UNIT 4

HUMAN RESOURCES MANAGEMENT

Introduction:

Human resource management focuses on all issues related to ‘people’ in the organization. The people in an
organization are the most important assets. Managing human resource is one of the key functions of
business organizations. The people in the organization instrumental to success. So managing g people in an
efficient and effective way is essential.

Definitions:

HRM is the art of procuring, developing, and maintaining competent work force to achieve the goals of an
organization is an organization is an effective and efficient manner.

Human resource management is organizing, coordinating, and managing an organization's current employees
to carry out an organization’s mission, vision, and goals. This includes recruiting, hiring, training,
compensating, retaining, and motivating employees.

Human resource management as the “planning, organizing, directing, controlling of procurement,

development, compensation, integration, maintenance and separation of human resources to the end that
individual, organizational and social objectives are achieved”.
- Edwin Flippo
“Human Resource Management is the set of organizational activities directed at attracting, developing
and maintaining an effective workforce.”
Ricky W. Griffin

Concept of HRM:
HRM is a management function that helps managers to recruit, select, train and develop members for an
organization. HRM is concerned with the people’s dimension in organization. HRM is the planning,
organizing, directing and controlling of the procurement, development, compensation, integration and
maintenance of human resources so that the individual, organizational and social objectives are
accomplished.
Significance / Importance / Advantages of HRM:

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

Facilitates Professional Growth: Due to proper HR Policies employees are trained well and this makes
them ready for future promotions.
Better Relationships between Union and Management: Healthy HRM practices can help the
organization to maintain co-ordinal relationship with the unions.

Helps an Individual to Work in a Team / Group: Effective HR practices teach individuals team work
and adjustment. The individuals are now very comfortable while working in team thus work improves.

Allocating the Jobs to the Right Person: If proper recruitment and selection methods are followed, the
company will be able to select the right people for the right job.

FUNCTIONS OF HUMAN RESOURCE MANAGEMENT

HRM functions can be broadly classified into two categories:
i) Managerial functions. ii) Operative functions.
i) Managerial Functions:
Managerial functions of the human resource department are planning, organizing, staffing, directing and
controlling.
ii) Operative Functions: Operative function may be discussed as under:
HUMAN RESOURCE PLANNING
Human resources planning is a process that identifies current and future human resources needs for an
organization to achieve its goals. Human resources planning should serve as a link between human
resources management and the overall strategic plan of an organization.

Human resource planning is a process through which the right candidate for the right job is ensured. For
conducting any process, the foremost essential task is to develop the organizational objective to be achieved
through conducting the said process.

Six steps in human resource planning are:

1. Analysing Organizational Objectives: The objective to be achieved in future in various fields such as
production, marketing, finance, expansion and sales gives the idea about the work to be done in the
organization.

2. Inventory of Present Human Resources: From the updated human resource information storage sys-
tem, the current number of employees, their capacity, performance and potential can be analysed. To fill
the various job requirements, the internal sources (i.e., employees from within the organization) and
external sources (i.e., candidates from various placement agencies) can be estimated.

3. Forecasting Demand and Supply of Human Resource: The human resources required at different
positions according to their job profile are to be estimated. The available internal and external sources to
fulfill those requirements are also measured. There should be proper matching of job description and job
specification of one particular work, and the profile of the person should be suitable to it.

4. Estimating Manpower Gaps: Comparison of human resource demand and human resource supply will
provide with the surplus or deficit of human resource. Deficit represents the number of people to be
employed, whereas surplus represents termination. Extensive use of proper training and development
programme can be done to upgrade the skills of employees.

5. Formulating the Human Resource Action Plan: The human resource plan depends on whether there
is deficit or surplus in the organization. Accordingly, the plan may be finalized either for new recruitment,
training, interdepartmental transfer in case of deficit of termination, or voluntary retirement schemes and
redeployment in case of surplus.

6. Monitoring, Control and Feedback: It mainly involves implementation of the human resource action
plan. Human resources are allocated according to the requirements, and inventories are updated over a
period. The plan is monitored strictly to identify the deficiencies and remove it. Comparison between the
human resource plan and its actual implementation is done to ensure the appropriate action and the
availability of the required number of employees for various jobs.

RECRUITMENT

Meaning:
Recruitment is a positive process of searching for prospective employees and stimulating them to apply for
the jobs in the organisation. When more persons apply for jobs then there will be a scope for recruiting
better persons.
Definition:
According to Edwin B. Flippo, “It is a process of searching for prospective employees and stimulating and
encouraging them to apply for jobs in an organisation.”
Methods of Internal Sources:

1. Transfers: Transfer involves shifting of persons from present jobs to other similar jobs. These do not
involve any change in rank, responsibility or prestige. The numbers of persons do not increase with
transfers.

