QUEENS COLLEGE

DEPARTEMENT OF BUSINESS ADMINISTRATION

INDIVIDUAL ASSIGNMENT
On

HUMAN RESOURCE MANAGEMENT (HRM)

PREPARED BY: - Name: - Kebede Nigussie

ID.No. GSR/MBA/0870/14

Section –A

Submitted to: - Dr Enyew

NOVEMBER/2022
1.What is compensation? What are the factors that affect compensation?
Definition of Compensation

Compensation is the remuneration awarded to an employee in exchange for their services

or individual contributions to your business. The contributions can be their time,
knowledge, skills, abilities and commitment to your company or a project.

In simpler words, compensation is the money received by an employee from an employer as

a salary or wages.

Types of Compensation

Compensation doesn’t mean only paycheck, although that’s part of it. Compensation
comprises of a number of different elements that may be cash and non-cash payments.

Here’s a list of some of the most common and commonly overlooked types of
compensation:
 Base pay (hourly or salary wages)
 Commissions
 Overtime Pay, shift differentials, and longevity pay
 Bonus
 Profit Sharing distributions
 Merit Pay or recognition
 Workers compensation or workmans comp
 Incentive plan or achievement award
 Tip income
 Benefits include Dental, insurance, medical, vacation, leaves, retirement, etc.
 Stock options
 Travel/Meal/Housing Allowance
 Child care and tuition assistance
 Gym memberships and free lunches
 Employee assistance programs that provide counseling, legal advice, and other
services.
 Health and wellness benefits
 Other non-cash benefits
Importance of Compensation

Compensation is one of the most important aspects of running a business that can make or
break a business. Having a good compensation plan can help organizations to flourish and
compete in their respective markets.

Some of the benefits of providing the right compensation package to your employees are:
 Attracts top talent
 Increases employee motivation at the workplace
 Boosts employee loyalty
 Increases productivity and profitability
 Improves job satisfaction and employee engagement
 Helps in retaining top employee
 Helps stay in compliance with the Federal and State government agencies
Difference between Base Pay and Total Compensation

Base pay is just one part of your employees’ total compensation and defined as the initial
pay received by an employee before taxes and other deductions.Bonuses, overtime, tips,
commissions, and other types of compensation mentioned above are not part of base pay
but come under total compensation.
How to Create a Compensation Plan for Your Business

Having an appealing compensation plan for your organization will help in attracting and
retaining the top talent. Developing a compensation plan isn’t a simple task but following
these steps can help you make your workplace happier resulting in business growth.
1. Compensation Philosophy

Start by developing a compensation philosophy that suits the vision and mission of your
business. It should include base pay, commissions, bonuses, tips, incentives, overtime, and
other compensations you want to offer.

If you are just starting out and learning how to do payroll for your business, then write
down the job titles and job descriptions for all the positions you think are essential for your
business.
2. Competitor Research

Research your competitors and determine how much compensation they are offering for
similar positions. You can use Glassdoor, PayScale, or similar websites to get information
on salary/wage comparison and salary surveys in your city or state. Before you move on to
the next step, at least have a ballpark figure of the budget.
3. Salary or Wage
Now it’s time to set a base salary level or hourly pay rate for each position with the
information or data you have in your hand from your earlier research. Ensure the
salaries/wages should be competitive in your city/state and industry. Take sound advice
from HR professionals when deciding whether to pay employees hourly or with an annual
salary.
4. Annual Pay Raise

Employees are an integral part of your business; Investing in them will increase
productivity and profitability. Having a plan for their annual pay raise and executing it
will surely increase the loyalty and performance of your employees.
5. Performance-Based Plan

Create an incentive or performance-based plan for top talent to motivate other employees
to improve and increase their performance. Else, you can also offer periodic pay raises.
6. Payroll Software
It’s time to choose payroll software that can help you successfully implement your
compensation plan
Compensation: Laws & Regulations

There are certain rules and regulations that govern how employers handle compensation
and they are governed by many local, state, and federal agencies.

What are the factors that affect compensation?

The factors affecting employee compensation can be categorized into:-
1. Internal Factors and 2. External Factors.
Some of the external factors affecting employee compensation are:
1. Demand and Supply of Labour 2. Cost of Living 3.Economic Conditions 4.Prevailing Wage
Level 5.Society 6.Government Control 7.Labour Unions 8.Legislation 9.Globalization 10. Cross
Sector Mobility and 11. Compensation Survey.

