Human Resource Management Unit 1

Unit 1 Introduction to Human Resource Management

Structure:
1.1 Introduction to Human Resource Management
Objectives
1.2 Concept of Human Resource Management
1.3 Scope of Human Resource Management
1.4 History of Human Resource Management
1.5 Function of Human Resource Management
1.6 Role of HR Executives
1.7 Summary
1.8 Glossary
1.9 Terminal Questions
1.10 Answers
1.11 Case Study

1.1 Introduction to Human Resource Management

Every organisation is essentially a blend of material and Human Resource
(HR). Material refers to money and machines pre-arranged by organisations
for production or trade. Human Resource, on the other hand, refers to the
knowledge, education, skills, training and ability of the members of the
organisation. Human resources are the most valuable and unique assets of
an organisation.
The successful management of an organisation's human resources is an
exciting, dynamic and challenging task, especially at a time when the world
has become a global village and economies are in a state of change. The
scarcity of talented resources and the growing expectations of the modern
day worker have further increased the complexity of the human resource
function. Even though specific human resource functions/activities are the
responsibility of the human resource department, the actual management of
human resources is the responsibility of all the managers in an organisation.
In this unit, we shall look into the concept of Human Resource Management
(HRM), its functions and roles in detail.

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Objectives:
After studying this unit, you should be able to:
 describe the concept of HRM
 define the scope of HRM
 describe the history of HRM
 explain the functions of human resource
 recognise the role of HR executives

1.2 Concept of Human Resource Management

Today’s organisations constantly mould itself to meet the business
challenges despite economic, political and social patterns in which it exists.
The efforts made by organizations to sustain business metrics like revenue,
profits and growth, market share is possible only through the people in the
organization who work towards making this happen within the enterprise.
One of the most useful definitions of Human Resources Management
(HRM) is provided by Fisher, Schoendfelt and Shaw in their book “Human
Resources Management,“ HRM involves all management decisions and
practices that directly affect or influence the people or Human resources
who work for the organization”.
The concept of human resources entails:
 Total knowledge
 Skills
 Creative abilities
 Talents
 Aptitudes of an organisation’s workforce
 Values
 Attitudes
 Belief of the individuals involved
A human resource manager has to build an effective workforce, handle the
expectations of the employees and ensure that they perform at their best.
He or she also has to take into account the firm’s responsibilities to the
society that it operates in.
It is therefore necessary for all managers to understand and give due
importance to the different human resource policies and activities in the
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organisation. Human resource management outlines the importance of HRM

and its different functions in an organisation. It examines the various HR
processes that are concerned with attracting, managing, motivating and
developing employees for the benefit of the organisation.
Objectives of HRM
The objectives of HRM can be classified into the following:
 To act as a link between the top management and the employees.
 To arrange and maintain adequate manpower inventory, which in turn,
ensures the smooth working of the organisation.
 To offer training as a way of developing skills, enhancing productivity
and most importantly, increasing individual and organisational
performance to achieve the desired results.
 To devise employee benefit schemes for improving employee motivation
and group morale, and enhancing employer-employee cooperation.
 To ensure and enhance the quality of work life, which refers to the
employees’ perception of their physical and psychological well-being at
work.
 To help keep up ethical values and behaviour amongst employees both
within and outside the organisation.

Self Assessment Questions

Fill in the blanks:
1. A HR Manager has to build an effective ____________, handle the
expectations of the employees and ensure that they perform at their
best.
2. One of the major objectives of HRM is to act as a link between the
____________ and __________.
3. HRM examines the various HR processes that are concerned with
attracting, managing, ______ and ______ employees for the benefit of
the organisation.

1.3 Scope of Human Resource Management

In the previous section we discussed the concept and objectives of HRM.
Let us now discuss the scope of HRM in an organisation.

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The scope of HRM is wide and far-reaching. An understanding of HRM is

important to anyone who is employed in an organisation. HR issues become
important wherever there is a group of workers. Staffing is performed by all
the managers as a managerial function, either directly or indirectly through
HR department. All managers are, in this way, HR managers, since they get
involved in HR activities such as selecting, training, inducting, compensating
and motivating the employees along with industrial relations activities.
We may classify the scope of HRM under the following heads:
 HRM in personnel management – This is typically direct manpower
management that involves manpower planning, hiring (recruitment and
selection), training and development, induction and orientation, transfer,
promotion, compensation, layoff and retrenchment, and employee
productivity. The overall objective is to ascertain individual growth,
development and effectiveness which indirectly contribute to
organisational development.
It also includes performance appraisal, developing new skills,
disbursement of wages, incentives, allowances, travelling policies and
procedures, and other related courses of actions.
 HRM in employee welfare – This particular aspect of HRM deals with
working conditions and amenities at the workplace. This includes a wide
array of responsibilities and services such as safety services, health
services, welfare funds, social security and medical services. It also
covers appointment of safety officers, making the environment
conducive for working, eliminating workplace hazards, support by top
management, job safety, safeguarding machinery, cleanliness, proper
ventilation and lighting, sanitation, medical care, sickness benefits,
employment injury benefits, personal injury benefits, maternity benefits,
unemployment benefits and family benefits.
It also relates to supervision, employee counselling, establishing
harmonious relationships with employees, education and training.
Employee welfare is about determining employees’ real needs and
fulfilling them with active participation of both the management and the
employees. In addition to this, it also takes care of canteen facilities,
crèches, rest and lunch rooms, housing, transport, medical assistance,
education, health and safety, recreation facilities, etc.

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 HRM in industrial relations – Since employment relationship is a highly

sensitive area, it needs careful interactions with labour or employee
unions, address their grievances and effectively settle the disputes in
order to maintain peace and harmony in the organisation. Industrial
relations is the art and science of understanding the employment (union-
management) relations, joint consultations, disciplinary procedures,
solving problems with mutual efforts, understanding human behaviour
and maintaining work relations, collective bargaining and settlement of
disputes.
The main aim is to safeguard the interest of employees by securing the
highest level of understanding to the extent that does not leave a
negative impact on the organisation. It is about establishing, growing
and promoting industrial democracy to safeguard the interests of both
employees and management.

Self Assessment Questions

Match the following:
4. Personnel management (a) working conditions and workplace
amenities
5. Employee welfare (b) promotes industrial democracy
6. Industrial relations (c) Direct manpower management

1.4 History of Human Resource Management

In the previous unit we discussed the scope of HRM and its classification
under different headings. Let us now discuss the history of HRM.
There is a vast difference between modern HRM and the personnel
management that was prevalent decades ago. By the end of the twentieth
century, the managerial philosophy that had defined the personnel function
had undergone radical changes. Over the past several years, scientific
management approach and the human relations approach appeared and
then disappeared too. However, the human resource approach has gained
prominence in recent times.

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Scientific management approach

Fredrick Taylor, who is widely considered to be the father of scientific
management, focused on motions that were required for each job, the tools
used and the time needed to accomplish each task. Fair performance
standards were then determined for each job, on the basis of such scientific
data rather than on the superior’s subjective judgment. Those workers
whose output exceeded the standards were given additional incentive pay.
The base of scientific management was solely motivated by money and led
to many problems.
Human relations approach
The Hawthorne studies conducted during the 1930 and 1940s, forced
organisations to shift their attention from scientific management approach to
human relations approach.
Hawthorne studies suggested that employee productivity was not only
influenced by the way the job was designed and the economic rewards, but
also by certain social and psychological factors. Feelings, emotions and
sentiments of employees were greatly influenced by work conditions such
as group relationships and management support.
It was recognised that treating employees with respect would improve
employee satisfaction and help in achieving higher productivity.
Human resources approach
Human resources approach treats people as resources, rather than factors
of production, or as human beings who act on the basis of emotions alone.
Some of the principles of human resource approach are:
 Employees are assets to an organisation.
 Policies, programmes and practices must cater to the needs of
employees and should help them in their work and in their personal
development.
 The job and tasks are the primary motivators for employees. Individual
employee needs must be catered to maintain motivation.
 It is necessary to create and maintain a supportive work environment, to
encourage the employees to develop and harness their knowledge and
skills for the benefit of the organisation.

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 HR policies and practices should be in alignment with the goal of

balancing individual and organisation’s needs.
When employees are considered as assets and treated individually, the
level of motivation improves. This leads to more committed and better
employee performance. Overall increase in the performance of employees
leads to an increased organisational performance. When the organisation
reaps benefits out of the increased performance, it is bound to share some
of it to the employees in the form of employee rewards.
Employee rewards may be monetary such as hike in salary or increments or
it may be non-monetary such as change in designation, status, fringe
benefits, etc. When employees realise that they are rewarded and respected
for their efforts they are further motivated. Thus, the human resource
approach helps the employees to achieve through a mutual process where
the organisation and the employees help each other to achieve their goals
as shown in figure 1.1.

Employee
Motivation

Employee Employee
Rewards Performance

Organisational
Performance

Fig. 1.1: Human Resource Approach

[Source: ICFAI Center for Management Research]
8

Self Assessment Questions

Fill in the blanks:
7. _________ is considered to be the father of scientific management.
8. __________ suggested that employee productivity was not only
influenced by the way the job was designed and the economic rewards
but also by certain social and psychological factors.

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9. __________ approach states that HR policies and practices should be

in alignment with the goal of balancing individual and organisation’s
needs.

Activity 1:
Browse the Internet and prepare a report on the implications of
Hawthorne Studies.
(Hint: Refer to:
1. http://www.enotes.com/hawthorne-experiments-
reference/hawthorne-experiments
2. http://www.nwlink.com/~donclark/hrd/history/hawthorne.html)
3. http://www.accel-team.com/motivation/hawthorne_02.html

1.5 Function of Human Resource Management

In the previous section we discussed the history of HRM and analysed the
various approaches towards HRM. Let us now describe the functions of
HRM.
Human resource management involves blending the traditional
administrative functions along with the changing concepts of employee
welfare in the organisation. Organisations now regard employees as a
precious resource and spend more efforts to retain them. The retention of
employees is dependent on how they are perceived and treated in the
organisation based on their performance, abilities and skills.
Human resource managers are involved right from identifying potential
candidates for jobs to their separation from the organisation. They
encourage communication amongst the employees and also promote better
employer – employee relationship.
Organisational performance depends directly on how efficiently and
effectively the HR department functions. It is the quality of the human
resources available to the organisation that primarily determines the quality
of the products and services produced by the organisation. The HR
personnel are the key link between the top management and the
employees. Today, HRM operates in tune with other essential organisational
requirements and co-exists with the topmost management cadre. It thrives

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on the strength of the relationship between the management and the

workers of the company.
Figure 1.2 depicts the major functions that an HR manager has to carry out
in any organisation. The extent of activities carried out by the HR is
dependent on the size and scope of the organisation, the nature of
operations and the attitude of management towards the employees.

MISSION OF AN ORGANISATION

P O D C VISION & OBJECTIVES

L R I O
A G R N HRM OBJECTIVES
N A E T
I N C R STRATEGIES AND POLICIES OF HRM
N I T O
G S I L MANAGERIAL FUNCTIONS OF HRM
I N L
N G I OPERATIVE FUNCTIONS OF HRM
G N
G EMPLOYMENT HUMAN CONPENSATION EMPLOYEE
RESOURCES MANAGEMENT RELATIONS
DEVELOPMENT
JOB MOTIVATION
HUMAN EVALUATION
RESOURCES PERFORMANCE APPRAISAL
DEVELOPMENT WAGE AND MORALE
TRAINING SALARY
RECRUITMENT JOB
MANAGEMENT DEVELOPMENT FRINGE SATISFACTION

SELECTION BENEFTS
PERFORMANCE APPRAISAL
COMMUNICATION
INDUCTION ORGANISATION CHANGE AND
ORGANISATION DEVELOPMENT GRIEVANCE AND
PLACEMENT 10
DISCIPLINARY PROCEDURE

Fig. 1.2: Flow Chart of Functions of HRM

[Source: Rao, Subba (2011). Essentials of HRM and Industrial Relations,
3rd Ed. Himalaya Publishing Pvt Ltd.]

HRM functions can be broadly classified into the following two categories:
1. Managerial functions
2. Operative functions
Managerial functions of HR department
The managerial functions of HR department include the following:
 Planning – Future course of action; it also includes identifying human
resource requirements and forecasting personnel needs.

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 Organising – Division of labour; assignment of responsibility is part of

the organisation’s functions.
 Staffing – It is the process of obtaining and maintaining capable and
competent personnel in various positions at all levels, i.e., manpower
planning, recruitment, selection, placement and induction.
 Directing – It is the process of directing all the available resources
towards the common organisational goals.
 Controlling – It is the measurement and rectification of activities to
ensure that the events conform to plans.
Operative functions of HR department
Operative functions of HR department are those core functions that only the
HR department is assigned to perform. These include functions such as
employment of new personnel, developing their skill sets, compensating
them for their efforts and maintaining employee relations. Figure 1.3 depicts
the operative functions of HRM.

Fig. 1.3: Operative Functions of HRM

Let us now discuss the operative functions of HRM.

 Employment – Employment is the first operative function of HRM. This
involves procuring and employing individuals with suitable knowledge,
skills, experience and aptitude necessary to perform various jobs. It
includes functions such as job analysis, human resource planning,

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recruitment, selection, placement and induction. Figure 1.4 shows the

different functions of employment.

Fig. 1.4: Functions of Employment

The various functions of employment are:

a) Job analysis – To ensure the satisfactory performance of an
employee, his skills, abilities and motives to perform a job must
match the requirements of the job.Job analysis is the process by
which the tasks which comprise the job are determined and the skills
and abilities required to perform it successfully are identified.
b) HR planning – HR planning involves forecasting the human
resource requirements of an organisation and the future supply of
human resources, and making suitable adjustments between the two
in correlation with the organisational plans.
c) Recruitment – Recruitment is the process of seeking and attracting
prospective candidates against a vacancy in the organisation.
d) Selection – The purpose of employment selection is to choose the
right candidate for a job.
e) Placement – After a selected candidate conveys his or her
acceptance of the offer of employment made by an organisation, his
or her placement has to be decided based on the needs of the
organisation.

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f) Induction – Introducing a new employee to the organisation, the

organisation’s business, its culture, values and beliefs, and practices
and procedures is termed as induction.
 HR development – HR development concentrates on developing the
workforce so that both the employees and the organisation in turn can
achieve their goals. It focuses on strengthening the skills, knowledge
and aptitudes of the employees. This includes functions starting with
evaluating the performance of the employees, providing necessary
training and development programmes to fill the gaps between current
performances to the optimum performance of employees.
HR development involves functions such as:
a) Performance appraisal – This is the process of evaluating the
performance of an employee on the job and developing a plan for
the employee’s improvement. This includes an assessment of the
strengths and weaknesses of the employee, and drawing up a
development plan in consultation with him or her to prepare him or
her for future tasks and responsibilities in the organisation.
b) Training – Training is the systematic development of knowledge,
skills and attitudes required to perform a given task or job
successfully, in an individual.
c) Management development – It is the concept of developing the
employees of an organisation to meet future changes and
challenges.
d) Career planning and development – Career planning and
development refers to identifying one’s career goals and formulating
plans forachieving them through various means such as education
and work experience.
 Compensation – Compensation includes all the rewards that an
employee receives during the course of his or her job–for his or her
contributions to the organisation. Compensation encompasses base
salary, incentives, bonus and benefits, and is based on job evaluation.
a) Job evaluation – Job evaluationis a systematic determination of the
value of each job in relation to other jobs in the organisation, in the
industry and in the market.

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b) Wage and salary administration – Wage and salary administration is

the process of formulating and operating a suitable wage and salary
programme.
c) Incentives – Incentives are the rewards that an employee earns in
addition to regular wages or salary based on the performance of the
individual, the team or the organisation.
d) Fringe benefits – Fringe benefits are monetary and non-monetary
benefits given to employees during their employment, and
sometimes, also in the post-employment period. These include
housing facilities, canteen facilities, conveyance facilities,
educational facilities for employees and their children, medical and
welfare facilities, company stores, etc.
 Employee relations – Employee relations deals with the employees, in
the organisational context, as a social group that contributes to the
organisation. It includes:
a) Increasing employee productivity.
b) Keeping the employees satisfied and motivated.
c) Developing team building, team management, leadership skills in
employees.
d) Designing and implementing a fast and suitable grievance
management system.
e) Ensuring discipline among the employees by prompt action to
correct deviations.
f) Supporting employees by counselling and developing them into
complete individuals and responsible citizens.
g) Enhancing the quality of both work and personal life of the
employees.

Self Assessment Questions

10. __________ is the future course of action that includes identifying
human resource requirements and forecasting personnel needs.
11. ___________ are the rewards that an employee earns in addition to
regular wages or salary based on the performance of the individual,
team or the organisation.
12. ____________ are monetary and non-monetary benefits given to
employees during their employment.

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1.6 Role of HR Executives

In the previous section, we discussed the various functions involved in
HRM. Let us now discuss the role of HR executives.
Managing people is one of the biggest challenges for a manager. Few of the
reasons are:
 Individuals differ from each other in terms of their values, attitudes,
beliefs and culture. This leads to a very complex situation.
 The stimulating and motivational factors might not be the same for all
employees.
It is important to understand the individual needs of the employees and
cater to those needs. This involves taking up different roles by the HR. The
specialist role of HR manager includes:
 Services provider
 Administrative expert
 Facilitator
 Consultant
 Auditor
 Change agent
 Employee advocate
Let us now look into each of these roles in detail.
 Service provider – Management needs to gather information such as
market statistics, pay rates and labour laws, and legislations from the
market as well as from their competitors before making decisions on
various employee related issues.
 Administrative expert – The administrative role involves record
keeping and legal compliance. The HR is responsible for maintaining all
records of the employees relating to their employment and also ensuring
the organisation complies to the statutory health and safety, employee
welfare measures.
 Facilitator – They act as a facilitator when training and development
actions are planned and conducted,and when performance appraisals
are done.

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 Consultant – While supervising the employees, managers face many

problems. Their problems may be due to lack of motivation, lack of
training,job misfit and grievances relating to pay.They should know how
to smoothly resolve such problems.
 Auditor – HR specialists are responsible for ensuring that all members
of the management perform their respective roles efficiently and also
ensures that there is effective use of the human resources of the
organization.
 Change agent – It is the HR that helps organisations to implement
changes and help employees adapt to changes. The HR is the first
department that recognises the changes in the external environment and
makes necessary changes within the organisation to help the
organisation adjust to the changes without any hitches. When the
market is not favourable, the HR may be busy with downsizing and
when there are new prospects in future, the HR tries to ensure that the
employees are well trained to take full advantage of it.
 Employee advocate – HR employees are the link between the top
management and the employees. The concerns of the employees are
first reported to the HR personnel. They report these issues to the top
management and try to resolve the issues.
Thus, we have seen that the HR in any organisation has multiple roles to
play. No HR can perform just one role. They may have to perform all the
mentioned roles at different stages in their career as HR personnel.

Self Assessment Questions

13. The administrative role of the HR involves record keeping and
____________.
14. As an ___________ HR employees link the top management and
employees.
15. As an _______ HR specialists are responsible for ensuring that all
members of the management perform their respective roles concerned
with the effective use of HR.

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1.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Human resource management is one of the most complex and
challenging field of management study. It mainly deals with people
dimension in management.
 Over the past several years various approaches to human resource
management have been adopted by companies. Scientific management
approach gave rise to the human relations approach. The human
resource approach has gained prominence in recent times valuing
employees as the prime asset in any organisation.
 The primary objective of HRM is to take care of the work life of
employees even while ensuring their best possible cooperation for
achieving the organisational goals and objectives.
 The scope of HRM can be divided into HRM in personnel management,
HR in employee welfare, HR in industrial relations.
 Basically, HRM includes the four functions of acquiring, developing,
motivating and managing the human resources. HRM functions are
broadly classified into two categories – managerial and operative
functions.
 Managerial functions include planning, organising, directing and
controlling.
 The operative functions of HRM are related to specific activities of HRM
such as employment, development, compensation and employee
relation.
 The specialist role of the HR professional takes a number of roles, which
is that of an auditor, service provider, administrative expert, facilitator,
consultant, the change agent and employee advocate.

1.8 Glossary
 Manpower inventory: A record of all the employees that lists all
relevant employment related information such as age, sex, educational
qualification, job history, type of employment, years of work experience.
It helps in knowing the number of employees in a department and the
job that they carry out.

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 Employee Retention: Employee retention refers to the various policies

and practices which let the employees stick to an organization for a
longer period of time.
 Hawthorne studies: In the 1920s Harvard Business School professor,
Elton Mayo, and his Fritz J. Roethlisberger led a landmark study of
worker behavior at Western Electric, Chicago. The study began by
examining the physical and environmental influences of the workplace
(e.g. brightness of lights, humidity) and later, moved into the
psychological aspects (e.g. breaks, group pressure, working hours,
managerial leadership). The major finding of the study was that almost
regardless of the experimental manipulation employed, the production of
the workers seemed to improve. The Hawthorne experiments brought to
light ideas concerning motivational influences, job satisfaction;
resistance to change, group norms, worker participation, and effective
leadership.

1.9 Terminal Questions

1. What is human resources management? Discuss the scope of HRM.
2. Explain the functions of HRM.
3. Discuss the main features of human relation approach. How does it
differ from scientific management?
4. Briefly describe the different roles of HR professional in business.

1.10 Answers

Self Assessment Questions

1. Workforce
2. Top management and the employees
3. motivating, developing
4. (c) direct manpower management
5. (a) Working conditions and workplace amenities
6. (b) promotes industrial harmony
7. Fredrick Taylor
8. Hawthorne studies

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9. Human Resource
10. Planning
11. Incentives
12. Fringe benefits
13. Legal compliance
14. Employeee Advocate
15. Auditor

Terminal Questions
1. Human resource refers to total knowledge, skills, creative abilities,
talents and individual aptitudes of an organisation’s workforce, as well
as values, attitudes and beliefs of the individuals involved. A human
resource manager has to build an effective workforce, handle the
expectations of the employees and ensure that they perform at their
best.For more details, refer section 1.2
2. HRM includes the four functions of acquiring, developing, motivating and
managing the human resources. HRM functions are broadly classified
into two categories-managerial and operative functions.For more details,
refer section 1.5
3. The Hawthorne studies conducted during the 1930 and 1940s, forced
organisations to shift their attention from scientific management
approach to human relations approach. Hawthorne studies suggested
that employee productivity was not only by the way the job was
designed and the economic rewards, but also by certain social and
psychological factors. For more details, refer section 1.4
4. HR professional takes a number of forms: the auditor’s role, the
executive’s role, the facilitator’s role, the consultant’s role, and the
service provider’s role. HRM objectives should align with the
organisational objectives, and should balance them with the individual
and social goals. For more details, refer section 1.6

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1.11 Case Study

HR, The trendsetter?
No longer is HR just a recruitment function; it is part of the company's
overall strategy to achieve its business goals. With increased competition in
every industry, the challenge for companies is to remain competitive, and
are they doing just that? Industry experts give a bird's-eye view of a few HR
trends in the months to come.
Dayanand Allapur, Head HR, Tesco HSC, feels that in the months to come,
there would be an increased focus on strengthening the employee brand
and creating a ‘workplace of choice' through various initiatives such as
smarter employee policies, increased workplace interaction through new
age social media tools and using technology to optimise systems and
processes. "This would be augmented with greater focus on talent planning
and development, thereby providing better career options to employees.
The trend would also lean more towards the "human side" of companies
such as how "green" are we and also focus on diversity and giving back to
the community," says Allapur.
What is in store?
Ashish Srivastava, Director - HR, Canara HSBC Oriental Bank of
Commerce Life Insurance:
Work-life balance – Organisations will look at ensuring higher flexibility with
enhanced focus on overall productivity rather than mere number of hours.
Employees would be encouraged to constantly up-skill themselves and
learn to work "smarter" and carve time for value-added initiatives with
colleagues and family.
Staffing and Compensation – Staffing will remain lean with higher
demands on individual productivity - beyond specified KRAs, albeit all within
the parameter of core organisational values. The concept of "Total
Rewards" will be earnestly applied as organisations will make compensation
more creative and competitive. Expect deliberate focus on variable pay
plans and a higher ROI on compensation. "Recognition" would be a focal
point to ensure sustained engagement whilst simultaneously encouraging
increased performance differentiation. What the high-performing
organisations will choose to do is to give a staff an overall sense of "a great
total-deal" and not just a good fixed base in compensation.
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Talent Management – What will matter is the "Employment Brand" and

existent talent, just as much as product loyalty will differentiate the top
players in the industry. For instance, propel increase in the breadth of
experience resulting in versatile workforce within the organisation through
means of short-term and cross functional projects and assignments.
Deepak Kaistha, Director, Planman Consulting
Work-life Balance – Work-life balance is just not a simple term but the way
one should maintain/divide their work hours effectively. What will matter in
the months to come is how you work smart and complete a defined task at a
given time frame. Employees who are able to manage the same will be
termed ‘smart' workers.
Staffing and Compensation – Hiring plans for the next quarter is on its
spree and looks optimistic. As per a study, employers in various industry
sectors and all four regions of India report positive hiring plans for the next
three months. Job seekers in the wholesale and retail trade sector (+51 per
cent) and service sector (+48 per cent) can look forward to the most
vigorous hiring in the next three months. Globally, the third quarter hiring
expectations are positive, India being the strongest country, apart from
Brazil, Taiwan, Turkey and Singapore.
Talent Management – Given ample evidence that companies with highly
engaged employees outperform companies with neutrally or negatively
engaged employees, over the next few years we'll see more companies
adopt - not just talk about - best practices such as closer scrutiny of
manager quality, continuous feedback, talent mining and mobility, workforce
segmentation, employee recognition programmes and differentiated pay.
Rajesh Padmanabhan, Head-HR, Capgemini India
Work-life balance – is an important ingredient of driving company culture
and employer of choice value proposition. India Inc. will see more
expectations around this and will need to ready organisations keeping this
important aspect in mind.
Staffing and Compensation – as a recruitment channel is set to increase,
going forward. More structured compensation options in the form of time-off,
remote working, project allowance and performance accelerators would
slowly start coming into play.
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Human Resource Management Unit 1

Talent Management – Structured capability building models and building

future leaders will be the way forward.
Whatever the route, HR is all set to pull up its sleeves and become the new
trend-setter.
Discussion Questions
1. What are the trends in staffing ?
2. What are the ways of ensuring talent management ?
(Source: http://www.itsmyascent.com/web/itsmyascent/hr-zone/-/
asset_publisher/4htH/content/hr-the-trendsetter

(Retrieved on 27th February, 2012)

References:
 Bearwell, I, & Holden, L. (1995). Human Resource Management: A
Contemporary Perspective. New Delhi: Macmillan India Limited.
 Dessler, G, & Verkkey, B. (2011). Human Resource Management. New
Delhi: Pearson Prentice Hall.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.
E-Reference:
 http://www.managementstudyguide.com/scope-of-human-resource-
management.htm (Retrieved on 20 December 2011 )
 http://www.slideshare.net/hemanthcrpatna/procedures-for-handling-
disciplinary-matters-in-ktms (Retrieved on 20 December 2011 )

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Human Resource Management Unit 2

Unit 2 HRM in India

Structure:
2.1 Introduction
Objectives
2.2 HRM in India
2.3 Changing Role of Human Resource in India
2.4 Globalisation and Its Impact on HR
2.5 Summary
2.7 Glossary
2.8 Terminal Questions
2.9 Answers
2.10 Case Study

2.1 Introduction
In the previous unit we studied about the concepts and scope of HRM. We
also learnt the evolution of the concept of HRM. We have learnt that
workforce has evolved from being considered as a commodity to being the
most valuable resource in any organisation.
Although ‘Human Resources’ is comparatively a recent management term
we can trace the relevance of it to the vedas. In The Bhagavad Gita, Lord
Krishna not only makes Arjuna spiritually enlightened, but also teaches him
the art of self-management, anger management, stress management,
conflict management, transformational leadership, motivation, goal setting
and many other aspects which are now essential parts of any HRM
curriculum.
After Indian independence, the government resorted to protectionism in
order to nurture the country’s fledgling industries. There were very limited
job opportunities and having a government job was regarded with high
esteem. There was a high degree of loyalty, and therefore, people used to
work and retire from the same job. This situation drastically changed after
the government liberalized the economy in 1991 and allowed foreign
competition. Domestic organizations were forced to raise the bar by
improving their products and services to compete with global organizations.
More and more of private multinational organisations started setting up

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companies in India bringing along with them global HR practices. Also apart
from being a global hub of outsourcing, Indian companies are expanding all
over the world through mergers and acquisitions.
The critical HR issues today in India are performance management,
employee motivation and retention, career and succession planning. In this
unit we shall look into the changing role of HR in India and how globalisation
has impacted the changes in HR practises.
Objectives:
After studying this unit, you should be able to:
 analyse the concepts of HRM in India
 describe the changing role of HR in India
 explain the impact of globalisation and its impact on Indian business

2.2 HRM in India

The viewpoint of HRM in India has shifted in the last two decades. The
economic liberalisation of 1991 has created a massive change in the HRM
perspective in India. It not only led to the creation of a very competitive
market situation but also in turn forced Indian organisations to think and
implement innovative measures to attract and retaining employees.
The Indian workforce is now being globally acknowledged as a dedicated,
intelligent and a well-informed workforce. This is the result of the strong
foundation provided by the Indian education system at the primary,
secondary, technical and at professional levels. It is an undisputed fact that
the Indian Institutes of Technology, the National Institutes of Technology
and the famed India Institutes of Management are among the world-class
institutions to name a few. Quality education and research are encouraged
on these campuses and across the country, which mould and contribute to
the practices in Indian organisations.
There are arguments that HRM practices in India are a simple extension of
the HR practices from the established western organisations and the
developed countries. They argue that much of the changes in the
employment perspectives in India have changed only after the economic
liberalisation. However, there is an equally strong cultural impact on the
hiring practices, compensation standards, benefits and statutory benefits,

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performance linked rewards and pay-out, which though in-step with

international HRM practices have a flavour of their own. We will discuss a
few distinct differentiators that impact HRM practices in Indian
organisations:
 The Indian culture is one that is deeply rooted in its societal and
collectivistic values whereby there is a natural urge to collaborate at the
workplace, work in teams and groups with ease.
 Work culture-wise, the natural ability to work hard and long hours,
perseverance and the need to earn money impact the way the work is
organised in Indian organisations. It is not uncommon for the Indian to
compromise personal time with family/friends and instead attend to work
and satisfy a customer. There is an overwhelming sense of ‘service’ that
manifests itself at the workplace.
 Indians are quick at accepting diverse views and ideas as a result of its
diverse religious and regional culture. Tolerance for diversity is high
among Indians and therefore not much HR efforts are needed to
practice tolerance towards others points of view.
 The tolerance for ambiguity and uncertainty however is low in the Indian
workforce, which requires a lot more detailing of jobs and roles and
responsibilities. There is need therefore to establish definite boundaries
of authority and responsibility.
 Availability of a large educated group of individuals of different calibre of
knowledge and skill allows the country to undertake different nature of
work beginning with lower skilled activities such as BPOs (Business
Process Outsourcing) and moving up the value curve to far more
advanced activities like KPOs (Knowledge Process Outsourcing).
 Due to the availability of large employable individuals, compensation
and benefits costs continue to provide a competitive advantage for India.
 There is a naturally expressed need ‘to belong’. This again is typical of
the Indian population and has brought about a significant amount of
customisation of the workplace and its norms to allow for cultural events
and activities through the year. There is a lot more scope for socialising
that exists in the Indian organisations.
 Current trend is that the overpopulated urban part of the country is
quickly moving to tire 2 and tire 3 cities, and towns where the cost of
living and wage levels are not as competitive, further expanding the

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Indian resource base for hiring and building talent, contributing to the
overall gain of the country.
HRM in India however, is not structurally well-researched and hence there is
a lack of theoretical information to track and document its progress, unlike
the emerged countries, such as the USA and the UK, where the research
networks are mature and well established. Research is yet at its infancy in
India and there is a lot of dependence on the developed countries in
emulating best practices in the way people are hired and managed. Today
the organisations of Indian origin have their unique HR strategies that work
best for them. Work more and earn more is a common and accepted
philosophy at Indian workplaces. Work is respected, revered and almost
worshipped in Indian organisations. Benefits are basic yet equitable and
adequate. There is a high focus on cash in hand as opposed to benefits and
perks.

Activity 1:
Prepare a report on how the Indian culture has influenced the HR
practices in India.
Refer: 1. http://rphrm.curtin.edu.au/2007/issue2/india.html
2. http://www.f3.htwberlin.de/Professoren/Arora/discussion_paper/
Foreign_Multinationals_in_India-Dayanand_Arora.pdf

Self Assessment Questions

State whether the following statements are true or false.
1. HRM in India is structurally well-researched.
2. The tolerance for ambiguity and uncertainty is high in the Indian
workforce.
3. Tolerance for diversity is high among Indians and therefore not much
HR efforts are needed to practice tolerance towards others points of
view.
4. Indian employees require cultural events and activities in the
organisation.
5. There is a natural urge for Indian employees to collaborate at the
workplace, work in teams and groups with ease.

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2.3 Changing Role of Human Resource in India

In the previous section, we discussed HRM in India. Let us now discuss
about the changing role of HR in India.
The role of HR has undergone several changes in India. From being
considered as compliance checking body, human resource managers are
now being considered as strategic partners to the organisation. They are
involved in all the crucial business decisions made by the company. Their
role is not limited to designing the organisational structure to meet the
changing market demands, attracting high performing talent, evaluating
performance, retaining top talent and also ensuring that employees are
motivated and engaged.
The roles that HR in India has to take up have increased. They are the
change agents, counselors, motivators, trainers and also the spokeman of
the employees.
HRM challenges
One of the challenges HR managers face is the issue of upgrading the skill
set of employees through training and development. Indian companies are
recognising their responsibilities to enhance the employee’s opportunity to
develop skills and abilities for full performance within the position and for
career advancement.
The fast pace in which the global business environment is changing has
kept HR managers in India also on toes. Every little change in the business
environment bring along with it subsequent changes in the workforce. This
has become a challenge for the HR personnel to handle several complex
issues such as attracting the right talent who meets international work
standards, designing work teams, creating faster communication patterns,
creating innovative employee recognition strategies and devising measures
to ensure that the top quality talent is retained.
Managing changes in technology is also one of the challenges that an HR of
any organisation in India faces. Technology is changing rapidly, and every
day we are witnessing innovative technological advancements. All
organisations want to be technologically oriented. They want their
employees to aware of the changes and quickly adapt to them. This require
the HR personnel to attract the right talent with the required knowledge and

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are also responsible for upgrading the skills and knowledge and motivating
them to learn, absorb and come out of their comfort zones is a great
challenge faced by many organizations.
Developing Accountability: With the advent of Six Sigma methodologies,
organizations have lowered their tolerance levels for mistakes, errors and
delays. It is a challenge which HRM in India is facing like its global
counterparts. It is not easy to train people to shoulder responsibility.
Managing workforce stress and employment relations: HR is the face of an
organization. It hires and fires employees and if the HR of an organization is
not emphatic towards its workforce it does not help in employment relations.
This factor is fast becoming a challenge for HRM especially in sectors like
hospitality, IT and allied support services, media and entertainment.
Managing inter-functional conflict: Earlier it was the friction between different
levels of an organization and now the new emerging challenge for the HR is
to manage inter-functional conflict within an organization. With
organizational restructuring becoming common in the past few years,
disputes and friction between different functions has been on the rise.
Managing workplace diversity: With globalization and India’s economy
changing gears to accelerate growth, organizations hire as well depend on a
people from different countries, cultures and ethnicity. To manage the
diverse workforce who have fairly diverse physiological and the
psychological influences, is also a huge challenge for the HR in the
emerging Indian economy.
Progressive HR policies
Today, most of Indian companies are committed to provide equal
employment opportunities for all. The employers are increasingly realising
the value of trained human resource, especially women, in India. Some
organisations are changing their HR policies to retain their valuable
employees. MNCs are providing flexible options such as working from a
different city, sabbatical from corporate life and extended maternity leave so
that female employees, at various life stages, benefit from these policies.
Entrepreneurship by employees
Indian organizations are encouraging 'entrepreneurs' or employees who
have ideas that could potentially become an asset. HRM has taken a

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leading role in encouraging Corporate Social Responsibility (CSR) activities

at all levels. Companies, such as Wipro, inculcate CSR values amongst its
workforce right at the beginning during the induction process. Corporate
presentations and keeping employees updated through regular newsletters
are the instruments used by HR to keep employees energised about the
organisation’s socially responsible initiatives.
Over the last decade, India's vast manpower has played an instrumental
role in its economic success story. Indeed, the success of Indian companies
is not based on superior access to raw materials or technology or patents,
but fundamentally upon human skills. The synergy between the strategic
planning and innovative HRM practices will be pivotal as Indian Inc.
embarks itself on a global journey.

Self Assessment Questions

6. The challenges HR managers face is the issue of upgrading the skill
set of employees through ________ in the face of high attrition.
7. Most of Indian companies are committed to provide ___________
opportunities for all.
8. Human Resource Management has taken a leading role in encouraging
________ activities at all levels.
9. Organisations are changing their HR policies to retain their _________.

2.4 Globalisation and Its Impact on HR

In the previous section, we discussed the changing role of HR in India. Let
us now discuss about globalisation and its impact on HR.
The tendency of firms is to extend their sales and/or manufacturing to new
markets abroad, and for business everywhere. The one element that is
unique about every nation or company is its workforce.
A workforce that is knowledgeable and skilled at doing complex things
keeps a company competitive and attracts foreign investment. Well-trained
workers attract global corporations, which invest and provide employment
opportunities to the workers, which in turn generate additional training and
experience.

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Human Resource Management Unit 2

Technology
The most important use of technology in HRM is in an organisation’s Human
Resource Information system.
Trends in the nature of work
Technological and globalisation trends are in turn producing changes in the
nature of jobs and work. Following are a few trends in the nature of work:
 Information technology and personal computers have allowed
companies to relocate operations to locations with lower wages.
 Increased use of part time and temporary workers.
A service society
 An enormous shift from manufacturing jobs to service jobs.
 For service jobs new types of knowledge workers and new HRM method
to manage them.
Knowledge work and human capital
 The distinguishing characteristics of companies today and tomorrow is
the growing emphasis on human capital–the knowledge, education,
training skills and expertise of a firm's workers.
 This growing emphasis on education and human capital reflects several
social and economic factors.
 Now companies are relying more on employee’s creativity and skills.
Other trends affecting HRM
 Equal employment opportunity laws that bar discrimination on the basis
of race, age, disability, religion, sex or national origin, have been
passed.
 Virtually all managers are thus now legally bound to uncover and correct
instances of discrimination.
 Mandated health benefits, occupational safety and health requirements.
 Union-management relations.
 HR managers have to deal with all these legal constraints.
Workforce diversity
Diversity in the field of HRM can be defined as the situation that arises when
employees differ from each other in terms of age, gender, ethnicity,
education, etc.

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Managing diversity means establishing a heterogeneous workforce to

perform to its potential in an equitable work environment where no member
or group of members has an advantage or a disadvantage.
Young, skilful and knowledgeable employees are occupying positions of
importance.
Organisations now cannot discriminate on the basis of age. They must listen
to their experienced employees, to draw from their expertise and initiate
programmes that meet these needs.
At the same time companies have to understand and appreciate the
changing values of the young workers who join the company with lots of
expectations.
To attract and retain young brains, organisations have to institute
appropriate HR policies, supported by attractive compensation offers.
Figure 2.1 depicts workforce diversity.

Global
Markets Teamwork
Strategies
Workforce
Diversity
Shift from
Mergers & Manufacturing
Alliance to Services
Changing
Labour
Market

19

Fig. 2.1: Workforce Diversity

There are five reasons, as shown in figure 2.1, why diversity has become a
dominant activity in managing an organisation’s human resources:
1. The shift from a manufacturing to a service economy.

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Human Resource Management Unit 2

2. Globalisation of markets.
3. New business strategies that require more team work.
4. Mergers and alliances that require different corporate cultures to work
together.
5. The changing labour market.

Activity 2:
Identify three practices in Indian companies that you know of that are
specific to the Indian culture. Think of festivals and how they are
celebrated in companies.

Self Assessment Questions

10. The most important use of technology in HRM is an organisation’s
__________.
11. Technological and ___________ trends are in turn producing changes
in the nature of jobs and work.
12. ___________ means establishing a heterogeneous workforce to
perform to its potential in an equitable work environment where no
member or group of members has an advantage or a disadvantage.
13. An enormous shift from manufacturing jobs to _____ is observed in
workforce diversity.

2.6 Summary
Let us recapitulate the important concepts discussed in this unit:
 The viewpoint to Human Resource Management in India has shifted in
last two decades. Economic liberalisation in 1991 created a hyper-
competitive environment.
 As international firms entered the Indian market bringing with them
innovative and severe competitiveness, Indian companies were forced
to adopt and implement innovative changes in their HR practices.
 Increasing demand for skilled performers affected the companies to shift
focus on attracting and retaining high-performing employees in a
competitive marketplace.

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Human Resource Management Unit 2

 One of the challenges HR managers face is the issue of upgrading the

skill set of employees through training and development,
 Most of the Indian companies are committed to provide equal
employment opportunities for all.
 A workforce that is knowledgeable and skilled at performing complex
jobs keeps a company competitive and attracts foreign investment.
 Well-trained workers attract global corporations, which invest and
provide employment opportunities, which in turn, generate additional
training and experience.

2.7 Glossary
 Corporate social responsibility – It is a set of actions of a company that
changes business operations to improve, maintain, or mitigate a
company’s impact on society and the environment.
 Globalisation – The integration of the world’s economies brought about
by the rapid improvements in communication and transportation.
Globalisation involves the spread of economic, social and cultural ideas
across the world, and growing uniformity between different places that
result from this spread.
 Knowledge Process Outsourcing – Knowledge process outsourcing
(KPO) is a form of outsourcing, in which knowledge-related and
information-related work is carried out by workers in a different company
or by a subsidiary of the same organization, which may be in the same
country or in an offshore location to save cost.
 Workforce diversity – Differences among recruits and employees in
characteristics, such as gender, race, age, religion, cultural background,
physical ability, and sexual orientation.

2.8 Terminal Questions

1. Discuss the concept of HRM in India.
2. Discuss the impact of changing roles of human resource in India.
3. Discuss globalisation and its impact on HR.

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Human Resource Management Unit 2

2.9 Answers

Self Assessment Questions

1. False
2. False
3. True
4. True
5. True
6. Training and development
7. Equal employment
8. Corporate Social Responsibility
9. Valuable employees
10. Human Resource Information system
11. globalisation
12. Managing diversity
13. Service jobs

Terminal Questions
1. The Indian corporate is emerging as a base for committed, intelligent
and a knowledgeable workforce. As international firms entered the
Indian market bringing with them innovative and severe
competitiveness, Indian companies were forced to adopt and
implement innovative changes in their HR practices. For more details,
refer section 2.2)
2. The role of HR has transformed from that of an administrative and
legal compliance body to that of a strategic partner. Refer section 2.3
for more details.
3. A workforce that is knowledgeable and skilled at doing complex things
keep a company competitive and attracts foreign investment. Well-
trained workers attract global corporations, which invest and provide
employment opportunities, which in turn, generate additional training
and experience.For more details, refer section 2.4

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2.10 Case Study

Indian Tech Tries to Retain Top Workers
By Jessica MehroinIrani
At a time when most IT companies are reducing employee numbers to cut
costs, tech majors such as Wipro, TCS and Infosys are re-channelising their
manpower. Sabbaticals are more common and people on the bench are
being asked to undergo longer and more rigorous training programmes.
Wipro has asked some of its non-billable and skilled employees to move to
subsidiary Wipro Infotech on the same pay package as earlier; but they will
continue to be on the payrolls of Wipro Technologies.
"These are not under performers, but talented people we don't want to lose.
The move to Infotech is currently for a year, and this will give them a chance
to be productive" said Pratik Kumar, Wipro Executive Vice President of
human resources. This will also help the company in sustaining high
utilisation rates.
The other option given to employees, who have been on the bench for over
six months, is a special programme which allows them to come to work for
10 days a month, at half their salary. "This allows them to take up
certification programmes, work on innovation projects and help in creating
question banks for domain specific internal tests" said Kumar. "Once we see
an opening for them on a project, we will transfer them immediately."
TCS has also put its benched employees on high-end training programmes
in areas such as enterprise resource planning, business intelligence and
analytics. "We are building a larger skill set as we would like to be ready
when the demand picks up," said a TCS spokesperson. The IT Company
has also invited its employees to write research papers on technology that
can be used by the company.
Reducing employee numbers for saving costs is a short-term solution, said
Nandita Gurjar, head of global HR at Infosys. "When demand picks up, we'll
be hiring skill pools at a higher cost; there will also be the cost of extra
training. We weed out non-performers, but retain talent even if they are not
being utilised currently."
While Infosys has said that 50 employees, at any given point of time, can
take a year off and work for an NGO at half their salaries, its peer Wipro has
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Human Resource Management Unit 2

introduced project rejuvenate where employees, across all levels, can take a
year-long sabbatical and pursue their hobbies.
This is not restricted to those on the bench, but also for those working on
projects. Even though these people are asked to take a pay cut, it does not
matter.
"As long as you get to keep your job and do fun things to de-stress, a pay
cut doesn't matter," said a Wipro employee.
Discussion Questions:
1. What all strategies are taken by Indian IT companies to retain their
talented employees?
(Source: Business Week, Monday, March 30, 2009)

References:
1. Fisher, S, and Shaw. (2010).Human Resources Management. New
Delhi:Cengage publication.
2. K Aswathappa. (2010). Human Resource Management. New Delhi: Tata
McGraw Hill.
3. Wayne, C.F. (1998). Managing Human Resource. Irwin/McGraw Hills.
4. Durai, P.(2010). Human Resource Management, New Delhi: Pearson
Publication.