2. Promotions: Promotions refer to shifting of persons to positions carrying better prestige, higher
responsibilities and more pay. The higher positions falling vacant may be filled up from within the
organisation. A promotion does not increase the number of persons in the organisation.A person going to
get a higher position will vacate his present position. Promotion will motivate employees to improve their
performance so that they can also get promotion.

3. Present Employees: The present employees of a concern are informed about likely vacant positions.
The employees recommend their relations or persons intimately known to them. Management is relieved
of looking out prospective candidates.The persons recommended by the employees may be generally
suitable for the jobs because they know the requirements of various positions. The existing employees take
full responsibility of those recommended by them and also ensure of their proper behaviour and
performance.

Advantages of Internal Sources:

• Improves morale
• No Error in Selection
• Promotes Loyalty
• No Hasty Decision
• Economy in Training Costs
• Self-Development

Disadvantages of Internal Sources:

(i) It discourages capable persons from outside to join the concern.

(ii) It is possible that the requisite number of persons possessing qualifications for the vacant posts may not
be available in the organisation.

(iii) For posts requiring innovations and creative thinking, this method of recruitment cannot be followed.

(B) External Sources:

All organizations have to use external sources for recruitment to higher positions when existing employees
are not suitable. More persons are needed when expansions are undertaken.
Methods of External Sources:

1. Advertisement: It is a method of recruitment frequently used for skilled workers, clerical and higher
staff. Advertisement can be given in newspapers and professional journals. These advertisements attract
applicants in large number of highly variable quality.

Preparing good advertisement is a specialised task. If a company wants to conceal its name, a ‘blind
advertisement’ may be given asking the applicants to apply to Post Bag or Box Number or to some
advertising agency.

2. Employment Exchanges: Employment exchanges in India are run by the Government. For unskilled,
semi-skilled, skilled, clerical posts etc., it is often used as a source of recruitment. In certain cases it has
been made obligatory for the business concerns to notify their vacancies to the employment exchange. In
the past, employers used to turn to these agencies only as a last resort. The job-seekers and job-givers are
brought into contact by the employment exchanges.

3. Schools, Colleges and Universities: Direct recruitment from educational institutions for certain jobs
(i.e. placement) which require technical or professional qualification has become a common practice. A
close liaison between the company and educational institutions helps in getting suitable candidates. The
students are spotted during the course of their studies. Junior level executives or managerial trainees may
be recruited in this way.

4. Recommendation of Existing Employees: The present employees know both the company and the
candidate being recommended. Hence some companies encourage their existing employees to assist them
in getting applications from persons who are known to them.In certain cases rewards may also be given if
candidates recommended by them are actually selected by the company. If recommendation leads to
favouritism, it will impair the morale of employees.

5. Factory Gates: Certain workers present themselves at the factory gate every day for employment. This
method of recruitment is very popular in India for unskilled or semi-skilled labour. The desirable candidates
are selected by the first line supervisors. The major disadvantage of this system is that the person selected
may not be suitable for the vacancy.

6. Casual Callers: Those personnel who casually come to the company for employment may also be
considered for the vacant post. It is most economical method of recruitment. In the advanced countries, this
method of recruitment is very popular.

7. Central Application File: A file of past applicants who were not selected earlier may be maintained. In
order to keep the file alive, applications in the files must be checked at periodical intervals.

8. Labour Unions: In certain occupations like construction, hotels, maritime industry etc., (i.e., industries
where there is instability of employment) all recruits usually come from unions. It is advantageous from
the management point of view because it saves expenses of recruitment. However, in other industries,
unions may be asked to recommend candidates either as a goodwill gesture or as a courtesy towards the
union.

9. Labour Contractors: This method of recruitment is still prevalent in India for hiring unskilled and semi-
skilled workers in brick klin industry. The contractors keep themselves in touch with the labour and bring
the workers at the places where they are required. They get commission for the number of persons supplied
by them.
10. Former Employees: In case employees have been laid off or have left the factory at their own, they
may be taken back if they are interested in joining the concern (provided their record is good).

Merits of External Sources:

• Availability of Suitable Persons:
• Brings New Ideas:
• Economical:

Demerits of External Sources:

• Demoralisation:
• Lack of Co-Operation:
• Expensive:
• Problem of Maladjustment

SELECTION

Selection is a process of choosing right person for the right job.

The selection process consists of a series of steps or techniques as follows

1. Job Analysis : The first step in selection process is analyzing the job. Job analysis consists of two parts
:

(a) Job Description, and

(b) Job Specification.
Proper job analysis helps to advertise the job properly. Accordingly, the right candidates may apply for the
job, thus saving a lot of time and effort of the selectors.

