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 ALAGAPPA UNIVERSITY
[Accredited with ‘A+’ Grade by NAAC (CGPA:3.64) in the Third Cycle
and Graded as Category–I University by MHRD-UGC]
(A State University Established by the Government of Tamil Nadu)

KARAIKUDI – 630 003

Directorate of Distance Education

[Link].
II - Semester
102 22

HUMAN RESOURCE
MANAGEMENT
PG Aquinas, Chairman, Post Graduate Department of Studies and Research in Social Work, Mangalore University
Units (1.0-1.2, 2.0-2.4, 2.6, 3, 4, 5, 6.0-6.2, 7.0-7.2, 9, 10, 11, 12.3.3)
Prof S. C. Srivastava, Secretary General of the National Labour Law Association
Units (8.0-8.2, 12.0-12.2, 12.3.4, 12.5, 13.0-13.3)
Dr. Richard Regis, Adjunct Professor, VIT University, Vellore
Unit 14
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 SYLLABI-BOOK MAPPING TABLE
Human Resource Management
Syllabi Mapping in Book

BLOCK I: BASICS OF HUMAN RESOURCE MANAGEMENT

UNIT – I: Human Resource Management - Definition and Concept – Features Unit 1: Introduction to Human
– Objectives – Functions - Scope and Development of Human Resource Resource Management
Management - Importance of Human Resource Management - Human Resource (Pages 1-14);
Practices. Unit 2: HRM and Personnel
UNIT – II: HRM and Personnel Management – Concept of Personnel Management
Management - Personnel Management in India - Functions of the Labour Welfare (Pages 15-35);
Officer - Difference Between Personnel Management and HRM. Unit 3: Human Resource Planning
UNIT – III: Human Resource Planning - Concept of Human Resource Planning (Pages 36-54);
(HRP) - Factors in HRP - Process of HRP. Unit 4: Job Analysis and Design
UNIT – IV: Job Analysis and Design - Job Analysis - Job Description - Writing (Pages 55-67)
a Job Description - Job Specification - Job Design.

BLOCK II: EMPLOYEE SELECTION AND TRAINING

UNIT – V: Recruitment – Concept of Recruitment - Factors Affecting Unit 5: Recruitment
Recruitment - Types of Recruitment. (Pages 68-82);
UNIT – VI: Selection: Concept of Selection - Process of Selection - Selection Unit 6: Selection
Tests - Barriers in Selection. (Pages 83-104);
UNIT – VII: Induction - Meaning and Definition of Induction - Need for Unit 7: Induction
Induction - Problems Faced during Induction - Induction Programme Planning (Pages 105-113);
UNIT – VIII: Training - Concept and Significance of Training - Training Needs Unit 8: Training
- Training Methods - Types of Training. (Pages 114-134)

BLOCK III: PERFORMANCE AND BENEFITS OF EMPLOYEES

UNIT – IX: Performance Appraisal - Concept of Performance Appraisal - Unit 9: Performance Appraisal
Purpose of performance appraisal – Process - Methods of Performance Appraisal (Pages 135-161);
- Major Issues in Performance Appraisal. Unit 10: Wages and Salary
UNIT – X: Wages and Salary – Nature and Significance of Wage and Salary (Pages 162-179);
Administration - Theories of Wages - Methods of Wage Fixation. Unit 11: Incentives
UNIT – XI: Incentives: Concept of Incentives - Effective Incentive System - (Pages 180-201)
Types of Incentive Scheme.

BLOCK IV: DEVELOPMENT & GROWTH

UNIT – XII: Employee Relations - Concept of Employee Relations - Managing Unit 12: Employee Relations
Discipline - Managing Grievance - Employee Counseling. (Pages 202-223);
UNIT – XIII: Employee Empowerment – Concept of Employee Empowerment Unit 13: Employee Empowerment
- Process of Empowerment - Empowerment in Indian Scenario - Empowerment (Pages 224-246);
in Global Scenario. Unit 14: International HRM
UNIT – XIV: International HRM – Comparison of Domestic and International (Pages 247-264)
HRM - Challenges in International HRM.
 CONTENTS
INTRODUCTION
BLOCK I: BASICS OF HUMAN RESOURCE MANAGEMENT
UNIT 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 1-14
1.0 Introduction
1.1 Objectives
1.2 Human Resource Management: Features, Scope and Development
1.2.1 Definition, Importance and Objectives of HRM
1.2.2 HRM Functions
1.2.3 HRM Challenges
1.3 Human Resource Practices
1.4 Answers to Check Your Progress Questions
1.5 Summary
1.6 Key Words
1.7 Self Assessment Questions and Exercises
1.8 Further Readings
UNIT 2 HRM AND PERSONNEL MANAGEMENT 15-35
2.0 Introduction
2.1 Objectives
2.2 Concept of Personnel Management
2.3 Personnel Management in India
2.4 Functions of the Labour Welfare Officer
2.5 Difference Between Personnel Management and HRM
2.6 Answers to Check Your Progress Questions
2.7 Summary
2.8 Key Words
2.9 Self Assessment Questions and Exercises
2.10 Further Readings
UNIT 3 HUMAN RESOURCE PLANNING 36-54
3.0 Introduction
3.1 Objectives
3.2 Concept and Process of Human Resource Planning (HRP)
3.3 Factors in Human Resource Planning
3.4 Answers to Check Your Progress Questions
3.5 Summary
3.6 Key Words
3.7 Self Assessment Questions and Exercises
3.8 Further Readings
UNIT 4 JOB ANALYSIS AND DESIGN 55-67
4.0 Introduction
4.1 Objectives
4.2 Job Analysis and Job Design
4.3 Job Description
4.4 Job Specification
 4.5 Answers to Check Your Progress Questions
4.6 Summary
4.7 Key Words
4.8 Self Assessment Questions and Exercises
4.9 Further Readings
BLOCK II: EMPLOYEE SELECTION AND TRAINING
UNIT 5 RECRUITMENT 68-82
5.0 Introduction
5.1 Objectives
5.2 Recruitment: Concept, Factors and Types
5.3 Answers to Check Your Progress Questions
5.4 Summary
5.5 Key Words
5.6 Self Assessment Questions and Exercises
5.7 Further Readings
UNIT 6 SELECTION 83-104
6.0 Introduction
6.1 Objectives
6.2 Concept of Selection: Process and Selection Tests
6.2.1 Objectives of Selection
6.2.2 Methods of Selection
6.3 Barriers in Selection
6.4 Answers to Check Your Progress Questions
6.5 Summary
6.6 Key Words
6.7 Self Assessment Questions and Exercises
6.8 Further Readings
UNIT 7 INDUCTION 105-113
7.0 Introduction
7.1 Objectives
7.2 Meaning, Definition and Need for Induction
7.3 Problems Faced during Induction
7.4 Induction Programme Planning
7.5 Answers to Check Your Progress Questions
7.6 Summary
7.7 Key Words
7.8 Self Assessment Questions and Exercises
7.9 Further Readings
UNIT 8 TRAINING 114-134
8.0 Introduction
8.1 Objectives
8.2 Training: Concept, Significance and Needs
8.3 Types of Training
8.4 Answers to Check Your Progress Questions
8.5 Summary
8.6 Key Words
 8.7 Self Assessment Questions and Exercises
8.8 Further Readings
BLOCK III: PERFORMANCE AND BENEFITS OF EMPLOYEES
UNIT 9 PERFORMANCE APPRAISAL 135-161
9.0 Introduction
9.1 Objectives
9.2 Performance Appraisal: Process and Techniques
9.2.1 Purpose of Performance Appraisal
9.2.2 Need of Performance Appraisal
9.2.3 Process of Performance Appraisal
9.2.4 Methods or Techniques of Performance Appraisal
9.3 Answers to Check Your Progress Questions
9.4 Summary
9.5 Key Words
9.6 Self Assessment Questions and Exercises
9.7 Further Readings
UNIT 10 WAGES AND SALARY 162-179
10.0 Introduction
10.1 Objectives
10.2 Wage and Salary Administration
10.2.1 Nature and Significance of Wage and Salary Administration
10.2.2 Theories of Wages
10.2.3 Methods of Wage Fixation
10.3 Answers to Check Your Progress Questions
10.4 Summary
10.5 Key Words
10.6 Self Assessment Questions and Exercises
10.7 Further Readings
UNIT 11 INCENTIVES 180-201
11.0 Introduction
11.1 Objectives
11.2 Concept of Incentives
11.2.1 Effective Incentive System
11.2.2 Types of Incentive Schemes
11.3 Answers to Check Your Progress Questions
11.4 Summary
11.5 Key Words
11.6 Self Assessment Questions and Exercises
11.7 Further Readings
BLOCK IV: DEVELOPMENT & GROWTH
UNIT 12 EMPLOYEE RELATIONS 202-223
12.0 Introduction
12.1 Objectives
12.2 Concept of Employee Relations
 12.3 Managing Discipline
12.3.1 Aspects and Objectives of Discipline
12.3.2 Causes of Indiscipline
12.3.3 Disciplinary Procedure
12.3.4 Code of Discipline
12.4 Employee Counselling
12.5 Managing Grievance
12.6 Answers to Check Your Progress Questions
12.7 Summary
12.8 Key Words
12.9 Self Assessment Questions and Exercises
12.10 Further Readings
UNIT 13 EMPLOYEE EMPOWERMENT 224-246
13.0 Introduction
13.1 Objectives
13.2 Concept and Process of Employee Empowerment
13.3 Empowerment in Indian Scenario
13.4 Empowerment in Global Scenario
13.5 Answers to Check Your Progress Questions
13.6 Summary
13.7 Key Words
13.8 Self Assessment Questions and Exercises
13.9 Further Readings
UNIT 14 INTERNATIONAL HRM 247-264
14.0 Introduction
14.1 Objectives
14.2 International HRM: An Introduction
14.3 Comparison of Domestic and International HRM
14.4 Challenges in International HRM
14.5 Answers to Check Your Progress Questions
14.6 Summary
14.7 Key Words
14.8 Self Assessment Questions and Exercises
14.9 Further Readings
Introduction
INTRODUCTION

In all organizations today, there is a separate department that takes care of

NOTES the welfare and performance of all those who are part of the organizations’
operations. Depending on the size of the organization, there is usually an
individual or a team of people involved in organizing programmes, putting
processes in place and setting policies that directly affect all those working
with or associated with the organization. Such a team is said to be in charge
of Human Resource Management. The Human Resource Management team
is involved in a lot of activities including setting rules, establishing operation
policies and processes, outlining disciplinary procedures, recruiting new
employees, organizing training and educational programmes for the existing
employees and deciding on the compensation.
With increasing globalization of economy, the marketplace has become
increasingly complex, highly uncertain, competitive and transformational.
What makes the ultimate difference is whether an organization is able to
develop and establish competitive differentiation or not. It is here that people
provide organizations with a sustained competitive advantage. Organizations
are required to adopt proactive development programmes towards the
attainment of corporate objectives by nurturing a development oriented
culture. Human Resource Management deals with creating conditions that
enable people to get the best out of themselves and their lives.
This book, Human Resource Management, is divided into fourteen
units that follow the self-instruction mode with each unit beginning with an
Introduction to the unit, followed by an outline of the Objectives. The detailed
content is then presented in a simple but structured manner interspersed
with Check Your Progress Questions to test the student’s understanding
of the topic. A Summary along with a list of Key Words and a set of Self-
Assessment Questions and Exercises is also provided at the end of each unit
for recapitulation.

Self-Instructional
Material
 Introduction to Human
BLOCK - I Resource Management

BASICS OF HUMAN RESOURCE MANAGEMENT

NOTES
UNIT 1 INTRODUCTION TO
HUMAN RESOURCE
MANAGEMENT
Structure
1.0 Introduction
1.1 Objectives
1.2 Human Resource Management: Features, Scope and Development
1.2.1 Definition, Importance and Objectives of HRM
1.2.2 HRM Functions
1.2.3 HRM Challenges
1.3 Human Resource Practices
1.4 Answers to Check Your Progress Questions
1.5 Summary
1.6 Key Words
1.7 Self Assessment Questions and Exercises
1.8 Further Readings

1.0 INTRODUCTION

Human resource management (HRM) is the management of an organization’s

workforce or human resources. It is responsible for the selection, training,
assessment, rewarding and retaining of employees. It is also responsible for
overseeing organizational leadership and culture, and ensuring compliance
with employment and labour laws.
In this unit, you will study the objectives and functions of HRM
in organizations. Organizational objectives, individuals and social goals
influence the objectives of HRM. Integration of the interests of both the
employer and the employees is important in order to attain these objectives.
Furthermore, you will learn that the basic functions of HRM involve operative
and managerial functions, each of which cannot function without the other.
The unit will also discuss the role and structure of HRM in organizations.
The role of personnel managers is influenced by factors such as size, nature
and location of the business or industry. In terms of the changing environment,
some of the important roles of HR managers are:
· Reactive/proactive roles
· Business partner role
Self-Instructional
Material 1
Introduction to Human · Strategist’s role
Resource Management
· Interventionist’s role
· Innovation role
NOTES · Internal consultancy role
· Monitoring role
You will also learn that the organizational structure of the Human
Resources Department (HRD) has a pyramid-like shape with the HRD
Manager or HRD Director at the head. Right below the HRD Manager, there is
another level with personnel officers who report directly to the HRD Manager.
The unit will also explain the challenges in HRM, some of which
are managing globalization, developing leadership skills, developing work
ethics, retaining talent, managing workforce stress and employment relations,
managing workforce diversity, etc.
The unit will conclude by discussing the approaches to HRM, with a
focus on the significance of HRM.

1.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the definition and concept of human resource management
(HRM)
· Explain the features, objectives and functions of HRM
· Discuss the scope and development of HRM
· Analyse the importance of HRM and human resource practices

1.2 HUMAN RESOURCE MANAGEMENT:

FEATURES, SCOPE AND DEVELOPMENT

Different experts in the field have defined it differently. It is a task that

facilitates the most effective use of people to achieve organizational and
individual goals. Human Resource Management (HRM) seeks to bring
together and develop an effective organization enabling the employees to
do their best both as an individual and as a member of a working group.
The scope of HRM, on the other hand, is vast. It embraces a wide range of
activities. The importance of HRM lies in the fact that along with financial
and material resources, it contributes to the production of goods and services
in an organization. The functions of human resource management include
operative and managerial functions, personnel management policies and
strategic challenges for HR.
Self-Instructional
2 Material
1.2.1 Definition, Importance and Objectives of HRM Introduction to Human
Resource Management
Definitions of HRM: According to Ivancevich and Gluck, ‘Human resource
management is the function performed in organizations that facilitates the
most effective use of people (employees) to achieve organizational and NOTES
individual goals.’
Byars and Rue say: ‘Human resource management encompasses those
activities designed to provide for and coordinate the human resources of an
organization.’
According to Dale Yoder, ‘The management of human resources is
viewed as a system in which participants seeks to attain both individual and
group goals.’
According to Flippo, HRM is ‘the planning, organizing, directing and
controlling of the procurement, development, compensation, integration,
maintenance and reproduction of human resources to the end that individual,
organizational and societal objectives are accomplished.’
In the words of Michael J. Jucious, human resource management
‘may be defined as that field of management which has to do with planning,
organizing and controlling the functions of procuring, developing, maintaining
and utilizing a labour force, such that the (i) objectives for which the company
is established are attained economically and effectively, (ii) objectives of all
levels of personnel are served to the highest possible degree; (iii) objectives
of society are duly considered and served.’
Objectives of HRM: Objectives are preset goals towards which all individuals
or groups direct their activities in an organization. The objectives of HRM are
affected by not only organizational objectives but also individual and social
goals. Every organization has certain objectives and each part of it make
some contribution, whether direct or indirect, to achieve these predetermined
objectives. The character of an organization can be judged by its objectives.
These objectives form the basis for voluntary cooperation and coordination
among all employees. Objectives also form the bases for deciding benchmarks
or standards for performance evaluation. The primary aim of HRM is the
promotion of effectiveness of the employees in performance of the duties
assigned to them. This can be done by substituting cooperation instead
of the hostility characteristic employer-employee relations. According to
Indian Institute of Personnel Management, ‘Personnel management (Human
Resource Management) aims to achieve both efficiency and justice, neither
of which can be pursued successfully without the other. It seeks to bring
together and develop an effective organization, enabling men and women who
make up an enterprise to make their best contribution to its success both as an
individual and as a member of a working group. It seeks to provide fair terms
and conditions of employment and satisfying work for all those employed.’
Self-Instructional
Material 3
Introduction to Human Objectives of human resource management are derived from the basic
Resource Management
objectives of an organization. In order to achieve organizational objectives,
integration of the employer’s and employees’ interests is necessary. The
objectives of human resource management may be summarized as follows:
NOTES
1. To improve the services rendered by the enterprise by building better
employee morale which leads to more efficient individual and group
performance. Thus, HRM seeks to manage change to the mutual
advantage of individuals, groups, organization and society.
2. To establish in the minds of those associated with the enterprise—
employees, shareholders, creditors, customers and the public at large—
the fact that the enterprise is rendering the best service it is capable of
and distributing the benefits derived from the fairly and contributing
success of the enterprise.
3. To create and utilize an able and motivated workforce for accomplishing
the basic organizational goals.
4. To understand and satisfy individual and group needs by providing
adequate and equitable wages, employee benefits, status, social security,
incentives, prestige, recognition, challenging work and security. Thus,
an organization can look into and realize the individual and group goals
by offering appropriate monetary and non-monetary incentives.
5. To employ the skills and knowledge of employees efficiently and
effectively, i.e., to utilize human resources effectively in achieving the
organizational goals.
6. To fortify and acknowledge the human assets continuously by providing
training and developmental programmes. These programmes help the
organization in attaining its goals by providing well-trained and well-
motivated employees.
7. To keep the moral of the employees high and maintain sound human
relations by sustaining and improving the various conditions and
facilities.
8. To increase job satisfaction and self-actualization of employees by
encouraging and assisting every employee to realize his full potential.
9. To make available good facilities and working environment and
generate a favourable atmosphere for maintaining the stability of
employment.
10. To identify and satisfy individual needs and group goals by offering
appropriate monetary and non-monetary incentives.
11. To create and enforce a quality of work life (QWL) that makes
employment in organization comfortable.
Maximum development of individual, good working relationship
Self-Instructional and optimum utilization of human resources are the primary aims of HRM.
4 Material
Management has to create a comfortable and suitable environment and Introduction to Human
Resource Management
provide necessary preconditions for the attainment of the objectives
Scope of HRM: The scope of personnel management is indeed vast. All
the major activities in the working life of an employee from the time of his
NOTES
joining an organization till he leaves come under the scope of personnel
management (Figure 1.1).

Nature of
human resource
management

Employee
education Employee
selection

PERSONNEL
MANAGEMENT
Industrial
relations Employee
remuneration

Employee
health and Employee
safety motivation

Fig. 1.1  Scope of Personnel Management

HRM embraces a very wide field of activities. Its scope is so wide

and varied that the HR department and the personnel execu­tives perform a
variety of roles in accordance with the needs of a situation. The HR manager
plays multiple roles like that of a researcher, counsellor, bargainer, mediator,
peacemaker, problem solver, and so on. The functional areas of HRM as
outlined by Northcott are:
(i) employment
(ii) selection and training
(iii) employee services
(iv) wages
(v) industrial relations
(vi) health and safety
(vii) education
It has, therefore, been rightly observed by Peter Drucker that ‘man­
agement is a multipurpose organ, which has three jobs, two of which are
directly related to personnel: managing a business; managing manag­ers; and
managing workers and the work.’ The personnel executives play an important
role in a business organization. They not only help in determining the rules
of the organization, but also play a significant role in interpreting and apply­
Self-Instructional
Material 5
Introduction to Human ing the rules of the system itself. They are expected to enjoy the confidence
Resource Management
of the management which is crucial to the efficient and effec­tive operation
of the business organization. The focus of human resource management is
on people at work. It is indeed a wide area and covers a broad spectrum of
NOTES activities. A manager, whether he is in charge of production or marketing
func­tion, deals with human beings and gets his job done through people.
In the past, a lot of attention has been paid to the significance of HRM
in establishing a firm’s competitive advantage. Randall Schuler have identified
the factors that have caused businesses to focus increased attendance on
HRM. These factors were as follows:
· Rapid change
· High levels of uncertainty about basic business conditions
· Rising costs
· Rapid technological changes
· Changing demographics
· More limited supplies of highly trained labour
· Rapidly changing government legislation and regulations
· Increased globalization of industries
These transformations in the business environment present a number of
competitive trials that differ from those confronted by firms in earlier times.
Several researches have shown that there is a strong connection between the
manner in which firms manage their people and the economic results achieved
by them. Following high-performance work practices can significantly affect
a firm’s economics. High-performance work practices provide important
basis for increased organizational performance. People work more because
they are increasingly involved and committed. This commitment comes from
having more control on their work. They are smarter at work because of the
encouragement they receive to build skills and competence. HR systems have
an important practical effect on the existence and economic performance of
the firms and on the productivity and quality of work of its employees.
Importance of HRM: Human resources, along with financial and
material resources, contribute to the production of goods and services in
an organization. Physical and monetary resources, by themselves, cannot
improve efficiency or contribute to an increased rate of return on investment.
It is through the combined and concerted efforts of people that monetary and
material resources are harnessed to achieve organizational goals. However,
these efforts, attitudes and skills have to be sharpened from time to time to
optimize the effectiveness of human resources and to enable them to meet
greater challenges. This is where HRM plays a crucial role. The significance
of HRM can be discussed at four levels:
Self-Instructional
6 Material
 1. Corporate: Good human resource practices help to attract and retain Introduction to Human
Resource Management
the best people in the organization. Planning alerts the company to
the types of people it will need in short, medium and long run. HRM
can aid an enterprise to attain its goals in a more well-organized and
effective way by: NOTES
· Inviting and keeping talent through effective human resource
planning, employment, selection, compensation and promotion
policies:
· Developing the necessary talent and right outlook among the
employees through training
· Securing cooperation of employees through motivation
· Effectively utilizing the available human resources
2.  Professional: Optimum management of human resource helps
to further improve the quality of work life. It plays an important role
in the professional growth in the following ways by:
· Making available adequate opportunities for personal development
of each employee
· Allocating work properly and scientifically
· Maintaining healthy relationships between individuals and groups
in the organization
3.  Social: Sound human resource management has a great
significance for society. Society, as a whole is the major beneficiary
of good human resource practices in the following ways:
· Employment opportunities multiply.
· Scarce talents are put to best use.
· Organizations that pay and treat people well are always ahead of
others and deliver excellent results.
· Maintain an equilibrium between the jobs available and job seekers
in terms of numbers, qualifications, needs and aptitudes.
· Provides appropriate employment that ensures social and
psychological contentment to people.
4. National: Human resources and their organization plays an important
role in the development of a nation. There is a wide disparity in
development among countries with similar resources due to qualitative
differences among their peoples. Development of a country depends
primarily on the talent, mental framework and habits of its human
resources. Efficient management of human resources helps to fasten
the process of economic development, which in turn leads to higher
standards of living and fuller employment.
Self-Instructional
Material 7
Introduction to Human 1.2.2 HRM Functions
Resource Management
The basic functions of HRM or personnel management involve two categories
of functions: operative and managerial.
NOTES
1. Operative functions: The operative functions essentially belong to
activities concerned with procurement, development, compensation,
utilization and maintenance of an efficient workforce.
(i) Procurement: The term ‘procurement’ means recruitment of the
required number of employees possessing the right qualifications
and experience, keeping in mind the importance of achieving
the established objectives of the organization. It is primarily
concerned with recruiting the most suitable people to fill positions,
at the right time. Procurement involves activities such as plan­ning,
selecting and placing manpower.
(ii) Development: This term refers to activities aimed at increasing
the efficiency and skills of the workers by educating and training
the employees. Development-related activities include conducting
workshops, training sessions, seminars, group discussions and
educational programmes.
(iii) Compensation: This includes activities dealing with the technique
and standard of remuneration and terms of employment.
(iv) Utilizing: This term refers to the use of employees’ services to
the maximum and in the best possible manner. This includes not
only incentive schemes but also schemes to share the profits from
higher productivity.
(v) Maintaining: This is all about maintaining good, comfortable and
amicable working conditions for the employees. This means not
just preparing but also implementing health and safety schemes,
etc.

2. Managerial functions: These functions include activities such as
planning, organizing, coordinating, directing and controlling the
employees. These functions are performed by all managers. Therefore,
these common functions are referred to as managerial functions. In
other words, they are performed by all types of managers including
personnel managers.
(i) Planning: When the process of management is reviewed, the very
first function that a manager performs is planning. A personnel
manager is responsible for beginning a programme for developing
personnel. This can only be done through planning.  A plan is a
predetermined course of action for the achievement of established
objectives. Planning leads to specification of the whats and hows
for the performance of the personnel functions.
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 (ii) Organizing: You already know that planning helps the management Introduction to Human
Resource Management
decide what to  do and how. Organizing is an effective tool
to achieve the plans. Organizing requires grouping of personnel
activities and assigning them to different individuals.
NOTES
(iii)
Coordinating: Coordination is concerned with action directed
towards a common goal in a harmonious and unified effort/action.
Coordination makes sure that all groups and persons work in an
efficient, economical and harmonious manner. Inter-personal
communication is very effective in achieving coordination.
(iv) Directing: Directing is a function involving the management of
managers, workers as well as the work by motivating, leading,
communicating effectively and coordinating. A personnel manager
is expected to develop the capability to command as well as direct
others.
(v) Motivating: Motivation is a managerial function to inspire and
encourage people to take required action. Motivation involves
guiding and supervising the personnel. Motivation can help
manage any enterprise successfully and smoothly. A personnel
manager should be able to not only inspire but also persuade
workers to appreciate the policies of the organization and see the
positive side of everything. Motivation can help an individual to
perform certain tasks properly. A personnel manager should guide
employees towards improving perform­ance and motivating the
team to perform with enthusiasm and confidence.
(vi) Controlling: Control is the process of measurement of actual
results with certain standards of performance. It involves
investigation why there are deviations of actual results from
desired ones and taking corrective action whenever neces­sary.
Therefore, controlling facilitates the realization of plans.
These two functions are significant because one cannot work without
the other. The personnel manager has to mix both to an extent desired.
Personnel management policies
A policy is a statement or a general guideline for employees to make decision
with respect to any course of action. Personnel policies provide guidelines
for a variety of employment relationships and identify the organization’s
intentions in recruitment, selection, development, promotion, compensation,
motivation, and so on. According to Armstrong, ‘personnel policies are
continuing guidelines on the approach the organization intends to adopt
in managing its people. They define the philosophies and values of the
organization on how people should be treated and from these are derived

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Introduction to Human principles upon which managers are expected to act when dealing with
Resource Management
personnel matters.’
The objectives of HR or personnel policies is described by Peter
Drucker in the following words: ‘The management must gear its policies and
NOTES
objectives in such a fashion that the employees perform their work and do their
assigned tasks.… It also means a acknowledgement that human resources,
unlike any other resources, have attributes like personality, citizenship, control
over where they work, how much and how well. … And it is the management
alone, that can satisfy these requirements.’
HR or personnel policies are required in the following areas:
· Acquisition of personnel
· Training and development
· Appraisal and compensation of human resources
· Human resource mobility
· Working conditions and work schedules
· Industrial relations
1.2.3 HRM Challenges
Human resource element works towards the vision, mission and goals of
an organization. The three major roles of HRM in any organization are
transactional, transformational and transitional. The challenges faced by
human resource managers in an organization are naturally evolving with the
ever-transforming scenario in the corporate world.
Organizations face several challenges in human resource management,
some of which are listed as follows:
· Strategic challenges for HR
· Challenges for organizations and HRM professionals
o Changing workforce demographics
o Implications for HRM professionals
o The need for lifelong learning
o Competing in a global economy
o Facilitating organizational learning
o Eliminating the skills gap

1.3 HUMAN RESOURCE PRACTICES

HR practices are significantly different from human resources functions.

Functions are comprised of transactional activities that can be handled
within the organization or easily outsourced. Practices are part conceptual,
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part implementation of an HR strategy, comprised of systems that follow the Introduction to Human
Resource Management
normal or customary way of doing business. The term “best practices” refers
to the HR systems that have the highest impact on the employees and the
organization. Generally, HR recruitment and selection practices are based on
the workplace culture and the organization’s mission. For example, employers NOTES
that recognize and acknowledge the value of workplace diversity, embrace
recruitment practices designed to attract diverse applicants. Recruitment
practices underlie recruiting activities and functions such as sponsoring career
fairs at colleges and universities with diverse student populations, advertising
job vacancies across several venues to reach a broad audience.

Check Your Progress

1. Define human resource management.
2. What are objectives?
3. What all come under the scope of personnel management?
4. What do you understand by procurement?

1.4 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Human resource management encompasses those activities designed

to provide for and coordinate the human resources of an organization.
2. Objectives are preset goals towards which all individuals or groups
direct their activities in an organization.
3. All the major activities in the working life of an employee from the
time of his joining an organization till he leaves come under the scope
of personnel management.
4. The term ‘procurement’ means recruitment of the required number of
employees possessing the right qualifications and experience, keeping
in mind the importance of achieving the established objectives of the
organization.

1.5 SUMMARY

· According to Ivancevich and Gluck, ‘Human resource management

is the function performed in organizations that facilitates the most
effective use of people (employees) to achieve organizational and
individual goals.’

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Introduction to Human · According to Dale Yoder, ‘The management of human resources is
Resource Management
viewed as a system in which participants seeks to attain both individual
and group goals.’

NOTES · Objectives are preset goals towards which all individuals or groups
direct their activities in an organization. The objectives of HRM are
affected by not only organizational objectives but also individual and
social goals.
· These objectives form the basis for voluntary cooperation and
coordination among all employees.
· Objectives of human resource management are derived from the basic
objectives of an organization.
· The scope of personnel management is indeed vast. All the major
activities in the working life of an employee from the time of his
joining an organization till he leaves come under the scope of personnel
management.
· The HR manager plays multiple roles like that of a researcher,
counsellor, bargainer, mediator, peacemaker, problem solver, and so
on.
· It has, therefore, been rightly observed by Peter Drucker that ‘man­
agement is a multipurpose organ, which has three jobs, two of which
are directly related to personnel: managing a business; managing
manag­ers; and managing workers and the work.’
· Randall Schuler have identified the factors that have caused businesses
to focus increased attendance on HRM.
· Human resources, along with financial and material resources,
contribute to the production of goods and services in an organization.
· Good human resource practices help to attract and retain the best people
in the organization.
· HRM can aid an enterprise to attain its goals in a more well-organized
and effective way by inviting and keeping talent through effective
human resource planning, employment, selection, compensation and
promotion policies.
· Optimum management of human resource helps to further improve
the quality of work life.
· Human resources and their organization plays an important role in the
development of a nation.
· There is a wide disparity in development among countries with similar
resources due to qualitative differences among their peoples.
· The basic functions of HRM or personnel management involve two
categories of functions: operative and managerial.
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 · The operative functions essentially belong to activities concerned with Introduction to Human
Resource Management
procurement, development, compensation, utilization and maintenance
of an efficient workforce.
· The term ‘procurement’ means recruitment of the required number of NOTES
employees possessing the right qualifications and experience, keeping
in mind the importance of achieving the established objectives of the
organization.
· A policy is a statement or a general guideline for employees to make
decision with respect to any course of action.
· Personnel policies provide guidelines for a variety of employment
relationships and identify the organization’s intentions in recruitment,
selection, development, promotion, compensation, motivation, and so
on.
· According to Armstrong, ‘personnel policies are continuing guidelines
on the approach the organization intends to adopt in managing its
people.
· HR practices are significantly different from human resources functions.
Functions are comprised of transactional activities that can be handled
within the organization or easily outsourced.

1.6 KEY WORDS

· Management: It refers to the process of dealing with or controlling

things or people.
· Corporate: It means relating to a large company or group.
· Organization: An organization or organization is an entity comprising
multiple people, such as an institution or an association, that has a
collective goal and is linked to an external environment.

1.7 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Briefly explain the scope of HRM.
2. Why is HRM important? Discuss its significance at various levels.
3. Write a short note on personnel management policies.
4. Briefly describe human resource practices.

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Introduction to Human Long Answer Questions
Resource Management
1. Discuss the meaning, purpose and objectives of human resource
management.
NOTES 2. Explain the operative and managerial functions of HRM in detail.
3. Organizations face several challenges in human resource management.
Critically comment.

1.8 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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 HRM and Personnel

UNIT 2 HRM AND PERSONNEL Management

MANAGEMENT
NOTES
Structure
2.0 Introduction
2.1 Objectives
2.2 Concept of Personnel Management
2.3 Personnel Management in India
2.4 Functions of the Labour Welfare Officer
2.5 Difference Between Personnel Management and HRM
2.6 Answers to Check Your Progress Questions
2.7 Summary
2.8 Key Words
2.9 Self Assessment Questions and Exercises
2.10 Further Readings

2.0 INTRODUCTION

In this unit, you will get an overview of personnel management. As its name
suggests, the concern of personnel management is the ‘people’ dimension.
It refers to the philosophy, policies and programmes with regard to the
management of people in an enterprise. Since all organizations comprise
people, acquisition of their services and development of their skills are
important. They should be motivated to achieve higher performance levels.
Besides, how committed people are to their organization is equally important
for achieving organizational objectives. It is a well-established fact that the
organizations are more effective and efficient if they succeed in acquiring,
developing, stimulating and keeping motivated workers. Organizations that
fail to achieve this, lag behind. Hence, it is the management of human assets
that makes or breaks an organization. If human resources are neglected or
mismanaged, the organization is unlikely to do well.