E-Reference:
1. http://www.chillibreeze.com/articles_various/HR-practices-in-Indian-
Corporate-510.asp - (Retrieved on 20th March, 2012)
2. http://www.managementparadise.com/forums/articles/6374-changing-
role-hr-todays-world-sees-lending-hand-every-other-dept.html (Retrieved
on 20th March, 2012)
3. http://www.shrm.org/Research/Articles/Articles/Documents/
09-0754%20India%20Talent%20Mindset%20Research%20Article-
FNL.pdf (Retrieved on 20th March, 2012)

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Human Resource Management Unit 3

Unit 3 Human Resource Planning

Structure:
3.1 Introduction
Objectives
3.2 Process of Human Resource Planning
3.3 Need for Human Resource Planning
3.4 HR Forecasting Techniques
3.5 Successful Human Resource Planning
3.6 Summary
3.7 Glossary
3.8 Terminal Questions
3.9 Answers
3.10 Case Study

3.1 Introduction
In the previous unit we studied about HRM in India. We also studied the
changing role of HR in India and learnt about globalisation and its impact on
Indian businesses. We have learnt that one of the most crucial challenges
that an HR personnel faces these days is preparing the perfect HR plan.
Human Resource Planning (HRP) can be defined as the method of
ensuring the right number of qualified people, in the right job at the right time
to bring the results in an efficient and effective manner.
In simple words, HRP is understood as the process of forecasting an
organisation’s future demand for, and supply of, the right type of people in
the right number. It is only after this that the HR department can initiate the
recruitment and selection process. HRP is a sub system in the total
organisational planning. Organisational planning includes managerial
activities that set the company objectives for the future and determines the
appropriate means for achieving those objectives.
The process of HRP starts with understanding the organisational objectives,
and translating them into a schedule of employee requirements over a
period of time. The next step is to devise plans to secure the right resource
to meet these requirements.

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In this unit, we will discuss the process involved in human resource planning
and the need for HRP. We will also study the HR forecasting technique and
the factors to be considered for a successful HRP.
Objectives:
After studying this unit, you should be able to:
 explain the process of human resource planning
 state the need for HRP
 list the HR forecasting techniques
 list the factors responsible for the success of HR planning.

3.2 Process of Human Resource Planning

Let us now describe the process of Human Resource Planning.
The process of Human Resource Planning is one of the most critical, difficult
and continuing managerial functions which, according to the Tata Electric
and Locomotive Company (now known as Tata Motors), "embraces
organisation development, management development, career planning and
succession planning."
'Manpower planning consists of projecting future manpower requirements
and developing manpower plans for the implementation of the projections.'
Objectives of the human resource planning are:
 to maintain the required quantity and quality of human resource required
for an even and well-organised functioning of the organisation.
 to forecast the turnover/attrition rates.
 to plan to meet organisational human resource needs at the time of
expansion or diversification.
HRP may be rightly regarded as a multi-step process, including various
issues such as:
 deciding goals or objectives.
 estimating future organisational structure and manpower requirements.
 auditing human resources both internally and externally.
 planning job requirements and job descriptions/person specifications.
 building a plan.

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HRP, therefore is used for determining long term needs, rather than for
momentary replacement needs. It has to take into account the career
planning for individual employees and succession planning in the
organisation.
Let us now go in to the detailed steps that are involved in the HR planning.
Steps in human resource planning
The basic steps of HRP include the following:
1. Considering the effect of organisational strategy and objectives on
different units of the organisation in terms of the human resource
requirement.
2. Forecasting the manpower requirements of the organisation by involving
the line managers to decide and finalise the human resource needs of
their respective department. Forecasting may be carried out using
mathematical projection tools or judgements.
3. Forecasting the quality and quantity of human resource required by each
department/division.
4. Creating an inventory of present manpower resources.
5. Matching the current human resources position incumbents in the
organisation with the numbers required in the future.
6. Developing an action plan to meet the future requirements in terms of
addition or separation, in a planned and phased manner. It involves
planning the necessary programmes of recruitment, selection, training,
development, utilisation, transfer, promotion, motivation and
compensation to ensure that future manpower requirements are properly
met.
Figure 3.1 depicts the various steps involved in the process of HRP.

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Human Resource Management Unit 3

Organisational Plans and Objectives

Identify future human resource requirements

Compare with current HR inventory

Determine the nos. level and

Determine the redundant
criticality of vacancies
nos.
Analyse the cost and time Analyse the cost and time
involved in managing the involved in managing the
demand demand

Choose the resources & Redeploy Retrench

method of recruitment

Fig. 3.1: Process of Human Resource Planning

(Source: ICFAI Centre for Management Research)

HRP is not only done by organisations and corporate bodies. It is a

prevalent practice at different levels of the organisation such as:
 At the country’s national level, it is generally performed by the
government and covers items like population projections, programme for
economic development, basic and advanced educational infrastructure
and opportunities, occupational distribution across urban and rural
areas, industrial and geographical mobility of employable people.
 At the state level, it may be performed by the state government and
would include manpower planning for the needs of the agricultural,
industrial and service sector.
 At the specific industry level, it would include manpower needs forecast
for specific industries, such as engineering, heavy industries, consumer
goods industries and public utility industries.
 At the level of the individual organisation/unit, it would relate to the
planning of manpower needs for each department and for various types
of personnel.

Self Assessment Questions

1. HRP has to take into account the __________ for individual employees
and ___________ in the organisation.

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2. Human resource planning helps to __________ the turnover/attrition

rates.
3. Manpower planning consists of ___________future manpower and
developing manpower plans for the __________ of the projections.
Match the following:
4. It is generally done by the government a) At the industry level
and covers items like population
projections, programme of economic
development, educational facilities,
occupational distribution,
and growth, industrial and –
geographical mobility of personnel.
5. It may be done by the government- b) At the state level
central or state-and may cover
manpower needs of agricultural,
industrial and service sector.
6. It may cover manpower forecast for c) At individual unit level
specific industries, such as engineering,
heavy industries, consumer goods
industries, public utility industries.
7. It may relate to its manpower d) At the national level
needs for various departments
and for various types of personnel.

3.3 Need for Human Resource Planning

In the previous section, we learnt the process of HRP. Let us now study the
need for HRP.
HRP is a mandatory part of every organisation’s annual planning process.
Every organisation that plans for its business goals for the year also plans
for how it will go about achieving them and therein the planning for the
human resource:
 To carry on its work, each organisation needs competent staff with the
necessary qualifications, skills, knowledge, work experience and
aptitude for work.

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 Since employees exit the organisation both naturally (as a result of

superannuation) and unnaturally (as a result of resignation), there is an
on-going need for hiring replacement staff to augment employee exit.
Otherwise, work would be impacted.
 In order to meet the need for more employees due to organisational
growth and expansion. This in turn calls for larger quantities of the same
goods and services as well as new goods. This growth could be rapid or
gradual depending on the nature of the business, its competitors, its
position in the market and the general economy.
 Often organisations might need to replace the nature of the present
workforce as a result of its changing needs, therefore the need to hire
new set of employees. To meet the challenge of the changed needs of
technology/product/service innovation the existing employees need to
be trained or new skill sets induced into the organisation.
 Manpower planning is also needed in order to identify an organisation’s
need to reduce its workforce. In situations where the organisation is
faced with severe revenue and growth limitations it might need to plan
well to manage how it will reduce its workforce. Options such as
redeployment and outplacement can be planned for and executed
properly.

Self Assessment Questions

8. Human Resource Planning is essential because of frequent _________
which is unavoidable and even beneficial.
9. Manpower Planning is required in order to meet the needs of
_________ programmes that become necessary because of increase
in the demand for goods and services.
10. Manpower planning is also needed in order to identify areas in which
there is a __________ of personnel.

3.4 HR Forecasting Technique

In the previous section, we studied the need for human resource planning.
Let us now study the HR forecasting technique.
The success of HR plans depends on the accuracy of the HR forecasts that
are needed to implement the organisational strategies. These forecasting

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involve estimating the future requirements of the organisation in terms of the

nature and the number of people. An organisation may use one or more of
the forecasting techniques available to assess the future HR requirements.
In fact, the accuracy of HR forecasting largely depends on the ability of the
forecasting techniques in rightly projecting the future.
Following are few of the HR forecasting techniques:
a) Index/Trend Analysis
b) Expert Forecasts/Delphi technique
c) Nominal Group Technique
d) HR Budgets:
– Staffing/Manning Tables
e) Envelope and Scenario Forecasting
f) Regression Analysis, etc.
g) Productivity Ration
h) Personal Ratio
i) Time Series
a) Index/Trend analysis
Trend analysis forecasts the requirement for additional manpower by
projecting trends of the past and present to the future. It makes use of
operational indices for this.
 Historical relationship between the operational index and the Demand
for Labour.
 Operational indices used are:
– Sales
– Number of units produced
– Number of clients serviced
– Production/Direct Labour Hours
Trend analysis can be used for forecasting overall Organisation, Aub-units,
or Indirect (Staff) and Direct (Line) Manpower requirements.
The Index/Trend analysis involves the following steps:
1. Select the appropriate business/operational index – Select a readily
available business index, sales level that is known to have direct
influence on the organisational demand for labour.
2. Track the index over time – Once the index has been selected, it is
necessary to go back in time for at least four or five most recent years.

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3. Track the workforce size over time – Record the historical figures of
the total number of employees.
4. Calculate the average (or most recent) ratio of the business index
to the workforce size (‘Employee Requirement Ratio’) – In this step,
the ratio of number of employees required for each thousand rupees of
sales is obtained by dividing each year’s number of employees by the
level of sales.
5. Calculate the forecasted HR demand – Multiply the annual forecasting
for the business index times the average employee requirement ratio for
each future year to arrive at forecasted annual demand for labour.
b) Expert forecasting or Delphi technique:
This method is essentially a group process to achieve a consensus forecast.
This method calls for selection of a panel of experts either from within or
outside the organisation. A series of questions is prepared from the
responses received from a prior set of questions in sequencing manner.
The procedure of Delphi technique involves the following steps:
1. To start with, it requires selection of a coordinator and a panel of experts
from both within and outside the organisation.
2. The coordinator then circulates questions in writing to each such expert.
3. The experts then write their observations.
4. The coordinator then edits those observations and summarises, without
however disclosing the majority opinion in his summary.
5. On the basis of his summary, the coordinator develops a new set of
questionnaire and circulates those among the experts.
6. Experts then answer such set of questions.
7. The coordinator repeats the process till such time he is able to
synthesise from the opinion of the experts.
Figure 3.2 depicts the procedure involved in Delphi technique.

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Leader identifies judgment issues and develops questionnaire

Prospective participants are identified and asked to cooperate

Leaders send questionnaire to willing participants, who record

their judgments and recommendations and return the
questionnaire

Leaders compile summaries and reproduces participants’

responses

Leader sends the compiled list of judgment to all participants

Participants comment on each other’s ideas and propose a final

judgment

Leader looks
for consensus

Leader accepts consensus judgment as group’s choice

Fig. 3.2: The Delphi Technique

c) Nominal group method

Nominal group method involves a panel of experts similar to the Delphi
technique.
The major difference between the two is that while under Delphi technique,
experts are not allowed to discuss among themselves, for assessing the
questions, under nominal group method, experts are given the opportunity
to discuss among themselves.
Nominal group method involves the following steps:
1. The coordinator assumes the role of a facilitator, allowing the experts to
sit together to discuss their ideas and records of such discussion.
2. After these round table discussions on ideas, experts are asked to rank
their ideas according to their perceived priority.
3. The group consensus is then derived mathematically in terms of
individual rankings.
The process affords creativity and facilities scientific group consensus unlike
consensus by qualification like Delphi technique.

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Figure 3.3 depicts the procedure involved in Nominal group method.

A small group of 4-5 people gather around a table. Leader
identifies judgment issue and gives participants procedural
instructions.

Participants write down all ideas that occur to them, keeping

their lists private at this point. Creativity is encouraged during
this phase.

Leader asks each participant to present ideas and writes them

on a blackboard or flipchart, continuing until all ideas have been
recorded.

Participants discuss each other’s ideas, clarifying, expanding

and evaluating them as a group.

Participants rank ideas privately in their own personal order and

preference.

The idea that ranks highest among the participants is adopted

as the group’s judgment.

Fig. 3.3: Nominal Group Method

d) HR budgets
The HR budget process produces what is referred to as a staffing and
manning table, which contains information related to a specific set of
operational assumptions or levels of activity.
The staffing or manning table presents the total HR demand requirement as
well as the number of personnel required by level and function.
HR planner can determine short-run future demand requirements for sub-
units and organisation as a whole.
e) Envelope/Scenario forecasting
Envelope/Scenario forecasting is a flexible HR Demand forecasting
technique which utilises projections. Each scenario of possible future state
contains its own set of assumptions (Time and Activity). It produces a single
Staffing/Manning Table for each Specific Course of Action.
Example: Overtime, Optimistic, Most Likely and Pessimistic Scenarios form
an Envelope.

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f) Regression analysis
Past levels of various work load indicators, such as sales, production levels,
are examined for statistical relationships with staffing levels. Where
sufficiently strong relationships are found, a regression (or multiple
regression) model is derived. Forecasted levels of the retained indicator(s)
are entered into the resulting model and used to calculate the associated
level of human resource requirements.
Productivity ratio
Historical data is used to examine past levels of a productivity index (P):
P = Work load / Number of People
Where constant, or systematic, relationships are found, human resource
requirements can be computed by diving predicted workloads by P.
g) Personnel ratio
Past personnel data is examined to determine historical relationships among
the employees in various jobs or job categories. Regression analysis or
productivity ratios are then used to project either total or key-group human
resource requirements and personnel ratios are used to allocate total
requirements to various job categories or to estimate for non-key groups.
h) Time series
Past staffing levels (instead of work load indicators) are used to project
future human resource requirements. Past staffing levels are examined to
isolate cyclical variation, long-tem terms, and random movement. Long-term
trends are then extrapolated or projected using moving average, exponential
smoothing or regression technique.

Self Assessment Questions

11. The success of HR plans depends on the accuracy of the ________
that are needed to implement the organisational strategies.
12. ______ calls for selection of a panel of experts either from within or
outside the organisation.
13. In __________ past staffing levels (instead of work load indicators) are
used to project future human resource requirements.

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3.5 Successful Human Resource Planning

In the previous section, we studied the various HR forecasting techniques.
Let us now discuss the factors for successful HR planning.
The responsibilities of the HR department for ensuring successful
manpower planning can be summarised as:
 to establish HRP as an integral part of the corporate planning activities.
Therefore, ensuring that they are aware of the company’s corporate and
business objectives.
 ensure that the top management supports and recognises the
importance of the HRP process and drives the senior leaders to
participate in it and abide by it.
 set aside funds to provide for technological requirements and other
supporting costs such as the creation and maintenance of skills
inventory, training initiatives etc.
 data collection and analysis to be chosen as best suited to the industry
and the economic environment as well as the organisations’ own plans.
 hold the HR department responsible for coordinating the HRP process
and tracking progress with continuous review.
 review the HRP process year on year to identify if there are any changes
to be made to the HRP process itself to make it relevant and useful
towards achieving the business goals.
It is not uncommon for the presence of resistance to the HRP function.
Some common barriers are:
 The need to frequently change staffing plans depending on the market
situation.
 The knowledge of the HR, about the business and its objectives, to lead
the HRP initiative to successfully contribute to the achievement of
business results.
 Financial forecasting trends to take precedence over HRP as it impacts
the organisation’s profits/losses.
 Balancing long term short term needs of the business – often what HR
might recommend might go contrary to achieving immediate business
results and vice versa.
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 The role of statistical quantitative information versus qualitative intuitive

information – each has its role to play in the HRP process and this
usually is a widely debatable aspect on the projection of human
resources requirements.
 Soliciting the support of all the business managers and leaders to
contribute to the planning process by providing all the necessary
information and actively participating in the HRP process–this also
ensures that the managers remain committed to the human resource
plan through the year.

Self Assessment Questions

14. Successful HR planning calls for establishing HRP as an integral part
of the _______________ activities.
15. ___________________of the HRP process every year is necessary to
incorporate changes in it to make it more useful.

3.6 Summary
Let us recapitulate the important concepts discussed in this unit:
 Human Resource Planning can be defined as the method of ensuring
the right number of qualified people, in the right job at the right time to
get the results in an efficient and effective manner.
 HRP is used for determining long term needs, rather than for momentary
replacement needs. It has to take into account the career planning for
individual employees and succession planning in the organisation.
 The success of HR plans depends on the accuracy of the HR forecasts
that are needed to implement the organisational strategies. These
forecasts involve estimating the future requirements of the organisation
in terms of the nature and the number of people. An organisation may
use one or more of the forecasting techniques available to assess the
future HR requirements.
 Few forecasting techniques available are Index/Trend Analysis, Expert
Forecasting, Delphi Technique, Nominal Group Method, HR Budgets,
Envelope/Scenario Forecasting, Regression Analysis, etc.

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 Effective HRP reduces the pressure on the management and

employees, as both employment and retrenchment would be well
planned and phased out over a comfortable time span, avoiding
unpleasant consequences.

3.7 Glossary
 Attrition rate: A factor, normally expressed as a percentage, reflecting
the degree of losses of workforce due to various causes within a
specified period of time.
 Human Resource Planning: Human resource planning is a process
that identifies current and future human resources needs for an
organization to achieve its goals.
 Index/ Trend Analysis: A quantitative approach to forecasting labour
demands based on organisational index such as sales.
 Superannuation: An organizational pension program created by a
company for the benefit of its employees.

3.8 Terminal Questions

1. Define human resource planning. Discuss the need for human resource
planning in an organisation.
2. Describe the process of human resource planning.
3. Examine the relevance of the different techniques used to forecast the
human resources available to an organisation.

3.9 Answers

Self Assessment Questions

1. Career planning, succession planning
2. Forecast
3. Projecting, implementation
4. d
5. b
6. a
7. c
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8. Labour Turnover
9. expansion
10. Surplus
11. HR forecasts
12. Delphi Technique
13. Time series
14. corporate planning
15. Review

Terminal Questions
1. HRP is understood as the process of forecasting an organisation’s future
demand for, and supply of, the right type of people in the right number.
HRP is significant as it helps determine future human resource needs.
To carry on its work, each organisation needs competent staff with the
necessary qualifications, skills, knowledge, work experience and
aptitude for work. There is an on-going need for hiring replacement staff
to augment employee exit. Otherwise, work would be impacted. Refer
Section 3.1 and 3.3 for more details.
2. The processes of HRP need to consider the effect of the organisational
strategy and objectives, involving the line managers to decide and
finalise the human resource needs of their respective department,
forecasting the quality and quantity of human resource required by each
departments/division, matching the current human resources position in
the organisation with the numbers required in the future, developing an
action plan to meet the future requirements in terms of addition or
separation, in a planned and phased manner. Refer section 3.2 for more
details.
3. The HR forecasting techniques are Index/Trend Analysis, Expert
Forecasting, Delphi Technique, Nominal Group Method, HR Budgets,
Envelope/Scenario Forecasting, Regression Analysis, etc. Refer section
3.4 for more details.

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3.10 Case Study

Workers Should Highlight their Value to Employers
By Sol E. Solomon
SINGAPORE – Being the quiet achiever can sometimes work against
employees in the workplace, where workers are judged by their
achievements and successes, according to a local-based recruitment
expert.
Karin Clarke, general manager of Select Business Services, noted in a
recent press statement how "very innate" it is in the Singaporean culture for
employees to be modest and reserved, preferring not to draw attention to
their accomplishments for fear of being seen as arrogant and pretentious.
According to Richard Talbot, general manager of recruitment company
Sapphire Technologies Singapore, this trait cuts across all professions
including the IT sector, in the island-state.
"We find one of the key reasons IT candidates look to change jobs is that
they know they can achieve higher remuneration elsewhere, and their
employer has not been forthcoming with a suitable increment," said Talbot in
an e-mail interview.
However, he noted that IT professionals need to also understand how to
best present their achievements to their current employer, in order to secure
that promotion or pay increment they have been eyeing.
Tho Lye Sam, human resource director at IBM Singapore, said in the past,
technical individuals ranging from engineers to programmers appeared to be
less superior in their interpersonal or written skills compared to their
business or sales peers.
"But we're definitely seeing less of this today," Tho said in an e-mail
interview.
Increasingly, she said, employers are witnessing a new breed of
employees who bring a mix of business, technical and people skills.
Tho added, "These knowledge workers will fuel the 21st century economy,
and are definitely capable of presenting the best of their capabilities and
competence–with the aim of sharing best practices, as opposed to being
outright showy for personal glory."

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Clarke said current global economic pressures make it particularly important

for workers in Singapore to make their value known in the workplace. This
way, they can ensure they are recognised fairly and reap the rewards of
doing their job well, she said.
"It is important that employees realise it may be time to work even harder
and then communicate this success to the right people. Don't be shy to let
relevant colleagues and managers know about what you have achieved,"
she added.
Boast the right way
But while employees should draw attention to their achievements, they
should not do so blatantly.
"Some simple, subtle steps can be taken to make sure you receive the
recognition you deserve," Clarke said. "It will make for a more positive work
environment and will contribute to job security, career progression and show
you are willing to take responsibility and ownership for your work."
"It could be as simple as copying in your manager on positive feedback from
customers, or communicating the successful completion of a project or task.
While it is not imperative to tell your peers unless you want to, making sure
you tell the decision makers in your organisation is essential," she said.
Tho said IBM encourages the sharing of best practices, and this involves
putting the limelight on an individual, a team, a country or even a region.
"These are 'official broadcast' platforms to share an individual or a team's
winning ways to the larger IBM community," she explained. "In addition, by
celebrating performance and leadership excellence, we are able to
encourage more of such desired behavior."
Talbot suggests employees who fear publicising their achievements could
work against them consider taking a "reasoned approach."
"Of course, an employee who constantly talks about personal achievements
all the time can be an annoyance, but conversely, employees that never
highlight what they have achieved are easy to forget," he noted.
The individual should also recognise when to highlight an achievement to
the manager, and when not to raise the issue. Talbot said: "An annual
review would be a good time, for example, to highlight achievements."

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IBM's Tho said: "Our employees are well aware that overstatements may
look good in the short term, but are not sustainable in the longer term."
Clarke recommended that workers keep a record of their achievements, so
they have documentation to support their case when it is time for salary
negotiation or formal reviews. "It can be one of the most difficult
conversations of your career, but discussing money with your employer is
much easier if you can clearly demonstrate that your work has contributed to
the success of your organisation," she said.
Discussion Questions:
1. How do you think allowing employees to showcase their achievements
affect HR planning ?
2. What changes in HR planning with regards to recruiting IT professionals
are seen now ?
(Source: ZDNet Asia, Thursday, October 02)

References:
 Fisher S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa K. (2010). Human Resource Management. New Delhi: Tata
McGraw Hills.
 Wayne C. F. (1998). Managing Human Resource. Irwin/McGraw Hills
 Durai P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

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Unit 4 Recruitment and Selection

Structure:
4.1 Introduction
Objectives
4.2 Concept of Recruitment
4.3 Factors Affecting Recruitment
4.4 Sources of Recruitment
4.5 Recruitment Policy
4.6 Selection
4.7 Selection Process
4.8 Application Forms
4.9 Selection Test
4.10 Interviews
4.11 Evaluation, Placement, Induction
4.12 Summary
4.13 Glossary
4.14 Terminal Questions
4.15 Answers
4.16 Case Study

4.1 Introduction
In the previous unit, we studied the need and the process of human
resource planning in an organisation. We also learnt the different HR
forecasting techniques used by organisations.
Once the manpower requirement is finalised, then the HR managers begin
to find suitable persons for filling up the positions. One of the most important
tasks of human resource management is to choose the right kind of person
for the right job. This is because the ability of an organisation is determined
to a great extent by the ability of its workforce. An organisation must have
effective recruitment policies and processes to inform candidates about the
job openings and influence them to apply for the available position.
Recruitment is the first step in the process of acquiring and retention of
human resources for an organisation. Hence, it is important to have a well-
defined requirement policy in place. This can be executed effectively to get

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the best people for the vacant position. In this unit, we will discuss the
concept of recruitment, various sources and factors affecting recruitment.
We will also study the selection process, application form and the selection
test involved in the recruitment process.
Objectives:
After studying this unit, you should be able to:
 analyse various sources of recruitment
 explain the importance of recruitment
 evaluate various tools and techniques
 identify appropriate recruitment sources
 analyse role and techniques of selection

4.2 Concept of Recruitment

Recruitment is the process of searching for prospective employees and
stimulating them to apply for the jobs in the organisations. It is the process
of seeking and attracting a pool of people from which qualified candidates
can be chosen for job vacancies. Recruitment, as a process, starts with
identification of the need for human resources and ends with getting the
prospective employees to apply for the vacancies available.
The aim of effective recruitment programme is to attract the best people for
the job and aid the recruiter by making a wide choice available.
The ability to identify the right talent for not just the role/job but also from the
organisational values perspective can be summarised as the key recruiting
challenge. Under these conditions, the pressure to properly match a
candidate to a job is only one-sided, that is, from employer's side only.

Self Assessment Questions

1. Recruitment is a process of searching for _________ employees and
stimulating them to apply for the jobs in the organisations.
2. The aim of ________ programme is to attract the best people for the job
and aid the recruiter by making a wide choice available.

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4.3 Factors Affecting Recruitment

In the previous section, we discussed the concepts of recruitment. Let us
now study the various factors affecting recruitment.
There are many factors that affect the recruitment programme. These
factors can be classified as organisational or internal factors, and
environmental or external factors.
Organisational factors include the following:
 Reputation of the organisation-an organisational reputation depends on
its size, area of business, profitability, management, etc.
 The organisational culture and the attitude of its management towards
employees.
 Geographical location of the vacant position as potential candidates
might not be eager to work in a remote place unless they belong to that
place.
 The amount of resources allocated.
 The channels and methods used to advertise the vacancy.
 The salary that the company offers also influences the decision of a
candidate.
Environmental factors includes the following:
 The situation in the labour market, the demand for manpower, the
demographics, the knowledge and skill sets available.
 Stage of development of the industry to which the organisation belongs.
 Culture, social attitudes and beliefs also impact on recruitment.
 Law of the land and the legal implication.

Self Assessment Questions

True and false:
3. An organizational reputation does not depends on its size, area of
business, profitability, management etc.
4. Geographical location is an important factor for recruitment.
5. Channel of advertisement is not an important factor for recruitment
process.
6. Factors affecting recruitment can be classified as organisational and
environmental factor.

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4.4 Sources of Recruitment

In the previous section, we discussed the various factors affecting the
recruitment process. Let us now discuss the sources of recruitment.
The objectives of recruitment are more likely to be achieved if the recruiting
sources used are suitable for the kind of position that is to be filled. The
selection of recruitment sources should be economical as well. Different
sources of recruitment can be employed, depending on various factors like
the level of the position, number of people required, time available and the
funds allocated for recruitment.
Sources of recruitment may be internal or external.
Internal Sources
Many organisations try to identify employees from within the organisation, to
be grooming to take on higher responsibilities. Organisations which go in for
an internal search normally announce the vacancy and display in the notice
boards, send circulars to different departments or inform through the
company website.
Candidates from within the organisation respond to job posting by sending
in their applications. Promotions and transfers are also internal sources of
recruitment as candidates are identified within an organisation
Some advantages of internal sources are:
 It helps in maintaining good employee relations.
 It boosts the morale of the employees (feel important and valued).
 It encourages competent and ambitious individuals, as their
performance will be rewarded.
 Cost of recruitment is minimal.
 Complete information about the employee will be available.
External Sources
An organisation will have a greater choice in human resources if it decides
to go in for external recruitment. There are various methods of recruiting
from external sources. Some popular methods are advertisements, campus
recruitments, employee referrals, employee exchanges, HR head hunters
etc.

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There are various external sources:

 Advertisement – Employment advertisements may be given by an
organization in newspapers, magazines, pamplets, posters and banners.
The important information that has to be furnished in an advertisement
are:
o Nature of business and size of the business
o Nature of job
o Location
o Task and responsibilities
o Emoluments, benefits and other facilities
o Requirements of the job
o Last date to respond
o Ways to respond – e-mail, phone or by post
 Employee referrals – Employee referrals form a very good source of
recruitment especially for middle and lower level management.
Employees who are already working in the organisation recommend
their friends or acquaintances for the vacant positions in the
organisation. Some companies in competitive industries, where it is
difficult to find suitable candidates, even pay their employees if the
candidates referred by them are selected.
 Employment agencies – Based on the type of clientele they serve,
employment agencies can be broadly classified into public or state
agencies, private agencies and head hunters:
o Public agencies – Few years ago, employment exchanges were
extremely popular in India. Today somehow they have become
outdated. With changing market needs and demands for different
skills sets, more and more companies and job-seekers are looking at
other options of recruitment.
o Private agencies – Private agencies do well in dynamic job
markets, where companies explore aggressively for talent and
potential candidates. They invite applications from interested
candidates, short listing them or interview them for a second round
of short listing and finally arriving at the list of suitable candidates for
the vacant position.

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 Educational institutes – During the placement season, educational

institutes turn into hunting grounds for organisations looking for fresh
talent. These educational institutes offer placement to their students by
trying to get few good companies in the market to their campus for
recruitment.
 Interested applicants – One of the sources of recruitment for an
organisation might be unsolicited applications of candidates interested in
working with the organisation. Such candidates send in their applications
to the management either through post or e-mails and express their
interest to join the organisation.
Information technology and HR recruiting on the Internet
Employers are using information technology as an aid in recruiting people:
 Computer applications range from recruiting on the Internet to
automatically scanning and storing applicants’ resumes.
 Recruiting firm posts job descriptions on its web page.
 Company advertising in their web page
 Using job portals such as Naukri.com, Monster.com, Times Jobs. com
etc.
 Using social networking sites such Facebook, Linkedin, Twitter etc. to
broadcast requirements.
 Using email campaigns.

Self Assessment Questions

7. Employees who are already working in the organisation ______ their
friends or acquaintances for the vacant positions in the organisation.
This is known as employee referral
8. ______ invite applications from interested candidates, short listing them
or interviewing them for a second round of short listing and finally
arriving at the list of suitable candidates for the vacant position.
9. One of the sources of recruitment for an organisation might be
__________ applications of candidates interested in working with the
organisation.
10. ______ are using information technology as an aid in recruiting people.

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Activity 1:
Ask some of your friends or relatives who have attended a job interview
and answer the following questions:
a) What was the method that the firm was using to find suitable job
candidates?
b) How effective do you think they would be in finding the right
candidate?
c) What suggestions would you make to the employer of the firm on
choosing a better recruiting method?

4.5 Recruitment Policy

In the previous section, we studied various sources of recruitment. Let us
now discuss the recruitment policy of organisations.
The recruitment policy of an organisation would normally be aligned with the
objectives and policies of the organisation. It lays down the objectives of
recruitment, and the channels and sources of recruitment.
The characteristics of recruitment policy are:
1. Complies with government policies on hiring.
2. Provides employment security.
3. Assures candidates of the management’s interest in their development.
4. Prevents the formation of small exclusive groups.
5. Reflects the social commitment of the organisation by employing
handicapped people.
6. Flexible enough to accommodate changes in the organisation.
7. Ensures long-term employment opportunities for employees.
8. Cost effective.

Self Assessment Questions

True and false:
11. Recruitment policy is not in compliance with government policies.
(True/False)
12. Recruitment policy is flexible enough to adjust to changes in the
organisation. (True/False)
13. Policy of recruitment has no alignment with the policy of the
organisation. (True/False)
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4.6 Selection
In the previous section, we discussed about recruitment. Let us now look
into the process of selection.
The process of choosing the most suitable candidate for a job from among
the available applicants is called selection.
This is the most important stage of employment as the concept of the right
candidate for right position, takes its final shape here. Selecting the wrong
candidates and rejecting the right candidates could prove to be a costly
mistake.
The selection process involves a series of steps which help in evaluating the
candidates. The selection process in an organisation has to be in
accordance with the organisational requirements.
The selection process can have four possible outcomes. Two of the possible
outcomes have a positive effect on the organisation, whereas two have a
negative impact.
Figure 4.1 shows the possible selection decision outcomes.
Selection Decision Outcomes

Accept Reject
1) Correct 2) Rejection error
Successful decision
3) Acceptance 4) Correct decision
Unsuccessful
error

Fig. 4.1: Selection Decision Outcomes

(Sources: Decenzo and Robins, S, Personal Management;
John Wiley and Sons, 7th Ed.2002)

First, let us see the positive outcomes of selecting the right candidates (as
given in 1). It is quite obvious that the impact of right candidate would be
positive and effective for the organisation. The candidate would prove to be
a valuable asset to the organisation.

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The second outcome (as given in 4) is to reject an unsuitable candidate,

which also has a positive effect on the organisation, because selecting an
unsuitable candidate will affect the productivity of the organisation.
One negative outcome is selecting an unsuitable candidate (as given in 3).
In this case, the cost of having an unsuitable candidate in the job is high. He
or she would not add any value to the organisation. The organisation will
incur costs in training the candidate, would add to the cost of the non-
performance. If he has to be replaced, the cost of separation and recruiting
another candidate would also add to the cost of having hired the wrong
candidate. This is known as acceptance error.
The other negative outcome is not selecting the right candidate. This is a
loss to the company because they have selected the second or third best
candidate instead of the best candidate. Also the cost of not selecting the
right candidate could mean continuing the search and thereby increasing
the cost of recruitment. This is known as rejection error.

Self Assessment Questions

14. The process of choosing the most suitable candidate for a job from
among the available applicants is called ____________.
15. Selecting the _______ candidates and rejecting __________
candidates could be one of the costly mistakes.
16. Rejecting an unsuitable candidate will have a _______ effect on the
organisation.

4.7 Selection Process

In the previous unit we defined selection and discussed about the selection
decision outcomes. Let us now study the steps involved in the selection
process.

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Steps in the Selection Process

Resumes/CVs Review

Initial Screening Interview

Analyse the Application Blank

Conducting Test and Evaluating Performance

Preliminary Interview

Core and Departmental Interview

Reference checks Rejection

Job Offer to candidate Rejection by Offer to
candidate next
Acceptance suitable
Medical Exam candidate

Placement

Fig. 4.2: Steps in the Selection Process

The various steps in the selection process are shown in figure 4.2. The
process of selection starts with a review of the applications. These
applications can either be in company specified format, or format submitted
by individual applicants. At this stage the company checks the basic
qualifications and experience of the candidates. Applicants who do not
match the required criteria are rejected at this stage. After the initial
screening, the applicants are called for a test or an interview. Tests are
generally conducted to analyse the skill levels of the candidates, for the job
being offered.
Later the test results are analysed. Unsuccessful candidates are rejected
and the successful candidates are interviewed. Some companies have an
interview panel consisting of representatives from HR department, and the
department that will employ the selected candidate. Finally the candidate
will have an interview with the concerned manager. Based on the interview
and the manager’s feedback the company decides whether to offer the job
to the candidate or not. Rejecting unsuccessful candidates happen in all the

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stage of the process. This filtering process ensures that only the right
candidate is successful.
Let us now look into the process in detail.

Self Assessment Questions:

17. In the first stage of the selection process, the company checks basic
_______ and ________ of the candidate.
18. The applicants are called for a test or an interview, after __________.
19. Interviews are generally conducted to test the ___________ of the
candidate.

Activity 2:
Continuing with the activity 1, what was the experience your friend faced
during the interview process? What were the major questions asked ?
Prepare a list of questions asked and analyse the area that the interview
panel wanted to assess.

4.8 Application Forms

In the previous section, we studied the steps involved in the selection
process. Let us first discuss about applications forms.
An application form, filled by the person seeking the job, is normally the
beginning of the selection procedure. An application blank is a traditional,
widely accepted template for obtaining information from a prospective
applicant. Application forms are designed to help applicants provide relevant
information including background, qualification and experience.
Some of the items that usually appear on the application forms are:
Personal information: Personal information in an application form normally
includes candidate’s name, date of birth, gender, marital status, details of
family and residential address.
Educational qualification: Educational qualification includes the list of
schools, colleges and institutes attended by the applicant, the period of
study and courses taken and subjects studied, the percentages of marks
scored and grades obtained by the applicant.

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Work experience: Work experience provides all the basic information on

the previous jobs the applicant has worked in indicating the tasks, activities
and responsibilities handled by him.
Salary: Here the applicant needs to give information on the salary drawn in
the previous job, including all the benefits given by previous employer.
Sometimes it may be required to maintain the expected salary for future job.
Personality items: Personality items require the applicant to provide
information such as strengths and weaknesses, professional goals, hobbies
and interest-this extra information helps employers to understand the
candidate’s personality.
Reference checks: The names and addresses of the individuals who can
be contacted for reference check of the applicant are included in this part of
the application. This is a way to check the credibility of the candidates and
obtain information of their past experience.

Self Assessment Questions:

20. _________ in an application form normally includes the candidate’s
name, date of birth, gender, marital status, details of family and
address.
21. ________ check the credibility of the candidates and get information of
their past experience.
22. In ________ items the applicant is required to provide information such
as strength and weaknesses.

4.9 Selection Test

In the previous section, we discussed about applications forms. Let us now
discuss about the selection test.
Following are a few of the selection tests conducted by organisations:
Intelligence test – Measures the general mental ability of individuals. This
is the first standardised and most widely used test developed by
psychologists.
Aptitude test – Measures the ability to learn a given job, when given
adequate training.

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Achievement test – Measures the job related proficiency and knowledge of

the applicants.
Situational test – The candidates are exposed to simulated business
situations and their responses are recorded and evaluated.
Interest test – If an individual has a genuine interest in a job, he is likely to
perform well in the given task.
Personality test – Helps in assessing an individual’s value system,
emotions, maturity and other personal characteristics.
Polygraph test – Used to check the validity and truthfulness of an applicant
by monitoring the physical changes in his body as he answers a series of
questions. Normally used for screening applicants for defence and high-
profile security jobs where it is essential that the candidate is completely
trustworthy.
Graphology – Examines an individual’s handwriting to assess his or her
personality.

4.10 Interviews
Most organisations use interviews as an essential step in the selection
process. An interview helps in assessing the applicant’s profile and
comparing it with the job profile for suitability.
Some applicant’s may provide some false information in their applications,
just to gain employment.
Interview process: The interview process involves preparation, conducting
and closing the interview.
Preparation
Interviewer should follow these steps when preparing for an interview:
 Determine the objectives
 Read the application
 Determine the mode of evaluation
 Time
 Without any prejudice and bias
Setting:
Interviewers should make the candidate feel comfortable and relaxed.
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Conduct interview:
While conducting the interview the interviewer should:
 Demonstrate a basic liking and respect for people.
 Preferably ask open ended questions.
 Not invade the privacy of the candidate.
 Be an attentive listener.
 Note or mark the relevant points.
Closing an interview:
Closing an interview is an important part of the interview. It should be
carried out in a smooth manner. Interviewer should make an overt sign to
indicate the end of the interview.
There are several types of interviews which are as follows:
Preliminary interview
Preliminary interviews are brief, first round interviews that aim to eliminate
the applicants who are obviously unqualified for the job. These interviews
are generally informal and unstructured and are conducted even before the
candidates fill in the application blanks.
Selection interview
A selection or core interview is normally the interaction between the job
applicant and the line manager and/or experts, where the applicant's
knowledge, skills, talent, etc. are evaluated and ascertained. The selection
interview can be of the following types:
Formal and structured interview
A structured interview is very rigid in its structure and contents. It is based
on a thorough job analysis. The interviewer selects the questions to be
asked and plans the interview in advance.
To comprehensively cover all areas related to the job amount the candidate
Unstructured interview
An unstructured interview has no pre-determined framework of questions
and takes its own course depending on the responses of the candidate and
the interest of the interviewer. An unstructured interview contains more open
ended questions.

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Stress interview
The objective of a stress interview is to test the applicant’s ability to perform
and deliver under stress. Interviewers put the interviewee under stress by
repeatedly interrupting him, criticising his answers, asking him unrelated
questions or keeping quiet for long periods after the interviewee has finished
speaking.
Group interview
In a group interview all candidates or a group of candidates are interviewed
by a panel of interviewers or a single interviewer.
This method is resorted to when the number of applicants is high and time
available for interviewing is short.
Panel interview method
In today’s organisations where all functions are interdependent and every
job involves cross-functional interactions, it is imperative that people from
different functions interview a candidate.
In-depth interview
In-depth interviews are more suitable for selection of candidates for high-
end technology and high skill jobs. Experts in the relevant area test the
candidate’s knowledge and understanding of the subject, and assess his
expertise.
Decision – making interview
After the applicants’ knowledge in the core areas of the job is evaluated by
experts including line managers in the organisation, the applicants are finally
interviewed by the departmental heads and the HR function.
These interviews are generally informal discussions.

4.11 Evaluation, Placement, Induction

Evaluation:
The evaluation of the candidate starts as soon as he/she leaves the room.
Evaluation is carried out on the basis of the candidate’s educational
qualifications, years of experience, week experience in similar jobs, skills
and competencies as well as interest expressed and personality.

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Reference check:
Once all candidates are evaluated and the final decision has been taken,
and the offer has been made to the candidate to join the organisation,
employers perform a reference check.
Medical examination:
Many organisations have made physical medical examinations mandatory,
to ensure that the candidate is physically fit.
Placement:
Once the candidate accepts the offer and joins, organisation has to place
him in the job he has been selected.
A proper placement of an employee results in low employee turnover, low
absenteeism, and low accident rates in shop floor jobs and improved morale
and commitment of the employees.
Induction
After selection the employee is first inducted into the organisation
This is the period of familiarisation for the employee with the organisation,
with his colleagues and with his job. Then, the employee is usually put on
probation for a period ranging from six months to two years. The
organisation then decides the final placement after the initial probation
period is over, based on the employee’s performance during the period and
his aptitude and interest.

Self Assessment Questions

23. _________ measures the general mental ability of individuals. This is
the first standardised and most widely used test developed by
psychologists.
24. _________ measures the job related proficiency and knowledge of the
applicants.
25. In _________, the candidates are exposed to simulated business
situations and their responses are recorded and evaluated.
26. ________ examines an individual’s handwriting analysis to assess his
personality.
27. _________ are first round interviews that aim to eliminate the
applicants who are obviously unqualified for the job.

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28. ________ are deliberate attempts to create pressure to observe how

an applicant performs under stress.
29. ___________ is the period of familiarisation for the employee, with the
organisation, with his colleagues and with his job.
30. _____________ is an important part of the interview. It should be done
in a smooth manner. Interviewer should make an overt sign to indicate
the end of the interview.

4.12 Summary
Let us recapitulate the important concepts discussed in this unit:
 Recruitment is a process of searching for prospective employees and
stimulating them to apply for the jobs in the organisations. The process
of seeking and attracting a pool of people from which qualified
candidates can be chosen for job vacancies.
 Recruitment, as a process, starts with identification of the need for
human resources and ends with getting the prospective employees to
apply for the vacancies available.
 There are many factors that affect the recruitment programme. These
factors can be classified as organisational or internal factors, and
environmental or external factors.
 The process of choosing the most suitable candidate for a job from
among the available applicants is called selection. This is the most
important stage of employment as the concept of the right candidate for
right position, takes its final shape here. Selecting the wrong candidates
and rejecting the right candidates could prove to be a costly mistake.
 An application form, filled by the person seeking the job is normally the
beginning of the selection procedure. An application blank is a
traditional, widely accepted template for obtaining information from a
prospective applicant.
 Application forms are designed to help applicants provide relevant
information including background, qualification and experience.
 Most organisations use interviews as an essential step in the selection
process. An interview helps in assessing the applicant’s profile and
comparing it with the job profile for suitability. There are several types of
interviews.

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 Interview processes are based on preparation, setting, conducting

interview, closing interview.
 The selection process ends with evaluation, reference check, medical
examination, placement and induction.

4.13 Glossary
 Employee referral: Employee referral is an internal recruitment method
employed by organizations to identify potential candidates from their
existing employees' social networks.
 In-depth interview: In-depth interviewing is a qualitative research
technique that involves conducting intensive individual interviews with a
small number of respondents to explore their perspectives on a
particular idea, program, or situation.
 Induction: An induction programme is the process used in organisations
to welcome new employees and prepare them for their new role.

4.14 Terminal Questions

1. Define recruitment and discuss the factors affecting recruitment.
2. Discuss selection process outcomes and its effect in the selection of
candidates.
3. Discuss the types of interviews.
4. Discuss the process of interview.

4.15 Answers

Self Assessment Questions

1. prospective
2. effective recruitment
3. false
4. true
5. false
6. true
7. recommend

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8. Private agencies
9. unsolicited
10. Employers
11. False
12. True
13. False
14. Selection
15. Wrong, right
16. Positive
17. qualification and experience
18. Initial screening
19. Skill levels
20. Personal information
21. Reference check
22. Strength, weakness
23. Intelligent test
24. Achievement Test
25. Situational test
26. Graphology
27. Preliminary Interview
28. Stress interviews
29. Induction
30. Closing of interview

Terminal Questions
1. Recruitment is a process of searching for prospective employees and
stimulating them to apply for the jobs in the organisations. There are
many factors that affect the recruitment programme. These factors can
be classified as organisational or internal factors, and environmental or
external factors. Refer section 4.2 and 4.3 for more details.

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2. Selecting the wrong candidates and rejecting the right candidates could
prove to be a costly mistake. Selection decision outcomes are as given
below:
Selection Decision Outcomes

Accept Reject
1) Correct 2) Rejection error
Successful decision
3) Acceptance 4) Correct decision
Unsuccessful
error

Refer section 4.6 for more details.