2. Advertising the Job: The next step is to advertise the job. The job can be advertised through various
media. The right details about the job and the candidate must be given in the advertisement.

3. Initial Screening: The initial screening can be done of the applications and of the applicant. Usually,
a junior executive does the screening work. At this stage, the executive may check on the general
personality, age, qualifications, family background of the candidate. The candidate may also be informed
of salary, working conditions, etc.

4. Application Blank: It is a prescribed form of the company which helps to obtain information about
candidate in respect of social, biographic, academic, work experience, references, etc.It provides basis to
reject candidates if they do not meet eligibility criteria, such as experience, qualifications, etc.

5. Tests: Various tests are conducted to judge the ability and efficiency of the candidates. The type of
tests depends upon the nature of job. An important advantage of testing is that it can be administered to a
large group of candidates at a time and saves time and cost.The various tests are: (a) Personality test, (b)
Intelligence test, (c) Performance test, (d) Stress test, etc.

6. Interview: It is face to face exchange of views, ideas and opinions between the candidate and
interviewer(s).There are various types of interviews such as : (a) Panel Interview, (b) Individual Interview,
(c) Group Interview, (d) Stress Interview, (e) Exit Interview.
7. Reference Check: A candidate may be asked to provide references from those who are willing to
supply or confirm about the applicant’s past life, character and experience.

• Reference check helps to know the personal character and family background of the candidate.
• It helps to guard against possible false information supplied by candidate.

8. Medical Check: Medical examination of the candidates is undertaken before they join the firm in
order to –

• Find out whether the candidate is physically fit to carry out duties and responsibilities effectively,
• Ensure the health and safety of other employees,
• Find out whether the candidate is sensitive to certain work place such as in a chemical factory.

9. Final Interview: Before making a job offer, the candidates may be subjected to one more oral
interview to find out their interest in the job and their expectations. At this stage, salary and other perks
may be negotiated.

10. Job Offer: This is the most crucial and final step in selection process. A wrong selection of a candidate
may make the company to suffer for a good number of years and the loss is incalculable. Company should
make a very important decision to offer right job to the right person.

TRAINING AND DEVELOPMENT

“Training & Development is any attempt to improve current or future employee performance by
increasing an employee's ability to perform through learning, usually by changing the employee's attitude
or increasing his or her skills and knowledge.”

A. On-the-job training Methods:

Under these methods new or inexperienced employees learn through observing peers or managers
performing the job and trying to imitate their behaviour. These methods do not cost much and are less
disruptive as employees are always on the job, training is given on the same machines and experience would
be on already approved standards, and above all the trainee is learning while earning. Some of the
commonly used methods are:

1. Coaching: Coaching is a one-to-one training. It helps in quickly identifying the weak areas and tries to
focus on them. It also offers the benefit of transferring theory learning to practice. The biggest problem is
that it perpetrates the existing practices and styles. In India most of the scooter mechanics are trained only
through this method.

2. Mentoring: The focus in this training is on the development of attitude. It is used for managerial
employees. Mentoring is always done by a senior inside person. It is also one-to- one interaction, like
coaching.
3. Job Rotation: It is the process of training employees by rotating them through a series of related jobs.
Rotation not only makes a person well acquainted with different jobs, but it also alleviates boredom and
allows to develop rapport with a number of people. Rotation must be logical.
4. Job Instructional Technique (JIT): It is a Step by step (structured) on the job training method in which
a suitable trainer (a) prepares a trainee with an overview of the job, its purpose, and the results desired, (b)
demonstrates the task or the skill to the trainee, (c) allows the trainee to show the demonstration on his or
her own, and (d) follows up to provide feedback and help. The trainees are presented the learning material
in written or by learning machines through a series called ‘frames’. This method is a valuable tool for all
educators (teachers and trainers). It helps us:

a. To deliver step-by-step instruction

b. To know when the learner has learned

c. To be due diligent (in many work-place environments)

5. Apprenticeship: Apprenticeship is a system of training a new generation of practitioners of a skill. This

method of training is in vogue in those trades, crafts and technical fields in which a long period is required
for gaining proficiency. The trainees serve as apprentices to experts for long periods. They have to work in
direct association with and also under the direct supervision of their masters.

The object of such training is to make the trainees all-round craftsmen. It is an expensive method of training.
Also, there is no guarantee that the trained worker will continue to work in the same organisation after
securing training. The apprentices are paid remuneration according the apprenticeship agreements.

6. Understudy: In this method, a superior gives training to a subordinate as his understudy like an assistant
to a manager or director (in a film). The subordinate learns through experience and observation by
participating in handling day to day problems. Basic purpose is to prepare subordinate for assuming the full
responsibilities and duties.