ADVERTISEMENTS:

Some of the internal factors affecting employee compensation are:

1. Compensation Policy of the Organization 2. Employer’s Affordability 3. Worth of a Job 4.

Employee’s Worth 5. The Organizational Ability to Pay 6. Job Analysis and Job Description and
7. Employee Related Factors.

External and Internal Factors Affecting Employee Compensation

The compensation awarded to the employee is dependent on the volume of effort exerted, the
nature of job and his skill. Besides, there are several other internal and external factors affecting
the compensation.
I. External Determinants of Compensation:
1. Labour Market Conditions:
The forces of demand and supply of human resources, no doubt, play a role in compensation
decision. Employees with rare skill sets and expertise gained through experience command
higher wage and salary than the ones with ordinary skills abundantly available in the job market.
But the higher supply of human resources for certain jobs may not lead to reduction of wages
beyond a floor level due to Government’s prescription of minimum wage levels and employee
union’s bargaining strength.
Similarly, this factor by itself does not result in lower pay if the vast majority of available
resources are unemployable due to poor skill and low talent. Thus, it is clear that law of demand
and supply applies to labour market only to a limited extent.

2. Economic Conditions:
Organizations having state-of-the-art technology in place, excellent productivity records, higher
operational efficiency, a pool of skilled manpower, etc., can be better pay masters. Thus,
compensation is the consequence of the level of competitiveness .prevailing in a given industry.
3. Prevailing Wage Level:
Most of the organizations fix their pay in keeping with the level for similar jobs in the industry.
They frequently conduct wage survey and accordingly seek to keep their wage level for different
jobs. If a particular firm keeps its pay level higher than those of others in the industry, its
employee cost becomes heavier which may escalate the end cost of the products. This will affect
the competitiveness of the firm. On the other hand, if a firm keeps its pay level lower than the
prevailing rates, it may not recruit the skilled and competent manpower.
4. Government Control:
Government through various legislative enactments such as Minimum Wages Act, 1948,
Payment of Wage Act, 1936, Equal Remuneration Act, 1976, Payment of Bonus Act, 1965,
dealing with Provident Funds, Gratuity, Companies Act, etc., have a bearing on compensation
decisions. Therefore, firms have to decide on salaries and wages in the light of the relevant Acts.
5. Cost of Living:
Increase in the cost of living, raise the cost of goods and services. It varies from area to area
within a country and from country to country. The changes in compensation are based on
consumer price index which measures the average change in the price of basic necessities like
food, clothing, fuel, medical service, etc., over a period of time. Allowances like Dearness
Allowance. City compensatory allowances are paid to meet the increasing cost of living and
parity among employees posted at different geographies.
6. Union’s Influence:
The collective bargaining strength of the trade unions also influence the wage levels. Trade
unions enjoy an upper hand in certain industries like banking, insurance, transport and other
public utilities. Therefore, wage structure in such industries and in such Union-active regions,
salary and wage need to be fixed and revised in consultation with the unions for ensuring smooth
industrial relation.
7. Globalization:
It has ushered in an era of higher compensation level in many sectors of the economy. The entry
of multinational corporations and big corporates have triggered a massive change in the
compensation structure of companies across sectors. There is a salary boom in sectors like
information technology, hospitality, biotechnology, electronics, financial services and so on.