3. Organisations use interviews as an essential step in the selection
process. An interview helps in assessing an applicant’s profile and
comparing it with the job profile for suitability. There are several types of
interviews including preliminary interview, core interview, stress
interview etc. Refer section 4.10 for more details.
4. Interview processes are based on preparation, setting, conducting
interview, closing interview. Refer section 4.10 for more details.

4.15 Case Study

Recruitment Sites Woo First-time Job Seekers
By Anjali Prayag
“Travelling across the country for campus hiring has become an expensive
process and companies were looking for alternatives.”
Bangalore, May 11. The campus recruitment process, which had fallen into
a pattern in the last few years, has taken a new turn this year.
While some of last year’s recruits are yet to receive their joining dates,
thanks to the slowdown, students passing out this year will see little activity
in the campus placement process.
Turning this slump into a business opportunity, online job sites are focusing
their services on this new category of users.

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Naukri.com is beta testing Firstnaukri.com, a job site targeted at graduates

ready for the job market in 2009.
Mr Hitesh Oberoi, COO, Naukri.com, told Business Line that this was in
response to clients requesting Naukri to help them in campus hiring.
Moreover, travelling across the country for campus hiring has become an
expensive process and companies are looking for alternatives, he said.
About 25 companies have already registered and 20,000 CVs have been
posted on FirstNaurki.com, said Mr Oberoi. Several institutes are interested
in registering their students’ profiles on the site.
“This kind of campus-to-corporate online network will help companies reach
out to a greater number of students,” said Mr Srini Krishnamurthi, Managing
Director, Expertus, a training outsourcing firm that has just launched a job
portal for engineering graduates. From a career point of view, typical job
sites do not work well for freshers as their needs are different.
“Seniors have social networking sites that help them in connecting with
people. That’s why we decided to launch c2c.com where students can
participate in blogs and forums and get news about the industry, and who’s
hiring.”
To help freshers, JobStreet India is adding a bunch of skill tests in
TestBench, a job seeker self-assessment product in its portfolio, said Mr
Anand Iyer, CEO, Jobstreet India.
This product offers aptitude and skill tests which job seekers (most of the
time freshers) would find useful to assess their current competencies at their
own pace, and choose to take remedial measures to become better
qualified in the shrunken job market, said Mr Iyer.
Friendly portal for job seekers
By G. Naga Sridhar
Hyderabad, March 23. If you are one of those who lost your job due to
recession, here is some good news. There are “friends” who wish to help
you find a job soon.
What you need to do is post your CV on www.asksaurabh.com, a portal set
up by Pune-based Mr Saurabh, who recently lost his job in Yahoo, along
with his friends Mr Anthony, Mr Iqbal Gandham and others.

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At the very outset, the portal lists three rules: no job consultants, no fake
jobs/profiles and no charges for matchmaking. It also asks the users upfront
to “kindly respect the three rules of this free service.”
One can post CV and jobs in a wide range of areas such as design,
engineering finance, general, HR, quality assurance, testing and software
development, among others.
“Our philosophy is simple, if we can help one person get back into a job, our
web site would have done its job,” Mr Iqbal told Business Line. Asksaurabh
is not allowing recruitment agencies to post, and there is no charge for
posting.”
Besides the concept of “a friend in need is a friend indeed”, what gave birth
to the web site is an inspiration from Purple People Collective (PPC), a site
that helps match up IT professionals who are looking for people and those
who need jobs in the US and Europe.
“It all started when we visited our friend Saurabh in Bangalore who had just
been laid off by Yahoo!, and was looking for a new job,” said Mr Anthony
over phone from Pune.
“The Indian IT landscape and talent pool, with its different requirements,
offerings and prices, requires its own dedicated site (like PCC),” he added.
The response has been “amazing” – 60 companies posted their
requirements in the last 20 days while over 500 job seekers signed up for
posting their CVs and finding prospective employers.
“The site is still in its infancy. Going forward, we believe the response would
be more along with the number of people benefiting out of this,” said
Mr Anthony.
Discussion Questions:
1. Do you think that technology enabled recruitment is now being more
accepted ? Justify.
2. What are the benefits that job portals provide for recruiters and
candidates ?
(Source: Business line May 12th/May 24th 2009)

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References:
 Fisher S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa K. (2010). Human Resource Management. New Delhi: Tata
McGraw Hills.
 Wayne C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

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Human Resource Management Unit 5

Unit 5 Training and Management Development

Structure:
5.1 Introduction
Objectives
5.2 Meaning of Training
5.3 Area of Training
5.4 Methods of Training
5.5 Concept of Management Development
5.6 Management Development Methods
5.7 Differences Between Training and Development
5.8 Evaluation of Training and Management Development
5.9 Summary
5.10 Glossary
5.11 Terminal Questions
5.12 Answers
5.13 Case Study

5.1 Introduction
In the previous unit we discussed the concept of recruitment, the factors
affecting recruitment, the sources of recruitment and the recruitment policy.
We also studied the selection process, application forms and selection test.
Once the right candidate is selected for the job, the candidate has to be
trained for the job role selected for. Training is a process of assisting a
person in enhancing his efficiency and effectiveness in a particular work
area by acquiring more knowledge and practices. Training is important to
establish specific skills, abilities and knowledge for an employee. For an
organisation, training and development is important for organisational
growth. Organisational growth and profits are also dependent on the
training. Training is a function of the organization development. Training is
different from education, particularly formal education. Education is
concerned mainly with enhancement of knowledge, but the aim of training is
increasing knowledge while changing attitudes and competences. Basically
education is formulated within a framework and according to a syllabus, but
training is not formed as per a syllabus. It may differ from one employee to
another, one group to another, even for groups in the same class. The

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reason for this is the difference of attitudes and skills of one person from
another. That is an advantage of training.
Every organisation needs to have well-trained and experienced personnel to
perform the necessary tasks. Today’s organisations invest a lot of time,
effort and resources to enhance the skills and knowledge of their
employees. In this unit, we will discuss the meaning and methods of
training, concept of management development, and evaluation of training
and development.
Objectives:
After studying this unit, you should be able to:
 explain the importance of training
 describe the types and techniques of training and development
 analyse the methods and procedures of training

5.2 Meaning of Training

Training enhances the skills and capabilities of employees in an
organisation. A successful training programme improves the performance of
an employee which in turn enhances organisational performance.
Training is an essential part of the orientation programme for new recruits in
an organisation.
The main objectives of training are:
 Improving employee performance: When an employee is recruited by
an organisation, he might not have all the skills required to carry out his
job. Training at this stage helps him learn his job faster and ensures
better performance.
 Updating employee skills: It is important for the management to
continuously evaluate and adopt any technological advances that can
help the organisation function more effectively and efficiently.
 Avoiding managerial obsolescence: Managerial obsolescence is the
failure to adopt new methods and processes that can improve employee
and organisational performance. Rapid changes in technical, legal and
social environments have an impact on the way managers perform their
jobs.

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 Preparing for promotion and managerial succession: Training helps

an employee acquire the skills required to assume greater
responsibilities.
 Retaining and motivating employees: One way to motivate and retain
employees is through a systematic programme of career planning and
development. Employees feel cared.
 Creating an efficient and effective organisation: A manager who has
well trained and well equipped employees needs to spend less time
supervising them.

Self Assessment Questions

1. ___________ enhances the skills and capabilities of the individuals in
an organisation.
2. Training helps an employee acquire the skills required to assume
greater ______.
3. A manager who has well trained and well equipped employees needs
to spend less time ___________ them.

5.3 Area of Training

In the previous section, we discussed the meaning and objectives of
training. Let us now study the areas where employees are trained.
Some major areas where employees are normally trained in an organisation
are:
Company policies and procedures: Understanding company policies and
procedures is important for any employee of the organisation. An employee
should acquaint himself with the organisation’s rules, practices, processes
and procedure.
 Skill–based training: Employees should be provided training to match
the skill requirements of the job they perform.
 Human relations training: It is important for employees to know how to
manage their professional relationships. Human resource training is
essential to improve the employees’ skills in the area of self-learning,
interpersonal skills, group dynamics, perception, leadership styles,
motivation, disciplinary procedures, grievance redressal etc.

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 Problem solving training: Training in problem-solving skills equips an

employee to deal successfully with the problems he is facing.
 Management and supervisory training: This type of training is
essential for the employee who performs managerial and supervisory
functions as they move ahead in their career paths to assume positions
of increasing responsibility.
Factors affecting success of training
Let us look into some of factors responsible for the success of training
programmes in organisations.
 Motivation: Employees usually resist participating in training sessions
as they either do not understand the benefits of training or are not
convinced about its effectiveness. Organisations should motivate people
to understand the benefits of training and the reason they need to
improve their performance.
 Participation: Active participation of the employees in a training
programme ensures its success. Employees learn better through direct
experience. Training methods like on-the-job training is more effective
then class room teaching.
 Feedback: Feedback on employee performance after the training also
enables the employee to adopt and employ the newly acquired
knowledge and skills.
 Repetition: Continuous practice during training and development helps
in better learning.
 Application: Training loses its meaning if the learning is not applicable
at work.

Self Assessment Questions

4. Understanding ________ and procedures is important for any
employee of the organisation.
5. Training in ____________ equips an employee to deal successfully
with the problems he is facing.
6. ________ on employee performance after the training also enables the
employee to adopt and employ the newly acquired knowledge and
skills.

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7. _______ participation of the employees in a training programme

ensures its success.

5.4 Methods of Training

In the previous section, we discussed the different areas where employees
are normally trained. Let us now study the various methods of training.
Following are a few methods of training:
 On-the-job training
 Off the job training
On-the-job training
It’s a real job environment where the trainee is exposed to actual work
situations. The major advantage of this method is that the trainee gets
hands-on experience of the job that has to be performed. The different types
of on-the-job training are:
 Job instruction training: In this method trainees can discuss the
problems in performing the job immediately with the trainer.
 Apprenticeship and coaching: Individuals seeking to enter skilled
trades, like those of carpenters, electricians etc, are required to go
through formal apprenticeship under experienced employees, before
they join their regular job.
 Job rotation: In this method the trainee is placed on various jobs across
different functions in the organisation. The trainee gains cross-functional
knowledge and is equipped to take up different jobs.
 Committee assignments: In this method, a group of employees are
assigned an actual organisational problem and are asked to find a
solution. The trainees develop their team-management skills,
interpersonal skills, communication skills, problem-solving skills and
leadership skills while solving the problem as a group.
Off the job training
Off the job training refers to training imparted away from the employee’s
immediate work area.

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When training is performed on the job, any mistake by the trainee might
result in damage to the organisation. Hence, off the job training can be
conducted to minimise this damage. The different types of off the job
training are:
(i) Classroom lectures: This approach is widely used for helping the
employees. The trainer should actively involve the trainees and make the
session more interactive.
(ii) Simulation exercises: In this method of training, the trainee is exposed to
an artificial work situation that closely resembles the actual situation.
Simulation exercises are of great help to the employee to learn the task on
hand. It can be in the form of case exercises, experiential exercises,
complex computer modelling, Vestibule training and role play. Following are
a few types of simulation exercises:
o Case exercise – In case study a real life problem encountered in the
organisation is presented to the trainees.
o Experiential exercise – In this method, the trainer simulates situations
where the employees are exposed to actual work problems. The trainer
can create a situation where employees are asked to work in teams.
After the exercise is complete, the trainer discusses the behaviour of the
employees during the exercise, with the group. He appraises the
trainees about their performance, and discusses the exercise with the
help of theoretical concepts.
o Computer modelling – Computer modelling is a technique whereby the
dimensions of the job are programmed into the computer. Computer
modelling helps in learning directly. In this training, trainees get real life
experience by working on a computer.
o Vestibule training – In this method, the actual work conditions are
simulated and the equipment used by the trainees is similar to what is
used in job.
o Role playing – Roleplay is described as a method of human interaction
involving realistic behaviour in an imaginary situation.

Self Assessment Questions

8. In _________ method, the trainee can discuss the problems in
performing the job immediately with the trainer.

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9. _________ is a training method where the trainee is placed on various

jobs across different functions in the organisation.
10. Under the___________, a group of employees are given an actual
organisational problem and are asked to find the solution.
11. ___________ is a technique whereby the dimensions of the job are
programmed into the computer.
12. ____________ training where the actual work conditions are simulated
and the equipment used by the trainees is similar to what is used in the
job.

5.5 Concept of Management Development

Management development is related to the development and growth of the
employees in an organisation through a systematic process. This
development is future-oriented and prepares managers for a career of
valuable contribution to the organisation. It is concerned with the learning
and development of the employees. It helps in the development of the
intellectual, managerial and people management skills of managers. It trains
managers to understand and analyse different situations, and to arrive at
and implement the correct solutions.
Objectives of management development
The main objectives of management development programmes are:
 Improving the performance of the managers.
 Enabling the senior managers to have an overall perspective about the
organisation and also equipping them with the necessary skills to handle
various situations.

5.6 Management Development Methods

Following are a few management development methods:
 On-the-job development methods
 Off the job development methods
On-the-job development methods
The different on-the-job development methods are:
a) Coaching: Coaching involves one manager playing an active role in
guiding another manager.

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The coach/trainer teaches the trainee what to do, how to do it, and rectifies
any mistakes committed by the trainee.
b) Job rotation: Job rotations play an important role in developing the skill
set of a manager.
c) Understudy assignments: In this method of development, a senior
manager selects and trains a trainee manager from among his/her
subordinates, who at a future time will be capable of handling the senior
manager’s responsibilities.
d) Multiple management: This technique enables junior managers to
participate in board and committee meetings, which are normally attended
only by senior and top level managers.
Off the job development methods
The different types of off the job development methods are:
(i) Simulation exercises: The popularly used simulation exercises are:
a) Case study: Case studies are prepared based on actual experience of
the organisation. Trainees study, analyse and discuss the case, identify
the hidden problem and try to get an appropriate solution.
b) Business games: In this method, the trainees are divided into different
groups and teams. They play the roles of competing firms in a simulated
market.
c) Role play: In this method, participants enact roles to solve problems
that are common in real life. They react to the situation and to one
another, in the same way as they would do in their managerial jobs.
d) Incidental method: This method aims to develop the intellectual ability,
practical judgment and social awareness of the employees. Each
employee is given a written incident which he analyses, identifies the
problems and the probable causes and suggests a solution.
e) In basket method: This is a method of development that simulates the
aspects of a manager’s job. The trainee receives documents similar to
the items normally found in managers in basket, such as memos, letters,
reports etc.

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(ii) Sensitivity training: Sensitivity training or Laboratory training is a

method which helps to change the behaviour through unstructured group
interaction.
– Training groups (T-groups) that seek to change behaviour through
unstructured group interaction.
– Provides increased awareness of others and self.
– Increases empathy with others, listening skills, openness, and tolerance
for others.
(iii) Transactional analysis: This is a theory of personality development
which provides an approach for defining and analysing the interaction
between people. The basic theory behind transactional analysis is that an
individual’s personality comprises three ego states, namely, the parent, the
child and the adult ego states.
The parent ego state is characterised by a feeling of superiority and
authority. A person in the parent ego state is dominating and authoritative.
The child ego state includes all those impulses that are common in an
infant. A person in the child ego state is either obedient or manipulative,
charming at one point of time and repulsive at another.
The adult ego state is objective and rational. In the adult state, actions
such as processing of data, estimation of probabilities or alternatives and
making decisions are done systematically and logically.
(iv) Conferences: A meeting of people to discuss a topic of common
interest is referred to as a conference.
(v) Lectures: A lecture is the simplest technique of presenting and
explaining a series of facts, principles and concepts.

Activity 1:
Specify the type of training you would recommend for the following
people and justify. a) Mechanic b) Marketing Manager.

Self Assessment Questions

13. _____________ method the trainees are divided into different groups
and teams. They play the roles of competing firms in a simulated
market.

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14. ________ technique enables junior managers to participate in board

and committee meetings, which are normally attended only by senior
and top level managers.
15. ______ method aims to develop the intellectual ability, practical
judgment and social awareness of the employees.
16. __________ is a method of development that simulates the aspect of a
manager’s job. Trainee receives some documents similar to the items
normally found in managers in basket.
17. _________ is a method which helps to change the behaviour through
unstructured group interaction.
18. ___________ is a theory of personality development and provides an
approach for defining and analysing the interaction between people.

5.7 Differences Between Training and Development

In the previous unit, we discussed the management development methods.
Let us now list the differences between training and development.
Table 5.1 lists the differences between training and development.
Table 5.1: Differences Between Training and Development

Training Development

1. It describes the acquisition of 1. Activities that are designed to

technical knowledge and skills. improve the skills of managers.
2. Training helps employees to 2. Grooms them to handle future
improve their performance. responsibilities.
3. It generally concentrates on a 3. Focus on a broad range of
limited number of technical skills. skills.
4. Mainly focuses on managerial 4. Wide variety of interpersonal
and technical skills such as skills.
planning, organising, leading,
communicating, motivating and
decision making.

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5.8 Evaluation of Training and Management Development

In the previous unit, we listed the differences between training and
development. Let us now discuss the evaluation of training and
management development.

The process of examining a training programme is called training evaluation.

Training evaluation checks whether the training has had the preferred
outcome. Training evaluation makes sure whether candidates are able to
implement their learning in their respective workplaces, or to the regular
work schedules.

Purpose of training evaluation: The five main purposes of training

evaluation are as given in Figure 5.1.

Fig. 5.1: Purpose of Training Evaluation

(Source: http://traininganddevelopment.naukrihub.com/training-
evaluation.html)

Feedback: It helps in giving feedback to the candidates by defining the

objectives and linking it to learning outcomes.
Research: It helps in determining the relationship between acquired
knowledge, transfer of knowledge at the work place, and training.
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Control: It helps in managing the training programme because if the training

is not effective, then it can be dealt with accordingly.
Power games: At times, the top management (higher authoritative
employee) uses the evaluative data to manipulate it for their own benefits.
Intervention: It helps in determining whether the actual outcomes are
aligned with the expected outcomes.
Process of training evaluation
The process of training evaluation entails the following:
Before training: The trainee's skills and knowledge are assessed before
the training programme. During the start of training, candidates generally
perceive it as a waste of time and resources because at most of the times
candidates are unaware of the objectives and learning outcomes of the
programme. Once aware, they are asked to give their opinions on the
methods used and whether those methods confirm to the candidates
preferences and learning style.
During training: It is the phase at which instruction is started. This phase
usually consists of short tests at regular intervals.
After training: In this phase trainee’s skills and knowledge are assessed
again to measure the effectiveness of the training. This phase is designed to
determine whether the training has had the desired effect at individual,
department and organisational levels. There are various evaluation
techniques for this phase.
Figure 5.2 depicts the process of training evaluation.

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Fig. 5.2: Process of Training Evaluation

(Source: http://traininganddevelopment.naukrihub.com/training-
evaluation.html)
Techniques of evaluation
The various methods of training evaluation are:
 Observation
 Questionnaire
 Interview
 Self diaries
 Self recording of specific incidents
 Change in behaviour

Self Assessment Questions

19. The process of examining a training programme is called ________.
20. ______ helps in managing the training programme because if the
training is not effective, then it can be dealt with accordingly.
21. ________ helps in determining whether the actual outcomes are
aligned with the expected outcomes.
22. The trainee's skills and knowledge are assessed before the________.

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Activity 2:
Training is considered as a tool to enhance knowledge and skill. Try to
find out answers to the following questions from a person you know who
has attended training:
 Did the person learn from the training?
 Was the training material sufficient enough?
 What were the method used in training ?

5.9 Summary
Let us recapitulate the important concepts discussed in this unit:
 Training is a process of assisting a person for enhancing his efficiency
and effectiveness in a particular work area by getting more knowledge
and practices.
 Training is important to establish specific skills, abilities and knowledge
of an employee.
 Training is different form education; particularly formal education.
Education is concerned mainly with enhancement of knowledge, but the
aim of training is to increase knowledge while changing attitudes and
competences in good manner.
 Some major areas where employees are normally trained in an
organisation are company policies and procedure, skilled based training,
human relation training, problem solving training.
 There are mainly two methods used in training programmes: On-the-job
training is a real job environment where the trainee is exposed to actual
work situations. The major advantage of this method is that the trainee
will get hands-on experience. Off the job training refers to training
imparted away from the employee’s immediate work area. When training
is performed on the job, any mistake by the trainee might result in
damage to the organisation.
 Management development is related to the development and growth of
the employees in an organisation through a systematic process. This
development is future-oriented and prepares managers for a career of
valuable contribution to the organisation.
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Human Resource Management Unit 5

 The process of examining a training programme is called training

evaluation. Training evaluation checks whether training has had the
preferred outcome. Training evaluation ensures whether candidates are
able to implement their learning in their respective workplaces, or to the
regular work schedules.

5.10 Glossary
 Management development: refers to the activities involved in
enhancing leaders', managers' and supervisor's abilities to plan,
organize, lead and control the organization and its members.
 Simulation: It is the imitation of the operation of a real-world process or
system over time.
 Training: The term training refers to the acquisition of knowledge, skills,
and competencies as a result of the teaching of vocational or practical
skills and knowledge that relate to specific useful competencies.
 Transactional analysis: Transactional Analysis (TA) is a model of
people and relationships that was developed during the 1960s by Dr.
Eric Berne. It is based on two notions, first that we have three parts or
'ego-states' to our 'personality, and secondly that these converse with
one another in 'transactions'.

5.11 Terminal Questions

1. What is training? What are its objectives?
2. Discuss the methods of training.
3. Discuss management development programme.
4. Distinguish between training and management development.
5. Explain the evaluation process of training programme.

5.12 Answers

Self Assessment Questions

1. Training
2. Responsibilities
3. Supervising

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4. Company policies
5. Problem-solving skills
6. Feedback
7. Active
8. Job instruction training
9. Job rotation
10. Committee assignment method
11. Computer modelling
12. Vestibule training
13. Business Games
14. Multiple management
15. Incidental method
16. In basket
17. Sensitivity training
18. Transactional analysis
19. Training evaluation
20. Control
21. Intervention
22. Training programme

Terminal Questions
1. Training is a process of assisting a person for enhancing his efficiency
and effectiveness in a particular work area by getting more knowledge
and practices. Training is important to establish specific skills, abilities
and knowledge to an employee.
The main objectives of training are improving employee performance,
updating employee skills, avoiding managerial obsolescence, preparing
for promotion and managerial succession, retaining and motivating.
Refer section 5.2 for more details.
2. Two training methods are on-the-job training and off the job training.
Refer section 5.4 for more details.
3. Management development is future oriented and provides employees
with skills and knowledge required for career advancement. Refer
section 5.5 for more details.

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4. Training provides technical knowledge and skills while development

programmes focus on activities designed to improve skills of managers.
Refer section 5.7 for more details.
5. The process of examining a training programme is called training
evaluation. Training evaluation checks whether training has had the
preferred outcome. Training evaluation ensures whether candidates are
able to implement their learning in their respective workplaces, or to the
regular work schedules. Refer section 5.8 for more details.

5.13 Case Study

Case Studies and Success Stories – Training and Development
A community resource
Multilink Community Services Inc was started in 1988 by a small group of
migrants and refugees who saw a need for English classes and support
services for non-English speaking people. Multilink incorporated in 1989,
took on its first funded programmes in 1991 and now it operates 32
programmes on a weekly basis across six local government areas. The
organisation receives funding from local, state and federal governments, but
it also owns two businesses – one that provides an interpreting and
translating service; the other, a series of multicultural card games for
children.
Of the 330 people who work for Multilink, nearly all of its staff members are
from different cultural backgrounds and none of them are under 40 years of
age. Multilink’s director Lynda Ford is very happy with the results that have
been achieved by these mature age employees. ‘They are honest,
hardworking, loyal, insightful and always ready to help others,’ Lynda
said. ‘They are happy to be working, taking the opportunities made available
to them and they are great resources, providing us with cultural and
religious knowledge, contacts and language skills.’
Training for its mature age employees remains one of Multilink’s most
important issues. While English literacy will always be a key concern, Lynda
Ford has also identified what she calls ‘workplace literacy’ as another area
that requires attention. ‘I believe that training issues were greater for this
culturally diverse workgroup as often they need skills, knowledge and
experience of Australian systems (education, employment, medical, drivers’

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licenses, telephone connections, etc.) and conceptual skills to establish their

programmes, collect data, write reports and liaise with government and
other organisations.’
Having identified that there is a great need for it; Multilink encourages and
supports continuing training for its mature age employees. The organisation
informs its staff about external training opportunities, and it provides two
hours per week study leave for full-time employees. Multilink also conducts
individual staff appraisals for all staff that identify training needs, and the
organisation has developed a 2005-06 training plan that offers a variety of
practical and technical sessions to staff.
Key to success and fulfillment
Career Keys is a non-profit organisation that provides community-based
training and transition support to young people, parents and socially
disadvantaged groups to assist them with gaining employment. It is the only
organisation that is delivering this type of service in the Logan area. Career
Keys is about helping others to develop their confidence, work skills and the
ability to fulfill their career goals successfully, and most of its programmes
are available free of charge.
Deidre Foreman, the general manager of Career Keys, has a staff of
20 employees – three quarters of whom are much valued mature age
workers. ‘I wanted to have a balanced workforce and I have put in place on-
going training that has given an opportunity for staff to adapt to new skills as
needed,’ Deidre said.
Because mature age people do not always have the confidence to sell
themselves at job interviews, Deidre believes that employers need to have
skills to elicit information from potential employees so that they can see
what skills mature age job seekers may bring to the workplace. She also
has a policy of allowing her staff to work part-time - an arrangement that
requires her staff to share jobs and be multi-skilled.
Deidre Foreman, Marcella Mortimer and Elena Meale at Career Keys
Discussion Questions:
1. What were the key training needs of the employees of Multilink ?
2. How do you think training programmes improve the skill set of nature
employees by the intervention of career keys ?
(Source: http://www.deewr.gov.au/Employment/Programmes/Jobwise/
Employers/Pages/case05.aspx)
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References:
 Fisher, S, and Shaw.(2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.
E-References:
 http://practicehrm.blogspot.com/2009/10/introduction-to-training-
and.html – Retrieved on December 26 2011
 http://traininganddevelopment.naukrihub.com/training-evaluation.html
– Retrieved on December 27 2011

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Human Resource Management Unit 6

Unit 6 Employee Career Planning and Growth

Structure:
6.1 Introduction
Objectives
6.2 Concept of Employee Growth
6.3 Managing Career Planning
6.4 Elements of a Career Planning Programme
6.5 Succession Planning
6.6 Other Career Programmes
6.7 Summary
6.8 Glossary
6.9 Terminal Questions
6.10 Answers
6.11 Case Study

6.1 Introduction
In the previous unit, we discussed the meaning and methods of training,
concept of management development and management development
methods. We also learnt the evaluation of training and development, and the
differences between training and development. Now let us look into an
employer’s career planning and growth.
An individual’s career describes the different positions held by him
throughout his work life. An evaluation of a career would show the extent to
which one has accomplished the specific career goal. Career can be defined
as a sequence of positions. Organisations have to help employees plan their
careers and manage them. The employees have to be given a chance to
identify their competencies and aptitudes, and then provided with the right
opportunities. Organisations that help their employees plan their career,
enjoy and benefit from a motivated and loyal workforce.
A career can be viewed from two perspectives, objective and subjective, as
objective perspective of career deals with the past position held by an
individual. In this unit, we will discuss the concept of employee growth and
managing career planning. We will also study the elements of career
planning programme, succession planning and other career programmes.

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Objectives:
After studying this unit, you should be able to:
 analyse the concept of employee growth
 describe the dimensions of career planning
 review promotions and internal job postings
 describe succession planning
 evaluate other programmes for special employee growth

6.2 Concept of Employee Growth

Increasingly, organisations have become more active in implementing
employee growth programmes. Companies are designing employee growth
programmes to increase employee productivity, control attrition, prevent job
burnout and obsolescence, and improve the quality of employees’ work
lives. HR departments of almost all large companies and most medium
sized companies have taken a greater interest in employee development
programmes. HR professionals have never before faced so many
challenges in meeting the needs of individual employees and organisations
in designing career systems. It is the employee’s responsibility to manage
his or her own career, while it is the employers’ responsibility to provide
employees with the tools and opportunities to enhance their skills. The end
objective however remains, for the organisations to have a career-resilient
workforce, one that has self reliant workers who are capable of reinventing
themselves to keep up with the fast pace of organisational changes and fulfil
their career aspirations, without feeling the need to move to another
company in search of better career opportunities.
What this essentially means can be summarised under the following key
initiatives that are commonly practiced in organisations today:
 Career planning and development
 Promotions and internal job postings
 Succession planning
 Other talent management activities focused on employee growth
While these activities are normally part of the core HR functions, often
organisations (depending on the size of the organisations) might have a
dedicated individual supported by a small team leading all of these activities
and reporting to the Head of HR or even the CEO/MD.

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Self Assessment Questions

1. Companies are designing __________________________ to increase
employee productivity, prevent job burnout and obsolescence, and
improve the quality of employees’ work lives.
2. To cope in today’s turbulent times, it has become increasingly
important for both _______________ and ______________ to better
redress employee career needs.
3. The end result for a ____________ workforce is one that has self-
reliant workers who are capable of uninventing themselves to keep us
with the fast pace of organisational changes.

6.3 Managing Career Planning

In the previous section, we discussed the concept of career planning. Let us
now study how to manage career planning.
Career can be defined as a sequence of positions, roles or jobs held by one
person over a relatively long time span and over his/her life-time.
Managing career planning may include the following aspects:

Career path: It is the sequential pattern of jobs that form a career.

Career goals: They are the future positions that an individual strives to
reach as part of a career.

Career planning: It refers to the process by which an individual selects

career goals and the path to these goals. The process whereby each
employee personally plans careers goals is known as individual
career.Planning and the process whereby the organisation plans career
goals for its employees is known as organisational career planning.

Following are the benefits of career planning to an organisation:

Ensures availability of resources for the future: Career development in

an organisation should be in alignment with the HRP. HRP determines the
changing requirements of an organisation and career development helps in
meeting the resource requirements.

Enhances organisational ability to attract and retain talent: In a

competitive market environment, talented employees have career

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opportunities. Therefore, an organisation that shows concern for the

employees’ future by providing them the best opportunities can attract and
retain talented people.
Ensures growth opportunities for all: A comprehensive planning exercise
by the organisation ensures growth opportunities for all the employees.
Handles employee frustration: Today’s workforce is more knowledgeable
and has greater expectations. They desire more responsibility and greater
challenges. A good career development programme can help in handling
the expectations of the employees.
Career management: is the process of designing and implementing goals,
plans and strategies that enable HR professionals and managers to satisfy
workforce needs and allow individuals to achieve their career objectives.
Career development programmes help in the achievement of career
objectives.
Career anchors: It is attitudinal characteristics that guide people throughout
their careers.
Autonomy/Independence: Desire to have freedom and not to be bossed
over.
Security/Stability:Individuals who want to be free from any anxiety of
uncertainty or insecurity prefer to remain in the same kind of job and with
the same employer.
Technical/Functional competence:-Those with a technical/functional
competence exhibit a strong inclination to develop something which they
can call their own, e.g., engineers, scientists, technologists etc.
General management: Have good planning, organising, managing and
controlling skills. They have a broader view of things and play a facilitating
role.
Entrepreneurial creativity: Individuals with creativity as an anchor are
more often successful as artists, free lancers, entrepreneurs.
Service: Service as a career anchor drives individuals to take up jobs in not
for profit service organisations.
Pure challenge: People who just love to solve difficult problems.

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Life-style: For some people, nothing is more important than enjoying life.
They have a disinclination to sacrifice life-style solely for career
advancement.

Self Assessment Questions

4. _________ can be defined as a sequence of positions, roles or jobs
held by one person over a relatively long time span and over his/her life
time.
5. ___________refers to the process by which an individual selects
career goals and the path to these goals.
6. _________ is an attitudinal characteristic that guides people throughout
their careers.

6.4 Elements of a Career Planning Programme

In the previous section, we discussed how to manage career planning. Let
us now study the elements of a career planning programme.
There are four distinct elements of career planning programme:
 Individual assessment and need analysis
 Organisational assessment and opportunity analysis
 Need – opportunity alignment
 Career counselling
Individual assessment and need analysis
Many people begin their careers without any formal assessment of their
abilities, interests, career needs and goals.This phenomenon of people
entering their jobs, occupations and careers with little attention to career
planning and then feeling disengaged is known as career drift.
Organisational assessment and opportunity analysis
For an employee’s goals and aspirations to be fulfilled, a basic requirement
is that the goals must be realistic and achievable. They have to be realistic
not only in terms of the employee’s own capabilities, but also in terms of the
organisation’s possibilities.
Need – opportunity alignment
The organisation plays an important role in helping the employee make this
alignment. The organisation also has to make its own alignments to match
the aspirations with the organisational opportunities.
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Career counselling
This is the final stage of career planning. The supervisor as well as the HR
department, has to counsel the employee regarding the available
opportunities, the employee’s aspirations and of course, his competencies.

Activity 1:
Speak to a friend or a relative working in a large company and find
answers to the following questions:
How is career planning handled by the company?
What career planning policies does this company have?

6.5 Succession Planning

In the previous section, we discussed the elements of a career planning
programme. Let us now study succession planning.
Traditionally succession planning was restricted to senior-level management
positions and this was either an informal or formal process.
Over the years succession planning has established itself as a key HR
activity in most organisations with formal processes that ensure it is
reviewed regularly and scientifically. In smaller organisations it is yet an
informal process where the individual manager identifies and grooms his or
her own successor.
Succession planning involves an examination of strategic (long-range) plans
and HR forecasts for all identified key positions in an organisation. It
includes positions that are critical for the business and for its continuity, and
not just the senior level positions. It includes a review of the data on all
potential candidates who might be able to move to these positions either
right-away or in the near future. The objective is to identify employees with
potential and managerial depth as well as promoting from within the
company. This exercise is carried out by the senior management team of
the unit/subsidiary and facilitated by the HR team. Usually, committees of
top managers work together to identify high potential candidates within their
team and then outline developmental activities for them. They may also
include a formal assessment of the performance and potential of
candidates, and written individual development plans for candidates.

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A succession planning exercise concludes with an organisation chart of all

key positions with listing of possible potential candidates and the readiness
rating for each potential candidate. For example, a position that can
immediately be filled is rated higher than a position which does not have a
ready-now candidate. Other components include performance appraisal of
these employees, and individual development plans and management
development programmes. Additionally, the factors rated as most important
in selecting specific internal/external potential candidates for grooming
includes:
 past job performance,
 past positions or prior employment,
 perceived credibility,
 area of expertise and
 career paths and values and attitudes.
Following are the benefits of having a formal Succession Planning System:
 Provides a clear framework to strategic business planning as the key
positions for the business’s success are what are being planned for.
 Aligns strategic goals and human resources to enable the “right people
in the right place at the right time” to achieve desired business results.
 Develops qualified pools of candidates ready to fill critical or key
positions.
 Provides stability in leadership and other critical positions to sustain a
high-performing service.
 Identifies workforce renewal needs as a means of targeting necessary
employee training and development.
 Helps individuals realise their career plans and aspirations within the
organisation.
 Improves employees’ ability to respond to changing environmental
demands.
 Provides opportunity for timely corporate knowledge transfer.
 Regardless of what type of succession planning programme is used
(formal or informal), most successful programmes obtain the support of
top management.

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Self Assessment Questions

7. Succession planning is usually restricted to senior-level management
positions and can be _________________or ____________.
8. Formal succession planning involves an examination of strategic (long-
range) plans and HR forecasts and a review of the data on all
___________________ employeers.
9. Succession planning reduces ___________________ of managerial
development movements.

6.6 Other Career Programmes

In the previous section, we discussed about succession planning. Let us
now study few other career programmes.While the general notion is that
most career development programmes are often instituted to meet the
unique needs of particular employees, the benefits for the organisation are
immense. This is one reason why organisations continue to invest time and
resources on it despite the fact that it does not offer immediate measurable
benefits. Although many different groups and issues may be targeted for
career development, some of the more common programmes are those that
focus on work-family issues, outplacement, entrenched employees, late-
career employee, disadvantages employees, fast track employees and
managers.
Work-family programmes – Focus on supporting employee manages their
personal as well as work related challenges in a balanced manner.
Increasing use of flexible work schedules, work from home options, opening
of more on-site or company-sponsored child-care centres, and greater use
of paid leave for fathers and adoptive parents are some common practices
in this area. There are also more focused programmes that focus on
managing gender diversity at the workplace and set goals for advancing
women into senior management positions. And truly amazing is the
increasing pattern of companies holding managers accountable for meeting
these goals. There are specific workshops and training programmes
mandated for managers to help them initiating and implementing them.
Relocation assistance and hiring practices – These practices redress the
challenges associated with employee relocation on account of a career
move. The support provided by firms in assisting spouse of employees with

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opportunities within the company, linking them with job placement

consultants as well as sponsoring the cost of re-training or picking up a new
skill. The amount and nature of support could vary from company to
company. Some firms have altered their policy to allow for hiring both
spouses while they may not be allowed to work in the same
department/team.
Worklife balance seminars and flexible HR practices – Through these
practices, organisations design programmes to help employees manage
their work-family conflicts and coping strategies. Especially prevalent in the
business process outsoursing organisations where the work-life balance is a
concern. This practice is now part of most organisations where the
increasing work pressure is driving companies to help employees cope with
personal pressure. Various stress management workshops and ‘stretch-
exercise schedules’ are practiced to help employees cope with stress.
Lifestyle management workshops too are becoming popular in larger
organisations. Organisations are also changing their practices for
recruitment, travel, transfer, promotions, scheduling hours and benefits to
meet the needs of the larger number of dual career couples.
Flexible work schedules – Are being increasingly instituted at the
workplace. These include flexitime, job sharing, part time work, working from
home, compressed workweeks, temporary workweeks, etc. Such
programmes enable employees to address their work and family concerns
and reduce their potential stress or conflicts between their various life roles.
Telecommuting has become very popular. This provides for organisational
as well as employee related advantages. Some difficulties with
telecommuting are communication problems with other employees, limited
access to necessary supplies and equipment and family interruption.
Outplacement programme – During retrenchment and downsizing is a
professionally managed process in most organisations. The objective here
is to assist the affected employees in making the transition to new
employment. It could involve re-skilling for new, more relevant skills per
market demand, so finding a new job is easier. Companies might tie up with
training institutes and provide the skills training. Else the company might
prefer to reimburse the cost of re-skilling directly to the impacted employee
for a course of his/her choice. Outplacement services would also involve
working with placement agencies and recruitment firms to provide
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interviewing opportunities for the employees. Outplacement programmes

stress the importance of self confidence and individual career planning
beneficial for middle or late-career employees who are being laid off.
Special programmes for women, minorities and employees with
disabilities – With organisations increasingly tapping into this critical talent
pool, more employees in these special categories are entering the
workforce. This calls for special focus on the importance of assisting these
employees with their career needs.
Fast track employees – Are now being increasingly identified as ‘stars’ with
high potential for bright future in the organisation. The identification and
development of these employees requires organisations to exert efforts to
build and monitor special programmes that cater to this special audience.
These employees are identified in a formal process and are placed on a fast
track programme. The objective here is to enable them to move to senior
positions quickly. As is with all other such initiatives, this initiative helps in
retaining this critical talent. Among other activities that target this group they
are offered quicker job changes and more challenging job assignments.

6.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Employee growth is an evolving HR activity in today’s corporate. While
immediate returns are not measurable the payoffs from these
investments have proven long-term benefits.
 Career development programmes must be integrated with and
supported by the existing HR programmes if they are to be successful.
 Career development initiatives need to be well communicated and
supported by the business leaders and HR to ensure its benefits both for
the organisation as well as the employee.
 There are four distinct elements of career planning:
a) individual assessment and need analysis
b) organisational assessment
c) need-opportunity alignment
d) career counseling.

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 Succession planning involves an examination of strategic (long-range)

plans and HR forecasts for all identified key positions in an organisation.
 There are many benefits of having a formal Succession Planning
System. It provides a clear framework to strategic business planning,
aligns strategic goals and human resources, helps in the development of
pools of qualified candidates, provides stability in leadership, identifies
workforce renewal needs, helps individuals realise their career plans,
improves employees’ ability to respond to changing environmental
demands, and the opportunity for timely corporate knowledge transfers.
 Some other career planning initiatives that are being practised in the
industry these daysare work-family programmes, relocation assistance
and hiring practices, work-life balance seminars and flexible HR
practices,flexible work-schedules, outplacement programmes, special
programmes for women, minorities and employees with disabilities.
 Career development programmes must positively impact organisational
and individual effectiveness over the short and long term.

6.8 Glossary
 Career counselling: A process by which a counsellor, or another
qualified professional or experienced person, provides information and
advice to employees to facilitate their career planning and development.
 Downsizing: It refers to indicate employee reassignment, layoffs and
restructuring in order to make a business more competitive, efficient,
and/or cost-effective.
 Outplacement: The provision of assistance to laid-off employees in
finding new employment, either as a benefit provided by the employer
directly, or through a specialist service
 Retrenchment: Employee termination because of changing business,
financial, technological or organisational circumstances.
 Work life balance: A range of practices designed to improve the
balance between the demands of an employee’s work and personal life.

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6.9 Terminal Questions

1. What is career planning?
2. Discuss the elements of a career planning programme.
3. What is succession planning? What are the benefits of having a formal
Succession Planning System in an organisation?
4. What are some other career planning initiatives that are being practised
in the industry these days?

6.10 Answers

Self Assessment Questions

1. Employee growth programmes
2. Organisations and employees
3. Career resilient
4. Career
5. Career planning
6. Career anchors
7. Informal or formal
8. Potential candidates
9. Randomness

Terminal Questions
1. Career planning is the process by which individuals select career goals
and the parth to these goals. Refer section 6.3 for more details.
2. There are four distinct elements of career planning: a) individual
assessment and need analysis b) organisational assessment c) need-
opportunity alignment d) career counseling. Refer section 6.4 for more
details.
3. Succession planning involves an examination of strategic (long-range)
plans and HR forecasts for all identified key positions in an
organisation. There are many benefits of having a formal Succession
Planning System that provides a clear framework to strategic business
planning: Aligning strategic goals and human resources, development
of qualified pools of candidates, providing stability in leadership,
identifying workforce renewal needs, helping individuals realise their

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career plans, improving employees’ ability to respond to changing

environmental demands, and the opportunity for timely corporate
knowledge transfer. Refer section 6.5 for more details.
4. Some other career planning initiatives that are being practised in the
industry these daysare work-family programmes, relocation assistance
and hiring practices, work-life balance seminar and flexible HR
practices,flexible work-schedules, outplacement programme, special
programme for women minorities and employees with disabilities. Refer
Section 6.6 for more details.

