Rent + Profits + Interest).
(vi) Marginal Productivity Theory – According to J.B. Clark, the wages are determined on the basis of marginal
contributions of the worker to the production. The employer stops employing further workers where the
contributions of the most recently employed worker are equal to his wages.
(vii) The Bargaining Theory of Wages – According to this theory the wages and other terms of employment are
determined on the basis of the relative bargaining strength of the two parties, viz., the employer and the
employees. Webbs stated that, “the conditions of the market which under a system of free competition and
individual bargaining determines the conditions of employment.”
(viii) Contribution of Behavioural Scientists to the Wage Theories – According to behavioural scientists, wages
are determined on the basis of several factors like the size, nature, prestige of the organisation, strength of the
union, social norms, traditions, customs, prestige of certain jobs in terms of authority, responsibility and status,
level of job satisfaction, morale, desired lines of employee behaviour and level of performance.
Thus, the first five wage theories influenced the wage determination until 19th century. But the influence of
these theories had been reduced to a greater extent during the 20th century. The bargaining theory of wages and
the behaviour theory of wages influence much the determination during the present century. The modern and
important system of salary administration is job evaluation.
System # 2. Job Evaluation:
Job evaluation determines the relative worth or money value of jobs. It may be defined as a process of
determining the relative worth of jobs, ranking and grading them by comparing the duties, responsibilities,
requirements like skill, knowledge of a job with other jobs, with a view to fixing compensation payable to
concerned job holder.
Jobs can be evaluated on the basis of various methods/techniques. Thus, job evaluation is a part of pay fixation
machinery along with other concepts like wage theories, seniority, performance, career progression, wage
survey and other factors influencing wage determination.
System # 3. Wage/Salary Survey:
Survey is an investigation of current position. Salary survey is one of the techniques useful in salary
administration. The purpose of this survey is to collect competitive salary data regarding various jobs in the
labour market and provide the same for salary administration.
A salary survey enables an organisation to find out what other organisations pay for specific jobs and the basis
for payment of the existing salary level. The going rate or the market rate in that particular region influences die
wage rate of the organisation. Mostly, the organisations are forced to pay the wage equivalent to the going rate.

Factors Affecting Wage/Salary Levels – 6 Factors

Generally, a large number of factors influence the salary levels in an organisation. Significant among them are-
(i) Remuneration in Comparable Industries; (ii) Firm’s Ability to Pay; (iii) Cost of Living; (iv) Productivity; (v)
Union Pressure and Strategies; and (vi) Government Legislations.
(i) Remuneration in Comparable Industries:
Prevailing rates of remuneration in comparable industries constituted an important factor in determining salary
levels. The organisation, in the long-run, must pay at least equal to the going rate for similar jobs in similar
organisations. Further, the salary rates for the similar jobs in the firms located in the same geographical region
also influence the wage rate in the organisation.
The organisation has to pay the wages equal to that paid for similar jobs in comparable industries in order to
secure and retain the competent employees, to follow the directive of courts of law, to meet the trade union’s
demands, to satisfy the employee need for the same social status as that of the same categories of employees in
comparable organisations.
Comparable industries constitute the organisations engaged in the same or similar activities, of the same size, in
the similar type of management, i.e., public sector or under the management of the same owners, organisations
located in the same geographical region etc.
(ii) Firm’s Ability to Pay:
One of the principal considerations that weighs with the management in fixing the salary levels is its ability to
pay. But in the short-run, the influence of ability to pay may be practically nil. However, in the long-run, it is
quite an influential factor. In examining the paying capacity of an organisation, apart from profitability, various
expenses that the industry has to bear, certain trends in prices of products/services that are to be charged by the
industry should also be taken into account.
In addition, total cost of employees (salaries, allowances, cost of fringe benefits etc.) should be taken into
consideration in determining the ability to pay. Trade Unions demand higher wages when the company’s
financial position is sound. But they may not accept wage reduction, when the company is financial position is
in doldrums.
Hence, the management has to take decision judiciously. Further, certain incentives are linked to the
profitability. Thus, whatever the influence of other factors may be, the organisation cannot pay more than its
ability to pay in the long-run.
(iii) Cost of Living:
The cost of living is another important factor that influences the quantum of salary. The employees expect that
their purchasing power be maintained atleast at the same level, if not increased by adjusting wages to changes in
cost of living. In fact, in recent years, in advanced countries, “a number of labour agreements have ‘escalator’
clauses, providing for automatic wage and salary increase as cost of living index rises.” 18 Dearness allowance is
an allowance granted to the employees with a view to combating onslaughts of soaring prices.
(iv) Productivity:
An interesting development in wage determination has been productivity standard. This is based on the fact that
productivity increase is also the result of employee satisfaction and contribution to the organisation. But wage
productivity linkage does not appear to be so easy since many problems crop up in respect of the concept and
measurement of productivity.
But, although the wages are not linked directly to the productivity, in an organisation, changes in productivity
have their impact on remuneration. This criterion received consideration of wage boards, “not only because it
constituted a factor in the fixation of ‘fair wage’ but also because it was directly related to such questions as
desirability of extending the system of payment by result.”
(v) Union Pressure and Strategies:
The wages are also often influenced by the strength of unions, their bargaining capacity and their strategies.
Arthur M. Ross, concluded that “real hourly earnings have advanced more sharply in highly organised industries
than in less unionized industries.” Unions pressurise management through their collective bargaining strategies,
political tactics and by organising strikes etc.
Trade unions influence may be on the grounds of wages in comparable industries, firm’s financial position,
rising living cost, government regulations, etc. It may be noted here that the unions may have the wage raised
particularly in those industries where the wage level is below that of other comparable industries.”
(vi) Government Legislations:
Government legislations influence wage determination. The two important legislations which affect wage
fixation are- The Payment of Wages Act, 1936 and The Minimum Wages Act, 1948. The important provisions
of The Payment of Wages Act, 1936 are- ensuring proper payment of wages and avoiding all malpractices like
non-payment, under payment, delayed and irregular payment, and payment in kind and under-measurement of
work.
The Act covers all employees drawing the wage up to Rs 1,000 per month. The Act stipulates that the
organisations with less than hundred workers should pay the wage by the seventh and the organisations with
more than 100 employees should pay by the tenth of next month.
The Act also stipulates time for payment of dues to the discharged employees. Under the Act, fines can be
levied but after due notice to the employees and the fine deductions are restricted to 1/32nd of the wage.
The important provisions of The Minimum Wages Act, 1948 are-The Act seeks to protect the workers from
underpayment of wages for their efforts. It presented the guidelines for the fixation of minimum wages which is
just sufficient to meet the basic needs of workers and to keep a man’s ‘body and soul’ together.
Statutory minimum wage is determined according to the procedure prescribed by the relevant provisions of the
Act. The Act provides for fixing of- (i) Minimum wage in certain employments; (ii) Minimum time rate; (iii)
Minimum piece rate; (iv) Guaranteed time rate; (v) Overtime rate; and (vi) Basic pay and D.A. The Act also
provides for revisions of minimum wage at fixed intervals.
Wage Fixation Institutions in India – Collective Bargaining and Adjudication, Wage Boards and Pay
Commissions
Wages are fixed by the following institutions in India. They are- (i) Collective Bargaining and Adjudication; (ii)
Wage Boards; and (iii) Pay Commissions.
(i) Collective Bargaining and Adjudication:
Collective bargaining is a procedure in which compromise is reached through balancing of opposed strengths. It
is a means through which employee problems relating to various issues including wages are settled. If these
problems are not settled through collective bargaining, they may be settled through voluntary arbitration or
adjudication. The awards given or reached by or through the arbitrator or adjudicator or collective bargaining
agreements from the basis for fixing wages in various organisations.
(ii) Wage Boards:
This is one the important institutions set-up by the Government of India for fixation and revision of wages.
Separate wage boards are set-up for separate industries. Government of India started instituting Wage Boards in
accordance with the recommendations of Second Five Year Plan, which were reiterated by the Third Five Year
Plan. Wage Boards are not governed by any legislation but are appointed on ad-hoc basis by the Government.
Each Wage Board consists of one neutral Chairman, two independent members and two or three representatives
of workers and management each. The Wage Boards have to study various factors before making its
recommendations. The recommendations of the Wage Board are first referred to the Government for its
acceptance. The Government may accept with or without modification or reject the recommendations of the
Wage Board. The recommendations accepted by the Government are enforceable by the parties concerned.
The Wage Boards take the following factors into consideration for fixing or revising the wages in various
industries:
(a) Job evaluation.
(b) Wage rates for similar jobs in comparable industries.
(c) Employees’ productivity.
(d) Firm’s ability to pay.
(e) Various wage legislations.
(f) Existing level of wage differentials and their desirability.
(g) Government’s objectives regarding social justice, social equality, economic justice and economic quality.
(h) Place of industry in the economy and society of the country and the region.
(i) Need for incentives, improvement in productivity etc.
The Wage Boards fix and revise various components of wages like basic pay, dearness allowance, incentive
earnings, overtime pay, house rent allowance and all other allowances.
(iii) Pay Commissions:
This is another institution which fixes and revises the wages and allowances to the employees working in
government and government departments. Pay Commissions are separately constituted by Central and State
Governments. Central Government so far has appointed four Pay Commissions.
Wage and Salary Administration – How to Control Wage and Salary Administration
Wage and salary administration should be controlled by some proper agency. This responsibility may be
entrusted to the personnel department or to some job executive. Since the problem of wages and salary is very
delicate and complicated, it is usually entrusted to a Committee composed of high-ranking executives
representing major fine organisations.
The major functions of such Committee are:
(i) Approval and/or recommendation to management on job evaluation methods and findings;
(ii) Review and recommendation of basic wage and salary structure;
(iii) Help in the formulation of wage policies; from time to time;
(iv) Coordination and review of relative departmental rates to ensure conformity; and
(v) Review of budget estimates for wage and salary adjustments and increases.
This Committee should be supported by the advice of the technical staff. Such staff committees may be for job
evaluation, job description, merit rating, wage and salary surveys in an industry, and for a review of present
wage rates, procedure and policies.
Alternatively, the over-all plan is first prepared by the Personnel Manager in consultation and discussions with
senior members of other departments. It is then submitted for final approval of the top executive. Once he has
given his approval, for the wage and salary structure and the rules for administration, its implementation
becomes a joint effort of all heads of the departments.
The actual appraisal of the performance of subordinates is carried out by the various managers, who in turn
submit their recommendations to higher authority and the latter, in turn, to the personnel department.
The personnel department ordinarily reviews recommendations to ensure compliance with established rules of
administration. In unusual cases of serious disagreement, the president makes the final decision.

Wage and Salary Administration – Problems

Wage and salary administration involves consideration of various interests such as those of employers,
employees, government and society at large. The employer is interested in securing a satisfactory level of output
in tune with the remuneration paid to his employees, establishing standard wages for standard occupations,
adjusting wages to changes in the market, maintaining equity in wage relativities, rewarding efficient employees
through incentives or performance-based remuneration and providing effective arrangements for dealing with
compensation issues.
A sound compensation policy may also contribute to achieving certain social objectives by ensuring more
equitable compensation, reduction of wage exploitation and satisfying employees’ ambitions. The interests of
the employer may not be in conformity with those of the employees and their union. Difficulties may also have
to be encountered in ensuring compliance with governmental policy in the field.
In balancing the many conflicting considerations, organisational goals may appear controlling, but over any
significant period they probably cannot be allowed to conflict with socially prescribed objectives. These
problems of establishing a balance between employer’s interests and those of others are manifested in various
areas of compensation; the more notable of these are described below.
1. Wage and Salary Level:
An important field of compensation is the wage and salary level. Problems in this area are directly related to the
conditions of labour market. If the level of wages and salaries is too low, there will be the problem of attracting
and maintaining a competent workforce.
There may also be difficulties in complying with statutory rates of wages or those awarded by tribunals and
courts, and also the rates arrived at as a result of bargaining. On the contrary, if the level of wages and salaries is
too high, the competitive position of the undertaking in the product market will deteriorate.
The setting of an appropriate level of wages and salaries calls for a careful consideration of several factors such
as – (i) market conditions, (ii) governmental policy and regulation, (iii) prevailing level of wages in comparable
employments, (iv) collective bargaining and union wage policy and (v) management’s approach towards proper
wage and salary level.
2. Wage and Salary Structure:
Wages and salaries paid to employees on different jobs within an organisation constitute an important field of
compensation. Many organisations work out the wage structure on the basis of “job evaluation.” The main
concern of the management is to prevent wage inequities and correct anomalies wherever necessary.
During more recent years, especially after the advent of globalisation and emergence of highly competitive
product markets, managements have to give serious attention to remunerating different categories of employees
on the basis of their performance and productivity. Setting of wage and salary structure by the management also
involves the problem of strategic decisions regarding various components of wages.
In many organisations, the wage structure is based on collective agreements, industrial awards, court decisions
or wage board recommendations. In these cases, the freedom of management to work out the wage structure for
its organisation is severely curtailed.
3. Wage Fixation for Individual Employees:
The setting of wage structure and determination of the level of wages involve pricing of various jobs. Very
often, problem arises as to whether all the employees employed on the same job should be paid the same wage.
Payment of the same wages to all employees employed on the same job may lead to dissatisfaction among
efficient and senior employees. The problem is generally sought to be solved in two ways.
The first is the adoption of incentive system or performance-based remuneration. Another method is that of
setting up wage ranges—a starting rate, a standard rate and a maximum rate for individuals on the same job. In
such a case, procedures have to be devised for enabling individuals to move through the ranges.
One such procedure may be automatic increases based on length of service. Another may be to allow increases
on the basis of merit rating or performance appraisal. The third may be a combination of both.
4. Methods of Wage Payment:
Generally, there are two principal methods of wage payment. These are as follows – (i) payment on the basis of
time such as by hour, day, week or month (time rate), and (ii) payment on the basis of output that is by piece
produced (piece rate). In a particular organisation, either or both may be used depending on the arrangement of
work and consent of the parties. Where incentive schemes are in operation, there is a problem of selecting the
most suitable of these or a system combining both may be adopted.
 5. Compensation for Executives and Managerial Personnel:
The problem of remuneration of executives and managerial and professional personnel is not generally tackled
in a planned and systematic manner. This has been in contrast to more or less careful attention to the pay
problems of workers. Efforts have been made to design pay plans for them in such a way so as to offset the
effects of progressive income tax. One way for satisfying this group has been providing them with substantial
fringe benefits not coming under the purview of income tax law.
However, in India, recent amendments to income tax law have brought a number of fringe benefits under the
coverage of taxation. As a result, the advantages available to this class of personnel through the availability of
fringe benefits have materially declined. Despite these limitations, lucrative schemes of performance-based
remuneration and rewards for these categories of personnel have been adopted in most of the competing
industrial organisations.
6. Control:
To the management, control constitutes the central problem in wage and salary administration. Control in wage
and salary administration involves the evaluation of the sufficiency and efficiency of the solutions reached on
the total compensation problem. The management has to control both payroll and labour cost, and also has to
realise that the value in return of wage bill is more important than the wage bill itself.
More specifically, control in wage and salary administration involves evaluation of achievements in many
areas including the following:
(i) Whether the total wage bill constitutes a specified proportion of sales;
(ii) Whether the pay for jobs is within the ranges set up for them;
(iii) Whether efficient employees on the payroll are being maintained;
(iv) Whether the general level of wages is in tune with the conditions of labour market;
(v) Whether individual wages and salaries are worked out on a consistent basis.
Control also demands creation of standards for comparing the efficacy of the practices in every phase of wage
and salary administration, including wage bill, forecast, basic rates, rate-ranges and wage and salary data in the
community and the industry.

OBJECTIVES

1. To Attract Top Talent

Rai University states that one of the primary goals of compensation should be to recruit qualified talent. When
you have a competitive compensation plan in place, you’ll be better able to attract top industry talent.
2. To Retain & Reward Personnel
Don’t lose your top talent to your competitors because employees believe that the grass will be greener
elsewhere. Find out market values for your employees and pay accordingly. You can also set up pay-for-
performance models to drive performance by encouraging associates to reach new goals and push farther.
3. To Boost Motivation
When structured effectively, your compensation plan can drive motivation across your teams. Employees who
know that they’re being fairly compensated for their work feel appreciated and are therefore more likely to stay
engaged, committed, and productive. A well-developed compensation plan can also increase job satisfaction in
general, according to com.
4. To Be Compliant
Compensation isn’t just about being fair within the industry; it must also comply with federal regulations, such
as the Fair Labor Standards Act. While adhering to standards can complicate your compensation management, it
will help protect your company against litigation and ensure fairness across the board for your personnel.
5. To Maximize ROI
It requires some fine tuning, but compensation management is most effective when you get the biggest bang for
your buck. In other words, if you can create a compensation plan that stays within budget while also driving
productivity through pay-for-performance and other motivational tactics, you’re creating a plan that’s both
equitable for the company and advantageous for hardworking employees.

Compensation management software can simplify planning processes to help you -achieve all of the objectives
listed above without overburdening HR. In addition, you can tailor it to your organization to prioritize the
objectives that are most important to you.

FACTORS AFFECTING WAGES AND SALARY LEVELS (ALL READY ABOVE )

HRM APPROACHES TO REWARD MANAGEMENT

What Is Reward Management?

Chris has been working for an electronics company for over 10 years. He receives a call from a competitor that
offers him a higher salary to join its company. Chris makes the move without hesitation because he needs
additional money, and his current company isn't willing to match the pay or benefits of the new job. By losing
Chris, the electronics company also loses many customers and his expertise. In retrospect, the company realizes
that Chris might have stayed if it had used a reward management system.
Reward management is a motivational practice that businesses use to reward employees for their achievements
and success. The company sets goals and establishes rules for its employees to follow to achieve those goals. It
makes sure that employees are clearly aware of these goals, rules, and the rewards they will get for high
performance. All employees follow the same reward system, and the system is organized and just. Using a
website to track employee development enables the employee and employer to monitor progress and easily
identify when goals are reached and rewards earned.

There are three major approaches as given here:

1. Bargaining Approach:
For a long, within the HR scenario, whatever the employees required to get some consideration or wages that
were the mutual rate towards the compensation structure. The capitalist and workers have been mutually
determine the considerable amount between them. So it was the long back approach which determine the
compensation based on bargaining capacity of workers with their employees.
2. Traditional Approach:
This approach compensates employees through job based pay system. It is based on the analytical study as well
as job evaluation of a particularly job and its design. It is determine the relative worth and technological factors
concerning of jobs or a specified job.
3. Contemporary Compensation Approach:
This approach has more emphasise on skill, efficiencies and competencies which are worthwhile aspect to
determine the compensation and rewards. Today, within HR scenario, there is need to promote and
accommodate most skilled and knowledgeable employees. The employees can influence their compensation
through their efficient performance.

Introduction
The concept of reward system has been introduced for acknowledging the efforts and contribution of the
employees towards the overall goal attainment of the business organization. This reward system management
mainly concerns with rewarding the deserving candidates in the workplace based on their worth for the business
and in the fair and just manner (Armstrong and Cummins, 2011). The management system is accounted to be an
effective tool used by Human Resource management team while managing the performance of the employees in
the organization. This essay has dealt with the assessment of significance of reward system management for the
business organization and why organizations use two types of rewards as incentives for the employees.

Importance Of Reward Management

The key importance of reward system in the organization it helps in motivating the employees and encourages
them to perform better.  This management system enables the organizational leaders to boost up the employee’s
retention ability of the organization and thus, develop a stronger bond between the employees and organization
(Aguinis, 2009). There are different types of rewards which are given to the employees such as, the minimum
wage, earnings, share options, merit increase and long term incentive plans.

Minimum Wage:

The minimum wage system is considered to be the compensation provided by the business organization for the
time and effort of the employees and which is provided to the employees as a counter balance. This is the
monetary form of compensation which is paid to the employee for the service, the person is providing to the
company. Irrespective of the nature and job and organization all the employees are provided with the minimum
salary for their service in the organization (Armstrong, 2007). Based on the skill and qualification required for
the job a standard minimum wage or salary is provided to the employee staffs. This is also acting as the reward
that the person is provided with by the organization for the expertise and support and for this purpose a
minimum wage is decided. However, based on the productivity some additional amounts are also given as the
reward system of the company. The rewarding system in shape of minimum wage is one of the effective and
most widely used methods followed by most of the business organizations. From the general point of view the
amount of minimum wage or salary symbolizes the value of the employee in the organization and the higher the
amount it is considered to be more prestigious for the employees.

Earnings:

]The earnings system is another effective form of providing incentives to the employees in the process of reward
management system. This is the extrinsic form of reward or can be realized in the monetary terms such as the
periodic bonus or incentive provided to the achievement of any target by the employee. The earnings is the
additional amount of money that the employee can get over and above normal amount of reimbursement for the
extra effort made by the employee for the achievement of certain target of the company (Armstrong, Brown and
Reilly, 2010). The earnings act like an incentive used by company in the process of encouraging the employees
to give their extra effort. This is also considered to be a primary form of rewarding the employees and which is
also appreciated among the workforce of the organization mainly in the manufacturing sector. The earnings
system has been developed from the concept that the extra efforts of the employees assist a firm to generate
more earnings and company share a part of its earnings with the deserving employees. Thus, the rewarding
policy through earnings is shaped to gain the satisfaction of the employees and motivate them to give their extra
effort (Brown, 2014).   

Share Options:

Offering the share options is another form of reward system used by the companies. The offering of share
options as the rewards is not found in all business organizations but, this is recognized as a common method of
recognition which is offered to the employees by the companies. Mainly the higher levels of employees are
rewarded with share options. This is considered to be a prestigious form of reward that an employee can get for
the service as; by offering the shares the management offers a part of ownership of the business to the employee
(Korzynski, 2013). Thus, the worth or value of the employee is recognized and the higher level employees are
further motivated to shape more effective strategies for the company and help the business to uplift its
performance. The share options provided to the employees not only offer them the share of business ownership
but, the employee also gets the additional benefit of getting the share of periodic profits in shape of dividend.
Thus, it can be said that this form of rewarding system can help the organizations to offer the extrinsic reward to
the employees.

Merit Increase:  

The use of merit increase system is the way established by the organizational leaders to pay for the performance
of the employees other than the normal pays. The term merit has been used as the pay is based on the
performance and based on the past records or improvement in the merit list of the employee that the rewarding
amount is ascertained. The amount is used as the increased pay that the employee would get on the continuous
basis with the basis pay or salary. The merit increase amount is decided depending on the improvement of
performance of the employees studied for the specific time period (Mikkelsen, et al., 2015). Other factors taken
into account for deciding the amount is the pay trend in the market and prevailing economic situation of the
economy.

This type of rewarding system is one of the most used from of rewarding the employees, followed by the
organizational leaders. The merit increase system is used for acknowledging the performance of the employee
over the longer time period, and also provides the employee a competitive amount to the employees that helps
them to cope up with the increased cost of living (Bamberger et al., 2014). Therefore, this kind of reward system
help the employees to uplift their standard of living and this is highly appreciated by the employees.

Long Term Incentive Plan:

The long term incentives plans are generally used by the HR management group so as to help uplift the long
term performance of the employees in the workplace. The rewarding system has been designed with a strategic
interest of the company it aims to retain the skill and expertise back into the business for the longer time period.
Nevertheless, as the system is based on long term basis therefore, there are certain conditions that the employee
needs to fulfil in the course of employment (Naile and Selesho, 2014). Within the considered span of time the
employee will have to prove his or her worth in the company by helping in elevating the overall productivity of
the company. Generally, the company offers its shares to the employee but, the entire ownership of the specified
number of shares, is parted and the employee would be able enjoy the reward gradually. This is mainly done to
ensure the long term relationship between the company and its employee or executive and thus, a strategy used
to reduce the rate of employee turnover (Perkins and White, 2011). Moreover, this reward system not only
ensures a long stay of the employee with the company but also encourage the person to improve the
performance in the due course.  

Organizations Use Two Types Of Rewards As Employee Incentives

With continuous changes of the business environment has given birth to a number of new dynamics when it
comes to management of the human resources. The organizational managers are considering a number of newer
methods of motivating the employees to help them to uplift the standard of their performance and also to
improve the bonding of the company and its employees (Armstrong & Taylor, 2014). Therefore, from the
broader perspective there are two basic forms of reward systems the extrinsic and intrinsic rewards are offered
by organizations as the two major forms of rewards. Where the extrinsic is considered to be the traditional and
most used form of reward system, the rewards which come in the monetary forms are known as the extrinsic
rewards.

Few decades back the incentives or rewards in the monetary forms were hugely recognized among the
employees with the shift in the perceptions and dynamics, as per the present work culture intrinsic rewards are
mainly preferred by the employees. Therefore, owing to shifts in the market the business organizations too had
to modify its offerings for the employees. This is true that money is the basic factor that the employees are
servicing in the business organizations (Thomas, 2016). However, at present the employees consider the aspects
of flexible time, job rotations, job enrichments, more responsibilities and offering more motivating and exciting
jobs to employees are highly demand rather than only getting the extrinsic rewards. The intrinsic rewards highly
motivate the employees to stretch their limits while performing in the organizations.

This is the main reason that the organizations are uses both the types rewards for recognizing the performance of
the employees and motivating them. Therefore, most of the leading multinational like Toyota, Ford, Tesco,
IBM, A&Z Banks and many others from different sectors are highly regarding the intrinsic rewards for
stimulating their work forces. The extrinsic rewards are fulfilling the basic needs of the employees yet; the
intrinsic rewards are providing the employees with the sense of meaningfulness, competence and progress
(Armstrong, 2012). This is the main reason that the organizations are trying thriving hard to meet with the
psychological requirements of the employees by providing them intrinsic and extrinsic as well as rewards.

Such as Tesco is offering a range of competitive benefits and incentives which is also instrumental with the
labour laws of the country. The company is offering 75 percent coverage for the medical requirements of the
employees in US and is also offering the tuition subsidy in South Korea for the children of their employees.
During 2010 the company rewarded their 216000 employees with £105.5 million value shares under the scheme
Shares In Success (Rewards and benefits - Tesco PLC, 2016). However, apart from the extrinsic rewards the
company is also offering the extrinsic rewards as well such as offering flexible time for working, maternity
leave, job sharing, part time jobs and many more.
Recommendations

From the shifts in the management system of human resource this is apparent that motivating the employees for
performance enhancement has always been one of the core aspects of the organizational leaders. This is where
the consideration of reward management plays a pivotal role and enabling the organizational managers to
reward the employees in the most able manner. Nevertheless, at present the intrinsic rewards are highly
appreciated by the employees beside the extrinsic. Therefore, this is highly desirable for the companies
irrespective of the nature and size that they should value their employees by offering them more responsibilities
in the workplace (Armin, 2010). The job enrichment gives the employees the sense of belonging in the
organization and they try to prove their worth with added responsibilities.

 Further offering the incentives of flexible timing accompanied with more holidays encourages the employees to
accelerate their productivity and efficiency when the employees are at work. This would be further suggestible
that all organizations should use the intrinsic benefits along with extrinsic rewards to boost the morale of the
employees and encourage them to give their best to the organization, corporate with the entire team and learn
more.      

Conclusion

This can be concluded from that the reward management system, at present is used as the essential devise to
design the performance and motivate the morale of the employees in the workplaces. There are different forms
rewards like the bonus, fringe benefits, increments and others or the extrinsic type of reward but, the intrinsic
type is equally important in the proves of valuing the employees or human assets of the organization. 

References

Aguinis, H. 2009, Performance management. Upper Saddle River, NJ: Pearson Prentice Hall.

Armin, F. 2010, Neural Correlates of the Influence of Extrinsic Rewards on Intrinsic Motivation.Front.
Neurosci., vol. 4.

Armstrong, M. 2007, A handbook of employee reward management and practice. London: Kogan Page.

Armstrong, M. 2012, Armstrong's handbook of reward management practice. London: Kogan Page.

Armstrong, M. and Cummins, A. 2011, The reward management toolkit. London: Kogan Page.

Armstrong, M., & Taylor, S. 2014, Armstrong's handbook of human resource management practice. Kogan
Page Publishers.

Armstrong, M., Brown, D. and Reilly, P. 2010, Evidence-based reward management. London: Kogan Page.

Bamberger, P. A., Biron, M., & Meshoulam, I. 2014, Human resource strategy: Formulation, implementation,
and impact. Routledge.
Brown, D. 2014, The Future of Reward Management: From Total Reward Strategies to Smart
Rewards. Compensation & Benefits Review, vol. 46, no. 3, pp.147-151.

Korzynski, P. 2013,  Employee motivation in new working environment. International Journal of Academic

Research, vol. 5, no. 5, pp.184-188.

Mikkelsen, M., Jacobsen, C. and Andersen, L. 2015, Managing Employee Motivation: Exploring the
Connections Between Managers’ Enforcement Actions, Employee Perceptions, and Employee Intrinsic
Motivation. International Public Management Journal, pp.1-23.

Naile, I. and Selesho, J. 2014, The Role of Leadership in Employee Motivation. MJSS.

Perkins, S. and White, G. 2011,  Reward management. London: Chartered Institute of Personnel and
Development.

Rewards and benefits - Tesco PLC. 2016, [online] Tescoplc.com. Available at:
https://www.tescoplc.com/site/library/policiesandfactsheets/rewards-and-benefits.htm [Accessed 7 Mar. 2016].

Thomas, K. 2016, The Four Intrinsic Rewards that Drive Employee Engagement | Ivey Business Journal.
[online] Iveybusinessjournal.com. Available at: https://iveybusinessjournal.com/publication/the-four-intrinsic-
rewards-that-drive-employee-engagement/ [Accessed 7 Mar. 2016].

JOB EVALUATION

What is Job Evaluation – Meaning

Job evaluation is a term which is applied to a number of distinct but related administrative methods which rank
or assess the relative value of different jobs or occupations. Job evaluation is a systematic and orderly process of
determining the worth of a job in relation to other jobs. The objective of this process is to determine the correct
rate of pay.
ADVERTISEMENTS:

It is an attempt to assess and compare the demands which the normal performance of a particular job makes on
normal workers without taking into account the individual abilities or performance of the workers concerned.
Individual abilities or efforts are reflected in the workers’ earnings, but this is something entirely different from
the ratings of the job. Job evaluation rates the job, not the man.
It is a complex of job analysis, the study of jobs, job description, the statements of the results of the analysis
upon which follows job grading, the placing of jobs in a sequence or ranking which is the basis of job
assessment and the establishment of fair pay based on job grading.
There are two essential features or characteristics of job evaluation. First, the focus of job evaluation is upon the
job itself, its content or its demands upon the normal average or standard worker performing it rather than upon
the person doing it and what he/she may choose to put into it.
ADVERTISEMENTS:
Second, the reliance of job evaluation is upon the exercise of human judgement as the method by which ranking
of relative work or value of the different jobs in the family or population is arrived at. Together, these
distinguish job evaluation as a category of wages and salary determination.

What is Job Evaluation – Definition Propounded by ILO, British Institute of Management and Bureau of
Labour Statistics of USA
Job evaluation is an orderly and systematic technique which aims at determining the worth of various jobs in the
organisation. In other words, it is a formal system of determining the base compensation of jobs.
“Job evaluation may be defined as an attempt to determine and compare the demands which the normal
performance of particular jobs makes on normal workers without taking into account of the individual abilities
or performance of the workers concerned.” —International Labour Office (ILO)
“Job evaluation is the process of analysis and assessment of jobs to ascertain reliably their relative worth using
the assessment as a basis for a balanced wage structure.” —The British Institute of Management
ADVERTISEMENTS:

The Bureau of Labour Statistics of USA has described job evaluation as follows – “Job evaluation is the
evaluation or rating of jobs to determine their position in a job hierarchy. The evaluation may be achieved
through the assignment of points or the use of some other systematic rating method for essential job
requirements, such as skill, experience, and responsibility. Job evaluation is widely used in the establishment of
wage rate structures and in the elimination of wage inequities. It is always applied to jobs rather than the
qualities of individuals on the jobs.”
Job evaluation may be defined as the process of determining the demands in terms of efforts and abilities which
the normal performance of a job makes on normal workers. The demand made on the workers by a particular
job is the worth of that job. Job evaluation rates the job and not the job-holder.
It takes into account the demands of the job in terms of efforts and abilities, but it does not take into account the
individual abilities and efforts, which may of course be taken into consideration and reflected in the worker’s
earnings under a system of payment by results or of merit rating or performance appraisal.

What is Job Evaluation – Scope: Selection of Employees, Training and Development, Standardization of
Wage Structure and Settlement of Disputes
The scope of job evaluation is wide and is discussed below:
ADVERTISEMENTS:

1. Selection of employees – The job evaluation procedure considers the skill required to perform the job,
responsibility associated with performing the job. These factors help to select the suitable person for the job.
2. Training and development – Job evaluation process determines the significance and necessity of training and
development of the employees associated with a particular job.
3. Standardization of wage structure – Job evaluation performs an important function of designing a
standardised wage structure for different jobs. Job evaluation helps to determine salary and wage structure on
rational basis and establishes fairness and justice.
4. Settlement of disputes – The most common factor causing industrial unrest and dispute is inequitable wage
and salary. Job evaluation helps to settle disputes and establishes industrial peace and discipline by introducing
rational and objective pay structure and removing disparity in wage payment.
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Determination of an equitable wage and salary structure is one of the most important phases of employer-
employee relations. For good industrial relations, each employee should – (i) receive sufficient wages or salaries
to sustain himself and his dependents, and (ii) feel satisfied with the relationship between his wages and the
wages of other people performing the same type of work in some other organisation.

What is Job Evaluation – Objectives

The objectives of job evaluation are enumerated below:
1. To secure and maintain complete, accurate and impersonal descriptions of each distinct job or occupation in
the entire plant.
2. To provide a standard procedure for determining the relative worth or value of each job in a plant.
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3. To determine a rate of pay for each job which is fair and equitable with relation to other jobs in the plant,
community and industry.
4. To ensure that like wages are paid to all qualified employees on like work.
5. To promote fair and accurate consideration of all employees for advancement and transfer.
6. To provide a factual basis for the consideration of wage rates for similar jobs both within the community and
within the industry.
7. To provide information for the work organisation, employee’s selection and training and numerous other
important purposes.
The basis of a sound wage structure is job evaluation. Job evaluation systems are useful in achieving internal
equity of pay between different jobs in the organisations. The process of job evaluation uses selected criteria to
compare jobs within an organisation so that they can be ordered for the purpose of assigning differential pay.
Job evaluation systems provide a rationale for paying one job in an organisation more or less than another. It is
the process of analysis and assessment of jobs to ascertain reliably their relative worth, using the assessment as a
basis for a fair and equitable wage structure. It is in the interest of both the unions and the management that job
evaluation is carried out on a joint basis.
What is Job Evaluation – 5 Main Features: Not Concerned with External Relativities, Judgmental, Assess
Job not the Person, Factual Evidence and Evaluates the Wage Structure
Following are the main features of job evaluation:
Feature # 1. Not Concerned with External Relativities:
When it is used within an organisation, job evaluation in the true sense (i.e., not market pricing) can only assess
the relative size of jobs in that organisation. It is not concerned with external relativities, i.e., the relationship
between die rates of pay of jobs in the organisation and the rates of pay of comparable jobs elsewhere (market
rates).

Feature # 2. Judgmental:

In this process, human judgment has to be exercised at a number of points. Although factual evidence is die
bases of job evaluations this has to be interpreted. It is possible that information provided regarding such jobs
through job analysis may sometimes fails to provide a dear indication of the levels at which demands are
present.

The fundamental aim at any process of job evaluation which ensures, as for as possible, that consistent
judgements are made based on objectively assessed information.

Feature # 3. Assess Job not the Person:

Job evaluation is concerned with differences in the work itself, not in differences that are found between people.
In other winds, it tries to make the assessment of jobs, not people.

Feature # 4. Based on Factual Evidence:

The determination of the relative value or size of the job is set on the basis of information on the characteristics
of the job. There are predetermined criteria or factors against which each job is measured. This may be the
description of the whole job, or of its component parts.

Feature # 5. Evaluates the Wage Structure:

Job evaluation does not fix pay scales. However, it provides a basis for evaluating a rational wage structure.