2.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of personnel management
· Analyse personnel management in India
· Describe the functions of the Labour Welfare Officer
· Explain the difference between personnel management and HRM.

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HRM and Personnel
Management 2.2 CONCEPT OF PERSONNEL MANAGEMENT

Personnel management has evolved due to enlightened employers trying hard,

NOTES over the years, to improve the lot of their workers. According to Kautilya,
a systematic management of human assets was very much in existence in
the fourth century bc. Moses originated the principle of division of labour
in 400 bc. The Babylonians had a code for incentive wage plans in 1800 bc.
Thus, personnel management in some form or the other has been practised
in various parts of the world since the dawn of civilization. With the onset
of the Industrial Revolution, the position underwent a radical change.
Industrial Revolution refers to changes that occurred in England during
1760–1850. It brought about far reaching changes in the economic life of
people. Numerous inventions took place during that period which changed the
entire system of production and distribution. The use of machines involved a
change in the methods of industrial organization and brought about a change
from the domestic system to the factory system of production involving a
large scale and complex division of labour. The discovery of steam as an
important source of power helped to increase the production many times
over. The use of machines necessitated large amount of capital, which led to
concentration of economic power and growth of large enterprises.
It is against this background that we trace the origin of modern
personnel management. Figure 2.1 mentions the various stages in the
evolution of personnel management.

Industrial Scientific Industrial

Paternalistic
Revolution Management Psychology
Era
Era Era Era

Personnel Human
Behavioural
Welfare Era Specialists Relations
Science Era
Era Era

Fig. 2.1  Stages in the Evolution of Personnel Management

1. Industrial revolution era

The industrial revolution consisted essentially of the development of
machinery. This brought about mass production of goods. Large-scale
production brought about increased output and the accumulation of capital.
Business and commerce were greatly accelerated, and the owners of
businesses and entrepreneurs did well. But labour fared poorly and was
considered a commodity to be bought and sold.

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 But the consequence of grouping workers into shops and factories, and HRM and Personnel
Management
of the specialization of labour, was a gradual emergence of more systematic
attention to the design of jobs, to the choice of workers for those jobs
(selection), to the provision of pay and benefits (compensation) and to the
welfare of employees both on and off the job. In the late 1800s when unions NOTES
were battling for recognition and violent strikes become a significant concern,
these developments in management practices accelerated. By the early 1900s,
the foundation of several features of modern personnel management had
been laid.
2. Scientific management era
The scientific management of the late 1800s and early 1900s concentrated
particularly on job design, selection and compensation. The name most
closely associated with this movement is Fredrick W Taylor who worked in
the steel industry in the late 1870s. Taylor believed in the same techniques
used by scientist in the laboratory—experimentation, forming and testing
hypotheses and proposing theories based on research and testing—could be
used by management to increase efficiency in the workplace.
The scientific management movement owes its origin to Frederick W
Taylor, the father of scientific management. He was the first to recognize and
emphasize the need for adopting a scientific approach to the task of managing
an enterprise. He started his experiments in the steel industry in the Midvale
and Bethelem plants.
According to Taylor, ‘Planning should be the result of cooperation
between the management and workers and that a provision should exist for
compensating the personnel with financial incentives’. The ideas of Taylor
led to a separate discipline called ‘Human Engineering’.
Contributions of scientific management
The chief contributions of scientific management are:
· Emphasis on rational thinking on the part of management
· Focus on the need for better methods of industrial work through
systematic study and research
· Emphasis on planning and control of production
· Development of cost accounting
· Development of incentive plans of wage payment based on systematic
study of work
· Focus on the problem of fatigue and rest in industrial work
· Focus on the need for a separate personnel department

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HRM and Personnel But after thirty years, this approach began to lose its popularity. Many
Management
management thinkers were tempted to modify the views of Taylor. The most
important among them are Henry Gantt, Frank and Lilian Gilbreth. They
made scientific management more humanized and meaningful to followers
NOTES of Taylor. Henry Gantt propounded the ‘Gantt Chart and the Task and Bonus
Wage System’. Frank Gilbreth formulated the ‘Laws of Efficient Motion’. His
wife, Lilian Gilbreth, is credited with applying the principles of psychology
in the scientific management of human assets.
3. Paternalistic era
Robert Owen, a British industrialist, is considered to be a great scholar of
management thought. He was the manager of different cotton textile mills
between 1800 and 1828. He brought many social changes and was the first
person who gave due emphasis to labour welfare. Robert Owen, the father of
personnel management, emphasized and developed the spirit of cooperation
between employees and employers. He advocated that the investment in
developing human resources was much more profitable than in machinery
and equipment. He worked for the betterment of workers and tried to improve
their working conditions.
4. Industrial psychology era
Applications of psychology to business and industry (industrial psychology)
began to emerge in the 1890s and 1900s as psychologists studied selling
techniques and ways of testing job candidates. The most notable industrial
psychologist was Hugo Munsterberg, whose major contributions were:
· The analysis of jobs in terms of their physical, mental and emotional
requirements
· The development of testing devices for selecting workers.
In the industrial psychology era, greater emphasis was given to
individual and group relationships in the work place. The role of psychology
and sociology in the understanding of individual and group behaviour
in an organization was emphasized. German-American psychologist,
Hugo Munsterberg, is regarded as the father of industrial psychology. His
contributions to industrial management were particularly notable in the
field of emotional requirements of workers. Top management personnel
began to realize that ‘human resources are the most valuable assets that any
organization possesses and that without these, other resources are useless’.
5. Human relations era
What came to be called the human relations’ movement has been a major
influence on modern personnel management. This movement is characterized
by its focus on group behaviour and workers’ feelings as they relate to
productivity and morale. Experiments were conducted by Elton Mayo
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and Co. of the Harvard Graduate School of Business Administration at the HRM and Personnel
Management
Hawthorne plant of the Western Electric Company. The important features
of the Hawthorne experiment are:
· A business organization is primarily a social system. It is not just a
NOTES
techno-economic system.
· An employee can be motivated by psychological and social wants
because his behaviour is also influenced by feelings, emotions and
attitudes. Thus, economic incentives are not the only method to
motivate people.
· Management should not just depend on command; it should develop
cooperative attitudes.
· Participation becomes an important instrument in human relations’
movement. In order to achieve participation, an effective two-way
communication network is essential.
· Productivity is linked with employee satisfaction in business
organizations. Therefore, management must take greater interest in
employee satisfaction.
· Group psychology plays an important role in any business organization.
We must therefore rely more on informal group effort.
· The industrial psychological era emphasises that man is a living
machine and he is far more important than the inanimate machine.
Hence, the key to higher productivity lies in employee morale. High
morale results in higher output.
The findings of the Hawthorne Experiment put emphasis on the
importance of understanding the needs of both the management and the
workers. The basic conclusion was that sociological and psychological
phenomena often exerted even greater influences on output than the physical
conditions of work. Therefore, management must be mainly concerned with
the informal and spontaneous behaviour of work groups and the sentiments
and attitudes of employees.
6. The behavioural science era
Further on the basis of further enquiries and experiments, It was concluded
that Employees’ team spirit and cooperative attitude had a great bearing on
the productivity. There were several factors which determined the cooperation
and enthusiasm of workers, such as supervisors’ and experimenters’ positive
attitude towards workers, the avoidance of force and coercion against workers
and the workers’ participation in decision-making in areas affecting them.
Human relationists made very significant contribution to management
thought by bringing into limelight human and social factors in organization.
The behavioural science movement was a byproduct of the human relations
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HRM and Personnel studies. The behavioural science era extensively used data obtained from
Management
experiments, observations and surveys done in the various fields, such as
sociology, anthropology and psychology. The various theories formulated
in the behavioural science era are:
NOTES
(i) Maslow’s Need Hierarchy Theory or Deficit Theory of Motivation
According to Abraham Maslow, who propounded the need hierarchy theory,
‘There is a series of needs some of which are lower in the scale or system
of values, in individual or social context and some are higher. Higher needs
cannot be satisfied or even felt if the lower needs remain unsatisfied. A
satisfied need is not a motivator’.
The features of his theory are as follows:
· People have a variety of needs, which work as a strong motivation
for them.
· There are five types of human needs: physical needs, safety or
security needs, affiliation or social needs, esteem needs and self-
actualization needs.
· It is not impossible to arrange human requirements into a hierarchy.
In this hierarchy, the needs that are physical in nature occupy the
base. Self-actualization needs, on the other hand, occupy the top.
· It is observed that people first satisfy their physical needs. When
these needs are satisfied, they strive for the next higher level of
needs.
· In order to realize the higher level of needs, it is essential that the
lower level needs are satisfied.
· People are not motivated by the satisfaction of a need; a satisfied
need only generates the desire to fulfil the next higher level of needs.
(ii) Herzberg’s Two Factors Theory of Motivation
Herzberg propounded the two-factor theory of motivation. According to
this theory, motivation and dissatisfaction of workers are the results of two
separate sets of conditions. Satisfiers or motivational factors have a direct
bearing on the job content itself. Motivational factors include achievement,
recognition, the work itself, advancement, etc. The dissatisfiers, maintenance
and hygiene factors do not provide motivation. They avoid unpleasantness and
are necessary to maintain current status of satisfaction. Of all the maintenance
factors identified by Herzberg, significant ones include the interpersonal
relationship among the management, supervisors and subordinates; wage
and security of job; status in the organization and working conditions.

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(iii) McGregor’s Theory X and Theory Y HRM and Personnel
Management
McGregor propounded two management views with regard to the nature of
man. These two views were of contrasting nature and were classified into
hard and soft approaches. The hard approach is called McGregor’s ‘Theory NOTES
X’, while the soft or permissive approach is called McGregor ‘Theory Y’.
Theory X
It is the traditional theory of human behaviour. According to McGregor’s
theory, management is accountable for organizing the elements of productive
enterprises, such as money, material, equipment and people, to meet economic
ends. Theory X makes certain assumptions about human nature, such as:
· With reference to people, management refers to a process of directing
their efforts, motivating them, controlling their actions, modifying
their behaviour in order to be in conformity with the needs of the
organization.
· If there is no intervention by the management, people are bound to
be passive. They can even be resistant or indifferent to organizational
needs. Thus, the management needs to persuade, reward, punish (if
necessary) and direct workers.
· The average human being dislikes work and tends to avoid it if he can.
· The average human being is not ambitious, dislikes responsibility and
opts to be led.
· The average human being is inherently self-centered and is not
interested in organizational needs.
· The average human being is by nature resistant to change.
· The average human being is innocent.
Theory Y
According to McGregor, theory Y makes the following assumptions:
· ‘Work is as natural as play or rest if the conditions are favourable. It
is not true that the average human being inherently dislikes work.
· External control and the threat of punishment are not the only tools
for making people work towards organizational objectives. Man can
exercise self-control and self-direction to meet the objectives he is
committed to.
· The rewards associated with the achievement of objectives bring a
sense of commitment among people. People set goals for themselves
in the hope of some reward, material or even psychological.
· The average human beings, in favourable circumstances, accept
responsibility and even look for it.
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HRM and Personnel · The capacity to exercise a relatively high degree of imagination,
Management
ingenuity and creativity to solve organizational problems is universally
distributed in the population.’
Table 2.1  Comparison between Theory X and Theory Y
NOTES
Theory X Theory Y
1. Theory X assumes human beings to be 1. Theory Y assumes that work is
inherently opposed to work. as natural as play or rest.
2. Theory X emphasizes that people do 2. Theory Y assumes just the
not have ambitions and they shirk reverse.
responsibility.
3. Theory X assumes that people in general 3. According to Theory Y, the
have little capacity for creativity. capacity for creativity is widely
distributed in the population.
4. While in Theory X, people lack self- 4. According to Theory Y, people
motivation and need to be externally are self directed, creative and
controlled and closely supervised in prefer self-control
order to get maximum output.
5. T h e o r y X e m p h a s i s e s u p o n t h e 5. T h e o r y Y e m p h a s i s e s
centralization of authority. decentralization and greater
participation in decision making
process.
McGregor suggested advocating the carrot and stick approach to
motivate people in the workplace.
7. Personnel specialist era and welfare era
With the introduction of the factory system, a large number of persons were
employed by an organization. These employees were to be controlled if
the goals of that organization were to be achieved. With the increase in the
number of employees, a separate personnel specialist had to be appointed.
A personnel specialist has the following three responsibilities:
(i) He should assist the line managers so that the optimum efficiency of
the workforce is maintained.
(ii) He should help management in its efforts to maintain good human
relations and labour–management relations. Developing a sound and
just personnel policies and procedures is also his responsibility.
(iii) He should manage all welfare services meant for employees.

2.3 PERSONNEL MANAGEMENT IN INDIA

The history of the evolution and growth of personnel management in

India is not very old. As compared to the developed nations, the personnel
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management system developed late in India. The growth of personnel HRM and Personnel
Management
management in India may be divided into the following stages:
1.  Report of the Royal Commission on Labour in India
Personnel management in India dates back to the Report of the Royal NOTES
Commission on Labour in India (1929–31). The Commission made several
important recommendations, which included the appointment of labour
officers to keep a check on corrupt practices in recruitment of industrial
workers.
(i) The jobber should be excluded from the engagement and dismissal of
labour and that, instead, a labour officer should be appointed for the
purpose.
(ii) The qualities required of the labour officer should be integrity,
personality, energy and the ability to understand individuals and he
should have a linguistic skill. If he is a right person, the workers will
have confidence in him and regard him as their friend.
(iii) All labourers should be engaged by him, and none should be dismissed
without consulting him.
(iv) The labour officer should fulfil many duties and should particularly
initiate and administer welfare measures.
2. Appointment of Labour Officers
Following the recommendation of the Royal commission of Labour, labour
officers were appointed by many industries. Labour officers were entrusted
with the responsibility of promoting welfare activities. They functioned as
industrial relations officers to handle grievances. The Bombay Mill Owners
Association, for example, appointed labour officers to settle grievances and
disputes.
3.  The Second World War
During the Second World War, the need for enlisting labour support for the
war efforts was considered imperative. This led to the appointment of welfare
officers, who were generally entrusted with the handling of welfare and
labour administration. They were to deal with working conditions, canteens,
ration shops, recreation facilities, medical facilities, housing facilities, etc.
The Second World War resulted in welfare officers being appointed by the
government as well as industries. The function of the welfare officers included
welfare activities, personnel activities and industrial relations.
4. Enactment of the Industrial Disputes Act
The enactment of the Industrial Disputes Act, 1947 made adjudication
compulsory. This made the welfare officers handle disputes and adjudication
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HRM and Personnel relating to conditions of service, wages, benefits, etc. The welfare officers
Management
thus became industrial relations officers. As a result, employers hired welfare
officers with a legal background.

NOTES 5. Enactment of the Factories Act

Section 49 of the Factories Act, 1948 made it obligatory for factories
employing 500 or more workers to appoint welfare officers. A welfare officer
had a list of duties laid down for him. He had to perform activities concerned
with welfare, personnel administration and industrial relations.
6. 1960 and after
Till 1960, recruitment of labour was not governed by any law. However, the
rapid growth of industry and the consequent demand for skilled and semi-
skilled workers led to the enactments of the Employment Exchange Act,
1959 to regulate the recruitment of workers and the Apprentice Act, 1961 to
regulate the training of workers to some extent.
Thus, later, personnel officers were appointed as ‘labour welfare
officers’ to satisfy statutory requirements. Next, the role of a personnel officer
was converted into that of an ‘industrial relations officer’. Today his role is
that of a ‘human resource manager’. He has to works in three areas of labour:
welfare, industrial relations and personnel administration.
Professionalization of Personnel Management
A professional subscribes to certain ethical standards. He is more loyal to
the profession than to the employer. With the emergence of professional
personnel managers, the growth of personnel management has accelerated.
A professional has knowledge and judgement, which he uses to make
his decision. He is not controlled or directed by his employer. Thus,
professionalization makes a business enterprise more efficient, dynamic and
socially responsible. The growth of personnel management education in India
has contributed to professionalization of personnel management.
Social Responsibilities of Business
Employees should be treated as human beings and their cooperation must
be achieved for the realization of organizational goals. The business should
fulfil the following obligations towards their employees:
(i) Fair wages: Business should pay reasonable salaries so that their
employee’s may lead a good life and satisfy their needs.
(ii) Adequate benefits: Employees should be provided benefits like
housing, insurance cover, medical facilities and retirement benefits.
(iii) Good working conditions: Good working conditions are necessary
to maintain the health of the workers.
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 (iv) Opportunity for growth: Business should give the employees HRM and Personnel
Management
opportunity to develop their capabilities through training and education.
(v) Recognition of worker’s rights: The business should recognize
the worker’s right to fair wages, to form trade unions, to collective
NOTES
bargaining, etc.
(vi) Cooperation: The business must win the cooperation of workers by
creating the conditions in which workers are willing to put forward
their best efforts towards the common goals of the business.
Therefore, business organizations have made a conscious attempt by
contributing to the well-being and upliftment of the community in which it
is situated.
Change of Government Attitude
The relationship between the state and the economy has a chequered history
since the days of the planner economist Adam Smith. During the time of
Adam Smith, the doctrine of Laissez Faire was widely accepted as the
guiding principle of economic activity. The State was expected to concern
itself only with problems relating to law and order. It scrupulously avoided
any interference in the working of private business. Laissez faire was the era
of free enterprises. The doctrine of laissez faire was based on the assumption
‘that every individual acting as a rational being tries to get the greatest
satisfaction from life for himself and in the process contributes towards the
greatest possible satisfaction to society’. Thus, the classical economist fondly
believed that the principle of non-interference with the economic and business
matters led to ‘the greatest good of the greatest numbers’.
Prior to Independence, the British Government followed a laissez-
faire attitude to labour–management relations. But after Independence the
National Government took upon itself the pledge to establish a welfare state.
The Government therefore enacted many laws for the benefit of the workers.
Factors Impeding the Growth of HRM in India
The various factors which have impeded the growth and progress of Personnel
Management in India, are:
1.  Late Arrival of the Factory System
Personnel management is conditioned by industrial development. In India,
modern industry started with the development of the railways. Even after
the progress of industry, personnel management was unheard of. It was the
Royal Commission of Labour which recommended in 1931 the appointment
of labour officers to deal with the recruitment of labour and to settle their
grievances. Thus, the slow growth of personnel management in India can be
linked to the late arrival of large-scale industry.
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HRM and Personnel 2.  Abundance of Cheap Labour
Management
In India, the main source of labour supply has been the growth of population.
Modern industrial sector in India attracts labour from the agricultural sector.
NOTES Industrial centres draw on their surrounding rural areas for recruitment of
workers. The rapid increase of population, low degree of industrialization and
widespread unemployment, both in rural and urban areas, have resulted in
an abundant supply of labour to the industries. Since labour is in abundance,
good human relations are not necessary in India and there are arbitrary
dismissals and layoffs.
3.  Weak Labour Movement
The Indian working class is generally passive and depends on outside
politicians for leadership. This outside leadership has failed to understand
the needs of the working class. Instead of awakening social consciousness
among the workers, the politicians in fact use the workers to achieve their
political ends.
The migratory character of Indian labour leads to unhealthy growth
of trade unions. Many workers do not take an active part in the formation of
unions and do not like to pay their subscriptions because they do not come
to the cities to live permanently.
No trade union will be strong unless it gets legal recognition. The
recommendation of the Royal Commission on Labour favoured the
recognition to a trade union even if it represented only a handful of employees.
It said that ‘the fact that unions consist of only a minority of employees is
not adequate reason for withholding recognition’. In view of this, the Trade
Unions ACT, 1926 was amended in [Link] amendment made it obligatory
on the part of the employer to recognize a union under certain conditions.
However, the amendment could not be implemented. Thus, the lack of legal
recognition to small trade unions hampered the growth of labour movement
in India.
4.  Highly Authoritarian Culture
The Indian society has a highly authoritarian culture. This makes the worker
depend on his superiors. Freedom is not a value in India. This culture thus
discourages participative style of management and free communication. These
two conditions are the bases for ideal human relations, which is lacking in
the Indian conditions.
5. Technological Backwardness
Technological environment influences business in terms of investment in
technology, consistent application of technology and the effects of technology
on markets. The immense technological progress in the West has raised the
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26 Material
because of their technological backwardness. Technological progress has an HRM and Personnel
Management
important role to play in the economic development of a country. No backward
country can hope to march ahead on the road of economic development
without adopting newer techniques of production.
NOTES
6. Instability in Employment
The Indian workers are attracted to the cities by the lure of higher wages but
the instability of their employment, chronic housing shortage and high house
rents prevent them from settling down in the cities with their families. Thus,
an industrial worker would not remain in industry if he could secure sufficient
food and clothing in the village. ‘It is truly said that industrial workers are
pushed, not pulled to the city’.
Future of Personnel Management in India
The personnel professional’s role should be to aid and assist the line managers
in such a way that the human resource is put to its optimum use. Areas like
wage negotiations, collective bargaining, recruitment and social welfare need
the professional skill and strategy of a personnel professional. By virtue of
their education and training, personnel professionals are the most suited
persons to handle these delicate matters. According to Prof. Manoria, ‘In
a fast-changing society as our own, self-development in professional field
is a continuing feature which must be kept up at all levels lest obsolescent
would eat our vitalities’.
The function of a personnel manager has undergone many changes.
Following the recommendations of the Royal Commission on Labour, the
job of a welfare officer was ‘dealing with employment matters and labour
grievances’. After the enactment of the Factories Act, 1948 (sec 49), the
personnel manager was identified with the paternalistic labour welfare officer.
However, his role remained very much within the legalistic boundaries, as
he owed his origin to labour legislation. Since good labour welfare is not
a substitute for poor management, organizations were forced to develop an
interest in the social wellbeing of the workers. As a result, the scope of the
personnel functions expanded; new dimensions were added, and the emphasis
was shifted. With these changes, role modification of the personnel manager
also became necessary. Thus, cultural, social and economic changes have
made inroads into the personnel management field. The greater emphasis on
human dignity and a stronger and more enlightened labour movement have
created a favourable climate for the development of personnel management
in India. The consequences of these changes are discussed below:
1. Greater demand for joint decision-making
The paternalistic efforts to help needy employees solve their personal
problems. Industrial organizations in India have moved to a joint consultative
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HRM and Personnel process of decision-making which influences employees. This has been
Management
brought about by voluntary acceptance by the employers, strong trade
unions and governmental legislation. The attitude of employers and the
trade unions towards each other has gradually improved. The profile of the
NOTES Indian workforce is changing with education and an increasing awareness of
its rights. This greater awareness of its rights will result in a greater demand
for joint participation in management.
2. Greater emphasis on human resource development
A personnel manager is likely to be more concerned about the development
of human resources than the administration of personnel service. He will
advice management on the relationship between individual development and
the achievement of organization goals. He will engage himself in planning
meaningful personnel research with a view to assist the line managers
regarding the current management practices.
3. Change in the profile of workers
Educated workforce should demand greater autonomy and discretion in the
workplace. The needs and aspirations of the educated people are different
from those of uneducated people. Therefore, the challenge faced by the
personnel manager is varied. Similarly, the employment of women in large
numbers has changed the sex composition of the workforce. These women
workers have begun to assert themselves and resist ‘discrimination’ against
them. These factors have resulted in changing the existing personnel policies.
4. Change in attitude of top management
The scope of personnel management function depends, to a large extent, on
its importance in the organization and the attitude of the top management.
5. Increasing role of government
Changes in the personnel function depend to a large extent on the needs
dictated by the socio-economic and legal changes in the country. Enactment
of various labour laws has made it necessary to appoint a personnel manager
who is a specialist in law to advice the management on the changing legal
obligations on the part of the organizations.
6. Better method of performance appraisal
Performance appraisal or merit rating is one of the oldest and more universal
practices of management. It refers to all the formal procedures used in working
organizations to evaluate personalities and contributions and potential of
group members. Permanent performance appraisal records of employees
help the management to give up sole reliance upon personal knowledge of

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supervisors. Performance appraisal thus serves as a means for evaluating the HRM and Personnel
Management
effectiveness of workers. Workers would value a closer connection between
pay and performance and would certainly work harder to achieve better
compensation for the work done.
NOTES
7. More importance to motivation
Motivation concern itself with the will to work. It seeks to know the incentives
for work and tries to find out the ways and means whereby their realization
can be helped and encouraged. According to M. J. Jucious, motivation is ‘the
act of stimulating someone or oneself to get a desired course of action’. The
traditional system of motivation, the ‘carrot and stick’ policy, is no longer
effective, as the element of fear is no longer as potent as it was in the past.
Today, many positive and psychological rewards, such as better wages,
interesting and challenging work and participative management, act as better
motivators.
8. Changing work ethics
A personnel manager’s action often represents the position he holds or the
office he occupies rather than his personal beliefs. A personnel manager, being
a professional, should depend on certain rules of conduct and behaviour.
The decisions and actions of a professional are guided by certain ethical
considerations. Therefore, personnel manager would be called upon to set up
and enforce good quality standards. He should be committed to the workers,
changing needs.
We can conclude on the future role of personnel management in India
by using the words of S.N. Pandey who observed that:
Just as the business of finance men is to manage the finances of the organization
to get the optimum return on investment, just as it is the business of production
men to utilize the various resources at their disposal in such manner that optimum
output is obtained, so is the business of personnel men to manage human resource
ensuring harmony, motivation, satisfaction and commitment.

Thus, the future trends of personnel management in Indian industries

will modify the role of the personnel manager. His functions will definitely be
enlarged from traditional areas such as management of manpower planning,
selection, recruitment, training, and welfare. With growing personnel needs,
new dimensions will be added.

Check Your Progress

1. What does industrial revolution refer to?
2. What is human relations’ movement?
3. What is two-factor theory of motivation?

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HRM and Personnel
Management 2.4 FUNCTIONS OF THE LABOUR WELFARE
OFFICER
NOTES This section discusses the functions of the Labour Welfare Officer.
One of the major aspects of national programmes towards betterment
of the majority of labour creating population is labour welfare. The term
‘labour welfare’ is very dynamic, flexible as well as comprehensive. Welfare
work aims at providing the workers with basic facilities and amenities of life
which they themselves cannot provide thus enabling them to enjoy a richer
and fuller life. Labour welfare improves the morality and efficiency of worker
and ultimately the productivity of industrial worker and organization.
The Labour Welfare Officer looks after the implementation of labour
laws and the maintenance of proper working conditions. The officer concerns
himself with matters relating to the workers’ well-being; with industrial peace
and harmonious labour relations.
The main objectives of a Labour Welfare Officer are to eliminate the
evils of the jobber system in the recruitment of labour and to develop and
improve the labour administration in mills and factories. The role of a Labour
Welfare Officer is to serve as a liaison with the State Labour Commissioner.
The Malaviya Committee’s Report on Labour Welfare in 1969, following
the model rules framed under the Factories Act of 1948, has specified the
following duties of welfare officers:
(a) Supervision
(b) Advice
(c) Liaison
(d) Counselling

2.5 DIFFERENCE BETWEEN PERSONNEL

MANAGEMENT AND HRM

Since the 1980s the nature of personnel management is undergoing change

and personnel function is shifting the locus of its focus. Amongst personnel
specialists, the term, ‘Personnel Management’ is being substituted by that
of ‘Human Resources Management’. It is felt that Personnel Management
is being directed mainly at company employees and is not being completely
identified with managerial needs.
Personnel men have all along been mediating in between the
management and the employees communicating the needs of each to the
other. To maintain credibility with employees mediating personnel men have
to look after their welfare. At the same time to justify their existence with
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30 Material
management, they must show to their managers, a concern for the efficiency HRM and Personnel
Management
of labour utilization as well as ensure that staff interests are always subservient
to those of organizational effectiveness.
Human Resources Management, by contrast, is directed mainly
NOTES
towards managerial needs for people resources in organizations, with greater
emphasis being placed on planning, monitoring and control rather than on
problem solving and mediation. Whereas traditional Personnel Management
is committed to the idea that employees’ needs should be looked after, since
employees are effective only when their needs are satisfied, Human Resources
Management reflects a different set of beliefs. These are that deploying of
human resources in correct numbers with the right skills at the right price is
more important than a patronizing involvement with people’s personal affairs.
HRM (Human Resources Management) is significantly different from
Personnel Management. HRM is proactive rather than reactive, is system-
wide rather than piecemeal, treats labour as social capital rather than as
a variable cost, is goal-oriented rather than relationship-oriented and is
ultimately based on commitment rather than compliance.
Torrington has argued that Personnel Management has grown through
assimilating a number of additional emphases to produce an ever-richer
combination of expertise. HRM is no revolution but a further dimension to
a multi-faced role. While Personnel Management is supply-driven, HRM is
demand-driven.
Personnel Management is directed mainly at the employees of the
organization—finding and training them, arranging their pay and contracts
of employment, explaining what is expected of them, justifying what the
management is doing and trying to modify any management action that could
produce an unwelcome response from the employees. In contrast, the human
resource manager starts not from the organization’s employees, but from the
organization’s need for human resources; with demand rather than the supply.
At first sight, a revolution seems to be taking place in Personnel
Management all over the world. Not only are there major changes in practice
which go far beyond the choice of this or that technique, there is also said
to be a paradigm shift occurring in the thinking on Personnel Management
which shows a new theoretical sophistication. The new paradigm seems
capable of both describing and explaining the changes in practice and of
providing the rationale for elevating Personnel Management or to use the more
modern term, HRM to strategic importance in the running of organizations.
Basically, it sees management, faced with ever increasing competition in the
context of the globalization of the economy, forced to rethink the sources of
competitive advantage and to make strategic choices about future directions.
No economy can compete with Japan; they would have to lower wages and
living standards of the workers to socially and politically unacceptable levels
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HRM and Personnel which would not be possible. Instead, they should place emphasis on the
Management
quality of goods and services. Quality goods and services require a quality
workforce. From this it follows that people and the way they are managed,
are the major sources of competitive advantage.
NOTES
The challenge of HR managers today is to recognize talent and nurture
the same carefully and achieve significant productivity gains over a period
of time. The enterprise is nothing but people. Some will be intelligent, others
not so intelligent; some are committed to jobs, others are not; some will
be outgoing, others reserved and so on. ‘The point is that these differences
demand attention so that each person can maximize his effectiveness so that
the society as a whole can make the wisest use of its human resources.’
The role of an HR manager is shifting from one of a protector and
screener to that of a planner and change agent. In the present-day competitive
world, highly trained and committed employees are often a firm’s best bet.
HR professionals can help an organization select and train employees for
emerging roles. Only people who are involved and intelligent can make
a difference. Charles Creer has pointed out that ‘in a growing number of
organizations human resources are now viewed as a source of competitive
advantage … Increasingly it is being recognized that competitive advantage
can be obtained with a high-quality workforce that enables organizations to
compete on the lines of market responsiveness, product and service quality,
differentiated products and technological innovations.’
In the future, the principal issues will be how the HRM function
can transform its outlook from a traditional to a modern one: from being
functionally-oriented internally focused, reactive, activity-driven, centralized
and control-oriented to being business-oriented, customer-focused, proactive,
effectiveness-driven, decentralized and empowerment-oriented.
Moreover, organizations will need to be concerned with extending
their recruiting efforts, developing careful screening procedures, training
employees to adapt to change, providing appropriate and sufficient
educational programmes and accounting for their investment in recruiting,
selecting and training employees. The new generation of employees will
weigh salary and benefits packages against their personal needs and values.
Therefore, compensation and benefits packages will offer greater flexibility
in order to meet individual needs.

Check Your Progress

4. What is the role of a Labour Welfare Officer?
5. State one challenge faced by HR managers today.

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 HRM and Personnel
2.6 ANSWERS TO CHECK YOUR PROGRESS Management

QUESTIONS

1. Industrial Revolution refers to changes that occurred in England during NOTES

1760–1850.
2. Human relations’ movement is characterized by its focus on group
behaviour and workers’ feelings as they relate to productivity and
morale.
3. According to the two-factor theory of motivation, motivation and
dissatisfaction of workers are the results of two separate sets of
conditions.
4. The Labour Welfare Officer looks after the implementation of labour
laws and the maintenance of proper working conditions.
5. The challenge for HR managers today is to recognize talent and nurture
the same carefully and achieve significant productivity gains over a
period of time.

