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Unit - 1 : Introduction to Human Resource

Management
Structure of Unit:
1.0 Objectives
1.1 Introduction
1.2 Opening Case
1.3 What is Human Resource Management?
1.4 Nature of HRM
1.5 Scope of HRM
1.6 Objectives of HRM
1.7 Functions of HRM
1.8 Role of HRM
1.9 HRM in the New Millennium
1.10 Summary
1.11 Self Assessment Questions
1.12 Reference Books
1.0 Objectives
After studying this unit, you will be able to:
 Understand the basic concepts of human resource management (HRM).
 Explain what human resource management is and how it relates to the
management process.
 Provide an overview of functions of HRM.
 Describe how the major roles of HR management are being transformed.
 Explain the role of HRM in the present millennium.
1.1 Introduction
Human beings are social beings and hardly ever live and work in isolation.
We always plan, develop and
manage our relations both consciously and unconsciously. The relations are
the outcome of our actions
and depend to a great extent upon our ability to manage our actions. From
childhood each and every
individual acquire knowledge and experience on understanding others and
how to behave in each and
every situations in life. Later we carry forward this learning and
understanding in carrying and managing
relations at our workplace. The whole context of Human Resource
Management revolves around this
core matter of managing relations at work place.
Since mid 1980’s Human Resource Management (HRM) has gained
acceptance in both academic and
commercial circle. HRM is a multidisciplinary organizational function that
draws theories and ideas from
various fields such as management, psychology, sociology and economics.
There is no best way to manage people and no manager has formulated how
people can be managed
effectively, because people are complex beings with complex needs.
Effective HRM depends very much
on the causes and conditions that an organizational setting would provide.
Any Organization has three
basic components, People, Purpose, and Structure.
In 1994, a noted leader in the human resources (HR) field made the following
observation: Yesterday, the
company with the access most to the capital or the latest technology had the
best competitive advantage;
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Today, companies that offer products with the highest quality are the ones
with a leg up on the competition;
But the only thing that will uphold a company’s advantage tomorrow is the
caliber of people in the
organization.
That predicted future is today’s reality. Most managers in public- and private
sector firms of all sizes
would agree that people truly are the organization’s most important asset.
Having competent staff on the
payroll does not guarantee that a firm’s human resources will be a source of
competitive advantage.
However in order to remain competitive, to grow, and diversify an
organization must ensure that its
employees are qualified, placed in appropriate positions, properly trained,
managed effectively, and
committed to the firm’s success. The goal of HRM is to maximize employees’
contributions in order to
achieve optimal productivity and effectiveness, while simultaneously
attaining individual objectives (such
as having a challenging job and obtaining recognition), and societal
objectives (such as legal compliance
and demonstrating social responsibility).
1.2 Opening Case
On October 3, 2003, Anant Dalvi and Akhtar Khan, who worked as contract
workers in Tata Electric
Company until they were laid off in 1996, doused themselves with kerosene
and set themselves ablaze
even as their co-workers protested before the company’s offices. While Dalvi
died on the spot, Khan
died a few days later.
The Tata Electric Company said they were no longer on their payroll and
were not permanent workers.
Employees union had taken up their case and filled petition in the Labour
Court before their contracts
were terminated. The court directed the company not to terminate their
services without following the due
process of law. Despite this their services were terminated on June 30, 1996.
The company union promised the workers that they would renegotiate. Yet
on the night before they killed
themselves when Khan and Dalvi spoke to the union leader Shinde, they
were told that nothing more
could be done for them. It is this that led them to take their lives. Dalvi has
been in service as a peon for17
years and Khan had been employed for 19 years. But their services were not
regularized. Such workers
draw salary much less than the permanent employees.
This is an example of the problem that comes under the purview of Human
Resource Management- the
main concept elaborated in this chapter.
1.3 What is Human Resource Management?
HRM is the study of activities regarding people working in an organization. It
is a managerial function that
tries to match an organization’s needs to the skills and abilities of its
employees.
1.3.1 Definitions of HRM
Human resources management (HRM) is a management function
concerned with hiring, motivating
and maintaining people in an organization. It focuses on people in
organizations. Human resource
management is designing management systems to ensure that human
talent is used effectively and efficiently
to accomplish organizational goals.
HRM is the personnel function which is concerned with procurement,
development, compensation, integration
and maintenance of the personnel of an organization for the purpose of
contributing towards the
accomplishments of the organization’s objectives. Therefore, personnel
management is the planning,
organizing, directing, and controlling of the performance of those operative
functions (Edward B. Philippo).
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According to the Invancevich and Glueck, “HRM is concerned with the
most effective use of people
to achieve organizational and individual goals. It is the way of managing
people at work, so that they give
their best to the organization”.
According to Dessler (2008) the policies and practices involved in
carrying out the “people” or human
resource aspects of a management position, including recruiting, screening,
training, rewarding, and
appraising comprises of HRM.
Generally HRM refers to the management of people in organizations. It
comprises of the activities, policies,
and practices involved in obtaining, developing, utilizing, evaluating,
maintaining, and retaining the appropriate
number and skill mix of employees to accomplish the organization’s
objectives. The goal of HRM is to
maximize employees’ contributions in order to achieve optimal productivity
and effectiveness, while
simultaneously attaining individual objectives (such as having a challenging
job and obtaining recognition),
and societal objectives (such as legal compliance and demonstrating social
responsibility).
In short Human Resource Management (HRM) can be defined as the art of
procuring, developing and
maintaining competent workforce to achieve the goals of an organization in
an effective and efficient
manner.
1.4 Nature of HRM
HRM is a management function that helps manager’s to recruit, select, train
and develop members for an
organization. HRM is concerned with people’s dimension in organizations.
The following constitute the core of HRM
1. HRM Involves the Application of Management Functions and
Principles. The functions
and principles are applied to acquiring, developing, maintaining and
providing remuneration to
employees in organization.
2. Decision Relating to Employees must be Integrated. Decisions on
different aspects of
employees must be consistent with other human resource (HR) decisions.
3. Decisions Made Influence the Effectiveness of an Organization.
Effectiveness of an
organization will result in betterment of services to customers in the form of
high quality products
supplied at reasonable costs.
4. HRM Functions are not Confined to Business Establishments Only
but applicable to nonbusiness
organizations such as education, health care, recreation and like.
HRM refers to a set of programmes, functions and activities designed and
carried out in order to maximize
both employee as well as organizational effectiveness.
1.5 Scope of HRM
The scope of HRM is indeed vast. All major activities in the working life of a
worker – from the time of his
or her entry into an organization until he or she leaves the organizations
comes under the purview of HRM.
The major HRM activities include HR planning, job analysis, job design,
employee hiring, employee and
executive remuneration, employee motivation, employee maintenance,
industrial relations and prospects
of HRM.
The scope of Human Resources Management extends to:
 All the decisions, strategies, factors, principles, operations, practices,
functions, activities and
methods related to the management of people as employees in any type of
organization.
 All the dimensions related to people in their employment relationships, and
all the dynamics that
flow from it.
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Figure 1.1: Scope of HRM
The scope of HRM is really vast. All major activities n the working life of a
worker – from the time of his
or her entry into an organization until he or she leaves it comes under the
purview of HRM. American
Society for Training and Development (ASTD) conducted fairly an exhaustive
study in this field and
identified nine broad areas of activities of HRM.
These are given below:
 Human Resource Planning
 Design of the Organization and Job
 Selection and Staffing
 Training and Development
 Organizational Development
 Compensation and Benefits
 Employee Assistance
 Union/Labour Relations
 Personnel Research and Information System
a) Human Resource Planning: The objective of HR Planning is to ensure
that the organization has
the right types of persons at the right time at the right place. It prepares
human resources inventory
with a view to assess present and future needs, availability and possible
shortages in human resource.
Thereupon, HR Planning forecast demand and supplies and identify sources
of selection. HR
Planning develops strategies both long-term and short-term, to meet the
man-power requirement.
b) Design of Organization and Job: This is the task of laying down
organization structure, authority,
relationship and responsibilities. This will also mean definition of work
contents for each position
in the organization. This is done by “job description”. Another important step
is “Job specification”.
Job specification identifies the attributes of persons who will be most suitable
for each job which
is defined by job description.
Personnel
Research and
Information
System
Human
resource
planning
Design of the
Organization
and Job
Selection and
Staffing
Training and
Development
Organizational
Development
Employee
Assistance
Compensation
and Benefits
Union/Labour
Relations
Human
resource
management
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c) Selection and Staffing: This is the process of recruitment and selection
of staff. This involves
matching people and their expectations with which the job specifications and
career path available
within the organization.
d) Training and Development: This involves an organized attempt to find
out training needs of the
individuals to meet the knowledge and skill which is needed not only to
perform current job but
also to fulfil the future needs of the organization.
e) Organizational Development: This is an important aspect whereby
“Synergetic effect” is
generated in an organization i.e. healthy interpersonal and inter-group
relationship within the
organization.
f) Compensation and Benefits: This is the area of wages and salaries
administration where wages
and compensations are fixed scientifically to meet fairness and equity
criteria. In addition labour
welfare measures are involved which include benefits and services.
g) Employee Assistance: Each employee is unique in character,
personality, expectation and
temperament. By and large each one of them faces problems everyday.
Some are personal some
are official. In their case he or she remains worried. Such worries must be
removed to make him
or her more productive and happy.
h) Union-Labour Relations: Healthy Industrial and Labour relations are
very important for enhancing
peace and productivity in an organization. This is one of the areas of HRM.
i) Personnel Research and Information System: Knowledge on
behavioral science and industrial
psychology throws better insight into the workers expectations, aspirations
and behaviour.
Advancement of technology of product and production methods have
created working environment
which are much different from the past. Globalization of economy has
increased competition
many fold. Science of ergonomics gives better ideas of doing a work more
conveniently by an
employee. Thus, continuous research in HR areas is an unavoidable
requirement. It must also take
special care for improving exchange of information through effective
communication systems on a
continuous basis especially on moral and motivation.
HRM is a broad concept; personnel management (PM) and Human resource
development (HRD) are a
part of HRM.
1.6 Objectives of HRM
The primary objective of HRM is to ensure the availability of competent and
willing workforce to an
organization. The specific objectives include the following:
1) Human capital : assisting the organization in obtaining the right number
and types of employees to
fulfill its strategic and operational goals
2) Developing organizational climate: helping to create a climate in which
employees are encouraged
to develop and utilize their skills to the fullest and to employ the skills and
abilities of the workforce
efficiently
3) Helping to maintain performance standards and increase productivity
through effective job design;
providing adequate orientation, training and development; providing
performance-related feedback;
and ensuring effective two-way communication.
4) Helping to establish and maintain a harmonious employer/employee
relationship
5) Helping to create and maintain a safe and healthy work environment
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6) Developing programs to meet the economic, psychological, and social
needs of the employees
and helping the organization to retain the productive employees
7) Ensuring that the organization is in compliance with provincial/territorial
and federal laws affecting
the workplace (such as human rights, employment equity, occupational
health and safety,
employment standards, and labour relations legislation). To help the
organization to reach its goals
8) To provide organization with well-trained and well-motivated employees
9) To increase the employees satisfaction and self-actualization
10) To develop and maintain the quality of work life
11) To communicate HR policies to all employees.
12) To help maintain ethical polices and behavior.
The above stated HRM objectives can be summarized under four specific
objectives: societal, organizational,
and functional and personnel.
Figure 1.2: Objectives of HRM
1) Societal Objectives: seek to ensure that the organization becomes
socially responsible to the
needs and challenges of the society while minimizing the negative impact of
such demands upon
the organization. The failure of the organizations to use their resources for
the society’s benefit in
ethical ways may lead to restriction.
2) Organizational Objectives: it recognizes the role of HRM in bringing
about organizational
effectiveness. It makes sure that HRM is not a standalone department, but
rather a means to assist
the organization with its primary objectives. The HR department exists to
serve the rest of the
organization.
3) Functional Objectives: is to maintain the department’s contribution at a
level appropriate to the
organization’s needs. Human resources are to be adjusted to suit the
organization’s demands. The
department’s value should not become too expensive at the cost of the
organization it serves.
4) Personnel Objectives: it is to assist employees in achieving their
personal goals, at least as far as
these goals enhance the individual’s contribution to the organization.
Personal objectives of
employees must be met if they are to be maintained, retained and
motivated. Otherwise employee
performance and satisfaction may decline giving rise to employee turnover.
Personnel
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1.7 Functions of HRM
Human Resources management has an important role to play in equipping
organizations to meet the
challenges of an expanding and increasingly competitive sector. Increase in
staff numbers, contractual
diversification and changes in demographic profile which compel the HR
managers to reconfigure the role
and significance of human resources management. The functions are
responsive to current staffing needs,
but can be proactive in reshaping organizational objectives. All the functions
of HRM are correlated with
the core objectives of HRM (Table 1.1). For example personal objectives is
sought to be realized
through functions like remuneration, assessment etc.
Figure 1.3 : Functions of HRM
Table 1.1 HRM Objectives and Functions
HRM Objectives Supporting Functions
1. Societal Objectives Legal compliance
Benefits
Union- management relations
2. Organizational Objectives Human Resource Planning
Employee relations
Selection
Training and development
Appraisal
Placement
Assessment
3. Functional Objectives Appraisal
Placement
Assessment
4. Personal Objectives Training and development
Appraisal
Placement
Compensation
Assessment
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HR management can be thought of as seven interlinked functions taking
place within organizations, as
depicted in Figure 1.3 Additionally, external forces—legal, economic,
technological, global, environmental,
cultural/geographic, political, and social—significantly affect how HR
functions are designed, managed,
and changed. The functions can be grouped as follows:
 Strategic HR Management: As a part of maintaining organizational
competitiveness, strategic
planning for HR effectiveness can be increased through the use of HR
metrics and HR technology.
Human resource planning (HRP) function determine the number and type of
employees needed to
accomplish organizational goals. HRP includes creating venture teams with a
balanced skill-mix,
recruiting the right people, and voluntary team assignment. This function
analyzes and determines
personnel needs in order to create effective innovation teams. The basic HRP
strategy is staffing
and employee development.
 Equal Employment Opportunity: Compliance with equal employment
opportunity (EEO) laws
and regulations affects all other HR activities.
 Staffing: The aim of staffing is to provide a sufficient supply of qualified
individuals to fill jobs in an
organization. Job analysis, recruitment and selection are the main functions
under staffing.
Workers job design and job analysis laid the foundation for staffing by
identifying what diverse
people do in their jobs and how they are affected by them.
Job analysis is the process of describing the nature of a job and specifying
the human requirements
such as knowledge, skills, and experience needed to perform the job. The
end result of job
analysis is job description. Job description spells out work duties and
activities of employees.
Through HR planning, managers anticipate the future supply of and demand
for employees and
the nature of workforce issues, including the retention of employees. So HRP
precedes the actual
selection of people for organization. These factors are used when recruiting
applicants for job
openings. The selection process is concerned with choosing qualified
individuals to fill those jobs.
In the selection function, the most qualified applicants are selected for hiring
from among the
applicants based on the extent to which their abilities and skills are matching
with the job.
 Talent Management and Development: Beginning with the orientation
of new employees,
talent management and development includes different types of training.
Orientation is the first
step towards helping a new employee to adjust himself to the new job and
the employer. It is a
method to acquaint new employees with particular aspects of their new job,
including pay and
benefit programmes, working hours and company rules and expectations.
Training and Development programs provide useful means of assuring that
the employees are
capable of performing their jobs at acceptable levels and also more than
that. All the organizations
provide training for new and in experienced employee. In addition,
organization often provide
both on the job and off the job training programmes for those employees
whose jobs are undergoing
change.
Likewise, HR development and succession planning of employees and
managers is necessary to
prepare for future challenges. Career planning has developed as result of the
desire of many
employees to grow in their jobs and to advance in their career. Career
planning activities include
assessing an individual employee’s potential for growth and advancement in
the organization.
Performance appraisal includes encouraging risk taking, demanding
innovation, generating or
adopting new tasks, peer evaluation, frequent evaluations, and auditing
innovation processes.
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This function monitors employee performance to ensure that it is at
acceptable levels. This strategy
appraises individual and team performance so that there is a link between
individual innovativeness
and company profitability. Which tasks should be appraised and who should
assess employees’
performance are also taken into account.
 Total Rewards: Compensation in the form of pay, incentives and benefits
are the rewards given
to the employees for performing organizational work. Compensation
management is the method
for determining how much employees should be paid for performing certain
jobs. Compensation
affects staffing in that people are generally attracted to organizations
offering a higher level of pay
in exchange for the work performed. To be competitive, employers develop
and refine their basic
compensation systems and may use variable pay programs such as incentive
rewards, promotion
from within the team, recognition rewards, balancing team and individual
rewards etc. This function
uses rewards to motivate personnel to achieve an organization’s goals of
productivity, innovation
and profitability. Compensation is also related to employee development in
that it provides an
important incentive in motivating employees to higher levels of job
performance to higher paying
jobs in the organization.
Benefits are another form of compensation to employees other than direct
pay for the work
performed. Benefits include both legally required items and those offered at
employer’s discretion.
Benefits are primarily related to the area of employee maintenance as they
provide for many basic
employee needs.
 Risk Management and Worker Protection: HRM addresses various
workplace risks to
ensure protection of workers by meeting legal requirements and being more
responsive to concerns
for workplace health and safety along with disaster and recovery planning.
 Employee and Labor Relations: The relationship between managers and
their employees
must be handled legally and effectively. Employer and employee rights must
be addressed. It is
important to develop, communicate, and update HR policies and procedures
so that managers
and employees alike know what is expected. In some organizations,
union/management relations
must be addressed as well. The term labour relation refers to the interaction
with employees who
are represented by a trade union. Unions are organization of employees who
join together to
obtain more voice in decisions affecting wages, benefits, working conditions
and other aspects of
employment. With regard to labour relations the major function of HR
personnel includes negotiating
with the unions regarding wages, service conditions and resolving disputes
and grievances.
1.8 Role of HRM
The role of HRM is to plan, develop and administer policies and programs
designed to make optimum use
of an organizations human resources. It is that part of management which is
concerned with the people at
work and with their relationship within enterprises. Its objectives are: (a)
effective utilization of human
resources, (b) desirable working relationships among all members of the
organizations, and (c) maximum
individual development. Human resources function as primarily
administrative and professional. HR staff
focused on administering benefits and other payroll and operational
functions and didn’t think of themselves
as playing a part in the firm’s overall strategy.
HR professionals have an all encompassing role. They are required to have a
thorough knowledge of the
organization and its intricacies and complexities. The ultimate goal of every
HR person should be to
develop a linkage between the employee and organization because
employee’s commitment to the
organization is crucial.
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The first and foremost role of HR personnel is to impart continuous education
to the employees about the
changes and challenges facing the country in general and their organization
in particular. The employees
should know about the balance sheet of the company, sales progress, and
diversification of plans, share
price movements, turnover and other details about the company. The HR
professionals should impart
such knowledge to all employees through small booklets, video films and
lectures.
The primary responsibilities of Human Resource managers are:
 To develop a thorough knowledge of corporate culture, plans and policies.
 To act as an internal change agent and consultant
 To initiate change and act as an expert and facilitator
 To actively involve in company’s strategy formulation
 To keep communication line open between the HRD function and
individuals and groups both
within and outside the organization\
 To identify and evolve HRD strategies in consonance with overall business
strategy.
 To facilitate the development of various organizational teams and their
working relationship with
other teams and individuals.
 To try and relate people and work so that the organization objectives are
achieved efficiently and
effectively.
 To diagnose problems and determine appropriate solution particularly in
the human resource
areas.
 To provide co-ordination and support services for the delivery of HRD
programmes and services
 To evaluate the impact of an HRD intervention or to conduct research so as
to identify, develop or
test how HRD In general has improved individual and organizational
performance.
Different management gurus have deliberated different roles for the HR
manager based on the major
responsibilities that they full fill in the organization. Few of the commonly
accepted models are enumerated
below.
Pat Mc Lagan has suggested nine roles that are played by HR practitioners
1. To bring the issues and trends concerning an organization’s external and
internal people to the
attention of strategic decision makers and to recommend long term
strategies to support
organizational excellence and endurance.
2. To design and prepare HR systems and actions for implementation so that
they can produce
maximum impact on organizational performance and development.
3. To facilitate the development and implementation of strategies for
transforming one’s own
organization by pursuing values and visions.
4. To create a positive relationship with the customer’s by providing them
with the best services; to
utilize the resources to the maximum and to create commitment among the
people who help the
organization to meet the customers needs whether directly connected or
indirectly connected to
the organization.
5. To identify the learning needs hence to design and develop structured
learning programmes and
materials to help accelerate learning for individuals and groups.
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6. To enable the individuals and groups to work in new situations and to
expend \and change their
views so that people in power move from authoritarian to participative
models of leadership.
7. To help employees to assess their competencies, values and goals so that
they can identify, plan
and implement development plans.
8. He also assists the individual employee to add values in the workplace and
to focus on the
interventions and interpersonal skills for helping people change and sustain
change.
9. He assesses the HRD practices and programmes and their impact and to
communicate results so
that the organization and its people accelerate their change and
development.
According to Dave Ulrich HR play’s four key roles.
1. Strategic Partner Role-turning strategy into results by building
organizations that create value;
2. Change Agent Role- making change happen, and in particular, help it
happen fast
3. Employees Champion Role—managing the talent or the intellectual
capital within a firm
4. Administrative Role—trying to get things to happen better, faster and
cheaper.
The role HR in organizations has undergone an extensive change and many
organizations have gradually
oriented themselves from the traditional personnel management to a human
resources management approach.
The basic approach of HRM is to perceive the organization as a whole. Its
emphasis is not only on
production and productivity but also on the quality of life. It seeks to achieve
the paramount development
of human resources and the utmost possible socio-economic development.
Current Classification of HR roles
According to R.L Mathis and J. H. Jackson (2010) several roles can be fulfilled
by HR management. The
nature and extent of these roles depend on both what upper management
wants HR management to do
and what competencies the HR staff have demonstrated. Three roles are
typically identified for HR. The
focus of each of them, as shown in Figure 1.is elaborated below:
1. Administrative Role of HR
The administrative role of HR management has been heavily oriented to
administration and recordkeeping
including essential legal paperwork and policy implementation. Major
changes have happened in the
administrative role of HR during the recent years. Two major shifts driving
the transformation of the
administrative role are: Greater use of technology and Outsourcing.
Technology has been widely used to improve the administrative efficiency of
HR and the responsiveness
of HR to employees and managers, more HR functions are becoming
available electronically or are being
done on the Internet using Web-based technology. Technology is being used
in most HR activities, from
employment applications and employee benefits enrollments to e-learning
using Internet-based resources.
Fig 1.4 Current Classification of HR Roles
Administrative
Personnel practices
Legal compliance forms
and paperwork
Operational Actions
Managing employee
relationship issues
Employee advocate
Strategic HR
Organizational/business
strategies
HR strategic or planning
Evaluation of HR
effectiveness.
Figure 1.4 : Current Classification of HR roles
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Increasingly, many HR administrative functions are being outsourced to
vendors. This outsourcing of HR
administrative activities has grown dramatically in HR areas such as
employee assistance (counseling),
retirement planning, benefits administration, payroll services, and
outplacement services.
2. Operational and Employee Advocate Role for HR
HR managers manage most HR activities in line with the strategies and
operations that have been identified
by management and serves as employee “champion” for employee issues
and concerns.
HR often has been viewed as the “employee advocate” in organizations.
They act as the voice for employee
concerns, and spend considerable time on HR “crisis management,” dealing
with employee problems that
are both work-related and not work-related. Employee advocacy helps to
ensure fair and equitable
treatment for employees regardless of personal background or
circumstances.
Sometimes the HR’s advocate role may create conflict with operating
managers. However, without the
HR advocate role, employers could face even more lawsuits and regulatory
complaints than they do now.
The operational role requires HR professionals to cooperate with various
departmental and operating
managers and supervisors in order to identify and implement needed
programs and policies in the
organization. Operational activities are tactical in nature. Compliance with
equal employment opportunity
and other laws is ensured, employment applications are processed, current
openings are filled through
interviews, supervisors are trained, safety problems are resolved, and wage
and benefit questions are
answered. For carrying out these activities HR manager matches HR
activities with the strategies of the
organization.
3. Strategic Role for HR
The administrative role traditionally has been the dominant role for HR.
However, as Figure 1.4 indicates
that a broader transformation in HR is needed so that significantly less HR
time and fewer HR staffs are
used just for clerical work.
Differences between the operational and strategic roles exist in a number of
HR areas. The strategic HR
role means that HR professionals are proactive in addressing business
realities and focusing on future
business needs, such as strategic planning, compensation strategies, the
performance of HR, and measuring
its results. However, in some organizations, HR often does not play a key role
in formulating the strategies
for the organization as a whole; instead it merely carries them out through
HR activities.
Many executives, managers, and HR professionals are increasingly seeing
the need for HR management
to become a greater strategic contributor to the “business” success of
organizations. HR should be
responsible for knowing what the true cost of human capital is for an
employer. For example, it may cost
two times key employees’ annual salaries to replace them if they leave.
Turnover can be controlled though
HR activities, and if it is successful in saving the company money with good
retention and talent management
strategies, those may be important contributions to the bottom line of
organizational performance.
The role of HR as a strategic business partner is often described as “having a
seat at the table,” and
contributing to the strategic directions and success of the organization. That
means HR is involved in
devising strategy in addition to implementing strategy. Part of HR’s
contribution is to have financial
expertise and to produce financial results, not just to boost employee morale
or administrative efficiencies.
Therefore, a significant concern for chief financial officers (CFOs) is whether
HR executives are equipped
to help them to plan and meet financial requirements.
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However, even though this strategic role of HR is recognized, many
organizations still need to make
significant progress toward fulfilling it. Some examples of areas where
strategic contributions can be made
by HR are:
 Evaluating mergers and acquisitions for organizational “compatibility,”
structural changes, and
staffing needs
 Conducting workforce planning to anticipate the retirement of employees
at all levels and identify
workforce expansion in organizational strategic plans
 Leading site selection efforts for new facilities or transferring operations to
international outsourcing
 locations based on workforce needs
 Instituting HR management systems to reduce administrative time,
equipment, and staff by using
HR technology
 Working with executives to develop a revised sales
 compensation and incentives plan as new products
It is the era when for the competitive triumph of the organization there is a
need to involve HRM significantly
in an integrated manner, which demands such capabilities from the HR
specialists.
The role of HR shifted from a facilitator to a functional peer with
competencies in other functions, and is
acknowledged as an equal partner by others. The HR is motivated to
contribute to organizational objectives
of profitability and customer satisfaction, and is seen as a vehicle for
realization of quality development.
The department has a responsibility for monitoring employee satisfaction,
since it is seen as substitute to
customer satisfaction.
According to McKinsey’s 7-S framework model HR plays the role of a catalyst
for the organization.
According to this framework, effective organizational change is a complex
relationship between seven
S’s. HRM is a total matching process between the three Hard S’s (Strategy,
Structure and Systems) and
the four Soft S’s (Style, Staff, Skills and Super-ordinate Goals). Clearly, all the
S’s have to complement
each other and have to be aligned towards a single corporate vision for the
organization to be effective. It
has to be realized that most of the S’s are determined directly or indirectly
by the way Human Resources
are managed, and therefore, HRM must be a part of the total business
strategy.
1.9 HRM in the New Millennium
Human Resources have never been more indispensable than today. The
competitive forces that we face
today will continue to face in the future demanding organizational
excellence. In order to achieve this
extended quality, organization’s need to focus on learning, quality
development, teamwork, and
reengineering. These factors are driven by the way organizations implement
things and how employees are
treated.
1. HR Can Help in Dispensing Organizational Excellence: To achieve
this paradigm shift in the
organization excellence there is a need for organizations to reform the way
in which work is carried out by
the Human Resource department. By designing an entirely new role and
agenda that results in enriching
the organization’s value to customers, investors and employees, HR can help
in delivering organizational
excellence. This can be carried out by helping line managers and senior
mangers in moving planning from
the conference room to the market place and by becoming an expert in the
way work is organized and
executed.
HR should be a representative of the employees and should help the
organization in improving its capacity
14
for change. HR will help the organizations in facing the competitive
challenges such as globalization,
profitability through growth, technology, intellectual capital, and other
competitive challenges that the
companies are facing while adjusting to uncontrollably challenging changes
in business environment. The
novel role of HR is to rapidly turn strategy into action; to manage processes
intelligently and efficiently; to
maximize employee contribution and commitment and to construct favorable
conditions for flawless change.
2. Human Resource Should be a Strategy Partner: HR should also
become a partner in strategy
executions by propelling and directing serious discussions of how the
company should be organized to
carry out its strategy.
Creating the conditions for this discussion involves four steps. First HR need
to define an organizational
architecture by identifying the company’s way of doing business. Second, HR
must be held responsible
for conducting an organizational audit. Third, HR as a strategic partner needs
to identify methods for
restoring the parts of the organizational architecture that need it. Fourth and
finally, HR must take stock of
its own work and set clear priorities. In their new role as administrative
experts they will need to shed their
traditional image and still make sure all routine work for the company is
done well.
3. HR Accountability Should be Fixed to Ensure Employee
Commitment: HR must be held
accountable for ensuring that employees feel committed to the organization
and contribute fully. They must
take responsibility for orienting and training line management about the
importance of high employee
morale and how to achieve it. The new HR should be the voice of employees
in management discussions.
The new role for HR might also involve suggesting that more teams be used
on some projects or that
employees be given more control over their own work schedules.
4. The New HR Must Become a Change Agent: The new HR must
become a change agent, which
is building the organization’s capacity to embrace and capitalize on change.
Even though they are not
primarily responsible for executing change it is the duty of the HR manager
to make sure that the organization
carries out the changes framed for implementation.
5. Improving the Quality of HR: The most important thing that managers
can do to drive the new
mandate for HR is to improve the quality of the HR staff itself. Senior
executives must get beyond the
stereotypes of HR professionals as incompetent support staff and unleash
HR’s full potential
6. Change in Employment Practices: The balance sheet of an
organization shows human resource as
an expense and not as a Capital. In the information age, it is perceived that
the machines can do the work
more efficiently than most people however; technology to work is dependent
on people.
The challenges for Employment Practice in the New Millennium will require
that there should be strategic
involvement of the people and labour-management partnerships as
they both have to take organization
ahead.
7. Benchmarking Tool Must be Mastered by HR Professionals: HR
professionals must master
benchmarking, which is a tool for continuous improvement- directing the
human side associated with the
strategic path adopted by the organization. Through this, HR department will
start appreciating the changes
happening within and outside the environment while expanding the
knowledge about how to add value to
decision making at the highest level of the organization.
8. Aligning Human Resources to Better Meet Strategic Objectives:
Too often organizations craft
their strategy in a vacuum. Some organizations don’t even include key
people during strategy formulation
resulting in lacunae between the actual problems and the solutions
implemented- as critical inputs are not
sought from those individuals who are supposed to implement the new
strategies.
15
A past CEO of Sony once said that organizations have access to the same
technology and the same
information. The difference between any two organizations is the “people”-
the human resource. Empowering
the workforce is an essential tool for aligning human resources with the
achievement of corporate objectives.
It is the duty of HR manager to hire talented human resource and to provide
them with a positive environment
where they will be able to utilize their skills and potentials and to create an
environment in which these
individuals are comfortable taking risks.
9. Promote From Within and Invest in Employees: Promoting
employees from within sends a powerful
message that the organization’s employees are valued. New blood and fresh
ideas often come from
newcomers to the organization. To avoid stagnation of the firm, new ideas
and approaches are critical. Yet
to improve employee morale, promoting individuals from within the
organization is essential. This
communicates that the organization values their employees and invests in
their human resources.
10. Review the Recruitment and Selection Process: A key element of
human resource planning is
ensuring that the supply of appropriate employees (with the right skill mix) is
on board when needed. This
requires a proactive approach whereby the organization anticipates its needs
well in advance. It is important
to identify the competencies being sought. That is, the criteria upon which
selection decisions are to be
made should be decided in advance. A firm must identify those skill sets
required by employees to be
successful. Charles O’Reilly suggests that companies should hire for attitude
(perhaps even more so than
technical skills). That is, the fit of the individual with the values of the
organization and the culture of the firm
should also be considered when selecting employees. This has been referred
to as the person-organizationfit.
It is no longer enough to simply consider the person’s fit (and technical skill
set) with the job. Part of the
employee’s fit with the organization should focus on the core values and
beliefs of the organization. This
will increase employees’ contributions to the overall success of the
organization if they already embrace
the core values of the organization prior to their selection
11. Communicate Mission and Vision: If employees are expected to
contribute to the attainment of the
organization’s strategic objectives, they must understand what their role is.
This can be achieved in part by
clearly communicating the mission and vision statements of the firm. The old
adage is certainly true. If a
person does not know where he or she is going, any road will get him or her
there.
The mission communicates the identity and purpose of the organization. It
provides a statement of who the
firm is and what their business is. Only those employees who understand this
purpose can contribute to the
fullest extent possible. The vision statement provides a picture of the future
state of the firm. It should be
a stretch to attain. This keeps all the organization’s employees pulling in the
same direction with a common
end point. It is much easier to align human resources with corporate
objectives when these employees are
familiar with the mission and vision of the firm.
As the mission and vision statements are articulated, organizational
members begin to more closely embrace
their very meaning on an individual level. These statements provide a road
map leading employees down
the road to achieve organizational objectives. Employees then identify how
they can contribute their unique
talents toward the attainment of these goals.
12. Use Teams to Achieve Synergy: Synergy can be concisely defined as
“two plus two equals five”.
In other words, the whole is greater than the sum of the parts. So much more
can be achieved as people
work together. Through the effective use of teams, organizations can often
achieve synergy. Team goals,
however, must be aligned with the organization’s strategic objectives.
Aligning team objectives with overall
corporate objectives ensures that people are working toward the same goal
16
1.10 Summary
It is critical that today’s organizations align their human resources to better
meet strategic objectives. A
failure to do so results in wasted time, energy, and resources. Organizations
are more likely to achieve this
alignment with their corporate objectives when they review their recruitment
and selection processes for
fit, communicate the mission and vision statements, use joint goal setting,
design an appropriate reward
system, empower the workforce, promote and develop from within, and use
teams to achieve synergy.
Human Resource Management is the management function that helps the
managers to plan, recruit, select,
train, develop, remunerate and maintain members for an organization. HRM
has four objectives of societal,
organizational, functional and personal development. An organization must
have set policies; definite
procedures and well defined principles relating to its personnel and these
contribute to the effectiveness,
continuity and stability of the organization.
1.11 Self Assessment Questions
1. Define HRM? What are its functions and objectives?
2. Elaborate about the nature of HRM and its relevance in present scenario.
3. Explain the role of HR manager in HRM.
1.12 Reference books
- Aswathappa. K. (2008), Human Resource and Personnel Management (5th
edition), Tata
McGraw-Hill Publishing Company Ltd., New Delhi.
- Biswajeet Pattanayak (2001), Human Resource Management, Prentice Hall
of India Pvt.
Ltd., New Delhi.
- Lloyed L. Byers and Leslie W. Rue (1997), Human Resource Management
(5th edition),
The McGraw-Hill Companies, USA.
- Michael Armstrong (1999), A Handbook of Human Resource Management
Practice (7th
edition), Kogan Page Limited, 120 Pentonvelle Road, London.
17
Unit - 2 : Human Resource Planning
Structure of Unit:
2.1 Objectives
2.2 Introduction
2.3 Human Resource Planning (HRP)
2.4 Definition of Human Resource Planning
2.5 Nature of HRP
2.6 Objectives of Human Resource Planning
2.7 Need for HRP in Organizations
2.8 Importance of HRP
2.9 Factors Affecting HRP
2.10 HRP Process
2.11 Requisites for Successful HRP
2.12 Barriers to Human HRP
2.13 Summary
2.14 Self Assessment Questions
2.15 Reference Books
2.1 Objectives
After studying this unit, you will be able to:
 Understand the nature and need of HRP
 Able to gain information about different factors that affect HRP
 Realize the importance of human resource planning in current
organizational scenario
 Understand the HRP process and the pre requisites for successful HRP
process
2.2 Introduction
As told in the last chapter Human resource management has started to play
a significant role in the overall
strategic development of the organization. At present HR strategies are
designed in tune with the overall
business strategy of the organization. HR strategy should sub serve the
interest of the organization, translating
firm’s goals and objectives into a consistent, integrated and complimentary
set of programmes and policies
for managing people.
First part of Human resource strategy is HRP – Human Resource Planning. All
other HR activities like
employee hiring, training and development, remuneration, appraisal and
labour relations are derived from
HRP.HR planning is important in a wide variety of industries and firms. HR
planning affects what employers
do when recruiting, selecting, and retaining people, and of course these
actions affect organizational results
and success. The challenges caused by changing economic conditions during
recent year’s show why HR
workforce planning should occur.
Staffing an organization is an HR activity that is both strategic and
operational in nature. As the HR
Headline indicates, HR planning is important in a wide variety of industries
and firms. HR planning affects
what employers do when recruiting, selecting, and retaining people, and, of
course these actions affect
organizational results and success. Human Resources planning mean
different means to different
organizations. To some companies, human resources planning mean
management development. It involve
helping executives to make better decisions, communicate more effectively,
and know more about the
firm. The purpose of HRP is to make the manager a better equipped for
facing the present and future.
18
2.3 Human Resource Planning (HRP)
Human resource planning is important for helping both organizations and
employees to prepare for the
future. The basic goal of human resource planning is to predict the future
and based on these predictions,
implement programmes to avoid anticipated problems. Very briefly humans
resource planning is the process
of examining an organization’s or individual’s future human resource needs
for instance, what types of
skills will be needed for jobs of the future compared to future human
resource capabilities (such as the
types of skilled employees you already have) and developing human
resource policies and practices to
address potential problems for example, implementing training programmes
to avoid skill deficiencies.
2.4 Definition of Human Resource Planning
According to Vetter, “HRP is the process by which management
determines how the organization should
move from its current man power position to desired manpower position.
Through planning, management
strives to have the right time, doing things which result in both the
organization and individual receiving
maximum long run benefits”.
According to Gordon Mc Beath, “HRP is concerned with two things:
Planning of manpower requirements
and Planning of Manpower supplies”.
According to Beach, “HRP is a process of determining and assuming that
the organization will have an
adequate number of qualified persons, available at proper times, performing
jobs which meet the needs of
the enterprise and which provides satisfaction for the individuals involved”
Simply HRP can be understood as the process of forecasting an
organization’s future demands for and
supply of the right type of people in the right number. In other words HRP is
the process of determining
manpower needs and formulating plans to meet these needs.
HRP is a Four-Phased Process.
 The first phase involves the gathering and analysis of data through
manpower inventories and
forecasts,
 The second phase consists of establishing manpower objectives and
policies and gaining top
management approval of these.
 The third phase involves designing and implementing plans and
promotions to enable the
organization to achieve its manpower objectives.
 The fourth phase is concerned with control and evaluation of manpower
plans to facilitate progress
in order to benefit both the organization and the individual. The long run
view means that gains
may be sacrificed in the short run for the future grounds. The planning
process enables the
organization to identify what its manpower needs is and what potential
manpower problems required
current action. This leads to more effective and efficient performance.
2.5 Nature of HRP
Human resource planning is the process of analyzing and identifying the
availability and the need for human
resources so that the organization can meet its objectives. The focus of HR
planning is to ensure that the
organization has the right number of human resources, with the right
capabilities, at the right times, and in
the right places. In HR planning, an organization must consider the
availability and allocation of people to
jobs over long periods of time, not just for the next month or the next year 1.
HRP is a sub system in the total organizational planning. Actions may include
shifting employees to other
jobs in the organization, laying off employees or otherwise cutting back the
number of employees, developing
19
present employees, and/or increasing the number of employees in certain
areas. Factors to consider
include the current employees’ knowledge, skills, and abilities and the
expected vacancies resulting from
retirements, promotions, transfers, and discharges. To do this, HR planning
requires efforts by HR
professionals working with executives and managers.
2.6 Objectives of Human Resource Planning
1. To ensure optimum utilization of human resources currently available in
the organization.
2. To assess or forecast the future skill requirement of the organization.
3. To provide control measures to ensure that necessary resources are
available as and when required.
4. A series of specified reasons are there that attaches importance to
manpower planning and
forecasting exercises. They are elaborated below:
 To link manpower planning with the organizational planning
 To determine recruitment levels.
 To anticipate redundancies.
 To determine optimum training levels.
 To provide a basis for management development programs.
 To cost the manpower.
 To assist productivity bargaining.
 To assess future accommodation requirement.
 To study the cost of overheads and value of service functions.
 To decide whether certain activity needs to be subcontracted, etc.
HRP exists as a part of planning process of business. This is the activity that
aims to coordinate the
requirements for the availability of the different types of employers. The
major activities are the forecasting,
(future requirements), inventorying (present strength), anticipating
(comparison of present and future
requirements) and planning (necessary program to meet the requirements).
The HR forecasts are responsible for estimating the number of people and
the jobs needed by an organization
to achieve its objectives and realize its plans in the most efficient and
effective manner.
HR needs are computed by subtracting HR supplies or number of the
employees available from expected
HR demands or number of people required to produce a desired level of
outcome. The objective of HR
is to provide right personnel for the right work and optimum utilization of the
existing human resources.
The objectives of human resource planning may be summarized as below:
 Forecasting Human Resources Requirements: HRP is essential to
determine the future needs
of HR in an organization. In the absence of this plan it is very difficult to
provide the right kind of
people at the right time.
 Effective Management of Change: Proper planning is required to cope
with changes in the
different aspects which affect the organization. These changes need
continuation of allocation/
reallocation and effective utilization of HR in organization.
20
 Realizing the Organizational Goals: In order to meet the expansion and
other organizational
activities the organizational HR planning is essential.
 Promoting Employees: HRP gives the feedback in the form of employee
data which can be
used in decision-making in promotional opportunities to be made available
for the organization.
 Effective Utilization of HR: The data base will provide the useful
information in identifying
surplus and deficiency in human resources. The objective of HRP is to
maintain and improve the
organizational capacity to reach its goals by developing appropriate
strategies that will result in the
maximum contribution of HR.
2.7 Need for HRP in Organizations
Major reasons for the emphasis on HRP at the Macro level:
1) Employment-Unemployment Situation: Though in general the
number of educated
unemployment is on the rise, there is acute shortage for a variety of skills.
This emphasizes on the
need for more effective recruitment and employee retention.
2) Technological Change: The changes in production technologies,
marketing methods and
management techniques have been extensive and rapid. Their effect has
been profound on the job
contents and job contexts. These changes have caused problems relating to
redundancies, retention
and redeployment. All these suggest the need to plan manpower needs
intensively and systematically.
3) Demographic Change: The changing profile of the work force in terms
of age, sex, literacy,
technical inputs and social background has implications for HRP.
4) Skill Shortage: Unemployment does not mean that the labour market is
a buyer’s market.
Organizations generally become more complex and require a wide range of
specialist skills that
are rare and scare. A problem arises in an organization when employees with
such specialized
skills leave.
5) Governmental Influences: Government control and changes in
legislation with regard to
affirmative action for disadvantages groups, working conditions and hours of
work, restrictions
on women and child employment, causal and contract labour, etc. have
stimulated the organizations
to be become involved in systematic HRP.
6) Legislative Control: The policies of “hire and fire” have gone. Now the
legislation makes it
difficult to reduce the size of an organization quickly and cheaply. It is easy
to increase but difficult
to shed the fat in terms of the numbers employed because of recent changes
in labour law relating
to lay-offs and closures. Those responsible for managing manpower must
look far ahead and thus
attempt to foresee manpower problems.
7) Impact of the Pressure Group: Pressure groups such as unions,
politicians and persons displaced
from land by location of giant enterprises have been raising contradictory
pressure on enterprise
management such as internal recruitment and promotion, preference to
employees’ children, displace
person, sons of soil etc.
8) Systems Approach: The spread of system thinking and advent of the
macro computer as the
part of the on-going revolution in information technology which emphasis
planning and newer
ways of handling voluminous personnel records.
21
9) Lead Time: The log lead time is necessary in the selection process and
training and deployment
of the employee to handle new knowledge and skills successfully.
2.8 Importance of HRP
HRP is the subsystem in the total organizational planning. Organizational
planning includes managerial
activities that set the company’s objective for the future and determines the
appropriate means for achieving
those objectives. The importance of HRP is elaborated on the basis of the key
roles that it is playing in the
organization.
1. Future Personnel Needs: Human resource planning is significant
because it helps to determine
the future personnel needs of the organization. If an organization is facing
the problem of either
surplus or deficiency in staff strength, then it is the result of the absence of
effecting HR planning.
All public sector enterprises find themselves overstaffed now as they never
had any planning for
personnel requirement and went of recruitment spree till late 1980’s. The
problem of excess staff
has become such a prominent problem that many private sector units are
resorting to VRS ‘voluntary
retirement scheme’. The excess of labor problem would have been there if
the organization had
good HRP system. Effective HRP system will also enable the organization to
have good succession
planning.
2. Part of Strategic Planning: HRP has become an integral part of
strategic planning of strategic
planning. HRP provides inputs in strategy formulation process in terms of
deciding whether the
organization has got the right kind of human resources to carry out the given
strategy. HRP is also
necessary during the implementation stage in the form of deciding to make
resource allocation
decisions related to organization structure, process and human resources. In
some organizations
HRP play as significant role as strategic planning and HR issues are
perceived as inherent in
business management.
3. Creating Highly Talented Personnel: Even though India has a great
pool of educated
unemployed, it is the discretion of HR manager that will enable the company
to recruit the right
person with right skills to the organization. Even the existing staff hope the
job so frequently that
organization face frequent shortage of manpower. Manpower planning in the
form of skill
development is required to help the organization in dealing with this problem
of skilled manpower
shortage
4. International Strategies: An international expansion strategy of an
organization is facilitated to
a great extent by HR planning. The HR department’s ability to fill key jobs
with foreign nationals
and reassignment of employees from within or across national borders is a
major challenge that is
being faced by international business. With the growing trend towards global
operation, the need
for HRP will as well will be the need to integrate HRP more closely with the
organizations strategic
plans. Without effective HRP and subsequent attention to employee
recruitment, selection,
placement, development, and career planning, the growing competition for
foreign executives
may lead to expensive and strategically descriptive turnover among key
decision makers.
5. Foundation for Personnel Functions: HRP provides essential
information for designing and
implementing personnel functions, such as recruitment, selection, training
and development,
personnel movement like transfers, promotions and layoffs.
6. Increasing Investments in Human Resources: Organizations are
making increasing investments
in human resource development compelling the increased need for HRP.
Organizations are realizing
22
that human assets can increase in value more than the physical assets. An
employee who gradually
develops his/ her skills and abilities become a valuable asset for the
organization. Organizations
can make investments in its personnel either through direct training or job
assignment and the
rupee value of such a trained, flexible, motivated productive workforce is
difficult to determine.
Top officials have started acknowledging that quality of work force is
responsible for both short
term and long term performance of the organization.
7. Resistance to Change: Employees are always reluctant whenever they
hear about change and
even about job rotation. Organizations cannot shift one employee from one
department to another
without any specific planning. Even for carrying out job rotation (shifting one
employee from one
department to another) there is a need to plan well ahead and match the
skills required and
existing skills of the employees.
8. Uniting the Viewpoint of Line and Staff Managers: HRP helps to
unite the viewpoints of line
and staff managers. Though HRP is initiated and executed by the corporate
staff, it requires the
input and cooperation of all managers within an organization. Each
department manager knows
about the issues faced by his department more than anyone else. So
communication between HR
staff and line managers is essential for the success of HR Planning and
development.
9. Succession Planning: Human Resource Planning prepares people for
future challenges. The
‘stars’ are picked up, trained, assessed and assisted continuously so that
when the time comes
such trained employees can quickly take the responsibilities and position of
their boss or seniors
as and when situation arrives.
10. Other Benefits: (a) HRP helps in judging the effectiveness of manpower
policies and programmes
of management. (b) It develops awareness on effective utilization of human
resources for the
overall development of organization. (c) It facilitates selection and training of
employees with
adequate knowledge, experience and aptitudes so as to carry on and
achieve the organizational
objectives (d) HRP encourages the company to review and modify its human
resource policies
and practices and to examine the way of utilizing the human resources for
better utilization.
2.9 Factors Affecting HRP
HRP is influenced by several factors. The most important of the factors that
affect HRP are (1) type and
strategy of organization (2) organizational growth cycles and planning (3)
environmental uncertainties (4)
time horizons (5) type and quality of forecasting information (4) nature of
jobs being filled and (5) off
loading the work.
1. Type and Strategy of the Organization: Type of the organization
determines the production processes
involve, number and type of staff needed and the supervisory and
managerial personnel required. HR
need is also defined by the strategic plan of organization. If the organization
has a plan for organic growth
then organization need to hire additional employees. On the other hand If
the organization is going for
mergers and acquisition, then organization need to plan for layoffs, as
mergers can create, duplicate or
overlap positions that can be handled more efficiently with fewer employees.
Organization first decides whether to be reactive or proactive in HRP.
Organizations either carefully
anticipate the needs and systematically plan to fill the need in advance
(proactive) or can simply react to
the needs as they arise (reactive). Likewise, the organization must determine
the width of the HR plan.
Organization can choose a narrow focus by planning in only one or two HR
areas like recruitment and
selection or can have a broad perspective by planning in all areas including
training and remuneration.
23
The nature of HR plan is also decides upon the formality of the plan. It can
decides to have an informal
plan that lies mostly in the minds of the managers and personnel staff or can
have a formal plan which is
properly documented in writing
The nature of HR plan is also depended upon the flexibility that is practiced
in the organization. HR plan
should have the ability to anticipate and deal with contingencies.
Organizations frame HRP in such a way
that it can contain many contingencies, which reflect different scenarios
thereby assuring that the plan is
flexible and adaptable.
Figure 2.1 : Factors Affecting HRP.
Figure 2.1 summarizes the five factors that influence an organization while
framing its strategic HRP.
2. Organizational Growth Cycles and Planning: All organizations pass
through different stages of
growth from the day of its inception. The stage of growth in which an
organization is determines the nature
and extends of HRP. Small organizations in the earlier stages of growth may
not have well defined personnel
planning. But as the organization enters the growth stage they feel the need
to plan its human resource. At
this stage organization gives emphasis upon employee development. But as
the organization reaches the
mature stage it experience less flexibility and variability resulting in low
growth rate. HR planning becomes
more formalized and less flexible and less innovative and problem like
retirement and possible retrenchment
dominate planning.
During the declining stage of the organization HRP takes a different focus
like planning to do the layoff,
retrenchment and retirement. In declining situation planning always
becomes reactive in nature towards
the financial and sales distress faced by the company.
3. Environmental Uncertainties: Political, social and economic changes
affect all organizations and the
fluctuations that are happening in these environments affect organizations
drastically. Personnel planners
deal with such environmental uncertainties by carefully formulating
recruitment, selection, training and
HRP
Organizational
Growth cycle
and Planning
Environmental
Uncertainties
Outsourcing
Nature of jobs
being filled
Type and
quality of
forecasting
information
Time horizons
Type and
Strategy of
Organization.
24
Table 2.2 : Levels of HRP Information
Strategic Information General Organizational
Information
Specific Information
Necessary for HRP
Product mix
Customer mix
Organizational structure
Information flows
Job analysis
Skills inventories
Competitive emphasis Operating and capital
budgets
Functional area objectives
Management inventories
Geographic limits of
market
Production schedules
Distribution channels
Available training and
development programmes
Sales territories
Production processes
Recruitment sources
Level of technology
Planning horizons
Labour market analysis
Compensation programmes
Constitutional provisions
and labour laws
Retirement plans
Turnover data.
development policies and programmes. The balance in the organization is
achieved through careful succession
planning, promotion channels, layoffs, flexi time, job sharing, retirement,
VRS and other personnel related
arrangements.
4. Time Horizons: HR plans can be short term or long term. Short term
plans spans from six months to
one year, while long term plans spread over three to twenty years. The
extent of time period depends
upon the degree of uncertainty that is prevailing in an organizations
environment. Greater the uncertainty,
shorter the plan time horizon and vice versa.
Source: Elmer H. Burack and Nicholas J. Mathis, Human Resource Planning- A
Pragmatic approach
to manpower Staffing and development, Illinosis, Brace- Park Press, 1987, p.
129.
5. Type and Quality of information: The information used to forecast
personnel needs originates from
a multitude of sources. The forecast depends to a large extent upon the type
of information and the quality
of data that is available to personnel planners. The quality and accuracy of
information depend upon the
clarity with which the organizational decision makers have defined their
strategy, structure, budgets,
production schedule and so on.
Source: Leap& Crino, Personnel/ Human Resource Management, p. 161.
6. Nature of Jobs Being Filled: Personnel planners need to be really
careful with respect to the nature
of the jobs being filled in the organization. Employees belonging to lower
level who need very limited skills
can be recruited hastily but, while hiring employees for higher posts,
selection and recruitment need to be
carried out with high discretion. Organization need to anticipate vacancies
far in advance as possible, to
provide sufficient time to recruit suitable candidate.
Table 2.1 : Degree of Uncertainty and Length of Planning Period
Short Planning period- uncertainty/
instability
Long planning period- certainty/ stability
Many new competitors
Rapid changes in social and economic
conditions
Strong competitive position
Evolutionary, rather than rapid social,
political and technological change
Unstable product/ service demand patterns
Small organizational size, poor management
practices (crisis Management)
Stable demand patterns
Strong management practices.
25
7. Outsourcing: Several organizations outsource part of their work to
outside parties in the form of
subcontract. Outsourcing is a regular feature both in the public sector as well
as in the private sector
companies. Many of the organizations have surplus labour and hence instead
of hiring more people they
go for outsourcing. Outsourcing is usually done for non critical activities.
Outsourcing of non- critical
activities through subcontracting determines HRP.
2.10 HRP Process
HRP effectively involves forecasting personnel needs, assessing personnel
supply and matching demand –
supply factors through personnel related programmes. The HR planning
process is influenced by overall
organizational objectives and environment of business.
Figure 2.2 : The HRP Process
Environmental Scanning:
It refers to the systematic monitoring of the external forces influencing the
organization. The following
forces are essential for pertinent HRP.
 Economic factors, including general and regional conditions.
 Technological changes
 Demographic changes including age, composition and literacy,
 Political and legislative issues, including laws and administrative rulings
 Social concerns, including child care, educational facilities and priorities.
By scanning the environment for changes that will affect an organization,
managers can anticipate their
impact and make adjustments early.
Organizational Objectives and Policies: HR plan is usually derived from
the organizational objectives.
Specific requirements in terms of number and characteristics of employees
should be derived from
organizational objectives
Once the organizational objectives are specified, communicated and
understood by all concerned, the HR
department must specify its objective with regard to HR utilization in the
organization.
26
HR Demand Forecast:
Demand forecasting is the process of estimating the future quantity and
quality of people required to meet
the future needs of the organization. Annual budget and long-term corporate
plan when translated into
activity into activity form the basis for HR forecast.
For eg: in the case of a manufacturing company, the sales budget will form
the basis for production plan
giving the number and type of products to be produced in each period. This
will form the basis upon which
the organization will decide the number of hours to be worked by each
skilled category of workers. Once
the number hours required is available organization can determine the
quality and quantity of personnel
required for the task.
Demand forecasting is influenced by both internal factors and external
factors: external factors includecompetition,
economic climate, laws and regulatory bodies, changes in technology and
social factors
whereas internal factors are budget constraints, production level, new
products and services, organizational
structure and employee separations.
Demand forecasting is essential because it helps the organization to 1.
Quantify the jobs, necessary for
producing a given number of goods, 2. To determine the nature of staff mix
required in the future, 3. To
assess appropriate levels in different parts of organization so as to avoid
unnecessary costs to the organization,
4. To prevent shortages of personnel where and when, they are needed by
the organization. 5. To monitor
compliances with legal requirements with regard to reservation of jobs.
Techniques like managerial judgment, ratio- trend analysis, regression
analysis, work study techniques,
Delphi techniques are some of the major methods used by the organization
for demand forecasting.
HR Supply Forecast:
Supply forecast determines whether the HR department will be able to
procure the required number of
workers. Supply forecast measures the number of people likely to be
available from within and outside an
organization, after making allowance for absenteeism, internal movements
and promotions, wastage and
changes in hours, and other conditions of work.
Supply forecast is required because it is needed as it 1. Helps to quantify the
number of people and
positions expected to be available in future to help the organization realize
its plans and meet its objectives
2. Helps to clarify the staff mixes that will arise in future 3. It assesses
existing staffing in different parts of
the organization. 4. It will enable the organization to prevent shortage of
people where and when they are
most needed. 5. It also helps to monitor future compliance with legal
requirements of job reservations.