8. Cross Sector Mobility:

Contemporary companies find it difficult to benchmark the salaries of their staff with others in
the industry thanks to mobility of talent across the sectors. For example, hospitality sector
employees are hired by airlines, BPOs, healthcare companies and telecom companies.
II. Internal Determinants of Compensation:
1. Compensation Policy of the Organization:
Firm’s policy regarding pay i.e., attitude to be an industry leader in pay or desire to pay the
market rate determines its pay structure. The former can attract better talent and achieve lower
cost per unit of labour than the ones that pay competitive pay.
2. Employer’s Affordability:
Those organizations which earn high profit and have a larger market share, a large business
conglomerate and multinational companies can afford to pay higher pay than others. Besides,
company’s ability to pay higher pay is impaired by sector- specific economic recession and acute
competition.
3. Worth of a Job:
Organizations base their pay level on the worth of a job. The wages and salaries tend to be higher
for jobs involving exercise of brain power, responsibility laden jobs, creativity-oriented jobs,
technical jobs.
4. Employee’s Worth:
In some organizations, time rates are granted to all employees irrespective of performance. In
such cases, employees are rewarded for their mere physical presence on the job rather than for
their performance. However many private sector organizations follow performance-linked pay
system. They conduct performance appraisal more often than not which provides input for
determining pay levels. It distinguishes the high-performer from the low-performer and the non-
performer.
2.Discuss the approaches of compensation system?
(1) Going Rate Approach – When the compensation packages of the expatriates are determined
on the basis of the salary structure prevailing in the host nation, it is called the going rate
approach or market rate approach. Typically, the salary in this method is decided on the basis of
the survey undertaken in the host country where the business is located. However, international
companies usually grant additional pay and benefits to expatriates if they happen to work in
nations where their pay is low.
(2) Balance Sheet Approach – It is also known as the build-up approach. The balance sheet
approach is arguably the dominant compensation system used in multinational companies. The
approach has been used for more than 20 years, yet nearly two of every three companies still use
a form of this approach to compensation. The basic objective of the balance sheet approach is to
ensure that employees can maintain a standard of living in the country of assignment similar to
that which they enjoy in their home country. This keeps the shock from changes in standard of
living relatively small. The basic premise of the balance sheet approach is that companies use a
set of allowances or differentials to maintain employees’ purchasing power while on
international assignments. Fundamentally, assignees should neither benefit nor be hurt
economically as a result of relocating.
(3) Citizen’s Approach – In this approach, an international basket of goods is used for all
expatriates, regardless of country of origin. The basket of goods includes food, clothing, housing,
and so forth. However, expatriates are not provided salary adjustments that would allow them to
purchase exactly the same items in the host country as in the home country.
(4) Lump Sum Approach – This involves giving the expatriate a predetermined salary and
letting the individual decide about how to spend it. Finally, there is the regional system, under
which the MNC sets a compensation system for all expatriates who are assigned to a particular
region. Thus, everyone going to Europe falls under one particular system and those going to
South Africa come under a different system.
3.Elaborate the compensation theories?

Theories of Compensation

Definition: The Compensation is the remuneration given to the employees for the work they do
for the organization. In other words, an employee is entitled to both the financial and the
nonfinancial benefits in return for his contribution to the organization.

To understand which component of compensation is efficient, we need to go through the theories

of compensation. There are three theories of compensation viz. Reinforcement and Expectancy
Theory, Equity Theory and Agency theory which are explained below.

Theories of Compensation
1. Reinforcement and Expectancy Theory: This theory is based on the assumption that, the
reward-earning behavior is likely to be repeated, i.e. an employee would do the same thing again
for which he was acknowledged once.
Similarly, in the case of Expectancy Theory, given by Vroom, the employee is motivated to do a
particular thing for which he is sure or is expected that performance will be followed by a
definite reward or an outcome.

2. Equity Theory: According to this theory, there should be equity or the uniformity in the pay
structure of an employee’s remuneration. If the employee feels he is not being paid fairly for the
amount of work he does in a day will result in lower productivity, increased turnover and high
absenteeism. The remuneration system should comply with three types of equity:
2.1 Internal Equity: The employee perceives the fairness in different pay for different jobs based
on the nature of work involved, i.e. he must feel that pay differentials among the jobs are fair.

2.2 External Equity: The employee should feel the fairness in what they are being paid is in line
with what other players in the same industry are paying to their employees for the same kind of
job.

2.3: Individual Equity: The employee perceives the pay differentials among the individuals who
are performing the same kind of a job and within the same organization. Usually, an individual
with more experience gets high remuneration as compared to the fresher irrespective of the
nature of a job.

3. Agency Theory: This theory states that both the employer and the employee are the stakeholders
of the company, and the remuneration paid to the employee is the agency cost. The employee
will try to get an increased agency cost whereas the employer will try to minimize it. Hence, the
remuneration should be decided in such a way that the interest of both the parties can be aligned.
Thus, these theories posit that the compensation in the form of salary or wages can be decided on
the basis of the outcome or the behavior of an employee.

4.What is training and differentiated from development?