What is Job Evaluation – Job Evaluation Systems: Ranking or Grading Method, Weighted-in Money
Method and Various Point Methods
Job evaluation systems may be classified into 3 major groups, namely:
i. The Ranking or Grading Method;
ii. The Factor Comparison Plan, or the Weighted-in Money Method; and
iii. The Various Point Methods.
All types of job evaluation strive to eliminate personal whims and to introduce scientific procedures. Any type
when carefully used will give satisfactory results.
i. The Ranking or Grading System of Job Evaluation:
The ranking or grading system of job evaluation consists primarily in arranging the various jobs in the enterprise
in an order from the simplest to the highest or the reverse, each successive job being either higher or lower than
the previous one in the sequence. This system should be preceded by careful job analysis and the writing of
accurate job descriptions before the rating process is undertaken.
Another procedure, which is in reality merely a modification of the simple rating described above, is to establish
a series of grades, or zones, and arrange all the jobs in the plant into groups within these classifications, or
groups. A more common practice is to arrange all the jobs in the plant according to their requirements by rating
them and then to establish the classifications, or groups.
The detailed job description is particularly helpful when ranking of jobs is done by different individuals and
there is a disagreement among them. It is desirable to associate workers in the construction of the job description
and in rating the job. Usually a series of key jobs that are well known throughout the plant are first rated and the
other jobs roughly compared with these key jobs to establish a rough rating, after which each job is compared in
greater detail to establish its exact rank in the scale.
In establishing the relative rank of a given job, as far as possible, the current wage being paid should be ignored,
if we want the ranking to be serviceable in wage adjustments. Rating the jobs, by ranking method, should also
ignore the qualifications of the person filling the jobs at the time, since the ranking is of the jobs and not of the
workers.
The particular worker may have qualifications that are higher than those required for the job. It is to be
remembered that ranking of jobs requires infinite patience and attention to details. It usually results in a
compromise or pooled judgement of the relative worth of a job.
As an example of this method may be quoted the programme of a company which measured each job in
comparison with other jobs in terms of the relative importance of the following six factors –
a. Supervision and leadership of subordinates.
b. Co-operation with associates outside the line of authority- exchange of opinion on controversial matters
involving tact, diplomacy, appreciation of the other person’s point of view; necessity for and degree of
teamwork, exchange of information, etc.
c. Probability and consequences of errors – assuming that the occupation is filled by an experienced,
conscientious employee, consider typical errors that are apt to be made and the consequences of each in terms of
waste, damage to equipment, delays, complaints, confusion, spoilage of product, discrepancies.
d. Initiative and resourcefulness – Requirements concerning originality, creativeness, judgement, analysis of
conditions and reaching independent decisions, planning, estimating, etc., extent to which supervision is
received.
e. Minimum experience requirements including both preliminary experience and the experience in the
occupations; estimated time required for inexperienced but otherwise qualified persons to reach a satisfactory
degree of proficiency.
f. Minimum education requirement – amount of schooling or study absolutely necessary to fill successfully the
occupation.
The advantages claimed for the Ranking or Classification system briefly are:
a. Simplicity – It is relatively easy to understand by the workers and supervisors. It is less mechanistic and
theoretical than the point system. Each job is compared as an entity with each other job. One can write the title
of each job on a card, with one card being used for each job, and then arrange the cards so that the top one holds
the most important job title, the next holds the next most important job title, and so on. Grade groups then can
be designated and salaries assigned.
b. The time element – Unless carried to the detailed point used by the company, it requires less time.
c. Frankness – It avoids the criticism of claiming to be scientific.
The disadvantages of the system are as follows:
a. Unless the same detailed analysis is pursued as that used in the various point systems, the analyst or
committee cannot possibly be familiar with all the jobs. If the same details are followed, most of the advantages
of this system, other than simplicity, do not exist.
b. The ranking system merely produces a job order and does not indicate to what degree a job is more important
than the one below it. It gives the rank, or tells that a job is higher than another, but does not say how much
higher.
c. The system tends to be used without adequate job descriptions having been made, thus the ranking is likely to
be severely biased by general opinions and existing wage rates. Because of these limitations the ranking system
is suitable for only the smallest enterprises.
ii. The Factor Comparison Plan, or the Weighted-in-Money Method:
Under the Factor Comparison System of job evaluation the analyst or evaluation committee selects key jobs for
which there- exist clearly understood job descriptions and counterparts in other organisations, and for which the
money rates are considered satisfactory.
Each of these jobs is analysed in terms of the following factors, and that portion of the money rate which is
considered appropriate is assigned to the factor – (a) Mental requirements; (b) Skill requirements; (c) Physical
requirements; (d) Responsibility; (e) Working conditions.
For example, the prevailing wage for the filing clerk may be established at Rs.1.25 per hour. The evaluation
committee would then estimate what portion of the Rs.1.25 is paid in consideration of each of the factors. In this
case mental (intelligence) requirements might be credited with 40 P.; skill requirements, 10 P.; physical
requirements, 50 P.; responsibility, 10 P.; and working conditions 15 P.
This process is followed for each key job with due attention being given to the factor rankings of the previous
survey. If one job were ranked above another for the skill factor, it should also be ranked higher monetarily, or
the differences should be reconciled.
At this point the analyst using the factor comparison system can begin evaluating the jobs of undermined value.
Each job is considered factor by factor in the process, the factor being evaluated according to their positions
along the pre-established scales. For example, the skill value of key job A might be 50 P., and that of key job B
might be only 45 P.
If the amount of skill required for job X is considered to be less than the requirement for job A but more than for
job B, job X should be awarded some amount between 45 P., and 50 P., in consideration of the skill required.
Each other factor is considered in the same manner, and the total base rate for the job is determined by summing
the factor values. When one completes the same steps for every job in the organisation an overall wage structure
has been established.
The advantages of the Factor Comparison Plan are as follows:
a. Flexibility – There are no limits to the value that may be assigned to each factor.
b. Simplicity – The Plan does not require a translation from points to money. It involves a comparative process
wherein jobs are priced against other jobs rather than against some established numerical scale.
c. The system lends itself admirably to the establishing of classification.
Disadvantages of the system are:
a. It is costly to install, and somewhat difficult for anyone who is not acquainted with the general nature of job
evaluation techniques to grasp.
b. Wage levels change from time to time, and thus adjustments are required.
c. Money rates, when used as a basis for rating, tend to influence the actual rate more than abstract points.
iii. The Various Point Methods:
The Point System of evaluating jobs consists of several plans using points for job evaluation as a basis of
establishing relative job worth. All the point systems are based on the assumption that it is possible to assign
points to the respective factors considered pertinent in evaluating the individual jobs and that the sum of these
points will give an index of the relative significance of the jobs being rated.
The difference in the various systems arises mainly from the number of characteristics used in establishing the
relative requirements of the various jobs. One Plan uses three major divisions under which the various job
characteristics are classified, namely- (a) Job conditions, (b) Physical ability required, and (c) Mental
requirements. Under each of these three main headings are listed the various factors, with each factor clearly
defined and under each factor a description of the degrees required, the number of points allotted to each degree.
The factors used in the job rating in another plan are grouped under 4 headings, namely- (a) skill; (b) effort, (c)
responsibility, and (d) job conditions. Each of these general heads has subheads as in the first plan. Most of the
point systems include the following 5 items in evaluating jobs – (a) Mental requirements; (b) Physical
requirements; (c) Skill; (d) Responsibility; and (e) Job or Working conditions.
The assignment of points to the major factors – skill required, effort required, responsibility of the job, and job
conditions – is the next step. Each of these categories is then broken up into subgroups. For example, skill
requirements are evaluated according to education required, experience required, and the necessary initiative
and ingenuity of a satisfactory job holder. For each sub-factor 5 degrees of importance are defined, and a
specified number of points is associated with each degree.
For example, the first degree under education may be defined as “the ability to read, or add or subtract” – and be
awarded 14 points. The fifth degree, on the other hand, carries 70 points and involves a high level of knowledge,
such as technical university training. Points given to each degree of a sub-factor vary from one sub-factor to
another according to the relative importance placed upon each. For example, experience may carry 14 points for
the first degree and 110 points for the fifth degree.
Therefore, experience is of greater significance than the education factor which carries a maximum of 70 points.
This system, thus, permits management to place added weight upon those characteristics which are selected as
the most important in the establishment of a suitable job hierarchy.
The point systems are too easy to use, and therefore permit managements to employ them without giving serious
thought to the selection of factors to be utilised and the adding weights. It is necessary for their success that
management should determine the purposes and objectives of the job hierarchy to be established and then select
and weigh the factors accordingly. In selecting the factors, care should be taken to cover all phases of work with
a few factors, without, of course, allowing overlapping of factors.
Precise definition of degrees is of extreme importance to the success of the system. Such ambiguous words as
“low”, “medium”, and “high” should be avoided, as they lend themselves to different interpretations by different
analysts.
The Physical Demand factor appraises the extent to which physical effort must be expanded in performing the
job. The elements to consider are weight of material moved, the distance it is moved and the type of
conveyance, the continuity of effort, and the resultant fatigue.
The Attention Factor appraises the degree of mental or visual concentration required. Initiative and ingenuity
appraise the independent action, exercise of judgment, the making of decisions or the amount of planning that
the job requires. Schooling pertains to the educational requirements essential to satisfactory performance of the
job. This factor should not be confused with experience or on-the-job training. The Experience factor pertains to
the amount of job training necessary to gain satisfactory proficiency.
The Responsibility factor for different items measures responsibility for preventing damage to machinery or
equipment which might result from error or negligence, and also to the probability of damage to materials, parts
in process or finished goods. Responsibility for safety of others is an important factor, as it involves care to
avoid or prevent injuries to fellow workers.
Leadership is a factor which pertains to responsibility for the work of others. It is limited to instruction or
direction and is not intended to appraise complete supervisory responsibility for results and matters.
The working conditions factor appraises the surroundings or physical conditions under which the job must be
done and the extent to which such conditions make the job disagreeable. Consideration will be given to the
presence, relative amount and continuity of exposure to dust, dirt, heat, fumes, cold, noise, vibration, wet, or
other unpleasant conditions. The factor of accident hazards appraises the conditions which expose the employee
to the possibility of accident.

What is Job Evaluation – Importance

The importance of the job evaluation technique may be judged from the following facts:
(1) It is a technique by which a rational and consistent wage structure is involved:
Wage and salary structure is designed on the basis of weight allotted to different factors in job-evaluation.
Moreover, internal as well as external consistencies are also maintained to avoid a dispute. Thus, job evaluation
is the basis for rational wage and salary administration.
(2) It eliminates inequalities in grades:
Job-evaluation evolves standard rates for similar or comparable jobs in the organisation and thus inequalities in
base compensation are removed by this technique. It removes not only the internal inconsistency but external
inconsistency also. Wages paid in similar firms and social costs are also taken into consideration, while fixing
the value for the job.
(3) It also eliminates personal prejudices:
In this, the worker, who has been assigned the job will get the wages fixed for the job, by job evaluation process
hence, it leaves no chance of favouritism to any worker.
(4) It maintains harmonious employer-employee relation:
It tends to eliminate in-equalities in wage structure within the organisation and the industry and also help
eliminating personal prejudices. Thus, it promotes harmonious industrial relations in the organisation because
wage inequality is the biggest single factor for labour disputes.
(5) Wage controversies are solved by justifying wage-rates:
Job evaluation provides, a relatively objective base for wage determination, therefore, controversies relating to
wages are resolved very easily by justifying the wage rates for different jobs.
(6) Important job-factors are used in evaluation:
Job evaluation is made after proper scrutiny of the various factors determined by the job-analysis and presented
by the job-description and the job-specification. Thus, job values are established only after taking various job-
factors into consideration.
(7) A job-evaluation technique provides the basis for comparison of each job:
It provides the basis for the comparison of jobs within the organisation and with similar jobs in other
organisations and the industry and thus helps in wage and salary survey.
(8) It lowers cost of recruitment and selection:
It helps in keeping down the cost of recruitment and selection of workers. It assists in keeping down the rate of
labour turnover or in other words retaining the workers in the organisations because wage and salary is the
single common factor which controls the labour turnover.
If wages are determined keeping in mind the external and internal consistencies it will help in maintaining the
work force. It involves job analysis and appraisal which are of great use while recruiting the personnel.
Selection and placement can be made objectively by matching the qualifications of the candidate with job
specification.
(9) Multifarious use of job-evaluation data:
Statistics collected for job evaluation by job analysis; job grading and job classification techniques are used in
other spheres of personnel management. Merit-rating or personnel appraisal selection and training of workers,
determining working conditions, simplification of jobs and introducing incentive wage systems are based on job
evaluation data. Job evaluation data may also be used in the promotion and transfer of workers.
(10) It helps in the development of workers:
In a proper and rational job-evaluation system the position of job is fixed. Every worker knows the job
description and job specifications of each job. He tries to develop his personality so as to occupy the higher
position.
Thus, it is clear that job-evaluation promotes industrial relations by resolving several personnel problems
through a sound, rational and consistent wage and salary structure.

What is Job Evaluation – 5 Basic Methods of Job Evaluation: Ranking,Classification, Factor

Comparison, Point Method and Market Pricing Method
There are five basic methods of job evaluation:
(1) Ranking,
(2) Classification,
(3) Factor comparison,
(4) Point method, and
(5) Market pricing method.
The simplest and most basic form of job evaluation is job ranking. It is a conventional method in which jobs are
compared one with another, and arranged or ranked in the order of their importance, their difficulty, or their
value to the organisation. It is highly subjective method and depends upon the experience of the people doing
the ranking; a committee usually carries out the procedure.
This method is most appropriate for small organisations and for those with a limited number of different jobs. Its
advantage is that it can be done quickly and inexpensively. An obvious disadvantage is that jobs may be ranked
without the benefit of well-defined standards.
This means that the ranking may be somewhat superficial and lead to the ranking of the job-holder rather than
the job itself. This makes the method less useful for establishing internal equity in an organisation’s pay
structure.
The job classification method depends upon the recognition that there are differences in the level of duties,
responsibilities and skills required for the performance of different jobs. These differences once recognised can
be expressed as grades or levels. Jobs having been analysed can then be fitted into these various grades.
These grades can then be defined and jobs classified by the selection of a particular grade for each job to
correspond to its work. This method is widely used for salaried jobs, including those in government and service
occupations.
It is also used for manual jobs in some industries in which the same worker is called upon to perform a variety
of more or less standardised jobs for which standardised rates of remuneration can be fixed, as in engineering
workshops, and in the electrical and shoe industries.
The factor comparison method is a quantitative method of job evaluation which evaluates jobs according to
several compensable factors. It is a sophisticated method of ranking in which jobs are compared to each other
across several factors.
There are five stages in this method. In the first stage, a job evaluation committee selects and rank-orders the
“key jobs” in the organisation. Job evaluation committees usually consist of a personnel professional, one or
more supervisors and/or managers, and one or more employees’ representatives.
Key jobs represent the full range of jobs from the highest to the lowest levels and are typical of the various job
families. When key jobs have been ranked, a monetary value is assigned to them. This monetary value is the
current going wage of each key job. In the second stage, the evaluation committee rank-orders compensable
factors in terms of their relative importance in each job.
Though the committee could select their own compensable factors, the most commonly used factors for this
purpose are mental requirement, skill requirement, physical effort, responsibility and working condition. The
third step involves assignment of a monetary value to each factor for each key job.
The fourth stage is the development of job factor comparison scales for physical efforts and mental requirements
based on the information from the third stage. Each scale is weighted by the highest monetary value assigned to
it. The factor which is heavily weighted will be the most important of the compensable factors.
The final stage in the factor comparison method is to evaluate other non-key jobs in the organisation using the
factor comparison scales. The main advantage of the factor comparison method is that it permits of a more
systematic comparison of jobs. It is also too easy to use because evaluators rate jobs in terms of well-known
jobs in their own organisation.
However, comparison method has several limitations. The most important problem is that as the content of key-
jobs changes, it becomes less accurate. Further, the complexity of this method makes it difficult for employees
to understand and accept.
The most complex and yet the most frequently used major job evaluation method is the point method. It is very
similar to the factor comparison method in that separate scales are developed for each compensable factor.
The two methods differ primarily in that the factor comparison method is based upon a set of key jobs existing
in one organisation at one point in time, while the point method is independent of jobs in a particular
organisation since the point systems are usually not unique to a specific organisation.
Many of the ready-made job evaluation systems are point systems Scales based on the point method are more
precise and accurate than the factor comparison scales, because the point systems use universal compensable
factors which are further divided into sub-factors and degrees.
The point method is the most accurate job evaluation system and remains relatively stable over time, unlike the
factor comparison method whose key jobs are subject to change. Due to the accuracy and comprehensiveness of
the method, employee acceptance is relatively high. One disadvantage of the point method is that administrative
costs may be too high to justify its use in small and medium-sized organisations.
The market pricing method is entirely different from the other four methods of job evaluation. This method
relies entirely on the labour market to determine how much jobs should be paid.
It is not concerned with the internal equity of pay, compensable factors, or assigning relative worth to jobs
except in relation to the going rate in the labour market. In order to evaluate jobs using the market pricing
method, an employer must conduct a pay survey to determine the market price.
The market pricing method may prove difficult and impractical for a number of reasons. First, it may prove
difficult to obtain pay information for some of the more unique jobs in an organisation. Second, market prices of
jobs vary from time to time. This makes it difficult to maintain stable pay structure.
Market price fluctuations can also make cost control more difficult since labour costs are less predictable under
this system. Finally, the market pricing method may cause internal equity problems, especially for persons in
jobs for which demand has declined. When the demand declines the going rate for the job declines.
An obvious advantage of the market pricing method is that the job evaluation committees’ and management bias
in pricing jobs is avoided. The system is fairly simple, and the organisation may already have access to pay
survey information for the purpose of attracting quality employees.

What is Job Evaluation – Job Evaluation and Market Consideration

You can arrive at appropriate wages for positions on your farm on the basis of two main management
tools:
(1) Job evaluations (based on compensable factors such as education, skill, experience, and responsibility), and
(2) The going rate (or market value) of a job.
(1) Job Evaluation:
A farmer such as Cecilia who pays different rates for different jobs usually first classifies the jobs on her ranch.
Through a job evaluation she rates the jobs on the farm according to their relative ”importance.” Each job might
be given its own rate, or jobs of comparable importance may be grouped or banded into a single wage
classification, or pay grade.
Job evaluations compare positions in an organization with respect to such factors as education, responsibility,
experience and physical effort. Figure 13.5 shows a sample job evaluation. In it, for instance, much more value
is given to responsibility and education than to physical requirements. The supervisor in this example would
earn about twice what an equipment operator would.
Figure 13.5 uses education as a compensable factor. You may prefer to think in terms of what combination of
experience and education would qualify a person for the job. This is an important step for determining the value
of the position to be filled. However, when it comes time to hire someone, you may not care what combination
of education or experience an applicant has as long as he can do the job.
If education is used as a compensable factor, a bachelor’s degree might be worth 200 points, a junior college
degree 150, a high school diploma 100, and an elementary diploma 50 points. Some of the jobs in the ranch
might require a high school diploma, thus earning 100 points in this category, while others might have no
education requirement. (0 points allotted) regardless of the educational qualifications of the person who may
actually apply. Similar ratings of jobs would be made for responsibility and other factors worth compensating.
You decide how much weight to allot various compensable factors and how to distribute points within each job.
For the job evaluation to be useful, a detailed list of compensable factors needs to be articulated. (The job
analysis created during the selection process can help.) You can test the job evaluation by comparing a few jobs
you value differently. Does the tentative evaluation match your expectations? If not, are there any job factors
missing or given too much or too little value?
Workers may also participate in the process of evaluating jobs and can add valuable insight into the essential job
attributes for various positions. Personnel involved in evaluating their own jobs, nevertheless, are likely to
experience conflict of interest.
Although supervisors will normally make more than those they supervise, this is not always the case. A very
skillful welder or veterinarian will probably make more than his farm supervisor. Some workers harvesting at a
piece rate often make more than the crew leaders supervising them. Supervisors may be offered additional pay
during labor-intensive periods.
Job evaluations, then, reflect the relative value or contribution of different jobs to an organization. Once a job
evaluation has been completed, market comparisons for a few key jobs need to be used as anchors for market
reality. In theory, other jobs in the job evaluation can be adjusted correspondingly.
(2) Market Considerations:
In practice, results of job evaluations are often compromised or even overshadowed by market considerations.
Labor market supply and demand forces are strong influences in the setting of wages. No matter what your job
evaluation results may indicate, it is unlikely you will be able to pay wages drastically lower or higher than the
going rate.
Supply and demand factors often control wages. When there are many more pickers than available jobs, for
instance, the going wage decreases. If few good livestock nutrition specialists are available for hire, they
become more expensive in a free market. The market may also influence the migratory patterns of farm workers,
for example- whether a worker stays in Mexico or travels to Texas, Florida or Oregon.
Of course, the market is not totally free. Legal constraints affect wages (e.g., equal pay, minimum wage). Labor
groups, in the form of unions, can combine forces to protect their earnings. They may prevent employers from
taking advantage of a large supply of workers.
At times wages are driven so high that corporations cannot compete in a broader international market. Some
professional groups can also impact the market. By limiting acceptance to universities, a limited supply of
available professionals is set.
To establish external equity, employers need information about what other employers pay in the same labor
market. While some employers are content to lean over the fence and simply ask their neighbors what they pay,
others conduct systematic wage and salary surveys.
Wage surveys need to describe jobs accurately as positions may vary widely even for jobs with the same title.
Surveys should seek information about benefits given employees (e.g., farm products, housing). Of course, there
are other “intangible benefits such as stability, the prestige of the position or the institution [and] the possibility
of professional development.”
Surveys need to consider the number of workers per farm in a given classification. Wages on a farm employing
many employees affect the going rate more than one with few. In some cases, farmers may compete for labor
within a broader labor market. When compensating mechanics or welders, for instance, you may have to check
what those in industry are paid.
An important pay decision is whether one will pay the going market rate. Those who pay at or below the market
may have difficulty attracting workers. Further, they may find themselves training people who leave for higher
paid positions. Merely paying more than another farm enterprise, however, does not automatically result in
higher performance and lower labor costs.
Even when well paid, workers may not see the connection between wages and their performance. Farmers who
pay too much may find it difficult to remain competitive. Furthermore, there are other factors valued by
employees besides pay, such as working for an organization that values their ideas and allows them to grow on
the job.
Reconciling Market & Job Evaluations:
In wage setting, it is usually more beneficial to reconcile market information and job evaluation results than to
singly rely on either. Unique jobs are more appropriately priced on the basis of job evaluations. You may
depend more heavily on the job market for common jobs.
In most cases, farmers have freedom to satisfy both job evaluation and the market. Where the market pays a job
substantially less than a job evaluation does, however, you can either pay the higher wage, reconsider job
evaluation factors, or pay the reduced wage. The farmer has fewer viable options when the market would pay a
higher wage than the job evaluation.

What is Job Evaluation – Human Relations Effects

In any organization a sound, systematic, consistent system of compensation determination plays a crucial role to
promote equity and satisfaction, provided that such a system receives good understanding and acceptance from
employees. Job evaluation precedes pay determination.
The process of job evaluation is very systematic but it is not an exact science; it relies on subjective judgement.
It possesses high degree of reliability, but its validity must be determined by ascertaining the impact upon
employee satisfaction. Perhaps data collection and data analysis on employee complaints and grievances
concerning pay would serve the purpose. Similarly, morale survey also could be of great use.
Sometimes installation of job evaluation suddenly gives rise to immediate increase in the number of grievances
concerning wages as it turns a spotlight on wages.
Another difficulty is that there is often a conflict between worker and management values in job evaluation.
Usually managements consider the factors like skill, effort, responsibility, and working conditions as having
value in rating a job.
From the point of workers, important factors having value in rating their job should also include “the type of
supervision received, the congeniality of other workers, the steadiness of the work, the amount of overtime, and
the tightness of incentive standards.”
It is practically impossible to encompass each and every variable of a job that makes it attractive and valuable to
a worker.
However, it is important to have a valid system which results in a structure acceptable to both employee and
employer. And as Flippo maintains “structures that are internally and externally consistent have the greatest
chance of effecting overall satisfaction. Under-reward, over-reward, and inconsistency in reward not only tend
to lead to lower satisfaction but encourage behaviour that often proves dysfunctional to organizational
objectives.”

What is Job Evaluation – Programmes: Steps, Essential of Success and Suggestions

Steps in Job Evaluation Programme:
The Indian Institute of Personnel Management lays down the following steps which should be taken to
install a job evaluation programme:
1. Analysis and Prepare Job Description – This requires the preparation of job description and also an analysis
of job requirements for successful performance.
2. Selection and Prepare a Job Evaluation Plan – Job must be broken down into its components parts.
3. Classify Jobs – This requires groping or arranging jobs in a current sequence in terms of value to certain their
relative value.
4. Install the Programme – This involves explaining it to employees and putting it into operation.
5. Maintain the Programme – Job cannot continue to changing condition and situations.
Essentials of Success of Job Evaluation Programmes:
When it is finally decided to install a formal system of job evaluation irrespective of which system is decided
upon, the utmost care must be exercised to ensure that human as well as technical aspects are taken into account.
In order that a job evaluation system works efficiently, it is necessary that all those who are concerned with job
evaluation should be fully conversant with the techniques and implications of the different available systems.
Otherwise, the chances of success are doubtful.
The following conditions are necessary for the successful operation of a job evaluation programme:
(a) It must be carefully established by ensuring that- (i) the management’s aims are clear to all concerned and
that not only the manual workers but also all levels of supervision and management employees fully understand
its implications; and (ii) all the relevant internal and external factors have been taken into account in arriving at
the final form of the scheme.
(b) It must have the full approval and continued support and backing of the top management.
(c) It must have obtained the acceptance of trade unions.
(d) Adequate administrative control must be set up to ensure- (i) a centralised co-ordination of the scheme; (ii)
the evaluation of new and changed jobs; (iii) a proper control of individual rate ranges; and (iv) the conduct of
wage surveys to provide the necessary information about the intra-plant ranges.
(e) The importance of factors, other than job content, in wage rate determination (employment market
conditions, sex, wage differentials, geographical wage differentials, and the relative bargaining power of the
management and the trade union) must be recognised and taken into consideration while launching a job
evaluation programme.
(f) Before launching a job evaluation programme, certain issues should be decided beforehand. There are- (i)
Which category of employees are to be covered (i.e., whether hourly paid job or salaried job employees) and up
to what range? (ii) Who will evaluate a job — outside consultants or trade analysts or the personnel of the
personnel department? (iii) How will the employees be consulted in regard to the method of putting the
programme through? and (iv) Does a proper atmosphere exist for launching of the programme?
Some Suggestions:
We suggest the following measures and steps for improving the working of evaluation programmes:
1. A job evaluation scheme should be chosen cautiously. It should be devised and administered with due regard
to the conditions of the employment market, which cannot be ignored if the scheme is to be successful. It
should, therefore, reflect those forces which are important in the market, e.g., relative supply of and demand for
labour, bargaining power of the parties and job conditions.
2. The details of a scheme should be drawn up in such a way that they do not conflict with other provisions of a
Collective Agreement such as, for example, seniority clauses and grievance procedure.
3. The scheme should be introduced on a plant-to-plant basis than applied to a whole industry. This is because it
is difficult to standardise jobs throughout an industry unless the plants in it are so familiar that they can be
treated as being virtually a single firm.
4. The scheme should be sold to all concerned and suggestions sought. If the workers in a plant are unionised, it
is highly desirable that any scheme adopted should be agreed to and, if possible, developed jointly by the
company and the trade unions.
5. It is of major importance that the number of job titles and classifications be kept to a minimum. If they are
not, a scheme becomes too inflexible because of the narrow coverage of the job descriptions. Promotions within
a grade become more serious. Moreover, workers tend to feel more insecure and cling to their present jobs
because they may not have the qualifications for another job.
6. Any anticipated changes in methods should be carried out before a scheme is installed and all modifications
in it should be resisted until it becomes fully established.
7. In preparing job descriptions, it is a sound practice to emphasise in them the things which make one job
different from another rather than to find a comprehensive statement of all the duties of the jobs.
8. A scheme which provides for single rates and for definite ratios between the rates for classes of workers (A,
B, C, etc.) within a job grade is easier to administer than one which establishes rate ranges and has no fixed
ratios.
9. A scheme is better administered by the Industrial Relations staff of a company than by the Industrial
Engineers who may have developed it. The essence of successful administration of a scheme is flexibility, and
this is better understood by those engaged in industrial relations work than by Industrial Engineers.
10. The better the state of industrial relations, the easier it is to introduce a job evaluation scheme.

What is Job Evaluation – 10 Major Limitations

Job evaluation suffers from certain limitations, which are as follows:
i. Lacks in scientific approach
ii. Makes use of in-exhaustive factors that are not universal in nature while performing job evaluation
iii. Does not consider the impact of technology, industry standards, government policies, and values and
aspirations of employers on their job evaluation
iv. Leads to increased costs that arise because expensive technical processes used in many organizations. In such
cases, the prevalent compensation practices are adopted instead of taking job evaluation in a formal way
v. Leads to differentiation in perception of the employees, trade union leaders, management, and the program
operators in selecting the compensable factors and giving them weightage
vi. Acts as the only factor among several factors that determine wage level, thus it cannot be considered as a
comprehensive method to establish wage levels
vii. Leads to domination by certain factors, such as government policy
viii. Takes too much time. In practice, the bureaucratic nature of job evaluation makes it time consuming and
less efficient.
ix. Suits to large organizations where HR practices are formalized.
x. Involves difficulty in implementation of some techniques that are not easily understood supervisors.

EMPLOYEE WELFARE MEASURES

1. Introduction

An employee who feels appreciated will further be comfortable, satisfied and more prolific. It has leads not only
towards higher productivity but also improves the quality of performance which helps to capture the market share
which is profitable for the company. A satisfied employee will not look into for other job opportunities and it
enables an employer to keep the best talents and record lower employee turnover. Welfare includes anything that
is done for the comfort and improvement of employees and is facilitated with over and above the wages. The
provision of welfare measures helps in keeping the morale and motivation of the employees high to retain the
employees for a longer duration. The welfare measures need not be in monetary terms only, it can also be in any
forms. Employee welfare includes monitoring of working conditions, creation of industrial harmony through
infrastructure for health, industrial relations and insurance against disease, accident and unemployment for the
workers and their families. Employee welfare is a comprehensive term including various services, facilities and
amenities provided to employees for their betterment. Welfare measures are something that is available to
employees in addition to regular wages and other economic benefits under legal provisions and collective
bargaining. The perseverance of employee welfare is to improve the working class which in turn makes a worker
a good employee and a happy citizen. Employee welfare is an indispensable part of social welfare. It involves a
balance between an employee’s work life and family life to the community or social life.

Objectives of the study:

 To study the impact of employee welfare measures.
 To study the level of employee satisfaction towards the welfare facilities offered at ETA.
To suggest the measures to improve the welfare measures to enhance the performance of the employees.

2. Literature Review

P. Anju (2016) in the study identified that the rate of absenteeism had been reduced to a great extent by providing
housing, health and family care, canteen, educational and training facility and provision of welfare activities. He
also stated that this principle for successful implementation of labor welfare activities is nothing but an extension
of democratic values in an industrialized society.

Mr. Ramana T. Ventata (2015) finds that the welfare facilities are provided to the employees to keep the
motivation levels high. He states that the intramural and extramural welfare measures offered to the employees
have improved their rate of satisfaction towards job.

Dr. P. Venugopal and T. Bhaskar (2011) found that employees are satisfied with welfare measures such as
recreational, medical, educational, housing, transportation, sanitation, safety. The employees are also satisfied
towards statutory welfare measures such as Workmen Compensation, ESI, Sickness, P.F and Maternity benefits.
These measures have an impact on the quality of work life and also on the smooth relationship between employer
and employee which leads towards the attainment of organization goals.

Dr. Usha Tiwari (2014) conducted a study on the employees’ welfare facilities and its impact on employees. It
was also further reiterated that the management should provide facilities to all employees in such way that
employees become satisfied on the welfare facilities which in turn leads to increase in productivity in terms of
quality and quantity.
Dr.P.Bhujanga Rao(2017) state that welfare measure is a process of recognizing the unique place of the worker in
the society and doing good for them, retaining and motivating employees and building up the local reputation of
the company.

3. Methodology

The Researcher used Descriptive Research Design in this research. Primary Data was collected through
questionnaire and, secondary data are from journals, books, and websites. The data were edited, coded, classified
and tabulated for analysis. The sampling technique used by the researcher is Systematic Random Sampling.
Sample size taken for the study is 80.

4. Data Analysis and Interpretations

4.1 Pilot Study

A pilot study, pilot project or pilot experiment is a small scale preliminary study conducted to evaluate feasibility,
time, cost, adverse events, and effect size (statistical variability) in an attempt to predict an appropriate sample
size and improve upon the study design before performance of a full scale. Pilot study was done with 10
respondents.

4.2 Reliability Test

Table 1: showing the reliability test

Reliability Statistics

Cronbach’s Alpha N of Items

0.828 44

Inference: Cronbach alpha value of the reliability test is 0.828 which is more than 0.75. Hence the questionnaire
is highly reliable.
Table 2 showing chi-square to show the association between welfare measures and physical and mental health of
employees.

 Null hypothesis
There is no significant difference between department and impact of welfare measures towards the improvement
of physical and mental health.

Alternate hypothesis
There is significant difference between department and impact of welfare measures towards improvement of
physical and mental health.

Table 2: Chi-square
Welfare Measures Chi-
square
Dept Effective Neutral Ineffective Total value P value

human 6 18 2 26    
resources
23.1% 69.2% 0.07% 100.0%
 19.4% 46.2% 20.0% 85.6%

16 13 8 37

43.2% 35.1% 21.7% 100.0%

Marketing 51.6% 33.3% 80.0% 164.9%

17.30 0.002**
9 8 0 17

52.9% 47.1% 0% 100.0%

Finance 29.0% 20.5% 0% 49.5%

Total 31 39 10 80

Since p-value is <0.05

Reject the null hypothesis
Accept the alternate hypothesis

Inference: Since the p-value is less than 0.05, the null hypothesis is not accepted and, the alternate hypothesis is
accepted. There is a significant difference between department and impact of welfare measures towards the
improvement of physical and mental health. Each department has a different form of workload and work stress
and creates an impact on employees’ physical and mental health. Welfare measures like seating arrangements,
medical facilities, and recreation facilities should be provided effectively.
Table 3 showing ANOVA test the opinions of employees towards welfare measures with their experience

Null Hypothesis: There is no significant difference between the opinions of employees towards welfare measures
with the experience of employees.

 Alternate Hypothesis: There is a significant difference between the opinions of employees towards welfare
measures with the experience of employees.
Table 3: ANOVA test
Sum of Mean
Attributes   Squares Df Square F Sig.

Between
Groups 3.535 2 1.767 3.146 .049

Within
Groups 43.265 77 .562
Medical
facilities Total 46.800 79

Insurance Between
facilities Groups 9.105 2 4.553 9.119 .000

Within 38.445 77 .499

Groups
 Total 47.550 79

Between
Groups 8.247 2 4.123 5.614 .005

  Within
Groups 56.553 77 .734
Education  
Facilities Total 64.800 79

Between
Groups 17.601 2 8.800 19.699 .000

Within
Groups 34.399 77 .447
Housing
Facilities Total 52.000 79

Between
Groups 12.295 2 6.148 14.305 .000

Within
Groups 33.092 77 .430
Good Working
Environment Total 45.388 79

Between
Groups 4.839 2 2.419 4.321 .017

Within
Groups 43.111 77 .560
Transport
Facilities Total 47.950 79

Inference: Since the p-value is less than 0.05, the null hypothesis is not accepted with respect to medical
facilities, insurance facilities, education facilities, housing facilities. Good working environment and transport
facility that is offered as welfare measures. Hence there is a significant difference between the opinions of
employees towards welfare measures concerning their experience. New employees may have one kind of
expectation and employees who have more experience may expect a different set of welfare measures. Therefore
the experiences of the employees should be considered as a factor while improvising the welfare measures.
Table 4 showing the Anova Test showing the difference between gender and the satisfaction towards welfare
measures provided at the construction industry.

Null Hypothesis:
There is no significant difference between gender and satisfaction towards welfare measures.
Alternate Hypothesis:
There is a significant difference between gender and satisfaction towards welfare measures.
Table 4: Anova Test
Sum of Mean
Attributes   Squares Df Square F Sig.

Medical Between 38.896 2 19.448 14.010 0.000

facilities Groups
 Within
Groups 188.787 136 1.388

Total 227.683 138

Between
Groups 55.891 2 27.946 25.126 0.000

Within
Groups 151.260 136 1.112
Insurance
facilities Total 207.151 138

Between
Groups 42.841 2 21.421 15.729 0.000

  Within
Groups 185.216 136 1.362
Education  
Facilities Total 228.058 138

Between
Groups 31.267 2 15.634 10.394 0.000

Within
Groups 204.560 136 1.504
Housing
Facilities Total 235.827 138

Between
Groups 53.657 2 26.828 20.285 0.000

Within
Groups 179.868 136 1.323
Good Working
Environment Total 233.525 138

Between
Groups 38.896 2 19.448 14.010 0.000

Within
Groups 188.787 136 1.388
Transport
Facilities Total 227.683 138

Since p-value is <0.05

Reject the null hypothesis.

Inference:
Since the p-value is less than 0.05, the null hypothesis is overruled with respect to gender and welfare measures
offered to the employee’s viz., medical facilities, insurance facilities, education facilities, housing facilities, good
working environment, and transport facility that is offered as welfare measures offered and its impact on
satisfaction of employees. Hence, there is a significant difference between the satisfaction of employees towards
welfare measures with the gender of the employees. The satisfaction of employees towards welfare measures
differs based on gender. The preference of the employees towards welfare measure varies as per gender and
management should take into consideration this factor while framing employee’s welfare measures.