Supply analysis covers the existing human resources, internal sources of
supply and external sources of
supply.
HR Programming:
Once an organization’s personnel demand and supply are forecasted the
demand and supply need to be
balanced in order that the vacancies can be filled by the right employees at
the right time.
HR Plan Implementation:
HR implementation requires converting an HR plan into action. A series of
action are initiated as a part of
HR plan implementation. Programmes such as recruitment, selection and
placement, training and
development, retraining and redeployment, retention plan, succession plan
etc when clubbed together
form the implementation part of the HR plan.
27
Control and Evaluation:
Control and evaluation represent the final phase of the HRP process. All HR
plan include budgets, targets
and standards. The achievement of the organization will be evaluated and
monitored against the plan.
During this final phase organization will be evaluating on the number of
people employed against the
established (both those who are in the post and those who are in pipe line)
and on the number recruited
against the recruitment targets. Evaluation is also done with respect to
employment cost against the
budget and wastage accrued so that corrective action can be taken in future.
2.11 Requisites for Successful HRP
1. HRP must be recognized as an integral part of corporate planning
2. Support of top management is essential
3. There should be some centralization with respect to HRP responsibilities in
order to have
co-ordination between different levels of management.
4. Organization records must be complete, up to date and readily available.
5. Techniques used for HR planning should be those best suited to the data
available and
degree of accuracy required.
6. Data collection, analysis, techniques of planning and the plan themselves
need to be constantly
revised and improved in the light of experience.
2.12 Barriers to HRP
Human Resource Planners face significant barriers while formulating an HRP.
The major barriers are
elaborated below:
1) HR practitioners are perceived as experts in handling personnel matters,
but are not experts in
managing business. The personnel plan conceived and formulated by the HR
practitioners when
enmeshed with organizational plan, might make the overall strategic plan of
the organization
ineffective.
2) HR information often is incompatible with other information used in
strategy formulation. Strategic
planning efforts have long been oriented towards financial forecasting, often
to the exclusion of
other types of information. Financial forecasting takes precedence over HRP.
4) Conflict may exist between short term and long term HR needs. For
example, there can be a
conflict between the pressure to get the work done on time and long term
needs, such as preparing
people for assuming greater responsibilities. Many managers are of the belief
that HR needs can
be met immediately because skills are available on the market as long as
wages and salaries are
competitive. Therefore, long times plans are not required, short planning are
only needed.
5) There is conflict between quantitative and qualitative approaches to HRP.
Some people view
HRP as a number game designed to track the flow of people across the
department. Others take
a qualitative approach and focus on individual employee concerns such as
promotion and career
development. Best result can be achieved if there is a balance between the
quantitative and
qualitative approaches.
6) Non-involvement of operating managers renders HRP ineffective. HRP is
not strictly an HR
department function. Successful planning needs a co-ordinated effort on the
part of operating
managers and HR personnel.
28
2.13 Summary
Today, human resource planning is viewed as the way management comes
to grasp the ill-defined and
tough-to-solve human resource problems facing an organization. Human
resource planning is the process
of determining the human resources required by the organization to achieve
its goals. Human resource
planning also looks at broader issues relating to the ways in which people
are employed and developed,
in order to improve organizational effectiveness. HRP is a decision making
process that combines activities
such as identifying and acquiring the right number of people with the proper
skills, motivating them to
achieve high performance and creating interactive links between business
objectives are resource planning
activities. HRP sets out requirements in both quantitative and qualitative
terms. Accurate manpower plan
is a dream. A common error of many managers is to focus on the
organization’s short term replacement
needs. Any human resource plan, if it is to be effective, must be derived from
the long term plans and
strategies of the organization. The various approaches to human resource
planning under which a number
of major issues and trends in today’s work plan that will affect organization
and employees are (1) Examine
external and internal issues, (2) Determining future organizations
capabilities, (3) Determining future
organizational needs, and (4) Implementing human resources programmes
to address anticipated problems.
Although change is occurring very rapidly in the work world it is important for
both organizations and
employees to monitor issues and events continuously and consider their
potential effects.
2.14 Self Assessment Questions
1. Explain the role of HR professional in human resource planning process in
organizations.
2 Describe the various forecasting techniques and how these techniques are
being used in
human resource planning.
3 Explain the barriers to HRP. Bring out the requisites for effective planning.
2.15 Reference Books
- Lloyd L. Byars and Leslie W. Rue (1997), Human Resource Management
(5th edition), The
McGraw-Hill Companies, USA.
- Michael Armstrong (1999), A Handbook of Human Resource Management
Practice (7th
edition), Kogan Page Limited, 120 Pentonvelle Road, London.
- Biswajeet Pattanayak (2001), Human Resource Management, Prentice Hall
of India Pvt. Ltd.,
New Delhi.
- K. Aswathappa (1999), Human Resource and Personnel Management (2nd
edition), Tata
McGraw-Hill Publishing Company Ltd., New Delhi.
- P. Subba Rao (2004), Management and Organisational Behaviour (First
edition), Himalaya
Publishing House.
29
Unit - 3 : Job Analysis and Job Design
Structure of Unit:
3.0 Objectives
3.1 Introduction
3.2 Job Analysis Defined
3.3 Uses of Job Analysis
3.4 Steps in Job Analysis
3.5 Methods for Collecting Job Analysis Data
3.6 Job Description
3.7 Writing Job Description
3.8 Job Specification
3.9 Job Design
3.10 Methods of Job Design
3.11 Summary
3.12 Self Assessment Questions
3.13 Reference Books
3.0 Objectives
After completing this unit, you will be able to:
 Define job analysis.
 Understand the basic steps in a Job analysis.
 Identify the major methods of collecting Job analysis data.
 Recognize the major elements of job descriptions
 Explain how to prepare job descriptions and job specification and their use.
 Point out and explain job design and its various methods
 Distinguish between job enlargement and job enrichment.
3.1 Introduction
Manpower planning is concerned with determination of quantitative and
qualitative requirements of
manpower for the organization. Determination of manpower requirements is
one of the most important
problems in manpower planning. Job analysis and job design, provide this
knowledge. Before going
through the mechanism of job analysis and job design, it is relevant to
understand the terms which are
used in job analysis and job design.
Job: A job may be defined as a “collection or aggregation of tasks, duties
and responsibilities which as a
whole, are regarded as a regular assignment to individual employees,” and
which is different from other
assignments, In other words, when the total work to be done is divided and
grouped into packages, we
call it a “job.” Each job has a definite title based upon standardized trade
specifications within a job; two
or more grades may be identified, where the work assignment may be
graded according to skill, the
difficulty of doing them, or the quality of workmanship. Thus, it may be noted
that a position is a “collection
o tasks and responsibilities regularly assigned to one person;” while a job is a
“group of position, which
involve essentially the same duties, responsibilities, skill and knowledge.” A
position consists of a particular
set of duties assigned to an individual.
30
Decenzo and P. Robbins define other terms as follows:
Task: It is a distinct work activity carried out for a distinct purpose.
Duty: It is a number of tasks.
Position: It refers to one or more duties performed by one person in an
organization, There are at
least as many positions as there are workers in the organization; vacancies
may create
more positions than employees.
Job: It is a type of position within the organization.
Job Family: It is group of two or more jobs that either call for similar worker
characteristics or contain
parallel work tasks as determined by job analysis.
Occupation: It is a group of similar jobs found across organizations.
Career: It represents a sequence of positions, jobs, or occupations that a
person has over his working life.
3.2 Job Analysis Defined
Developing an organizational structure, results in jobs which have to be
staffed. Job analysis is the procedure
through which you determine the duties and nature of the jobs and the kinds
of people (in terms of skills
and experience) who should be hired for them.’ It provides you with data on
job requirements, which are
then used for developing job descriptions (what the job entails) and job
specifications (what kind of
people to hire for the job). Some of the definitions of job analysis ate given
as follows, to understand the
meaning of the term more clearly:
According to Michael L. Jucius, “Job analysis refers to the process of
studying the operations, duties
and organizational aspects of jobs in order to derive specifications or as they
called by some, job
descriptions.”
According to DeCenzo and P. Robbins, “A job analysis is a systematic
exploration of the activities
within a job. It is a basic technical procedure, one that is used to define the
duties, responsibilities, and
accountabilities of a job.”
Figure 3.1: Job Analysis Information Hierarchy
(Adapted from Decenzo and P. Robbins, Personnel/Human Resource
Management)
Element
Task
Duty
Position
Job
Job Family
Occupation
Career
31
According to Herbert G Herman “A job is a collection of tasks that can be
performed by a single
employee to contribute to the production of some product or service
provided by the organization. Each
job has certain ability requirements (as well as certain rewards) associated
with it. Job analysis process
used to identify these requirements.”
Flippo has offered a more comprehensive definition of job analysis
as, “Job analysis is the process
of studying and collecting information relating to the operations and
responsibilities of a specific job. The
immediate products of the analysis are job descriptions and job
specifications”
Thus, job analysis involves the process of identifying the nature of a job (job
description) and the qualities
of the likely job holder (job specification).
3.3 Uses of Job Analysis
As summarized in Figure 3.2 the information generated by the job analysis is
used as a basis of several
interrelated personnel management activities:
1. Achievement of Goals: Weather and Davis have stated, “Jobs are at the
core of every organization’s
productivity, if they are designed well and done right, the organization
makes progress towards its objectives.
Otherwise, productivity suffers, profits fall, and the organization is less able
to meet the demands of
society, customer, employees, and other with a stake in its success.”
2. Organizational Design: Job analysis will be useful in classifying the jobs
and the interrelationships
among the jobs. On the basis of information obtained through job analysis,
sound decisions regarding
hierarchical positions and functional differentiation can be taken and this will
improve operational efficiency.
3. Organization and Manpower Planning: It is helpful in organization
planning, for it defines labour in
concrete terms and co-ordinates the activities of the work force, and clearly
divides duties and responsibilities.
4. Recruitment and Selection: Job analysis provides you with information
on what the job entails and
what human requirements are required to carry out these activities. This
information is the basis on which
you decide what sort of people to recruit and hire.
Job Description
Job Specification
Organizational design
Organiz a tion a nd m a n
powe r pla nning
Recruitment & selection
Placement & orientation
Training & development
Safety and health
Employee counseling
Job
Analysis
Performance appraisal
Figure 3.2: Uses Figure 3.2 : Uses of Job Ana loyf sJiosb Analysis
32
5. Placement and Orientation: Job analysis helps in matching the job
requirements with the abilities,
interests and aptitudes of people. Jobs will be assigned to persons on the
basis of suitability for the job.
The orientation programme will help the employee in learning the activities
and understanding duties that
are required to perform a given job more effectively.
6. Employee Training and Management Development: Job analysis
provides the necessary information
to the management of training and development programmes. It helps in to
determine the content and
subject matter of in training courses. It also helps in checking application
information, interviewing test
results and in checking references.
7. Job Evaluation and Compensation: Job evaluation is the process of
determining the relative worth of
different jobs in an organization with a view to link compensation, both basic
and supplementary, with the
worth of the jobs. The worth of a job is determined on the basis of job
characteristics and job holder
characteristics. Job analysis provides both in the forms of job description and
job specification.
8. Performance Appraisal: Performance appraisal involves comparing
each employee’s actual
performance with his or her desired performance. Through job analysis
industrial engineers and other
experts determine standards to be achieved and specific activities to be
performed.
9. Health and Safety: It provides an opportunity for identifying hazardous
conditions and unhealthy
environmental factors so that corrective measures may be taken to minimize
and avoid the possibility of
accidents.
10. Employee Counselling: Job analysis provides information about career
choices and personal limitation.
Such information is helpful in vocational guidance and rehabilitation
counselling. Employees who are unable
to cope with the hazards and demands of given jobs may be advised to opt
for subsidiary jobs or to seek
premature retirement.
3.4 Steps in Job Analysis
The six steps of job analysis are shown in figure 3.3:
Collection of back
ground information
Selection of job
for analysis
Collection of job
analysis data
Information processing
Job
Description
Job
Specification
Determination of uses
of job analysis
Figure 3.3 : Job Analysis Process
33
1. Determine the Use of the Job Analysis Information: Start by
identifying the use to which the
information will be put, since this will determine the type of data you collect
and the technique you use to
collect them.
2. Collection of Background Information: According to Terry, “The
make-up of a job, its relation to
other jobs, and its requirements for competent performance are essential
information needed for a job
evaluation. This information can be had by reviewing available background
information such as organization
charts (which show how the job in question relates to other jobs and where
they fit into the overall
organization); class specifications (which describe the general requirements
of the class of job to which the
job under analysis belongs); and the existing job descriptions which provide
a starting point from which to
build the revised job description”.
3. Selection of Jobs for Analysis: To do job analysis is a costly and time
consuming process. It is
hence, necessary to select a representative sample of jobs for purposes of
analysis. Priorities of various
jobs can also be determined. A job may be selected because it has
undergone undocumented changes in
job content. The request for analysis of a job may originate with the
employee, supervisor, or a manager.
When the employee requests an analysis it is usually because new job
demands have not been reflected in
changes in wages. Employee’s salaries are, in part, based upon the nature of
the work that they perform.
Some organizations establish a time cycle for the analysis of each job. For
example: A job analysis may
be required for all jobs every three years. New jobs must also be subjected to
analysis.
4. Collection of Job Analysis Data: Job data on features of the job,
requited employee qualification
and requirements, should be collected either form the employees who
actually perform a job; or from
other employees (such as foremen or supervisors) who watch the workers
doing a job and there by
acquire knowledge about it; or from the outside persons, known as the trade
job analysis who are appointed
to watch employees performing a job. The duties of such a trade job analyst
are (i) to outline the complete
scope of a job and to consider all the physical and mental activities involved
in determining what the
worker does.; (ii) find out why a worker does a job; and for this purpose he
studies why each task is
essential for the overall result; and (iii) the skill factor which may be needed
in the worker to differentiate
between jobs and establish the extent of the difficulty of any job.
5. Processing the Information: Once job analysis information has been
collected, the next step is to
place it in a form that will make it useful to those charged with the various
personnel functions. Several
issues arise with respect to this. First, how much detail is needed? Second,
can the job analysis information
be expressed in quantitative terms? These must be considered properly.
6. Preparing Job Descriptions and Job Classifications: Job information
which has been collected
must be processed to prepare the job description form. It is a statement
showing full details of the activities
of the job. Separate job description forms may be used for various activities
in the job and may be
compiled later on. The job analysis is made with the help of these description
forms. These forms may be
used as reference for the future.
7. Developing Job Specifications: Job specifications are also prepared on
the basis of information
collected. It is a statement of minimum acceptable qualities of the person to
be placed on the job. It
specifies the standard by which the qualities of the person are measured. Job
analyst prepares such
statement taking into consideration the skills required in performing the job
properly. Such statement is
used in selecting a person matching with the job.
34
3.5 Methods for Collecting Job Analysis Data
As discussed earlier, information is to be collected for job analysis. Such
information may be collected by
the trained job analysis, superiors concerned and job holders themselves. Job
information is collected
through the following methods:
1. Participant Diary/Logs: Workers can be to keep participant diary/long
or lists of things they do
during the day. For every activity he or she engages in, the employee
records the activity (along with the
time) in a log. This can provide you with a very comprehensive picture of the
job, especially when it’s
supplemented with subsequent interviews with the worker and his or her
supervisor. This method provides
more accurate information if done faithfully. However, it is quite time
consuming. Further, each job holder
may maintain records according to his own way which presents problems in
analysis at later stage. Therefore,
it has limited application.
2. Interview: There are three types of interviews you can use to collect job
analysis data: individual
interviews with each employee; group interviews with groups of employees
having the same job; and
supervisor interviews with one or more supervisors who are thoroughly
knowledgeable about the job
being analyzed. The group interview is used when a large number of
employees are performing similar or
identical work, since this can be a quick and inexpensive way of learning
about the job. As a rule, the
worker’s immediate supervisor would attend the group session; if not, you
should interview the supervisor
separately to get that person’s perspective on the duties and responsibilities
of the job.
3. Critical Incidents: In this method, job holders are asked to describe
incidents concerning the job on
the basis of their past experience. The incidents so collected are analyzed
and classified according to the
job areas they describe, A fairly picture of actual job requirements can be
obtained by distinguishing
between effective and ineffective behaviors of workers on the job. However,
this method is time consuming.
The analyst requires a high degree of skill to analyze the contents of
descriptions given by workers.
4. Technical Conference Method: This method utilizes supervisors with
extensive knowledge of the
job. Here, specific characteristics of a job are obtained from the “experts.”
Although it is a good data
gathering method, it often overlooks the incumbent worker’s perception
about what they do on their job.
5. Job Performance: Under this method, the job analyst actually performs
the job under study to get
first-hand experience of the actual tasks, and physical and social demands of
the job. This method can be
used only for jobs where skill requirements are low and can be learnt quickly
and easily. This is a timeconsuming
method and is not appropriate for jobs requiring extensive training.
6. Functional Job Analysis: Functional job analysis (FJA) is employee-
oriented analytical approach of
job analysis. This approach attempts to describe the whole person on the
job. The main features of FJA
include the following:
 The extent to which specific instruction are necessary to perform the task
 The extent to which reasoning and judgment are required to perform the
task
 The mathematical ability required to perform the task and
 The verbal and language facilities required to perform the task.
7. Observation Method: Using this method, a job analyst watches
employees directly on the job.
Observations are made on various tasks, activities, the pace at which tasks
are carried out, and the way
different activities are performed. This method is suitable for jobs that
involve manual, standardized, and
short job cycle activities. This method also requires that the entire range of
activities be observable;
possible with some jobs.
35
8. Questionnaires: The method is usually employed by engineering
consultants. Properly drafted
questionnaires are sent out to job-holders for completion and are returned to
supervisors. However, the
information received is often unorganized and incoherent. The idea in issuing
questionnaire is to elicit the
necessary information from job –holders so that any error may first be
discussed with the employee and,
after corrections, may be submitted to the job analyst.
This technique is time consuming and generally does not yield satisfactory
results because many employees
do not complete the questionnaire or furnish incorrect information because
of their own limitations. The
use of questionnaire is recommended only in case of those technical jobs
where the job contents are not
completely known to the supervisor or the operation is too complex to
observe.
There are certain standardized questionnaires developed by a few agencies
which are used by various
organizations for job analysis. Most of these questionnaires are of two types:
position analysis questionnaire
and management position description questionnaire that are decribed as
follows:
a. Position Analysis Questionnaire. Position analysis questionnaire (PAQ)
is a highly specialized
instrument for analyzing a job in terms of employee activities. The PAQ
developed by Purdue University
is a comprehensive questionnaire for collecting information for job analysis.
In this questionnaire, various job elements have been grouped into six
categories with each category
containing relevant job elements resulting into 195 elements as shown in
Table 3.1.
Questionnaire for Job Analysis
1. Your Name ………..………..………..………..………..………..………..
2. Title or Designation of your job …………………………………………
3. Regular or Extra …………………………………………………………
4. Your Department ……………………………………………………….
5. To whom do you report directly (Name and Title): ………………………
6. Description of work:
(a) Daily Duties:
(b) Periodical Duties:
(c) Occasional Duties:
7. Your knowledge Requirements:
(A) Store Procedure and Methods:
(B) Merchandise:
8. What Equipment do you use?
9. What Materials do you work with or sell?
10. If you supervise the work of others, state how many and what their jobs
are.
11. To what job would you normally expect to be promoted?
12. From what job were you transferred to your present job?
36
Table 3.1 : Position Analysis Questionnaire
The advantage of PAQ is that it provides a quantitative score or profile of any
job in terms of how that job
rates on the basic activities. The PAQ’s real strength is, thus, in classifying
jobs. PAQ’s results can be used
to compare the jobs relative to one another and pay levels can be assigned
for each job.
The major problem with PAQ is the time it takes for a job analyst to fill out
the ratings. However, PAQ has
been widely researched and tested and appears to be both reliable and valid.
b. Management Position Description Questionnaire: Management
position description is a highly
structured questionnaire containing 208 items relating to managerial
responsibilities, restrictions, demands
and other miscellaneous position characteristics. W.W. Tomov and P.R. Pinto
have developed the following
Management position Description factors:
 Product, marketing and financial strategy planning.
 Coordination of other organization units and personnel
 Internal business Control
 Products and services responsibility
 Public and customer relations
 Advanced consulting
 Autonomy of actions
 Approval of financial commitments
 Staff Service
 Supervision
 Complexity and stress
 Advanced financial responsibility
 Broad personnel responsibility
The above methods are the most popular ones for gathering job analysis
data. They all provide realistic
information about what job incumbents actually do. They can thus be used
for developing job descriptions
and job specifications. Caroll L. Shartle, Otis and Lenhert have provided the
following suggestions for
making the job analyst’s task simple.
Job Aspects No. of
elements
Information input - Where and how do employee get information to do their
job?
35
Mental processes- what reasoning, planning, organizing, and decision
making is done?
14
Work output – what physical activities, tools and machines are used? 49
Relationships – what contact with other people, both in the company and
outside is maintained or developed?
36
Job context- what is the physical and social context in which the job is
maintained?
19
Other job characteristics – what other activities, conditions or Characteristics
not covered by the categories are relevant?
42
37
 Introduce yourself so that the worker knows who you are and why you are
there.
 Show a sincere interest in the worker and the job that is analyzed;
 Do not try to tell the employee how to do his job.
 Try to talk to the employee and supervisors in their own language;
 Do a complete job study within the objectives of the programmer: and
 Verify the job information obtained.
3.6 Job Description
Job description is the immediate product of job analysis process; the data
collected through job analysis
provides a basis for job description and job specification.
Job Description: is a written record of the duties, responsibilities and
requirements of a particular job.
It is concerned with the job itself and not with the job holders. It is a
statement describing the job in such
terms as its title, location, duties, working conditions and hazards.
Flippo has Defined Job Description as, “A job description is an
organized, factual statement of duties
and responsibilities of a specific job. In brief, it should tell what is to be done.
How it is done why. It is a
standard of function, in that defines the appropriate and authorized content
of a job.
According to Pigors and Myres, “Job description is a pertinent picture (in
writing) of the organizational
relationships, responsibilities and specific duties that constitutes a given job
or position. It defines a scope
of responsibility and continuing work assignments that are sufficiently
different form that of other jobs to
warrant a specific title.”
According to Zerga, who analyzed 401 articles on job description about 30
years ago. A job description
helps us in:
(i) Job grading and classification
(ii) Transfers and promotions.
(iii) Adjustments of grievances;
(iv) Defining and outlining promotional steps:
(v) Establishing a common understanding of a job between employers and
employees;
(vi) Investigation accidents ;
(vii) Indicating faulty work procedures or duplication of papers;
(viii) Maintaining, operating and adjusting machinery;
(ix) Time and motion studies;
(x) Defining the limits of authority;
(xi) Indicating case of personal merit;
(xii) Studies of health and fatigue;
(xiii) Scientific guidance;
(xiv) Determining jobs suitable for occupational therapy;
(xv) Providing hiring specifications; and
(xvi) Providing performance indicators.
“Job description” is different from “performance assessment.” The former
concerns such functions as
planning, co-ordination, and assigning responsibility; while the latter
concerns the quality of performance
itself. Though job description is not assessment, it provides an important
basis establishing assessment
standards and objectives.
38
3.7 Writing Job Description
A Job description is a written statement of what the job holder actually does,
how he or she does it, and
under what conditions the job is performed. This information is in turn used
to write a job specification.
This lists the knowledge, abilities, and skills needed to perform the job
satisfactorily. While there is no
standard format you must use in writing a job description, most descriptions
contain at least sections on:
1. Job Identification: It includes the job title, alterative title, department,
division, and plant and
code number of the job. The job title identifies and designates the job
properly, the department, division,
etc., indicate the name of the department where it is situated – whether it is
the maintenance department,
mechanical shop etc. Location gives the name of the place. This portion of
job description gives answer
to two important questions: to what higher level job is this job accountable.
And who is supervised
directly?
2. Job Summary: Job summary describes the contents of the jobs in terms
of activities or tasks
performed. Job summary should clear the nature of the job. Primary,
secondary and other duties to be
performed on the job should clearly be indicated separately.
3. Duties and Responsibilities: This is the most important phase of job
description and should be
prepared very carefully. It describes the duties to be performed along with
frequency of each major
duty. Responsibilities concerning custody of money, supervision and training
of staff etc. are also described
in this part.
4. Supervision: Under it is given number of persons to be supervised along
with their job titles, and the
extent of supervision involved –general, intermediate or close supervision.
Example of a Job Description
Job Title: Record Clerk Job No. 011
Supervisor: Record Supervisor Job Grand –III
Supervises: None Date: 2/21/12
Job Summary: Originate, process, and maintain comprehensive records;
implement
required controls; collect and summarize data as requested.
Job Duties and Responsibilities :
 Review a variety of documents, listings, summarizes, etc, for completeness
and
accuracy.
 Check records against other current sources such as reports or summaries;
investigate
differences and take required action to ensure that records are accurate and
up to date;
compile and summarize data report format as required.
 Implement controls or obtaining, preserving, and supplying a variety of
information.
Prepare simple requisitions, forms, and other routine memoranda.
 Provide functional guidance to lower-level personnel as required.
Working Conditions: Normal working conditions. But visits sites on
average twice a week.
Eight hours per day
Relationships:
 With equivalent officers in other departments.
 Maintains formal and social contacts with local officials.
Job Characteristics: Skilled operation of computer, calculating machine, or
key punch
machine is not necessarily a requirement of this job.
The above information is correct and approved by:
(Signed) (Signed)
Job Analyst In charge Manager
39
5. Relation to Other Jobs: It describes the vertical and horizontal
relationships f work flow. It also
indicates to whom the jobholder will report and who will report to him. It
gives an idea of channels of
promotion.
6. Machine, tools and equipment define each major type or trade name of
the machines and tools and the
raw materials used.
7. Working Conditions: The working environment in terms of heat, light,
noise, dust and fumes etc, the
job hazards and possibility of their occurrence and working conditions should
also be described. It will be
helpful in job evaluation.
8. Social Environment: It specifies the social conditions under which the
work will be performed. In this
part the size of work group, interpersonal interactions required to perform
the job and development
facilities are mentioned
3.8 Job Specification
The job specification states the minimum acceptable qualifications that the
incumbent must possess to
perform the job successfully. Based on the information acquired through job
analysis, the job specification
identifies the knowledge, skills, and abilities needed to do the job effectively.
Individuals possessing the
personal characteristics identified in the job specification should perform the
job more effectively than
individuals lacking these personal characteristics. The job specification,
therefore, is a important tool in the
selection process, for it keeps the selector’s attention on the list of
qualifications necessary for an incumbent
to perform the job and assists in determining whether candidates are
qualified.
According to Dale Yoder, “The job specification, as such a summary
properly described is thus a
specialized job description, emphasizing personnel requirement and
designed especially to facilitate selection
and placement.”
Flippo has defined job specification as, “Job specification is a statement
of the minimum acceptable
human qualities necessary to perform a job properly ………….. It is a
standard of personnel and designates
the qualities required for acceptable performance.”
In is clear from the above definitions that job specification is a statement of
summary of personnel
requirements for a job. It may also be called “standard of personal for the
selection”
A Job Specification should include:
(i) Physical characteristics, which include health, strength, endurance,
age, height, weight, vision,
voice, eye, hand and foot co-ordination, motor co-ordination, and colour
discrimination.
(ii) Psychological and social characteristics such as emotional stability,
flexibility, decision making
ability, analytical view, mental ability, pleasing manners, initiative,
conversational ability etc.
(iii) Mental Characteristics such as general intelligence, memory,
judgement, ability to concentrate,
foresight etc.
(iv) Personal Characteristics such as sex, education, family background,
job experience, hobbies,
extracurricular activities etc.
All these characteristics must be classified into three categories:
 Essential attributes which a person must possess.
 Desirable attributes which a person ought to posses.
 Contra indicators which will become a handicap to successful job
performance.
40
3.9 Job Design
Job design is of comparatively recent origin. The human resource managers
have realized that the design
of a job has considerable influence on the productivity and job satisfaction;
poorly designed jobs often
result in boredom to the employees, increased turnover, job dissatisfaction,
low productivity and an increase
in overall costs of the organization. All these negative consequences can be
avoided with the help of
proper job design.
According to Jon Werner and DeSimone, “Job design is the development
and alteration of the
components of a job (such as the tasks one performs, and the scope of one’s
responsibilities) to improve
productivity and the quality of the employees’ work life.”
Job design has been defined by Davis (1966) as: “The specification of the
contents, methods, and
relationships of jobs in order to satisfy technological and organizational
requirements as well as the social
and personal requirements of the job-holder.”
Milkovich and Boudreau defined job design as, “Job design integrates
work content (tasks, functions,
and relationships), the rewards (extrinsic and intrinsic) and the qualifications
required (skills, knowledge,
abilities) for each job in a way that meets the needs of employees and the
organization.”
Michael Armstrong has defined job design as “the process of deciding
on the content of a job in
terms of its duties and responsibilities, on the methods to be used in carrying
out the job, in terms of
techniques, systems and procedures, and on the relationships that should
exist between the job holder and
his superiors, subordinates and colleagues.”
Job design is an attempt to create a match between job requirements and
human attributes. It involves
organizing the components of the job and the interaction patterns among the
members of a work group. It
helps in developing appropriate design of job to improve efficiency and
satisfaction.
Principles of Job Design:
Principles are the bases of the approach used in job design. Robertson and
Smith (1985) have suggested
the following five principles of job design:
 To influence skill variety, provide opportunities for people to do several
tasks and combine
tasks.
 To influence task identity, combine tasks and from natural work units.
 To influence task significance, form natural work units and inform people of
the importance of
their work.
 To influence autonomy, give people responsibility for determining their
own working systems.
 To influence feedback; establish good relationship and open feedback
channels.
3.10 Methods of Job Design
The various techniques of job design and redesign are discussed below:
1. Job Simplification: In job simplification, the complete job is broken down
into small subparts; this is
done so that employee can do these jobs without much specialized training.
Moreover, small operations of
the job can also be performed simultaneously so that the complete operation
can be done more quickly.
For job simplification, generally time and motion studies are used.
2. Job Rotation: Another technique designed to enhance employee
motivation is job rotation, or periodically
assigning employees to alternating jobs or tasks. For example, an employee
may spend two weeks attaching
41
bumpers to vehicles and the following two weeks making final checks of the
chassis. During the next
month, the same employee may be assigned to two different jobs. Therefore,
the employee would be
rotated among four jobs. The advantage of job rotation is that employees do
not have the same routine
job day after day. Job rotation only addresses the problem of assigning
employees to jobs of limited
scope; the depth of the job does not change. The job cycle of the actual daily
work performed has not
been lengthened or changed. Instead, employees are simply assigned to
different jobs with different cycles.
Because job rotation does not change the basic nature of jobs, it is criticized
as nothing more than having
an employee perform several boring and monotonous jobs rather than one.
Some employees dislike job
rotation more than being assigned to one boring job because when they are
assigned to one job they know
exactly where to report and what work to expect each day. Workers quickly
realize that job rotation does
not increase their interest in their work.
Although it seldom addresses the lack of employee motivation, it give
manages a means of coping with
frequent absenteeism and high turnover. Thus when absenteeism or
turnover occurs in the work force,
managers can quickly fill the vacated position because each employee can
perform several jobs.
Job rotation is often effectively used as a training technique for new,
inexperienced employees. At higher
organizational levels, rotation also helps to develop managerial generalists
because it exposes them to
several different operations.
Advantage of Job Rotation Technique:
 The employee experiences variety of work, workplace and peer group.
 Job rotation helps to broaden the knowledge and skills of an employee.
 The main advantage of job rotation is that it relieves the employee from
the boredom and monotony
of doing the same job.
 With the help of this method, people become more flexible. They are
prepared to assume
responsibility especially at other positions.
 Job rotation broadens the work experience of employees and turns
specialists into generalists.
 It is beneficial for the management also as the management gets
employees who can perform a
variety of tasks to meet the contingencies.
 This method improves the self image and personal worth of the employee.
Disadvantage of Job Rotation Technique:
 Job rotation also creates disruptions. Members of the work group have to
adjust to the new
employee.
 Productivity is reduced by moving a worker into new position just when his
efficiency at the prior
job was creating organizational economies.
 Training costs are increased.
 The supervisor may also have to spend more time answering question and
monitoring the work of
the recently rotated employee.
 It can demotivate intelligent and ambitious trainees who seek specific
responsibilities in their chosen
specialty.
3. Job Enlargement: Another means of increasing employee’s satisfaction
with routine jobs is job
enlargement, or increasing the number of tasks performed (i.e. increasing
the scope of the job). Job
enlargement, like job rotation, tries to eliminate short job cycles that create
boredom. Unlike job rotation,
job enlargement actually increases the job cycle. When a job is enlarged,
either the tasks being performed
are enlarged or several short tasks are given to one worker. Thus, the scope
of the job is increased
because there are many tasks to be performed by the same worker. Job
enlargement programs change
42
many methods of operation- in contrast to job rotation, in which the same
work procedures are used by
workers who rotate through work stations. Although job enlargement actually
changes the pace of the
work and the operation by reallocating tasks and responsibilities, it does not
increase the depth of a job.
The focus of designing work for job enlargement is the exact opposite of that
for job specialization.
Instead of designing jobs to be divided up into the fewest of tasks per
employee, a job is designed to have
many tasks for the employee to perform. An enlarged job requires a longer
training period because there
are more tasks to be learned. Worker satisfaction should increase because is
reduced as the job scope is
expanded. However, job enlargement programs are successful with jobs
what have increased scope;
such workers are less prone to resort to absenteeism, grievances, slowdowns
and other means of displaying
job dissatisfaction.
Enlargement is done only on the horizontal level. Thus, the job remains the
same, but becomes of a larger
scale than before. In the words of Geroge Strauss and L.R. Sayles “Job
enlargement implies that instead
of assigning one man to each job, a group of men can be assigned to a group
of jobs and then allowed to
decide for themselves how to organize the work. Such changes permit more
social contacts and control
over the work process.”
Job enlargement has the following advantages:
 Increase in diversity of jobs
 Job satisfaction
 Provides wholeness and identity with the task and increases the knowledge
necessary to perform
it.
 Provides variety of skills.
 Reduces tension and boredom.
 Trains and develops more versatile employees.
Despite these advantages this is not a completely satisfactory method of job
design as it does not increase
the depth of a job. Enlarged jobs require longer training period as there are
more tasks to be learned.
4. Job Enrichment: The concept of job enrichment has been derived from
Herzberg’s two-factor theory
of motivation in which he has suggested that job content is one of the basic
factors of motivation. If the job
is designed in such a manner that it becomes more interesting and
challenging to the job performer and
provides him opportunities for achievement, recognition, responsibility,
advancement and growth, the job
itself becomes a source of motivation to the individual.
According to Richard W. Beatty and Graig Eric. Schneider, “Job
enrichment is a motivational technique
which emphasizes the need for challenging and interesting work. It suggests
that jobs be redesigned so
that intrinsic satisfaction is derived from doing the job. In its best
applications it leads to a vertically
enhanced job by adding function from other organizational levels, making it
contain more variety and
challenge and offer autonomy and pride to the employee.”
According to P. Robbins, “Job enrichment refers to the vertical expansion
of the jobs. It increases the
degree to which the worker controls the planning, execution and evaluation
of his work.”
In the words of Robert Albanese, “Job enrichment sometimes called.
“vertical job leading’ is a job
redesign strategy that focuses on job depth.”
According to Mondy. Holmes, and Flippo, “Job enrichment refers to
basic changes in the content and
level of responsibility of a job so to provide for the satisfaction of the
motivation needs of personnel.
Rebert Ford, who was associated with designing of jobs to make them
more enriched, has provided
some bases (though not exhaustive) for job enrichment as shown in Table
3.3.
43
Table 3.2 : Job Enrichment Bases
Techniques of Job Enrichment: In order to enrich the jobs. The
management should adopt the following
measures:
 Freedom in decisions
 Assign a natural work unit to an employee.
 Encouraging participation
 Allow the employee to set his own standards of performance.
 Minimize the controls to provide freedom to the employees
 Make an employee directly responsible for his performance.
 Encourage participation of employees in deciding organizational goals and
policies.
 Expand job vertically
 Introducing new, difficult and creative tasks to the employees.
 Sense of achievement.
Advantages of Job Enrichment: The advantages of job enrichment are as
follows:
 It enriches the role.
 Job enrichment is the most widely used of job design as it provides a
meaningful learning to
employees.
 It makes the work interesting and employee get motivated.
 It helps in reducing the rate of labour turnover and absenteeism.
 It increases skills of the employees.
 It increases morale and performance.
 Reduce Boredom and dissatisfaction.
 Increase in output both qualitative and quantitative.
Disadvantages of Job Enrichment: Dunham and Newstrom state, “Even
the strongest supporters of
job enrichment readily admit that there are limitations in its application.”
Newstrom and Keith Davis also
write, “Employees are the final judges of what enriches their jobs. All that
management can do is to gather
information about what tends to enrich jobs, try these changes in the job
system, and then determine
whether employees feel that enrichment has occurred.” A few limitations of
or problems with job enrichment
are as follows:
Tasks Motivator involved
Assign specific or specialized task to
individuals enabling them to become expert
Responsibility, growth, advancement
Making periodic reports directly available
to the individual himself rather than to the
supervisor.
Internal recognition
Giving a person a whole, natural unit of
work (module, exchange district, division,
area, etc.)
Responsibility, achievement, recognition
Increasing the accountability of individuals
for own work
Responsibility, recognition
44
 Increase cost
 Need more employee counseling, training, and guidance.
 Not applicable to all jobs.
 Negative impact on personnel.
 Imposed on people.
 Objected by unions
 Pay dissatisfaction
JOB ENLARGEMENT vs. JOB ENRICHMENT
Job enlargement and job enrichment are both important forms of job design
in order to enhance productivity
and satisfaction of the employees. They differ from each other in the
following respects:
1. Nature of Job: The major difference between job enrichment and
enlargement lies in the nature of
additions to the job. Enlargement involves a horizontal loading or expansion,
or addition of tasks of the
same nature. Enrichment involves vertical loading of tasks and responsibility
of the job holder; it improves
the quality of the job in terms of its intrinsic worth.
2. Purpose: The purpose of job enlargement is to reduce the monotony in
performing repetitive jobs
by lengthening the cycle of operation. On the other hand, the purpose of job
enrichment is making the
job lively, challenging and satisfying. It satisfies the higher level needs such
as ego satisfaction, self
expression, sense of achievement and advancement of Job holders.
3. Skill Requirement: Job enlargement may not necessarily require the use
of additional skills which
the job holder was using in performing the job before the enlargement. This
is due to similarity of
additional tasks. Enrichment calls foe development and utilization of higher
skills, initiative, and innovation
on the part of the job holder in performing the job.
4. Direction and Control: Job enlargement requires direction and control
from external sources, say
supervisor. In fact, the job holder may require more direction and control
because of enlargement of his
responsibility. Enrichment does not require external direction and control as
these come from the job
holder himself. He requires only feedback from his supervisor.
3.11 Summary
 The purpose of an organization is to give each person a separate distinct
job and to ensure that
these jobs are coordinated in such a way that the organization accomplishes
its goals.
 Developing an organization structure results in jobs that have to be staffed.
Job analysis is the
procedure through which you find out (1) what the job entails, and (2) what
kinds of people
should be hired for the job. It involves six steps: (1) determine the use of the
job analysis information;
(2) collection of background information; (3) selection of jobs for analysis; (4)
collection of job
analysis data; (5) processing the information; (6) preparing job descriptions
and job classifications;
and (7) developing job specifications.
 Techniques of job analysis are – observation method, questionnaires,
participant diary/logs,
interview, critical incidents, technical conference method, and job
performance.
 Job description and job specification are products of job analysis. Job
description should indicate:
duties to be performed by the job holder and the manner he should complete
the tasks. Job
specification: answer the question “what human traits and experience are
necessary to do the job.
It portrays what kind of person to recruit and for what qualities that person
should be tested”.
45
 Job design is an attempt to create a match between job requirements and
job attribute. Job
rotation implies transfer to a job of same level and status. Job simplification
enables the employees
to do the without much specialized training
 Job enlargement is the process of increasing the scope of job of a particular
by adding more tasks
to it. And job enrichment implies increasing the contents of a job or the
deliberate upgrading of
responsibility scope and challenge in work.
 Job enlargement and job enrichment are both important forms of job
design in order to enhance
the productivity and satisfaction of the job holders.
3.12 Self Assessment Questions
1. What do you understand by job analysis? What is its importance in the
management of human
resources?
2. What is job analysis? What steps are involved in the preparation of job
analysis?
3. What are the byproducts of job analysis? Discuss the techniques used for
collecting data for job
analysis?
4. What is job description? How is it prepared?
5. Define job specification? How is it different from job description?
6. Write notes on :
(i) Job Rotation
(ii) Job Simplification
7. Distinguish between :
(a) Job description and job specification
(b) Job enlargement and job enrichment
8. “Job analysis is the most basic personnel management function.” Discuss.
9. Clearly define and discuss the relationship among job analysis, job
description and job specification.
3.13 Reference Books
- Mamoria C.B., Gankar S.V., (2006), “A Textbook of Human Resource
Management”, Himalaya
Publishing House, New Delhi.
- Dwivedi R.S., (1997), “Personnel Management in Indian Enterprises”,
Galgotia Publising Company,
New Delhi.
- Devid A. DeCENZO, STEPHEN P. ROBBINS (2002), “Personnel/Human
Resource
Management”, Prentice Hall of India, New Delhi.
- Prasad L.M., (2005), Human Resource Management,” Sultan Chand & Sons,
New Delhi.
- Dessler Gary (2010), “Human Resource Management”, Prentice Hall
International Editions, New
Jersey.
- Carrell Michael R., Elbert Norbert F., Hatfield Robert D. (1999), “Human
Resource Management,”
Prentice Hall, Englewood Cliffs, New Jersey.
46
Unit - 4 : Recruitment
Structure of Unit:
4.0 Objectives
4.1 Introduction
4.2 Recruitment: Meaning and Definition
4.3 Process of Recruitment
4.4 Recruitment Policy
4.5 Factor Affecting Recruitment
4.6 Sources of Recruitment
4.7 Methods of Recruitment
4.8 Philosophies of Recruitment
4.9 Summary
4.10 Self Assessment Questions
4.11 Reference Books
4.0 Objectives
After completing this unit, you will be able to:
 Define recruitment.
 Cite the steps in recruitment process.
 Understand the prerequisites of a good recruitment policy.
 Describe the various sources of recruitment.
 Understand the methods through which prospective candidates may be
recruited.
 Point out the various factors affecting recruitment.
4.1 Introduction
Successful human resource planning should identify our human resource
needs. Once we know these
needs, we will want to do something about meeting them. The next step in
the acquisition function, therefore,
is recruitment. This activity makes it possible for us to acquire the number
and types of people necessary
to ensure the continued operation of the organization.
Hallett says, “It is with people that quality performance really begins and
ends.” Robert Heller also says,
“If people of poor calibre are hired, nothing much else can be accomplished
and Gresham’s law will work:
the bad people will drive out the good or cause them to deteriorate.”
Recruiting is the discovering of potential candidates for actual or anticipated
organizational vacancies. Or,
from another perspective, it is a linking activity-bringing together those with
jobs to fill and those seeking
jobs.
4.2 Recruitment: Meaning and Definition
Recruitment forms a step in the process which continues with selection and
ceases with the placement of
the candidate. It is the next step in the procurement function, the first being
the manpower planning.
Recruiting makes it possible to acquire the number and types of people
necessary to ensure the continued
operation of the organisation. Recruiting is the discovering of potential
applicants for actual or anticipated
organisational vacancies.
47
According to Edwin B. Flippo, “Recruitment is the process of searching
for prospective employees and
stimulating them to apply for jobs in the organisation.”
According to Lord, “Recruitment is a form of competition. Just as
corporations compete to develop,
manufacture, and market the best product or service, so they must also
compete to identify, attract and
hire the most qualified people. Recruitment is a business, and it is a big
business.”
In the words of Dale Yoder, “ Recruiting is a process to discover the
sources of manpower to meet the
requirements of the staffing schedule and to employ effective measures for
attracting that manpower in
adequate numbers to facilitate effective selection of an efficient working
force.”
According to Werther and Davis, “Recruitment is the process of finding
and attracting capable
applicants for employment. The process begins when new recruits are
sought and ends when their applications
are submitted. The result is a pool of applicants form which new employees
are selected.”
Dales S. Beach writes, “Recruitment is the development and maintenance
of adequate manpower
resources. It involves the creation of a pool of available labour upon whom
the organisation can depend
when it needs additional employees.”
Thus, recruitment process is concerned with the identification of possible
sources of human resource
supply and tapping those sources. In the total process of acquiring and
placing human resources in the
organisation, recruitment falls in between different sub-processes as shown
in Figure 4.2.
According to Scott, Clothier and Spriegel the need for recruitment
arises out of the following situations:
 Vacancies created due to expansion, diversification, and growth of
business.
 An increase in the competitive advantage of certain concerns, enabling
them to get more of the
available business than formerly.
 An increase in business arising from an upswing during the recovery period
of a business cycle.
 Vacancies created due to transfer, promotion, retirement, termination,
permanent disability or
death.
 The normal population growth, which requires increased goods and
services to meet the needs of
the people.
 A rising standard of living, which requires more of the same goods and
services as well as the
creation of new wants to be satisfied.
Human Resource
Planning
Job Analysis
Recruitment
Selection
Figure 4.1: Recruitment to Human Resource Acquisition Process
Placement
48
4.3 Process of Recruitment
Recruitment process passes through the following stages:
 Recruitment process begins when the personnel department receives
requisitions for recruitment
from any department of the company, The personnel requisitions contain
details about the position
to be filled, number of persons to be recruited, the duties to be performed,
qualifications expected
from the candidates, terms and conditions of employment and the time by
which the persons
should be available for appointment etc.
 Locating and developing the sources of required number and type of
employees.
 Identifying the prospective employees with required characteristics.
 Developing the techniques to attract the desired candidates. The goodwill
of an organisation in the
market may be one technique. The publicity about the company being a
good employer may also
help in stimulating candidates to apply. There may be others of attractive
salaries, proper facilities
for development etc.
 Evaluating the effectiveness of recruitment process.
According to Famularo, personnel recruitment process involves five
elements, viz., a recruitment policy,
a recruitment organisation, a forecast of manpower, the development of
sources of recruitment, and different
techniques used for utilising these sources, and a method of assessing the
recruitment programme. The
explanation of these is described below:
1. Recruitment Policy: It specifies the objectives of recruitment and
provides a framework for the
implementation of the recruitment programme. It also involves the
employer’s commitment to some
principles as to find and employ the best qualified persons for each job, to
retain the most promising of
those hired, etc. It should be based on the goals, needs and environment of
the organisation.
Human
Resource
Planning
Recruitment Selection Placement
Search for
Prospective
Employees
Evaluating
Recruiting
Effectiveness
Internal
Sources
Personnel
Research
Job Posting
Upgrading in
Same Position
Transferring
to New Job
Prompting
to Higher
Responsibilities
External
Sources
Employee
Referrals
Advertising
Scouting
Evaluating
for Selection
Figure 4.2 : Place of Recruitment in Selection System
49
2. Recruitment Organisation: The recruitment may be centralised like
public sector banks or
decentralised. Both practices have their own merits. The choice between the
two will depend on the
managerial philosophy and the particular needs of the organisation.
3. Sources of Recruitment: Various sources of recruitment may be
classified as internal and external.
These have their own merits and demerits.
4. Methods of Recruitment: Recruitment techniques are the means to
make contact with potential
candidates, to provide them necessary information and to encourage them
to apply for jobs.
5. Evaluation of Recruitment Programme: The recruitment process must
be evaluated periodically.
The criteria for evaluation may consist of cost per applicant, the hiring ratio,
performance appraisal, tenure
of stay, etc. After evaluation, necessary improvements should be made in
the recruitment programme.
4.4 Recruitment Policy
As Yoder et al observe recruitment policy spells out the objectives of the
recruitment and provides a
framework for implementations of the recruitment programme in the form of
procedures. It may involve a
commitment to broad principles such as filling vacancies with the best
qualified individuals. The recruitment
policy may embrace several issues such as the extent of promotion from
within, attitudes of enterprise in
recruiting old, handicapped, and minor individuals, minority group members,
part-time employees and
relatives of present employees. In addition, the recruitment policy may also
involve the organisation system
to be developed for implementing the recruitment programme and
procedures to be employed. Explicitly,
an organisational system is a function of the size of an enterprise. In smaller
enterprises, there may be
merely informal recruiting procedures and the line official may be
responsible to handle this function along
with their usual responsibilities. On the other hand, in larger organisations,
there is usually a staff unit
attached with personnel or an industrial relations department designated as
employment or recruitment
office. This specialisation of recruitment enables staff personnel to become
highly skilled in recruitment
techniques and their evaluation. However, recruitment remains the line
responsibility as far as the personnel
requisition forms are originated by the line personnel, who have also the final
word in the acceptance or
rejection of a particular applicant. Despite this, the staff personnel have
adequate freedom in respect of
sources of manpower to be tapped and the procedure to be followed for this
purpose.
Recruitment policy covers the following areas:
 To prescribe the degree of emphasis. Inside the organisation or outside the
organisation.
 To provide the weightage that would be given to certain categories of
people such as local
population, physically-handicapped personnel, personnel from scheduled
castes/tribes and other
backward classes.
 To prescribe whether the recruitment would be centralised or decentralised
at unit levels.
 To specify the degree of flexibility with regard to age, qualifications,
compensation structure and
other service conditions.
 To prescribe the personnel who would be involved in recruitment process
and the role of human
resource department in this regard.
 To specify the budget for meeting the expenditures incurred in completing
the recruitment process.
According to Yoder, “the recruitment policy is concerned with quantity and
qualifications of manpower.”
It establishes broad guidelines for the staffing process. Generally, the
following factors are involved in a
recruitment policy:
50
 To provide each employee with an open road and encouragement in the
continuing development
of his talents and skills;
 To provide individual employees with the maximum of employment
security, avoiding, frequent
lay-off or lost time;
 To avoid cliques which may develop when several members of the same
household or community
are employed in the organisation;
 To carefully observe the letter and spirit of the relevant public policy on
hiring and, on the whole,
employment relationship;
 To assure each employee of the organisation interest in his personal goals
and employment objective;
 To assure employees of fairness in all employment relationships, including
promotions and transfers;
 To provide employment in jobs which are engineered to meet the
qualifications of handicapped
workers and minority sections; and
 To encourage one or more strong, effective, responsible trade unions
among the employees.
Prerequisites of a Good Recruitment Policy: The recruitment policy of
an organisation must satisfy
the following conditions:
 It should be in conformity with its general personnel policies;
 It should be flexible enough to meet the changing needs of an
organisation;
 It should be so designed as to ensure employment opportunities for its
employees on a long-term
basis so that the goals of the organisation should be achievable; and it
should develop the potentialities
of employees;
 It should match the qualities of employees with the requirements of the
work for which they are
employed; and
 It should highlight the necessity of establishing job analysis.
4.5 Factor Affecting Recruitment
The factors affecting recruitment can be classified as internal and external
factors.
The internal factors are:
 Wage and salary policies;
 The age composition of existing working force;
 Promotion and retirement policies;
 Turnover rates;
 The nature of operations involved the kind of personnel required;
 The level and seasonality of operations in question;
 Future expansion and reduction programmes;
 Recruiting policy of the organisation;
 Human resource planning strategy of the company;
 Size of the organisation and the number of employees employed;
51
 Cost involved in recruiting employees, and finally;
 Growth and expansion plans of the organisation.
The external factors are:
 Supply and demand of specific skills in the labour market;
 Company’s image perception of the job seekers about the company.
 External cultural factors: Obviously, the culture may exert considerable
check on recruitment. For
example, women may not be recruited in certain jobs in industry.
 Economic factors: such as a tight or loose labour market, the reputation of
the enterprise in the
community as a good pay master or otherwise and such allied issues which
determine the quality
and quantity of manpower submitting itself for recruitment.
 Political and legal factors also exert restraints in respect of nature and
hours of work for women
and children, and allied employment practices in the enterprise, reservation
of Job for SC, ST and
so on.
4.6 Sources of Recruitment
After the finalisation of recruitment plan indicating the number and type of
prospective candidates, they
must be attracted to offer themselves for consideration to their employment.
This necessitates the
identification of sources from which these candidates can be attracted. Some
companies try to develop
new sources, while most only try to tackle the existing sources they have.
These sources, accordingly, may
be termed as internal and external.
Internal Sources
It would be desirable to utilise the internal sources before going outside to
attract the candidates. Yoder
and others suggest two categories of internal sources including a review of
the present employees and
nomination of candidates by employees. Effective utilisation of internal
sources necessitates an understanding
of their skills and information regarding relationships of jobs. This will
provide possibilities for horizontal
and vertical transfers within the enterprise eliminating simultaneous
attempts to lay off employees in one
department and recruitment of employees with similar qualification for
another department in the company.
Promotion and transfers within the plant where an employee is best suitable
improves the morale along
with solving recruitment problems. These measures can be taken effectively
if the company has established
job families through job analysis programmes combining together similar
jobs demanding similar employee
characteristics. Again, employees can be requested to suggest promising
candidates. Sometimes, employees
are given prizes for recommending a candidate who has been recruited.
Despite the usefulness of this
system in the form of loyalty and its wide practice, it has been pointed out
that it gives rise to cliques posing
difficulty to management. Therefore, before utilising this system attempts
should be made to determine
through research whether or not employees thus recruited are effective on
particular jobs. Usually, internal
sources can be used effectively if the numbers of vacancies are not very
large, adequate, employee records
are maintained, jobs do not demand originality lacking in the internal
sources, and employees have prepared
themselves for promotions.
Merits of Internal Sources: The following are the merits of internal
sources of recruitment:
 It creates a sense of security among employees when they are assured
that they would be preferred
in filling up vacancies.
52
 It improves the morale of employees, for they are assured of the fact that
they would be preferred
over outsiders when vacancies occur.
 It promotes loyalty and commitment among employees due to sense of job
security and opportunities
for advancement.
 The employer is in a better position to evaluate those presently employed
than outside candidates.
This is because the company maintains a record of the progress, experience
and service of its
employees.
 Time and costs of training will be low because employees remain familiar
with the organisation and
its policies.
 Relations with trade unions remain good. Labour turnover is reduced.
· As the persons in the employment of the company are fully aware of, and
well acquainted wit, its
policies and know its operating procedures, they require little training, and
the chances are that
they would stay longer in the employment of the organisation than a new
outsider would.
 It encourages self-development among the employees. It encourages good
individuals who are
ambitious.
 It encourages stability from continuity of employment.
 It can also act as a training device for developing middle and top-level
managers.
Demerits of Internal Sources: However, this system suffers from certain
defects as:
 There are possibilities that internal sources may “dry up”, and it may be
difficult to find the requisite
personnel from within an organisation.
 It often leads to inbreeding, and discourages new blood from entering and
organisation.
 As promotion is based on seniority, the danger is that really capable hands
may not be chosen.
The likes and dislikes of the management may also play an important role in
the selection of
personnel.
 Since the learner does not know more than the lecturer, no innovations
worth the name can be
made. Therefore, on jobs which require original thinking (such as advertising,
style, designing and
basic research), this practice is not followed.
This source is used by many organisations; but a surprisingly large number
ignore this source, especially
for middle management jobs.
External Sources
DeCenzo and Robbins remark, “Occasionally, it may be necessary to bring in
some ‘new blood’ to
broaden the present ideas, knowledge, and enthusiasm.” Thus, all
organisations have to depend on external
sources of recruitment. Among these sources are included:
 Employment agencies.
 Educational and technical institutes. and
 Casual labour or “applicants at the gate” and nail applicants.
Public and private employment agencies play a vital role in making available
suitable employees for different
positions in the organisations. Besides public agencies, private agencies
have developed markedly in large
cities in the form of consultancy services. Usually, these agencies facilitate
recruitment of technical and
professional personnel. Because of their specialisation, they effectively
assess the needs of their clients
and aptitudes and skills of the specialised personnel. They do not merely
bring an employer and an
employee together but computerise lists of available talents, utilising testing
to classify and assess applicants
and use advanced techniques of vocational guidance for effective placement
purposes.
53
Educational and technical institutes also form an effective source of
manpower supply. There is an increasing
emphasis on recruiting student from different management institutes and
universities commerce and
management departments by recruiters for positions in sales, accounting,
finance, personnel and production.