6.11 Case Study

CWA and AT&T Walking the Talk: (2800 Century Parkway, Atlanta,
Georgia)
The 2800 Century Parkway AT&T building in Atlanta is a hotbed of Alliance
activity. Why? Because The Alliance, CWA Local 3250 and local AT&T
Management have found value in working together. They have banded
together to create opportunities in which employees can gain skills and
increase their employment security while improving the efficiency of AT&T in
providing service to its customers. In just the first 7 months of the 2005
Programme Year, 2800 has already exceeded its annual goals.
The picture was not always so rosy at this location. In late 2001 the Alliance
Local Committee (ALC) and Company/Union support for it had virtually
disappeared. Layoffs in both the occupational and management ranks
displaced most key supporters and ALC members. A local CWA election
that fall saw most of the Union Leadership at Local 3250 turn over. Without
strong onsite leadership 2800 did not come close to reaching its annual
goals for the first time that year.
The Alliance Associate Director, Jay Ott, saw an opportunity to create a
better, stronger relationship between The Alliance, CWA and AT&T
Management. He began by working with the new CWA Vice President for
2800, Roy Hegenbart (who is now the Local President for 3250) to identify
the right occupational employee to promote The Alliance on-site - someone
who understood the joint labour/management concept, who knew the people
in the building, and was respected by both Management and CWA. That

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person was Chandra Patton, and in May of 2002, Roy convinced the
company to assign Chandra as Alliance site coordinator full-time.
Chandra and Jay took a different approach to creating a new
Labour/Management team for 2800. They spent the rest of 2002 meeting,
communicating, and building relationships with the local AT&T management
and CWA leadership. Their focus was on the Administrative Supervisors, as
they were the ones who could get the support needed for classroom space,
particularly space for an upgraded computer lab, and for company time
when the building was affected by a surplus declaration. A Leadership Team
was formed to support these efforts. It consisted of Chandra Patton (Alliance
Site Coordinator), James Bates, Debbie Shelton, John Bozart and Alicia
Brock (AT&T Administrative Supervisors), Roy Hegenbart (Local 3250 V.P.),
and Jay Ott (Alliance Associate Director). In order for Jay to fully participate
in this team, Christine Deas from The Insight Group was brought in to
facilitate the meetings. The goals of the Leadership Team were:
Develop a stronger, more viable relationship between AT&T Management,
CWA and The Alliance at 2800 Century Parkway.
Work with the Alliance Local Committee to develop training opportunities for
the surplus, represented workforce on company-time.
Identify and offer training that will enhance employee skills and marketability
within as well as outside of AT&T.
Reestablish a viable after-hours training schedule that employees would
support.
Encourage more Business Unit Initiatives on company-time.
Encourage all employees to take advantage of opportunities to grow and
develop their skills, talents and interests.
The everyday work of implementing the programme still needed to be
addressed. The Leadership Team appointed ALC members who had the
skills and initiative to make the day-to-day operational decisions (e.g., what
classes, when, where, marketing, registration, follow-up, etc.). By June of
2003, the work of the Leadership Team and the ALC resulted in a huge
increase in Alliance activity. 2800 had surpassed its annual goals in only 9
months! Its success did not go unnoticed. Chandra Patton, Debbie Shelton
and Jay Ott presented the 2800 story to The Alliance Board of Trustees at

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their July meeting in New Jersey. This story of cooperation and achievement
was outlined in a unique way. The team developed a series of CD-ROM’s to
explain who they were and how they achieved so much success in a short
period of time. It was obviously well received.
However, wait! This is only half the story. What happened next is what
makes 2800 stand out from most other Alliance locations in the country. The
Leadership Team had always kept the people to whom they reported
informed of the success of The Alliance, and the AD made special efforts to
reach out to those upper level managers and union officers in order to find
common interests and goals. The Board of Trustees presentation was used
as a springboard to pitch the District/Division level managers and CWA
leadership on even more opportunities that potentially could be in the best
interest of the Company, the Union and the represented employees.
Because of those presentations, Sharon Cochrane – District Manager Date
Group, Bernie Ragland – Division Manager and Terry Parr – District
Manager Voice Group supported many Business Unit Training Initiatives on
company-time. Some of the more notable activities were Customer
Relations Skill Certification, Voice over Internet Protocol (VoIP), CCNA
Certification, CCP@, and Net+ Certification. These programmes, along with
the more traditional Alliance programmes, helped the 2800 location exceed
their annual goals for the third time in as many years.
Another indication of the strength of the Alliance commitment is the support
that AT&T provides to CWA represented employees from Avaya and
Lucent. The only Alliance lab with the equipment to provide high level IT
training is at 2800. The Alliance committee works closely with management
(including GRE and Security) to make this lab accessible to all Alliance
participants in the area.
The opportunities available at 2800 Century Parkway are a direct result of
Labour and Management seeing value in creating a more skilled workforce
through The Alliance. Together, they really do “walk the talk”.
(Source: http://www.employeegrowth.com/success_stories_6-05.htm)

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References:
 Fisher, S, and Shaw.(2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

E-Reference:
 http://www2.gnb.ca/content/gnb/en/departments/human_resources/care
er_development/content/succession_planning/benefits.html - Retrieved
on December 30 2011

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Unit 7 Performance Appraisal

Structure:
7.1 Introduction
Objectives
7.2 Concept and Need for Performance Reviews
7.3 Overview of Performance Appraisal
7.4 Types of Appraisal Methods
Individual evaluation methods
Multiple-person evaluation methods
7.5 360 degree appraisal
7.6 Benefits of Performance Appraisal
7.7 Summary
7.8 Glossary
7.9 Terminal Questions
7.10 Answers
7.11 Case Study

7.1 Introduction
In the previous unit, we discussed the concept of employee growth and
managing career planning. We also learnt the elements of career planning
programme, succession planning and other career programmes.
Performance management is a process of aligning an organisation’s goals
with the employee goals. It is an ongoing and interactive process that helps
employees enhance their capability and facilitate productivity. To put it
simply “It is the means, by which employee’s work behaviour is aligned with
the organisation’s goals.” The performance evaluation system is an
organised set of activities established to regularly and systematically
evaluate employee performance and ensure its alignment to business
metrics. Organisations also link it to rewards and incentives.
In this unit, we will discuss the concept and need for employee review. We
will also learn the types of appraisal methods and the benefits of
performance appraisal.
Objectives:
After studying this unit, you should be able to:
 describe the process of performance appraisal

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 list the methods of appraisal

 analyse the concept of 360 degree appraisal

7.2 Concept and Need for Performance Reviews

Performance review is a systematic activity through which the organisation
determines the extent to which the employee is delivering as per agreed
objectives that is aligned to business results. Generally speaking, the HR
specialists design and implement the Performance Management System
(PMS). They work with the line managers to review the employees’
performance and maintain the records. Apart from focusing on performance,
today’s organisations are emphasising the need for employee development
focus in implementing an effective PMS. The line managers use the system
to review employee performance and the normal steps include:
1. Defining performance goals/objectives – The performance
targets/goals are to be set (for a period of one year), which is split into
monthly or quarterly targets. Performance goals should be SMART (the
principle of being Specific, Measurable, Achievable, Realistic and Time-
bound). These goals are agreed to mutually by the manager as well as
the employee at the beginning of the performance period. Most PMS
require the employee and manager to enter it into a prescribed
performance appraisal template and sign off on the commitments prior
to the commencement of the performance period or at the start of it.
2. Measuring performance: While it largely involves the assessment of
the performance against the set targets at the end of the assessment
period/performance period, the focus here is on on-going review of the
employee’s performance by the manager throughout the year. This
allows for the following:
o Review of progress and ascertain help/support the employee might
need to complete the goals as per agreed standards.
o Recommend training or other on-the job/off the job assistance that
the employee might need to meet the targets within the deadlines.
o Review the targets and commitments, and make changes if required.
This is generally influenced by external factors that impact
performance. The targets get reviewed upwards or even downwards.

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3. Feedback and coaching: This focuses on the developmental needs of

the employee that the manager needs to take care to enable the
employee to successfully meet the goals. A proactive approach is to
ensure the employee succeeds and the job is well done rather than
waiting till the end of the assessment period. On-going feedback and
coaching can also ensure that the business goals are not sacrificed.
This also influences the decision to reassign the work to someone more
capable, if the employee is unable to complete it as committed. This
step in the PMS also includes discussion between the employee and
his/her manager on the medium-long term career progression plan for
the employee. What does the employee aspire professionally and how
she/he plans to achieve it within the organisation, what role can the
manager play in this career planning decision are few aspects that are
discussed.
For performance evaluation to be more than an annual paperwork exercise,
top management, along with the HR team need to encourage its use to
encompass all of the three steps. An effective performance management
framework must also establish clear linkage to reward decisions such as
promotions, salary hike and performance-linked-incentives.

Self Assessment Questions

1. _____________________ is the HR activity by means of which the
organisation determines the extent to which the employee is performing
the job effectively.
2. The _______________ do the evaluation of the employees.
3. ______________________ must encourage use of performance
management and use it to make reward decisions such as promotions.

7.3 Overview of Performance Appraisal

In the previous section, we discussed the concept and need of performance
reviews. Let us now learn about performance appraisal.
Research confirms that effective performance management systems impact
corporate performance and the bottom line positively. A person’s job
performance is a combination of ability, effort and opportunity that is
measured in terms of outcomes or results produced. Thereby, performance

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is defined as the record of outcomes produced on a specific job function or

activity during a specific time period. For example, a sales representative
would have number of units sold or revenue achieved as an outcome while
a customer service executive would have number of queries handled and
resolved or number of satisfied customers as a measure for defining
performance.
Performance includes a number of tasks or activities involved in performing
the job. It is important that the outcomes are measured. Unfortunately many
performance appraisal systems confuse measures of performance with the
characteristics of the person.
Summarised below are few aspects that need to be considered while
establishing a PMS:
1. Validity of the PMS framework – A PMS framework should:
 Measure important job characteristics.
 Encompass the whole job, not parts of it.
 Measure what it claims to measure.
 Not assess other constructs besides performance.
 Be based on a sound job analysis of the jobs.
2. Reliability of the assessment tool – The assessment tool must:
 Guard against subjective evaluation. It must clearly identify the
aspect that needs to be assessed to reduce multiple interpretations.
 Clearly define the link between the outcome produced and its
measure. For example, sales target of 35 units in an FMCG
company is split as:
o Below 25 Units – Poor Performance
o 25 to 33 Units – Below Expectations
o 34 to 36 Units – Met Expectations
o More than 36 Units – Exceeded Expectations
3. Clarity – Eliminate biases through objective assessment, by not having
too many open-ended or poorly defined criteria for assessment.
4. Practicality – Simple and easy to use/implement. Use of technology to
reduce paperwork and moving to an online workflow system that
reduces the time required in managing it.

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Self Assessment Questions

4. Performance is defined as the record of outcomes produced on a
specific job function or activity during ______________________.
5. Performance includes _______ involved in performing a job.
6. Two aspects that need to be considered while establishing a PMS are
________ and ___________.

7.4 Types of Appraisal Methods

In the previous section, we discussed performance appraisal and the
aspects to be considered while establishing a PMS. Let us now study the
types of appraisal methods.
Ideally every individual in any organisation needs to be appraised. The
appraisal system should be able to take care of this and it should also meet
the needs and objectives of the organisation. In a broader sense, the type of
appraisal template used to assess performance, should focus on the
organisational objectives. Following are the types of appraisal methods:
 Trait-based appraisal – This method is used to assess personality or
personal characteristics such as loyalty, communication skills, level of
initiative, decision making, etc. This assesses what the person is than
what the person does on the job. This is common in companies that are
in the business of service and customer satisfaction. Since it is difficult to
define the criteria for a trait accurately, rater/manager bias is high and
providing feedback is a challenge as the focus is on personal attributes.
 Behaviour-based appraisal – This method focuses on the appraisal of
what an employee ‘does’ on the job. It evaluates the behaviour and
measures what an employee should do differently. This is common in
organisations that have high customer interface such as
hospitality/NGO. As the focus is on the assessment of behaviour,
rater/manager bias remains a challenge here as well.
 Results-based appraisal – This method measures the work results
objectively. The focus is on the outcome/deliverables from the job that
alone serves as the measure for success. It is not possible to use this
method in jobs that depend on team work or where the job is
service/support based.

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Most organisations use a combination of trait, behaviour and results in their

appraisal systems as all three are important. It provides a holistic and fair
assessment of the individual.

Activity 1:
Think of the helpers in a grocery shop in your neighbourhood. How do
you think the shop owner/supervisor would assess the helpers?
Can you list 3-5 traits, behaviours and results that the shop owner can
possibly use to assess them?
If possible share it with the shop owner and observe his reaction.

The next challenge in evaluation is the method to use. There are three
common methods that are in-use: individual evaluation methods; multiple
person evaluation methods; and other methods.
7.4.1 Individual evaluation methods
There exists five ways to evaluate an employee individually. Here the
employee is evaluated one at a time without directly comparing him/her with
other employees.
a) Graphic rating scale: The most widely used performance rating
technique is a graphic rating scale (e.g., 3, 4 or 5 or even 10 point rating
scale). In this technique, the evaluator is presented with a list of assessment
characteristics and asked to assign a number rating to the employee on
each of the characteristics listed. The number of characteristics might vary
from a few to several dozen. It aims to measure the quality of performance
and ability to do the present job.
The ratings are in a continuous scale (0-9). Typically, these ratings are then
assigned points. For example, outstanding may be assigned a score of 4
and unsatisfactory a score of 0. Total scores are then computed. In some
plans, greater weights are assigned to more important traits. Evaluators are
often asked to provide supporting comments for each rating in a sentence or
two.
b) Forced choice: In forced choice method, the evaluator must choose
from a set of descriptive statements about the employee. The two-, three- or
four-statement items are grouped in a way that the evaluator cannot easily
judge which statements apply to the most effective employee.
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Typically, HR specialists/consultants prepare the items for the form and

managers or other HR specialists rate the items for applicability, that is, they
determine which statements describe effective and ineffective behaviour.
The manager then evaluates the employee. The HR Department adds the
number of statements in each category (for example, effective behaviour),
and they are summed into an effectiveness index. Forced choice can be
used by superiors, peers, subordinates, or a combination of these in
evaluating employees.
c) Essay evaluation: In the essay technique of evaluation, the evaluator is
asked to describe the strong and weak aspects of the employee's behaviour
in the form of an essay. In very few organisations, the essay technique is
the only one used, in others the essay is combined with another form, such
as a graphic rating scale. The essay summarises and elaborates on some
or all of the ratings or discusses added dimensions which are not captured
by the scale. Wherever it is used the essay is open ended or as in most
cases there are guidelines on the topics to be covered, the purpose of the
essay, etc. The essay method is a supervisor oriented method that does not
provide sufficient room for the employee’s comments, therefore, it is not
very popularly used.
d) Management by Objectives (MBO): This method is one of the most
popular methods of performance appraisal for individuals. In this system, the
manager and the employee to be evaluated jointly set objectives/targets in
advance for the employee to achieve during a specified period. And usually
the objectives framed are of quantitative nature. MBO is a very common
industry practice. At the beginning of the year, clear objectives are laid down
for achievement during the course of the year. These objectives are
popularly called by the following names:
1. KRA-key result areas
2. KPA-key performance areas
3. Targets
4. Commitments
These performance objectives are designed using the SMART framework.
SMART refers to Specific, Measurable, Achievable, Results and Time-
bound. All objectives must conform to this framework.

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MBO is one of the most effective methods for performance review primarily
because it is identified at the beginning of the review period and is regularly
reviewed for achievements and modified again in consensus between the
employee and the manager. The objectives are then broken up into half
yearly, quarterly and monthly objectives, again keeping in mind the SMART
framework. All along the process both the employee and the manager are in
consensus of the objectives and the timelines, as well as the deliverables.
At the end of the review year, the MBO’s are reviewed for completion with
the SMART framework. The evaluation is a joint review of the degree of
achievement of the objectives. In case of a new joinee or internal
movements between jobs/assignments/teams, the objectives are set after
about 6-8 weeks of being in the new process.
e) Critical incident technique: In this technique the performance is
assessed on critical incidents-the performance incidents that are particularly
effective or ineffective. The HR specialists combine these statements into
categories, which vary with the job. Once the categories are developed, the
statements of effective and ineffective behaviour are provided to the
managers. The manager maintains a log for each employee right through
the evaluation period. The manager "records” examples of critical
(outstandingly good or bad) behaviours in each of the categories. This log is
used to evaluate the employee at the end of the period. The manager can
be specific in making positive and negative comments, and it avoids
“recency” bias. The critical incident technique is normally used by superiors
than in peer or subordinate evaluations.
f) Checklists and weighted checklists: This is another type of individual
evaluation method. In its simplest form, checklist is a set of objectives or
descriptive statements of job-related characteristics or behaviour. If the
manager believes that the employee possesses the traits listed, the
manager checks the items, if not it is left blank. The number of items
selected from the list is the score of the employee. A recent variation is the
weighted checklist. Managers or HR specialists familiar with the job of
evaluation, prepare a large list of descriptive statements about effective and
ineffective behaviour on jobs, similar to the critical incident process. Raters
rate the elected items on a scale from excellent to poor (0-9).The managers
or other raters receive the checklists without the scores, and they check the

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items that apply and assign their scores on the items. The employee's
evaluation is the average of sum of the scores (weights) on the items
checked by all raters. Checklists and weighted checklists can be used by
evaluators who are superiors, peers, or subordinates, or by a combination.
Behaviourally Anchored Rating Scale (BARS): The most prevalent
technique which is a variation of the critical incident approach is the
Behaviourally Anchored Rating Scale (BARS). This technique is also called
the Behavioural Expectation Scale (BES).
In BARS, the anchor points are defined in detail using examples of
behaviour that represent particular levels of performance. The development
of BARS is a costly and time-consuming process. A group of knowledgeable
employees identify and detail the important dimensions that make up for
effective performance. A second group illustrates the list of critical incidents
to illustrate the differences in the dimensions—effective, average,
ineffective, poor. Each critical incident is then assigned with the dimensions
and then the rating for the employee is attached. For example, “smiles and
greets customers” is the incident that is reliably sorted into the “customer
service” dimension of performance, and for employee “X” it is rated as o
whether it represents outstanding, above-average, average, or below-
average.
7.4.2 Multiple-person evaluation methods
While the above techniques are used to evaluate employees one at a time,
there are a number of methods being used in organisations to evaluate an
employee in comparison with other employees. Following are few of the
multiple-person evaluation methods:
a) Ranking – In ranking method, the manager/s rate the employees doing
similar jobs on an overall criteria from highest to lowest without repeating
any rank. While it is easier to rank the best and worst employees, it is
difficult to evaluate the average ones. Therefore, simple ranking is carried
out by first picking the top and bottom employees, and then selecting the
next highest and next lowest, to move towards the middle. This gets difficult
if the group is large.
b) Paired comparison: This approach makes the ranking method easier
and more reliable. First, the names of the persons to be evaluated are

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placed on separate sheets (or cards) in a predetermined order, so that each

person is compared to all others who are to be evaluated. The evaluator
then checks the person he feels is a better performer of the two on the set
criterion. Typically the criterion is the overall ability to do the present job.
The person who has been preferred in most of the listed criteria in
comparison with others is the highest performer, followed by the rest in the
order of performance.
c) Forced distribution: The forced-distribution system is similar to 'grading
on a curve’. The evaluator rates the employees in fixed distribution of
categories. The number of employees in the group is segregated in the Bell
curve that represents poor, below average, average, above average and
excellent performers. This method is ideal to rate potential. This method is
effective as it avoids rating errors where managers tend to rate employee
towards the centre of the scale (average) or at the higher end of the scale
(excellent).
Self Assessment Questions
7. In _______________, the evaluator must choose from a set of
descriptive statements about the employee.
8. In the ________________ of evaluation, the evaluator is asked to
describe the strong and weak aspects of the employee's behaviour.
9. In ________________, the targets are set in advance.

7.5 360 Degree Appraisal

Typically, performance appraisal has been limited to a feedback process
between employees and managers. However, with the increased focus on
teamwork, employee development and customer service, the emphasis has
shifted to employee feedback from multiple sources as depicted in figure
7.1. This multiple-input approach to performance feedback is called "360
degree assessment."

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Fig. 7.1: 360 Degree Matrix

A variety of rating sources in addition to that of the manager help in getting a

broader view of the employee’s performance as well as to eliminate biases.
Research has proved that assessment approaches with multiple rating
sources provide more accurate, reliable and credible information. Hence,
HR department supports the use of multiple rating sources as an effective
method of assessing performance for formal appraisal and other evaluative
and developmental purposes.
The feedback from multiple sources consists of managers, peers,
subordinates, customers and oneself. It is not necessary, or always
appropriate, to include all of the feedback sources in a particular appraisal
programme. The organisational culture and mission must be considered and
the purpose of feedback will differ with each source. The objectives of
performance appraisal and the particular aspects of performance that are to
be assessed must be established before determining which sources are
appropriate.
For example, subordinate assessments of a manager's performance can
provide valuable developmental guidance, peer feedback can be the heart
of excellence in teamwork and customer service feedback focuses on the
quality of the team's or agency's results. We shall discuss the contributions
of each source of ratings and feedback. In addition, precautions are listed to

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consider when designing a performance management programme that

includes 360 degree assessment.
Superiors
Evaluations by superiors are the most traditional source of employee
feedback. This form of evaluation includes both the ratings of individuals by
managers on elements in an employee's performance plan and the
evaluation of programmes and teams by senior managers.
Contribution of superiors
The first-line manager is often in the best position to effectively carry out the
full cycle of performance management: Planning, Monitoring, Developing,
Appraising and Rewarding. The manager may also have the broadest
perspective on the work requirements and be able to take into account shifts
in those requirements. So, the highest contribution to the performance
feedback is from the first-level managers.
Following are a few cautions to be addressed:
 Research demonstrates that appraisal programmes that rely solely on
the rating of superiors are less reliable and valid than programmes that
use a variety of other rating sources to supplement the manager's
evaluation.
 Superiors should be able to observe and measure all facets of the work
to make a fair evaluation. In some work situations, the manager or rating
official is not in the same location or is supervising very large numbers of
employees and does not have detailed knowledge of each employee's
performance.
 Managers need training on how to conduct performance appraisals.
They should be capable of coaching and developing employees as well
as planning and evaluating their performance.
Self-assessment/Self-appraisal
The employee in this form of appraisal assesses his/her own performance
on the given rating scale. The form may have the key descriptors of
performance listed or the employee might have to list the agreed
targets/objectives to be achieved for the specified period of time. These are
then rated by him/her on the defined scale. The next step is assessment by
the immediate supervisor(s), generally in a meeting.

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Following are a few aspects that the self assessment contributes:

 The most significant contribution of self-ratings is the improved
communication between managers and subordinates.
 The employee keeps note of his/her accomplishments and failures
throughout the year. This reduces the ‘error of recency’ of rating–rating
self or others on the basis of recent performance. The developmental
focus of self-assessment is a key factor. The self assessment instrument
(in a paper or computer software format) should be structured around
the performance plan, but can emphasise training needs and the
potential for the employee to advance in the organisation.
 The value of self-ratings is widely accepted. Self-ratings would
contribute to a fair and well-rounded performance appraisal.
 Self-appraisals should not simply be viewed as a comparative or
validation process, but as a critical source of performance information.
Self-appraisals are particularly valuable in situations where the manager
cannot readily observe the work behaviours and task outcomes.
Following are a few cautions to be addressed:
 Research shows low correlations between self-ratings and all other
sources of ratings, particularly manager rating. The self-ratings tend to
be consistently higher. This discrepancy can lead to defensiveness and
alienation if managers do not use good feedback skills.
 Sometimes self-ratings can be lower than others ratings. In such
situations, employees tend to doubt themselves and may feel
intimidated and "put on the spot".
 Self-ratings should focus on the appraisal of performance elements, not
on the summary level determination. A range of rating sources, including
the self assessments, help to "round out" the information for the
summary rating.
Peers
With downsizing and reduced hierarchies in organisations, as well as the
increasing use of teams and group accountability, peers are often the most
relevant evaluators of their colleagues' performance. Peers have a unique
perspective on a co-worker's job performance and employees are generally
very receptive to the concept of rating each other. Peer ratings can be used

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when the employee's expertise is known or the performance and results can
be observed. There are both significant contributions and serious pitfalls that
must be carefully considered before including this type of feedback in a
multifaceted appraisal programme.
Following are the few aspects that the peers contribute:
 Peer influence through peer approval and peer pressure is often more
effective than the traditional emphasis to please the boss. Employees
report resentment when they believe that their extra efforts are required
to "make the boss look good" as opposed to meeting the unit's goals.
 Peer ratings have proven to be excellent predictors of future
performance. Therefore, they are particularly useful as input for
employee development.
 Peer ratings are remarkably valid and reliable in rating behaviours but
may be limited in rating outcomes that often require the perspective of
the manager.
 The use of multiple raters in the peer dimension of 360 degree
assessment programmes tends to average out the possible biases of
any one member of the group of raters. (Some agencies eliminate the
highest and lowest ratings, and compute the average of the remaining.)
 The increased use of self-directed teams makes the contribution of peer
evaluations the central input to the formal appraisal since the manager is
not directly involved in the day-to-day activities of the team.
 The addition of peer feedback can help the manager perform the role of
a coach rather than purely judging.
Following are few cautions to be addressed:
 Peer evaluations is appropriate for developmental purposes, but
attempting to emphasise them for pay, promotion or job retention
purposes (i.e., the rating of record) may not be prudent. Peer input can
be effectively used for recognition and awards, than exclusively using it
for performance appraisal.
 There is a difference of opinion about the need for anonymity of the peer
evaluators. Generally, it is advised that the identity of the raters is kept
confidential to assure honest feedback. However, in close-knit teams
that have matured to a point where open communication is part of the

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culture, the developmental potential of the feedback is enhanced when

the evaluator is identified and can perform a coaching role.
 It is essential that the peer evaluators be very familiar with the team
member's tasks and responsibilities. In cross-functional teams, this
knowledge requirement may be a concern. In these situations, the
greatest contribution the peers can make pertains to the behaviours and
efforts (input) the employee invests in the team process.
 The use of peer evaluations can be very time consuming. When used in
performance ratings, the data would have to be collected several times
in a year to include the results in progress reviews.
 Depending on the culture of the organisation, peer ratings have the
potential for creating tension and breakdown than fostering cooperation
and support. A very competitive programme for rewarding individuals in
the organisation may further compromise the value of peer rating
systems.
 Employees and their representatives need to be involved in every
aspect of the design of appraisal systems that involve peer ratings.
Subordinates
An upward-appraisal process or feedback survey (sometimes referred to as
Subordinates Appraising Managers (SAM)) is among the most significant
and yet controversial features of a "complete" performance evaluation
programme. Both managers, being appraised, and their own superiors
agree that subordinates have a unique, often essential, perspective. The
subordinate ratings provide particularly valuable data on performance
elements concerning managerial and managerial behaviours. However,
there is usually a great reluctance, even fear, concerning implementation of
this rating dimension. The contributions can outweigh the concerns if the
precautions are addressed.
Following are the few aspects that the subordinates contribute:
 A formal subordinate feedback programme will give managers a more
comprehensive picture of employee issues and needs. Managers who
assume they will sufficiently stay in touch with their employees' needs by
relying solely on an "open door" policy get very inconsistent feedback.
 Employees feel they have a greater voice in organisational decision
making. Through managerial action plans and changes in work

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processes, the employees can see the direct results of the feedback
they have provided.
 The feedback from subordinates is particularly effective in evaluating the
manager's interpersonal skills. However, it may not be as appropriate or
valid for evaluating task-oriented skills.
 Combining subordinate ratings, such as peers rating, can provide the
advantage of creating a composite appraisal from the averaged ratings
of several subordinates. This averaging adds validity and reliability to
the feedback because the aberrant ratings get averaged out and/or the
high and low ratings are dropped from the summary calculations.
Following are a few cautions to be addressed:
 The need for anonymity is essential when using subordinate ratings as a
source of performance feedback data. Subordinates simply will not
participate, or they will give gratuitous, dishonest feedback, if they fear
being reprimanded from their managers. If there are fewer than four
subordinates in the rating pool for a particular manager, the ratings
(even though they are averaged) should not be given to the manager.
 Managers may perceive their authority has been undermined if the
subordinates would evaluate them. However, research suggests that
managers who are more responsive to their subordinates’ feedback are
more effective managers.
 Subordinate feedback is most beneficial when it is used for
developmental purposes. It can also be used in arriving at the
performance rating, but precautions should be taken to ensure that
subordinates are appraising elements of which they have knowledge.
For example, if a manager's performance plan contains elements that
address effective leadership behaviours, subordinate input would be
appropriate. It may not be appropriate for the employee to appraise the
manager's individual technical assignments.
 Only subordinates with a sufficient length of assignment under the
manager (at least 1 year is the most common standard) should be
included in the pool of assessors. Subordinates currently involved in a
disciplinary action or a formal performance improvement period should
be excluded from the rating group.

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 Organisations currently undergoing downsizing and/or reorganisation

should carefully balance the benefits of subordinate appraisals against
the likelihood of fuelling an already tense situation with distrust and
paranoia.
Customers
Customers include internal and external customers. Internal customers are
defined as users of products or services supplied by another employee or
group within the organisation. External customers are outside the
organisation and include, but are not limited to, the general public. Setting
Customer Service Standards requires organisations to survey internal and
external customers, publish customer service standards and measure
organisational performance against these standards.
Following are the few aspects that the customers contribute:
 Customer feedback should serve as an "anchor" for almost all other
performance factors. Combined with peer evaluations, the data will
provide a holistic view of the performance feedback programme and
would assist to focus attention beyond the feedback limited to the formal
"chain of command."
 Including a variety/mix of customers in the 360 degree performance
assessment programme expands the focus of performance feedback.
Typically, employees concentrate on satisfying the standards and
expectations of the person who has the most control over their work
conditions and compensation, who is generally their manager. Service to
the broader range of customers often suffers if it is neglected in the
feedback process.
Following are few cautions to be addressed:
 With few exceptions, customers should not be asked to assess an
individual employee's performance. The value of customer service
feedback is most appropriate for evaluating team or organisational
output and outcomes. This feedback can then be used as part of the
appraisal for each member of the team. The possible exceptions are
evaluations of senior officials directly accountable for customer
satisfaction and evaluations of individual employees in key "front line"
jobs personally serving internal or external customers.

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 Customers, by definition, are better at evaluating outputs (products and

services) as opposed to processes and working relationships. They
generally do not see or particularly care about the work processes, and
often do not have knowledge of how the actions of employees are
limited by regulations, policies and resources.
 Designing and validating customer surveys are an expensive and time-
consuming process. The time and money are best spent developing
customer feedback systems that focus on the organisation or work unit
as a whole.
In India, the use of the 360 degree as a performance assessment tool has
not found many followers. Companies such as Wipro and even IBM use it
for middle and senior managers only and it is used purely for developmental
purposes. The concerned manager receives the feedback directly and he
can then work with a mentor or his own manager to identify development
areas and improve on them.

Activity 2:
List the possible job indicators of a Customer Care Executive at Telecom
Service Provider.
Form a group of 4 members and assign each individual the role of –
Customer Care Executive, Executive’s Manager, Customer and HR
representative. Evaluate the customer care executive’s performance
considering each individual’s perspective.

Self Assessment Questions

10. In ______ technique, the performance is assessed on effective or
ineffective performance incidents.
11. In ________________, the evaluator is asked to rate employees from
highest to lowest on some overall criterion.
12. In _______________________ approach, first the names of the
persons to be evaluated are placed on separate sheets in a
predetermined order, so that each person is compared to all others to
be evaluated.
13. The __________________________ is similar to 'grading on a curve’.

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7.6 Benefits of Performance Appraisal

In the previous section, we discussed the various types of appraisal
methods. Let us now learn the benefits of performance appraisal.
When an employee works well, the employee naturally wants it to be
praised and recognised by his/her boss and fellow-workers. "Praise seems
to have its greatest value when given and received as recognition, and is
not perceived by either party as an attempt to control the behaviour of the
recipient."
In today’s highly competitive workplace individuals seek status and are
anxious to excel at what they do and to achieve their personal aspirations
and dreams. PMS affords a fair process that allows the employee to
benchmark themselves and calibrate performance vs. relevant others in the
team/organisation.
Recognition satisfies the basic human need for self-esteem and self worth.
This recognition may be a simple pat on the back of the employee or a
recommendation for a pay raise, promotion or assignment of more
interesting tasks. Awards may be given in the form of articles, banquets
honouring certain individuals, certificates and plaques, too, may be given, or
the employee's name may be entered on the Honours Board. Where team
work is critical, collective recognition may be given by the award of a shield
or a banner or a certificate, special privileges or a money bonus to the group
of employees.
The use of incentives reinforces people's actions to use their skills and
ability to achieve important longer-run goals. Rewards should be regarded
as a "pay off" for performance. It is common in most organisations to
provide performance linked incentives that serve to attract employee
attention and stimulate him/her to work more effectively and to stretch
beyond the normal expectation. In the words of Burack and Smith, "an
incentive scheme is a plan or programmes to motivate individual or group
performance. An incentive programme is most frequently built on monetary
rewards (incentive or a monetary bonus), but may also include a variety of
non-monetary rewards or prizes."
Promotion is a term which is an essential outcome of successive superior
performance. A promotion maybe defined as an upward advancement of an

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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. It calls for greater responsibilities and usually
involves higher pay and better terms and conditions of service and
therefore, a higher status or rank. Organisations have well documented
policies that articulate the promotion criteria and performance rating are a
critical part of promoting an employee.
Promotions are usually given for the following reasons:
1. To put the worker in a position where he/she will be of greater value to
the organisation and where they may derive increased personal
satisfaction and income from their work.
2. To recognise an individual's performance and reward the individual for
the work so that he/she may have an incentive to move ahead.
Employees will have little motivation if better jobs are reserved for lateral
hires.
3. To increase an employee's organisational effectiveness.
4. To build morale, loyalty and a sense of belonging on the part of the
employees, it has to be driven home that they would be promoted if they
exhibit their potential.
5. To promote job satisfaction among the employees and give them an
opportunity for unbroken, continuous service.
6. To provide a process of "selective socialisation." Employees whose
personalities and skills enable them to fit into an organisation's human
relations programme tend to stay on, while those whose personalities do
not fit well with those of the organisation tend to leave.
7. To attract suitable and competent workers for the organisation.
8. To create a feeling of contentment among employees with their present
conditions and encourage them to succeed in the organisation.

Self Assessment Questions

14. ______________ satisfies human need for esteem and self worth.
15. __________ may be given in the form of articles, certificates, plaques
etc.
16. The use of ________________ assumes that people's actions are
related to their skills and ability to achieve important longer-run goals.

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7.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 The HR specialists design the performance evaluation system, train the
line managers in the use of the systems and maintain the records.
 The three categories used here are–individual evaluation methods,
multiple-person evaluation methods, and other methods.
 The following methods help to evaluate an employee individually:
o Graphic Rating Scale
o Forced Choice
o Essay Evaluation
o Management by Objectives
o Critical Incident Technique
o Checklists and Weighted Checklists
 Three techniques that have been used to evaluate an employee in
comparison with other employees being evaluated are:
o Ranking
o Paired Comparison
o Forced Distribution
 Recognition satisfies human need for self-esteem and self-worth.
 This recognition may be shown in the form of praise, a pat on the back
of the employee or a recommendation for a pay raise, promotion or
assignment of more interesting or challenging tasks.
 An incentive or reward can be anything that attracts a worker's attention
and stimulates him/her to work.
 The use of incentives assumes that people's actions are related to their
skills and ability to achieve important longer-run goals.
 However, with the increased focus on teamwork, employee development
and customer service, the emphasis of performance feedback has
shifted to feedback from multiple sources than being limited to employee
and manager. This multiple-input approach to performance feedback is
also called 360 degree assessment.

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7.8 Glossary
 360 degree appraisal: It is a system or process in which employees
receive confidential, anonymous feedback from the people who work
around them.
 Critical Incident Technique: A set of procedures used for collecting
direct observations of human behaviour that have critical significance
and meet methodically defined criteria
 Management by Objectives: A system in which specific performance
objectives are jointly determined by subordinates and their superiors,
progress towards objectives is periodically reviewed, end results are
evaluated and rewards are allocated on the basis of this progress.
 Performance Management System: A management technique
intended to holistically consider the performance of individual or a group
of employees to work towards optimum performance of a particular or a
group of tasks.

7.9 Terminal Questions

1. Explain the five ways of individually evaluating an employee.
2. Define performance.
3. Explain briefly the multiple-person evaluation methods.
4. Write short note on the purpose of promotions.
5. Explain the concept of 360 degree appraisal.

7.10 Answers

Self Assessment Questions

1. Performance evaluation
2. Line managers
3. Top management
4. A specific time period
5. Activities or tasks
6. Validity and Reliability
7. Forced Choice
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8. Essary evaluation
9. Management by objectives
10. Critical Incident Technique
11. Ranking Method
12. Paired Comparison
13. Forced-Distribution System
14. Recognition
15. Awards.
16. Incentives

Terminal Questions
1. The ways of evaluating an employee individually are graphic rating
scale, forced choice, essary evaluation, MBO and Critical Incident
Technique. Refer section 7.4.1 for more details.
2. Performance is defined as the record of outcomes produced on a
specific job function or activity during a specific time period. For
example, a Sales representative would have number of units sold or
revenue achieved as an outcome while a Customer service executive
would have number of queries handled and resolved or number of
satisfied customers as a measure for defining performance. Refer to
section 7.3 for more details.
3. Multiple-person evaluation methods are ranking, paired comparison,
forced distribution. Refer to section 7.4.2 for more details.
4. Purpose of Promotion: Promotions are usually given:
 To put the worker in a position where he/she may derive increased
personal satisfaction and income from his work;
 To recognise an individual's performance and reward the individual
for the work
 To increase an employee's organisational effectiveness;
 To build up morale, loyalty, and a sense of belonging
 To promote job satisfaction
 To provide a process of "selective socialisation".
 To attract suitable and competent workers for the organisation;
 To create a feeling of contentment among employees with their
present conditions. Refer section 7.6 for more details.
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5. A 360 degree appraisal is a process where multiple ratings sources are

considered to derive the performance of an individual. Refer to section
7.5 for more details.

7.11 Case Study

Employees, Key Contributors to Indian Growth Story
David Evans would like to call himself a ‘motivational evangelist’. The
founder-chairman of the $460-million performance improvement solution
company Grass Roots, and an associate of the WPP group, Evans says the
Indian growth story has been contributed not just by companies but its key
stakeholders – the employees.
The company, which set up operations in India this month, finds that the
country offers immense scope for ‘Performance Improvement Tools’. In a
freewheeling interview with The New Manager, Evans (60), reiterated that
investments – the trendiest word globally – should be applied to employees
and not to projects.
You have always said that unappreciated workers vote with their feet and
one in four quits if the trend continues?
For any organisation, the biggest investment is not on projects but on its
people. Disgruntled employees are like stretched out elastic bands. They
lose their elasticity and hit back. The essence of investment is retaining,
acquiring or improving assets – items that have a place and a value on the
balance sheet. So if a company has lost an employee, effectively it has lost
an investment.
Indian companies are going global. What global best practices should be
followed to survive the attrition crisis?
Companies, like human beings, are also creatures of habit. If an
organisation has built bad habits into itself and doesn’t change them, these
habits could accumulate to become life-threatening. Employee retention
training in the workplace is the buzzword. Motivation, both of the employees
and the company, is essential. Companies do very little to motivate their
employees. This is where Performance Management tools come in handy.
Training has completely eclipsed learning. Performance Management is all
about learning newer values for achieving long-term goals. While training
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has always been judged quantitatively, learning without measurement is like

a ship without a sail. When companies are becoming ‘glocal’, it is imperative
to measure it qualitatively. The budget was spent, the courses took place,
the trainers imparted their skills, the trainees returned to their offices – but
what was the net outcome? Performance Management, on the other hand,
is like a good butler. If a company has a problem, like a good butler we
listen and serve to fix it up. It is more like coaching a company for bigger
responsibilities.
Besides statistical analysis, the best way to measure performance
management is through mystery shopping, a tool to measure how well new
knowledge is being applied in practice. The only difference between mystery
shoppers and real client customers is that the mystery shoppers record and
reveal what happened to them. In all other respects they are the genuine
article, meeting the demographic profile and living locally. They can find out
exactly what it feels like to be a customer, and how staff reacts to a given
scenario that they convincingly enact.
Indian companies are going global. Does culture diversity come in the way
of the employee-employer relationship?
Culture diversity has to be kept in mind especially following any M&A deals.
However, constant dialogue can be cathartic. It breaks barriers and helps in
establishing a foothold in the global arena.
How important are coaching and mentoring to the managerial cadre?
Coaching can unleash the potential on a one-to-one or person-to-person
basis in a non-threatening manner. It is personal therapeutic counselling.
Managers are expected to wear the coaching hat more often than their
managerial hats.
Likewise, CEOs are desperately seeking a sounding board and want to
partner with someone, who can help them navigate their business
challenges and realise their full potential. Organisations need to be hand-
held and they must provide platforms for engagements.
Discussion Questions:
1. How does performance management differ from training?
2. Is there a way to measure performance management?
(Source: Business Line Jan 28, 2008)

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References:
 Fisher, S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource – Productivity, Quality
of Work Life, Profits. Irwin/McGraw Hills.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

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Unit 8 Compensation Management

Structure:
8.1 Introduction
Objectives
8.2 Wage and Salary Administration
8.3 Managing Wages
8.4 Concept of Rewards and Incentives
8.5 Managing Benefits in Organisations
8.6 Summary
8.7 Glossary
8.8 Terminal Questions
8.9 Answers
8.10 Case Study

8.1 Introduction
In the previous unit, we discussed the concept and need for employee
review. We also learnt the types of appraisal methods and the benefits of
performance appraisal. Money is ranked as a key motivator as well as a
reason to seek employment. This unit is designed to provide an
understanding of the key challenges that compensation/salary management
poses for the organisation.
The terms ‘wage’, ‘salary’, ‘compensation’ are often used as synonyms. The
term wage is usually associated with contractual employee whose pay is
calculated according to the number of hours worked/units produced. The
word salary/compensation applies to the remuneration that is paid for a fixed
period and does not depend upon the number of hours worked. It is
associated with the white-collar worker. Certain theories were propounded
for determination of wages but these could not stand the test of time. A few
labour and wage theories are discussed in this unit. W will discuss the wage
and salary administration, the methods of managing wages. We will also
learn the concepts of rewards and incentives and managing benefits in an
organisation.

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Objectives:
After studying this unit, you should be able to:
 analyse the concept of compensation and different wages
 describe wage and salary administration
 explain reward and incentive plans
 analyse managing benefits in organisation

8.2 Wage and Salary Administration

The term compensation management, or alternatively, wage and salary
administration revolves around designing and managing policies and
methods of disbursing employee compensation. Traditionally it includes
areas such as job evaluation, maintenance of wage structures, wage
surveys, incentives administration, wage changes and adjustments,
supplementary payouts, profit sharing, control of compensation costs and
other related pay items.
Salaried often implies a status distinction, because those who are on salary
are generally white-collar, administrative, professional and executive
employees, whereas wage earners are designated as hourly, non-
supervisory or blue-collar. Wage earners in some organisations do receive
full wage if they are absent for such reasons as sickness, whereas salaried
employees, especially at the lower levels, often receive overtime pay when
they work over the standard work week.
Compensation/salary systems are designed to ensure that employees are
rewarded appropriately depending on what they do and the skills and
knowledge (intellect) required for doing a specific job. It must therefore
provide for the following key factors in order to be effective:
 Signal to the employee the major objectives of the organisations –
it must link to the overall goals and objectives of the company. For
example, if doing a quality job is critical for the company its
compensation system has to ensure that this is adequately rewarded.
On the other hand if a company values the productivity and the units
produced the compensation system should be designed such that
productivity is rewarded.
 Attract and retain the talent an organisation needs – The need to
benchmark salaries to the prevalent market standard for that job/skill so

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that the company is able to attract the right talent. If an enterprise pays a
salary lower that what is the prevalent market standard for that
job/responsibilities, the probability that suitable candidates would take
the job offer and join the company is low. Even if they do join
subsequently when they find that the market pays more for that job they
would quickly find a more remunerative job and leave the company.
 Create the type of culture the company seeks – Compensation
systems play a critical role as sponsors for the organisation’s culture. A
performance driven culture would build compensation policies that
clearly and significantly reward performance. A company that rewards
loyalty would reward employees who stay longer in the company with
significantly better incentive programmes.
Hence, we see how compensation systems are reflective of the
organisation’s overall philosophy of what its goals and objectives are and
how this can be linked to salary payout.

Self Assessment Questions

1. The term ______________ is commonly used for those employees
whose pay is calculated according to the number of hours worked.
2. _________________ often implies a status distinction, because those
who are on salary are generally white-collar, administrative,
professional and executive employees, whereas wage-earners are
designated as hourly, non-supervisory or blue-collar.
3. A __________ is defined as a collection or aggregation of tasks, duties,
and responsibilities that, as a whole, is regarded as the reasonable
assignment to an individual employee.

8.3 Managing Wages

In the previous section, we discussed wage and salary administration. Let
us now study about managing wages.
The main purpose of wage and salary administration is to establish and
maintain equitable wage and salary programmes. The secondary objective
is to design and implement an equitable labour-cost structure. Therefore
payout cannot be out-of-sync with the organisation’s ability to pay – it needs

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to be able to satisfy the employees as well as employers, with profits

maximised and conflicts minimised.
Wage and salary administration is concerned with the financial aspects of
needs, motivation and rewards. Managers, therefore, analyse and interpret
the needs of their employees so that rewards can be suitably designed to
satisfy these needs.
The word 'salary' is defined in the Oxford Dictionary as ‘fixed periodical
payment to a person doing other than manual or mechanical work.’ The
payment towards manual or mechanical work is referred to as wages. The
word pay refers to the payment for services done which would include salary
as well as wages.
Wages are commonly understood as price of labour. In ordinary parlance,
any remuneration paid for services is etymological wage. Benham defines
wage as “a sum of money paid under contract by an employer to a worker
for services rendered.”
Labour was always looked upon as a commodity governed by the law of
supply and demand. Certain theories were propounded for determination of
wages but these could not stand the test of time. A few theories are
discussed below:
 Subsistence theory: This theory, also known as 'Iron Law of Wages',
was propounded by David Ricardo (1772-1823). According to this
theory, wages tend to settle at a level just sufficient to maintain the
workers and their families at minimum subsistence levels. The theory
applies only to backward countries where labourers are extremely poor
and are unable to get their share from the employers.
 Standard of living theory: This theory is a modified form of subsistence
theory. According to this theory, wages are determined not by
subsistence level but also by the standard of living to which a class of
labourers become habituated.
 Residual claimant theory: Francis A. Walker (1840-1897) propounded
this theory. According to him, there were four factors of
production/business activity i.e., land, labour, capital and
entrepreneurship. Wages represent the amount of value created in the

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production which remains after payment has been made for all these
factors of production. In other words, labour is the residual claimant.
 The wage fund theory: According to this theory, after rent and raw
materials are paid for, a definite amount remains for labour. The total
wage fund and the number of workers determine the average worker's
share in the form of wages.
 Demand and supply theory: According to this theory, wages depend
upon the demand and supply of labour.
 Marginal productivity theory: This is an improved form of demand and
supply theory. Wages are determined by the value of the net product of
the marginal unit of labour employed.
 Purchasing power theory: According to this theory the prosperity,
productivity and progress of an industry depend on the presence of
sufficient demand to ensure the sale of its products and pocketing of
reasonable profits. A large part of the products of industry is consumed
by workers and their families, and if wages are high, demand will be
good. However, if wages and the purchasing power of the workers are
low, some of the goods will remain unsold, output will go down, which
will result in unemployment.
 Bargaining theory of wages: John Davidson propounded this theory.
According to him, wages are determined by the relative bargaining
power of workers or trade unions and of employers. When a trade union
is involved, basic wages, fringe benefits, job differentials and individual
differences tend to be determined by the relative strength of the
organisation and the trade union.
The tribunals and wage boards have generally followed the principles laid
down in the Fair Wages Committee's Report on fixing wages. The
committee, in its report, has focused on wage differentials and has identified
the following factors for consideration for fixation of wages:
1. The degree of skill.
2. The strain of work.
3. The experience involved.
4. The training involved.
5. The responsibility undertaken.
6. The mental and physical requirements.

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7. The disagreeableness of the task.