2.7 SUMMARY

· Personnel management has evolved due to enlightened employers

trying hard, over the years, to improve the lot of their workers.
· Industrial Revolution refers to changes that occurred in England during
1760–1850. It brought about far reaching changes in the economic life
of people.
· The use of machines necessitated large amount of capital, which led
to concentration of economic power and growth of large enterprises.
· The scientific management of the late 1800s and early 1900s
concentrated particularly on job design, selection and compensation.
· The scientific management movement owes its origin to Frederick W
Taylor, the father of scientific management.
· According to Taylor, ‘Planning should be the result of cooperation
between the management and workers and that a provision should exist
for compensating the personnel with financial incentives’.
· Robert Owen, a British industrialist, is considered to be a great scholar
of management thought. He was the manager of different cotton textile
mills between 1800 and 1828.
· Human relationists made very significant contribution to management
thought by bringing into limelight human and social factors in
organization.
· Herzberg propounded the two-factor theory of motivation. Self-Instructional
Material 33
HRM and Personnel · According to McGregor’s theory, management is accountable for
Management
organizing the elements of productive enterprises, such as money,
material, equipment and people, to meet economic ends.

NOTES · Personnel management in India dates back to the Report of the Royal
Commission on Labour in India (1929–31).
· The Commission made several important recommendations, which
included the appointment of labour officers to keep a check on corrupt
practices in recruitment of industrial workers.
· Following the recommendation of the Royal commission of Labour,
labour officers were appointed by many industries.
· The enactment of the Industrial Disputes Act, 1947 made adjudication
compulsory.
· HRM (Human Resources Management) is significantly different from
Personnel Management.
· HRM is proactive rather than reactive, is system-wide rather than
piecemeal, treats labour as social capital rather than as a variable cost,
is goal-oriented rather than relationship-oriented and is ultimately based
on commitment rather than compliance.
· The challenge of HR managers today is to recognize talent and nurture
the same carefully and achieve significant productivity gains over a
period of time.

2.8 KEY WORDS

· Personnel: It refers to the people employed in an organization.

· Administration: It is the process or activity of running a business,
organization, etc.
· Compliance: It is the process of defining both individual and group
behaviors to ensure the organization’s applicable laws and policies are
followed.
· Decentralize: It means to move departments (of a large organization)
away from a single administrative centre to other locations.

2.9 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Write a note on the evolution and history of personnel management.
2. Write short notes on:
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34 Material
 (a) Herzberg’s Two Factors Theory of Motivation HRM and Personnel
Management
b) McGregor’s Theory X and Theory Y
3. What do you understand by personnel management?
4. Write a short note on the duties of a Labour Welfare Officer. NOTES
5. Differentiate between personnel management and HRM.
Long Answer Questions
1. Describe growth of personnel management during human relations era
and behavioural science era.
2. Give a detailed description of Maslow’s Need Hierarchy Theory or
Deficit Theory of Motivation.
3. Give a detailed explanation of personnel management in India. Discuss
the factors impeding the growth of HRM in India in detail.
4. What is the future of personnel management in India?

2.10 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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Human Resource Planning

UNIT 3 HUMAN RESOURCE

PLANNING
NOTES
Structure
3.0 Introduction
3.1 Objectives
3.2 Concept and Process of Human Resource Planning (HRP)
3.3 Factors in Human Resource Planning
3.4 Answers to Check Your Progress Questions
3.5 Summary
3.6 Key Words
3.7 Self Assessment Questions and Exercises
3.8 Further Readings

3.0 INTRODUCTION

Since every organization is made up of people, acquiring their services,

developing their skills, motivating them to higher levels of performance and
ensuring that they continue to maintain their commitment to the organization
are essential to achieve organizational objectives. Those organizations that
are able to acquire, develop, stimulate and keep outstanding workers will be
both effective and efficient. On the other hand, those organizations that are
ineffective or inefficient have the risk of stagnating or going out of business.
Human resource thus creates organizations and makes them survive and
prosper. If human resources are neglected or mismanaged, the organization
is unlikely to do well. Human resource planning has thus become a crucial
requirement in every organization. It involves predetermining the future path
of action selected from a number of different courses of action to acquire,
build up, administer and stimulate the human element of enterprise. It
identifies a deliberate choice of patterns of the humanization of work milieu
in an organization.
This unit explains the concept, objectives and importance of HR
planning, including the process, strategies, advantages and limitations of it.

3.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of Human Resource Planning (HRP)
· Explain the factors in HRP
· Describe the process of HRP
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 Human Resource Planning
3.2 CONCEPT AND PROCESS OF HUMAN
RESOURCE PLANNING (HRP)

Human resource planning is the predetermination of the future course of NOTES

action chosen from a number of alternative courses of action for procuring,
developing, managing, motivating, compensating, career planning, succession
planning and separating the human element of enterprise. It determines a
conscious choice of staffing decisions in an organization.
Characteristics of HR Planning
According to Geisler, ‘HR planning is the process (including forecasting,
developing and controlling) by which a firm ensures that it has the right
number of people and the right kind of people at the right places at the right
time doing work for which they are economically most useful.’
According to Wendell French, human resource planning may be defined
as “the process of assessing the organization’s human resources needs in the
light of organizational goals and making plans to ensure that a competent,
stable workforce is employed.”
From the above definitions, we can gather some general characteristics
of human resource planning as follows:
1. Human resource planning must incorporate the human resource
needs in the light of organizational goals.
2. A human resource plan must be directed towards well-defined
objectives.
3. Human resource planning must ensure that it has the right number
of people and the right kind of people at the right time doing work
for which they are economically most useful.
4. Human resource planning should pave the way for an effective
motivational process.
5. A human resource plan should take into account the principle of
periodical reconsideration of new developments and extending
the plan to cover the changes during the given long period.
6. Adequate flexibility must be maintained in human resource
planning to suit the changing needs of the organization.
The HR manager must follow a systematic process for HR planning
as given in Figure 3.1.

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Human Resource Planning
FORECASTING DEMAND

Considerations
· Product/Service demand
Techniques
NOTES · Technology
· Trend analysis
BALANCING SUPPLY
AND DEMAND
· Organizational growth
· Estimation
· Financial resources · Delphi
· Management philosophy technique RECRUIT –
· Absenteeism (For shortages).
· Labour turnover Employees can be
recruited for full time
vacancies, part time
basis or on contract
FORECASTING SUPPLY basis. We may also
recall retrenched
workers
External Considerations
· Demographic changes REDUCTION OF
Techniques
· Marko
· Labour mobility SURPLUS STAFF –
analysis · Policies of government Organizations layoff,
· Replacement · Education level of terminate or give
charts workers golden handshake to
· Succession surplus work force
planning

Fig. 3.1  Flow Chart Depicting ‘Human Resource Planning Model’

Objectives of HR planning
From Figure 3.1, it is clear that the failure in HR planning will be a limiting
factor in achieving the objectives of the organization. If the number of persons
in an organization is less than the number of persons required, then, there
will be disruptions in the work—production will be hampered, the pace of
production will be slow and the employees burdened with more work. If on
the other hand, there is surplus manpower in the organization, there will be
unnecessary financial burden on the organization in the form of a large pay
bill if employees are retained in the organization, or if they are terminated the
compensation will have to be paid to the retrenched employees. Therefore,
it is necessary to have only the adequate number of persons to attain the
objectives of the organization.
In order to achieve the objectives of the organization, the HR planner
should keep in mind the timing and scheduling of HR planning. Furthermore,
the management has to be persuaded to use the results of manpower planning
studies.
Manpower planning can also be used as an important aid in formulating
and designing the training and development programmes for the employees
because it takes into account the anticipated changes in the HR requirements
of the organizations.

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Importance of HR planning Human Resource Planning

HR planning is a highly important and useful activity. Without clear-cut

planning, an estimation of the organization’s human resource needs is reduced
to mere guesswork. If used properly, it offers a number of benefits. These are: NOTES
1. Planning defines future manpower needs and this becomes the basis
of recruiting and developing personnel.
2. Employees can be trained, motivated and developed in advance and
this helps in meeting future needs for high-quality employees.
3. Change in technology has attached more importance to knowledge and
skill resulting in surplus manpower in some areas and shortage in other
areas. HR planning helps in creating a balance in such a situation.
4. Jobs are becoming more and more knowledge-oriented. This has
resulted in a changed profile of HR. Because of increased emphasis on
knowledge, recruitment costs have also increased. To avoid the high
cost of recruitment, proper HR planning is necessary.
5. The organization can have a reservoir of talent at any point. People with
requisite skills are readily available to carry out the assigned tasks.
6. Planning facilitates the preparation of an appropriate manpower budget
for each department. This in turn, helps in controlling manpower costs
by avoiding shortages/excesses in manpower supply.
7. Systematic HR planning forces top management of an organization to
participate actively in total HR management functions. When there is
active involvement of top management, they will appreciate the real
value of human resources in achieving organizational effectiveness.
8. Systematic HRP forces top management of an organization to participate
actively in total HRM functions. When there is active involvement of
top management, they will appreciate the real value of human resources
in achieving organizational effectiveness.
Process of HR Planning
With the expansion of business, adoption of complex technology and
professional management techniques, the process of HR planning has assumed
greater significance. It consists of the following stages.
(i) Analysing organizational plans and deciding on objectives
Before undertaking the HR planning of an organization the short-term and
long-term objectives should be analysed. The process of HR planning should
start with analysing the organizational plans and programmes. They help in
forecasting the demand for human resources as it provides the quantum of
future work activity.
Self-Instructional
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Human Resource Planning (ii) Analysing factors for manpower requirements
The existing job design and analysis may be reviewed thoroughly keeping
in view the future capabilities, knowledge and skills of present employees.
NOTES The job design and analysis should reflect the future human resources and
organizational plans. The factor for manpower requirements can be analysed
in two ways:
(a)
Demand forecasting – Forecasting the overall HR requirements in
accordance with the organizational plans.
(b)
Supply forecasting – Obtaining the data and information about the
present inventory of human resources and forecast the future changes
in present human resource inventory.
Demand and supply forecasting are discussed in detail in section 1.5.
(iii) Developing employment plans
After determining the number of personnel for each job in the organization,
the HR department has to spell out the job description and job specification.
(a) Job description:  A job description generally describes the work to be
performed, the responsibilities involved, the skill or training required,
conditions under which the job is done, relationships with other jobs
and personal requirements on the job.
(b) Job specification:  Job specification is an output of job description and
states the minimum acceptable qualifications that the newcomer must
possess to perform the job satisfactorily and successfully.
(iv) Developing human resource plans
Net HR requirements in terms of number and components are to be determined
in relation to the overall HR requirement. After estimating the supply and
demand of human resources, the management starts the adjustment. When
the internal supply of employees is more than the demand, that is, there is a
human resource surplus; then the external recruitment is stopped. If there is
a human resource deficit, then the planners have to rely on external sources.
Advantages of HR Planning Programmes
As the manpower planning is concerned with optimum use of HR, it can be
of great benefit to the organization in particular and to the nation in general.
At the national level, it would be concerned with factors like population,
economic development, educational facilities and labour mobility. At the
level of the organization it is concerned with personnel requirements, sources
of availability, the welfare of HR, etc. The advantages of HR planning are
discussed below:

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(a)  Improvement of labour productivity Human Resource Planning

Manpower or HR as a factor of production differs from other factors of

production. As it is subject to its free will, the productivity of labour can be
improved if the workers are kept satisfied. In other words, just as the satisfied NOTES
workers can be productive, dissatisfied workers can even be destructive.
Therefore, through proper HR planning we can improve the morale of the
labour and thereby labour productivity.
(b)  Recruitment of qualified HR
Talented and skilled labour has become a scarce resource, especially in
developing countries. Therefore, for the survival of the firm it is essential to
recruit the best labour force through proper manpower planning.
(c)  Adjusting with rapid technological changes
With the advancement in technology, job and job requirements are changing.
Therefore, it is necessary to forecast and meet the changing manpower, which
can withstand the challenges of the technological revolution. This can be
done through effective manpower planning.
(d) Reducing labour turnover
Labour turnover refers to the mobility of labour out of the organization due to
various factors, such as dissatisfaction, retirement, death, etc. Due to labour
turnover a firm loses experienced and skilled labour force. This loss can be
minimized through efficient manpower planning.
(e) Control over recruitment and training costs
Highly skilled personnel are in short supply and it is costly to hire, train, and
maintain them. A company has to incur heavy costs in processing applications,
conducting written tests, interviews, etc., and in the process providing
adequate training facilities. In consideration of these costs it is essential to
plan carefully vis-à-vis manpower so as to minimize costs.
(f)  Mobility of labour
Today, it is difficult to retain qualified personnel in an organization as they
move from one job to another in search of better prospects. In a free society,
people enjoy unrestricted mobility from one part of the country to the other.
Therefore, in order to reduce the loss of experienced and skilled labour, every
organization must have a sound system of manpower planning.
(g)  Facilitating expansion programmes
In these days of rapid industrial development every company goes for
expansion of its activities. With the increase in company size, the demand
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Human Resource Planning for HR also increases. This necessitates proper manpower planning so as to
ensure the continued supply of the required manpower for the firms’ activities.
(h)  To treat manpower like real corporate assets
NOTES Today it is being increasingly felt by the practicing managers and
psychologists that employees in an organization must be treated as the most
significant assets. The productivity of a company can be improved only
through manpower planning, recognizing the significance of the human
factor in business. A proper manpower planning is based on the realization
that satisfied workers can contribute to the overall profitability of the firm
through improved productivity.
Limitations of HR Planning
The main hurdles in the process of HR planning are:
(a Inaccuracy: HR planning involves forecasting the demand for and
supply of HR. Projecting manpower needs over a period of time is a risky
task. It is not possible to track the current and future trends correctly
and convert the same into meaningful action guidelines. Longer the
time taken, greater is the possibility of inaccuracy. Inaccuracy increases
when departmental forecasts are merely aggregated without critical
review. Factors such as absenteeism, labour turnover, seasonal trends
in demand, competitive pressures, technological changes etc., may
reduce the rest of manpower plans as fashionable, decorative pieces.
(b) Uncertainties: Technological changes and market fluctuations are
uncertainties, which serve as constraints to HR planning. It is risky
to depend upon general estimates of manpower in the face of rapid
changes in environment.
(c) Lack of support: Support from management is lacking. The latter is
unwilling to commit funds for building an appropriate HR Information
System. The time and effort involved with no tangible and immediate
gains often force them to look the ‘other way’.
· HR planning grows slowly and gradually. In some cases,
sophisticated technologies are forcefully introduced just because
competitors have adopted them. These may not yield fruit unless
matched with the needs and environment of the particular enterprise.
· Planning is generally undertaken to improve overall efficiency. In the
name of cost cutting it also helps management weed out unwanted
labour at various levels. The few efficient ones that survive such
frequent onslaughts complain about increased workload.
Support from management is lacking. The latter is unwilling to commit
funds for building an appropriate HR information system. The time and
effort involved – with no tangible, immediate gains – often force them to
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 look the ‘other way’. HR planning grows slowly and gradually. In some Human Resource Planning
cases, sophisticated technologies are forcefully introduced just because
competitors have adopted them. These may not yield fruit unless matched
with the needs and environment of the particular enterprise.
NOTES
(d) Numbers’ game: In some companies, HR planning is used as a numbers’
game. The focus is on the quantitative aspect to ensure the flow of people
in and out of the organization. Such an exclusive focus overlooks the more
important dimension, i.e. the quality of human resources. HR planning,
in the long run, may suffer due to an excessive focus on the quantitative
aspects. Aspects such as employee motivation, morale, career prospects,
training avenues, etc may be totally discounted.
(e) Employees resistance: Employees and trade unions feel that due to
widespread unemployment people will be available for jobs as and
when required. Moreover they feel that HR planning increases their
workload and regulates them through productivity bargaining.
(f) Employers resistance: Employers may also resist HR planning on the
ground that it increases the cost of manpower.
(g) Lack of purpose: Managers and HR specialists do not fully understand
the human planning process and lack a strong sense of purpose.
(h) Time and expense: Manpower planning is a time-consuming and
expensive exercise. A good deal of time and costs are involved in data
collection and forecasting.
(i) Inefficient information system: In most of the organizations, human
resource information system has not been fully developed. In the
absence of reliable data, it is not possible to develop effective HR plans.
Responsibility for HR planning
HR planning is the responsibility of the personnel department. The department
has to recommend relevant personnel policies in respect of HR planning,
devise methods and procedures and determine the quantitative aspects of
HR planning. Geisler has enumerated the responsibility of the personnel
department with regard to HR planning in the following words:
1. To assist, counsel and pressurise the operating management to plan
and establish objectives.
2. To collect and summarise data in total organizational terms and to
ensure consistency with long-range objectives and other elements of
the total business plan.
3. To monitor and measure performance against the plan and keep the
top management informed about it.
4. To provide the research necessary for effective manpower and
organizational planning.
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Human Resource Planning Different Approaches to HRP
The starting point of effective human resource planning is the organizations’
overall purpose or mission. Strategic plans are as unique as the organizations
NOTES that develop them, but underlying most organizational strategies is the
determination of some unfulfilled need for products or services that the
organizations can satisfy. Satisfying these products or services then becomes
a part of the organization’s goals. An organizational goal is a long-term
broad purpose or aim. A part of strategic planning is the development of
organizational goals and objectives.
To a great extent, organizational goals influence the nature of all
managerial processes and of human resource management in particular.
This means that the structure of the organization, the specific jobs to be
performed and the financial and technological resources needed, and the
number and qualifications of people employed will consistently reflect the
organizational goals. Thus, human resource planning is the ongoing planning
of the organization’s human resources philosophy, policies and programmes
in the context of the overall strategic plans and the changing conditions within
and outside the organization.
Role of HR strategy in strategic management
One of the major problems with existing HR systems is that they are fragmented,
incomplete and sometimes built on faulty assumptions about human or
organizational growth. Grundy (1997) argues that strategic human resource
development and planning involves linking business strategy of the organization
to the current and emerging pool of management skills, thus identifying the
key shifts and gaps and areas for intervention. Figure 3.2 explains this.

Strategic HR
Planning and
Development

Current Competitive
Organizational Strategy Future
Policies Organizational
Plans

Environment

Fig. 3.2  Strategic Human Resource Planning and Development Organization and Strategy

Source: Grundy, Tony. ‘Human Resource Management: A Strategic Approach’, Long

Range Planning, 30: 507–17.
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 Figure 3.2 shows how competitive strategy influences the current Human Resource Planning
position of the organization. It also shows the linkages between the strategic
human resources planning and development with the competitive strategy.
The absence of a clear HR strategy linked to corporate strategy may adversely
affect organizational effectiveness. NOTES

Strategies for Human Resource Planning

The objective of manpower planning is to help the organization to achieve
its goals. For this purpose, the manpower planners have to develop some
strategies. Stainer has suggested the following nine strategies for the benefit
of manpower planners:
1. They should collect, maintain and interpret relevant information
regarding human resources.
2. They should report periodically the manpower objectives, requirements
and existing employment and allied features of manpower.
3. They should develop procedures and techniques to determine the
requirements of different types of manpower over a period of time,
from the standpoint of organization’s goals.
4. They should develop measures of manpower utilization as component of
forecasts of manpower requirement along with independent validation.
5. They should employ suitable techniques leading to the effective
allocation of work with a view to improving the manpower utilization.
6. They should conduct research to determine the factors hampering the
contribution of individuals and groups to the organization with a view
to modifying or removing these handicaps.
7. They should develop and employ methods of economic assessment of
the human resources, reflecting its features as income-generator and its
expenditure and accordingly improve the quality of decisions affecting
the manpower.
8. They should evaluate the procurement, promotion and retention of the
effective human resources; and
9. They should analyse the dynamic process of recruitment, promotion and
loss to the organization and control these processes so as to maximise
the individual and group performance without involving high cost.
Types of HRM strategies
The success of HRM lies in its flexibility in reorienting itself in tune with the
changing internal and external forces of the organizations. Stace and Dunphy
have proposed four HRM strategies. These strategies are summarized in the
Table 3.1.

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Human Resource Planning Table 3.1 HRM Strategies and their Conditions for Use

HRM Strategy type Conditions for use

Task-Focused HRM Strategy
HRM strategy strongly focused on the business Used when market/products/services are
NOTES unit undergoing major change and niche strategies
· Strong bottom line orientation are prevalent. HRM strategies must deliver the
· Emphasis on workforce planning, job capacity for rapid structural systems, skill and
redesign and work practice reviews cultural changes. Strong emphasis on business
· Focus on tangible reward structures unit autonomy, maximum devolution, right-
· Internal or external recruitment sizing (continuous redeployment) outsourcing
· Functional skills training and formalized of labour
multi-skilling
· Formalized industrial relations procedures
· Strong business unit culture
Development Strategy
HRM strategy is jointly carried out by the Used when markets are growing and
corporate HR unit and the business units product/market innovation is desired. HRM
· Emphasis on developing the individual and strategies must create cross-organizational
the team synergy and a market-leader culture. Strong
· Internal recruitment, where ever possible emphasis on individual development, corporate
· Extensive development programmes culture management, developing strong internal
· Use of intrinsic rewards labour market (promotions/appointments) and
· Corporate organizational development given team skills.
high priority
· Strong emphasis on corporate culture
Turnover HRM Strategy
HRM strategy is driven for a short period by Used when the business environment changes
the executive leadership, characterized by dramatically, i.e., when the organization is not
challenging, restructuring or abolishing HR compatible with its environment. Also used
systems, structures and methodologies. when the business strategy of the organization
· Major structural changes affecting the total radically changes. HRM strategies must break
organization and career structures. and abolish redundant HRM practices,
· Downsizing retrenchments structures and redefine a new culture. Strong
· Lateral recruitment of key executives from emphasis on forced downsizing, lateral
outside recruitment, new HRM systems and radical
· Executive team building, creating a new work and job restructuring.
mindset
· Breaking away from the old culture
Paternalistic HRM Strategy
HRM Practice is centrally administered Used only in very limited mass production
· Centralist personnel orientation situations where the organization has an
· Emphasis on procedures, precedent and absolute monopoly on stable markets/products.
uniformity HRM strategies are used as devices for control
· Organization and methods studies and uniformity of procedures/operations.
· Inflexible internal appointments policy Strong emphasis on formal employer-employee
· Emphasis on operational and supervisory industrial relationships and industrial awards.
training
· Industrial awards and agreements set the HR
framework

Source: Stace, D. and D. Dunphy ‘Beyond Traditional Paternalistic and Developmental

Approaches to Organizational Changes and Human Resource Strategy’ International
Journal of Human Resource Management, 2(3): 263–83 (1991).

Business HRM alignment

A large number of HRM professionals and strategic and corporate planners
insist that there must be a sharp linkage between the business plans and the
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HRM plans in an organization. They believe that such an association not only Human Resource Planning
strengthens the organizational functioning but also positions the HRM in a
strategic role. Tomas Garavan, Noreen Heraty and Pat Costine have identified
ten approaches that organizations can follow to establish the said linkage.
These approaches are described below: NOTES
1. Top-down approach: This approach involves:
(a) identification of the business plan,
(b) formulation of HRM strategy corresponding to the business plan,
and
(c) designing HRM activities based on HRM strategy.
2. Market-driven approach: Here employees are grouped depending on
their skill and knowledge. It is necessary to assess the skills available
and predict what skills the employees require to meet the organizational
market demands.
3. Career planning approach: The existence and growth of every
employee proceeds from the business plans of the organization. Here,
the career plans of each employee is linked to the business plan.
4. The futuring approach: In the strategy formulation stage, HRM
becomes a major focus and ingredient of the business plan.
5. Performance diagnosis approach: This approach proposes that
linkage between the two can be achieved through HRM playing the
facilitator role in the formulation and execution of the business plans.
6. Artificial experience approach: HRM practitioners in this approach
create simulation of future business plans and develop ways of HRM
alignment.
7. Pulse-taking approach: Here survey technique and training and
develop- ment interventions are employed to gauge the effectiveness
of the business plans.
8. The educational approach: The linkage achieved in this approach
mainly includes offering training and knowledge of strategic thinking,
methods to prepare business plans and also equipping them with
implementation skills.
9. Interpersonal approach: This approach is based on the premise that
a substantial percentage of corporate strategy is informal and dynamic.
Therefore, it is the HRM professionals, who with their interpersonal
approach can institutionalize this informal strategy in a planned and
formal way.
10. The rifle approach: This approach is based on troubleshooting.
HRM should be used to identify the problems and constraints in the
implementation of business plans and also to resolve them.
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Human Resource Planning Strategic and operational control
Strategic control is the process of taking into account the changing premises
on which the strategy is based, continuously evaluating the strategy as it is
NOTES being implemented and taking corrective actions to adjust the strategy to
the new requirements. This process is necessary because there is a time lag
between strategy formulation and its implementation requiring changes in
the strategic formulation itself.
Operational control is concerned with action or performance and
is aimed at evaluating the performance of the organization as a whole
or its different components. Operational control is used by almost every
organization in some form or the other.
Harold Koontz et al. have given the difference between strategic and
operation control which is shown in the Table 3.2.
Table 3.2 Difference between Strategic and Operational Control

Factors Strategic Control Operational Control

1. Basic question Are we moving in right direction? How are we performing?

2. Aim Proactive continuous questioning of Allocation and use of

the basic direction of the strategy organizational resources

3. Main concern Steering the future direction of the Action control

organization

Source: Koontz Harold, Cyrill O’Donnell and Heiz Weihrich, Management. McGraw-
Hill, New York, (1980).

Procedure
Procedures are plans which help establish methods for handling future
activities. They prescribe basically the chronological sequences of action
required to achieve an objective. It is a standing plan acting as a means of
implementing a policy. For example the sales department lays down a policy
to execute all orders within 48 hours. The procedure of execution of the orders
will prescribe a sequence of steps that must be followed after the receipt of
the order, till the dispatch of goods to the customer. These chronological
series of steps or tasks constitute a procedure.
According to Terry and Franklin — ‘A procedure is a series of related
tasks that make up the chronological sequence and the established way of
performing the work to be accomplished’.
Procedures provide the guidelines for performing an action. They
include how each task in the organization should take place, when it should
take place and by whom it should to be performed.

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Characteristics of a good procedure Human Resource Planning

Since procedures are the standing plans which can be used frequently in
performing the work, these should be framed very carefully. Normally a
procedure or set of procedures with the following characteristics contributes NOTES
in a positive way to the organization:
1. A procedure should be based on adequate facts of the particular
situation. It should be such that it does not hinder the efficiency of the
organization.
2. A procedure should possess stability. A stable procedure provides
continuity in the action and people get well-versed with the system.
3. Flexibility of a procedure is desirable in order to cope with a crisis or
emergency. Therefore, a balance should be maintained between the
stability and flexibility of the procedure.
4. There should be a continuous review of the procedures so that their
utility is ascertained.
5. The procedures should small otherwise they become more important
than the results themselves.
Advantages of procedure
A procedure has the following advantages:
· It ensures uniformity of action.
· It decreases the need for further decision-making by laying down a
standard path to follow.
· It increases coordination among the personnel in the organization and
its departments.
· It provides a good standard for the manager to appraise his employees.
· It is an important aid for communication because they communicate
the steps to be followed to complete a particular piece of work.
· It often leads to the simplification of the work flow and elimination of
unnecessary steps.
· It ensures uniformity and consistency of action under recurring
situations.
Disadvantages of procedures
· A procedure lays down the fixed way of doing a particular job and thus
creativity is lost.
· They bring about rigidity in the performance of operations.
· They need to be reviewed and updated constantly.
· They discourage the search for any improvement.
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Human Resource Planning
3.3 FACTORS IN HRP

Some of the steps that may be taken to improve the effectiveness of HRP
NOTES are as follows:
· Objectives: The HR plan must fit in with the overall objectives of the
organization. Important aspects, such as working conditions, human
relationships, etc., must be kept in mind while developing the plan. The
HR plan should be balanced with the corporate plan of the enterprise.
The methods and techniques used should fit the objectives, strategies
and environment of the particular organization.
· Top management support: The plan must meet the changing
needs of the organization and should enjoy consistent support from
top management. Before starting the HRP process, the support and
commitment of top management should be ensured. Moreover, the
exercise should be carried out within the limits of the budget. There is
no use formulating plans which cannot be implemented due to financial
constraints.
· Appropriate time horizon: The period of a HRP should be appropriate
to the needs and circumstances of the specific enterprise. The size and
structure of the enterprise as well as the changing aspirations of the
people should be taken into consideration.
· Manpower inventory: The quantity and quality of human resources
should be stressed in a balanced manner. The emphasis should be
on filling future vacancies with the right people rather than merely
matching existing people with existing jobs. The organization must
have an up-to-date employee skills inventory showing pervious jobs
held, tenure on current job, educational and training qualifications,
specific knowledge and skills, prior work performance, past and current
compensation and mobility factors. The Markov analysis (an approach
to forecast the internal supply of manpower tracking past patterns of
personnel movements) may be pressed into service while preparing
the manpower inventory. Upward mobility of existing staff needs to
be considered carefully.
· Human resource information system: An adequate database should be
developed for human resources to facilitate HRP. To manage employee
skills inventories, organizations should maintain computerized
human resource information systems containing data on: individuals,
demographics, career progression, appraisals and skills.

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 Human Resource Planning
Check Your Progress
1. Define human resource planning.
2. State one benefit of HR planning. NOTES
3. What is demand forecasting?
4. Mention one limitation of HR planning.
5. Why is strategic control needed?

3.4 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Human resource planning is the process of assessing the organization’s

human resources needs in the light of organizational goals and making
plans to ensure that a competent, stable workforce is employed.
2. Planning defines future manpower needs and this becomes the basis
of recruiting and developing personnel.
3. Demand forecasting means forecasting the overall HR requirements
in accordance with the organizational plans.
4. Technological changes and market fluctuations are uncertainties, which
serve as constraints to HR planning.
5. Strategic control is necessary because there is a time lag between
strategy formulation and its implementation requiring changes in the
strategic formulation itself.

3.5 SUMMARY

· Human resource planning is the predetermination of the future course

of action chosen from a number of alternative courses of action for
procuring, developing, managing, motivating, compensating, career
planning, succession planning and separating the human element of
enterprise.
· According to Geisler, ‘HR planning is the process (including
forecasting, developing and controlling) by which a firm ensures that it
has the right number of people and the right kind of people at the right
places at the right time doing work for which they are economically
most useful.’
· HR planning is a highly important and useful activity. Without clear-cut
planning, an estimation of the organization’s human resource needs is
reduced to mere guesswork.
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Human Resource Planning · Change in technology has attached more importance to knowledge and
skill resulting in surplus manpower in some areas and shortage in other
areas. HR planning helps in creating a balance in such a situation.

NOTES · Before undertaking the HR planning of an organization, the short-term

and long-term objectives should be analysed.
· The process of HR planning should start with analysing the
organizational plans and programmes.
· The existing job design and analysis may be reviewed thoroughly
keeping in view the future capabilities, knowledge and skills of present
employees.
· After determining the number of personnel for each job in the
organization, the HR department has to spell out the job description
and job specification.
· Manpower or HR as a factor of production differs from other factors
of production.
· HR planning involves forecasting the demand for and supply of HR.
Projecting manpower needs over a period of time is a risky task.
· Technological changes and market fluctuations are uncertainties, which
serve as constraints to HR planning.
· The plan must meet the changing needs of the organization and should
enjoy consistent support from top management.
· An adequate database should be developed for HR to facilitate HR
planning.
· A separate manpower planning division must be created, especially
in large organizations to coordinate manpower planning exercise at
various levels.
· HR planning is the responsibility of the personnel department.
· The department has to recommend relevant personnel policies in respect
of HR planning, devise methods and procedures and determine the
quantitative aspects of HR planning.
· The success of HRM lies in its flexibility in reorienting itself in tune
with the changing internal and external forces of the organizations.
· Strategic control is the process of taking into account the changing
premises on which the strategy is based, continuously evaluating the
strategy as it is being implemented and taking corrective actions to
adjust the strategy to the new requirements.

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 Human Resource Planning
3.6 KEY WORDS

· Employee: It refers to a person employed for wages or salary, especially

at non-executive level. NOTES
· Manpower: It is the number of people working or available for work
or service.
· Compensation: It refers to something, typically money, awarded to
someone in recognition of loss, suffering, or injury.

3.7 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. State the characteristics and objectives of HR planning.
2. Why is HR planning important?
3. Discuss the limitations of HR planning.
4. Who is responsible for HR planning?
Long Answer Questions
1. Discuss the process of HR planning in detail. What are the advantages
of HR planning programmes?
2. What is the role of HR strategy in strategic management? Discuss the
various types of HRM strategies.
3. What are procedures? Explain the characteristics of a good procedure.
Also discuss the advantages and disadvantages of procedures.
4. Discuss some of the steps that may be taken to improve the effectiveness
of HRP.

3.8 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.