These students are recruited as management trainees and then placed in
special company training
programmes. They are not recruited for particular positions but for
development as future supervisors and
executives. Indeed, this source provides a constant flow of new personnel
with leadership potentialities.
Frequently, this source is tapped through on-campus interview with
promising students. In addition, vocational
schools and industrial training institutes provide specialised employees,
apprentices, and trainees for
semiskilled and skilled jobs. Persons trained in these schools and institutes
can be placed on operative and
similar jobs with a minimum of in-plant training. However, recruitment of
these candidates must be based
on realistic and differential standards established through research reducing
turnover and enhancing
productivity.
Frequently, numerous enterprises depend to some extent upon casual labour
or “applicants at the gate”
and nail applicants. The candidates may appear personally at the company’s
employment office or send
their applications for possible vacancies. Explicitly, as Yoder and others
observe, the quality and quantity
of such candidates depend on the image of the company in community.
Prompt response to these applicants
proves very useful for the company. However, it may be noted that this
source is uncertain, and the
applicants reveal a wide range of abilities necessitating a careful screening.
Despite these limitations, it
forms a highly inexpensive source as the candidates themselves come to the
gate of the company. Again,
it provides measures for good public relations and accordingly, all the
candidates visiting the company
must be received cordially.
Table 4.1 : Recruiting Sources Used by Skill and Level
Source: Adapted from Stephen L. Mangum, “Recruitment and job Search:
The Recruitment Tactics of
Employers. “Personnel Administrator, June 1982, p. 102.
Skill/Level Recruiting Source Percentage of Use
Unskilled and Semiskilled Informal contacts
Walk-ins
Public Employment Agencies
Want Ads
85
74
66
52
Skilled Informal Contacts
Walk-ins
Public Employment Agencies
Want Ads
88
66
55
55
Professional Employees Internal Search
Informal Contacts
Walk-ins
Public Employment Agencies
Want Ads
Private Employment Agencies
94
92
71
52
48
22
Managerial Level Internal Search
Informal Contacts
Walk-ins
Private Employment Agencies
Want Ads
Public Employment Agencies
100
71
31
20
17
12
54
As Jucius observes, trade unions are playing an increasingly important role in
labour supply. In several
trades, they supply skilled labour in sufficient numbers. They also determine
the order in which employees
are to be recruited in the organisation. In industries where they do not take
active part in recruitment, they
make it a point that employees laid off are given preference in recruitment.
Application files also forms a useful source of supply of work force. Attempts
may be made to review the
application to determine jobs for which the candidates filed for future use
when there are openings in these
jobs. The candidates may be requested to renew their cards as many times
as they desire. All the renewed
cards may be placed in “active” files and those not renewed for considerable
time may be placed in
“inactive” file or destroyed. Indeed, a well-indexed application file provides
utmost economy from the
standpoint of a recruiting budget.
Efficacy of alternative sources of supply of human resources should be
determined through research.
Attempts may be made to relate the factor of success on the job with a
specific source of supply. Alternative
sources can also be evaluated in terms of turnover, grievances and
disciplinary action. Those sources
which are significantly positively related with job performance and
significantly negatively related with
turnover, grievances and disciplinary action, can be effectively used in
recruitment programmes. The
assessment should be periodically performed in terms of occupations. It may
be that source “A” is most
effective for technical workers, while source “B” for semiskilled workers.
Advantages of External Recruitment: External sources of recruitment
are suitable for the following
reasons:
 It will help in bringing new ideas, better techniques and improved methods
to the organisation.
 The cost of employees will be minimised because candidates selected in
this method will be
placed in the minimum pay scale.
 The existing employees will also broaden their personality.
 The entry of qualitative persons from outside will be in the interest of the
organisation in the long
run.
 The suitable candidates with skill, talent, knowledge are available from
external sources.
 The entry of new persons with varied expansion and talent will help in
human resource mix.
Disadvantages of External Sources:
 Orientation and training are required as the employees remain unfamiliar
with the organisation.
 It is more expensive and time-consuming. Detailed screening is necessary
as very little is known
about the candidate.
 If new entrant fails to adjust himself to the working in the enterprise, it
means yet more expenditure
on looking for his replacement.
 Motivation, morale and loyalty of existing staff are affected, if higher level
jobs are filled from
external sources. It becomes a source of heart-burning and demoralisation
among existing
employees.
4.7 Methods of Recruitment
Methods of recruitment are different from the sources of recruitment.
Sources are the locations where
prospective employees are available. On the other hand, methods are way of
establishing links with the
prospective employees. Various methods employed for recruiting employees
may be classified into the
following categories:
55
1. Direct Methods:
These include sending recruiters to educational and professional institutions,
employees, contacts with
public, and manned exhibits. One of the widely used direct methods is that
of sending of recruiters to
colleges and technical schools. Most college recruiting is done in co-
operation with the placement office
of a college. The placement office usually provides help in attracting
students, arranging interviews, furnishing
space, and providing student resumes.
For managerial, professional and sales personnel campus recruiting is an
extensive operation. Persons
reading for MBA or other technical diplomas are picked up in this manner.
For this purpose, carefully
prepared brochures, describing the organisation and the jobs it offers, are
distributed among students,
before the interviewer arrives. Sometimes, firms directly solicit information
from the concerned professors
about students with an outstanding record. Many companies have found
employees contact with the
public a very effective method. Other direct methods include sending
recruiters to conventions and seminars,
setting up exhibits at fairs, and using mobile offices to go to the desired
centres.
Table 4.2: Methods of Contacting Prospective Candidates
2. Indirect Methods:
The most frequently used indirect method of recruitment is advertisement in
newspapers, journals, and on
the radio and television. Advertisement enables candidates to assess their
suitability. It is appropriate
when the organisation wants to reach out to a large target group scattered
nationwide. When a firm wants
to conceal its identity, it can give blind advertisement in which only box
number is given. Considerable
details about jobs and qualifications can be given in the advertisements.
Another method of advertising is
a notice-board placed at the gate of the company.
3. Third-Party Methods:
The most frequently used third-party methods are public and private
employment agencies. Public
employment exchanges have been largely concerned with factory workers
and clerical jobs. They also
provide help in recruiting professional employees. Private agencies provide
consultancy services and
charge a fee. They are usually specialised for different categories of
operatives, office workers, salesmen,
Based on personnel to be recruited
Managerial/technical personnel Operative personnel
Advertisement
Internet
Walk-ins
Campus recruitments
Job fairs
Consultancy firms
Personnel contacts
Poaching and raiding
Public employment exchanges
Labour unions
Employee referrals
Gate hiring
Labour contractors
Based on the movement of the organisation
Direct methods Third party method
Advertisement
Internet recruiting
Campus recruitment
Job fairs
Personnel contacts
Gate hiring
Consultancy firms
Public employment exchanges
Labour unions
Employee referrals
Labour contractors
56
supervisory and management personnel. Other third-party methods include
the use of trade unions. Labourmanagement
committees have usually demonstrated the effectiveness of trade unions as
methods of
recruitment.
Several criteria discussed in the preceding section for evaluating sources of
applicants can also be used for
assessing recruiting methods. Attempts should be made to identify how the
candidate was attracted to the
company. To accomplish this, the application may consist of an item as to
how the applicant came to learn
about the vacancy. Then, attempts should be made to determine the method
which consistently attracts
good candidates. Thus, the most effective method should be utilised to
improve the recruitment programme.
4.8 Philosophies of Recruitment
There are basically two philosophies of recruitment:
 Traditional
 Realistic
The traditional philosophy is to get as many people as possible to apply for
the job. As a result of this, a
large number of job seekers apply for the job, which makes the final
selection process difficult and can
often result in the selection of wrong candidates. Wrong selection can, in
turn, lead to employee dissatisfaction
and turnover in the long run.
In realistic philosophy, the needs of the organisation are matched with the
needs of the applicants, which
enhance the effectiveness of the recruitment process. In realistic approach,
the employees who are recruited
will stay in the organisation for a longer period of time and will perform at
higher level of effectiveness.
Table 4.3 : Difference between Traditional and Realistic Job Preview
4.9 Summary
Recruitment forms a step in the process which continues with selection and
ceases with the placement of
the candidate. It is the next step in the procurement function, the first being
the manpower planning.
Recruiting makes it possible to acquire the number and types of people
necessary to ensure the continued
operation of the organisation. Thus, recruitment process is concerned with
the identification of possible
sources of human resource supply and tapping those sources.
Recruitment process involves five elements, viz., a recruitment policy, a
recruitment organisation, the
development of sources of recruitment, and different techniques used for
utilising these sources, and a
method of assessing the recruitment programme. After the finalisation of
recruitment plan indicating the
Traditional Job Preview Realistic Job Preview
Setting unrealistic and high job expectations. Setting realistic job
expectations.
Job is viewed by the candidates as highly attractive
Attractiveness of job is evaluated in the
light of realistic job expectations
High rate of acceptance of job offers. Some accept and some reject job
offers.
High expectation belied by actual job experience Expectations are confirmed
by job
experience.
Creations of dissatisfaction, frustration and
thoughts for leaving the job
Creation of satisfaction in the light of
job expectations.
High rate of personnel turnover and lower rate of
job survival
High rate of personnel retention and
high rate of job survival
57
number and type of prospective candidates, they must be attracted to offer
themselves for consideration
to their employment. This necessitates the identification of sources from
which these candidates can be
attracted. Some companies try to develop new sources, while most only try
to tackle the existing sources
they have. These sources, accordingly, may be termed as internal and
external.
Methods of recruitment are different from the sources of recruitment.
Sources are the locations where
prospective employees are available. On the other hand, methods are way of
establishing links with the
prospective employees. Various methods employed for recruiting employees
may be classified into direct
methods, indirect methods and third party methods.
4.10 Self Assessment Questions
1. Define recruitment and identify the various factors which affect
recruitment.
2. Discuss the steps of recruitment process. How will you reconcile the
internal and external sources
of recruitment?
3. Discuss various sources of recruitment.
4. What is realistic job preview? How does it differ from traditional job
preview?
5. What do you mean by recruitment policy? Explain the prerequisites of a
good recruitment policy.
6. Write short notes on following.
(i) Advantages and disadvantages of internal sources of recruitment.
(ii) Advantages and disadvantages of external source of recruitment.
7. Explain the direct, indirect and third party methods of recruitment.
4.11 Reference Books
- Mamoria C.B., Gankar S.V., (2006), “A Textbook of Human Resource
Management”, Himalaya
Publishing House, New Delhi.
- Dwivedi R.S., (1997), “Personnel Management in Indian Enterprises”,
Galgotia Publising Company,
New Delhi.
- Devid A. DeCENZO, STEPHEN P. ROBBINS (2002), “Personnel/Human
Resource
Management”, Prentice Hall of India, New Delhi.
- Prasad L.M., (2005), Human Resource Management,” Sultan Chand & Sons,
New Delhi.
- Dessler Gary (2010), “Personnel Management”, Prentice Hall International
Editions, New Jersey.
- Carrell Michael R., Elbert Norbert F., Hatfield Robert D. (1999), “Human
Resource Management,”
Prentice Hall, Englewood Cliffs, New Jersey.
58
Unit - 5 : Selection
Structure of Unit:
5.0 Objectives
5.1 Introduction: Selection
5.2 Selection Procedure
5.3 Selection Decision Outcomes
5.4 Placement – Orientation - Socialization
5.5 Summary
5.6 Self Assessment Questions
5.7 Reference Books
5.0 Objectives
After completing this unit, you will be able to:
 Understand and define selection and its process.
 Understand the selection process so as to make it effective.
 Explain how the final selection decision is made.
 Point out the outcomes of selection decision.
 Understand in brief about placement and orientation.
 Develop a selection decision process.
5.1 Introduction: Selection
Human resource selection is the process of choosing qualified individuals
who are available to fill positions
in an organization. In the ideal personnel situation, selection involves
choosing the best applicant to fill a
position. Selection is the process of choosing people by obtaining and
assessing information about the
applicants with a view to matching these with the job requirements. It
involves a careful screening and
testing of candidates who have put in their applications for any job in the
enterprise. It is the process of
choosing the most suitable persons out of all the applicants. The purpose of
selection is to pick up the right
person for every job.
It can be conceptualised in terms of either choosing the fit candidates, or
rejecting the unfit candidates, or
a combination of both. Selection involves both because it picks up the fits
and rejects the unfits. In fact, in
Indian context, there are more candidates who are rejected than those who
are selected in most of the
selection processes. Therefore, sometimes, it is called a negative process in
contrast to positive programme
of recruitment.
According to Dale Yoder, “Selection is the process in which candidates for
employment are divided into
two classes-those who are to be offered employment and those who are
not”.
According to Thomas Stone, “Selection is the process of differentiating
between applicants in order to
identify (and hire) those with a greater likelihood of success in a job”.
In the words of Michael Jucius, “The selection procedure is the system of
functions and devices
adopted in a given company for the purpose of ascertaining whether or not
candidates possess the
qualifications called for by a specific job or for progression through a series
of jobs.”
According to Keith Davis, “Selection is the process by which an
organisation chooses from a list of
screened applicants, the person or persons who best meet the selection
criteria for the position available.”
59
Thus, the selection process is a tool in the hands of management to
differentiate between the qualified and
unqualified applicants by applying various techniques such as interviews,
tests etc. The cost incurred in
recruiting and selecting any new employee is expensive. The cost of
selecting people who are inadequate
performers or who leave the organisation before contributing to profits
proves a major cost of doing
business. Decenzo and Robbins write, “Proper selection of personnel is
obviously an area where
effectiveness - choosing competent workers who perform well in their
position-can result in large saving.”
According to them, selection has two objectives: (1) to predict which job
applicants would be successful
if hired and (2) to inform and sell the candidate on the job and the
organization. Satisfaction of employee
needs and wants as well as the fullest development of his potential are
important objectives of selection.
Dale Yoder says, “Selection has long held a high rank in the priority of
problem areas in management.
Investments in good people produce a very high rate of return. A good
choice of people can provide a
basis for long, sustained contributions.”
Difference between Recruitment and Selection: Difference between
recruitment and selection has
been described by Flippo as, “Recruitment is a process of searching for
prospective employees and
stimulating and encouraging them to apply for jobs in an organisation. It is
often termed positive as is
stimulates people to apply for jobs, selection on the other hand tends to be
negative because it rejects a
good number of those who apply, leaving only the best to be hired.”
Recruitment and selection differs in
following manner:
1. Difference in Objective: The basic objective of recruitment is to attract
maximum number of candidates
so that more options are available. The basic objective of selection is to
choose best out of the available
candidates.
2. Difference is Process: Recruitment adopts the process of creating
application pool as large as possible
and therefore. It is known as positive process. Selection adopts the process
through which more and
more candidates are rejected and fewer candidates are selected or
sometimes even not a single candidate
is selected. Therefore, it is known as negative process or rejection process.
3. Technical Differences: Recruitment techniques are not very intensive,
and not require high skills. As
against this, in selection process, highly specialised techniques are required.
Therefore, in the selection
process, only personnel with specific skills like expertise in using selection
tests, conducting interviews,
etc., are involved.
4. Difference in Outcomes: The outcome of recruitment is application pool
which becomes input for
selection process. The outcome of selection process is in the form of
finalising candidates who will be
offered jobs.
5.2 Selection Procedure
The selection procedure is concerned with securing relevant information
about an applicant. This information
is secured in a number of steps or stages. The objective of selection process
is to determine whether an
applicant meets the qualification for a specific job and to choose the
applicant who is most likely to
perform well in that job. Selection is a long process, commencing from the
preliminary interview of the
applicants and ending with the contract of employment (sometimes).
The selection procedure consists of a series of steps. Each step must be
successfully cleared before the
applicant proceeds to the next. The selection process is a series of
successive hurdles or barriers which an
applicant must cross. These hurdles are designed to eliminate an unqualified
candidate at any point in the
selection process. Thus, this technique is called “Successive Hurdles
Technique”. In practice, the process
differs among organisations and between two different jobs within the same
organisation. Selection procedure
60
for the senior managers will be long drawn and rigorous, but it is simple and
short while hiring lower level
employees.
The major factors which determine the steps involved in a selection
process are as follows:
 Selection process depends on the number of candidates that are available
for selection.
 Selection process depends on the sources of recruitment and the method
that is adopted for
making contact with the prospective candidates.
 Various steps involved in as selection process depend on the type of
personnel to be selected.
All the above factors are not mutually exclusive, rather these operate
simultaneously. In any case, the basic
objective of a selection process is to collect as much relevant information
about the candidates as is
possible so that the most suitable candidates are selected. A comprehensive
selection process involves the
various steps as shown in Figure 5.1.
Application pool from
recruitment process
Primary screening
& interview
Eliminate those who does not
fulfil job requirement.
Application
Blank
Unfavourable personnel data
Selection tests Eliminate those who obtain
unfavourable test score
Interviews
Eliminate those not meeting job
and organisational requirements
Background
investigations Eliminate those with adverse remarks
Physical examination Eliminate those not meeting physical standards
Approval by appropriate
authority
Adopt objectivity
Congratulate
Check the reliability and validity
Final Employment
decision

“
Evaluation
Figure 5.1 Steps in Selection Process
61
1. Application Pool: Application pool built-up through recruitment process
is the base for selection
process. The basic objective at the recruitment level is to attract as much
worthwhile applications as
possible so that there are more options available at the selection stage.
2. Preliminary Screening and Interview: It is highly noneconomic to
administer and handle all the
applicants. It is advantageous to sort out unsuitable applicants before using
the further selection steps. For
this purpose, usually, preliminary interviews, application blank lists and short
test can be used. All applications
received are scrutinised by the personnel department in order to eliminate
those applicants who do not
fulfil required qualifications or work experience or technical skill, his
application will not be entertained.
Such candidate will be informed of his rejection.
Preliminary interview is a sorting process in which the prospective
candidates are given the necessary
information about the nature of the job and the organisation. Necessary
information is obtained from the
candidates about their education, skills, experience, expected salary etc. If
the candidate is found suitable,
he is elected for further screening. This courtesy interview; as it is often
called helps the department screen
out obvious misfits. Preliminary interview saves time and efforts of both the
company and the candidate. It
avoids unnecessary waiting for the rejected candidates and waste of money
on further processing of an
unsuitable candidate. Since rejection rate is high at preliminary interview,
the interviewer should be kind,
courteous, receptive and informal.
3. Application Blank or Application Form: An application blank is a
traditional widely accepted device
for getting information from a prospective applicant which will enable the
management to make a proper
selection. The blank provides preliminary information as well as aid in the
interview by indicating areas of
interest and discussion. It is a good means of quickly collecting verifiable
(and therefore fairly accurate)
basic historical data from the candidate. It also serves as a convenient
device for circulating information
about the applicant to appropriate members of management and as a useful
device for storing information
for, later reference. Many types of application forms, sometimes very long
and comprehensive and
sometimes brief, are used. Information is generally taken on the following
items:
(a) Biographical Data: Name, father’s name, data and place of birth, age,
sex, nationality,
height, weight, identification marks, physical disability, if any, marital status,
and number of
dependants.
(b) Educational Attainment: Education (subjects offered and grades
secured), training acquired
in special fields and knowledge gained from professional/technical institutes
or through
correspondence courses.
(c) Work Experience: Previous experience, the number of jobs held with
the same or other
employers, including the nature of duties, and responsibilities and the
duration of various assignments,
salary received, grades, and reasons for leaving the present employer.
(d) Salary and Benefits: Present and expected.
(e) Other Items: Names and addresses of previous employers, references,
etc. An application
blank is a brief history sheet of an employee’s background and can be used
for future reference,
in case needed.
The application blank must be designed from the viewpoint of the applicant
as well as with the company’s
purpose in mind. It should be relatively easy to handle in the employment
office. Application form helps to
serve many functions like:
62
 Its main usefulness is to provide information for reference checking, good
interviewing, and
correlation with testing data.
 It helps to weed out candidates who are lacking in education, experience or
some other eligibility
traits.
 It helps in formulating questions to be asked in the interview.
 Data contained in application form can be stored for future reference.
 It also tests the candidate’s ability to write, to organize his thoughts, and to
present facts clearly
and succinctly.
 It indicates further whether the applicant has consistently progressed to
better jobs. It provides
factual information.
Weighted Application Blanks
Some organisations assign numeric values or weights to the responses
provided by the applicants. This
makes the application form more job related. Generally, the items that have
a strong relationship to job
performance are given higher scores. For example, for a sales
representative’s position, items such as
previous selling experience, area of specialisation, commission earned,
religion, language etc. The total
score of each applicant is then obtained by adding the weights of the
individual item responses. The
resulting scores are then used in the final selection. WAB is best suited for
jobs where there are many
employees especially for sales and technical jobs. It can help in reducing the
employee turnover later on.
However, there are several problems associated with WAB e.g.
 It takes time to develop such a form.
 The WAB would have to be updated every few years to ensure that the
factors previously identified
are still valid products of job success.
 The organisation should be careful not to depend on weights of a few items
while finally selecting
the employee.
4. Selection Tests: Many organisations hold different kinds of selection
tests to know more about the
candidates or to reject the candidates who cannot be called for interview etc.
Selection tests normally
supplement the information provided in the application forms. Such forms
may contain factual information
about candidates. Selection tests may give information about their aptitude,
interest, personality, which
cannot be known by application forms. Types of tests and rules of good of
testing have been discussed in
brief below:
A. Aptitude Tests: These measure whether an individual has the capacity
or talent ability to learn a
given job if given adequate training. These are more useful for clerical and
trade positions.
B. Personality Tests: At times, personality affects job performance. These
determine personality
traits of the candidate such as cooperativeness, emotional balance etc.
These seek to assess an
individual’s motivation, adjustment to the stresses of everyday life, capacity
for interpersonal relations
and self-image.
C. Interest Tests: These determine the applicant’s interests. The applicant
is asked whether he
likes, dislikes, or is indifferent to many examples of school subjects,
occupations, amusements,
peculiarities of people, and particular activities.
63
D. Performance Tests: In this test the applicant is asked to demonstrate
his ability to do the job. For
example, prospective typists are asked to type several pages with speed and
accuracy.
E. Intelligence Tests: This aim at testing the mental capacity of a person
with respect to reasoning,
word fluency, numbers, memory, comprehension, picture arrangement, etc.
It measures the ability
to grasp, understand and to make judgement.
F. Knowledge Tests: These are devised to measure the depth of the
knowledge and proficiency in
certain skills already achieved by the applicants such as engineering,
accounting etc.
G. Achievement Tests: Whereas aptitude is a capacity to learn in the
future, achievement is concerned
with what one has accomplished. When applicants claim to know something,
an achievement test
is given to measure how well they know it.
H. Projective Tests: In these tests the applicant projects his personality
into free responses about
pictures shown to him which are ambiguous.
Rules of Good Testing
 Norms should be developed for each test. Their validity and reliability for a
given purpose should
be established before they are used.
 Adequate time and resources must be provided to design, validate, and
check tests.
 Tests should be designed and administered only by trained and competent
persons.
 The user of tests must be extremely sensitive to the feelings of people
about tests.
 Tests are to be uses as a screening device.
 Reliance should not be placed solely upon tests in reaching decisions.
 Tests should minimize the probabilities of getting distorted results. They
must be ‘race-free’.
 Tests scores are not precise measures. They must be assigned a proper
weightage.
5. Interview: An interview is a procedure designed to get information from
a person and to assess his
potential for the job he is being considered on the basis of oral responses by
the applicant to oral inquiries
by the interviewer. Interviewer does a formal in-depth conversation with the
applicant, to evaluate his
suitability. It is one of the most important tools in the selection process. This
tool is used when interviewing
skilled, technical, professional and even managerial employees. It involves
two-way exchange of information.
The interviewer learns about the applicant and the candidate learns about
the employer.
Objectives of Interviews: Interview helps:
 To obtain additional information from the candidate.
 Facilitates giving to the candidate information about the job, company, its
policies, products etc.
 To assess the basic suitability of the candidate.
The selection interview can be:
 One to one between the candidate and the interviewer:
 Two or more interviewers by employers representatives-sequential;
 By a panel of selections, i.e., by more than representative of the employer.
The sequential interview involves a series of interviews; each interviewer
meeting the candidate separately.
The panel interview consists of two or more interviews meeting the
candidate together.
Types of interviews: Interviews can be classified in various ways
according to:
(A) Degree of Structure
(B) Purpose of Interview
(C) Content of Interview
64
(A) Degree of Structure:
(1) Unstructured or non directive: in which you ask questions as they
come to mind. There is
no set format to follow.
(2) Structured or directive: in which the questions and acceptable
responses are specified in
advance. The responses are rated for appropriateness of content.
Structured and non-structured interviews have their pros and cons. In
structured interviews all applicants
are generally asked all required questions by all interviewers. Structured
interviews are generally more
valid. However structured interviews do not allow the flexibility to pursue
points of interests as they
develop.
(B) Purpose of Interview: A selection interview is a type of interview
designed to predict future job
performance, on the basis of applicant’s responses to the oral questions
asked to him.
A stress interview is a special type of selection interview in which the
applicant is made
uncomfortable by series of awkward and rude questions. The aim of stress
interview is supposedly
to identify applicant’s low or high stress tolerance. In such an interview the
applicant is made
uncomfortable by throwing him on the defensive by series of frank and often
discourteous questions
by the interviewer.
(C) Content of Interview: The content of interview can be of a type in
which individual’s ability to
project a situation is tested. This is a situation type interview. In job-related
interview, interviewer
attempts to assess the applicant’s past behaviours for job related
information, but most questions
are not considered situational.
In a behaviour interview a situation in described and candidates are
asked how they behaved
in the past in such a situation. While in situational interviews candidates
are asked to describe
how they would react to situation today or tomorrow. In the behavioural
interview they are asked
to describe how they did react to the situation in the past.
Principles of Interviewing
To make it effective, an interview should be properly planned and conducted
on certain principles; Edwin
B. Flippo has described certain rules and principles of good interviewing to
this end:
 Provide proper surroundings. The physical setting for the interview should
be both private and
comfortable.
 The mental setting should be one of rapport. The interviewer must be
aware of non-verbal behaviour.
 Plan for the interview by thoroughly reviewing job specifications and job
descriptions.
 Determine the specific objectives and the method of the interviewing.
 Inform yourself as much as possible concerning the known information
about the interviewee.
 The interviewer should possess and demonstrate a basic liking and respect
for people.
 Questions should be asked in a manner that encourages the interviewee to
talk. Put the applicant
at ease.
 Make a decision only when all the data and information are available. Avoid
decisions that are
based on first impressions.
 Conclude the interview tactfully, making sure that the candidate leaves
feeling neither too elated
nor frustrated.
 Maintain some written record of the interview during or immediately after
it.
 Listen attentively and, if possible, protectively.
65
 Questions must be stated clearly to avoid confusion and ambiguity.
Maintain a balance between
open and overtly structured questions.
 ‘Body language’ must not be ignored.
 The interviewer should make some overt sign to indicate the end of the
interview.
Interviewing is largely an art, the application of which can be improved
through practice.
6. Background Investigation: The next step in the selection process is to
undertake an investigation of
those applicants who appear to offer potential as employees. This may
include contacting former employers
to confirm the candidate’s work record and to obtain their appraisal of his or
her performance/ contacting
other job-related and personal references, and verifying the educational
accomplishments shown on the
application.
The background investigation has major implications. Every personnel
administrator has the responsibility
to investigate each potential applicant. In some organization, failure to do so
could result in the loss of his
or her job. But many managers consider the background investigation data
highly biased. Who would
actually list a reference that would not give anything but the best possible
recommendation? The seasoned
personnel administrator expects this and delves deeper into the candidate’s
background, but that, too,
may not prove to be beneficial. Many past employers are reluctant to give
any information to another
company other than factual information (e.g., date of employment).
Even though there is some reluctance to give this information, there are
ways in which personnel
administrators can obtain it. Sometimes, for instance information can be
obtained from references once
removed. For example, the personnel administrator can ask a reference
whose name has been provided
on the application form to give another reference, someone who has
knowledge of the candidate’s work
experience. By doing this, the administrator can eliminate the possibility of
accepting an individual based
on the employee’s current employer’s glowing recommendation when the
motivation for such a positive
recommendation was to get rid of the employee.
7. Physical Examination: After the selection decision and before the job
offer is made, the candidate is
required to undergo physical fitness test. Candidates are sent for physical
examination either to the
company’s physician or to a medical officer approved for the purpose. Such
physical examination provides
the following information.
 Whether the candidate’s physical measurements are in accordance with
job requirements or not?
 Whether the candidate suffers from bad health which should be corrected?
 Whether the candidate has health problems or psychological attitudes
likely to interfere with work
efficiency or future attendance?
 Whether the candidate is physically fit for the specific job or not?
Policy on these physical exams has changed today. Dale Yoder writes,
“Modem policy used the physical
examination not to eliminate applicants, but to discover what jobs they are
qualified to fill. The examination
should disclose the physical characteristics of the individual that are
significant from the standpoint of his
efficient performance of the job he may enter or of those jobs to which he
may reasonably expect to be
transferred or promoted. It should note deficiencies, not as a basis for
rejection, but as indicating restrictions
on his transfer to various positions also.”
8. Approval by Appropriate Authority: On the basis of the above steps,
suitable candidates are
recommended for selection by the selection committee or personnel
department. Though such a committee
or personnel department may have authority to select the candidates finally,
often it has staff authority to
recommend the candidates for selection to the appropriate authority.
Organisations may designate the
66
various authorities for approval of final selection of candidates for different
categories of candidates. Thus,
for top level managers, board of directors may be approving authority; for
lower levels, even functional
heads concerned may be approving authority.
9. Final Employment Decision: After a candidate is finally selected, the
human resource department
recommends his name for employment. The management or board of the
company offers employment in
the form of an appointment letter mentioning the post, the rank, the salary
grade, the date by which the
candidate should join and other terms and conditions of employment. Some
firms make a contract of
service on judicial paper. Usually an appointment is made on probation in the
beginning. The probation
period may range from three months to two years. When the work and
conduct of the employee is found
satisfactory, he may be confirmed. The personnel department prepare a
waiting list and informs the
candidates. In case a person does not join after being selected, the company
calls next person on the
waiting list.
10. Evaluation: The selection process, if properly performed, will ensure
availability of competent and
committed personnel. A period audit, conducted by people who work
independently of the human resource
department, will evaluate the effectiveness of the selection process. The
auditors will do a thorough and
the intensive analysis and evaluate the employment programme.
5.3 Selection Decision Outcomes
Consider, for a moment, that any selection decision can result in four
possible outcomes. As shown in
Figure 5.2, two of these outcomes would indicate correct decisions, but two
would indicate errors.
Correct decisions are those where the applicant was predicted to be
successful and later did prove to be
successful on the job, or where the applicant was predicted to be
unsuccessful and would have performed
accordingly if hired. In the former case, we have successfully accepted; in
the latter case, we have successfully
rejected. Thus the purpose of selection activities is to develop outcomes
shown as “correct decisions” in
Figure 5.2.
Problems occur when we make errors-by rejecting candidates who would
later perform successfully on
the job (reject errors) or accepting those individuals who subsequently
perform poorly on the job (accept
errors). These problems are, unfortunately far from insignificant. Reject
errors historically meant that the
costs in performing selection activities would be increased. Accept errors, on
the other hand, have very
obvious costs to the organization including the cost of training the employee,
the costs generated (or
profits forgone) due to the employee’s incompetence, the cost of severance
and the subsequent costs of
further recruiting and selection screening. The major thrust of any selection
activity, therefore, is to reduce
the probability of making reject or accept errors while increasing the
probability of making reject or
accept errors while increasing the probability of making correct decisions.
Correct
decision
Reject
error
Accept
error
Correct
decision
Successful
Unsuccessful
Accept Reject
Later Job Pertormance
Figure 5.2: Selection Decision Outcomes
67
In summary, selection have two objectives: (1) to predict which job
applicants would be successful if hired
and (2) to inform and sell the candidate on the job and the organization.
Unfortunately, these two objectives
are not always compatible Putting a job candidate through hours of filling out
forms, taking tests, and
completing interviews rarely endears the organization to the candidate.
These are tiresome and often
stressful activities. Yet if the selection activities place too great an emphasis
on public relations, obtaining
the information needed to make successful selection decisions may be
subordinated. Hence a manager’s
dilemma in selection is how to balance the desire to attract people with the
desire to gather relevant
selection data.
5.4 Placement – Orientation - Socialization
After an employee has been recruited he is provided with basic background
information about the employer,
working conditions and the information necessary to perform his job
satisfactorily. The new employee’s
initial orientation helps him perform better by providing him information of
the company rules, and practices.
According to Pigors and Myers, “Placement consists in matching what
the supervisor has reason to
think the new employee can do with what the job demands (job
requirements), imposes (in strain, working
conditions, etc.), and offers (in the form of pay rate, interest, companionship
with other, promotional
possibilities, etc.)” They further state that it is not easy to match all these
factors for a new worker who is
still in many ways an unknown quantity. For this reason, the first placement
usually carries with it the status
of probationer.
A few basic principles should be followed at the time of placement
of an employee on the job.
These may be enumerated as below:
 The job should be offered to the man according to his qualifications. The
placement should neither
be higher nor lower than the qualifications.
 While introducing the job to the new employee, an effort should be made
to develop a sense of
loyalty and cooperation in him so that he may realise his responsibilities
better towards the job and
the organisation.
 The employee should be made conversant with the working conditions
prevailing in the industry
and all things relating to the job. He should also be made aware of the
penalties if he commits a
wrong.
 Man should be placed on the job according to the requirements of the job.
The job should not be
adjusted according to the qualifications or requirements of the man. Job first;
man next, should be
the principle of placement.
 The placement should be ready before the joining date of the newly
selected person.
 The placement in the initial period may be temporary as changes are likely
after the completion of
training. The employee may be later transferred to the job where he can do
better justice.
In the words of John M. Ivancevich, “Orientation orients, directs, and
guides employees to understand
the work, firm, colleagues, and mission. It introduces new employees to the
organisation, and to his new
tasks, managers, and work groups.”
According to John Bernardin, “Orientation is a term used for the
organizationally sponsored, formalized
activities associated with an employee’s socialisation into the organisation.”
68
Billimoria has defined orientation as, “Induction (orientation) is a
technique by which a new employee
is rehabilitated into the changed surroundings and introduced to the
practices, policies, and purposes of
the organisation.”
Orientation is one component of the new employee socialization process.
Socialization is the ongoing
process of instilling in all new employees prevailing attitudes, standards,
values, patterns of behaviour that
are expected by the organisation and its departments.
Thus, orientation is a process through which a new employee is introduced to
the organisation. It is the
process wherein an employee is made to feel comfortable and at home in
the organisation. The new
employee is handed over a rulebook, company booklets, policy manuals,
progress reports and documents
containing company information which are informational in nature. It is
responsibility of the human resource
department to execute the orientation programme.
5.5 Summary
 Selection is the process of picking up individuals out of the pool of the job
applicants with requisite
qualifications and competence to fill jobs in the organisation. Proper
selection can minimize the
costs of replacement and training, reduce legal challenges, and result in a
more productive work
force.
 The discrete selection process would include the following.
a. Application Pool,
b. Preliminary Screening and Interview,
c. Application Blank or Application Form,
d. Selection Tests,
e. Interview
f. Background Investigation,
g. Physical Examination,
h. Approval by Appropriate Authority,
i. Final Employment Decision,
j. Evaluation
 Selection process involves mutual decision making. The organisation
decides whether or not to
make a job offer and how attractive the job offer should be. The candidate
decides whether or
not the organisation and the job offer is according to his goals and needs.
Selection of proper
personnel helps the management in getting the work done by the people
effectively.
 To be an effective predictor, a selection device should be
a. Reliable
b. Valid
c. Predict a relevant criterion
 In India the selection process on hiring skilled and managerial personnel
are fairly well defined and
systematically practical.
5.6 Self Assessment Questions
1. What do you understand by selection process? Discuss various steps
involved in it.
2. What is application blank? What purpose does it serve? Explain the
contents of an application
blank.
69
3. Discuss the characteristics of a good test. Explain various types of tests
used in the selection process.
4. What is an interview? What purpose does it serve? Discuss various types
of interviews.
5. Discuss various guidelines to be followed for an interview.
6. Explain various steps involved in the selection of personnel.
7. What do you understand by placement and orientation?
5.7 Reference Books
- Mamoria C.B., Gankar S.V., (2006), “A Textbook of Human Resource
Management”, Himalaya
Publishing House, New Delhi.
- Dwivedi R.S., (1997), “Personnel Management in Indian Enterprises”,
Galgotia Publising Company,
New Delhi.
- Devid A. DeCENZO, STEPHEN P. ROBBINS (2002), “Personnel/Human
Resource
Management”, Prentice Hall of India, New Delhi.
- Prasad L.M., (2005), Human Resource Management,” Sultan Chand & Sons,
New Delhi.
- Dessler Gary (2001), “Personnel Management”, Prentice Hall International
Editions, New Jersey.
- Carrell Michael R., Elbert Norbert F., Hatfield Robert D. (1999), “Human
Resource Management,”
Prentice Hall, Englewood Cliffs, New Jersey.
- Mamoria C.B., Rao, VSP (2012) Personnal Management (Text and cases),
Himalays Publishing,
Mumbai.
70
Unit - 6 : Employee Training
Structure of Unit:
6.0 Objectives
6.1 Introduction : Concept
6.2 Need for Employee Training
6.3 Importance
6.4 Types of Employee Training
6.5 Objectives and Process of Employee Training
6.6 Advantages of On the Job Training Methods
6.7 Summary
6.8 Self Assessment Questions
6.9 Reference Books
6.0 Objectives
After completing this unit, you would be able to:
 Understand various aspects of the training design process;
 Classify the various training methods;
 Point out various factors affecting training decisions;
 Know about various objectives of employee training;
 Learn and appreciate the significance of employee training;
 Understand difference between on the job and off the job training.
6.1 Introduction : Concept
Training is a process of learning a sequence of programmed behavior. It is
the application of knowledge &
gives people an awareness of rules & procedures to guide their behavior. It
helps in bringing about positive
change in the knowledge, skills & attitudes of employees.
Thus, training is a process that tries to improve skills or add to the existing
level of knowledge so that the
employee is better equipped to do his present job or to mould him to be fit
for a higher job involving higher
responsibilities. It bridges the gap between what the employee has & what
the job demands.
Training refers to a planned effort by a company to facilitate employees’
learning of job related competencies.
These competencies include knowledge, skills, or behaviors that are critical
for successful job performance.
The goal of training is for employees to master the knowledge, skill, and
behaviors emphasized in training
programs and to apply them to their day to day activities. Training is seen as
one of several possible
solutions to improve performance. Other solutions can include such actions
as changing the job or increasing
employee motivation through pay and incentives. Today there is a greater
emphasis on-
 Providing educational opportunities for all employees. These educational
opportunities may include
training programs, but they also include support for taking courses offered
outside the company,
self-study, and learning through job rotation.
 An ongoing process of performance improvement that is directly
measurable rather than organizing
one time training events.
 The need to demonstrate to executives, managers, and trainees the
benefits of training.
 Learning as a lifelong event in which senior management, trainer manager,
and employees have
ownership.
71
 Training being used to help attain strategic business objectives, which help
companies, gains a
competitive advantage.
The term training refers to the acquisition of knowledge, skills, and
competencies as a result of the
teaching of vocational or practical skills and knowledge that relate to specific
useful competencies. It
forms the core of apprenticeships and provides the backbone of content at
institutes of technology (also
known as technical colleges or polytechnics). In addition to the basic training
required for a trade, occupation
or profession, observers of the labor-market recognize as of 2008 [update] the
need to continue training
beyond initial qualifications: to maintain, upgrade and update skills
throughout working life. People within
many professions and occupations may refer to this sort of training as
professional development.
Training usually refers to some kind of organized (and finite it time) event —
a seminar, workshop that has
a specific beginning data and end date. It’s often a group activity, but the
word training is also used to refer
to specific instruction done one on one.
Employee development, however, is a much bigger, inclusive “thing”. For
example, if a manager pairs up
a relatively new employee with a more experienced employee to help the
new employee learns about the
job, that’s really employee development. If a manager coaches and
employee in an ongoing way, that’s
employee development. Or, employees may rotate job responsibilities to
learn about the jobs of their
colleagues and gain experience so they might eventually have more
promotion opportunities. That’s employee
development.
In other words employee development is a broader term that includes
training as one, and only one of its
methods for encouraging employee learning. The important point here is that
different activities are better
for the achievement of different results. For example, if the desire is provide
an employee with a better
understanding of how the department works, job rotation might work very
well. If the goal is to improve
the employee’s ability to use a computer based accounting package direct
training would be more
appropriate than, let’s say, job rotation.
TRAINING AND DEVELOPMENT OBJECTIVES
The principal objective of training and development division is to make sure
the availability of a skilled and
willing workforce to an organization. In addition to that, there are four other
objectives: Individual,
Organizational, Functional, and Societal. Training and development is a
subsystem of an organization. It
ensures that randomness is reduced and learning or behavioural change
takes place in structured format.
Individual Objectives – help employees in achieving their personal goals,
which in turn, enhances the
individual contribution to an organization.
Organizational Objectives – assist the organization with its primary
objective by bringing individual
effectiveness.
Functional Objectives – maintain the department’s contribution at a level
suitable to the organization’s
needs.
Societal Objectives – ensure that an organization is ethically and socially
responsible to the needs and
challenges of the society.
The quality of employees and their development through training and
education are major factors in
determining long-term profitability of a small business. If you hire and keep
good employees, it is good
policy to invest in the development of their skills, so they can increase their
productivity.
Training often is considered for new employees only. This is a mistake
because ongoing training for current
employees helps them adjust to rapidly changing job requirements. Reasons
for emphasizing the growth
and development of personnel include
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 Creating a pool of readily available and adequate replacements for
personnel who may leave or
move up in the organization.
 Enhancing the company’s ability to adopt and use advances in technology
because of a sufficiently
knowledgeable staff.
 Building a more efficient, effective and highly motivated team, which
enhances the company’s
competitive position and improves employee morale.
 Ensuring adequate human resources for expansion into new programs.
Research has shown specific benefits that a small business receives from
training and developing its
workers, including:
 Increased productivity.
 Reduced employee turnover.
 Increased efficiency resulting in financial gains.
 Decreased need for supervision.
Employees frequently develop a greater sense of self-worth, dignity and well-
being as they become more
valuable to the firm and to society. Generally they will receive a greater
share of the material gains that
result from their increased productivity. These factors give them a sense of
satisfaction through the
achievement of personal and company goals.
6.2 Need for Employee Training
Training of employees takes place after orientation takes place. Training is
the process of enhancing the
skills, capabilities and knowledge of employees for doing a particular job.
Training process moulds the
thinking of employees and leads to quality performance of employees. It is
continuous and never ending in
nature.
Training is given on four basic grounds:
1. New candidates who join an organization are given training. This training
familiarizes them with the
organizational mission, vision, rules and regulations and the working
conditions.
2. The existing employees are trained to refresh and enhance their
knowledge.
3. If any updations and amendments take place in technology, training is
given to cope up with those
changes. For instance, purchasing new equipment, changes in technique of
production, computer
impartment. The employees are trained about use of new equipments and
work methods.
4. When promotion and career growth becomes important. Training is given
so that employees are
prepared to share the responsibilities of the higher level job.
Training needs can be assessed by analyzing three major human resource
areas: the organization as a
whole, the job characteristics and the needs of the individuals. This analysis
will provide answers to the
following questions:
 Where is training needed?
 What specifically must an employee learn in order to be more productive?
 Who needs to be trained?
Begin by assessing the current status of the company how it does what it
does best and the abilities of your
employees to do these tasks. This analysis will provide some benchmarks
against which the effectiveness
of a training program can be evaluated. Your firm should know where it
wants to be in five years from its
long-range strategic plan. What you need is a training program to take your
firm from here to there.
Second, consider whether the organization is financially committed to
supporting the training efforts. If
not, any attempt to develop a solid training program will fail.
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Next, determine exactly where training is needed. It is foolish to implement a
companywide training effort
without concentrating resources where they are needed most. An internal
audit will help point out areas
that may benefit from training. Also, a skills inventory can help determine
the skills possessed by the
employees in general. This inventory will help the organization determine
what skills are available now and
what skills are needed for future development.
Also, in today’s market-driven economy, you would be remiss not to ask your
customers what they like
about your business and what areas they think should be improved. In
summary, the analysis should focus
on the total organization and should tell you (1) where training is needed and
(2) where it will work within
the organization. Once you have determined where training is needed,
concentrate on the content of the
program. Analyze the characteristics of the job based on its description, the
written narrative of what the
employee actually does. Training based on job descriptions should go into
detail about how the job is
performed on a task-by-task basis. Actually doing the job will enable you to
get a better feel for what is
done. Individual employees can be evaluated by comparing their current skill
levels or performance to the
organization’s performance standards or anticipated needs.
6.3 Importance
Training is crucial for organizational development and success. It is fruitful to
both employers and employees
of an organization. An employee will become more efficient and productive if
he is trained well. The
benefits of training can be summed up as:
1. Improves Morale of Employees- Training helps the employee to get job
security and job
satisfaction. The more satisfied the employee is and the greater is his
morale, the more he will
contribute to organizational success and the lesser will be employee
absenteeism and turnover.
2. Less Supervision- A well trained employee will be well acquainted with
the job and will need
less of supervision. Thus, there will be less wastage of time and efforts.
3. Fewer Accidents- Errors are likely to occur if the employees lack
knowledge and skills required
for doing a particular job. The more trained an employee is, the less are the
chances of committing
accidents in job and the more proficient the employee becomes.
4. Chances of Promotion- Employees acquire skills and efficiency during
training. They become
more eligible for promotion. They become an asset for the organization.
5. Increased Productivity- Training improves efficiency and productivity of
employees. Well trained
employees show both quantity and quality performance. There is less
wastage of time, money and
resources if employees are properly trained.
6.4 Types of Employee Training
Some commentator use a similar term for workplace learning to improve
performance: “training and
development”. One can generally categorize such training as on-the-job or
off-the-job:
 On-the-job training takes place in a normal working situation, using the
actual tools, equipment,
documents or materials that trainees will use when fully trained. On-the-job
training has a general
reputation as most effective for vocational work.
 Off-the-job training takes place away from normal work situations —
implying that the employee
does not count as a directly productive worker while such training takes
place. Off-the-job training
has the advantage that it allows people to get away from work and
concentrate more thoroughly
on the training itself. This type of training has proven more effective in
inculcating concepts and
ideas.
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The most frequently used method in smaller organizations that is on the job
training. This method of
training uses more knowledgeable, experienced and skilled employees, such
as mangers, supervisors to
give training to less knowledgeable, skilled, and experienced employees. OJT
can be delivered in classrooms
as well. This type of training often takes place at the work place in informal
manner.
On the Job Training is characterized by following points
 It is done on ad-hoc manner with no formal procedure, or content
 At the start of training, or during the training, no specific goals or
objectives are developed
 Trainers usually have no formal qualification or training experience for
training
 Training is not carefully planned or prepared
 The trainer are selected on the basis of technical expertise or area
knowledge
Formal OJT programs are quite different from informal OJT. These programs
are carried out by identifying
the employees who are having superior technical knowledge and can
effectively use one-to-one interaction
technique. The procedure of formal on the job training program is:
1. The participant observes a more experienced, knowledgeable, and skilled
trainer (employee)
2. The method, process, and techniques are well discussed before, during
and after trainer has
explained about performing the tasks
3. When the trainee is prepared, the trainee starts performing on the work
place
4. The trainer provides continuing direction of work and feedback
5. The trainee is given more and more work so that he accomplishes the job
flawlessly
The four techniques for on the job development are:
 COACHING
 MENTORING
 JOB ROTATION
 JOB INSTRUCTION TECHNIQUE (JIT)
1.) Coaching is one of the training methods, which is considered as a
corrective method for inadequate
performance. According to a survey conducted by International Coach
Federation (ICF), more than
4,000 companies are using coach for their executives. These coaches are
experts most of the time outside
consultants.
A coach is the best training plan for the CEO’s because
 It is one to one interaction
 It can be done at the convenience of CEO
 It can be done on phone, meetings, through e-mails, chat
 It provides an opportunity to receive feedback from an expert
 It helps in identifying weaknesses and focus on the area that needs
improvement
This method best suits for the people at the top because if we see on
emotional front, when a person
reaches the top, he gets lonely and it becomes difficult to find someone to
talk to. It helps in finding out the
executive’s specific developmental needs. The needs can be identified
through 60 degree performance
reviews.
75
Procedure of the Coaching
The procedure of the coaching is mutually determined by the executive and
coach. The procedure is
followed by successive counseling and meetings at the executive’s
convenience by the coach.
1. Understand the participant’s job, the knowledge, skills, and attitudes, and
resources required to
meet the desired expectation
2. Meet the participant and mutually agree on the objective that has to be
achieved
3. Mutually arrive at a plan and schedule
4. At the job, show the participant how to achieve the objectives, observe the
performance and then
provide feedback
5. Repeat step 4 until performance improves
For the people at middle level management, coaching is more likely done by
the supervisor; however
experts from outside the organization are at times used for up and coming
managers. Again, the personalized
approach assists the manger focus on definite needs and improvement.
2.) Mentoring is an ongoing relationship that is developed between a senior
and junior employee. Mentoring
provides guidance and clear understanding of how the organization goes to
achieve its vision and mission
to the junior employee.
The meetings are not as structured and regular than in coaching. Executive
mentoring is generally done by
someone inside the company. The executive can learn a lot from mentoring.
By dealing with diverse
mentee’s, the executive is given the chance to grow professionally by
developing management skills and
learning how to work with people with diverse background, culture, and
language and personality types.
Executives also have mentors. In cases where the executive is new to the
organization, a senior executive
could be assigned as a mentor to assist the new executive settled into his
role. Mentoring is one of the
important methods for preparing them to be future executives. This method
allows the mentor to determine
what is required to improve mentee’s performance. Once the mentor
identifies the problem, weakness,
and the area that needs to be worked upon, the mentor can advise relevant
training. The mentor can also
provide opportunities to work on special processes and projects that require
use of proficiency.
Some key points on Mentoring
 Mentoring focus on attitude development
 Conducted for management-level employees
 Mentoring is done by someone inside the company
 It is one-to-one interaction
 It helps in identifying weaknesses and focus on the area that needs
improvement
3.) For the executive, job rotation takes on different perspectives. The
executive is usually not simply
going to another department. In some vertically integrated organizations, for
example, where the supplier
is actually part of same organization or subsidiary, job rotation might be to
the supplier to see how the
business operates from the supplier point of view.
Learning how the organization is perceived from the outside broadens the
executive’s outlook on the
process of the organization. Or the rotation might be to a foreign office to
provide a global perspective.
For managers being developed for executive roles, rotation to different
functions in the company is regular
carried out.
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This approach allows the manger to operate in diverse roles and understand
the different issues that crop
up. If someone is to be a corporate leader, they must have this type of
training. A recent study indicated
that the single most significant factor that leads to leader’s achievement was
the variety of experiences in
different departments, business units, cities, and countries.
An organized and helpful way to develop talent for the management or
executive level of the organization
is job rotation. It is the process of preparing employees at a lower level to
replace someone at the next
higher level. It is generally done for the designations that are crucial for the
effective and efficient functioning
of the organization.
Some of the major benefits of job rotation are:
 It provides the employees with opportunities to broaden the horizon of
knowledge, skills, and
abilities by working in different departments, business units, functions, and
countries
 Identification of Knowledge, skills, and attitudes (KSAs) required
 It determines the areas where improvement is required
 Assessment of the employees who have the potential and caliber for filling
the position
4.) Job Instruction Technique (JIT) uses a strategy with focus on
knowledge (factual and procedural),
skills and attitudes development.
JIT Consists of Four Steps:
Plan – This step includes a written breakdown of the work to be done
because the trainer and the trainee
must understand that documentation is must and important for the
familiarity of work. A trainer who is
aware of the work well is likely to do many things and in the process might
miss few things. Therefore, a
structured analysis and proper documentation ensures that all the points are
covered in the training program.
The second step is to find out what the trainee knows and what training
should focus on. Then, the next
step is to create a comfortable atmosphere for the trainees’ i.e. proper
orientation program, availing the
resources, familiarizing trainee with the training program, etc.
Present – In this step, trainer provides the synopsis of the job while
presenting the participants the
different aspects of the work. When the trainer finished, the trainee
demonstrates how to do the job and
why is that done in that specific manner. Trainee actually demonstrates the
procedure while emphasizing
the key points and safety instructions.
Figure 6.1 : Steps in JIT
Trial – This step actually a kind of rehearsal step, in which trainee tries to
perform the work and the
trainer is able to provide instant feedback. In this step, the focus is on
improving the method of instruction
because a trainer considers that any error if occurring may be a function of
training not the trainee. This
step allows the trainee to see the after effects of using an incorrect method.
The trainer then helps the
trainee by questioning and guiding to identify the correct procedure.
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Follow-up – In this step, the trainer checks the trainee’s job frequently after
the training program is over
to prevent bad work habits from developing. There are various methods of
training, which can be divided
in to cognitive and behavioral methods. Trainers need to understand the
pros and cons of each method,
also its impact on trainees keeping their background and skills in mind
before giving training.
OFF THE JOB TRAINING –
There are many management development techniques that an employee
can take in off the job. The few
popular methods are:
 SENSITIVITY TRAINING
 TRANSACTIONAL ANALYSIS
 STRAIGHT LECTURES/ LECTURES
 SIMULATION EXERCISES
1.) Sensitivity Training is about making people understand about
themselves and others reasonably,
which is done by developing in them social sensitivity and behavioral
flexibility.
Social sensitivity in one word is empathy. It is ability of an individual to sense
what others feel and think
from their own point of view. Behavioral flexibility is ability to behave
suitably in light of understanding.
Sensitivity Training Program requires three steps:
Unfreezing the Old Values –
It requires that the trainees become aware of the inadequacy of the old
values. This can be done when the
trainee faces dilemma in which his old values is not able to provide proper
guidance. The first step consists
of a small procedure:
 An unstructured group of 10-15 people is formed.
 Unstructured group without any objective looks to the trainer for its
guidance
 But the trainer refuses to provide guidance and assume leadership
 Soon, the trainees are motivated to resolve the uncertainty
 Then, they try to form some hierarchy. Some try assume leadership role
which may not be liked
by other trainees
 Then, they started realizing that what they desire to do and realize the
alternative ways of dealing
with the situation
Figure 6.2 Procedure of Sensitivity Training
Development of New Values – With the trainer’s support, trainees begin
to examine their interpersonal
behavior and giving each other feedback. The reasoning of the feedbacks are
discussed which motivates
trainees to experiment with range of new behaviors and values. This process
constitutes the second step
in the change process of the development of these values.
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Refreezing the new ones – This step depends upon how much opportunity
the trainees get to practice
their new behaviors and values at their work place.
2.) Transactional Analysis provides trainees with a realistic and useful
method for analyzing and
understanding the behavior of others. In every social interaction, there is a
motivation provided by one
person and a reaction to that motivation given by another person. This
motivation reaction relationship
between two persons is a transaction.
Transactional analysis can be done by the ego states of an individual. An
ego state is a system of
feelings accompanied by a related set of behaviors. There are basically three
ego states:
Child: It is a collection of recordings in the brain of an individual of
behaviors, attitudes, and impulses
which come to her naturally from her own understanding as a child. The
characteristics of this ego are to
be spontaneous, intense, unconfident, reliant, probing, anxious, etc. Verbal
clues that a person is operating
from its child state are the use of words like “I guess”, “I suppose”, etc. and
non verbal clues like, giggling,
coyness, silent, attention seeking etc.
Parent: It is a collection of recordings in the brain of an individual of
behaviors, attitudes, and impulses
imposed on her in her childhood from various sources such as, social,
parents, friends, etc. The
characteristics of this ego are to be overprotective, isolated, rigid, bossy, etc.
Verbal clues that a person is
operating from its parent states are the use of words like, always, should,
never, etc and non-verbal clues
such as, raising eyebrows, pointing an accusing finger at somebody, etc.
Figure 6.3
Adult: It is a collection of reality testing, rational behavior, decision making,
etc. A person in this ego state
verifies, updates the data which she has received from the other two states.
It is a shift from the taught and
felt concepts to tested concepts. All of us evoke behavior from one ego state
which is responded to by the
other person from any of these three states.