B. Off-the-job Training Methods:

Off-the-job training methods are conducted in separate from the job environment, study material is
supplied, there is full concentration on learning rather than performing, and there is freedom of expression.
Important methods include:

1. Lectures and Conferences: Lectures and conferences are the traditional and direct method of
instruction. Every training programme starts with lecture and conference. It’s a verbal presentation for a
large audience. However, the lectures have to be motivating and creating interest among trainees. The
speaker must have considerable depth in the subject. In the colleges and universities, lectures and seminars
are the most common methods used for training.

2. Vestibule Training: Vestibule Training is a term for near-the-job training, as it offers access to
something new (learning). In vestibule training, the workers are trained in a prototype environment on
specific jobs in a special part of the plant.
An attempt is made to create working condition similar to the actual workshop conditions. After training
workers in such condition, the trained workers may be put on similar jobs in the actual workshop.

This enables the workers to secure training in the best methods to work and to get rid of initial nervousness.
During the Second World War II, this method was used to train a large number of workers in a short period
of time. It may also be used as a preliminary to on-the job training. Duration ranges from few days to few
weeks. It prevents trainees to commit costly mistakes on the actual machines.

3. Simulation Exercises: Simulation is any artificial environment exactly similar to the actual situation.
There are four basic simulation techniques used for imparting training: management games, case study, role
playing, and in-basket training.

(a) Management Games: Properly designed games help to ingrain thinking habits, analytical, logical and
reasoning capabilities, importance of team work, time management, to make decisions lacking complete
information, communication and leadership capabilities. Use of management games can encourage novel,
innovative mechanisms for coping with stress.

(b) Case Study:Case studies are complex examples which give an insight into the context of a problem as
well as illustrating the main point. Case Studies are trainee centered activities based on topics that
demonstrate theoretical concepts in an applied setting.

(c) Role Playing: Each trainee takes the role of a person affected by an issue and studies the impacts of the
issues on human life and/or the effects of human activities on the world around us from the perspective of
that person.

(d) In-basket training: In-basket exercise, also known as in-tray training, consists of a set of business
papers which may include e-mail SMSs, reports, memos, and other items. Now the trainer is asked to
prioritise the decisions to be made immediately and the ones that can be delayed.

4. Sensitivity Training:

Sensitivity training is also known as laboratory or T-group training. This training is about making people
understand about themselves and others reasonably, which is done by developing in them social sensitivity
and behavioral flexibility. It is ability of an individual to sense what others feel and think from their own
point of view.

JOB EVALUATION

Job Evaluation is defined as a process of evaluating and assessing one job in relation to another job in the
organization. The relative worth of various jobs is determined by the organization so that they can establish
a satisfactory wage system that will depend on the worth of the job.

Every organization consists of many jobs but few jobs have more importance than others jobs in terms of
relative worth. The main purpose of job evaluation is to rate the job rather than rate the employee’s
performance.

MEANING:
Job evaluation is a process that is concerned with determining the relative worth of each job in relation to
other jobs in an organization. It is intended to provide a rational, orderly hierarchy of jobs based on their
worth to the company by analyzing the difficulty of the work performed and the importance of the work to
the organization. The factors used to assess a job’s worth are identified, defined, and weighted in the
company’s job evaluation plan.

Management uses the job evaluation method to achieve equity in pay and formulate a formal wage and
salary program that is accepted by all employees and compensates all employee effort and hard work they
put into their service.

DEFINITION:

According to the International Labour Organization (ILO),

“Job Evaluation is an attempt to determine and compare the demands which the normal performance of a
particular job makes on normal workers, without taking into account the individual abilities or performance
of the workers concerned”

Job Evaluation can be defined as “a systematic and orderly process of determining the worth of a job in
relation to other jobs”. – Edwin B.Flippo

Objectives of Job Evaluation

• To compare the duties, responsibilities, and required technical or conceptual skills of a job with
other jobs.

• To collect the data or information for the preparation of job descriptions and job specifications
of various jobs.
• To minimize wage discrimination based on sex, age, caste, and religion.

• To determine the proper hierarchy of jobs in the organization structure.

• To rank the various jobs according to their relative worth.

• It simplifies the wage structure.

• To improve employee-management relations.

Importance of Job Evaluation

• It helps in standardizing and fixation of salary and wage.

• It provides a basis for grading and the pay structure of the organization.
 • It helps in reducing the inequalities in the wage structure.

• It resolves all kinds of controversies related to salary and wages.

• It helps in recruiting and selection.

• It helps in wage in salary negotiation.

• It increases employee job satisfaction because of fair and transparent wage norms.
• It enhances the company’s brand image and the organization earns a lot of goodwill.
The Job evaluation program is a process involving a few steps.