8. The hazard attendant on the work.
9. The fatigue involved.
Classification of wages
The International Labour Organisation (ILO) in one of its publications,
classified wages as under:
1. The amount necessary for mere subsistence.
2. The amount necessary for health and decency.
3. The amount necessary to provide a standard of comfort.
In India, wages are classified as below:
1. Minimum wage:
2. Fair wage
3. Living wage
Minimum wage: Minimum wage has been defined by the Committee as
"the wage which must provide not only for the bare sustenance of life, but
for the preservation of the efficiency of the worker. For this purpose, the
minimum wage must provide for some measure of education, medical
requirements and amenities." In other words, a minimum wage should
provide for the sustenance of the worker's family, for his efficiency, for the
education of his family members, for their medical care and for some
amenities. It is very difficult to determine the minimum wage because
conditions vary from place to place, industry to industry and from worker to
worker. However, the principles for determining minimum wages were
evolved by the Government and have been incorporated in the Minimum
Wages Act, 1948, the important principle being that minimum wages should
provide not only for the bare sustenance of life but also for the preservation
of the efficiency of the workers by way of education, medical care and other
amenities.
Fair wage: According to the Committee on Fair Wages, "Fair wage is the
wage which is above the minimum wage but below the living wage." The
lower limit of the fair wage is obviously the minimum wage, the upper limit is
set by the "capacity of the industry to pay". Between these two limits, the
actual wages should depend on considerations of such factors as:
 The productivity of labour.
 The prevailing rates of wages in the same or neighbouring localities.
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 The level of the national income and its distribution.

 The place of industry in the economy.
Living wage: Living wage was recommended by the Committee as a fair
wage and as ultimate goal in a wage policy. It defined Living Wage as "one
which should enable the earner to provide for himself and his family not only
the bare essentials of food, clothing and shelter but a measure of frugal
comfort, including education for his children, protection against ill health,
requirements of essential social needs and a measure of insurance against
the more important misfortunes including old age." In other words, a living
wage was to provide for a standard of living that would ensure good health
for the worker and his family as well as a measure of decency, comfort,
education for his children, and protection against misfortunes.
Generally, ascertaining wages and deciding who to pay what, is an activity
undertaken in the beginning when an organisation is set up. Thereafter, it is
annually reviewed to make corrections per the country’s economic and
market/industry trends. The management considers the state of the labour
market and takes into account of what the worker can afford to pay and the
value of the worker. The workers’ willingness for employment at the rate
offered implies that they agree to work at that rate, though they have had no
part in fixing it.
Wage differentials
The difference in wages paid for same or similar work because of various
reasons such as differences in work schedules, hazards involved, cost of
living etc.
Wage boards
Wage boards are appointed by the government and usually consist of seven
members – two representatives of management, two of labour, two
independent members and a chairman. The board is expected to take into
account the needs of the specific industry in a developing economy, the
special features of the industry, the requirements of social justice and the
necessity for adjusting wage differential in such a manner as to provide
incentives to workers for advancing their skill. Its recommendations maybe
accepted by the Government either completely or partly, and maybe
statutorily imposed on the industry in question, or may be rejected.

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In a nutshell, wages are influenced both by social and economic factors. In

one case, economic factors may play a major role, whereas in another,
social factors may be predominant. Thus, wages are a product of both social
and economic factors.

Self Assessment Questions

4. The term _________ is defined in the Oxford Dictionary as ‘fixed
periodical payment to a person doing other than manual or mechanical
work’.
5. _________ theory is also known as 'Iron Law of Wages'.
6. _________ theory was propounded by Francis A. Walker.
7. _________ has been defined by the Committee as "the wage which
must provide not only for the bare sustenance of life, but for the
preservation of the efficiency of the worker.”

Activity 1:
Understand the common Indian statutory laws that govern compensation.
Browse the Internet to read the “Minimum Wages Act” and make notes of
the key points. Read the Provident Fund Act and the Gratuity Act as well.

8.4 Concept of Rewards and Incentives

In the previous section, we discussed managing wages and the
classification of wages. Let us now learn the concept of rewards and
incentives.
Organisation rewards are those that the employee earns as a result of his
employment with the organisation. Most organisations link their reward
system to employee performance and commitment to the organisation.
There are basically two types of rewards:
 Extrinsic reward – Extrinsic rewards are tangible in nature and are
normally under the control of the organisation. Example of extrinsic
reward is promotion, bonus.
 Intrinsic reward – Intrinsic rewards are intangible in nature and are
internal to the individual. Example of intrinsic reward is a challenging
assignment or an informal recognition.

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Types of incentive plans

Incentive plans are of two types:
 Short term incentive
 Long term incentive
I. Short term incentive
Short term incentives include the following plans:
1. Halsey plan – This plan tries to eliminate the limitations of time and
piece rate system while trying to combine their merits.
A certain amount of work is fixed as standard output. A worker receives
a percentage of wages as extra earning if he is completing in a
prescribed time. If hourly rate is 5 and the plan percentage of wages is
fixed at 50%.
Plan percentage x Time saved x hourly rate
2. Rower plan – Standard Time is fixed also minimum wage on time basis.
Time saved x Time taken x Hourly rate/Standard rate
3. Barth system of wages - No guarantee of a minimum rate.
Wages = √ Standard time x Time taken x Hourly rate
4. Task bonus system – This method of incentive payment is generally
used for a group. In this method the task of each group member is
predetermined and he has to achieve it to earn a bonus in his standard
pay.
5. Point-rating system – Each job is rated in terms of a standard time. At
the end of a specified period, the output of each worker is assessed.
Example: an organisation fixes its standard time value as 10 units of
production per hour. Let the number of working hour per day be 8 and
the hourly rate is Rs 5. At the end of the day if any worker produces 100
units, it is equivalent to 10 hours production.
6. Progressive bonus – Under this system of incentive payment, the
earnings increase at a progressive rate once the output crosses the
minimum or standard out.

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II. Long term incentives

Long term incentives include the following plans:
1) Annual bonus – The most common type of annual incentive plan is the
annual cash bonus.
2) Profit sharing: In the profit sharing incentive method, employees earn a
share of the company’s profit, which is normally calculated as a
percentage of local profit.
o Distribution plan: Annual or quarterly basis bonus is paid according
to a pre-determined formula and based on the company profits.
o Deferred plan: Employees earn profit sharing credits instead of
cash payment, which are distributed when the employee parts with
the organisation.
o Combination plan: Employees are allowed to receive a portion of
each period’s profit in case bonus.
3) Gain sharing: Rewarding groups for their successful performance.
Groups are rewarded for the team work, coordination and other
characteristics that have determined their success.
4) Employee stock plans: - This is a scheme in which employees are
given a part of ownership at a price lower than market price in
consideration of their duration and meritorious performance in the job.
Few of the employee stock plans are:
o Employee stock purchase plan: The employees are given the right
to acquire stocks of the company immediately after they earn them,
normally at a price lower than the prevailing market price.
o Employee stock option scheme: The company grants an option to
its employees to acquire shares at a future date.
o Stock appreciation right: Under this scheme, the employee does
not have to put in any money and has the right to withdraw the stock.
The employee is given the appreciation in the value of shares from
the date the option was granted.
o Restricted stock plan: In this type of stock plan, the employees
need not put in money. Some restriction is there - one of them is that
shares may be forfeited if they are not “earned out” over a specific
period of time. The employees are forced to continue their
employment with the organisation over this specific period.

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o Phantom Stock: Phantom Stock is a special type of employee stock

option plan that protects the holder against any depreciation in the
value of stock.
o Premium price options: These are also called performance-vesting
options. These options can be exercised only if the market price of
the stock reaches or exceeds the predetermined exercise price,
which is significantly higher than within the stipulated time, the option
would be forfeited.
Non-monetary incentives:-
Giving non-monetary incentives to employees for their performance and
contribution is one of the best methods of motivating them.
 Non-monetary incentives are:
 Recognition of an employee’s contribution.
 A challenging assignment would assure an employee of the
management’s confidence in his ability.
 Giving additional responsibility.
 Rewarding an employee for his performance through free gifts or free
vacations.

Self Assessment Questions

8. Recognition of an employees’ contribution by giving an award is a
_______ incentive.
9. In the ________ incentive method, employees earn a share of the
company’s profit, which is normally calculated as a percentage of local
profit. Rewarding groups for their successful performance is known as
________________.

8.5 Managing Benefits in Organisations

In the previous unit, we discussed the concept of rewards and incentives.
Let us now study about managing employee benefits.
Managing employee benefits is a critical part of the entire compensation
policy and particularly so as the cost is completely borne by the company.
There is no scientific way of ascertaining its impact on factors such as
employee satisfaction and employee retention or productivity.

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In designing benefits packages organisations need to pay attention to the

following aspects:
 Legal and local laws of the land that require statutory compliance.
 The positioning of benefits in the total compensation strategy.
 Are the benefits provided consistent with the long term strategic
business objectives and plans ?
 Are the benefits meeting the needs and expectations of the employees
and their dependents?
 Are we competitive with respect to the choice of benefits, adequacy and
equity and costs vs. the industry/our competitors?
The components of a benefits package are commonly practiced as Security
and Health Benefits – which focuses on the provisions made by the
employer with respect to life insurance, worker compensation, accident
insurance, medical insurance for self and dependents (where different
companies could differently categorise dependents-some might include
parents as dependents, some might limit it to spouse and children only),
other medical coverage, Provident Fund and Pension Plans, Severance Pay
etc. Organisations might even have other health benefit programmes such
as health check-up camps, dental camps and other employee wellness
initiatives. Modern organisations provide for on-campus gymnasium facilities
or the reimbursement of gymnasium/health club memberships.
Other reimbursement plans like reimbursement of telephone bills and
broadband bills where these facilities might not be entirely used for business
purposes alone. Reimbursement of conveyance costs including providing for
pickup and drop facilities for their employees.
Canteen facilities – some organisations provide for catering of lunch and
snacks in addition to sophisticated on-campus food-courts and even
departmental stores, all with the objective of helping the employee manage
better work life balance.
Another popular benefit is the provision for crèche facilities for the infants of
employees. While larger companies can afford an on-campus or adjacent
crèche, which is for the children of the employees, other companies allow
for the reimbursement of the cost of crèche for their employees’ children.
Organisations like Cognizant and IBM go a step further by organising for
children’s camp during the school vacations.
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Organisations also provide for employee counselling/assistance

programmes and facilities. Some might tie-up with professional counsellors
to provide remote/over phone/e-mail counselling services, while some other
companies provide on-campus employee assistance kiosks manned by
professional counsellors visiting the facility 2-3 times a week. Some
organisations might insist on few benefits to be contributory where the
employee might need to bear part of the cost.
Most large and medium sized organisations manage compensation and
benefits through state-of-the-art Human Resource Management Systems
(HRMS) and the corporate intranet portals. Employee can enrol online for
the benefits, ask queries, look up the policies and review the outstanding
and balance status of the various benefits. They can view deadlines, apply
for the various benefit claims and track reimbursement status online. This
brings a lot of empowerment to the employee as well as awareness of the
total benefits that he/she and their dependents are eligible for.
Some common metrics used to assess the investments made by a company
on benefits are:
a) Annual cost of benefits for all employees
b) Cost per employee per year
c) Percentage cost of payroll
d) Percentage cost of total costs
In these times of economic challenges organisations are closely tracking the
investments and driving efficiency.

Activity 2:
Talk to a friend/relative in a corporate and ascertain the different benefits
that the company provides for the employees. Differentiate between the
statutory and the non-statutory benefits. Also try and identify the ones that
are specific to the industry and not common to all.

Self Assessment Questions

10. There is no scientific way of ascertaining the impact of ___________
on factors such as employee satisfaction and employee retention or
productivity.

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11. Some organisations might insist on few benefits to be _____________

where the employee might need to bear part of the cost.
12. Most organisations manage compensation and benefits through
________ and _________ .

8.6 Summary
Let us recapitulate the important concepts discussed in this unit:
1. In residual theory, there were four factors of production/business activity
i.e., land, labour, capital and entrepreneurship. Wages represent the
amount of value created in the production which remains after payment
has been made for all these factors of production.
2. Wage boards are appointed by the government and usually consist of
seven members – two representatives of management, two of labour,
two independent members and a chairman.
3. Fair wage is the wage which is above the minimum wage but below the
living wage.
4. Organisation rewards are those that the employee earns as a result of
his employment with the organisation. Most organisations link their
reward system to employee performance and commitment to the
organisation. Two types of rewards are extrinsic reward and intrinsic
reward.
5. Managing employee benefits is a critical part of the entire compensation
policy.
6. The challenge in managing benefits is that while it costs a lot it is often
taken for granted by the employees.
7. The key to leveraging the investment made by organisations on benefits
can be obtained by adequate communication making employees aware
of them.
8. In these times of economic challenges organisations are closely tracking
the investments and driving efficiency.

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8.7 Glossary
 Employee Stock Option Scheme: An employee benefit plan designed
to invest primarily in the stock of the sponsoring employer, where the
employees receive various tax benefits.
 Profit sharing: It refers to various incentive plans that provide direct or
indirect payments to employees that depend on company's profitability in
addition to employees' regular salary and bonuses.
 Wage Differentials: Different rates of pay for the same general type of
work, the variations resulting from differences in working conditions,
performance standards and types of workers.

8.8 Terminal Questions

1. Define wage and sslary. What are the factors for effective wage
administration?
2. Describe the process of Wage Fixation and the tools available for it.
3. Explain long-term and short-term incentive plan.
4. What are the challenges in benefits management and how do
organisations cope with it?

8.9 Answers

Self Assessment Questions

1. Wage
2. Salaried
3. Job
4. Salary
5. Subsistence theory
6. Residual claimant theory
7. Minimum wage
8. non monetary
9. gain shares
10. employee benefits
11. Contributory
12. HRMS, corporate intranet portals.

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Terminal Questions
1. Salary systems are designed to ensure that employees are rewarded
appropriately depending on what they do and the skills and knowledge
required for doing a specific job. Refer section 8.2 for more details.
2. The main purpose of wage and salary administration is to establish and
maintain equitable wage and salary programmes. The Tribunals and
Wage Boards have generally followed the-principles laid down in the
Fair Wages Committee's Report on fixing wages. The Committee, in its
report, has focused on wage differentials and has identified the following
factors for consideration for fixation of wages: the degree of skill, the
strain of work, the experience involved, the training involved, the
responsibility undertaken, the mental and physical requirements, the
disagreeableness of the task, the hazard attendant on the work, and the
fatigue involved. Refer section 8.3 for more details.
3. Incentive plans are of two types: Short-term incentive, Long-term
incentive.
Short-term incentive: Halsey plan, Rower Plan, Task Bonus system,
Point-rating system, Progressive Bonus.
Long term plan: Annual bonus, Profit sharing, Distribution plan,
Combination Plan, Gain sharing, Employee Stock plans, etc. Refer
section 8.4 for more details.
4. Few challenges organisations face in benefits packages are as follows:
 Legal and local laws of the land that require statutory compliance
 The positioning of benefits in the total compensation strategy
Refer section 8.5 for more details.

8.10 Case Study

Starlight Achieves Consistency and Transparency in Incentive
Planning and Management
Inconsistencies affect goal setting and payouts:
As is typical in the hotel industry, Starlight’s sales people move around a lot.
And many of them move from hotel to hotel across the Starlight portfolio of
properties. To track performance, Starlight relied on a semi-automated,
Excel- based process, where each hotel accessed centrally-stored data and
entered those numbers into a spreadsheet.

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“It was hard to know if everyone, at each hotel, was using the same
calculations or adding their own calculations into the spreadsheets,” says
Rob Peters, Vice President Sales Administration for Starlight. “The lack of
transparency in goal setting also made it difficult to ensure that individual
hotels were rolling up into divisional goals. So it became quite time intensive
to implement the required checks and balances on those processes.”
A new approach to setting goals and modeling plans:
Peters recognised the need for a new solution and chose ServeC after a
competitive review. He was impressed by the technology but also by
ServeC’s quick grasp of Starlight’s business requirements. For Peters, there
was a synergy between the companies and personalities, and he was
impressed by ServeC’s eagerness to devise a creative solution that
maximised Starlight’s return on investment for the project.
“We definitely had challenges in the process, but ServeC listened and
collaborated with us to find solutions,” says Peters. “With this type of project,
it is critical to have a dedicated business and IT person on board right at the
beginning. And preparation is essential–know what you want, compare and
prepare, and have a strong sense of your expectations around feel and
functionality.”
Currently, Starlight has more than 2000 ServeC system users. At the
beginning of the year, Starlight uses ServeC to set goals by division, by
region, by individual hotel, by business type, by individual and by line of
business/targeted measure. On a monthly basis, users input performance
details into the system, which integrates with SAP for reference values and
calculates accurate payouts.
With ServeC, Peters can ensure that sales people are using the most up-to-
date plans and documents. He can make plan changes instantly and have
immediate insight into the sales people affected by the change. Eliminating
the separate spreadsheets from each location has enabled more effective
modelling as well. Peters can add, modify, pick and choose measures and
understand how they will affect performance.
“When payouts are a significant percentage of a seller’s total compensation,
it is critical to maximise the dollars you put into your plans so you can focus
on motivating through promotions and incentives,” says Peters. “Having

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automated modelling capabilities enables me to use the data that we have

in our systems strategically to identify the best way to spend our dollars on
driving performance.”
Accuracy and transparency support changing sales strategies:
By replacing the semi-automated, spreadsheet-based process with ServeC,
Peters eliminated his key challenges in incentive planning and
management.
“We have total transparency in our goal setting, ensuring that sellers align at
the hotel, regional and divisional level. Each goal and measure must be
assigned to a sales manager, and the system enables simplified checks and
balances. With ServeC, we also have the flexibility to change measures and
weightings in our plans to adapt quickly to changing market conditions.”
Peters is also able to track internal turnover more efficiently because each
employee has one system log on, regardless of how many different hotels
they sell. In addition, Peters no longer has to direct time to checking
performance numbers from each hotel, freeing him up to complete higher
value activities including business modeling and improved management
reporting.
Discussion Questions:
1. How is compensation for employees arrived at starlight ?
2. Do you think that incentives will emprove employee performance ?
Justify.

References:
 Fisher S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa K. (2010). Human Resource Management. New Delhi: Tata
McGraw Hills.
 Wayne C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

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Unit 9 Job Evaluation

Structure:
9.1 Introduction
Objectives
9.2 Concept of Job Evaluation
9.3 Objectives of Job Evaluation
9.4 Techniques of Job Evaluation
9.5 Advantages and Limitations of Job Evaluation
9.6 Introduction to Competency
9.7 Summary
9.8 Glossary
9.9 Terminal Questions
9.10 Answers
9.11 Case Study

9.1 Introduction
In the previous unit, we discussed the wage and salary administration, the
methods of managing wages. We also learnt the concepts of rewards and
incentives and managing benefits in an organisation. Research indicates
that 50% of job performance problems are due to people being in the wrong
job. And 25% of the on-the-job performance problems are associated with
the inability to identify the ‘gaps’ between the competencies of the person
and the job requirements. Given these statistics the need to understand the
requirements for performing a job well and what qualities the individual must
have to do a good job is critical. This unit focuses on understanding the
traditional time-tested approach of ‘Job Evaluation’ which is still practised in
most organisations, as well as the emerging ‘competency mapping’ modern
approach, prevalent in the larger MNC’s.
Some form of job evaluation is invariably part of a formal compensation
management programme. The objective of job evaluation is to rank and
price the job rather than the job holder; evaluation is concerned with
assessing the value of the job in relation to another for it is only when each
job has been properly evaluated that a sound compensation structure can
be built. And the fundamental concept of job evaluation is to be able to
objectively assess the worth of the job with respect to the skills and
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capabilities that is required to execute it. The British Institute of

Management has defined job evaluation as “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.”
In this unit, we will discuss the concept and objectives of job evaluation. We
will also study the various job evaluation methods and competency.
Objectives:
After studying this chapter, you should be able to:
 analyse the concept of job evaluation
 state the objectives of job evaluation
 evaluate the job evaluation methods
 explain the concept of competency
 describe the concept of succession plan

9.2 Concept of Job Evaluation

Job evaluation is a systematic process of analysing and evaluating jobs to
determine the relative worth of jobs in an organisation.
Job evaluation is the evaluation or rating of jobs to determine their position
in the job hierarchy. The evaluation may be achieved through assignment of
points or use of some other systematic method for essential job
requirements such as skill, experience and responsibility.

Self Assessment Questions

1. ________ is a systematic process of analysing and evaluating jobs to
determine the relative worth of jobs in an organisation.
2. Job evaluation is the evaluation or rating of jobs to determine their
position in the ____________.

9.3 Objectives of Job Evaluation

The decision to measure or rate jobs should only be made with the intent to
reach certain objectives which are important to both the management and
the employee. Although there are many side benefits of job evaluation, the
purpose is to work towards a solution of the many wage and compensation
related administrative problems which confront the industry and to

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determine the relative worth of different jobs in the organisation and provide
the basis for compensation management.
The objectives of job evaluation are to:
 Determine the position and place of the job in the organisational
hierarchy.
 Associate responsibility and authority with the job.
 Measure employee satisfaction with respect to the compensation.
 Maintain complete and accurate data relating to description and
specification of various jobs.

Activity 1:
Read the article of Philip Johnson, Hay Group on “The future of Job
evaluation – understanding and measuring work”. Prepare a report on the
perspectives of job evaluation.
http://www.haygroup.com/downloads/us.mar-ape-journal of
compensation and benefits-johnson.pdf

Self Assessment Questions

3. ______________________ determines the position and place of the
job in the organisational hierarchy.
4. The objective of job evaluation is to measure employee satisfaction
with respect to the ____________.
5. Maintain complete and accurate data relating to ___________ and
_________ of various jobs.

9.4 Techniques of Job Evaluation

In the previous section, we discussed the concept of job evaluation. Let us
now learn the different techniques of job evaluation.
The techniques of job evaluation are:
1. Quantitative
2. Non-quantitative

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Figure 9.1 shows the types of job evaluation methods.

Fig. 9.1: Techniques of Job Evaluation Methods

I. Quantitative techniques
There are two types of quantitative techniques:
 Point Rating Method
 Factor-Comparison Method
a) Point rating method
In this method a quantitative point scale is developed to evaluate the jobs.
The different steps in the point rating method are:
1. Determine the job factors or compensable factors.
2. Determine the sub factors.
3. Define the degree statement or profile statements.
4. Assign points to factors, sub factor and degree.
5. Preparation of a chart.
6. Applying the point system.

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Table 9.1 shows the points rating method.

Table 9.1: Points Rating Method

Points Rating Method

Compensable/ Maximum Job sub-factors Assigned Points per Degree

job Factors Points
I II III IV

Knowledge/skill 200 Knowledge 35 70 105 140

Experience 20 40 60 80
Initiative 10 20 30 40
Effort 240 Physical 20 40 60 80
Mental 40 80 120 160
Responsibility 360 Towards company 35 40 60 80
towards co-workers 20 80 120 160
Towards customer 10 60 90 120
Job conditions 140 Working conditions 20 40 60 80
hazards 15 30 45 60
Total possible 1000
points

b) Factor-comparison method
This method is associated with the name of E. J. Benge. Each factor (as in
the point method) is ascribed a money value. Key jobs, representing the
various levels or grades are ranked factor-by-factor and upon this ranking, a
scale of pay/money value is prepared. The sum of the values for each factor
is taken to be the money value of the job.

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The factor-comparison method is shown in table 9.2.

Table 9.2: Factor-Comparison Method

Factor Comparison Method

Job Hourly Mental Skill Physical Responsi Working

Pay Requirem Requirem requireme bility Condition
ents ents nts s
Inventory $13.65 $4.00 $4.40 $1.25 $3.00 $1.00
Control
Specialist
Job 13.40 3.00 4.40 1.80 2.30 1.90
Maintenance
Electrician
Warehouse 11.10 2.25 3.00 1.80 2.30 1.75
Stocker

Secretary 8.65 3.00 2.00 0.50 2.15 1.00

II. Non-quantitative techniques

There are two types of non-quantitative techniques:
 Ranking Method
 Job Classification or Grading Method
a) Ranking method
In this method the jobs in an organisation are assessed based on the
knowledge, skills effort and other job dimensions associated with each job.
Several techniques of ranking are:
i) Relative ranking – In this method a key job (representative) is identified
and its worth is determined, also the relative importance of each job in
comparison with the representative is determined and then ranked.
ii) Paired comparison: – Each job is compared with every other job in the
organisation.
iii) Single factor ranking:– Single most important factor of a job is identified
and is compared with the single most important factor of other jobs.
b) job classification on Grading Method – In this method jobs are classified
and graded based on their significance and their worth to the
organization. Grades are formulated on the nature of tasks and
responsibilities of the job.

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Self Assessment Questions

6. ______ is a method where quantitative point scale is developed to
evaluate the jobs.
7. In the _________ method the jobs in an organisation are assessed
based on the knowledge, skills effort and other job dimension
associated with each job.
8. ___________ are formulated on the job of the nature of tasks and
responsibilities of the job.
9. In _______________, each job is compared with every other job in the
organisation.

9.5 Advantages and Limitations of Job Evaluation

In the previous section, we discussed the different techniques of job
evaluation. Let us now discuss the advantages and limitations of job
evaluation.
The advantages of job evaluation are:
1. Job evaluation is a logical and an objective method of ranking jobs
relative to each other. It may thus help in removing inequities in existing
wage structures and in maintaining sound and consistent wage
differences in a plant or an industry.
2. The method replaces accidental factors occurring in less systematic
procedures of wage bargaining by more impersonal and objective
standards, thus establishing a clearer basis for negotiation.
3. The method may lead to greater uniformity in wage rates and simplify
the process of wage administration.
4. Information collected in a process of job description and analysis can be
used for improvement of selection, training, transfer and promotion,
procedures on the basis of the comparative job requirement.
The limitations of job evaluation are:
1. Methods of job evaluation are not considered to be completely objective
as some amount of subjectivity is involved in the selection of
benchmarking jobs and key compensable factors.

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2. External factors of jobs are not considered in job evaluation. It would be

difficult to fix anything less than the prevailing wages even if job
evaluation recommends so.
3. Due to the faster pace of changes in the external factors such as
technology and labour market characteristics, job characteristics
requirements undergo changes in quick succession. This makes job
evolution results relevant for a short period only.
4. The determination of employee compensation is often influenced by the
bargaining power of the employees and their unions. However, the job
evaluation process never considers this factor while deciding the pay
scale for jobs.
5. Since job evaluation is a time consuming, complex and costly process,
small and medium organisations give minimum importance on pay scale
fixing.

Self Assessment Questions

10. Job evaluation is a ___________ and an objective method of ranking
jobs relatively to each other.
11. Job evaluation simplifies the process of___________.

9.6 Introduction to Competency

In the previous section, we discussed the advantages and limitations of job
evaluation. Let us now learn the concept of competency.
First popularised by Boyatiz, competency is defined as “a capacity that
exists in a person that leads to a behaviour that meets the job demands
within organisational parameters and that in-turn bring about the desired
results.” Competency can also be defined as “an underlying characteristic of
a person results in effective and/or superior performance on the job.”
Competency can be thought of a as a tool that can be used to map ‘best-in-
class’ performance–the best performer is always called the competent
performer. Competencies are based on Knowledge–information
accumulated in a particular area of expertise, Skills–the demonstration of
the expertise, Motive–the recurrent thought that drives behaviour, Attitude–

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self-concept, value and self image, Traits–a general disposition to behave

in a particular way.
There are two sets of competencies:
 Threshold competencies – They are the characteristics that any job
holder needs to have to perform that job effectively, but do not
differentiate between average and superior performer.
 Differentiating competencies – They are the characteristics that
superior performers have but are not present in average performers.
This thinking holds the key to differentiating employees based on
competencies they possess and there compensation and growth within
the companies in modern companies.
Competency framework defines the competency requirements in an
organisation. These consist of both work specific as well as behavioural
competencies. Each job in the organisation is profiled for the competencies
needed and these are then placed on to a common framework. Depending
on the value of that competency, the number of competencies, the
proficiency level of the competency and the competency’s’ uniqueness, the
job worth can be assessed in a comparative manner.
Organisations need to invest significantly and usually outsource the activity
of competency mapping. Once this is done it remains relevant and in active
use for the next 4-5 years unless there is a significant change in the way the
company conducts its business and its operating practices.
The benefits of competency framework are:
1. One universal set of competencies for all positions and employees in
these positions.
2. Builds a common language and frame of reference for everyone.
3. Merit of each positions/individual.
4. Makes it easier to compare positions and employees across the job
functions in the organisation.
5. Helps align everyone towards a common culture and can support any
culture change process.

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Activity 2:
Read the article on ‘Compentency Based Pay’ by Fiana Neathey and
Peter Reilly (www.employment-studies.co.uk/pdflibrary/mp25.pdf)
Prepare a report on the link between reward and competency.

Linking competency to HR systems

One of the key benefits of the competency based management approach is
its usage to build all of the other HR systems such as recruitment,
performance management, training and development, career development,
compensation management and succession planning. Let us study them
one by one.
Recruitment and selection
The competency profile for a job serves as the reference for the candidate
hunt for the position. It is used at multiple stages in the recruitment and
selection process:
 Job description and competency profile is shared with the recruitment
consultant as well as hosted on the company intranet and internet site
for prospective applicants to view.
 The competencies are used to design the appropriate selection tests
and other methods.
 Assessment forms for interviewers to contain the competency list and
specify the desired proficiency levels.
Performance management: Increasingly the focus in most organisations
using competency frameworks is to build competency based performance
assessment processes. The employees’ performance is assessed on the
core tasks and results as well as on the competencies required for the job
he/she is doing. If there are gaps between the desired proficiency and the
current proficiency of the employee, the employee is reviewed for
development initiatives to improve the competency. If the employee has
competencies above the desired proficiency he is considered as a potential
talent and nurtured for other roles and higher responsibilities.
Training needs: The information on gaps in competencies is collated for
employees across the organisations and suitable training interventions are

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designed. The methodology used for competency improvement is usually

action learning based. Focus is on internalising the learning by ensuring
workplace application projects and activities. Managers need to give effort to
make competency training successful.
Career planning: Competency assessments are popularly used for helping
an employee discover his competencies and therefore serve as effective
means for the employee to identify what roles/jobs can be best for the
competencies the employee possesses. A compensation philosophy is a
company's commitment to how it values employees. A consistent pay
philosophy gives the organisation and the employee a frame of reference
when discussing salary in a negotiation. The goal of a pay philosophy is to
attract, retain and motivate employees. For companies in the private sector,
this usually requires a competitive pay philosophy. For companies in the
public sector, this means a well-rounded philosophy, with a focus on
benefits and work life.
Companies attract, motivate and retain through total compensation
The idea of a good compensation philosophy is to attract, retain and
motivate high-quality people. To accomplish these goals, companies use a
mixture of the three main components of compensation: Base pay, also
called salary; incentive pay, whether in the form of cash or non-cash award
such as stock; and benefits, or non-financial rewards. A pay philosophy is a
blend of all three, since the company must pay for whatever it delivers to the
employees.
For example, a company's pay philosophy might be to offer salaries that are
competitive in the market, or it might favour pay that is structured to attract
employees rather than pay that helps to retain them. But few companies can
afford to attract, motivate and retain via generous compensation. The
challenge is to create a pay programme that acknowledges all three goals
without exhausting resources.
As an example, suppose a small company with moderate cash resources is
establishing a pay philosophy. The philosophy might look something similar
to the following:
 Pay a competitive base salary - not an aggressive one, but a salary
comparable to what an employee could get somewhere else.

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 Offer equity in the company to all employees, so that they can reap the
rewards of the company.
 Be aggressive in total overall compensation through the use of the
incentives. If, for example, an employee is below market by Rs.20,000 in
base pay, deliver market parity via a Rs.5,000 signing bonus, a Rs.5,000
retention bonus, and a Rs.10,000 incentive. Incentive programmes
should be designed so that high-performance employees get high
compensation.
Succession planning: Succession planning is the process of ensuring that
pools of skilled employees are trained and available to meet the strategic
objectives of the organisation. Succession planning is done in different time
frames to ensure the availability of right managerial personnel at the right
time in right positions for continuing organisational vitality and strength.

Self Assessment Questions

12. __________ are underlying characteristic of a person which results in
effective and/or superior performance on the job.
13. There are two sets of competencies, ___________________________
and __________________________.
14. ____________ is the process of ensuring that pools of skilled
employees are trained and available to meet the strategic objectives of
the organisation.

9.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Job evaluation is the evaluation or rating of jobs to determine their
position in the job hierarchy. The evaluation may be achieved through
assignment of points or use of some other systematic method for
essential job requirements such as skill, experience and responsibility.
 The objective of job evaluation is to work towards a solution of the many
wage and compensation related administrative problems which confront
the industry and to determine the relative worth of different jobs in the
organisation and provide the basis for compensation management.

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 Techniques of job evaluation can be classified into quantitative and non-

quantitative.
 Competency can be thought of as a tool that can be used to map ‘best-
in-class’ performance - the best performer is always called the
competent performer. Competencies are based on Knowledge–
information accumulated in a particular area of expertise, Skills–the
demonstration of the expertise, Motive–the recurrent thought that drives
behaviour, Attitude–self-concept, value and self image, Traits–a general
disposition to behave in a particular way.
 One of the key benefits of the competency based management
approach is its usage to build all of the other HR systems such as
recruitment, performance management, training and development,
career development, compensation management and succession
planning.

9.8 Glossary
 Competency: It is a set of defined behaviours that provide a structured
guide enabling the identification, evaluation and development of the
behaviours in individual employees.
 Job classification method: It is a non-quantitative method of job
evaluation, a predetermined number of job groups or job classes are
established and jobs are assigned to these classifications. This method
places groups of jobs into job classes or job grades.
 Job evaluation: It is a technique to rank jobs in an organization on the
basis of the duties and responsibilities assigned to the job.
 Job grade: The classification specified for each job in a job category,
based on experience, skill and other requirements.

9.9 Terminal Questions

1. Define job evaluation and discuss its techniques.
2. Enumerate the merits and limitations of job evaluation.
3. Define competency and its benefits in organisation.
4. How is competency linked with HR system? Explain with examples.

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9.10 Answers

Self Assessment Questions

1. Job evaluation
2. Job hierarchy
3. Job evaluation
4. Compensation
5. Job description and Job specification
6. Point rating method
7. Ranking method
8. Grades
9. Paired-comparison Method
10. logical
11. Wage administration
12. Job description and analysis
13. competencies
14. Threshold competencies and Differentiating competencies
15. Succession planning

Terminal Questions
1. Job evaluation is the evaluation or rating of jobs to determine their
position in the job hierarchy. The evaluation may be achieved through
assignment of points or use of some other systematic method for
essential job requirements such as skill, experience and responsibility.
Techniques of job evaluation can be classified into two those are
quantitative and non quantitative. Refer section 9.2 and 9.4 for more
details.
2. Job evaluation helps in removing inequities in existing wage structures
and in maintaining sound and consistent wage differences in a plant or
an industry. Limitations are - methods of job evaluation are not
considered to be completely objective as some amount of subjectivity is
involved in the selection of benchmarking jobs and key compensable
factors. Due to the faster pace of changes in the external factors like
technology and labour market characteristics, job characteristics are
requirements undergo changes in quick succession. This makes job

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evolution results relevant for a short period only. Refer section 9.5 for
more details.
3. Competency can be thought of a as a tool that can be used to map
‘best-in-class’ performance the best performer is always called the
competent performer. Competencies are based on Knowledge-
information accumulated in a particular area of expertise, Skills- the
demonstration of the expertise, Motive – the recurrent thought that
drives behaviour, Attitude - self-concept, value and self image, Traits –
a general disposition to behave in a particular way. Refer section 9.6
for more details.
4. One of the key benefits of the competency based management
approach is its usage to build all of the other HR systems such as
recruitment, performance management, training and development,
career development, compensation management and succession
planning. Refer section 9.6 for more details.

9.11 Case Study

The Need for Competency Mapping

By Sheetal Srivastava
The economic downturn has made companies sit up and recognise the
need to have the best quality manpower working with them if they are to tide
over the financial crisis looking large over the industry. This is where
competency mapping has risen high up in the priority list for many
organisations. Let’s find out.
Finding the right fit for the right job is a matter of concern for most
organisations especially in today’s economic crisis. As meeting an
individual's career aspirations are concerned, once the organisation gives
an employee the perspective of what is required from him/her to reach a
particular position, it drives them to develop the competencies for the same.
Competencies enable individuals to identify and articulate what they offer –
regardless of the job. Competency mapping is a process of identifying key
competencies for a particular position in an organisation, and then using it
for job-evaluation, recruitment, training and development, performance
management, succession planning, etc. Introduction of competency

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mapping has also involved introducing skill appraisals in performance

appraisals.
Need of the hour
“The slowing economy around the world has put new and increased
pressure on an organisation’s capability to get more out of the available
resource they have, and this often translates into pressure on the individual
employees. That is where it is important to correlate performance result with
competencies. It is therefore imperative to define a set of core competencies
which corresponds the organisation’s key market differentiator,” says
Gyanendra Acharya, manager – human resources, Hughes Systique
Corporation.
The current economic downturn has created a situation for companies to
scale down various overhead costs to meet their growth requirements.
“Competency modelling identifies the precise set of competencies and
proficiency levels needed for every role in the organisation. This system
helps identify specific areas of training and maps employee growth to
strategic business needs. During a difficult economic situation, it becomes
particularly important for organisations to sustain their competitive edge in
the industry by investing in learning and development programmes that will
empower employees to build on their strategic career objectives,” notes
Narendra Raje, director – learning and development, Unisys.
Competency mapping – An important HR tool
Companies have long realised the importance of competency mapping as
an important HR function. This is especially relevant in this recessionary
environment where human capital is one of the most important assets of an
organisation and needs to be nurtured. According to Ajay Trehan, founder
CEO, AuthBridge, “There is always a need to have the best quality
manpower. More and more companies are using competency mapping tools
to screen and hire people with specific competencies. There might be a
need for a person with excellent writing skills or an excellent creative mind.
When individuals must seek new jobs, knowing one’s competencies can
give one a competitive edge in the market.”
Professional Aptitude Council, a global talent mapping organisation, through
its assessment tests for competency mapping helps companies understand
their employees better. PAC has a set of modules used to help
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organisations assess their existing talent pool. These tests assess a person
on the basis of Aptitude, Domain Skills, Communication Skills and
Personality and Psychometric fit. "This involves making crucial decisions as
to place which employee in which project, identify core competency area of
employees etc. These tools that PAC uses help organisations plan their
training requirements in the long run," notes Naveen Manjunath, managing
director (India) Professional Aptitude Council.
Unisys India has a comprehensive career management framework that
helps employees map their growth paths, lateral or vertical. Each role has a
defined set of competencies aligned to it. “Employees are expected to first
acquire the competencies defined for the current role and then focus on the
competencies for a growth role before they are considered eligible for
movement. Unisys University facilitates the mapping of specific learning
activities for each competency required for a role in the organisation and
has over 4000 training programmes, both e-learning and instructor-led to
help bridge any gaps in employee competencies,” adds Raje.
Adding further to this he says, “Unisys India has a robust and transparent
Internal Job Posting (IJP) process to enable employees to get a complete
picture of the opportunities available within the company. With this
information, employees are better equipped to make informed career
decisions and equip themselves with the knowledge and skills they require
to move up the career ladder.”
CBay Systems has the advantage of employees delivering and exceeding
requisite performance levels since the former has mapped out
competencies that are required to perform specific roles. “New hires are
pegged against these that are required for the role before being hired to
ensure they fit as per their deliverables. Existing employees are periodically
reviewed with the help of assessment tools and based on the gap analysis
we provide them necessary training and development to hone the requisite
competency. The action plans for the competency development outcome
based on such assessments are finalised and the entire initiative is
institutionalised,” confirms Sanjay Shanmugaum, vice president - human
resources, CBay Systems.
Competency mapping not only helps know your competencies but also your
weak areas which can be worked upon. Besides increasing employee

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morale and enhancing productivity, it induces fresh thinking, fosters

innovation and thereby aims to provide an enriching job experience.
Discussion Questions:
1. What are the benefits of competency mapping for the organisations?
2. How does competency mapping help the employees?

(Source: Times Ascent, July 27, 2009 at 12:41:33 PM)

References:
 Fisher, S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

E-Reference:
 http://www.salary.com/Small-Business-Advice/advice.asp?part=par410

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Unit 10 Human Resource Information System

Structure:
10.1 Introduction
Objectives
10.2 Concept of Human Resource Information System
10.3 Components of Human Resource Information System
10.4 Types of Human Resource Information System
10.5 Application of HRIS in Human Resource Management
10.6 Implementation of Human Resource Information System
10.7 Benefits of Human Resource Information System
10.8 Impact of Implementation of Human Resource Information System
10.9 Summary
10.10 Glossary
10.11 Terminal Questions
10.12 Answers
10.13 Case Study

10.1 Introduction
In the previous unit, we discussed the concept and objectives of job
evaluation. We also learnt competency and the various job evaluation
methods. Information is the unrefined material of planning. A quality
planning effort cannot be done without proper and adequate information.
Information is provided in an organisation by an inter-related set of
procedures and process known as an information system. An information
system especially developed for the human resource management function
is called an HRIS–Human Resource Information System.
HRIS has become one of the most important tools for many businesses.
Even a small, 20-person office needs to realise the benefits of using HRIS to
be more efficient. Many firms do not realise how much time and money they
are spending on manual Human Resource Management (HRM) tasks until
they sit down and take inventory of their time. HRIS is advancing using
Information Technology (IT). It allows companies to cut costs and offer more
information to employees in a faster and more efficient way. Especially in
difficult economic times, it is critical for companies to become more efficient
in every sector of their business and Human Resource (HR) is no exception.

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An information system is an interrelated set of procedures and processes to

provide information for decisions. Information is data that has been
processed so that they are meaningful. It adds to the representation of an
idea. It corrects and confirms previous information. It tells us something
which we did not know. Many organisations have computer-assisted
information systems.
HRIS refers to software packages that address HR needs with respect to
planning, employee information access and employer regulatory
compliance. The following text begins with a discussion of human resource
planning, followed by human resource management systems.
The HRIS is basically a database system developed to assist HR in decision
making and reporting. It is normally one of the elements of the overall
management information system of an organisation. It is an IT enabled HR
service available to the HR managers for data analysis and to help in the
decision making process. HRIS helps the HR managers to make an
effective decision by ensuring them an adequate and timely availability of all
relevant information. This information system use to improve the
performance of overall organisation and improve relationships among
organisation.
An effective HRIS provides information on anything the company needs to
track and analyse about employees, former employees and applicants. In
this unit, we will discuss the objectives, components and types of HRIS. We
will also learn the application of HRIS in HRM, benefits of HRIS and the
process of implementing HRIS in an organisation.
Objectives:
After studying this unit you should be able to:
 analyse the objectives of an HRIS
 list the components and types of HRIS
 describe the applications of an HRIS in human resource management
 evaluate the benefits of an HRIS
 explain the HRIS implementation
 analyse the impact of implementation of HRIS

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10.2 Concept of Human Resource Information System

HRIS, HR Technology or HR modules are an intersection between HRM
and IT. It merges HRM as a discipline and in particular its basic HR activities
and processes with the IT field, whereas the planning and programming of
data processing systems evolved into standardised routines and packages
of Enterprise Resource Planning (ERP) software. On the whole, these ERP
systems have their origin in software that integrates information from
different applications into one universal database. The linkage of its financial
and human resource modules through one database is the most important
distinction to the individually and proprietarily developed predecessors,
which makes this software application both rigid and flexible.
HRIS has become significant for decision-making and policy formulation as
well as for ensuring fairness and equity in HR policies and practices. There
is an increasing realisation that for organisational survival and growth in a
competitive environment, human resource is the most critical resource.
This coupled with the increase in the cost of hiring, retaining, developing
and motivating people to perform at their best has pushed organisations to
base their HR decisions on sound logic and thereby, on proper information.
HRIS becomes a major asset from this point of view. The growing need for
transparency among the employees and the society is another factor that is
compelling organisations towards proper management of information in all
areas, including HR.
HRIS is a key management tool which collects, maintains, analyses and
reports information on people and jobs. It is a system because it integrates
all the relevant data, which otherwise might have been lying in a fragmented
and scattered way at various points in the larger system, converts this data
into meaningful conclusions or information and makes it accessible to the
persons who need it for their decisions.
This incorporation of data can be at the large-scale level at the level of a
nation or on broader level- at the level of an industry or at the smaller level,
that is, at the level of an organisation.
HRIS includes all the HR functions of the organisation, namely, recruitment
and selection, training and development, wages and salary administration,
incentives and benefits, grievance resolution, human resource planning and

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succession planning. It has three elements, namely, input, process and

output. HRIS can be defined as an automated system for gathering, storing,
retrieving, analysing and disseminating HR-related data for facilitating
operational, managerial and strategic decision making that impacts human
resources.
The objectives of an HRIS are to:
 increase the ability of the human resource management to influence
new emerging opportunities and challenges in the business world.
 ensure efficient collection, storage and distribution of HR-related
information in a paperless environment.
 facilitate the HR managers to devote more time to strategic issues by
relieving them from routine operations through the employee self-service
system.
 facilitate employees’ direct and online access to information on training,
payroll and other relevant matters.
Self Assessment Questions
1. HRIS has three elements, namely _________, ___________
and_______.
2. Objective of HRIS is to increase the ability of the ________________
to influence new opportunities.
3. ________ facilitate the HR managers to devote more time to strategic
issues.

10.3 Components of HRIS

In the previous section, we discussed the concept of HRIS. Let us now
discuss the components of HRIS.
HRIS performs three interconnected activities as a database:
i) receiving inputs in the form of data from different sources.
ii) storing and processing data with the purpose of transforming them into
meaningful information
iii) generating output in different forms, as required by the users.