Training and development is one of the most important aspects of staffing. The process of
increasing the knowledge, skills and abilities of employees for doing a work is known
as Training. It is a process by which attitudes, skills, and capabilities to do a particular job are
increased. It is a process of learning new skills and applying knowledge. Its main aim is to
improve the performance of the current job and prepare them for any future job. Training
enhances productivity and reduces accidents and wastage of resources. It also helps to increase
the morale and satisfaction of the employees.
Development refers to the overall growth of the employees. These are learning opportunities
which are designed for employees to grow. These include not only those activities which help
to improve employees’ performance, but also help in employees’ growth.
Training focuses on developing the skills, which are already possessed by an employee,
whereas development focuses on developing hidden qualities and talents of employees.

Content: Training Vs Development

BASIS FOR
TRAINING DEVELOPMENT
COMPARISON

Meaning Training is a learning process in Development is an educational

which employees get an opportunity process which is concerned with
to develop skill, competency and the overall growth of the
knowledge as per the job employees.
requirement.

Term Short Term Long Term

Focus on Present Future

Orientation Job oriented Career oriented

Motivation Trainer Self

 BASIS FOR
TRAINING DEVELOPMENT
COMPARISON

Objective To improve the work performances To prepare employees for future

of the employees. challenges.

Number of Many Only one

Individuals

Aim Specific job related Conceptual and general

knowledge

Definition of Training

Training is a process in which the trainees get an opportunity to learn the key skills which are
required to do the job. Learning with earning is known as training. It helps the employees to
understand the complete job requirements.

Nowadays, many organisationsorganise a training program for the new recruits just after their
selection and induction, to let them know about the rules, policies and procedures for directing
their behaviour and attitude as per the organisational needs. Training also helps the employees to
change the conduct towards their superior, subordinates and colleagues. It helps to groom them
for their prospective jobs.
 Training Process

Induction training, vestibule training, apprenticeship training, job training, promotional training,
internship training are some of the major types of training. The merits of the training are given as
under:

 It results in higher productivity both quantitatively and qualitatively.

 It develops a number of skills in the employees.
 Improved performances.
 The cooperative environment of the organisation.
 It builds confidence in the employees for doing a job.
 Decreased employee turnover.
 Lesser chances of accidents.
Definition of Development

The training for the top level employees is considered as development, also known as
management or executive development. It is an on-going systematic procedure in which
managerial staff learns to enhance their conceptual, theoretical knowledge. It helps the individual
to bring efficiency and effectiveness in their work performances.

Development is not only limited to a particular task, but it aims to improve their personality and
attitude for their all round growth which will help them to face future challenges. It changes the
mindset of the employees and makes them more challenging or competing.

As the technology needs updating, the manpower of the organisation also needs to be updated, so
the development is a must. Development is an educational process which is unending, as
education has no visible end. It involves training a person for higher assignments. It digs out the
talents of the managerial staff and helps in applying the new knowledge, which is a requirement
of the organisation.

Coaching, mentoring, counselling, job-rotation, role playing, case study, conference training,
special projects are some of the methods of development.

The performance of an organisation is based on the quality of its employees, and so the greater
the quality of employees, the greater will be their performance. The primary purpose of
development is that the second list of managers or executives is prepared for future replacement.

Key Differences Between Training and Development

The major differences between training and development are as under:

1. Training is a learning process for new employees in which they get to know about the key
skills required for the job. Development is the training process for the existing employees
for their all round development.
2. Training is a short-term process i.e. 3 to 6 months, but development is a continuous
process, and so it is for the long term.
3. Training focuses on developing skill and knowledge for the current job. Unlike, the
development which focuses on the building knowledge, understanding and competencies
for overcoming with future challenges.
4. Training has a limited scope; it is specific job oriented. On the other hand, development
is career oriented and hence its scope is comparatively wider than training.
5. In training, the trainees get a trainer who instructs them at the time of training. In contrast
to development, in which the manager self-directs himself for the future assignments.
6. Many individuals collectively attend the training program. Development is a self-
assessment procedure, and hence, one person himself is responsible for one’s
development.
5.Discuss the Off the Job Training Methods?

What is off-the-job training?

Off-the-job training refers to an education method where employees learn more about their
job or the latest advancements in their field at a location away from their workplace. This
type of training essentially helps employees perform their job more efficiently. Unlike on-
the-job training, off-the-job training can take place near the workplace or somewhere
further away, such as at a resort or at a training center. When employers hold training
away from the workplace, it helps minimize distractions so employees can fully focus on the
material they're learning.