1. Gaining acceptance
2. Creating a job evaluation committee
3. Finding the jobs to be evaluated
4. Analyzing and preparing a job description
5. Selecting the method of evaluation
6. Classifying jobs

Gaining acceptance

Before undertaking job evaluation, top management must explain the aims and uses of the program to the
employees and unions.

To elaborate on the program further, oral presentations could be made. Letters and booklets could be used
to classify all relevant aspects of the job evaluation program.

Creating a job evaluation committee

A single person can’t evaluate all the key jobs in an organization.

Usually, a job evaluation committee consisting of experienced employees, union representatives, and HR
experts is created to set the ball rolling.

Finding the jobs to be evaluated:Every job need not be evaluated. This may be too taxing and costly.
Certain key jobs in each department may be identified. While picking up the jobs, care must be taken to
ensure that they represent the type of work performed in that department.

Analyzing and preparing a job description:This requires the preparation of a job description and also an
analysis of job needs for successful performance.Check out our article on the job description and how the
job description explains job duties, responsibilities, reporting relationships, working conditions, and
supervisory responsibilities.

Selecting the method of evaluation:The most important method of evaluating the jobs must be identified
now, keeping the job factors and organizational demands in mind.
Classifying jobs:The relative worth of various jobs in an organization may be found out after arranging
jobs in order of importance using criteria such as skill requirements, experience needed under which
conditions the job is performed, type of responsibilities to be shouldered, degree of supervision needed, the
amount of stress caused by the job, etc.

Weights can be assigned to each such factor. A job’s worth is determined when we add all the weights. The
points may then be converted into monetary values.

Methods of Job evaluation

Job evaluation is considered an important function of HRM which help to determine the relative worth of
jobs in an enterprise. It plays a key role in establishing fair and standard pay differentials among jobs.

Job evaluation methods are classified into two categories which are further subdivided into two types –

Qualitative or Non-Analytical Methods

As per this method of job evaluation, all jobs in the enterprise are compared with each other. There is no
attempt is made to break down or divide the jobs so that all aspects, demands, and components are analyzed
completely and correctly.

1. Ranking System of Job Evaluation

The ranking method is one of the simplest methods of job evaluation. As per this method, the job raters
compare and then rank one job against another without assigning point values. The job rater arranged the
jobs from the most difficult to the simplest.

Again the job rater compares two jobs, one against another, and rank the more difficult job higher than the
other job. and this process is continue until all jobs have been assigned their relative positions or rank.

Process of the Ranking Method

• Data collection from job analysis

• Selection of Raters
• Ranking of jobs
• Decide the pay structure

Advantages:

• It is a very simple and easy method

• This method is economical
• It takes very less time
• This method is used in small firms where all jobs are well-known to job raters.

Disadvantages:
 • It is subjective in nature because a committee rank the job hence it enhances the chance of
human error.
• The exact difference between different jobs is not determined because only rank is allocated to
jobs.

• Jobs are not broken down into different criteria.

• This method fails to provide a yardstick or criteria for measuring the relative worth of one job
against another.

2. Job Grading Method

The job grading method is also known as the job classification method. This method begins with the
collection of information and data about various jobs with the help of job analysis and then all the jobs are
put under different grades or classes that match them best based on the nature of the job, skill,
responsibilities, experience, and another requirement. The job structure is divided into several classes or
grades and each grade has its own wage rate.

The job grading method is slightly different from the ranking method because the grading method uses
scale whereas in the rank method there is no involvement of the job.

For example, jobs may be graded as skilled, unskilled, clerical, managerial, executive, etc.

This method is mostly used in government departments for example RRB grade A jobs, RRB grade B jobs,
RRB grade C jobs and etc.

Process

• Preparing grade description

• Selection of grade
• Grading of job
• Decide the wage structure as per the grade

Advantages:

• It is easy to understand.
• It provides an opportunity for a systematic organizational structure.
• It is more elaborate than the ranking method.
• Does not require any technical skill to perform this method.
• It takes into account all the factors that a job comprises.

Disadvantages:

• There is a high chance of human biases.

• As the number of jobs increases then it becomes difficult to write grades or class descriptions
are not easy with this method.
 • There may be a possibility that jobs are classified wrongly.
• This method is not suitable for large organizations.

Quantitative or Analytical Methods

1. Points Rating Method

The point rating method is the most sophisticated and widely used method in business organizations. In this
method first job key factor is identified then the job is broken down into various job-related factors and
placed weights or points on them.

Assigning points to factors and degrees – Evaluators examine each job on a factor-by-factor basis and
ascertain the degree the job fits into each factor. The factors and degrees are weighted or assigned points.