5. Discussions & Implications

 There is a significant difference between department and impact of welfare measures towards the
improvement of physical and mental health. Each department has a different form of workload and work
stress and creates an impact on employees’ physical and mental health. Welfare measures like seating
arrangements, medical facilities, and recreation facilities should be offered effectively to the employees.
 There is a significant difference between the opinions of employees towards welfare measures with their
experience of the employees. The opinions of employees towards welfare measures differ based on their
experiences. New employees may have one kind of expectations and employees who have more
experience may expect a different set of welfare measures. Therefore the experiences of the employees
should be considered as a factor while improvising the welfare measures.
6. Conclusion

Employee welfare is a comprehensive term including various services, facilities, and services provided to
employees for their furtherance. Thus from this study, it is found that the welfare measures provided by the
Construction industry directly impact the work competence of the employees. Proper welfare measures should be
provided to persuade the employees and increase proficiency and effectiveness. The Company should take steps
to create awareness among the employees about the welfare measures provided as it falls under the rights of the
employee to know about the welfare measures provided for him/her by the company.

UNIT 5

MAINTAINING

Maintenance of Human Resources

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After reading this article you will learn about the key points for maintenance of human resources.

Maintenance function of human resource management is concerned with protecting and promoting the physical
and mental health of employees. In order to achieve these objective several types of fringe-benefits such as
housing, medical and, educational facilities, conveyance facilities etc. are provided to the employees.

Social security measures like provident fund, pension, gratuity, maternity benefits, group insurance etc. are also
arranged. Health, safety and welfare measures are designed to preserve the human resources of the organisation.

Maintenance of Employee’s Health:

This is an important function of personnel management. For this task, certain provisions are given in ‘Factory
Act’, which must be strictly followed. In addition, when a new worker is appointed, he should first be medically
examined to ensure that he is physically fit to perform duties. If a worker on a medical examination is not found
fit, he should not be given appointment, otherwise it will cause increase in labour turnover and other troubles.

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Proper sanitation in factory as well as in workers colony is essentially required to be maintained. To avoid
monotony of work suitable rest pauses, recreational and cultural amenities hospital or dispensary should be
made in the factory or colonies separately. All these will be conducive to health, worker’s morale will be high
and they feel satisfied.

Maintenance of Employee’s Safety:

This is also an important function of personnel management. For this, some provisions are given in ‘Factory
Act’; those are required to be enforced by the employer. Safety is obtained by proper inspection of plant and
machinery, work place, fire protection, first-aid premises, and arranging safety education programmes.

Everyone working in the factory should know the causes of accidents and how to prevent them. If there are no
accidents, large number of workers will be willing to compete for the job. Accidents discourage the workers and
reduce output.

Labour Welfare:
Labour welfare is the voluntary efforts by the employers to provide best conditions of employment in their own
industries.

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The object of introducing labour welfare scheme is to secure an improved standard of living for the workers,
which results in the increase in their productive efficiency.

Labour (Personnel) welfare schemes are aimed at:

1. Making the employees healthier, sound thinking

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2. To motivate people to carry out production in a better way,

3. To improve and maintain employees morale and loyalty.

4. To keep workforce in competition with other organisations,

5. To maintain better employee-employer relations.

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6. To meet the social, recreational and cultural needs of the employees.

7. To reduce the labour turn-over, absenteeism.

Welfare Measures:
Welfare measures can be categorised as:
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1. Economic Welfare Measures:

(a) Health services and first aid,

(b) Paid holidays, reduced hours of work,

(c) Profit sharing,

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(d) Pension scheme,

(e) Insurance scheme, including group insurance,

(f) Subsidised lunch, water, electricity, and 

(g) Loans on reduced rate of interest.

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2. Facilitate Welfare Measures:

(a) Housing,

(b) Transport,

(c) Canteen and lunch facility,

(d) Company stores for cheaper shopping,

(e) Sale of company products on discount to employees,

(f) Educational facilities,

(g) Rest rooms,

(h) Safety measures, and 

(i) Measures to reduce fatigue.

3. Recreational Measures:
(a) Games and Sports.

(b) Recreational clubs.

(c) Cultural programmes.

(d) Social get-togethers.

Maintenance of Human Relations:

Labourers in India usually belong to poor and illiterate class. The wages given to them are not sufficient to
maintain them and their families properly. Their standard of living is low and they do not possess any reserves,
which can be utilised during sickness and unemployment.

Their wages are not enough even to meet their daily necessities. Their diet is poor and they have to live in small
houses situated in unhealthy surroundings. They cannot afford modern costly medical aid.

Now, steps are being taken by the Government, to improve the living conditions of the labourers. Laws are
made to safeguard their rights. Progressive employers have realised the importance and utility by improving
their lodging, providing sanitary surroundings, supply of pure water and fresh air, sufficient medical aid, better
working conditions. This had resulted in remarkable increase in productive efficiency of labourers.

Main object of welfare organization is to improve the human relation. In a developing country like ours human
resources are the most important resources and industrial efficiency depends considerably upon the physical and
mental efforts made by the management and labour. Employee-employer relations are mainly responsible to
take the full use of physical energy, skill and mental aptitude.

Here it is important to note that it is not the economic factors only which influence the employer-employee
relations but also the psychological factors. Thus in addition to wages, self-satisfaction and a sense of
importance and other conditions of employment also play an important role to influence the relations? It is also
essential that the feelings of workers are not crushed.

If we start thinking “Industry for man and not man for industry” most of the problems will automatically be
solved. Here it is also necessary to keep in mind that one can buy man’s time and physical presence at a
particular place but his enthusiasm, initiative, loyalty and devotion to duty cannot be bought. These can only be
carried through the good employee-employer relations.

When the worker’s economic, social and physical wants are fulfilled and he is fully satisfied and is free from
worries (may be connected with family or with services), he will work hard with his full physical and mental
aptitude and enthusiasm and will improve the productivity and cooperation.

Thus the ‘Human-relations’ is the key to maximum productivity for both the employer and employee. The
maximum prosperity for each employee does not mean only higher wages but also the development to the state
of his maximum prosperity to the employer and with maximum benefits to each employee.

Factors Responsible for Human Relations:

We can summarise the important factors, which are responsible for affecting the human relations into the
following categories:
1. Physiological needs.

2. Safety needs.

3. Social needs.

4. Self-realisation needs.

1. Physiological needs:
These are the necessities of food, cloth and shelter. These needs must be fulfilled so as to keep worker worriless.
Workers also want a guarantee that these needs will also be met in future.

2. Safety needs:
An employee also wants security for job and protection against danger and threat.

3. Social needs:
Main social desires of a man are reputation, confidence, appreciation, independence and strength. These needs
can be recognised by providing the participation of employees in the organisation.

4. Self-realisation needs:
Man always desires that he should be put to such job for which he is fit. A person will not remain happy on the
post which is lower than that for which he is suitable.

Suggestion for the Improvement in Human Relations:

It is very necessary for the management to develop a climate which will motivate the employees to do more and
will help to achieve the satisfaction.
To improve the human relations, following suggestions are being given:
1. Proper Wages:
A worker should get sufficient wages, so as to fulfill his minimum needs. For better human relations, decent
wages should be paid to the worker. This will then result in increased production and more prosperity and will
thus benefit both the employer and employee.

2. Special Inducement:
Fair wages satisfy only physiological needs of the employee, but to get the maximum output some incentives, in
the form of promotion, bonuses etc. are necessary.

3. Mutual Trusteeship:
Mutual trust and social responsibility on the part of both labour and management reduces the conflicts and it
will help in the increase of sense of cooperation.

4. Open Communication:
Exchange of views, information and feelings are very essential as a means of promoting communication among
various sections. These help in understanding each other and making decisions. For this purpose Works
Committee, Joint Management councils are framed having a suitable representation of labour and management.

5. Suggestion Programme:
By this scheme, employee takes live interest in the affairs of the company, specially in the matter of production.
In the absence of such programme, employee generally criticises the management as a whole or the
departmental head and the sectional supervisors.

In the performance of a task, the employees may have bright ideas about the way in which the things would or
could be done. If workers are given the opportunities to put these ideas forward, a valuable idea may be
received. Sometimes the suggestions are of immense value. The employee giving valuable suggestion may be
awarded to encourage the persons to take more interest in the scheme.

6. Human Dignity:
It is the desire of every man that he should be treated with respect and dignity. Human-dignity is the moral basis
for human relations. Each individual should therefore be recognised as a separate personality. Human-dignity
cannot be wholly awarded by the management. Worker should also try himself to attend it by means of his
personal growth.

Advantages of Labour Welfare:

(i) Make the employees healthier, more forward looking

(ii) Contributes for motivation and improving moral and loyalty

(iii) Interest for work is created

(iv) Helps in maintaining good industrial relations

(v) Satisfy the social, cultural and recreational needs of the employees

(vi) Reduces labour turn-over and absenteeism

(vii) Reduces relations amongst employees.

Maintenance of Personnel Records:

It is the duty of the personnel manager to evaluate periodically as to how effectively the human resources are
being utilised. For exercising control over human resources, it is necessary to have personnel records, reports,
research and audit. Personnel records include the documents and files relating to the human resources of the
organisation.

The record contains information on manpower plans, recruitment, selection, training, compensation, appraisal,
job changes. Job applications, test scores, results of medical examination, labour turnover and absenteeism data,
morale surveys, wage and salary data are some of the examples of personnel records.

These records are maintained to serve the following purpose:

(i) To provide information required for taking decisions on personnel matters.

(ii) To provide an evidence of what has taken place in the organisation.

(iii) To provide a basis for evaluating, formulating and modifying the personnel policies and programmes.

(iv) To meet legal requirements under various labour laws.

Conducting Personnel Audit:

Personnel audit implies critical examination and evaluation of policies, programmes and procedures in the area
of human resource management. It should be conducted periodically to measure the effectiveness of personnel
management and to determine the steps required for more effective use of human resources.

The aim of personnel audit is to determine whether the personnel policies and practices are consistent with
oganisational objectives. It also aims to find out as to how effectively the personnel policies and programmes
have been implemented.

Personnel audit is actual evaluation of personnel policies, programmes and results. After the completion of audit
the personnel auditor submits a written report containing actual data and recommendations.
HRM APPRAOCHES TO EMPLOYEE (NOT FOUND)

QUALITY OF WORK LIFE QWL

Quality of Work Life: it’s Meaning and Definition!

The present era is an era of knowledge workers and the society in which we are living has come, to be known as

knowledge society. The intellectual pursuits have taken precedence over the physical efforts.

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Some knowledge workers work for more than 60 hours a week. As a result of this, their personal hobbies and

interests clash with their work. Life is a bundle that contains all the strands together and hence the need to

balance work life with other related issues.’

One must have both love and work in one’s life to make it healthy. Gone are the days when the priority of

employees used to be for physical and material needs. With the increasing shift of the economy towards

knowledge economy, the meaning and quality of work life has undergone a drastic change.

Meaning:

Quality of work life (QWL) refers to the favourableness or unfavourableness of a job environment for the

people working in an organisation. The period of scientific management which focused solely on specialisation

and efficiency, has undergone a revolutionary change.

The traditional management (like scientific management) gave inadequate attention to human values. In the

present scenario, needs and aspirations of the employees are changing. Employers are now redesigning jobs for

better QWL.

Definition:

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The QWL as strategy of Human Resource Management has assumed increasing interest and importance. Many

other terms have come to be used interchangeably with QWL such as ‘humanisations of work’ ‘quality of

working life, ‘industrial democracy’ and ‘participative work’.

 There are divergent views as to the exact meaning of QWL.

A few definitions given by eminent authors on QWL are given below:

1. “QWL is a process of work organisations which enable its members at all levels to actively; participate in

shaping the organizations environment, methods and outcomes. This value based process is aimed towards

meeting the twin goals of enhanced effectiveness of organisations and improved quality of life at work for

employees. ”

CONDITIONS

Quality of work life is a multi dimensional aspect. The workers expect the following needs to be fulfilled by the
organizations:

1. Compensation: The reward for work should be above a minimum standard for life and should also be
equitable. There should be a just an equitable balance between the effort and the reward.
2. Health and Safety: The working environment should be free from all hazards detrimental to the health
and safety of the employees. The main elements of a good physical environment for work should be reasonable
hours of work, cleanliness, pollution free atmosphere, risk free work etc.
3. Job Security: The organization should offer security of employment. Employees should not have to
work under a constant concern for their future stability of work and income.
4. Job Design: The design of jobs should be such which is capable of meeting the needs of the
organization for production and the individual for satisfying and interesting work. Quality of work life can be
improved if the job allows sufficient autonomy and control, provides timely feed back on performance and uses
a wide range of skills.
5. Social Integration: The workers should be able to feel a sense of identity with the organization and
develop a feeling of self esteem. This includes the elimination of discrimination and individualism, whilst
encouraging teams and social groups to form.
6. Social Relevance of Work: Work should not only be a source of material and psychological
satisfaction, but also a means of social welfare. An organization that has greater concern for social causes can
improve the quality of work life.
7. Scope for Better Career Opportunities: The management should provide facilities to the employees
for improving their skills both academic and otherwise. The management should always think of utilizing
human resources for expansion and development of the organizations.

SPECIFIC ISSUES OF QWL

ISSUES IN QWL

QWL as an abbreviation means Quality of Work Life in a business or Industrial organization. Trade unions
claim that they are responsible for the improvement in various facilities to workers whereas management takes
credit for improved salaries, benefits and facilities. However, P/HR manager has (identified) specific issues in
QWL besides normal wages, Salaries; fringe benefits etc. and take lead in providing them so as to maintain
higher order QWL. Klott, Mundick and Schuster suggested major QWL issues. They are:

1. Pay and Stability of Employment: Good pay still dominates most of the other factors in employee satisfaction.
Various alternative means for providing wages should be developed in view of increase in cost of living index,
increase in levels and rates of income tax and profession tax. Stability to a greater extent can be provided by
enhancing the facilities for human resource development.
2. Occupational Stress: Stress is a condition of strain on one’s emotions, thought process and physical
condition, Stress is determined by the nature of work, working conditions, working hours, pause in the work
schedule, worker’ abilities and nature and match with the job requirements. Stress is caused due to
irritability, hyper-excitation or depression, unstable behavior, fatigue, stuttering, trembling, psychosomatic
pains, heavy smoking and drug abuse. Stress adversely affects employee’s productivity. The P/HR manager,
in order to minimize the stress, has to identify, prevent and tackle the problem. He may arrange the treatment of
the problem with the health unit of the company.

3. Alternative Work Schedules: Alternative work schedules including work at home, flexible working hours,
staggered hours, reduced work week, part-time employment which may be introduced for the convenience and
comfort of the workers as the work schedule which offers the individual the leisure time, flexible hours of work
is preferred.

4. Recognition: Recognizing the employee as a human being rather than as a laborer increases the QWL.
Participative management, awarding the rewarding system, congratulating the employees for their achievement,
job enrichment, offering prestigious designations to the jobs, providing furnished and decent work places,
offering memberships to clubs or association, providing vehicles, offering vacation trips are some of the means
to recognize the employees.

5. Congenial Worker Supervisor Relation: Harmonious supervisor-worker elations give the worker a sense of
social association, belongingness, achievement of work results etc. This in turn leads to better QWL.

6. Adequacy of Resources: Resources should match with stated objectives otherwise, employees will not be able
to attain the objectives. This results in employee dissatisfaction and lower QWL.

7. Seniority and Merit in Promotions: Seniority is generally taken as the basis for promotion in case of operating
employees. Merit is considered as the basis for advancement for managerial people whereas seniority cum-merit
is preferred for promotion of ministerial employees. The promotional policies and activities should be fair and
just in order to ensure higher QWL.

STRATEGIES OF IMPROVEMENT OF QWL

Way # 1. Reward and Recognition:

There should be a reward and recognition system that includes both material as well as psychological rewards.
Reward begets commitment and the bottom-line for any employee to work is to earn proper reward and
recognition. This is the main reason why everyone works and once this is given to an employee, he will be
motivated to invest more time and energy in his job.

Way # 2. Growth Opportunities:

Another powerful measure which can cause commitment among employees is growth opportunities provided by
the company. Growth and development is an inborn need of human beings and everyone desires to achieve
growth. There are many ways which a company can adopt to help its employees grow.

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Providing opportunities for greater responsibility, promotion, value-added jobs, meaningful and worthwhile job,
and learning culture enable employees to grow and develop. Once they recognize that growth of the company
will result in their growth, they will put in committed efforts.

Way # 3. Respect and Boosting Self Esteem:

Whatever the status, people equally need respect. A good manager respects people at all levels. In turn, they will
always try to prove him right by doing whatever is necessary. In 1989, a pacemaker manufacturing company
had initiated a major organisational improvement programme involving quality teams.

In one of the meetings while talking to the factory workers who were involved as teams, the general manager
addressed them and said “We are very lucky to have you in this factory paying only for your two hands, and
using, your brains for free. You are very capable people because each one of you has this excellent asset. We
would highly appreciate if from today onwards in addition to your hands you also used this greatest asset for
bringing new ideas and suggestions on how we could improve our performance”.

The workers felt great and respected. As a result, they committed with their hearts and souls and made the
project a total success. The company achieved enormous results. Thus, when people are respected, they do their
best to attain success for any project or company plan.

Way # 4. Vision and Get Supported:

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Commitment cannot be achieved if people do not know “Commitment towards what”. Organisations and its
leaders must provide a compelling vision of the future to the employees. People will act if they can visualize
what they are supposed to achieve. An effective leader will motivate people by giving them a vision of what
they can become and how they can transform their organisations. People are vision directed.

As such, every organisation must provide clear vision to its people. Additionally, employees must be helped to
align their actions towards achievement of the vision. A good vision should be challenging, meaning something
worth the extra effort and sacrifice. Challenging the employees to create new standards of excellence produces
powerful and positive results.

Vision is a group effort and it must be communicated, shared and supported by everyone in the company. A
good manager will make the company vision compatible with the employees’ individual visions and dreams in
life. It can be done by showing employees how achievement of the organisation will contribute to their lives in
the form of good salaries, better working conditions, career advancement or share holdings. People will give
their best if they are clear about rewards as ‘people work for their reasons, not ours.’
Way # 5. Mutual Commitment:
In order to get support from employees, employers should initiate it in terms of leadership by example or self-
commitment. They should provide proper tools and equipment; adequate training and other inputs needed by the
people for successfully performing their jobs.

Way # 6. Good Working Environment:

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Today, most of the working people spend their major portion of time at work. One major factor which
employees would highly appreciate is the congenial working environment, where they are happy to work with
others. Teamwork, cooperation, friendship with colleagues and bosses and mutual respect are the signs of a
good working environment which attract employees and retain them to stay longer with a company.

In contrast, too much politicking, back biting and other negative practices discourage people to work with a
company unless they have no other place to work in. As such, good working environment binds employees
amongst themselves and with the organization.

Way # 7. Empowerment:
Empowerment means giving people the power, authority, freedom and responsibility to carry out their jobs. This
give them a sense of control over their work and makes them feel worthy of doing things on their own.
Empowerment leads to greater job satisfaction and sense of control, which can result in better commitment and
loyalty.

Empowerment is an important motivational tool that makes employees independent by giving them the means,
ability and authority to do the work.

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It helps employees:
a. Achieve mastery over their job.

b. Have control over their work.

c. Perform successful roles in the organisation

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d. Reduce stress at work through social recognition and assistance at work.

Empowerment at work is no more an option. It is a necessity.

An employee feels empowered when he feels:
i. His task will make some difference in the organisational work (Impact).

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ii. He has the ability, skills and knowledge to perform the task (competence).

iii. He feels that the task he is performing is worth while and not mere work (meaningfulness).

iv. He has autonomy to take decisions and make choices at his own will (choice).

Way # 8. Hiring the Right People:

One of the worst mistakes companies can make is hiring wrong people with negative attitudes, low job
competence, who do not meet the requirements of the jobs they are hired for. To sustain a good pool of
committed employees, companies need to hire right people with desired skills and capabilities.

Way # 9. Work/Life Balance:

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Helping employees to achieve balance between the work and personal lives encourages people to stay with the
organisation. Many studies have revealed that work life balance is one of the main concerns of employees.
Organisations which enable employees to balance work and family responsibilities have positive impact on
employees’ decision to stay with them.

Way # 10. Out of the Way Help:

One of the highly appreciated things especially in eastern culture is out of the way help people receive from
their employers and managers. Depending on situations, things like visiting employees when they are sick,
attending their relatives’ weddings or support through depression are some of the out of the way things which
managers can do for their employees. These gestures are normally reciprocated by employees in the form of
commitment to their employers.

RETIREMENT

What Is Retirement Planning?

Retirement planning is the process of determining retirement income goals and the actions and decisions
necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating
expenses, implementing a savings program, and managing assets and risk. Future cash flows are estimated to
determine if the retirement income goal will be achieved. Some retirement plans change depending on whether
you're in, say, the United States, or Canada.

Retirement planning is ideally a life-long process. You can start at any time, but it works best if you factor it
into your financial planning from the beginning. That's the best way to ensure a safe, secure—and fun—
retirement. The fun part is why it makes sense to pay attention to the serious and perhaps boring part: planning
how you'll get there.
 KEY TAKEAWAYS

 Retirement planning refers to financial strategies of saving, investment, and ultimately distribution of
money meant to sustain one's self during retirement.
 Many popular investment vehicles such as IRAs and 401(k)s allow retirement savers to grow their
money with certain tax advantages.
 Retirement planning takes into account not only assets and income but also future expenses, liabilities,
and life expectancy.
 It is never too early - or too late (although earlier is better!) - to start retirement planning.

Here are top four reasons why you will need retirement planning.

 Medical emergencies - With rising age, come new and health problems. Medical expenses make a
huge dent in your finances post retirement. Studies show medical inflation is 14-15% a year. This means health
costs potentially become 4 times of what they were just ten years ago. Take a proper retirement plan, and never
lose sleep over long and multiple hospitalization. With a large enough retirement kitty or pension, post-
retirement you will always be well taken care.

 Inflation - Price rise is a universal fact. The effect of inflation, even if it appears small in the short-
term, can be massive over a few years.
A 5% inflation means Rs 100 will have the value of ₹ 95 a year later. But, a 5% decline is quite serious. Twenty
years later a sum of ₹ 21 lakh will have the same purchasing power as ₹ 7.5 lakh today if inflation grows by 5%
every year. In growing economies like India, the consumer level inflation can in fact be more than 5%.
Even when you are retired, some costs will always remain. You may not have EMIs, or you may not eat out
much, but you will still need to buy groceries, medicines, and pay off utility bills. A good pension plan must be
bought in such a way that anticipated inflation is accounted for.

 No state sponsored pension - Private sector employees in India do not have a fallback option like a
state sponsored pension. Unlike the US and UK where they have state-funded/sponsored pensions or social
security benefits during retirement, India so far does not have anything similar matching that scale. This means
you are on your own when you are retired. This is both good and bad.
The good part is that your own pension strategy gives you the flexibility to buy a retirement plan and remain in
control. Government funded pensions are a fixed amount that can remain unchanged for years. There are some
small benefits for senior citizens, but there is no outright income replacement solution from the government. So,
engaging in retirement planning is a smart thing to do. Once you know the goals, invest in a pension plan and
get a self-sponsored retirement income!

 Nuclear families - Long gone are those days when the elderly could rely on monetary support from a
big family. The culture of the Indian families is changing as couples are going nuclear and staying separately.
They are also having less children. Twenty-thirty years down the line there may not be many relatives to take
care of you as a senior citizen. Children, when they grow up, want to relocate for jobs elsewhere. Plus, the
pressure to earn money and have a decent lifestyle would not give them enough time to allocate for parents and
elders.
Hence, it is vital to plan your retirement without expecting any financial help from your immediate family.
There is a lot of mental satisfaction in having the ability to buy your own spectacles, medicines, provide food for
yourself and also your spouse. Why should it change when you are 60? A retirement plan allows you to always
keep your head high and live a retired life full of dignity and respect.

Step 1: Define Your Retirement

You probably have some idea of how you'd like to spend retirement. Here's where you write your objectives
down, listing the most important goals first. For now, don't focus on budget. Focus on ideas, and be as specific
as you can. For example, instead of "travel," list "trips to the lake" or "walking tours of foreign countries."
Instead of "stay involved in my community," write down "volunteer with kids one day a week."
Try to limit the list to your top five goals. Keep a scrapbook or start a journal depicting how you envision your
retirement. Be practical: Your list should rule out unnecessary expenses. Make sure all your financial needs are
 met as you brainstorm. The more descriptive you are, the more tangible your retirement will be. This will help
keep you focused on a realistic set of goals, which will make each of them more attainable.
If your goals are still general or vague, that's OK, too. You can simply start by outlining how you envision
enjoying your retirement.
Step 2: Take Stock of Your 'Assets'

You know how much you bring home each month, how much you have in the bank and how much you have in
your retirement account. But what about those other nontraditional assets that could help fund your retirement?
Maybe you collect antiques or restore cars. Perhaps you're an accomplished pianist or have a half-written novel
you want to finish.  
Many hobbies and skills can be turned into real income in your retirement years — trading antiques or teaching
piano lessons, for example. Take the time to list all of your hobbies and skills. Don't worry if your list is small,
but do list all of your passions and untraditional "assets." After that, start thinking about how you can morph
those skills and hobbies into money-making endeavors.

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Step 3: Evaluate Your Health — Now

To get the most out of your retirement — and life in general — you want to be as healthy as possible. And while
few of us enjoy doctors' visits, a little preventive medical attention can go a long way.
Schedule your checkups and preventive exams now, from an annual physical to teeth cleaning. At each
appointment, work with your provider on a plan to improve or maintain your health. Commit (or recommit) to
eating healthy, exercising and getting enough sleep. Healthy living doesn't have to be a chore. Many healthy
foods are delicious and satisfying, and exercise can be fun (walk on the beach, anyone?). Commit to staying
mentally sharp with brain games, puzzles and books. Staying in close contact with family and friends will help
you maintain your health both physically and mentally and may aid in fighting off any blues that may arise once
you are retired.
Step 4: Determine When to Collect Social Security

(Hint: Later Is Better!)

Wouldn't it be nice if you saved and invested enough to enjoy financial freedom during retirement? Perhaps you
did but for many that's not reality. Most of us will need the Social Security benefit we'll receive — both to pay
for basic essentials and to support our retirement dreams. The age at which you choose to start collecting Social
Security will have a direct impact on how much you'll get in monthly benefits. The longer you wait to claim
Social Security, the greater the benefit for you and your family.
Consider this: A widow or widower whose spouse claimed Social Security at full retirement age or older gets
100 percent of the benefits. A widow or widower whose spouse claimed benefits early gets 71 percent to 99
percent, depending on when the spouse began claiming. If you wait to claim, you'll also be eligible for delayed
retirement credits, which give you an increase in benefits each year until you reach age 70. Whether you are
married, single, widowed or divorced, it usually pays to wait to claim. AARP's Social Security Benefits
Calculator will show you when it's best to claim.

Related Information

 Quiz: Are you savvy about Social Security?

 Quiz: Retirement health care costs
 Infographic: Health care costs in retirement

Join AARP — Receive access to exclusive info, benefits and discounts

Step 5: Network Through Social Media and Other Methods

You need to build and maintain your network even in retirement. Use networking opportunities to showcase
your talents. It's OK to brag about yourself to those who might help you fulfill your retirement dreams.
Include a networking strategy in your retirement plan. It may involve spending an hour a day on Twitter or
LinkedIn "conversing" with people who share your skills and interests, or starting a morning meetup group at a
local coffee shop to discuss ideas with other soon-to-be retirees. Such strategies will build relationships that in
turn can grow your network. Also, be prepared to have clear, direct answers to such questions as "How can you
use your talents and experience to contribute part time to an organization or cause?" The more socially active
you are — online and offline — the more opportunities you are likely to create for yourself.
Step 6: Decide How Much You Want (or Need) to Work

This is the classic cost-benefit equation: Unless you are financially set for life, you will have to either stretch
limited money and give up some retirement dreams or stay in the workforce (in some capacity) to help pay for
those dreams. As you write down your retirement goals, take into consideration how much work is necessary.
In the previous step, you were encouraged to look at your interests. But you should consider your lifestyle and
preferences, too. "Work" will mean different things to different people in retirement. Either way, to ensure you
successfully reach your goals, you'll have to decide how much time you want (or need) to spend at a job. Don't
wait until after retirement to make the decision. Weigh right now the pros and cons of working — including
how many hours per week. The sooner you get comfortable with this decision, the more secure you will be in
your retirement planning.
Community: Share your fears about Social Security. Join the discussion
Step 7: Create a Retirement Budget

Your budget needs to include:

 How much money is coming in.

 How much it will cost to reach the goals you identified in step 1.
 How much debt you have. 

Start by tracking your income and expenses for a couple of months. Next, figure out how much money you'll
need in retirement to support your chosen lifestyle. You'll also need to do a financial checkup of your
investments. Make sure you are diversifying your money into multiple investments, investing in things you
understand and going with those investments that won't cost you a ton in fees. If you are carrying debt, make
sure your budget includes monthly payments to knock it down. Once you have a budget you know you can stick
to, start putting it into action. AARP's Retirement Calculator can help you take a deeper look at the numbers.
Step 8: Find New Ways to Cut Your Expenses (Start Saving More)

Your retirement may be right around the corner or years away. Regardless, saving more now will always make
you better prepared. That doesn't mean all of your extra cash has to go into savings, but now is the time to find
new way to cut your expenses. Start by listing your bills and then figure out ways to trim them. Maybe you don't
need 100 cable channels or to eat out three nights a week. Even cutting one movie night a month can bring you
closer to your retirement goals.
Got a green thumb? Growing your own vegetables can save you money that can be socked away for retirement.
Don't ignore your debt as a way to save more. Cutting your debt now will mean less worry when you retire. One
strategy that works for many people: Pay off your smallest debts first, regardless of interest rate. This gives you
a sense of accomplishment and empowers you to go after the bigger debts, knowing you have the willpower to
eliminate debt.
 AARP Retirement Tools & Resources

 Social Security Benefits Calculator

 Social Security Question & Answer Tool - Earn points toward Rewards for Good 
 Retirement Calculator
 Health Care Costs Calculator

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Step 9: Prepare for the Unexpected

Few of us head into retirement expecting the worst. But sometimes it happens. Prepare for the unexpected now
and you won't get caught off guard later. Taking time to consider how you'd pay for — and respond to —
everything from minor issues like a roof leak to serious ones like a grave illness will help you weather those
storms when they come. Discuss the big issues with your family or those closest to you. How much would it
cost to make major repairs? What would you want to do (or what care would you want) if there was an illness in
the family?
Step 10: Stick to Your Plan (Our Community Can Help)

This step may be challenging but it's definitely rewarding: sticking to your plan. We humans are creatures of
habit and it's common to revert to old habits after trying a new course. We have ways of helping you avoid that.
Joining our online community will connect you with others going through the same life changes.
The community holds a wealth of information, ideas and tips, and for many is a source of comfort and strength.
So join now, build your profile, share photos and even publish a blog. Use the community to tell us how we can
help you realize your dreams so you and your family can enjoy the retirement you so richly deserve.
Next, take stock of your protection. Do you have enough homeowner's insurance to cover a major calamity? Is
your health insurance or long-term care insurance adequate? If your insurance coverage lacks some things, now
is the time to increase it. Put money aside for the unexpected. Preparing now means you won't pay later.

DISCHARGE

STEPS

Discharging an employee is one of the least pleasant tasks of running a business -- no small business owner

wants to take away an employee's ability to earn a living. However, certain circumstances may make

discharging an employee the appropriate choice for maintaining the efficiency and profitability of your business.

Before you discharge an employee, follow the correct steps to minimize the chance of confrontation and legal

complications.
Preliminary Disciplinary Action

In most cases, you will base your decision to terminate an employee on aspects of the person's work

performance, such as excessive absenteeism, failure to complete projects on time or misuse of company

property. Provide preliminary disciplinary action, such as verbal warnings and written warnings, for infractions
before you opt for discharge. This gives the employee an opportunity to make adjustments to avoid termination.

Document all disciplinary actions in writing, including the dates and times of the infractions and the actions

taken in response to the infractions. If the employee does not improve his performance, documentation prevents

the employee from claiming that you terminated his position without warning. Ask the employee to sign all

disciplinary documentation. If he refuses, have a witness sign the documentation and note the employee's refusal

to sign.

Final Written Warning

If an employee commits repeated infractions and does not respond to verbal and written warnings, issue a final

written warning to give the employee one last chance before discharge. Explain in the written warning that any

future infractions will result in discharge from the company. As with other disciplinary actions, ask the

employee to sign the documentation or have a witness sign it if he refuses. You may opt to add an expiration to

the final written warning to motivate the employee to improve. For example, state in the letter that if no future

infractions occur, the final written warning will expire in 12 months.

Notice of Discharge

After the final written warning, if the employee's poor performance continues, you may have no choice but to

discharge the employee. Conduct the termination meeting in a private area where your discussion cannot be

heard by employees other than a witness. Present the employee with a notice of discharge. This document

clearly states that the employee has been terminated from employment with your company, and provides the

date and reason for discharge. It also includes a list of previous infractions, including the dates when these

infractions occurred and a description of previous disciplinary actions. Have the employee sign the notice of

discharge and provide him with a copy of the signed document. The witness should sign if the employee

refuses; however, the employee's refusal to sign does not invalidate the termination.

Post-Discharge

After you have held the termination meeting and reviewed the notice of discharge with the employee, collect

any company-owned property from the employee, such as access badges, laptops, cell phones and keys. Escort

the discharged employee from the building to prevent him from contacting other employees. If you feel that the

discharged employee poses a physical threat, have a manager request police presence while you are conducting

the termination meeting. File all documentation so you can access it quickly if you need to respond to an

unemployment claim or wrongful termination lawsuit.

DEF

Discharge: Discharge is the termination of the services of an employee but it is not done for the punishment

purpose.

What are the reasons for discharge?

• Inebriation or alcoholism

• Violation of rules.

• Physical disability

• Violent and aggressive acts.

• Inefficiency

• Unauthorized absence from the duty for a long time.

• Dishonesty.

VRS

Definition: Voluntary retirement scheme is a method used by companies to reduce surplus staff. This mode has

come about in India as labour laws do not permit direct retrenchment of unionized employees.

INTRO

Voluntary retirement scheme (VRS) refers to voluntary retirement scheme, when company faces the problem of
surplus labor, they have to remove the extra workers. This needs to be done to avoid increase in cost. One of the
methods used by the companies is the methods used by companies is the VRS scheme. Under this scheme
people have put in 20 or more number of years of service are given an option to opt for early retirement benefits
and some other amount which is due to them are paid when they leave the company.

Voluntary retirement programs offer employees an incentive to commit to employment with their employer for a
significant number of years. Voluntary retirement programs can also provide employees with an option to retire
before the minimum age of a government pension scheme.

It is an offered to certain employees as an incentive to retire. It usually contains generous benefits and is
typically targeted at employees in middle age and/ or those who have been with a company for a considerable
amount of time.

Voluntary Retirement Scheme (VRS) – Reasons for Offering VRS by Employers and by Employee
Though the eligibility criteria for VRS varies from company to company, but usually, employees who have

attained 40 years of age or completed 10 years of service are eligible for voluntary retirement. The scheme

applies to all employees including workers and executives, except the directors of a company.

The employee who opts for voluntary retirement is entitled to get forty five days emoluments for each

completed year of service or monthly emoluments at the time of retirement multiplied by the remaining months

of service before the normal date of service, whichever is less. Along with these benefits, the employees also get

their provident fund and gratuity dues. Compensation received at the time of voluntary retirement is exempt

from tax under section 10 (10C) of the Income Tax Act, 1961.
A. Reasons for Offering VRS by Employers:

(a) Recession in the economy forces the organization to opt for VRS in order to survive.

(b) Globalization has brought intense competition in terms of innovation, knowledge of manpower, knowledge

of technological and management systems. Every organization wants to recruit fresh management and techno-

workers who can adapt to the latest developments easily. Thus, the old workforce is asked to retire.

(c) Intense competition has led to mergers and takeovers in the economy. Every organization wants to merge or

amalgamate to others to become more powerful and sustainable. These ventures keep lean structure and want to

be more cost competitive. They show doors to many old workers.

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(d) At times, a constant decline in the productivity compels the organization to get rid of the inefficient staff

which is causing it.

B. Reasons for Offering VRS by Employee:

(a) Employees may want a strategic shift in their careers at any time in life. When they want to go in for new

career, they may ask for VRS.

(b) Some employees can sense the threat of retrenchment coming in their organization very soon. In order to

look for better opportunities, they may opt for VRS.

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(c) At times, employees are not satisfied with their growth and advancement in the organization. This triggers

off their need to ask for VRS.

(d) On account of bad health, some employees find it difficult to keep up with their responsibilities. They find it

very fair to resign and live a comfortable retired life.

(e) Very ambitious employees opt for VRS to start with their own enterprises e.g. Computer Engineers generally

take up their own ventures after VRS.

(f) Monetary benefits of VRS allow you to meet your family responsibilities easily, e.g. construction of house,

settling dependents etc. Many employees take VRS and meet their liabilities and join other organizations in the

evening of their careers.

Employees’ Reasons for Accepting VRS:

(1) Employee’s personal financial position – Since a hefty compensation is paid upfront by the employer, the

employee feels tempted to seek early retirement. The compensation amount so received can be utilized by the

employee for meeting family members’ needs, say, to set up business, and so forth.