During this type of training, employees express their views and opinions and explore new
ideas to bring to the workplace. Before the conclusion of the training, employees typically
receive some form of evaluation. For example, they may receive an evaluation that tests
their understanding of the knowledge the instructor taught them during the off-the-job
training. The evaluation measures the performance and participation of each trainee.

8 off-the-job training methods

Off-the-job training takes many forms, often dependent on your industry or job. Knowing
what each method entails can help you better understand what to expect. Here are some
off-the-job training methods:

Classroom lectures

Also known as the lecture method, classroom lectures often train white-collar or
management-level employees. This type of off-the-job training takes place in a classroom-
like environment and involves a trainer providing instruction in a lecture format. Trainees
learn crucial skills needed for their jobs, get to know their job responsibilities and have the
opportunity to get their questions answered by experts. In addition, classroom lectures may
teach trainees the administrative or management aspects of their job, make them aware of
certain procedures or provide them with instruction on a certain subject matter.
Audio-visual

Trainees who receive off-the-job training through an audio-visual method learn the
material through the use of various media such as films, television, video and presentations.
Education institutions often use this method to help students remember the learning
material more easily. In the corporate world, customer care center employers often
administer this type of training to their employees to teach them how to interact and
behave with customers.

Simulation

With the simulation method of off-the-job training, trainees get trained through equipment
or a machine that resembles what they'd use in the field or on the job. The simulation
method helps them prepare for handling the equipment and machines in real life.
Typically, this training method is reserved for employees who handle expensive machinery
or equipment. For example, an airplane pilot may undergo simulation training to help
them get ready for flying an airplane. Since airplanes are expensive, an employer may not
allow trainees to train using a real airplane in order to avoid costly damage or to avoid
putting the trainee's life in danger. Instead, they'll use a simulator to keep costs low and
keep the trainee safe.

Vestibule training

Technical staff, office staff and employees who handle tools and machinery typically
undergo vestibule training. Trainees learn about the equipment they'll use on the job.
However, unlike on-the-job training, vestibule training takes place away from the
workplace. This means the tools and equipment used for vestibule training are available at
the training location. Employers typically administer this type of training to introduce their
employees to new or advanced tools and machinery they want them to use to perform
certain duties related to their job.

Case studies

With this method, trainees receive a situation or problem in the form of a case study that
pertains to their field. In other words, they receive a written description of a real situation
that previously occurred. They're then instructed to analyze the situation and provide their
conclusions in a written format. Training instructors then review the pros and cons of each
option to help trainees improve their decision-making skills.

Role-playing

Often reserved for customer service professions, role playing involves trainees taking on
roles and acting out certain situations to help them better understand the learning
concepts. Trainees act as if they're facing the situation and having to solve it without
guidance or prior rehearsal. Role players have to quickly respond to the ever-changing
situation and react as they would to the situation in real life. This off-the-job training
method essentially involves realistic behavior in a hypothetical circumstance. Examples of
situations trainees may face include hiring, discussing a workplace problem or making a
sales pitch to a customer.

Programmed instructions

The programmed instructions method involves a series of steps with bits of knowledge and
a mechanism for presenting the series and measuring the trainee's knowledge. Trainees
receive questions in a sequence and receive a sign when they answer each question
correctly. Training instructors may use manuals or books to carry out this off-the-job
training. The programmed instructions method is often used to teach information
regarding subjects like math or physics.

Management games

Management games provide trainees with a fun and competitive way to learn. With this
type of off-the-job training, trainees split up into teams of approximately five or six people.
Each team then competes in a simulated marketplace. For example, they may have to
decide how much inventory to maintain or how much to spend on advertising. It's worth
noting that the teams don't have knowledge of the other teams' decisions. Management
games help trainees get involved, while also developing their problem-solving skills and
helping them with the planning process. Trainees also learn leadership, teamwork and
organization skills as they have to organize their groups themselves and foster a sense of
collaboration to get the job done.

Types of Training Methods?

Over a period of time the training methods have changed a lot. Based on the requirement of the
company, now training methods can be selected from variety of options. A lot of companies
implement different training methods for various team, departments and groups of employees. It
is important in Training and Development Process to select the training methods as per the needs
and desired outcome from the training program. Training methods are categorized as traditional
and modern methods.