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Figure 10.1 depicts the three activities that an HRIS performs.

Data storage and

Input Output
processing

Fig. 10.1: HRIS Activities

(Source: Pravin Durai, Human Resource Management, Pearson

Publication, New Delhi .2010.)

Input
Input refers to all employee-related data. HR policies, procedures, corporate
goals and information about the statutory provisions entered into HRIS for
conversion into the desired form of output.
Data processing
Data processing refers to the storing and processing of data by a computer
with the help of the software that issues instructions for processing.
Output
Output refers to the generation of reports in the form desired by the users.
This is the final stage of an HRIS process.

Activity 1:
Interview a HR manager in a company, and ask how HRIS is facilitating
them in HR functions?
Hint: Refer Section 10.2

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Self Assessment Questions

4. ________ refers to all employee-related data. HR policies, procedures,
corporate goals and information about the statutory provisions entered
into HRIS for conversion into the desired form of output.
5. __________ helps in storing and processing of data by a computer with
help of the software that issues instructions for processing.
6. ______ is the final stage of an HRIS process.

10.4 Types of HRIS

In the previous section, we discussed the components of HRIS. Let us now
discuss the types of HRIS.
Some organisations may use HRIS only for data storage and report
generation, while some others may use it in decision making processes and
in simulation.
HRIS supports management at three levels of an organisation.
1. The electronic data processing level – The purpose of HRIS at the
electronic data processing level is collecting, storing, manipulating,
analysing retrieving and distributing relevant information of human
resources in the organisation.
2. The Management Information System (MIS) level – MIS is the next
level of HRIS in which HRIS has much wider and advanced applications.
It is a system that provides information to managers, who use it for
decision making.
3. The decision support system level – The last level of an HRIS is
decision support system. The primary users of this level are mainly top
management and executives. It helps users in simulating situations and
making decisions.
Self Assessment Questions
7. The purpose of HRIS at the _______ level is collecting, storing,
manipulating, analysing retrieving and distributing relevant information
of human resources in the organisation.
8. _________ is a system that provides information to managers, who use
it for decision making.
9. __________ helps users in simulating situations and making decisions.
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Activity 2:
Analyse existing records, reports and forms in a company to determine the
requirements for data in the HRIS.

10.5 Applications of HRIS in Human Resource Management

In the previous section, we discussed the types of HRIS. Let us now discuss
the applications of HRIS in HRM.
HR needs to handle many things in an organisation including increasing
numbers of employees and different HR activities. It became important for
many organisations to bring almost all HR activities under HRIS.
Different applications of an HRIS are as follow:
 Applicant tracking system – Many organisations are now gradually
adopting and installing applicant tracking system software. The purpose
of this system is to give support to recruitment process and to streamline
the overall recruitment process.
 Training and development system – The purpose of a training and
development system is to help the employees gain new knowledge.
HRIS facilitates workplace e-learning by the employees as part of their
training programme.
 Compensation management system – The compensation
management system aims at computing employee payments through an
integrated payroll system. This compensation system normally considers
employee working hours, attendance and productivity for computing the
salary of the employees.
 Performance management system – The main goal of the
performance management system is to track employee performance
reviews and due dates for next reviews.
 Manpower planning system – The manpower planning system
manages the employee inventory and supports several HR activities.
 Succession planning system – The succession planning module
brings the identified and selected employees into the succession
channel.

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 Grievance management system – The grievance management assists

the management in pre-empting employee grievance by analysing the
nature, sources and frequency of earlier grievances.
Self Assessment Questions
Fill in the blanks
10. ____________ is to give support to recruitment process and to
streamline the overall recruitment process.
11. The ________ aims at computing employee payments through an
integrated payroll system.
12. The ______ module brings the identified and selected employees into
the succession channel.

10.6 Implementation of Human Resource Information System

In the previous section, we discussed the applications of HRIS in HRM. Let
us now discuss about implementing an HRIS.
Many organisations have realised the need to apply technology to human
resource management in order to develop human resources as strategic
tools to survive and grow in an extremely competitive market. In fact, there
is a general expectation that the future success of human resource depends
on how effectively it is integrated with technology. Generally, implementation
of HRIS is expensive for an organisation; they need to be careful in deciding
its installation, each company has their own approach to implementation of
HRIS.
Following stages can be considered for HRIS installation:
Determination of the need for HRIS – Before implementing an HRIS, the
management must clearly decide the need for an HRIS in the organisation.
First it needs to assess the present HR operations that require system-
enabled support and then the extent to which these operations require such
supports. Factors such as size of the organisation, strength of the
workforce, present level of HR efficiency and the problems an organisation
is facing in current HR operations need to be considered carefully before
HRIS implementation.
Select a project team for implementation – It would be a major effort to
find and select the HRIS that will meet the organisational needs. The

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problem is that an organisation rarely gives enough thought into choosing

who will implement the HRIS. The management needs to choose a
specialised team for this purpose. The main task of this team is to supervise
the entire operation from planning to execution of the project, including post-
installation monitoring. It is extremely important that the organisation put the
same effort into picking who will handle the implementation that they did in
selecting an HRIS application.
Following steps can help to get the best HRIS implementation:
 Find out exactly who will be doing the HRIS implementation and
check their background – It is very important to know how many
implementations have been done by the team. It is a tough job for an
organisation to find an expert or a team who can perform well in
handling HRIS implementation. The team may be certified on HR system
and/or HR payrolls, but until they have performed a large number of
installations they will not be able to handle all the pitfalls and issues that
inevitably arise. It is also a good idea to ask for references about the
individual who will be working on the HRIS implementation.
 Set HRIS implementation expectations – First it needs to be verified
that the HRIS implementation consultant and/or staff are qualified
enough to handle the job - the organisation needs to make sure that
both sides are in full agreement as to what is included in the scope of
the project. Avoidable misunderstandings regarding expectations create
cost overruns and can lead to poor implementations. Make sure
everything is in writing and specifically they should provide a detailed list
of project requirements and an estimated time of completion for each.
Most companies will provide a low and high expected range (“two to
three months”, for example).
 HRIS implementation project cost versus hourly or daily – HRIS
implementation projects are typically quoted either on daily rate basis or
by project basis. Project costing has some advantages, because
organisations would not go over the quoted amount unless needs arise
that are outside of the project’s original scope. The disadvantage of
project costing is that companies are going to charge a higher rate since
they have to quote the project on the high side. Daily or hourly quotes
for consulting are fine, but make sure to get a detailed plan on the
consulting time. Employers can break down the hours according to each
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step in the implementation process: half a day for network installation,

one day for code table setup, one day for benefits setup, etc.
 Preparation for HRIS implementation – Before the organisation begins
the implementation, make sure all information and data that the
consulting staff will need is ready. It would not be good for a consultant
doing nothing while waiting for data on benefits plans. Organisations
should provide all the facilities that the consultant or the implementation
team will work with during the process (IT staff especially - make sure
they know when their services will be needed).
 Stay on track – As an HRIS system implementation is taking place and
the customers are learning more and more about the capabilities of their
new HR software, make sure they don’t get off track with work that is
outside the scope of the project. They need to finish the core project first
and then determine how much quoted time is left for other
considerations.

Self Assessment Questions

13. ________ must clearly decide about the need for an HRIS in the
organisation.
14. Implementation of HRIS is __________ for an organisation.
15. ________ projects are typically quoted either on daily rate basis or by
project basis.

10.7 Benefits of Human Resource Information System

In the previous section, we discussed about implementing an HRIS. Let us
now discuss the benefits of HRIS.
An HRIS, which is an interaction between human resource and information
technology, is an important tool for developing competitive advantage out of
human resource. HRIS keeps the organisation healthy by monitoring and
optimising the human resources available in the organisation constantly.
The benefits of HRIS are as follows:
 Effective use of human resource: HRIS standardises the processes
for key HR functions which ensure that there is uniformity in the
performance of HR activities in the entire organisation.

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 Ability to manage voluminous data: An HRIS can handle large data.

This requires reconciliation with high speed and great accuracy.
 Reduction in labour cost: HRIS has an ability to reduce the labour
requirement in the HR department significantly.
 Faster and effective HR decisions: HRIS is capable of generating
alternative decision possibilities.
 Better supervision and control over human resources: the
effectiveness of supervision and control exercised by the managers over
human resource is higher than in a manual environment.
 Accessible: HRIS enables its users to have anytime, anywhere access
with multiple channels.

Self Assessment Questions

16. HRIS _____ the processes for key HR functions which ensure that
there is uniformity in the performance of HR activities in the entire
organisation.
17. HRIS has an ability to reduce the _________ in the HR department
significantly.
18. HRIS enable its users to have anytime, anywhere access with
__________ channels.

10.8 Impact of Implementation of Human Resource Information

System
In the previous section, we discussed the benefits of HRIS. Let us now
discuss the impact of implementation of HRIS.
HRIS has a great impact on organisations that implement them. Most often,
organisations replace several related systems, such as employee database,
payroll and benefits systems, with one HRIS that does it all. Many
companies go through a process of comparing and evaluating several HRIS
packages using a team of analysts or managers from various departments
affected – HR, payroll, benefits, employee relations, training, etc. The HR
department looks for improved reporting of employee data, while payroll
would be concerned with the system’s paycheck calculations and regulatory
reporting, and benefits may be looking for a more streamlined enrollment
process. The hiring process is a good example. As a person is recruited,
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hired and paid, each department may have its own specialised system and
process for managing the employee data. As the team evaluates an HRIS
software package, it begins to get a better grasp on what the company’s
business processes are, and therefore what the company might require in
an HRIS. The team will most likely find that HRIS evaluation team members
spend most of their efforts building selection criteria and choosing an HRIS,
instead of setting expectations and building executive support.
There are three primary activities in an HRIS implementation:
 Configuring the HRIS for the organisation’s business processes and
policies.
 Interfacing data with other systems and converting historical data into
the HRIS.
 Preparing the organisation for the HRIS.
An HRIS comes with built-in processes for most HR activities, but an
organisation needs to customise the system to process according to their
specific needs. For example, every HRIS supports the process of benefits
open enrollment, but the system does not come delivered with a company’s
specific benefit providers and eligibility rules.
Configuration tasks then become a process of understanding the company’s
business processes well enough to programme that logic into the HRIS.
This mapping of business processes and policies into system control tables
requires people who understand both the business process and the HRIS–
typically the existing IT support and HR business analysts.
The HRIS project team must track progress not only on the technical
aspects of implementing the HRIS, but also on the softer side of managing
the organisation as a whole to accept the new business processes that
come with the HRIS. Companies typically underestimate this change-
management effort. From the very beginning there must be a focus on
preparing the organisation and the employees for the new HRIS.
For example, HR and payroll may have reported to separate areas of the
company, and parts of HR business processes were scattered throughout
various departments. But once HRIS is implemented, the previous
organisations are transformed to report to a single authority and a shared-
services group is established to perform the integrated work processes that

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were once scattered. This is a common, but often unexpected, result of

HRIS implementations.
During the implementation phase, organisation should also be determining
what their support model will look like–what kind of organisation will be
required to support in HRIS.
All of the items mentioned so far force HR managers to become involved in
what is usually perceived as an IT project. They may be accustomed to
pushing responsibility for such projects onto IT managers, but implementing
an integrated HRIS requires the HR manager’s participation and active
involvement in scoping, implementation, cutover, resourcing and
management.
HRIS leads to more integrated reporting of employee data, which can lead
to efforts that benefit the company–better reporting of employee costs, skills
and requirements, time-keeping and recording, etc. It gives information to
senior managers that can be used to improve the application of HR policy or
to cut costs. The user should be properly trained before using HRIS. He/she
must know the business process and how it relates to the HRIS. In most
companies, a certain portion of users will be able to do “analytical” thinking
where as others will not. The resulting shakeout has to happen, and it is
most often painful, either for the employees themselves or for the HRIS
support organisation. If a more centralised, integrated HR organisation
doesn’t surface during the implementation period, the organisation will tend
to evolve in that direction.
Most HRIS packages rely on relational data models, higher-level
programming languages and interactive data management, presenting
technical requirements for which some IT analysts may not be ready. The
HRIS may have proprietary languages or facilities, requiring new IT skills.
Often these skills will be in high demand, driving a premium rate of pay.
Internal resources may opt to leave the company for a higher pay or they
may demand higher pay at the company. The higher pay might be outside
the HR guidelines for fair salary. The resulting dilemma can create retention
problems. HR users–the analysts in HR, payroll and benefits–must take a
more active role in ongoing support and system changes.

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Some companies depend too much on consulting firms or contractors to

perform an implementation. Given the level of change such a project will
create, there will be areas that resist the implementation.
This should motivate other employees to follow their colleagues’ paths and
will discourage internal system experts leaving the company for a higher-
paying consulting job. Training programmes can help employees to
understand the system well.
Many organisations also find it useful to defend the steering committee past
HRIS implementation and into the productive life of the HRIS. The steering
committee is an excellent group to monitor the ongoing quality of HRIS
operations, manage relationships with the HRIS vendor and clear the path
for later HRIS upgrades or enhancements. It may take years for a firm to
adjust to a new HRIS. As it does, most will see that their organisational
structure will tend to reflect the HRIS structure. This is natural – managers
for years have organised their departments to fit the way work is done and
the organisational culture often reflects that structure. When the way that
work is done changes–and an HRIS will engender that change–it’s natural
for the organisation to change as well. Structural and cultural changes might
be painful, and people will resist, but it’s hard to fight these natural
tendencies. Instead of fighting them, managers need to be aware of what is
happening and proactively prepare for this new world.

Activity 2:
Read the article ‘HRIS Helping HR’ and prepare a list of benefits of using
HRIS.
Refer: http://www.employeeeconnect.com/pdf/sept.2001-
employeeconnect.pdf

Self Assessment Questions

19. _______ has a deep effect on organisation that implements them.
20. Some companies depend too much on _________ to perform HRIS
implementation.
21. __________ help employees to understand the HRIS well.

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10.9 Summary
Let us recapitulate the important concepts discussed in this unit:
 HRIS includes all the HR functions of the organisation, namely,
recruitment and selection, training and development, wages and salary
administration, incentives and benefits, grievance resolution, human
resource planning and succession planning.
 A HRIS performs three interconnected activities as a database: (i)
receiving inputs in the form of data from different sources. (ii) storing and
processing data with the purpose of transforming them into meaningful
information. (iii) generating output in different forms, as required by the
users.
 HRIS supports management at three levels of an organisation. The
electronic data processing level, the management information system
level, and the decision support system level.
 Different applications of an HRIS are applicant tracking system, training
and development system, compensation management system,
performance management system, manpower planning system,
succession planning system and grievance management system.
 Important benefits of HRIS are effective use of human resource, ability
to manage voluminous data, reduction in labour cost, faster and
effective HR decisions, better supervision and control over human
resources, and easily assessable.
 Implementation of HRIS is expensive for an organisation. They need to
be careful in deciding about its installation, each company has their own
approach to implementation of HRIS. The stages that can be considered
for HRIS installation are determination of the need for HRIS, selecting a
project team for implementation, who will be doing the HRIS
Implementation, setting HRIS implementation expectations, HRIS
implementation project cost versus hourly or daily, preparation for HRIS
implementation, stay on track.
 HRIS have a deep effect on organisation that implements them. Most
often organisations are replacing several related systems, such as
employee database, payroll system and benefits system, with one HRIS
that does it all. Many companies go through a process of comparing and
evaluating several HRIS packages using a team of analysts or
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managers from the various departments affected – HR, payroll, benefits,

employee relations, training, etc. The HR department looks for improved
reporting of employee data, Payroll is concerned with the system’s
paycheck calculations and regulatory reporting, while benefits may be
looking for a more streamlined enrollment process. The hiring process is
a good example. As a person is recruited, hired and paid each
department may have its own specialised system and process for
managing the employee data. As the team evaluates an HRIS software
package, it begins to get a better grasp on what the company’s business
processes are, and therefore what the company might require in an
HRIS.

10.10 Glossary
 Enterprise resource planning: Enterprise Resource Planning (ERP) is
an integrated computer-based system used to manage internal and
external resources, including tangible assets, financial resources,
materials, and human resources.
 Management Information system: It is a computer based or manual
system that transforms data into information useful in the support of
decision making.
 Payroll: The total amount of wages and salaries paid by a company to
its employees.

10.11 Terminal Questions

1. Discuss the concept of HRIS and its objectives.
2. Discuss the types of HRIS.
3. Explain the applications of HRIS in human resource management.
4. Discuss of the benefits of HRIS in an organisation.
5. Explain the stages of HRIS implementation.
6. Discuss the impacts of HRIS implementation in an organisation.

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10.12 Answers

Self Assessment Questions

1. Input, process, output
2. Human resource management
3. Human resource information system
4. Input
5. Data Processing
6. Output
7. Electronic data processing
8. Management Information System
9. Decision Support System
10. Applicant tracking system
11. Compensation management system
12. Succession planning
13. Management
14. Expensive
15. HRIS Implementation
16. Standardises
17. Labour requirement
18. Multiple channels
19. HRIS
20. Consulting firms
21. Training programme

Terminal Questions
1. HRIS includes all the HR functions of the organisation, namely,
recruitment and selection, training and development, wages and salary
administration, incentives and benefits, grievance resolution, human
resource planning and succession planning. For more details, refer
section 10.2.
2. HRIS supports management at three levels of an organisation. The
electronic data processing level, the management information system

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level, and the decision support system level. For more details, refer
section 10.4.
3. Different applications of an HRIS are as follow, applicant tracking
system, training and development system, compensation management
system, performance management system, manpower planning system,
succession planning system, and grievance management system. For
more details, refer section 10.5.
4. Important benefits of HRIS are effective use of human resource, ability
to manage voluminous data, reduction in labour cost, faster and
effective HR decisions, better supervision and control over human
resources and easily assessable. For more details, refer section 10.7.
5. Implementation of HRIS is expensive for an organisation; they need to
be careful in deciding about its installation, each company has their own
approach to implementation of HRIS. The stages that can be considered
for HRIS installation are determination of the need for HRIS, selecting a
project team for implementation, who will be doing the HRIS
implementation, set HRIS implementation expectations, HRIS
implementation project cost versus hourly or daily, preparation for HRIS
implementation, stay on track. For more details, refer section 10.6.
6. The HR department looks for improved reporting of employee data,
payroll is concerned with the system’s paycheck calculations and
regulatory reporting, while benefits may be looking for a more
streamlined enrollment process. The hiring process is a good example.
As a person is recruited, hired and paid each department may have its
own specialised system and process for managing the employee data.
As the team evaluates an HRIS software package, it begins to get a
better grasp on what the entire company’s business processes are, and
therefore what the company might require in an HRIS. For more details,
refer section 10.8.

10.13 Case Study

Sridhar Pharmaceuticals Limited is a company engaged in the production of
healthcare products for the past 15 years. This company has been offering
competitive compensation packages to its employees and has excellent
array of HR policies and practices. Yet, its track record in employee hiring

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has not been very impressive for some time since some of the new entrants’
performance was simply dismal.
The management was not impressed by the explanations provided by the
HR department. So it appointed an external HR expert to look into the
problems of the HR department. The external HR expert, who audited the
HR policies, procedures and performance of the HR department,
recommended the introduction of an HRIS in a phased manner. As a first
response to the recommendation of the external HR auditor, management
decided to implement the applicant tracking system in the recruiting section
of the HR department. It instructed the HR manager to plan and implement
the system in a hassle free way in close consultation with the trade union.

Discussion Questions:
1. If you are in the position of HR manager in Sridhar Pharmaceutical how
do you find HRIS is going to help you in the recruitment process?
(Sources: Durai, P. (2010). Human Resource Management. New Delhi:
Pearson Publication.)

References/ E- references:
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.
 Kavamagh, M. J., and Thite, M. (2009) Human Resource Information
System. New Delhi: Saga Publication.
 Fisher, S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.

E-References:
 http://www.hr.howard.edu/HRIS/default.htmHuman Resource (Retrieved
on 26 February, 2012)
 http://www.insightcp.com/res_09.html(Retrieved on 26 February, 2012)
 http://www.egyankosh.ac.in/bitstream/123456789/35600/1/unit-16.pdf
(Retrieved on 26 February, 2012)

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Unit 11 Job Analysis and Design

Structure:
11.1 Introduction
Objectives
11.2 Concept of Job Analysis and Design
11.3 Process of Job Analysis
11.4 Methods of Job Analysis
11.5 Job Analysis Information
11.6 Concept of Job Design
11.7 Summary
11.8 Glossary
11.9 Terminal Questions
11.10 Answers
11.11 Case Study

11.1 Introduction
In the previous unit, we discussed the objectives, components and types of
HRIS. We also learnt the application of HRIS in HRM, benefits of HRIS and
the process of implementing HRIS in an organisation. Job analysis is the
process used to collect information about the duties, responsibilities,
necessary skills, outcomes and the work environment of a particular job.
You need as much data as possible to put together a job description, which
is the frequent outcome of job analysis. There are critical inputs to decide
about the job importance and the performance standard requirements. Job
information provides input about the jobs, as per which jobs are
documented. Job evaluation decides the relative worth of a job. Job design
helps in organising job tasks and it has direct impact on mental and physical
health of employees and so also on their performance levels.
In this unit, we will discuss the concept of job analysis, process and
methods of job analysis. We will also learn the job analysis information and
the concept of job design.
Objectives:
After studying this unit, you should be able to:
 analyse the concept of job analysis

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 explain the methods of job analysis

 describe the process of job analysis
 analyse the concept of job design and characteristics of job design

11.2 Concept of Job Analysis and Design

Job analysis is the process of determining and recording all the pertinent
information about a specific job, including the tasks involved, the knowledge
and skill set required to perform the job, the responsibilities attached to the
job and abilities required to perform the job successfully. Job analysis is a
process to identify and determine in detail the particular job duties and
requirements and the relative importance of these duties for a given job. It is
a process where judgements are made from data collected on a job.
An important concept of job analysis is that the analysis is conducted of the
job and not the person. While job analysis data may be collected from
incumbents through interviews or questionnaires, the product of the analysis
is a description or specifications of the job, not a description of the person.
Purpose of job analysis
The purpose of job analysis is to establish and document the 'job
relatedness' of employment procedures such as training, selection,
compensation and performance appraisal.
Job analysis is a recording of all the activities involved in a job and the skill
and knowledge requirements of the performer of the job.
Job analysis assists in the following HR activities:
1. Recruitment
2. Selection
3. Job design
4. Estimating job worth
5. Training
6. Appraisal
These activities depend on job analysis and its end products for their own
functioning. Job description and specifications are end products of job
analysis (from the basis for recruitment).

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Job analysis plays a key role in designing and managing the performance
appraisal system in an organisation:
1. It helps in identifying the Key Responsibility Area (KRAs) for a position.
2. It helps in setting of goals or objectives for the appraisal period.
3. This forms the basis for the evaluation of an employee’s performance.
4. A comparison of the job specifications arrived at the end of a job
analysis to identify the training needs for existing employee.
Figure 11.1 depicts the job analysis.

Fig. 11.1: Job Analysis

(Sources: Carrell, M. R. (1995). Human Resource Management-Global
Strategies for Managing Diverse Workforce. Prentice Hall 5th Ed)
.
Self Assessment Questions
1. ________ is a recording of all the activities involved in a job and the
skill and knowledge requirements of the performer of the job.

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2. Job analysis helps in identifying the _________ for a position.

3. Job analysis plays a key role in ______ and ______ the performance
appraisal system in an organisation.

11.3 Process of Job Analysis

In the previous section, we discussed the concept and purpose of job
analysis. Let us now learn the process of job analysis.
An effective and right process of analysing a particular job is good for the
organisation. It helps them maintain the right quality of employees, measure
their performance on realistic standards, assess their training and
development needs, and increase their productivity. Let us discuss the job
analysis process and find out how it serves the purpose.
Job analysis is the process of breaking down a specific job into parts and
scrutinising each of them to gather the necessary information. It requires a
systematic and efficient examination of the tasks, duties, responsibilities and
accountability of a job. The process of job analysis involves the execution of
a series of related steps.
a) Information gathering
First stage in job analysis is to gather all the necessary information relating
to:
 Organisation structure.
 Role of the job in relation to other jobs in the organisation.
 Class to which job belongs.
 A detailed description of the activities and responsibilities involved in the
job.
b) Job-specific competency determination
Based on study and observation, the competencies required for the job are
identified.
c) Developing a job description
A description of the tasks, responsibilities, duties and functions of the job is
prepared. This forms the job description.

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d) Developing a job specification

The job specification provides a complete list of competencies and
qualifications required to match the job description.

Self Assessment Questions

4. First stage in job analysis is to gather all the necessary ___________.
5. In ________ the tasks, responsibilities, duties and functions of the job
are prepared.

Activity 1:
Suppose you are an HR Manager in a local bank. Prepare the job
description for a Security Guard of the bank ATM. List the duties and
responsibilities that the Guard would have to carry out.

11.4 Methods of Job Analysis

In the previous section, we discussed the concept and purpose of job
analysis. Let us now learn the methods of job analysis.
The following are the methods of job analysis:
Observation methods
In this method, individuals performing the job are observed and relevant
points are noted. It includes what was done and how it was done. Time and
motion study is the best example of observation method. In this method, the
observer knows what has to be noted and what can be ignored. Otherwise
whole observation method can result in a lengthy but superfluous document.
Individual interview method
This method is employed when the job in question is complex and has
varied tasks. It is effective when the interview is structured and the analyst is
clear about what information has to be obtained from the interview. An
unstructured interview might help in gathering all the information about the
job but it will be very time consuming.
Group interview method
In this method the employees performing the same job are interviewed in
groups. Information which might have been missed during individual

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interview will come up during group interview. It is less time consuming.

Sometimes group dynamics might affect the direction of the interview.
Questionnaire methods
In this method, the analyst gives a long structural questionnaire to be filled
by the employees. Both objective and open-ended questions are included. It
is a good method to take the information from employees without disturbing
them on their job. Sometimes the analysis part becomes problematic,
especially when there is no clarity. Sometimes the analyst might fail to
convey what kind of information exactly they want to gather from
incumbents.
Technical conference methods
This is a method of gathering all the job related information from ‘Experts’
(Supervisors) and not from the employee(s).
Diary method
In this method, incumbents of that particular job make immediate note of the
activities they perform. A lot more information can be gathered about the job
from this method. This exercise takes longer time to complete as there are
many activities which take longer time intervals.
Functional job analysis
Beginning in the 1940s, Functional Job Analysis (FJA) was used by U.S.
Employment Service job analysts to classify jobs. (Fine and Wiley, 1971).
The most recent version of FJA uses seven scales to describe what workers
do in jobs: (1) Things, (2) Data, (3) People, (4) Worker Instructions,
(5) Reasoning, (6) Math, and (7) Language. Each scale has several levels
that are anchored with specific behavioural statements and illustrative tasks.
Like other job analysis instruments, FJA is a methodology for collecting job
information.
The work functions of any job can be categorised under the heading of data,
people and things - basically, an employee’s handling of data, his
relationship with colleagues and kind of work that he does are covered
under these headings.

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Table 11.1: Work Functions and Levels of Difficulty

Data People Things
0 Synthesising 0 Mentoring 0 Setting up
1 Coordinating 1 Negotiating 1 Precision working
2 Analysing 2 Instructing 2 Operating-controlling
3 Computing 3 Supervising 3 Driving-Operating
4 Copying 4 Diverting 4 Manipulating
5 Comparing 5 Persuading 5 Tending
6 Speaking-Signaling 6 Feeding-off-bearing
7 Serving 7 Handling
8 Taking instructions-Helping
(Sources: US Department of Labour, Dictionary of occupational titles, 4 th ed.
(Washington, DC Government printing office, 1977))

Table 11.1 defines the levels of difficulty associated with various job
functions, which in turn help in determining the difficulty associated with
various jobs. This analysis is based on three parameters–data, people and
things. The greater the difficulty of a function, the lower the number
associated with it. Example: synthesising (0) is more difficult than
copying (4).
Position Analysis Questionnaire (PAQ)
PAQ is another standard method of job analysis that describes jobs in terms
of worker activity. Jobs are differentiated from one another on the bases of
the following five dimensions:
1. Having decision-making/Communications/Social responsibilities –
Activities that involve considerable amount of communication and
interaction with people, as well as the responsibilities associated with
decision making and planning functions.
2. Performing skills activities – Skills activities that are performed by
using technical devices or tools and in which the emphasis is on
precision, recognising subtle differences and on manual control.
3. Being physically active/Related environmental conditions – The
activities that involve considerable movement of the entire body or major
part of it. (found in factories and shops)

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4. Operating vehicles/equipment – Activities that use vehicles or

equipment and typically involve sensory process.
5. Processing information – Activities that involve a wide range of
information are processing exercises.
6. Critical Incident Technique (CIT) – Behaviours and specific situations
contribute to the success or failure of individuals or organisation.
Interviews and questionnaires can be used to collect and compile
information about these critical incidents and is suitable for middle and
top management jobs.

Self Assessment Questions

6. In ___ method individuals performing the job are observed and relevant
points are noted. It includes what was done and how was it done.
7. ___________ is a method of gathering the job related information from
‘Experts’ (Supervisors) and not from employee.
8. In _________ method incumbents of that particular job make
immediate note of the activities they perform.

11.5 Job Analysis Information

In the previous section, we discussed the methods of job analysis. Let us
now learn about job analysis information.
A well planned and well executed job analysis exercise results in many
effective tools for HR function:
 Job identification.
 Significant characteristics of a job.
 What the typical worker does.
 What materials and equipment the worker uses.
 How a job is performed.
 Required personal attributes.
 Job relationship
Job description
The job description describes in detail the various aspects of a job such as
the tasks involved, the responsibilities of the job and the deliverables. It also
describes the setting and work environment of the job.

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Guidelines to write a job description

The scope and nature of the work, including all important relationships of the
work and duties of the position should be clearly laid out. Kind of work,
degree of complexity, degree of skill required, responsibility for each phase
of work, etc. Supervisory responsibility should be explained to employee in
brief.
Job Specification
A job specification is a written statement of the minimum acceptable
qualifications, knowledge, skill traits, and physical and mental characteristics
that an employee can perform the job successfully.
Different specifications are as follows:
 Physical specifications: Physical features such as height, weight,
vision, hearing, ability to lift and carry weights, heath conditions, age etc.
 Mental specifications: Analytical ability, data interpretation ability,
decision –making ability, etc.
 Emotional and social specifications: Emotional specifications include
stability, adaptability and flexibility. Social specifications include ability to
work in a team, lead a team, maintain interpersonal relationship, etc.
 Behavioural specifications: Ability to make judgments, ability to
undertake research, creativity, teaching ability, maturity, self-reliance
and ability to be authoritative, etc.
Uses of job analysis
Job knowledge has many uses in HRM. Organisations use information
obtained by job analysis for recruitment, selection and placement,
organisation planning and job design, training, grievance settlement, as well
as job evaluation and other compensation programmes. People outside the
organisation also use information about jobs. Career placement requires the
same type of person-job matching that organisations do. Getting a disabled
worker back to work requires knowledge of jobs in order to determine what
jobs the worker can do or can be trained to do.
Centrality of job analysis
Figure 11.2 depicts the centrality of job analysis.

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Fig. 11.2: Centrality of Job Analysis

(Source: Adapted from J. Ghorpade (1988). Job analysis: A handbook for the
HR director. Englewood cliffs, NJ: Prentice Hall, p. 6)

These different uses of job information may require specialised job

descriptions. Job evaluation requires information that permits distinguishing
jobs from one another, usually on the basis of work activities and/or job
required worker characteristics. Recruitment and selection require
information on the human attributes a successful jobholder must bring to the
job. Training requires information on the knowledge and skills that the
successful jobholder must evidence. Job design may require identifying
employee perceptions of intrinsic and extrinsic rewards. Although there is
overlap among these different requirements, arguments for separate job
analysis for separate purposes are understandable.

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Self Assessment Questions

9. A ________ is a written statement of the minimum acceptable
qualifications, knowledge, skill traits, and physical and mental
characteristics that an employee can perform the job successfully.
10. The _________ describes in detail the various aspects of a job such as
the tasks involved, the responsibilities of the job and the deliverables. It
also describes the setting and work environment of the job.
11. _________ include stability, adaptability and flexibility, social
specifications include ability to work in a team, lead a team, maintain
interpersonal relationship.

11.6 Concept of Job Design

In the previous section, we discussed the job analysis information. Let us
now learn the concepts of job design.
Job design specifies the content of job and methods of doing the job. It is
the process of determining specific tasks to be included in a job and the
methods of performing those tasks. According to DeCenzo and Robbins,
“Job design is the way in which job tasks are organised into a unit of work.”
According to Byars and Rue “Job design is the process of structuring work
and designing the specific work activities of an individual or group of
individuals to achieve certain organisational objectives.”
Job design is the process of structuring work and designating the specific
activities at individual or group levels.
The different approaches to job design are:
 Engineering Approach
 Sociotechnic Approach
Engineering approach
The key element of this approach is the ‘task idea’ that led to job
specialisation. The task idea’ is the work of every workman that is fully
planned and laid out by the management, at least one day in advance.
Sociotechnical approach
The approach taken by the sociotechnical systems method is the design of
work systems that foster a locking of the technical and social aspects of

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jobs. In order to create jobs, which have this supportive relationships, work
teams and not individual jobs are studied. Jobs in the traditional sense are
non-existent and instead, each worker plays an assigned role in
accomplishing the group's objectives. Redesigning work through
sociotechnical systems methods requires the combined efforts of
employees, supervisors and union representatives in analysing significant
job operations. Jobs are not necessarily designed to be intrinsically
motivating, rather, they are designed so that the work is accomplished. As in
scientific management, a supervisor's goal is to ensure that the
organisation's objectives are met. However, this is accomplished by
concentrating only on critical job aspects, by forming work teams consisting
of members who have the necessary qualifications to accomplish the tasks
and by allowing work groups the autonomy to manage their own work
process.
The thrust of the sociotechnical approach to job design is that both the
technical system and the accompanying social system should be considered
when designing jobs. According to this concept, jobs should be designed by
taking a ‘holistic' or ‘systems' view of the entire job situation, including its
physical and social environment. Using the sociotechnical approach, the
following guidelines have been developed for designing jobs:
1. A job needs to be reasonably demanding for the individual in terms other
than sheer endurance and yet provide some variety (not necessarily
novelty).
2. Employees need to be able to learn on the job and to continue learning.
3. Employees need some minimum area of decision making that they can
call their own.
4. Employees need some minimal degree of social support and recognition
at the workplace.
5. Employees need to be able to relate what they do and what they
produce to their social life.
According to this approach, job should be designed taking a holistic view of
both physical and social environments.

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The basic characteristics of a job according to the sociotechnical approach

are:
 A little challenging and demanding
 Variety and novelty
 Social support and recognition
 Desirable future
 Decision-making authority
 Correlation with social levies
Modern management techniques
Job rotation enhances employee motivation by periodically assigning the
employee to alternative jobs.
An employee, who has been doing the same job repeatedly over the years,
would get bored and this would affect his performance.
Job enlargement and job enrichment are two closely related approaches to
improve the job design. Job enlargement refers to increasing the range of
activities performed by an individual. Job enrichment is job enlargement
carried out with the specific objective of making a job more interesting and
satisfying for individual employees.
Job enlargement
Job enlargement involves increasing the length and hence the operating
time of each cycle of work for the job holder.
Job enlargement is a job design technique wherein there is an increase in
the number of tasks associated with a certain job. In other words, it means
increasing the scope of one’s duties and responsibilities. The increase in
scope is quantitative in nature and not qualitative and at the same level.
Job enlargement is a horizontal restructuring method that aims at increasing
the workforce flexibility and at the same time reducing monotony that may
develop over a period of time. It is also known as horizontal loading in that
the responsibilities increase at the same level and not vertically.
Many believe that since the enlargement is horizontal in nature there is not a
great need for training! Contrary to this, job enlargement requires
appropriate training especially on time and people management. Task
related training is not required much since the person is already aware of

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the same or doing it for some time. The following are the major benefits of
job enlargement:
 Reduced monotony: Howsoever interesting the job may appear in the
beginning, sooner or later people complain of boredom and monotony.
Job enlargement if planned carefully can help reduce boredom and
make it more satisfying and fulfilling for the employees.
 Increased work flexibility: There is an addition to the number of tasks
an individual performs. There is thus an increased scope of carrying out
tasks that are versatile and yet very similar in certain aspects.
 No skills training required: Since the individual has already been
performing the task in the past, there is no great requirement for
imparting of new skills. However, people and time management
interventions may be required. The job thus gets more motivational for
the one performing it.
Job enrichment
Job enrichment is the most popular technique for enhancing employee
motivation.
Job enrichment is done by redesigning jobs so as to increase both their
scope and their depth.
Typically job enrichment involves combining various existing and new tasks
into one large module of work. The work is then handed over to an
employee, which means there is an increase in responsibilities and scope.
This increase in responsibility is often vertical. The idea is to group various
tasks together such that natural work units are created.
In addition, expanding jobs vertically also gives employee direct control over
work units that were formerly under the jurisdiction of top management only.
While on one hand this increases the ownership of the employees in their
work, it also relieves the unnecessary burden from the top management.
Job enrichment also opens up a feedback channel for the employees.
Employees are frequently apprised of their performance. This keeps them
on track and helps them know their weak and strong points. Performance
standards are set for the employees themselves and future performances
are matched against the benchmarks. All this without any serious
intervention or involvement of the top management!

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In a certain bank that dealt with commercial credit letters for import and
export trade, the employees processed the documents in a sequence with
each employee being specialised for certain aspect of verification. Often it
so happened that a mistake at preceding level lead to a series of mistakes
at succeeding level. Errors accumulated at each level and this resulted in
huge loss of productivity.
The organisation decided to go for job enrichment where each employee or
clerk was specialised in all aspects of processing. Each employee was now
able to handle a client on his own. After some time it was found out that the
transaction volume increased by 100 percent!
Job enrichment involves the following steps:
 Selecting the job that can motivate employees and improve
performance.
 Providing scope for change.
 Making a list of changes.
 Concentrating on achievement, responsibility, self control.
 Changing the content of job rather than the incumbents.
 Providing adequate training guidance encouragement and help.
 Introducing the enriched jobs carefully.
 Preparing specific programmes for each project.
Benefits of job enrichment
Research studies on job enrichment found out decreased levels of
absenteeism among the employees, reduced employee turnover and a
manifold increase in job satisfaction. There are certain cases however
where job enrichment can lead to a decrease in productivity, especially
when the employees have not been trained properly. Even after training, the
process may not show results immediately, since it takes time to reflect in
the profit line.
Difference between job enrichment and job enlargement are as follows:
1. The difference between job enrichment and job enlargement is
essentially of quantity and quality. Whereas job enlargement means
increasing the scope of the job quantitatively by adding up more tasks,
job enrichment means improvement in the quality of job such that
employees are more satisfied and fulfilled.

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2. Through job enrichment an employee finds satisfaction and contentment

in his job and through job enlargement employee feels more responsible
and worthwhile in the organisation.
3. Job enrichment entails the functions of planning and organising and
enlargement involves execution of the same. Both complement each
other, in that job enrichment empowers and enlargement executes.
4. Job enrichment depends upon job enlargement for success and the
reverse in not true.
5. Job enrichment means a vertical expansion in duties and responsibilities
and span of control whereas in job enlargement the expansion is
horizontal in nature.
Job enrichment has been found to have greater impact in terms of
motivation when compared to job enlargement. Since enrichment gives
employee greater insights in managerial functioning and a better work
profile, it is looked upon as an indicator of growth and development. The
same is not true in case of job enlargement which is seen as an employer
tactic to increase the workload.
Some of the other modern management techniques include:
 Flextime
 Telecommuting
 Condensed work
 Working from home

Self Assessment Questions

12. According to _________ approach job should be designed taking a
holistic view of both physical and social environments.
13. ______ enhances employee motivation by periodically assigning the
employee to alternative jobs.
14. ______ involves increasing the length and hence the operating time of
each cycle of work for the job holder.
15. ________ is done by redesigning jobs so as to increase both their
scope and their depth.

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11.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Job analysis is the process used to collect information about the duties,
responsibilities, necessary skills, outcomes and work environment of a
particular job.
 Job analysis provides a number of HR activities such as recruitment,
selection, job design, estimating job worth, training and appraisal.
 Job analysis is the process of breaking down a specific job into parts
and scrutinising each of them to gather the necessary information.
 The process of job analysis involves the execution of a series of related
steps: Information gathering, job-specific competency determination,
developing a job description and developing a job specification.
 Methods of job analysis are: observations method, individual method,
group method, questionnaire method, technical conference method,
diary method, functional method, position analysis questionnaire and
critical incident method.
 Job design is the process of structuring work and designating the
specific activities at individual or group levels. Basic characteristics of
job design are: a little challenging and demanding, variety and novelty,
social support and recognition, desirable future, decision-making
authority and correlation with social levies.

11.8 Glossary
 Job enlargement: An increase in the number of tasks that an employee
performs. It is associated with the design of jobs to reduce employee
dissatisfaction.
 Job enrichment: Job Enrichment is the addition to a job of tasks that
increase the amount of employee control or responsibility.
 Job rotation: The process of periodically moving employees between
different jobs or tasks to minimize monotonous activities and
overexertion of particular muscles or tendons.
 KRA: Key Result Areas (KRA)) Key Result Areas are the goals or
targets set by an entity in their strategic plan. Also known as Key
Performance Indicators.

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11.9 Terminal Questions

1. Define job analysis. What HR activities does job analysis provide?
2. Explain the process of job analysis.
3. Discuss all methods which are related to job analysis.
4. Define job design. Discuss the characteristics of job design.

11.10 Answers

Self Assessment Questions

1. Job analysis
2. key responsibility area
3. designing, managing
4. information
5. Job description
6. Observation
7. Technical conference method
8. Diary Method
9. Job specification
10. Job description
11. Emotional specifications
12. Sociotechnical Approach
13. Job rotation
14. Job enlargement
15. Job enrichment

Terminal Questions
1. Job analysis is the process of determining and recording all the pertinent
information about a specific job, including the tasks involved, the
knowledge and skill set required to perform the job, the responsibilities
attached to the job and abilities required to perform the job successful.
Job analysis assists a number of HR activities like recruitment, selection,
job-design, estimating job worth, training, and appraisal. Refer
section 11.2 for more details.
2. Job analysis is the process of breaking down a specific job into parts
and scrutinising each of them to gather the necessary information. The

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process of job analysis involves the execution of a series of related

steps: Information gathering, job-specific competency determination,
developing a job description, and developing a job specification. Refer
section 11.3 for more details.
3. Methods of job analysis are: Observations Method, individual method,
group method, questionnaire method, Technical conference method,
Diary method, functional method, position analysis questionnaire and
critical incident method. Refer section 11.4 for more details.
4. Job design is the process of structuring work and designating the
specific activities at individual or group levels. Basic characteristics of
job design are: a little challenging and demanding, variety and novelty,
social support and recognition, desirable future, decision-making
authority and correlation with social levies. Refer section 11.6 for more
details.

11.11 Case Study

Job Analysis and Design
Aravind Suitings is a global textile company based in India. The company
has presence in more than 3 countries. It has succeeded in getting a decent
share in an increasingly competitive global market. It employs more than
5,800 employees. This company always views its employees as its strength
and as the secret of its success. It has got several HR practices oriented
towards employee satisfaction and motivation. The uniqueness of the HR
practices of this company are: (i) its accent on extensive training programme
for its employees during their probationary period of two years, and (ii) its
compensation packages, which are excellent for the industry. The HR
department of the company is managed by Mr. Ravi Varma, a post-graduate
in human resource management.
However, the company has been plagued by quite a few HR related
problems in the recent past. One of them is the high rate of attrition
witnessed by the company, especially among the employees promoted to
the higher positions in the organisation. Some other recently promoted
employees were asking reversals to their original positions. Apparently, the
company was perplexed by the developments as the employees leaving the
organisation were indeed performing activities critical to the organisation.

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The company took the matter seriously and was determined to identify the
reasons. It appointed a team of HR experts to look into the issue and
suggest necessary remedial measures.
The team approached all the employees who were leaving the organisation
and conducted an exit interview to ascertain the reason for their quitting the
firm. It also interviewed the employees in that cadre as on that date. Finally,
it went a step ahead and contacted the employees who had already left the
company in the recent past and elicited their views on the different aspects
of employment and the reason for leaving.
Shockingly, almost all the employees spoke negatively about their job. They
also informed the team about the presence of an anomaly in authority,
responsibility and accountability. A number of them perceived a lack of fit
between the level of authority and responsibility. They opined that the job
carried too huge a responsibility but provided little authority and
responsibility. They also revealed that the lack of demarcation of job
authority of different employees often led to misunderstanding and quarrels
with their subordinates. Several employees felt that the compensation
package was not commensurate with the difficulty and accountability of the
job. Based on its interviews with the present and former employees, a team
of HR experts prepared a report and presented it to the top management.
The report squarely blamed the job analysis report (that had been made
earlier) and the resultant HR practices as responsible for the present
situation. It held the job analysis report as poorly investigated and drafted.
The HR manager was asked to respond to the report and present his own
report about the situation. In his report, the HR manager cited the lack of
cooperation of the employees for the job analysis exercises, as the reason
for inaccuracies in the job analysis report. However, he strongly defended
the methods and techniques adopted in the job analysis process.
Finally, the company decided to undertake a fresh job analysis for all the job
titles and integrate the information with the HR practices by revising these
practices thoroughly. An external HR consultancy agency with relevant
expertise in job analysis was hired this time to prepare the job analysis
report even though it charged a high fee.