(2) Employee’s physical health – Failing health condition may compel an employee to opt for VRS and utilize

the compensation amount on health improvement and leading a healthy life thereafter.

(3) Extent of job satisfaction – No or low level of work satisfaction is a potent driving factor for employees to

quit their jobs and take advantage of VRS.

(4) Possibility of future lay-offs – Employees anticipating complete or partial downturn in company’s business

may think it wise to seek early retirement with immediate financial gain under VRS.

(5) Inability to meet work responsibilities – If an employee finds himself inadequate to perform the duties and

meet the demands of his current job, he may decide to leave the organization and take advantage of VRS.

(6) Better alternative job opportunities – An employee having a better alternative employment opportunity may

find the time opportune to quit the present job and enter into the alternative field of work.

Voluntary Retirement Scheme (VRS) – Circumstances under which a Firm May Opt for VRS

The policies for opting for early retirement vary by employer. Such policies govern who is eligible for voluntary

retirement and often provide a period of time within which the option must be exercised. The policy may define

who is eligible for early retirement by setting a minimum age and/or length of service. They may require

retirement when a voluntary retirement application is submitted and not withdrawn within a certain time period.

Following are some common reasons for announcing a VRS scheme:

1. Due to recession in the business.

2. Due to reduce labour costs to cut total cost of production.

3. Due to intense competition, the establishment becomes unviable unless downsizing is resorted to.

4. Due to joint-ventures with foreign collaborations.

5. Due to takeovers and mergers.

6. Due to obsolescence of Product/Technology.

7. Due to the need for getting rid of surplus workforce without resorting to termination of jobs.

Voluntary Retirement Scheme (VRS) – Steps and Procedures

The various steps and procedure for voluntary retirement scheme (VRS):

1. H.L. Kumar further emphasises that before embarking on a Voluntary Retirement Scheme (VRS), companies

must work out other alternatives for improving performance. VRS should be the last alternative because it is a

painful process and has social implications on the departed employees and the society.

2. The strategy to be developed will be dependent on the history of labour management relating to the company,

the role of internal and external trade union leaders, the profile and capability of the human resource and

company’s financial ability to bear the cost of compensation under VRS. The reduction process should match

with strategic corporate plan.

3. The effect of downsizing, including that on the work or activities of the organisation is to be considered, i.e.,

post-reduction operations such as deployment, training, etc., should also be planned.

4. The management has to notify the decision to offer VRS through a circular, which should cover –

i. The reason for rightsizing,

ii. Eligibility, i.e. who can apply for VRS, 

iii. The age limit and minimum service period of employees who can apply (Employee who are 40 and above

and those who have completed minimum 10 years of service in the establishment), and

iv. The benefits that employees who offer to retire voluntarily are entitled as per law and rules – the benefits of

Provident fund, Gratuity and salary for balance of privilege leave up to the date of their retirement, besides the

voluntary retirement benefits. Managements are offering lucrative separation benefit which is much above the

retrenchment compensation under ID Act.

One public sector has offered the terms as under – 

a. 60 days salary for each completed year of service, 

b. Monthly salary for remaining period of service before normal retirement, whichever is less. This is subject to

maximum of 60 months’ salary,

c. Continue to avail medical facilities as applicable to their retired employees,

v. The right of an employer to accept or reject any application for voluntary retirement,

vi. The date up to which the scheme is open and applications are received for consideration by the employer,

vii. To indicate income tax exemption on voluntary retirement benefits up to of Rs.5 lakhs, which is maximum

tax free benefit,

viii. If the company is public sector undertaking, obtain approval of the government,

ix. If there is a union of employees in the establishment, involve the union by communicating to them the

reasons, the target group and the benefits to be offered to those who opt for the scheme,

x. Motivate the managers and employees. The VRS should be made attractive and no pressures should be used

to ease out persons. There should be complete transparency, and

xi. Provide professional assistance to employees who accept VRS to plan their post-retirement, activities and

financial management.

Voluntary Retirement Scheme (VRS) – Advantages and Negative Consequences

A firm offering VRS to its employees can reap the following advantages:

(i) VRS is a more humane way to reduce surplus workforce than terminating services of employees. The firm’s

reputation remains intact.

(ii) Payment of heavy compensation to retiring employees prevents resentment on their part.

(iii) Trade unions also do not object to VRS as it is voluntary in nature.

(iv) Despite heavy initial upfront costs in the form of heavy compensation package, VRS reduces payroll costs

or wage bills significantly over time. The firm is saved from paying monthly wages or salaries to the employees

opting for VRS.

However, VRS can also lead to the following negative consequences:

(i) Efficient employees may leave the firm and inefficient stay back. This would reduce the skill base of the

firm.

(ii) VRS might increase the workload of existing employees if it is used to cut the pay bill.
(iii) VRS might create a sense of insecurity in the minds of employees not opting for VRS and deciding to stay

with the firm.

Voluntary Retirement Scheme (VRS) – Issues to be Considered for Successful VRS

To achieve the desired results from VRS, organizations must consider the following issues thoughtfully

before the scheme is put on offer:

(1) Identifying the Need for VRS:

VRS should be put on offer only when the management is convinced that the surplus staff will remain unutilized

over a considerably long period of time and the organization will not greatly benefit by retaining this staff. To

deal with temporary phase of surplus workforce, VRS is not warranted because the staff once lost is not easy to

replace, except at a very high cost.

(2) Designing the Scheme:

After having established the need for VRS, the management should design the scheme incorporating the

following aspects:

(a) Employees to be Covered under VRS:

Logic lies in covering those employees under VRS who are unproductive for the organization. To ensure that

only unproductive employees take advantage of VRS, management can lay down conditions in terms of age

limit, categories of employees, etc. Steel Authority of India (SAIL), a public sector enterprise, for example, shed

over 18,000 workers between 1986 and 1987 and set the following age limits for eligibility under VRS for

various categories of employees.

(b) Compensation Package to be Offered:

Depending upon the financial position of the organization and the general expectations of the employees likely

to be covered under VRS, a suitable compensation package can be offered. For example, in Hindustan Unilever,

the VRS package consisted of a lump sum equal to 2.25 times the July 1992 salary multiplied by the remaining

years of service plus pension equal to 70 per cent of the July 1992 salary payable till the age of 60 (the

company’s decided retirement age for employees) plus prizes such as computers on the basis of a lucky draw. In

most of the public sector banks, the compensation package offered comprises 45 days of service for every year

of service completed or service for balance years, whichever is less.

(3) Role of Employees’ Unions in VRS:

VRS, no doubt, is a voluntary scheme and it works on the mutual agreement between the employer and the

employee. Nonetheless, cooperation from the employees’ unions is still desirable and may even be necessary if

the management-union agreement stipulates.

The influence of unions is so powerful on employees that they are always able to influence employees to accept

or reject VRS. Unless the VRS package is patently against the interests of employees, unions generally do not

oppose the scheme. Responsible unions perceive VRS as a painless method of trimming surplus labour.
(4) Crucial Issues:

When the employer decides to go for VRS, there are some crucial issues on which a balanced thought is

required.

They are as follows:

i. Rationale for VRS:

It is important to explore as may options as possible before introducing VRS in the organization. If the

management feels that due to less demand, adhoc workers can be dispensed with or working hours can be cut

down, then VRS is not warranted. Many big automotive companies like TATA, Mitsubishi etc., have not

resorted to VRS in the past even at times of lean demand.

It is not good to carry out workforce reduction during temporary lean seasons. If reliable workforce is lost due to

VRS, it will be an irreparable loss to the organization. The professional organizations identify the workers who

are becoming a liability and use this weapon of VRS to bid them goodbye.

VRS, therefore, should be taken up as the last measure to reduce the workforce. The workforce which needs to

be shown the door has to be first prepared with caution to accept the VRS. Any lapse in this regard may lead to

endless troubles for the organization.

ii. Personnel to be Covered in VRS:

When the decision has been taken to introduce the VRS, the next crucial decision has to be identifying the

workforce which has to be brought in VRS. The personnel which will have least impact on the operations if

dispensed with should be covered in VRS. This scheme should not cover the key men in the company.

There could be different criteria for offering VRS to unskilled workers, skilled workers, junior management,

middle management and senior management. HRM should have adequate power to make such a criteria as

ultimately the HRM will only be giving response to all employee queries about VRS.
Determination of Compensation:

The VRS has to comply with the law of the country. The compensation packages have to be attractive enough to

compel the workers to think about retiring early. It is always suggested by professionals to take trade unions into

confidence while deciding compensation packages.

If labour unions are not involved, severe labour management problems may be surfaced. When labour union

leaders are used to convince employees about fairness of VRS, it will be more effective. It is a greater challenge

to assure the employees who are not taking VRS that such a step has been taken to keep the company lean and

viable.

If all the above challenges are met by the management of an organization, VRS would work successfully across

all divisions of the organization. If management cannot meet these challenges duly, implementation of VRS

would prove to be a liability for the employer

Voluntary Retirement Scheme (VRS) – Steps for Successful Implementation of VRS

Successful implementation of VRS requires the following steps:

Step # 1. Identifying the Need for VRS:

First of all, the organisation must check whether VRS is really necessary. In case there is surplus workforce

which cannot be utilised in future, VRS may be required. The type of employees to be covered in the scheme

need to be identified carefully.

Step # 2. Cost Benefit Analysis:

Before deciding to launch a VRS, its implications for the organisation should be carefully considered. VRS is

double edged weapon and not a panacea for all ills of human resource management. It is possible that only the

employees who are employable elsewhere opt for the scheme. In such a case, the organisation may lose talent

and may be left with poor quality staff. If this happens the very purpose of VRS will be defeated.
Step # 3. Designing the Scheme:

The major decisions involved in designing VRS are:

(a) Employees to be covered under the scheme- Logic lies in covering those employees who are least required in

future. SAIL prescribed the minimum age limit for different categories of employees.

(b) Compensation Package to be Offered- In public sector enterprises, three months’ salary for each completed

year of service subject to a maximum of monthly salary multiplied by the number of months left for retirement
is the norm. In public sector banks, 45 days of salary for every year of service or salary for the balance period of

service whichever is less was offered.

Step # 4. Convincing Trade Unions:

For the effective implementation of voluntary retirement scheme, the HR manager has to convince the trade

union leaders about the need and rationale of the scheme. The HR manager has also to convince them about the

schemes for the rehabilitation of the retiring employees.

Step # 5. Rehabilitation:

The HR management should design training programs to impart new skills among the retiring employees to

make them re-employable. He should also arrange out placement services for the retiring employees.

MEAN

oluntary Retirement Scheme (VRS) – Introduction and Meaning

In the present globalised scenario, right sizing of the manpower employed in an organization has become an

important management strategy in order to meet the increased competition. The voluntary retirement scheme

(VRS) is the most human technique to provide overall reduction in the existing strength of the employees. It is a

technique used by companies for trimming the workforce employed in the industrial unit.

It is now a commonly used method to dispense off the excess manpower and thus improve the performance of

the organization. It is a generous, tax-free severance payment, to persuade the employees to voluntarily retire

from the company.

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It is also known as ‘Golden Handshake’ as it is the golden route to retrenchment. Downsizing of the work force

generally implemented through VRS in India, and the Industrial Disputes Act, 1947 puts restrictions on

employers in the matter of reducing excess staff by retrenchment, by closures of establishment and the

retrenchment process involved lot of legalities and complex procedures. Also, any plans of retrenchment and

reduction of staff and workforce are subjected to strong opposition by trade unions.

Hence, VRS was introduced as an alternative legal solution to solve this problem. It allowed employers

including those in the government undertakings, to offer voluntary retirement schemes to off-load the surplus

manpower and no pressure is put on any employee to exit.

The voluntary retirement schemes were also not subjected to not vehement opposition by the Unions, because

the very nature of its being voluntary and not using any compulsion. It was introduced in both the public and

private sectors. Public sector undertakings, however, have to obtain prior approval of the government before

offering and implementing the VRS.

VRS is different from downsizing because here employee are asked to retire voluntarily and are not laid off by

force. Secondly, in VRS employees are given attractive severance package whereas in downsizing they are not

given any monetary or non-monetary benefits.

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VRS refers to a scheme of an option given by the organization to its employees to retire before superannuation

(i.e., before the actual date of retirement) in exchange for additional severance payment and benefits.

VRS is based on mutual agreement between the employer and employees, under which an employee agrees to

voluntarily separate from the organization on payment of agreed compensation by the employer. VRS is also

known as ‘early retirement buyout’ (because the organization buys the retirement of an employee before

superannuation by paying for it) and ‘golden handshake’ (because both the employer and the employee happily

bid a final goodbye to each other).

VRS is not new to the Indian corporate sector and has been practised in the past by many organizations,

including public sector enterprises. However, the scale was not large enough to attract attention. Bharat Heavy

Electricals Limited (BHEL), a public sector enterprise, launched VRS in 1988. The response from its nation-

wide workforce, however, was lukewarm.

VRS came back into the limelight post 1991, when economic liberalization was ushered in India. This time,

many organizations actively sought a congenial solution to the problem of over-staffing, something that was

eating into their profits without adding anything to it. VRS provided them with the solution to deal with it and

become more competitive in a liberalized market.

ADVERTISEMENTS:

Downsizing of workforce is generally implemented through Voluntary Retirement Scheme (VRS). Under this

scheme, the organisation and its employees enter into a mutual agreement under which employees agree to

voluntarily retire on payment of agreed compensation by the employer.

VRS has come to be recognized as GOLDEN HANDSHAKE because of the benefits for both the employees

and the employers. The employees get handsome amount under the VRS package and the employers save

recurring fat wage bills in the long-run.

VRS has been used in India as a part of downsizing strategy to cut the size of the wage bill. VRS has been

executed in both public and private sector undertakings by offering attractive separation package known as

golden handshake’. Such organisations include public sector banks, SAIL, TISCO, Bajaj Auto, Philips India,

Castrol, Hindustan Unilever Ltd. etc.

Voluntary retirement scheme is a method used by companies to reduce surplus staff. This mode has come about

in India as labour laws do not permit direct retrenchment of unionized employees.

H.L. Kumar, noted legal advisor states ‘voluntary’, means without compulsion— willingly. Voluntary is an act

on the part of the employee to give up employment willingly and without compulsion from the employer. It is a

unilateral act on the part of an employee to cease the contract of employment with the employer. The word

“voluntary retirement” received legislative recognition in 1953, when section 2(00) was engrafted in the

Industrial Disputes Act. The said Section 2(00) asserts that retrenchment does not include voluntary retirement

of the workmen.

EXIT INTERVIEWS

exit interview

An exit interview is a wrap-up meeting between management representatives and someone who is leaving an

organization, either voluntarily or through termination. 

Exit interviews are common in business, education and government environments. The purpose of the interview

is to gather useful feedback that can help guide future practices and improve recruiting and retention.  

In a corporate environment, exit interviews are usually conducted by human resources (HR) personnel.

Alternatively, depending on the size of the company and other factors, interviews may be conducted by

management or outsourced to an HR service provider. 

The interview may be conducted in person, over the phone, through chat or email, or in an online survey. In

general, interactive methods are considered more useful than surveys because they allow interviewers to respond

to the employee and develop follow-up questions that can yield more in-depth information. 
The specific questions asked in an exit interview vary for terminated employees and those leaving voluntarily.

For an employee leaving voluntarily, the most important question is "Why?" If they repeatedly hear particular

reasons for leaving, the business may be motivated to review practices, pay scales and benefits, among other

things. 

Whether an employee quits or is fired, it may be profitable to ask what they liked most about the job and what

they liked least. If a number of employees mention problems working with a particular manager, for example,

that is an issue that should be explored. When an employee is fired for inadequate performance, it can be useful

to ask if they believe business practices or other corporate issues contributed to the problem. 

The exit interview is also an opportunity to provide the employee with information about any benefits and pay

yet to be disbursed and any agreements in force between the business and the employee. 

Although exit interviews are often company policy, they should always be voluntary. 

Definition: The Exit Interview is conducted at the time an employee is separating from the organization. The
main purpose of the exit interview is to determine the employee’s reason for departure.

Through this interview, the organization can get an effective feedback from the departing employee and can
assess the weakness and the strength of a firm. It is often recommended to have a face-to-face interview with the
departing employee in order to have an effective communication and to give him the sense of how important he
was for the organization.

Exit Interview

January 14, 2020 By Prachi M Leave a Comment

Definition: Exit interview is a human resource practice carried out by the organization to gain valuable
feedback from the employee who is leaving the organization. It is a standard procedure to obtain insights on the
company’s strengths and weaknesses, as perceived by the leaving employee.

In an exit interview, an interviewer can be an HR representative, manager, owner or any other person like a
third-party consultant. An interviewee is a person who is terminating his/her services in the organization.

Content: Exit Interview

1. Purpose
2. Questions
3. Template
4. Methods
5. Process
6. How to make exit interviews useful?

Purpose of Exit Interviews

For companies, time is equivalent to money. Then why do they invest their ample time in carrying out exit
interviews?

This is because such practice can set human resource benchmarks for the companies in the following ways:

 Acquire Constructive Feedback: Exit interview is essential to know the unseen strengths and
weaknesses of the company from the employee’s perspective.
 Gather Information on Managerial Effectiveness: It is a useful method for evaluating the manager’s
efficiency and leadership skills in the work environment.
 Build a Positive Brand Image: When the employees can share their grievances within the company
premises, they feel satisfied and speaks positively in public.
 Understand the Prevailing Human Resource Issues: An exit interview can unfold many pages of
the human resource management flaws prevailing in the company.
 Become Aware of Competitor’s Human Resource Benchmarks: If the employee is about to join a
competitive firm, the management can get the idea about the human resource standards and practices of
the competitor.
 Find Out the Scope for Improvement: The exiting employee can throw light upon the human
resource shortcomings which have not been considered by the company yet.
 Learn about Employee’s Perspective: Every personnel has a different opinion about the company,
the job, the people and the work environment. Since the employee would convey this impression to the
outside world, the company must be aware of it.

Exit Interview Questions

An exit interview is vital for every organization, whether it is a substantial corporate or a small business entity.

Now we are going to discuss some critical EI questions and the insights that each of them provides to the
management:

Were you satisfied with the job profile?

This question is merely asked to know if the employee has any role ambiguity or dissatisfaction from the duties
assigned to him/her.

Did you ever intend a long-term association with the organization?

It facilitates the management to understand whether the employee was serious about the job or he/she took it up
as a temporary or secondary option.

How did you perceive your career goals in this company?

This is to find out about the future expectations and career objectives of the personnel if he/she remained
associated with the organization for an extended period.

What is your opinion about your manager or supervisor?

This question can prove to be a landmark to ensure the manager’s efficiency and his/her leadership style.

What is your opinion about your team?

It analyzes the human resource planning abilities in the context of the composition, quality, interpersonal
relationship and performance of the group or team, in which the exiting employee was placed.

Were you satisfied with your remuneration and other benefits?

Here, the company can determine if their remuneration system meets employee expectations. Also, if the
competitors have a stronger compensation model through which they may attract the company’s top talents.

Was sufficient training provided to you?

This question helps to find out the loopholes in the training and development process of the company.

Do you think that the resources provided to you for task accomplishment were adequate?

The company can take note of any hindrance in production, due to lack of sufficient tools, amenities and
resources.

What are the benefits offered by your new company?

If the employee is leaving the job to avail a better opportunity, the company can analyze and compare the
additional benefits which the employee’s new company is providing.

According to you, what improvements shall we make to retain our valuable resources?

This is the most valuable information for the company. The exiting employee may enlighten some significant
reasons for increasing employee turnover.

Also, it helps in strengthening the organization’s human resource strategies which may have been ignored for an
extended period.

Exit Interview Template

Before organizing an exit interview, the management first needs to prepare itself. Some companies even conduct
EIs of the involuntarily terminated personnel. The interview questionnaire must be modified according to the
termination reason.

The questions should be framed such that they have the potential of seeking maximum information. The
sequence of questioning plays a significant role in engaging the employee and acquiring valuable feedback.
Given below is a sample of employee exit form, which has been drafted by considering the above questions:

An exit interview data is highly confidential in terms of an individual’s identity. It should not be formally or
informally disclosed among the staff or the management.

Methods of Conducting Exit Interviews

How is an exit interview carried out? What all modes do the interviewer has for it under different
circumstances?
Exit interviews usually proceed through personal interaction; however, the company has other means too for
such practice. Let us understand the four prominent ways of taking exit interviews:

In-Person: This is a frequently used method of exit interviews where the interviewer engages in a one to one
conversation with the interviewee (departing employee).

This type of EI is carried out in the office premises itself. The interviewer has to enter the gathered information
in the system physically.

Online: This kind of exit interview is popular in the globally operating companies. The departing employee is
asked to take the exit interview on the company’s website.

It provides authentic information and also facilitates automatic data-keeping through the information system.

Paper and Pencil: On the leaving date, the EI form is manually presented or mailed to the leaving employee. It
is an elaborated form with multiple questions.

However, many times, employee hesitate in giving an honest review or even avoid submitting the form.

Telephone: A representative from a third party or the HR team reaches out the leaving employee over a phone
call to carry out the exit interview.

However, it is an inefficient method due to excessive cost involved in it.

Exit Interview Process

The process of an exit interview varies for every organization. However, the steps discussed below are generally
adopted by many companies:
The exit interview is initiated as soon as the employee serves a notice period or a letter of retirement to his/her
respective head.

Next, the supervisor or manager contacts the human resource department to notify the employee’s decision. The
HR team confirms the information and then calls the respective personnel for an exit interview.

While many companies go for in-person exit interviews; some may adopt any of the other methods as per the
convenience of the interviewer and the interviewee.

Finally, the interview is accomplished, and useful information is stored for further analysis.

After the examination of the data, the HR team compiles the critical information in a report which is late
submitted to the senior authorities.

How to make exit interviews useful?

An exit interview can prove to be a milestone in the growth of the organization. Therefore, negative words and
questions should be avoided to create an impact on the interviewee.

Also, the interviewer needs to be attentive and responsive in the whole conversation to develop trust and
comfort. The points enumerated by the interviewee should be given due consideration while analyzing the
information.

The most important of all is that the interviewer should be the person who holds a good reputation among the
workers. He/she should be considered reliable and sensible enough so that an effective feedback can be initiated.

CHANGING ROLE OF HR IN KNOWLEDGE ERA

Introduction
 Liberalization, Privatization, and Globalization have influenced all segments of society. While the
impact is minimal in some sectors, it is widespread in others. Business organizations in India, therefore, not only
face competition from global players, but more so from the domestic players. Therefore, organizations need to
be more innovative, competitive, and proactive in their endeavours. There is an urgent need to anticipate,
advocate, and accelerate the change processes in the business environment and act accordingly. The gaps that
demand attention in organizations, especially from HR functionaries, are talent gaps, knowledge gaps, and
strategy gaps. It becomes essential, then, to redefine and transform HR practices from the traditional reactive
approach to those that can anticipate business needs and provide solutions for them.
Knowledge is the full utilization of information and data, compelled with the potential of people’s
skills, competencies, ideas, intuitions, commitments and motivations. Knowledge is more relevant to sustained
business then capital and land. Nevertheless it remains the most neglected asset.
A holistic view considers knowledge to be present in ideas, judgments, talents, root causes,
relationships, perspectives and concepts. Knowledge is stored in the individual brain or encoded in
organizational processes, documents, products, services, facilities and systems. Knowledge is the result of
learning which provides the only sustainable competitive advantage. Knowledge is action, focused innovation,
pooled expertise, special relationships and alliances. Knowledge is value-added behavior and actions.
Knowledge management is an audit of intellectual assets that highlights unique sources, critical
functions and potential bottlenecks which hinder knowledge flows to the point of use. It protects intellectual
assets from decay, seeks opportunities to enhance decisions, services and products through adding intelligence,
increasing value and providing flexibility. Knowledge management complements and enhances other
organizational initiatives such as total quality management (TQM) business process re-engineering (BPR) and
organizational learning, providing a new and urgent focus to sustain competitive position.  
Knowledge management comprises a range of strategies and practices used in an organization to
identify, create, represent, distribute and enable adoption of insights and experience. Such insights and
experiences comprise knowledge, either embodied in individuals or embedded in organizations as processes or
practices.
Knowledge management efforts typically focus an organizational objectives such as improved
performance, competitive advantage, innovation, the sharing of lessons learned, integration and continuous
improvement of the organization. Knowledge management efforts overlap with organizational learning and may
be distinguished from that by a greater focus on the management of knowledge as a strategic asset and a focus
on encouraging the sharing of knowledge. 
Knowledge Management - A Key Emerging Area
·        According to Webster’s Dictionary, Knowledge is the fact or condition of knowing something with familiarity
gained through experience or association. Knowledge refers  to ideas or understanding which an individual
possesses, and those that are utilized effectively for goal realization.
·        Knowledge Management is defined as the systematic process of finding, selecting, organizing, and resenting
information in a way that improves employees’ comprehension in a specific area of interest.
A simple definition of knowledge management is that it is ‘about connecting people to people and
people to information to create competitive advantage’. In other words, it is the systematic process of finding,
selecting, organizing, distilling, and presenting information in a way that improves an employee’s
comprehension in a specific area of interest. It helps an organization to gain insight and understanding from its
own experiences.  Knowledge management is first and foremost a management discipline that treats intellectual
capital as a managed asset.
Important Functions of Knowledge Management
 Knowledge management functions are associated with different departments in different organizations.
It may be combined with quality, sales, HR, innovations, operations etc and are likely to be determined by the
knowledge management motivation of that particular organization. 
Knowledge management is the collection of processes that govern the creation of knowledge.
Knowledge management is concerned of knowledge, dissemination of knowledge, and the utilization of
knowledge.
Knowledge management means the ability to manage knowledge another term is information
management, this term came about when people realized that information is a resource that can and needs to be
managed to be useful in an organization. Organizations are now starting to look at ‘knowledge’ as a resource as
well.
i)                   Knowledge Analysis: It is necessary step for the ability to manage knowledge and always its usefulness, its
weaknesses and its appropriateness within the organization.
ii)                 Knowledge Planning: When an organization has a grip on its knowledge, it will be able to plan for the
future. An organization will now be able to develop a multi - year knowledge plan that defines how the
organization will develop its knowledge resources things training and development programmed.                      
Dimensions of Knowledge Management
A dimension of knowledge distinguishes between tacit knowledge and explicit knowledge. 
ð Tacit Knowledge: It represents internalized knowledge that an individual may not be consciously aware of, such
as how he or she accomplishes particular tasks.
ð Explicit Knowledge: It represents knowledge that the individual holds consciously in mental focus, in a form that
can easily be communicated to others.
Hayes and Walsham describe content and relational perspectives of knowledge and knowledge
management as two fundamentally different epistemological perspectives. Knowledge is easily stored because it
may be codified, while the relational perspective recognizes the contextual and relational aspects of knowledge
which can make knowledge difficult to share outside of the specific location where the knowledge is developed.
Process of Knowledge Management
                The process of knowledge management covers information (both internal as well as external),
experiences of the employees, and details of the systems/ process. The aim is to empower employees with the
required information and knowledge in order to improve their performance and productivity. The process of
knowledge management consists of other sub-processes starting from identifying knowledge to retrieving and
reusing organizational knowledge.
Knowledge Management Strategies
Knowledge may be accessed at three stages: before, during and after. knowledge management – related
activities. Different organizations have tried various knowledge captures incentives, including making content
submission mandatory and incorporating rewards into performance measurement plans. Considerable
controversy exists over whether incentives work or not in this field and no consensus has emerged. 
i). Push Strategy: The strategy to knowledge management involves actively managing knowledge. In
such an instance, individuals strive to explicitly encode their knowledge into a shared knowledge repository,
such as a database, as well as retrieving knowledge they need that other individuals have provided to the
repository. This is also commonly known as the codification approach to knowledge management.
ii). Pull Strategy: The strategy to know involves individuals making knowledge requests of experts
associated with a particular subject on an ad hoc basis. In such an instance, expert individuals can provide their
insights to the particular person needing this. This is also commonly known as the personalization approach to
knowledge management
Knowledge Management System
Knowledge management system refers to a system for managing knowledge in organizations for
supporting creation, capture, storage and dissemination of information. It can comprise a part   of a knowledge
management initiative. The idea of knowledge management system is to enable employees to have ready access
 to the organization’s documented based of facts, sources of information, and solutions. For example, a typical
claim justifying the creation of a knowledge management system might run something like this: an engineer
could know the metallurgical composition of an alloy that reduces sound in gear systems. Sharing this
information organization wide can lead to more effective engine design and it could also lead to ideas for new
improved equipment.                             
Role of Knowledge Managers
Knowledge manager’s role has evolved drastically from that of one involving the creation and
maintenance of knowledge repositories to one that involves influencing the culture of an organization toward
improved knowledge sharing, reuse, learning, collaboration and innovation.
Knowledge managers have varied backgrounds ranging from information sciences to business
management. An effective knowledge manager is likely to be someone who has a versatile skills portfolio and is
comfortable with the concepts of organizational  behavior and culture, processes, branding and marketing and
collaborative technology.
Managing Knowledge Workers
The globalization of work and continuing advances in technology are changing the nature of the
workforce. Information specialists called knowledge workers are equipped to maintain and expand the
technological leadership role in the next century are replacing blue-collar workers.
The profile of knowledge workers is completely different from that of other types of workforce.
Knowledge economy derives its strengths from use of knowledge of its HR. Human resource in knowledge
economy are known as knowledge workers. Though the concept of knowledge workers may include all HR who
are primarily engaged in getting things done through the use of knowledge.   
Knowledge workers are also called gold-collar workers, who are sometimes known by their
professional specialists, for   example, lawyer, doctor, programmer, information system designer, information
specialist, librarian, teacher, and scientist. Knowledge workers are also known for their special characteristics.
They are HR who can analyse, synthesize, and evaluate information and use that information to solve various
problems.
The way of describing knowledge workers is by their skills and abilities: people who are highly
educated, creative, computer literate, and have portable skills that make it possible for them to move anywhere
their intelligence of talent are needed. The employees in the IT industry are the best examples befitting this
concept.
Knowledge workers basically use their intellect to transform ideas, products, services, and processes.
They own the knowledge, utilize it, and still own it. Their main value to an organization is their ability to gather
and analyse information and make decisions that will benefit the company. They are also involved in a
continuous learning process as they are aware that knowledge has a limited shelf life.
Knowledge workers tend to be different from other workers; they have certain unique personality and
occupational characteristics. Because of unique characteristics of knowledge workers, managing them
effectively poses serious challenges before HR professionals. Following characteristics of knowledge workers
are important from HRM point of view:
a)     Challenging jobs.
b)    Autonomy
c)     Immediate feedback and reward
d)    Professional commitment
e)     Lifestyle
Based on the above characteristics of knowledge workers, HR professionals have to; (i) recruit and
select those knowledge workers who fit with overall job requirements. Only technical competence of knowledge
workers should not be taken into consideration.  Realizing the importance of  knowledge economy and the role
of knowledge workers therein many companies in knowledge economy have changed the name of their HR
department to knowledge management department.      
The important aspect is that the performance of an individual, organization, industry, or country in
acquiring and applying knowledge will increasingly become the key competitive factor for success and income.
In the long run, societies will emerge as knowledge societies. 
New technologies, which are taking over many of the routine tasks performed in the workplace, are
directing workers towards the more complex tasks that require thinking, understanding, assimilating, new
knowledge, and problem solving. The time-saving aspects of new technologies not only free employees for
more sophisticated tasks but also increase pressure on them to develop new skills that will enable them to
participate in the knowledge revolution that reflects the changing nature of the workplace.
Research indicates that organizations hire knowledge workers and leave them alone. They do not
employ quality measurements, Six Sigma, re-engineering, etc.,  or formally attempt to observe the flow  of
work. Further, they are not benchmarked, and there is no accountability for the money and time spent on their
activities. Even if these assessments are attempted, the measurement yardsticks are varied and subtle. 
In knowledge organizations, however, it is each worker’s knowledge and intelligence that combine to
form the means of production. The organization cannot control or own that. A worker can leave at any time,
taking the means of production with him or her. Companies need to learn to look at employees as assets to be
valued rather than as costs. The value in a knowledge company lies in the minds of the employees more than it
does in the machinery on the factory floor.
Knowledge workers are essentially investors. They make discretionary choices as to how and when
their energies and skills may be invested in their companies. The decision to invest or apply the skill may be
contingent on (a) ability, (b) motivation, and (c) opportunity available.
Organizations across different sectors are attempting to identify ways to manage knowledge workers.
The methods being used include flexible work hours and environment, accommodation and furnishing
arrangements for the employees and their families, opportunities for overseas scholarship, presentation of papers
in conferences or workshops, holidays with family members, celebration of  events etc. 
Another vital requirement in managing the knowledge worker is developing an internal infrastructure
in the communications area. This can be facilitated by email to all by way of virtual private net-workers and
cohesive distributed systems and having a standard organizational vocabulary. Any piece of information or
direction can be communicated instantly. The knowledge worker would gain by this process and it would
enhance their self-esteem.
Peter F. Druker stated that a knowledge worker shines in a team. Employee teams may be encouraged
to meet, discuss, exchange, and build ideas, with no boundaries and constraints of operations. Coaching and
mentoring may be the process involved. An open environment, easily accessible information or database, clarity
in performance expectations and goals, and immediate feedback would enhance the self-esteem of the
knowledge worker.
Boosting the motivation levels of knowledge workers is critical to their performance. It is observed that
knowledge workers tend to openly communicate the meaning of their work and are inclined towards information
sharing. The knowledge workers appreciates autonomy. They prefer to make their own decisions within their
sphere of competence. They seek the jobs where abilities get manifested. The organizations may also take up
wide participative management programmes, strengthen their communication channels, and make resources
available for their employees. To provide a framework that would enhance the motivational levels of the
knowledge worker. However, since knowledge workers will dominate the future workforce in organizations, the
management must concentrate on how to retain, maintain, and motivate them.                    

MERGERS AND ACQUISITIONS

What is Mergers & Acquisitions?
Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating the two
terms, Mergers is the combination of two companies to form one, while Acquisitions is one company taken over
by the other. M&A is one of the major aspects of corporate finance world. The reasoning behind M&A
generally given is that two separate companies together create more value compared to being on an individual
stand. With the objective of wealth maximization, companies keep evaluating different opportunities through the
route of merger or acquisition.

Stages involved in any M&A:

Phase 1: Pre-acquisition review: this would include self assessment of the acquiring company with regards to
the need for M&A, ascertain the valuation (undervalued is the key) and chalk out the growth plan through the
target.
Phase 2: Search and screen targets: This would include searching for the possible apt takeover candidates.
This process is mainly to scan for a good strategic fit for the acquiring company.
Phase 3: Investigate and valuation of the target: Once the appropriate company is shortlisted through primary
screening, detailed analysis of the target company has to be done. This is also referred to as due diligence.
Phase 4: Acquire the target through negotiations: Once the target company is selected, the next step is to
start negotiations to come to consensus for a negotiated merger or a bear hug. This brings both the companies to
agree mutually to the deal for the long term working of the M&A.
Phase 5:Post merger integration: If all the above steps fall in place, there is a formal announcement of the
agreement of merger by both the participating companies.
Process of Merger and Acquisition

The process involving merger and acquisition is important as it can dictate the benefits derived from the deal.
The process involves the following steps:
Preliminary Valuation

This step primarily focuses on the business assessment of the target company. Not only the latest financials of
the target company are scrutinized, its expected market value in future is also calculated. This close analysis
includes the company’s products, capital requirements, brand value, organizational structure, etc.

Proposal Phase

Once the target company’s business performance is analyzed and reviewed, the proposal for the business
transaction is given. It could be either a merger or an acquisition. Generally, the mode of giving a proposal is an
issuance of a non-binding offer document.

Planning for Exit

After the proposal is given to the target company and it takes the offer, the target company then engages in
planning for the exit. This includes planning the right time to exit and considering all the options such as a full
sale or partial sale. This is also a time for tax planning and evaluating the reinvestment options.
Marketing

Once the exit plan is finalized, the target company engages in a marketing plan and aims to achieve the highest
selling price.

Agreement

In the case of an acquisition deal, the purchase agreement is finalized. In the case of a merger, the final
agreement is signed.

Integration: This is the final step that involves the complete integration of the two companies. It is important to
ensure that the same rules are followed throughout in the new company.
Advantages of Mergers and Acquisitions

The following are the advantages of the mergers and acquisitions:

Synergy

The synergy created by the merger of two companies is powerful enough to enhance business performance,
financial gains, and overall shareholders value in long-term.

Cost Efficiency

The merger results in improving the purchasing power of the company which helps in negotiating the bulk
orders and leads to cost efficiency. The reduction in staff reduces the salary costs and increases the margins of
the company. The increase in production volume causes the per unit production cost resulting in benefits from
economies of scale.
Competitive Edge

The combined talent and resources of the new company help it gain and maintain a competitive edge.

New Markets

The market reach is improved by the merger due to the diversification or the combination of two businesses.
This results in better sales opportunities.

Disadvantages of Mergers and Acquisitions

The following are the disadvantages of the mergers and acquisitions:

Bad for Consumers

With the merger, competition can reduce the industry and the new company may have higher pricing power.
Decrease in Jobs

A merger can result in job losses. An acquiring company may shut down the under-performing segments of the
company.