Traditional Training Methods

Traditional types of training methods are commonly used in ample amount of companies. They
are simple to implement and requires less tools. Here are three primary types of traditional
training methods:

Off the Job Training Methods

1. Off the job Training

Classroom learning is a way of off-the-job training. Here groups of employees go through
different presentations, activities, case study assessments to learn more about their job. The
information about vision and mission of the company and the company policy is also
conveyed to the employees during off-the-job training. This type of training provides rich
learning opportunity to the employees, however due to cost issues many companies avoid
arrangement of such training programs.

2. On-The-Job Training
During on-the-job training the employees are involved in the real work activities and learn
through experience. It provides rapid learning experience and improves bonding among
team members. However some employees find this method of training very stressful and
fail to learn or fail to perform on the job.

3. Interactive Training
The interactive training ensures that employees are actively involved in the learning
process. The training includes simulation, scenarios, games and quizzes. In order to
practice a new skill the employee get a realistic work scenarios and thus employee can
apply their knowledge before actually working on the real job. The method is quite time
consuming and the employee’s needs constant feedback from the trainer to move further in
the training program.

Modern Training Methods

After globalization now technology is key to every process. Thus, the modern types training
methods include online and computer based training. Another need of training is on the social
front, as in the company now people from different backgrounds, cultures work together it is
important to develop the social skills and team work among the employees.
 1. Social Learning
Social learning methods are a process in which employees learn through observation,
imitation and modeling their behavior. It is a effective training method for overall
development of the employee, it enhance the problem solving skills and employees acquire
empathy about their team members.

2. Online Training
If you want to training large number of employees in an effective manner, then online
training is an answer for you. Online workplace training includes eLearning courses,
videos, webinars which present information in front of employees and also test their
acquired skills. Basic PC-based programs, Interactive multimedia training and web-based
training programs are different types of online training.

3. Outdoor Training
Many large companies are now using outdoor training as a tool to improve teamwork skills
among their employees. It is termed as a break from work and classroom learning. The
training includes adventure like group of employees can live outdoors and engage in
activities such as mountain climbing or whitewater rafting. The training is a social activity
in which employees get to know each other.

On The Job Training Methods

For the training of non-managerial level of employees most of the organizations use on the job
training methods. As compared to classroom training the on the job training is quite easy to
execute as employee will be available in the actual work environment. On the job training is used
when organization wants the employee to be productive immediately after joining the job. The
core of on the job training is development through job performance. It provides opportunity to
new employee to build good relationship with their working team while learning in the early
days.

Different types of On-the-job training methods are as given below:

 1. Job rotation: Job rotation involves regular movement of employee from one job profile
to another in order to gain experience and knowledge. This method is useful to improve
employees skill set and provide them overview of overall organizational working pattern.
It also improves the relationship between employees working in different departments of
the organization.
2. Coaching: This method includes assignment of mentor or supervisor to each employee
who will train the employee, resolve their work related issues and provide feedback on
their performance.
3. Job instructions: It is a systematic training in which the instructor explains each step of
doing job to the employee, let them perform and correct them in the case of mistake.
4. Committee assignments: A group of employees are given a work related issue which
they should solve by healthy discussion with each other. It is also a way to improve team
work among employees.
5. Internship training: Generally theoretical and practical training is provided to the
students of various colleges before they actually start their actual career in corporate world.
Most of the time after completions of internship the company offers the student to join
them as a employee.
Advantages of On-the-Job Training

o It is a flexible way to train the employees.

o It is less expensive as compared to other training methods.
o It motivates and encourages the employee to learn and perform at work.
o Not much additional arrangement required to conduct the training of the employee.
Disadvantages of On-the-Job Training

o The on-the-job training is not properly structured and the training environment is not
created.
o It is difficult for employees to learn when the managers providing on-the-job training
lack in training skills.
o As training and work both is going on hand in hand the performance criteria is not clearly
defined.
Off the Job Training Methods
The development activity implemented by the organization which is away from the work field is
called as off-the-job training. There are several off-the-job training methods which can be used
to train employees. In this type of training the employees can fully concentrate on learn as there
will be no work pressure.