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Human Resource Planning Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.
NOTES
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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 Job Analysis and Design

UNIT 4 JOB ANALYSIS AND

DESIGN
NOTES
Structure
4.0 Introduction
4.1 Objectives
4.2 Job Analysis and Job Design
4.3 Job Description
4.4 Job Specification
4.5 Answers to Check Your Progress Questions
4.6 Summary
4.7 Key Words
4.8 Self Assessment Questions and Exercises
4.9 Further Readings

4.0 INTRODUCTION

Job analysis is the process by means of which a description of the methods

and procedures of doing a job, the physical conditions under which the job is
done and the relation of the job to other jobs and conditions of employment
are developed. The first outcome of a job analysis is a job description. The job
description defines the scope of a job, its major responsibilities as well as its
positioning in the organization. Recruitment is another critical HR function.
It is the process of identifying qualified and skilled persons for actual or
anticipated vacancies in organizations. It is important for organizations to have
a recruitment policy. Selection can be of two kinds — internal or external. It
is the process of selecting a certain number of people, from a large number
of applicants, who are most likely to perform their jobs with maximum
effectiveness and remain with the company. After selecting a candidate, he/
she should be placed in a suitable job. Placement is an important HR activity
and involves assigning a specific rank and responsibility to an employee.
This unit covers the fundamentals of job analysis, job description and
job specification.

4.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the role and uses of job analysis and job design
· Explain the components and uses of job description
· Describe how to write a job description
· Analyse job specification Self-Instructional
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Job Analysis and Design
4.2 JOB ANALYSIS AND JOB DESIGN

Job analysis is the process through which a description is developed of the

NOTES present methods and procedures of doing a job, physical conditions in which
the job is done, relation of the job with other jobs, and other conditions of
employment. The purpose of job analysis is not to describe the ideal but
to show the management how at the moment the constituent parts of its
business are being carried out. Thus, job analysis helps in the development
of the present method and procedure of doing a job, the physical conditions
in which it is done the relation of the job with other jobs and other conditions
of employment.
Uses of Job Analysis
Job analysis is of fundamental importance to manpower management
programme. The following are the possible uses of job analysis:
(i)
Provides complete knowledge of the job: It provides complete
knowledge about the job. Therefore, it is helpful in organi­zational
planning.
(ii) Helps in recruitment and selection: By indicating the specific
requirements of each job, job analysis provides a realistic basis
for recruitment and selection of employees. It is the best means of
discovering the essential traits and personal characteristics leading to
success or failure on the job.
(iii) Establishes a base for compensation of employees: By indicating the
qualifications required for doing a specified job and the risk and hazards
involved in doing a job, job analysis helps in establishing a basis for
compensation. It precedes job evaluation that measures the worth of
jobs within the organization for the purpose of establishing a base
for wages. A satisfactory evaluation of jobs is not possible without a
comprehensive job analysis.
(iv) Job re-engineering: Job analysis provides information that enables
us to change jobs in order to permit their being manned by personnel
with specific characteristics and qualifications. It helps to rearrange
the work flow and to revise existing procedure.
(v)
Employee development: Job analysis provides the necessary informa­
tion for employee development. When considering an employee for
promotion, it may facilitate his easy consideration for the job.
(vi) Performance appraisal: Job analysis helps in establishing clear-cut
standards.  This helps the employees as they can know what is expected
of them. It also helps the managers to appraise the perform­ance of their
subordinates.
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 (vii) Training: Job analysis reveals the required skills and knowledge for Job Analysis and Design
doing a job. This helps in providing suitable training for the workers
by determining the content and subject matter for the training course.
Role analysis and Job design NOTES
Role Analysis is the process whereby information related to the requirements
of various roles is collected, analysed and recorded to form the basis of a role
profile. Role analysis focuses on what is expected of the role holders, that is,
what they are expected to know and how they are expected to perform. As
the name suggests, role analysis has the concept of a role at its core. Role
here, refers to the part people play in fulfilling the objectives of their work
through efficient operation. It also includes the manner in which people are
able to perform with sufficient flexibility in keeping with the structure, goals
and processes of the organization.
In case of a job, no matter who the job holder is, his/her responsibilities
and duties are fixed. Systematic analysis of roles and jobs is done to find
out their relative size. This is referred to as job evaluation. The terms job
evaluation and role evaluation are often used interchangeably.
Role analysis can be said to be a branch of job analysis and is generally
done through interviews along with some competency analysis technique.
Role analysis focusses on the identification of the KRA or key result areas.
It helps define the behavioural and occupational competencies that job
holders must possess and their importance in smooth operations. It analyses
the relationship of the job holders with their team members, team leaders,
clients, suppliers and all those they are required to deal with outside the
organization. Role analysis helps to define the manner in which job holders
fit into the structure of the organization, the initiatives they are expected to
take and the manner in which they set priorities.
Importance of role analysis in an organization
Role analysis and job evaluation are aimed at establishing the relative value
or size of jobs or roles. It provides the relevant information for designing
and maintaining equitable pay structures and grades. Role analysis helps to
place roles and jobs within a grade structure in the most objective manner
possible. It also facilitates consistent decisions regarding the grading of jobs
or roles to ensure that the organization fulfills the ethical requirements with
regard to pay. Role analysis helps organizations avoid discrimination on the
basis of sex, religion, disability or race.
Advantages of role analysis
· It allows judgements about relative size of job and gradings to be made
objectively.

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Job Analysis and Design · Judgements can be made on the basis of facts without relying on
opinions.
· It allows evaluation of the job and not the person.
NOTES · Evaluations ignore the job holder’s personal characteristics.
· Evaluations do not directly take into consideration the volume of work.
· Role analysis does not take into account market rates.
Management in various organizations, work at different levels along
with their subordinates to identify goals and set objectives that are consistent
with the goals of the organization. They work hand-in-hand to achieve these
organizational goals.
Measurement of performance is done against objectives and deviations
are discussed. The existing objectives are reviewed by superiors as well
as subordinates and new objectives are defined following discussions on
deviations. Management by objectives or MBO is a self-evaluation technique
wherein the process of setting goals is extremely participative.
MBO is essentially a method of self-evaluation. Goal-setting is a
highly participative process with self-established role prescriptions. Since
job analysis does not cover all the activities of tasks performed by the seniors
and subordinates under MBO, here, role analysis is preferred to cover the
task performed under MBO programmes by the employees.
In view of the criticism against job analysis, Edwin B Flippo was of
the opinion that role analysis should include the different roles played by
an employee. A role would comprise the job holder’s pattern of expected
behaviour, interactions as well as sentiments. The concept of role goes
beyond that of a job. Usually, a job holder is expected to play different roles
in the process of discharging his duties. A manager, for instance, is expected
to also act as an individual who protects the interests of subordinates. The
subordinates, in the same way, are expected to work towards maximizing
sales/profits/ productivity. At times, employees are expected to play various
roles, informally. Such roles are not included in job analysis.
In a boundary spanning job, the incumbent is assigned the task of
dealing with an element of the outer environment. Employees holding
boundary spanning jobs, such as personnel managers, are required to interact
with trade union leaders, government officers, management associations,
etc. Therefore, they are required to possess verbal skills, a certain degree of
sensitivity to the values of external individuals and employees, counselling
skills and interpersonal relations. The personnel manager, therefore, plays
many different roles—roles that conflict with one another, roles that are in
addition to the personnel manager’s duties as outlined in the job description.
Therefore, in modern organizations, the job designers try to take into
account the concept of role analysis while designing jobs.
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 MBO with regards to HR forms the basis for performance appraisal Job Analysis and Design
and at the end of the specified period performance evaluation. The superior in
setting up the objectives tries to include all possible roles of the incumbent.
MBO is a broader term for an organization and even overall strategy for short
term and long term formulated by the directors also covered by this. In this NOTES
article we have discussed the MBO in relation to superior and incumbent in
their work-related area.

Check Your Progress

1. State one use of job analysis.
2. Define role analysis.

4.3 JOB DESCRIPTION

Job description is an important document, which is basically descriptive in

nature and contains a statement of job analysis. It provides both organizational
information (location in structure, authority, etc.) and functional information
(what the work is). It defines the scope of job activities, major responsibilities
and the positioning of the job in the organization. It provides the worker,
analyst and supervisor with a clear idea of what the worker must do to meet
the demands of the job.
Job description is different from performance assessment. The former
is concerned with functions such as planning, coordinating and assigning
responsibility; while the latter is concerned with the quality of performance
itself. Though job description is not assessment, it provides an important
basis for establishing assessment standards and objectives.
Job description describes the ‘jobs,’ not the ‘job holders.’ The movement
of employees due to promotion, quits, etc., would create instability to job
descriptions if people rather than jobs are described.
Uses of Job Description
Job description has several uses, such as:
(i) Preliminary drafts can be used as a basis for productive group
discussion, particularly if the process starts at the executive level.
(ii) It aids in the development of job specifications, which are useful in
planning recruitment, in training and in hiring people with required
skills.
(iii) It can be used to orient new employees towards basic responsibilities
and duties.

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Job Analysis and Design (iv) It is a basic document used in developing performance standards.
(v) It can be used for job evaluation, a wage and salary administration
technique.
NOTES A job description enables the manager to frame suitable questions to
be asked during an interview. It is particularly helpful when the application
form is used as a tool for eliminating unfit personnel. According to Zerga, a
job description helps 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) Investigating 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) Facilitating job placement
(xiii) Studies of health and fatigue
(xiv) Scientific guidance
(xv) Determining jobs suitable for occupational therapy
(xvi) Providing hiring specifications
(xvii) Providing performance indicators
Components or Contents of Job Description
A job description contains the following data:
(i)
Job identification or organizational position which includes the job
title, alternative title, department, division, 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. The location gives the name of the place. This portion of job
description gives answers to two important questions: to what higher
level job is this job accountable; and who is supervised directly?
(ii) Job summary serves two important purposes. First, it provides a short
definition which is useful as an additional identification information
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 when a job title is not adequate. Second, it serves as a summary to Job Analysis and Design
orient the reader towards an understanding of detailed information
which follows. It gives the reader a ‘quick capsule explanation’ of the
content of a job usually in one or two sentences.
NOTES
(iii) Job duties and responsibilities give a comprehensive listing of the
duties together with some indication of the frequency of occurrence
or percentage of time devoted to each major duty. It is regarded as the
heart of a job. It tells us what needs to be done, how it should be done,
and why it should be done. It also describes the responsibilities related
to the custody of money, the supervision of workers and the training
of subordinates.
(iv) Relation to other jobs: This helps to locate the job in the organization
by indicating the job immediately below or above it in the job hierarchy.
It also gives an idea of the vertical relationships of work flow and
procedures.
(v)
Supervision: Under it is given the number of persons to be supervised
along with their job titles, and the extent of supervision involved —
general, intermediate or close supervision.
(vi) Machine, tools and equipment define each major type or trade name
of the machines and tools and the raw materials used,
(vii) Working conditions usually give information about the environment
in which a job holder must work. These include cold, heat, dust,
wetness, moisture, fumes, odor, oily conditions, etc. present inside the
organization.
(viii) Hazards give us the nature of risks to life and limb, their possibilities
of occurrence, etc.
Writing a Job Description
Opinions differ on how to write job descriptions. Some experts are of the
view that these should be written in detail and in terms of workflow. Others
feel that these should be written in terms of goals or results to be achieved,
in other words as performance standards (or what is popularly known as
‘management by objectives’). The prevalent thinking is that job descriptions
should be written in terms of duties and responsibilities, i.e., in terms of
functions performed.
Job descriptions are written by the personnel department or its
representatives.
Although there is no set way of writing a job description, the following
pattern is fairly typical, and used by many companies:

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Job Analysis and Design (i) A paragraph is allocated to each major task or responsibility.
(ii) Paragraphs are numbered and arranged in a logical order, task sequence
or importance.
NOTES (iii) Sentences are begun with an active verb, e.g., ‘types letters’, ‘interviews
the candidates’, ‘collects, sorts out, routes and distributes mail.’
(iv) Accuracy and simplicity are emphasized rather than an elegant style.
(v) Brevity is usually considered to be important but is largely conditioned
by the type of job being analysed and the need for accuracy.
(vi) Examples of work performed are often quoted and are useful in making
the job description explicit.
(vii) Job descriptions, particularly when they are used as bases for training,
often incorporate details of the faults which may be encountered in
operator tasks and safety check-points.
(viii) Statements of opinion, such as ‘dangerous situations are encountered’,
should be avoided.
(ix) When job descriptions are written for supervisory jobs, the main factors
(such as, manning, cost control, etc.) are identified and listed. Each
factor is then broken down into a series of elements with a note on the
supervisor’s responsibility.
The British Institute of Management publication adds four more guidelines:
(i) Give a clear, concise and readily understandable picture of the whole
job.
(ii) Describe in sufficient detail each of the main duties and responsibilities.
(iii) Indicate the extent of direction received and supervision given.
(iv) Ensure that a new employee understands the job if he reads the job
description.
Limitations of Job Description
In any use of job descriptions, it should be remembered that these descriptions
are not perfect reflections of the job. ‘The object of a job description is to
differentiate it from other jobs and set its outer limits.’ Further, executives
tend to carry work patterns with them into new jobs, thus modifying the job
drastically.
To avoid such problems, care must be exercised in writing a job
description to make it as accurate as possible, and at the managerial or
professional level, it should be reviewed and discussed after the job. Jobs
tend to be dynamic, not static, and a job description can quickly go out of
date. Therefore, a job should be constantly revised and kept up-to-date and the
personnel and other departmental heads should be apprised of any changes.
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 Job Analysis and Design
4.4 JOB SPECIFICATION

Job specification states the bare minimum acceptable qualities important to

job performance satisfactorily. Making job description as its base, it lays down NOTES
the abilities and qualities that a worker should possess in order to hold the
job in question. Job specifications translate the job description into terms of
the human qualifications which are required for a successful performance of
a job. A job specification or man specification is a statement of the minimum
acceptable human qualities necessary to perform a job satisfactorily. It tells
what kind of person to recruit and for what qualities that person should be
tested. These specifications relate to:
(i)
Physical characteristics: height, weight, vision, voice, etc.
(ii) Personal characteristics: emotional stability, good and pleasing
manners, skill in dealing with others, etc.
(iii) Psychological characteristics: analytical ability, mental concen­tration
and alertness, mechanical aptitude, etc.
(iv) Responsibilities: responsibility for the safety of others, respon­sibility
for generating confidence and trust, etc.
(v)
Demographic characteristics: age, sex, education, experience, etc.
Job specifications are based on the opinion of supervisors and personnel
managers. It should be remembered that preparing a complete and correct
job specification is relatively difficult as compared with preparing a correct
job description. There is always considera­ble disagreement concerning the
human requirement for work. Further, there is also a difference of opinion
on whether a requirement should be ‘mandatory’ or ‘desirable’.

Hotel Manjuran
Old Port Road, Bunder, Mangalore - 575 001
Education Qualification: School leaving certificate like SSC, SSLC Class X
or equivalent
Experience: At least 2 years in similar position in starred hotels
Skill, Knowledge and Abilities
Skill: Glass work cleaning, use of mechanical cleaner/polisher procedure for
cleaning plastic signs, use of menu, how to change menus
Social Skills: Diplomacy (problems of interruption by guests), liaison with
maintenance department, liaison with staff.
Abilities: Ability to have light conversation with guests in English and local
language.
Knowledge: Stores indent procedures, recognition of electrical faults on signs,
current guest list, and staff currently employed.
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Job Analysis and Design Work Orientation Factors: Position may require standing up to 30% of work
timings
Age: Preferably below 28 years
Educational Qualification: MBA with specialization in HRM or MA in
NOTES Industrial Psychology or MSW with specialization in labour welfare.
Desirable: A degree or diploma in Labour Law.
Experience: At least 3 years experience in a large manufacturing company.
Skill: Skill in conducting job analysis interview, making group presentations,
writing job description, conducting exit interviews to find out more about the
deficiency in the present system.
Ability: Ability in conducting meetings with departmental heads, prioritize
work and to put forth views in a convincing manner.
Knowledge: Knowledge of compensation practices in competing industries,
procedure of compensation survey techniques, analysing performance appraisal
systems, conducting job analysis procedures.
Work Orientation Factors: The position may require travelling extensively
from the place of work to an extent of at least 15% of the work time.
Age: Preferably between the age of 35 and 45 years.

Check Your Progress

3. What is job description?
4. Who writes job descriptions?

4.5 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Job analysis provides complete knowledge about the job. Therefore,

it is helpful in organizational planning.
2. Role analysis is the process whereby information related to the
requirements of various roles is collected, analysed and recorded to
form the basis of a role profile.
3. Job description is an important document, which is basically descriptive
in nature and contains a statement of job analysis.
4. Job descriptions are written by the personnel department or its
representatives.

4.6 SUMMARY

· Job analysis is the process through which a description is developed of

the present methods and procedures of doing a job, physical conditions
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 in which the job is done, relation of the job with other jobs, and other Job Analysis and Design
conditions of employment.
· The purpose of job analysis is not to describe the ideal but to show the
management how at the moment the constituent parts of its business
NOTES
are being carried out.
· By indicating the specific requirements of each job, job analysis
provides a realistic basis for recruitment and selection of employees.
· Role analysis is the process whereby information related to the
requirements of various roles is collected, analysed and recorded to
form the basis of a role profile.
· Role here, refers to the part people play in fulfilling the objectives of
their work through efficient operation.
· Role analysis focusses on the identification of the KRA or key result
areas.
· Role analysis and job evaluation are aimed at establishing the relative
value or size of jobs or roles.
· Management by objectives or MBO is a self-evaluation technique
wherein the process of setting goals is extremely participative
· Job description describes the ‘jobs,’ not the ‘job holders.’ The movement
of employees due to promotion, quits, etc., would create instability to
job descriptions if people rather than jobs are described.
· Job descriptions are written by the personnel department or its
representatives.
· In any use of job descriptions, it should be remembered that these
descriptions are not perfect reflections of the job.
· ‘The object of a job description is to differentiate it from other jobs
and set its outer limits.’
· Job specification states the bare minimum acceptable qualities important
to job performance satisfactorily.
· A job specification or man specification is a statement of the minimum
acceptable human qualities necessary to perform a job satisfactorily.
· Job specifications are based on the opinion of supervisors and personnel
managers.
· It should be remembered that preparing a complete and correct job
specification is relatively difficult as compared with preparing a correct
job description.

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Job Analysis and Design
4.7 KEY WORDS

· Assessment: It is the action of assessing someone or something.

NOTES · Manager: It refers to a person responsible for controlling or
administering an organization or group of staff.
· Job: It refers to a paid position of regular employment.
· Salary: It is a fixed regular payment, typically paid on a monthly
basis but often expressed as an annual sum, made by an employer to
an employee, especially a professional or white-collar worker.
· Subordinate: It refers to a person under the authority or control of
another within an organization.

4.8 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. What is job analysis and what are its uses?
2. Briefly discuss the meaning and uses of job description.
3. What are the limitations of job description?
4. Write a detailed note on job specification.
Long Answer Questions
1. Discuss the importance of role analysis in an organization. What are
its advantages?
2. What are the components of job description?
3. Write a detailed note on how to write a job description.

4.9 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
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Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd Job Analysis and Design
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
NOTES
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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Recruitment
BLOCK - II
EMPLOYEE SELECTION AND TRAINING
NOTES
UNIT 5 RECRUITMENT
Structure
5.0 Introduction
5.1 Objectives
5.2 Recruitment: Concept, Factors and Types
5.3 Answers to Check Your Progress Questions
5.4 Summary
5.5 Key Words
5.6 Self Assessment Questions and Exercises
5.7 Further Readings

5.0 INTRODUCTION

In the previous unit, you studied the meaning, objectives, importance and
process of human resource planning. Apart from this, you also gathered
valuable information about job analysis and job design. In this unit, you
will learn about the recruitment techniques. Recruitment plays a vital role
in the planning function of the human resource of any organization and their
capability to compete. There are two sources of recruitment; internal sources
and external sources. Human resources of high proficiency are positioned at
appropriate levels within an organization. The recruitment process is aimed
at achieving a specific number and quality of workforce. This workforce is
capable of supporting the organization for achieving its goals and objectives.
As an extension of the same goal, recruitment helps in the creation of a team
of prospective candidates for the company. From this group, the management
can make a selection of a suitable employee for the appropriate vacancy.

5.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of recruitment
· Explain the factors affecting recruitment
· Describe the types of recruitment

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 Recruitment
5.2 RECRUITMENT: CONCEPT, FACTORS AND
TYPES

If the HR department fails to identify the quality and the number of persons NOTES
to be recruited and also fails to procure the services of persons with required
qualifications, skill and calibre continuously, a time may come ultimately
when all the qualified persons have retired, and no qualified person remains
in the organization. Therefore, the importance of recruitment and selection of
the right type of persons at the right time is indispensable to the organization.
Meaning and Definitions
Recruitment is a process designed to attract a qualified pool of job applicants
to the organization. It is important to ensure that there is compatibility
between the job and the applicant. Before the recruitment efforts begin,
the requirements for the jobs to be filled must be clearly specified. These
requirements can be established by job analysis, job descriptions and job
specifications.
Job analysis, as you have already learned in the previous unit, is an
orderly study of job requirements and involves systematic investigation
relating to the operations and responsibilities including knowledge, skills and
abilities required for the successful performance of a job. The information
collected includes work activity as to what is being done, nature of the physical
environment, type of equipment and tools used, performance standards and
personal attributes of the worker such as skills, training, experience and so
on. Job analysis forms the basis for job description and job specification.
You have also learned in the previous unit that job descriptions are
written statements that outline the duties and responsibilities involved in
performing jobs. It is a tangible outcome of job analysis as to ‘who does what,
when, where, how and why.’ A job description generally contains information
which includes job identification, brief summary of the type of job, duties
performed, type of machinery handled, working conditions and so on. Job
descriptions clearly communicate to workers as to what they are required to
do, and this reduces confusion and misunderstanding.
Job specifications define the characteristics of the individuals who
should be hired for the job. These specifications relate to:
· Physical characteristics: These include general health, height and
weight, vision, endurance level, hearing, colour discrimination,
reflexes, motor coordination and so on.
· Psychological characteristics: These include mental dexterity,
emotional stability, maturity, patience, aggressiveness, outgoing

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Recruitment nature, poise, initiative, drive, leadership qualities, cooperative
spirit, conversational ability and so on.
· Responsibility: This involves supervision of others, responsibility
for safety of others and so on.
NOTES
· Other characteristics: These may be, for the record, age, sex,
education, experience, training required, fluency in languages and
other sensory demands such as sense of sight, smell or hearing.
Once a complete job analysis has been completed and manpower needs
have been determined, then management can begin the recruitment process.
The recruitment may be internal to the organization or the prospective
candidates can be drawn from outside sources. To what extent the internal
sources or external sources for recruitment would be used would depend
upon the specific environment of the organization as well as its philosophy of
operations. Some companies prefer to promote from within for key positions
because these persons know the company well. Others prefer to hire from
outside because the outside personnel do not know the company so that they
can bring some new and fresh ideas into the company.
According to Flippo, recruitment is ‘a process of searching for
prospective employees and stimulating and encouraging them to apply for
jobs in an organization’.
In the words of Mamoria, ‘Recruiting is the discovering of potential
applicants for actual or anticipated organizational vacancies’.
Types and Processes of Recruitment
Basically, the sources of recruitment are of two types: internal and external.
Internal Sources
Internal sources include personnel already on the pay roll of an organization.
Filling a vacancy from internal sources by promoting people has the
advantages of increasing the general level of morale of existing employees and
of providing to the company more reliable information about the candidate.
Internal sources include promotions, transfers, and response of employees to
notified vacancy. Employee referrals and former employees also constitute
the internal sources of recruitment. Let us discuss these five types of sources.
1.  Promotions
Promotions from among present employees can be a good source of
recruitment. To be effective, promotion requires using job posting, personnel
records and skill banks. Job posting means notifying vacant positions by
announcing at staff meetings, posting notices and inviting employees to
apply to notified vacancies. Examining personnel records may help in
identifying talented employees for higher positions. Skill banks are a list of
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employees who have specific skills. Promotions have several advantages for Recruitment
the organization as well as its employees, such as:
· It builds morale among employees as organizations consider them for
higher positions.
NOTES
· It is cheaper than going for outside sources.
· Internal employees are familiar with the organizations.
· Promotion when carefully planned acts as a training device for
developing employees for higher level jobs.
· It improves the probability of a good selection since the person is
already known to the organization.
· It encourages competent individuals who are ambitious.
Here it should be noted that promotions can be dysfunctional to
organizations as the advantage of hiring outsiders who may be better qualified
and skilled is denied. Promotion also results in inbreeding and discourages
new blood from entering the organization which is not good for it.
2.  Transfers
A transfer is a change in job assignment. It does not involve a change in
responsibility and status. A movement of an employee between equivalent
positions at periodical intervals is calls as ‘transfer’. A transfer, therefore,
does not involve in a change of responsibility or compensation. Transfers
are normally made to place employees in positions where they are likely
to be more effective or where they are likely to get greater job satisfaction.
Transfers are often important in providing employees with a broad-based
view of the organization.
3.  Response of employees to notified vacancies
Employees who are qualified but are doing jobs below their educational
qualifications or skill level may respond to notified vacancies. This practice
is not followed for senior positions which are generally filled with people
hired from outside. When employees respond to notified vacancies, examining
personnel records is desirable. It helps to track persons who have the potential
for further training or those who have the right background for the vacant
positions.
4.  Employee referrals
Employee referrals can also be treated as a good source of internal recruitment.
This source is usually one of the most effective methods of recruiting because
many qualified people are reached at a very low cost to the company.
Therefore, when vacancies are notified it is also necessary to bring this
information to the employees by posting notices, circulating publications
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Recruitment number of employees, this approach can provide quite a large pool of potential
organization members.
Employee referrals can help employees to develop good prospects to
their family members, friends and can induce them to apply for vacancies in
NOTES
the organizations. Most employees know from their own experience about the
requirements of the job and what sort of persons the company is looking for.
Often employees have friends or acquaintances who meet these requirements.
5.  Former employees
Former employees can include those who have worked on part-time basis and
now desire to work on a full-time employment, retired employees or those
who have left the company for some reason but are now willing to come
back and work. Former employees are a good internal source of recruitment.
They have the advantage of knowing the organization, which, in turn, know
the performance of these people.
Merits of internal sources of recruitment
The merits of internal sources of recruitment are as follows:
· They absorb people already acquainted with the company culture.
· They provide tried and tested people on whom the company can depend.
· They are a useful signal to employees that assures them that their
services are recognized, which helps in maintaining their motivation
and morale.
· They reduce labour turnover as it gives employees a sense of job
security and opportunity for advancement.
· They minimize job training.
· They are less costly than the other sources of recruitment.
Demerits of internal sources of recruitment
Internal sources of recruitment suffer from certain constraints that are as
follows:
· They limit the choice to a few employees only.
· The likes and dislikes of the superiors play an important role in the
selection of an employee.
· They create frustration among the unselected employees.
External Sources
External sources lie outside the organization. There are seven external sources
of recruitment, which are discussed as follows:

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1.  Advertisements Recruitment

Advertising in newspapers, trade journals and magazines is the most

frequently used method. In order to be successful, an advertisement should
be carefully written. If it is not properly written, it may not draw the right NOTES
type of applicants or it may attract too many applicants who are not qualified
for the job.
2.  Employment exchanges
An employment exchange is an office set up for bringing together as quickly
as possible candidates searching for employment and employees looking for
prospective employees. The main functions of employment exchanges are
registering job seekers and their placement in notified vacancies.
3.  Campus recruitment
Sometimes, recruiters are sent to educational institutions where they meet
the placement officer or the faculty members who recommend suitable
candidates. This system is prevalent in USA where campus recruitment is
a major source. However, today the idea of campus recruitment has slowly
caught up the fancy of Indian employers too.
4.  Unsolicited applicants
Unsolicited applicants are another source. Some candidates send in their
applications without any invitation from the organization.
5.  Labour contractors
Many organizations employ labour contractors to hire workers. This method
is usually resorted to when the work is of a temporary nature.
6.  Employee referrals
Friends and relatives of present employees are also a good source from which
employees may be drawn.
7.  Field trips
An interviewing team makes trips to towns and cities, which are known
to contain the kinds of employees required. In this method of recruitment,
carefully prepared brochures describing the organization and the job it offers
are distributed to the candidates before the interviewer arrives. The arrival
dates and the time and venue of interview are given to the candidates in
advance.
8. Web recruitment
In accordance with the research by the Society for Human Resource
Management, the Internet is used by 96 per cent of all job seekers. This makes it
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Recruitment the most commonly used mode of searching. On the other hand, Internet is used
by 88 per cent of recruiters to advertise for new opportunities and vacancies.
This approach is considered cheaper, faster and highly efficient by firms and
candidates. Applicants can make use of a number of websites that can be availed
NOTES on the Internet, for this purpose. The applicants can make use of these websites
for submitting their resumes and similarly, prospective employers can check
these resumes for candidates who may suite their requirements. These websites
also have a system to match the requirements with the skills of the candidates.
Recently, firms have found it more convenient and effective to construct their
own websites, wherein they advertise the job vacancies. Websites prove to be
speedy, convenient and cost-effective for applicants who use the Internet to
submit their resumes. The resumes are then converted into a standard format
that uses the software to make a short list of candidates. This is in accordance
with the set criteria such as qualifications, experiences, etc. The requirements are
furnished by the HR department which also generates the profiles of candidates
from the company’s database.
· Recruitment alternatives: Recruiting sources are equipped for
locating and hiring full-time and permanent employees. Nevertheless,
economic facts, combined with the trends of management such as
rightsizing, have caused the emergence of slightly different focus. A
large majority of companies is presently hiring temporary employees,
leased employees and are using independent contractors.
· Temporary help service: This proves to be valuable when meeting
short-term fluctuations in the need for human resource management
Temporary employees prove to be specifically. Though they are
traditional in their way of handling office administration, yet temporary
staffing services have expanded to a broad range of skills. It is possible
to hire temporary computer programmers, accountants, technicians,
administrative assistants, etc.
· Leased employees: Leased employees tend to be with a firm for a long
time. They work and are employed with the organization in accordance
with a leasing arrangement. If a firm is on the lookout for employees
who are specifically skilled, it gets in touch with leasing firms. These
firms cater them with leased employees. Leased employees are trained
well. The leasing firm screens them, as required and gives them proper
training. They are assigned to organizations with absolute guarantee.
In case a leased employee does not perform, the organization is given
a replacement, or the paid fee is returned. This is also beneficial to the
employee who is being leased. There are a few workers who like their
lives to be flexible. When they are on lease, it allows them the choice
to work at their convenience and for as long as they desire.
· Independent contractors: Independent contracting is an alternative
method of recruitment. Firms may prefer hiring of independent
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 contractors for specific jobs that are located within or outside its Recruitment
premises. The system of independent contracting is beneficial for
the organization as well as for the worker. In this case, the worker is
different from an employee, since it is more economic for the company
with full or part-time employees, in terms of social security schemes NOTES
such as provident fund, insurance, gratuity, etc. In addition, this is
also a good way to keep ideal workers in association with the firm. If
an individual is allowed the freedom to work from home, as per his
convenience of time, it is beneficial to both, the firm and the individual.
9. Employment exchange
Employment exchange is also an important external source of recruitment.
The Employment Exchanges (Compulsory Notification of Vacancies)
Act was enacted in 1959 to provide for compulsory notification of vacancies
to the Employment Exchanges and for the rendition of returns relating to
Employment situation by the employers. This act came into force with effect
from 1st May 1960.
All Establishments in public sector and such establishments in
private sector excluding agriculture, where ordinarily 25 or more persons
are employed come within the purview of the Act. These establishments
are required to notify all vacancies (other than those exempted) to the
appropriate Employment Exchange as notified in the official Gazette by the
State Government in the prescribed format.
This Act will not apply to vacancies in any employment in agriculture
(including horticulture), domestic service, unskilled office work, employment
connected with the staff of parliament, and if the total duration of the vacancies
are less than three months.
The establishments are also required to render quarterly employment
return in Form ERI for every quarter ending 31st March, 30th June, 30th
September and 31st December and biennial occupational return in Form
ER-II once in two years viz., by private sector in odd years and by public
sector in even years.
As per the provisions of this Act, persons authorized by the Government
shall have access to any relevant records of the employer. They are also
empowered to inspect or take copies of relevant records or document. Penal
provision of imposition of fine for any offence has been made for violation
for various provisions of this act.
Merits of external sources of recruitment
The merits of the recruitments using external sources are as follows:
· Fresh talent and skill come into the organization.
· New employees may try to change old habits.
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Recruitment · New employees may be selected at the latest terms and conditions of
the organization.
· Highly qualified and experienced employees may help the organization
to boost performance.
NOTES
· Since persons are recruited from a large market, the best selection can
be made. In other words, the recruiter has a wide range of candidates
to choose from.
· They provide the requisite type of personnel having the required skill
and standard.
Demerits of external sources of recruitment
The constraints of recruitments using external sources are as follows:
· They reduce the morale of existing employees because outsiders are
preferred to fill up superior vacancies.
· They deny carrier advancement for existing employees.
· Proper evaluation may not be possible due to the time constraint
resulting in faulty selection.
· Outsiders not being acquainted with the policies and procedures of the
organization need training, before they can deliver.
From all this, we can conclude that there is no hard and fast rule whether
the recruitment must be internally or externally or exclusive to each other. The
best management policy regarding recruitment must be to first look within
the organization and if no able talent is available, external sources may be
looked at. To use the words of Koontz and O’Donnell ‘The (recruitment)
policy should be to ‘raise’ talent rather than ‘raid’ for it’.
Constraints
Some constraints might crop up while placing an employee on a job. These
problems could include:
· Employee’s expectations from the job are not matching with reality.
· Expectation from the employers are more than the employee’s ability
or skills.
· Technological changes might result in mismatch between the job and
the employee.
· Change in the organizational structure may result in changes in the job.
These changes result in a misfit between the employee and the job.
Recruitment Policy
A policy is a directive providing a continuous framework for executive
actions on recurrent managerial problems. A policy assists decision-
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making. However, deviations may be needed, as exceptions and under some Recruitment
extraordinary circumstances. Such a policy asserts the objectives of the
recruitment and provides a framework of implementation of the recruitment
programme in the form of procedures.
NOTES
The essentials of policy formation may be listed as follows:
· It should be definite, positive and clear. Everyone in the organization
should understand it.
· It should be translatable into practice.
· It should be flexible and at the same time should have a high degree
of permanency.
· It should be formulated to care all reasonable anticipated conditions.
· It should be founded upon facts and sound judgements.
· It should conform to economic principles, statutes and regulations.
· It should be a general statement of the established rules.
Therefore, a well-considered and pre-planned recruitment policy,
based on corporate goals and needs, may avoid hasty decisions and help the
organization to appoint the right type of personnel.
According to Yoder, ‘A recruitment policy may involve a commitment
to broad principles such as filling vacancies with the best-qualified
individuals... It may also involve the organization system to the developed
for implementing recruitment programme and procedures to the employed’.
Therefore, a recruitment policy involves a commitment by the organization
to principles, such as:
· To find and employ the best qualified persons for each job
· To retain the best talent by offering life-time carriers
· To facilitate personal growth on the job
Conditions Necessary for a Good Recruitment Policy
A good recruitment policy must satisfy the following conditions:
(i) Organization’s objectives: A good recruitment policy should be
in conformity with the organization’s objectives. It must take into
consideration the basic parameters for recruitment decisions.
(ii) Identification of recruitment needs: A good recruitment policy should
be flexible enough to meet the changing needs of an organization. The
recruiters should prepare profiles for each category of workers and
accordingly work out the employees’ specifications.
(iii) Ensuring long term employment opportunities for its employees:
A good recruitment policy should be so designed by the organization
as to ensure career growth for its employees on a long-term basis. It
should help in developing the potentialities of employees. Self-Instructional
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Recruitment (iv) Preferred sources of recruitment: A good recruitment policy should
match the qualities of employees with the requirements of the work
for which they are employed. The preferred sources of recruitment,
which would be tapped by the organization for skilled or semi-skilled
NOTES workers could be internal sources or employment exchanges, whereas
for highly specialized managerial personnel, external sources could be
preferred.