3.) Lecture is telling someone about something. Lecture is given to enhance
the knowledge of listener or
to give him the theoretical aspect of a topic. Training is basically incomplete
without lecture. When the
trainer begins the training session by telling the aim, goal, agenda,
processes, or methods that will be used
in training that means the trainer is using the lecture method. It is difficult to
imagine training without lecture
format. There are some variations in Lecture method. The variation here
means that some forms of lectures
are interactive while some are not.
Straight Lecture: Straight lecture method consists of presenting
information, which the trainee attempts
to absorb. In this method, the trainer speaks to a group about a topic.
However, it does not involve any
kind of interaction between the trainer and the trainees. A lecture may also
take the form of printed text,
such as books, notes, etc. The difference between the straight lecture and
the printed material is the
trainer’s intonation, control of speed, body language, and visual image of the
trainer. The trainer in case of
straight lecture can decide to vary from the training script, based on the
signals from the trainees, whereas
same material in print is restricted to what is printed. A good lecture consists
of introduction of the topic,
79
purpose of the lecture, and priorities and preferences of the order in which
the topic will be covered.
Some of the main features of lecture method are:
 Inability to identify and correct misunderstandings
 Less expensive
 Can be reached large number of people at once
 Knowledge building exercise
 Less effective because lectures require long periods of trainee inactivity
4.) Games and Simulations are structured and sometimes unstructured,
that are usually played for
enjoyment sometimes are used for training purposes as an educational tool.
Training games and simulations
are different from work as they are designed to reproduce or simulate
events, circumstances, processes
that take place in trainees’ job.
A Training Game is defined as spirited activity or exercise in which trainees
compete with each other
according to the defined set of rules. Simulation is creating computer
versions of real-life games. Simulation
is about imitating or making judgment or opining how events might occur in
a real situation. It can entail
intricate numerical modeling, role playing without the support of technology,
or combinations. Training
games and simulations are now seen as an effective tool for training because
its key components are:
 Challenge
 Rules
 Interactivity
These three components are quite essential when it comes to learning. Some
of the examples of this
technique are:
Figure 6.4
Trainees can therefore experience these events, processes, games in a
controlled setting where they can
develop knowledge, skills, and attitudes or can find out concepts that will
improve their performance. The
various methods that come under Games and Simulations are:
 BEHAVIOR-MODELLING
 BUSINESS GAMES
 CASE STUDIES
80
 EQUIPMENT STIMULATORS
 IN-BASKET TECHNIQUE
 ROLE PLAYS
6.5 Objectives and Process of Employee Training
The training design process refers to a systematic approach for developing
training programs. It includes
the seven steps in this process. Training is one of the most profitable
investments an organization can
make. No matter what business or industry you are in the steps for an
effective training process are the
same and may be adapted anywhere. If you have ever thought about
developing a training program within
your organization consider the following four basic training steps. You will
find that all four of these steps
are mutually necessary for any training program to be effective and efficient.
Step1 is to conduct a needs assessment, which is necessary to identify
whether training is needed. This
step identifies activities to justify an investment for training. The techniques
necessary for the data collection
are surveys, observations, interviews, and customer comment cards. Several
examples of an analysis
outlining specific training needs are customer dissatisfaction, low morale,
low productivity, and high turnover.
The objective in establishing a needs analysis is to find out the answers to
the following questions:
 “Why” is training needed?
 “What” type of training is needed?
 “When” is the training needed?
 “Where” is the training needed?
 “Who” needs the training? and “Who” will conduct the training?
 “How” will the training be performed?
By determining training needs, an organization can decide what specific
knowledge, skills, and attitudes
are needed to improve the employee’s performance in accordance with the
company’s standards.
The needs analysis is the starting point for all training. The primary objective
of all training is to improve
individual and organizational performance. Establishing a needs analysis is,
and should always be the first
step of the training process.
Step 2 is to ensure that employees have the motivation and basic skills
necessary to master training
content. This step establishes the development of current job descriptions
and standards and procedures.
Job descriptions should be clear and concise and may serve as a major
training tool for the identification
of guidelines. Once the job description is completed, a complete list of
standards and procedures should
be established from each responsibility outlined in the job description. This
will standardize the necessary
guidelines for any future training.
Step 3 is to create a learning environment that has the features necessary
for learning to occur. This step
is responsible for the instruction and delivery of the training program. Once
you have designated your
trainers, the training technique must be decided. One-on-one training, on-
the-job training, group training,
seminars, and workshops are the most popular methods.
Before presenting a training session, make sure you have a thorough
understanding of the following
characteristics of an effective trainer. The trainer should have:
81
- A desire to teach the subject being taught.
- A working knowledge of the subject being taught.
- An ability to motivate participants to “want” to learn.
- A good sense of humour.
- A dynamic appearance and good posture.
- A strong passion for their topic.
- A strong compassion towards their participants.
- Appropriate audio/visual equipment to enhance the training session.
For a training program to be successful, the trainer should be conscious of
several essential elements,
including a controlled environment, good planning, the use of various
training methods, good communication
skills and trainee participation.
Step 4 is to ensure that trainees apply the training content to their jobs.
This step will determine how effective and profitable your training program
has been. Methods for evaluation
are pre-and post- surveys of customer comments cards, the establishment of
a cost/benefit analysis outlining
your expenses and returns, and an increase in customer satisfaction and
profits. The reason for an evaluation
system is simple. The evaluations of training programs are without a doubt
the most important step in the
training process. It is this step that will indicate the effectiveness of both the
training as well as the trainer.
There are several obvious benefits for evaluating a training program. First,
evaluations will provide feedback
on the trainer’s performance, allowing them to improve themselves for
future programs. Second, evaluations
will indicate its cost-effectiveness. Third, evaluations are an efficient way to
determine the overall
effectiveness of the training program for the employees as well as the
organization.
The importance of the evaluation process after the training is critical.
Without it, the trainer does not have
a true indication of the effectiveness of the training. Consider this
information the next time you need to
evaluate your training program. You will be amazed with the results.
The need for training your employees has never been greater. As business
and industry continues to grow,
more jobs will become created and available. Customer demands, employee
morale, employee productivity,
and employee turnover as well as the current economic realities of a highly
competitive workforce are just
some of the reasons for establishing and implementing training in an
organization. To be successful, all
training must receive support from the top management as well as from the
middle and supervisory levels
of management. It is a team effort and must be implemented by all members
of the organization to be fully
successful.
6.6 Advantages of On the Job Training Methods
On the job training method has the following advantages that can be
considered:
 Generally most cost-effective
 Employees are actually productive
 Opportunity to learn whilst doing
 Training alongside real colleagues.
 Training can be delivered on time and at the optimum time.
 The trainee will have the good opportunities to practice and implement.
 The trainee will have feedbacks.
 Trainee builds confidence by working with own speed and productivity.
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6.7 Summary
The unit begins with an introduction of the concept and explains the
importance of training. It explains the
difference between training and development and defines the utility and
purpose of training, the levels of
training, the need and importance of training, and the benefits of training to
the individual and the organization.
It expounds on the philosophy of training, process of training and purpose or
objectives of training.
6.8 Self Assessment Questions
1. Explain the term training and the need of training for organizations.
2. Distinguish between training and development.
3. Explain the methods and approaches to training.
4. Explain various On the job and off the job training methods in detail.
6.9 Reference Books
- Aswathappa K.(2009) “Human Resource and Personnel Management” –
Text and Cases, Tata
McGraw Hill Publishing Company Ltd., New Delhi.
- Chhabra T.N. “Human Resources Management – Concepts and Issues,
Fourth Edition”, Shampat
Rai & Co., Delhi.
- Gupta, C. B. (2004), “Human Resource Management”, Sixth Edition, Sultan
Chand & Sons,
New Delhi.
- Dessler, G. (2000); ‘Human Resource Management’; Prentice Hall, New
York.
- Grundy, T. and Brown, L.(2003); ‘Value-based Human Resource Strategy;
Elsevier, Boston.
- Mabey, C. and Salaman, G. (2000); ‘Strategically Managing Human
Resources’; Infinity Books,
New Delhi.
- Rao, V.S.P. (2001); ‘Managing Human Resources- Text and Cases, Excel
Books, New Delhi.
- Thite, M. (2004); Managing People in the New Economy, Sage Publications,
New Delhi.
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Unit - 7 : Executive Development
Structure of Unit:
7.1 Objectives
7.2 Introduction
7.3 Importance and Factor Influencing Executive Development
7.4 Process
7.5 Methods of Executive Development
7.6 Career Planning and Development
7.6.1 Objective
7.6.2 Process
7.7 Summary
7.8 Self Assessment Questions
7.9 Reference Books
7.1 Objectives
After completing this unit, you would be able to:
 Understand the methods of executive development;
 Point out various career planning processes;
 Know about various pros and cons of these processes;
 Learn and appreciate the significance career planning to society;
7.2 Introduction
It is also known as ‘management development’ or ‘executive development’.
It is one of the fastestdeveloping
areas in personnel. It is realized that an effective management team may be
as important to the
survival of an organization as any tangible item on the balance sheet.
Interest in management development
is great partly due to the shortage of well-trained managers. Executive
development or management
development is a systematic process of learning and growth by which
managerial personnel gain and apply
knowledge, skills, attitudes and insights to manage the work in their
organization effectively and efficiently.
The program of executive development aims at achieving following
purposes: -
 To sustain good performance of managers throughout their careers by
exploiting their full potential.
 To understand economic, technical, and institutional forces in order to
solve business problems.
 To acquire knowledge about problems of human resources.
 To think through problems this may confront the organization now or in the
future.
 To develop responsible leaders.
 To inculcate knowledge of human motivation and human relationships.
 To increase proficiency in management techniques such as work study,
inventory control, operations
research and quality control.
Johnson and Sorcher write, “Management development focuses on
developing in a systematic manner,
the knowledge base, attitudes, basic skills, interpersonal skills and technical
skills of the managerial cadre.”
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According to Flippo “executive development includes the process by
which managers and executives
acquire not only skills and competency in their present job but also
capabilities for future managerial tasks
of increasing difficulty and scope.”
The characteristics of executive development are as following: -
 Executive development is a planned and organized process of learning.
 It is an ongoing and never ending exercise.
 Executive development is a long term process as managerial skills cannot
be developed overnight.
 It aims at preparing managers for managers.
Today, it is the growth that makes one person stay at the company. The
opportunity and challenges is what
keeps a person satisfied and charmed with his job. Companies have
understood this fact and therefore are
forming policies and procedures to develop their employees.
Executive development Program (EDP) is one such program. With Human
resource making a move from
a welfare department to a strategic partner, more and more companies are
undertaking this program. We
at Career Solutions provide you the opportunity of developing a specific EDP
for your company. There
are four major steps to be covered during the EDP-
1) Problem Assessment: the experts along with the concerned employees
and CEO shall begin
with an assessment of the company’s current problem and owner’s plans of
the future.
2) Management Audit and Appraisal: there shall be regular feedback
sessions to check as to
whether we are reaching where we are supposed to reach.
3) Analysis of Development Needs: here the problem that has been
uncovered shall be tried to
and remedied via a development program.
4) Identify Replacement Needs: the assessment may uncover a need to
recruit and select new
management talent. The format of EDP will vary with company’s size and
nature of operation so
as to provide optimum result.
7.3 Importance and Factors Influencing Executive
Development
Executive development is more future oriented. It is more concerned with
education than is employee
training. In today’s competitive environment, an organization has to be
concerned about the development
of supervisors, middle level managers and top-level executive.
Executive development is important for the following reasons: -
 Executive development programmes are required to train and develop
professional managers.
 It helps managers to develop skills to face cut throat competition.
 It enables managers to face problems related to technology and institution.
 It helps in developing better relations with the labors.
 Executives need training and education to understand and adjust to
changes in socio-economic
changes.
 Executive development is required to broader the outlook of managers.
Factors Influencing Executive Development
A host of factors influencing the executive development processes in
organizations are as follows:-
 Failure to train the managers will lead to ineffective and inefficient
managers who negatively affect
the organization’s performance.
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 In the absence of training and developmental avenues, the performing
managers may get demotivated
and frustrated in leading the organizations. This would lead to severe losses
for the
organization in financial parameters, in terms of the cost of recruiting and
training the new incumbent.
 The organizational performance may be affected by the loss of market
shares, lower sales, reduced
profitability, etc.
 The absence/ shortage of trained and skilled managers make it important
for the organizations to
have appropriate retention strategies. Training and development is being
used by organizations as
a part of their retention strategy.
 The competitive pressures make it necessary for organizations to
continuously roll out new products
and services, and also maintain the quality of the existing ones. The training
and development of
managers would help them in developing the competencies in these areas.
 The competitive environment is making it imperative for the organizations
to continuously restructure
and re-engineer, and to embark upon these processes, it is essential for the
organizations to train
the managers for the new scenarios.
7.4 Process
Contemporary organizations have realized the importance of human capital
and increasingly finding its
necessary to continuously train and develop human resources. The training
and development needs of the
employees cannot be looked at in isolation; any proactive organization has to
view the individual training
needs in the overall organizational context. The training and development
processes are not longer adjunct
to other departments but have become a part of organizational strategy and
one of the key organizational
objectives. The process of arriving at the development needs of the
executives can be comprehensively
viewed through the process given in Fig.-
Figure 7.1 : Executive Development Process
Compet itive Envi ronment
Organiz ational Strat egy
Organi zat ional Obj ectives
Id entif y Compete ncy Gaps
Training ne eds asse ssme nt
Annual Training Plan
Conduct of Training
Review of Tra ining Activiti es
Competenc y Ma pping Career Planning
Stage I
Stage II
Stage III
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The Process of Executive Development
Stage I: In the Stage I, at the macro level, there are three key elements are
considered as competitive
advantage, organizational strategy and organizational objectives. The
analysis of competitive environment
helps the organization to decide its competitive positioning in the market
place, based on which the
organizational strategy is drawn out in an attempt to transform or reposition
of the organization. The macro
view is broken down into specific organizational objectives for further
dissemination to functional/
departmental, and individual level.
Stage II: This stage is most important and crucial phase of executive
development process. This stage
deals analysis on the competency mapping, identification of competency gap
and career planning. In the
competency stage which helps to capture the competencies of all the
employees of the organization which
includes the capacities of the management also. In the second stage, the
organizational requirements and
competency gap to be analyzed. In the third phase, this deals with
identifying and verifying the organizational
needs, individual growth and along with career planning of the executives.
Stage III: This stage is consisting of three levels. The first level of this stage
deals with the activities
involving training need assessment of individuals and of all employees based
on which Annual Training
Plan (ATP) is drawn. Based on the annual training plan the employees are
chosen to expose to either
corporate training program, for internal training programs and external
organizations. While deciding the
venue and types and nature of the training program the personnel
department and training facilitator should
consider the various issues like no of executives, cost, outsourcing and
availability of technical expertise in
the organizations. In case of organizational development related exercises,
the combination of internal and
external training programs should be arrange for the all employee of the
organization.
Though the money, infrastructure and finally the manpower to be utilized in
the whole process keeping into
this, the top management has to take decision in this regard. The training
department, management and
HR Department should work in union. It is a collective phenomenon, which is
mostly initiatives, motives of
the top management. If entire process of executive development is mostly
determined by its efficacy and
its effectiveness.
Apart from this the process of executive development can be defined in
several other ways with slight
difference.
The process of executive development is as follows:
1. Analysis of Development Needs: First of all the present and future
development needs of the
organization are ascertained. It is necessary to determine how many and
what type of executives
are required to meet the present and future needs of the enterprise.
2. Appraisal of the Present Managerial Talent: A qualitative
assessment of the existing executives
is made to determine the type of executive talent available within the
organization.
3. Planning Individual Development Programmes: Each one of us has a
unique set of physical,
intellectual and emotional characteristics. Therefore, development plan
should be tailor-made for
each individual.
4. Establishing Training and Development Programme: The HR
department prepares
comprehensive and well conceived programmes.
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5. Evaluating Developing Programs: Considerable money, time and
efforts are spent on executive
development programmes. It is therefore natural to find out to what extent
the programme’s
objective has been achieved.
Evaluation of Executive Development
In the competition scenario, where the focus is on efficiency and profitability
and the return on investment
(ROI) on all the activities of the organization, executive development cannot
be an exception to the
phenomenon. The evaluation of the process assumes importance from the
following perspectives:
 Improving the quality of the training and development process.
 Improving the efficiency and competency of the trainers.
 Making improvements in the system to make it more responsive and
realistic.
 Aligning the training activities to the organizational objectives.
 Building the cost implications of the training into the organizational budget.
 Evaluating the ROI on account of training and development to justify
further investments.
 Changing the perception of the management on training as expenditure to
more as an investment
for the future growth of the organization.
The levels of evaluation include the reaction level, immediate level,
intermediate level, and ultimate level.
For the purpose of evaluation, it is essential to collect the data for which
there should be appropriate
measures for data collection, both during the course of the training
programme and after the training
programme. Some of the methods being used by experts are self-complete
questionnaires, interviews,
observations, and desk research. The desk research involves low cost and
less amount of time.
7.5 Methods of Executive Development
Management development programs help in acquiring and developing
managerial skill and knowledge. A
Varity of methods of management development have come into prominence
these days. Different types of
techniques are used to acquire and develop various types of managerial skill
and knowledge as given in
the table below:
Managerial Training / Management development: The following
diagram shows the stages involved
in the managerial training.
S.
No.
Competency Development Area Methods
1. Decision-making skill In-basket, Business games, Case study
2. Interpersonal skill Role plying, Sensitivity Training
3. Job Knowledge On-the-Job experiences, Coaching, Understudy
4. Organizational Knowledge Job Rotation, Multiple Management
5. General Knowledge Special course, Special Meeting, Specific Reading
6. Specific Individual Needs Special Projects, Committee Assignments
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Figure 7.2 : Stages of Managerial Training
In all above stages, we should satisfy the following essential aspects in order
to make the programmes a
success:
1. Policy decisions
2. Acceptance
3. Appreciation
4. Support
5. Conductive atmosphere
6. Strong urge for learning
7. Participation
8. Identification of strength and weakness
9. Involvement
10. Self-development
A number of executive development methods are available. Generally these
methods are used in combination
of two or more.
The various techniques of executive development may be classified into two
broad categories: -
Organizational Planning
Program Targeting
Discovering the key position
Appraisal
Replacement skill abilities
Individual development
Evaluation
Stage I
Stage II
Stage III
Stage IV
Stage V
Stage VI
Stage VII
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1. On the Job Techniques: It is delivered to employees while they perform
their regular jobs. In this
way, they do not lose time while they are learning. After a plan is developed
for what should be taught,
employees should be informed of the details. A time-table should be
established with periodic evaluations
to inform employees about their progress. On-the-job techniques include
orientations, job instruction
training, apprenticeships, internships and assistantships, job rotation and
coaching. It consists of: -
 Coaching-Coaching is a one-to-one relationship between trainees and
supervisors which offers
workers continued guidance and feedback on how well they are handling
their tasks. The coach
assigns the task, monitors the trainee behavior, and provides reinforcement
and feedback. Coaching
is commonly used for all kinds of trainees, from unskilled to managerial
position. This method is
critically depends on the quality of the coach.
 Under Study- An understudy may be assistant to someone or special
assistant to some supervisory
or executive positions. He learns by experience, observation, guidance and
coaching.
 Position Rotation-This involves the movement of the trainee from one
job to another. This helps
him to have a general understanding of how the organization functions.
Apart from releasing boredom,
Job rotation allows workers to build rapport with a wide range of individuals
within the organization,
facilitating future cooperation among various departments. Such cross-
trained personnel offer a
great deal of flexibility for organizations when transfers, promotions or
replacement become
inevitable.
 Multiple Management- It provides knowledge about the organization to
the junior and middle
managerial personnel. Here the members are exposed to all types of the
decision taken at higher
level.
2. Off-the-Job Technique: It consists of :
 Lectures- It is a traditional and direct method of instruction. The instructor
organizes the material
and gives it to a group of trainees in the form of a talk. To be effective, the
lecture must motivate
and create interest among the trainees. An advantage of this method is that
it is direct and can be
used for a large group of trainees. The major limitation of this method is that
it does not provide for
the transfer of training effectively.
 Case Studies- It presents the trainees with a written description of a
business or organizational
problem. The object of the case method is to teach the trainees how to
analyze information,
generate alternative decisions, and evaluate the alternatives. Cases can be
analyzed by individuals
or small groups. Feedback and reinforcement are provided through oral
discussion or written
comments from the instructor.
 Group Discussions- This method is a direct discussion on a specific topic
conducted with a
relatively small group of trainees. This method is useful for teaching and
exploring difficult conceptual
materials, and for changing attitudes and opinions. It provides opportunity
for feedback,
reinforcement practice, motivation, and transfer, largely due to the active
interchange of ideas
between the participants.
 Role Playing- In most of role-playing assignments, each of the student
takes the role of a person
affected by an issues on human life and effect the human activities all
around us from the perspective
of that person.
 Management Games- Verities of business and management games have
been devised and are
being used with the varying degree of success in the developing
programmes. A management
game is classroom exercise in which a number of team of trainees competes
against each other to
achieve certain objectives.
90
 Sensitivity Training- It has been successfully employed by behavioral
scientists over the past
thirty years. Sensitivity to the circumstances and feeling of others is the
cornerstone of human
relationships. It is important to note that sensitivity is not just an emotion; it
must express itself in
actions as well, especially when people we know are experiencing pain and
difficulties.
7.6 Career Planning and Development
Career development is an organized approach used to match employee
goals with the business needs of
the agency in support of workforce development initiatives. The purpose of
career development is to:
 Enhance each employee’s current job performance.
 Enable individuals to take advantage of future job opportunities.
 Fulfil agencies’ goals for a dynamic and effective workforce.
Career development involves managing your career either within or between
organizations. It also includes
learning new skills, and making improvements to help you in your career.
Career development is an
ongoing, lifelong process to help you learn and achieve more in your career.
Whether you are looking at
making a career change, or moving up within a company, planning your own
career development will help
you succeed. By creating a personal career development plan, you can set
goals and objectives for your
own personal career growth. Don’t make the mistake of leaving your career
development future in the
hands of your employer, hoping that you will get the next promotion or pay
raise. This misconception can
lead to job dissatisfaction and resentment. Career planning is a lifelong
process, which includes choosing
an occupation, getting a job, growing in our job, possibly changing careers,
and eventually retiring. The
Career Planning Site offers coverage of all these areas. This article will focus
on career choice and the
process one goes through in selecting an occupation. This may happen once
in our lifetimes, but it is more
likely to happen several times as we first define and then redefine ourselves
and our goals.
Managers are responsible for linking the organization’s needs to employee
career goals, and can assist
employees in the career planning process. Human Resources is responsible
for designing career paths and
employee development programs that help employees reach their goals.
Each employee is responsible for
planning and managing his/her career.
7.6.1 Objective
Career Management is the combination of structured planning and the active
management choice of one’s
own professional career. The outcome of successful career management
should include personal fulfillment,
work/life balance, goal achievement and financial assurance.
The word career refers to all types of employment ranging from semi-skilled
through skilled, and semi
professional to professional. The term career has often been restricted to
suggest an employment commitment
to a single trade skill, profession or business firm for the entire working life of
a person. In recent years,
however, career now refers to changes or modifications in employment
during the foreseeable future.
There are many definitions by management scholars of the stages in the
managerial process. The following
classification system with minor variations is widely used:
1. Development of overall goals and objectives,
2. Development of a strategy (a general means to accomplish the selected
goals/objectives),
3. Development of the specific means (policies, rules, procedures and
activities) to implement the
strategy, and
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4. Systematic evaluation of the progress toward the achievement of the
selected goals/objectives to
modify the strategy, if necessary.
The career management process begins with setting goals/objectives. A
relatively specific goal/objective
must be formulated. This task may be quite difficult when the individual
lacks knowledge of career
opportunities and/or is not fully aware of their talents and abilities. However,
the entire career management
process is based on the establishment of defined goals/objectives whether
specific or general in nature.
Utilizing career assessments may be a critical step in identifying
opportunities and career paths that most
resonate with someone. Career assessments can range from quick and
informal like those on CareerBuilder
or may be more in depth like those such as Myers-Briggs and Career Leader
supported assessments
found on My Path. Regardless of the ones you use, you will need to evaluate
them. Most assessments
found today for free (although good) do not offer an in-depth evaluation.
The time horizon for the achievement of the selected goals or objectives -
short term, medium term or long
term - will have a major influence on their formulation.
1. Short term goals (one or two years) are usually specific and limited in
scope. Short term goals are
easier to formulate. Make sure they are achievable and relate to your longer
term career goals.
2. Intermediate goals (3 to 20 years) tend to be less specific and more open
ended than short term
goals. Both intermediate and long term goals are more difficult to formulate
than short term goals
because there are so many unknowns about the future.
3. Long term goals (more than 100 years), of course, are the most fluid of all.
Lack of life experience
and knowledge about potential opportunities and pitfalls make the
formulation of long term goals/
objectives very difficult. Long range goals/objectives, however, may be easily
modified as additional
information is received without a great loss of career efforts because of
experience/knowledge
transfer from one career to another.
4. Making career choices and decisions – the traditional focus of careers
interventions. The changed
nature of work means that individuals may now have to revisit this process
more frequently now
and in the future, more than in the past.
5. Managing the organizational career – concerns the career management
tasks of individuals within
the workplace, such as decision-making, life-stage transitions, dealing with
stress etc.
6. Managing ‘boundary less’ careers – refers to skills needed by workers
whose employment is
beyond the boundaries of a single organization, a work style common
among, for example, artists
and designers.
7. Taking control of one’s personal development – as employers take less
responsibility, employees
need to take control of their own development in order to maintain and
enhance their employability.
Career development, as both a field of study and a practical form of training
for workers, is primarily
concerned with producing better employees and maximizing employee
potential. Career development
programs can help the unemployed find jobs or provide workers with the
skills and tools they need to
advance within a government agency, corporation or organization.
Self-Awareness- One of the major objectives of any career development
program is a heightened sense
of self-awareness for participants. Employees should be able to identify their
strengths and weaknesses, in
order to apply their skills more effectively. Understanding shortcomings is
also useful in teaching employees
where to focus efforts toward improvements. Self-awareness is also related
to understanding the difference
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between real and perceived career advancement limitations. By examining
available opportunities and
making an honest assessment of an employee’s skills, career development
seeks to give every employee
a realistic outlook on the future.
Flexibility- Career development also sets enhanced flexibility as a goal.
Employees work in a changing
world and adaptation is an essential skill. This may mean abandoning
practices that have worked in the
past, or devoting time to education and new training. Employees who find
themselves unable to adapt in a
changing workplace may suffer from decreased productivity or be unable to
compete with workers whose
skills are more flexible and easier to apply across a range of tasks.
Education- Education is among the more straightforward objectives of
career development. Such programs
attempt to give employees, or prospective employees, access to information
about job opportunities and
options for skills training. Following up with such employees is an important
objective as well, since this
gives those who work in career development a way of measuring the
program’s effectiveness.
Sensitivity to Diversity- Many career development programs make
sensitivity to diversity in the
workplace a top priority. With ever-increasing globalization, workers are
frequently put into contact with
members of different backgrounds and cultures. Understanding the value of
diverse work habits and
viewpoints can prevent this from becoming a point of confusion or
misunderstanding. At the same time,
educating workers about the customs and concerns of others can help
prevent social problems or
embarrassment in a diverse workplace.
7.6.2 Process
Career development and the career planning process include a number of
specific steps that help to
identify personal skills and attributes. Finding out how those skills can be
utilized in the job market is
accomplished by researching a number of career fields that are of interest to
you and then by gaining
experience in those fields and/or speaking to people currently working in the
field. Participating in some
form of experiential education will help you to identify if the field is the right
choice for you.
Step #1: Self-Assessment
Evaluating who you are as a person. This involves taking a personal
inventory of who you are and identifying
your individual values, interests, skills, and personal qualities. What makes
you tick as a person? You will
look at those personal attributes under a microscope and come up with key
qualities you can identify and
use in your search for the perfect career. Career assessments may be
required to promote a better
understanding of personal attributes and skills. Contact your Career Services
Office at your college to
discuss if a career assessment may be right for you.
Self-Assessment Reality Check Goal Setting Action Planning
Figure 7.3 : The Career Management Process
Step #2: Research (Career Exploration)
Obtain an insider’s perspective about the career field you are considering.
Conduct Informational Interviews
in person, phone, or by email. Professionals enjoy sharing their expertise
with people interested in the
93
field. Perform informational interviews with alumni from your college to gain
their perspective of the field
and to listen to what they have to say. This strategy provides firsthand
knowledge from someone currently
working in the field and gives you an opportunity to ask about their
experiences as well as potential jobs
and what one might expect if just entering the field. Gain experience through
internships or by job shadowing
for one to several days to see what a typical work day entails and to gain
perspective of what the environment
is like and the typical job responsibilities of someone working in the field.
Research what types of jobs are
available in your area of interest by checking out Majors to Career Converter,
The Occupational Outlook
Handbook and The Career Guide to Industries. The Occupational Outlook
Handbook offers a wealth of
information for those currently just entering the job market and for those
anticipating making a career
change.
Step #3: Decision-Making
Once you’ve made a thorough self-assessment and have done some
research of career options, it’s time
to make a decision. This can be difficult since there may still be many
unknowns and a fear of making the
wrong choice. One thing for sure is that although we can do all the necessary
steps to making an informed
decision, there is no absolute certainty that we are unquestioningly making
the right decision. This uncertainty
is easier for some people than others but a key point to remember is that
you can always learn from any
job you have and take those skills and apply them at your next job.
Step#4: Search (Taking Action)
It’s now time to look for prospective jobs and/or employers, send out cover
letters and resumes, and
begin networking with people in the field. Keep in mind that cover letters and
resumes are designed to
make a favorable impression on employers (if done properly) and the
interview process is what will
ultimately land you the job. In other words, make sure your cover letter and
resume highlight your skills
and strengths based on the employer’s needs and that you are fully
prepared to knock their socks off at
the interview. Take time to research the employer’s website prior to the
interview, and be prepared to ask
thoughtful questions based on your research.
Step #5: Acceptance
Wow! You’ve completed all of the steps above and you’ve been accepted
into a new and exciting or
different job. Congratulations! According to the Bureau of Labor Statistics,
64.1% of people change jobs
between 5 and 14 times in their lifetime. Consequently, learning the skills
above will increase your chances
of gaining meaningful and satisfactory work as well as help you to avoid
many of the stresses that occur
with changing jobs. By recognizing that change is good (even
advantageous), changing jobs can be viewed
as a positive experience and need not be as anxiety provoking as it may
initially seem. You will continue the
process of self-assessment, research, decision-making, and job searching in
order to make effective and
fulfilling career changes throughout your lifetime.
It is a known fact that most professionals leave an organization due to lack of
career growth. Active career
development initiatives by a company are a key retention tool to keep the
best talent within its fold. It is
one of the greatest motivators to keep an employee happy and engaged. But
does career planning and
development of employees actually make a difference to the productivity of
a worker? Most organizations
think so, and consider it a part of their critical human resource strategy.
From the employees’ point of view
career development initiatives gives them a clear focus about their career
track, the blind spots that they
have to overcome and the final goal to be reached. This focused approach
works to their advantage from
their everyday work to long-term aspirations.
The impact of career development/ succession planning programmes can be
seen through the productivity
indicator, engagement surveys and reduction in attrition rate. It is in fact a
win-win situation for all.
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7.7 Summary
Executive development plays a crucial role in HRM. It is the managers /
executives who can determine the
destiny of the organization by strategizing, implementing the strategies, and
more importantly, leading the
employees to higher levels of efficiency and performance. The unit begins
with an introduction to the
emerging scenario, explains the process of the executive development
programme (EDP) in the overall
organizational context and also the various stages involved. It explains the
factors influencing executive
development. Executive development and its inter-relationship with e-
learning, and the methods and
techniques involved in executive development have been discussed. The
factors involved in the design and
development of EDP have been discussed in brief and the EDP has been
viewed in the context of organization
development. The process of planning for the employee from the time of
joining to the time of retirement.
It also helps in understanding career management from the organization and
individual prospective. It also
attempts to bring out the differences between career and job, identifies the
steps in career planning, and
analyses the steps that need to be taken from the individual and employee’s
point of view for career
success.
7.8 Self Assessment Questions
1. What do you mean by the importance of executive development?
2. Analyse the process involved in the designing and development
programmes?
3. Explain the importance and process of career planning?
4. Briefly explain the advantages of career planning in detail?
5. Explain the methodologies of making the evaluation process more
objective.
7.9 Reference Books
- Bee, F. and Bee, R. (1994); ‘Training Needs Analysis and Evaluation’;
Chartered Institute of
Personnel.
- Dessler, G. (2000); ‘Human Resource Management’; Prentice Hall, New
York.
- Grundy, T. and Brown, L.(2003); ‘Value-based Human Resource Strategy;
Elsevier, Boston.
- Mabey, C. and Salaman, G. (2000); ‘Strategically Managing Human
Resources’; Infinity Books,
New Delhi.
- Rao, V.S.P. (2001); ‘Managing Human Resources- Text and Cases, Excel
Books, New Delhi.
- Thite, M. (2004); Managing People in the New Economy, Sage Publications,
New Delhi.
- Aswathappa K.(2009) “Human Resource and Personal Management” – Text
and Cases, Tata
McGraw Hill Publishing Company Ltd., New Delhi.
- Chhabra T.N. “Human Resources Management – Concepts and Issues,
Fourth Edition”, Shampat
Rai & Co., Delhi.
- Gupta, C. B. (2004), “Human Resource Management”, Sixth Edition, Sultan
Chand & Sons,
New Delhi.
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Unit - 8 : Performance Appraisal
Structure of Unit:
8.0 Objectives
8.1 Introduction
8.2 Meaning of Performance Appraisal
8.3 Need and Importance of Performance Appraisal
8.4 Objectives of Performance Appraisal
8.5 Methods of Performance Appraisal
8.6 The Performance Appraisal Process
8.7 Factors Affecting Performance Appraisal
8.8 Benefits of Performance Appraisal
8.9 Problems of Performance Appraisal
8.10 Performance Appraisal Practices in India
8.11 Effective Performance Appraisal
8.12 Summary
8.13 Self Assessment Questions
8.14 Reference Books
8.0 Objectives
After completing this unit, you will be able to:
 Understand the concept of performance appraisal;
 State the meaning and importance of performance appraisal;
 Discuss the benefits and problems of appraisal;
 Enumerate the steps in performance appraisal process;
 Outline the objectives of performance appraisal;
 Describe various appraisal methods;
 Outline few performance appraisal practices in India:
8.1 Introduction
In a casual sense, performance
appraisal is as old as mankind itself. In an official sense, performance
appraisal of an individual began in the Wei dynasty (AD. 261-265) in China,
where an Imperial Rater
appraised the performance of the official family’. In 1883, the New York City
Civil Service in USA
introduced a official appraisal programme shortly before World War .
However, official appraisal of
employees’ performance is thought to have been started for the first time
during the First World War,
when at the instance of Walter Dill Scott, the US Army: adopted the “Man-to-
man’ rating system for
evaluating personnel. For being fair and unbiased, in judging the employee it
is necessary to review the
performance of the person in the organization. This is now done in a
systematic way in most countries of
the world. The evaluation of an individual’s performance in the organization
is called Performance Appraisal.
The, system of performance appraisal compels the management to have a
promotion policy within the
organization. It also gives motivation to those employees who are efficient
and are capable of working in
a best way. An organization’s goals can be achieved only when people within
the organization give their
best efforts. How to know whether an employee has shown his or her best
performance on a given job?
The answer is performance appraisal.
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In the organization context performance appraisal is an evaluation of
personnel in a systematic way by
superiors or others familiar with their performance. It is also described as
merit rating in which one individual
is ranked as better or worse in comparison to others. The basic purpose in
this merit rating is to determine
an employee’s eligibility for promotion. However, performance appraisal is a
broad term and it may be
used to ascertain the need for training and development, salary increase,
transfer, discharge, etc. besides
promotion.
In simple terms, performance appraisal may be understood as the review of
an individual’s performance in
an orderly way, the performance is measured by considering factors like job
knowledge, quality and
quantity of output, initiative, leadership abilities, supervision, dependability,
co-operation, judgment,
versatility, health, and the like. Evaluation should not be restricted to past
performance alone but, the
future performances of the employee should also be assessed.
8.2 Meaning of Performance Appraisal
Performance appraisal system has been defined in many ways. The easiest
way to understand the meaning
of performance appraisal is as follows:
It is the systematic assessment of an individual with respect to his or her
performance on the job and his or
her potential for development in that job. Thus, performance appraisal is a
systematic and objective way
of evaluating the relative worth or ability of an employee in performing his
job. The two aspects of
performance appraisal considered to be important are: systematic and
objective. The appraisal is said to
be systematic when it evaluates all performances in the same manner, by
applying the same approach, so
that appraisal of different persons are comparable. Such an appraisal is
taken from time to time according
to plan; it is not left to probability. Thus, both raters’ and ratees know the
system of performance
appraisal
and its timing. Appraisal has objectivity also. It’s important aspect is that it
attempts at precise measurement
by trying to remove human biases and prejudices.
According to Flippo, a prominent personality in the field of Human
resources, “performance appraisal is
the systematic, periodic and an impartial rating of an employee’s excellence
in the matters pertaining to his
present job and his potential for a better job.”
In the words of Yoder, “Performance appraisal refers to all formal
procedures used in working organizations
to evaluate personalities and contributions and potential of group members.”
Thus performance appraisal
is a formal programme in an organization which is concerned with not only
the contributions of the members
who form part of the organization, but also aims at spotting the potential of
the people.”
It is a systematic way of judging the relative worth of an employee while
carrying out his work in an
organization. It also helps recognize those employees who are performing
their tasks well and also- who
are not performing their tasks properly and the reasons for such (poor)
performance.
According to International Labor Organization, “A regular and
continuous evaluation of the quality,
quantity and style of the performance along with the assessment of the
factors influencing the performance
and behavior of an individual is called as performance appraisal.”
In short, we can say that performance appraisal is expected to result in an
assessment of: development
potential of the employees, training needs for the employees; capabilities of
employees being placed in
higher posts, behavior and obedience of the employees; and the need of the
organization to evolve a
control mechanism.
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8.3 Need and Importance of Performance Appraisal
Performance is always measured in terms of outcome and not efforts.
Performance Appraisal is needed in
most of the organizations in order:
(1) To give information about the performance of employees on the job and
give ranks on the basis of
which decisions regarding salary fixation, demotion, promotion, transfer and
confirmation are
taken.
(2) To provide information about amount of achievement and behavior of
subordinate in their job.
This kind of information helps to evaluate the performance of the
subordinate, by correcting
loopholes in performances and to set new standards of work, if required.
(3) To provide information about an employee’s job-relevant strengths and &
weaknesses.
(4) To provide information so as to identify shortage in employee regarding
ability, awareness and
find out training and developmental needs.
(5) To avoid grievances and in disciplinary activities in the organization.
(6) It is an ongoing process in every large scale organization.
Performance appraisals in an organization provide employees and managers
with an opportunity to converse
in the areas in which employees do extremely well and those in which
employees need improvement.
Performance appraisals should be conducted on a frequent basis, and they
need not be directly attached
to promotion opportunities only. It is important because of several reason s
such as:
1. Personal Attention: Performance appraisal evaluation, gives employee
to draw personal concern
from supervisor and talk about their own strengths and weaknesses.
2. Feedback: Employees on a regular basis get feedback of their
performances and issues in which
they lack, which needs to be resolved on a regular basis.
3. Career Path: It allows employees and supervisors to converse goals that
must be met to grow
within the company. This may encompass recognizing skills that must be
acquired, areas in which
improvement is required, and additional qualification that must be acquired.
4. Employee Accountability: Employees are acquainted that their
evaluation will take place on a
regular basis and therefore they are accountable for their job performance.
5. Communicate Divisional and Company Goals: It not only
communicates employees’ individual
goals but provides an opportunity for managers to explain organizational
goals and in the manner
in which employees can contribute in the achievement of those goals.
8.4 Objectives of Performance Appraisal
Performance appraisal in any organization is undertaken to meet certain
objectives which may be in the
form of salary increase, promotion, recognizing training and development
needs, providing feedback to
employees and putting stress on employees for better performance.
An employee in an organization may think that performance appraisal is
basically used by the organization
to blame employees and to take corrective actions. An employee may feel
that performance appraisal is
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introduced in an organization for punishment in such a case well thought out
performance appraisal may
results into failure. If the objectives set in a more positive, problems may
arise as they may not all be
achievable and they may cause conflict. For Example, an employee who is
likely to be appraised will
never discloses his loopholes as it may affect his appraisal. Thus the
objective of performance appraisal
should e clear and specific. Thus including objectives into the appraisal
system may draw attention to
areas for improvement, new directions and opportunities.
1. Salary Increase: Performance appraisal plays an important role in
making decision about increase
in salary. Increase in salary of an employee depends on how he is performing
his job. Evaluation
of an employee takes place on a continuous basis which may be formally or
informally. In a large
as well as in small organizations performance appraisal takes place but it
may be in a formal or
informal way. It shows how well an employee is performing and to what
extent a hike in salary
would take place in comparison to his performance.
2. Promotion: Performance appraisal gives an idea about how an employee
is working
in his present
job and what his strong and weak points are. In comparison to his strength
and weaknesses it is
decided whether he can be promoted to the next higher position or not. If
necessary what additional
training is required. Similarly it could be used for demotion, discharge of an
employee and transfer.
3. Training and Development: Performance appraisal gives an idea about
strengths and weaknesses
of an employee on his present job. It gives an idea about the training
required by an employee for
overcoming the limitations that an employee is having for better
performance in future.
4. Feedback: Performance appraisal gives an idea to each employee where
they are, how they are
working, and how are they contributing towards achievement of
organizational objectives. Feed
works in two ways. First, the person gets view about his performance and he
may try to conquer
his weaknesses which may lead to better performance. Second, the person
gets satisfied after he
relates his work with organizational objectives. It gives him an idea that he is
doing a meaning full
work and can also contribute in a better way.
5. Pressure on Employees: Performance appraisal puts a sort of stress on
employees for better
performance. If the employees are aware that they are been appraised in
comparison to their
performance and they will have positive and acceptable behaviour in this
respect
Activity A:
1. Currently you are working in a manufacturing organization. Write the
objectives of performance
appraisal of your organization in the light of those mentioned above.
8.5 Methods of Performance Appraisal
Performance appraisal methods are categorized in two ways traditional and
modern methods. Each
organization adopts a different method of performance appraisal according
to the need of organization. In
small organization, it may be on an informal basis where personal opinion of
a superior about his
subordinates
may consider for appraisal.
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1. Ranking Method: It is the oldest and simplest method of performance
appraisal in which employees’
are ranked on certain criteria such as trait or characteristic. The employee is
ranked from highest to lowest
or from worst to best in an organization. Thus if there are seven employees
to be ranked then there will be
seven ranks from 1 to 7.
Rating scales offer the advantages of flexibility comparatively easy use and
low cost. Nearly every type of
job can be evaluated with the rating scale, the only condition being that the
Job-performance criteria
should he changed’ .In such a way, a large number of employees can be
evaluated in a shorter time period.
Thus, the greatest limitation of this method is that differences in ranks do
not indicate how much an
employee of rank 1 is better than the employee whose rank is last.
2. Paired Comparison: In method is comparatively simpler as compared to
ranking method. In this
method, the evaluator ranks employees by comparing one employee with all
other employees in the
group. The rater is given slips where, each slip has a pair of names, the rater
puts a tick mark next those
employee whom he considers to be the better of the two. This employee is
compared number of times so
as to determine the final ranking.
This method provides comparison
of persons in a better way. However, this increases the work as the
large number of comparisons
has to be made. For example, to rank 50 persons through paired comparison,
there will be 1,225 comparisons. Paired comparison method could be
employed easily where the numbers
of employees to be compared are less.
This may be calculated by a formula N (N — 1)12 where N is the total
number of persons to be compared.
Where N is the total number of persons to be evaluated.
For example
If the following five teachers have to be evaluated by the Vice Chanceller of
a University : Chinmay ( c),
Mohan (M), Rohit (R), Vishal (V), and Basanti (B), the above formula gives
5 (5— 1)/2 or 10 pairs. These are;
Table 8.2 Methods of Performance Appraisal
Traditional Methods Modern Methods
Ranking method Management by Objectives (MB0)
Paired comparison Behaviorally anchored rating scales
Grading method Assessment centers
Forced distribution method 360-degree appraisal
Forced choice method Cost accounting method
Checklist method
Critical incidents method
Graphic scale method
Essay method
Field review method
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CwithM,
CwithR MwithR
CwithV MwithV RwithV
CwithB MwithB RwithB VwithB
Thus, the pairs to be compared give the maximum possible combinations in
which an employee could be
compared with one another. If an employee sores better number of times as
compared to other employee
is considered better, makes his/her score. Such scores are considered for
each worker and he/she is
ranked according to his/her score. This method cannot work when large
number of employee is compared.
3. Grading Method: In this method, certain categories are defined well in
advance and employees are
put in particular category depending on their traits and characteristics. Such
categories may be defined as
outstanding, good, average, poor, very poor, or may be in terms of alphabet
like A, B, C, D, etc. where
A may indicate the best and D indicating the worst. This type of grading
method is applied during Semester
pattern of examinations. One of the major limitations of this method is that
the rater may rate many
employees on the better side of their performance.
4. Forced Distribution Method: This method was evolved to abolish the
trend of rating most of the
employees at a higher end of the scale. The fundamental assumption in this
method is that employees’
performance level conforms to a normal statistical distribution. For example,
10 per cent employees may
be rated as excellent, 40 per cent as above average, 20 per cent as average,
10 per cent below average,
and 20 per cent as poor. It eliminates or minimizes the favoritism of rating
many employees on a higher
side. It is simple and easy method to appraise employees. It becomes
difficult when the rater has to
explain why an employee is placed in a particular grouping as compared to
others.
5. Forced-choice Method: The forced-choice rating method contains a
sequence of question in a
statement form with which the rater checks how effectively the statement
describes each individual being
evaluated
in the organization. There may be some variations in the methods and
statements used, but the
most common method of forced choice contains two statements both of
which may be positive or negative.
It may be both the statement describes the characteristics of an employee,
but the rater is forced to tick
only one i.e the most appropriate statement which may be more descriptive
of the employee. For example,
a rater may be given the following two statements:
(i) The employee is hard working.
(ii) The employee gives clear instructions to his subordinates.
Though both of them describe the characteristics of an employee,
the rater is forced to tick only one
which appears to be more descriptive of the employee. Out of these two
statements, only one statement
is considered for final analysis of rating. For example, a rater may be given
the following two statements:
(i) The employee is very sincere.
(ii) Employee gives clear and fast instructions to his subordinates.
Both of the above statements are positive but the rater is supposed to rate
only one which is more
appropriate of subordinate’s behavior. For ranking only one statement is
considered .As the rater is not
aware about the statement to be considered the result would be free from
bias. This method may be more
objective but it involves lot of problems in framing of such sets of
statements.
6. Check-list Method: The main reason for using this method is to reduce
the burden of evaluator. In
this method of evaluation the evaluator is provided with the appraisal report
which consist of series of
questions which is related to the appraise. Such questions are prepared in a
manner that reflects the
behavior of the concerned appraise. Every question has two alternatives, yes
or no, as given below:
1. Is he/she respected by his/her subordinates? Yes/No
2. Is he/she ready to help other employees? Yes/No
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3. Does her behavior remain same for everyone in the organization? Yes/No
The concerned
rater/evaluator has to tick appropriate answers relevant to the appraises.
When the check-list is finished, it is sent to the personnel department to
prepare the final scores for all
appraises based on all questions based on yes or no. While preparing
question effort is made to establish
the level of consistency of the rater by asking the same question twice but in
a different manner. This
method is considered to be easy if questions are framed properly for
different categories of employees.
However, one of the disadvantages of the check-list method is that it is very
difficult to accumulate,
analyze and evaluate a number of statements about employee
characteristics and contributions. It is even
costly method with lot of time and efforts required by the organization.
7. Critical Incidents Method: This method is very useful for finding out
those employees who have the
highest potential to work in a critical situation. Such an incidence is very
important for organization as they
get a sense, how a supervisor has handled a situation in the case of sudden
trouble in an organization,
which gives an idea about his leadership qualities and handling
of situation. It is also said to be a continuous
appraisal method where employees are appraised continuously by keeping in
mind the critical situation. In
this method, only the case of sudden trouble and behavior associated with
these incidents or trouble are
taken for evaluation.
This method is categorized in three steps. First, a list of notable (good or
bad) on-the-job behavior of
specific incidents or sudden trouble is prepared. Second, selected experts
would then assign weightage or
score to these incidents according to how serious a particular incident is and
their degree of willingness to
perform a job. Third, finally a check-list indicating incidents that illustrate
workers as good or “bad” is
formed. Then, the checklist is given to the rater for evaluating the workers.
The strong point of critical incident method is that it focuses on behaviors
and, thus, judge’s performance
rather than personalities.
Its drawbacks are that too frequently they need to write down the critical
incidents which is very timeconsuming
and burdensome for evaluators, i.e., managers. Generally, negative incidents
are more noticeable
than positives.
8. Graphic Scale Method: It is one of the simplest and most popular
techniques for appraising
performances of employee. It is also known as linear rating scale. In graphic
rating scale the printed
appraisal form is used to appraise each employee.
Such forms contain a number of objectives, and trait qualities and characters
to be rated like quality of
work and amount of work, job knowhow dependability, initiative, attitude,
leadership quality and emotional
stability.
The rater gives an estimate the extent to which subordinates possess each
quality. The extent to which
quality is possessed is measured on a scale which can vary from three points
to several points. In general
practice five-point scales is used. Some organizations use numbers in order
to avoid the propensity of the
rater to tick mark central points. It may be numbered or defined. Thus
numbers like 5, 4, 3, 2 and 1 may
denote points for various degrees of excellent-poor, high-low, or good-bad,
and so on. Such numbers
may be expressed in terms like excellent, very good, average, poor and very
poor; or very high, high,
average, low and very low.
Graphic scale method is good for measuring various job behaviors of an
employee. But, it is bound to
limitations of rater’s bias while rating employee’s behavior at job.
102
9. Essay Method: In this method, the rater writes a detailed description on
an employee’s characteristics
and behavior, Knowledge about organizational policies, procedures and
rules, Knowledge about the job,
Training and development needs of the employee, strengths, weakness, past
performance, potential and
suggestions for improvement. It is said to be the encouraging and simple
method to use. It does not need
difficult formats and specific training to complete it.
10. Field Review Method: In this method of appraisal direct superior is not
going to appraise an
employee but appraised by another person, usually, from personnel
department .The rater, in such a
case, appraises the employee on the basis of his past records of productivity
and other information such
as absenteeism,
late corning, etc. It is more suitable in a situation where an organization
wants to provide
promotion to an employee. It also gives information for comparing
employees from different locations and
units. It reduces partiality to some extent as personnel department person is
supposed to be trained in
appraisal mechanism. This method suffers from two limitations:
1. As employees are not rated by immediate boss, the rater from other
department may not be
familiar with the conditions in an employee’s work environment which may
hamper his ability and
work motivation to perform.
2. The rater from other department do not get a chance to scrutinize the
employee’s behavior or
performance with different time interval and in a variety of situations, but
only in an unnaturally
structured interview situation which is for a very short period of time.
Modern Methods
1. Management by Objectives (MB0): The concept of ‘Management by
Objectives’ (MBO) was
coined by Peter Drucker in 1954. It is a process where the employees and
the superiors come together to
identify some goals which are common to them, the employees set their own
goals to be achieved, the
benchmark is taken as the criteria for measuring their performances and
their involvement is there in
deciding the course of action to be followed.
The basic nature of MBO is participative, setting their goals, selecting a
course of actions to achieve goals
and then taking decision. The most important aspect of MBO is measuring
the actual performances of the
employee with the standards set by them. It is also said to be a process that
integrates organizational
objectives into individual objectives.
Entire program me of MBO is divided in four major steps i.e setting up of
goal, action planning, comparison
and timely review.
Setting up of goal-In goal setting superior and subordinate together set
certain goals, i.e the expected
outcome that each employee is supposed to achieve.
In action planning, the manner in which goals could be achieved is
determined i.e. identifying the activities
which are necessary to perform; to achieve pr determined goals or
standards. When the employees start
with their activities, they come to know what is to be done, what has been
done, and what remains to be
done and it also gives an idea about the resources to be achieved.
In the third step, the goals set by the individual employee are compared with
the actual goals achieved. It
gives an idea to the evaluator as why there is a variation in desired outcome
and actual outcome .Such a
comparison helps create need for training so as to enhance employees’
performance. Finally, in the timely
review step, corrective actions are taken so that actual performances do not
deviates from standards
established in beginning.
The main reason for conducting reviews is not to humiliate the performer but
to assist him in better
performances in future. Few advantages of MBO are a) it is outcome –
oriented. It co-ordinates the
103
planning and control functions and provides motivation) Employees are clear
about the task that they are
expected to perform and also how they may be evaluated.MBO do have
certain limitations such as it is
time consuming, employees and the superiors jointly setting the goals may
lead to conflict as employee
would always like to set lower goal and the superior would like to set it on
the higher side, lack of
confidence in employee by management.
2. Behaviorally Anchored Rating Scales: This method is a combination of
traditional rating scales and
critical incidents methods. It consists of preset critical areas of job
performance or sets of behavioral
statements which describes the important job performance qualities as good
or bad (for e.g. the qualities
like inter personal relationships, flexibility and consistency, job knowledge
etc). These statements are
developed from critical incidents.
These behavioral examples are then again translated into appropriate
performance dimensions. Those that
are selected into the dimension are retained. The final groups of behavior
incidents are then scaled numerically
to a level of performance that is perceived to represent. A rater must
indicate which behavior on each
scale best describes an employee’s performance. The results of the above
processes are behavioral
descriptions, such as anticipate, plan, executes, solves immediate problems,
carries out orders, and handles
urgent situation situations. This method has following advantages: a) It
reduces rating errors) Behavior is
assessed over traits. c) It gives an idea about the behavior to the employee
and the rater about which
behaviors bring good Performance and which bring bad performance.
3. Assessment Centres: It is a method which was first implemented in
German Army in 1930. With the
passage of time industrial houses and business started using this method.
This is a system of assessment
where individual employee is assessed by many experts by using different
technique of performance
appraisal. The techniques which may be used are role playing, case studies,
simulation exercises,
transactional analysis etc.
In this method employees from different departments are brought together
for an assignment which they
are supposed to perform in a group, as if they are working for a higher post
or promoted. Each employee
is ranked by the observer on the basis of merit .The basic purpose behind
assessment is to recognize
whether a particular employee can be promoted, or is there any need for
training or development. This
method has certain advantages such as it helps the observer in making
correct decision in terms of which
employee has the capability of getting promoted, but it has certain
disadvantages also it is costly and time
consuming, discourages the poor performers etc.
4. 360 Degree Performance Appraisals: This method is also known as
‘multi-rater feedback’, it is the
appraisal in a wider perspective where the comment about the employees’
performance comes from all
the possible sources that are directly or indirectly related with the employee
on his job.
In 360 degree performance appraisal an employee can be appraised by his
peers, managers (i.e. superior),
subordinates, team members, customers, suppliers/ vendors - anyone who
comes into direct or indirect
contact with the employee and can provide necessary information or
feedback regarding performance of
the employee the “on-the-job”.
The four major component of 360 degree performance appraisal are
1. Employees Self Appraisal
2. Appraisal by Superior
3. Appraisal by Subordinate
4. Peer Appraisal.
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Employee self appraisal gives an option to the employee to know his own
strengths and weaknesses, his
achievements, and judge his own performance. Appraisal by superior forms
the traditional part of the 360
degree performance appraisal where the employees’ responsibilities and
actual performance is judged by
the superior.
Appraisal by subordinate gives a chance to evaluate the employee on the
basis of communication and
motivating abilities, superior’s ability to delegate the work, leadership
qualities etc. It is also known as
internal customers; the correct opinion given by peers can aid to find
employees’ who are co-operative,
employees who ready to work in a team and understanding towards others.
5. Cost Accounting Method: In this method performance of an employee
is evaluated on the basis of
monetary returns the employee gives to his or her organization. A
relationship is recognized between the
cost included in keeping the employee in an organization and the benefit the
organization gets from him or
her. The evaluation is based on the established relationship between the cost
and the benefit. The following
factors are considered while evaluating an employee’s performance:
1. Interpersonal relationship with others.
2. Quality of product produced or service given to the organization.
3. Wastage, damage, accidents caused by the employee.
4. Average value of production or service by an employee.
5. Overhead cost incurred.
Activity B:
1. In the light of above mentioned methods of Performance Appraisal select
any company
of your choice and identify the method used by that company.