Different types of Off-the-job training methods are given below:

1. Case study method: To impart critical and analytic thinking among employees a
business problem is assigned to the employees. The employees can analyze the entire case
and provide various possible solutions on the given situation.
2. Incident method: A real situation is created in the term of incident and the group of
employees is asked to make a decision on the given issue. The group discussion is a way to
take a decision on the real-life situation.
3. Role play: In a simulated situation the employees are asked to assume that they are
playing role of an individual present in a problem. According to the assigned role the
different participants interacts and try to resolve the problem.
4. In-basket method: An imaginary company is created and all the information about the
activities, products and employees is provided to the trainee. Now trainee has to delegate
tasks and prepare schedules for this imaginary company. This task helps to develop
situational judgments among employees.
5. Business games: Here group of employees are asked to discuss the activities and
functions of an imaginary organization. It helps to improve decision making and team
work among employees.
6. Grid training: It is a kind of phased training program which last for 6 years. It includes
development, implementation and evaluation of various training aspects.
7. Lectures: For large number of employees attending the training, lecture method is very
useful. An expert explains various job related concepts and principles to the employees
through face to face lectures.
8. Simulation: An imaginary situation act as a simulator to the employee and they have to
take immediate action on the situation. It helps in development of strategic way of thinking
on different aspect of organization.
9. Management education: Companies collaborate with various bachelors and
postgraduate institutes which provide high education to the employees.
 10. Conferences: A conference acts as a place where people working in the same field
meet up and shares their unique ideas with each other. It is a best way to know about the
latest updates in the industry.
Advantages of Off-the-Job Training

o The normal operation of organization remains undisturbed

o Trainers who provide training are well qualified and experienced.
o The training program is properly drafted and well organized.
Disadvantages of Off-the-Job Training

o The training is artificial in nature and not directly in context to the work.
o It is quite expensive to implement
o The work hours of the employees is lost which can lead to lost productivity of the
organization.
6.What is the performance appraisal and who performs it

What Is a Performance Appraisal?

The term “performance appraisal” refers to the regular review of an employee’s job
performance and overall contribution to a company. Also known as an annual review,
performance review or evaluation, or employee appraisal, a performance appraisal evaluates an
employee’s skills, achievements, and growth, or lack thereof.

Companies use performance appraisals to give employees big-picture feedback on their work
and to justify pay increases and bonuses, as well as termination decisions. They can be
conducted at any given time but tend to be annual, semiannual, or quarterly.12

KEY TAKEAWAYS

 A performance appraisal is a regular review of an employee’s job performance and

contribution to a company.
 Performance appraisals are also called annual reviews, performance reviews or
evaluations, or employee appraisals.
 Companies use performance appraisals to determine which employees have contributed
the most to the company’s growth, review progress, and reward high-achieving workers.
 Although there are many different kinds of performance reviews, the most common is a
top-down review in which a manager reviews their direct report.
  Employees who believe that the evaluation’s construction isn’t reflective of their
company’s culture may feel dissatisfied with the appraisal process.

generally done in systematic ways which are as follows

1. The supervisors measure the pay of employees and compare it with targets and plans.
2. The supervisor analyses the factors behind work performances of employees.
3. The employers are in position to guide the employees for a better performance.

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in mind:

1. To maintain records in order to determine compensation packages, wage structure,

salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right men on right job.
3. To maintain and assess the potential in a person for growth and development.
4. To provide a feedback to employees regarding their performance and related status.
5. It serves as a basis for influencing working habits of the employees.

Performance appraisal methods

There are 5 performance appraisal methods. Using one of these methods for performance
appraisal can help organizations gain partial information. However, combining one or more
methods will lead to extracting better information and accurate data. It is one thing to collect data
and another to do something actionable with it.