Check Your Progress

1. What is recruitment?
2. What is required to make promotions effective?
3. What is a transfer?
4. What do you understand by employment exchange?
5. Define what constitutes a good recruitment policy.

5.3 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Recruitment is a process designed to attract a qualified pool of job

applicants to the organization.
2. To be effective, promotion requires using job posting, personnel records
and skill banks. Job posting means notifying vacant positions by
announcing at staff meetings, posting notices and inviting employees
to apply to notified vacancies.
3. A movement of an employee between equivalent positions at periodical
intervals is calls as ‘transfer’.
4. An employment exchange is an office set up for bringing together
as quickly as possible candidates searching for employment and
employees looking for prospective employees.
5. A good recruitment policy should be in conformity with the
organization’s objectives. It must take into consideration the basic
parameters for recruitment decisions.

5.4 SUMMARY

· Recruitment plays a vital role in the planning function of the human

resource of any organization and their capability to compete.
· There are two sources of recruitment; internal sources and external
sources.
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 · Human resources of high proficiency are positioned at appropriate Recruitment

levels within an organization.

· The recruitment process is aimed at achieving a specific number and
quality of workforce. NOTES
· Selection, either internal or external, is a deliberate effort of
organizations to select a fixed number of personnel from a large number
of applicants.
· Recruitment is a process designed to attract a qualified pool of job
applicants to the organization. It is important to ensure that there is
compatibility between the job and the applicant.
· Once a complete job analysis has been completed and manpower needs
have been determined, then management can begin the recruitment
process.
· According to Flippo, recruitment is ‘a process of searching for
prospective employees and stimulating and encouraging them to apply
for jobs in an organization’.
· In the words of Mamoria, ‘Recruiting is the discovering of potential
applicants for actual or anticipated organizational vacancies’.
· Internal sources include personnel already on the pay roll of an
organization.
· Filling a vacancy from internal sources by promoting people has
the advantages of increasing the general level of morale of existing
employees and of providing to the company more reliable information
about the candidate.
· Promotions from among present employees can be a good source of
recruitment. To be effective, promotion requires using job posting,
personnel records and skill banks.
· Here it should be noted that promotions can be dysfunctional to
organizations as the advantage of hiring outsiders who may be better
qualified and skilled is denied.
· Employee referrals can also be treated as a good source of internal
recruitment. This source is usually one of the most effective methods
of recruiting because many qualified people are reached at a very low
cost to the company.
· An employment exchange is an office set up for bringing together
as quickly as possible candidates searching for employment and
employees looking for prospective employees.
· Many organizations employ labour contractors to hire workers. This
method is usually resorted to when the work is of a temporary nature.

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Recruitment · In accordance with the research by the Society for Human Resource
Management, the Internet is used by 96 per cent of all job seekers.
· On the other hand, Internet is used by 88 per cent of recruiters to
NOTES advertise for new opportunities and vacancies.
· Recently, firms have found it more convenient and effective to construct
their own websites, wherein they advertise the job vacancies.
· Recruiting sources are equipped for locating and hiring full-time and
permanent employees.
· However, a majority of companies are presently hiring temporary
employees, leased employees and are using independent contractors.
· Leased employees tend to be with a firm for a long time. They work
and are employed with the organization in accordance with a leasing
arrangement.
· In case a leased employee does not perform, the organization is given
a replacement, or the paid fee is returned.
· Independent contracting is an alternative method of recruitment.
· The system of independent contracting is beneficial for the organization
as well as for the worker.
· The Employment Exchanges (Compulsory Notification of Vacancies)
Act was enacted in 1959 to provide for compulsory notification of
vacancies to the Employment Exchanges and for the rendition of returns
relating to Employment situation by the employers.
· All Establishments in public sector and such establishments in private
sector excluding agriculture, where ordinarily 25 or more persons are
employed come within the purview of the Act.
· To use the words of Koontz and O’Donnell ‘The (recruitment) policy
should be to ‘raise’ talent rather than ‘raid’ for it’.
· A policy is a directive providing a continuous framework for executive
actions on recurrent managerial problems.

5.5 KEY WORDS

· Skill: It is the ability and capacity acquired through deliberate,

systematic, and sustained effort to smoothly and adaptively carryout
complex activities or job functions
· Applicant: It refers to a person who makes a formal application for
something, especially a job.

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 · Referral: It is a program where in employees refers their own friends, Recruitment

ex-colleagues, college batchmates or acquaintances for recruitment in

the company where they work.

NOTES
5.6 SELF ASSESSMENT QUESTIONS AND
EXERCISES

Short Answer Questions

1. Discuss the meaning of recruitment by means of various definitions
given in the unit.
2. What are the merits and demerits of internal sources of recruitment?
3. Write a short note on employment exchange.
4. Describe the conditions necessary for a good recruitment policy.
Long Answer Questions
1. Discuss the specifications required to define the characteristics of the
individuals who should be hired for a job.
2. What are the various types of sources of recruitment? Discuss each in
detail.
3. What is a recruitment policy? What are the essentials of policy
formation?

5.7 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.

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Recruitment Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
NOTES
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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 Selection

UNIT 6 SELECTION
Structure
NOTES
6.0 INTRODUCTION
6.1 Objectives
6.2 Concept of Selection: Process and Selection Tests
6.2.1 Objectives of Selection
6.2.2 Methods of Selection
6.3 Barriers in Selection
6.4 Answers to Check Your Progress Questions
6.5 Summary
6.6 Key Words
6.7 Self Assessment Questions and Exercises
6.8 Further Readings

6.0 INTRODUCTION

If an organization fails to procure the services of persons with required

qualifications, skill and calibre continuously, a time may come ultimately
when all the qualified persons retire and then the organization is bound to
suffer. Therefore, the importance of recruitment and selection of the right
type of persons at the right time is indispensable to the organization.
In the previous unit, we discussed recruitment. In this unit we will
discuss selection.

6.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of selection
· Explain the process of selection
· Describe selection tests
· Analyse the barriers in selection

6.2 CONCEPT OF SELECTION: PROCESS AND

SELECTION TESTS

Selection, either internal or external, is a deliberate effort of organizations to

select a fixed number of personnel from a large number of applicants. The
primary aim of employee selection is to choose those persons who are most
likely to perform their jobs with maximum effectiveness and to remain with
the company. Thus, an attempt is made to find a suitable candidate for the Self-Instructional
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Selection job. In doing so naturally many applicants are rejected. This makes selection
a negative function.
According to Yoder, “the hiring process is of one or many ‘go-no-
go’ gauges. Candidates are screened by the employer and the short-listed
NOTES
applicants go on to the next hurdle, while the unqualified ones are eliminated”.
Steps in Selection Procedure
There is no shortcut to an accurate evaluation of a candidate. A variety of
methods are used to select personnel. The selection pattern, however, is not
common for all organizations. It varies from one to another, depending on
the situation and needs of the organization. Therefore, there is no standard
selection procedure followed by all.
However, according to Yoder the steps commonly followed are as
under:
(a) Application Blank
In a sense the application blank is a highly structured interview in which
the questions are standardized and determined in advance. An application
blank, is a traditional, widely accepted device for getting information from a
prospective applicant. The application blank provides preliminary information
as well as aids in the interview by indicating areas of interest that may be
useful for discussion.
(b) Initial Interview of the Candidate
Those who are selected for interviews on the basis of particulars furnished
in the application blank are called for initial interview by the organizations.
This is meant to evaluate the appearance of the candidate and to establish
a friendly relationship between the candidate and the company and for
obtaining additional information or clarification on the information already
on the application bank. Preliminary interview becomes a necessity, when a
large number of candidates apply for a job.
(c) Selection Tests
For further assessment of a candidate’s nature and abilities, some tests are used
in the selection procedure. If tests are properly conducted, they can reduce
the selection cost by reducing the large number of applicants to manageable
levels. The different types of tests are:
(i) Aptitude Test: Aptitude or potential ability tests are widely used to
measure the talent and ability of a candidate to learn a new job or skill.
Aptitude tests measure ability and skills. They enable us to find out
whether a candidate would be suitable for the job.

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 (ii) Interest Test: Interest test finds out the type of work in which the Selection
candidate has an interest. An interest test only indicates the interest of
a candidate for a particular job. It does not reveal his ability to do it.
(iii) Intelligence Test: This test is used to find out the candidate’s intelligence.
NOTES
It reveals the candidate’s mental alertness, reasoning ability, power of
understanding etc. The scores on intelligence tests are usually expressed
as Intelligence Quotient (IQ), which is calculated as follows:
Mental Age
IQ = × 100
Actual Age

(iv) Performance or Achievement Test: This test is used to measure the

candidate’s level of knowledge and skill in a particular trade or
occupation. Achievement test measures the skill or knowledge which
is acquired as a result of previous experience or training obtained by
a candidate.
(v) Personality Test: Personality test is used to measure the characteristics
that constitute personality.
(d) Interviews
Candidates are called for an interview after they have cleared all other
tests. The interview consists of interaction between the interviewer and the
applicant. If handled properly, it can be a powerful technique in achieving
accurate information and getting access to material otherwise unavailable. If
the interview is not handled carefully, it can be a source of bias, restricting
or distorting the flow of communication. An interview is thus an attempt to
secure maximum amount of information from the candidate concerning his
suitability for the job under consideration.
(e) Checking References
The reference provided by the applicant has to be checked. This is to find out
from the past records of the candidate. Reference checking requires the same
use of skills as required by the interviewer and some amount of diplomacy.
The main difficulty is ascertaining the accuracy of information given. Besides
inaccurate facts, the referees’ inability to assess and describe the applicant
and his limited knowledge about the candidate also pose problem. In spite
of its difficulties, it is necessary to carry out reference checks. In many
organizations, reference checking is taken as a matter of routine and treated
casually or omitted entirely.
(f) Physical or Medical Examination
The next step is getting the candidates medically examined if there is a
need. Quite often the candidates are told to get medically examined before
reporting for duty. In Government and other quasi-government organizations
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Selection getting medically examined is a must before reporting for duty or at the time
of reporting for duty. Medical examination is a part of the selection process
for all suitable candidates in many organizations.

NOTES (g) Final Interview and Induction

After the candidate is finally selected the management will have to explain
the job to him. He should be told as to what his duties are, what is required
of him and what are his future prospects in the organization. Normally this
information is given to the candidate at the time of final selection interview.
This is the way how the candidate is inducted into the job. He is formally
appointed by issuing him an appointment letter or by concluding with him a
service agreement. The appointment letter contains the terms and conditions
of the employment, pay scale and other benefits associated with the job.
The interviewer can describe the company and its policies, the duties
and responsibilities of the applicant as well as the opportunities available
to him for future promotion. The interviewer should, in fact highlight the
favourable aspects of the job. This process is explained in great detail in the
subsequent sections.
6.2.1 Objectives of Selection
As Blum and Naylor observe, the purpose of the selection process is to
make effective use of individual differences with a view to select individuals
who possess the greatest degree of qualities required for an effective job
performance. Indeed, individual differences provide the basis for the selection
and placement processes. It has been found that differences between the
most efficient and the least efficient workers for certain jobs, such as spoon
polishing, are five times. This indicates advantages of developing selection
methods to reject individuals with relatively less efficiency. It may be noted,
as the psychology of individual differences reveals, that personal qualities of
people are normally distributed in the population. Thus, some individuals will
have a high amount of a certain quality and some will have a low amount,
while most of the individuals will have a moderate amount of that quality.
6.2.2 Methods of Selection
Earlier on you studied that although selection procedures vary from one
organization to another, in terms of size, industry, location, and scalar levels
of jobs being filled, the selection process depends upon effective job analysis
and recruitment. As Yoder et al. suggest, the selection process involves
seven steps as follows: (i) preliminary screening of applicants, (ii) review
of application blank, (iii) checking references, (iv) physical examination, (v)
psychological testing, (vi) employment interview, and (vii) evaluation of the
programme. Let us now study these in detail.

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I. Preliminary Screening and Review of Application Blank Selection

(a) Preliminary Screening

It is highly non-economical to administer the entire series of tests of selection NOTES
process to all the applicants. It is advantageous to sort out unsuitable
applicants before using the selection battery. For this purpose, usually
preliminary interviews, application blank check-lists and short tests can
be used. As regards screening interviews, they should be conducted by
skilled and trained interviewers instead of some lower cadre clerk in the
personnel department. The rejection standards for applications should be
well defined. Further, application blank check-lists can also be used to sort
out applicants. However, the list should be determined through research,
and a suitable standard for rejection should be worked out. Suppose, the
minimum standard for typing is 40 words per minute; the check-list should
include this information. All applicants with a typing speed below 40 can be
straightaway rejected. Sometimes, oral trade tests or aptitude tests are also
used for screening purposes.
A Screening Device
Yoder et al. suggest Toops’ successive-hurdles technique as an effective
screening device. According to this technique, all selection factors are arranged
in the decreasing order of importance. For example, if the aptitude test has the
highest correlation among all the selection devices with job success, it would
be ranked first. Likewise, if personal history has the least correlation among
all factors with job success, it would come in last. Accordingly, an aptitude
test can be used to screen out the applicants. Then, the next valid test will be
used. Some organizations use non-objective methods such as observational
techniques (i.e., facial expression) and length of experience, in screening
applicants. This is a highly arbitrary method having only a chance validity.
(b) Review of Application Blank
Personal History Data. Application blanks are frequently used as selection
devices. These blanks vary from small one-page sheet to several folders
consisting of hundreds of items regarding the applicant’s history. The
application forms usually involve items such as name, address, age,
marital status and dependents, schooling, experience and reference. There
may be several other items depending upon the specific requirements of
the organization and the job. As Harrell observes, these blanks provide
preliminary information as well as help in the interview by indicating the
areas of interest and discussion. If the application blanks consist of the proper
items, the personal history items can be effectively used. Usually, the past
provides indications regarding the future. The most effective predictor of job
success is one’s demonstrated ability to perform effectively in a similar job.
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Selection Limitation. However, in practice, these application forms are not as
effective as they appear to be. Sometimes, the applicants tend to exaggerate
their abilities. In several cases, the questions contained in the blanks
themselves are irrelevant. In addition, sometimes the personnel department
NOTES members are unaware of the proper evaluation procedure of blanks and
accordingly cannot make their effective use.
Determining the Effectiveness of Personal History Data. Notwithstanding
these limitations, the application blanks have proved to be highly effective
in several jobs. For example, several issues of personal history such as age,
marital status and number of dependents are found to be effective correlates of
success of life insurance agents and department or store salesmen. Likewise,
personal history has been found to be associated with turnover. College
scholarship and other factors have been compared with that of salaries after
five years following graduation. The results revealed that college scholarship
was the most important factor for success in business. Some researchers have
pointed out that business leaders are college graduates and have not benefited
by ‘family pull’ in the business, and that they usually come from homes of
professional people, managers and business people. It may be noted, however,
that those results should be interpreted with caution. Attempts should be
made to constantly determine the effectiveness of personal history data for
jobs and organizations.
Weighted Application Blanks. Weighted application blanks can be
prepared on the basis of information regarding personal history items
associated with job success. Suppose, if being under 30 years of age is an
advantage for an insurance agent, it is weighed high, and for a handicap it
is weighed low. Likewise, if academic achievement is the least predictor for
future success in salesmanship, it is assigned a low-weighted value. If it is
markedly associated with success in executive jobs, it is assigned a relatively
high weight. It is not possible to prepare a weighted application blank for
all jobs in general. Rather, attempts should be made to prepare weighted
applications for specific jobs and organizations.
II. Reference Checking and Physical Examinations

(a) Reference Checking

Applicants should be requested to give character and general references in
the application blanks. The previous employers and schools can provide
useful information. Attempts may be made to make personal visits and
telephone calls to procure objective responses. Usually, correspondence is
made to verify work history information including dates of employment,
duties performed, and wages and salaries received. It is an effective practice
to send a brief questionnaire involving checking of answers instead of a great
deal of writing. The enquiries should be as specific and precise as possible.
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(b) Physical Examinations Selection

Physical examinations are frequently conducted and used for differential

placement purposes rather than rejection of applicants. Large organizations
have their own medical clinics while the smaller ones refer to private clinics. NOTES
Medical examinations have assumed significance in view of increasing
fringe and welfare programmes. As Yoder observes, physical examinations
form a positive rather than a negative selection device. This helps in
effective manpower utilization by stressing differential placement, involving
assessment of an individual’s capacities and matching them with several
job possibilities in the organizational setting. Attempts should be made to
conduct physical demands analysis related to physical and environmental job
requirements and conditions, and physical capacities analysis related to the
determination of how extensively a person can indulge in physical activities.
The physical demands of the jobs should be matched and compared with the
physical capacities of applicants. Everyone is handicapped physically at some
job or the other. Therefore, physical examination is of utmost significance in
selective or differential placement.
Methods. Following Hanman, physical-demands analysis can be
conducted by three methods: (1) the disability method, (2) the rating method,
and (3) the specific method. The disability method stresses upon employees’
disabilities rather than abilities. For example, jobs are classified in terms
of their suitability for people with various handicaps such as the blind, the
one-armed or the deaf. The rating method involves rating of jobs demanding
‘heavy lifting’, ‘moderate lifting’, ‘light lifting’, etc. This is a highly subjective
method. The specific method stresses what the employee can do. Attempts
are made to state the job demands as well as employee capacities in specific,
objective terms, thereby enabling matching and comparison. This method also
involves development of specific physical and environmental demands of a
job through job analysis. Thus, it enables the personnel manager to assess
specific abilities and demands for specific applicants for several specific jobs.
III. Psychological Testing

(a) General Principles

Psychological tests are used in organizations for several purposes including
selection and placement of employees, their transfer and promotion,
determining training needs, evaluation of training programmes and
counselling. Among these purposes, psycho-logical testing is primarily
used for selection and placement. The testing programme is effective if
the number of applicants for a job is high. Systematic use of tests helps in
rejecting applicants. Thus, the testing programme is highly useful when there
is considerable unemployment and abundance of applicants. However, it
does not mean that it is not useful when the number of applicants is less. In
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Selection such a situation, it is useful for placement purposes to enable the manpower
manager to place the individual in a job for which he is most suitable.
As Tiffin and McCormick point out, it should be recognised that
psychological tests are not infallible, and that sometimes they reveal results
NOTES
which are not a true indication of the potential job success of the candidate.
The effectiveness of any method depends upon the degree of improvement
and not perfection. Suppose, without the use of testing programme, the
turnover rate is 30 per cent and with the use of testing programme it comes
down to 25 per cent. Here, the testing programme is considered as successful
although it has not eliminated the turnover.
(b) Types of Tests
Psychological tests can be classified under several types. There may be
group or individual tests, instrumental or paper and pencil tests, aptitude or
achievement tests, personality and interest tests, and power or speed tests.
Group tests can be administered to any number of candidates simultaneously
depending upon physical infrastructure, while individual tests can be given
to one applicant at a time, usually involving utmost attention of the tester.
The examples of group tests are Purdue Vocational Achievement Tests,
Adaptability Test, Wonderlic Personnel Test, etc. while among individual
tests, Purdue Pegboard Tests of Manual Dexterity can be cited. The
instrumental tests make use of tools and are usually individual in character.
The paper and pencil tests are usually group tests involving written responses.
Aptitude tests assess an individual’s potentiality to learn about a job
through adequate training. These tests are effective for freshers. Achievement
tests indicate how effectively an individual can perform a job and what he
knows about it. These tests are useful if the candidates have prior experiences
of similar jobs. It may be noted that there are certain tests which when used
in a particular way are classified as achievement tests and when used in
other ways, can be designated as aptitude tests. Thus, the basic classification
criterion should be the purpose and not the content. Personality and interest
tests indicate personal traits conducive to the job performance. These tests
are akin to aptitude tests. A power test refers to a test where the ability of the
candidate to complete the test items is more crucial than his speed, while speed
test refers to a test where each item can be completed by most candidates,
but in which speed is crucial.
Testing the Tests
The tests should be tested before they are actually conducted.
Validity of Tests. Explicitly, the tests should have adequate validity.
The term ‘validity’ means that a test measures what it purports to measure.
There are several methods of validating the tests. The present employee
method and the follow-up method are largely used. The present employee
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method involves testing of present employees and correlating their test scores Selection
with a suitable criterion of job performance. The follow-up method involves
assessing new employees at the time of recruitment, filing the test scores and
subsequently determining the relationship between the test scores and the
performance of employees on the job after a period of time. Although these NOTES
methods have several advantages and disadvantages, the testing programme
should make use of both methods to have maximum effectiveness. There
are four types of validity related to several purposes of testing. These are
content validity, predictive validity, concurrent validity and construct validity.
Content validity is assessed by indicating how effectively the content of a test
represents the subject matter or types of situations which the test purports
to measure. Predictive validity (exemplified by the follow-up method) is
assessed by indicating how effectively predictions made by the test have
been confirmed subsequently. Concurrent validity (exemplified by the present
employee method) is assessed by indicating how effectively the test is related
to some present criterion of performance. Construct validity is assessed by
determining what psychological characteristics a test usually measures. This
is accomplished by correlating a test with another which measures the same
characteristics. Factor analysis can also be used for this purpose.
In addition to validity, as Tiffin and McCormick point out, other factors
determining the functional value of psychological tests include reliability,
selection ratio and the percentage of present employees who are satisfied
with the job.
Reliability. This refers to the degree of consistency with which a test
measures what it purports to measure. There are three types of reliability
including coefficient of stability, coefficient of equivalence, and coefficient
of internal consistency. Coefficient of stability is assessed by the test-
retest method. A group of individuals are administered the same test twice
after a period of time, and then the two sets of test scores are correlated.
The coefficient of equivalence is evaluated by the alternate forms method
involving administration of two separate but equivalent forms of the test to
the candidates. The coefficient of equivalence is derived by correlating the
scores of the two forms. Index of internal consistency is evaluated by the
split-halves method. Each test is scored on each of the two halves of the items
(odd versus even or chance halves randomly chosen), and then the two sets of
scores are correlated. Usually, tests with the coefficients of reliability above
0.80 are satisfactory. It may be noted that the test might have reliability but
not necessarily high validity. However, if a test has low reliability, it is not
likely to have satisfactory validity.
Selection Ratio. Moreover, the functional value of the test of a
manpower manager depends upon the selection ratio—the ratio of the persons
selected to those tested. Suppose, we have 100 applicants and place the 75
who score the highest on the test. Thus, we reduce those placed to 75 per cent
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Selection of those tested. Accordingly, the selection ratio will be 0.75. Likewise, if we
test 200 applicants and place the 100 who score the highest on the test, our
selection ratio will be reduced to 0.50. Again, suppose we test 500 applicants
and place only the 50 who score the highest on the test, the selection ratio
NOTES will be reduced to 0.10. Overall, the effectiveness of the testing programme
increases with a fall in the selection ratio. Thus, as Tiffin and McCormick
observe, in group testing where the manpower manager is interested in
average, rather than individual results, he can effectively use the test with
lower validity by adequately decreasing the selection ratio. Thus, in group
testing, a decrease in selection ratio provides a substitute for high validity.
This does not mean that it is a substitute of ‘no validity’. The test must have
some validity to permit the utilization of reduction in the selection ratio.
Percentage of Present Satisfactory Employees. Finally, another factor
influencing the efficiency of a psychological test relates to the percentage of
the present employees who have been considered satisfactory. Other things
remaining the same, the lower the percentage of existing employees who
have been placed satisfactorily without test, the higher the percentage of
satisfactory employees placed by using tests is likely to result. Let us assume
that we have a test with a validity of 0.50 and use a selection ratio of 0.50, and
only 5 per cent of employees placed by the traditional method are successful.
Under these conditions, the expected increase to 9 per cent represents an 80
per cent increase in the number of satisfactory employees placed by the test.
Indeed, if the percentages of satisfactory employees placed without the test
is larger, the percentages of increase accomplished by using the test becomes
smaller. Accordingly, for 90 per cent of satisfactory employees placed by the
traditional method, the increase of this percentage to 97 per cent by using
the test will lead to a gain of only 8 per cent in the number of employees
satisfactorily placed.
Thus, other things being equal, if more complicated it is to identify
and place satisfactory employees without applying tests, the more advantage
a manpower manager can acquire through a proper psychological testing
programme. The Taylor-Russell tables can be used to ascertain as to what
percentage of employees recruited will be effective under several combinations
of test validity, selection ratio and percentage of present employees viewed
effective. However, these tables should be used with caution.
Using the Tests
A significant issue is how to use the tests for employment purposes. The
selection standard (critical score) on the test should vary with the market
conditions. If the market conditions are tight, the critical score should be
low and if loose, the selection standard should be high. Another point is that
several tests should be combined into a battery.

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 A Battery. There are two methods of combining tests in a battery. Selection
These include the multiple cut-off and the multiple correlation method. In the
multiple cut-off method, tests are administered one at a time and applicants
who do not perform satisfactorily are eliminated with each test. Thus, the
first test will eliminate all the low-scoring candidates, and the remaining NOTES
candidates will be administered the second test which will further eliminate
more candidates and so on. The multiple correlation method involves the
computation of multiple correlation between the best combination of test
scores and the relevant criterion. Thus, the performance on different tests
can be combined into a composite score in order to weigh each to attain the
maximum correlation between the performance on the test battery and the
criterion of job success. Thus, the value of the testing programme increases
by using many tests in combination because no single test gives as high a
validity coefficient as does the battery as a whole.
Inspection or Graphic Method. Yoder et al. suggest the inspection or the
graphic method using maximum as well as minimum cutting scores. Explicitly,
we may come across the fact that individuals who scored very high in the
test as well as those who scored very low, had a short tenure in an enterprise.
These types of relationships are called ‘curvilinear’ and involve separate
correlational techniques. Usually the eta coefficient is used for this purpose.
A study of turnover data of a company will reveal that short tenure employees
are those who have scored either below 80 or above 120 on the intelligence
test. Obviously, setting a minimum critical score at 80 and a maximum at 120
will remove short tenure risks related with either very high or very low scores.
It may be noted that the selection ratio discussed above assumes linearity of
relationships and accordingly cannot be used for curvilinear data.
Training. Last but not the least, adequate training of testers is of utmost
significance for the full advantage of the testing programme. Testing human
beings is quite different from testing materials or processes. Humans may
react both favourably and unfavourably to test situations. So, attempts should
be made to obtain a favourable response. The testers, therefore, should have
proper training to take the best out of the applicants and leave favourable
impression of the company with them.
IV. Psychological Tests in Selection and Placement
Tiffin and McCormick describe several types of tests used for selection and
placement under three categories including aptitude tests, personality and
interest tests, and achievement tests.
(a) Aptitude Tests
Aptitudes have been grouped into five categories including mental abilities,
mechanical and related abilities, psychomotor abilities, visual skills and a
class of other specific aptitudes.
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Selection (i) Mental Ability. The term mental ability has been used interchangeably
with intelligence. There are several kinds of mental abilities such as
verbal comprehension, word fluency, memory, inductive reasoning,
number facility, speed of perception and spatial visualization. Most
NOTES of these tests used for selection and placement purposes are group
tests. The tests that are used most frequently in industry include the
Adaptability Test, Otis Self-Administering Tests of Mental Ability,
Wonderlic Personnel Test, The Purdue Non-Language Personnel Test,
etc. These tests have been effectively used for clerical and supervisory
jobs and found useful in the selection of newspaper writers, teletype
operator trainees, etc. However, these tests have negative relationships
with performance in routine jobs such as assembly workers.
(ii) Mechanical Ability. The term mechanical ability refers to the ability
involved in the working of mechanical parts and equipment. This
ability has two aspects—mental and motor or physical. The mental
aspect relates to mechanical comprehension and the understanding of
the mechanical principles, while the motor or physical aspect relates to
skills such as muscular coordination and dexterity. Mechanical ability
has been used in its restricted sense involving a complex of intellectual
abilities. There may be a general mental ability as well as specific
abilities such as visualization of spatial relations. The most frequently
used group tests for mechanical ability include Flanagan Aptitude
Classification Tests, Bennett Test of Mechanical Comprehension,
Purdue Mechanical Adaptability Test, Revised Minnesota Paper Form
Board, etc. There is also some individual test, such as Minnesota
Mechanical Assembly Test, Purdue Mechanical Performance Test,
etc. These tests have been found effective especially for apprentices,
craftsmen, mechanics and repairmen, draftsmen and engineers.
(iii) Psychomotor Tests. These tests measure dexterity, manipulative ability,
motor ability, eye-hand coordination and allied sensory and muscular
abilities. Specifically, these tests involve several factors such as control
precision, multilimb coordination, response orientation, reaction time,
speed of arm movement rate control, manual dexterity, finger dexterity,
wristfinger speed and aiming. Typical psychomotor tests include
O’Connor Finger Dexterity Test, O’Connor Tweezer Dexterity Test,
Purdue Pegboard, Minnesota Rate of Manipulation Test, etc. These
tests have been found very useful in the selection and placement of
packers and minor operators.
Visual Skills. Vision tests are of special significance for practically every
industrial job. The visual skills required in an industry include keenness of
vision (visual acuity) at appropriate distances, discrimination of differences
at distances (depth perception or stereopsis), discrimination of difference

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in colour and postural characteristics of the eyes (phorias) at appropriate Selection
distances. Among the major vision tests used in industry include Ortho-Rater,
the Sight-Screener, the Telebinocular and the Vision Tester. Research results
have revealed several visual job families, i.e., groups of jobs which are similar
to each other vis-à-vis visual requirements. These visual job families include NOTES
clerical and administrative inspection and close work, vehicle operator,
machine operator, labourer, mechanic and skilled tradesmen, etc.
Special Aptitudes. In addition to the earlier mentioned aptitude tests,
there are several other tests to test the special aptitudes such as clerical
aptitude, reading speed and comprehension, vocabulary and perceptual speed.
Clusters. On the basis of extensive research, aptitude tests have
been grouped into three ‘clusters’—intellectual ability, spatial ability and
motor ability. Intellectual ability tests are highly effective in selection and
the placement of general supervisors, foremen, general clerks, salesmen,
protective-service workers and complex machine operators and least effective
for vehicle operators. The spatial ability tests have the highest validity for
structural workers and the lowest for general supervisors and clerks. The
motor ability tests are found useful for selection and placement of vehicle
operators, processing workers and gross manual workers.
(b) Personality and Interest Tests
It has been recognised that an employee may have adequate aptitude for a
required job, but he is still likely to fail if he possesses a personality which
would cause adjustment difficulties in work settings. This necessitates
identification of desirable and undesirable personality traits among job
applicants. Several attempts have been made to devise tests for measuring
personality and interest traits. Among the major personality tests conducted
in the industry are Bernreuter Personality Inventory, the Humm Wadsworth
Temperament Scale, the Guilford Series of Personality Tests, the Minnesota
Multiphasic Personality Inventory, the Gordon Personal Profile, the Rorschach
Projective Test and Thematic Apperception Test. As regards interest tests,
Strong Vocational Interest Blank and Kuder Preference Record, are largely
applied in the industry. The major limitation of personality and interest tests
for employment purposes relates to ‘faking’, i.e., the possibility of responses
to test items are not descriptive of the testee.
Overall, personality tests appear to be more effective for selection of
clerks, salesmen, public relations officials and trades and crafts than for other
occupational categories. It has been widely agreed that the non-intellectual
traits of personality are most significant for failures at work and for the
effectiveness of managers. There has been more evidence of the usefulness
of personality tests than of interest tests in the industry.