Sometimes Dis-economies of Scale

The increased size may lead to dis-economies of scale for the new company. It may not have the control
required for running a bigger company.

Conclusion:
Though mergers and acquisitions are considered as synonyms, both the business combinations are different in
their own ways. A company needs to understand the process and the resulting advantages and disadvantages
well to appreciate the complexities involved.

OUTPLACEMENT

What is Outplacement?
Outplacement is any service that assists a departing employee with obtaining a new job or transitioning to a new
career. Access to outplacement services is offered by some employers as an employee benefit for their staff.
Outplacement services can be beneficial for all parties monetarily, professionally, and emotionally and, more
often than not, ensure a peaceful end to a working relationship.

Definition: Outplacement
Outplacement is a process of facilitating a terminated employee's search for a new job by providing professional
services, counselling, paid for by the former employer. It is done generally done by a downsizing company
which pays for the services of a third-party company to assist their laid-off employee to seek new employment.
The assistance provided maybe in the form of resume writing, salary negotiation advice, resume distribution to
employment agencies and head hunters, cover letter writing and career counselling.

OUTPLACEMENT PROCESS: 10 THINGS TO CONSIDER FROM YOUR PROVIDER

1. Engagement: Does the outplacement provider proactively engage your employees both initially and ongoing
and how? Is their overall outplacement process intuitive? Is it easy for an employee to know what to do and
when? Are there guides to help participants through the outplacement process? If the services aren't simple to
navigate and easy to understand, you are wasting your company's money and your employee's time.
2. Accessibility: Does the provider offer flexible hours throughout the outplacement process? Can their services
be accessed multiple ways? Depending on your employee's needs, the flexibility to access services in off-hours,
including nights and weekends, can be invaluable.
3. Flexibility: Does the provider offer the flexibility to effectively meet your demand for the service through the
entire outplacement process? Look for a provider that is willing to be innovative to meet your needs and has the
ability to ebb and flow with your succession and workforce plan.
4. Personal and Personalized: Is there a human element to the service? Is the service personalized to each
individual? Virtual benefits aside, losing the personal touch in a career transition program is almost never a
good idea. The most effective providers incorporate this smoothly throughout the outplacement process as a
baseline, and also have some element of personal attention and customization within the outplacement offering.
5. Service- Focused: What is the provider's service delivery model throughout the outplacement process? How
much of their business is focused on outplacement? What is the account management structure and the
experience? How will they communicate with you? All of your HR Technology vendors should practice great
services but it's especially important when looking at outplacement providers.
6. Strategic Partner: How will the provider support you more strategically during a RIF or layoff? Finding an
outplacement provider that can be a service partner, as well as offering a product or platform for your
transitioning employee, is a baseline need for your organization. With all the discussion surrounding HR being
an integrated and efficient function, it makes sense to look for a partner, rather than just a vendor.
7. Technology: How does the provider leverage technology to support their service and speed a person's
transition throughout the entire outplacement process? Are they using best-in-class practices such as
gamification? Social media? Personalization? How much do they spend on R&D? How frequently do they
enhance their technology? In today's job seeker world, technology is critical for both speed and efficiency. A
lack of focus and investment in the most advanced technology throughout the outplacement process will be a
detriment to both your employee and the company.

What Are the Steps in the Outplacement Process?

To put it simply:
A laid off employee is onboarded by the outplacement firm
An expert coach does a ‘Needs Assessment’
Based on that assessment, the firm writes a resume, creates social accounts, and starts the networking
process
The participant is given access to online tools for self-learning
Using various platforms, the participant applies for specific jobs
Interviews are prepared for
The participant gets placed in a new role
8. Strategic Partnerships: What strategic partnerships has the outplacement provider established through out
their outplacement process? Look for a vendor who has advantageous partnerships. Outplacement providers
should be able to point to partnership opportunities that will benefit the job seeker.
9. Proof Points: What metrics can the outplacement provider supply? What are their clients saying? How do
they measure satisfaction? When considering a provider, pay attention to proof that the services work
throughout the entire outplacement process. While many outplacement providers have different ways of proving
their system works, the very least you should find is one that can be verified. Comparing the results from an
outplacement provider against widely available statistics can help make choosing a platform simpler.
10. Pricing: What is the pricing model? What services are included in the pricing? Prices vary widely and the
devil is in the details. Look for a provider who is willing to understand your needs and able to work flexibly
with you on creative solutions and pricing throughout the outplacement process.
All ten of the items above should be addressed by a provider when discussing their outplacement process. It is
important to ask questions similar to those above to gain a solid understanding of what to expect in every step of
the outplacement process. 
HR FUNCTIONS OF OUTSOURCING

Step 1: Identify Key HR Initiatives

First, it’s important for HR to let go of the idea that it can be all things to all people. Define HR’s strategic role
in your company. Go back to the basics and write up some good old-fashioned job responsibilities for HR.

Focus on how HR drives the company’s overall mission. Decide what HR tasks are special to your company and
important to the culture.

Step 2: Consider Which Functions Can Be Outsourced

Any roles HR is currently managing that fall outside of the sweet spot you have identified should be considered
for outsourcing. There are good outsourcing firms that can efficiently handle activities like
relocation, temporary staffing, background checks, and drug screening. While these processes are very
important to the operation of the company, they do not drive the strategic mission of the organization.

Even a critical function like regulatory compliance should be considered for outsourcing. HR compliance
requires constant attention to stay up to date on the latest regulations and legal decisions. Most HR departments
don’t have that kind of expertise on staff.

Outsourcing to a specialist can provide added insurance against the financial penalties and bad publicity that
result from compliance gaffes like failure to properly classify independent contractors, for example.

Step 3: Create a Team of Internal and External Specialists

A company that enlists outside specialists to supplement on-staff talent is cultivating a strong team of HR
professionals. In this era of lean management, most HR departments are not going to be able to have an on-staff
expert to manage every HR issue.

Step 4: Find a Trusted Partner or Partners

Concerned that you’ll compromise quality if you outsource certain HR functions? You can maintain control of
important HR functions and help HR become a more efficient and effective player, but you need to find trusted
partners. Do your homework.

Compare benefits, the associated costs, and approaches of different firms. Conduct background checks to ensure
the outsourcing firm’s reputation is solid. Be sure the Better Business Bureau accredits the firm, and talk to
other companies that have used the firm. Read all proposals carefully. Make sure you understand the value you
will receive in doing business with a particular vendor.

Step 5: Explore a Plug-and-Play Solution

One outsourcing option that works for some companies is to contract with a group purchasing
organization (GPO). A GPO provides access to qualified, prior negotiated contracts with staffing firms,
managed service providers and others. This arrangement can be a convenient, efficient, and cost-effective one-
stop shop for a range of HR outsourced services.

Companies avoid the time and effort required for negotiating and managing multiple contracts. The GPO vets
the best suppliers, leverage relationships to secure competitive contracts, and helps a company secure the
resources it needs.

The majority of the GPO market in the United States is focused on healthcare procurement. The major GPOs in
this space are making purchases more than $200 billion annually for their hospital and related industry clients.
 There are no reliable statistics on the size of the corporate GPO market, which is newer, smaller and more
fragmented, and in general more focused on procurement than HR outsourcing. According to a 2011 study by
the procurement media site Spend Matters, 15-20 percent of Fortune 1000 companies are now using a GPO, and
85 percent of those companies reported savings of 10 percent or more.

Step 6: Consider a Complete Outsourcing of HR

For certain companies, it may make sense to consider a professional employer organization (PEO). A PEO takes
over all of a company’s HR functions by literally hiring the company's employees and becoming their employer
of record for tax and insurance purposes. The practice is known as co-employment or joint employment.

Through a PEO, the employees of small businesses gain access to employee benefits such as 401(k) plans;
health, dental, life, and other insurance; dependent care, and other benefits typically provided by large
companies. According to the National Association of Professional Employer Organizations (NAPEO),
approximately 250,000 businesses use PEOs.

What is outsourcing?

Outsourcing is a business practice in which services or job functions are farmed out to a third party. In
information technology, an outsourcing initiative with a technology provider can involve a range of operations,
from the entirety of the IT function to discrete, easily defined components, such as disaster recovery, network
services, software development or QA testing.

Companies may choose to outsource IT services onshore (within their own country), nearshore (to a neighboring
country or one in the same time zone), or offshore (to a more distant country). Nearshore and offshore
outsourcing have traditionally been pursued to save costs.

Outsourcing benefits and costs

The business case for outsourcing varies by situation, but the benefits of outsourcing often include one or more
of the following:

 lower costs (due to economies of scale or lower labor rates)

 increased efficiency
 variable capacity
 increased focus on strategy/core competencies
 access to skills or resources
 increased flexibility to meet changing business and commercial conditions
 accelerated time to market
 lower ongoing investment in internal infrastructure
 access to innovation, intellectual property, and thought leadership
 possible cash influx resulting from transfer of assets to the new provider

Some of the risks of outsourcing include:

 slower turnaround time

 lack of business or domain knowledge
 language and cultural barriers
 time zone differences
 lack of control

What Is Outsourcing?
Outsourcing is the business practice of hiring a party outside a company to perform services and create goods
that traditionally were performed in-house by the company's own employees and staff. Outsourcing is a practice
usually undertaken by companies as a cost-cutting measure. As such, it can affect a wide range of jobs, ranging
from customer support to manufacturing to the back office.
Outsourcing was first recognized as a business strategy in 1989 and became an integral part of business
economics throughout the 1990s. The practice of outsourcing is subject to considerable controversy in many
countries. Those opposed argue that it has caused the loss of domestic jobs, particularly in the manufacturing
sector. Supporters say it creates an incentive for businesses and companies to allocate resources where they are
most effective, and that outsourcing helps maintain the nature of free-market economies on a global scale.

EMPLOYEE LEASING

Definition
Popular Terms
Arrangement in which a firm (called subscribing firm) transfers its employees to another firm (called
leasing firm) which specializes in human resource management, payroll accounting, and risk
administration. The subscribing firm leases its employees back as employees of the leasing firm and
usually pays more for their services than their salaries at the time of transfer. This way the payroll and
associated expenses and taxes of the leased employees become the leasing firm's liabilities.

The concept of Employee Leasing

Employee leasing deals with the concept of having an efficient authority that cannot only hire workforce for you
but also manages the HR functionalities. This way, you will be free from the administrative complexity of
managing the workforce.

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The leasing company can work on a number of areas such as payroll, keeping records and similarly many other
works of administration.
There are also times when the lease employees may handle the responsibilities of the permanent staffs of the
organization but without making any changes in the structure of the organization.

PEO will be Assisting you in

 Human Resource Management

 Risk Management
 Payroll and Taxes
 Time and Attendance
 Health Care Benefits
 Flex Benefits
 Ancillary Benefits
 Retirement Plans

Though there are a number of benefits that the organizations enjoy leasing the employees, there are also a few of
the problems that can be caused. Hence, before proceeding ahead to lease the employees for an organization, it
is highly advised to check out the various pros and cons of the concept.

Advantages or Pros of Employee Leasing:

1. The liabilities for business are experiencing certain tasks get reduced:

When a company hires a new employee, then it has to fulfill various tasks that need to be completed on a routine

basis. HR management, workers compensation, paying taxes, benefits administration and payroll are some of

these tasks.

With the use of employee leasing service, the liabilities associated with them are transmitted to the organization

that is carrying the services.

2. Serves as an instant framework for the business:

Structuring the HR department from the very first step seems next to impossible. Most of the small companies

even lack sufficient funds for it.

By availing the advantage of employee leasing, it is possible to install an instant framework for solutions so

that everything required is easily accessible. It supports the business to enter the market more easily.

3. It involves a predictable cost for services:

Employee Leasing offers help in every industry and field that exists presently for a flat rate. Companies or

businesses are aware of the cost that they have to spend to include this framework into their business. It gives

them a better calculation of their yearly expenditure.

Once the contracted rates fit well into their business and offer them convenient access to whatever they require,

businesses can then confidently move towards accomplishing their demands.

4. Better advantages are obtainable for employees:

When employee leasing is available as a service, the leasing company gains access to a better pool of

advantages that can be considered to a local employee base.

It is also a fantastic recruiting tool to direct inexperienced sound people and then be able to retain them. Such

a technique is great support, even when start-ups are not able to serve employees with a competitive salary

structure.

5. Access to competitive and desirable gains:

Agencies that provide employee leasing solutions can control economies of scale and hence can negotiate with

the service providers. This implies that a staffing agency can offer more desirable and competitive benefits, like

extended health insurance, pensions, dental plans, food coupons, schemes and more.

All such facilities are offered by these companies at a much-reduced expenditure than the company can

negotiate on their own.

6. Advanced Performance Management Support:

If company partners with an active agency that manages the performance of employees with scheduled retention

and review programs, then the employees that are hired are offered with support on a regular basis by the

agency.

It is an active management style that is usually not requested by the companies who hire employees. Some

entities select this technique as it enables them for unbiased feedback to be given to both the company and

employee and development and training support to be availed when needed.

7. An extensive HR support:

The process of employee leasing is not only linked with outsourcing the payroll or HR department but also to

offer essential support to their HR department. In most of the instances, medium to small sized companies does

not have enough funds and resources to handle the vital HR functions.
The employee leasing program offers companies the ease to offer an extensive support solution to their HR

department. It is because of the character of the co-employment relationship, partnering with such agencies

can offer wider support to the HR system.

8. Companies can focus on other imperative functions:

The program of employee leasing enables small business managers and owners to spend their time in

performing other vital activities of their businesses. It offers them the ease to avoid engaging into the hassles of

paperwork and other issues related to the hiring procedure.

Around 30 – 40% of the management time is spent on carrying such activities, which can be otherwise spent on

performing other productive activities. It is, therefore, a simple way to focus on other key areas of the business.

9. Legal protections:

There are numerous legal formalities involved in the employee hiring process. The employee leasing program

helps companies to fulfill all sorts of legal formalities with ease and accuracy. Most agencies perform legal

solutions like employment liability insurance, civil defense and more.

In case an employee does not possess complete documents or other essentials that are required for the

designation, then the agencies keep notice of it and make sure that they do not hire any wrong or unprofessional

employee.

10. Offer cost savings solutions:

Most of the agencies that offer employee leasing services are big giants that are involved in this practice over

the years. By hiring services of such agencies, it becomes feasible for companies and businesses to hire

employees at better-negotiated packages and reduced insurance costs.

Although companies have to pay such agencies a desired amount of fee, then the cost is extremely low as

compared to the costs related to the hiring of the employees.

Disadvantages or Cons of Employee Leasing:

1. Less control over employees:

Since the employees are hired by a leasing agency, the company lacks control over it. Most of the times,

employees tend to perform certain functions as per their convenience.

To be concise, the business owners are not able to work as ultimate authority in their workplace, and they have

partial control over the functioning of their employees. In domains like firing and hiring the company lacks

authority and such issues are simply transferred to the customer’s worksite.

2. Lack of communication:

The process of employee leasing adds a greater height of bureaucracy to the overall employment procedure.

When employees possess certain questions related to benefits, payroll or other HR-related functions, then they

communicate directly to the leasing agency and not to the company.

The process is smooth and trouble-free if the agency and company have a very strong and reliable working

relation, which is not in most of the cases. So as a result, there is always a communication gap between the

company and the employee.

3. Issues related to commitment:

If you hire an employee who is bound to develop a long-term working relationship or if you intend to maintain

long-term investment in your hired employees, then the process of employee leasing is not ideal for you.
Most of the employee leasing programs do offer maintenance of the long-term relationship between

the company and the employee. But most of them provide only temporary services and hence make it difficult

to perform necessary employee deployment programs.

4. Impersonal:

Entities that undertake the services of employee leasing agencies are not able to offer an equivalent level

of personalized solutions that they provide to their other employees. In most cases, companies treat differently

the employees that are hired by external agencies.

For this reason, even large number of employees avoids getting hired to an organization through the employee

leasing program. However, it is not always the situation, but still it happens in most of them.

5. Health care transformations:

Organizations that work under the employee leasing program always search for the best deal on the health care

of an employee. For this reason, they may alter health care providers on a continuous basis, which can be

frustrating for the employees.

However, you may still utilize such agencies for administrative purposes and offer health insurance services to

the employees.

6. The employer only defines the hiring standards:

The employee leasing agency is mostly responsible for performing all the activities related to hiring or new

employees. The hiring process is performed by a standard that the employer defines, but even the agency sets

certain hiring criteria.

The employer is not allowed to interfere in the hiring procedure, which results in a lack of control over who

enters the workplace and who is rejected from the post.

7. Leasing agencies history is not beneficial to independently operating businesses:

For companies that intend to operate liberally might not find the historical records or other vital data related to

the employees useful. It is because there are few leasing agencies that perform a poor job, and hence, they are

not able to deliver the companies with adequate results, which the firms intend to avail.

It could also lead to the complete replacement of the HR framework for a small-sized firm. The results that may

lead to the cost of the transfer or fiscal loss or loss of reputation can be troublesome to combat.

8. Lack of employee motivation and loyalty:

Another drawback of the employee leasing process is that in some cases it leads to lack of loyalty

and motivation within the employee who is being hired through such process.

Employees may feel that they are either not an active member of the company or are not involved in

the productive performance of the organization. In such cases, there is also a conflict between leased and

regular employees of the firm, and all this may lead to a reduction in the overall productivity of the organization.

9. The dependency of the company increases:

One major downside of the employee leasing process is that most of the companies develop a dependency on

leasing agencies. In such circumstances, if the agency stops working for the company or if the agency moves out

of the state, then it can generate a huge trouble to the business company.

Sometimes, the business firm can also engage in a legal dispute with the employee as the complete details and

knowledge about the employee is possessed only by the agency.

10. Financial expenditure:

A company hiring the services of a leasing agency has to bear a fiscal debt regarding the fee to be paid to the

leasing agency. Whether an employee sticks to the company or not, or whether an employee can cope with the

company’s demand, if an agency has hired him and if he has been allowed to enter the workplace, then the

business agency has to pay its hiring cost to the leasing agency. It can be troublesome to the companies,

especially of small size.

MEAN

Employee leasing is a contractual arrangement in which the leasing company, also known as a professional
employer organization (PEO), is the official employer. Employment responsibilities are typically shared
between the leasing company and the business owner (you, in this case). You retain
essential management control over the work performed by the employees. The leasing company, meanwhile,
assumes responsibility for work such as reporting wages and employment taxes. Your main responsibility is
writing a check to the leasing company to cover the payroll, taxes, benefits and administrative fees. The PEO
does the rest.

Employee leasing lets you add workers without adding administrative complexity. Employee leasing firms
manage compliance with state and federal regulations, payroll, unemployment insurance, W-2 forms claims
processing, and other paperwork. Some also offer pension and employee assistance programs.

By combining the employees of several companies into one large pool, PEOs can also offer business owners
better rates on health-care and workers' compensation coverage. The net effect can be significant savings of
your time and money.

If you've decided to look into employee leasing and are considering working with a PEO, how can you decide if
that PEO is right for your business? The National Association of Professional Employer Organizations
(NAPEO)makes the following recommendations:

 Look for services that fit your human resources needs. Is the company flexible enough to work with
you?
 Check for banking and credit references and evidence that the company's payroll taxes and insurance
premiums are up to date. Ask to see a certificate of insurance.
 Ask for client and professional references, and call them.
 Investigate the company's administrative competence. What experience does it have?
 Understand how employees' benefits are funded. Do they fit your workers' needs? Find out who the
third-party administrator or carrier is, and whether it is licensed if your state requires this.
 Make sure the leasing company is licensed or registered if required by your state.
 Review the agreement carefully and try to get a provision that permits you to cancel with short notice--
say, 30 days.

HRM CHANGES IN MANAGEMENT CONTROL SYSTEM

Management Control System: Definition, Characteristics and Factors!

Definition and Nature of MCS:
Horngreen, Datar and Foster define management control system “as a means of gathering and using information

to aid and coordinate the process of making planning and control decisions through- out the organisation and to

guide the behaviour of its managers and employees. The goal of management control system is to improve the

collective decisions within an organisation in an economically feasible way.”

Different managers perform different responsibilities in an organisation and therefore different kinds of

information are needed by them to manage the activities in their respective areas. Management control system

should be able to develop, gather and communicate information to management at different levels in the

organisation. Also, management control system should aim to provide financial as well as non-financial

information as needed by different managers.

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Some examples of financial information are material costs, labour costs, net profit, investments made etc. Non-

financial data are those which are not in monetary terms such as production units per worker, labour hours,

machine hours, time taken to comply with the customer’s orders, absenteeism. Some information gathered under

management control system may emerge from internal data maintained within the firm.

Some other information required by managers may be gathered from external sources such as information about

competitors’ product. As stated earlier, different types of information are needed by persons working at different

levels in the organisation. For example, top managers may require internal as well as external financial and non-

financial data as their responsibilities relate to total organisation. However, a production manager would be

more interested in internally generated financial and non-financial data.

Management Control Systems:

Broadly, management control system (MCS) refers to the design, installation and operation of management

planning and control systems.

The term ‘management control systems’ emphasises on two distinct, but highly interrelated and

sometimes indistinguishable, subdivisions of controls systems:

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(i) Structure or organisation structure or relationships among the units in the organisation, more specifically the

responsibility centres, the relationship among responsibility centres, performance measures and the information

that flows among these responsibility centres.

(ii) Process or set of activities, or steps or decisions that are taken by an organisation or managers to establish

purposes, allocate resources and achieve organisational purposes.

The process consists of interrelated phases of programming (programme selection), budgeting, execution,

measurement and evaluation of actual performance.

The structure of a management control system indicates what the system “is” and process of a management

control system indicates what the system “does.” The management control systems knits the organisation

together so that each part, by exercising the autonomy given to it, fulfills a purpose that is consistent with and

contributes to the fulfillment of the overall purpose of the organisation.

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The control system should be designed to achieve unity of purpose through the use of the diverse talents of

individuals in the organisation. The constant requirement of management control is the achievement of unity in

diversity through coordination, in pursuit of short-term objectives and long-term goals.

Management Control System — Formal and Informal:

Management control system includes both formal control system and informal control system. A formal control

system requires that an organisation should have clear-cut rules, procedures, guidelines, plans relating to

different managerial aspects. Such things are needed to guide, direct, motivate the managers and other

employees and coordinate their behaviour to achieve organisational goals.

In an organisation, many formal control systems may exist such as cost accounting system, management

accounting system, production engineering systems, human resource system, quality maintenance system etc.

Informal management control systems are always unwritten and implicit.

However, they contribute greatly in the implementation of business goals and strategies and help the

organisation to attain high degree of motivation and goal congruence. Examples of informal management

control systems are unwritten norms about good behaviour of managers and employees, loyalties, shared values,

organisational culture and ethics, mutual commitments among managers and employees.

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A major objective of management control is to encourage goal congruence, which means that as people work to

achieve their own goals, they also work to achieve the goals of the company. People must have incentives to

work toward the company’s goals. To accomplish that objective, managers must assign responsibilities and

develop performance evaluation criteria that motivate employees to work toward the company’s goals.

A management control system is most effective when it establishes evaluation criteria that encourage goal-

congruent behaviour and is implemented through a responsibility accounting system that employees trust to

report their performance.

Characteristics of Management Control Systems:

Management control systems designed in an organisation should fulfill the following characteristics:

(i) Management control systems should be closely aligned to an organisation’s strategies and goals.

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(ii) Management control systems should be designed to fit the organisation’s structure and the decision-making

responsibility of individual managers.

(iii) Effective management control systems should motivate managers and employees to exert efforts toward

attaining organisation goals through a variety of rewards tied to the achievement of those goals.

Factors Influencing Management Control Systems:

Factors influencing the design of Management Control Systems are as follows:

(i) Size and Spread of the Enterprise:

The size and spread of a large firm is bound to be different compared with that of a small firm. This would

certainly determine the content and nature of the control system for each organisation.
(ii) Organisational Structure, Delegation and Decentralisation:

Statutes and conventions govern organisational structure, and the extent of decentralisation and delegation in all

enterprises. For example, the management philosophy of the State Bank of India is bound to be different from

that of the State Trading Corporation. Also, within an enterprise, the degree of decentralisation and delegation

changes from one point of time to another to meet changed environmental challenges and the opportunities that

these may present. All these influence management control systems practiced in organisations.

(iii) Nature of Operations and Divisibility:

Nature of operations and their divisibility affect management control systems. For example, in the oil industry,

for instance, sub-units can not be formed on the basis of products. In many large trading companies, however,

divisions can be created on the basis of products. Again, in the paper industry, the different stages in pulp

making can not be subdivided for the purposes of management control, though pulp making as a whole can be

regarded as a division.

(iv) Types of Responsibility Centres:

Different control systems are needed for the various responsibility centres or sub-systems within an

organisation. Whether the performance of a responsibility centre should be measured in terms of expenses or

profitability or return on investment depends on the type of responsibility centre. For example, a bank may

apply different performance measures to measure performance of its different branches.

There are transactional differences between branches; some are deposit heavy or advance heavy, some are with

or without safe deposit facilities or foreign exchange transaction. It is, therefore, not possible to have profit as

the sole criteria for performance evaluation of all branches. Hence, control systems with different criteria of

performance should be used for different sub-units.

(v) People and their Perceptions:

Perceptions of people in the organisation about the likely effects of the control system on their work life, job

satisfaction, job security, promotion and general well-being could differ across organisations. These

considerations will significantly influence the nature and content of the management control system needed in

the organisation and must be duly considered while designing management control systems.

HRIS
The Human Resource Information System (HRIS) is a software or online solution for the data entry, data
tracking, and data information needs of the Human Resources, payroll, management, and accounting functions
within a business. It is useful for all processes that you want to track and from which you hope to gather useful
and purposeful data.

Normally packaged as a database, hundreds of companies sell some form of HRIS and every HRIS has different
capabilities. Pick your HRIS carefully based on the capabilities you need in your company. As HRIS has
become increasingly sophisticated, the choice has become enough to practically paralyze an HR department.

Watching a technology company, where computer experts exist, go through three different HRIS systems in ten
years before finally settling on their current system, was an education in their complexity. This is why choosing
an HRIS is a major undertaking for a business.

What is HRIS? 
HRIS or Human Resources Information System is a Human Resources Software used for information storage,
processing, and managing. HRIS helps businesses streamline their employee-related information such as
Employee Personal and Job Information, Payroll and Expenses, Time-off, Performance Evaluations, and
Benefits. Certain HR software also has Applicant Tracking as part of it.
HRIS becomes the one place to go to for all information required to decide actions, curate reports, and track
changes.

The different types of HRIS 

HRIS can be classified into a few types based on the functions it performs. It is used to solve different
challenges or meet different requirements in the HR and Employee Space. The most common classification
comes in these 4 types: 
 

1. Operational HRIS 
HRIS functions that help stakeholders perform certain operations are commonly referred to as Operational
HRIS. For example, the employee information stored on all employees helps the manager and the organization
to fetch them for performing certain functions like placing the employees in the right place within the
organizational structure. Knowing the information on their performances to manage it and review it are also part
of the Operational HRIS. 

2. Tactical HRIS 
Tactical HRIS takes care of the processes that help in decision making for the managers with respect to the
usage of the resources. This includes actions like Recruiting, Job and Design Analysis, Employee Training and
Compensation/Benefits in the organization. 
All these actions require information on the employees, vacancies in the organization, etc., which is done using
Tactical HRIS. 

3. Strategic HRIS
Strategic HRIS comes of use when a company is looking to expand or grow, strategically. Strategic HRIS helps
in the proper planning of the workforce and know well about the labor resources available. As a part of this,
Strategic HRIS holds information that supports workforce planning and a specialized HRIS system on the whole
with certain HR functions to help manage and understand labor resources. 

4. Comprehensive HRIS 

Comprehensive HRIS is more of everything involved in HR actions, including the above three types. It acts as a
combined platform with all HR  files, employee information, open positions, hiring and job details, job analysis
and design files, guidelines files on employee safety, etc., It acts as a place with all information that can be
produced at any time to perform any action.
 

How to know if you are ready for an HRIS Software? 

Not all companies require an HRIS. Software costs, year after year and unless you are very sure you would
make the best use out of the buy you make, and that it will solve real-time challenges for your organization, it
makes little sense to go with an HRIS, at least for now. If you are not sure if your company needs a Human
Resource Information System, ask yourself the questions below. 

1. What is the employee count of your company? 

A. Less than 50 Employees
B. 50 - 300 employees
C. Over 300 employees 
If you answered B or C, you definitely need an HRIS system, sit down with your HR Department and they
probably have a lot of challenges they want to share with you which could help you decide which HRIS best fits
for your company. 

2. What’s your Hiring Bandwidth or How many open jobs do you have? 
A.  We hire every month and have over 20 open jobs. 
B.  We hire once in 6 months, and we have around 5-10 open jobs. 
C.  We are not hiring currently or in the near future.  
If you find yourself in the situation of A or B, you most likely need an Applicant Tracking System. If your
answer to the first question was B or C, then it’s better to go for a HR software that comes with ATS. 
3. Are you over 50 employee company and do you offer Time-off/Time-based Pay? 
A. Yes? Then it would be wise to switch to an HRIS.
B.  No? Then let’s wait. 

4. Do you have an elaborate Onboarding Process?  

A. Yes? Then it would be wise to switch to an HRIS. 
B.  No? Then let’s wait. 
If you did not find your company fit in any of the above situations, it’s possibly because you are a company with
few employees, you are not actively hiring and can handle HR management on sheets. If your HR team is still
feeling challenged, it would be ideal to sit down with them and understand their challenges: Employee Data or
Time and Time-off Management, Payroll or Recruitment - based on their requirements you can decide if you
need an HRIS or only Payroll or only ATS. 
 

Common Features included in an HRIS

The list of features an ideal Human Resource Information System provides vary, so here is a list of the standard
features that make up an HRIS. 

 Employee Database 
The foremost feature of an HRIS software is Employee Database. It is the place where the HRIS stores all your
employee information, this includes personal information such as date of birth, Name, Address, Contact., and
professional information like Education, Experience, and Skills. 
Not only does the database act as a storage platform, but it also helps other features like Org Chart, Time-off to
perform seamlessly. 

 Time-off Management  
Another common feature available in most HR information systems is Time-off Management. There are
different variations to this, some only keep track of Time-off, while some have a complete Time-off
Management where Employees can request time-off, it can be approved, declined, each employee’s time-off is
tracked, updated and reported. With Payroll, it will help to update compensation. 

 Performance Management
Performance Management in HRIS gives the ability to set goals, track works, give feedback, perform reviews,
and determine appraisals. Performance management gives an organization a unique and combined platform to
map employees with their performance and test their results. 
Assigning goals, managing and tracking the work of each employee, aligning the objectives to resources and
tracing the process of completion can be done using Performance Management in an HRIS.  

 Applicant Tracking 
Applicant Tracking is one of those highlighting features of an HRIS. Ironically, not all products that call
themselves HRIS software comes with Applicant Tracking.  ATS helps you bring your whole hiring process to
one place. 
From posting a job to sourcing candidates from different channels like Email, Job Boards, interviewing and
executing the hiring process to rolling out an offer, and moving the candidate to an employee, an HRIS with
ATS can be really useful to help you bring in talents seamlessly. 
Other common features of an ATS is to set a cooling period to avoid a repetition of candidates, archiving good
talents to the talent pool, etc., 

 Payroll 
Payroll is a critical feature of a Human Resource Information System. Payroll can be useful to have in a HR
Information System as it gives an end-to-end management help to the HR personnel. 
Compensation on an hourly/ weekly/ monthly basis is all provided in HRIS software. Employee Information
like Bank Details, Role, and Appraisal, Time off are provided by the HRIS system which enables payment of
compensation easier, error-free and fair.  

 Onboarding and Offboarding 

Don’t be surprised to find this feature on the list. Onboarding and Offboarding are no longer a manual process
where your new hires and ex-employees sign a bunch of documents before they join or leave your company. 
With an increase in the importance of Employee Experience, Onboarding and Offboarding have become
essential ways through which a company establishes its relationship with an employee. Also, both these crucial
steps of an employee’s life-cycle involve a lot more than paperwork which is why HR Information Systems now
have Onboarding and Offboarding automated and digitalized. 

 Employee Self-service
One of the most important features of an HR information system is Employee Self-service which gives
employees the ability to be accountable for their information. They can take control and build ownership
increasing their individual responsibility. 
From editing their information, creating time-off requests, setting their own goals and tracking them, the
employee self-service feature in an HRIS software enables a healthy relationship between the employees and
any other stakeholders involved with the managing. 

 Mobile HRIS
Almost all HRIS systems now come with a Mobile App supporting both Android and iOS. This feature makes
all the above features available in your pocket, with few exceptions, thus enabling on-the-go productivity. 
 

HRM ACCOUNTING

Everything you need to know about human resource accounting. Human resources accounting (HRA) is one of
the latest concept adopted by few corporations in our country.
Most of the corporations have realised that human resources are their most precious resources. So it is
required to taken some measures to develop their human resources but also taken measures to accelerate their
values.
The concept of human resource accounting has been defined by the committee on Human Resource Accounting
of the American Accounting Association as “the process of identifying and measuring data about human
resources and communication this information to interested parties.”
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The American Accounting Society Committee on Human Resource Accounting defines it as follows –
“Human Resource Accounting is the process of identifying and measuring data about human resources and
communicating this information to interested parties.”
In simple terms, it is an extension of the accounting principles of matching costs and revenues and of organizing
data to communicate relevant information in financial terms.
Learn about:- 1. Meaning of Human Resource Accounting 2. Definition of Human Resource Accounting 3.
Historical Perspectives 4. Concept 5. Need 6. Costs Involved 7. Significance 8. Methods 9. Applications 10.
Advantages 11. Limitations.

HR Accounting: Meaning, Definitions, Concept, Need, Methods, Advantages and Limitations

Human Resource Accounting – Meaning
Since the beginning of globalisation of business and services, the human resources are becoming more
important and decisional input for the success of any corporate enterprise. Human resource accounting (HRA)
involves accounting for expenditures related to human resources as assets.
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All the processes of the organisation are operated by human resources, thereby the changes in the HR cost and
benefits must be considered. Though it has been accepted that HR is capital resource thereby the valuation of
this resource is very necessary and information about the valuation should be given to the investors, the
management and others through financial statements.
Human resources accounting is basically an information system that tells management what changes are
occurring over time to the human resources of the business.
Human resources accounting (HRA) is one of the latest concept adopted by few corporations in our country.
Most of the corporations have realised that human resources are their most precious resources. So it is required
to taken some measures to develop their human resources but also taken measures to accelerate their values.
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Human Resources are invaluable asset in an organization. It is a live asset of any business concern but their
value cannot be measured accurately. The value of manpower, present and potential, to the management is
conceptually well established. From a macroeconomic view point, the services which people can potentially
provide constitute a form of capital. Recently Indian Corporate Sector has shown growing interest in the
accounting for human resources.
The concept of human resource accounting has been defined by the committee on Human Resource Accounting
of the American Accounting Association as “the process of identifying and measuring data about human
resources and communication this information to interested parties.”
Human beings are the active agents and economic growth is the consequence of the progress in the areas of
human resource. Thus human resource accounting consists of valuation of human resources and recording it in
the books of accounts and presenting the information in the financial statement for communication.
Flamholtz has specifically underlined the primary role of human resource accounting as that of providing
information essential for management to perform the functions of acquiring, developing, allocating, conserving,
utilizing, evaluating and rewarding human resources.
The basic objectives of human resource accounting are as under:
(1) HRA facilitates managing the people as one of the resources of the organization.
(2) To help the management for making decision about acquiring, allocating, developing and maintaining
human resources in order to keep control on human resource cost as one of the organizational objective.
(3) To provide information to the management regarding human resource cost and value.
(4) To see whether the human resources are effectively utilized or not
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(5) To see whether the human resources are producing a return on investment of the persons interested in the
organization or not.
(6) Provide human resources accounting detail to outsiders like financers such as bankers, financial institutions
and creditors etc.

Human Resource Accounting – Definitions Provided by American Accounting Society Committee, Mr.