Process

• Determine critical job-related factors

• Identify and define subfactors
• Assigned respective points to factors
• Preparing job evaluation manual
• Adding points for all factors to ascertain the total point value for each job.
Advantages:

• Their method provides no chance for subjective judgment in evaluating jobs, as the factors and
degrees are elaborately explained
• This method provides an accurate evaluation as points for factors/degrees are decided before
job evaluation is made.
• This method is through a selection of an appropriate number of factors and degrees.

Disadvantages:

• It is a very complex method.

• It is a very time-consuming method.
• This method is very costly so many organizations do not adopt this method of job evaluation.
• It needs the expertise to decide factors, degrees, and point values.
• It is difficult to change any factor, or degree after a manual point plan is formulated.

2. Factor comparison method

The factor comparison method has a lot of similarities to the point-raking method as it categorizes different
job factors under created groups. In this method, the first key jobs are decided and jobs are divided into the
key job factors, these factors are assumed to be constant for each set of jobs present to some degree in all
jobs in organization present in the organization.

Generally, these key factors include mental requirements, physical requirements, skill requirements,
working conditions, job responsibilities, supervisory responsibilities, etc. Thus, all jobs are compared to
each other on the basis of key job factors that are present in all jobs. The same point is assigned to each
factor and the total number of points indicates the job’s ranking.

The key jobs are ranked on a factor-by-factor basis and the organization ranks each of such key jobs from
top to bottom, for each of the factors.

Conversion of ranking into money rates. Existing wage rates for key jobs are taken to find out the worth of
each factor in each key job.

Process

• Identify the key jobs.

• Defining the key factors that are present in all jobs.
• Rank the key job, factor by factor basis.
• Decide the salary or monetary compensation for each factor and rank the key jobs.
• Compare the factor ranking of each job with its monetary ranking.
Advantages:

• It provides a better basis for assessing the relative worth of each job when compared to the non-
analytical methods.
• This method is easy to understand.
• No training is required to implement this system.
• This method is considered accurate because it compares other jobs with key jobs.

Disadvantages:

• It is a complex method.
• It is a very costly method for job evaluation.
• Communicating the job values assigned to the employees can also be challenging as they are
often subjective.
• Selection of key jobs and their key job factor is very difficult for the job evaluator.
• Using the same criteria or key factors to measure all jobs in an organization may not be effective
in situations when jobs vary within the organization.

PERFORMANCE APPRAISAL

It is the process of evaluating the relative merit of the person on a given job. It is an essential task of the
personnel manager to distinguish the meritorious employees from the others. The data collected from this
task is used for strategic decisions such as releasing an increment in pay, promotion, transfer, transfer on
promotion to a critical assignment, or even discharge.\

Objectives
 ▪ To determine salary increments
▪ To decide who has to be transferred, promoted, or demoted
▪ To enhance employee morale, and thus, stimulate positive thinking among employees about the
work and the organization
▪ To discover the worker’s needs for retraining and advanced training.
▪ To unfold the exceptional skills among the employees, based on their innate potentials
▪ To guide and monitor the performance of those who are lagging behind
While evaluating the merit of an employee, the following traits of the employee are closely observed and
analyzed:

▪ Ability to carry out the instructions to do the job assigned

▪ Knowledge of every detail of the job
▪ Ability to solve problems on the job
▪ Special qualities such as creativity, quality of interaction, and so on
▪ Supervisory capabilities
▪ Ability to adapt or manage crisis
▪ Ability to work in a team
▪ Capability to work against hard targets

The list is, however, not a standard one. The list of such traits can be flexible considering the requirements
of the organizations. The purpose for which the employee is evaluated is, more often, the better guide to
suggest the parameters of evaluation.

Methods of Performance appraisal

There are different methods of assessing the performance of the person on the job. While most of them are
based on supervisor’s remarks, some of them are based on self-evaluation. In other words, particularly at
higher executive positions, the employee is given an opportunity to evaluate his own performance against
his own preset objectives. Such reports are evaluated based on the merits of each case. The following are
the different methods merit rating.

Ranking method

In this method, all the staff of a particular cadre or a department are arranged either in the ascending or the
descending order in order of merit or value to the firm. Though this is a simple method, it cannot be followed
where the employees in the department are many in number. This method fails to identify the degree of
differential merit among the staff.

Paired comparison method

Here, every employee is compared with all others in a particular cadre in the department. By comparing
each pair of employees, the rater can decide which of the employees is more valuable to the organization.
This method is more useful for an overall comparison of employees and if the number of employees is
reasonable.
Rating scale

Traits good Fair poor

Skills on the job 3 2 1

Punctuality 3 2 1

Cooperation 3 2 1

Care towards the equipment and tools 3 2 1

Here, the factors dealing with the quantity and quality of work are listed and rated. A numeric value may
be assigned to each factor and the factors could be weighed in the order of their relative importance. All the
variables are measured against three or five point scale. For instance, if a variable such as skill on the job
is evaluated, a three point scale could be
Similarly, a five point scale could be excellent, good, satisfactory, average, and poor in which case the
weightage could be 5, 4, 3, 2 and 1 respectively. Several traits or attributes such as punctuality, efficiency,
cooperation, initiative, and others are evaluated on such a scale. The indication is recorded by marking the
concerned number representing the degree to which the individual satisfies the standard. The numbers also
serve as weights, which can be added to judge the relative merit of the each employee.