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Discussion Questions:
1. How do you view the developments in Aravind Suitings from your
perspective?
2. What is your response to the report of the HR manager Mr. Ravi Varma
blaming employees for the defective job analysis report?
(Source: Pravin Durai, Human Resource Management, Pearson Publication,
New Delhi, 2010)

References:
 Fisher S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa K. (2010). Human Resource Management. New Delhi: Tata
McGraw Hills.
 Wayne C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

E-References:
 http://www.managementstudyguide.com/job-enrichment.htm (Retrieved
on 27 January 2012)
 http://www.openlearningworld.com/books/Job%20Design%20and%20
Enrichment/Job%20Design%20and%20Enrichment/Approaches%20to
%20Job%20Design.html (Retrieved on 27 January 2012)
 http://www.eridlc.com/index.cfm?fuseaction=textbook.chpt10 (Retrieved
on 27 January 2012)

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Human Resource Management Unit 12

Unit 12 Employee Misconduct and

Disciplinary Procedure
Structure:
12.1 Introduction
Objectives
12.2 Meaning and Objectives of Discipline
12.3 Principles for Maintenance of Discipline
12.4 Basic Guidelines of a Disciplinary Policy
12.5 Disciplinary Action - Penalties
12.6 Procedure for Disciplinary Action
12.7 Summary
12.8 Glossary
12.9 Terminal Questions
12.10 Answers
12.11 Case Study

12.1 Introduction
In unit 7, you have learnt about performance appraisal. Performance
appraisal is an overall evaluation of the employee in the organization. You
have also learnt that well conducted and disciplined employees have a
higher chance of being promoted.
Managing employee behaviour and performance is one of the important
tasks of managers. Discipline refers to the employees’ observance of
standards set by the organisation. Disciplinary action refers to punishing the
employees who fail to meet the standards of behaviour.
Many organisations maintain a disciplinary policy or system to regulate the
behaviour of the employees and deal with acts of indiscipline. Purpose of
disciplinary action is not to punish erring employee but to make them
understand what type of behaviour organisation wants from the employees
to maintain a proper decorum. In this unit, we will discuss the meaning and
objectives of discipline, and the principles for maintenance of discipline. We
will also study the basic guidelines of a disciplinary policy, disciplinary action
penalties and the procedure for disciplinary action.

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Objectives:
After studying this unit, you should be able to:
 describe the concept of employee misconduct at the workplace
 state how discipline is implemented and measured
 analyse the techniques to ensure discipline

12.2 Meaning and Objectives of Discipline

Discipline is employee self-control which prompts him/her to willingly co-
operate with the organisational standards, rules, objectives, etc.
Discipline is best defined as the observation of principles, rules or any other
laid down procedures, practices, written or otherwise in the organisation by
the employees or group of employees, to whom these apply, for smooth and
effective functioning of the organisation.
As per Dr. Spriegal, "discipline is the force that prompts an individual or a
group to observe the rules, regulations and procedures which are deemed
to be necessary to the attainment of an objective; it is force or fear of force
which restrains an individual or a group from doing things which are deemed
to be destructive of group objectives. It is also the exercise of restraint or the
enforcement of penalties for the violation of group regulations". Bremblett,
Earl R says that, "discipline in the broad sense means orderliness-the
opposite of confusion...”. According to Richard. D Calhoon, "discipline may
be considered as a force that prompts individuals or groups to observe the
rules, regulations and procedures which are deemed to be necessary for the
effective functioning of an organisation.”
Webster's Dictionary gives the meanings of the word ‘discipline as follows:
"First, it is the training that corrects, moulds, strengthens or perfects.
Second, it is the control gained by enforcing obedience. The third meaning
is punishment or chastisement."
In its most practical form, employee misconduct does not mean strict and
technical observance of rigid rules and regulations. It simply means working,
cooperating and behaving in a normal and orderly way, as responsible
adults.

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The aims and objectives of discipline are:

 to ensure and enable employees to work in accordance with the rules
and regulations of the organisation.
 to ensure that employees follow the organisational processes and
procedures in spite of their different personalities and behaviour.
 to provide direction to the employees and fix responsibilities.
 to improve organisational performance by improving the efficiency of
each employee.
 to maintain a sense of orderliness and confidence in the employees
towards each other and towards the management.
 to maintain common feelings of trust and confidence in the employees
towards each other and towards the management.
Good employee conduct is usually catalysed by effective leadership.
Leaders by being examples, prevail upon their teams to willingly follow the
applicable policies, rules and procedures. Similarly employee misconduct
exists when employees fail to observe the rules of the organisation or the
orders of their supervisors. Conditions contributing to poor discipline can be
caused by weaknesses within the organisational structure or by external
factors.

Self Assessment Questions

1. ________________ is the observance of principles, rules or any other
laid down procedures, practices, written or otherwise in the
organisation by the employees or group of employees, to whom these
apply, for smooth and effective functioning of the organisation.
2. According to ____________________, "discipline may be considered
as a force that prompts individuals or groups to observe the rules,
regulations and procedures which are deemed to be necessary for the
effective functioning of an organisation.”
3. Conditions contributing to ______________________ are caused by
weaknesses within the organisational structure or by external factors.

12.3 Principles for Maintenance of Discipline

In the previous section, we discussed meaning and objective of discipline.
Let us now study the principles for maintenance of discipline. Since

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disciplinary measures have serious implications for employees; they often

are based on the principles of being fair, just and acceptable to employees
and, where applicable, the union as well. It cannot be enforced or imposed
on employees, as history has proved, it never benefits anyone. One of the
most significant transformations that have impacted the workplace in the
past few years is the ‘reinstatement’ of discipline in a positive and
employee-supported environment. The way it is practiced in today’s
organisations is extremely well communicated and adopts a discretionary
approach.
The most important principles to be observed in the maintenance of
discipline have been outlined by Yoder. Heneman, Turnball and Harold
Stone:
 As far as possible, all the rules should be framed in cooperation and
collaboration with the representatives of employees. If the latter have a
share in formulating them, they will be more likely to observe them.
 All rules should be checked at regular intervals to ensure that they are
working well according to the organisational policy and practice.
 Rules should vary with changes in the working conditions of employees.
Those framed for office employees, for example, may very well be
different from those that are formulated for workers in an industrial
concern.
 Rules should be uniformly enforced if they are to be effective. They must
be applied without exception and without bending them or ignoring them
in favour of any one worker.
 Penalties for any violation of any rule should be clearly stated in
advance. Employees have the right to know what to expect in the event
of any infringement of a rule or regulation. For this purpose, it is better to
publish them in the employees' handbook.
 A disciplinary policy should have as its objective as the prevention of
any infringement rather than the simple administration of penalties,
however just: it should be preventive rather than punitive.
 Extreme caution should be exercised to ensure that infringements are
not encouraged. This should be done as a matter of policy.

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 If violations of a particular rule are fairly frequent, the circumstances

surrounding them should be carefully investigated and studied in order
to discover the cause or causes of such violations.
 For troublesome employees, the organisation should exercise more
caution and take extra measures to control them.
 Definite and precise provisions for appeal and review of all disciplinary
actions should be expressly mentioned in the employees' handbook for
collective agreements.

Self Assessment Questions

4. As far as possible, all the rules should be framed in cooperation and
collaboration with the ___________ of employees.
5. ___________ should be uniformly enforced if they are to be effective.
6. A disciplinary policy should be __________ rather than punitive.

Activity 1:
Review few recent articles to identify 2-3 incidents of employee
indiscipline. How do you think it should have been dealt and resolved by
the organisation?

12.4 Basic Guidelines of a Disciplinary Policy

In the previous section, we discussed the principles for maintenance of
discipline. Let us now study the basic guidelines of a disciplinary policy.
Modern organisations have evolved the way it practices the art of managing
employee misconduct. However the basic principles discussed remain as
the guiding framework. The principal ingredients of a sound disciplinary
system in organisations are:
1. Location of responsibility: The responsibility of creating awareness
regarding discipline is entrusted with every individual in the
organisation. In case of employee indiscipline, the line manager issues
only verbal and written warnings. In serious cases, which warrant
discharge or suspension, the Industrial Relations Officer and other
independent legal consultants need to be consulted.
2. Proper formulation and communication of rules: The employees are
expected to conform to rules and regulations, and behave in a
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responsible manner. It is essential that these rules and regulations are

carefully formulated, communicated clearly and properly documented
by organisations. This should be easily accessible for employees. In
many organisations the employees need to read it and sign it once in a
year. This acts as an effective preventive mechanism to ensure that
employees are aware of it and have committed to abide by it.
3. Rules and regulations should be reasonable: Today’s organisations
pay a lot of attention, and rightly so, towards formulating equitable
polices that protect employee as well as the organisation’s values and
rights. Often organisations involve employee representatives in
formulating these policies and guidelines. Sometimes companies
conduct workshops and training programmes to help their employees
to get a good and clear knowledge about company policies.
4. Equal treatment: An employee should realise the consequence of
his/her inappropriate behaviour and if he/she is going against the
norms or the rules. The rule applied for a particular act of indiscipline
should reflect the offence and not the person who committed it.
Discipline should be enforced and ensured across every employee and
every situation.
5. Disciplinary action should be taken in private: While the policies
governing the acceptable code of conduct are communicated publicly,
the reprimand for non-compliance needs to be carried out in private.
This is to ensure that a wrong behaviour is corrected and not that the
wrongdoer be punished, or ridiculed. At all times the organisation
needs to be watchful of remaining respectful of its employees and carry
out any action in a respectful and in a confidential manner.
6. Importance of promptness in taking disciplinary action: As goes the
popular saying – justice delayed is justice denied. If the action for
review and reprimand is taken long after a violation of a policy/rule has
happened, it loses its positive and corrective influence. The employees
lose trust in the system and assume that the organisation lacks
commitment to it. It might even lead to resentment, which may not have
developed if the corrective action had been imposed on time.
7. Innocence is presumed: Again as per the fundamental rights of a
human being, an individual is presumed to be innocent until he is

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proven to be guilty. It is the organisation’s responsibility and therefore

the HR team’s responsibility to prove beyond a reasonable doubt, that
a violation or an offence has been committed before any punishment is
awarded. The employee or employees need to be given the first
opportunity to explain himself/herself/themselves. The kind of proof that
would be needed for this purpose would depend on the gravity of the
offence that has been committed.
8. Get the facts: Before taking any disciplinary action, it is important to
ensure that records of the offence and any previous warnings are
reviewed closely.
9. Action should be taken in a non-threatening atmosphere: Based on
appropriate evidence management can take proper action against the
accused employee.

Self Assessment Questions

7. The ___________________ should issue only verbal and written
warnings.
8. While finalising the rules, _________________ should be given the
opportunity to express freely their views.
9. An employee should realise the ___________ of his/her inappropriate
behaviour.

Activity 2:
Visit the official website of ITC and browse through the organisational
code of conduct.
List the aspect of personal conduct that the organisation wants the
employees to adhere.
Refer: www.itcportal.com/about.itc/itc-values/code-of-conduct.aspx.

12.5 Disciplinary Action – Penalties

In the previous section, we discussed the basic guidelines of a disciplinary
policy. Let us now discuss the disciplinary - action penalties. There are
varying penalties for first, second, and third offences of the same rule.
Following are the commonly practiced actions in business organisations:

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1. Oral reprimand
2. Written warning
3. Denial of increments, promotions and pay hikes
4. Pay reductions and disciplinary demotions
5. Suspension
6. Discharge or dismissal
Oral reprimand: The penalties are listed in the general order of severity,
from mild to severe. For most cases, an oral reprimand is sufficient to
achieve the desired result. The supervisor must know his or her personnel in
determining how to give a reprimand. For one person, a severe "session"
may be necessary in order to get attention and cooperation; another person
may require only a casual mention of a deficiency. If the offence is more
serious, the reprimand may be put in written form.
Written warning: When an oral warning or counselling to the employee
does not produce the desired result, the manager may issue a written
warning to the employee. The employee is normally asked to acknowledge
the receipt of written reprimand, irrespective of whether he agrees with the
content of the letter or not.
Since a written reprimand is more permanent than an oral one, it is
considered a more severe offence and the penalty levied accordingly.
Denial of increments, promotions and pay hikes: On some incidents the
management may refuse promotions, increments or pay hike by blacklisting
the employee for a specific period of time. This is usually treated as a
punishment for a certain period of time.
Pay reductions and disciplinary demotion: This is usually more severe
than the denial of pay hikes and promotions because the employee loses
part of existing benefits and privileges received by him from the
organisation.
In the case of demotion, an employee loses social status.
Suspension:
A few offences normally require the direct suspension of the employee
without any prior warning, depending upon the nature of the misconduct

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committed by the employee. The decision regarding suspension is generally

made by higher authorities.
Discharge or dismissal:
This is the severest punishment of all. Both discharge and dismissal
culminate in termination of employment.
When the conduct of an employee is deemed to be mismatched with the
faithful discharge of his duties, and undesirable or against the interest of the
employer to continue him in employment, dismissal will be justified.
In case of discharge, an employer terminates the employment of an
aberrant employee either by giving agreed advance notice or by paying
money in lieu of such notice.
Mc. Gregor’s Red Hot Stove Rule:
One effective way to approach the disciplinary process is to follow what is
popularly known as the red hot stove rule.
It suggests that administering discipline is more like touching a hot stove.
According to Mc. Gregor, action should be immediate, impartial and
consistent with a warning such as the results of touching a red hot stove.
 Immediate: The burn happens as soon as a person touches a red hot
stove; like that an employee should be made to realise immediately if
he/she is going against the norms or the rules.
 Impersonal: Regardless of who touches it, the stove causes burns. In
the same way the rule applied for a particular act of indiscipline should
reflect the offence and not the person who committed it.
 Consistent: Every time a person touches a red hot stove he receives
burns. That is, the result is consistent. In the same way discipline should
be enforced and ensured across every employee and for every situation.
 Foreseeable: The red hot stove warns the individual through the heat it
generates, that it will burn if touched. In the same way employees
should be made aware that poor conduct or indiscipline will result in
specific, predetermined consequences.

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Self Assessment Questions

10. The supervisor must know his or her employee in determining how to
give a ________________.
11. Since a written reprimand is more permanent than a
________________ one, it is considered a more severe penalty.
12. Both discharge and dismissal culminate in __________ of
employment.

12.6 Procedure for Disciplinary Action

In the previous section, we discussed the disciplinary - action penalties. Let
us now discuss the procedure for disciplinary action.
Though there is no specific procedure to be followed, different organisations
use a variety of formal and informal methods to resolve these matters. The
following steps are recommended.
The different stages in the disciplinary procedure of an Indian organisation
are discussed below:
Forming and issuing a charge sheet: When the management of an
organisation wants to initiate an enquiry against an employee for alleged
misconduct, the concerned employee is issued a charge sheet.
The charge sheet should clearly indicate the charges against the employee
and seek an explanation for the employee’s misconduct.
Considering the explanation: If the employee admits his misconduct or if
the management is satisfied with the explanation offered by the employee in
response to the charge sheet, there is normally no further enquiry.
Issuing the notice of enquiry: If it is decided that an enquiry be held. A
notice of enquiry has to be issued to the worker. The notice must mention
the time, date and place of enquiry. An enquiry officer is also appointed,
preferably a person who has good knowledge in law.
Holding a full-fledged enquiry: The enquiry should be in conformity with
the principles of natural justice and the employee concerned must be given
an opportunity to be heard. If it is felt that the offence is serious or that the
employee concerned might influence the enquiry proceedings, he might
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either be asked to go on leave or may be suspended without pay, pending

enquiry.
Final order of action: The appropriate authority, based on the findings of
the enquiry officer, makes the judgment. He either acquits the employee or
judges him guilty of the charges. Based on the decision taken, the
punishment for the employee’s misconduct is determined. Before that, the
manager should consider the employee’s previous record.
In case the employee feels that the enquiry is biased or improper, and that
the disciplinary action is unjust, he should be given a chance to make an
appeal.
Follow-up: After administering disciplinary action, there should be proper
follow-up. The punishment for misconduct should be conveyed to the
employee.

Self Assessment Questions

13. When the management of an organisation wants to initiate an enquiry
against an employee for alleged misconduct, the concerned employee
is issued a ________.
14. The _________ should clearly indicate the charges against the
employee and seek an explanation for the employee’s misconduct.
15. In case the employee feels that the enquiry is ____________ and that
the disciplinary action is unjust, he should be given a chance to make
an appeal.

12.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Good employee conduct might be described as orderly behaviour based
on definite standards catalysed by effective leadership.
 Disciplinary measures have serious repercussions on employees. Hence
they should be based on certain principles so that they must be fair, just
and acceptable to employees and their union.
 As far as possible, all the rules should be framed in cooperation and
collaboration with the representatives of employees.
 All the rules should be appraised at frequent and regular intervals.
 Rules should be uniformly enforced if they are to be effective.

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 A disciplinary policy should be preventive rather than punitive.

 It is essential that these rules and regulations are properly and carefully
formulated and communicated to employees.
 Identical punishment should be awarded for identical offences,
irrespective of the position or seniority of the employee.
 If the penalty is imposed long after a violation of rules has been
committed, it loses its positive and corrective influence.
 The ultimate purpose of a disciplinary action is to maintain discipline, to
ensure productivity and avoid a repetition of the offence.
 A disciplinary action should be evaluated in terms of its effectiveness
after it has been taken.

12.8 Glossary
 Discipline: The practice of training people to obey rules or a code of
behaviour, using punishment to correct disobedience.
 Disciplinary action: Action taken by the management invoking a
penalty against an employee who fails to meet organisational standards
or comply with organisational rules.
 Suspension: The official prohibition of someone from holding their usual
post or carrying out their usual role for a particular length of time
 Charge sheet: It is the proposed statement of charges against an
employee.

12.9 Terminal Questions

1. Define discipline. What are its objectives?
2. What are the basic principles to maintain discipline?
3. Enumerate the steps for disciplinary procedure.
4. Explain the action-penalties of discipline.

12.10 Answers

Self Assessment Questions

1. Discipline
2. Richard. D. Calhoon

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3. Poor discipline
4. Representatives
5. Rules
6. preventive
7. Line Executive
8. Everyone
9. Consequence
10. reprimand
11. Oral
12. Termination
13. charge sheet
14. Charge sheet
15. biased

Terminal Questions
1. Discipline is employee self-control which prompts him to willingly co-
operate with the organisational standards, rules, objectives, etc.
Objectives of discipline are to
 ensure and enable employees to work in accordance with the rules
and regulations of the organization and to
 ensure that employees follow the organisational processes and
procedures in spite of their different personalities and behavior.
Refer section 1.2 for more details.
2. Since, disciplinary measures have serious implications for employees;
they often are based on the principles of being fair, just and acceptable
to employees and, where applicable, the union as well. It cannot be
enforced or imposed on employees, as history has proved, it never
benefits anyone. Refer section 12.3 for more details.
3. The different stages in the disciplinary procedure of an Indian
organisation are discussed below: Forming and issuing a charge sheet,
Considering the explanation, Issuing the notice of enquiry, Holding a
Full-fledged Enquiry, Final order of Action, Follow-up. Refer section 12.6
for more details.

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4. There are varying penalties for first, second, and third offences of the
same rule. Following are the commonly practiced actions in business
Organisation:
a. Oral reprimand
b. Written warning
c. Denial of increments, promotions and pay hikes
d. Pay reductions and disciplinary demotions
e. Suspension
f. Discharge or dismissal
Refer section 12.5 for more details.

12.11 Case Study

HC Disallows Action Against Employee under Articles of Association
Chennai April 13, The Madras High Court has ruled that use of articles of
association of a State-owned transport corporation or clarifications by the
State Government cannot be used to persist with a departmental enquiry
against an employee for alleged misconduct.
If an employee had committed a loss or damage to business or property of
the corporation, it could always institute civil proceedings for recovery
notwithstanding whether the person was in service or not, Mr Justice K.
Chandru held while allowing a writ petition from R. Balraj, Managing
Director, TN State Transport Corporation.
The petitioner had joined the transport corporation as Works Manager and
served in Cheran Transport Corporation; he was later transferred to TN
State Transport Corporation and became a permanent employee from 1976
as Assistant Manager. He was subsequently promoted as Managing
Director of the corporation in 1987. While serving as MD, in relation to a
certain decision taken by him as part of the purchase committee, two charge
memos were served on him on August 28, 2002, just two days ahead of his
retirement, and he was allowed to retire without prejudice to disciplinary
proceedings, and his terminal benefits like pension, gratuity and PF were
withheld. The present petition was against the charge memos.
The petitioner contended that in the absence of any service rule, there was
no power vested on the employer to conduct an enquiry for alleged
misconduct even after his superannuation. The respondents submitted that

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there were serious charges against the petitioner, and he was allowed to
retire without prejudice to disciplinary action pending against him. They said
that though there was no specific power enjoyed by the corporation, Rule 10
of articles of association of corporation provided for the Government to issue
instructions.
The Judge said that articles of association of the corporation could not be
raised to the level of any statutory provision to proceed against employees.
Also, in the absence of any substantive power to retain an employee, the
corporation could not rely upon articles of association or any clarification
issued by the Government.
Holding that the corporation could always institute civil proceedings for
recovery of any loss allegedly caused by the employee, the Judge said
there were also enough provisions in the Companies Act for making such
recoveries from employees of Corporation.
Allowing the petition, the Judge directed the corporation to settle the
terminal benefits of the petitioner within four weeks.

Discussion Questions:
1. On what grounds did Madras High Court disallow action against
employees?
2. What were the punitive measures taken by the Transport Corporation
against the employees ?

(Source: Business Line April 14th 2007)

References:
 Fisher, S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

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Human Resource Management Unit 13

Unit 13 Grievance and Grievance Procedure

Structure:
13.1 Introduction
Objectives
13.2 Concept of Grievance
13.3 Causes of Grievances
13.4 Forms and Effects of Grievance
13.5 The Grievance Handling Procedure
13.6 Need for Grievance Redressal Procedure
13.7 Summary
13.8 Glossary
13.9 Terminal Questions
13.10 Answers
13.11 Case Study

13.1 Introduction
In the previous unit, we discussed the meaning and objectives of discipline,
and the principles for maintenance of discipline. We also learnt the basic
guidelines of a disciplinary policy, disciplinary action penalties and the
procedure for disciplinary action.
It is human nature to express discontentment when we feel it. Employees
differ as individuals, in their needs, expectations and behaviour. When their
needs are not satisfied or their objectives are not achieved, the result is
employee dissatisfaction. It is not an easy task for the management to keep
all employees satisfied and to motivate them, all the time. There are
different reasons for an employee being dissatisfied.
For example, failure to get a pay hike and/or promotion can lead to
unhappiness and dissatisfaction to an employee. This dissatisfaction takes
the shape of grievance when it will be formally brought to the notice of the
management.
The grievance redressal procedure of an organisation enables employees to
release their dissatisfaction. It is important for organisations to introduce an
effective grievance redressal system. In this unit we will discuss the
concept, causes and the need for grievance. We will also study the forms
and effect of grievance, and the grievance handling procedure.
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Human Resource Management Unit 13

Objectives:
After studying this unit, you should be able to:
 explain the meaning of ‘grievances’
 analyse the importance of grievance handling
 describe grievance machinery and its procedure

13.2 Concept of Grievance

Grievance is a sign of an employee’s discontent with job and its value-any
dissatisfaction or feeling of injustice in connection with one’s employment
situation that is brought to the notice of the management.
The definition of grievance often varies from company to company and from
author to author. The broadest interpretation of the term would include any
discontent or dissatisfaction that affects organisational performance. As
such, it can be stated or voiced, written or oral, legitimate or ridiculous.
The word grievance is often used in a generic form to indicate various forms
and stages of an employee’s dissatisfaction while at work. While the
dissatisfaction could be defined as anything that disturbs an employee, a
complaint is a spoken or written dissatisfaction brought to the attention of
the manager or to the HR department/team member. Often employees view
the HR team as the custodian of employee content/discontent and take up
their grievances with the HR team. Grievance could also be voiced by a
group of employees, it need not necessarily be a single employee with a
complaint.
Dale Yoder defines grievance as "a written complaint filed by an employee
and claiming unfair treatment." Prof. Jucious defines grievance as “any
discontent or dissatisfaction, whether expressed or not and whether valid or
not, arising out of anything connected with the company that an employee
thinks, believes or even feels unfair, unjust or inequitable.” Prof. Pigors and
Meyers define grievance as dissatisfaction. According to them,
dissatisfaction of an employee is anything that disturbs the employee,
whether expressed or not. The International Labour Organisation (ILO)
classifies grievance as a complaint of one or more workers with respect to
wages and allowances, conditions of work, interpretations of service
stipulations, covering such areas as overtime, leave, transfer, promotion,
seniority, job assignment and termination of service. The National

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Commission of Labour states that complaints affecting one or more

individual workers in respect of their wage payments, overtime, leave,
transfer, promotion, seniority, work assignment and discharges would
constitute grievances.
It must be expressed by the employee and brought to the notice of the
management and the organisation.
Grievances take the form of collective disputes when they are not resolved.
Also they will then lower the morale and efficiency of the employees.
Unattended grievances result in frustration, dissatisfaction, low productivity,
lack of interest in work, absenteeism, etc.
In short, grievance arises when employees’ expectations are not fulfilled
from the organisation, as a result of which a feeling of discontentment and
dissatisfaction arises. This dissatisfaction must crop up from employment
issues and not from personal issues.
Factors
In an organisation, a grievance may arise due to several factors such as:
 Violation of management’s responsibility such as poor working
conditions.
 Violation of company’s rules and regulations.
 Violation of labour laws.
 Violation of natural rules of justice such as unfair treatment in promotion.

Self Assessment Questions

1. The broadest interpretation of the term grievance ould include any
discontent or dissatisfaction that affects ________________________.
2. In the language of the labour management relations, a grievance is a
complaint formally presented by the _______________________ to the
management.
3. The __________________________ states that complaints affecting
one or more individual workers in respect of their wage payments,
overtime, leave, transfer, promotion, seniority, work assignment and
discharges would constitute grievances.

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13.3 Causes of Grievances

In the previous section, we discussed the concept of grievance. Let us now
discuss the causes of grievance. Grievances can arise out of the day to day
working relations in an organisation. Relations with supervisors and
colleagues also determine employee’s job satisfaction.
Grievances may occur for a number of reasons:
(a) Economic: Wage fixation, over time bonus, wage revision etc.
Employees may feel that they are paid less when compared to others.
(b) Work environment: Poor physical conditions of workplace, tight
production norms, defective tools and equipment, poor quality of
materials, unfair rules, lack of recognitions etc.
(c) Supervision: Relates to the attitude of the supervisor towards the
employee such as perceived notion of bias, favoritism, nepotism, caste
affiliations, regional feelings etc.
(d) Work group: Employee is unable to adjust with his colleagues, suffers
from feelings of neglect, humiliations.
(e) Miscellaneous: These include issues related to certain violations with
respect to promotions, safety methods, transfer, disciplinary rules, fines,
granting leave, medical facilities, etc.
Figure 13.1 shows the causes of grievance.
Causes of Grievance

Economic
Economic

Work
Work Causes of supervision
supervision
environment
environment Grievance
Causes of Grievance

Workgroup
Work group Miscellaneous
Miscellaneous

Fig. 13.1 Causes of Grievance

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Many organisations form committees and involve employees in most

employee-impacting decisions, be it the choice of a new office location or
what needs to be served for lunch in the cafeteria and other such workplace
hygiene factors. In job-related issues such as promotions, compensation
and merit hikes, today’s organisations provide for a transparency in its
policies and practices. The increasing focus on skills and competencies for
employee reward and growth do not allow for personal biases that can lead
to grievances.
Self Assessment Questions
4. Employees may feel that they are _____ when compared to others.
5. Poor physical conditions of _________, tight production norms,
defective tools and equipment, poor quality of materials, unfair rules,
lack of recognitions, etc. are the work environment causes of
grievance.
6. Employee is unable to adjust with his _________ suffers from feelings
of neglect, humiliations.

13.4 Forms and Effects of Grievance

In the previous section, we discussed the causes of grievance. Let us now
discuss the forms and effects of grievance.
Forms of grievance
Grievance may take any one of the following forms:
 Factual
 Imaginary
 Disguised
Factual: A factual grievance arises when legitimate needs of the employees
remain unfulfilled. For example, wage hike has been agreed but not
implemented citing various reasons.
Imaginary: When an employee’s dissatisfaction is not because of any valid
reason but because of a wrong perception, wrong attitude or wrong
information he or she has gathered. Such a situation may create an
imaginary grievance.

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Disguised: An employee may have dissatisfaction for reasons that are

unknown to him/her if he/she is under pressure from family, friends,
relatives, neighbours and may come to workplace with a heavy heart.
Effect of grievance
Grievance can have several effects that are essentially adverse and
counterproductive to organisational purpose: Few of the effects of grievance
are:
a) Loss of interest in work and consequent lack of morale and
commitment.
b) Poor quality of production.
c) Low productivity.
d) Increase in wastage and costs.
e) Increase in employee turnover.
f) Increase in absenteeism.
g) Increase in the incidence of accidents.
h) Indiscipline.
i) Unrest.
Grievances, if not identified and redressed, may adversely affect the
workers, managers and the entire organisation.
On production
 Low quality of production.
 Low quality of production and productivity.
 Increase in the wastage of material, spoilage/leakage.
 Increase in cost of production per unit.
On employees:
 Increases the rate of absenteeism and turnover.
 Reduces the level the level of commitment, sincerity and punctuality.
 Increases the incidence of accidents.
 Reduces the level of employee morale.
On managers:
 Strains the super-subordinate relations.

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 Increases the degree of supervision, control and follow up.

 Increase in disciplinary action cases.
 Increase in unrest and thereby, machinery to maintain industrial peace.

Activity 1:
Visit the following website and read it.
http://www.indianmba.com/Faculty_Column/FC338/fc338.html
Reflect on what the author is trying to convey. How practical is it?

Self Assessment Questions

7. A _________ arises when legitimate needs of the employees remain
unfulfilled.
8. _______ is when an employee’s dissatisfaction is not because of any
valid reason but because of a wrong perception.
9. Grievances, if not identified and redressed, may affect ____ the
workers, managers and the entire organisation

13.5 The Grievance Handling Procedure

In the previous section, we discussed the forms and effects of grievance.
Let us now learn the grievance handling procedure.
The following guidelines may help a supervisor while dealing with grievance:
 Treat each case as important and get the grievance in writing.
 Talk to the employee directly. Encourage him/her to speak the truth.
Give him/her a patient hearing.
 Discuss in a private place. Ensure confidentially if necessary
 Handle each case within a time-frame
 Examine company provisions in each case, Identify violations, if any, Do
not hold back the remedy if the company is wrong. Inform your
supervisor about all grievances.
 Get all relevant facts about the grievance, examine the personal records
of the aggrieved worker. See whether any witnesses are available. Visit
the work area. The idea is to find where things have gone wrong and
who is at fault.

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 Gather information from the union representative, what he has to say,

what he wants etc. Give short replies, uncovering the truth as well as
provisions. Treat him properly.
 Control your emotions, your remark and behavior
 Maintain proper records and follow up the action taken in each case
The essential requirements of a good grievance procedure are:
 Legality sustainable
 It should be ensured by the organisation that its grievance procedure
is in conformity with the existing laws of nation.
 The procedure cannot violate any of the rights of the employees
guaranteed by the law.
 Mutually acceptable
 In order to be effective, the grievance procedure must enjoy the
confidence of all the relevant parties, i.e., the management and the
unions. It should not be like a battleground. Procedure must ensure
equity, justice and openness.
 Easily understandable
 The grievance procedure must be reasonably simple and easily
understandable.
 Known to all the employees of the organisation.
 If someone has some grievance, then he/she should know who is to
be contacted.
 Highly flexible
 The grievance procedure should be flexible enough to respond to the
reported grievance quickly. The number of stages in the grievance
procedure should be kept to the minimum.
Sufficiently knowledgeable: The managers, supervisors, union leaders
and others dealing with employee grievance must be well-trained in the
grievance handling procedure.
Self Assessment Questions
10. It should be ensured by the organisation that its grievance procedure is
in _________ with the existing laws of nation.

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11. The grievance handling procedure cannot __________ any of the

rights of the employees guaranteed by the law.
12. The number of stages in grievance procedure should be kept to the
_______ .

13.6 Need for Grievance Redressal Procedure

In the previous section, we discussed the grievance handling procedure. Let
us now learn the need for grievance redressal procedure.
A grievance redressal procedure is needed for the following reasons:
 In the absence of a grievance redressal procedure, an employee could
either keep his or her dissatisfaction to himself/herself or share with
his/her colleagues. If he/she has no means of express he/she will get
frustrated.
 If the settlement does not satisfy at the first level he/she can approach
the next level.
 Grievance procedures keep a check on arbitrary action.
 Grievance procedures help in upward communication.
 A good grievance redressal system ensures that employee grievances
are settled before they turn into an industrial conflict.
The guiding principles are:
1. Conformity with existing legislation: A grievance redressal procedure
should be acceptable to both the management and the employees and
also should conform to the existing legislation of the firm.
2. Simple and expeditious machinery: When a grievance arises, it has to
be settled at the lowest possible level in the redressal procedure.
3. Employee knowledge of grievance procedure: Employees should
have thorough knowledge about the grievance redressal procedure.
They should know whom to approach.
4. Constitution of the grievance committee: The grievance committee
consists of two representatives from the management, two from the
union and one from the same department in which the concerned
employee works.

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Figure 13.2 depicts a model grievance redressal procedure.

Model Grievance Redressal procedure

Voluntary Arbitration VI Settlement within 7 days

NS
Committee of union and
management representatives V Management’s decision on
revision 7 days
NS
Managers IV Decision within 7 days
NS
Grievance III Decision within 7 days
Committee NS

Departmental Head of the

II Decision within 3 days
Representatives Dept.
NS
supervisor I Stage Response within 48
Departmental
Representatives NS hours
Foreman
NS
Verbally
Grievance Employee

Fig. 13.2: Model Grievance Redressal Procedure

Self Assessment Questions

13. When a grievance arises, it has to be settled at the _______ level in
the redressal procedure.
14. The grievance committee consists of two representatives from the
_______, two from the union and one from the same department in
which the concerned employee works.
15. Grievance procedures keep a check on __________.

Activity 2:
Speak to two or three friends/relatives who are working in companies.
Ask them how they express dissatisfaction against an issue at work.
What kind of acceptable formal/informal processes does the company
have to take care of employee complaints/grievances?

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13.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 The broadest interpretation of the term ‘grievance’ would include any
discontent or dissatisfaction that affects organisational performance.
 In the language of labour management relations, grievance is a
complaint formally presented by the employee or employees to the
management.
 The dispute or grievance constitutes a managerial problem and the
scientific method is usually most productive in arriving at a satisfactory
solution.
 Grievance is always a symbol of some malfunctioning or maladjustment,
and an able and skilful manager can always find the real or submerged
reasons for a grievance.
 The dispute must be handled by some member of the management. In
the solution of a problem, the greater burden rests on the management.
 The clearest opportunity for settlement is found at the first stage, before
the grievance has left the jurisdiction of the manager.
 The following directions help in handling a grievance:
o Receive and define the nature of the dissatisfaction.
o Get the facts.
o Analyse and divide.
o Apply the answer.
o Follow-up.
 Grievance should be dealt within the limits of the first line manager.
 The appellate authority should be made clear to the employee.
 The grievance should be dealt with speedily.
 In establishing a grievance procedure, if the grievance is against an
instruction given by a superior in the interest of order and discipline, the
instructions must be carried out first and then only an employee can
register his protest.
 In case the grievance has not been settled by the top management and
the top union leadership, the same may be submitted to an impartial
arbitrator.

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13.8 Glossary
 Grievance: A cause of uneasiness and complaint; a wrong done and
suffered; that which gives ground for remonstrance or resistance, as
arising from injustice, tyranny, etc., injury.
 Grievance committee: A group of representatives chosen from a labour
union or from both labour and management to consider and remedy
workers' grievances.

13.9 Terminal Questions

1. What is grievance? Why does it arise? What is its importance?
2. Bring out the effects of grievance on employees.
3. Explain the grievance handling procedure.

13.10 Answers

Self Assessment Questions

1. Organisational performance
2. Employee or employees
3. National Commission of Labour
4. Paid less
5. Workplace
6. Colleagues
7. Factual grievance
8. Imaginary grievance
9. Adversely
10. Conformity
11. Violate
12. minimum
13. Lowest possible
14. Management
15. Arbitrary action

Terminal Questions
1) Grievance is a sign of an employee’s discontent with job and its value.
When their needs are not satisfied or their objectives are not achieved,

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the result is employee dissatisfaction. Refer Section 13.1 and 13.2 for
more details.
2) Grievances increases employee turnover and absenteeism. Refer
section 13.4 for more details.
3) A good grievance redressal procedure promotes harmonious industrial
relations as employee grievances are settled before they turn into
industrial conflict. Refer section 13.6 for more details.

13.11 Case Study

Kanika Datta: Handling management grievances

Associations with board-level representation may sound radical but they
aren't such a bad idea.
Workers and clerical staff have unions, the C-suite has the decision-making
powers, but how should the general cadres of white-collar managerial
employees express their grievances?
This issue has been starkly highlighted over the last two months when some
pilots of, first, Jet Airways and, this week, of Air India struck work over pay
and allowances, holding air travellers to ransom country-wide. Much
opprobrium has been heaped on them, the conventional view being that
pilots, who would broadly correspond to mid-level managers in airlines, are
obscenely overpaid and have no right to protest besides displaying a gross
sense of irresponsibility.
In Jet Airways’ case, the point was made with all the maudlin histrionics that
Chairman Naresh Goyal had perfected during an earlier strike by cabin crew
last year. This time, it was cabin and ground crew who held a press
conference to beseech their pilot colleagues to abandon the sick-out and
return to work. Otherwise, they said, innocent employees, caught in the
middle, would be in trouble if the airline lost revenue. The implication: the fat
cats of the airline were ruining the livelihood of the toiling lesser mortals.
State-owned Air India played out the drama differently but characteristically
with Civil Aviation Minister Praful Patel, with an anxious eye to impending
Assembly elections, telling the pilots to return or else – even as
compromises were feverishly being worked out backstage.

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The jury is still out on whether the pilots of India’s largest private and state-
owned airlines have a legitimate case – the fact that both managements
backed down doesn’t necessarily suggest the pilots were right. The bigger
question, though, is this: if such a category of employees do think they have
a valid grievance and if negotiations with senior management fail, how
should they react? Is taking mass sick leave or simply not reporting to work
– a strike by any other name as the Mumbai high court ruled in Jet’s case –
a justified form of protest by people in positions of managerial responsibility,
especially when their organisations are bleeding profusely?
The short answer from senior managers is that managerial staff who don’t
agree with corporate policies are always free to leave or look elsewhere, a
privilege blue-collar labour doesn’t enjoy. This is a fair argument in the kind
of open labour market that India has become. Indeed, pilots have done just
this in the past, exiting with alacrity from state-owned airlines to private
competitors when the industry was booming; their protests now are an
indicator of the dire straits in which the airline business finds itself.
It is telling that in the late eighties, union-style protests for higher pay by
mid-level managers in the public sector proved signal failures precisely
because of the lack of job mobility in those pre-liberalisation days. Around
the same time, a strike by Indian Airlines pilots on pay and perks failed for
precisely the same reason.
One of the issues in the pilot-management clash in Jet Airways was over
whether pilots had a right to form a union. They didn’t, according to the
airline’s management, which provided it an excuse not to negotiate –
initially, that is; the stance changed later following the widespread havoc the
strike created. Apparently, it was okay for the pilots to have a “welfare
organisation” but not a grievances forum.
In an economy in which quality of talent counts for rather more than just
manpower numbers, viewing the marketplace as an automatic grievance-
correcting mechanism could boomerang on managements. Even if we
assume that it is unseemly and undignified for managerial cadres to go on
strike or haggle via employee unions, the truth is that middle managers
remain uniquely disenfranchised.

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This is hardly a healthy situation. Forget about the dire predictions about
robots replacing middle managers on the shopfloor. In most organisations,
despite successive bouts of “de-layering” and “right-sizing”, middle
management forms a critical element of the employee base – if not always
in numbers, certainly in the nature of the work it performs.
In other words, it makes sense for CEOs to put in place more enlightened
“protest management” mechanisms beyond the standard HR structures – to
act as (a) early warning systems and (b) create a dignified, non-combative
negotiation forum for its managerial cadres. Associations with board-level
representation may sound radical but they aren’t such a bad idea – after all,
labour union leaders in the West are represented on corporate board, so
why not middle managers. Some Scandinavian countries have
experimented with such structures.
Management gurus, of course, will tell you that transparent decision-making
is the ideal – but experience has shown that most corporations pay lip
service to the concept. IT companies, heavily dependent on talent as they
move up the value chain, have cracked the system better than most. For an
emerging economy like India, such mechanisms could bridge the
management deficit that is inevitable in family- and government-owned
corporations that currently make up the vanguard of India’s competitive
advantage.
Discussion Questions:
1. “One of the issues in the pilot-management clash in Jet Airways was
over the issue whether pilots had a right to form a union.” What went
wrong in this situation? Explain.
(Source: Business Standard, New Delhi October 1, 2009)

References:
 Fisher, S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.
 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.
 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.
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Human Resource Management Unit 14

Unit 14 Employee Welfare and Working Conditions

Structure:
14.1 Introduction
Objectives
14.2 Concept of Employee Welfare
14.3 Welfare Measures
14.4 Types of Welfare Measures
14.5 Employee Welfare Responsibility
14.6 The Business Benefits of Employee Welfare Activities
14.7 Summary
14.8 Glossary
14.9 Terminal Questions
14.10 Answers
14.11 Case Study

14.1 Introduction
In the previous unit, we discussed the concept, causes and the need for
grievance. We also learnt the forms and effect of grievance, and the
grievance handling procedure.
Employee welfare measures are one of the key inputs to bring about the
desired level of employee satisfaction, motivation and productivity of the
organisation. The basic objective of welfare measures is to ensure the
physical and mental well-being of the employee.
Employee welfare is a comprehensive term including various services,
benefits and facilities offered to employees by the employer. Through such
generous fringe benefits, the employer makes life worth living for
employees. The welfare amenities are extended in addition to normal wages
and other economic rewards available to the employees as per legal
provisions.
Welfare includes anything that is done for the comfort and improvement of
employees and is provided over and above the wages. Welfare helps in
keeping the morale and motivation of the employees high so as to retain the
employees for longer duration. The welfare measures need not be in
monetary terms only but in any kind/forms. Employee welfare includes

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monitoring of working conditions, creating industrial harmony through

infrastructure for health, industrial relations, and insurance against disease,
accident and employment for the workers and their families.
The working environment in a factory adversely affects the health of the
employees. This has to be contained through preventive steps aimed at
improving the lot of workers. In this unit, we will discuss the concept of
employee welfare, welfare measures and its types. We will also discuss
about employee welfare responsibility and the business benefits of
employee welfare activities.
Objectives:
After studying this unit, you should be able to:
 analyse employee welfare
 explain the types of welfare measures
 analyse the responsibility for welfare facilities in an organisation
 describe the basic features of labour welfare measures

14.2 Concept of Employee Welfare

Employee welfare is a comprehensive term including various services,
benefits and facilities offered to employees and by the employers. Through
such generous fringe benefits the employer makes life worth living for
employees.
Employee welfare entails all those activities of an employer which are
directed towards providing the employees with certain facilities and services
in addition to wages or salaries.
The very logic behind providing welfare schemes is to create an efficient,
healthy, loyal and satisfied labour force for the organisation. The purpose of
providing such facilities is to make the employees’ work life better and also
to raise their standard of living. The important benefits of welfare measures
can be summarised as follows:
 They provide better physical and mental health to workers and thus
promote a healthy work environment.
 Facilities like housing schemes, medical benefits, education and
recreation facilities for workers’ families help in raising their standards of

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living. This makes workers to pay more attention towards work and thus
increases their productivity.
 Employers get stable labour force by providing welfare facilities. Workers
take active interest in their jobs and work with a feeling of involvement
and participation.
 Employee welfare measures increase the productivity of the
organisation and promote healthy industrial relations, thereby
maintaining industrial peace.
 The social evils prevalent among the labourers, such as substance
abuse, are reduced to a greater extent by the welfare policies.
Organisations provide welfare facilities to their employees to keep their
motivation levels high. Employee welfare is a major concern of employers.
Prior to the labour union movements of the early 20th century, employers
cared little about employee welfare and instead thought of employee/labour
as something to be bought at the lowest price possible. In today's world,
employers must be more careful to watch out for employee welfare. In short,
employee welfare involves watching out for the good of all employees.
Employers should seek several different objectives in promoting employee
welfare.
Objectives of employee welfare:
The most important purpose of employee welfare measures is to improve
the employer-employee relationship within an organisation. However, an
organisation can also achieve multiple objectives while developing
employee welfare measures. An organisation aims at accomplishing both
the long term and short term objectives through employee welfare
measures.
Employee welfare has the following objectives:
1. To provide better life and health to the workers.
2. To make the workers happy and satisfied.
3. To relieve workers from industrial fatigue and to improve intellectual,
cultural and material conditions of living of the workers.
Production
One of the primary concerns of employee welfare promotion is to create
happy employees. However, this type of objective has a greater purpose
and is not always due to the benevolence of the employer. Instead, good
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employers both genuinely care for their employees and do so because they
know that a happy employee is one that will be productive and do his/her job
correctly. In careers like sales where production is essential to making
money, employers who promote employee welfare know that employees will
make more money for themselves and for the company.
Loyalty
Another reason to promote the well-being of an employee is that it can
improve employee loyalty. In the long run, employees who are taken care of
by their employers are less likely to jump ship and change companies or
careers. Even in situations where it might be possible to make more money
with a different company, the employee who feels accepted and needed by
his employer may not even consider other job offers when they come along.
Organisational improvement
Because employee welfare specifically deals with the well-being of
employees, employee welfare programmes adopted by employers are more
effective when the wants and wishes of employees are taken into
consideration. In organisations where employees are well-cared for and
employees are asked to provide suggestions as to how to improve the
company, employees feel that they play an important role in the
improvement of the organisation.
Health
Health promotion is another major objective of most employee welfare
programmes. The health of an employee is integral to the success of a
company. Employees who are happy and healthy show up to work every
day and do their jobs correctly, whereas those that are in poor health and
have no means to change the situation will miss work and slow production.
Organisations are obliged to provide employees with a safe and healthy
environment. Health is a general state of physical, mental and emotional
well being.
Safety, like good health is of utmost importance. The main purpose of health
and safety policies is the protection of people and the work environment.
Industrial health is essential to:
 Promote and maintain the highest degree of physical, social and mental
well being of workers.