Woodruff, M.N. Baker, Flamholtz & Stephen Knauf
The American Accounting Society Committee on Human Resource Accounting defines it as follows –
“Human Resource Accounting is the process of identifying and measuring data about human resources and
communicating this information to interested parties.” In simple terms, it is an extension of the accounting
principles of matching costs and revenues and of organizing data to communicate relevant information in
financial terms.
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Mr. Woodruff Jr., Vice President of R. G. Batty Corporation defines it as follows –

“Human Resource Accounting is an attempt to identify and report investments made in human resources of an
organisation that are presently not accounted for in conventional accounting practice. Basically it is an
information system that tells the management what changes over time are occurring to the human resources of
the business.”
M.N. Baker defines Human Resource Accounting as follows –
“Human resource accounting is the term applied by the accountancy profession to quantify the cost and value of
employees to their employing organisation”
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According to Flamholtz, “Human resources accounting means accounting for people as an organizational
resource. It involves measuring the costs incurred by business firms and other organizations to recruit, select,
hire, train and develop human assets. It also involves measuring the economic value of people to organization.”
Another management consultant, Stephen Knauf, has defined HRA as –
“The measurement of quantification of human organisation inputs such as recruitment, training, experience and
commitment”. Thus, human resources accounting may be defined as, “a process of accounting which identifies,
quantifies and measures human resources for the use of management to cope up with the changes in its quantum
and quality so that equilibrium could be achieved between the required resources and the provided human
resources”.
To ensure growth and development of any organisation, the efficiency of people must be augmented in the right
perspective. Without human resources, the other resources cannot be operationally effective. The original health
of the organisation is indicated by the human behaviour variables, like group loyalty, skill, motivation and
capacity for effective interaction, communication and decision making. Men, materials, machines, money and
methods are the resources required for an organisation.
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These resources are broadly classified into two categories, viz. animate and inanimate (human and physical)
resources. Men, otherwise known as the human resources, are considered to be animate resources. Others,
namely, materials, machines, money and methods are considered to be inanimate or physical resources. The
success or otherwise of an organisation depends on how best the scarce physical resources are utilised by the
human resource. What is important here is that the physical resources are being activated by the human
resources as the physical resources cannot act on their own.
Therefore, the efficient and effective utilisation of inanimate resources depends largely on the quality, caliber,
skills, perception and character of the people, that is, the human resources working in it. The term human
resource at macro level indicates the sum of all the components such as skills, creative abilities, innovative
thinking, intuition, imagination, knowledge and experience possessed by all the people. An organisation
possessed with abundant physical resources may sometimes miserably fail unless it has right people, human
resources, to manage its affairs.
Thus, the importance of human resources cannot be ignored. How, generally accepted system of accounting this
important asset, viz. the human resources has not been evolved. For a long period, the importance of human
resource was not taken care of seriously by the top management of organisations. Therefore, at this juncture, it
becomes imperative to pay due attention to the proper development of such an important resource of an
organisation.

Human Resource Accounting – Historical Perspectives

It is fact that over the last four decades, it was the era of human values and recognition, the organisations
believes that the actual assets are the human resources. The skills, ability, creativity and motives cannot be
replaced by machines. There were some remarkable studies and contributions made by several behavioural
scientist and scholars.
The experts in this field were Shulz (1960) and William Pyle (1967) who recognised the actual value of human
resources. Flam Holth (1973) and Kenneth Sinclare (1978) contributed appropriate methodology for finding out
the value of the employees to the organisation.
Methods of Accounting Valuation of Human Resources:
The different approaches invariably denotes the methods or techniques for evaluation of the human resources.
In order to measure the value of HR, there are few decisional aspects to be considered, are as given here:
i. Performance evaluation part for human resources;
ii. Present value of salary/wages payments;
iii. Real capital cost;
iv. Matching the cost of HR with the revenue of organisation.
Generally the methods for HR Accounting with its valuation may be given here:
1. Historical Cost Approach:
This approach was developed by William C. Pyle, which is based on the concept that there are certain cost
incurred by the organisation with regard to human resources. Cost is a sacrifice aspect incurred to obtain some
anticipated benefits or services.
In this approach the actual cost incurred on recruiting, selecting, hiring, training and development of human
resources, of the organisation is maintained and a proportion of it is written off to the income of the next and
expected useful life of human resources.
The approach of the cost of human resources is very similar to the book value of the other physical assets. This
method is simple to understand and easy to work out. It is based on traditional accounting concept of matching
cost with revenue.
2. Replacement Cost Approach:
This approach was first opined by Rensis Likert and was developed by Eric G. Flamholth. Human resource of
an organisation are to be values on the assumption that a new similar organisation has to be created from cut
down and what would be the cost to the firm if the existing resources were required to be replaced with other
persons of equivalent talents and experience.
According to this model the value of employee is estimated as the cost of replacement with a new employee of
equivalent ability and efficiency. There are two costs, individual replacement cost and positional replacement
cost. The cost of recruiting, selecting, training and development and familiarisation cost are account in
individual replacement cost.
When an employee change the present position to another or leave the organisation then the cost of moving,
vacancy, carrying and other relevant costs reflect in individual replacement cost. Positional replacement cost
refers to the cost of filling different position in an organisation.
3. Opportunity Cost Approach:
This approach analyse the alternative earning sources from the productive capacity of human resources by
putting some alternative use. Opportunity cost is the value of an asset (HR) when there is an alternative use of it.
The perspective chances of opportunity cost are declined for those employees that are not scarce.
Here, only the scarce people may be comprised the value of human resources. But the alternative use of HR
within the organisation is restricted and at the same moment, the use of HR with finding out their alternative
cost may not be incorporated properly.
4. Standard Cost Approach:
This approach is based on the line and staff as well as functional relationship of employees in an organisation.
The employees of an organisation are categorised and divided into different groups with hierarchical levels or
positions. Standard cost is fixed for each category of employees and their worthwhile role may be calculated.
Due to some of the static position of employees on account of their status and position, it does not take any
differences of them put in the same group.

Human Resource Accounting – Concept

The concept of human resource accounting can be better understood if one goes through some of the important
definitions given by the competent authors in the accounting field. The American Accounting Society
Committee on HRA defines it as follows – “HRA is the process of identifying and measuring data about human
resources and communicating this information to interested parties”. In simple terms, it is an extension of the
accounting principles of matching costs and revenues and of organising data to communicate relevant
information in financial terms.
Mr. Woodruff, Jr. Vice President of R. G. Batty Corporation defines it as follows – “HRA is an attempt to
identify and report investments made in human resources of an organisation that are presently not accounted for
in conventional accounting practice. Basically it is an information system that tells the management what
changes over time are occurring to the human resources of the business.”
M. N. Baker defines HRA as follows – “HRA is the term applied by the accountancy profession to quantify the
cost and value of employees to their employing organisation”.
Another management consultant Stephen Knauf has defined HRA as – “The measurement of quantification of
human organisation inputs such as recruitment, training, experience and commitment.” Thus, HRA may be
defined as a process of accounting which identifies, quantifies and measures human resources for the use of
management to cope up with the changes in its quantum and quality so that equilibrium could be achieved in
between the required resources and the provided human resources.
In short, HRA is the art of valuing, recording and presenting systematically the worth of human resources in the
books of account of an organisation.
This definition brings out the following important characteristic features of human resource accounting:
1. Valuation of human resources.
2. Recording the valuation in the books of account.
3. Disclosure of the information in the financial statements of the business.
HRA provides useful information to the management, financial analysts and employees as stated below:
1. It helps the management in the employment, locating and utilisation of human resources.
2. It helps in deciding the transfers, promotion, training and retrenchment of human resources.
3. It provides a basis for planning of physical assets vis-a-vis human resources.
4. It assists in evaluating the expenditure incurred for imparting further education and training in employees in
terms of the benefits derived by the firm.
5. It helps to identify the causes of high labour turnover at various levels and taking preventive measures to
contain it.
6. It helps in locating the real cause for low return on investment, like improper or under-utilisation of physical
assets or human resource or both.
7. It helps in understanding and assessing the inner strength of an organisation and helps the management to
steer the company well through most adverse and unfavourable circumstances.
8. It provides valuable information for persons interested in making long term investment in the firm.
9. It helps employees in improving their performance and bargaining power. It makes each of them to
understand his contribution towards the betterment of the firm vis-a-vis the expenditure incurred by the firm on
him.

Human Resources Accounting – Need
The need for human resources accounting arose primarily as a result of the growing concern for human relations
management — in industry. Behavioural scientists concerned with the management of organisation pointed out
that the failure of accountants to value human resources was a serious handicap for effective management.
1. A business manager has to use resources carefully to achieve immediate and long-term goals for the
organisation. This necessitates valuable information about resources. The human beings constitute an important
asset for an organisation. Without people in the organisation, other resources physical and financial cannot be
effectively used. In conventional accounting, not much information is available about human resources.
2. The levels of income shown in the conventional statements in profit and loss accounts do not accurately
reflect the level of business performance.
3. Expenses on human resources are charged to current revenue instead of being treated as investments to be
amortised over the economic service of the employees with the result that the figures of net income shown are
significantly distorted.
The result in the conventional balance sheets fail to reflect the value of human assets, hence there is distortion in
value of organisation and the rate of return of investment. Distorted measures render assessment of organisation
and inter-organisation comparison difficult.
4. Conventional treatment of investments on human resources may lead to the erosion of investors, interest
through management decisions which is harmful for the long-run success of an organisation and to the investor’
equity.
5. Traditional accounting involves treatment of human capital and non-human capital differently; the recorded
value of other assets is indicated as non-human capital. There is no such record of human assets corresponding
to the human capital of the organisation although the productivity and profitability depend largely on
contribution by human assets.
To make it more explicit, two firms engaged in the same business line, use identical physical assets under
similar market conditions, may have different end results in terms of their profitability and growth due to
differences in their human assets. It is, therefore, not possible to assess the total value of the firm, since the
value of human capital (i.e., human assets) is not taken into consideration while assessing the total valuation of
the firm’s assets.
6. Expenses incurred by a firm on recruitment, training and development of human resources, employees are at
present as per practice, treated as current costs and written off against current revenue in the conventional
accounts. Similarly, other employee related expenses such as welfare expenses, incentives, benefits are treated
under the present system of accounting.
But all such expenses are in reality, expenses in the nature of investment in human resources and, the benefits of
such investment on human resources are often derived or accrued over a longer period than the ‘one year’ in
which these expenses are debited to the current revenue in the year a balance sheet is prepared.
The managements generally are interested to keep these costs on ‘welfare’ of human resources as low as
possible, i.e., controlling or cutting down the ‘costs.’ These results in immediate savings in costs and resulting
profits are achieved, neglecting the long-term impact of such a policy on the motivation or the morale of the
employees.
7. The impact of management decision on human assets of the firm cannot be clearly perceived if the value of
human resources is not reported in the profit and loss account and balance sheet.

Human Resources Accounting – Top 3 Costs Involved: Acquisition, Training and Development &
Welfare
1. Acquisition Cost:
It refers to the costs incurred in acquiring the right man for the right job at the right time and in right quantity. It
includes the expenses incurred on recruitment, selection and placement entire cost is taken into consideration
including those who are not selected.
i. Recruitment cost – It is the cost incurred to identify sources of human resources both from within and outside
the organisation. For example, cost of recruiting materials, administrative expenses, advertising costs, agency
fees, recruiter’s salary and travel and outstation costs.
ii. Selection cost – It depends on several factors such as the type of personnel being recruited and the method of
recruitment. The cost of selection depends on the position for which a person is being selected. The higher the
position, the greater is the selection cost. It includes cost of application blanks, administrative cost of processing
applications, conducting tests, interview, medical examination and the consulting fees of the selectors.
iii. Placement cost – In deciding upon the placement, the individual’s ability, attitude, interest, temperament and
aspirations are taken into consideration with reference to the job requirements. The cost of placement can be
collected for the purpose of human resource accounting.
2. Training and Development Cost:
It refers to the sacrifice that must be made to train a person either to provide the expected level of performance
or to enrich the individual’s skill. Training improves the productivity potential of both the individual and the
organisation.
The training cost includes the following:
i. Formal training cost – It refers to the cost incurred in conventional training for the orientation of an individual
so that he can handle the work. The remuneration to the training staff and the fixed cost of the training schools
are essentially Human Resource Investment items.
ii. On the job training cost – Once the employee is placed on the job, he must be trained to do the job efficiently
and effectively and in this regard the employee learns while he is on his job. In the process, the costs of
mishandling the job and the payments to the employee more than what he actually contributes, are on-the-job
training cost. Thus it is an investment in Human Resource.
iii. Special training cost – To achieve the performance standards sometimes specific training programmes may
be devised. The costs of such training are called special training costs and fall under the human resource
investment of the organisation.
iv. Development programme cost – Employees may be allowed to participate in a variety of development
programmes to enrich their faculties. These programmes may range from ordinary lectures to international
conferences and seminars. The participants have an opportunity to interact with other executives on national and
international level. Such association involves cost such as delegate fees, the travel cost, loss of output during the
development programme etc. which are to be accounted for as a human resource investment.
3. Welfare Cost:
Management is after all the creation and maintenance of an environment. Therefore, it is a vital function of an
employer to provide an atmosphere to the employees to perform their work in healthy, congenial climate
conducive for good health and high morale. The expenses incurred for this purpose will facilitate the employee
to increase the quality of his civic life.
These welfare costs can be classified as follows:
i. Welfare and amenities within the organisation – Creches, rest shelters and canteens, latrines and urinals,
washing and bathing facilities, drinking water and occupational safety etc., are the welfare facilities provided by
the employer within the organisation.
ii. Welfare outside the organisation – Social insurance measures, maternity benefit, medical facilities, education
facilities, housing, recreational facilities, holiday homes and leave travel facilities are some of the welfare
measures provided outside the establishment.

Human Resource Accounting – Significance

The signifying part of HRA are as given here:
1. It provide a basic platform of planning in that the objectives, aims and methods for acquiring human
resources are included;
2. It provide various assistance to the management in employment and utilisation of human resources;
3. It helps the management in planning and executing personnel policies and plans pertaining to the recruitment,
transfer, promotion and retrenchment of human resources;
4. It helps to study and assessing the inner strength of an organisation and helps the management to overcome
the most adverse and unfavourable circumstances;
5. It helps to analyse the causes of high labour turnover at various levels and taking preventive measures for
control over it;
6. It helps to give the cost of developing human resources and as such it will enable the management to ascertain
the cost of labour turnover also;
7. It helps in evaluating the expenditure incurred for imparting further education and training of employees in
terms of benefits derived by the organisation;
8. It helps to find out the real cause for low utilisation of HR, under utilisation of assets as well as low return on
investment;
9. It helps the HR managers for conducts a better ways and means for organisational development in the
organisation;
10. It helps in improving the efficiency of employees towards improving their performance and their worth;
11. It helps the each employee to understand his contribution towards the perspective results of the firm as well
as the expenditure incurred by the firm on him.

Human Resource Accounting – 2 Important Models: Cost Based and Economic Value (With Limitations)
Quite a few Models have been suggested in the past for the Human Resource Accounting and these can be
classified into 2 parts each having various Models.
Some of the important ones are:
A. Cost Based Models:
1. Capitalisation of Historical Costs:
As per this method of HR Accounting, the sum of all costs related to Human Resources (i.e. Recruitment,
Acquisition, Formal Training, Informal Training, Informal familiarisation, experience and development) is taken
together to represent the value of the human resources.
The value is amortised annually over the expected length of the service of individual employees and the
unamortised cost is shown as Investments in the Human Assets. If an employee leaves the firm (i.e. Human
Assets expire) before the expected service life period, then the net value to that extent is charged to the Current
Revenue.
Limitations:
i. This Model of HR Accounting is simple and easy to understand and satisfies the basic principles of matching
the costs and revenues.
ii. As the historical costs are sunk costs and are irrelevant for decision making, this model was severely
criticised as it failed to provide a reasonable value to the human resources.
iii. This method of HR Accounting capitalises only the Training and Development Costs incurred on the
employees and ignores the future expected costs to be incurred for their maintenance.
iv. This Model of HR Accounting distorts the value of the highly skilled human resources as such employees
require less training and therefore, according to this model, they will be valued at a lesser cost.
2. Replacement Costs:
The Historical Cost Method was highly criticised as it only takes into account the Sunk Costs which are
irrelevant for Decision Making. Thus, a new model for Human Resource Accounting was conceptualised which
took into the account, the costs that would be incurred to replace its existing human resources by an identical
one.
a. Individual Replacement Costs – Which refers to the cost that would have to be incurred to replace an
individual by a substitute who can provide the same set of services as that of the individual being replaced.
b. Positional Replacement Costs – Which refers to the cost of replacing the set of services referred by an
incumbent in a defined position
Thus, the Positional Replacement Cost takes into account the position in the organisation currently held by the
employee and also the future positions expected to be held by him.
Limitations:
i. As per this method of HR Accounting, the determination of replacement cost of an employee is highly
subjective and often impossible.
ii. Particularly at the management cadre, finding out an exact replacement is very difficult. The exit of a top
management person may substantially change the human assets value.
3. Opportunity Cost Model:
This model was advocated by Hekimian and Jones in the year 1967 and is also known as the Market Value
Method. This method of measuring Human Resources under this Model is based on the concept of opportunity
cost i.e. the value of an employee in its alternative best use, as a basis of estimating the value of human
resources.
The opportunity cost value may be established by competitive bidding within the firm, so that in effect,
managers bid for any scarce employee. A human asset therefore, will have a value only if it is a scarce resource,
that is, when its employment in one division denies it to another division.
Limitations:
i. One of the serious limitations of this method for Human Resource Accounting is that it excludes employees of
the type which can be hired readily from outside the firm.
ii. Thus, this approach seems to be concerned with only one section of a firm’s human resources, having special
skills within the firm or in the labour market.
B. Economic Value Models:
1. Present Value of Future Earnings Model:
This Model of human resource accounting was developed by Lev and Schwartz in the year 1971 and involves
determining the value of human resources as per the present value of estimated future earnings discounted by
the rate of return on Investment (Cost of Capital). As per this valuation model of Human Resource Accounting,
the following expression is used for calculating the expected value of a person’s human capital
Limitations:
i. This Model of HR Accounting ignores the possibility and probability that an Individual may leave an
organisation for reasons other than Death or Retirement.
ii. This Model of HR accounting also ignores the probability that people may make role changes during their
careers. For example, an Assistant Engineer will not remain in the same position throughout the expected
service life in the Organisation.
iii. Despite the above limitations, this model is the most commonly used model across the Globe for the purpose
of Human Resource Accounting.
2. Reward Valuation Model/ Flamholtz Model:
Flamholtz advocated that an Individual’s Value to an organisation is determined by the services he is expected
to render. This model of Human Resource Accounting is an improvement to the “Present Value of Future
Earnings Model” as it takes into account the probability that an individual is expected to move through a set of
mutually exclusive organisational roles or service states during a time interval. Such movement can be estimated
probabilistically by using the following model
Limitations:
i. The major drawback of this model of Human Resource Accounting is that it is difficult to estimate the
probabilities of likely service states of each employee.
ii. Determining the monetary equivalent of service states is also very difficult and costly affair.
iii. Since the analysis is restricted to Individuals, it ignores the value added element of Individuals working as
groups.
3. Valuation on Group Basis:
While applying the above models, the Accountants realised that proper Valuation as per Human Resources
Accounting is not possible unless the contributions of the Individuals as a Group are taken into consideration.
An Individual’s expected service tenure in the organisation is difficult to predict but on a group basis it is
relatively easier to estimate the percentage of people in a group likely to leave the organisation in the future.
This model of Human Resource Accounting attempted to calculate the present value of all existing employees in
such in each rank.
Such Present Value is ascertained with the help of the following steps:
a. Ascertain the number of employees in each rank- Estimate the probability that an employee will be in his rank
within the organisation or will be terminated in the next period. This probability will be estimated for a specified
time period.
b. Ascertain the economic value of an employee in a specified rank during each time period.
c. The present value of existing employees in each rank is obtained by multiplying the above three factors and
applying an appropriate discount rate.
Limitations:
i. Although this process simplifies the process valuation of Human Resource Accounting by considering a group
of employees as a valuation base, but this method ignores the exceptional qualities of certain skilled employees.
ii. Thus, the performance of a group may be seriously affected in the event of exit of a single individual.

Human Resource Accounting – Applications in Public Sector and Private Sector

If we look at the annual reports of public enterprises and private enterprises in India, we find that chairman’s
report invariable contains the statements highlighting the significance of human resources. The chairman of
these enterprises make their remarks at the annual general meeting of the shareholders that our employees are
most important assets and without their significant contribution, the present growth in the operation would not
have been attained. ‘I wish to place it as record of my sincere gratitude for the hard work done by the employees
of our company’.
‘I thankfully acknowledge the contribution made by our employees’. These qualitative pronouncements reflect
the importance of human resources in an enterprise but the quantitative information relating to their contribution
or their value is nowhere recorded or shown in the financial accounts.
However, in practice, a few enterprises, stated below, value their human resources and report this
information in their annual reports:
(a) Public Sector Enterprises:
i. Bharat Heavy Electrical Ltd.,
ii. Cement Corporation of India,
iii. Project and Equipment Corporation of India,
iv. Engineers India Ltd.,
v. Minerals and Metals Trading Corporation of India,
vi. Electrical India Ltd.,
vii. Oil and Natural Gas Commission,
viii. Hindustan Shipyard Ltd.,
ix. Steel Authority of India Ltd., and
x. Oil India Ltd.
(b) Private Sector Enterprises:
i. Tata Engineering and Locomotive Works (TELCO)
ii. Associated Cement Company (ACC), and
iii. Southern Petro Chemical Industries Corporation (SPIC).
Many companies such as BHEL do not consider labour as a cost but as a resource and in valuing this
asset and ‘Lev and Schwartz’ model is mostly adopted with the following assumptions:
(a) Present pattern in employee compensation including direct benefits including the effect of wage revision;
(b) Normal career growth as per the present policies, with vacancies filled from the levels immediately below,
(c) Weightage for changes in efficiency due to age, experience and skills; and
(d) Application of discount factor of 12 per cent annum on the future earnings to arrive at the present value.
According to this method, the value of human resources is taken as the present value of estimated future
earnings of employees discounted by the rate of return on investment; and applying employee group-wise
weights for the firm. For this, the value of future services of an employee is estimated in terms of wages and
salaries. The period for which the employee will be with the firm is also taken into consideration.
The methodology of human asset accounting encompasses the elements such as:
(a) The composition of employees in different grades for five years;
(b) Productivity of human resources for five years;
(c) Programmes for employee development;
(d) Personnel payments to the employees and expanses on social welfare per employee;
(e) Human asset valuation;
(f) Human assets vis-a-vis total assets, and
(g) Value of human assets in an organisation etc.
Human Resource Accounting – 8 Main Advantages: Information for Manpower Planning, Making
Personnel Policies, Utilization of Human Resources and a Few Others
Advantage # 1. Information for Manpower Planning:
HRA provides useful information about the cost and value of human resources. It shows the strengths and
weakness of the human resources. All this information helps the managers in planning and making the right
decisions about human resources. Thus, it provides useful information for Manpower Planning and Decision
Making.
Human Resource Planning anticipates not only the required kind and number of employees but also determines
the action plan. It provides scope for advancement and development of employees by effective training and
development.
Advantage # 2. Information for Making Personnel Policies:
HRA provides useful information for making suitable personnel policies about promotion, favorable working
environment, job satisfaction of employees, etc. It checks the corporate plan of the organisation.
The corporate plan aiming for expansion, diversification, changes in technological growth etc. has to be worked
out with the availability of human resources for such placements or key positions. If such manpower is not
likely to be available, HR accounting suggests modification of the entire corporate plan.
Advantage # 3. Utilization of Human Resources:
HRA helps the organisation to make the best utilization of human resources.
Advantage # 4. Proper Placements:
HRA helps the organisation to place the right man in the right post depending on his skills and abilities. It
offsets uncertainty and change, as it enables the organisation to have the right person for the right job at the right
time and place. It aims to see that the human involvement in the organisation is not wasted and brings high
returns to the organisation.
It helps to take steps to improve employee contribution in the form of increased productivity. It provides
different methods of testing to be used, interview techniques to be adopted in the selection process based on the
level of skill, qualifications and experience of future human resources.
Advantage # 5. Increases Morale and Motivation:
HRA shows that the organisation cares about the employees and their welfare. This increases their morale and it
motivates them to work hard and achieve the objectives of the organisation. It helps individual employee to
aspire for promotion and better benefits. It can foresee the change in value, aptitude and attitude of human
resources and accordingly change the techniques of interpersonal management
Advantage # 6. Attracts Best Human Resources:
Only reputed organisations conduct HRA. So, competent and capable people want to join these organisations.
Therefore, it attracts the best employees and managers to the organisation.
Advantage # 7. Designing Training and Development Programs:
HRA helps the organisation to design (make) a suitable training and development program for its employees and
managers.
Advantage # 8. Valuable Information to Investors:
HRA provides valuable information to present and future investors. They can use this information to select the
best company for investing their money.

Human Resource Accounting – 9 Major Limitations

1. The valuation of human assets is based on the assumption that the employees are going to remain with the
organisation for a specified period. However, this assumption is wrong because employee mobility is very high.
2. The human resource accounting may lead to the dehumanization in the organisation. If the valuation is not
done correctly or the results of the valuation are not used properly.
3. In the case of financial accounting, there are certain specified accounting standards which every organisation
must follow. However, there are no standards for HRA. Each organisation has its own standards for it. So, there
are no uniform standards for it. Therefore, the HRA of two organisations cannot be compared.
4. There are no specific and clear cut guidelines for ‘cost’ and ‘value’ of human resources of an organisation.
The present valuation systems have many limitations.
5. The life of a human being is uncertain. So its value is also uncertain.
6. Calculation the value of human resources is not so easy because it is most difficult to calculate the value of
the quality of any person. What worth will be of honesty, morality, benevolence and generosity? But these
moral values are so important for developing any company from bottom point.
7. Jealousy to see the high value of other employee can decrease the efficiency of any employee because he can
think why my price is sow low and other employee’s price is so high.
8. From human resource accounting, we cannot get short period benefits like general historical accounting
system.
9. Indian company law 1956, Indian Income tax law 1961 and other legal laws are no rule for showing human
resource assets in the balance sheet.
Consequences of Human Resources Accounting:
The consequences of the current accounting practice relating to human resources are deep and wide. It’s
behavioural and policy impacts are too significant to be dismissed lightly.
They may be listed as under:
(i) By charging expenses of recruitment, training and development of human resources to current period’s profit
and loss account, profits during that period are understated or losses are overstated. By doing so the boundaries
of principles of conversion are stretched beyond its logical limits and even at the cost of ignoring the tenet of
accrual.
(ii) By not capitalising expenses relating to human resources, even when they are substantial, the assets are
concealed and net worth is understated to that extent.
(iii) The combined effect of the foregoing two points would be a blatant negation of the cardinal principle of
true and fair disclosure in published accounts.
(iv) By writing off goodwill when profits are rising, accountants
create secret reserves.
(v) Though physical assets are fully recorded under the existing system, human assets are ignored in the internal
as well as external reports. This leads to faulty evaluations and decisions.
By not valuing human resources, depreciation of human assets is also ignored. It is a stark reality that human
resource deteriorates in terms of its efficiency and productivity due to several indigenous and exogenous man-
made factors. Had there been any attempt to systematically measure and report the “depreciation” or
“appreciation” of human resources, the quality of management would certainly improve.
HR AUDIT
Human Resource Audit – Introduction
Organizations are increasingly finding it imperative to improve returns on investment, in order to stay
competitive. Traditionally, accounting norms were viewed only from the financial perspective and were applied
to all departments ranging from marketing, production, distribution, etc. HRM was limited to salary and
administration and, while doing so, it was analysed from the perspective of provisioning and expenditure.
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However, in today’s competitive scenario, it has become essential to analyse HRM activities and assess their
contribution in a more systematic and methodical manner. The Indian industry has aggressively adopted various
innovative systems, such as HR audit and balanced scorecard, with a macro perspective of balancing
performance management across all organizations.
Human Resource (HR) Audit is not only a tool for evaluating the personnel activities of an organisation, but also
an important aspect of the human resource management. It is a great deal of attention from Human Resource
Practitioners.
It basically review the effectiveness of human resource practices. It gives feedback about HR functions not only
to operating managers, but also the HR department about how very well operating managers are meeting their
HR duties.
Therefore, audit is the key word, which control and check the Human Resource activities in a public
organisation and an evaluation of how these activities support overall organisational strategy. In the opinion of
Gray “the primary purpose of personnel audit is to assess how various units are functioning and how they have
been able to meet the policies and guidelines which were agreed upon and to assist the rest of the organisation
by identifying the gap between objectives, lay-out and results achieved. The end product of evaluation should be
to formulate plans for corrections or adjustment.”
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Systematic audit can help build strong rapport between the department and operating managers. Further, audit
creates discipline in personnel staff and encourages them to move away from intuitive techniques to a more
rigorous assessment of the likely benefits to be achieved.
This aims at the following:
i. Introducing the theoretical framework behind concepts such as HRA, HR audit and balanced scorecard.
ii. Explaining the strategic framework behind their implementation in international vis-a-vis the Indian context.
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iii. Presenting case studies to drive home learning.
Human Resources Audit:
Human resources audit is the systematic assessment of an organization’s HR service excellence.
A good HR audit helps organizations to:
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i. Identify the HR programmes that are most important to achieving the organization’s objectives.
ii. Find out how well the HR department is delivering these programmes.
iii. Benchmark HR work to ensure continuous improvement.
iv. Promote change and creativity.
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v. Direct the focus of the HR staff to important issues.

vi. Bring HR closer to the line functions of the organization.
HRD Audit:
An audit helps an organization to assess its current position. It helps estimate what needs to be achieved to
improve the HR function. The process involves a systematic review of all aspects of the HR function, typically
with a checklist, in order to ensure that regulations and corporate policies are adhered to.
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The aim is to learn in the process or discover, but not to test. The basic premise is that there is always scope for
improvement.
An HRD audit process will provide certain advantages to the organization, such as linking the HR strategy, re-
engineering the systems and processes, and improving the competency and functional efficiency of HR systems.

Human Resource Audit – Meaning

The term audit is normally associated with financial accounting and refers to the official examination and
verification of a company’s financial and accounting records. HR audit is a similar concept in the field of
Human Resource Management.
HR audit involves examining and reviewing the organization’s existing policies, procedures and practices
regarding recruitment and selection, orientation and placement, training and development, job analysis and
design, job evaluation, compensation, morale and motivation, employee health and safety, social welfare,
industrial relations, etc.
According to Eric Flamholtz, “Human Resource Audit is a systematic assessment of the strengths, limitations,
and developmental needs of its existing human resources in the context of organizational performance.”
Normally, in an organization, not all HR policies are formal and written; there are many informal policies, not
officially documented. The HR audit involves the review of all the HR policies, procedures and practices
currently adopted by the organization, irrespective of whether they are formal or informal.
The audit also helps to check that the company complies with the legal requirements and regulations regarding
employees as laid down by the government of the country. By means of an audit, the company can determine its
strengths and weaknesses in the area of HRM and plan accordingly to improve its processes and procedures
related to the human resource function.
Human Resource Audit also called Personnel Management Audit is well practised in Western developed
countries. In India, there is no lull audit like financial audit of the personnel or Human Resource activities in an
organisation. Audit is evaluation, examination, review and verification of completed activities, to see whether
they represent a true state of affairs of the activities in the department audited.

Human Resource audit refers to an examination and evaluation of policies, practices, procedures to determine
the effectiveness and efficiency of the Human resource management and to verify whether the mission,
objectives, policies, procedures, programmes have been followed, and expected results achieved. The audit also
makes suggestions for future improvement as a result of the measurement of past activities.

It helps essentially in evaluating the various HR practices and processes in an organization against the set
standards. ‘An HR audit involves devoting time and resources to taking an intensely objective look at the
company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and
identify opportunities for improvement'(SHRM, India).

‘A Human Resources Audit is a comprehensive method (or means) to review current human resources policies,
procedures, documentation and systems to identify needs for improvement and enhancement of the HR function
as well as to ensure compliance with ever-changing rules and regulations’ (Strategic HR Inc.).

Human Resource Audit – Process

1. Determining the Scope and Type of Audit:
Since HR is a very wide field, the company may either choose to conduct a comprehensive review of all HR
functions or it may decide to review a few specific areas as it deems necessary. For example, a company may
choose to review only the policies and procedures related to recruitment, selection and orientation policies.
2. Determining the Audit Method:
HR audits are usually conducted by using a questionnaire that elicits information about the relevant HR areas.
The audit may also be conducted by interviewing managers and employees of the HR department to analyze
how well they have understood the company’s policies and how efficiently these policies are being
implemented. When using a questionnaire, care should be taken to design it in such a way that it elicits all
necessary information regarding the areas to be audited.
3. Data Collection:
This step includes the actual process of collecting data about the organization and its HR practices. Information
is collected by using the questionnaire and by interviewing relevant HR personnel about the HR procedures and
policies being used in the company.
4. Setting the Standards:
To assess the efficiency of HR functions, the information collected has to be compared with some pre-
determined standards. These standards have to be pre-set and any acceptable level of discrepancies should be
specified clearly. Comparing the actual results with the standards will give an idea about the efficiency with
which the HR functions are being performed.
5. Feedback about the Results:
After collecting information and comparing the results, the audit team summarises the findings and provides
feedback to the company’s HR personnel and senior management in the form of an audit report.
The results of the audit should be discussed with the employees of the HR department so that they are made
aware of the present condition of the HR functions in the company. Discussion with employees will also throw
up new ideas for improving the policies and procedures in future.
6. Develop Action Plans:
Once the results of the audit are out, this information should be used for improving the working of the HR
department. The findings of the audit should be categorised according to order of importance: high, medium and
low. The organization should examine the areas of weaknesses as revealed by the audit and find ways to
overcome them. Conducting HR audit would serve no practical purpose if no actions are taken.

INTERNATIONAL HRM
International Human Resource Management – Introduction
International human resource management bears both functional and strategic resemblance to human resource
management. Functionally it performs almost the same set of activities as human resource management –
recruitment, selection, performance management, compensation, training, industrial relations, career
management etc. Strategically international HRM is closely linked to the business strategy of the organization.
Hence international human resource management can be defined as the set of activities involved in hiring,
managing performance, compensation, training and relations with employees hired to manage internal
operations of a company, with a view to ensure the success of their international business and strategies.
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International human resource management differs from domestic human resource management primarily in
terms of the complexity associated with managing people across national boundaries.
International human resource management deals with at least three types of employees based on their
country of origin:
1. Parent-Country Nationals (PCNs) – Employees belonging to the country where a company’s headquarters are
located are called as parent-country nationals or home country nationals.
2. Host-Country Nationals (HCNs) – Employees belonging to country where the company has set up a
subsidiary or a manufacturing facility are called host- country nationals.
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3. Third-Country Nationals (TCNs) – Employees who work in the home or host country facility of the company
but are not nationals of either are called third- country nationals.
International HRM also means dealing with issues related to different countries, expatriation, repatriation, cross-
cultural issues etc.
Dowling (1999) attributed to six factors that differentiate international from domestic HRM:
1. Wide range of HR activities.
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2. Need for a broader perspective.

3. More Involvement in personal life of the employee.
4. Responsiveness to changes in staffing requirements as international strategy changes.
5. Higher risk exposure.
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6. More external influences.

International Human Resource Management – Definition: As Defined by Pulapa Subba Rao

International human resource management (IHRM) is the process of procuring, allocating, and effectively
utilizing human resources in a multinational corporation. If the MNC is simply exporting its products, with only
a few small offices in foreign locations, then the task of the international HR manager is relatively simple.
However, in global firms human resource managers must achieve two somewhat conflicting strategic objectives.
First, they must integrate human resource policies and practices across a number of subsidiaries in different
countries so that overall corporate objectives can be achieved.
Pulapa Subba Rao defines international human resource management as, performing HRM and its related
activities and arranging for related and necessary immigration facilities for prospective and current expatriate
employees, by organizations operating in domestic and/or foreign countries.
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At the same time, the approach to HRM must be sufficiently flexible to allow for significant differences in the
type of HR policies and practices that are most effective in different business and cultural settings.
Organizations like Procter & Gamble, IBM, Pepsi and Coca Cola have had extensive International experience
and their success can only be attributed to their capability of constantly deploying the right people at the right
place, facilitating knowledge and innovation dissemination and constantly identifying and developing talents on
a global basis.
Thus for Ford which has a global HR perspective “The company requires understanding different cultures, what
motivates people from different societies, and how they are reflected in the structure of international
assignments”.

International Human Resource Management – Concept

International HRM is the process of acquiring, allocating, and utilizing human resources in a global business to
achieve the stated objectives. Because of global context, international HRM is the interplay of three dimensions-
HR activities, type of employees, and countries of operations.
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The three dimensions of international HRM are described here briefly:

1. There are three broad activities in international HRM — procuring, allocating, and utilizing employees for
international operations. These three broad activities cover all HR functions which are relevant for domestic
operations and discussed in different parts of the text.
2. There are three types of employees in a multinational firm based on their place of origin — parent country
nationals, host country nationals, and third country nationals. Parent country nationals (PCNs) are those whose
origin is the country where the firm’s headquarters are located.
Host country nationals (HCNs) are those whose origin is the country where the firm’s operations are located.
Third country nationals (TCNs) are those whose origin is a country which is neither the home country nor the
host country.
3. There are three types of countries involved in international HRM activities — home country, host country,
and third country. Home country is the country of origin of the firm. Host country is the country in which
operations of the firm are carried on. For a single firm, there may be many host countries. Third country is a
country from where resources — human and other resources — are procured. There may be many third
countries.