8.6 The Performance Appraisal Process
The performance appraisal system of one organization may vary from other
organizations, though some of
the specific steps that an organization may follow are as follows:
1. Establish Performance Standards: It begins by establishing
performance standards i.e. what
they expect from their employee in terms of outputs, accomplishments and
skills that they will
evaluate with the passage of time. The standards set should be clear and
objective enough to be
understood and measured. The standards which are set are evolved out of
job analysis and job
descriptions. Standards set should be clear and not the vague one. The
expectation of the manager
from his employee should be clear so that it could be communicated to the
subordinates that they
will be appraised against the standards set for them.
2. Communicating the Standards Set for an Employee: Once the
standards for performance
are set it should be communicated to the concerned employee, about what it
expected from them
in terms of performance. It should not be part of the employees’ job to
estimate what they are
expected do. Communication is said to be two ways street, mere passing of
information to
subordinate does not mean that the work is done. Communication only takes
place when the
information given has taken place and has been received and understood by
subordinate. . If
necessary, the standards may be tailored or revised in the light of feedback
obtained from the
employees.
3. Measuring of the Actual Performances: It is one of the most crucial
steps of performance
appraisal process. It is very important to know as how the performance will
be measured and
what should be measured, thus four important sources frequently used by
managers are personal
observation, statistical reports, oral reports, and written reports. However,
combination of all
105
these resources gives more reliable information. What we measure is
probably more critical to the
evaluation process than how we measure. The selection of the incorrect
criteria can result in
serious consequences. What we measure gives an idea about what people in
an organization will
attempt to achieve. The criteria which are considered must represent
performance as stated in the
first two steps of the appraisal process.
4. Comparing Actual Performance with Standards Set in the
Beginning: In this step of
performance appraisal the actual performance is compared with the
expected or desired standard
set. A comparison between actual or desired standard may disclose the
deviation between standard
performance and actual performance and will allow the evaluator to carry on
with the discussion
of the appraisal with the concerned employees.
5. Discussion with the Concerned Employee: In this step performance of
the employee is
communicated and discussed. It gives an idea to the employee regarding
their strengths and
weaknesses. The impact of this discussion may be positive or negative.
The impression that subordinates receive from their assessment has a very
strong impact on their
self esteem and, is very important, for their future performances.
6. Initiate Corrective Action: Corrective action can be of two types; one is
instant and deals
primarily with symptoms. The other is basic and deals with the causes.
Instant corrective action is
often described as “putting out fires”, where as basic corrective action gets
to the source from
where deviation has taken place and seeks to adjust the differences
permanently. Instant action
corrects something right at a particular point and gets things back on track.
Basic action asks how
and why performance deviated. In some instances, managers may feel that
they do not have the
time to take basic corrective action and thus may go for “perpetually put out
fires.
Thus the appraisal system of each organization may differ as per the
requirement of that Organization.
Activity C:
1 Assume you are currently operating an appraisal system in your
organization. How will you carry
out the appraisal process in your organization?
8.7 Factors Affecting Performance Appraisal
There are various factors which may influence the performance appraisal
system in any organization.
There are some factors which introduce bias whereas; some other factors
hinder purposeful assessment.
Such factors are as follows:
1. Value System of Evaluator: The task of evaluator is to assess the work
of subordinate and
write reports of the same. They are projected to do this for some purposeful
assessment. It
happens that evaluator sometime judges the performance on the basis of
their own value system.
Each person has his own value system and socio-cultural environment.
Mostly, it is found that the
reports are influenced by the evaluator’s value-system. This subjective
element has lot of impact
on final report.
2. Dominant Work Orientation: The performance Appraisal Report of a
subordinate is prepared
by a superior is found to have an impact by the dominant work orientation of
the superior officer.
Sometimes there is more emphasis on certain aspect of the work as
compared to other aspect
which may be equally important by the superior. It introduces subjectivity
performance appraisal
system. A superior may evaluate the subordinate on the basis of following
elements:
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a) Inclination for work of dynamic nature.
b) Liking for routine work and strict maintenance of.
c) Importance on inter-personal relations and rank.
d) Emphasis on qualities which do not have much functional utility; and
e) Emphasis on consistency to some philosophy.
These elements bring subjectivity in the process of evaluation, influence the
judgment of the superior
and distort the evaluation of performance of the subordinates.
3. Loyalty: It plays a vital role in evaluating employee. An Employee shows
loyalty due to many
reasons such as common values, objectives, emotional needs, interests,
caste, religion, language
or region. Loyalty brings the superior and the loyal subordinate closer and
closer to each other,
and creates distance between those employee who are not loyal to their
superior. This makes
assessment of superior to be biased.
4. Level of Achievement: Subordinates evaluation may also depend on the
level of achievement of
the superior. If there is a vast difference between the level of achievement of
the superior and
Subordinate, then it can create problems of adjustment and purpose for
which evaluation is done
is not achieved.
5. Factors Hindering Objective Assessment: There are various factors
which obstruct the
objective appraisal of the performance of the subordinates. These factors are
as follows:
a) Superiority complex of the superior reporting officer.
b) Overall performance assessment do not take place only certain incidence
are assessed.
c) Past-record of the subordinate.
d) Personality of the subordinate.
g) Ability of the subordinate to exercise influence at higher level.
8.8 Benefits of Performance Appraisal
An effective performance appraisal system can be of benefit to three parties
they are for organization, for
appraiser and for appraisee.
1) For the Organizations: Following are the benefits of an organization.
 It leads to better performance throughout the organization, due to
successful communication of
the objectives and values of the organizations, sense of being close to the
organization, loyalty and
improved relationships between managers and staff.
 Overall improvement in the duties performed by each employee of the
organization.
 Due to performance appraisal of employee new ideas for improvement in
their work is generated.
 Long-term plans can be generated.
 The need for training and development can be identified more clearly.
 A traditions of nonstop improvement and success in the organization can
be formed and maintained.
 Career development plans can be chalked out for capable employee to
enhance their performance
in future.
2) For the appraiser: Following are the benefits to the appraiser:
 It gives an opportunity to the appraiser to develop a general idea of
individual jobs and departments.
 For every new or difficult situation new idea is generated for improvement
or for overcoming that
problem.
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 It gives an opportunity to integrate team and individual objectives and
targets with departmental
and organizational objectives.
 It gives an opportunity to explain the amount of work expected by
manager from teams and
individuals.
 It gives an opportunity to focus more on targets.
 It enables to form more productive relationship with staff based on mutual
trust and understanding.
3) For the Appraisee: Following are the benefits for the appraisee:
 Increased motivation.
 Increased job satisfaction.
 Increased sense of personal value.
 Increase in morale of an employee.
 It gives an opportunity to know their strength and weaknesses.
 It gives an idea about areas of their improvement.
 There will be a chance to subordinate to express his views even after
performance appraisal
 An employee should express his emotional needs and his value system
which is considered
to be important today.
Activity D:
1 Suppose you are an evaluator (superior) in your organization. List out the
benefit that you
would like to get as an appraiser .
8.9 Problems of Performance Appraisal
Performance appraisal technique is very beneficial for an organization for
taking decisions regarding salary
fixation, demotion, promotion, transfer and confirmation etc.But,it is not
freed from problem In spite of
recognition that a completely error-free performance appraisal can only be
idealized a number of errors
that extensively hinder objective evaluation. Some of these problems are as
follows:
1. Biasness in rating employee: It is the problem with subjective measure i.e.
the rating which will not
be verified by others. Biasness of rater may include:
(a) Halo Effect: It is the propensity of the raters to rate on the basis of one
trait or behavioral
consideration in rating all other traits or behavioral considerations. One way
of minimizing the
halo effect is appraising all the employees by one trait before going to rate
on the basis of another
trait.
(b) The Central Tendency Error: It is the error when rater tries to rate each
and every person on
the middle point of the rating scale and tries not to rate the people on both
ends of the scale that
is rating too high or too low. They want to be on the safer side as they are
answerable to the
management.
(c) The Leniency and Strictness Biases: The leniency biasness exists when
some raters have a
tendency to be generous in their rating by assigning higher rates constantly.
Such ratings do not
serve any purpose.
(d) Personal prejudice: If the raters do not like any employee or any group, in
such circumstances
he may rate him on the lower side of the scale, the very purpose of rating is
distorted which might
affect the career of employees also.
(e) The Recent Effect: The raters usually retain information about the recent
actions of the employee
at the time of rating and rate on the basis of recent action taken place which
may be favorable or
unfavorable at that point of time.
2. The superiors may be unsuccessful in conducting performance appraisal of
employees and post
performance appraisal interviews.
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3. The performance appraisal is mostly based on subjective assessment.
4. The performance appraisal techniques have a low reliability and validity in
terms of result.
5 Ratings an employee on the negative side may disturb interpersonal
relations and industrial relations
system.
6. Appraisers opinion on the performance of the employee may lead to
setback on production.
7. An organization may give emphasis to punishment if an employee has not
done a good job rather
than providing training.
8. Few ratings are based on guess work.
Various other problems of performance appraisal are:
 There was a significant relationship between rating by superior and
performance after promotions.
 Appraisal reports were completed within a short period of time.
 The circumstances were very unpleasant in feedback interview.
 The Subordinates were not given suggestion in a manner which may be
helpful to them.
Activity E:
1 List out the problem faced by you as a subordinate in your organization in
appraising you.
8.10 Performance Appraisal Practices in India
The systematic study of performance appraisal practices in India is very
limited. According to few studies
in India the performance appraisal is mainly undertaken for three objectives
such as (i) to determine
increments in salary; (ii) to assist organizational planning, placement, or
suitability; and (iii) for training and
development purposes. Other objectives of appraisal were: informing
employee where they stand in
organization, follow-up interviews, etc.
Every company uses different criteria to evaluate their employees. There are
basically three groups of
criteria being used for appraisal purpose: (i) evaluation of qualitative
characteristics, such as, intelligence,
reliability, honesty, leadership and attitudes, abilities, etc., evaluation of
actual performance- qualitatively
and quantitatively; and evaluation of development and future potential and
development by an employee
during the period under consideration. Evaluation criteria vary from company
to company. There is vast
deviation in periodicity of appraisal of employees. Few companies appraise
annually, some appraise halfyearly,
and a few quarterly; however, annual appraisal is most common among
many.
Few innovative performance appraisal practices are:
 Managerial personnel are allowed to challenge or appeal appraisal
decisions made by evaluator.
 Employee management skills are important in performance appraisal.
 Personnel department gives a clear instruction of policy and its
implementation.
 Evaluation to be made only on the basis of performance of employee at
work.
 It has also enhanced role clarity in the Organization.
The performance appraisal practice by Dabur India Limited is as follows: The
main purpose of performance
appraisal system is to evaluate the performance of employee, promote their
employees and to make
necessary arrangement for their training needs if required.
Employees are evaluated by how well they accomplish a specific set of
objectives that have been determined
to be critical in the successful completion of their job. This approach is
frequently referred to as Management
by objectives.
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The latest mantra being followed by organizations across the world being –
“get paid according to what
you contribute” – the focus of most of the organizations is turning to
performance management and
specifically to individual performance.
1. The focus of the performance appraisals practice in todays environment is
changing by concentrating
more on career development relying on the dialogues and discussions with
the superiors.
2. Performance measuring, rating and review systems have become more
thorough, structured and
individual employee specific than before.
3. Appraisal through a 360-degree feedback system takes place
4. In India, the performance appraisal processes are faced with a lot of
poblems, the most important
is the need of quantifiable indicators of the performance.
The emergence of following trends related to Performance appraisal
practices can be seen in the global
scenario: 360 degree feedback, Team performance appraisal, Rank and yank
strategy.
1) 360 Degree Feedback: It is also known as ‘multi-rater feedback’, where
the feedback about
the employees’ performance comes from all the sources that come in
contact with the employee
on his job.
2) Team Performance Appraisal: In this method each employee
performance is measured as a
team member as well as individually.
3) Rank and Yank Strategy: It is also known as up or out policy where the
performance appraisal
model is prepared in which best-to-worst ranking methods are used to
identify and separate the
poor performers from the good performers. Then certain plans are chalked
out for improvement.
Some of the organizations following this strategy are Ford, Microsoft and Sun
Microsystems.
8.11 Effective Performance Appraisal
The performance appraisal system is always questioned in terms of its
effectiveness and the problems of
reliability and validity. It is always difficult to know whether what is appraised
is what was supposed to be
appraised. As long as subjective judgment is there this question cannot be
answered perhaps, the following
steps can help improve the system.
a) The supervisors should be told that they themselves will be evaluated on
the basis of how seriously
they are performing their duties.
b) To perform assigned task of evaluation in a better way superior should be
provided with better
training of writing report.
c) To carry out job evaluation studies and prepares job descriptions/roles and
prepares separate
forms for various positions in the organization.
d) The system should be designed in such a way that it is neither difficult to
understand nor impossible
to practice.
e) The supervisor should monitor whether the improvement in performance
in the areas found weak
is taking place or not and, if not, help the employee to achieve the required
improvement.
f) Finally, reviewing, the appraisal systems every now and then help
updating it, and making appropriate
changes in it. This is the most important factor in making performance
appraisal effective, with the
passage of time necessary changes in tasks, abilities and skills to perform
has to be made. If
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changes in the format are not considered the reports may not generate the
kind of result needed to
satisfy appraisal objectives.
The following measures could also be adopted for improving the
effectiveness of an appraisal:
a) Behaviorally Based Measures: The research strongly favors
behaviorally based measures over
those developed around traits. b) Ongoing Feedback: Employees like to
know how they are performing
the duties assigned to them. c) Multiple Raters: If a person is evaluated by
a large no of superior then
chance of getting more frequent information increases d) Peer
Evaluations: Peer evaluations are conducted
by employees’ co-workers, people explicitly familiar with the jobs involved
mainly because they too are
doing the same thing, they are the person who know the co-workers’ day to-
day work behavior and
should get a chance to provide the management with some feedback.
8.12 Summary
In the organizational context performance appraisal is an evaluation of
personnel in a systematic way by
superiors or others familiar with their performance. It is also described as
merit rating in which one individual
is ranked as better or worse in comparison to others. The basic purpose in
this merit rating is to determine
an employee’s eligibility for promotion. However, performance appraisal is a
broad term and it may be
used to ascertain the need for training and development, salary increase,
transfer, discharge, etc. besides
promotion. It is the systematic assessment of an individual with respect to
his or her performance on the
job and his or her potential for development in that job.
Performance appraisals should be conducted on a frequent basis, and they
need not be directly attached
to promotion opportunities only. It is important because of several reason s
such as: Personal Attention,
Feedback, Career Path, Employee Accountability, Communicate Divisional
and Company Goals. Thus,
objectives into the appraisal system may draw attention to areas for
improvement, new directions and
opportunities. The methods of performance appraisal are categorized in two
ways traditional and modern
methods. Each organization adopts a different method of performance
appraisal according to the need of
organization, with each method having its own advantages and drawbacks.
The performance appraisal
system of one organization may vary from other organizations; this may lead
to few changes in appraisal
process. Some of the problems faced in appraising employees are biasness
of rater which may include: (a)
halo effect, (b) central tendency error, (c) the leniency and strictness biases,
(d) personal prejudice, and
(e) the recent effect etc.
The systematic study of performance appraisal practices in India is very
limited. Few innovative performance
appraisal practices are: 1) Managerial personnel are allowed to challenge or
appeal appraisal decisions
made by evaluator.2) Employee management skills are important in
performance appraisal.3) Personnel
department gives a clear instruction of policy and its implementation. 4)
Evaluation to be made only on the
basis of performance of employee at work.5) It has also enhanced role clarity
in the Organization.
The latest mantra being followed by organizations across the world being –
“get paid according to what
you contribute” – the focus of most of the organizations is turning to
performance management and
specifically to individual performance. It is always questioned in terms of its
effectiveness and the problems
of reliability and validity exist which could be improved if the supervisors are
told that they themselves will
be evaluated on the basis of how seriously they are performing their duties,
To perform assigned task of
evaluation in a better way superior should be provided with better training of
writing report. Thus,
performance appraisal is the technique which is essential for every
organization.
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8.13 Self Assessment Questions
1 “Performance appraisal is the systematic evaluation of the individual with
respect to his performance
on the job and his potential for development’’. What are the options open to
you in the design of
a performance appraisal system to achieve this goal?
2 Explain the Performance Appraisal System. Either suggests improvements
to an existing appraisal
system in your organization or design an appraisal system which would meet
the objectives outlines
in this chapter.
3 Does current thinking indicates that appraisal for training should be
conducted separately from
appraisal for promotion?
4 Explain in detail the process of performance appraisal.
5 Write short notes of:
a) Management by objectives
b) Behaviorally Anchored Rating Scale
6 Explain the methods of performance appraisal in detail.
7 “Performance appraisal is not only for appraisal but is for achievement and
improvement of
performance”. Explain.
8 According to you what should be done to have an effective performance
appraisal system in your
organization.
9 Write short notes on:
a) Field review method:
b) Critical incidents method
8.14 Reference Books
· Prasad L.M, (2005); ‘Principles and Practices of Management’; Sultan Chand
and Sons Publisher,
New Delhi.
· P.Subba Rao, (2007); Essentials of Human Resource Management and
Industrial Relations’;
Himalaya publishing House, Mumbai.
· S.S.Khanka, (2008); Human Resource Management; S.Chand& Company
limited’; New Delhi.
· K Aswathappa (2003); Human Resource and Personnel Management’; Tata
McGraw-Hill
Publishing Company limited, New Delhi.
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Unit - 9 : Wage and Salary Administration
Structure of Unit:
9.0 Objectives
9.1 Introduction
9.2 Principles of Wage and Salary Administration
9.3 Essentials of Sound Wage and Salary Administration
9.4 Factors Affecting Wage and Salary Administration
9.5 Methods of Wage Payments
9.6 Process of Wage Determination
9.7 Summary
9.8 Self Assessment Questions
9.9 Reference Books
9.0 Objectives
After Completing the unit you would be able to:
 Understand the significance of Wage and Salary Administration in the
organization:
 Learn about principles of Wage and Salary Administration;
 Know some of the prerequisites for sound compensation management;
 Understand major factors affecting Wage and Salary determination in an
organization;
 Know in detail methods of wage payments;
 Learn how wages are determined in an organization.
9.1 Introduction
Employees’ compensation is one of the major determinants of employee
satisfaction in an organization.
The compensation policy and the reward system of an organization are
viewed by the employee as a
indicators of the management’s attitude and concern for them. It is not just
the compensation in tote, but its
fairness as perceived by the employees that determines the success of a
wage and salary administration
system. Hence, it very important for the management to design and
implement its compensation system
with utmost care and tact. A good wage and salary administration should be
able to attract and retain
employees, give them fair deal, keep the organization competitive and
motivate employees to perform
their best.
Wage and salary determination and its administration has always remains
sensitive issue for an organizational
management, since employees moral, motivation, productivity and their
relationship with the management
more or less associated with the compensation management system.
Furthermore compensation has always
remain as a major yardstick for the success or failure or concern for the
employees by an organization.
Traditionally, pay scales in companies reflected the importance of the work
and the responsibility level.
Today organization tries more to assess the worth of an individual in terms of
his performance and contribution
to the organization. With the growing demands of the workforce and the
constant challenges in the business
environment, organizations have to evolve an accurate system for evaluating
jobs and assessing their
worth. Job evaluation helps to determine the relative worth of job in an
organization in a systematic,
consistent and accurate manner. It also helps in estimating the basic pay for
each job in accordance with
the importance of the job in the organizational hierarchy. Once basic pay is
determined, the rewards,
incentives and benefits attached with the pay, position and performance are
also determined. The basic
wage, incentives and rewards and benefits, together from compensation
package of an employee.
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9.2 Principles of Wage and Salary Administration
Since the issue of wage and salary determination has always enjoying the
major consideration for any
organization, it should be develop and maintain based on sound principles ,
some of them are narrated
below, attempt should be made to incorporate them as far as possible while
designing the compensation
system.
1) There should be a definite plan and system to ensure that differences in
pay for jobs are based
upon variations in job requirements, means maintaining equity in the
distribution of wages and
salaries in the organization.
2) Maintaining competitiveness in the wage market means the general level
of wage and salary should
be reasonably in line with that prevailing in the market.
3) Matching employees’ expectations and it should avoid unjustified
discrimination by providing
equal pay for equal work.
4) Reinforcing positive employee behavior and contribution to the
organization, differences in the
compensation package should be based on contribution, productivity, job
performance,
achievement etc.
5) Devising a system that is the most efficient for the organization, as far as
possible it must eliminate
any discrepancies or exploitation of the employees.
6) The compensation system should formulate and define rules and
regulations for determining,
changing, adjusting wages in the organization.
7) The compensation package must ensure fairness, should maintain
harmonious relationship between
the employee and employer.
8) Compensation system should be flexible enough so that future changes
can be incorporated.
9) The wage and salary administration should take care of and comply all the
rules and regulations
laid down by the legislator for protecting the employees’ interest.
10) Optimization of management and employee interests.
9.3 Essentials of Sound Wage and Salary Administration
Sound Wage and salary administration demands some essentials to satisfy,
so that one who is shoulder
with the responsibility of designing administrative aspects with this regards,
may come out with efficient
system for managing the issues related with it. Some of the pre requisites for
the sound compensation
system are:
I. Rational Job Analysis: It is an important exercise with regards to each
category of jobs. It
reveals detailed aspects of the job, like duties, responsibilities associated
with the performance,
performance standards as a fair parameter for evaluation of the
performance. It gives fair idea
about job specification i.e. qualification, experience, skill and other essential
requirements that job
performer must satisfy. Thus rational job analysis always put policy decider
in a better condition to
lay down appropriate content in policy design.
II. Proper Job Evaluation: Job evaluation is a systematic process of
analyzing and evaluating jobs
to determine the relative worth of job in an organization. It forms the basis
for designing the sound
compensation system in an organization. Since wage and salary
administration and the perceived
fairness of approach adopted under it have a immense influence on
employee morale, motivation
and satisfaction, proper job evaluation exercise demands sensible
consideration.
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III. In Depth Knowledge About an Organization and Market Factors:
Apart from job evaluation,
the various other factors that determine the administrative aspects for wage
and salary administration
are the size and structure of the organization and the industry in which it
operates, the strength of
employees union, position of a person and his importance to the
organization, demand and supply
for particular skill sets in the industry, organizational ability and capacity to
pay and its economic
condition like profitability, and legislative aspects related with wage
determination. Sound system
for compensation management demands detail knowledge about all these
factors in order to its
sound framework and operation in the organization.
IV. Clarity of Objectives or Purposes of Wage and Salary
Administration : Last but not the
least in terms of its significance, in order to have effective and efficient
administration of
compensation as an area in the organization, one must have accurate clarity
about the purposes
that it may tries to satisfy through policy decisions .objectives may be
attracting talented resources;
retaining and motivating employees; financial management of an
organization; satisfying legal
requirement; and many more. Sometimes these objectives are conflicting in
nature also. So it is
very essential that one, who is going to carry out this responsibility of
designing the compensation
system in the organization, should have reasonable clarity for objectives to
be satisfied with the
design.
9.4 Factors affecting Wage and Salary Administration
The term employees remuneration includes both wages and salaries. Wages
are commonly considered as
the price of labor paid to the workers for the services rendered to the
organization employing them.
Where quantum of services rendered is difficult to measure the payment is
called salary. Normally, payment
made to workers is referred to as wages, and remuneration paid periodically
to persons whose output
cannot be measured such as clerical, supervisory and managerial staff, is
called salary. Wage and salary
administration is affected by so many factors and most of them are
uncontrollable in nature so probably,
this decision is more crucial and critical. Major factors affecting wage and
salary administration are discussed
as under:
Figure 9.1 : Factors Affecting Wage and Salary Administration
Deman d & Su pp ly of S kill
or Lab our
Pr evailing Market Rare
or “Going Wage Rate”
Prod uc tivit y
Cost of Living
Job Re qu ir em ent s
Man ageme nt At titu de
Psych ologic al and S ocial
Fact ors
Le gislat ive c onside rat ion s
C ompe nsat ion
Or ganizat ion’s Ability to
Pay
Trad e Union ’s Bargain in g
P ower
Rate
115
1) Demand and Supply: Demand for and supply of labor and its availability
will have great influence
on the determination of wage rates. If there is a shortage of labor, the wages
demanded will be
high. If, on the other hand labor is plentiful, workers will be too willing to
work at low rates of
wages. However, wages cannot be regarded today merely a price for
services rendered. In recent
years therefore, both management and labor has been becoming less and
less dependent on this
factor as a basic factor. An employee will not hesitate to accept lower wages
if he has opportunities
for growth in the organization. Today, the money which is paid as
compensation should enable a
worker to buy goods and services which will enable him and his family to live
a better and fuller life
and satisfy his hierarchical needs.
2) Organization’s Ability to Pay: This is a major affecting factor in
determining wage and salary
structure of an organization. Financial position and soundness of an
organization can put it in a
position to offer attractive compensation package. Some of the reputed
economically sound
organizations are offering good compensation package and thereby
successful in obtaining and
maintaining talented workforce. Good compensation package helps in
attracting and retaining
quality talent in an organization. Generally wages in most of the organization
decide through collective
bargaining and , organization’s ability and capacity to pay attractive wages
depends upon over all
financial soundness and economic condition of an organization.
3) Prevailing Market Rate or “Going Wage Rate”: This is practically the
major factor that
induces any organization to take it as a base while determining wage and
salary structure for it.
Prevailing market rate is also known as ‘most comparable rate of wage’, and
most popular method
for wage rate determination, especially for lower cadre positions. There are
many reasons for an
organization to pay wages at a market rate like competition and a practice of
‘Brain Drain’ prevails
in the market. Further more certain laws framed laid down principal of’
minimum wages’, ‘equal
wage for equal work’. In addition to this trade unions are also prefer to
bargain upon and in
accordance with market rate of wages.
4) Productivity: Productivity is measured in terms of output per man hour.
It a result of several
factors such as technology, labor efforts, method of doing work,
management contribution and
support and so on. However, productivity has always remained as base for
wage differences
since it a base which is apparently justifiable and acceptable to all in the
organization. Many a time
this as base is not acceptable to many trade unions as it is very difficult to
have accurate measurement
and is has always remain at a discretion of management policies.
5) Cost of Living: It is always expected that there has to be adjustment in
pay rates in accordance
with prevailing cost of living. The changes in the cost of leaving affect
purchasing power of the
person. Trade union also considers this as a base for collective bargaining on
wage issues.
6) Trade Union’s Bargaining Power: Generally the mechanism for fixing
of wages for majority of
workers is collective bargaining or negotiation, and collective bargaining and
negotiations depends
upon the trade union’s strength. If there is a strong union operates in the
organization, it may
dictate its terms on wage fixation and revision over a period of time and vice
versa. The strength
and power of the trade union depends upon its membership, financial
strength and leadership it
may have, for its functioning.
7) Job Requirements: From the organizational perspective appropriate job
analysis and job
evaluation exercise is a base for the wage determination and revision. It is
quite obvious also that
wages to be paid to the workers should be in accordance with the duties,
responsibilities and the
116
efforts likely to be put for job performance. Wage or compensation package
very in accordance
with job description and job specification.
8) Management Attitude: Attitude of employer or management towers the
working community of
the organization does influence in wage determination and revision at an
appropriate time. Some
reputed and professional organization does prefer to pay wage in accordance
with their reputation
or prestige of an organization in the market. They may give participation to
workers in sharing
profits. On the other hand conservative organizations do not prefer to go for
such profit sharing.
9) Psychological and Social Factors: Psychologically person perceive
wages and compensation
package as sole parameter for success or failure in the life. Compensation
package plays significant
role in the employees pride, moral, motivation and psychological
engagement and involvement in
the work. Therefore such variable should not be overlooked by the
organization while determining
wage and salary structure. Socially and ethically also people feels that
“equal work should carry
equal pay “ i.e. wage should be in accordance with efforts and workers
should not be felt like
being cheated. Compensation policy should not make any discrimination on
the basis of caste,
color, Sex or region, and must try to satisfy condition for fairness equity and
justice.
10) Legislative Considerations: Legislative provisions do provide
protection to the working
community by fixing bottom line for wage payments. Many a time it was
found that the bargaining
power of the workers was not strong enough to ensure fair wages.
Consequently, the state legislative
frame work stepped in to regulate wages and provide for certain benefits to
the workers. Legislation
like Minimum Wages Act, 1936, provides for statutory minimum wages to be
prevails in the
industrial organization so that workers can satisfy their bare requirements
and maintain their minimum
living standard. These aspects are also considered while deciding
compensation policy for an
organization.
9.5 Methods of Wage Payments
Wage plans are mainly micro plans and each company may devise any of the
wage plans. Basically there
are two methods for wage payments, viz. (1) Time rate wage system; and (2)
Piece rate wage system. The
wage paid to labor has to perform important functions in the economic
system. It should be such as to
make the worker capable and willing to be efficient and involved in the job.
There should be link, wherever
feasible between emoluments and productivity; and fair parity between
wage differentials and skill differential.
The plan should act as an incentive to improve the efficiency, and it should
attract the worker wherever
demanded or needed. Whatever may be the method of wage payment but
the wage plan should contain
following ingredients:
 It should be simple and understandable
 It should be capable of easy computation
 It should be capable of motivating the employees
 It should be attractive enough for new talent in the organization.
 It should be fair, just and stable to all the employees.
The fundamental plans of wage payment are:
I. Time Rate Wage System: It is the oldest and the simplest form of wage
fixing. Under this
system, workers are paid according to the work done during a certain period
of time at a rate of
per hour, per day, per week, per fortnight, or per month or any other fixed
period of time. According
117
to the section4 of the Payments of Wages Act,1936, not more than one
month must elapse between
two wage period. Time wage system adopts time as the basis of worker
remuneration without
taking in to account the units produced. The worker is guaranteed a specified
sum of money for a
fixed period of his time taking no account of the quality or quantity of the
work done. Evaluation
on the basis benefits and weaknesses is as under:
Merits:
 It is simple and understandable and easy for calculation of wages, since
wages under this system
is equal towage per hour* numbers of hours worked by an employee.
 There is no time limit for completion of job, workman are not in hurry to
finish it and this may mean
that they may pay p enough attention to the quality of work, effective
handling of machinery and
utilization of resources in an optimum manner.
 All workers are given same treatment in terms of equal wage payment, so
grievances, ill will;
jealousy can be avoided among them.
 Time rate system provides regular and stable income to workers, so they
can adjust and manage
their budget accordingly.
 It requires less administrative attention as this system provide good faith
and mutual understanding
and trust between employer and employee.
Demerits:
 It does not take in to account the ability and capacity of the workers so the
skilful and more
capable workers who have higher production efficiency will demoralize.
 Time rate system is unrelated to the productivity and does not provide
extra motivation for extra
efforts by the workers.
 The labor charges for a particular job do not remain constant. This put the
management in a
difficult position in the matter of quoting rates for a particular piece of work.
 There is a possibility of systematic evasion of work by the workers, since
there is no specific
target or demand for specific quantity of work by the management.
 Time rate system does not ask for maintaining individual workers record, it
becomes difficult for
the employer to determine his relative efficiency for the purpose of
performance evaluation for
future promotion or rewards. Thus it does injustice to the outstanding
employees.
Suitability: Time rate system is suitable when the output contributed by the
worker is difficult to measure
and cannot be recorded in an individual basis. It is also suitable when by
cultivating mutual trust and
confidence and by giving fair and equal treatment to all the employees,
management can get the work
done in an appropriate manner
II. Piece Rate Wage System: Under this system, workers are paid
according to the amount of
work done or numbers of units produced or completed, the rate of each unit
being settled in
advance, irrespective of the time taken to do the work. This does not mean
that the workers can
take any time to complete a job because of his performance far exceeds the
time which his
employer expects he would take, the overhead charges for each unit of
article will increase. There
is an indirect implication that a worker should not take more than average
time.
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Merits:
 The main advantage of this system is recognition of merit, as efficient is
rewarded, It is therefore
more equitable then time rate system.
 It pays workers as per their efficiencies, ability, capacity or performance, so
it gives direct stimulus
and motivation to the employees for extra efforts, which may result into
more productivity.
 It requires less managerial supervision as total remuneration depends upon
units produced, and
not on time spent in an organization.
 Being interested in continuity of his work, a workman is likely to take
greater care to prevent
breakdown in the machinery or in the work shop. It is a gain to the
management since it reduces
maintenance expenditure in an organization.
 As the direct labor cost per unit of production remains fixed and constant,
calculation of cost
while filling tenders and estimates becomes easier.
 It results in to not only increase in the output and wages ,but the methods
of production too are
also improved, as workers demand material and tools free from defects and
machinery in perfect
operating condition.
Demerits:
 If rates of wages are not scientifically fixed and acceptable to the workers,
would result into
workers exploitation and may prove counterproductive
 As workers are interested in completion of the job with a greatest speed,
may damage the machinery,
quality of output or may increase rate of hazards in an organization.
 Trade unions generally do not like this system of wage payment; they may
not have full support
and acceptance. It may be the major issue for industrial dispute.
Suitability: It can be introduced generally in jobs of a repetitive nature,
when task can be easily measured,
inspected and counted. It is practically suitable for standardized processes,
and it appeals to skilled and
efficient workers who can increase their earnings by working to their best
capacity.
III. Balance and Debt System: This system combines time rate and piece
rate. Under it a minimum
weekly wage is guaranteed for a full weeks’ work, with an alternative piece-
rate determined by
the rate fixed on the assumption that the worker would put enough effort to
earn his minimum
wage. If the wages calculated on piece bases are in excess of the time rate,
the worker earns the
excess. If the piece rate wages are less than the time-rate earnings, he
would still get weekly
wage, but on the condition that he shall have to make good the excess paid
to him out of the
subsequent wage he would earn. Suppose a worker is expected to complete
at least 10 pieces
during the week in order to earn the minimum wage of rs.60, the piece rate
has been fixed at a rate
of Rs.6 per unit. If the worker produces 12 units within the week, his earning
will be Rs.72. If on
the other hand he produces only 9 units , he will still be paid Rs. 60 his
minimum weekly wage but
as on the basis of piece rate his earning should amount to only Rs. 54, the
sum of Rs. 6 paid in
excess will be debited to him to be deducted out of his subsequent earnings.
Thus under this
system workers’ wages are determined, by both the number of hours he
works and the pieces he
produces. So it a hybrid system producing the same benefits and limitations
of both the time rate
and piece rare system.
119
9.6 Process of Wage Determination
Practically how wages are determined and maintained or administered in an
organization is very organization
to organization. Ideally speaking it depends upon sole discretion that what
procedure an organization
follows for wage and salary administration. More or less an attempt is made
by every organization to
follow the principles suggested for sound compensation management.
Organization tries to inculcate
systematic procedure for wage determination and their revision at an
appropriate time. Process of wage
determination includes job analysis and job evaluation, survey of wages in
the environment, determining
wage structure, and deciding rules for wage administration. Briefly these
steps are discussed as under:
Figure 9.2: Job Analysis
1. Job Analysis and Job Evaluation: This may be the primary exercise
that an organization needs
to carefully carry out with an intention to create base for wage
determination. Job analysis reveals
information about tasks, duties, responsibilities and standards with proposed
job is to be performed
by the employees. It also guides in terms of job specification i.e. skills,
ability. Qualification and
experiences needed to perform the job with requisite performance
standards. Job analysis gives
enough information about the job and the profile of the performer in order to
perform that job.
Another important exercise that an organization needs to carry out is ‘Job
Evaluation’. It is nothing
but finding out relative worth of a job, in terms its contribution and
significance to the overall
organizational objectives.
2. Determining Performance Standard and Wage Surveys: Having
understood the job in
considerable detail an attempt is made to determine expected performance
standard to be carried
out by the performer. Then, an organization must survey wage rates prevails
in the market for the
same job or its similar type, so that attractive compensation package can be
designed to induce
good quality of candidature to apply for the job in an organization. Here care
should be taken that
wage structure should be in accordance with the complexity and efforts
needed in the performance.
3. Deciding Wage Structure and Rules for Its Administration: Based
on collection of relevant
information and taking in to account some of the influencing factors, an
organization should design
wage structure which includes slab for basic or minimum wages, incentives,
and/or increment over
a period of time to gather with other financial and nonfinancial perquisites to
be offered to an
employee. Attempt should be made to follow principles of fairness, equity
and justice to gather
with transparency while designing wage structure and deciding rules for its
administration. The
rules should not provoke un justified discriminations and exploitation of
workers otherwise it may
prove counterproductive and may give rise to grievance, and industrial
disputes.
Job
Analysis
Job
Evaluation
Determining
Performance
Standard
Rules,
Policies for
Wage &
Salary
Administrati
Deciding
Wage
Structure
Wage
Survey
120
9.7 Summary
Compensation package is one of the most significant decisions of the
modern Human Resource
Management, since it is carrying great influence as a maintenance factor as
well as a means for employee’s
motivation also. Therefore organization needs to pay attention on Wage and
Salary Administration in
order to maintain organizational efficiency for maintaining and motivating
employees. There are some of
the major considerations based on which it can go for compensation
determination like demand and
supply of skill, organizational ability to pay, prevailing market rate,
employees productivity, cost of living,
trade union’s bargaining power, job requirements management attitude,
productivity, psychological and
social factors and legislative considerations. Organization can adopt either
‘Time Rate’ or ‘Piece Rate’
method for wage payments, both are having their own merits and demerits
and suitability. Organization
can go for combination of the both also. There may be s standard scientific
process also for wage
determination, which consists of steps like job analysis and job evaluation,
determination of performance
standards and wage surveys and deciding wage structure and rules and
policy for effective wage
administration.
9.8 Self Assessment Questions
1. Why Wage and Salary Administration is considered as a significant Human
Resource Management
function? What principles an organization is require keeping in mind while
deciding compensation
policy?
2 Discuss in detail different factors that generally affect compensation
decision of an organization.
3 What are the methods generally available to an organization for making
wage payments? Discuss
their suitability together with their merits and demerits.
4 Elaborate standard procedure or mechanism that an organization follows
for determining Wage
and salary structure together with the rationality attached with each step.
9.9 Reference Books
- Principles of personnel Management-Edwin flippo
- Personnel Management &Industrial Relations-Yoder (Prentice Hall of India
Ltd. New Delhi)
- Personnel Management-C.E.Nrothcott
- Personnel Management –C.B.Mamoria
- Personnel Management-Dr.P.C.Tripathi
- Dynamic Personnel Administration-Management OF Human Resources-
M.N.Rudrabasavaraj
121
Unit - 10 : Compensation and Incentives
Structure of Unit:
10.0 Objectives
10.1 Introduction
10.2 Meaning and Definition of Compensation
10.3 Objectives of Compensation Planning
10.4 Factors Affecting Compensation Planning
10.5 Various Modes of Compensation
10.6 Incentives
10.7 Kinds of Incentives
10.8 Fringe Benefits
10.9 Kinds of Fringe Benefits
10.10 Summary
10.11 Self Assessment Questions
10.12 Reference Books
10.0 Objectives
After reading this chapter, you will be able to understand:
 The objective of compensation planning.
 Various factors affecting compensation planning.
 Various modes of compensation.
 Concept of Incentives.
 What are fringe Benefits and its type.
10.1 Introduction
One of the most difficult functions of personnel management is that of
determining rates of monitory
compensation. It is not only duty for organisation but also equally important
to both the organisation and
the employee. It is significant to organisation, because wages and salaries
constitute the greatest single
cost of doing business and it important to the employer because the earning
is the only means of economics
survival; it is the mean that influence the standard of living, status in society,
work as motivational factor,
loyalty and productivity.
Compensation is a tool used by management for a variety of purpose to
further the existence of the
company. It is a remuneration that an employee receives in return for his or
her contribution in the organisation.
So, the employee compensation programs are designed to attract capable
employees to the organisation,
to motivate them towards superior performance and to retain their services
over an extended period of
time.
10.2 Meaning and Definition of Compensation
In layman’s language the word ‘compensation’ means something, such as
money, given or received as
payment for service. The word compensation may be defined as money
received in the performance of
work, plus the many kinds of benefits and services that organization provides
their employee. It refers to
wide range of financial and non-financial rewards to employee for their
service rendered to the organization.
It is paid in the form of wages, salaries , special allowance and employee
benefits such as paid vacation,
insurance, maternity leaves, free travel facility , retirement benefits etc.
122
According to Wendell French,” Compensation is a comprehensive term
which includes wages, salaries
and all other allowance and benefits.”
Wages are the remuneration paid for skilled, semi-skilled and unskilled
operative workforce. Salary is the
remuneration of those employees who provides mental labour to the
employer such as supervisor, office
staff, executive etc wages are paid on daily or hourly basis where as salary is
paid on monthly basis.
10.3 Objectives of Compensation Planning
The basic purpose or objective of establishing sound compensation is to
establish and maintain an equitable
rewards system. The other aim is the establishment and maintenance of an
equitable compensation structure
i.e an optimal balancing of conflicting personnel interest so that the
satisfaction of employees and employers
is maximised and conflicts minimized, the compensation management is
concerned with the financial aspect
of employees need, motivation and rewards.
A sound compensation structure tries to achieve these objectives:
 To attract manpower in a competitive market.
 To control wages and salaries and labour costs by determining rate change
and frequency of
increment.
 To maintain satisfaction of employees by exhibiting that remuneration is
fair adequate and equitable.
 To induce and improved performance, money is an effective motivator.
a) To Employees:
i. Employees are paid according to requirement of their jobs i.e highly skilled
jobs are paid more
compensation than low skilled jobs. This eliminates inequalities.
ii. The chances of favouritism are minimised.
iii. Jobs sequence and lines of promotion are established wherever they are
applicable.
iv. Employee’s moral and motivation are increased because of the sound
compensation structure.
b) To Employers:
i. They can systematically plan for and control the turnover in the
organization.
ii. A sound compensation structure reduces the likelihood of friction and
grievance over remunerations.
iii. It enhance an employee morale and motivation because adequate and
fairly administrative incentives
are basis to his wants and need.
iv. It attracts qualified employees by ensuring and adequate payment for all
the jobs.
v. In dealing with a trade union, they can explain the basis of their wages
programme because it is
based upon a systematic analysis of jobs and wages facts.
10.4 Factors Affecting Compensation Planning
Factors determining compensation of an employee considerable amount of
guess word and negotiation
are involved. But following are the certain factors which have been extracted
as having an important
bearing upon the final decision:
a) Supply and Demand of Labour: Whatever the organization produces as
commodity they desire
services and it must pay a price that of workers acting in concert. If more the
labour is required,
such as at war time prosperity, there will be tendency to increase the
compensation; whereas the
situation when anything works to decrease the supply of labour, such as
restriction by a particular
123
labour union, there will be a tendency to increase the compensation. The
reverse of each situation
is likely to result in a decrease in employee compensation, provided, labour
union, ability to pay,
productivity, government do not intervene.
b) Ability to Pay: Labour Unions has often demanded an increase in
compensation on the basis
that the firm is prosperous and able to pay.
c) Management’s Philosophy: Management’s desire to maintain or
improve moral, attract high
calibre employees, reduce turnover, and improve employees standard of
living also affect wages,
as does the relative importance of a given position to a firm.
d) Legislation: Legislation related to plays a vital role in determining
internal organization practices.
Various acts are prescribed by government of country for wage hours laws.
Wage-hour laws set
limits on minimum wages to be paid and maximum hours to be worked. In
India minimum wages
act 1948 reflecting the wage policy for an organization and fixation of
minimum rates of wages to
workers in sweated industries. In 1976 equal remuneration act was enacted
which prohibits
discrimination in matters relating to remuneration on the basis of religion,
region or gender.
10.5 Various Modes of Compensation
Various modes of compensation are as followsa)
Wages and Salary- Wages represent hourly rates of pay and salary refers
to monthly rate of pay
irrespective of the number of hours worked. They are subject to annual
increments. They differ
from employee to employee and depend upon the nature of jobs, seniority
and merit.
b) Incentives- These are also known as payment by results. These are paid
in addition to wages
and salaries. Incentive depends upon productivity, sales, profit or cost
reduction efforts. Incentive
scheme are of two types:
Individual incentive schemes.
Group incentive schemes.
c) Fringe Benefits- These are given to employees in the form of benefits
such as provident fund,
gratuity, medical care, hospitalization, accident relief, health insurance,
canteen, uniform etc.
d) Non- Monetary Benefits- They include challenging job responsibilities,
recognition of merit,
growth prospects, competent supervision, comfortable working condition, job
sharing and flexi
time.
10.6 Incentives
Incentives are monetary benefits paid to workmen in lieu of their outstanding
performance. Incentives vary
from individual to individual and from period to period for the same
individual. They are universal and are
paid in every sector. It works as motivational force to work for their
performance as incentive forms the
part total remuneration. Incentives when added to salary increase the
earning thus increase the standard of
living. The advantage of incentive payment are reduced supervision, better
utilisation of equipment, reduced
scrap, reduced lost time, reduced absenteeism and turnover & increased
output.
According to Burack & Smith, “An incentive scheme is a plan or
programme to motivate individual or
group on performance. An incentive programme is most frequently built on
monitory rewards ( incentive
pay or monetary bonus ), but may also include a variety of non monetary
rewards or prizes.”
124
10.7 Kinds of Incentives
Incentives can be classified under the following categories:
1. Individual and Organizational Incentives
2. Financial and Non-Financial Incentives
3. Positive and Negative Incentives
1) Individual and Organizational Incentives- According to L.G.
Magginson, “Individual incentives are
the extra compensation paid to an individual for all production over a
specified magnitude which stems
from his exercise of more than normal skill, effort or concentration when
accomplished in a predetermined
way involving standard tools, facilities and materials.” Individual
performance is measured to calculate
incentive where as organizational or group incentive involve cooperation
among employees, management
and union and purport to accomplish broader objectives such as an
organization-wide reduction in labour,
material and supply costs, strengthening of employee loyalty to company,
harmonious management and
decreased turnover and absenteeism
I) Individual Incentive System is of two types:
a) Time based System- It includes Halsey Plan, Rowan Plan, Emerson Plan
and
Bedeaux Plan
b) Production based System- it includes Taylor’s Differential Piece Rate
System, Gantt’s
Task and Bonus Plan
II) Group Incentive System is of following types
a) Scalon Plan
b) Priestman’s Plan
c) Co-Partnership Plan
d) Profit Sharing
Some important these plans of incentive wage payments are as follows:
Halsey Plan- Under this plan a standard time is fixed in advance for
completing a work. Bonus
is rewarded to the worker who perform his work in less than the standard
time and paid wages
according to the time wage system for the saved time.
The total earnings of the worker = wages for the actual time +
bonus
Bonus = 33.5% of the time saved (standard time set on past experience)
Or
50% of the time saved (standard are scientifically set)
Example: Time required to complete job (S) = 20 hours
Actual Time taken (T) = 15 hours
Hourly Rate of Pay (R) = Rs 1.5
Calculate the wage of the worker.
Solution: T X R + (S-T ) X R
2
15 X 1.5 + (20-15 ) X 1.5 = 22.5 + 3.75 = 26.25 Rs
2
In this equation 3.75 Rs are the incentives for saving 5 hours.
Rowan Plan – Under this method minimum wages are guaranteed given to
worker at the ordinary
rate for the time taken to complete the work. Bonus is that proportion of the
wages of the time
taken which the time saved bears to the standard time allowed.
125
Incentive = Wages for actual time for completing the work + Bonus
where,
Bonus = S-T X T X R
S
Emerson Plan – Under this system, wages on the time basis are guaranteed
even to those workers
whose output is below the standard. The workers who prove efficient are
paid a bonus. For the
purpose of determining efficiency, either the standard output per unit of time
is fixed, or the standard
time for a job is determined, and efficiency is determined on the basis of a
comparision of actual
performance against the standard.
Bedeaux Plan – It provide comparable standards for all workers. The value
of time saved is
divided both to the worker and his supervisor in the ratio of ¾ and ¼
respectively. A supervisor
also helps a worker in saving his time so he is also given some benefit in this
method. The standard
time for each job is determined in terms of minutes which are called
Bedeaux points or B’s. each
B represents one minute through time and motion study. A worker is paid
time wages upto
standard B’s or 100% performance. Bonus is paid when actual performance
exceeds standard
performance in terms of B’s.
Taylor’s Differential Piece Rate System - F.W. Taylor, founder of the
scientific management
evolved this system of wage payment. Under this system, there is no
guarantee of minimum wages.
Standard time and standard work is determined on the basis of time study.
The main characteristics
of this system is that two rates of wage one lower and one higher are fixed.
Those who fail in
attaining the standard, are paid at a lower rate and those exceeding the
standard or just attaining
the standard get higher rate. Under this system, a serve penalty is imposed
on the inefficient
workers because they get the wages at lower rates. The basic idea
underlying in this scheme is to
induce the worker at least to attain the standard but at the same time if a
worker is relatively less
efficient, he will lose much. For example, the standard is fixed at 40 units per
day and the piece
rate are 40 P. and 50 P. per unit. If a worker produces 40 units or more in a
day, he will get the
wages at the rate of 50 P per unit and if he produces 39 units will get the
wages at 40 paise per
unit for the total output.
Gantt’s Task and Bonus Plan - In this, a minimum wage is guaranteed.
Minimum wage is
given to anybody, who completes the job in standard time. If the job is
completed in less time,
then there is a hike in wage-rate. This hike varies between 25% to 50% of
the standard rate.
Profit Sharing – It is a method of remuneration under which an employer
pay his employees a
share in form of percentage from the net profits of an enterprise, in addition
to regular wages at
fixed intervals of time.
2) Financial and Non-financial Incentives- Individual or group
performance can be measured in
financial terms. It means that their performance is rewarded in money or
cash as it has a great impact on
motivation as a symbol of accomplishment. These incentives form visible and
tangible rewards provided in
recognition of accomplishment. Financial incentives include salary, premium,
reward, dividend, income
on investment etc. On the other hand, non-financial incentives are that social
and psychological attraction
which encourages people to do the work efficiently and effectively. Non-
financial incentive can be delegation
of responsibility, lack of fear, worker’s participation, title or promotion,
constructive attitude, security of
service, good leadership etc..
3) Positive and Negative Incentives- Positive incentives are those
agreeable factors related to work
situation which prompt an individual to attain or excel the standards or
objectives set for him, where as
126
negative incentives are those disagreeable factors in a work situation which
an individual wants to avoid
and strives to accomplish the standards required on his or her part. Positive
incentive may include expected
promotion, worker’s preference, competition with fellow workers and own ‘s
record etc. Negative
incentives include fear of lay off, discharge, reduction of salary, disapproval
by employer etc.
10.8 Fringe Benefits
Employees are paid several benefits in addition to wages, salary, allowances
and bonus. These benefits
and services are called ‘fringe benefits’ because these are offered by the
employer as a fringe. Employees
of the organization are provided several benefits and services by the
employer to maintain and promote
employee’s favorable attitude towards the work and work environment. It
not only increases their morale
but also motivate them. These provided benefits and services forms the part
of salary and are generally
refereed as fringe benefits.
According to D. Belcher, “ Fringe benefits are any wage cost not directly
connected with the employees
productive effort, performance, service or sacrifice”. According to Werther
and Davis, “Fringe embrace
a broad range of benefits and services that employees receive as part of
their total compensation, packagepay
or direct compensation and is based on critical job factors and performance”.
According to Cockman, “ Employee benefits are those benefits which are
supplied by an employer to or
for the benefits of an employee and which are not in the form of wages,
salaries and time rated payments”.
These are indirect compensation as they are extended condition of
employment and are not related to
performance directly.
10.9 Kinds of Fringe Benefits
The various organizations in India offers fringe benefits that may be
categorized as follows:
1) Old Age and Retirement Benefits - these include provident fund
schemes, pension schemes,
gratuity and medical benefits which are provided to employee after their
retirement and during old
age as a sense of security about their old age.
2) Workman’s Compensation - these benefits are provided to employee if
they are got ignored or
die under the working conditions and the sole responsibility is of the
employer.
3) Employee Security- Regular wage and salary is given to employee that
gives a feeling of security.
Other than this compensation is also given if there is lay-off or retrenchment
in an organization.
4) Payment for Time Not Worked – Under this category of benefits, a
worker is provided payment
for the work that has been performed by him during holidays and also for the
work done during
odd shifts. Compensatory holidays for the same number in the same month
are given if the worker
has not availed weekly holidays.
5) Safety and Health – Under this benefit workers are provided conditions
and requirements
regarding working condition with a view to provide safe working
environment. Safety and Health
measures are also taken care of in order to protect the employees against
unhealthy working
conditions and accidents.
6) Health Benefits – Employees are also provided medical services like
hospital facility, clinical
facility by the organization.
10.10 Summary
 Compensation are monetary and non-monetary benefits design to attract,
retain and motivate
workers of the organisation.
 Compensation are depend on labour market conditions, legislations,
management philosophy and
organisations ability to pay.
127
 Broad objectives of the compensation planning is to assign a monetary
value to each job or skill
set in the organisation.
 Incentive plans and fringe benefits are the modes of compensation.
 Incentive plans used in industries are both for individual and group.
Individual incentives are based
on individual performance and group incentives rewards employees for their
collective performance.
 Compensation in addition to direct wages or salaries such as company car,
paid holidays, retirement
benefits, health and safety benefits, workman’s compensation are known as
fringe benefits. Purpose
of fringe benefits is to increase the economic security of employees.
10.11 Self Assessment Questions
1 Describe compensation and its various modes?
2 Explain various factors affecting compensation planning?
3 What do you understand by individual and group incentive? Discuss them
with their relative
advantage and demerits?
4 What do you understand by fringe benefits? What are its essential
features?
5 Write Short Notes on:
i. Halsey Premium Plan
ii. Safety & Health measures.
iii. Rowan Plan.
10.12Reference Books
 David a. Decenzo and Stephen P. Robbins “ Personnel / Human Resource
Management”, Prentice
Hall of India Private Ltd, New Delhi 3rd edition 2004
 K.Aswathappa;”Human Resource and Personnel Management- Text and
cases”;Tata Mcgraw
Hill Publishing company Ltd, New Delhi, 4 th edition 2005
 Edwin B. Flippo;”Personnel management”; McGraw Hill Book
Company,Singapore; International
edition 1984
 Wayne F.Casico; “Managing Human Resource- Productivity, Quality of Work
Life, Profits” ,Tata
Mcgraw Hill Publishing Company Ltd, New Delhi 7 th edition 2006.
 G.S. Sudha; “Human Resource Management”; Professional Publications,
Jaipur’3rd revised edition
2009
 Shashi k. Gupta and Rosy Joshi ; “Human Resource Management”; Kalyani
Publishing , New
Delhi 2011
 C.B. Mamoria and S.V. Gankar;” Personnel Management- Text and Cases”;
Himalaya Publishing
House, 22nd edition 2002.
128
Unit - 11 : Industrial Relation
Structure of Unit:
11.0 Objectives
11.1 Introduction
11.2 The Concept of Industrial Relation or Meaning and Definition of
Industrial Relation (IR)
11.3 Objective of Industrial Relation
11.4 Approaches to IR
11.5 Suggestions and Measures to Improve IR
11.6 Significance of Good Relations
11.7 Industrial Disputes
11.8 Forms of Industrial Disputes
11.9 Causes of Disputes
11.10 Prevention of Industrial Disputes
11.11 Settlement of Industrial Disputes
11.12 Summary
11.13 Self Assessment Questions
11.14 Reference Books
11.0 Objectives
After completing this unit, you would be able to:
 Understand the concept of industrial relation
 Know about objective and approaches of industrial relation
 Learn how to measures of improving industrial relation
 Point out various industrial disputes
 Know about causes of industrial disputes
 Learn how to prevent and settle down industrial disputes
 Learn how to resolve industrial relation.
11.1 Introduction
Industrial relation is not a very new concept but it has become one of the
most delicate and complex
problem of modern Indian society. Industrial Progress is impossible without
labour management cooperation
and industrial harmony. The concept of Industrial relation has a wide
meaning and connotation. In the
narrow sense, the term “Industrial Relation” refers to the nature of
relationship between the employers and
employees in an Industrial enterprise. In the broad sense, industrial relation
refers to all types of relationship
between all the parties concerned with the industry. Examples are:
 Individual relations
 Relationship between employers and workers at the place of work or
workers participation in
management.
 Collective bargaining
 Trade union
 Machinery for settlement of industrial disputes
 Unfair labor practices
 Individual grievance and disciplinary policy and practice.
129

 Industrial relation training.
 State participation in industrial Relation.
Another related term is ‘employee relations’ or ‘human relation’.