The rating scale is a widely used method of evaluating performance because it is economical to develop
and easily understood by the workers and the evaluator. A major weakness is that each evaluator is apt to
interpret the factors such as skills on the job and the degrees describing that factor are marked off along the
scale (such as good, fair, poor). This method is simple to administer but cannot sharply differentiate the
employees.

Forced distribution method here, employees are given a set of alternatives and they have to choose one,
which reflects their understanding of the true nature of the job. Their thinking is conditioned by the given
set of answers. In other words, employees are forced to select one, from the given set of answers, which
they think correct. Based on their answers, their judgment skills, analytical, and reasoning skills are
assessed. The answers given may be very close to each other and to select the right answer, the candidate
has to understand the job and scope for promotion.

Narrative or essay method here, the candidate is required to narrate in an essay format his/her strengths,
weaknesses, and potential to perform. Here, the candidate is not restricted by any given set of alternatives.
The candidate is free to decide what to furnish or what not furnish. The advantage with this method is that
the evaluator is also not bound by any constraints such as scaling, and others. This method is often used in
evaluating employees, mostly in the service organization. All the eligible candidates may be asked to
enclose in their application for promotion, a page write up on ‘Why they should promoted ‘. The one who
presents his arguments in a logical and justifiable manner is likely to emerge victorious. One difficulty with
this method is the comparison. Since the candidates are likely to cover different aspects of performance and
personal traits, it is difficult to compare the relative merit of each employee.

Management by objectives (MBO) the short term objectives mutually agreed upon by the management
and the employee are used as performance standards. This method considers the actual performance as the
basic for evaluation. It is a systematic method of goal setting. Also, it provides for reviewing performance
based on results rather than personality traits or characteristics. However, this is not practical at all levels
and for all kinds of work in the organizations.

The 360-degree feedback method is designed to get feedback from all the key players an employee
impacts in their day-to-day activities — managers and supervisors, peers, subordinates, and even clients
and customers. The employee also completes a self-evaluation. This method is highly regarded because
multiple people are involved in evaluating the employee’s performance. Organizations typically collect
this feedback via an online questionnaire or form.

BARS( Behaviorally Anchored Rating Scale) is “a measuring system which rates employees or trainees
according to their performance and specific behavioral patterns.”

This is considered one of the most effective modern methods of performance appraisal because it relies on
both quantitative and qualitative forms of measurement. In this approach, the employer compares each
employee’s performance with specific behavioral examples that are anchored to numerical ratings.
Incentives:
An employee incentive is a reward that an employer gives to employees for results achieved by the company
as a whole. It is usually monetary compensation and can be in addition to salary or wages. An employee
incentive can be in the form of a gift, free products, paid time off, or additional shares of stock.

Incentive pay, or profit-sharing, is a method of compensating employees based on the

company’s performance. Would typically give any rewards earned at the end of a fiscal year. It
can be in the formation of cash, stock options, or bonuses. When used appropriately, incentive
pay creates an environment where employees are driven to perform their best and help the
company obtain positive results.

There are three types of incentives that managers can offer employees:

Positive incentives or rewards: encourage desirable behaviors and actions, such as customer
service and sales initiatives. Reward or positive incentive programs come in various forms:
stock options, prizes, bonuses, increased pay, or special privileges like flexible work schedules.

Negative incentives or penalties: discourage undesirable behaviors and actions, such as

customer complaints and workplace accidents. Penalty programs include demotions, pay cuts,
reprimands, suspensions, and firings.

Process incentives: to encourage teamwork and cooperation among employees for the
organization’s benefit in general. Examples include quality circles (team meetings), suggestion
box programs, Quality of Work-Life programs (teamwork in general), employee empowerment
programs (like self-directed work teams), and product development, teams.

Types of Incentives:

An inducement that motivates or inspires one to take action in a desirable direction is an incentive. Thus,
all the steps executed by a company’s management or business to increase the performance of its personnel
can be classified as incentives.
Modern businesses use many incentives to inspire their staff that can be divided broadly into two categories:
financial and non-financial incentives. Let’s discuss them one by one in great detail.

Financial Incentives

Financial incentives are directly monetary, i.e., money that can be measured in monetary terms. Money has
become a crucial component of our lives in today’s socioeconomic climate, both in urban and rural areas.