International Human Resource Management – Need

HRM activities are performed in a particular context. It implies that either different HRM activities may be
required in a global firm as compared to the domestic firm or even if the HRM activities remain the same, there
may be difference in the way of performing these activities.
There are four major contextual variables because of which HRM activities in a global firm differ from a
domestic firm, hence the need for international HRM. These are cultural diversity, workforce diversity,
language diversity, and economic diversity. Let us go through these variables and see how they affect HRM
practices.
I. Cultural Diversity:
Culture of a country is one of the key factors which affect people-oriented processes, and HRM is a people-
oriented process. Therefore, culture of a country has very significant impact on HRM practices. When we
consider global perspective of HRM, we find cultural diversity along the globe, that is, cultures of two countries
are not alike.
Cultural diversity exists on five dimensions- individualism versus collectivism, power orientation, uncertainty
avoidance, masculinity versus femininity, and time orientation. Let us see how these dimensions affect human
behaviour and, consequently, work practices.
1. Individualism versus Collectivism:
People differ in terms of individualism and collectivism. Individualism is the extent to which people place value
on themselves; they define themselves by referring themselves as singular persons rather than as part of a group
or organization. For them, individual tasks are more important than relationships. Collectivism is the extent to
which people emphasize the good of the group or society.
They tend to base their identity on the group or organization to which they belong. Countries that value
individualism are USA, Great Britain, Australia, Canada, Netherlands, and New Zealand. Countries that value
collectivism are Japan, Columbia, Pakistan, Singapore, Venezuela, and Philippines.’ India may be placed near to
collectivism.
2. Power Orientation:
Power orientation, also known as orientation to authority, is the extent to which less powerful people accept the
unequal distribution of power; people prefer to be in a situation where the authority is clearly understood and
lines of authority are never bypassed. On the other hand, in a culture with less orientation to power, authority is
not as highly respected and employees are quite comfortable circumventing lines of authority to accomplish
jobs.
3. Uncertainty Avoidance:
Uncertainty avoidance, also known as preference for stability, is the extent to which people feel threatened by
unknown situations and prefer to be in clear and unambiguous situations. In many countries, people prefer
unambiguity while in many other countries, people can tolerate ambiguity.
4. Masculinity versus Femininity:
Masculinity or femininity, also known as degree of assertiveness or materialism, is the extent to which the
dominant values in a society emphasize aggressiveness and the acquisition of money and material goods, rather
than concern for people and overall quality of life.
In societies having masculinity characteristics, more emphasis is placed on ego goals such as career, money,
etc., while in societies having femininity characteristics, more emphasis is placed on social goals such as
relationships, helping others, etc.
5. Time Orientation:
Time orientation dimension divides people into two categories- long- term orientation and short-term
orientation. People having long-term orientation focus on future, prefer to work on projects having a distant
payoff, and have persistence and thrift. People having short-term orientation are more oriented towards past and
present and have respect for traditions and social obligations.
The basic implication of cultural diversity is that same set of HRM practices is not suitable for all cultures;
consideration has to be given about matching HRM practices with cultural characteristics of the countries
concerned.
II. Workforce Diversity:
Workforce diversity is increasingly becoming common for large organizations even for domestic ones.
However, in a global firm, additional workforce diversity emerges because of hiring personnel from different
countries.
A typical global firm may draw its employees from three types of countries — home country (PCNs), host
country (HCNs), and third country (TCNs). In a global firm, workforce diversity can also be seen in the context
of employee mobility from one country to another country for performing jobs.
On this basis, an employee can be put in one of the following categories:
1. Expatriate — a parent country national sent on a long-term assignment to the host country operations.
2. Inpatriate — a host country national or third country national assigned to the home country of the company
where it is headquartered.
3. Repatriate — an expatriate coming back to the home country at the end of a foreign assignment.
Workforce diversity implies that various categories of employees not only bring their skills and expertise but
also their attitudes, motivation to work or not to work, feelings, and other personal characteristics. Managing
such employees with pre-determined HRM practices may not be effective but contingency approach has to be
adopted so that HRM practices become tailor-made.
III. Language Diversity:
Language is a medium of expression but employees coming from different countries have different languages.
Though English is a very common language, it does not serve the purpose adequately as it does not cover the
entire world. While employees coming from different countries may be encouraged to learn the language of the
host country for better dissemination of the information, it does not become feasible in many cases.
An alternative to this is to send multilingual communications. It implies that anything transmitted to employees
should appear in more than one language to help the message get through. While there are no hard- and-fast
rules in sending such messages, it appears safe to say that such a message should be transmitted in the languages
the employees understand to ensure adequate coverage.
IV. Economic Diversity:
Economic diversity is expressed in terms of per capita income of different countries where a global company
operates. Economic diversity is directly related to compensation management, that is, paying wages/salaries and
other financial compensation to employees located in different countries.
One of the basic principles of paying to employees is that “there should be equity in paying to employees.”
However, putting this principle in practice is difficult for a global company because its operations are located in
different countries having different economic status. In such a situation, some kind of parity should be
established based on the cost of living of host countries.
Diversity of various types in a global firm suggests that HRM practices have to be tailor- made to suit the local
conditions.

International Human Resource Management – Various Roles Suggested by Researchers

The HR strategy and the degree of internalization determine the role or roles that HR assumes upon itself.
Various international human resource management roles suggested by various researchers are:
1. Champions of Processes:
This roles encompasses:
a. Building commitment of the senior leadership.
b. Training managers.
c. Monitoring HR processes.
2. Guardian of Culture:
This includes:
a. Supervision and management of implementation of global values and systems.
b. Ensuring future leaders are sensitive and equipped to deal with global challenges.
3. Effective Political Influencer:
It means:
a. Understanding internal labour market where a subsidiary is located.
b. Managing the internal labour market for the global managers.
4. Network Leadership:
It includes:
a. Building strong internal and external networks.
b. Keeping abreast with latest trends and developments.
c. Mobilizing resources to staff project teams effectively.
5. Builder:
This includes:
a. Articulating various International HR management basics.
b. Developing basic internal HR management practices at the beginning of internalization.
6. Change Partner:
This means:
a. Continuously calibrating human resource management practices as the external environment changes.
b. To enable the MNC to be agile in terms of its HR practices to meet the challenges of the environment and
cash-on the business opportunities.
7. Navigator:
It encompasses:
a. Competency development of the people and developing a competent organization.
b. Balancing between long-term and short-term plans and goals.
c. Balancing between global integration and local responsiveness.
d. Balancing between change and status quo in an global environment

International Human Resource Management – Activities

Although the major activities of human resource management as practiced in international organizations, their
scope, responsibilities, and authority may vary according to the size of the subsidiary. The policy making
section may study the local situation and generate a report which will then submitted to the top management for
approval. They themselves may not have the authority to formulate such policies.
Let us look at the major areas generally looked after by the human resource department:
1. Establishing or Reviewing Employment Policies:
Check their relevancy and applicability to International operations. For instance, Equal Employment
Opportunity Policies relevant to the United States may not be applicable to the subsidiaries in overseas
operations. Some countries allow only certain percentage of expatriates to be appointed in their subsidiaries.
Decisions regarding policies also must be made whether to fill all key positions with parent country nationals;
appointment of home country nationals; appoint the best qualified irrespective of their nationality and so on.
The employment policies must be approved by the headquarters before they are being circulated to respective
HR managers in various subsidiaries. Such policies also must be reviewed periodically to check for their
workability and validity and proper changes must be incorporated.
Generally, a survey of American companies indicates the following steps used in finding the right people
for jobs and placing them on the jobs after taking them through various steps of the selection process:
a. Preliminary Screening at campus or company locations
b. Issuing Application Forms to be completed
c. Testing—Psychological or job-related
d. Structured job interviews
e. Reference checks
f. Meeting with Department heads
g. Physical examination
h. Induction
i. Placement on jobs
j. Probations
Most of the above selection methods are transferable to the subsidiaries from the headquarters of the companies
with the exception of a few items. Let us look at the items in somewhat detailed manner and see how the
transferability takes place. If the subsidiary is not large, the human resource function will be placed under
production head who will be in charge of the selection process and take care of most of the human resource
functions and activities, with the help of one or two clerical personnel.
If the subsidiary is fairly big, then there will be a full-fledged human resource department with variety of
responsibilities, each looking after one section and reporting to the subsidiary human resource manager. The
manager will directly report to the Managing director of the company. At times, the manager will be a member
of the executive committee and participates in policy making bodies.
2. Recruitment:
Recruitment and selection policies must be established taking local regulations and rules. Human resource plans
must be drawn for the local operations annually and such information must be passed on to the headquarters for
compilation of a cumulative plan for the whole corporation. Checks and verifications must be made for the
accuracy and relevancy for scheduled production and service operations of the subsidiary.
Such information must be updated annually or when and where changes have been made due to expansion of
operations or retrenchment exercises due to economic slowdown or other human resource problems.
Since human resource policy issues are already covered, the decisions must be made as to whether recruit
human resources from outside or look for them internally. If the focus is going to be from outside, then, identify
the sources and established contacts with such sources. Such contacts would help public relations purposes also.
Some multinational companies have a good rapport with schools and colleges in the community and make
annual visits to such institutions for recruitment exercises.
Placing advertisements in the news media also serves as a good exercise not only for getting potential
employees but also gets publicity to the company.
3. Selection Process:
The steps involved in the selection process must be examined to see their relevancy and applicability to the
subsidiaries. For instance, the content and the information secured through application forms must be relevant
and applicable to the local situation. Care must be exercised in importing such forms from parent company and
using them in the subsidiary without incorporating the local content.
It may be easier to use imported application forms, but they may secure the right kind of information or the
items in such forms may be understood by the applicant. Local laws must be taken into consideration rather than
asking questions pertaining to laws and regulations in the country of parent organization.
The use of psychological tests is not that common in many Asian and African countries. The validity and
reliability of these tests are not checked for accuracy and applicability. Although there are no laws pertaining to
the use of these tests in India, they may pose language problems. The academic institutions started to use
objective-centered tests for the entrance exams and as a result of these experiences, students and employees is
slowly getting used to such tests.
The interviews are common features of selection program in many companies and there should not be any
problem in this area of selection process. Students who apply for admissions into the educational institutions or
for employment, appear for admission interviews or job interviews. They get used to preparing for these
interviews and adequate training must be given to the interviewers to conduct such interviews and develop the
capability to interpret the information obtained through the interview process.
In many companies using reference checks for obtaining the recommendations from the candidates previous
employers or from the academic institutions has become a routine matter. The human resource specialists must
learn to use such information more productively for choosing the right candidate. The ability to interpret the
most valuable information is not gained to an extent in the subsidiaries of international companies.
The interviews conducted by the technical supervisors, foremen, and managers are carried out in an informal
manner. Some of the international companies, particularly, the global companies use structured approaches to
carry out these interviews. At times, the senior people also sit in these interviews either as observers or to quiz
the candidates. Some companies with good HR practices give practical tests to test the skill level of the
candidates.
Once the interviewers have firmed up their mind to the acceptability of the candidate, they may send the
potential employee for a physical examination to check the general health of the candidate. In some
multinational companies, the candidates may be asked to go for some specialized tests, depending on the nature
of work environment and the job.
If the individual is allergic to certain aspects of job, such as, chemicals, it is better to check that aspect in the
early stages itself. This way some legal implications can be avoided. In one of the American companies, while
an employee was asked to carry a heavy load, he suffered heart attack and ended up suing the company. If the
company would have known the condition of the employee, this incident could have been avoided.
The human resource specialists in some international companies administer highly structured induction and
orientation programs to those selected for jobs after the final interviews and checking of all records, including
the reference checks. In recent years, most of the International companies seem to have well-structured selection
programs.
Once the employees are placed on the jobs and their probationary period is completed, they are placed on
regular jobs and their performance is observed and monitored. Proper guidance and counseling are offered to
those who encounter difficulties whether in adjustments to the environment or in the learning process. Of course
such things do not happen in all international companies. Generally, some employee turnover takes place during
this period. But with proper built-in safeguards, such turnover can be minimized or eliminated.
International companies must be aware of and knowledgeable in laws pertaining to recruitment and selection of
employees in a particular country. For instance, the Indian Government has laid down some laws pertaining to
the recruitment and selection. As per these laws, reservations for Scheduled Caste, Tribes Backward Classes
exist and certain percentage of jobs must be allocated for these groups.
As of now, such reservation does not apply to private sector companies. Child labor Protection Acts do apply to
the Private sector companies also. The human resource department must be familiar with the Factories Act,
Environmental Regulation Act (Anti- Pollution), and there are several legislative measures regarding purchase
of land and constructing Factories.
The Equal Employment Opportunity Act implemented in the U.S may not apply to Indian subsidiaries. The
immigration act in the U.S. has direct implication for hiring Indian employees for jobs in Indian companies in
the U.S. Wherever Federal Government funding is secured, Federal Laws apply.
4. Performance Assessment:
Performance assessment is an essential part of the Human resource Management in many of the international
companies. They may range from simple to complex assessment systems, such as Competency based systems.
The employee’s performance is evaluated periodically with a formalized assessment system.
Whatever approaches are chosen, the following seem to be the common objectives of a performance
appraisal used in international companies:
1. To help the employees improve their current job performance.
2. To stimulate their interest in self-development
3. To provide an adequate supply of well-prepared employees for promotional exercises
4. To provide a tool for comparing employee s performance with salary for sound salary administration.
5. To provide opportunity to express his feelings about job related matters.
6. To foster good personal relations.
7. To encourage high standards of performance
8. To let each employee know where he or she stands.
In recent years, quite a number of international companies have imported Management By Objectives approach
to the assessment system in their subsidiaries. With proper training, the system has become routine and accepted
by the employees.
Such a system includes the following steps:
1. Agreement on duties and responsibilities of the subordinate’s job between the boss and the subordinate.
2. Setting objectives in all areas of major responsibility
3. After setting the objectives, the subordinate submits them to his or her boss.
4. Reporting of progress to the boss.
5. At the end of the given period, the subordinate prepares an accomplishment report comparing performance to
the set objectives.
6. The next important step is the appraisal interview where reasons for not accomplishing objectives are
explored and corrective actions are suggested.
MBO is accepted as a way of life in many international companies and the human resource department gets the
responsibility to make sure the system is in place and carried out effectively. According to Morrisey, the
dynamism that can make MBO a potential force in organizations occurs only with the recognition that it is a
human and not a mechanical process.
In many international organizations, performance assessment occupies an important place due its impact on
providing feedback on the performance to the corporate headquarters or to the subsidiary heads. Due to its
importance, this process is also known as Performance Improvement Management. The department heads and
their subordinates are trained into conducting the appraisals and providing feedback to their subordinates.
The employee potentials are assessed for upgrading them and grooming them for higher level positions.
Employee career strategies are linked to the feedback obtained from the performance appraisal outcomes.
Setting up of career plans and strategies are not that common in many international companies.
This may be because of the availability of all types of employees when and where needed. Of course this
attitude is changing and more and more subsidiaries are instituting career plans in their organizations. Although
there are different approaches to career plans and career development, it is considered as a process of
developing a personal strategy that is conceptually similar to a corporate strategy.
5. Training and Development:
Through Training and Development, international companies have contributed a great deal of education to the
employees of their subsidiaries. In many organizations, a separate department is set up to look after this
responsibility. Training improves the ability and knowledge of operative employees and development, improves
the ability and knowledge of managerial personnel.
While training prepares the individual to meet the requirements of the job by upgrading their skills, development
involves improving a manager’s general knowledge to perform managerial responsibilities. Managers learn
skills to make good decisions during class lectures and when get back to work, they apply such skills.
The international companies are known for imparting knowledge, skills, and techniques for new employees and
skills need to upgrade for existing employees. The Japanese multinationals spend quite a bit of money, time, and
effort for training employees at the shop-floor not only in Japan but also wherever their subsidiaries are located.
The quality consciousness is put into every employee. Small group activities are very common in Japanese
companies. The Koreans also follow the Japanese example.
Some of the commonly used training programs in the subsidiaries of international companies are:
a. Job instruction using models or prototypes
b. Apprenticeship training or understudy
c. Job rotation
d. Lectures to provide theoretical aspects of job
e. Coaching, especially low performers
Very systematically and objectively, the training needs are determined in the subsidiaries using the techniques
learnt from the parent company. Through questionnaires, psychological assessments, and the feedback from
performance assessment, the training needs are determined. Once the needs are determined, appropriate training
and development methods are chosen and the trainees are selected. For managerial personnel, the feedback from
performance assessment system comes as input for selecting the developmental methods.
The developmental methods cannot be simply taken from the headquarters and planted into the subsidiaries.
Such efforts may not yield good results. What constitutes the success criteria in the local context must be
examined systematically and then the relevant programs must be planned. The subsidiaries must analyze their
own situations and try to isolate executive characteristics necessary to make their executives successful in those
situations.
Once these factors are assessed, the developmental programs can be designed and program sessions can be
planned. At times, managers are sent to the headquarters of the parent organization for gaining insights and
education. The Japanese companies are very aggressive in this aspect. Executives get expose to things as
practiced in the corporate headquarters, especially the world’s best run companies either in Japan, America or
Europe. Visiting such places gives the managers firsthand knowledge and exposure. They are also indoctrinated
into the philosophies and culture of the parent company.
Subsidiaries in many developing countries have set up institutes for providing vocational training. Some of them
were funded by the agencies under the United Nations. The apprentice programs are still common in these
countries. These are well-structured programs which provide classroom training as well as job training to the
people who are coming out of vocational institutions which provide basic education.
Some of the commonly used developmental programs for executive level in subsidiaries are:
a. Interviewing Skills
b. Negotiation Skills
c. Motivational methods
d. Leadership styles
e. Grievance handling skills
f. Middle management development programs
g. Executive development programs
h. MBA level courses on a part-time basis.
i. Use of local educational institutions
Multinationals use most of the above developmental programs. Moulton and Fickel stress that all development
whether it takes place on or off the job is self-development individual has the ultimate responsibility for
continuing growth as a person and as a professional manager on a defined career path.
Newer types of developmental methods and techniques are generally imported from the corporate headquarters
and in some cases they are adapted to the local conditions. The local facilitators and trainers are used to deliver
the message. The program content is also adapted to the local environment and situational conditions. At times,
the trainers and consultants are brought in to deliver the programs with the assistance of subsidiary trainers.
6. Employee Compensation:
Compensation is a complex subject when it comes to International area of management. Conditions, systems,
and legal aspects vary from country to country. If two or more countries are involved in determining salaries and
benefits to their employees in world-wide locations, the complexity is further increased.
The parent organization may have to work out several policies, procedures, and methods acceptable to the
employees in various subsidiaries. This particular area of business also involves governmental rules and
regulations, economic conditions, pressures from the unions and things alike. The currency exchange rate will
further complicate the issue. When people are moved from one country to another, the internationally accepted
standards and norms have to be followed.
The expatriate managers may have to be compensated at a much higher level than the local managers. Their
housing, travel, maintaining cars, special clothing allowances, maintenance expenses have to be added to their
salaries. Their compensation package will take varying income tax rates in different countries. The tax reporting
system to their respective governments is also too complex.
The same types of problems are experienced by the expatriates working for Subsidiaries of Indian companies.
Bharat Forge, Tata’s, Birla’s, Ranbaxy, Infosys Technologies, and Oberoi are some examples. They have to
work out compensation packages to employees in different countries as per the local conditions and regulations
caused by economic, political, and regulatory backgrounds.
In the compensation practices of multinational companies, variations occur. Different countries have different
systems and policies to determine the salaries and reporting systems. The impact of national cultures on
compensation determination was studied by Schuler and Rogovsky Development of culture specific
compensation practices based on status, performance, social benefits, and employee ownership plans were
examined by the authors.
They tried to correlate these four factors with Hofstede’s four dimensions of culture and found to be associated
with comparative practices.
Generally, there are two common approaches to the determination of compensation in International companies.
These are balance sheet approach and the Going rate approach. In this approach, the amount paid for income
tax, expenses met for house rents and related expenses, goods and services payments, and discretionary
expenses.
The differences between home country and the country of residence are figured out and if there is a difference,
that difference will be compensated. Going rate approach refers to the market rate. In this approach, the salary
structure of the host country is connected to the base salary. Some supplements are given consideration.
The National Employers’ Federations or some consulting companies put out annual surveys which are used for
determining salaries. Due to some complexities in figuring out the base salary, this approach is not favored.
Only problem is figuring out the taxes and living expenses. The services of accounting firms and consulting
companies are utilized in handing the compensation matters.
Besides salaries, the benefits offered by the company vary depending on the nationality of the company. While
some are generous, others take a stringent approach. Some countries are generous in offering maternity benefits
for their female employees. The mothers can get nearly ten month’s salary for their pregnancy related expenses
and given a few months of paid leave. Some countries go to the extent of granting four weeks of paternity leave.
Singapore has developed a very interesting system for compensating employees. This system is known as
Flexible wage system. In recent years the single most important task facing international and local companies is
handing wages and salaries according to changing environmental conditions. When the panic button is pressed,
the human resource people look for short-term solutions which sometimes may get them into trouble.
There is a great deal of rigidity to traditional compensation systems based on collective bargaining agreements.
Generally these agreements are for two or three years. The increments are predetermined at the time of
collective negotiations and the employers are bound to go by the agreements irrespective of the prevailing
economic conditions. Traditional wage systems also favor seniority rather than individual performance.
Granting across the board increases without any consideration for individual performance leads to inequity.
A flexible wage system is one that gives discretionary power to the employer in determining compensation.
Such power is essential when deteriorating and unfavorable economic conditions prevail. Without such power or
flexibility, the employer may not be able to adjust to changing business conditions.
The power to manipulate wages and salaries does not mean that the employer can do anything at the will. In
fact, such power places a greater degree of responsibility on the employer. This responsibility includes coming
out with an equitable compensation system for a given economic situation.
The flexible wage system has certain principles in common. The basic wage and salary component of the system
reflects the worth of the job. Usually, a job evaluation exercise is used to assess the relative worth of jobs in a
company. Thus inequities in the existing compensation system must be removed, if the flexible wage system is
going to be successful. The company’s performance and productivity measures are considered in setting aside
funds for the distribution of wages and salaries to increase, payments. Individual s performance is assessed
through performance appraisal as a criterion for distributing payments to individual employees.
An important and critical element in the flexible wage system is the assessment of the individual’s performance.
Along with this is the need to convince the individual that the assessment is fair and objective. Without an
effective appraisal system, a flexible wage system will not be a flexible wage system.
The flexible wage system and its accompanying appraisal system should not be used as a tool to justify one’s
actions. Rather, it should be used to demonstrate fairness. Now days, new models are being developed for more
fair distribution of wages and salaries across the globe, taking Globalization into consideration. It is worth
keeping an eye on the models and strategies for Wage and Salary Administration.
International Human Resource Management – Morgan’s Model of International Human Resource
Management
Morgan (1986) had developed a unique model to depict how IHRM works.He asserted that IHRM basically is
comprised of three components, namely-
1. The wide spectrum of HR activities particularly with reference to the added responsibilities of the
international HR managers in terms of managing cultural diversity and developing international executives.
2. The National/Country specific people and cultural categories involved in IHR activities and lastly
3. Types of international employees deployed in various international organizations.
1. HR Activities:
The HR activities on an International perspective can be broadly depicted as those of procurement, allocation
and utilization of human resources in the organization. These activities include international human resource
planning, staffing (recruitment, selection, induction and placement), performance management, training and
development, compensation and reward management and managing international employee relations and
industrial relations.
These HR activities with respect to an international scenario have a broad spectrum mainly in terms of the
complexity created by country differences, level of control, cultural differences and so many factors influencing
the international business environment.
2. Country Categories Involved in IHRM:
The model further depicts that in an international perspective three types of country categories may be involved,
namely-
a. The host country where the subsidiary could be located or be operating.
b. The home country where the MNC/International firm could be headquartered.
c. The “third-country” from where employees, capital and other resources like technology or logistics could be
availed or procured by the organization.
3. Employee Categories Involved in IHRM:
Depending on the above country categories, the employees in an international perspective could be
broadly classified as under:
a. Host Country Nationals (HCNs) representing the employees hired from the host country.
b. Parent Country Nationals (PCNs) representing the employees expatriated to the foreign subsidiary from the
home country of the MNC.
c. Third Country Nationals (TCNs) representing the employees deployed from third/other countries other than
that of the home country of the MNC.

International Human Resource Management – Recruitment Policy

Companies operating outside their home countries, essentially, follow three ways of hiring executives:
1. Ethnocentrism:
It is a cultural attitude marked by the tendency to regard one’s own culture as superior to others. Sending home
country executives abroad – thinking that they will be able to deliver the goods – may be an appropriate strategy
in the initial stages of expanding company operations worldwide as these officials know what to do
immediately. At Royal Dutch Shell, for instance virtually all financial controllers around the world are Dutch
nationals.
Often the other reasons advanced for ethnocentric staffing policies include- lack of qualified host country
managerial talent, a desire to have a unified corporate culture, tight control and the keenness to transfer the
parent company’s core competencies (say, a specialised design skill) to a foreign subsidiary more expeditiously.
However, a policy of ethnocentrism is too narrow in its focus and may evoke strong negative reactions from
local executives whose upward mobility is blocked.
There is also no guarantee that the expats will win over the hearts of local employees and offer positive
contributions. In fact, failures of US expats range from 10% to 15%. European and Japanese expat failures are
equally alarming, the costs of each such failure running to several thousands of dollars.
Too often expats are selected on the strength of their domestic track record. They are posted abroad without
requisite cross-cultural training. The family factors stand completely discounted in the selection process. The
rate of failures could be drastically reduced if these issues are properly addressed.
2. Polycentrism:
In the polycentric corporation, there is a conscious belief that only host country managers can ever really
understand the culture and behaviour of the host country market; therefore, the foreign subsidiary should be
managed by local people. The home-office headquarters, of course, is staffed by parent-country nationals.
Hiring nationals has many advantages. It eliminates language barriers, expensive training periods, cross-cultural
adjustment problems of managers and their families.It also permits the firms to attract talented locals by offering
an attractive compensation package. Many western MNCs have found that the key to success on foreign soil is
to employ local people.
Analog Devices Inc. has achieved global success in a highly technical field by picking up local managers,
training them extensively and then empowering them to hire and manage more local talent. Likewise, global
sales of Bausch & Lomb improved dramatically after putting the local managerial talent to good use.
3. Geocentrism:
Geocentrism assumes that management candidates must be searched on a global basis, without favouring
anyone. The best manager for any specific position anywhere on the globe may be found in any of the countries
in which the firm operates. Such a staffing policy seeks the best people for important jobs throughout the
organisation, regardless of nationality. It helps to build a stronger and more consistent culture and set of values
among the entire global management team.
‘Team members here are always interacting, networking and building bonds with each other, as they move from
assignment to assignment, around the globe and participate in global development activities’. Colgate-Palmolive
is an example of a company that hires the best person for the job regardless of nationality. It has been operating
globally for more than 55 years, and its products are household names in more than 175 countries.
Fully 60 per cent of the company’s expatriates are from countries other than the Unites States and two of its last
four CEOs were not US nationals. Moreover, all the top executives speak at least two languages and important
meetings routinely take place all over the globe.
International Human Resource Management – Challenges
According to P. V. Morgan, International HRM is the result of an interplay among the three dimensions —
human resource activities, types of employees and countries of operation. The complexities of operating in
various countries and employing different national categories of workers is an important variable that
differentiates domestic and international HRM, rather than any major differences between HRM activities
performed.

Broadly stated, IHRM is “the process of procuring, allocating and effectively utilising human resources in a
multinational corporation “. When compared to domestic human resources management, the scope of IHRM is
very wide.

For example, while compensating people in India, the American MNC must keep in mind the expectations of
locals, the competitor’s compensation structure, taxation problems of repatriates, TCN’s aspirations and a host
of other issues that have a bearing on the psyche of employees possessing different skills and having different
cultural backgrounds (both within and outside the country).

IHRM, thus, requires a much broader perspective, encompasses a greater scope of activities and is subject to
much greater challenges than is domestic HRM.

International HRM can be a challenging exercise because of fairly obvious reasons:

I. Integration Issues:
It is difficult to push the right button at the right time, especially when managers operate from headquarters
separated by distance. Controlling operations of subsidiary companies in different parts of the globe through
remote control can be really taxing — especially in coordinating effort and put the same on track in sync with
the established policies of a company.
II. Heterogeneous Functions:
International HRM can be very challenging when one takes a look at what international HR managers are
supposed to handle in terms of variety and complexity — including issues relating to international hiring,
placement, culture-specific training, compensation relating problems, administrative services to expatriates,
carrying out appraisals from time to time, offering growth opportunities to the talented ones, putting out fires
with labour, resolving conflicts and maintaining health labour-management relations, etc.
The employees sent abroad on an assignment need to be taken care of in a special way. Their families too need
to be taken care of including medical, educational, insurance, transportation benefits, etc. HR issues relating to
the above are going to be impacted by a variety of factors which demand a closer examination.

International Human Resource Management – Issues

Some of the more basic issues involved in pertinent areas of global human resource management are
explained below:
1. Staffing, Recruitment and Selection:
There are basically three ways to meet the requirements of manpower in foreign ventures. First, a foreign
company may send persons of its home country to manage its affairs in the host country. Second, it can hire
people of the host countries to meet its human resource requirements there. Third, it can also utilise the services
of third country nationals. International HRM is now accepted as the key source of competitive advantage for
international business.
In all cases, there have emerged certain norms regarding basic characteristics in international staffing. These are
as follows – (i) cultural adaptability, (ii) strong communication skills, (iii) technical competence, (iv)
professional expertise, (v) global experience, (vi) inter-personal skills, (vii) family flexibility and (viii) country
or region specific considerations. Most of the multinational companies vie with each other to recruit candidates
for technical and managerial positions from highly reputed technical and management institutes offering them
lucrative compensation packages and try to retain the services of the most talented ones.
Some of the advantages of staffing from the home country nationals are as follows – (i) greater control over
activities of the organisation, (ii) acquisition of experience in local markets; (iii) greater efficiency in
implementing business strategy and (iv) adequate understanding of culture of the host country. The
disadvantages include the following – (i) difficulty in adoption to the foreign environment, (ii) problems of
family adjustability and (iii) friction resulting from language barriers.
The major advantages of staffing from amongst the host country nationals are as follows – (i) elimination or
reduction of language barriers; (ii) better understanding of host country’s laws and regulations; (iii) reduction of
hiring cost and (iv) reduced compensation package. The disadvantages include- (i) poor understanding of
business objectives of host-country organisation and (ii) possibility of biases and favouritism in appointments.
The advantages of third country nationals in staffing are as follows – (i) better equipped with the use of
international perspectives and (ii) possibility of low cost of hiring. Disadvantages are as follows – (i) poor
understanding of political situations and national hostilities and (ii) resistance from the government and local
people and functionaries in the organisation.
In India, major requirements of various categories of manpower needed by foreign companies are met by the
people of the country itself. India has a bountiful of software engineers and analysts, technical and managerial
personnel with adequate expertise and specialisation, skilled and unskilled workers. Most of the foreign MNCs
operating in India utilise the services of the local people to manage their businesses in the country.
The use of information technology, Internet and the services of specialised and professional organisations have
considerably made the task of hiring easy and convenient. Only in the case of top positions, the foreign
companies generally prefer to fill them by personnel of their home countries.
Foreign companies having their business in India also have the advantage of not facing the rigours of laws
related to management of human resources such as the Civil Rights Act of the USA, compulsions of co-
determination of Germany and a few European countries and compulsory collective bargaining as in existence
in the USA and a few European countries. Besides, they do not have to face the problems of visa restrictions,
rigid immigration laws and regulation of supplies.
There are, however, legal constraints on dismissing, discharging, retrenching or otherwise separating specified
categories of employees under the Industrial Disputes Act, 1947. Besides, most of these countries do not have to
face problems of language and skill and expertise of personnel needed for manning positions at various levels.
These companies also have the advantage of outsourcing of specific operations, the facilities of which are in
abundance in the country.
The Indian companies having their businesses abroad do not have to face many problems in recruitment and
selection of suitable candidates for their enterprises as a sufficient number of qualified and competent people
with managerial and technical skills and specialisation are available in the country for foreign assignments.
They can conveniently be sent to countries having English as the major language. Many of the Indian students
acquire efficiency in different foreign languages, which do not only enhance their career prospects, but also
contribute to the success of the enterprises in the host countries.
Only in a few cases, both the Indian and foreign companies avail of the services of third-country nationals.
2. Training and Development (T&D):
Training and Development is an important area which calls for special attention in international human resource
management. Although a sufficient number of qualified people with requisite academic background is available
in India, they need suitable training to develop skills and capabilities commensurate with requirements of jobs
assigned to them.
Different foreign and Indian companies have their own specific areas of operations, and their needs for
equipping employees with essential capabilities vary. In the situation of fierce competition among firms, it
becomes imperative for them to keep their employees at the level of maximum efficiency.
It is the task of training and development programmes to ensure that employees at all levels of organisational
hierarchy are effectively trained and developed keeping organisation’s objective at the forefront. Some more
notable areas of T&D programmes in international businesses comprise the following – (i) language efficiency,
(ii) understanding of the social and political environment of the host countries; (iii) awareness of the cultural and
social environment; (iv) adaptability to changing situations; (v) efficiency in the use of the computers, Internet
and other electronic devices and (vi) the needs of employees’ career development.
As the extent and dimension of competition, technology job requirements, market conditions and government
policies change, so also it is necessary to arrange for suitable training programmes on a continuing basis. Some
of the methods used for training of managers and executives in international perspective comprise job rotation
training, simulation, conferences, case study and Internet-based training.
Many reputed companies have started laying increasing emphasis on professional development in order to
enable employees to achieve their carrier-related goals. T&D programmes must also cover proper understanding
of legal framework of the host countries including labour and social security laws and those related to
compensation and personnel matters.
3. Compensation:
In international human resource management, compensation issues are of vital importance. Companies engaged
in foreign businesses must offer lucrative compensation packages to all categories of employees in order to
attract and retain talented and competent personnel.
It must also be emphasised that labour cost has increasingly become an important component of the total cost of
business operations. Although the use of improved technology in various areas of business activities has tended
to replace manpower by electronic and other devices, the total expenditure on wages and salaries has continued
to rise.
While formulating compensation policies and determining compensation packages, it is necessary to give due
consideration to the standard of living, prevailing rates of remuneration, statutory regulation of wages and
fringes benefits, cost of medical care and income tax laws of the host countries. People of various countries
prefer to work in gulf countries as their emoluments are income-tax free.
Labour laws of many countries also lay down minimum standards related to paid holidays, vacation time pay,
maximum daily and weekly hours, minimum rates of wages statutorily fixed, liability of the employers in regard
to social security benefits and payment of gratuity and bonus. As there are wide variations in practices in
different countries of the world, international human resource management must take into account the
implications of these variations.
Other pertinent aspects that deserve particular attention in international compensation management, especially in
regard to higher positions, include the following – remuneration paid by competing firms; consistency with
international standards; need for career development of employees; simplicity in administration; and stability in
the retention of talents with a view to maintain the services of talented and indispensable executives. Many
MNCs have started offering stock ownership and equity-based compensation, long-term incentives, profit-
sharing and team-based remuneration to them.
4. Performance Appraisal:
Regular performance appraisal of various categories of functionaries in foreign business is also important in
international human resource management. It is rather very difficult for the home- country management to
evaluate performance of employees working abroad. The task of performance appraisal of such employees may
be entrusted to competent appraisers of the host country.
However, the home-country management may formulate guidelines and lay down the standards for key jobs.
Certain guidelines for appraisal may be related to objectives of assignment, emphasis on quantifiable
measurement for the assignment, converting qualitative behaviour into quantifiable measurements, evaluating
employees’ performance on these measurements and making calculations of return on investment (ROI).
It is always desirable to provide feedback which can be helpful in making appraisal objective and transparent.
Foreign companies sometimes have to face the problem of biases and prejudices by host-country appraisers,
impact of unforeseen situations and also group-pressures. Many foreign companies have started increasing
adoption of 360° appraisal. Email has generally been helpful in making both the appraiser and appraisee aware
of the relevant issues in performance appraisal.
Certain Other Areas in International Human Resource Management:
A specific area deserving attention in international human resource management is the standards set by
international and regional organisations in regard to the use of human resources. A particular mention may be
made of the role of the ILO, European Union, (EU), South Asian Association for Regional Cooperation
(SAARC), Association of South East Cooperation (APEC) and BRICS (Brazil, Russia, India, China and South
Africa).
The ILO creates international standards of labour in the forms of Convention and Recommendation.
Conventions are obligation-creating instruments. The member states ratifying a Convention are under the
obligation to give effect to its provisions by enacting labour law or under collective agreement or in other ways.
The MNCs operating in foreign countries must abide by the provisions of ratified Conventions as embodied in
labour law, collective agreement or other instruments.
Similarly, the European Union also creates norms in various areas related to the use of human resources in the
member countries. Some of these norms are related to industrial relations, workers’ participation in management
and rights and obligations of employers and unions. Some of the norms adopted by organisations in the Asian
countries also have direct or indirect relevance to the use of human resources.
The areas of activities in domestic and international human resource management are not dissimilar, but the
international HRM requires revamping and modifying them taking into account the dissimilarities in the
cultural, political, economic and legal environment of the countries in which they operate.

PRESPECTIVE AND CHALLENGES IN INTERNATIONAL HRM

1. Cultural Factors:

Culture means shared beliefs, values, norms, and moral by the people. Organisational culture means a pervasive

underlying set of beliefs, assumptions, values, shared feelings and perceptions, which influence the behaviour of

people in the organisation. The same distinguishes one organisation from another.

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Similarly, at macro level too, wide ranging cultural differences exist across the nations/countries. For example,

the eastern culture widely varies from the western one. Just to quote, the incentive plans in Asia (Japan) tend to

focus on the work group, while in the west the more usual prescription is still to focus on individual worker

incentives’.