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Selection (c) Achievement Tests
In industry, achievement tests are used for recruitment of individuals for
jobs demanding experience, transfer and promotion of existing employees
NOTES and training purposes. Achievement tests measure the actual job proficiency
of the testees.
Types. Achievement tests are classified in three groups including job
sample (or performance) tests, written tests, and oral tests.
The job or work sample tests involve utilization of equipments which
are used on the job. An example of job sample test is a miniature punch
press used effectively for selecting individuals in jobs such as packaging,
inspecting and several types of machine operation. Likewise, a performance
test has been devised for selecting fork-lift operators. Again, several tests have
been designed to select individuals for stenographic, clerical and secretarial
positions. These include Blackstone Stenographic Proficiency Tests, the
Purdue Clerical Adaptability Test and the Thurstone Examination in Typing.
Usually, written tests are ‘tailor-made’ to meet the requirements for specific
training programmes. An example of such test is the Purdue Vocational Test
which has been used for several trades such as the operation of the grinder,
planer, lathe and milling machine.
Although achievement tests are not largely used in the industry, they
appear promising for not only differentiating various job groups but also
different levels of ability within a job. Overall, achievement tests are highly
useful in selecting tradesmen and apprentices.
V.  Interview Process
Since the interview is one of the most commonly used personal contact
methods, it has to be conducted with great care. Generally, the following
steps are followed in an interview process. They are:
1. Reviewing background information
2. Preparing a question plan
3. Creating a helpful sitting
4. Conducting the interview.
5. Checking references.
6. Physical or medical examination.
7. Final interview and induction.
1. Reviewing Background Information
Before the actual interview begins, the critical areas in which questions will
be asked must be identified for judging the ability and skills required for
the job. Pertinent information about the candidate should be collected and
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noted beforehand. This preparation saves time and mental efforts during the Selection
interview. If there is more than one interviewer, some practice and mock
interviews will help.
2. Preparing a Question Plan NOTES
Every interviewer should have a question plan. This is formed by scrutinising
the information given in the application form. This procedure will make
the candidate more comfortable because the discussion will focus on his
experiences. Besides, preparing a question plan is useful for inexperienced
interviewers. It will act as a guide and the interviewer will know whether he
has covered all the areas of the interview or not.
3. Creating a Helpful Setting
The place of interview should be carefully chosen. Make arrangements for
reception and seating so as to give an impression to the interviewee that he
is an important person to whom the interviewer will devote great attention.
Most interviews have overtones of emotional stress for the applicant. Success
in interviewing depends on reducing this stress. Properly arranged seating
should be made available. The candidates should be well-received by the
receptionist. The sitting room is generally kept away from the place where
the actual interviews are held so that the conversation between the interviewer
and the interviewee is not overheard by other candidates. In brief, the place of
interview should have privacy and comfort, atmosphere of leisure, freedom
from interruptions, authentic feeling for and interest in the candidate.
4. Conducting the Interview
Conducting the interview is usually aimed at establishing rapport with the
candidate, getting complete and accurate information from him and recording
it properly. It is, therefore, necessary to use a number of different approaches
during the course of an interview.
(a) Establishing Rapport: The fundamental step is establishing ‘rapport’,
putting the interviewee at ease, conveying the impression that the
interview is a conversation between two friends and not a confrontation.
A job interview can be a trying experience for the applicant. The
interviewer should gain the confidence of the candidate at the very
beginning by establishing rapport with him. To begin with, the interview
should proceed in the form of a conversation so that the two may get
to know each other, with the specific underlying purpose of getting
information in certain areas. Sufficient time should be allowed to enable
the candidate to reveal the facts necessary for a fair assessment of him.
(b)  Getting Complete and Accurate Information: Once the
interviewee is put at ease, the interviewer starts asking questions or
seeking information related to the job. Getting complete and accurate
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Selection information from the applicant is an art which calls for experience,
skill and technique on the part of the interviewer. The interviewer
should use the language which is clear to the applicant. Here again
it is extremely important to lead up to complex questions gradually.
NOTES Asking a difficult and complex question in the beginning can affect
subsequent interaction, particularly if the interviewee is not able to
answer the question. Thus, it is advisable for the pattern to follow
the simple-to-complex sequence. Some general rules to be observed
regarding questioning are:
1. The interviewer should be prepared with precise questions and
not take too much time in framing them.
2. Leading questions should be avoided because they give the
impression that the interviewer is seeking certain kinds of answers.
3. Close ended questions which call for “yes” and “no” should not
be asked for they offer little scope to the candidate to expand his
answers and give more information.
4. Showing surprise or disapproval of speech, clothes or answers to
questions can also inhibit the candidate.
5. An interviewer should not allow the interview to get out of hand.
He should be alert and check the interviewee if he tries to lead
the discussion into areas which are not relevant to the interview.
6. The interviewer should have talent, experience, and a sympathetic
attitude so that he is able to draw out the applicant who may have
a considerable potential but who may be shy and reserved in the
beginning.
7. Highly personal questions should be omitted until one is sure that
rapport has been fully established.
(c) Recording of Impressions: In order to make an accurate evaluation
of the interview, it is necessary that the interviewers’ impressions are
briefly written down. This will help the interviewer to arrive at a final
judgment.
(d) Concluding the Interview: In the final few moments, the interviewer
guides the interview to a close. The close of the interview is as important
as its beginning. The interview should be closed diplomatically so that
the interviewee may feel satisfied that he was given a full hearing. After
the candidate leaves, the interviewer looks over his notes, recalls his
impressions and makes a provisional appraisal before seeing the next
candidate.
5. Checking References
The references provided by the applicant have to be checked. This is to find
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98 Material
use of skills as required by an interviewer and diplomacy. The main difficulty Selection
is ascertaining the accuracy of information given. Besides inaccurate facts,
the referees’ inability to assess and describe the applicant and his limited
knowledge about the candidate are the difficulties in checking references. In
spite of these difficulties, it is necessary to verify the information secured. NOTES
In many organization, reference checking is taken as a matter of routine and
treated casually or omitted entirely.
6. Physical or Medical Examination
The next step is getting the candidates checked medically if there is a need.
Quite often the candidates are told to get medically examined before reporting
for duty. In government and other quasi government organizations, getting
medically examined is a must before reporting for duty or at the time of
reporting for duty. Medical examination is a part of the selection process for
all suitable candidate in many organizations.
The objectives of this examination are:
(a) to check the physical fitness.
(b) to protect the company against unwarranted claims for
compensation.
(c) to prevent communicable diseases.
(d) to prevent injury or damage to the health of employees.
(e) to discover existing liabilities at the time of hiring so that the
company’s subsequent liabilities can be assessed in case of
workmen’s claim for compensation for an injury.
(f) to place persons on those jobs which they can handle without
damage to their health.
The main purpose of the medical examination is to see whether the
candidate is medically fit to occupy a particular post and has the capabilities
to withstand the physical and psychological stresses and strains required of
the job. When conducted by in service medical personnel, they are more
valuable to the applicant than when done by a doctor knowing very little
about the working conditions under which the job is done. For instance, in
defense service, the medical examination is done by the doctors attached
to each defense wing. Such an examination can predict, the possible health
problems in future involving serious surgical conditions and prolonged
treatment which would involve huge medical expenditure to the organization.
Normally candidates are not rejected in medical examination unless they
are suffering from contagious or incurable diseases or complex emotional
problems. Though medical examinations are generally conducted, they often
fail to detect complicated diseases because they are conducted in a cursory
way. Further, the validity and reliability of medical examination as a selection
tool is minimum because of two reasons. They are:
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Selection 1. With growing automation, less physical strength will be required for
most jobs.
2. A sound physical condition is no guarantee against accidents.
NOTES To conclude, medical examination reveals whether or not a candidate
possesses the required stamina, strength and tolerance of hard working
conditions. Major deficiencies may serve as a basis for rejections. The basic
purpose of a physical examination is to place selected candidates on jobs
which they can handle without injury to their health.
7. Final Interview and Induction
After the candidate is finally selected, the management will have to sell the
job to him. He should be told as to what his duties are, what is required of
him and what are his future prospects in the organization. Normally this
information is given to the candidate at the time of final selection interview.
This is the way how the candidate is inducted into the job. He is formally
appointed by issuing an appointment letter or by concluding with him a
service agreement. The appointment letter contains the terms and conditions
of employment, pay scale and other benefits associated with the job.
The interviewer can describe the company and its policies, the duties
and responsibilities of the applicant as well as the opportunities available
to him for future promotion. The interviewer should in fact highlight the
favourable aspects of the job.

6.3 BARRIERS IN SELECTION

The main objective of selection is to hire people that are competent and
committed to work and deliver results. However, this objective is sometimes
defeated because of certain barriers. The impediments which check
effectiveness of selection are perception, fairness, validity, reliability and
pressure. This are discussed in detail as follows:
1. Perception: Our inability to understand what others say accurately is
possibly the most fundamental barrier to selecting the right candidate.
Selection demands an individual or a group of people to assess and
compare the respective competencies of others, with the aim of
choosing the right persons for the jobs. However, it is quite notable
that our views and opinions are highly personalized. As no two people
are the same, different people have different perceptions. This limited
perceptual ability is definitely a stumbling block to the objective and
rational selection of people and needs to be addressed.
2. Fairness: Fairness in selection requires that no individual should be
discriminated against on the basis of religion, region, race or gender.
However, the existing employment data points in the other direction.
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 The low numbers of women and other less-privileged selections of Selection
the society in middle and senior management positions and open
discrimination on the basis of age in job advertisements and in the
selection process, would suggest that all the efforts to minimize inequity
have not been very effective. NOTES
3. Validity: Validity is a test that helps predict job performance of an
incumbent. A test that has been validated can differentiate between the
employees who can perform well and those who cannot. However, a
validated test is not completely reliable and does not predict job success
accurately. It can only increase possibility of success accurately and
can only increase possibility of success.
4. Reliability: A reliable method is one which will produce consistent
results when repeated in similar situations. Like a validated test, a
reliable test may fail to predict job performance with accuracy.
5. Pressure: This is another major barrier to selection. Many a times,
pressure is brought on the selectors by politicians, bureaucrats, relatives,
friends and peers to select particular candidates. Candidates selected
because of compulsions are obviously not the right ones as more often
than not they are not competent enough.

Check Your Progress

1. State the primary aim of employee selection.
2. What is an application blank?
3. What does aptitude tests measure?
4. What does an interview consist of?
5. Name the three methods required to conduct physical-demands
analysis.

6.4 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. The primary aim of employee selection is to choose those persons who

are most likely to perform their jobs with maximum effectiveness and
to remain with the company.
2. The application blank is a highly structured interview in which the
questions are standardized and determined in advance.
3. Aptitude tests measure ability and skills.
4. The interview consists of interaction between the interviewer and the
applicant.
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Selection 5. Physical-demands analysis can be conducted by three methods namely,
the disability method, the rating method and the specific method.

NOTES 6.5 SUMMARY

· Selection, either internal or external, is a deliberate effort of the

organization to select a fixed number of personnel from a large number
of applicants.
· The primary aim of employee selection is to choose those persons who
are most likely to perform their jobs with maximum effectiveness and
remain with the company.
· According to Yoder, “the hiring process is of one or many ‘go-no-go’
gauges. Candidates are screened by the employer and the short-listed
applicants go on to the next hurdle, while the unqualified ones are
eliminated”.
· A variety of methods are used to select personnel. The selection pattern,
however, is not common for all organizations.
· In a sense the application blank is a highly structured interview in
which the questions are standardized and determined in advance.
· Those who are selected for interviews on the basis of particulars
furnished in the application blank are called for initial interview by
the organizations.
· For further assessment of a candidate’s nature and abilities, some tests
are used in the selection procedure.
· Aptitude or potential ability tests are widely used to measure the talent
and ability of a candidate to learn a new job or skill.
· Interest test finds out the type of work in which the candidate has an
interest.
· Personality test is used to measure the characteristics that constitute
personality.
· Candidates are called for an interview after they have cleared all other
tests. The interview consists of interaction between the interviewer and
the applicant.
· The reference provided by the applicant has to be checked. This is to
find out from the past records of the candidate.
· After the candidate is finally selected, the management will have to
explain the job to him. He should be told as to what his duties are, what
is required of him and what are his future prospects in the organization.
· As Blum and Naylor observe, the purpose of the selection process is
to make effective use of individual differences with a view to select
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 individuals who possess the greatest degree of qualities required for Selection
an effective job performance.
· As Yoder et al. suggest, the selection process involves seven steps
as follows: (i) preliminary screening of applicants, (ii) review of
NOTES
application blank, (iii) checking references, (iv) physical examination,
(v) psychological testing, (vi) employment interview, and (vii)
evaluation of the programme.
· Aptitude tests assess an individual’s potentiality to learn about a job
through adequate training.
· A significant issue is how to use the tests for employment purposes.
The selection standard (critical score) on the test should vary with the
market conditions.
· Aptitudes have been grouped into five categories including mental
abilities, mechanical and related abilities, psychomotor abilities, visual
skills and a class of other specific aptitudes.
· Achievement tests are classified in three groups including job sample
(or performance) tests, written tests, and oral tests.
· Conducting the interview is usually aimed at establishing rapport with
the candidate, getting complete and accurate information from him and
recording it properly.

6.6 KEY WORDS

· Barrier: It refers to a circumstance or obstacle that keeps people or

things apart or prevents communication or progress.
· Appraisal: It is a formal assessment, typically in an interview, of the
performance of an employee over a particular period.
· Discrimination: It is the unjust or prejudicial treatment of different
categories of people, especially on the grounds of race, age, or sex.

6.7 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. What are the steps followed in a selection procedure?
2. Write a note explaining the types of employment tests.
3. Discuss the objectives of selection.
4. Briefly describe the interview process.

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Selection Long Answer Questions
1. Give a descriptive explanation of the methods of selection in detail.
2. The tests should be tested before they are actually conducted. Critically
NOTES comment.
3. How are the tests for employment purposes used? Discuss.
4. Elaborate on the barriers faced during selection.

6.8 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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 Induction

UNIT 7 INDUCTION
Structure NOTES
7.0 Introduction
7.1 Objectives
7.2 Meaning, Definition and Need for Induction
7.3 Problems Faced during Induction
7.4 Induction Programme Planning
7.5 Answers to Check Your Progress Questions
7.6 Summary
7.7 Key Words
7.8 Self Assessment Questions and Exercises
7.9 Further Readings

7.0 INTRODUCTION

The introduction of the employee to the job is known as induction. It is the

process by which new employees are introduced to the practices, policies and
purposes of the organization. It is basically a welcoming process. Induction
follows placement and consists of the task of orienting or introducing the
employee to the company. Instead of leaving him to stumble through the
organization, it is better to systematically introduce him to the company, its
policy and its position in the economy. Considering the fact that a number
of workers, newly recruited, either come from rural surroundings or have
secured appointments in an industrial unit for the first time, it is imperative
to have a thorough induction programme to ease the strain effected by the
change in social environment. It is regrettable that very little of this is done
in India. No personnel function is more neglected in Indian industries than
induction. A new employee is expected to learn about the company through a
process of trial and error. The employee invariably falls in the hands of those
who are anxious to assume leadership. Quite often the employee acquires
a wrong version of the company’s policy from such leaders. In these cases,
the employer has only himself to blame, for he had the first opportunity to
put the right ideas into the mind of the new employee, but he had not availed
himself of the same. The unit will discuss various aspects of induction.

7.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the meaning and definition of induction
· Explain the need for induction
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Induction · Assess the problems faced during induction
· Describe induction programme planning

NOTES 7.2 MEANING, DEFINITION AND NEED FOR

INDUCTION

According to R.P Billimoria, induction or 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 organization”. A
formal orientation tries to bridge the information gap of the new employee.
When a person joins an organization, he is a stranger to it. He may experience
a lot of difficulties which could lead to tension and stress in him. This in turn
can reduce his effectiveness.
Need for Orientation
In an organization, orientation is required for overcoming employee anxiety,
reality shocks and for accommodating employees.
· New employees experience a lot of anxiety in an organization. This is
a natural phenomenon which can be overcome through orientation.
· An employee joins an organization with certain assumptions and
expectations. When these expectations do not match with reality,
the new employee experiences a reality shock. Effective orientation
programmes help to reduce this reality shock by providing a more
realistic expectation on the part of the new employee.
· Proper employee orientation helps to accommodate the new employee
with existing employees by developing new acquaintances and
understanding of the various aspects of the job.
Content of the Induction Programme: Keith Davis has listed the
following topics that need to be covered in an employee’s induction
programme:
Table 7.1  Topics of an Induction Programme

1. Organizational Issues
· History of the company
· Names and titles of key executives
· Employees’ title and department
· Layout of physical facilities
· Probationary period
· Products/ Services offered
· Overview of production processes
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 · Company policies and rules Induction

· Disciplinary procedures
· Employees’ handbook
· Safety steps NOTES
2. Employee Benefits
· Pay scales, pay days
· Vacations, holidays
· Rest pauses
· Training avenues
· Counselling
· Insurance, medical, recreation, retirement benefits
3. Introductions
· To supervisors
· To co-workers
· To trainers
· To employee counsellors
4. Job Duties
· Job location
· Job tasks
· Job safety needs
· Overview of jobs
· Job objectives
· Relationship with other jobs
Types of Induction Programmes
Let us discuss different types of induction programmes.
(a) General Induction Programme
Once an offer of employment has been extended and accepted, the final stage
in procurement function is concluded. The individual has then to be oriented
towards the job and the organization. This is formally done through a process
known as induction or orientation. Induction is a welcoming process—the
idea is to welcome the candidate, make him feel at home in the changed
surroundings and to introduce him to the practices, policies and purposes
of the organization. The necessity of an induction programme is that when
a person joins an organization, he may feel strange, shy, insecure and/or
nervous. Induction leads to reduction of such anxieties.
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Induction (b) Specific Orientation Programme
Specific orientation is conducted by the foreman. Induction is specific and
requires skill on the part of the foreman. A new employee must be provided
NOTES operational knowledge that is specific to the position and location. The
immediate boss (foreman) is responsible for such induction and training.
Every new employee should know
(i) the people he/she works with
(ii) the work he is responsible for
(iii) the result to be accomplished
(iv) the current status of the work
(v) his relationships in the organization
(vi) reports and records he must understand and maintain
(vii) operating policies, procedures and rules
(viii) service group available to help him
The purpose of specific induction is to enable an employee to adjust
himself to his work environment.
(c) Follow-up Induction Programme
The purpose of the follow-up induction programme is to find out whether the
employee is reasonably satisfied with the job. It is usually conducted by the
foreman or by a specialist from the personnel department. Through guidance
and counselling, efforts are made to remove the difficulties experienced by
the newcomer. Usually, follow up induction takes place after about one or
two months from the time of appointment.

7.3 PROBLEMS FACED DURING INDUCTION

In every organization, new employees often go through an orientation

program which familiarizes them with the work culture of their new company.
The induction of the employees is a vital component in the development of
a dedicated and focused workforce. Orientation enables new employees to
socialize and know their employer better. Unfortunately, not paying much
attention to its planning and implementation results in an under-proficient
work force. The factors resulting in this are very minor and if rectified, would
benefit both the employee and the company.
Some of the problems faced during induction are as follows:
No Planning
Often companies do not invest enough time and money in their orientation
program and overlooks its impact in the long run. A lot of research and
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planning is required before conducting an induction. A valuable program Induction
is well-researched, made interesting and carefully organized, taking into
consideration the goals of both the employer and the employees.
Management Involvement NOTES
Usually, the top management excludes itself from induction programmes
and leaves it completely to the human resource department. Mostly, the
communication about the induction is delayed. Just the appearance of
managers can result in a positive atmosphere. They need to consider this as
an opportunity to effectively communicate company goals to new employees.
Ineffective Handouts
Another important thing that gets overlooked during induction are handouts.
They do not receive much attention. Handouts are like an itinerary containing
the content of presentations for the day. These can be used as a reference by
any employee later. Further, all the information can be placed on record at
the company website.
No Follow-Up
Companies treat induction as the final step. Majority of the companies do not
have follow-up sessions after an orientation program. It becomes difficult to
measure the impact of induction and to know whether the new employees are
comfortable with company policies. Periodic follow-up sessions are ways of
finding out how the employees perceived their workplace.

7.4 INDUCTION PROGRAMME PLANNING

A well organised induction programme is one of the most effective ways to

introduce new employees to their employer. It functions as an opportunity
to reassure the employees about their decision to come and work for that
company. It also helps to ensure that the new employees feel comfortable
in their new job and understand the corporate culture and work ethics of the
company they are joining.
By providing employees with a solid foundation of knowledge up front,
they are more likely to settle in quickly, with little disruption to others. It
further enables them to understand their responsibilities clearly thus saving
manager’s time. Therefore, the induction training should ensure that the new
employees who want to be integrated within the organization know about
the specific tasks they will be required to perform within the organization.
An important pre-requisite of induction planning is that the person
conducting the induction process should be very knowledgeable about the
organization to successfully integrate new employees into the firm. Many
companies have discovered that the cost of not training is higher than the Self-Instructional
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Induction cost of training, and hence there is a higher risk in choosing not to train new
employees into the business.
Steps in the Induction Programme Planning: The HR department may
initiate the following steps while organizing the induction programme:
NOTES
1. Welcoming the new recruit to the organization.
2. Providing knowledge about the company: what it is, what it does,
how it functions, the importance of its producers; knowledge of
conditions of employment, and company’s welfare services.
3. Giving the company’s manual to the new recruit.
4. Showing the location/ department where the new recruit will
work. This step should include specific job location and duties.
5. Providing details about various groups and the extent of unionism
within the company. In this step the new employee is given a brief
idea about the setup of the department, production processes,
different categories of employees, work rules, safety precautions
and rules.
6. Giving details about pay, benefits, holidays, leave, etc.
7. Defining the employee’s career prospects with reference to the
training and development activities that the company organizes
with special reference to the new recruits’ position.
Setting up a well-planned and successful employee induction program
is the first step towards welcoming new employees and helps in gaining their
commitment in the long run. While preparation plays an important role, it is
equally important to make sure that the information in the induction training
is regularly reviewed and updated. That way the training will always be
relevant and applicable to new employees.

Check Your Progress

1. Define induction.
2. Who conducts the specific orientation programme?
3. What is the purpose of follow-up induction programme?
4. What are handouts?

7.5 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Induction or orientation is “a technique by which a new employee

is rehabilitated into the changed surroundings and introduced to the
Self-Instructional practices, policies and purposes of the organization”.
110 Material
 2. Specific orientation is conducted by the immediate boss (foreman). Induction

3. The purpose of the follow-up induction programme is to find out

whether the employee is reasonably satisfied with the job.
4. Handouts are like an itinerary containing the content of presentations NOTES
for the day.

7.6 SUMMARY

· According to R.P Billimoria, induction or 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
organization”.
· In an organization, orientation is required for overcoming employee
anxiety, reality shocks and for accommodating employees.
· Induction is a welcoming process—the idea is to welcome the candidate,
make him feel at home in the changed surroundings and to introduce
him to the practices, policies and purposes of the organization.
· Specific orientation is conducted by the foreman.
· The purpose of specific induction is to enable an employee to adjust
himself to his work environment.
· The purpose of the follow-up induction programme is to find out
whether the employee is reasonably satisfied with the job.
· Through guidance and counselling, efforts are made to remove the
difficulties experienced by the newcomer.
· Usually, follow up induction takes place after about one or two months
from the time of appointment.
· In every organization, new employees often go through an orientation
program which familiarizes them with the work culture of their new
company.
· Often companies do not invest enough time and money in their
orientation program and overlooks its impact in the long run.
· A lot of research and planning is required before conducting an
induction.
· Another important thing that gets overlooked during induction are
handouts.
· Handouts are like an itinerary containing the content of presentations
for the day.
· An important pre-requisite of induction planning is that the person
conducting the induction process should be very knowledgeable about
the organization to successfully integrate new employees into the firm. Self-Instructional
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Induction
7.7 KEY WORDS

· Induction: It is an occasion when someone is formally introduced into

NOTES a new job or organization, especially through a special ceremony.
· Acquaintance: It refers to a person one knows slightly, but who is not
a close friend.
· Implementation: It is the process of putting a decision or plan into
effect; execution.

7.8 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Why is orientation needed?
2. What forms the content of an induction programme?
3. Briefly describe a general induction programme.
4. Should senior management be involved in induction programmes?
5. Write a short note on induction programme planning and discuss the
steps involved in planning.
Long Answer Questions
1. Exemplify induction training rolled out in some of the leading
organizations apart from those mentioned in the unit.
2. Elaborate and analyse the various types of induction programmes.
3. Assess the problems faced during an induction and measure their impact
in the short and long run.

7.9 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.

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Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd Induction
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
NOTES
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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Training

UNIT 8 TRAINING
Structure
NOTES
8.0 Introduction
8.1 Objectives
8.2 Training: Concept, Significance and Needs
8.3 Types of Training
8.4 Answers to Check Your Progress Questions
8.5 Summary
8.6 Key Words
8.7 Self Assessment Questions and Exercises
8.8 Further Readings

8.0 INTRODUCTION

In this unit, you will learn about employee training. For any organization
to perpetuate itself through growth, there is a basic need for developing its
manpower resources. It is one thing to possess knowledge but another to
put it to effective use. It is essential to help develop skills and also update
knowledge. Especially, in a rapidly changing society, employee training and
development is very important for an organization.
Training is a method of acquiring a succession of planned behaviour.
It attempts to improve employees’ performance on the current job or prepare
them for an intended job. Among other benefits, training instructs the workers
towards better job adjustment and reduces the rate of labour turnover and
absenteeism.

8.1 OBJECTIVES

After going through this unit, you will be able to:

· Describe the concept and significance of training
· Explain training needs
· Analyse training methods
· Discuss various types of training

8.2 TRAINING: CONCEPT, SIGNIFICANCE AND

NEEDS

Training is undertaken by organizations to improve the performance, quality,

skill and knowledge of their employees. Thus, it is a vital phase in the
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114 Material
Features of training Training

McFarland defines several concepts used in the development of human

resources. Although training and education are closely connected, these
concepts differ from each other in crucial ways. While the term ‘training’ NOTES
relates to imparting specific skills for specific objectives, the term ‘education’
involves the development of the whole individual socially, intellectually and
physically. Accordingly, training forms only a part of the entire educational
process. Moreover, education is more akin to the concepts of growth and
development than training. The term development can be defined as the nature
and direction of change taking place among personnel through educational
and training processes.
Nature of tasks and responsibilities as a determinant
The relative amount of training and education changes with the nature of
tasks and responsibilities in organizational settings. As one goes upward in
the organization, the requirement of training usually diminishes, and the
requirement of education goes up. Explicitly, non-managerial personnel
require more job or trade-related skills than managerial personnel
demanding the generalized conceptual skills and human relations insights.
Accordingly, there is a difference between employee training and management
development. Thus, employee training relates to the process by which non-
managerial employees are imparted job skills. This type of training is largely
task-centred instead of career-centred, and supplements basic skills and job
training obtained in trade schools.
Development as applied to managers
On the other hand, development as applied to managers involves the processes
by which managerial personnel accomplish not only skills in their present
jobs, but also competence for prospective assignments of enhanced difficulties
and scope. The higher responsibilities embrace complex conceptual thoughts
and analyses, and decision-making abilities. The development process relates
to the pressures, changes and growth patterns. Thus, development as applied to
managers embraces all those recognized and controlled measures, which exert
a marked influence towards the improvement of abilities of the participant
to accomplish his present job more effectively and enhance his potential for
prospective higher responsibilities.
Narrow and broad perspectives
However, Dunn and Stephens do not limit the term ‘development’ to
managerial personnel only. According to them, ‘Training refers to the
organization’s efforts to improve an individual’s ability to perform a job or
organizational role, whereas development refers to the organization’s efforts
(and the individual’s own efforts) to enhance an individual’s abilities to
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Training advance in his organization to perform additional job duties.’ Thus, training
provides knowledge and skills required to perform the job. It may involve
showing a lathe operator how to produce a new component, demonstrating
to supervisors how to handle grievances, and improving a plant manager’s
NOTES skill to negotiate a contract with the trade union. Accordingly, training can
be viewed as job-oriented leading to an observable change in the behaviour
of the trainee in the form of increased ability to perform the job.
On the other hand, although development is still job-related, it is much
broader in scope. This is implied in management development programmes
purporting to prepare managers for higher level positions. It enhances general
knowledge related to a job as well as the ability to adapt to change. Thus,
training is narrow in scope and largely relates to the acquisition of skills,
while development embraces a broader scope. The concept of ‘education’
relates to the acquisition of knowledge of a general nature.
Present and future orientations
Thus, as Fitzgerald observes, training provides employees with specific skills
or helps them to overcome deficiencies in their present performance. On the
other hand, development provides employees with that the abilities that the
organization will need in the future.
Training versus development
According to Yoder, although the terms ‘training’ and ‘development’ appear
synonymous, there is a recognized difference between these concepts. Earlier,
training programmes stressed preparation for an improved performance in
largely specific rank-and-file jobs. With the growth of organizations, several
problems developed specifically at the supervisory level. Accordingly,
supervisory training programmes were launched enabling them to deal
with distinctive problems. During the training of the supervisors, the need
to train their bosses appeared significant. Therefore, special developmental
programmes for middle managers were organized. Later on, the development
programmes were started for the top management as well. These programmes
indicated the significance of the concept of development, and thus training
appeared to be an improper designation for learning a wide variety of
complex, difficult and intangible functions of managerial personnel.
Thus, the concept ‘training’ was degraded. As managers themselves
remarked, ‘training is for dogs, people are developed’. Today, the terms
‘development’ and ‘education’ are more suitable than the term ‘training’. It is
not the training but the full development of personality that enables the human
resources to exert their full potential. Accordingly, training and development
programmes are combined together for developing skills as well as basic
attitudes, leading to a continued personal growth. These programmes purport
to improve job performance, minimize waste and scrap, prepare individuals
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for promotions, reduce turnover, enable individuals to accept organizational Training
changes, facilitate understanding of the organizational goals and attain allied
behavioural objectives. Obviously, the basic problem in development is to
integrate the individual’s achievement, motivation and self-interest with the
goals of the organization. NOTES

Difference from four standpoints

Likewise, Gomez-Mezia et al. visualized that training tends to focus on
immediate organizational needs, while development focuses on long-term
requirements. While the scope of development is on the whole work group of
the organization, the scope of training is restricted to an individual employee.
The two concepts also differ vis-à-vis their goals. While training overcomes
current skill deficiency, development prepares the employees for future work
demands. Training is concerned with the current job, whereas development
relates to both current and future jobs. Accordingly, it is necessary to remember
these differences while evolving and evaluating training programmes.
Thus, the use of training programmes to influence long-range issues is
likely to be ineffective. In the same way, the use of a development programme
to improve current job performance will be futile.
Obviously, training provides a measure for modifying employee
behaviour involving complex attitudes, knowledge and understanding
and improving organizational effectiveness. Attempts are being made to
determine the training needs for the entire organization rather than its specific
departments and also to involve the top management in this programme.
There is an urgent need for overcoming resistance to a training programme by
demonstrating the concrete results of training, allowing the line personnel to
determine its specific needs and perform its own training as much as possible.
This approach ensures interest and involvement of the line personnel and
minimize conflicts between the line and staff personnel.
Training Needs and Objectives
The needs and objectives are as follows:
(a) Evaluating gap by skills analysis
As Price observes, a training need exists when there is a gap between the
present performance of an employee or group of employees and the desired
performance. The existence of this gap can be determined on the basis
of a ‘skills analysis’ involving the following five steps: (1) Analysis and
determination of the major requirements of the specific job, (2) Identification
of the tasks needed to be accomplished to meet the job requirements, (3)
Understanding of the procedures needed to accomplish each of the job
tasks, (4) Analysis of the knowledge and skills needed to accomplish the

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Training procedures, (5) Identification of any special problem of the job and analysis
of any particular skill needed to meet the problem.
(b) Training as a preventive tool to specific problems
NOTES Training needs should be determined from the standpoint of a specific problem
for which training is the most effective solution. The problem may be actual
or potential. There may be numerous problems for which training forms
a preventive tool. It may solve several problems of excessive number of
accidents, lack of ambition among employees, excessive buck passing, poor
cooperation, absence of job pride, excessive spoilage of material, frequent
changes in procedures, lack of understanding of responsibilities, lack of
effective teamwork, excessive number of transfers or request for transfers,
higher turnover, etc. The objective of training in these situations is to prevent
the occurrence of such specific problems. As indicated, specific training needs
can be determined by deducting the existing amount of employee skills from
the job requirements.
(c) Training as a tool to achieve organizational goals
As Bernardin points out, an organization should provide resources to training
programmes if they facilitate in the attainment of organizational goals. For
this purpose, needs analysis must be conducted to collect the best possible
data for justifying the use of training programmes. Organizations which
implement training programmes without such assessments are likely to make
pitfalls and waste money. For example, the research may reveal the need
for job redesign rather than training. This analysis must be conducted in the
context of strategic plans of any type of strength, weakness, opportunity and
threat analysis. According to Bernardin, needs assessment can be considered
as a systematic, objective determinant for training needs which involves
conducting three primary types of analysis: organizational analysis, job
analysis, and person analysis. These types of analysis can help in determining
the objectives for the training programmes.
Significance and Benefits of Training
Training is a process of learning a sequence of programmed behaviour. It
is application of knowledge. It gives people an awareness of the rules and
proce­dures to guide their behaviour. It attempts to improve their performance
on the current job or prepare them for an intended job. ‘According to Edwin
D Flippo, the purpose of training is to achieve a change in the behaviour of
those trained and to enable them to perform better.’ In order to achieve this
objec­tive, any training programme should try to bring positive changes in:
· Knowledge: It helps a trainee to know facts, policies, procedures and
rules pertaining to his job.