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 Improve productivity and quality of work.

 Reduce accidents, injuries, absenteeism and labour turnover.
 Protect workers against any health hazard arising out of work or
conditions in which it is carried on.

Self Assessment Questions

1. Organisations are obliged to provide employees with a ___ and ____
environment.
2. Main purpose of health and safety _______ is the protection of people
and the work environment.
3. The objective of labour welfare is to make people _____ and _______.

14.3 Welfare Measures

In the previous section, we discussed the concept and objectives of
employee welfare programmes in an organisation. Let us now learn the
welfare measures. Employee welfare is a term which must necessarily be
elastic, with somewhat different interpretations in different countries. This is
because of the different social customs, the degree of industrialisation and
educational levels of the workers in these countries. Welfare means faring
(or) doing well. It is a comprehensive term and refers to the physical,
mental, moral and emotional well-being of an individual.
Trade unions and governmental and non-governmental agencies
It is rather difficult to define the term employee welfare accurately because
of the relativity of the concept. Welfare includes anything that is done for the
comfort and improvement of employees and is provided over and above the
wages. Welfare helps in keeping the morale and motivation of the
employees high so as to retain the employees for longer duration. The
welfare measures need not be in monetary terms only but in kind also.
Employee welfare measures
We have to keep the employee attached to the organisation and keep them
happy to the extent possible. The solution is welfare measures. Welfare
measures are over and above the wages paid to employees. These include
improved working conditions, health care facilities, insurance for self and
family, recreation facilities, improved industrial relations, etc. These
measures may not be in the form of monetary benefits.

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All these measures are aimed at keeping the workers happy and satisfied,
to provide better employment life and health to workers, reduce stress
situations, improve intellectual, cultural and materials conditions.
Welfare measures are as follows:
Welfare measures are provided mainly by the employers. However
government schemes, social set ups and charitable agencies may also
extend their help, all aimed at improving employee health, economic
betterment and social status.
There are reasonable welfare measures available to employees through
statutory provisions. In most cases collective bargaining helps to improve
the degree of welfare facilities.
The welfare measures are not rigid. It will be changing all the time. It reflects
the personality of the Welfare Officer and his vision, creativity and
understanding the spirit of his work ethics.
The welfare measures may also help develop the personality of employees
to a certain extent.
The motive behind providing welfare schemes is to create an efficient,
healthy, loyal and satisfied labour force for the organisation.

The important welfare measures can be detailed as follows:

Housing schemes, medical benefits, education and recreation facilities for
workers’ families help in raising their standards of living. Because the
welfare of their families is taken care of, workers pay more attention towards
work increasing their productivity.
Employees become loyal to the employer. They will stick on. They start
taking active interest in their jobs and work with a feeling of involvement and
participation.

Statutory and non-statutory welfare schemes

Under the Factories Act and Rules, Dock worker’s Act, Mines Act etc there
are certain provisions on Welfare. These are to be complied with; failing
which legal proceedings will be initiated against the employer. Even
appointment of Labour Welfare Officer where more than 500 workers are
employed is a statutory requirement.

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The basic features of labour welfare measures are as follows:

 Labor welfare includes various facilities, services and amenities
provided to workers for improving their health and style of living, value,
economic betterment and social status.
 Welfare measures are in addition to regular wages and other economic
benefits available to workers due to legal provisions and collective
bargaining.
 Labour welfare schemes are flexible and ever-changing. New welfare
measures are added to the existing ones from time to time.
 Welfare measures may be introduced by the employers, government,
employees or by any social or charitable agency.
 The purpose of labour welfare is to bring about the development of the
whole personality of the workers to make a better workforce.

Self Assessment Questions

4. The purpose of labour welfare is to bring about the development of the
whole personality of the workers to make a _______.
5. Employee welfare measures increase the _______ of an organisation.
6. Facilities such as housing schemes, medical benefits, and education
and recreation facilities for workers’ families help in raising their
________.

14.4 Types of Welfare Measures

In the previous section, we discussed the welfare measures. Let us now
learn the types of welfare measures.
The employee welfare schemes can be classified into two categories, i.e.,
statutory and non-statutory welfare schemes. The statutory schemes are
those schemes that are compulsory to be provided by an organisation as
compliance to the laws governing employee health and safety. These
include provisions provided in industrial acts such as Factories Act, 1948,
Dock Workers Act (safety, health and welfare), 1986, Mines Act, 1962. The
non-statutory schemes differ from organisation to organisation and from
industry to industry.

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Statutory welfare facilities:

Statutory welfare facilities are facilities offered by the organisations in
compliance with the central and state government regulations. The relevant
provisions of various acts that deals with employee welfare measures are:
Factories Act, 1948
Contract Labour Act, 1970
The statutory welfare schemes include the following provisions:
1. Drinking water: At all working places safe hygienic drinking water
should be provided.
2. Facilities for sitting: In every organisation, especially factories, suitable
seating arrangements are to be provided.
3. First aid appliances: First aid appliances are to be provided and should
be readily accessible, so that initial medication can be provided to the
needed employee in case of any minor accidents.
4. Latrines and urinals: Sufficient number of latrines and urinals are to be
provided in the office and factory premises and are to be maintained in
a neat and clean condition.
5. Canteen facilities: Cafeteria or canteens are to be provided by the
employer so as to provide hygienic and nutritious food to the
employees.
6. Spittoons: In every work place, such as warehouses, store places, dock
area and office premises spittoons are to be provided in convenient
places and are to be maintained in a hygienic condition.
7. Lighting: Proper and sufficient lights are to be provided for employees
so that they can work safely during the night shifts.
8. Washing places: Adequate washing places such as bathrooms, wash
basins with tap and tap on the stand pipe are to be provided in the port
area in the vicinity of the work places.
9. Changing rooms: Adequate changing rooms are to be provided for
workers to change their clothes in the factory area and office premises.
Adequate lockers are also to be provided to the workers to keep their
clothes and belongings.

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10. Restrooms: Adequate numbers of restrooms are provided to the

workers with provisions of water supply, wash basins, toilets,
bathrooms, etc.
Non-statutory welfare schemes
Organisations are increasingly offering some form of personal financial
education as part of their employee benefits programmes. They recognise
that this service increases workplace productivity and morale, while
reducing stress levels. Other benefits to offering some form of workplace
financial education include:
1. Helping employees improve their personal financial wellness.
2. Assisting employees with workplace stress associated with financial
problems.
3. Helping employees navigate major financial milestones, including
managing credit and debt, insurance needs, investing basics, tax
planning and others

Activity 1:
Visit a nearby factory and list out the employee welfare facilities that the
employees enjoy..

Self Assessment Questions

7. Two types of welfare measures are ________ and ___________.
8. _______ offered by the organisations in compliance with the central
and state government regulations.
9. ________ are to be provided by the employer so as to provide hygienic
and nutritious food to the employees.
10. Proper and sufficient _____ are to be provided for employees so that
they can work safely during the night shifts.

14.5 Employee Welfare Responsibility

In the previous section, we discussed the types of welfare measures. Let us
now discuss about employee welfare responsibility. An employee’s welfare
facilities rest not only with the employers but also with the central
government, state governments and trade unions.

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Employers:
Employers have the first and direct responsibility to provide welfare facilities
to the employees. They usually provide facilities to attract and retain their
talented employees. To facilitate their employees, organisations generally
appoint labour welfare officers to supervise the welfare activities carried out
in the organisation.
Central Government:
The central government is empowered to make rules to protect the health,
safety and welfare of the employees working in factory premises. The laws
that govern the welfare facilitates are Factories Act 1948, Contract Labour
Act 1970, the Employees’ State Insurance Act 1948, etc.
State Government:
The state governments are normally the enforcing authorities for laws
enacted by the central government from time to time. They can also create
their own laws to regulate the condition of the employees and their welfare.
Trade unions:
Trade unions take an active role in offering welfare facilities to the
employees to improve their well-being. In a few organisations the unions, as
a representative of the employees, undertake employee welfare activities to
improve the health and safety of their members.

Self Assessment Questions

11. ______ have the direct responsibility to provide welfare facilities to the
employees.
12. The ___________ is empowered to make rules to protect the health,
safety and welfare of the employees working in factory premises.
13. ________ takes an active role in offering welfare facilities to the
employees in order to improve their well-being.

14.6 The Business benefits of Employee Welfare Actitivies

In the previous section, we discussed the employee welfare responsibility.
Let us now discuss about business benefits of employee welfare activities.

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For the management and employees of organisations who have been struck
by the backlash of recession, it would take some time to handle the issue of
employee welfare. It is the responsibility of the management to ensure that
employee welfare initiatives should not be put on the back seat in the name
of cutting costs. One of the measures to overcome this situation is to handle
the situation carefully and with constant communication to ward off adverse
rumours and protect employee sentiments. It is not an easy task however, to
look beyond the profit margins and focus on employee wellbeing in times of
reduction of bottom line, but then that is perhaps the need of the times.
There are many organisations however, who consider employee welfare as
a hygiene issue. It needs to be combined with the motivation factor because
that is what brings about employee satisfaction and enhances their
productivity. Profitability of an organisation has a direct relationship with the
employees’ productivity. Therefore, an organisation’s attempt should be at
creating a motivating environment that promotes job satisfaction, thereby
developing employees who are motivated, productive and fulfilled.
Cost cutting measures do not mean employee welfare compromise. It does
not mean reducing the facilities provided to employees to reduce the cost.
An employer needs to eliminate all inefficient and unproductive activities in
the organisation to reduce wastage, increase productivity and reduce
turnaround time in all operations of the organisation which automatically
results in cost saving.
An attempt to bring about employee friendliness should never be driven by
the current economic scenario, it has to be an ongoing effort. An
organisation is made up of its people. Employee friendly HR policies are the
main sources to enhance productivity. It is also helps to maintain a synergy
between the employer and the employee.
It would be too impractical to mention that an organisation should simply
focus on employee welfare even if the profit margins are reducing, during
tough times. It becomes important for both – the employer as well as the
employee – to put in their best efforts to flow through the tough phase. The
company needs to accept a balanced approach in such a situation, cutting
down on all the benefits is also risky and taking no action is also hazardous
from the survival point of view.

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Earning employee goodwill

When attrition rate is low in an organisation the employer needs to earn
employee goodwill and loyalty. Team spirit and collaboration should be
encouraged among employees. Initiatives such as celebrating
success/achievements in small ways go a long way in raising the confidence
and morale of the team.
In case a company is required to take cost cutting measures, it should be
taken in a manner that would not directly impact on employees, during tough
times it becomes all the more important to keep sentiments of employees
high and nothing should hurt their morale. Management of companies has to
look at sufficient amount of options so that the situation is taken care of
without putting undue pressure on the workforce. Companies that resort to
direct cost cutting measures directed towards employees will always be at
risk of higher attrition, which may hurt the company in the long run. HR,
which generally takes care of employee events, has to work along with the
employee clubs to manage the same company events in lower budgets and
in different ways. Money that they would have otherwise spent on lavish
events should be cut down. Focus should be on frequent but small-scale
events that are economical yet add to the fun element.
Advantageous for business
The tough times bring about certain benefits also, in terms of human as well
as system capabilities. Think tanks of the organisation are utilised to the
maximum possible efficiency. Members of the organisation family realise
their true potential and also learn how to put it to the best possible use for
the organisation.
Efficiency becomes the driving factor for any organisation to stay alive and
hence it is the time to focus on delivering the best by using the existing
resources optimally.
Organisations that resort to cost cutting measures directed at employees will
lose good talent, besides spoiling their brand image in the market. Besides,
higher attrition may impact the business and clients, which will further have
a negative impact on the overall business strategy of the company.
Long-term perspective
It is important to have a long-term perspective of things to ensure that good
people do not go away when they are most needed by the organisation.

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Organisations which want to do business even after the downturn is over

would need to continuously create and maintain the bond between them and
the employees’ goals and welfare. In fact, employees would gladly accept
cost cutting measures and would even contribute to it. Although, they need
to be very clear about strategic importance of the tough measures. They
need to be reassured constantly that their welfare is being considered as
important.
Developing and maintaining the right communication process is an essential
part of these trying times. Any minor carelessness or lack of caution might
result in a situation that might lead to total decline of the work culture and
employee morale.
For example, at Bajaj Electricals there are many welfare activities such as
long service and retirement awards on 14th July every year for employees,
to be categorised into 15 years long service and 25 years long service.
There is also welfare trust that is formed by Bajaj Electricals for providing
loan to employees for housing needs and also for the reimbursement of
medical expenses. They have created a “social responsibility business fund”
to provide scholarship to employees and children for higher education, and
also there is an emergency assistance in the form of financial assistance to
the family in case of death of any employee in harness.

Self Assessment Questions

14. When attrition rate is low in an organisation then the employer needs to
earn employee ___________ and ___________.
15. An organisation is made up of its ________.
16. Profitability of an organisation has a direct relationship with the
employees’ ____________.
17. ___________ of the employee affects the business as a whole.

14.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Employee welfare measures are one of the key inputs to bring about the
desired level of employee satisfaction, motivation and productivity of the
organisation. The basic objective of welfare measures is to ensure the
physical and mental well-being of the employee.
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 Employee welfare entails all those activities of the employer which are
directed towards providing the employees with certain facilities and
services in addition to wages or salaries. The very logic behind providing
welfare schemes is to create efficient, healthy, loyal and satisfied labour
force for the organisation. The purpose of providing such facilities is to
make their work life better and also to raise their standard of living.
 Employee welfare is a term which must necessarily be elastic, bearing a
somewhat different interpretation in each country according to the
different social customs, the degree of industrialisation and educational
level of the workers. Welfare means faring (or) doing well. It is a
comprehensive term and refers to the physical, mental, moral and
emotional well-being of an individual.
 Safety is of a person’s physical health. The main purpose of health and
safety policies is the safety and protection of people, and the work
environment.The welfare measures undertaken to improve the well
being of the employees can be divided into two categories namely,
statutory and non-statutory.
 Employee welfare facilities rest not only with the employers but also with
the central government, state governments, and trade unions. The
central government is empowered to make rules to protect the health,
safety and welfare of the employees working in factory premises. The
state governments are normally the enforcing authority for laws enacted
by the central government from time to time. Trade unions take an active
role in offering welfare facilities to the employees in order to improve
their well-being. In a few organisations the unions, as representative of
the employees, undertake employee welfare activities to improve the
health and safety of their members.
 Welfare benefits of the employees affect the business as a whole.
During the recession, organisations would take some time to handle the
issue of employee welfare. It is the responsibility of the management to
ensure that employee welfare initiatives should not be put on the back
seat in the name of cutting costs. One of the measures to overcome this
situation is to handle the situation carefully and with constant
communication to ward off adverse rumours and protect employee
sentiments. When attrition rate is low in an organisation, the employer
needs to earn employee goodwill and loyalty. At that time, team spirits
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and collaboration should be encouraged among employees. Initiatives

such as celebrating success/achievements in small ways go a long way
in raising the confidence and morale of the team. It would be too
impractical to mention that an organisation should simply focus on
employee welfare even if the profit margins are reducing during tough
times. It becomes important for both the employer as well as the
employee to put in their best efforts to flow through the tough phase.
The company needs to accept a balanced approach in such a situation,
cutting down on all the benefits is also risky and taking no action is also
hazardous from the survival point of view.

14.8 Glossary
 Employee welfare: 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.
 Gratuity: Gratuity is a part of salary that is received by an employee
from his/her employer in gratitude for the services offered by the
employee in the company.
 Labour Welfare Officer: According to Section 49, The Factories Act,
1948, every factory having five hundred or more workers shall employ in
the factory such number of Welfare officers as may be prescribed. The
respective State Government prescribe the duties, qualifications and
Conditions of service of the officers.

14.9 Terminal Questions

1. What is employee welfare? Explain its basic objectives.
2. Discuss the types of welfare measures.
3. Who all are responsible for welfare facilities in an organisation? Discuss.
4. Explain the basic features of labour welfare measures.
5. How do the welfare benefits affect the business of an organisation?

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14.10 Answers

Self Assessment Questions

1. Safe, healthy
2. Policies
3. Happy, satisfied
4. Better workforce
5. Productivity
6. Standards of living
7. Statutory, non-statutory
8. Statutory welfare
9. Canteens
10. Lights
11. Employers
12. Central government
13. Trade union
14. Goodwill and loyalty
15. People
16. Productivity
17. Welfare benefits

Terminal Questions
1. Employee welfare measures are one of the key inputs to bring about the
desired level of employee satisfaction, motivation and productivity of the
organisation. The basic objective of welfare measures is to ensure the
physical and mental well-being of the employee. Refer section 14.2 for
more details.
2. The welfare measures undertaken to improve the well being of the
employees can be divided into two categories, namely statutory and
non-statutory. Refer section 14.4 for more details.
3. An employee’s welfare facilities rest not only with the employers but also
with the central government, state governments and trade unions. Refer
section 14.5 for more details.
4. Labour welfare includes various facilities, services and amenities
provided to workers for improving their health and style of living, value,

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economic betterment and social status. Refer section 14.3 for more
details.
5. Welfare benefits of the employee affect the business as a whole. During
the recession, an organisation would take some time to handle the issue
of employee welfare. It is the responsibility of the management to ensure
that employee welfare initiatives should not be put on the back seat in
the name of cutting costs. One of the measures to overcome this
situation is to handle the situation carefully and with constant
communication to ward off adverse rumors and protect employee
sentiments. Refer section 14.6 for more details.

14.11 Case Study

Aqua food company Ltd is a FMCG company in Delhi. It is engaged in
manufacturing and distribution of food and personal care products. The
company views its human resources as its most important asset and sure
competitive advantage. Its compensation packages focus on encouraging
efficiency and emphasises on linking pay with performance. It has been
successful in achieving an optimum level of efficiency and productivity.
However, this company faces problems of employee retention as labour
turnover is slightly higher than industrial levels.
Through employee survey and other sources, management has identified
the inadequacies in employee welfare schemes as the main reason for the
existing problems. Management has decided to revamp the existing scheme
and make them more effective and attractive for their employees.
Discussion Questions:
1. If you are the HR manager in Aqua Food Company what all welfare
schemes would you introduce to retain your employees?
(Source: Pravin Durai, Human Resource Management, Pearson Publication, New
Delhi .2010.)

References:
 Fisher, S, and Shaw. (2010). Human Resources Management. New
Delhi: Cengage Publication.
 Aswathappa, K. (2010). Human Resource Management. New Delhi:
Tata McGraw Hills.

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 Wayne, C. F. (1998). Managing Human Resource. Irwin/McGraw Hills.

 Durai, P. (2010). Human Resource Management. New Delhi: Pearson
Publication.

E-References:
 http://industrialrelations.naukrihub.com/employee-welfare.html
(Retrieved on 15 January 2012)
 http://smallbusiness.chron.com/objectives-employee-welfare-17425.html
(Retrieved on 15 January 2012)
 http://www.expresscomputeronline.com/20090309/technologylife
01.shtml (Retrieved on 15 January 2012)
 http://www.citehr.com/176307-employee-welfare.html (Retrieved on 15
January 2012)
 http://deeparaajahumanresourcemanagement.blogspot.in/2007/12/
employee-welfare.html (Retrieved on 15 January 2012)

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Unit 15 Emerging Trends in HRM

Structure:
15.1 Introduction
Objectives
15.2 Competency Mapping
15.3 Business Process Outsourcing
15.4 Right Sizing of Workforce
15.5 Flexi time
15.6 Talent Management
15.7 Employee Engagement
15.8 Summary
15.9 Glossary
15.10 Terminal Questions
15.11 Answers
15.12 Case Study

15.1 Introduction
In the previous unit, we discussed the concept of employee welfare, welfare
measures and its types. We also discussed about employee welfare
responsibility and the business benefits of employee welfare activities.
Privatisation, economic liberalisations and globalisation of economies
adopted by various countries led to increased competition in global markets.
HRM is a process of bringing people and organisations together to meet
their goal jointly. The role of HR managers has transferred from that of a
protector and screener to the role of a planner and change agent.
Nowadays it is not possible to show a good financial or operating report
unless personnel relations are in order in an organisation. Over the years,
highly skilled and knowledge based jobs are increasing while low skilled
jobs are decreasing. This calls for future skill mapping through proper HRM
initiatives. Indian organisations are also witnessing a change in systems,
management cultures and philosophy due to the global alignment of Indian
organisations. There is a need for multi skill development. Role of HRM is
becoming more important.

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In this unit, we will discuss competency mapping, business process

outsourcing and right sizing of workforce. We will also study about
knowledge management, talent management and employee engagement.
Objectives:
After studying this unit, you should be able to:
 define competency mapping
 analyse business process outsourcing
 evaluate right sizing of workforce
 describe knowledge management
 describe talent management
 analyse employee engagement

15.2 Competency Mapping

Employee skills, knowledge and abilities are not sufficient to achieve the
desired goals. Additional skills such as mind-set, values, belief and
commitment are required by employees to achieve their desired
performance. Thus competency is the sum of knowledge, skills, attitude and
personality of an individual as required for performing current and future
organisational needs.
Competency mapping is a process of identifying key competencies for
an organisation and/or a job and incorporating those competencies
throughout the various processes (i.e., job evaluation, training, recruitment)
of the organisation. We would define competency as a behaviour
(i.e., communication, leadership) rather than a skill or ability.
The steps involved in competency mapping with an end result of job
evaluation include the following:
1) Conduct a job analysis by asking incumbents to complete a Position
Information Questionnaire (PIQ). This can be provided for incumbents to
complete or you can conduct one-on-one interviews using the PIQ as a
guide. The primary goal is to gather, from incumbents, what they feel are
the key behaviours necessary to perform their respective jobs.
2) Using the results of the job analysis, you are ready to develop a
competency based job description. A sample of a competency based job
description generated from the PIQ may be analysed. This can be

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developed after carefully analysing the input from the represented group
of incumbents and converting it into standard competencies.
3) With a competency based job description, you are on your way to begin
mapping the competencies throughout your human resources
processes. The competencies of the respective job description become
your factors for assessment on the performance evaluation. Using
competencies will help guide you to perform more objective evaluations
based on displayed or not displayed behaviours.
4) Taking the competency mapping one step further, you can use the
results of your evaluation to identify in what competencies individuals
need additional development or training. This will help you focus your
training needs on the goals of the position and the company and help
your employees develop to achieve the ultimate success of the
organisation.

Figures 15.1 and 15.2 depict the competency mapping and assessment.

Fig. 15.1: Competency Mapping

(Source: http://www.nahrs.in/our_services.aspx?id=8)

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Fig. 15.2: Competency Mapping and Assessment

(Source: http://www.nahrs.in/our_services.aspx?id=8)

Self Assessment Questions

1. __________ is a process that identifies key competencies for an
organisation and/or a job and incorporating those competencies of the
organisation.
2. To conduct a __________ by asking incumbents to complete a position
information questionnaire (PIQ) is the first step in competency
mapping.

15.3 Business Process Outsourcing

In the previous section, we discussed competency mapping. Let us now
learn about business process outsourcing. Business process outsourcing is
the assignment of one or more important business processes to external
providers. Outsourcing is contracting with another company or person to do
a particular function. Almost every organisation outsources in some way.
Typically, the function being outsourced is considered non-core to the
business. An insurance company, for example, might outsource its janitorial
and landscaping operations to firms that specialise in those types of work
since they are not related to insurance or strategic to the business. The
outside firms that are providing the outsourcing services are third-party
providers, or as they are more commonly called, service providers.
Although outsourcing has been around as long as work specialisation has
existed, in recent history, companies began employing the outsourcing
model to carry out narrow functions, such as payroll, billing and data entry.
Those processes could be done more efficiently and therefore more cost-
effectively, by other companies with specialised tools and facilities and
specially trained personnel.
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Currently, outsourcing takes many forms. Organisations still hire service

providers to handle distinct business processes such as benefits
management. But some organisations outsource whole operations. The
most common forms are Information Technology Outsourcing (ITO) and
Business Process Outsourcing (BPO).
BPO includes call center outsourcing, Human Resources Outsourcing
(HRO), finance and accounting outsourcing, and claims processing
outsourcing. Dominant outsourcing providers in the information technology
outsourcing and business process outsourcing fields include IBM, EDS,
CSC, HP, ACS, Accenture and Capgemini.

Self Assessment Questions

3. _______ is contracting with another company or person to do a
particular function.
4. Business process outsourcing is the assignment of one or more
important business processes to ___________.
5. The outside firms that are providing the outsourcing services are
_______.

15.4 Right Sizing of Workforce

In the previous section, we discussed business process outsourcing. Let us
now learn about right sizing of workforce. Right sizing of workforce refers to
employing and maintaining exact number of employees with required skills,
abilities and knowledge to perform the existing number of jobs in an
organisation. Clear and systematic job analysis, job specification and job
description provide the basis for arriving at the exact number of employees
required.
Overstaffing results in high labour cost, high cost of production in addition in
organisational policies. This ultimately affects the profitability of the
companies.
Indian organisations retrench the employees through various schemes like
voluntary retirement schemes and golden handshakes.

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Activity 1:
Find a company where few HR activities have been outsourced and find
out how it is effective for organisation as a whole?

Self Assessment Questions

6. _________ refers to employing and maintaining exact number of
employees with required skills, abilities and knowledge to perform the
existing number of jobs in an organisation.
7. ___________ results in high labour cost, high cost of production in
addition in organisational policies.
8. Indian organisations retrench the employees through various schemes
like___________ and ______________.

15.5 Flexi time

Flexi time is a scheme where an organisation gives its employees the
opportunity of a flexible working hours arrangement.
Under flexi time, there is normally a core period of the day when employees
must be at work (e.g., between 10 A.M. and 4 P.M.), whilst the rest of the
working day is "flexi time", in which the staff can choose when they work,
subject to achieving total daily, weekly or monthly hours. An employee must
work between the basic core hours and has the flexibility to clock in/out
between the other hours.
An example of a typical flexi time day is below:
 Begin work between 0700 – 1000 (flexitime)
 Must be there between 1000 – 1200 (core time)
 Lunch break between 1200 – 1400 (flexible lunch hour)
 Must be there from 1400 – 1600 (core time)
 Leave between 1600 – 1900 (flexitime)

The hours employees work between these times are credited to their flexi
time balance.
For example, if the employees work a 35-hour week, then, over four weeks,
they will be obliged to work for 140 hours. If they work more than the
required hours in those four weeks then they will be in credit. If they have

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enough flexi time credit they can turn that into time off, and this is one of the
best liked features. This could be one or maybe 2 days a month depending
on their scheme.
Benefits of flexi time
Utilising a flexi time policy in an organisation can benefit everyone involved–
employers, employees and their families.
Benefits to an organisation
Introducing flexible working hours could bring the following benefits in a
business:
 Greater staff morale and job satisfaction. Most employers offering flexi
time working report improvements in recruitment, reduced absenteeism
and productivity.
 Reduces stress and fatigue, and unfocussed employees.
 Increases employee satisfaction and production.
 Greater staff retention and increased ability to attract new staff.
Recruitment costs are thus reduced.
 Ability to attract a higher level of skills because the business is able to
attract and retain a skilled and more diverse workforce.
 Work time visits to doctor/dentist are in employees’ time.
 Measures employee’s attendance – you only pay for the time in
attendance (delayed arrival caused by traffic congestion, delayed trains
etc. are at employee’s expense).
 An incentive to complete the tasks the same day, instead of being
carried forward to the next day, since extra hours worked count towards
the final target. Greater competitiveness, for example, being able to
react more effectively to changing market conditions.
 Increased customer satisfaction and loyalty as a result of the above.
Benefits to employees
 Increased opportunity to fit other commitments and activities with work,
and make better use of their free time.
 Better control of their workloads and manage a better balance between
life and work. Allows the employees to schedule their travel; time to
avoid congestion.
 Allows employees bank time to be used for leisure/personal activities.

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 Avoid the stress of commuting at peak times if their start and finish times
are staggered or if they work from home.
 Personal matters can be sorted without having to take time off.
 Helpful for people caring for children or other dependants, others also
may find flexible working helpful too.
Disadvantages of flexi time
If the scheme is not monitored properly, there is potential for employees to
abuse the system. For example, if the time is recorded on paper or
spreadsheets by staff they can easily fabricate their time.
Administration of the system may make demands upon a HR department
and create additional workload.

Self Assessment Questions

9. ________ is a scheme where an organisation gives its employees the
opportunity of a flexible working hours arrangement.
10. Flexi time increases employee ____________ and ______________.
11. Flexi time benefits employees to avoid the _______of commuting at
peak times if their start and finish times are staggered.

15.6 Knowledge Management

In the previous section, we discussed about flexi time. Let us now learn
knowledge management. Most of the software companies have been
contributing to knowledge management.
Knowledge management is one of the hottest topics today in both the
industrial world and the information research world. In our daily life, we deal
with huge amount of data and information. Data and information is not
knowledge until we know how to get the value out of it.
Knowledge Management (KM) refers to a multi-disciplined approach to
achieving organisational objectives by making the best use of knowledge.
KM focuses on processes such as acquiring, creating and sharing
knowledge, and the cultural and technical foundations that support them.
Some of the key features of KM are:

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 KM may be viewed in terms of:

o People – How do you increase the ability of an individual in the
organisation to influence others with their knowledge?
o Processes – Its approach varies from organisation to organisation.
There is no limit on the number of processes.
o Technology – It needs to be chosen only after all the requirements of
a KM initiative have been established.
Utilisation of human knowledge through knowledge management
Companies can retain the talented people by using KM so that they are
given an opportunity to transfer and share their knowledge. They can
enhance employee retention rates by recognising the value of employee
knowledge and rewarding them for it. As human capital, knowledge-based
perspective understands workers as human assets who create the value of
the organisation. By joining and staying in the organisation, employees
invest and put at risk some of their human capital. By taking advantage of
opportunities for continuous learning and development, their human capital
is deepened and expanded.
Employees have certain obligations outside of work, to their families,
communities and themselves; so sometimes, they cannot commit their full
energies to the organisation. Efforts are needed to integrate work and
personal aspects of life, and also to engage employees, individually and
collectively, in ways to simultaneously address organisational and individual
interests and expectations. Most of the people are hired to do specific
functions based on current needs and as they have certain limited
knowledge about that area, they never think beyond that limit. Employees
hired for a specific function may never have their full capabilities assessed
or explored.
Employers can motivate them and give them sufficient support and training
to utilise their capabilities – create an environment where people can share
and exchange their knowledge and interest, make a job environment that
can be conducive for individual growth. Organisation can take a chance to
identify those people whom they think have certain interest to explore
themselves in a specific area other than their own functional area.
Acquisition of knowledge is another important variable for the development
of the employee, provided the individual is interested in it.

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One of the essential elements of knowledge management is to develop

special strategies to encourage spontaneous exchange of knowledge.
Knowledge Transfer
 Transferring knowledge can be one of the essential parts of the
organisation. Organisations can build relationships and trust through
face-to-face meetings with their employees, encourage people to create
common ground through academic discussion and publications,
establish time and place for knowledge transfers like talk rooms,
conference reports, and inform people about it. Using common language
while sharing the knowledge can create a knowledge repository.

Collect all reusable

artifact

Send it to Expert

Get the feedback

Categorise

Index preparation

Put it in knowledge
repository

Maintain the KR

Fig. 15.1 Process Flow Diagram for KM Activities

(Source: Juin Choudhury, Human Asset, Effective Executive the magazine for
decision makers, IUP Publication, Hyderabad, 2007)

Self Assessment Questions

12. __________ refers to a multi-disciplined approach to achieving
organisational objectives by making the best use of knowledge.

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13. Knowledge management focuses on processes such as ________,

_____________ and _____________ knowledge and the cultural and
technical foundations that support them.
14. _______ needs to be chosen only after all the requirements of a
knowledge management initiative have been established

15.7 Talent Management

In the previous section, we discussed about knowledge management. Let us
now learn talent management.
The term talent management is usually associated with competency-based
HRM practices. Talent management decisions are often driven by a set of
organisational core competencies as well as position-specific competencies.
The competency set may include knowledge, skills, experience and
personal traits. Talent management is the recruitment, development,
promotion and retention of people, planned and executed in line with the
organisation’s current and future business goals. Because it is aimed at
building leadership strength in depth, it creates flexibility to meet rapidly
changing market conditions. A structured talent management process will
systematically close the gap between the human capital an organisation
currently has and the leadership talent it will eventually need to respond to
future business challenges.
Talent management, with a focus on soft skills, leadership development and
succession planning, is the defining trend in HR.
Matching the right person to the right job is an acknowledged need in
organisations. But one of the toughest challenges in selection that is often
overlooked is matching the right candidate to his/her immediate boss. What
makes that goal particularly tough is when the boss does not have a clue
what kind of candidate would work well with him/her.. Employers also need
to identify critical competencies that people will need to develop for their
success.
Many organisations consider their employees or human resources as the
most valuable element in their asset portfolio. People are not organisational
assets; they cannot be owned or controlled. However, people are the
owners of human capital-talent, skills, knowledge and enthusiasm, some of
which are invested in their work.
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In India, technically qualified people are easier to find. But what companies
require is a domain expert with managerial skills to leverage that expertise
in the interest of the company. Selections are increasingly based on soft
skills such as attitude, ethics or people skills.
Today, one’s educational qualification is just not enough to get a job. This
becomes even more important as we go up the pyramid to middle, senior
and top level managers. One of the scarce capabilities is leadership.
As organisations, their customers, employees and their environment
become more global and competitive; the competency requirements for
successful leadership are increasing exponentially. Leadership comes with
empowerment and changing work-cultures across the levels through
continuous learning, skill development and change management.
We now live in a world where the job and job requirements are constantly
changing. Many of us are in jobs that didn’t exist three years ago and three
years from now many of us will be in jobs that don’t exist now. In this
context, succession planning needs to be re-engineered, to focus on
competencies rather than positions. Thus, succession planning will evolve
into a broader talent management, regardless of the organisation structure.

Self Assessment Questions

15. ___________ term is usually associated with competency-based HRM
practices.
16. Matching the __________ to the right job is an acknowledged need in
organisations.
17. People are not _________; they cannot be owned or controlled.

15.8 Employee Engagement

In the previous section, we discussed about talent management. Let us now
learn employee management.
Employee engagement is the level of commitment and involvement an
employee has towards their organisation and its values. An engaged
employee is aware of business circumstances and works with his/her
organisation to improve the performance within the job for the benefit of the
organisation and to make an effective organisation.

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The main idea of employee engagement is to offer a positive environment to

employees so that they are free to add and desire to contribute more of their
energy, efforts and thought processes in more ways than one, and
significantly and favourably impact the goals of the organisation. It’s about
having employees feel fully connected to their company and keen about
their job. It is empowering employees to imagine and to start change from
their viewpoint. Employee engagement activates increased job satisfaction
and employee retention. It maximises workforce productivity. Employee
engagement is essential for meeting corporate sales and effective
objectives.
Six factors that define employee engagement within an organisation are:
 Challenging work for employees
 Employees get appropriate decision-making authority
 Company gives importance to customer satisfaction
 Employees have excellent career opportunities
 Company has a reputation as a good employer
 Individual work is better than team work
Employee engagement can change any company’s right over best practices
to NEXT PRACTICES. How well an organisation manages talent acquisition
and develops human capital; the capital that delivers world class customer
service that truly differentiates that company from the rest.
The Hewitt model has gained a lot of importance in employee engagement
and it seems to fit into the Indian scenario very well. The Hewitt Model is
based on the following parameters:
 People
 Work motivation
 Opportunities
 Quality of life/values
 Procedures
 Total rewards
Figure 15.2 shows the parameters in the Hewitt model.

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Fig. 15.2: Hewitt Model

(Source:
http://was2.hewitt.com/bestemployers/canada/pages/driving_engagement.htm)

Employee engagement activities for business organisations

Before an organisation attempts to start with employee engagement
activities, they first understand why this business concept is important. In
any business, effectiveness of employee engagement is high because it is
inextricably linked to the business results. Employee engagement can be
considered to be directly proportional to the growth and success of an
organisation.
Useful employee engagement activities
There are a number of things an employer can do to make their employees
feel engaged with the overall performance of the business they are working
with. Organisations can choose to make posts every week or every month
keeping their employees up-to-date with what is happening around them or
can go the extra mile with their employee engagement activities, setting up
initiatives such as real-time tracking of the company’s progress online or
even bringing into existence an employee suggestion system. Setting up
conferences on a platform accessible to all and face-to-face communication
with their staff members can also prove to be useful employee engagement
activities. Business owners often forget this but business is not a one-man
show. As a business owner or even a manager for that matter, they need to

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know their employees and need to listen to their ideas, acting on their
contributions.
Special employee engagement activities
1. Family employee engagement activities
These are the most promising employee engagement activities. Bringing the
employees together for a magnificent get-together with their families does
that extra little bit. Giving employees a day off for their birthday or even
anniversary for that matter can also be considered. It will hardly cause any
dip in your business. On the other hand, it will make the employees feel that
they belong and they will do what it takes to make the business flourish.
2. Introduce employee engagement activities at work
Organisations can provide meditation rooms and play ground for the people
who work for the organisation to help them combat stress. It will
undoubtedly cost a few thousands of rupees but then employers can expect
a lot more in return. Employee engagement activities are absolutely
essential if a company want their employees to truly engage in what they do.
3. Awards for high achievers
Organisations can also introduce employee engagement activities such as
spotlight awards for the employees who outdo themselves for the sake of
the business organisation. This is truly beneficial in the sense that not only
do they reward and acknowledge the hard work of some of their staff
members; they also encourage others to do so. Obviously, if employers do
choose to introduce such employee engagement activities, they need to
make sure to keep things healthy. Perhaps the one thing employees
absolutely dislike is unfair treatment.
4. Festivals
In a diverse work culture, one of the best things that can be done in terms of
employee engagement activities is organise parties to celebrate the different
festivals of different communities without showing any discrimination.
Celebrate Diwali, Eid, Christmas and this will keep the employees feel
united and happy.

Self Assessment Questions

18. __________ is the level of commitment and involvement an employee
has towards their organisation and its values.

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19. The ______ has gained a lot of importance in employee engagement

and it seems to fit into the Indian scenario very well.
20. Organisations can introduce _______ for the employees who outdo
themselves for the sake of the business organisation.

15.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Employee skill, knowledge and abilities are not sufficient to achieve the
desired goals. Additional skills, such as mind-set, values, belief and
commitment are required by employees to achieve the desired
performance.
 Competency is the sum of knowledge, skills, attitude and personality of
an individual as required performing current and future organisation.
 Business process outsourcing is the assignment of one or more
important business processes to external providers. Outsourcing is
contracting with another company or person to do a particular function.
 Flexi time is a scheme where an organisation gives its employees the
opportunity of a flexible working hours arrangement.
 Right sizing of workforce refers to employing and maintaining exact
number of employees with required skills, abilities and knowledge to
perform the existing number of jobs in an organisation.
 Knowledge Management (KM) refers to a multi-disciplined approach to
achieving organisational objectives by making the best use of
knowledge. KM focuses on processes such as acquiring, creating and
sharing knowledge, and the cultural and technical foundations that
support them.
 Transferring knowledge can be one of the essential parts of the
organisation. Organisation can build relationships and trust through
face-to-face meetings with their employees, encourage people to create
common ground through academic discussion and publications.
 Talent management is usually associated with competency-based HRM
practices. Talent management decisions are often driven by a set of
organisational core competencies as well as position-specific
competencies.

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 Companies require a domain expert with managerial skills to leverage

the expertise in the interest of the company. Selections are increasingly
based on soft skills such as attitude, ethics or people skills.
 Employee engagement is the level of commitment and involvement an
employee has towards their organisation and its values. Employee
engagement is to offer a positive environment to employees so that they
are free to add and desire to contribute more of their energy, efforts and
thought processes in more ways than one and significantly and
favourably impact the goals of the organisation.

15.8 Glossary
 Competency matrix: A competency matrix is a tool by which a person’s
competencies are assessed. It is used as a means to define the required
competencies for a particular position, as well as a tool to help identify
the most suitable individuals for the job.
 Talent management: Talent management refers to the process of
developing and integrating new workers, developing and retaining
current workers, and attracting highly skilled workers to work for a
company.

15.9 Terminal Questions

1. Describe competency mapping. Discuss the steps involved in
competency mapping with an end result of job evaluation.
2. Explain business process outsourcing.
3. What are the benefits we can see if an organisation is providing flexi
time to their employees?
4. What is right sizing and how do companies manage right sizing?
5. Explain knowledge management.
6. Discuss talent management.
7. Explain employee engagement and discuss about the special activities
that an organisation can introduce to engage their employees?

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15.10 Answers

Self Assessment Questions

1. Competency Mapping
2. Job analysis
3. Outsourcing
4. External providers
5. Third-party providers
6. Right sizing of workforce
7. Overstaffing
8. Voluntary retirement schemes, golden handshakes
9. Flexi time
10. Satisfaction, production
11. Stress
12. Knowledge Management
13. Acquiring, creating, sharing
14. Technology
15. Talent management
16. Right person
17. Organisational asset
18. Employee engagement
19. Hewitt model
20. Spotlight awards
Terminal Questions
1. Employee skill, knowledge and abilities are not sufficient to achieve the
desired goal. Additional skills such as mind-set, values, belief and
commitment are required to achieve the desired performance. Thus
competency is the sum of knowledge, skills, attitude and personality of
an individual as required performing current and future organisation.
Refer section 15.2 for more details.
2. Business process outsourcing is the assignment of one or more
important business processes to external providers. Outsourcing is
contracting with another company or person to carry out a particular
function. Refer section 15.3 for more details.

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3. There has been a tremendous increase in the number of female

employees in all types of organisations.Flexi time is a scheme where an
organisation gives its employees the opportunity of a flexible working
hours arrangement. Refer section 15.5 for more details.
4. Right sizing of workforce refers to employing and maintaining exact
number of employees with required skills, abilities and knowledge to
perform the existing number of jobs in an organisation. Refer section
15.4 for more details.
5. Knowledge Management (KM) refers to a multi-disciplined approach to
achieving organisational objectives by making the best use of
knowledge. KM focuses on processes such as acquiring, creating and
sharing knowledge, and the cultural and technical foundations that
support them. Refer section 15.6 for more details.
6. Talent management is usually associated with competency-based
human resource management practices. Refer section 15.7 for more
details.
7. Employee engagement is the level of commitment and involvement an
employee has towards their organisation and its values. Special
activities can be family employee engagement activities, introduce
employee engagement activities at work, Awards for high achievers,
celebration of all the festivals. Refer section 15.6 for more details.

15.12 Case Study

M/s. Shubha Medical Limited was established in 1985 and started
experiencing abnormal increase in human resource cost by 2004,
consequent upon its revised retention policy. The revised retention policy
aimed at increasing the salaries of pharmacists and top level managers
more than that of market leaders.
Mr. John took charge as the CEO in 2005. Upon his takeover, he began to
look for ways to make the organisation more profitable. Throughout his
investigation he found that the company’s human resource cost was too
high and is a major cause for the dwindling financial position of the
company.
Mr. John instructed the HR manager of the company to downsize the
number of employees by 30 percent creating a saving of Rs.3 billion. The

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HR manager offered a counter proposal that it would be wise to expand the

production and marketing operations of the company by revising the
corporate strategy, as the market was providing opportunities for the
pharmaceutical industry. The CEO did not agree to the counter proposal of
the HR manager and consequently, the HR manager initiated the
downsizing process. The HR manager officially informed the employees
about the details of the downsizing programme.
The flourishing pharmaceutical industry enabled the employees of M/S
Shubha medical to find jobs in other companies with much difficulty.
However, most were successfully out-placed by June 2006.
The company’s financials improved slightly in 2007 and the CEO told the
HR manager that we achieved the goal. But the HR manager replied, “we
achieved the goal but we lost appropriate strategy and our competitors
gained a lot by employing our trained and expert staff”.
Discussion Questions:
1. Who is right: HR Manager or CEO?
2. Would it be appropriate to modify the strategy based on availability of
staff and also when market is favourable?
(Source: P.Subba Rao, Personal and Human resource Management,
Himalaya Publication House, 2011)

References:
 Rao, P. S. (2011). Personal and Human Resource Management.
Himalaya Publication House.
 Choudhury, J. (2007). Human Asset, Effective Executive the magazine
for decision makers. Hyderabad: IUP Publication.
E-References:
 http://www.chillibreeze.com/articles_various/human-resources.asp:
http://www.e-hresources.com/Samples/sample1.html
 http://www.flexitimeplanner.com/Flexi-time-policy.aspx
 http://www.articlesbase.com/human-resources-articles/emerging-trends-
of-talent-management-and-challenges-of-hrm-957837.html
 http://employeeengagementsurvey.net/employee-engagement-activities-
take-care-of-your-employees-and-boost-your-profits
__________________
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