11.2 The Concept of Industrial Relation or Meaning and
Definition of
Industrial Relation (IR)
The term “Industrial Relation” refers to all types of relationship between all
the parties concerned with
industry. According to Encyclopaedia Britannica, it denotes relations of
all those associated in productive
work, including industry, agriculture, mining, commerce, finance, transport
and other services.
According to Dale in his book Personnel Management and Industrial
Relation, defines Industrial relations
are relationship between management and employees or among employee
and their organization that arise
out of employment.
According to R.A.Lester Industrial relations involves attempts to have
workable solutions between
conflicting objectives and values, between incentive and economic security,
between discipline and the
industrial democracy, between authority and freedom and between
bargaining and cooperation”.
In modern usage, the phrase “Industrial Relation” includes the whole gamut
of matters that arise due to the
continuing relationship between the employers and the workers.
Its scope includes three rarely distinct areas:
 Relations between mangers and individual workers.
 The collective relations between employers and labor (trade) union.
 The role of government in the regulation of these relationships.
These three closely associated areas are often referred to respectively as
 Personnel Management
 Collective Bargaining
 Labor Legislation
Parties involved in industrial relations:
 Employers
 Employee
 Government
Figure 11.1
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Activity A:
1. Collect the data to tri parties at least of five industries about their
industrial relation within
the organization.
11.3 Objective of Industrial Relation
The primary objectives of Industrial Relation at national level are that to
improving the economic condition
of workers, increasing productivity and achieving industrial democracy in
industrial enterprise. The labor
management committee of the Asian Regional Conference of the
International Labor Organization (ILO)
has recognized certain fundamental objectives of Industrial relations are to
maintain sound and harmonious
relations between employees and employers. The other objectives drawn
from this objective are:
1. Industrial Relation safeguards the interest of labor and management
through mutual understanding
and goodwill among those parties in the industry which actively participates
in the process of
production.
2. To raise productivity of the industry at a higher level this is the need of the
day to contribute to the
economic development of the country.
3. To avoid all forms of industrial conflict
4. To minimize labour turnover and absenteeism by providing job satisfaction
to the workers and
increasing their morale.
5. To minimize the occurrence of strikes, lockouts and gheraos.
6. To encourage and develop trade unions in order to improve workers
collective strength and
resolving their problems through collective bargaining.
7. To establish, develop and maintain industrial democracy based on
employee’s participation in
management and profit of the industry.
8. To facilitate government control over industries in regulating production
and for protecting
employment or where production needs to be regulated in public interest.
9. To check and ensure a healthy and balanced social order in the industry.
11.4 Approaches to IR
Industrial Relation is perceived by differently by different people. Some of
the approaches to industrial
relations are as follows. There are three popular approaches to IR: Unitary,
Pluralistic and Marxist.
Some others are psychological approach, sociological, V.V.Giri, Gandhian ,
HRD and System Approach.
Here we are discussing on mainly popular approaches.
Unitary Perspective: In unitary, the organization is perceived as an
integrated and harmonious system,
viewed as one happy family. A core assumption of unitary approach is that
management and staff, and all
members of the organization share the same objectives, interests and
purposes; thus working together,
hand-in-hand, towards the shared mutual goals. Furthermore, unitary has a
paternalistic approach where
it demands loyalty of all employees. Trade unions are deemed as
unnecessary and conflict is perceived as
disruptive.
From employee point of view, unitary approach means that:
 Working practices should be flexible. Individuals should be business
process improvement oriented,
multi-skilled and ready to tackle with efficiency whatever tasks are required.
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 If a union is recognized, its role is that of a further means of
communication between groups of
staff and the company.
 The emphasis is on good relationships and sound terms and conditions of
employment.
 Employee participation in workplace decisions is enabled. This helps in
empowering individuals in
their roles and emphasizes team work, innovation, creativity, discretion in
problem-solving, quality
and improvement groups etc.
 Employees should feel that the skills and expertise of managers supports
their endeavors.
From employer point of view, unitary approach means that:
 Staffing policies should try to unify effort, inspire and motivate employees.
 The organization’s wider objectives should be properly communicated and
discussed with staff.
 Reward systems should be so designed as to foster to secure loyalty and
commitment.
 Line managers should take ownership of their team/staffing
responsibilities.
 Staff-management conflicts - from the perspective of the unitary
framework - are seen as arising
from lack of information, inadequate presentation of management’s policies.
The personal objectives of every individual employed in the business should
be discussed with them and
integrated with the organization’s needs
Pluralistic-Perspective: In pluralism the organization is perceived as being
made up of powerful and
divergent sub-groups - management and trade unions. This approach sees
conflicts of interest and
disagreements between managers and workers over the distribution of
profits as normal and inescapable.
Consequently, the role of management would lean less towards enforcing
and controlling and more toward
persuasion and co-ordination. Trade unions are deemed as legitimate
representatives of employees. Conflict
is dealt by collective bargaining and is viewed not necessarily as a bad thing
and if managed could in fact
be channelled towards evolution and positive change. Realistic managers
should accept conflict to occur.
There is a greater propensity for conflict rather than harmony.
They should anticipate and resolve this by securing agreed procedures for
settling disputes.The implications
of this approach include:·
 The firm should have industrial relations and personnel specialists who
advise managers and provide
specialist services in respect of staffing and matters relating to union
consultation and negotiation.
 Independent external arbitrators should be used to assist in the resolution
of disputes.
 Union recognition should be encouraged and union representatives given
scope to carry out their
representative duties·
 Comprehensive collective agreements should be negotiated with unions
Marxist Perspective: This view of industrial relations is a by product of
a theory of capitalist society
and social change. Marx argued that:
 Weakness and contradiction inherent in the capitalist system would result
in revolution and the
ascendancy of socialism over capitalism.
 Capitalism would foster monopolies.
 Wages (costs to the capitalist) would be minimized to a subsistence level.
 Capitalists and workers would compete/be in contention to win ground and
establish their constant
win-lose struggles would be evident
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This perspective focuses on the fundamental division of interest between
capital and labor, and sees
workplace relations against this background. It is concerned with the
structure and nature of society and
assumes that the conflict in employment relationship is reflective of the
structure of the society. Conflict is
therefore seen as inevitable and trade unions are a natural response of
workers to their exploitation by
capital.
11.5 Suggestions and Measures to Improve IR
Good industrial relation refer to harmonious relations between the trade
union and the management in an
organization, but it is not easy to promote and maintain sound and
harmonious industrial relations in an
organization but there are some suggestions which are help to maintain
sound and cordial relation between
the labor and the management.
1. Support of Top Management: Top management action always be
proactive and geared to
problem solving and its action and decision must be in favour of an
organization and employees.
2. Sound Personnel Policies: personnel policies constitute the business
philosophy of an organization
and guide it in arriving at human relations decisions. Sound policies and rules
are of little help
unless they are executed objectively and equitably at all the levels of an
organization. Positive
Attitudes: Both top management and trade union should adopt positive
attitudes towards each
other, they help them to understand problem of each and which can be
solved by collective
bargaining.
3. Collective Bargaining: Collective bargaining is an instrument which
helps to maintain industrial
peace in an organization .such collective bargaining agreements and
association of employees in
decision making process will bring about cooperation between labour and
management.
4. Strong Trade Union and Sound Employers’ Union: Industrial
relations can be sound only
when the bargaining power of the employees’ union is strong and equal to
that of management.
And employers’ union should also be sound and well organized. Sound
management are helpful
for the maintenance and promotion of uniform personnel policies among
various organizations and
to protect the interest of weak employers.
5. There are also some others suggestions but they are some expensive
because they want
some research work on them:
 There should be well established and properly administered grievance
redress machinery,
sometimes which provides an outlet for tensions and frustrations of workers.
Similarly, a suggestions
scheme will help to satisfy the creative urge of workers.
Job supervisors should be trained thoroughly to ensure that organizational
policies and practices
as well as leadership and communication skill, which help them too properly,
implemented and
carried into effect.
A regular follow up of IR programmed is essential so that existing practice
may be properly
evaluated and a check may be exercised on certain undesirable tendencies,
should they manifest
themselves.
11.6 Significance of Good Industrial Relations
If the objective of the nation is rapid national development and increased
social justice are to be achieved,
there must be harmonious relationship between management and union.
Such relations will lead to the
following benefits:
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1. Industrial Peace: Good industrial relations bring harmony and remove
causes of disputes. This
leads to industrial peace, which is an ideal situation for an industrial unit to
concentrate on productivity
and growth.
2. High Morale: Cordial industrial relations improve the morale of the
employee. It implies the
existence of an atmosphere of cooperation, confidence, and respect within
the enterprise. In such
an atmosphere, there are common goals, which motivate all members of the
organization to
contribute their best. Consequently, there is higher productivity, higher
income, and increased job
satisfaction – all resulting in higher morale of the workforce.
3. Mental Revolution: Sound industrial relation completely transforms the
outlook of employers
and employee. It is based on consultation between the workers and the
management. This motivates
the workers to give their best to the organization and share the fruits of
progress jointly with the
management.
4. Reduced Wastage and Increased Productivity: It helps in increasing
production. Wastage of
man, material and machines are reduced to the minimum and thus national
interest is protected.
Thus, they will contribute to the economic growth of the countries.
5. Programmes for Workers Development: New programmes for
workers development are
introduced in an atmosphere of peace such as training facilities, labor
welfare facilities etc. Hence,
full advantage of latest inventions, innovations and other technological
advancement can be obtained.
Through these employee development programme, workforce easily adjust
itself to required
changes for betterment.
Activity B:
1 Discuss the present position of industrial relations in the country, in your
Opinion; what steps
should be taken to improve it.
11.7 Industrial Disputes
Industrial Disputes Act 1947 defines any dispute or difference between
employers and employers or
between employers and workers, or between workers and workers, which is
connected with the
employment or non-employment or terms of employment or with the
conditions of labor of any person.
Industrial Disputes are frequently clouded by a sense of exploitation, distrust
and discontent between
employee and employers. In simple language, the disputes between
employers and employees on any
Industrial matters are known as industrial disputes. The term ‘dispute’ is
characterized by the following
factors :
1. Dispute mainly relate to the strife between employers and their
employees.
2. There must actually be a difference.
3. Its work related or industrial matter issues.
4. Disputes must be raised by group or class of workmen.
5. Disputes between one or two workmen and their employers are not an
industrial dispute.
11.8 Forms of Industrial Disputes
Industrial dispute can take place in any of the following forms:
1) Strikes: A strike means a cessation of work by a body of persons
employed in any industry
acting in combination or a concerted refusal under a common understanding
of a number of
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persons who are or have been so employed to continue work or to accept
employment. Strikes
are of several types:
 Economic Strike
 Sympathetic Strike
 General Strike
 Set down Strike
 Slow Down Strike
 Lightening Strike
 Hunger Strike
2) Lock Out: lock out is the counterpart of strike. Lock outs bring
psychological pressure on the
workers to agree to his conditions or face closure of the units. A lockout is
decaled as a trial of
strength between the management and its employees. Lockouts means the
employer closes down
his factory where his workers are employed because he wants to force them
to agree to his terms
and conditions of service during the pendency of a dispute.
3) Gherao: Its means “to surround”. According to National Commission on
Labour “ Gherao tend
to inflict physical duress on the persons affected and endanger not only
industrial harmony but also
create problems of law and order”.
4) Picketing: It is primarily a method of drawing public attention towards
the disputes and it is legal
so there is no violence is involved. In picketing, workers are dissuaded from
reporting for work
by certain persons stationed at the gate of the factory.
5) Boycott: Boycott aims at disrupting the normal functioning of an
enterprise, through forceful
appeals and negative behavioural acts.
11.9 Causes of Disputes
1) Wages and Allowances: The most important cause for disputes relates
to wages. The demand
for increase in wages and allowances is the most important cause of
industrial disputes. The
demand for wages and allowances has never been fully met because of
inflation and high cost of
living. High inflation results in increased cost of living resulting in never
ending demands from
unions. There are some more economic reasons who are the cause of
industrial disputes are
bonus, working conditions and working hours, modernization and automation
and demand for
other facilities.
2) Union Rivalry: Most organizations have multiple unions. Multiplicity of
unions leads to interunion
rivalries. If one union agrees to a wage settlement, another union will oppose
it.
3) Political Interference: Major trade unions are affiliated to political
parties. Political affiliated is
not peculiar to our country alone. Even a cursory assessment of labour
movements around the
world would show that trade unions are, by their very nature, political and
that politicization of the
rule rather than the exception. Everywhere trade union have been compelled
to engage in political
action to obtain enough freedom from legal restraint to exercise their main
industrial functions.
4) Managerial Causes: These causes include autocratic managerial
attitude and defective labour
policies. In this includes failures of recognize the trade union, defective
recruitment policies, irregular
layoff and retrenchment, defiance of agreements and codes, defective
leadership, weak trade
unions.
5) Unfair labour Practices: The Industrial Dispute Act, 1947 is more
specific about the unfair
labour practices. According to the Act, the following constitute unfair labour
practices:
135
 To interfere with, restrain from or coerce workmen in the exercise of their
right to organize,
form, join or assist a trade union or to engage in concerted activities for the
purpose of collective
bargaining or other mutual aid or protection, that is to say,
 Threatening workmen with discharge if they join a trade union
 Threating a lockout or closure, if a trade union is organised
 Granting wage increases to workmen at crucial periods of the trade union
organization, with a
view to undermine the efforts of the trade union at organization.
To, dominate, interfere with or contribute support, financial or otherwise,
to any trade union.
6) To encourage or discourage membership in any trade union by
discriminating against workmen.
7) To discharge or dismiss workmen.
8) To indulge in acts of force or violence.
9) To refuse to bargaining collectively, in good faith with the recognized
trade unions.
10) To insist upon individuals workmen, who are on a legal strike, to sign a
good conduct bond as a
precondition to allowing them to resume work?
11.10 Prevention of Industrial Disputes
It is very famous sentences prevention is always better than cure. Prevention
steps should, therefore, be
taken so that reduced industrial disputes and sometimes try to do not occur
the industrial disputes in the
organizations.
1) Collective Bargaining: Collective Bargaining is the most effective
method of resolving industrial
disputes. The role of collective bargaining in solving the problems arising
between the management
and the worker has been widely recognized. Collective bargaining not only
includes negotiation,
administration and enforcement of the written contracts between the
employees and the employers
but also includes the process of resolving labour management conflicts.
Collective bargaining offers the following benefits to both of the employees
and employers :
It helps increase economic strength of both the parties at the same time
protecting their interest.
It helps resolve disputes when it is occur in the organization.
It also help to establish uniform conditions of employment with a view to
avoid occurrences of
industrial disputes.
It lays down rules and norms for dealing with labour.
2) National Arbitration Promotion Board: The Truce Resolution 1962
and the code of Discipline
as evolved in 1958 recognized the principle of voluntary Arbitration. The
Government of India
took note of the intention of both the industrial partners and set up the
National Arbitration Promotion
Board in July 1967 to promote arbitration.
Arbitration is a procedure in which a neutral third party studies the
bargaining situation, listens to
both the parties and gathers information, and then makes recommendations
that are building on
the parties. Arbitration is effective because it is established by the parties
themselves and the
decision is acceptable to them and it also delays are cut down, settlement
are speeded up and less
expensive when compared to courts or tribunals.
136
3) Grievance Redresal Procedure: A grievance may be understood as an
employee’s dissatisfaction
or feeling of personal injustice relating to his or her employment relationship.
A grievance is generally
well- defined in a collective bargaining agreement. The Indian Labour
Conference inn1958 evolved
a code of discipline which was ratified by the national trade union and
employers’ organization.
Under this code, both the parties voluntarily agree to maintain and create an
atmosphere of mutual
trust and cooperation in the factory and to settle all the disputes and
grievance by mutual negotiation,
conciliation and voluntary arbitration and avoid direct action.
4) The Implementation Machinery: The central organizations of workers
and employers have
set up machinery to screen cases of industrial disputes before they are taken
to courts with a view
to reducing litigation. The main function of consultative machinery is to bring
the parties together
for mutual settlement of difference in a spirit of co-operation and goodwill.
Consultative machinery
operates at the plant, industry, national and state levels. At the plant level,
there are works
committees and joint management councils. Being essentially bipartite in
character, Work committee
are constituted as per the provisions of the Industrial Disputes Act, 1947 and
joint management
councils are set up following the trust laid down in the Industrial Policy
Resolution, 1956. At the
industry level, there are Wage Boards and Industrial Committees.
Implementation cells have been
set up in almost all the states and their activities are coordinated by the
central Implementation and
Evaluation Cell with a view to ensure uniform policies and action.
5) Workers Participation in Management: It is a method whereby the
workers are allowed to
be consulted and to have a say in the management of the unit. The
important schemes of workers
participation are:
 Work Committees consisting of representatives of employer and
employee where every industrial
undertaking employing 100 or more workers is under an obligation to set up.
Its main purpose to
promote industrial relations.
 Joint Management Councils: Government suggested setting up joint
management council to
make a start in labour participation in management.
 Shop council: it have been set up in the manufacturing and mining
industries employing 500 or
more workers in private, public and joint sectors. Its main function to assist
the management in
achieving production targets, improving production, productivity efficiency,
eliminating wastage
and in achieving optimum utilization of machinery and manpower.
 Joint Council : joint council have been established for the whole unit and
deals with matters
relating to optimum production and efficiency and the fixations of
productivity norms for man and
machine for the unit as a whole.
6) Tripartite Bodies: Tripartite bodies composed of employer, employee
and government have
been set up for consultation and discussion on problems of labour to solve it
out.
7) Model Standing Orders: Government enacted the Industrial
Employment (Standing Order) Act
1946 for to avoid frictions amongst employers and workmen over the terms
of employment. This
Act is requiring employers in the establishment to defuse with sufficient
precision, the condition of
employment under him and to make them known to all the workers. Such
conditions include
conditions of recruitment, discharge, disciplinary action, holidays, leave etc
of the workers. Thus,
the main object of the act is to prevent the dispute as soon as it arises by
framing model rules for
maintaining discipline and better relations.
137
11.11 Settlement of Industrial Disputes
If dispute could not be prevented on voluntary basis and do arise, steps have
to be taken for their settlement.
Industrial Dispute Act 1947 as amended in 1982 provides several provisions
for settling the disputes.
Various methods and provision are for resolving disputes. More important of
them are as follows:
1) Arbitration
2) Conciliation
3) Collective Bargaining
4) Code of Discipline
5) Grievance Procedure
6) Adjudication
7) Consultative machinery
1) Arbitration: it is a procedure in which a neutral third party studies the
bargaining situation listen to both
the parties and gathers information and then make recommendation that are
binding the parties. It is
effective because established by the parties themselves and the decision is
acceptable to them and relatively
expeditious when compared to courts or tribunals. Delays are cut down and
settlements are speeded up.
But it has some weakness also are it is expensive. The expenditure needs to
be shared by the labour and
the management and judgment become arbitrary if there is a mistake in
selecting the arbitrator.
2) Conciliation: It is a process by which representatives of workers and
employees are brought together
before a third party with a view to persuading them to arrive at an
agreement by mutual discussion between
them. The third party may be one individual or a group of people. The
alternative name for the third party
is mediators.
The conciliation officer can be appointed by the central and state
government to mediate in all disputes
brought to his notice. The officer enjoys the power of civil courts. He can call
and witness disputing parties
on oath and interpret the facts of the case. He is expected to give judgment
within 14 days of the
commencement of the conciliation proceedings. His judgment is binding on
all the parties to the disputes.
When the conciliation officer fails to resolve the disputes between the
parties, the government can appoint
a Board of Conciliation. It is not a permanent Board. It consists of a chairman
and two or four other
members nominated in equal numbers by the parties to the disputes.
3) Collective Bargaining: it is a process by which employers on the one
hand and representative of the
employees on the other, attempt to arrive at agreements covering the
conditions under which employees
will contribute and be compensated for their services. We already discuss on
it.
4) Code of Discipline: The code of discipline evolved by the Ministry of
Labour and Employment. The
code of discipline defines duties and responsibilities of employers and
workers. The objectives of promoting
constructive co-operation between their representatives at all levels,
avoiding stoppage as well as litigation,
securing settlement of grievance by mutual negotiation, conciliation and
voluntary arbitration, facilitating
the growth of trade union and eliminating all forms of coercion and violence
of Industrial Relation.
5) Grievance Procedures: A grievance may be understood as an
employee’s dissatisfaction or feeling of
personal injustice relating to his or her employment relationship. There are
some condition which may give
rise to a grievance are like a violation of law, a violation of the intent of the
parties as stipulated during
contract negotiation , a violation of company rules, a change in working
conditions or past company
practices and a violation of health and /or safety standards.
It is resolved by set procedure :
138
 How the grievance will be imitated?
 The number of steps in the process.
 Who will represent each party?
 The specified number of working days within which the grievance must be
taken on the next step
in the hearing.
6) Adjudication: it is means a mandatory settlement of an industrial
dispute by a labour court or a tribunal.
Whenever an industrial dispute remains unresolved by the conciliation officer
and the board of conciliation,
the matter is referred in a court of inquiry. A court of inquiry may consist of
one independent person or
such numbers of independent persons as the appropriate government may
think fit and submit its report to
the government within six months from the date of the commencement of
the inquiry. If settlement is not
arrived at by the efforts of the above machinery, three types of semi-judicial
bodies are formed i.e. labour
court, industrial tribunals and national tribunals.
 Labour Court shall consist of one person only to be appointed by the
appropriate government.
Labor court for adjudication of industrial disputes relating to disputed orders
of the employers.
e.g. dismissal, discharge and suspensions of employees, application and
interpretation of standing
orders, withdrawl of any concession or privilege, legality or otherwise of any
strike or lockout etc.
 Industrial Tribunals: the tribunals will consist of one person of the rank
of a high court judge by
state government. This tribunals solve out the disputes relating to wages,
hour of work and rest,
intervals, leave with pay, holidays, compensatory and other allowances,
bonus, profit sharing,
provident fund, retrenchment, gratuity and etc.
 National Tribunal: National Tribunals are set up by the Central
Government for the adjudication
of the industrial disputes which involves the question of national importance
or which affect industrial
establishment situated in more than one state. It gives decisions on matters
referred to it by the
Central Government which matter is referred to the national tribunal by the
central government,
the labour courts and industrial tribunals are barred from entertaining such
disputes and if any such
dispute is before labour court or tribunals. Shall be deemed to be quashed.
7) Consultative Machinery: It is set by the government to resolve
disputes. The main function of this
machinery is to bring the parties together for mutual settlement of
differences in a spirit of co-operation
and goodwill. Consultative machinery operates at the plant, industry, state
and the national level. At the
plant level, there are works committees and joint management councils
being bipartite in character and at
the industry level there are wage boards and industrial committees.
Activity C:
1 Management is bound for Labour Welfare-
(a) Within the factory only
(b) Outside the factory only
(c) Both of above
(d) None of the above
11.12 Summary
Industrial unrest is similar to a disease that demands cure and prevention
rather than suppression. The
emergence of the concepts of human relations, human resources
management and human resource
development has raised some hopes of findings solution to the problems of
industrial relations through
applied behavioral science interventions. Industrial relation refers to all type
of relationship between all the
parties concerned with the industry. The fundamental objectives of industrial
relations are to maintain
139
sound and harmonious relations between employers and employees. The
HRD Manager should try to
build labour management relations around mutual trust, understanding and
cooperation. The conflicts and
disputes between employer and employees on any industrial matter are
known as Industrial Disputes. It is
the most acute problem in any organization because it endangers peace in
the industry. According to
“Code of Industrial Relations, U.K. disputes are of two types- of right and of
interest. The main causes of
industrial disputes are economic, political, managerial, self-respect, ego and
etc.
Prevention is always better than care. Prevention steps should, therefore, be
taken so that individual
disputes do not occur. If the disputes cannot be prevented on voluntary basis
and do arise, steps have to
be taken for their settlement. Industrial Disputes Act, 1947 as amended in
1982, provides several provisions
for setting the disputes.
11.13 Self Assessment Questions
1. Explain the concept of Industrial Relations. What is the significance of
good industrial relations
and what are its objectives?
2. Bring out the causes and consequences of industrial disputes. Discuss
existing machinery for the
settlement of industrial disputes in India.
3. Discuss the steps you would suggest to promote industrial harmony in
India.
4. What do you mean by industrial relations? Discuss the role of various
participants in industrial
relations.
5. Explain the machinery for prevention and settlement of industrial disputes
in India.
11.14 Reference Books
- Industrial Relation and Legislative – T.N.Chabbra and Suri
- Industrial Relation - Nolakha
- Dynamics of Industrial Relations in India- C.B. and S. Mamoria
- Management of Industrial Relations- Verma, Pramod
- Industrial Relations Machinery- C.S.Srivastava
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Unit - 12 : Trade Unions
Structure of Unit:
12.0 Objectives
12.1 Introduction
12.2 What is Trade Union?
12.2.1 Objectives of Trade Union
12.2.2 Role of Trade Union
12.2.3 Functions of Trade Union
12.3 Types of Trade Union
12.4 Importance of Trade Union
12.5 Rights and Liabilities of Trade Union
12.6 Phases of Growth of Trade Union in India
12.7 Multiplicity and Effectiveness of Trade Union
12.8 Summary
12.9 Self Assessment Questions
12.10 Reference Books
12.0 Objectives
After completing this unit, you would be able to:
 Understand the meaning of Trade Union;
 Understand the different types of Trade Union;
 Learn about the different growth phases of Trade Union;
 Know about the duties and responsibilities of Trade Union;
 Learn about the effectiveness of Trade Union in Present Scenario.
12.1 Introduction
A trade union is an organization of workers that have banded together to
achieve common goals such as
better working conditions. The trade union, through its leadership, bargains
with the employer on behalf of
union members (rank and file members) and negotiates labor contracts
(collective bargaining) with employers.
This may include the negotiation of wages, work rules, complaint procedures,
rules governing hiring, firing
and promotion of workers, benefits, workplace safety and policies. The
agreements negotiated by the
union leaders are binding on the rank and file members and the employer
and in some cases on other nonmember
workers.
12.2 What is Trade Union?
Trade union as per Trade Union Act 1926 – “Any combination formed
primarily for the purpose of
regulating the relations between workmen and employers or workmen and
workmen or employers and
employers or for imposing restrictive conditions on the conduct of any trade
or business and includes any
federation of two or more trade unions.”
From the above definition it is clear that Trade union is not just an
association of the workmen
of a factory or a trade or a business but also can be formed by
officers and managers.
Under the Trade Unions Act, 1926, the expression trade union includes
both employers and workers in
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organizations. The term trade union however is commonly used to refer to
the organization of workers
formed to protect their rights and enhance their welfare.
According to V.V. Giri, “Trade unions are voluntary associations of workers
formed together to promote
and protect their interests by collective action.”
12.2.1 Objectives of Trade Union
Trade unions are formed to protect and promote the interests of their
members. Their primary function is
to protect the interests of workers against discrimination and unfair labor
practices. Trade unions are
formed to achieve the following objectives:
 Representation : Trade unions represent individual workers when they
have a problem at work.
If an employee feels he is being unfairly treated, he can ask the union
representative to help sort
out the difficulty with the manager or employer. Unions also offer their
members legal representation.
Normally this is to help people get financial compensation for work-related
injuries or to assist
people who have to take their employer to court.
 Negotiation : Negotiation is where union representatives, discuss with
management, the issues
which affect people working in an organization. There may be a difference of
opinion between
management and union members. Trade unions negotiate with the
employers to find out a solution
to these differences. Pay, working hours, holidays and changes to working
practices are the sorts
of issues that are negotiated. In many workplaces there is a formal
agreement between the union
and the company which states that the union has the right to negotiate with
the employer. In these
organizations, unions are said to be recognized for collective bargaining
purposes.
 Voice of Decision Effective Workers : The economic security of
employees is determined not
only by the level of wages and duration of their employment, but also by the
management’s personal
policies which include selection of employees for layoffs, retrenchment,
promotion and transfer.
These policies directly affect workers. The evaluation criteria for such
decisions may not be fair.
So, the intervention of unions in such decision making is a way through
which workers can have
their say in the decision making to safeguard their interests.
 Member Services : During the last few years, trade unions have
increased the range of services
they offer their members. These include:
 Education and Training : Most unions run training courses for their
members on employment
rights, health and safety and other issues. Some unions also help members
who have left school
with little education by offering courses on basic skills and courses leading to
professional
qualifications.
 Legal Assistance : As well as offering legal advice on employment issues,
some unions give help
with personal matters, like housing, wills and debt.
 Financial Discounts : People can get discounts on mortgages, insurance
and loans from unions.
 Welfare Benefits : One of the earliest functions of trade unions was to
look after members who
hit hard times. Some of the older unions offer financial help to their members
when they are sick or
unemployed.
12.2.2 Role of Trade Union
Trade unions are unique organisations whose role is variously interpreted
and understood by different
interest groups in the society. Traditionally trade unions role has been to
protect jobs and real earnings,
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secure better conditions of work and life and fight against exploitation and
arbitrariness to ensure fairness
and equity in employment contexts. In the wake of a long history of union
movement and accumulated
benefits under collective agreements, a plethora of legislations and industrial
jurisprudence, growing literacy
and awareness among the employees and the spread of a variety of social
institutions including consumer
and public interest groups the protective role must have undergone, a
qualitative change. It can be said
that the protective role of trade unions remains in form, but varies in
substance.
There is a considerable debate on the purposes and role of trade unions. The
predominant view, however,
is that the concerns of trade unions extend beyond ‘bread and butter’ issues.
Trade unions through industrial
action (such as protests and strikes) and political action (influencing
Government policy) establish minimum
economic and legal conditions and restrain abuse of labour wherever the
labour is organised. Trade unions
are also seen as moral institutions, which will uplift the weak and
downtrodden and render them the place,
the dignity and justice they deserve.
12.2.3 Functions of Trade Union
Trade unions perform a number of functions in order to achieve the
objectives. These functions can be
broadly classified into three categories:
1. Militant Functions
2. Fraternal Functions
1. Militant Functions
One set of activities performed by trade unions leads to the betterment of
the position of their members in
relation to their employment. The aim of such activities is to ensure
adequate wages secure better conditions
of work and employment get better treatment from employers, etc. When
the unions fail to accomplish
these aims by the method of collective bargaining and negotiations, they
adopt an approach and put up a
fight with the management in the form of go-slow tactics, strike, boycott,
gherao, etc. Hence, these functions
of the trade unions are known as militant or fighting functions. Thus, the
militant functions of trade unions
can be summed up as:
 To achieve higher wages and better working conditions
 To raise the status of workers as a part of industry
 To protect labors against victimization and injustice
2. Fraternal Functions
Another set of activities performed by trade unions aims at rendering help to
its members in times of need,
and improving their efficiency. Trade unions try to foster a spirit of
cooperation and promote friendly
industrial relations and diffuse education and culture among their members.
They take up welfare measures
for improving the morale of workers and generate self confidence among
them. They also arrange for legal
assistance to its members, if necessary. Besides, these, they undertake
many welfare measures for their
members, e.g., school for the education of children, library, reading-rooms,
in-door and out-door games,
and other recreational facilities. Some trade unions even undertake
publication of some magazine or
journal. These activities, which may be called fraternal functions, depend on
the availability of funds, which
the unions raise by subscription from members and donations from
outsiders, and also on their competent
and enlightened leadership. Thus, the fraternal functions of trade unions can
be summed up as:
 To take up welfare measures for improving the morale of workers
 To generate self confidence among workers
 To encourage sincerity and discipline among workers
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 To provide opportunities for promotion and growth
 To protect women workers against discrimination.
12.3 Types of Trade Union
Trade Union Act was established in the year 1926. TU is any association
(temporary /permanent) for the
purpose of regulating the relationship between employers-workers,
employer-employer, worker-worker
for imposing restrictive conditions on trade practices. It also includes
federation of unions referred as
association of professional persons. In countries like England, trade union is
referred as association of
professional person. In India it is considered as cursi - union /semi- union. In
America, TU is considered
as the association of all persons in a trade. Functions of TU: functions can be
categorized into: 1. Militant
/protective 2. Positive/fraternal. 3. Intramural/extramural
 Militant /protective: as the name suggests it protects their members,
aims at securing better
conditions of work, employment for members. It uses instruments like
strikes, lockouts etc. for
protecting the interest of their members.
 Positive/fraternal: It provides financial support to their members during
time of temporary
unemployment.
 Intramural/extramural: intramural refers to welfare schemes & activities
within the framework
of factory premises (safety, secure working environment, minimum wages,
minimum working hours,
and leave with wages) Extramural refers to the welfare schemes outside the
factory premises
(medical assistance, health care, education etc.)
TU are born out of the necessities of the workers to protect and defend them
from injustice, encroachment
and wrong. Unions classified according to purpose: Under this head,
normally two types of unions have
been kept 1) Reformist 2) Revolutionary
 Reformist Unions: These unions are those which aim at the preservation
of the capitalist society
and maintenance of the usual employer-employee relationship, elimination
of competitive system
of production. The reformist unions have been subdivided by hoxie according
to the objectives:
into business unions and uplift unionism.
 Revolutionary Unions: These unions aim at destroying the present
structure completely and
replacing it with new and different institution according to the ideas that are
regarded as preferable.
The revolutionary unionism is also of two types namely, anarchist and
political. Dr horie also
enumerates a third type of unionism namely predatory unions and gorilla
union.
According to membership structure there are four types of Trade unions:
1.Craft unionism, 2. staff unionism,
3. Industrial union and 4.general union.
 Craft Union: Workers, those are working in same as similar type of
work/trade/business. They
have similar skills, specialization. Members are mostly non manual workers.
Members are craft
conscious than class conscious .They take the membership on the basis of
similar type of work.
They strengthen their union by integration of their members.
 Staff Union: Organization, those are basing upon a sense of common
status, same type of need.
They try to seek their membership from non manual sectors of the economy
like clerical, supervisors,
operators, technicians, craftsmen etc. Unique feature of staff union was
women workers were
also members of staff union. Staff union gained popularity by taking women
workers as their
members.
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 Industrial Union: Irrespective of crafts, skill, grade, position, gender etc.
The workers working
in one industry were members of industrial union. This union is more class
conscious than trade
conscious.
 General union: It covers all types of industries. Labor class people from
any type of industry can
be members of general union. It is more open than the industrial unions.
Their numerical strength
is high.
12.4 Importance of Trade Union
The existence of a strong and recognized trade union is a pre-requisite to
industrial peace. Decisions taken
through the process of collective bargaining and negotiations between
employer and unions are more
influential. Trade unions play an important role and are helpful in effective
communication between the
workers and the management. They provide the advice and support to
ensure that the differences of
opinion do not turn into major conflicts. The central function of a trade union
is to represent people at
work. But they also have a wider role in protecting their interests. They also
play an important educational
role, organizing courses for their members on a wide range of matters.
Seeking a healthy and safe working
environment is also prominent feature of union activity.
Trade unions help in accelerated pace of economic development in many
ways as follows:
 By helping in the recruitment and selection of workers.
 By inculcating discipline among the workforce
 By enabling settlement of industrial disputes in a rational manner
 By helping social adjustments. Workers have to adjust themselves to the
new working conditions,
the new rules and policies. Workers coming from different backgrounds may
become disorganized,
unsatisfied and frustrated. Unions help them in such adjustment.
Trade unions are a part of society and as such, have to take into
consideration the national integration as
well. Some important social responsibilities of trade unions include:
 Promoting and maintaining national integration by reducing the number of
industrial disputes
 Incorporating a sense of corporate social responsibility in workers
achieving industrial peace.
12.5 Rights and Liabilities of Trade Union
1. Disabilities of Unregistered Union: A trade union shall not enjoy any
of the rights, immunities or
privileges of a registered trade union unless it is registered.
2. Immunity from Civil Suit in Certain Cases: No suit or other legal
proceeding shall be maintainable
in any civil court against any registered trade union or any officer or member
thereof in respect of any act
done in contemplation or in furtherance of a trade dispute to which a
member of the trade union is a party
on the ground only that such act induces some other person to break a
contract of employment, or that it
is an interference with the trade, business or employment of some other
person or with the right of some
other person to dispose of his capital or of his labour as he will.
3. Liability in Tort:
(1) A suit against a registered trade union or against any members or officers
thereof on behalf of
themselves and all other members of the trade union in respect of any
tortuous act alleged to have
been committed by or on behalf of the trade union shall not be entertained
by any court.
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(2) Nothing in this section shall affect the liability of a trade union or any
trustee or officers thereof to
be sued in any court touching or concerning the specific property or rights of
a trade union or in
respect of any tortuous act arising substantially out of the use of any specific
property of a trade
union except in respect of an act committed by or on behalf of the trade
union in contemplation or
furtherance of a trade dispute.
4. Liability in Contract: Every registered trade union shall be liable on any
contract entered into by it or
by an agent acting on its behalf: Provided that a trade union shall not be so
liable on any contract which is
void or unenforceable at law.
5. Objects in Restraint of Trade Not Unlawful in Case of Registered
Trade Union: The objects of
a registered trade union shall not, by reason only that they are in restraint of
trade be deemed to be
unlawful so as to render any member of such trade union liable to criminal
prosecution for conspiracy or
otherwise or to render void or voidable any agreement or trust.
6. Proceedings By and Against Trade Unions:
1. A registered trade union may sue and be sued and be prosecuted under its
registered name.
2. An unregistered trade union may be sued and prosecuted under the name
by which it has been
operating or is generally known.
3. A trade union whose registration has been cancelled or withdrawn may be
sued and prosecuted
under the name by which it was registered.
4. Execution for any money recovered from a trade union in civil proceedings
may issue against any
property belonging to or held in trust for the trade union other than the
benevolent fund of a
registered trade union.
5. Any fine ordered to be paid by a trade union may be recovered by distress
and sale of any
movable property belonging to or held in trust for the trade union in
accordance with any written
law relating to criminal procedure.
6. In any civil or criminal proceedings in which a registered trade union is a
party such trade union
may appear in such proceedings by anyone of its officers or by an advocate
and solicitor.
7. Strikes and Lock-outs:
1. No trade union of workmen shall call for a strike, and no member thereof
shall go on strike, and no
trade union of employers shall declare a lock-out –
a) in the case of a trade union of workmen, without first obtaining the
consent by secret ballot of at
least two-thirds of its total number of members who are entitled to vote and
in respect of whom
the strike is to be called; and in the case of a trade union of employers,
without first obtaining by
secret ballot the consent of at least two-thirds of its total number of
members who are entitled to
vote;
b) before the expiry of seven days after submitting to the Director General
the results of such secret
ballot in accordance with section 40 (5);
c) if the secret ballot for the proposed strike or lock-out has become invalid
or of no effect by virtue
of section 40 (2), (3), (6) or (9);
d) in contravention of, or without complying with, the rules of the trade
union;
e) in respect of any matter covered by a direction or decision of the Minister
given or made in any
appeal to him under this Act; or
f) in contravention of, or without complying with, any other provision of this
Act or any provision of
any other written law.
146
2. Any trade union which, and every member of its executive who,
commences, promotes, organises or
finances any strike or lock-out which is in contravention of subsection (1)
shall be guilty of an offence and
shall, on conviction, be liable to a fine not exceeding two
3. Any member of a trade union of workmen who commences, participates
in, or otherwise acts in
furtherance of, any strike which is in contravention of subsection (1) shall
forthwith cease to be a member
of the trade union, and thereafter such member shall not be eligible to
become a member of any trade
union except with the prior approval of the Director General in writing; and
the trade union of which he has
so ceased to be a member shall forthwith –
a) remove the name of such member from its membership register;
b) inform the Director General and the member concerned of such removal;
and
c) exhibit conspicuously in its registered office in a place where it may be
easily read a list of members
whose names are so removed.
4. The Director General may, where he is satisfied that subsection (1) has
been contravened by any
person and the trade union concerned has failed to carry out the provisions
of subsection (3), or where
there is undue delay in so doing, after such investigation as he deems
necessary, order the trade union to
remove forthwith the names of the members concerned from its membership
register.
5. The satisfaction of the Director General under subsection (4) that
subsection (1) has been contravened
by any person may be arrived at regardless as to whether or not there is any
prosecution of any person for
contravention of the said subsection (1).
6. Any registered trade union which, and every member of its executive who,
fails to comply with subsection
(3) or with an order of the Director General under subsection (4) shall be
guilty of an offence and shall, on
conviction, be liable to a fine not exceeding one thousand ringgit, and a
further fine of one hundred ringgit
for every day during which such offence continues.
7. In every proceeding for an offence under this section the onus of proving
that the requirements specified
in subsection (1) have been complied with shall be on the trade union, the
member of its executive or the
member of the trade union, as the case may be.
Thousand ringgit, or to imprisonment for a term not exceeding one year, or
to both, and a further fine of
one hundred ringgit for every day during which such offence continues.
12.6 Phases of Growth of Trade Union in India
Trade union is a direct product of Industrialization and a very recent
development. In India, the foundation
of modern industry was laid between 1850 and 1870. Prior to that trade was
confined to individuals and
families like craftsmen and artisans. They had expertise and specialized skills
which was inherited by their
off springs. After Industrial revolution, these people started losing their
individual identities and had to join
factories to earn their livelihood and compete with mass production. There
was a psychological dislocation
as they were losing their identities.
Indian trade union movement can be divided into three phases.
The first phase falls between 1850 and 1900 during which the inception of
trade unions took place.
During this period of the growth of Indian Capitalist enterprises, the working
and living conditions of the
labour were poor and their working hours were long. Capitalists were only
interested in their productivity
and profitability. In addition to long working hours, their wages were low and
general economic conditions
were poor in industries. In order to regulate the working hours and other
service conditions of the Indian
147
textile labourers, the Indian Factories Act was enacted in 1881. As a result,
employment of child labour
was prohibited. Mr. N M Lokhande organized people like Rickshawalas etc.,
prepared a study report on
their working conditions and submitted it to the Factory Labour Commission.
The Indian Factory Act of
1881 was amended in 1891 due to his efforts. Guided by educated
philanthropists and social workers like
Mr. Lokhande, the growth of trade union movement was slow in this phase.
Many strikes took place in
the two decades following 1880 in all industrial cities. These strikes taught
workers to understand the
power of united action even though there was no union in real terms. Small
associations like Bombay Mill-
Hands Association came up.
The second phase of The Indian trade union movement falls between 1900
and 1947. this phase was
characterized by the development of organized trade unions and political
movements of the working class.
It also witnessed the emergence of militant trade unionism. The First World
War (1914-1918) and the
Russian revolution of 1917 gave a new turn to the Indian trade union
movement and organized efforts on
part of the workers to form trade unions. In 1918, B P Wadia organized trade
union movements with
Textile mills in Madras. He served strike notice to them and workers
appealed to Madras High Court
because under ‘Common Law’, strike is a breach of law. In 1919, Mahatma
Gandhi suggested to let
individual struggle be a Mass movement. In 1920, the First National Trade
union organization (The All
India Trade Union Congress (AITUC)) was established. Many of the leaders of
this organization were
leaders of the national Movement. In 1926, Trade union law came up with
the efforts of Mr. N N Joshi
that became operative from 1927.
The third phase began with the emergence of independent India (in 1947),
and the Government sought
the cooperation of the unions for planned economic development. The
working class movement was also
politicized along the lines of political parties. For instance Indian national
trade Union Congress (INTUC)
is the trade union arm of the Congress Party. The AITUC is the trade union
arm of the Communist Party
of India. Besides workers, white-collar employees, supervisors and managers
are also organized by the
trade unions, as for example in the Banking, Insurance and Petroleum
industries.
LABOUR LAWS
Law-”Law is a rule or a system of rules recognized by a country or a
community as regulating the actions
of its members and enforced by the imposition of penalties.”
Factors responsible for development of Labor laws
 Exploitation of the workmen by the capitalists
 Social pressure and pressure from trade unions
 Government policies based on Government philosophy which in turn was
based on the political
ideologies
 Constitution of India (Directive Principles of state policy)
 Supreme Court’s recommendations on the cases that came up in the
courts
 Recommendations of various commissions and committees set up by
government from time to
time
 Conventions and recommendations of International labor organization (ILO)
 Awareness about environment
Common Features of All Laws
 Short title and commencement
 Preamble i.e. purpose of the law
 Definitions
148
 Substantive provisions
 Penalty provisions
 Records/ Registers/ Returns
 Inspectorate/ Enforcement authority
Categories of Labor Laws
 Regulatory legislations to oversee the conditions of work at workplace
Eg. Machinery arrangement, spittoons, working hours, leave with wages etc.
 Legislations related to wages
Eg. Payment of Wages Act, 1936, Minimum Wages Act, 1948
 Legislations related to social security
Eg. ESI Act, 1948, Employees Provident Fund Act, 1952
 Legislations related to Industrial Relations (IR)
Eg. Industrial disputes Act, 1947, Industrial Employments (Standing Orders)
Act, 1946, Trade
Union Act, 1926
 Legislations related to service conditions
Eg. Regulations of environment Act (for Dock workers), Conditions of Service
Act (for Sales
Promotion employees)
 Miscellaneous:
Eg. Apprentices Act, 1961, Environment protection Act, 1986
The trade unionism in India developed quite slowly as compared to the
western nations. Indian trade
union movement can be divided into three phases.
The Indian workforce consists of 430 million workers, growing 2% annually.
The Indian labor markets
consist of three sectors:
1. The rural workers, who constitute about 60 per cent of the workforce.
2. Organized sector, which employs 8 per cent of workforce, and
3. The urban informal sector (which includes the growing software industry
and other services, not
included in the formal sector) which constitutes the rest 32 per cent of the
workforce.
At present there are twelve Central Trade Union Organizations in
India:
1. All India Trade Union Congress (AITUC)
2. Bharatiya Mazdoor Sangh (BMS)
3. Centre of Indian Trade Unions (CITU)
4. Hind Mazdoor Kisan Panchayat (HMKP)
5. Hind Mazdoor Sabha (HMS)
6. Indian Federation of Free Trade Unions (IFFTU)
7. Indian National Trade Union Congress (INTUC)
8. National Front of Indian Trade Unions (NFITU)
9. National Labor Organization (NLO)
149
10.Trade Unions Co-ordination Centre (TUCC)
11.United Trade Union Congress (UTUC) and United Trade Union Congress -
Lenin Sarani (UTUC
- LS)
12.7 Multiplicity and Effectiveness of Trade Union
Multiple unionism leads to multiple enrolment in unions and no subscribing
members, causing delay or
failure to get recognition. This restrains a union’s bargaining power during a
period of prolonged strife
while the unions are squabbling among themselves for dominance, the
workers are deprived of their
wages and the plant suffers a loss of production. Multiple unionism
qualitatively weakens the movement
resulting in the formation of small- sized unions without effective
organization.
However it must be noted that in spite of foregoing there are many
organizations where multiple unions
exist and the management does effectively negotiate, and conclude
agreements. In many plants, workers
are unionized –on a craft basis –their special skills or training bonding them
together. Multi-unionism is
more a problem where general unions exist, for whom all categories can be
organized in one general
union.
Activity A:
1. Visit any organization and discuss the feasibility of relevance of Trade
Union in global economy.
12.8 Summary
The trade unions are organized by workers to solve their problems created
by modern industry. They are
voluntary associations of workers formed to promote and protect their
interests by collective action. They
play different roles; for example, they act as agents of the government and
help in maintaining social
discipline and administering its policies.
To achieve their objectives, trade unions may employ Variety of means –
depending on the attitude of the
unions regarding the economic system in which they operate; the degree of
group and class consciousness
among workers, the nature of political organization; and the nature and type
of trade union leadership.
Trade unionism in India suffers from a variety of problems, such as
politicizations of the unions, multiplicity
of unions, inter and intra-union rivalry, small size and low membership,
financial weakness, and lack of
financial weakness, and lack of welfare facilities for the members, weak
bargaining power, reliance on
litigation and strikes, and dependence on outside leadership. This vicious
circles has adversely affected
their status and bargaining power, and must be broken at as many points as
possible.
The factors that make a trade union strong and healthy and unflinching
adherence to the union’s constitution
and rules, regular payment of dues, fully representative character of the
union, co-operation with sister
unions and a sound leadership. A methodological organization with an
enlightened labor force is essential.
12.9 Self Assessment Questions
1. Define Trade Unions?
2. Describe different growth phases of trade union in India.
3. Explain the characteristics of Trade Union?
4. Explain Trade Union objectives?
150
12.10Reference Books
- Mamoria C.B.(2008); “ Dynamics of Industrial Relations”; Himalaya
Publishing House, Mumbai.
- Flanders, Alan,(1963);Trade Unions., pp.46-47.
- Punekar, S.D. and Madhuri (1967); “Trade Union Leadership in India: A
survey”, Bombay.
- Crouch, Harold (1966), “Trade Unions and Politicism in India”, Preface.
- Yoder, Dale, (1972); “Personnel Management and Industrial Relations”,
pp.159-160.
- Ghosh, S.T., “Trade Unionism in Underdeveloped Countries”, p.13.
- Joshi, N.M. “Trade Unionism in India”, P.9.
- World Labor Report (1998); I.L.O., , p.64.
151
Unit - 13 : Collective Bargaining
Structure of Unit:
13.0 Objectives
13.1 Introduction
13.2 Concept/Definition of Collective Bargaining
13.2.1 Why Workers Join Unions?
13.2.2 Advantages of Collective Bargaining
13.3 Objectives and Features of Collective Bargaining
13.4 Types of Collective Bargaining
13.5 Process of Collective Bargaining
13.5.1 Developing a Bargaining Relationship
13.5.2 Preparation for Negotiation
13.5.3 Negotiation Stage
13.5.4 Collective Agreements
13.6 Collective Bargaining Practice in India
13.7 Summary
13.8 Self Assessment Questions
13.9 References Books
13.0 Objectives
After completing this unit, you would be able to:
 Understand the concept of collective bargaining;
 Understand the features and objectives of collective bargaining;
 Learn about the different types of collective bargaining;
 Learn the process of collective bargaining;
 Understand the collective bargaining practices in India.
13.1 Introduction
Collective bargaining is specifically an industrial relations mechanism or tool,
and is an aspect of negotiation,
applicable to employment relationship. As a process, the two are in essence
the same, and the principle
applicable to negotiations is relevant to collective bargaining as well. In
collective bargaining the union
always has a collective interest since the negotiations are for the benefit of
several employees. Where
collective bargaining is not for one employer but for several, collective
interests become a feature for both
parties to the bargaining process. In collective bargaining certain essential
conditions need to be satisfied,
such as the existence of freedom of association and a labor law system.
Further, since the beneficiaries of
collective bargaining are in daily contact with each other, negotiations take
place in the background of a
continuing relationship which ultimately motivates the parties to resolve the
specific issues.
Collective bargaining is a process of negotiations between employers and
the representatives of a unit of
employees aimed at reaching agreements that regulate working conditions.
Collective agreement usually
set out wage scales, working hours, training, health and safety, overtime,
grievances, mechanisms and
rights to participate in workplace or company affairs. Ultimately the term
“bargaining” implies that the
process is one of haggling, which is more appropriate to one- time
relationships such as a onetime purchaser
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or a claimant to damages. While collective bargaining may take the form of
haggling, ideally it should
involve adjusting the respective positions of the parties in a way that is
satisfactory to all.
13.2 Concept/Definition of Collective Bargaining
Collective bargaining is a process whereby organized labor and
management negotiate the terms and the
conditions of employment. Let us explore some definitions from different
sources:
“Collective bargaining is a method by which trade unions protect and
improve the condition of their
member’s working lives.”
According to Flanders “Collective Bargaining as a means of joint
regulation”
According to ILO, (convention no: 87) “Collective Bargaining is a
fundamental right. The right to
Collective Bargaining forms an integral part of the ILO declaration on
fundamental Principles (1998).”
OECD (Organization for Economic Co-operation and Development), WTO
(World Trade Organization)
and the United Nations advocates Collective Bargaining in similar tones.
Collective Bargaining is a part of
“Core Labor Standards, Social clause and Global Compact respectively” This
means future that Collective
Bargaining should be considered as a Fundamental Right.
Today collective bargaining has assumed a complex nature, conducted in the
most formal environment,
associating the services of a large number of experts, legal practitioners,
consultants and specialized
personnel. Today it is regarded as a social process, because it occurs in a
social setting.
In majority of the cases collective bargaining process deals with issues like:
 Rate of wages, pay.
 Hours of employment, working conditions
 Employment policies
 Productivity settlement
13.2.1 Why Workers Join Unions?
It is essential to understand why workers join unions to understand the
importance of collective bargaining,
these are:
 Dissatisfaction with working environment, including working conditions,
compensation, and
supervision
 A desire to have more influence in affective change in the work
environment
 Employee beliefs regarding the potential benefits of unions.
13.2.2 Advantages of Collective Bargaining
To understand the collective bargaining it is necessary to know about the
various advantages of collective
bargaining, these are:
 Collective bargaining has the advantage of settlement through dialogue
and consensus rather than
through conflict and confrontation. Agreement resulting from collective
bargaining usually represents
the choice or compromise of the parties themselves.
 Collective bargaining agreements often institutionalize settlement through
dialogue. For instance, a
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collective agreement may provide for methods by which disputes between
the parties will be
settled. In that event parties know beforehand that if they are in
disagreement there is an agreed
method by which such disagreement may be resolved.
 Collective bargaining is a form of participation because it involves a
sharing of rule making power
between rule making power between employers and unions in the areas
which in earlier times
were regarded as management prerogative e.g. transfer, promotion,
redundancy.
 Collective bargaining agreements sometimes renounce or limit the
settlement of disputes through
trade union action.
 Collective bargaining is an essential feature in the concept of social
partnership towards which
labor relations should strive. Social partnership in this context may be
described as a partnership
between organized employer institutions and organized labor institutions
designed to maintain
non- confrontational process in the settlement of disputes which may arise
between employers
and employees.
 Collective bargaining has a valuable by- products relevant to the
relationship between the two
parties.
 In societies where there is a multiplicity of unions and shifting union
loyalties, collective bargaining
a consequent agreements tend to stabilize union membership.
 Collective bargaining is the most important and effective in improving
industrial relations.
13.3 Objectives and Features of Collective Bargaining
There are some basic objectives of collective bargaining on that basis whole
process generally work,
these are:
 Settle the conflicts related to working conditions and wages.
 To protect the interest of the workers through collective action.
 To resolve the difference between the workers and management through
voluntary negotiations
and to arrive at a consensus.
 To avoid third party intervention in matters relating to employment.
 Practically speaking any issues that has any relevance to management and
workers becomes the
subject matter of bargaining.
Features of Collective Bargaining
“Collective Bargaining is a mutual obligation on the employer and employee
to bargain in good faith
towards the settlement”. Keeping this statement in mind let’s explain the
features of collective bargaining in
detail:
 Collective: It’s collective in two ways:
1) All the workers collectively bargain for their collective interest, because
they do not have
individual capacity.
2) Workers and the management jointly arrive at an amicable solution
through negotiations. The
Union is expected to bring out the common consensus on collective issues
rather than individual
issues.
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 Bargaining Power: In collective bargaining the bargaining strength of
both the parties across the
table is equal. Ideally it is industrial democracy at work. It will only be
democratic only if both the
parties are equipped with knowledge and skill. The strength of the union also
depends on the
demand and supply of working force. Similarly how much capital is invested
upon one worker
also determines the ratio of bargaining power. For example: A pilots union
would have more
bargaining power than the union of road transport. Because the capita land
stake invested on the
pilot is much higher than the drivers.
 Flexible: In collective bargaining both the parties should have to flexible
mental set up to arrive
amicably at a common consensus.
 Voluntary: Both the parties come in front of each other voluntary in order
to arrive at a voluntary
agreement, which is mutually acceptable to both the parties.
 Continuous: Collective bargaining not only commences with negotiation
and ends in argument,
but it’s a continuous process that includes implementation of the agreement
and also further
negotiations.
 Dynamic: It’s a dynamic process because it involves the following:
1) A process of agreement which itself contains various concepts which may
change and alter
time to time.
2) The implementation process is also on going.
3) The mental makeup of the parties keeps on changing.
4) Various strategies used by both the parties keeps on changing based on
the demand
of the situation.
5) We all are a part of the global economy and the product, consumer’s
taste; market place etc
keeps on changing. This has tremendous effect on companies. The same has
impact on the
bargaining as well.
 Power relationship: Both the parties want to extract the maximum from
each other. But to reach
a consensus both the parties have to retreat from their positions in order to
reach a common
consensus. In such an attempt both the parties try to reach on a common
ground without any
serious dilution of their power. Example: If the job of the worker is not skilled
and he is being
easily replaceable, he would have lesser bargaining power. Because, there is
a huge mass of
unemployed youth waiting to be replaced.