1. Self-evaluation: This is an important way to get insights from the employees, evaluate them.
You need to first get information about how an employee evaluates himself/herself, after
conducting this evaluation the management has an opportunity to fairly appraise an employee
based on their thoughts.
2. 360-degree appraisal system 360-degree feedback, an employee is evaluated by his/her
supervisor/manager, peers, colleagues, subordinates and even management. Inputs from
different sources are considered before talking to the employee face-to-face. In this process,
 each employee is rated according to the job done based on the job descriptions assigned to
them.
3. Graphics rating scale: This is one of the most commonly used methods by managers and
supervisors. Numeric or text values corresponding to values from excellent to poor can be
used on this scale. Members of the same team who have similar job descriptions can be
parallels evaluated using this method. This scale should ideally be the same for each
employee.
4. Checklists: The evaluator is given a checklist of several behaviors, traits, attributes or job
description of the employee who needs to be evaluated. The checklist can contain sentences or
simply attributes and the evaluator thus marks the employee based on what describes the job
performance of the employee. If the evaluator believes that the employee has certain traits it is
marked positive otherwise it is left blank.
5. Essay method: This is also known as “free form method”. As the name suggests, it is a
descriptive method which elaborates performance criteria. A major drawback of this method is
to keep biases away.
Advantages of performance appraisal
1. A systematic performance appraisal method helps the managers/supervisors to correctly
identify the performance of employees and also highlight the areas they need improvement in.
2. It helps the management place the right employee for the right kind of job. This is a win-win
situation for both the employee and the organization.
3. Potential employees who have done some exceptional work are often offered a promotion on
the basis of the result of performance evaluation.
4. This process is also effective in determining the effectiveness of the training programs
conducted by the organization for the employees. It can show managers how much an
employee has improved after the training. This will give actionable insights to the managers
on how to improve the programs.
5. It creates a competitive environment amongst the employees in a good way. Employees try to
improve their performance and get better scores than their colleagues.
6. Managers use this as a platform to get first-hand feedback from employees to talk about their
grievances and how to handle them.
7. Keeping year on year record of appraisals gives managers a very good idea what is the pattern
of the growth rate of employees and which ones have a declining rate and what actions need to
be taken to improve it.
Disadvantages of performance appraisal
1. If the attributes being used in this method are not correctly defined the data collected won’t be
useful.
2. Sometimes biases can be an issue in this system.
3. Some objective factors can be vague and difficult to pin down. There are no known scientific
methods to measure that.
4. Managers sometimes are not qualified enough to assess the abilities of the employees, thus be
detrimental to the growth of an employee.
This appraisal method has five integral components like:

1. Self-appraisals
Self-appraisals offer employees a chance to look back at their performance and understand their
strengths and weaknesses. However, if self-appraisals are performed without structured forms or
formal procedures, it can become lenient, fickle, and biased.

2. Managerial reviews
Performance reviews done by managers are a part of the traditional and basic form of appraisals.
These reviews must include individual employee ratings awarded by supervisors as well as the
evaluation of a team or program done by senior managers.

3. Peer reviews
As hierarchies move out of the organizational picture, coworkers get a unique perspective on the
employee’s performance making them the most relevant evaluator. These reviews help determine
an employee’s ability to work well with the team, take up initiatives, and be a reliable contributor.
However, friendship or animosity between peers may end up distorting the final evaluation results.
 4. Subordinates Appraising manager (SAM)
This upward appraisal component of the 360-degree feedback is a delicate and significant step.
Repartees tend to have the most unique perspective from a managerial point of view. However,
reluctance or fear of retribution can skew appraisal results.

5. Customer or client reviews

The client component of this phase can include either internal customers such as users of product
within the organization or external customers who are not a part of the company but interact with
this specific employee on a regular basis.

Customer reviews can evaluate the output of an employee better, however, these external users
often do not see the impact of processes or policies on an employee’s output.

Advantages of using 360-degree feedback:

 Increase the individual’s awareness of how they perform and the impact it has on other stakeholders
 Serve as a key to initiate coaching, counseling, and career development activities
 Encourage employees to invest in self-development and embrace change management
 Integrate performance feedback with work culture and promote engagement
 During the assessment, employees are asked to take part in social-simulation exercises like in-
basket exercises, informal discussions, fact-finding exercises, decision-making problems, role-play,
and other exercises that ensure success in a role. The major drawback of this approach is that it is a
time and cost intensive process that is difficult to manage.

Advantages of the assessment centre method:

 Enhance a participant’s knowledge, boost his/her thought process, and improve employee efficiency
 Can be tailored to fit different roles, competencies, and business needs
 Offer an insight of the employee’s personality (ethics, tolerance, problem-solving skill,
introversion/extroversion, adaptability, etc.)

. Do You Want to Improve Your Performance?

The more knowledge and skills you possess, the easier it is to deliver an outstanding
performance on the job. And, of course, an excellent performance appraisal gets you noticed,
promoted, and most likely better compensation.

Simplilearn offers a full range of online classes and boot camps that can give your skills that
much-needed boost, regardless of what IT field you’re in. For instance, if you’re involved in the
areas of Data Science and Business Analytics, Simplilearn has you covered.