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 · Skills: It helps him to increase his technical and manual efficiency Training

necessary to do the job.

· Attitude: It moulds his behaviour towards his co-workers and
supervisors and creates a sense of responsibility in him. NOTES
Importance of training
(a) It equips the management to face the pressures of changing environment.
(b) It usually results in the increase of quantity and quality of output.
(c) It leads to job satisfaction and higher morale of the employees.
(d) Trained workers need lesser supervision.
(e) Trained workers enable the enterprise to face competition from rival
organizations.
(f) It enables employees to develop and rise within the organization and
increase their earning capacity.
(g) It moulds the employees’ attitudes and helps them to achieve better
cooperation with in the organization.
(h) Trained employees make better economic use of  materials  and
equipment resulting in reduction of wastage and spoilage.
(i) Training instructs the workers toward better job adjustment and reduces
the rate of labour turnover and absenteeism.
Benefits of training
(a) Benefits to organizations: A programme of training becomes essential
for the purpose of meeting specific problems of a particular organization
arising out of the introduction  of  new lines of production, changes
in design, demands of competi­tion, and so on. The major benefits of
training to an organization are:
(i) Higher productivity: Training can help employees to increase
their level of performance on their present assignment. It enhances
skills. Increased performance and productivity are most evident on
the part of new employees who are not yet fully aware of the most
efficient and effective ways of performing their jobs. Enhanced
skill usually helps to increase both quantity and quality of output.
(ii) Better organizational climate: An endless chain of  positive
reactions results from a well-planned training programme.  In­
creased morale, less supervisory pressures, improved product
quality, increased financial incentives, internal promotions, and
so on result in a better organizational climate.
(iii) Less supervision: Training does not eliminate the need for
supervision; it reduces the need for constant supervision.
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Training (iv) Prevents manpower obsolescence: Manpower obsolescence
is prevented by training as it fosters initiative and creativity of
employees. An employee is able to adapt himself to technolog­ical
changes.
NOTES
(v) Economical operations: Trained personnel will make economical
use of materials and equipment. This reduces wastage in materials
and damage to machinery and equipment.
(vi) Prevents industrial accidents: Proper training can help to prevent
industrial accidents.
(vii) Improves quality: Trained employees are less likely to make
operational mistakes thereby increasing the quality of the compa­
ny’s products.
(viii) Greater loyalty:  A common objective of training programme will
mould employees’ attitudes to achieve support for organiza­tional
activities and to obtain better cooperation and greater loyalty.
Thus, training helps in building an efficient and loyal workforce.
(ix) To  fulfil organization’s future personnel needs:  When the
need arises, organizational vacancies can be staffed from inter­nal
sources, if an organization initiates and maintains an ade­quate
training programme.
(x) Standardization of procedures: Trained employees will work
intelligently and make fewer mistakes when they possess the
required know-how and understand their jobs.
(b) Benefits to employees
(i) Personal growth: Employees on a personal basis gain individu­
ally from training. They secure wider awareness, enlarged skill and
enhanced personal growth.
(ii) Development of new skills: Training improves the performance of the
employees and makes them more useful and productive.  The skills
developed through training serve as a valuable personal asset to the
employee. It remains permanently with the employee.
(iii) Higher earning capacity: By imparting skills, training facil­
itates  higher remuneration and other monetary  benefits  to  the
employee.  Thus, training helps each employee to utilize and develop
his full potential.
(iv) Helps  adjust with changing technology: Old employees need
refresher training to enable them to keep abreast of the changing
methods, techniques and use of sophisticated tools and equipment.
(v) Increased safety:  Proper training can help prevent industrial accidents.
Trained workers handle the machines safely. Thus, they are less prone
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 to industrial accidents. A safe work envi­ronment also leads to a more Training
stable mental attitude on the part of the employees.
(vi) Confidence: Training creates a feeling of confidence in the minds of
employees. It gives safety and security to them in the organization.
NOTES
Training Methods and Schemes
There are many types of training methods, some of them are:
(a) Induction or orientation training: It is the method of introducing
a new employee into  the  organization with  a  view to gaining his
confidence and developing a sense of cooperation in him. It is a training
programme used to induct a new employee into the new social setting of
his work. The new employee is introduced to his job situation and to his
co-employees.  He is also informed about the rules, working conditions,
privileges and activities of the company. The induction training not
only helps personal adjustment of the new employee to his job and
work group but also promotes good morale in the organization.
An induction programme should aim at achieving the following
objectives:
(i) To build up the new employee’s confidence in the organization
so that he may become efficient
(ii) To ensure that the new employee may not form false impres­sions
regarding his place of work
(iii) To promote a feeling of belonging and loyalty
(iv) To give information to the new employee about canteen, leave
rules and other facilities, etc
In short, planned induction welcomes a new employee, creates a good
attitude, reduces labour turnover and makes the employee feel at home
right from the beginning.
(b) Job instruction training: The object of job training is to increase the
knowledge of workers about the job with which they are concerned,
so that their efficiency and performance are improved. In job training,
workers are enabled to learn correct methods of handling machines
and equipment avoiding accidents, minimizing wastes, and so on.
Under this technique, an employee is placed in a new job and is told
how it may be performed. It is primarily concerned with developing in
an employee the skills and habits consistent with the existing practices
of an organization and with orienting him to his immediate problems.
The employees learn the job by per­sonal observation and practice as
well as occasionally handling it. It is learning by doing, and it is most
useful for jobs that are either difficult to stimulate or can be learned
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Material 121
Training quickly by watching and doing. The actual training follows a four-step
process:
(i) Preparation of the trainee for instruction
NOTES (ii) Presentation of the instructions in a clear manner
(iii) To help the trainee try out the job to show that he has understood
the instructions
(iv) Encourage questions and allowing the trainee to work along with
regular follow-up by the trainer
(c) Promotional training: Many concerns follow a policy of filling some of
the vacancies at higher levels by promoting existing employees. This
policy increases the morale of workers. When the existing employees
are promoted to superior positions in the organization, they are required
to shoulder new responsibilities. For this, training has to be given.
(d) Refresher training: With the passage of time, employees may forget
some of the methods, which were taught to them, or they may have
become outdated because of technological development and improved
techniques of management and production. Hence, refresh­er training is
arranged for existing employees in order to pro­vide them an opportunity
to revive and also improve their knowledge.
According to Dale Yoder ‘Retraining (refresher training) pro­
grammes  are designed to avoid personnel obsolescence.’ Thus,
refresher training is essential because:
(i) Employees require training to bring them up-to-date with the
knowledge and skills and to relearn what they have forgotten.
(ii) Rapid  technological changes make even the  most qualified
workers obsolete in course of time.
(iii) Refresher training becomes necessary because many new jobs
are created and are to be manned by the existing employees.
(e) Apprenticeship training: Apprenticeship training system is widely
in vogue today in many industries. It is a good source of providing the
required personnel for the industry.  Under this method, both knowledge
and skills in doing a job or a series of related jobs are involved. The
apprenticeship programmes combine on-the-job training and experience
with classroom instructions in particular subjects. Apprenticeship
training is desirable in industries which require a constant flow of new
employees expect­ed to become all-round craftsmen.
(f) Internship training: Internship training is usually meant for
such vocations where advance theoretical knowledge is to be
backed up by practical experience on the job. Under this method,
the professional institutes enter into arrangement with a big business
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122 Material
 enterprise  for providing practical knowledge to its students. For Training
example, engineering students are sent to  industrial enterprise and
medical students are sent to hospitals for practi­cal knowledge.
(g) Vestibule training: In this method, actual work conditions are
NOTES
simulated in a class room. Material, files and equipment that are used
in the actual job are used in the training programme too. In vestibule
training, theory can be related to practice. This type of training is
commonly used for training employees for skilled and semi-skilled
jobs. Vestibule training consists of two parts:
· The lecture method that focuses on theoretical framework and the
principles involved in the job performance, and
· The practical exercises based on the theoretical aspects in a workshop
that is similar to the shop floor in the production department.
The vestibule training is more suitable for those employees who are
required to possess certain specific technical skills before they are
employed in actual operations.
Systems approaches to training
While designing training programmes the goal of the organization should
be kept in mind. The organizational goals and strategies form the basis for
training objectives. However, many of the organizations do not make the
connection between their strategic objectives and their training programme.
As a result, much of an organization’s investment in training programmes
does not contribute directly to organizational effectiveness and performance.
To make certain that investments in training and development have maximum
impact on individual and organizational performance, a systems approach to
training should be used. The systems approach to training has four phases
which are explained in Figure 8.1.
PHASE 4:
Evaluation
PHASE 3: · Reactions
Implementation · Learning
PHASE 2: · On-the-job · Behaviour
methods (transfer)
Design · Off-the-job · Results
· Instructional methods
objectives · Management
PHASE 1: · Trainee development
readiness
Need Assessment · Learning
· Organization principles
analysis
· Task analysis
· Person analysis

. Fig. 8.1  System Model of Training Self-Instructional

Material 123
Training Phase 1: Conducting the needs assessment: The need for training should be
felt by the organization. Managers, particularly HR managers, should find
out the types of training that are needed, where they are needed, who needs
them, and which method should be used to train the employees. In order to
NOTES do this, we must follow three steps:
1.
Organization analysis: It is an examination of the environment,
strategies, and resources of the organization to determine where training
emphasis should be placed.
2.
Task analysis: After doing the organization analysis, the next step
is to do the task analysis. Task analysis involves reviewing the job
description and job description and job specification to identify the
activities performed in a particular job. Task analysis often becomes
more detailed than job analysis, but the overall purpose is to determine
the exact content of the training programme. The knowledge skills
and abilities (KSAs) needed to perform the particular job should be
ascertained. The competency assessment focuses on the set of skills and
knowledge employees need to be successful, particularly for decision-
oriented and knowledge-intensive jobs.
3.
Person analysis: Person analysis involves determining which employees
require training and which employees do not need the particular type
of training. Person analysis helps the organizations in several ways (i)
it helps in avoiding the mistake of sending all employees into training
when some do not need it. (ii) It enables managers to determine what
prospective trainees are able to do when they enter training so that the
programmes can be designed to emphasize the areas in which they are
deficient.
Phase 2: Designing the training programme: The second step is to design
the type of learning environment necessary to enhance learning. The training
design should focus on the following:
1.
Instructional objectives: They describe the skills and knowledge to
be acquired and the attitudes to be changed. A clear statement of
instructional objectives will provide a sound basis for choosing methods
and materials and for selecting the means for assessing whether the
instruction will be successful or not.
2.
Trainee readiness: For any training to be successful the trainee should
be prepared to receive the training. In order to achieve this, prospective
trainees should be screened to determine that they have the background
knowledge and skill necessary to absorb what will be presented to
them.
3.
Principles of learning: Since the success or failure of a training
programme is frequently related to certain principles of learning,
managers and employees should understand that different training
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124 Material
 methods or techniques vary in extent to which they utilize these Training
principles.
4.
Characteristics of instructors: The success of any training effort will
depend to a large extent on the teaching skills of the instructors. A good
NOTES
instructor is one who shows a little more effort or demonstrates more
instructional preparation.
Phase 3: Implementing the training programme: A major consideration in
choosing among the various training methods is determining which one is
more appropriate for the KSAs to be learned.
Phase 4: Evaluating the training programme: Training should be evaluated
to determine its effectiveness. The four basic criteria available to evaluate
training are: (i) reactions (ii) learning (iii) behaviour and (iv) results. These
criteria can give a total picture of the training programme and help managers
evaluate the success or otherwise of the training programme.
Training programme is a costly and time-consuming process. The
following training procedure is essentially an adoption of the job instruction-
training course. The following steps are usually considered necessary.
(a) Discovering or identifying the training needs: A training programme
should be established only when it is felt that it would assist in the
solution of specific problems. Identifica­tion of training needs must
contain three types of analysis:
(i) Organizational analysis: Determine the organization’s goals, its
resources and the allocation of the resources as they relate to the
organizational goals.
(ii) Operations analysis: Focuses on the task or job regardless of the
employee doing the job.
(iii) Man analysis: Reviews the knowledge, attitudes and skills a
person must acquire to contribute satisfactorily to the attain­ment
of organizational objectives.
Armed with the knowledge of each trainee’s specific training
needs,  programmes of improvement can be developed that are  tai­
lored to these needs. The training programme then follows a general
sequence aimed at supplying the trainee with the opportu­nity to develop
his skills and abilities.
(b) Preparing the instructor: The instructor is the key figure in the entire
programme. He must know both the job to be taught and how to teach
it. The job must be divided into logical parts so that each can be taught
at a proper time without the trainee losing perspective of the whole.
This becomes a lesson plan. For each part one should have in mind
the desired technique of instruction, i.e., whether a particular point is
best taught by illustration, demonstration or explanation.
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Training (c) Preparing the trainee: This step consists of:
· Putting the learner at ease
· Stating the importance and ingredients of the job and its relationship
NOTES to work flow
· Explaining why he is being taught
· Creating interest and encouraging questions, finding out what the
learner already knows about his job or other jobs
· Explaining the ‘why’ of the whole job and relating it to some job
the worker already knows
· Placing the learner as close to his normal position as possible
· Familiarizing him with the equipment, materials, tools and trade
terms
(d) Presenting the operations: This is the most important step in a
training programme. The trainer should clearly tell, show, illustrate and
question in order to put across the new knowledge and operations. There
are many ways of presenting the operation, such as explanation and
demonstration. An in­structor mostly uses the method of explanation. In
addition, one may illustrate various points through the use of pictures,
charts, diagrams and other training aids. Demonstration is an excellent
device when the job is essentially physical in nature. The training
programme may be followed as per the following steps:
(i) Explain the course of the job
(ii) Do the job step-by-step according to the procedure
(iii) Explain each step that he is performing
(iv) Have the trainee explain the entire job
Instructions should be given clearly, completely and pa­tiently; there
should be an emphasis on key points and one point should be explained
at a time. The trainee should also be encouraged to ask questions in
order to indicate that he really knows and understands the job.
(e) Try out the trainees’ performance: Under this, the trainee is asked
to go through the job several times slowly, explaining him each step.
Mistakes are corrected, and if necessary, some complicated steps are
done for the trainee the first time. Then the trainee is asked to do the
job, gradually building up skill and speed.  As soon as the trainee
demonstrates that he can do the job in the right way, he is put on his
own. The trainee, through repetitive practice, will acquire more skill.
(f) Follow-up: The final step in most training procedures is that of follow-
up. This step is undertaken with a view to test the effectiveness of
training efforts. The follow-up system  should provide feedback on
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126 Material
 training effectiveness and on total value of training system.  It is worth Training
remembering that if the learner has not learnt, the teacher has not taught.
Comparison of on-the-job and off-the-job training programmes
NOTES
Merits of on-the-job training
(a) It permits the trainee to learn on the actual equipment and on-the-job
environment.
(b) It is a relatively cheaper and less time consuming as no additional
personnel or facilities are required for training.
(c) As the trainee gets a feeling of actual production conditions, it increases
the effectiveness of training.
Demerits of on-the-job training
(a) The instruction in on-the-job training is often highly disorganized and
haphazard.
(b) Trainees are often subjected to distractions of a noisy shop or office.
(c) There is low productivity.
Training methods and their Suitability
The success of any training or development programme largely depends on the
selection of the methods used. Here, it should be remembered that no single
method can prove to be the best method. Various methods are suitable for
various reasons. Table 8.1 shows the methods and their suitability for training.
Selection  of a training method
The selection of an appropriate method depends upon the following factors:
(a) Nature of problem area: The choice of a training method de­pends
upon the task to be done or the manner in which people interact with
each other, i.e., the problem may be either an operational problem or
a human relations problem.
(b) Level of trainees in the organization’s hierarchy: The choice of a
training method also depends upon the level of the participants.
(c) Method’s ability to hold and stimulate the interest of trainees
during  the training period: A trainer has to consider alterna­tive
methods of presenting training material to participants also from the
point of view of their ability to stimulate interest and facilitate retention
of the matter.
(d) Availability of competent trainers: A training method is as effective
as the ability of the trainer. He is the most important figure in the
entire training programme. Therefore, before ven­turing into a training
programme we have to first find a good trainer. Self-Instructional
Material 127
Training (e) Availability of finance: Availability of finance is crucial for any
training programme. To make a training programme effec­tive adequate
finance is necessary.
(f) Availability of time: Training cannot be done in a hurry. Adequate
NOTES
time is necessary to make the training programme a success.
Table 8.1  Suitability of Training Methods

Technique of Training Suitability

For large groups. For orientation or easy to

Lecture
understand material.
Case study For small groups. Requires discussion and
participation by all participants. It may be
used to develop group decision-making skills.

In-basket technique For small groups. For developing analytical

and decision-making skills.

For broadening knowledge, stimulating new

Conferences and seminars ideas and changing attitudes and for
developing skills.
For either large or small groups where cost is
Programmed instruction and
critical. Permits people to study at their own
computer-assisted learning
convenience.

For group projects. For developing decision-

Simulation and gaming
making skills required the integration of many
factors.

For groups of almost any size. For changing

Laboratory training an organization’s attitudes. For increasing
organizational problem-solving capabilities.

For developing better understanding and

T-group sensitivity training
better perceptions of co-workers.

Check Your Progress

1. Why is training important?
2. What is induction or orientation training?

8.3 TYPES OF TRAINING

Training involves learning and in a training situation learning is facilitated

by the trainer. A number of training methods are available that facilitate
learning. There are also different types of trainings. The following section
identifies some popular types of training.
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Inductive Training Training

This refers to the training conducted by organizations to initiate an employee

into the organization. Induction training is normally a process by which new
employees are informed about the activities of the organization, the terms and NOTES
conditions of employment, and his new duties and responsibilities. During
induction the employee may be introduced to the workers with whom he will
be working as well as the materials, the plant or equipment he will be expected
to use. The purpose of induction training is to orient new employees with
the management, the organization structure and the organizational vision,
mission and values.
It is during the process of induction that the new employee gets initiated
into the organizational culture specific to his company. Most induction
trainings are a kind of one-way communication in which the company’s
representative addresses the trainees. There is little or no participation from
the employees undergoing induction training. Induction training per se does
not contribute to employee development, skill enhancement or organizational
growth. Induction training programmes are not only for new employees. These
are also conducted for in-company promotees who have to be oriented to the
demands of new positions and responsibilities.
Induction training is based on the philosophy that the entry of new
employees into the organization has to be facilitated and that they have
to be eased into their new jobs and responsibilities. The aim is to make
the assimilation of new employees in the organizational culture little
less complex. Organizations spend considerable thought and resource in
organizing inductive training because of its crucial role in facilitating the entry
of new employees. The training consists of visiting the various departments
of the organization to understand their functioning. The trainees are also
introduced to the operational aspect of the organization. In short, induction
training is an elaborately planned initiation of the new employees into the
organizational culture and structure.
Training in Particular Skills
Every task demands a specific skill set for its effective accomplishment. All
organizations conduct skill training programmes of some kind or the other
for the employees to make them capable of accomplishing specific tasks.
Skill training is directly related to the acquisition of technical or practical
expertise. Skill training has a very narrow and focused objective, which is to
create competent workers who can contribute productively to the achievement
of organizational goals.
Human Relations Training
Human relations training refers to that training that has specific behavioural
objectives. These objectives are related to the following: Self-Instructional
Material 129
Training · Aspects of managing style
· Awareness of behaviour in its different forms
· Altering or shaping behaviour
NOTES · Improvement of inter personal behaviour
Problem Solving Training
Problem solving training provides a foundation for a continuous process or
system improvement. The purpose of problem solving training is to help
participants understand the various models of problem solving, discover
specific techniques for analysing problems, and use a variety of tools for
solving problems on the job.
Managerial and Supervisory Training
Managerial jobs combine both management techniques and conceptual
knowledge. In case the managerial job is that of a specialist, the training
would focus on subjects like operations research, finance, production
management, etc. If it is a general management job, then the training would
involve management principles and practices. The focus of the entire training
would be to make the manager conceptually clear and technically sound so
that he is able to function effectively as a manager or supervisor.
Apprentice Training
In India, the Apprentice Act of 1961 lays the foundation for apprentice
training. The motive behind apprenticeship training is to provide some basic
skills to unskilled individuals so as to enable them to be employed gainfully.
According to the Act, industrial organizations in specified industries are
required to train apprentices in proportion to their workforce in designated
trades.
Classroom
This is the most traditional type of training and the teaching method can vary
from the classical method in which the trainer lectures on a chosen topic to
the teaching method where the trainer acts as a facilitator. Classroom training
can vary from directive to non-directive. The learner participation in learning
can vary, depending on the participation allowed by the instructor.
Outdoors
This type of training is widely used by the armed forces, particularly in such
fields as leadership training and team building. Off late, corporates have
started using outdoor training schedules for team building and other exercises.
The advantage of outdoor training is that individual defences are lowered
and barriers to learning are removed in a non-structured environment. But
Self-Instructional
some trainers find outdoor training lacking the rigour of classroom training.
130 Material
Computer Assisted Learning Training

This type of training is basically a programmed learning method in which

the learner progresses step by step. That is, the learner has to master one step
before moving on to the next. The training material is delivered electronically NOTES
and with the growth of computer technology, computer assisted learning is
getting popular among learners.
E-Learning
With the growth of computer technology and the spread of the Internet,
e-learning has become an increasingly accepted training and learning method.
The above paragraphs list some common types of training without
following any classificatory criterion. Some trainers and experts classify
training types on the basis of training methods, some on the basis of trainer
and learner roles. The classification continues as per the convenience and
understanding of the trainer.

Check Your Progress

3. What is the purpose of problem solving training?
4. What is the Apprentice Act of 1961?

8.4 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Training is important because it equips the management to face the

pressures of changing environment.
2. Induction or orientation training is the method of introducing a new
employee into the organization with a view to gaining his confidence
and developing a sense of cooperation in him.
3. The purpose of problem solving training is to help participants
understand the various models of problem solving, discover specific
techniques for analysing problems, and use a variety of tools for solving
problems on the job.
4. According to the Apprentice Act of 1961, industrial organizations in
specified industries are required to train apprentices in proportion to
their workforce in designated trades.

8.5 SUMMARY

· Training is undertaken by organizations to improve the performance,

quality, skill and knowledge of their employees. Self-Instructional
Material 131
Training · McFarland defines several concepts used in the development of human
resources.
· The term development can be defined as the nature and direction of
NOTES change taking place among personnel through educational and training
processes.
· The relative amount of training and education changes with the nature
of tasks and responsibilities in organizational settings.
· Explicitly, non-managerial personnel require more job or trade-related
skills than managerial personnel demanding the generalized conceptual
skills and human relations insights.
· As Fitzgerald observes, training provides employees with specific skills
or helps them to overcome deficiencies in their present performance.
· On the other hand, development provides employees with that the
abilities that the organization will need in the future.
· According to Yoder, although the terms ‘training’ and ‘development’
appear synonymous, there is a recognized difference between these
concepts.
· Training needs should be determined from the standpoint of a specific
problem for which training is the most effective solution.
· Training is a process of learning a sequence of programmed behaviour.
It is application of knowledge.
· Training can help employees to increase their level of performance on
their present assignment.
· Training does not eliminate the need for supervision; it reduces the
need for constant supervision.
· Manpower obsolescence is prevented by training as it fosters initiative
and creativity of employees.
· By imparting skills, training facil­itates higher remuneration and other
monetary benefits to the employee.  
· Old employees need refresher training to enable them to keep abreast
of the changing methods, techniques and use of sophisticated tools and
equipment.
· The object of job training is to increase  the knowledge of workers
about the job with which they are concerned, so that their efficiency
and performance are improved.
· Apprenticeship training system is widely in vogue today in many
industries.
· The apprenticeship programmes combine on-the-job training and
experience with classroom instructions in particular subjects.
Self-Instructional
132 Material
 · Apprenticeship training is desirable in industries which require Training

a constant flow of new employees expect­ed to become all-round

craftsmen.
· Internship training is usually meant for such vocations where advance NOTES
theoretical knowledge is to be backed up by practical experience on
the job.
· The success of any training or development programme largely depends
on the selection of the methods used.
· Induction training is based on the philosophy that the entry of new
employees into the organization has to be facilitated and that they have
to be eased into their new jobs and responsibilities.
· Problem solving training provides a foundation for a continuous process
or system improvement.
· In India, the Apprentice Act of 1961 lays the foundation for apprentice
training.
· The motive behind apprenticeship training is to provide some basic
skills to unskilled individuals so as to enable them to be employed
gainfully.

8.6 KEY WORDS

· Training: It is the process of learning the skills that you need for a
particular job or activity.
· Development: It is the process in which someone or something grows
or changes and becomes more advanced.
· Employee Retention: It refers to the ability of an organization to retain
its employees.

8.7 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Differentiate between training and development.
2. Discuss the significance and benefits of training.
3. Why is training important?
4. What is job instruction training?
5. What do you understand by vestibule training?
6. What is inductive training?
Self-Instructional
Material 133
Training Long Answer Questions
1. Explain the concept of training in detail. Discuss its features, objectives
and need.
NOTES 2. Elaborate on any three training methods discussed in the unit.
3. What are the phases of systems approach to training? Discuss each in
detail.
4. What are the steps taken before establishing a training programme?
5. Describe the various popular types of training in detail.

8.8 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.
Flippo, Edwin B. 1984. Personnel Management, 4th Edition. New York:
McGraw Hill.
Bernardin, John. 2004. Human Resource Management–An Experimental
Approach. New Delhi: Tata McGraw Hill Ltd.
Beardwell, Ian and Len Holden. 1995. Human Resource Management.
London: Macmillan.
Byars, Loyd L. and Leaslie W. Rue. 1997. Human Resource Management.
Chicago: Irwin.
Werther Jr, William B. and Keith Davis. 1993. Human Resources and
Personnel Management, 4th Edition. New York: Macmillan.

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 Performance Appraisal
BLOCK - III
PERFORMANCE AND BENEFITS OF EMPLOYEES
NOTES
UNIT 9 PERFORMANCE
APPRAISAL
Structure
9.0 Introduction
9.1 Objectives
9.2 Performance Appraisal: Process and Techniques
9.2.1 Purpose of Performance Appraisal
9.2.2 Need of Performance Appraisal
9.2.3 Process of Performance Appraisal
9.2.4 Methods or Techniques of Performance Appraisal
9.3 Answers to Check Your Progress Questions
9.4 Summary
9.5 Key Words
9.6 Self Assessment Questions and Exercises
9.7 Further Readings

9.0 INTRODUCTION

Performance appraisal is regarded as the key to good human resource

management. It is the formal, systematic assessment of how well employees
are performing their jobs in relation to the established standards, and the
communication of that assessment to the employees. This unit explains the
purpose of performance appraisal and the process involved. It will further
familiarize you with the various techniques of performance appraisal and
how to evaluate them.

9.1 OBJECTIVES

After going through this unit, you will be able to:

· Explain the concept of performance appraisal
· Describe the purpose of performance appraisal
· Assess the process and methods of performance appraisal
· Analyse the major issues in performance appraisal

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Performance Appraisal
9.2 PERFORMANCE APPRAISAL: PROCESS AND
TECHNIQUES
NOTES According to Wendell French, performance appraisal is, ‘the formal,
systematic assessment of how well employees are performing their jobs in
relation to established standards, and the communication of that assessment
to employees.’
According to Flippo ‘Performance appraisal is the systematic, periodic
and an impartial rating of an employee’s excellence in matters pertaining to
his present job and his potential for a better job.’
According to Dale Yoder, ‘Performance appraisal includes all formal
procedures used to evaluate personalities and contributions and potentials
of group members in a working organization. It is a continuous process to
secure information necessary for making correct and objective decisions on
employees.’
According to C.D. Fisher, L.F. Schoenfeldt and J.B. Shaw,
‘Performance appraisal is the process by which an employee’s contribution
to the organization during a specified period of time is assessed.’
From the above definitions, we can conclude that performance appraisal
is method of evaluating the behaviour of employees in the work spot, normally
including both the quantitative and qualitative aspects of job performance. It
is a systematic and objective way of evaluating both work-related behaviour
and potential of employees. It is a process that involves determining and
communicating to an employee how he is performing the job and ideally
establishing a plan of improvement. Performance appraisal emphasizes
individual development. It is used for evaluating the performance of all the
human resources working at all levels of organization and of all types. It
evaluates the performance of technical, professional and managerial staff.
Objectives of Performance Appraisal
Performance appraisal plans are designed to meet the needs of the organization
and the individual. It is increasingly viewed as central to good human resource
management. Performance appraisal could be taken either for evaluating the
performance of employees or for developing them. The evaluative purpose
has a historical dimension and is concerned primarily with looking back at
how employees have performed over a given time period, compared with the
required standards of performance. The developmental purpose is concerned
with the identification of employee’s training and development needs.
Appraisal of employees’ serves several useful purposes. Some of these are
as follows:

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(i) Feedback Performance Appraisal

It serves as a feedback to the employee. It tells him what he can do to improve

his present performance and go up the ‘organizational ladder’. The appraisal
thus facilitates self-development. It also makes the employee aware of his NOTES
key performance areas.
(ii) Compensation Decisions
It provides inputs to the system of rewards. The approach to compensation
is at the heart of the idea that raises should be given for merit rather than for
seniority.
(iii) Database
It provides a valid database for personal decisions concerning placements,
pay, promotion, transfer, and so on. Appraisal also makes the employee aware
of his key performance areas. Permanent performance appraisal records of
employees help management to do planning without relying upon personal
knowledge of supervisors who may be shifted.
(iv) Personal Development
Performance appraisal can help reveal the causes of good and poor employee
performance. Through discussions with individual employees, a line manager
can find out why they perform as they do and what steps can be initiated to
improve their performance.
(v) Training and Development Programme
By identifying the strengths and weaknesses of an employee, it serves as
a guide for formulating a suitable training and development programme to
improve his performance. It can also inform employees about their progress
and tell them what skills they need to develop to become eligible for pay
rises and/or promotions.
(vi) Promotion Decisions
It can serve as a useful basis for job change or promotion. By establishing
whether the worker can contribute still more in a different or a higher job it
helps in his suitable promotion and placement. If relevant work aspects are
measured properly, it helps in minimizing feelings of frustration of those
who are not promoted.
(vii) Improves Supervision
The existence of a regular appraisal system tends to make the supervisors
more observant of their subordinates, because they know that they will be
periodically expected to fill out rating forms and would be called upon to
justify their estimates. This improves supervision.
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Performance Appraisal Performance appraisal helps to have comparative worth of employees.
Appraising employee performance is, thus, useful for compensation,
placement and training and development purposes. In the words of M.W.
Cummings, ‘the overall objective of performance appraisal is to improve the
NOTES efficiency of enterprise by attempting to mobilize the best possible efforts
from individual employed in it. Such appraisals achieve four objectives
including the salary reviews, the development and training of individuals,
planning job rotation and assistance promotions.’ The information can also
be used for grievance handling and keeping the record. It helps in improving
the quality of supervision and better the employee–employer relationship.
Uses of Performance Appraisal
Performance appraisal is a significant element of the information and control
system in organization. Performance appraisal is used in order to:
(i) Provide valuable information for personnel decisions such as pay
increases, promotions, demotions, transfers and terminations. The
information provided forms the basis for suitable personnel policies.
(ii) Provide feedback about the level of achievement and behaviour of
subordinates, rectifying performance deficiencies and to set new
standards of work, if necessary. It also identifies individuals with high
potential who can be groomed up for higher positions.
(iii) Tell a subordinate how he is doing and suggest necessary changes in
his knowledge, behaviour and attitudes. It thus provides information
that helps to counsel the subordinate. It also serves to stimulate and
guide employee’s development.
(iv) Analyse training and development needs. These needs can be assessed
because performance appraisal shows people who require further
training how to remove their weaknesses. By identifying the weaknesses
of an employee, it serves as a guide for formulating a suitable training
and development programme to improve his performance in his present
work.
(v) Performance appraisal serves as means for evaluating the effectiveness
of devices used for the selection and classification of employees. It,
therefore, helps to judge the effectiveness of recruitment, selection,
placement and orientation systems of the organization.
(vi) It facilitates human resource planning and career planning; permanent
performance appraisal records of employees help management to do
human resource planning without relying upon personal knowledge
of supervisors.
(vii) Performance appraisal promotes a positive work environment, which
contributes to productivity. When achievements are recognized and
rewarded on the basis of objective performance measures, there
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 is improvement in the work environment. Performance appraisal, Performance Appraisal
therefore, provide the rational foundation for incentives, bonus, etc. The
estimates of the relative contributions of employees helps to determine
the rewards and privileges rationally.
NOTES
(viii) The existence of a regular appraisal system tends to make the
supervisors and executives more observant of their subordinates
because, they know that they will be expected periodically to fill out
rating forms and would be called upon to justify their estimates. This
knowledge results in improved supervision.
(ix) Performance appraisal records protect management from charges
of favouritism and discrimination. Employee grievance can also be
reduced as it helps to develop confidence among employees.
9.2.1 Purpose of Performance Appraisal
Organizations use performance appraisals for three purposes:
(i) Administrative: It commonly serves as an administrative tool by
providing employers with a rationale for making many personnel
decisions, such as decisions relating to pay increases, promotions,
demotions, terminations and transfers.
(ii) Employee Development: It provides feedback on an employee’s
performance. Appraisal data can also be used for employee development
purposes in helping to identify specific training needs of individuals.
(iii) Programme Assessment: Programme assessment requires the
collection and storage of performance appraisal data for a number of
uses. The records can show how effective recruitment, selection and
placement have been in supplying a qualified workforce.
It is generally accepted that performance appraisals serve one or more
of the following purposes:
(a) To create and maintain a satisfactory level of performance;
(b) To meet an individual’s development needs;
(c) To bring about better operational or business needs;
(d) To facilitate fair and equitable compensation based on performance;
(e) To help the superiors to have a proper understanding about their
subordinates;
(f) To provide information useful for manpower planning by
identifying employees with a potential for advancement; and
(g) To facilitate for testing and validating selection tests, interview
techniques through comparing their scores with performance
appraisal ranks.