 Representation: The Collective Bargaining process must be represented
by those who have the
capacity to take decisions.
 Bipartite Process: The employees and the employers negotiate the issue
directly across the
table. And there is no third party intervention like pressure groups, legal
consultants.
 Good Faith Bargaining Process: Good faith bargaining is characterized
by the following events:
1) Meeting for the purposes of negotiations, the contract is used scheduled
and conducted
with the union of responsible time and place.
2) Realistic proposals are submitted.
3) Reasonable counter proposal should be offered.
4) Each party has to sign once it has been completed.
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13.4 Types of Collective Bargaining
In bargaining situations, demands are pitched higher than what one would
really settle for and offers are
initially made lower than what one is really prepare to give. On the other
hand it’s a charter in which some
major and some minor demands consist. All these variations in bargaining
can be divided in three types,
theses are:
1. Distributive Bargaining: Distributive bargaining is the most common
type of bargaining and
involves zero-sum negotiation. In other words, one side wins and other side
loses. Union employees
may try to convince management that they will strike if they don’t get the
wages or working
conditions they desire. Management, in turn may be willing to try to ride the
strike out, especially
if they have cross-trained other workers or have external replacements to fill
in for those on strike.
In this bargaining, union and management have initial offers or demands,
target points, resistance
points and settlement ranges.
2. Integrative Bargaining: Integrative bargaining is similar to problem-
solving sessions in which
both sides are trying to reach mutually beneficial alternatives. Both the
employer and union try to
resolve the conflict to the benefit of both parties.
3. Concessionary Bargaining: It involves a union’s giving back to
management some of what it
has gained in previous bargaining. Why would labor be willing to give back
what it worked so
hard to obtain? Usually such a move is prompted by labor leader who
recognize the need to assist
employers in reducing operating cost in order to prevent layoffs and that
motivates concessionary
bargaining.
13.5 Process of Collective Bargaining
13.5.1 Developing a Bargaining Relationship
One of the very important facets which need to be considered before
studying the process of collective
bargaining is “Understanding and developing of a good Bargaining
relationship”. This step consists of
these activities mainly;
1. Recognition of the Bargaining Agent: In those organizations where
there is a single trade union, that
union is generally granted recognition to represent the workers. But where
there is more than one union,
any of these criteria may be used for identifying the representative union,
namely:
 Selection of the union by a secret ballot.
 Selection through verification of membership by some government agency
if required.
 Bargaining with a joint committee of all major unions.
 Bargaining with a negotiation committee in which different unions would be
represented in proportion
to their verified membership
 Bargaining with a negotiation committee which consists of elected
representative of every
department of the organization selected by secret ballot, irrespective of their
union affiliations.
2. Levels of bargaining. Collective bargaining is possible at all levels, such
as:
 At the level of the enterprise,
 It may be at the level of the industry in a particular region.
 At the level of the entire industry in the country, that is, at the national
level.
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From the point of view of an individual establishment, enterprise-level
bargaining is generally useful in the
sense that the settlement is tailored to the conditions of that organization.
3. Scope and Coverage of Collective Bargaining: Though in many
organizations bargaining is struck
only by specific issues like wage increase, bonus, or seniority, promotion,
etc., yet it is considered
advantageous, both for the management and the trade unions, to cover as
many issues of interests to both
parties as possible. Now a days the orientation of collective bargaining is
changing from conflict to
cooperation and there by building an atmosphere of trust, progress and
social welfare. For example: union
must strive for larger scope and coverage like wages and service conditions
for contract labor, temporary,
part time employees, trainees etc.
4. Process Variation of Collective Bargaining: The negotiation process
has been visualized in different
ways. Collective bargaining procedure can be compared with the similar to
an exercise in politics where
the relative strength of the parties stems from decisiveness and that it
resembles with a debate. They are
also of the view that both the parties on the bargaining table become
entirely flexible and willing to be
persuaded only when all the facts have been presented.
However with the increasing maturity of collective bargaining, there has
been enlargement of the rational
process. In addition several other factors also influence the negotiation
process. Among these factors
some are mentioned below:
 Objectives of the parties.
 Kind of experience, knowledge the parties have.
 The Industrial legislation of the concerned country.
 The personalities and training of the negotiators.
 The history of the labor relations in the enterprise.
 The size of the bargaining unit and
 The economic environment.
Although several negotiators may attempt to bluff or outsmart the opposite
group, others seldom think of
using these tactics. While some bargainers may attempt to dictate the
contract on a unilateral ground,
others visualize that this process is eventually self defeating. While some
negotiators may come together
with excessive unrealistic proposals, others may have quite realistic ones. In
some negotiations, there may
be in each side implicit faith in the counterpart while in others there may
prevail a climate of mutual distrust,
suspicion and even hatred, in view of the past adverse labor relations.
Moreover if the objective is to
obtain solution to their mutual problems, the parties are likely to conduct the
negotiation on the ground of
rationality and fairness. However if the objective is to “put management in
its place” or to “weaken or to
even destroy the union”, the process of negotiation may take quite different
forms. Thus several factors
operate causing variations in the conduct of collective bargaining
negotiations. “Militant unions vs. irrational
management”, “Rational unions vs. oppressive management”, “Progressive
union and progressive
management”-There can be many permutations and combinations and
results of the bargaining process
would vary depending on these.
13.5.2 Preparation for Negotiation
Prior to the actual bargaining sessions, enough care should be taken by both
the parties to have a thorough
preparation for the negotiations. This has become a pre – requisite to
collective bargaining in view of
several reasons. Consultation with the lower level members of their
respective organizations can help both
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the parties to obtain valuable information and evolve specific bargaining
table approaches. The consultation
process also increases the morale of the two organizations. Again the
technical assistance of legal and
public relations experts can also be utilized gainfully in the collective
bargaining process. Finally care
should be taken to preplan with mutual consent the meeting places, ground
rules relating to transcripts of
the sessions , publicity releases, the payment system of union
representatives and allied issues.
13.5.3 Negotiation Stage
Methodology for bargaining is very important in negotiating process. It will
help the negotiator to develop
those personal and managerial (administrative) qualities of preparedness,
knowledge, ability, sensitivity,
timing, analytical abilities, composure and patience. These qualities develop
as a result of observation,
experience involvement and conscious individual effort and experience.
As a bargaining methodology it is desirable to list all the bargaining items,
whether introduced by the
employer or the employee that the parties will consider during the course of
the collective bargaining
negotiations. These bargaining items could be separated into two parts –
 The cost or financial items
 The other for non cost or non financial items.
After listing the items priority rating can be determined for these items
based on its value or importance
relative to all other items on the agenda. The range of the objectives could
be decided. This methodology
provides a systematic framework for approaching collective bargaining
negotiations. Some advantages to
collective bargaining negotiations result from the use of the methodology by
objectives.
Management Strategies:
Prior to the bargaining session, management negotiators prepare by
developing the strategies and proposals
they will use. Three major areas of preparation have been identified:
 Determination of the general size of the economic package that the
company anticipates offering
during the negotiations.
 Preparation of statistical displays and supportive data that the company
will use during negotiations.
 Preparation of a bargaining book for the use of company negotiators, a
compilation of information
on issues that will be discussed, giving an analysis of the effect of each
clause, its use in other
companies, another fact.
An important part of this calculation is the cost of various bargaining issues
or demands. The relative cost
of pay increases, benefits, and other provisions should be determined prior
to negotiations. Other costs
should also be considered. For instance, what is the cost to management, in
terms of its ability to do its
job, of union demands for changes in grievance and discipline procedures or
transfer and promotion
provisions? The goal is to be as well prepared as possible by considering the
implications and ramifications
of the issues that will be discussed and by being able to present a strong
argument for the position management
takes.
Union Strategies:
Like management, unions need to prepare for negotiations by collecting
information. More and better
information gives the union the ability to be more convincing in negotiations.
Since collective bargaining is
the major means by which the union can convince its members that it is
effective and valuable, this is a
critical activity. Union should collect information in at least three areas:
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 The financial situation of its company and its ability to pay;
 The attitude of management towards various issues, as reflected in past
negotiations of inferred
from negotiations in similar companies; and
 The attitudes and desires of the employees
The first two areas give the union an idea of what demands the management
is likely to accept. The third
area is important but is sometimes overlooked. The union should be aware of
the preferences of the
membership. For instance, is a pension preferred over increased vacation or
holiday benefits? The preferences
will vary with the characteristics of the workers. Younger workers are more
likely to prefer more holidays,
shorter work weeks, and limited overtime, whereas older workers are more
interested in pension plans,
benefits and overtime. The union can determine these preferences by using
a questionnaire to survey its
members.
13.5.4 Collective Agreements
Collective agreements are commonly classified under two headings
–‘procedural’ and ‘substantive’.
(a) Procedure Agreements: Procedure agreements spell out the steps by
which the industrial relations
processes are carried out. Procedure agreements are collective agreements
which relate to:
(1) Machinery for consultation, negotiation or arbitration on terms and
conditions of employment or
for any other matters which arise between trade unions and employers.
(2) Negotiating rights
(3) Facilities for trade union officials and
(4) Disciplinary matters and individual workers’ grievances.
(b) Substantive Agreements: These contain the ‘substance’ of any
agreement on terms and conditions
of the employment. They cover payments of all kinds, i.e. wage rates, shift
allowances, incentive payments
also holidays and fringe benefits such as pensions and sick pay and various
other allowances.
(c) Mixed Procedural/ Substantive Agreements: The distinction
between ‘procedural’ and ‘substantive’
agreements while useful, does not always apply in practice. It is possible to
have both ’substantive’ and
‘procedural’ elements in the same agreement. There is, however, a tendency
for procedural agreements to
have a separate and long term existence and consequently they are not
subject to a great deal of alteration.
On the other hand, substantive agreements are altered from time to time to
take account of on-going
negotiations.
Notwithstanding the variations in collective bargaining process, in recent
days it is characterized by rational
discussions based on facts. In modern collective bargaining process the low
level of behavioral patterns
such as emotional outburst, tricks, distortion of facts, misrepresentations and
deceit are largely avoided.
The labor and management representatives have realized that these
elements cause unhealthy labor relations
and increase the possibility of industrial conflict. Implicitly, one of the goals
of collective bargaining is to
promote a rational and harmonious relationship in the organization.
Accordingly, the negotiators should
have qualities of patience, trustworthiness, friendliness, integrity and
fairness. Each party should share the
attitude of self assessment and consider that the other party may not
necessarily be wrong all the time. If
such an open attitude is developed in both the parties, the negotiation
process is likely to become successful.
Harvard Law School’s Program on Negotiation describes the collective
bargaining process as comprising
five core phases:
1. Preparation and Framing. In this phase both the school board and the
union examine their own
situation in order to develop the issues that they believe will be most
important, including assessing
‘you’re interests as well as the interests of the other side’;
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2. Bargaining Over How to Bargain. Here, the parties decide the ground
rules that will guide the
negotiations. This is where the logistics are determined, such as the rules for
secrecy and the
frequency of negotiating meetings;
3. Opening and Exploring. This phase involves the initial opening
statements and the possible
options that exist to resolve them. In a word, this phase could be described
as ‘brainstorming’;
4. Focusing and Agreeing. This stage comprises the time when ‘what ifs’
and ‘proposals’ are set
forth and the drafting of agreements take place; and
5. Implementation and Administration. This stage is described as
consisting of ‘effective joint
implementation through shared visions, strategic planning and negotiated
change.’
13.6 Collective Bargaining Practices in India
Collective bargaining in India has been the subject matter of industrial
adjudication since long and has
been defined by our Law Courts .Collective bargaining is a technique by
which dispute as to conditions of
employment is resolved amicably by agreement rather than coercion.
Collective Bargaining machinery
essentially is a reflection of a particular social and political climate. The
history of the trade union movement
shows that union is affiliated to one or the other political parties. As a result
most of the trade unions are
controlled by outsiders. Critic says that the presence of outsiders is one of
the important reasons for the
failure of collective bargaining in India.
The Trade Unions Act, 1926, permits outsiders to be the office bearers of a
union to the extent of half the
total number of office bearers. So, it permits one to be the leader of the
union who does not actually work
in the industry. Sometimes a dismissed employee working as a union leader
may create difficulties in the
relationship between the union and the employer. Nevertheless, experience
shows that outsiders who
have little knowledge of the background of labor problems, history of labor
movement, fundamentals of
trade unionism and the technique of the industry and with even little general
education assume the charge
of labor union and become the self-appointed custodian of the welfare of
workers. The employers, therefore,
have been reluctant to discuss and negotiate industrial matters with
outsiders, who have no personal or
direct knowledge of day to day affairs of the industry.
The process of collective bargaining is not likely to succeed unless the threat
of strike/lockout is there in
the back-ground. Strike and lock-out are the weapons used by both the
parties daring the collective
bargaining process. Without having these weapons at hands, neither of the
party to the dispute can defeat
the claim of the other. The peculiar feature of our country while compared to
the advanced nations of the
world is that the economic condition of the workers is very poor and as a
result they cannot afford a longstanding
strike.
In Indian labor arena we see, multiplicity of unions and Inter-union rivalry.
Statutory provisions for
recognizing unions as bargaining agents are absent. It is believed that the
institution of collective bargaining
is still in its preliminary and organizational stage. State, therefore, must play
a progressive and positive role
in removing the pitfalls which have stood in the way of mutual, amicable and
voluntary settlement of labor
disputes. The labor policy must reflect a new approach. Hitherto the State
has been playing a dominant
role in controlling and guiding labor-management relation through its
lopsided adjudication machinery. The
role of the industrial adjudicator virtually differs from that of a judge of
ordinary civil court. The judge of a
civil court has to apply the law to the case before him and decide rights and
liabilities according to its
established laws, whereas industrial adjudicator has to adjust and reconcile
the conflicting claims of
disputants and rights and obligations of the disputants. In deciding industrial
disputes the adjudicator is
free to apply the principle of equity and good conscience.
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For an effective Collective Bargaining in India, recognition of trade union has
to be determined through
verification of fee membership method. The union having more membership
should be recognized as the
effective bargaining agent. The State should enact suitable legislation
providing for compulsory recognition
of trade union by employers. The provision for political fund by trade unions
has to be done away withsince
it invariably encourages the politicians to prey upon the union. State has to
play a progressive role in
removing the pitfalls which stand in the way of mutual, amicable and
voluntary settlement of labor disputes.
Activity A:
1. Visit an organization and try to find out practical collective bargaining
process between management
and trade unions.
13.7 Summary
Collective bargaining emerged initially has been purely Metter between the
plant level union and the plant
management. The negotiations either at the state or at the industry level are
yet not frequent. The collective
bargaining has not decentralized beyond the plant level because crafts
unions are absent. There are three
important reasons as to why collective bargaining has not gone beyond the
plant level: a) the varying sizes
not permit uniform employment conditions; b) the absence of homogeneous
labor market owing to lack of
uniform skills and pattern of training which does not promote free mobility of
labor market owing to lack
of uniform skills and pattern of training which does not promote free mobility
of labor so that uniform
employment conditions could be evolved for the industry as a whole. c) the
plant union leadership which
at present enjoys enormous powers and faces prospects of political climb is
reluctant to get integrated into
an industry wise union where its power are likely to be restricted.
13.8 Self Assessment Questions
1. What do you mean by “Collective Bargaining” Explain?
2. What are the advantages of collective bargaining?
3. What are the levels of collective bargaining?
4. What are the current trends of collective bargaining in India?
13.9 References Books
- Mamoria C.B.(2008); “ Dynamics of Industrial Relations”; Himalaya
Publishing House, Mumbai.
- Webb, Sydeny and Beatrice,(1902); “ Industrial Democracy” ;p.185.
- Richardson,J.H,(1964) “An Introduction to the study of industrial relations”;
p.22.
- Dunlop,John J.,(1954) “Challenges to collective Bargaining”p.170-174.
- ILO;”Collective Bargaining”.p.70.
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Unit - 14 : Discipline
Structure of Unit:
14.0 Objectives
14.1 Introduction
14.2 Meaning & Discipline
14.3 Concept of Discipline
14.3.1 Aspects of Discipline
14.3.2 Main Characteristics of Discipline
14.3.3 Aims & Objectives of Discipline
14.3.4 Importance of Discipline in Industry
14.4 Indiscipline
14.5 Misconduct
14.6 Causes & Approaches Towards Disciplinary Action
14.6.1 Causes for Infringement of Discipline
14.6.2 Principles of Industrial Discipline
14.6.3 Guidelines of a Disciplinary Action
14.6.4 Mc Gregor’s Hot Stove Rule
14.6.5 Procedure for Disciplinary Action
14.7 Code of Discipline in Indian Industry
14.8 Summary
14.9 Self Assessment Questions
14.10 Reference Books
14.0 Objectives
After studying this unit, you would be able to :
 Understand the fundamental nature of Industrial discipline
 Recognize difference between traditional and modern aspects of discipline.
 Point out the nature and major aims & objectives of discipline.
 Study and appreciate the significance of discipline in Industry.
 Know about various principles for maintenance of discipline.
 Understand the concepts of Indiscipline and misconduct.
 Know about the causes of Breach of discipline.
 Know about the guidelines governing the disciplinary action.
 Learn about the Mc Gregor’s hot stove rule.
 Learn about the code of discipline in Indian Industry.
14.1 Introduction
Discipline may be defined as an approach which aims at instilling orderly
behaviour and respect for willing
obedience to a recognized authority. Industrial discipline is crucial for
healthy industrial environment and
for escalating production & productivity. The promotion and maintenance of
employee discipline brings
multifarious benefits to the organisation and its employees in form of say ;
goal attainment , smooth functioning
of the organization etc.
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14.2 Meaning & Definition of Discipline
What does Discipline means?
Discipline means getting obedience to rules and regulations of the
organization. Discipline is absolutely
essential for the smooth running of business. Fayol, stated that discipline is
obedience, application, energy
and outward mark of respect. According to Webster’s Dictionary, the word
discipline has three meanings
“First, its is the training that corrects moulds , strengthens or perfects
individual behavior. Second, it is
control gained by enforcing obedience. The third meaning, it is punishment
or chastisement.
Definition of Discipline
According to Dr. Spriegel, “Discipline is the force that prompts an individual
or a group to observe the
rules, regulations and procedures which are deemed to be necessary to the
attainment of an objective; it
is force or fear of force which restrain an individual or a group from doing
things which are deemed to be
destructive of group objectives. It is also the exercise of restraint or the
enforcement of penalties for the
violation of group regulations.”
Thus discipline can be regarded as a force that requires employees to follow
the rules and regulations of an
organization considered vital for its efficient working.
In brief, discipline is an employee’s self control which motivates him to
comply with the organization’s
goals and objectives.
14.3 Concept of Discipline
The dialogue between the workers and managers in a work setting pave way
to the emergence of the
concept of discipline.
14.3.1 Aspects of Discipline
Negative Aspect - This aspect uses “fear” as a force to enforce discipline in
the organization. If any
employee or worker defies the rules and regulation strict punishment is
levied on them. This is categorized
as traditional concept of discipline.
Positive Discipline – Now a days the management of various organizations
have adopted positive
progressive outlook for disciplining the employees. With the ever increasing
awareness among the workers
concerning their rights and responsibility, it was required on the part of
management to reconsider the
negative approach of fear used by them so far.
Thus management emphasized on the concept of self – discipline. This
approach of self control asserts on
cooperative efforts of employees to abide by the rules of the organization.
Thus positive aspect of discipline
plays a much greater role in safeguarding industrial peace and prosperity.
Activity A:
1 According to you what is discipline? How does traditional concept of
discipline differ from
the modern concept?
14.3.2 Main Characteristics of Discipline
The main characteristics of Discipline can be summed up as follows :-
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(i) To guarantee successful fulfilment of organizational goals it motivates
workers to abide by the
instructions issued by the management or superiors.
(ii) It is a negative approach in the sense that it discourages employees in
under taking some activities
while encouraging to undertake the few others.
(iii) On Violation or disobedience of organization rules it imposes fine or
reprimand, therefore, it is
also called as punitive or big stick approach.
14.3.3 Aims & Objectives of Discipline
The aims and objectives of discipline are as follows:-
(i) For the achievement of organizational goals it tries to earn the willing
approval of employees.
(ii) To introduce the component of uniformity and assurance despite the
numerous difference
despite the numerous differences in informal behaviour patterns in the
organization.
(iii) For improving the quality of production by enhancing the morale and
working efficiency of the
employees.
(iv) To generate respect for human relations in the organization.
(v) To confer and seek direction and responsibility.
14.3.4 Importance of Discipline in Industry
Discipline acts as a cornerstone for the smooth functioning of any enterprise.
Absence of discipline in any
industry can create a great amount of commotion and confusion thereby
decreasing its productivity. For
any enterprise however big or small manpower is the most pivotal resource
and thereby all efforts should
be made to discipline them.
All steps should be taken to encourage mutual trust and confidence between
the workers and the management
which is indispensable to bring about needed discipline at the workplace.
Maintenance of discipline is a precondition for attaining the aims and
purposes of the organization swiftly.
Disciplined employers will assist in creation of pleasant industrial
environment which will be beneficial for
the industry and the nation both.
Activity B:
1 Analyze the critical role of discipline in today’s modern, complex
organizations.
14.4 Indiscipline
Meaning
Indiscipline may be expressed as non – compliance to formal and informal
rules and regulations of an
organization. Indiscipline may prove to have detrimental effects on the
morale and motivation of the
employees as well as on the organization as a whole. There are various
socio-economic and cultural
factors that play a role in creating indiscipline in an organization which can
be summed up in following
figure :-
164
Ways to Cope With Indiscipline
Management can adopt various strategies as mentioned in the figure below
to keep a check on indiscipline
in the organization.
UNFAIR LABOUR WAGE WRONG WORK
PRACTICES DIFFERENTIALS ASSIGNMENTS
DIFECTIVE FACTORS PAYMENT
GRIEVANCE RESULTING OF
PROCEDURE IN VERY LOW
INDISCIPLINE WAGES
POOR VICTIMISATION INEFFECTIVE
COMMUNICATION BY MGT. LEADERSHIP
Figure 14.1 Various Factors Responsible for Indiscipline
.
COUNSELLING JOB - ENRICHMENT
&
EDUCATION
APPROACHES TO
MANAGE
INDISCIPLINE
GRIEVANCE HANDLING PROPER INDUCTION &
TRAINING PROGRAMME
Figure 14.2 Means to Cope With Indiscipline
165
14.5 Misconduct
Meaning & Definition
An action or type of behaviour can be defined as misconduct if it is
prejudicial to the interests of the
employer and other employees, inconsistent with the norms set for
discharging duties, unsafe or unfaithful
to such a degree that it becomes incompatible to continue employer –
employee relationships.
Categories of Misconduct
Disciplinary acts of misconduct can be categorized on the basis of the
severity of the consequences.
(i) Minor Contravention– results in few serious consequences.
Example – negligence, minor disobedience to rules, carelessness.
(ii) Major Contravention – Partially hinders the working of the
organization.
Example – lying, cheating, stealing
(iii) Intolerable Offences – are of unlawful and severe nature which
endanger
employment relationship.
Example – threat to use weapon, use of drugs on the job, smoking near
inflammables.
Misconduct Stated In Model Standing Orders
Here is an illustrative list of acts constituting misconduct under Model
Standing Orders Act , 1946.
(i) Wilful insubordination or disobedience of any lawful and reasonable
order , rule or
regulation.
(ii) Refusal to work on a job or a machine which has been assigned to him.
(iii) Refusal to accept or reply to a charge sheet within the prescribed period
of time.
(iv) Theft , fraud , or dishonesty in connection with the property of the
company.
(v) Theft of another employee’s property inside the industrial area or
company premises.
(vi) Causing willful damage to , or loss of , the employer’s goods or property.
(vii) Causing damage to a product in process or to any property.
(viii) Interference with , safety devices.
(ix) Non-observance of safety precautions and rules.
(x) Taking or giving a bribe or any illegal gratification.
(xii) Acceptance of gifts from subordinates.
(xiii) Habitual late coming.
(xiv) Absence from duty without leave.
(xv) Overstay when on leave without prior authorized permission.
(xvi) Entering or leaving , or attempting to enter or leave , the work premises
except through authorized
entrance and exits.
14.6 Causes & Approaches Towards Disciplinary Action
14.6.1 Causes for Infringement of Discipline
The main reasons for breach of discipline in any organization may be stated
under following heads
(I) Causes Related To the Worker
(a) Illiteracy and low intellectual level of workers.
(b)Workers personal problems like their fears, hope, aspirations etc.
166
(c) Inborn tendencies of workers to flout rules.
(II) Causes Related To the Socio – Cultural Factors -
(a)Misunderstanding and rivalry among workers.
(b)Discrimination based on caste, colour, sex, place in imposing penalties.
(III) Causes Related To the Work Environment –
(a)Bad working conditions.
(b)Defective supervision
(c)Non-placement of right person on the right job.
(IV) Causes Related To the Management Practices –
(a)Lack of clarity in rules & regulation as laid out by the top management.
(b)Faulty performance appraisal systems leading to favoritism thereby
generating indiscipline.
(c)Absence of sympathetic and scientific management.
14.6.2 Principles of Industrial Discipline
Industrial Discipline should be based on certain just and fair principles to be
accepted by the employees.
The basic Prerequisites or principles to be observed are:-
(i) The very objectives of industrial discipline should be clearly laid out
(ii) The code of conduct should be framed with consultation & collaboration
of the workers or their
representatives.
(iii) The code of conduct must be communicated to all concerned in the
organization.
(iv) The rules and regulation concerning the discipline should understandable
by all.
(v) The rules of conduct must able to settle the grievances if any arising
during the period be of
employment.
(vi) The approach of discipline policy should be preventive i.e. stress be laid
on prevention of violation
of discipline rather than on the administration of penalties.
(vii) The quantum of reprimand for each case of misconduct should be
specified clearly in advance by
publishing them in employee’s handbook.
(viii) The enforcement authority must be specified.
(ix) Discipline policy should not discriminate against the employees; it should
be uniform for all employees
without favoring any one worker or employee.
(x) A disciplinary committee in the advisory capacity be constituted to look
into the matters of
indiscipline and put forth the necessary suggestions.
14.6.3 Guidelines of a Disciplinary Action
(a) Fixation of Responsibility – the responsibility for sustaining discipline
in the organization should
be given to a responsible person, say personnel officer.
(b) Proper Framing & Communication of Rules – the rules and
regulations should be cautiously
and accurately formulated and published in employee handbooks.
(c) Rules and Regulations Should be Reasonable – the work standards
set Should be attainable
by the employees and the rules be modified at frequent intervals to suit the
changing organizational
circumstances.
167
(d) Equal Treatment – Rules and penalties should be applied equitably.
Identical punishment should
be granted for identical offences.
(e) Prompt Action – care should be taken to make sure that the penalty is
imposed soon after the
violation of a rule has occurred.
(f) Search for the Facts – before proceeding to take any action against an
employee , provide him
with sufficient time to present his side of the case i.e. What and why it
Happened ….?
(g) Natural Justice – the punishment or penalty imposed on the
indisciplined worker must satisfy
the principle of natural justice. The punishment should always justify with the
gravity of the offence.
14.6.4 Mc Gregor’s Hot Stove Rule
The model method for enforcement of discipline should have the four
important characteristics of a red
– hot – stove.
(i) Advance Warning – a red – hot stove tells us, “don’t touch me, you will
suffer” Similarly a
worker knows what is expected of him and what will be the result if he fails
to live up to those
expectations.
(ii) Immediate Effect - if one overlooks the advance warning and touches
the stove, gets immediate
result (fingers may suffer burns) likewise workers may get instantaneous
effect on committing any
act of indiscipline.
(iii) Consistency – every time we touch a red – hot stove we get the same
result. Every time a
worker commits the insufficient act , he should be penalized.
(iv) Impersonal Approach – red – hot stove functions uniformly for all,
doing away with any favoritism.
In the same way, management should not discriminate in imposing
punishment on basis of caste,
creed, colour, sex etc. It should guarantee the fundamental right to equality.
Thus these four characteristics should be kept in mind before administrating
any disciplinary action.
14.6.5 Procedure for Disciplinary Action
The following steps should be taken care of while administrating a
disciplinary action.
(a) Ascertaining the Statement of the Problem - First look into the
violation of rule and the
number of employees involved in the matter. Then ascertain the gravity of
the violation and the
conditions under which it occurred.
(b) Searching for the Underlying Facts – This calls for thorough
examination of the case together
the relevant facts.
(c) Deciding upon the Type of Penalty – The penalty or punishment
should be such which
discourages future reoccurrence of the offence or violation. But it should
always relate to the
gravity of the offence.
(d) Application of Penalty – The selected penalty may be imposed on the
wrong doers and if the
offence is not of a serious nature then it may be disposed off quickly.
(e) Follow-up on Disciplinary Action – Vigilant supervision of the person
against whom a disciplinary
action is taken should be done.
Activity C:
1 with the help of an imaginary case elaborate the procedure of disciplinary
action.
168
14.7 Code of Discipline in Indian Industry
The Indian labour conference held in New Delhi in July 1957, discussed
discipline in Indian Industries,
and laid down certain principles governing it, these were
(a) It is a State – induced voluntary agreement between labour unions and
management to abide by
certain self-imposed rules of behavior in order to ensure that disputes do not
arise ; and that , if
they do, to promote and orderly settlement through negotiation , conciliation
and voluntary
arbitration.
(b) The Code enjoys upon the parties to accord due recognition to each
other’s just rights and
responsibilities.
(c) It enjoins upon the parties to refrain from taking any unilateral action in
connection with any
industrial matters ; to utilize the existing machinery for the settlement of
disputes with the utmost
expedition ; and to abjure strikes and lock-outs without notice and without
first exploring all
possible avenues of a settlement.
(d) It discourages litigation and lays emphasis on a mutual settlement of
disputes through negotiation,
conciliation and voluntary arbitration rather than through adjudication.
(e) It enjoins that neither party should resort to demonstration , intimidation ,
victimization , violence,
coercion , discrimination , or interfere in union activities or with the normal
work of employees , or
indulge insubordination or wilful damage to property.
(f) The code requires the employers to recognize the majority union in their
establishments or industries,
and set up a well-defined and mutually agreed grievance redressal
procedure. It requires workers
not to adopt go-slow tactics , or indulge in stay in or sit-down strikes while
they are on duty.
(g) It emphasizes that awards , decisions , agreements and settlements
should be promptly and readily
implemented ; and that any act which disturbs or impairs the cordial
relations between employees
and management , or which is contrary to the spirit of the Code , is carefully
avoided.
(h) It directs employees and their trade unions to take appropriate action
against their officers and
members who indulge in activities which are contrary to the spirit and letter
of the code.
14.8 Summary
Industry discipline is vital for creation and maintenance of healthy & peaceful
industrial environment. It
brings numerous benefits to the organization and its employee as well.
Discipline has two aspects i.e.
positive & negative. Indiscipline & misconduct can surge from number of
factors like unfair labour practices,
wage differentials, poor communication, ineffective leadership etc.
Indiscipline & misconduct are two
evils that can hamper the smooth functioning of an organization so they
should be curbed at any cost.
Model standing orders and the code of discipline as stated by the Indian
Labour Conference can help in
long term to keep a check on the Indiscipline in the Industry.
14.9 Self Assessment Questions
1. What do you mean by “Discipline”? State its major characteristics and
objectives.
2. Discuss the significance of discipline in Industry?
3. Write short notes on
169
(a) Indiscipline & (b) Misconduct
4. Explain in brief the guidelines of a disciplinary action.
5. State the characteristics of Red Hot stove in context of disciplinary action.
14.10 Reference Books
- Spriegel, William R., and Schultz , Edward , Industrial Management , 1957.
- Webster’s, New Collegiate Dictionary, 1953, p.236
- Arun Monappa (2004); Industrial Relations; Tata Mc Graw-Hill Publishing
Company Limited,
New Delhi.
- A.M. Sarma (2008); Industrial Relations (Conceptual and Legal Framework);
Himalayan Publishing
House, New Delhi.
- C.B. Mamoria & S.V. Gankar (2010); Personnel Management (Text & Cases);
Himalayan
Publishing House, New Delhi.
- T.N. Chhabra & R.K. Suri (2007); Industrial Relations (Concepts and Issues);
Dhanpat Rai & Co. (Pvt.) Ltd; Delhi
- PRN Sinha (2000); Industrial Relations, Trade Union and Labour Legislation;
Pearson Educations;
New Delhi.
170
Unit - 15 : Human Resource Accounting
Structure of Unit:
15.0 Objectives
15.1 Introduction
15.2 Growth & Development of Human Resource Accounting
15.3 Concept of Human Resource Accounting
15.3.1 Meaning & Definition
15.3.2 Need and Importance of Human Resource Accounting
15.3.3 Objectives of Human Resource Accounting
15.4 Human Resource Valuation Models
15.5 Human Resource Reporting in India
15.5.1 Problems in HRA Reporting
15.5.2 Suggestions
15.6 Summary
15.7 Self Assessment Questions
15.8 Reference Books
15.0 Objectives
After completing this unit you should be able to :
 Understand Meaning & Definition of Human Resource Accounting
 Classify the various development stages of Human Resource Accounting
 Learn the need & importance of Human Resource Accounting
 Point out the major objectives of Human Resource Accounting
 Understand the various HR Valuation models
15.1 Introduction
Human resources is an old field of research in economics. Without human
resources , the other resources
cannot be effective , thus we can say human resources mobilizes all the
other resources. The evolution of
service based economies from the past few decades has shifted the
importance from physical assets to
knowledge & attitudes of employees working in service providing firms.
The total value of any organization depends essentially on the skill set of its
employees and the services
they deliver. Therefore, the survival of these organization is dependent on
the quality of their human
resources, its knowledge, expertise, capability and perception of the
organizational culture.
Hence in today’s globalize knowledge driven economies , it is crucial that the
humans be recognized as an
central part of the total worth of an organization Thus, the importance of
human resources cannot be
ignored and at this juncture, it becomes necessary to give due consideration
to the development and
growth of such an important resource of the organization.
15.2 Growth & Development of Human Resource
Accounting
Research into Human Research accounting began in the 1960’s by Rensis
Likert. It supported long term
planning on diverse qualitative human resource variables yielding superior
benefits in long run. Human
resource Accounting is the outcome of numerous research studies conducted
in the field of accounting and
finance. Human resource as an asset if positioned & nurtured in the right
direction may realize its full
potential.
171
Lately, the Behavioral scientists criticized the conventional accounting
practice of valuing human resource
along with physical resources and stressed on the concept of assigning
monetary value to human resource
of the organization. They advocated that any expenses incurred on the
development of human resources
should be treated as capital expenditure as in the long run it gives benefits
which can be measured in
monetary terms.
Eric Falmholtz divided the development of Human Resource Accounting
into five stages, which can be
summed up as follows:-
First Stage (1960 – 66) – This symbolizes the beginning of Human
Resource Accounting where the
focus was to derive the concepts of Human Resource Accounting from other
studies like economics etc.
Second Stage – (1966 – 71) – The objective here was to assess some
models that would cover both
costs models & monetary & non – monetary value of Human Resource .
Third Stag - (1971 – 76) – Here noticeable significance in the field of
Human Resource Accounting grew
leading to number of researches in the field. The focal point was the
application of Human Resource
Accounting in business organizations.
Fourth Stage - (1976 – 80) – This period saw the collapse of the concept of
Human Resource Accounting
as the organizations were not prepared to invest time , energy and most
importantly the funds needed to
research further deep into the concepts of Human Resource Accounting.
Fifth Stage - (1980 Onwards) – The explosion of service economies in
developed countries brought
about a renewal of interest in Human Resource Accounting. And further in
mid 90’s the application of
Human Resource Accounting to business management gained greater
impetus.
15.3 Concept of Human Resource Accounting
15.3.1 Meaning & Definition
The concept of human resource accounting can be better understood by
following important definitions
given by eminent authors in the accounting field.
M.N. Baker defines, “H.R.A. is the term applied by the accountancy
profession to quantify the cost and
value of employees to their employing organization”.
K.Foley Defined “Human Resource Accounting is the measurement of the
cost and value of people for
organization.”
Prof. Davidson Defined “Human Resource Accounting is the term used to
describe a variety of proposals
that seek to report and emphasize the importance of human resource
knowledgeable , trained and loyal
employees in a company earning process and total assets”.
The American Accounting Society Committees on Human Resource
Accounting defined it as follows:-
“Human Resource Accounting is the process of identifying and measuring
data about human resources
and communicating this information to interested parties.”
Flamholtz defines “Human Resource Accounting as the measurement and
reporting of the cost and value
of people in organizational resources.”
In short, the definition of Human Resource Accounting brings out following
characteristic features:
172
Figure 15.1
15.3.2 Need and Importance of Human Resource Accounting
The need for Human Resource Accounting felt largely as a result of the
emerging concern for human
relations management in industry. The very importance of Human Resource
Accounting can be summed
up through following major points –
(a) Human Resource Accounting helps management in acquiring placing and
in making
effective utilization of human resources.
(b) To retain the qualified employees
(c) It aids in deciding the transfers , promotion , training etc of human
resources.
(d) It serves as a tool to measure and compare the expenditure incurred for
imparting the
training to employees and in turn the benefits derived by the firm.
(e) Human Resource Accounting helps to improve the profile of the
enterprise and its image.
15.3.3 Objectives of Human Resource Accounting
Putting in a capsule the main objectives of Human Resource Accounting are
to:
Figure 15.2
15.4 Human Resource Valuation Models
Human Resource Accounting can be explained in three ways :-
1. MONETARY MODELS – The Models which are created using monetary
variable are called monetary
models.
(A) COST BASED MODELS
(i) Historical Cost Model :- This Model was developed by Willim C. P.yle ,
R. Lee Brummet and Eric.
G. Flamholtz. This is also called original cost method or outlay cost method.
In this method actual cost
incurred on recruiting , selecting , hiring , training and developing the human
resource of the organization
are capitalized and amortized over the expected useful life of human
resources. If the human assets are
liquidated pre-maturely the whole of the amount not written off is charged to
the income of the year in
Valuation of Human Resources Recording it in books of act’s
Disclosure of this information
in financial statement
Improve Mgt by investment in H.R. Consider people as its asset
OBJECTIVES
Attract & Retain qualified people Profile the organization
in financial terms
Account
173
which year the assets is liquidated. If the useful life is recognized to be
longer than originally expected
revision are affected in the amortization schedule. The un-expired value is
shown in balance sheet as
investment in human assets.
Merits:
(i) it is a simple method.
(ii) This method can be used for evaluating return on investment in human
resources.
(iii) This method is objective rather than being subjective.
Limitations :
(i) Accurate measurement not possible.
(ii) It is difficult to estimate the number of years an Employee is going to be
with the firm.
Hence there is a problem of estimate the number of years over which the
capital expenditure
is to be amortized.
(ii) Replacement Cost Model: The replacement cost method of valuation
of human resource has been
developed by Eric G. Flamholtz. Under this method value to an organization
of an individual’s services is
reflected by the amount that the organization would have to pay to replace
these services.
Merits : -
(i) It considers the current value of the human resource.
(ii) Replacement cost are present oriented.
(iii) Replacement cost is better than historic cost.
Limitations :
(i) There may be no identical replacement of the existing human resources.
(ii) The valuation of human resources based on replacement cost is affected
by subjective
consideration.
(iii) Opportunity Cost Model: This method was suggested by Hekimian
and Jones This method is
based on economist’s concept of opportunity cost. Under opportunity cost
method , the value of an
employee in his alternative use is determined. This value is taken as the
basis for estimating the value of
human resources employed by the organization.
Merits :
(i) Opportunity cost approach gives more optimum allocation of personnel.
(ii) It provides quantitative base for evaluating human assets.
Limitation :
(i) This method is expensive.
(ii) The measure of reliability of opportunity cost is less.
(iv) Standard Cost Method: David Watson suggested this approach. Under
this method , employees of
an organization are categorized into different groups as per their hierarchical
positions. The standard cost
is fixed for each category and then their value is calculated. The standard
cost of recruiting, placing,
training and developing per grade of employee is developed and established
and made up to date every
year , Standard method provides easy implementation.
174
(B). VALUE BASED MODELS
(i) Lev and Schwartz Present Value of Future Earning Model.
(ii) Flamholtz Stochastic Rewards Valuation Model.
(i) Present Value of Future Earnings Model: This model is suggested by
Branch Lev and Aba. Schwartz.
This model is also known as compensation model. What is the present value
of an employee ? In orders
to find out the present value we take the discount rate. This discount rate is
normally that rate which is cost
of capital. Each and every employee is classified according to his age and
efficiency. Then we find out
what is average income of an employee in different groups. Then we
calculate the income of every group
up to the date of retirement. Then we apply the cost of capital rate. Then we
arrive at value of human
assets of the group.
Lev and Schwartz has given the following formulas
()
(1 ) ( )
xV T

It
rtx
tx




Where
x V = The human capital value of a person X year old.

I(+) = The person’s annual earnings up to the retirement

r = A discount rate specific to the person
T = Retirement age
Merits :-
(i) This method depends upon future earnings capacity of an employee.
(ii) This method is depending upon the present value of future earnings
capacity so this
method appears to be most logical.
(iii) Discount rate is based on cost of capital, which appears to be fair.
Replacement Cost Chart
Acquisition Cost Learning Cost Separation Cost
* Recruitment * Training * Separation pay
* Selection * Development * loss of efficiency
* Hiring due to vacant post
* Placement during search
* Promotion
* Transfer
s
175
Demerits :-
(i) The method does not take in to consideration that the employees leave
the organization
due to number of reason other than death & retirement.
(ii) This method ignores change in the profession of an employee due to
age , health etc.
(ii) Flamttltz’s Stoochastic Rewars Valuation Model: The model is
based on the presumption that a
person’s value to an organization depends upon the position he holds in the
organization. This model gives
five steps for valuing an individual in an organization.
(i) Find out the expected service life of an individual in any organization.
(ii) Identify how much time he will remain on particular status.
(iii) Estimate the value derived by the organization when a person holds a
particular
position.
(iv) Estimate the probability of occupying each possible mutually exclusive
status at
specified future time.
(v) Discount (at a predetermined rate) the expected service rewards to their
present
value. The Model has used the following formulae.
1
( ) [ ( )]
1
(1 )
nm
ti
RV Ri P Ri
rt




 (RV) Expected Realized value
Ri = Amount of service received
(R) at every possible state or status
P(Ri) = Status Possible expected service to be received by the organization
t = time period.
m = Retirement Stage
(1+ r) = Rate of Depreciation for money
Merits :-
(i) This method takes into account the probability of a person’s carrier
movement and of his
leaving the organization prior to his retirement or death.
(ii) The model combines both monetary and non-monetary variables.
Demerits :
(i) It is expensive.
(ii) It is very difficult to estimate that for how much period an employee will
continue in an
organization.
Dr. S.K. Chakraborty’s Model of Human Resource Valuation: -
According to Dr. Chakraboty human assets should be included in Balance
sheet on assets side under the
heading “Investments” He is of the opinion that if we include it in the
heading fixed Assets it will create
problems like depreciation, capital gains or losses , etc. The value of human
resources on a group basis
can be found out by multiplying the average salary of the group with the
average tenure if employment of
176
the employee in that group. He has suggested that recruitment , hiring ,
selection , development and
training costs of each employee should be recorded separately , it can be
treated as deferred revenue
expenditure to be written off over the expected average stay of the
employee in the organization and the
deferred position should be shown in balance sheet of the organization. If
there is a premature exit on
account of death , retirement etc then the balance on the deferred revenue
account for the year attributable
to that person should be written off against the income of the year of exit
itself.
2. NON-MONETARY MODEL
(A) Likert’s Casual, Intervening and End–Result Variable Model :-
This model is based on behavioural variable. This model was developed by
Rensis Likert and David G.
Bowers of U.S.A. The model is comprised of three variables – Casual ,
intervening and end results.
(i) Casual Variable – The casual variables are independent variables which
can be directly changed
by the organization and its management and which in turn determine the
course of developments
within an organization.
(ii) The intervening variables reflect the internal state, health and
performance capabilities of the
organization e.g. the loyalties, attitudes, motivation, performance goals and
perceptions of all
members and their collective capacity for effective action , interaction ,
communications and decision
– making.
(iii) The end result variables are the dependent variable, which reflect the
result achieved by the
organization such as its productivity costs, scrap loss, growth, share of
market & earnings.
Merits :-
(i) Model is based on non-monetary variables.
(ii) The model is highly useful in decision making.
Demerits :-
(i) The degree of objectivity is less
(ii) The degree of reliability is low.
(iii) The method is expensive.
3. STATISTICAL BASED METHODS
Under statistical based method of Human resources no according is involved.
The statistical information
regarding human resource is collected and they are presented in annual
reports. They may be of following
types:-
(i) Monthly Statistics on.
(a) Recruitment Costs
(b) Selection Costs
(c) Training Costs
(d) Special Development programme costs
(e) Worker’s education programmes
(f) Auxiliary costs such as canteen, medical and other fringe benefits
(ii) Total Human Resource Investment analyzed workmen into
177
(a) Personnel Officers, staff and workmen
(b) Department wise
(c) Expenses Category wise
(iii) Periodical change in Human Resources Investment.
(iv) Statement of contribution factor separately for officers, staff and
workmen.
(v) Statement on human resource cost co-efficient (human resource
investment human resource
current cost) separately for officers, staff & Workmen.
(vi) Times rate of return analysis.
(vii) Statement of human resource performance index showing separately for
officers , staff &
workmen.
(viii) Statement of per capital Human Resource performance index showing
separately for officers,
staff & workmen and also total.
(ix) Age wise Service Status
(x) Monetary value of service statutory
(xi) Statistics on employee turnover.
(xiii) Any other statistics relevant to the organization.
15.5 Human Resource Reporting in India
In India, reporting practices of Human Resource Accounting is extremely low.
A few companies do report
in their annual reports. The reporting of Human Resource Accounting is in
some sentences. Some Companies
furnish information about number of employees working in the organization,
how many working hours
have lost, what is the situation of industrial relation etc.
Both Public sector and private sector companies have used economic value
approach instead of cost
approach. Most of the companies have used Lev and Schwartz model. They
have Lev and Schwartz
model in modified way, which is similar to Flamholtz model. It has been
discovered that most likely variety
of the companies is replacement cost model, Human resources reporting is
not because their is no legal
compulsion by Indian Companies Act 1956. There is also problem in
measuring Human Resources.
Human Resource Accounting has been reported by above – mentioned
companies as a supplementary
information in their annual reports , such reporting by companies are
audited. The companies have classified
their employees, age wise, they have further classified them in managers,
executives, supervisors, Artisans,
clerical staff etc.
Some Companies in India shows human Resource development cost i.e.
training and development cost in
detail while some corporation are showing them in short, some shows them
in “Director’s Report or
chairman speech.”
Productivity / performance statistics of human resource have been presented
by some companies in detail.
Average employee cost is shown by few companies only.
Appreciations and Awards received by the companies have been shown by
the companies under the
heading “High light” or Director’s Report or elsewhere in the annual reports
of the Companies Highlight’s.
For purpose of calculating the present value of future earning of employees ,
all the companies have
adopted a discount rate , which is not common. Majority of the companies
adopted 12%.
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Some of the companies have not mentioned the purpose for which they are
reporting HRA information in
their annual reports. Whereas some companies have clearly mentioned their
objective of reporting human
resource data. It seems that some companies report HRA for image building
purposes. Some companies
have also given additional information as regarding number of employees ,
average salary , average age of
employees , average production per employee etc.
15.5.1 Problems in HRA Reporting
1. Human Resource Accounting is shown as supplementary information in
the annual reports , which
has no significance.
2. All the companies who are reporting Human Resource Accounting have
used Lev and Schwartz
model but this model is suffering from some drawbacks. One it has assured
state promotion
policy and consistent average salary to all the employees in a particular
group. These two
assumptions are far from reality , difference in skill , experience
qualifications and increasing
importance of employees union often lead to change in these policies.
3. Though human capital plays an important role in any organization , there
is a wide spread ,
disagreement regarding the reorganization and valuation of human resource
as assets on generally
the assets is one which fulfills the following three criteria. They are (i) the
entity should have legally
enforceable claim to it. (ii) It should be owned by the entity (iii) the entity
should posses it with the
expectation of deriving services from it in future HR are not fulfilling any
criteria. As such there is
a problem in recognizing human resources as assets.
4. Proper matching of costs with revenue is not possible unless the costs on
the recruitment training
and development of personnel are capitalized over their effective service
lives. It is so because the
benefits from such expenses are usually derived over a period beyond the
year of payment.
However in a number of cases, the earnings potential of employees may not
depend upon the
expenditure incurred by the firms for the purpose. But it depends upon
behaviour aspects like skill
, motivation group loyalty capacity for effective interaction and decision
making etc , to influence
the end results of an enterprises effectively.
5. The very idea of showing human resource as an asset on the balance
sheet of a firm tends to be
arbitrary for this purpose as per the methods available , human resource are
to be valued either on
the basis of cost incurred by a firm on recruitment trainings etc or
replacement cost. In both the
methods cost is taken as the value of human assets. But this hardly
represent the real value of
personnel in particular and the firm in general. The other method like
discounted wage, and salaries
method , economic value method , and opportunity cost method , involves
the element of subjectivity
in valuing the human resources.
6. Yet another difficulty regarding HRA is Quantification and pricing of
employees in respect of jobs
which do not yield any physical output. Determination of probabilities of the
expected services of
the employees is also a difficult task. These practical difficulties are subject
to the influence of age
qualification , the previous experience point of first entry , employment
period and turn over as
well as the organizational pulls and pressures on different categories of
employees.
7. In all the methods , the salaries earned by the employees are taken as the
basis for valuing human
resources. Thus the career movement of employees either within the
organization or elsewhere in
the other organization is kept outside the purview of valuation. Since the
employees make constant
179
trials to occupy higher position during their effective service life , any
valuation process without
considering this way tend to be less meaningful.
8. The provision of existing tax laws , do not recognize the amortized portion
of capitalized human
resource value as deductible expenses for computing income. Even if
attempts are made to amend
the existing provision of tax laws there is a greater amount of scope to
misuse the facility as the
employers may adopt fictitious method to undertake the profitability of their
business and may
show unrealistic value of the firm.
15.5.2 Suggestions
In India, human resource accounting has not been introduced so far as a
system. The companies Act
1956, does not require , furnishing of any significant information about
human resource in financial statement
of the Companies. The Institute of Chartered Accountant of India has also
developed 18 Accounting
Standards. The accounting standards are applicable to public and private
sector companies & large
borrowers of funds from banks and financial institutions in the corporate
sector. It is the duty of the
members Institute of Chartered Accountants of India to ensure that the
accounting standards are
implemented in the presentation of financial statements covered by their
audit report. All these accounting
standards are quite important from point of view of measurement and
disclosure of accounting information.
15.6 Summary
In today’s globalized world it has become imperative to give necessary
consideration to the Human
Resource of the organizations. Without human resource no other resource
can function effectively, therefore
Human Resource has been recognized as a crucial part of total organization
worth. Human Resource
Accounting facilitates the management of people as organizational
Resources. Human Resource Accounting
in application of accounting concepts & methods to management of Human
Resources it deals with
investments in people and with economic results of those investments.
Human Resource Accounting field
underwent a number of stages beginning from 1960 to till date to assume
the status of a fully fledged
subject. It greatly helps the management of the business organizations in
acquiring, placing and in making
effective utilization of human resources. Human Resource Accounting has its
number of models under the
purview of monetary , non - monetary and statistical methods. But the plight
of Human Resource Accounting
in India is extremely poor and both public and private sector companies do
not pay much head to Human
Resource Reporting. Therefore, the government needs to take steps in the
right directions for promotion
of Human Resource Accounting Practices in India.
15.7 Self Assessment Questions
1. What do you mean by “HRA “. Explain & Detail.
2. Classify the various stages in development of Human Resource
Accounting.
3. Discuss the importance of HRA in today’s globalized world.
4. Write short note on Human Resource Reporting in India.
5. What are the different valuation models of HRA ? State their merits and
demerits.
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15.8 Reference Books
- A.M. Sarma (2009) ; Personnel & Human Resource Management ; Himalaya
Publishing
House , New Delhi.
- P. Subba Rao (2008) ; Personnel & Human Resource Management ;
Himalaya Publishing
House ; New Delhi.
- Dr. G. L. Dave (2001) ; Social Accounting ; Renuka Publisher ; Jodhpur.
- Ravi M. Kishore (2008) ; Advanced Management Accounting ; Taxmann
Publication ; New
Delhi.
- Eric. G. Flamholtz (1999) ; Advances in concepts , methods and applications
; Kluwer
Academic Publishers.
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Unit - 16 : Managing Ethical Issues in HRM
Structure of Unit:
16.0 Objectives
16.1 Introduction
16.2 Nature of Ethics
16.3 Need of Business Ethics
16.4 Sources of Ethics
16.5 Importance of Ethics
16.6 Ethical Dilemmas
16.7 How to Manage Ethics at Workplace
16.8 Ethical Decision Making
16.9 Five Sources of Ethical Standards
16.10 Summary: A Framework for Ethical Decision-Making
16.11 Self Assessment Questions
16.12 Reference Books
16.0 Objectives
After completing this unit, you will have good understanding of:
 The nature, need and sources of business ethics
 The importance of ethics
 Ethical misconduct in personnel function
 How to manage ethics
 Ethical decision making
16.1 Introduction
Ethics refers to the study of good and evil, right and wrong, and just and
unjust actions of business people.
Business ethics is the same as the generally accepted norms of good or bad
practices. Human resource
management (HRM) is the science of managing people systematically in
organizations. The unique individual
actor in the organization - a given executive, manager, line worker - is not
the focus of HRM, rather,
human resources practices and policies concerning recurring cycles of
staffing, reward and compensation,
and performance management inform how any person or group of people is
introduced into the organization,
managed while there, and exited from the organization. When these three
overarching aspects of human
resource management are designed effectively, the organization benefits
from a management system that
enhances the sustained competitive advantage of the organization. A critical
part of designing these aspects
effectively requires consideration of ethical concerns at each stage. Staffing
is comprised of systems designed
to recruit and select employees to undertake required roles in the
organization. The purpose of recruiting
is to provide the organization with a group of candidates large enough for
the organization to select the
qualified employees that it needs. Needs are formalized by (1) job or position
descriptions, which are
written statements of content and organizational level of the job; and (2)
hiring specification, which details
background, experience, and skills requirements.
16.2 Nature of Ethics
Business ethics does not differ from generally accepted norms of good or
bad practices. If dishonesty is
considered to be unethical and immoral in the society, then any business
person who is dishonest with his
182
or her employees, customers, shareholders or competitors is an unethical
and immoral person. If protecting
others from any harm is considered to be ethical, then a company which
recalls a defective or harmful
product from the market is an ethical company. Two theories are important
when one considers nature of
ethics.
The theory of moral unity essentially advocates the principle that business
actions should be judged by the
general ethical standards of the society. There exists only one set of ethical
standards which applies to
business and non-business situations.
Opposite to this is the theory of amorality, which argues that a business can
be amoral, and actions of
business people need not be guided by general ethical standards. Managers
may act selfishly because the
market mechanism distills their actions into benefits to shareholders and the
society at large.
Activity A:
1 Break your class into groups of three and give each group a stack of 3-by-5
index cards with an
unethical situation written on it. For example, you may write, "You have
found a bank error on
your business's line of credit and you have been charged $10,000 less than
you should have
been."
One person in the group is the persuader, trying to convince another person
(the decider) to make
the unethical choice. The third person is the observer, who watches how the
persuader persuades
and the decider decides. After a few minutes, have the groups draw another
card and switch
roles.
This activity will teach the subjective nature of ethics, emphasizing through
discussion that unethical behavior
can be spun as ethical and vice versa.
16.3 Need of Business Ethics
The need of business ethics can be explained with the help of the following
points:-
(1) Introducing Socialism in Business: This means the gains of business
must be shared by all
concerned and not just by owner of business. Profit is the result of group
efforts and hence all
concerned must share the same. In other words, the concept of socialism in
business say that
workers, shareholders, consumers all others who contribute to the success of
the business must
share its gain.
(2) Interest of Industry: Business ethics are required to protect the
interest of small business firms.
Big firms normally try to dominate and eradicate small firms. If industry
follows code of conduct,
small firms can fight for their existence and stay in the business for long.
(3) Buyers Market: In recent times, structural changes have taken place in
the concept of business.
In case of many products, sellers market has been converted into buyers
market. Under such
changed business conditions business ethics is needed to stress the
importance of consumer
satisfaction and service orientation in place of profit orientation.