The research work of Geert Hofstede’ undertaken into IBM using the responses of managers from 66 different

countries produced some interesting evidences on cultural differences. In his study Hofstede found that societies

differ on four primary dimensions which he called: power distance (PDI), uncertainty avoidance (UAI),

individuality (INV) and masculinity (MASC).

A brief discussion of these follows:
Power Distance (PDI):

By power distance Hofstede means the extent to which members of a society accept that power in institutions

and organisations is and should be distributed equally. Accordingly, the distance between the government and

the governed is narrower in democratic societies like India than in dictatorial ones like Philippines. This means,

Hofstede concludes, the workers in India will have far more chances of influencing decisions of the government

than would the workers in Philippines. According to him, the same applies to organisations also.

Uncertainty Avoidance (UAI):

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In simple terms, uncertainty avoidance means the creation of set of rules and structures to eliminate ambiguity

in organisations and support those beliefs that are promising for certainty and conformity. Differences abound

among countries from this point of view also For example, while at work place, the Indians, Germans and the

French feel a much greater need for rules and regulations than do the Swedes and the British. The attitude of

uncertainty avoidance is much frowned on in high PDI countries like Philippines and Germany.

Individualism (INV):

In simple terms, individualism means the degree of preference of individuals expected to look after themselves

and their immediate families. Just reverse is collectivist. From this stand point, USA and Britain score high on

the individual index and Indonesia and Pakistan score low. What these mean is the preference for living and

working in individual and collectivist ways respectively.

Masculinity (MASC):

By masculinity, Hofstede means the extent to which the society values assertiveness (masculinity) and caring

(femininity). In simple terms, masculinity pertains to those societies in which social gender roles are clearly

distinct, that is, men are supposed to be assertive tough and focused on material success. Femininity pertains to

societies in which women are supposed to be more modest, tender and caring for the quality of life.

As per this index, Japan and Australia ranked high in masculinity, while Denmark and Sweden ranked low. It is

also important to note that in Japan, the most masculine country, women seem to retain their feminine values.

However, in Sweden, the least masculine country as per the index, feminine values applies also to men.
2. Economic Conditions:

Like cultural differences, there abound economic differences among nations/countries. Differences n economic

conditions or systems cause inter-country differences in HR practices. For example, in case of a country with

free enterprise systems, the need for efficiency tends to favour HR practices and policies that encourage

productivity, efficient workers, etc. On the other side, when one moves along the scale toward more socialist

systems, HR practices tend to shift toward different direction like preventing unemployment. It may do so even

at the expense of sacrificing efficiency.

3. Labour Cost Factors:

HR practices are also influenced by differences in labour costs existed in different countries. If the labour cost is

high, it can require more focus on labour efficiency which, in turn, can influence HR practice to shift toward

improving labour performance. Labour may get remuneration as per performance i.e., pay-for-performance.

Evidences are available to mention the inter-country differences in labour costs. Labour cost is quite more in

U.K. than in India, for example. Wide gaps in hours worked also exist among the countries which also need to

be considered while studying HR practices in a particular country.

Intra-country differences in hours worked exist across organisations. For example, in India, there is 5 days week

(work) in the central government departments, while its 6 days week in the state government departments. This

affects HR practices such as vacations between the two types of organisations in the same country.

4. Labour Relations Factors:

Labour relations or industrial relations i.e., relationship between employees, employers and the government that

vary from country to country and have an enormous bearing on affecting HR practices. For instance, in

Germany, codetermination is the rule. Here, the employees enjoy legal right to have their voice in the matters of

their company.

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On the other hand, in India and many countries, the State has its role to play in the relations between employees

and employers. In India, for instance! HR policies on most matters such as compensation (wages/salary) and
retirement benefits are set by the government. The government does so by enactment of the various Acts such as

the Minimum

Wages Act, 1948, The Payment of Gratuity Act, 1972, the Payment of Bonus Act, 1965, etc. The HR policies

are determined accordingly. As seen above, wide inter-country differences in culture, economic systems, labour

costs, and industrial relations systems affect HR practices. Hence, HR managers need to consider these impacts

and evolve HR practices for business operations conducted globally. The subsequent section deals with the same

CHALLENGES

Challenges That Oracle Would Face In The Management Of Its Human Resources In Ivory Coast, Africa

Staffing Policies
Staffing refers to the process through which an organization selects and trains individuals to take specific job
functions where the management charges them with responsibilities associated with the job function. Given the
fact that there exist key areas of departure between domestic and international businesses, human resource
managers must choose the appropriate staffing policies as dictated by organizational needs. Lee and Wu (2010)
notes that success of international human resources rests on the ability of the HR managers to choose the most
appropriate staffing policy.

The main type of approaches to staffing policy in IHRM are ethnocentric staffing, polycentric staffing, and
geocentric staffing. The ethnocentric policy approach advocates for the recruitment of home country nationals to
occupy top positions in the firm such as Executive positions (Robert et.al, 1998). Such a policy ensures that the
management of the company has substantial experience in the business environment.

Contrary to the ethnocentric policy, the polycentric approach advocates for the assignment of the home country
staffs to executive positions in the head offices and assignment of overseas workers to the middle-level
management position (Ulrich et.al, 2009). The policy enables the organization to learn about local markets from
the overseas workers. Finally, the geocentric approach advocates for the allocation of the executive position to
the best person suited for the position regardless of the nationality of the employee, culture or background.

Challenges/Issues In Staffing Policy In IHRM

Development of an effective staffing policy poses a significant challenge for IHRM (International Human
Resource Management). The ability of a firm to attract, recruit, and maintain qualified, skilled, and committed
workforce handles the success of any company (Prahalad, 1983). One of the primary challenges is the
geographical barrier between the head offices and the overseas branches which make it practically hard to
implement a day-to-day relationship (Dave, 1996).  Several other factors affect the staffing policy in IHRM as
summarized below

Political Factors
Kapoor, (2011) argues that certain political risk factors in the overseas countries serve to create an air of
uncertainty and an environment of suspicion in IHRM. As such human resource managers live with the fear of
unknown; consequently, the fail to make strategic decision owing to their long-term nature for fear of what will
transpire.

Legal Factors

Undoubtedly, the host country’s legal system serves as the main determinant of the staffing policy to be adopted
by an organization (Silzer and Dowell, 2010). As such, most international firms face a challenge where the host
country sets the minimum representation of the local employees in the multinational firms.

Economic Factors

Several economic factors such as the economic development and position concerning the investment made by
the MNCs have a huge impact on the staffing policy adopted by multinational firms. Schuler et al. (1993) argue
that the international human resource managers must take into account the differing purchasing as well as
prosperity powers. For instance, escalating costs in many developing countries have forced MNCs to replace the
expatriates with the local managers. Moreover, as a result of the scarcity of managerial talent in most developing
countries MNCs have experienced huge transaction costs as they ‘import’ managerial staffs from other
countries.

Socio-Cultural Factors

Cultural distance serves as one of the main determinants of the staffing philosophy and impacts immensely on
IHRM. Lather (2010) argues that among the most complex challenges facing international human resource
managers is cross-culture communication. Culture refers to a ‘software of the mind’ that directs the pattern of
thinking and behavior thus influencing how a particular people live and how they associate with others (Adler
and Graham, 2009). Cultural differences inarguably handle the performance of the company. Some cultures may
support particular types of organization and reject others.

Demographic Diversity

Most countries in the developing countries in Africa are characterized by a dwindling youth population and high
unemployment rates. Consequently, such countries experience a severe skilled labor shortage given the fact that
most of the youths have limited skills. Research have established that more than half of Africa’s population
comprise of youths below the age of 25 years most of whom are still students. Currently, the only solution to
solve the problem of a limited skilled workforce is by the company filling the gap with older skilled workers and
bringing more women into the workforce (Theodor, 2006).

Recommendations To Solve The Challenge Of International Staffing

Given the fact that human resource managers face an array of challenges when deciding on the appropriate
staffing policy, the following solutions would assist in solving the problems associated with international
staffing

Effective Cross-Cultural Management

As Barrera (2010) notes, irrespective of the good will that might exist in any firm, miscommunication will more
often than not occur owing to the differences in culture between the communicators. However, cross-cultural
management serves as the leading solution to cross-cultural conflicts. Multicultural companies can adopt several
strategies to overcome the blocks of behavior, emotions, culture, and race. Such strategies include the transfer
and dissemination of knowledge and bicultural skills.

Short-Term International Assignments

Collins et al. (2007) argue that short-term assignments serve as the most appropriate form of the non-standard
tasks. Such assignments involve a temporary/short-term (less than a year) transfer of the staffs/employees to a
foreign subsidiary. Such assignment would assist the firm to solve the challenge associated with talent shortage
in the host country and managerial development. Short-term assignments also come with additional benefits
which include increased effectiveness, flexibility, and simplicity.

Commuter And Rotational Assignments

Such an assignment involves an employee working in one country for a week or two and then transferring to
another workstation in another country and so on. Such an arrangement enables to solve the challenge of cross-
culture communication and increased flexibility.

Training And Development

International human resource managers face a range of challenges in their efforts to create and develop a high-
caliber workforce (Gregersen and Stroh, 1997). An important point to note in training and development is that
the HR manager should not only focus a lot of attention on quality training but must also make sure that the
training is effective and engaging. The following are the challenges faced in training and development.

Inconsistent Training

Given the fact that multinational firms have areas of operations in different location coupled with the fact that
there are multiple trainers, it becomes hard to standardize the training hence the inconsistency in training. The
reason rests on the fact that the level of knowledge, teaching style, and emphasis may differ from one trainer to
the next.

Mobile And Flexible Workforce

The corporate world has witnessed a huge increase in part-time workers, shift working, home working,
teleconferencing, and videoconferencing, and field working. As such, HR managers face a serious challenge on
how to train employees especially those in homeworking and shift working as they spend minimal time in the
firm (Barrera , 2010).

Difference In The Primary Language

A significant challenge IHRM faces in training and development which is associated with global expansion is
the primary areas of departure between the employees’ primary languages. No one specific language can be
understood by all the employees (Kapoor, 2011). As such, the employees might misunderstand some
instructions and directives such as compliance and safety directives posing a serious challenge.

Stipulated Timelines

Given the dynamic nature of the corporate world, the quicker the company trains and develops its workforce, the
higher the opportunity to achieve a competitive advantage. However, given the travels, human resource
managers have to make across borders, and the rise of shift and part-time working, training, and development
may take an extended period.

High Training Costs

Training and development require substantial investment given the nature of workers coupled with other
challenges such as a difference in the primary language.

GRIEVANCE PROCEDURE

INTRO

What is a Grievance Procedure?

When a grievance is brought to the attention of an employer, usually the employer has a formal means of
addressing the employee’s concern and trying to reach a resolution. This formal means is usually referred to as
the grievance procedure.
The collective bargaining agreement in place for unionized workplaces usually has a designation of
how grievances will be handled, such as the use of arbitration or mediation. Some nonunion workplaces also
have formal procedures to handle employee complaints and grievances.
The grievance procedure in place may be unique to the organization, but often there will be a series of steps that
are followed to try to get resolution. For example, many grievance procedures begin by outlining where the
employee’s grievance must be initiated, such as with the employee’s direct supervisor, who then must work with
the union rep to determine whether the grievance is valid (i.e., they determine whether the collective bargaining
agreement terms are being violated or misapplied). This is, of course, just an example, but it is often how
grievance procedures begin; it could differ in your workplace.

In our example, after the supervisor and the union rep meet and agree that the grievance is valid, they can take
steps to resolve it. If the employee remains unhappy after this, it may have to be escalated. Again, collective
bargaining agreements usually have specific steps laid out that detail the exact procedure to be followed when a
grievance is filed—and even nonunion workplaces often have formal systems to handle and resolve employee
complaints. Be sure to check your organization’s collective bargaining agreement, employee handbook, and
other policies to see what your organization has laid out.
Overall, having a formal grievance filing and resolution procedure can be beneficial for both parties. It gives
employees a way to air complaints and seek appropriate resolutions without resorting to lawsuits. It gives
employers the opportunity to resolve problems before those problems take the form of litigation. (Of course,
litigation is not always avoided in serious cases that are not adequately resolved!)

What has been your experience with formal employee grievance procedures? Does your organization have a
formal procedure in place? What are the steps? Have you found it helps to resolve problems before they
escalate?

1. Informal action
If the grievance is relatively minor, the employer should have a discussion with the employee to see if it can be
resolved informally.

In most cases, a quiet word is all that is needed to prevent an issue from escalating.
 An employer should keep a paper trail of all stages of the grievance procedure, including any informal
resolution that has been agreed.

If the grievance is serious, or the employee feels that it has not been satisfactorily resolved, the employer should
deal with the complaint under its formal grievance procedure, and ask the employee to put his or her grievance
in writing.

All employers should have a written grievance procedure in place and HR should ensure that line managers
familiarise themselves with it.
 Can an employer deal with a grievance informally?
 Model grievance policy
 Letter confirming to an employee that a grievance has been dealt with informally
 

2. Investigation
As soon as possible after receiving a grievance, the employer should carry out an investigation. In many cases,
this will be a relatively straightforward fact-finding exercise.

If the grievance involves other members of staff, they should be informed and given an opportunity to provide
their own evidence.

The investigation process will depend on the specific circumstances of the case.

Ultimately, the aim of the investigation is to establish the full facts of the grievance before any decision is taken.

 Task: Investigate an employee’s grievance

 Letter inviting an employee to an investigatory meeting regarding another employee’s grievance
 

3. Grievance meeting
After the investigation, the employer should hold a meeting with the employee so that he or she has an
opportunity to explain the complaint.

The employee should be asked how he or she thinks the grievance should be resolved and what outcome he or
she is seeking.

The Acas code of practice on disciplinary and grievance procedures states that an employee should be given a
statutory right to be accompanied by a companion at a grievance meeting.
Tribunals take the code into account when considering relevant cases, and can increase awards of compensation
by up to 25% for an unreasonable failure to comply with it.

 How to prepare for and conduct a grievance hearing

 Letter inviting an employee to attend a grievance meeting
 Can an employer reject an employee’s choice of companion for a disciplinary or grievance
hearing?
 

Grievances: tasks for HR

XpertHR has resources to help HR complete over 20 grievance tasks, including:
 dealing with a grievance that repeats an earlier complaint;
 responding where an employee retracts a grievance; and
 tackling a request to tape record a hearing.
4. Decision
Having considered the evidence, the employer will need to decide whether to uphold or reject the grievance.
 The decision should be communicated to the employee, in writing, as soon as possible.

If the grievance is upheld or partially upheld, the employer should tell the employee what action it proposes to
take and how this will be implemented.

The letter should also provide the employee with a right of appeal.

 Task: Inform an employee of the outcome of his or her grievance

 Letter informing an employee of the employer’s decision and right of appeal following a
grievance
 

5. Appeal
If the grievance has been rejected or partially rejected, the employer should be prepared for an appeal.

This should be dealt with by an impartial manager and, where possible, a more senior manager than the person
who dealt with the grievance.

Most appeal hearings will be in the form of a review but can take the form of a rehearing if the initial stage was
procedurally flawed.

After the hearing, the employee should be informed in writing of the outcome of the appeal.

 How to handle appeals against grievance decisions

DISCIPLAINARY PROCEDURE

Step 1 – Get an initial understanding

Establish the facts as soon as you can. Get the employee’s side of the story before you decide on next steps.
If you determine that the issue is more closely linked to performance or ability rather than behaviour, following
a capability procedure may be more appropriate.
In the case of a minor or first offence, it may be most appropriate to issue an informal warning, avoiding the
need to enter into a formal disciplinary process. This could be as simple as having a conversation with the
employee and following it up with a letter reflecting what was said.
Step 2 – Investigate thoroughly

If the offence is more substantial, or it is not the employee’s first, you may need to resort to formal procedure.
Begin by gathering all the information you need to establish the facts about the situation: speak to witnesses,
look at any information that may serve as evidence and hold an investigation meeting with the employee
concerned.
Unless you have written this into your disciplinary procedure, the employee doesn’t have the right to bring a
representative to the investigation meeting, and you don’t have to write to them to invite them to an
investigation meeting, as would be the case for a disciplinary meeting.
Make sure you record all your notes and evidence at this point.
If you’re investigating an instance of possible gross misconduct, it may be appropriate to suspend the
employee while the investigation is in progress.
If you believe there is no case to answer following the investigation, the matter stops here.
Otherwise, proceed to a formal disciplinary meeting.
Step 3 – Invite the employee to a disciplinary meeting

Invite the employee to a formal disciplinary meeting in writing.

Provide them with notice of the meeting, be sure to advise them of their right to be accompanied and provide
copies of all the evidence you hold against them for their review.
 Make sure the invite explains the conduct that the disciplinary matter will discuss.
Remember that your employee has a right to view and respond to all evidence before a decision on disciplinary
action is made and providing them with key evidence on the day of the disciplinary meeting is unlikely to be
fair.
If the meeting may result in their dismissal, because the matter is so serious (i.e. gross misconduct) or they are
already on a final written warning, you should explain in the invitation letter that this could be a potential
outcome of the meeting.
Step 4 – Conduct the disciplinary meeting

In the disciplinary meeting you’ll need to:

 Check that the employee is aware of their right to be accompanied if they have not brought anyone
with them.

 Run through the allegations you hold against them and invite them to respond.

 Review the evidence you hold and offer the employee an opportunity to add any further comments.

 Make sure notes are taken throughout the meeting – ideally you’ll have a note-taker present. This not
only provides a witness to discussions but also means you can concentrate on running the meeting.

 If you feel more investigation is needed before you make your decision, advise the employee that a
further meeting is necessary. Ensure you send them any new evidence you uncover before the meeting takes
place.
Step 5 – Decide on action to take

After the meeting, consider all the evidence you now have and whether it’s sufficient to prove the allegation of
misconduct.
In the case where you find the employee innocent, or feel that the behaviour doesn’t warrant taking further
action, you would explain this to the employee and end the procedure.
If misconduct is proven, the next step is to decide on the appropriate level of warning.
Consider whether the employee has any previous warnings on file, any mitigating circumstances and their
length of service. Also reflect on whether similar situations have occurred in your organisation previously and
how they have been dealt with to ensure fairness and consistency.
Your disciplinary policy should detail the levels of warnings in your procedure. You should have at least two
levels before you reach the dismissal stage, with the exception of gross misconduct where you can progress
directly to the dismissal stage.
Normally, lower level warnings are issued where the misconduct is more minor.
First level of warning
This is usually appropriate for relatively minor issues, or the first issue you have with an employee. Accompany
this with your expectations for their behaviour going forwards, and the further action you may take should they
fail to meet these expectations.
Final written warning
A final written warning may be applied if there is already a live warning in place, or in cases of serious
misconduct just below the level of gross misconduct, such as breaching a very important procedure – a ‘first and
final warning’.
Dismissal
This penalty can be issued for further misconduct when there is already an active final written warning on
record. In this case, the employee would be entitled to their contractual notice.
Alternatively, dismissal can be considered for instances of gross misconduct. This will often result in summary
dismissal – immediate dismissal without the entitlement to notice or notice pay.
Step 6 – Confirm the outcome in writing

Once you have made your decision, confirm it in writing to the employee.
You’ll need to inform them of:
 The nature of the misconduct

 The level of warning they are being issued with, or whether they are being dismissed

 How long any warning will remain active

 If they are place on warning – the necessary changes in behaviour and the likely consequences of
further misconduct

 In the case of a dismissal – the grounds for the dismissal

 Their right to appeal and the timescales they have to do this.

Step 7 – Right to appeal

For the disciplinary to be considered fair, the employee must be given an opportunity to challenge your decision.
Ideally you will have someone else who can hear this appeal, although this may not always possible in a small
business. If this is the case and you must hear the appeal yourself, be sure to be as objective as possible.
The appeal meeting should follow the same process as the original disciplinary meeting.

MEAN

Disciplinary Procedure definition

A disciplinary procedure is a process for dealing with perceived employee misconduct. Organisations will
typically have a wide range of disciplinary procedures to invoke depending on the severity of the transgression.

Disciplinary procedures vary between informal and formal processes. Informal disciplinary procedures may not
be codified and may be handled ‘discretely’ by a manager, while formal procedures are more likely to be
codified in a company handbook or employment contract and followed closely by the employer because
disagreement over handling could result in an employment tribunal.

For serious transgressions, employees are likely to be suspended from work while the disciplinary action is on-
going.

Acas provides guidance to UK HR departments on how to handle disciplinary procedures and while there’s no
legal requirement to follow them, pay outs at employment tribunals may be larger if you don’t.

DEF

Written, step-by-step process which a firm commits itself to follow in every case where an employee has to be

warned, reprimanded, or dismissed. Failure to follow a fair, transparent, and uniform disciplinary procedure may

result in legal penalties (damages) and/or annulment of the firm's action.

HR RESEARCH

Definition: HR Research
HR Research can be understood as the tool used to evaluate the HR practices and performance. HR research is
simply a kind of research which is conducted in the field of human resources. HR research also offers detail
analysis on the current development and management issues with the real-life case studies to enable the
formulation and implementation of the strategy practice within the current organization. 

Research is a very systematic and scientific process of information collection, analyzing the available
information and drawing conclusions for taking decisions. Research can be of advanced level as well, relying on
statistics and very sophisticated technology.Research often seeks to improve the performance, whether the
information is rigorous or not.  Research gives us the detailed information about the subject being researched,
which helps the researcher come to a very accurate and correct conclusion. There are usually two kinds of
research like applied and academics. Academic research contributes to the existing body of knowledge, while on
the other hand oriented research are known as applied research. In order to determine the HR performance the
applied research is conducted.

Following are the types of applied research:-

1. Statistical approach- The researchers generate statistical standards from the existing records to evaluate the
activities and programs. With this approach the team can discover the smallest of errors easily.
2. Comparative approach- The research team of the organization directly compares its organization with
another organization to figure out the areas of poor performance. This helps in identifying the areas that need
improvement in the organization.
3. Outside authority approach- Here the research team counts on the expertise of the consultant or published
researched records as the standards of activity or performance evaluation. The outside help may result in
correcting the cause of problem.
4. Compliance approach- With the help of samples from the human resource information system, the
researchers look for the deviation from the laws and company policies. The compliance helps us to know
whether the organization is complying with the company policies and legal regulations or not.
 
Hence, this concludes the definition of HR Research along with its overview.
Browse the definition and meaning of more terms similar to HR Research. The Management Dictionary covers
over 7000 business concepts from 6 categories. This definition and concept has been researched & authored by
our Business Concepts Team members.

OR

HR Research – Meaning and Definition by Michael J. Jucius, Dale Yoder and Other Experts
The study of human resource practices and activities gives the extent of success or failure of policies and
practices. Research on HRM activities provides an understanding of what does work, what does not work, what
needs change, the nature and the extent of change. HR research is, “the task of searching for, and analysing of
facts to the end that HR problems may be solved or principles and laws governing their solutions derived.”
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According to Michael J. Jucius, “HR research is the task of searching for and analysing of facts to the end that
HR problems may be solved or principle and laws governing their solution derived”.
According to Dale Yoder, “HR research is a shortcut to knowledge and understanding which can replace the
slower, more precarious road of trial and error in experience. It implies searching investigations, re-
examinations, reassessments and revaluation. It is a purposive and systematic investigation designed to test
carefully considered hypotheses or thoroughly framed questions”.
” According to another expert, HR research is “the task of searching for and analysing facts, to understand how
personnel problems may be solved or principles governing their solutions derived.”
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HR research implies searching investigations, re-examinations, re-assessments and revaluations. In other words,
research is a purposive and systematic investigation designed to test hypothesis through structured questions. It
seeks to answer specific questions and is not merely an accumulation of unstructured observations. It is
objective; that is, it recognises and limits bias and prejudice in every step of the process.
a. It is systematic; that is, it begins with a comprehensive designs or plan, and the investigation is conducted in
terms of that design.
b. It is parsimonious; that is, it identifies methods and techniques for the solution of problems with the minimum
cost.
c. It is repeatable; that is, it can be used independently by several researchers at the same time.
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d. It is a planned and designed investigation analysis and fact finding. It is conducted to verify or disapprove
certain assumptions or hunches. It supplements existing knowledge.
Research Procedure and Accountability:
A researcher has to follow a certain research procedure. In the first place, he has to define problem; that is he
has to determine the problem that is to be solved by constructing research design. He has then to state his
objective; that is, he has to determine the goal that is to be reached as a result of his research. E.g. formulates
and tests a hypothesis and collects data as a result of his observation of personnel and following the issue of a
questionnaire and the holding of interviews.

After the data have been collected, he classifies, analyses and interprets his information, draws conclusions,
makes generalisations, or develops new hypotheses. Finally, he prepares a formal report containing statements,
tables, charts and other explanatory or illustrative material, and submits the results of his research to those for
whom they are meant.

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The results of research projects, plans, findings and experiences are generally reported in a number of
publications brought out by an organisation, and in a number of other journals, technical or business magazines;
they are also covered in seminar reports, conference proceedings and monographs.

Yoder classifies these into three categories – (a) those professing a major interest in the field of personnel and
labour relations; (b) those having a specialised focus on one or more of these; and (c) journals covering wider
interests, which include reports on research in the manpower management area.
Research is not the sole responsibility of any one particular group or department in an organisation. The initial
responsibility is that of the personnel department which, however, should be assisted by line supervisors and
executives at all levels of management. The assistance that can be rendered by trade unions and other
organisations – for example, educational institutions, private research groups and governmental agencies –
should not be ignored, but should be properly made use of.

Psychologists, sociologists, economists, mathematicians, and specialists in business administration, political

science and other areas should also be laid under contribution insofar as research is concerned.

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According to Jucious, “The field of research requires the resources of several types of researchers and different
kinds of tools. To seek answers through the methodology and principles of a single specialty is to build upon a
weak foundation. Rather, research calls for a cosmopolitan attitude and interdisciplinary cooperation. The
specialists who try to build a fence around all Aspects of research do themselves and industry a serious
disfavor.”

HR Research – Need: Build upon Existing Knowledge, Evaluation of Proposed Programmes, Practices

and Activities and a Few Others
Undertaking human resource research is often crucial in solving HR problems as it is difficult to make effective
decisions without accurate information.
The human resource research is needed due to the following reasons:
(i) To build upon existing knowledge – Growth of the knowledge is a continuous and a never ending process.
Human resources knowledge grows at a faster rate. HR research contributes significantly for building up of the
existing HRM knowledge.
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(ii) Evaluation of proposed programmes, practices and activities – The proposed programmes, practices and
activities are needed to be appraised thoroughly, before implementation. HR research provides necessary
information for evaluation.
(iii) Evaluation of current and new policies and practices – The action research provides for implementation of
policies and practices based on the results of the research.
(iv) Anticipation of Personnel Problems – The HR problems are the outcome of employees’ dissatisfaction over
several issues. These problems will lead to industrial disputes. The HR research can predict the possible
problems and suggest measures for their prevention.
HR research is warranted due to the following reasons:
i. Growth of knowledge in the economy is tremendous and continuous. HR knowledge grows at a faster rate.
HR research significantly contributes to building up of new knowledge and strengthening existing knowledge.
ii. HR research supplies the inputs needed for thorough evaluation of proposed programmes, practices and
activities.
iii. In the light of HR research, current HR policies, programmes and practices need to be altered.
iv. HR research on various aspects of human behaviour helps the organization to spot out the areas of
satisfaction and dissatisfaction of employees. While it may take measures to shore up satisfaction, it may take
proactive measures to minimize employee dissatisfaction and the impending trouble to the organization.

HR Research – 8 Important Characteristics

Some of the important characteristics of HR research are:
(i) Human resource research is purposive. In other words, it seeks to answer specific questions.
(ii) HR research is objective. It recognises and limits bias and prejudice in every step of the process.
(iii) It is systematic. It brings with a comprehensive plan or design. Investigation is conducted based on that
design.
(iv) HR research is parsimonious. It identifies methods and techniques for the solution of the problems with the
minimum cost.
(v) HR research is repeatable. It can be used by different researchers at the same time.
(vi) It is planned and designed investigation and analysis.
(vii) It is conducted in a systematic manner to check or verify or disprove clues, assumptions or hunches.
(viii) It supplements knowledge and extends the frontiers of understanding.

HR Research – Coverage of HR Research Area

Research in manpower and human resources covers all those specific areas which are the subject matter of
personnel administration. The scope of such research may vary from the very simple to the very complex, or
from the short and inexpensive to the long and costly. Most studies reveal that the four most dominant areas of
research are selection; training and development; attitudes and leadership; and measurement devices.
The human resource researcher seeks to discover the basic relationships which may lead to improved personnel
decision-making in such areas as turnover, absenteeism, compensation levels and structure, job satisfaction,
employee morale, assessment of managerial potential, training effectiveness, grievance handling, labour
relations and collective bargaining.
Human resource research areas are often identified in terms of high or low appearance – selection, opinion
measurement, training and development, appraisal, motivation, organisational effectiveness, managerial
obsolescence, counselling and retirement. Managerial selection and development and general employee
motivation have generally been identified as the two main human resources areas which are in the greatest need
of additional research.

HR Research – Fundamental and Specific Objectives

The fundamental objectives of HR research have been listed here:
i. Promoting and evaluating present conditions.
ii. Predicting future conditions, events and behavioural patterns.
iii. Evaluating the effects and results of current policies, programmes, practices and activities.
iv. Providing an objective basis for revision of current policies, programmes, practices and activities.
v. Appraising proposed HR policies, programmes and activities.
vi. Evaluating and reviewing the linkage between organizational strategies and HRM strategies.
The specific objectives are:
(i) To measure and evaluate present conditions.
(ii) To predict future conditions, events and behavioural patterns.
(iii) To evaluate the effects and results of current policies, programmes, practices and activities.
(iv) To provide an objective basis for a revision of current policies, programmes, practices and activities.
(v) To appraise proposed policies, programmes and activities.
(vi) To keep the management abreast of its competitors by replacing old products by new products, old
techniques by new techniques and old organisational practices by new organisational practices.
(vii) To discover ways and means of strengthening the abilities and attitudes of employees at a good or high
level and on a continuous basis.
(viii)To evaluate and review the linkage and knitting between organisational strategies and HRM strategies.

HR Research – Process: Fixing Research Problem, Setting Objectives, Fixing Research Method,
Collection of Data, Analysis and Interpretation & Report Preparation
The HR research process begins from the stage of a sign of grievance of employees. The management to be
proactive should identify the possible future employee problems and offer solutions to prevent them. If,
prevention of problems is not possible, the management should conduct research for solving the HRM
problems.
Following are the processes of HR research:
1. Fixing Research Problem:
A researcher has to first fix a research problem for investigation. He can discover a research problem from
industrial environment, survey of literature, observation, discussion with experts, etc. Researcher has to be clear
about what he intends to study and why.
2. Setting Objectives:
Once the research problem is fixed, he has to formulate appropriate objectives and hypotheses. Otherwise
research would be directionless.
3. Fixing Research Method:
i. It means the method of data collection. Data are of two types. One is primary data and other one is secondary
data. Primary- data refers to data collected straight from the respondents while secondary data refers to
collecting data from documents, libraries, records, magazines, journals, books etc.
ii. Next step for researcher is to design the research instruments i. e., questionnaire or schedule in the case of
survey research.
iii. Researcher may collect data even from observation in the case of experimental study.
iv. Researcher has to fix sample where the universe is large. There are so many sampling techniques. He/she has
to arrive at a correct sampling method and right size of sample in order to get valid results. Where the universe
is small, he/she can contact all and cover the entire population.
v. The period of study needs to be fixed.
4. Collection of Data:
The researcher has to collect data from the respondents.
5. Analysis and Interpretation:
The collected data need to be analysed after processing it. Tables, charts and diagrams are used in analysis.
Further, statistical packages are used to confirm the results of analysis. The data analysed are interpreted and
then inferences are drawn. Final segment of analysis deals with implications of the results.
6. Report Preparation:
All the findings are accommodated in the report segment and finally suggestions are made for policy makers.

HR Research – Top 7 Methods: Historical Studies, Case Studies, Survey Research, Statistical Studies,
Mathematical Models and a Few Other Methods
Various methods and tools may be used in the conduct of personnel research. Of the various alternatives
available, a choice has to be made of research designs. The general practice is to choose the technique which
promises to yield quality with the least difficulty, effort and cost.
Usually, the methods or tools, which are available for research, are:
Method # 1. Historical Studies:
Past records and documents are systematically investigated, and interviews are conducted with former
employees. Almost all big organisations maintain records of the various personnel problems — absenteeism,
turnover, accident rates, wage structures, etc. The essential feature of this method is “its systematic
investigation, utilising an extended time span or longitudinal dimension.”
Method # 2. Case Studies:
These consist of analytically investigating the relationships which are significant in a particular situation or set
of circumstances. Although the precise meaning of the findings of a case study is limited to its unique past
situation, a careful analysis and thoughtful generalisation may be derived from it, which endows it with a
broader significance and application.
Individual case studies may lead to the formulation of general hypotheses which would be useful in laying a
foundation for additional or more intensive future research. The main merit of this method is that it enables the
researcher to make a thorough, in-depth investigation of key incidents or situations, while its demerit is that it is
historical in nature and does not necessarily represent general conditions.
Method # 3. Survey Research:
In a survey research, attention is concentrated on the collection of original data by administering a questionnaire
or conducting a structured interview. Certain research hypotheses are established, and survey questions are
designed to collect data. The correlation among observed phenomena, possible causes and related efforts is then
computed, and conclusions are drawn.
This method is time-consuming and costly, and has been criticised on the ground that its application may
emphasise the importance of the collection of data and not the importance of analysing these data and
formulating a theory on their basis.
Method # 4. Statistical Studies:
These studies deal with the collection, analysis, classification and interpretation of mathematical data and
quantitative information. They lay emphasis on the importance of qualification, mathematical manipulation, and
statistical inference. They may use averages, means, medians, modes, measures of dispersion, trends,
regressions and correlations. Their use is becoming increasingly widespread because of the development of
high-speed modern electronic data-processing equipment.
Method # 5. Mathematical Models:
Mathematical models are generally used in research to explain the relationships among the variables that are to
be examined. They help us to develop and test the designs and sequences of equations which tentatively
describe the behaviour of interacting variables in terms of mathematical notations.
These mathematical models also help us to examine comparatively simple and extremely complex relationships
and evolve decision rules of wide applicability.
Method # 6. Simulation:
Computers have popularised designs which involve simulation. The process begins with the statement of a
hypothesis. It is used to study problems of production and inventory control, of marketing, purchasing, hiring
and training of personnel, and of collective bargaining.
Method # 7. Field or Action Research:
This method has been most effectively used in understanding group behaviour in communities and working
organisations. It involves difficult design problems, for the observer himself becomes a variable in the process
of observation. This self- involvement on the part of the researcher gives him new insights; and these are gained
from an active interaction which would not have been possible under passive observation.

HR Research – 5 Main Approaches: Historical Research, Case Studies, Survey Research, Experimental
Studies and Exploratory Study
Following are the approaches to HR research:
Approach # 1. Historical Research:
Historical research traces the origin and development of HR problems in order to isolate and understand
causative factors. It is based on past records and documents. Historical research provides a perspective of
current events in the backdrop of past experiences. It systematically investigates on a time-span or longitudinal
dimension.
Historical research throws light on development of a problem over a period and then suggests solution for it.
This type of research is costly as it take a long time. Further, time gap between the occurrence of an event and
its investigation, poses a major problem. It questions the validity of data unless it is empirically demonstrated.
Approach # 2. Case Studies:
It seeks to analyse in particular how an individual or an institution handles a given problem. This type of study
enables a researcher to formulate general hypotheses which would facilitate further research for similar
problems in future. However, case studies are not amenable to comparison as each case presents a unique
contextual perspective.
Approach # 3. Survey Research:
In this type of research, researcher collects data from a representative sample population or from the entire
universe through structured questionnaire or interview schedule. He/she frames hypotheses. Data collected are
tabulated, analysed and conclusions drawn. This type of research is time consuming and costly as the
investigation has to contact each and every sample respondent, for example, investigation of job satisfaction,
absenteeism, attrition, morale, etc., comes under this type.
Approach # 4. Experimental Studies:
Experimental studies seek to investigate how one variable influences the other. In other words, it examines the
behaviour of one variable when the other one is constant. The casual relationship is established. For example,
impact of incentive on output, in order to establish a relationship between incentive and output, other variables
like personality of employees, environmental influence, etc., are kept controlled.
In this context, employee can be directed to work for a number of days under identical conditions by varying
incentives. If it is found that output varies with a given incentive, it can be concluded that other things being the
same, that particular incentives influence the output.
Approach # 5. Exploratory Study:
Exploratory studies lay emphasis on the discovery of new ideas and insight, in order to have closer familiarity
with a phenomenon or to get a new insight into a research problem to formulate hypotheses. For example,
software company intends to discover why there is high degree of attrition among programmers. It may
formulate specific hypotheses to be tested empirically. Thus, the reasons for attrition in this particular category
of employees are found out for remedial action. This type of study may serve as a precursor for large studies. It
does not involve much cost and time. It is said to be flexible in data collection.