Since money has purchasing power, it meets practically all our demands. Thus, financial incentives and
promotions positively impact employee engagement and loyalty around the world.

Salaries, bonuses, retirement benefits, commission, benefit sharing or gain sharing, promotions, medical
reimbursement, and employee stock ownership are all examples of financial advantages and rewards
necessary for an organisation’s plan.

Every organisation that wants to recruit and retain employees, their management must improve these
financial incentives. Financial incentives can be given to them individually or in groups to satisfy
employees’ monetary or future security needs.

Types of Financial Incentives

Financial incentives are types of remuneration linked to monetary incentives or need monetary payment.
This type of incentive can come in a variety of shapes and sizes. The most prevalent financial incentives
are listed below.

The different types of Financial Incentives are as follows:

❖ Salary – It is the basic Financial Incentive for any employee to work diligently for the organisation. It
includes components like basic pay, house rent allowance, dearness allowance and other such benefits.
❖ Bonus – It is a consolidated amount that an employee gets from the organisation for performing well.
It can act as a powerful motivator for the employee. The bonus can also be for specific occasions like
festivals or other important events for the company. The bonus can be in the form of monetary benefits,
paid vacations, gifts, etc.
❖ Performance-based incentives – Employees may also get increments based on their performance
apart from the yearly hike on basic pay. It can motivate the employee to keep improving their
efficiency.
❖ Stock options – Firms can offer ordinary shares to employees at rates below the market price. These
shares can act as a motivator for employees by making them part owners of the company.

❖ Profit-sharing Profit-sharing refers to a sort of financial incentive in which employees are paid out of
a percentage of the company’s pre-tax income. Under this, employees typically receive a share of the
company’s profits in addition to their regular pay. This indicates that a company or workplace will
give profit-sharing payments only based on the company’s earnings or other considerations such as
excellent customer service. Profit-sharing schemes also increase workers’ loyalty. Sharing a
company’s profits with employees allows them to feel like they are a valuable part of the organization.
Non-Financial Incentives

Financial incentives sometimes may not be enough or adequate to motivate the workers. Managers can
combine financial incentives with other incentives to increase employees’ productivity.

In addition to meeting monetary and future security demands, an employee has psychological, social, and
emotional needs that need to be satisfied. Fulfilling these social, economic, and psychological requirements
is vital for their motivation.

Non-financial incentives primarily focus on meeting these requirements and cannot be calculated in
monetary form. Personal attention, business vehicles, preparation and career advancement, approval and
appreciation, recognition are some examples of non-financial incentives

Types of Non-Financial Incentives

Using techniques other than money, a company can stimulate good behavioural change and encourage
employees to work more efficiently. Some of the most common forms of non-financial incentives have
been discussed below.

The different types of Non-Financial Incentives are as follows:

❖ Appreciation – Giving due recognition for an employee’s work encourages them to be more diligent
and dedicated towards their job. It gives a fillip to their self-esteem and motivates them. Companies
have employee recognition programs where they declare the best performers from time to time.
❖ Promotion – An employee’s current designation reflects their position in the organisational chart. It
determines their level of responsibility and authority, salary, bonus and other benefits. To keep an
employee motivated, companies can promote them to improve their standing in the organisation and
encourage them to continue their good work.
❖ Career opportunities – Companies can provide career development programs for their employees to
give them a chance to learn new skills. These skills can help them apply for senior positions within the
organisation.
❖ Job enrichment – Organisations can design jobs to involve higher knowledge and skill levels, greater
responsibility and autonomy to motivate employees. It will give them a chance to express themselves
while also providing more career growth and development opportunities. They can also set up
committees comprising employees from different departments and seek their input in enriching job
roles.
❖ Job security – Organisations must provide jobs that are relatively secular compared to their
competitors. It gives more confidence to the staff in a company to express their creativity. Job security
is one of the most essential Non-Financial Incentives that can ensure better performance from
personnel within the company.

❖ Organization's work environment-- Individual performance increases due to a better working

environment because a better working environment increases employee happiness, which leads to
increased performance. A person is motivated by a work environment where they feel they have
incentives to accomplish work and are given importance for doing their job. Productivity declines in
 working environments if workers lack enough resources, software, sufficient ventilation, comfortable
furniture, or lighting, making employees uncomfortable and impairing productivity.

❖ Recognition--Recognition is an expression of gratitude for a level of performance, an accomplishment,

or a contribution to a goal. It might be private or public, informal or formal. Employee appreciation is
one of the most effective ways to empower employees.It makes them feel valued, which increases
employee recruitment and retention. When done right, recognition is a cost-effective approach to boost
performance and make employees feel more invested in the company’s work.