(4) Better Relations with Society: Code of conduct results in better
relations between business
and society. It will reconcile conflicting interest of various sections of the
society such as workers,
shareholders, consumers, distributors, suppliers, competitors and
government.
(5) Advantages to Business and Society: Ethics point out what is good
and bad, so also what is
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right or wrong. It brings to the notice of the business community the
importance of honesty,
sincerity, fairness which makes them alert and socially conscious.
In the final analysis, business ethics help the business and society at large. It
ensures healthy atmosphere in
business which ensures improvement in social, economic and cultural values
of the society.
16.4 Sources of Ethics
HR managers in every society are influenced by three repositories of ethical
values-religion, culture and
law. These repositories contain unique systems of values that exert varying
degrees of control over managers.
A common thread --- idea of reciprocity or mutual help --- runs through all
the value systems. This idea
reflects the central purpose of all ethics-which is to bind the vast majority of
individuals in the society into
a cooperative whole. Ethical values constitute a mechanism that controls
behavior in HR situations and in
other walks of life. Ethics driven restraints are more effective than restrictive
controls such as police, law
suits or economic incentives. Ethical values channelize the individual
energies into pursuits that are benign
to others and beneficial to the society.
It is a code of conduct that is supposed to align behaviors within an
organization and the social framework.
But the question that remains is, where and when did business ethics come
into being?
It is for this reason we do not have uniform or completely similar standards
across the globe. These three
factors exert influences to varying degrees on humans which ultimately get
reflected in the ethics of the
organization. For example, ethics followed by Infosys are different than those
followed by Reliance Industries
or by Tata group for that matter. Again ethical procedures vary across
geographic boundaries.
Religion
It is one of the oldest foundations of ethical standards. Religion wields
varying influences across various
sects of people. It is believed that ethics is a manifestation of the divine and
so it draws a line between the
good and the bad in the society. Depending upon the degree of religious
influence we have different sects
of people; we have sects, those who are referred to as orthodox or
fundamentalists and those who are
called as moderates. Needless to mention, religion exerts itself to a greater
degree among the orthodox
and to lesser extent in case of moderates. Fundamentally however all the
religions such as Hinduism,
Buddhism, Christianity, Islam, Judaism and Confucianism, operate on the
principle of reciprocity towards
ones fellow beings.
Culture
Culture is a pattern of behaviors and values that are transferred from one
generation to another, those that
are considered as ideal or within the acceptable limits. No wonder therefore
that it is the culture that
predominantly determines what is wrong and what is right. It is the culture
that defines certain behavior as
acceptable and others as unacceptable. Culture determines what is ethical
and what is not. Cultural norms
play important role in determining values because individuals anchor their
conduct in the culture of the
group in which they belong.
Human civilization in fact has passed through various cultures, wherein the
moral code was redrafted
depending upon the epoch that was. What was immoral or unacceptable in
certain culture became acceptable
later on and vice versa.
During the early years of human development where ones who were the
strongest were the ones who
survived! Violence, hostility and ferocity were thus the acceptable.
Approximately 10,000 year ago when
human civilization entered the settlement phase, hard work, patience and
peace were seen as virtues and
the earlier ones were considered otherwise. These values are still pt in
practice by the managers of today!
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Still further, when human civilization witnessed the industrial revolution, the
ethics of agrarian economy
was replaced by the law pertaining to technology, property rights etc. Ever
since a tussle has ensued
between the values of the agrarian and the industrial economy!
Law
Laws are procedures and code of conduct that are laid down by the legal
system of the state. They are
meant to guide human behavior within the social fabric. The major problem
with the law is that all the
ethical expectations cannot be covered by the law and specially with ever
changing outer environment the
law keeps on changing but often fails to keep pace. In business, complying
with the rule of law is taken as
ethical behavior, but organizations often break laws by evading taxes,
compromising on quality, service
norms etc.
16.5 Importance of Ethics
Have you ever given a thought as to why societies function? Why is it that
since ages, human beings are
able to live with each other peacefully? Yes, there have been certain
incidences such as crimes and wars
which do disturb the delicate fabric of the society once in a while, but still, on
a whole, people have coexisted
and survived for so many years. The main reason why humanity has survived
for so long is due to
certain rules, values, mores and ethics, which all of us abide by. Just
imagine, what would happen if
suddenly we were left without any sense of morality or values. In such a
scenario, no doubt, chaos will
prevail everywhere. Thus, ethics and values are the very foundations on
which this society is standing.
Same is the case in business. Organizations which follow certain business
ethics have better chances of
survival, compared to the ones whose only goal is to make profits, even if
they have to compromise on a
lot of things for that. So what is the importance of business ethics? How does
it benefit the business?
Profit Maximization
The importance of ethics in business can be understood by the fact that
ethical businesses tend to make
much more profits than the others. The reason for this is that customers of
businesses which follow ethics
are loyal and satisfied with the services and product offerings of such
businesses. Let us take an example.
Suppose, there is an organization named XYZ which manufactures
cosmetics. XYZ greatly believes in the
importance of business ethics. When XYZ advertises its cosmetics in the
market, being an ethical
organization, it will be very truthful and honest in its communication with the
probable customers. It will tell
correctly about the kind of ingredients it has used while manufacturing the
cosmetics. It will not lie or
exaggerate about the benefits or uses of its products either. So the
customers, who buy its cosmetics,
know precisely what they are buying and how useful that product is going to
be for them. This way, the
product will meet their expectations and thus, satisfy the customers. When
customers are satisfied, they
will become loyal to the company and come back again for re-purchasing.
This will surely increase the
profits of the organization. Thus, the importance of business ethics is that it
creates loyalty in customers
and maximizes the profits.
Efficient Utilization of Business Resources
In an organization, people working at the junior levels often emulate the
ones working at the top. The same
applies with ethics too. If the management or seniors of an organization
follow ethical business practices,
i.e, they do not bribe to get their way or they do not cheat the customers,
investors, suppliers, etc., the
employees will follow suit. The employees too will refrain from using the
office property or resources for
personal benefits. This will result in better and efficient utilization of the
business resources.
185
Creates Goodwill in the Market
An organization, which is well known for its ethical practices, creates
goodwill for itself in the market.
Investors or venture capitalists are more willing to put their money in the
businesses which they can trust.
Shareholders too, remain satisfied with the practices of ethical businesses.
Thus, the importance of business
ethics in creating goodwill and building long term relationships, cannot be
denied. Also, an ethical business
puts greater value on its employees and thus, employees remain loyal to
such an organization too.
The chief goal of any organization is to maximize its profits. The importance
of business ethics can be
understood from the fact that it helps the businesses in achieving its goal of
profit making by creating
goodwill for the business in the market, increasing its loyalty among the
customers, by aiding in employee
retention and by maximum utilization of its resources.
16.6 Ethical Dilemmas
An ethical dilemma is a situation wherein moral precepts or ethical
obligations conflict in such a way that
any possible resolution to the dilemma is morally intolerable. In other words,
an ethical dilemma is any
situation in which guiding moral principles cannot determine which course of
action is right or wrong.
Several ethical dilemmas confront an HR manager. The ethical dilemmas
arise from three sources--- face
to face ethics, corporate policy ethics, and functional area ethics.
Face -to-face Ethics
These arise mainly because there is a human element in most business
transactions. For example, a purchasing
agent of a company develops personal relationship with sales representative
who sells supplies to the
company. They may address one another on first name basis, have lunch
together, and talk often on
phone. A company's best customers may be well known to people in the
production department as it
helps to ensure that the company's products fit the customer needs.
Corporate -policy Ethics
Companies are often faced with ethical dilemmas that affect their operations
across all departments and
divisions. Following conflicting situations are typical:
1. Your R & D department has modernized one of your products. It is not
really' new and improved'.
But you know printing these statements on the package and using it in
advertisement will increase
its sales. What would you do?
2. You have a chance to win a big account that will mean a lot to you and
your company assistant
recommends sending a color television set to his home. What would you do?
Another issue relates to the results of employment contraction in labour
intensive basic industries because
of the improved methods of production. Modern technology has replaced
older methods of production
which has in turn resulted in hundreds being rendered jobless. The issue
therefore is - global economic
competitiveness or local social-psychological stability?
The ethical burden of deciding corporate policy matters normally rests upon
a company's HR management.
The HR managers and directors are responsible for making policies and
implementing them too.
Functional -Area Ethics
Functional area of a business are likely to confront ethical issues. Accounting
is a critical function of any
business. Accounting statements reveal to the manager and owners the
financial soundness of a company.
186
Managers, investors, regulating agencies, tax collectors, and trade unions
rely on accounting data to make
decisions. Honesty, integrity and accuracy are absolute requirements of the
accounting functions.
Marketing lends itself to several ethical issues. Pricing, promotions,
advertising and product information
are the areas of unethical practices.
Ethical dilemmas crop up in purchasing departments where strong pressures
are felt to obtain the lowest
possible prices from suppliers and where suppliers too feel a similar need to
bag lucrative contracts.
Bribes, kickbacks, and discriminatory pricing are temptations to both the
parties.
16.7 How to Manage Ethics at Workplace
The effective management of ethics is sound business practice. Employees'
morale is raised; bottom-line
performance is improved, your corporate image is enhanced; and customers
choose to form business
relationships with companies that adhere to high standards of ethical
conduct. One of your key management
tasks is to persuade employees to accept your organization's ethical values.
Following are some points to
consider in managing ethics:
1. Understand the Benefits of Ethical Conduct.
All key parties benefit from ethical conduct within the organization.
Employees who have confidence in
their management contribute to their organization's prosperity. Conversely,
in an unethical climate, employee
productivity declines, creativity is channelled into seeking ways to profit
personally from the business,
loyalty diminishes, and absenteeism and staff turnover increase. Customers
prefer to be associated with
and remain loyal to companies that adhere to codes of ethical behavior.
Shareholders derive up to fifteen
times greater return from companies with a dedicated commitment to ethical
conduct.
2. Focus on Ethical Conduct.
When referring to codes of behavior, the term 'ethical conduct' is more
comprehensive and more meaningful
than 'ethics'. The best ethical values and intentions are relatively
meaningless unless they generate fair, just,
and observable behaviors in the workplace. Ethical conduct focuses on
demonstrated behavior-doing,
not just saying.
3. Develop a Code of Ethical Conduct.
The best way to handle ethical dilemmas is to avoid their occurrence in the
first place. The process
involved in developing a code of ethical conduct helps to sensitize
employees to ethical considerations and
minimizes the likelihood that unethical behavior will occur.
4. Promote Process.
When it comes to managing ethics and, in particular, developing a code of
ethical conduct, the journey is
just as important as the destination. Codes, policies, procedures, and
budgets are important. So, too, is
the process of reflection and dialogue that produces those deliverables.
Where possible use group decision
making to actively involve participation in, and ownership of, the final
outcome.
5. Link Ethics to Other Management Practices.
The development of a code of ethical conduct should not occur in isolation.
The creation of a values
statement, for example, should occur as part of a strategic planning process.
A link to ethical conduct fits
187
ideally with this process. Similarly, any discussion about personnel policies
could also reflect ethical values
as they apply to the organization's culture.
6. Demonstrate Ethical Practices.
The best way for an organization to gain a reputation for operating ethically
is to demonstrate that behaviorthe
most important way to remain ethical is to be ethical. And the best
advertisement your ethics management
program can have is everyone's commitment to it. Be prepared for an
increase in the number of ethical
issues to be dealt with. As staff becomes increasingly aware of the
importance of ethics management, it is
to be expected that more issues will be identified. 'The most damaging thing
is for management to come
out with a code of ethics, or a value statement, and model a different type of
behavior.'
7. Allocate Roles and Responsibilities.
The approach will vary according to the organization, but an appropriate
structure could include the
following:
 An ethics management committee, representing the entire organization,
with responsibilities to
include implementing and administering an ethics management program.
The creation and monitoring
of a code of ethical conduct would be part of that overall program.
 An ethics officer who ideally should be a senior executive but not from HR
or the Legal Department.
He or she must be trained in matters of ethics in the workplace and have
ultimate responsibility for
managing the program.
 Demonstrated involvement and support of top management. Staff and
Board must see that senior
management takes ethical conduct seriously.
8. Identify and Model Industry Benchmarks.
An increasing number of companies strive to match practices with espoused
values. The Soul of a Business,
for example, is an account of the way in which ethical considerations guided
the day-to-day operations of
the American company, Tom's of Maine. One of the company's stated values
was its commitment to the
health of the environment. The company, therefore, used glass containers
instead of plastic, even though
plastic was cheaper to purchase, label, and ship. Tom's of Maine was also
committed to supporting its
regional economy. Only when it couldn't purchase a resource in its local area
would Tom's go farther
afield. This demonstrated commitment to espoused values contributed to the
company's growth and
profitability and inspired others to follow its lead.
16.8 Ethical Decision-Making
Here is a short guide to help you think through ethical issues and make
effective decisions.
1. Is it an Ethical Issue?
Being ethical does not always mean following the law. And just because
something is possible doesn't
mean it is ethical, hence the global debates about bio-technology advances
such as cloning. And ethics
and religion do not always concur.
This is perhaps the trickiest stage in ethical decision making, as sometimes
the subtleties of the issue are
above and beyond our knowledge and experience. Listen to your instincts - if
it feels uncomfortable
making the decision on your own, get others involved and use their collective
knowledge and experience
to make a more considered decision.
188
2. Get the Facts
What do you know, and just as importantly, what don't you know? Who are
the people affected by your
decision? Have they been consulted? What are your options? Have you
reviewed your options with
someone you respect?
3. Evaluate Alternative Actions
There are different ethical approaches which may help you make the most
ethical decision.
a. Utilitarian Approach - which action results in the most good and least
harm?
b. Rights Based Approach - which action respects the rights of everyone
involved?
c. Fairness or Justice Approach- which action treats people fairly?
d. Common Good Approach - which action contributes most to the quality of
life of the people
affected?
e. Virtue Approach - which action embodies the character strengths you
value?
4. Test Your Decision
Could you comfortably explain your decision to your mother? To the man in
the street? On television? If
not, you may have to re-think your decision before you take action.
5. Just Do It - but what did you learn?
Once you've made the decision, then don't waste time in implementing it.
Set a date to review your
decision and make adjustments if necessary. Often decisions are made with
the best information to hand
at the time, but things change, and your decision making needs to be flexible
enough to change too.
16.9 Five Sources of Ethical Standards
1. The Utilitarian Approach
Some ethicists emphasize that the ethical action is the one that provides the
most good or does the least
harm, or, to put it another way, produces the greatest balance of good over
harm. The ethical corporate
action, then, is the one that produces the greatest good and does the least
harm for all who are affectedcustomers,
employees, shareholders, the community, and the environment. Ethical
warfare balances the
good achieved in ending terrorism with the harm done to all parties through
death, injuries, and destruction.
The utilitarian approach deals with consequences; it tries both to increase
the good done and to reduce the
harm done.
2. The Rights Approach
Other philosophers and ethicists suggest that the ethical action is the one
that best protects and respects
the moral rights of those affected. This approach starts from the belief that
humans have a dignity based on
their human nature per se or on their ability to choose freely what they do
with their lives. On the basis of
such dignity, they have a right to be treated as ends and not merely as
means to other ends. The list of
moral rights -including the rights to make one's own choices about what kind
of life to lead, to be told the
truth, not to be injured, to a degree of privacy, and so on-is widely debated;
some now argue that nonhumans
have rights, too. Also, it is often said that rights imply duties-in particular,
the duty to respect
others' rights.
3. The Fairness or Justice Approach
Aristotle and other Greek philosophers have contributed the idea that all
equals should be treated equally.
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Today we use this idea to say that ethical actions treat all human beings
equally-or if unequally, then fairly
based on some standard that is defensible. We pay people more based on
their harder work or the greater
amount that they contribute to an organization, and say that is fair. But
there is a debate over CEO salaries
that are hundreds of times larger than the pay of others; many ask whether
the huge disparity is based on
a defensible standard or whether it is the result of an imbalance of power
and hence is unfair.
4. The Common Good Approach
The Greek philosophers have also contributed the notion that life in
community is a good in itself and our
actions should contribute to that life. This approach suggests that the
interlocking relationships of society
are the basis of ethical reasoning and that respect and compassion for all
others-especially the vulnerableare
requirements of such reasoning. This approach also calls attention to the
common conditions that are
important to the welfare of everyone. This may be a system of laws, effective
police and fire departments,
health care, a public educational system, or even public recreational areas.
5. The Virtue Approach
A very ancient approach to ethics is that ethical actions ought to be
consistent with certain ideal virtues that
provide for the full development of our humanity. These virtues are
dispositions and habits that enable us
to act according to the highest potential of our character and on behalf of
values like truth and beauty.
Honesty, courage, compassion, generosity, tolerance, love, fidelity, integrity,
fairness, self-control, and
prudence are all examples of virtues. Virtue ethics asks of any action, "What
kind of person will I become
if I do this?" or "Is this action consistent with my acting at my best?"
Putting the Approaches Together
Each of the approaches helps us determine what standards of behavior can
be considered ethical. There
are still problems to be solved, however.
The first problem is that we may not agree on the content of some of these
specific approaches. We may
not all agree to the same set of human and civil rights.
We may not agree on what constitutes the common good. We may not even
agree on what is a good and
what is a harm.
The second problem is that the different approaches may not all answer the
question "What is ethical?" in
the same way. Nonetheless, each approach gives us important information
with which to determine what
is ethical in a particular circumstance. And much more often than not, the
different approaches do lead to
similar answers.
Making Ethical Decisions
Making good ethical decisions requires a trained sensitivity to ethical issues
and a practiced method for
exploring the ethical aspects of a decision and weighing the considerations
that should impact our choice
of a course of action. Having a method for ethical decision making is
absolutely essential. When practiced
regularly, the method becomes so familiar that we work through it
automatically without consulting the
specific steps.
The more novel and difficult the ethical choice we face, the more we need to
rely on discussion and
dialogue with others about the dilemma. Only by careful exploration of the
problem, aided by the insights
and different perspectives of others, can we make good ethical choices in
such situations.
We have found the following framework for ethical decision making a useful
method for exploring ethical
dilemmas and identifying ethical courses of action.
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16.10 Summary: A Framework for Ethical Decision-Making
Recognize an Ethical Issue
1. Could this decision or situation be damaging to someone or to some
group? Does this decision
involve a choice between a good and bad alternative, or perhaps between
two "good" or between
two "bad"?
2. Is this issue about more than what is legal or what is most efficient? If so,
how?
Get the Facts
3. What are the relevant facts of the case? What facts are not known? Can I
learn more about the
situation? Do I know enough to make a decision?
4. What individuals and groups have an important stake in the outcome? Are
some concerns more
important? Why?
5. What are the options for acting? Have all the relevant persons and groups
been consulted? Have
I identified creative options?
Evaluate Alternative Actions
6. Evaluate the options by asking the following questions:
 Which option will produce the most good and do the least harm? (The
Utilitarian Approach)
 Which option best respects the rights of all who have a stake? (The Rights
Approach)
 Which option treats people equally or proportionately? (The Justice
Approach)
 Which option best serves the community
as a whole, not just some member? (The Common Good Approach)
Which option leads me to act as the sort of person I want to be? (The
Virtue Approach)
Make a Decision and Test It
7. Considering all these approaches, which option best addresses the
situation?
8. If I told someone I respect-or told a television audience-which option I
have chosen, what would
they say?
Act and Reflect on the Outcome
9. How can my decision be implemented with the greatest care and attention
to the concerns of all
stakeholders?
10. How did my decision turn out and what have I learned from this specific
situation?
16.11 Self Assessment Questions
1. Define the term Ethics. Trace the sources of ethics. Why is ethics
important?
2. What are ethical dilemmas? Explain each.
3. Why is ethical decision making difficult? Discuss.
4. How does HR function become involved with business ethics in the
organization?
5. Explain the various HR ethical issues?
6. What are the different points to be considered in managing ethics in a
workplace?
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16.12Reference Books
- K Aswathappa, Human Resource Managemnet, TMH, Fifth edition.
- Fisher, choenfeldt, Shaw., Managing Human Resource, Cengage Learning
- S.S. Khanka, Human Resource Managemnet (Text and Case), S.Chand
Publications.
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Unit - 17 : The Future of HRM
Structure of Unit:
17.0 Objectives
17.1 Introduction
17.2 Significance of Human Resource Management
17.3 Role of HR Managers in Present Times
17.4 Recent Trends In HRM
17.5 Forces Changing HRM
17.6 Emerging Concepts
17.7 Impact of Technology on HRM
17.8 Workforce Trends
17.9 E-Human Resource Management
17.10 Challenges before HRM
17.11 HRM Practices In India
17.12 Self Assessment Questions
17.13 References Books
17.0 Objectives
After completing the unit you will be able to:
 Understand the importance of HRM in the emerging scenario.
 Role of HR manager in modern time.
 Forces affecting HRM
 Challenges faced in the changed business scenario
 Current practices of HRM in India
17.1 Introduction
The importance of Human Resource Management can be traced back to
Vedic ages! Yes, in The Bhagavad
Gita, Lord Krishna not only makes Arjuna spiritually enlightened, but also
teaches him the art of self
management, anger management, stress management, conflict
management, transformational leadership,
motivation, goal setting and many other aspects which are now essential
parts of any HRM curriculum.
Human resource management is a process of bringing people and
organizations together so that the goals
of each other are met. The role of HR manager is shifting from that of a
protector and screener to the role
of a planner and change agent. Personnel directors are the new corporate
heroes. The name of the game
today in business is Personnel. Nowadays it is not possible to show a good
financial or operating report
unless your personnel relations are in order.
17.2 Significance of Human Resource Management
The Human Resources (HR) function provides significant support and advice
to line management. The
attraction, preservation and development of high calibre people are a source
of competitive advantage for
our business, and are the responsibility of HR. Industries in India in general
and Human Resources function
in particular, will open new avenues in future. One clear trend concerns joint
decision making. From
largely paternalistic efforts to help needy employees solve their personnel
problems, industrial organizations
in India have moved to a joint consultative process of decision making which
influences employees.
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The scope of Human Resource function depends, to a large extent, on its
importance in the organization
and the attitude of the top management to executives in the HR department.
The basic objectives of
Human Resource Department of an organization are an effective and
efficient utilization of human resources,
harmonious relations among all employees and maximum development of
individuals. These objectives
are generally achieved by hiring capable people, using their efforts
effectively and encouraging a willingness
to work kind of environment to achieve organization’s goals.
Human Resources manager’s style of supervision, his plans, policies and
procedures have a significant
impact on an individual’s performance. Changes in HR function, to a large
extent reflect changing needs of
the organization. Changes in the organizational atmosphere, hopes and
aspirations of the workforce, and
the external environment all demand an innovative problem-solving
approach from the personnel department.
The functions of HR manager in future will definitely be enhanced from
traditional areas such as management
of manpower planning, recruitment, selection, training, internal mobility and
welfare.
17.3 Role of HR Managers in Present Times
HR Managers today are focusing attention on the followinga)
Policies- HR policies are based on trust, openness, equity and consensus.
b) Motivation- Create conditions in which people are willing to work with
zeal, initiative and
enthusiasm; make people feel like winners.
c) Relations- Fair treatment of people and prompt redress of grievances
which would pave the
way for healthy work-place relations.
d) Change Agent- Prepare workers to accept technological changes by
clarifying doubts.
e) Quality Consciousness- Commitment to quality in all aspects of
personnel administration will
ensure success.
Due to the new trends in HR, in a nutshell the HR manager should treat
people as resources, reward them
equitably, and integrate their aspirations with corporate goals through
suitable HR policies.
Traditionally, the role of the Human Resource professional in many
organizations has been to serve as the
systematizing, policing arm of executive management.
In this role, the HR professional served executive agendas well, but was
frequently viewed as a road
block by much of the rest of the organization. The role of the HR manager
must parallel the needs of his or
her changing organization. Successful organizations are becoming more
adaptive, resilient, quick to change
direction and customer-centered. Within this environment, the HR
professional, who is considered necessary
by line managers, is a strategic partner, an employee sponsor or advocate
and a change mentor.
Strategic Partner
In today’s organizations, to guarantee their viability and ability to contribute,
HR managers need to think of
themselves as strategic partners. In this role, the HR person contributes to
the development of and the
accomplishment of the organization-wide business plan and objectives.
The HR business objectives are established to support the attainment of the
overall strategic business plan
and objectives. The tactical HR representative is deeply knowledgeable
about the design of work systems
in which people succeed and contribute. This strategic partnership impacts
HR services such as the design
of work positions; hiring; reward, recognition and strategic pay; performance
development and appraisal
systems; career and succession planning; and employee development.
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Employee Advocate
As an employee sponsor or advocate, the HR manager plays an integral role
in organizational success via
his knowledge about and advocacy of people. This advocacy includes
expertise in how to create a work
environment in which people will choose to be motivated, contributing, and
happy.
Fostering effective methods of goal setting, communication and
empowerment through responsibility, builds
employee ownership of the organization. The HR professional helps establish
the organizational culture
and climate in which people have the competency, concern and commitment
to serve customers well.
In this role, the HR manager provides employee development opportunities,
employee assistance programs,
gain sharing and profit-sharing strategies, organization development
interventions, due process approaches
to problem solving and regularly scheduled communication opportunities.
Change Agent
People often resist change. A significant change occurs when an individual
moves from his home environment
to work environment, or when there is a transition from a traditional work
method to an advanced
technological method. Technological advancement brings about changes
which a worker may resist. At
this point, the personnel manager has a crucial role to play. He has to
convince workers of the need for
automation and prepare them to accept changes well before they are
introduced. Implementation is mainly
a method of getting new methods and ideas accepted and used with the
least friction but with ample scope
of improvement. Hence changes should be phased gradually and
thoughtfully without provoking negative
reactions from the workers.
The constant evaluation of the effectiveness of the organization results in the
need for the HR professional
to frequently support change. Both knowledge about and the ability to
execute successful change strategies
make the HR professional exceptionally valued. Knowing how to link change
to the strategic needs of the
organization will minimize employee dissatisfaction and resistance to
change.
The HR professional contributes to the organization by constantly assessing
the effectiveness of the HR
function. He also sponsors change in other departments and in work
practices. To promote the overall
success of his organization, he supports the identification of the
organizational mission, vision, values,
goals and action plans. Finally, he helps determine the measures that will tell
his organization how well it is
succeeding in all of this.
Activity A:
Prepare the activity report of an HR manager of a company known for its
proactive HR Practices.
17.4 Recent Trends In HRM
Over the years, highly skilled and knowledge based jobs are increasing while
low skilled jobs are decreasing.
This calls for future skill mapping through proper HRM initiatives. Indian
organizations are also witnessing
a change in systems, management cultures and philosophy due to the global
alignment of Indian organizations.
There is a need for multi skill development. Role of HRM is becoming all the
more important.
Some of the recent trends that are being observed are as follows:
 The recent quality management standards ISO 9001 and ISO 9004 of
2000 focus more on
people centric organizations. Organizations now need to prepare themselves
in order to address
people centered issues with commitment from the top management, with
renewed thrust on HR
issues, more particularly on training.
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 To move ahead of competition in this world of uncertainty, organizations
have introduced sixsigma
practices. Six- sigma uses rigorous analytical tools with leadership from the
top and
develops a method for sustainable improvement. These practices improve
organizational values
and helps in creating defect free product or services at minimum cost.
 Human resource outsourcing is a new accession that makes a
traditional HR department
redundant in an organization. Exult, the international pioneer in HR BPO has
already roped in
Bank of America, international players BP Amoco & over the years plan to
spread their business
to most of the Fortune 500 companies.
 With the increase of global job mobility, recruiting competent people is also
increasingly becoming
difficult, especially in India. Therefore by creating an enabling culture,
organizations are also
required to work out a retention strategy for the existing skilled
manpower.
17.5 Forces Changing HRM
In the 1990s several forces were shaping the broad field of HRM. The first
key force, new technologies—
particularly information technology—brought about the decentralization of
communications and the shakeup
of existing paradigms of human interaction and organizational theory.
Satellite communications, computers
and networking systems, fax machines, and other devices were facilitating
rapid change. Moreover, since
these technologies helped blur the lines between work time and personal
time by enabling employees to
work at home, Human Resource Management professionals began adopting
“Management by Objective”
approaches to human resources instead of the traditional “management by
Sight” method.
A second important change affecting HRM was new organizational structures
that began to emerge during
the 1980s and continued through the 1990s. Because many companies
began expanding their operations
and diversifying their products and services, the central decision-making
system failed to respond quickly
enough to managers’ needs and concerns. Therefore, companies started
scrapping traditional, hierarchical
organizational structures in favor of flatter, decentralized management
systems. Consequently, fewer
managers were involved in the decision-making process and companies were
adopting more of a team
approach to management. HRM professionals, as the agents of change, were
charged with reorganizing
workers and increasing their efficiency. These efforts also resulted in the
proliferation of part-time, or
contract, employees, which required human resource strategies that
contrasted with those applicable to
full time workers.
A third change factor was accelerating market globalization, which was
increasing competition and
demanding greater performance out of workers, often at diminished levels of
compensation. To compete
abroad, companies were looking to their HRM professionals to enhance
initiatives related to quality,
productivity, and innovation.
Other factors changing HRM include: an accelerating rate of change and
turbulence, resulting in higher
employee turnover and the need for more responsive, open-minded workers;
rapidly changing
demographics; and increasing income disparity as the demand for highly
educated workers increases at
the expense of lower-wage employees.
17.6 Emerging Concepts
Of late, a number of new concepts have emerged in the management field to
improve the overall effectiveness
of the organizations. The HR manager not only has to know them well but
has to prepare himself/herself to
implement some of these new ideas.
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1. Total Quality Management
The concept of TQM is based on the 14 principles of Deming that deal with
this subject. Deming was
born and brought up in USA and migrated to Japan in the early 50’s, where
he evolved these total quality
principles. TQM is a culture based on the realization that the high quality of
products and services and
associated customer satisfaction are the keys to organizational survival.
At its core, Total Quality Management (TQM) is a management approach to
long-term success through
customer satisfaction.
In a TQM effort, all members of an organization participate in improving
processes, products, services
and the culture in which they work.
The methods for implementing this approach come from the teachings of
such quality leaders as Philip B.
Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa and
Joseph M. Juran.4
A core concept in implementing TQM is Deming’s 14 points, a set of
management practices to help
companies increase their quality and productivity:
1. Create constancy of purpose for improving products and services.
2. Adopt the new philosophy.
3. Cease dependence on inspection to achieve quality.
4. End the practice of awarding business on price alone; instead, minimize
total cost by working with
a single supplier.
5. Improve constantly and forever every process for planning, production and
service.
6. Institute training on the job.
7. Adopt and institute leadership.
8. Drive out fear.
9. Break down barriers between staff areas.
10. Eliminate slogans, exhortations and targets for the workforce.
11. Eliminate numerical quotas for the workforce and numerical goals for
management.
12. Remove barriers that rob people of pride of workmanship, and eliminate
the annual rating or merit
system.
13. Institute a vigorous program of education and self-improvement for
everyone.
14. Put everybody in the company to work accomplishing the transformation.
2. Assessment Centres
An assessment centre is a comprehensive, standardized procedure in which
multiple assessment techniques
such as situational exercises and job simulation (business games,
discussions, reports, and presentations)
are used to evaluate employees for a variety of manpower decisions.
“An assessment centre consists of a standardized evaluation of behaviour
based on multiple inputs. Several
trained observers and techniques are used. Judgments about behaviour are
made by these specially trained
observers. At the end of the assessment the assessors get together to share
their data which is scientifically
recorded on a set of evaluation forms. They come to a consensus on the
assessments of each candidate.
Most frequently the approach has been applied to individuals being
considered for selection, promotion,
placement, or special training and development in management.
197
History of Assessment Centres: Assessment centres methodology is
known to have been used or
recommended at least 1500 years ago in India as mentioned in Kautilya’s
Arthashastra. Different methods
of assessing a candidate for ministerial positions have been spelt out in the
Arthashastra including: observation,
performance appraisal, assessment by those who knew him, interviewing,
and other forms of testing.
Early application of assessment centres can be traced to the German military
assessment programme
developed for selection of officers for the German Army. Both multiple
assessment techniques and multiple
assessors to evaluate complex behaviour with special focus on leadership
were used. Assessment was
based on subjective opinions and very little rating was done.
How are Assessment Centres Different Now?: Early assessment centres
were used essentially for
selection purposes since the traditional methods were thought to be
inadequate. The assessment centre
method since then has been subjected to scrutiny and research much more
than any other personnel
practice.5 Because of the high quality research and high reported validity,
the methodology finds widespread
use in a number of organizations. Besides selection, it is used for early
identification of management talent,
promotion, and diagnosis of developmental needs.
The basic purpose of Assessment Centre is:
(a) Making selection and promotion decisions; and
(b) Identify the strengths and weaknesses of an individual for development
purposes.
The requirements of Assessment Centre are listed below:
1. Multiple assessment techniques must be used like in basket exercises,
management games, leaderless
group discussions, tests, personality inventories etc.
2. Multiple assessors must be used. They can be line managers who are two
to three levels senior to
the candidate and or professional psychologists.
3. Judgment should be based on pooling of information among assessors.
4. An overall evaluation of behavior should be made, separate from the
observation of behavior.
5. Simulation exercises must be used.
3. Quality Circles
Quality Circles are (informal) groups of employees who voluntarily meet
together on a regular basis to
identify, define, analyze and solve work related problems.
Usually the members of a particular team (quality circle) should be from the
same work area or who do
similar work so that the problems they select will be familiar to all of them. In
addition, interdepartmental
or cross functional quality circles may also be formed.
An ideal size of quality circle is seven to eight members. But the number of
members in a quality circle can
vary.
The Main Objectives of Quality Circles are
 Promote job involvement
 Create problem solving capability
 Improve communication
 Promote leadership qualities
 Promote personal development
 Develop a greater awareness for cleanliness
 Develop greater awareness for safety
198
 Improve morale through closer identity of employee objectives with
organization’s objectives
 Reduce errors.
 Enhance quality
 Inspire more effective team work
 Build an attitude of problem prevention
 Promote cost reduction
 Develop harmonious manager, supervisor and worker relationship
 Improve productivity
 Reduce downtime of machines and equipment
 Increase employee motivation
Problem Solving Tools and Techniques Used by Quality Circles: Given
below are the most commonly
used tools and techniques. These are called the old QC tools:
 Brainstorming.
 Pareto analysis.
 Cause and effect diagram (or fish bone diagram or Ishikawa diagram).
 Histogram.
 Scatter diagram
 Stratification
 Check sheet
 Control charts and graphs
New QC Tools: Quality circles started using additional seven tools as they
started maturing. These are:
1. Relations diagram.
2. Affinity diagram.
3. Systematic diagram or Tree diagram.
4. Matrix diagram.
5. Matrix data analysis diagram.
6. PDPC (Process Decision Program Chart).
7. Arrow diagram.
Benefits of QC:
 Self development.
 Promotes leadership qualities among participants.
 Recognition.
 Achievement satisfaction.
 Promotes group/team working.
 Serves as cementing force between management/non-management
groups.
 Promotes continuous improvement in products and services.
 Brings about a change in environment of more productivity, better quality,
reduced costs, safety
and corresponding rewards.
While some of the organizations have started practicing these ideas, a large
number are still waiting to see
the effects elsewhere.
Given their significance in quality improvement and involvement of people,
these ideas show tremendous
potential for widespread acceptance. The HR managers have the
responsibility to educate other managers
about benefits coming from them and help them implement these ideas.
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The HR manager faces challenge to involve himself in all functional areas of
an organization. He will need
training not only in human resources but in production, marketing, finance,
etc., to give him a greater
understanding of the problems of employees in various functional areas.
17.7 Impact of Technology on HRM
Technological advances in office equipment over the past thirty years have
enabled organizations to improve
operating efficiencies, improve communications, reduce costs, increase their
global presence, and gain
competitive advantage through the implementation of information
technology systems.
Since the 1960’s, Information Technology has dramatically changed the
landscape of the workplace
through advances in office equipment, speed of information transmission
and methods of communication.
From a human capital perspective, Information Technology has allowed
companies and their employees
to increase efficiencies, communicate more rapidly, and work from remote
locations. The ability of the
workforce to perform organizational tasks from a remote location also known
as “Telecommuting” has
enabled employees to improve quality of life and manage the professional
and personal aspects of their
lives.
From an operational perspective, investments in Information Technology by
organizations willing to embrace
technology have resulted in increased efficiencies, cost reductions, global
expansion, improved intracompany
and customer communications, improved reporting and tracking methods,
and increased
competitive advantage in the market place.
Computers loaded with word processing, spreadsheet analysis and
presentation software programs have
become standard fixtures on each employee’s desk. Some of the workforce
became mobile, conducting
business outside of the traditional office settings through the use of Personal
Digital Assistants (PDAs),
cellular phones and laptop computers. The initial users of mobile technology
were salespeople and executive
management; however, easier access to the internet allowed more
employees to become “Telecommuters,”
who conducted work-related activities either from their homes or from some
other remote location.
Technological advances in electronic communication may continue to
decrease the need for traditional
office setting while increasing the number of telecommuters. Electronic
capabilities will also continue to
affect outsourcing, off-shoring and globalization efforts by many
organizations.
Collaboration technologies, currently being enhanced by Microsoft and IBM,
enables companies to conduct
“virtual meetings” . In a virtual meeting, employees from remote locations
conduct real-time meetings from
their own computers using peer-to-peer software. Participants can see one
another on computer screens,
share computer space and make to product designs or contract documents
via a “virtual whiteboard.”
17.8 Workforce Trends
a. Telecommuting: Telecommuting is working from one’s home or some
other remote location outside
the company’s office. Telecommuting offers benefits to both employees and
companies. For employees,
telecommuting increases quality of life by enabling a meshing of personal
and professional lives. The ability
to work from home can assist workers with child/elder care issues,
transportation restrictions, or employees
who may be physically unable to report to work on a daily basis due to
health-related issues (e.g., need
for regular medical treatments such as dialysis or chemotherapy). Other
economic benefits that companies
can realize from telecommuting include productivity gains, reduced
absenteeism, reduced employee turnover
costs, reduced real estate costs, and reduced relocation costs to name a few.
200
b. Globalization: In the future, multinational companies (corporations
operating in more than one country)
may utilize telecommuting to attract local talent that can work effectively
across international borders
through electronic communication. Training such “home grown talent” can
allow companies to reduce
international relocation expenses, manage competition levels for talented
resources, and reduce issues
related to working in foreign countries such as personal safety, security,
political, and regulatory issues.
Reducing globalization efforts through telecommuting can help to address
some of the issues related to
dealing with international workforces, such as language barriers, cultural
relationship differences, and time
zone differences that often lead to companies needing to maintain
continuous operations known as “24/7”.
c. Outsourcing/Off-shoring: Outsourcing is defined as “turning over all or
part of an organization’s
information systems operation to outside contractors or service providers”.
Outsourcing seems to be the
wave of the future. Many companies are outsourcing parts of their operations
in order to move parts of
their businesses off site in order to focus on their core competencies and try
to give them an advantage
over their peers. One of the more popular departments which are outsourced
is the Human Resources
Department. This is because most companies aren’t focused on HR and their
needs might be better
served by an outside company. There are advantages and disadvantages to
outsourcing this vital department.
Offshoring refers to outsourcing in another country. Conceptually,
outsourcing and off-shoring can be
viewed together, since both involve employing individuals outside of the
organization to handle operational
work.
There are some major drawbacks to sending operations overseas, such as a
loss of domestic talent, loss
of intellectual assets, decreased levels of customer satisfaction resulting
from diminished organizational
values that do not translate across cultures, and threats to organizational
performance
Advantages of Outsourcing
a) Cost Savings: The main benefit to outsourcing the HR department is the
cost savings which
will be associated with such a move. These cost savings can manifest
themselves in several ways.
Many times a company can get the same level of service for less cost. They
can then use the
savings to reinvest in their business. By doing this, they might be able to hire
more people or
operate more efficiently which might put them a step above their
competitors.
b) Regaining Primary Focus: Outsourcing also allows a company to regain
its primary focus.
When there is an internal HR department, senior management may have to
spend some time
dealing with that department’s issues. This is time which might be better
spent on whatever business
the company is in. The company as a whole will begin to shift toward its
primary business.
Disadvantages of Outsourcing
a) Employee Morale: There are some drawbacks to outsourcing, however.
The biggest of
these is the morale of the employees of the outsourcing company.
“Outsourcing” is a loaded word
which brings connotations of sending jobs overseas and the loss of income. If
the employees
aren’t behind the move to an offsite HR department, there may be less
productivity from them.
Any company considering moving the HR department off site should carefully
gauge the attitude
of the employees to get a feel for how this will affect them.
b) Loss of Expertise: Another disadvantage to this process is a loss of in-
house expertise.
When there is an in-house HR department, any questions related to labor
laws or benefits can be
answered quickly and sufficiently. If the HR is done off-site, it can cause a
delay in knowing how
to proceed in an employee issue, or worse, a manager may act in conflict
with the law, opening the
company up to bigger issues in the
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c) Issues with the Workplace of the Future: Security is the main issue
facing companies with
mobile workforces. Employees in the field, such as salespeople or
telecommuters, have access to
“mission critical” data and pose a significant threat to organizational systems
security. There are
numerous potential breaches of security related to mobile electronic devices
such as PDAs and
laptop computers that can be misplaced, stolen or damaged. The challenge
facing IT departments
is to protect sensitive company data, enable secure remote access, and
provide user-friendly and
productive electronic tools for its mobile workforce. IT departments must
also implement an
education process for training employees not to use unauthorized devices or
install any unauthorized
programs that might threaten the integrity of company data.
17.9 E-Human Resource Management
Nature of e-HRM
E-HRM is the relatively new term for this IT supported HRM, especially
through the use of web technology.
The major goals of e-HRM are mainly to improve HR’s administrative
efficiency/to achieve cost reduction.
Next to these goals, international companies seem to use the introduction of
e-HRM to Standardize/
harmonize HR policies and processes.
Though e- HRM hardly helped to improve employee competences, but
resulted in cost reduction and a
reduction of the administrative burden.
There is a fundamental difference between HRIS and e-HR in that basically
HRIS are directed towards
the HR department itself. Users of these systems are mainly HR staff. These
types of systems aim to
improve the processes within the HR departments itself, although in order to
improve the service towards
the business. With e-HR, the target group is not the HR staff but people
outside this department: the
employees and management.
HRM services are being offered through an intranet for use by employees.
The difference between HRIS
and e-HR can be identified as the switch from the automation of HR services
towards technological
support of information on HR services.
e-HRM is a way of implementing HR strategies, policies, and practices in
organizations through a conscious
and directed support of and/or with the full use of web-technology-based
channels. The word ‘implementing’
in this context has a broad meaning, such as making something work,
putting something into practice, or
having something realized. e-HRM, therefore, is a concept - a way of ‘doing’
HRM.
The e-HRM business solution is designed for human resources professionals
and executive managers
who need support to manage the work force, monitor changes and gather
the information needed in
decision-making. At the same time it enables all employees to participate in
the process and keep track of
relevant information.
The e-HRM business solution excels in:
 Modularity
 The solution can be accessed and used in a web browser
 Security of data, protected levels of access to individual modules, records
documents and their
component parts
 Parametric and customizability
 Access to archived records and documents
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 User-friendly interface
 Connectivity with the client’s existing information system (payroll
accounting, ERP, attendance
registration, document systems…)
 Multi-language support
Advantages of the e-HRM business solution:
 Gradual implementation
 Adaptability to any client
 Collection of information as the basis for strategic decision-making
 Integral support for the management of human resources and all other
basic and support processes
within the company
 Prompt insight into reporting and analysis
 A more dynamic workflow in the business process, productivity and
employee satisfaction
 A decisive step towards a paperless office
 Lower business costs
e-HR Activities
We talk about using technology in HR functions. Here we focus on
recruitment, selection, training,
performance management and compensation.
1. e- Recruitment: e- recruitment strategy is the integration and utilization
of internet technology to
improve efficiency and effectiveness of the recruitment process. Most
companies understand this and
have begun the evolution by integrating e-recruitment strategy into their
hiring process.
e-Recruitment Methods: Methods of E-recruitment are many, among
those the more important ones
are:
Job Boards: These are the places where the employers post jobs and search
for candidates.
Candidates become aware of the vacancies. One of the disadvantages is, it is
generic in nature.
Employer Websites: These sites can be of the company owned sites, or a
site developed by
various employers. For an example, Directemployers.com is the first
cooperative, employerowned
e-recruiting consortium formed by Direct Employers Association. It is a non
profit
organization formed by the executives from leading U.S corporations.
Professional Websites: These are for specific professions, skills and not
general in nature. For
an example, for HR jobs Human Resource Management sites to be visited
like www.shrm.org.
The professional associations will have their own site or society.
Advantages of e-Recruitment: e-recruiting offers several benefits to the
firms practising it
1) Centralised Platform
 Collects candidate information in a standard format.
 Consolidate data from multiple recruitment sources.
2) Streamline Workflow
 Automates workflow from job requisition to completion of the hiring
process.
 Captures and files candidate information and history for future retrieval by
all users of the syatem.
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3) Better Communication and Increased Productivity
 Shares knowledge and information between hiring team members online in
real time.
 Collaboration with colleagues to increase productivity.
4) Less Wastage of Paper
 Electronically collects and files information to reduce paper usage.
 Reduces manual administrative workload.
5) Candidates Pool
 Locates qualified candidates within a private pool of talent with precision.
 Centralized database collects and provides candidate information for
various units and location.
6) Centralised Reports
 Provides consolidated HR reports for the entire organization.
7) Save Cost and Time
 Improves productivity and reduces hiring expenses in the long run.
Drawbacks of E-Recruitment
1) Require being Computer Savvy: The process is restricted within
computer savvy candidates.
2) Legal Consequences: Alike other recruitment sources this source also
should be aware of the
words used in the advertisements otherwise it may lead to the charge of
discrimination.
3) Vast Pool of Applicants: This benefits the Organizations as well as it is
disadvantage to them
also. Because the huge database cannot be scanned in depth. Either first few
candidates are
called for interview or the resumes are screened based on some key words.
4) Non-serious Applicants: Lot of applicants forward their resumes just to
know their market
value.
5) Disclosure of Information: Candidates profile and company details are
available to public. The
applicants do not want their employer to know that they are looking for a
change. Phone number,
address information has lead to many security problems. Again the
companies do not want their
competitors always to know the current scenario.
Activity B:
1. Analyse the emerging trends in e-recruitment and prepare the report
detailing the challenges and
opportunities for the organization.
2. e- Selection: Usually it is difficult to decide where recruiting ends and
selection begins. The main
purpose of selection process is to distinguish individuals on the basis of
important characteristics. In a
changing environment, the speed of selection process becomes very
important. There are many formal
selection tools available to measure applicants on the characteristics:
 Work Samples
 Structured Interviews
 Personality inventories
 Situational Judgment Tests
 Cognitive Ability Tests
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e-selection process is a paperless process where electronic documents and
information can be quickly
disseminated nationwide or worldwide.
3. e- Performance Management: e-performance management also known
as Business Intelligence
(BI) or Business Performance Management is a growing field. Use of
technology in performance
management leads to increment in productivity, enhances competitiveness,
and motivates employees. This
is possible through two ways:
(i) Technology become a tool to facilitate the process of writing reviews or
generating performance
feedback.
(ii) Technology may facilitate measuring individual’s performance via
computer monitoring activities.
Examples here include multirater appraising that supervisors or team
members generate online, as
well as of-the –shelf appraisal software packages that a construct an
evaluation for a manager.
Technology can be applied in several ways in performance management. In
the first place , routine jobs
can be subject to computerized performance monitoring (CPM) system that
helps generate performance
data. Second , softwares are available that helps generate appraisal forms.
Third, performance management
system can be integrated with an overall enterprise resource planning
system (ERP) software system. This
helps HR professional to identify high performers, spot skill and competency
gaps and to analyze pay
relative to performance. With this information being available, HR manager
can plan for training, coaching
and education. Forth, firm intranets and internet may also help performance
management process. Fifth,
stand-alone software packages are a great help in performance management
system. The greatest benefits
of appraisal software are the elimination of paperwork and simplification of
the logistics for evaluators,
workers and administrators.
4. e-Learning: e-Learning is the use of technology to enable people to learn
anytime and anywhere. e-
Learning can include training, the delivery of just-in-time information and
guidance from experts. 13
e-Learning is learning that takes place in an electronically simulated
environment. e-Learning, web-based
training, internet-based training and computer-based training are the next-
generation instruction methods
being developed today. With e-Learning, users can immerse themselves in a
three-dimensional environment
to further enhance their learning experience. Moreover, e-Learning can be
done anywhere and anytime as
long as the user has the proper hardware. Today, e-Learning is fast
becoming a reality through companies
like Trainersoft and others.
e-Learning can be done using an internet connection, a network, an intranet,
or a storage disk. It uses a
variety of media like audio, text, virtual environments, video, and animation.
e-Learning, in some ways, is
even better than classroom learning methods as it is a one-on-one learning
method, it is self-paced and it
has an experiential-learning format.
As with any other forms of learning, e-Learning depends on its delivery
method and content to ensure its
success. For this reason, e-Learning modules have to be interesting,
interactive and informative in order to
be effective. Because it is computer/software based however, e-Learning has
the capability of immersing
its students completely within an environment most conducive to learning.
This sets it apart from classroomstyle
learning..
Advantages of e-Learning
1) Lower Costs and Larger Capacity
With e-Learning, students don’t have to physically attend classes, seminars
or training programs.
e-Learning is web-based and disk-based so participants don’t have to spend
a lot of time away
from their work. They can choose how much time or what specific time to
devote to learning the
subject matter offered.
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A web-based e-Learning program is a lot less expensive to maintain. e-
Learning program operators
need only maintain the networking infrastructure that will deliver their e-
Learning content to their
students and participants. This is a small investment compared to what is
required to pay for
instructors and training personnel in classroom-style learning. Moreover,
participants need not
spend money on travel and other expenses just to attend seminars and
training courses.
e-Learning also allows for more participants than traditional learning
methods since the number of
participants is not constrained by venue limitations.
2) Convenient Learning
Students can fit their learning activities easily with their daily routine. They
need not leave home to
participate in an e-Learning program and learning does not require complex
logistics. All a participant
needs is a computer, internet connectivity, access to the web-based server,
and if necessary, the
special e-Learning software provided by the e-Learning program operators.
3) Easily Updated and Upgraded
e-Learning modules can be easily revised. Activities can be easily added and
incorporated. The
e-Learning software can also be automatically updated by connecting to the
server. This is definitely
a lot faster than retraining professors and reprinting books and manuals.14
 Class work can be scheduled around personal and professional work
 Reduces travel cost and time to and from school
 Learners may have the option to select learning materials that meets their
level of knowledge
and interest
Learners can study wherever they have access to a computer and Internet
Self-paced learning modules allow learners to work at their own pace
Flexibility to join discussions in the bulletin board threaded discussion
areas at any hour, or
visit with classmates and instructors remotely in chat rooms
Different learning styles are addressed and facilitation of learning occurs
through varied activities
Development of computer and Internet skills that are transferable to other
facets of learner’s
lives
Successfully completing online or computer-based courses builds self-
knowledge and selfconfidence
and encourages students to take responsibility for their learning
Disadvantages of e-Learning
 Unmotivated learners or those with poor study habits may fall behind
 Lack of familiar structure and routine may take getting used to
 Students may feel isolated or miss social interaction
 Instructor may not always be available on demand
 Slow or unreliable Internet connections can be frustrating
 Managing learning software can involve a learning curve
 Some courses such as traditional hands-on courses can be difficult to
simulate
Knowing e-learning advantages and disadvantages helps with learning
software selection as well as online
distance learning programs structure and selection. It is important to know
the merits and demerits of elearning
to make a decision..
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17.10 Challenges before HRM
The HR Managers of today may find it difficult because of the rapidly
changing business environment and
therefore they should update their knowledge and skills by looking at the
organization’s need and objectives.
1. Managing the Vision: Vision of the organization provides the direction
to business strategy and
helps managers to evaluate management practices and make decisions. So
vision management
becomes the integral part of the process of Man management in times to
come .
2. Internal Environment: Creating an environment which is responsive to
external changes, providing
satisfaction to the employees and sustaining through culture and systems is
a challenging task.
3. Changing Industrial Relations: Both the workers and managers have
to be managed by the
same HRM Philosophy and this is going to be a difficult task for the managers
of tomorrow.
4. Building Organizational Capability: Even in the adverse
circumstances the employees have to
be made to live in psychological state of readiness to continually change.
5. Job Design and Organization Structure: Instead of depending on
foreign concepts we need to
focus on understanding the job, technology and the people involved in
carrying out the tasks.
6. Managing the Large Work Force: Management of large workforce
poses the biggest problem
as the workers are conscious of their rights.
8. Employee Satisfaction: Managers should be aware of techniques to
motivate their employees
so that their higher level needs can be satisfied.
9. Modern Technology: There will be unemployment due to modern
technology and this could be
corrected by assessing manpower needs and finding alternate employment.
10. Computerized Information System: This is revolutionary in
managerial decision making and is
having impact on coordination in the organization.
11. Managing Human Resource Relations: As the workforce comprises
of both educated and
uneducated, managing the relations will be of greatchallenge. One of the
challenges HR managers
face is issues of up gradation of the skill set through training and
development in the face of high
attrition. Indian companies are recognizing their responsibilities to enhance
the employee’s
opportunity to develop skills and abilities for full performance within the
position and for career
advancement.
17.11 HRM Practices In India
India’s Changing HRM Horizon
The outlook to Human Resource Management in India has witnessed sea-
change in last two decades.
Economic liberalization in 1991 created a hyper-competitive environment. As
international firms entered
the Indian market bringing with them innovative and fierce competitiveness,
Indian companies were forced
to adopt and implement innovative changes in their HR practices. Increasing
demand for skilled performers
forced the companies to shift focus on attracting and retaining high-
performing employees in a competitive
marketplace.
Emphasis on Employees: Human Resource policies, forming the
framework for the culture in the business
management, create awareness towards the need to achieve the business
goals in the best possible and
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ethical manner. Indian companies have realized that in today’s competitive
business milieu, the quality of
people you employ can make all the difference. In the last few years, the
Human Resource has become a
key player in strategic planning – it has come a long way from traditional HR
operations like managing the
recruitment process, handling staff appraisals.
HRM Challenges: One of the challenges HR managers face is issues of up
gradation of the skill set
through training and development in the face of high attrition. Indian
companies are recognizing their
responsibilities to enhance the employee’s opportunity to develop skills and
abilities for full performance
within the position and for career advancement.
Progressive HR Policies: Today, most Indian companies are committed to
providing equal employment
opportunities for both men and women. The employers are increasingly
realizing the value of trained
human resource, especially women in India. Some organizations are
changing their HR policies to stick
with their valuable employees. MNCs like Pepsico are providing flexibility so
that female employees at
various life stages could benefit from these policies like working from a
different city, sabbatical from
corporate life, and extended maternity leave.
Entrepreneurship by Employees: India Inc. is encouraging ‘intrapreneurs’
or employees who have
ideas that could potentially become a venture. Companies like Pepsico, NIIT,
and Adobe are actively
promoting practice of entrepreneurship by employees within the
organization. Human Resource Management
has taken a leading role in encouraging corporate social responsibility
activities at all levels. Companies
like Wipro inculcate corporate social responsibility values amongst its
workforce right at the beginning
during the induction process. Corporate presentations and keeping
employees updated through regular
newsletters are the instruments used by HR to keep employees energized
about the organization’s socially
responsible initiatives.
Over the last decade, India’s vast manpower has played an instrumental role
in its economic success
story. Indeed, the success of Indian companies is not based on superior
access to raw materials or
technology or patents, but fundamentally upon human skills. The synergy
between the strategic planning
and innovative HRM practices will be important as Indian Industries embarks
itself on the global journey.
17.12 Self Assessment Questions
1. What do you understand by human resource management? Why is it
needed?
2. Explain the role of HR manager in present times?
3. Discuss the recent trends or emerging issues in HRM?
4. Discuss the changing role of HRM. In which particular business areas HR
can play its role?
5. What are the challenges faced by HR managers in present time?
17.13Reference Books
- Aswathapa.K, Human Resource Management, TMH, 2007, p.695
- Rao,T.V.2004, Performance Management and Appraisal Systems—HR Tools
for Global
Competitiveness, Sage Publications, London, UK, pp.173-99.
- Marchand,D.A., Kiettinger,W.J. and Rollis, J.D., Information Orientation-The
link to Business
Performance, OUP, Oxford, UK, pp.173-90