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Performance Appraisal 9.2.2 Need of Performance Appraisal
The need of performance appraisal is that it enables the management to make
effective decisions. The need of an appraisal is concerned with:
NOTES (i) Creating and maintaining a satisfactory level of performance of
employees in their present job.
(ii) Fixation of salary, allowances, incentives and benefits.
(iii) Evaluating the effectiveness of training and development programmes.
(iv) Assessing the strengths and weaknesses of human resource (HR).
(v) Performance appraisal helps employees to improve by giving him
feedback.
9.2.3 Process of Performance Appraisal
Performance appraisal is planned, developed and implemented through a
series of steps. These steps are as follows.
(i) Job Analysis, Job Description and Job Specification
Performance appraisal is a process not to be undertaken in isolation of various
human resources functions. It begins with job analysis, job description and
job specification. These help in establishing the standard performance.
(ii) Establishing Standards of Performance
Appraisal systems require performance standards that serve as benchmarks
against which performance is measured. The standards set for performance
must be clearly defined and unambiguous. It should be attainable by every
employee. To be useful, standards should relate to the desired result of
each job. Performance standards must be clear to both the appraiser and
the appraisee. The performance standards or goals must be developed with
the help of the supervisors to ensure that all the relevant factors have been
included. Where the output can be measured, the personal characteristics,
which contribute to employee performance, must be determined.
Goals must be written down. They must be measurable within certain
time and cost considerations.
(iii) Communicating Performance Standards to Employees
Performance appraisal involves at least two parties; the appraiser who does
the appraisal and the appraisee whose performance is being evaluated.
The performance standards specified in the second step above are to be
communicated and explained to the employees (both appraiser and appraisee)
so that they know what is expected of them. Feedback should also be given so
that there is no confusion or misunderstanding. Through feedback the manager
knows that the information has reached the employees. If necessary, the
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standards may be revised or modified in the light of feedback obtained from Performance Appraisal
the employees and evaluators. As pointed out by DeCenzo and Robbins, ‘too
many jobs have vague performance standards and the problem is compounded
when these standards are set in isolation and do not involve the employee.’
NOTES
(iv) Measuring Actual Performance
After the performance standards are set and accepted, the next step is to
measure actual performance. This requires choosing the right technique
of measurement, identifying the internal and external factors influencing
performance and collecting information on the results achieved. It can
be affected through personal observation, written and oral reports from
supervisors. The performance of different employees should be so measured
that it is comparable. Performance measures, to be helpful must be easy to use,
be reliable and report on the critical behaviour that determine performance.
Performance measures may be objective or subjective.
(a)
Objective Performance Measures: Objective performance
measures are indications of job performance that can be verified
by others and are usually quantitative. Objective criteria include
the following:
· Quality of production
· Degree of training needed
· Accidents in a given period
· Absenteeism
· Length of service
(b)
Subjective Performance Measures: Subjective performance
measures are ratings that are based on the personal standards of
opinions of those doing the evaluation and are not verifiable by
others. Subjective criteria include:
· Ratings by supervisors
· Knowledge about overall goals
· Contribution to socio-cultural values of the environment
It should be noted here that objective criteria could be laid down while
evaluating lower level jobs which are specific and defined clearly. This
is not the case with middle level and higher-level positions that are
complex and vague.
(v) Comparing Actual Performance with Standards and Discuss
the Appraisal with Employees.
Actual performance is compared with the predetermined performance
standards. The actual performance may be better than expected and sometimes
it may go off track. Deviations if any from the set standards are noted.
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Performance Appraisal Along with the deviations, the reasons behind them are also analysed and
discussed. Such discussions will enable an employee to know his weaknesses
and strengths. The former is discussed so that the employee is motivated to
improve his performance.
NOTES
The assessment of another person’s contribution and ability is not an
easy task. It has serious emotional overtones as it affects the self-esteem
of the appraisee. Any appraisal based on subjective criteria is likely to be
questioned by the appraisee and leave him quite dejected and unhappy when
the appraisal turns out to be negative.
(vii) Initiating Corrective Action, if any
The last step in the process is to initiate corrective action essential to improve
the performance of the employee. Corrective action is of two types:
(a) The employee can be warned so that he himself can make necessary
attempts to improve his performance. But this is not enough or proper.
(b) Through mutual discussions with employees, the steps required to
improve performance are identified and initiated. The reasons for
low performance are identified and initiated. The reasons for low
performance should be probed. The employee is taken into confidence
and motivated for better performance. Training, coaching, counselling,
and so on, are examples of corrective actions that help to improve
performance.
Essentials of a Good Appraisal System
A sound appraisal system should comply with the following:
(i)  Reliability and Validity
The system should be both valid and reliable. The validity of ratings is
the degree to which they are truly indicative of the intrinsic merit of the
employees. The reliability of ratings is the consistency with which the ratings
are made, either by different raters, or by one rater at different times. Both
validity and reliability result from objective database. Appraisal system should
provide consistent, reliable and valid information and data which can be used
to defend the organization — even in legal challenges.
(ii) Job Relatedness
The evaluators should focus on job-related behaviour and performance of the
employees. In order to focus attention on behaviour under the employee’s
control, raters must become familiar with the observed behaviour. It is also
necessary to prepare a checklist so as to obtain and review job performance
related information. Ratings should be tied up with actual performance of
units under the rater’s control. The information generated through evaluators
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and norms of behaviour. Multiple criteria should be used for appraisal, and Performance Appraisal
it should be done periodically rather than once a year.
(iii) Standardization
Well-defined performance factors and criteria should be developed. Appraisal NOTES
forms, procedures, administration of techniques, ratings, and so on, should
be standardized as appraisal decisions affect all employees of the group.
It will help to ensure uniformity and comparison of ratings. The appraisal
techniques should measure what they are supposed to measure. They should
also be easy to administer and economical to use.
(iv) Practical Viability
The techniques should be practically viable to administer, possible to
implement and economical to undertake continuously. It must have the
support of all line people who administer it. If the line people think it is too
theoretical, too ambitious, too unrealistic, or that ivory-tower staff consultants
who have no comprehension of the demands on time of the line operators
have foisted it on them, they will resent it.
(v) Training to Appraisers
The evaluators or appraiser should be provided adequate training in evaluating
the performance of the employees without any bias. Evaluators should also
be given training in philosophy and techniques of appraisal. They should be
provided with knowledge and skills in documenting appraisals, conducting
post appraisal interviews, rating errors, and so on. Familiarity with rating
errors can improve the rater’s performance and this may inject the needed
confidence in appraisers to look into performance ratings more objectively.
(vi) Open Communication
The system should be open and participative. Not only should it provide
feedback to the employees on their performance, it should also involve them
in the goal setting process. This helps in planning performance better. The
employees should actively participate in managing performance and in the
ongoing process of evaluation. The superior should play the role of coach
and counsellor. The overall purpose of appraisals should be developmental
rather than judgemental.
(vii) Employee Access to Results
Employees should receive adequate feedback on their performance. If
performance appraisals were meant for improving employee performance,
then withholding appraisal result would not serve any purpose. If the result of
appraisal is negative and goes against the employee, it should be immediately
communicated to him so that he may improve his performance, or he may go
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Performance Appraisal for appeal before the appropriate authority in case he is not satisfied. Such
provisions should be made. This will enable the management to gain the
confidence of the employees.

NOTES (viii) Clear Objectives

The appraisal system should be objective oriented. It should fulfil the desired
objectives like determining the potential for higher jobs or for sanction on
annual increment in the salary or for granting promotion or for transfer or
to know the requirements for training. The objectives should be relevant,
timely and open. The appraisal system should be fair so that it is beneficial
to both the individual employee and the organization. The system should
be adequately and appropriately linked with other subsystems of human
resource management.
(ix) Post Appraisal Interview
After appraisal, an interview with the employee should be arranged. It is
necessary to supply feedback, to know the difficulties under which the
employees work and to identify their training needs. The appraiser should
adopt a problem solving approach in the interview and should provide
counselling for improving performance.
(x) Periodic Review
The system should be periodically evaluated to be sure that it is meeting its
goals. Not only is there the danger that subjective criteria may become more
salient than the objective standards originally established, there is the further
danger that the system may become rigid in a tangle of rules and procedures,
many of which are no longer useful.
(xi) Not Vindictive in Nature
It should be noted by the executives at the helm of affairs of the organizations
that the aim of performance appraisal or any system for that matter is to
improve performance, organizational effectiveness and to accomplish
organizational objectives and not to harass the employees and workers of
the organizations who are the vital human resource.
9.2.4 Methods or Techniques of Performance Appraisal
A number of different performance appraisal methods or techniques are
available for evaluating the performance of the employees. These methods
try to explain how management can establish standards of performance and
devise ways and means to measure and evaluate the performance. There is
no fool proof method of evaluating the performance of employees. Every
method suffers from certain drawbacks in spite of some merits. These methods
can broadly be divided into traditional and modern methods.
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I.  Traditional Methods Performance Appraisal

These methods are the old methods of performance appraisal based on

personal qualities like knowledge, capacity, judgement, initiative, attitude,
loyalty, leadership, and so on. The following are the traditional methods of NOTES
performance appraisal.
(i) Unstructured Method of Appraisal
Under this method, the appraiser has to describe his impressions about the
employee under appraisal in an unstructured manner. This is a simple method
of performance appraisal. The rater has to list his comments specifically on
qualities, abilities, attitude, aptitude and other personal traits of the employees.
This makes the method highly subjective in nature.
(ii) Straight Ranking Method
In this technique, the evaluator assigns relative ranks to all the employees in
the same work unit doing the same job. Employees are ranked from the best
to the poorest on the basis of overall performance. This method is also highly
subjective and lacks fairness in assessing the real worth of an employee.
(iii) Paired Comparison Method
Ranking becomes more reliable and easier under the paired comparison
method. This method is an attempt to improve upon the simple ranking
method. Under this method employees of a group are compared with one
another at one time. If there is a group of five employees A, B, C, D and E
then A’s performance is compared with that of B’s and decision is taken as
to whose performance is better. Similarly, A’s performance is compared with
C, D, and E and decisions regarding comparatively better performance are
taken. Comparison is made on the basis of overall performance. The number of
comparisons to be made can be decided on the basis of the following formula:

where N is the number of persons to be compared.

The paired comparison method is more reliable, but the method is not
suitable when large number of employees is to be evaluated.
(iv) Man-to-Man Comparison Method
In man-to-man comparison method, the performance of an employee is
evaluated by obtaining ratings about their performance from the evaluators. A
team of evaluators is involved in giving ratings to the employee performance.
Each member of the team gives the appropriate ratings, lowest, low, middle,
high and highest performers to the employees. These ratings are then used
to determine the appraisal procedure for a particular employee. The main
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Performance Appraisal benefit of this method is that the ratings are based on the real performance of
the employees. However, the drawback of this technique is that the ratings
given by each evaluator may not be consistent because each evaluator has
his or her own scaling criteria making it difficult to evaluate an employee’s
NOTES performance correctly.
(v) Grading Method
Under this technique of performance evaluation certain categories of worth
are determined in advance and they are carefully defined. These selected and
well-defined categories include
Grade ‘A’ for outstanding
Grade ‘B’ for very good
Grade ‘C’ for average
Grade ‘D’ for poor, etc.
These grades are based on certain selected features such as knowledge,
judgement, analytical ability, leadership qualities, self-expression, and so on.
The actual performance of employees is compared with the above grades and
employees are allotted grades that speak for their performance.
(vi) Graphic Rating Scale
Perhaps, the most commonly used method of performance evaluation is
the graphic rating scale. The evaluator is asked to rate employees on the
basis of job related characteristics and knowledge of job. Evaluator is given
printed forms. The performance is evaluated on the basis of these traits on
a continuous scale. It is a standardized, quantitative method of performance
appraisal. The scores are tabulated indicating the relative worth of each
employee.
(vii) Forced Choice Method
This method was developed during World War II for evaluating the performance
of American army personnel. The evaluators rate the performance as high,
moderate or low and escape the important responsibility assigned to them. The
primary purpose of the forced choice method is to correct the tendency of a
rater to give consistently high or low ratings to all the employees. This method
makes use of several sets of pair phrases, two of which may be positive and
two negative and the rater is asked to indicate which of the four phrases is
the most and least descriptive of a particular worker. Actually, the statement
items are grounded in such a way that the rater cannot easily judge which
statement applies to the most effective employee. The evaluator is forced to
select from each group of statements (normally two). The statements may
be the following:

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 (a) Good work organizer Performance Appraisal

(b) Shows patience with slow learners

(c) Dishonest or disloyal
(d) Careful and regular NOTES
(e) Avoid work
(f) Hard working
(g) Cooperates with fellow workers
(h) Does not take interest in work
From the above list of statements, favourable statements are marked
plus and unfavourable statements are marked zero. Under this method
subjectivity of evaluator is minimized.
(viii) Checklist
A checklist represents, in its simplest form, a set of objectives or descriptive
statements about the employee and his behaviour. The rater checks to indicate
if the behaviour of an employee is positive or negative to each statement.
The performance of an employee is rated on the basis of number of positive
checks. The following are some of the sample questions in the checklist.
· Is the employee regular on the job? Yes/No
· Is the employee respected by his subordinates? Yes/No
· Is the employee always willing to help his peers? Yes/No
· Does the employee follow instructions properly? Yes/No
· Does the employee keep the equipment in order? Yes/No
The objections to this method are as follows:
(a) It is difficult to construct a good checklist.
(b) A separate checklist is needed for each job because statements
used in one checklist to evaluate one category of workers cannot
be used in another checklist to evaluate other category of workers.
(ix) Weighted Checklist
The checklist provides to the evaluator statements relating to work-related
behaviour of the employees. Every statement is given equal importance.
However, under weighted checklist the items having significant importance
for organizational effectiveness are given weightage. Thus, in weighted
checklist, weights are assigned to different statements to indicate their relative
importance.

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Performance Appraisal (x) Free Essay Method
Under this method no quantitative approach is undertaken. It is open-ended
appraisal of employees. The evaluator describes in his own words what he
NOTES perceives about the employee’s performance. While preparing the essay on
the employee, the rater considers the following factors:
(a) Job knowledge and potential of the employee.
(b) The employee’s undertaking of the company’s programmes, policies,
objectives, etc.
(c) The employee’s relations with co-workers and superiors.
(d) The employee’s general planning, organizing and controlling ability.
(e) The attitudes and perceptions of the employee in general.
The description is expected to be as factual and concrete as possible. An
essay can provide a good deal of information about the employee especially
if the evaluator is asked to give examples of each one of his judgements.
(xi) Critical Incidents Method
Under this method, the performance of the worker is rated on the basis of
certain events that occur during the performance of the job (i.e., the evaluation
is based on key incidents). These critical incidents or events represent the
outstanding or poor behaviour of employees on the job. The rater maintains
logs on each employee, whereby he periodically records critical incidents
of workers behaviour. At the end of the rating period, these recorded critical
incidents are used in the evaluation of the workers’ performance. Critical
incidents method helps to avoid vague impressions and general remarks
as the rating is based on actual records of behaviour/performance. The
feedback from actual events can be discussed with the employee to allow
improvements. The rater can fully defend his ratings on the basis of his record.
(xii) Field Review Method
In this method, an HR specialist interviews line supervisors to evaluate their
respective subordinates. The interviewer prepares in advance the questions
to be asked. By answering these questions, a supervisor gives his opinions
about the level of performance of his subordinate, the subordinate’s work
progress, his strengths and weaknesses, promotion potential, and so on. The
evaluator takes detailed notes of the answers, which are then approved by
concerned supervisor. The concerned supervisor then approves these. These
are then placed in the employee’s personnel service file.
Since an expert is handling the appraisal process, in consultation with
the supervisor, the ratings are more reliable. However, the use of HR experts
makes this approach costly and impractical for many organizations.

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(xiii) Confidential Report Performance Appraisal

A confidential report by the immediate supervisor is still a major determinant of

the subordinate’s promotion or transfer. This is a traditional form of appraisal
used in most government organizations. It is a descriptive report prepared, NOTES
generally at the end of every year, by the employee’s immediate superior.
The report highlights the strengths and weaknesses of the subordinate. The
disadvantages of this method are as under:
(i) It involves a lot of subjectivity because appraisal is based on impressions
rather than on data.
(ii) No feedback is provided to the employee being appraised and, therefore,
its credibility is very low.
(ii) The method focuses on evaluating rather than developing the employee.
The employee who is apprised never knows his weaknesses and the
opportunities available for overcoming them.
In recent years, due to pressure from courts and trade unions, the details
of a negative confidential report are given to the appraisee.
(xiv) Forced Distribution Method
One of the errors in rating is leniency; of clustering a large number of
employees around a high point on a rating scale. The forced distribution
method seeks to overcome this problem by compelling the rater to distribute
the ratees on all points on the rating scale. The primary purpose of the forced
choice method is to correct the tendency of a rater to give consistently high
or low ratings to all the employees. The forced distribution method operates
under the assumption that the employee performance level conforms to
a normal statistical distribution. Generally, it is assumed that employee
performance levels conform to a bell-shaped curve.
The major weaknesses of the forced distribution method are as follows:
(a) The assumption that employee performance levels always conform
to a normal distribution.
(b) Forced distribution method is not acceptable to raters and ratees,
especially when members are all of high ability.
(c) The results of the forced choice method may not be useful for
training employees because the rater himself does not know how
he is evaluating the worker.
II.  Modern Methods
Modern methods are an improvement over the traditional methods. Modern
methods are an attempt to remove defects from old methods. These are
discussed below:
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Performance Appraisal (i) Behaviourally Anchored Rating Scales (BARS)
It is designed to identify critical areas of performance of a job. Under this
method the behaviourally anchored ratings scales are outlined to recognize the
NOTES critical areas of effective and ineffective performance behaviour for getting
results. The evaluator is required to observe the behaviour of the employee
while performing the job. He then compares these behavioural observations
with the behaviourally anchored rating scales. This method is more valid and
expected to give more reliable results as it minimizes the errors in performance
appraisal. It identifies measurable behaviour and is therefore more scientific.
The following are some of the important features of BARS method:
(a) Performance areas of the employees that need to be assessed are
determined and described by the individuals who will use the
scales.
(b) The scales are attached with the explanations of the actual job
behaviour to represent particular levels of performance.
(c) All the areas of performance that need to be examined are based
on the observable behaviour and are significant to the job, which
is being evaluated because BARS are customized for the job.
(d) As the raters who will use the scales actively participate in the
development process, they are more dedicated to the final product.
BARS were introduced to present results to improve the performance
of the employees of a company. BARS also help in overcoming rating errors.
(ii) Result-Oriented Appraisal or MBO Technique
The result-oriented appraisals are based on the concrete performance targets
that are usually established jointly by the superior and subordinates.
Much of the initial impetus for MBO was provided by Peter Drucker
(1954) and by Douglas McGregor (1960). Drucker first described MBO in
1954 in the Practice of Management. Drucker pointed to the importance
of managers having clear objectives that support the purposes of those in
higher positions in the organization. McGregor argues that by establishing
performance goals for employees after reaching agreement with superiors,
the problems of appraisal of performance are minimized. MBO in essence
involves noting clearly defined goals of an employee in agreement with his
superior. Refinements brought out by George Odione, Valentine, Humble
and others have enriched the concept and made it more acceptable as an
appraisal technique.
The MBO process has the following four steps:
(a) The first step is to establish the objectives by the superiors that
each employee should attained. These objectives are used to
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 (b) The second step is to set the standards for evaluating the Performance Appraisal
performance of the employees. As employees perform, they know
fairly well the standards against which their performance is to be
judged.
NOTES
(c) The third step is to compare the actual level of attained objectives
with the objectives set by the organization. The evaluator depicts
the reasons for the objectives that were not met. This step helps
in determining the needs to provide training to the employees of
the organization.
(d) The final step is to establish new strategies for the objectives
that were not met. This step involves active participation of the
superiors and subordinates in setting objectives.
This process is most useful at the managerial and subordinate level.
MBO does not apply to the assembly line workers whose jobs have less
flexibility and their performance standards are already defined.
(iii) Assessment Centre Method
This method of appraising was first applied in the German Army in 1930. Later
business organizations also started using this method. This is not a technique
of performance appraisal by itself. In fact, it is a system, where assessment of
several individuals is done by various experts by using various techniques.
In this approach, individuals from various departments are brought
together to spend two or three days’ working on an individual or group
assignment similar to the ones they would be handling when promoted.
Evaluators observe and rank the performance of all the participants.
Experienced managers with proven ability serve as evaluators. This
group evaluates all employees both individually and collectively by using
simulation techniques like role playing, business games and in basket
exercises. Assessments are done generally to determine employee potential
for promotion.
The following are the drawbacks of this method:
(a) Costly: Organizations have to pay for the travel and lodging
cost of the employees to be assessed. Moreover, the work of an
organization also suffers for the time period they are away from
the job. Also, the companies have to pay heavy expenditure in
establishment of assessment centers.
(b) Impression of the employees: Centre staff is influenced by the
subjective elements, such as social skills and personality of the
employee rather than the quality of their work.
(c) Demoralize an employee: A negative report for an employee may
demoralize an employee. It may have an adverse effect on the
behaviour and work of an employee who is not promoted. Self-Instructional
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Performance Appraisal (d) Promotes unhealthy competition: It promotes strong and unhealthy
competition among the employees that are assessed.
(e) Overemphasis on centre results: This method lays overemphasis
on the result of the centre, which is based on judgement of
NOTES
employees over a short span of time.
(iv) Human Resource Accounting Method
Human resources are a valuable asset of any organization. This asset can
be valued in terms of money. When competent, and well-trained employees
leave an organization the human asset is decreased and vice versa.
Human resource accounting deals with cost of and contribution of
human resources to the organization. Cost of the employee includes cost of
manpower, planning, recruitment, selection, induction, placement, training,
development, wages and benefits, etc. Employee contribution is the money
value of employee service which can be measured by labour productivity or
value added by human resources. Difference between cost and contribution
will reflect the performance of the employees.
Human resource accounting method is still in the transition stage. The
contribution made by employee can be measured in terms of output.
If the cost incurred on an employee is greater than the contribution
made than this is an indicator of finding out the causes of low performance,
analysing it and then making a proper check to control such causes. In case
the contribution is more or equivalent to the cost incurred than this also
requires review for future reference.
The various techniques under human resource accounting methods are:
· Probationary reviews
· Informal one-to-one review discussions
· Counselling meetings
· Observation on the job
· Skill- or job-related tests
· Assignment or task followed by review, including secondments
(temporary job cover or transfer)
· Survey of opinion of others who have dealings with the individual
· Graphology (handwriting analysis)
All these techniques are related to each other. A manager must keep a
written record of all these for future reference.
(v) Psychological Appraisals
Psychological appraisals are conducted to assess the employee potential. Large
organizations recruit full-time psychologist to assess the future performance
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of the employees. Psychological appraisals include in-depth interviews, Performance Appraisal
psychological test, and discussions with supervisors. Psychological appraisals
are conducted to assess the following features of the employees:
· Intellectual abilities
NOTES
· Emotional stability
· Reasoning and analytical abilities
· Sociability
· Interpretation and judgement skills
· Motivational responses
· Ability to foresee the future
Psychological evaluation can be done either to evaluate the performance
of employees for a particular job opening or to assess the future potential of
all employees globally. Psychological appraisal results are useful for decision-
making about employee placement, career planning and development and
training.
(vi) 360 Degree Appraisal
It is a method of appraisal in which employees receive their performance
feedback from their boss, colleagues, customers, peers and their own
subordinates in the organization. This form of performance evaluation
can be very beneficial to managers because it typically gives them a much
wider range of performance-related feedback than a traditional evaluation.
This method helps individuals to know their strengths and weaknesses
and, thus, helps them to develop their interpersonal skills. It also improves
communication between employees and their customers, as they will be able
to know what the customers think about them. Thus, it is an efficient method
to improve interpersonal skills of employees and to attain higher customer
satisfaction level.
The following are some of the drawbacks of this method:
(a) It is possible that the team member can have personal problems
with the employee and, thus, he may not take an honest decision.
(b) It involves lot of time required in selecting the team that will
rate the performance, preparing questionnaires and analysing the
collected information.
Post-appraisal Analysis
Performance appraisal system should be effective as a number of crucial
decisions are made on the basis of score or ratings given by the appraiser.
All organizations use performance appraisal for purposes such as salary
increase, determining training needs, motivating employees or establishing
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Performance Appraisal a basis for future personnel decisions. The ideal approach to performance
evaluation is that in which the evaluator is free from personal biases and
prejudices. This is because when an evaluator is objective, it minimizes the
potential dysfunctional behaviour of the evaluator which will be detrimental
NOTES to the achievement of the organizational goals. Given that all appraisals
entail judgements and given that judgements, may not always be fair, a
variety of techniques to make appraisal more objective have been introduced.
An appraisal system to be effective should possess the following essential
characteristics:
(i)  Reliability and Validity
Appraisal system should provide consistent reliable and valid information and
data which can be used to defend the organization even in legal challenges.
However, a single foolproof evaluation method is not available. Inequities in
evaluation often destroy the usefulness of the performance system—resulting
in inaccurate, invalid appraisals, which are unfair too. If two appraisers are
equally qualified and competent to appraise an employee with the help of
same appraisal techniques, their ratings should agree with each other. Then
the technique satisfies the conditions of inter-rater reliability.
(ii) Confidence and Trust
The existence of an atmosphere of confidence and trust is necessary to discuss
matters frankly and offer suggestions for the improvement of the employee
so that the organization as well as employee stands to benefit.
(iii) Immediate Superior as Appraiser
The immediate superior of the ratees must make the ratings, but the personnel
department can assume the responsibility of monitoring the system. The
superior should analyse the strengths and weaknesses of an employee and
advice him on correcting the weaknesses.
(iv) Swift and Economical
The appraisal programme should be less time consuming and economical.
Appraisal forms, procedures, administration of techniques, ratings, and so
on, should be standardized. An appraisal programme should bring maximum
benefit.
(v) Open Communication
The results of the appraisal, particularly when they are negative, should be
immediately communicated to the employees, so that they may try to improve
their performance. A good appraisal system provides the needed feedback
on a continuing basis. The appraisal interviews should permit both parties
to learn about the gaps and prepare themselves for future.
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(vi) Post-appraisal Interview Performance Appraisal

A post-appraisal interview should be arranged so that employees are given

feedback and the organization understands the difficulties under which
employees work, so that their training needs may be discovered. Permitting NOTES
employees to review the results of their appraisal allows them to detect any
errors that may have been made. If they disagree with the evaluation, they
can even challenge the same through formal channels.
(vii) Job Relatedness
Suggestions for improvement should be directed towards the objective facts
of the job. Plans for the future must be developed alongside in consultation
with subordinates. The individual as a person should never be criticized.
Problems of Performance Appraisal
None of the methods for appraising performance is absolutely valid or
reliable. Each has its own strengths and weaknesses. In spite of knowing
that a completely error-free performance appraisal can only be an idealized
model, we can isolate a number of factors that significantly impede objective
evaluation. The major problems in performance appraisal are:
(i) Rating Biases
Most appraisal methods involve judgements. The performance appraisal
process and techniques rely on the evaluator who has his own personal biases,
prejudices and idiosyncrasies. It would be naïve to assume that all evaluators
will impartially appraise their subordinates. The evaluator or rater’s biases
include the following:
(a) Leniency and strictness error: Errors of leniency are caused by the
tendency of the lenient rater to put most of the ratees on the higher
side of the scale, while the tough rater places them on the lower side of
the scale. This is so because every evaluator has his own value system
that acts as a standard against which appraisals are made. Relative to
the true or actual performance an individual exhibits, some evaluators
mark high and others low. The former is referred to as positive leniency
error and the latter as negative leniency error (strictness error). When
evaluators are positively lenient in their appraisal, an individual’s
performance becomes overstated. Similarly, a negative leniency error
understates performance, giving the individual a lower appraisal. If
the same person appraised all individuals in an organization, there
would be no problem. Although there would be an error factor, it would
be applied equally to everyone. The difficulty arises when there are
different raters with different leniency errors making judgements.

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Performance Appraisal (b) Halo error: The ‘halo effect’ is a tendency to allow the assessment on
one trait to influence assessment on others. According to Bernardin
and Beatty, halo effect is a ‘tendency to rate high or low on all factors
due to the impression of a high or low rating on some specific factors.’
NOTES This arises when traits are unfamiliar, ill-defined and involve personal
reactions. One way of minimizing the halo effect is by appraising all
the employees with one trait before going on to rate them on the basis
of another trait.
(c) Central tendency error: The central tendency error refers to the tendency
of not using extreme scale scores on the judgement scale; most of the
rates are clustered in the middle. According to Bernardin and Beatty,
central tendency is ‘the reluctance to make extreme ratings (in either
direction); the inability to distinguish between and among ratees; a
form of range restriction’. Raters who are prone to the central tendency
error are those who continually rate all employees as average. They
follow play safe policy because of answerability to management or
lack of knowledge about the job and person he is rating or least interest
in his job. This type of rating will create problems, especially if the
information is used for pay increases.
(d) Personal prejudice: The rater’s personal prejudice can influence the
objectivity of performance appraisals. If the rater dislikes an employee,
he may rate him poorly.
(e) Consequence of appraisal: If the evaluator knows that a poor appraisal
could significantly hurt the employee’s future (particularly opportunities
for promotion or a salary increase) the evaluator may be reluctant to
give a realistic appraisal.
(f) The recency effect: Raters generally remember the recent actions of
the employee at the time of rating. If a favourable action has taken
place recently, the employee will be given a high rating. Conversely,
he will be given a poor rating if an unfavourable action has taken place
recently.
(ii) Opportunity Bias
This results when the amount of output is influenced by factors beyond the
control of employees. Some employees have better working conditions,
supportive supervisors, more experienced co-workers, and hence their output
may be greater than others working on identical tasks.
(iii) Group Cohesiveness
Cohesive groups with high morale can produce more than less cohesive
groups with low morale.

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(iv) Knowledge of Predictor Bias Performance Appraisal

A rater’s knowledge of the performance of an employee on predictors can

influence his appraisal ratings. An employee who topped in the selection
list might leave the impression that he is the best among the employees and, NOTES
hence, the rater may rate him as ‘good’ when his performance is moderate.
(v) Similarity Error
When evaluators rate other people in the same way that the evaluators perceive
themselves, they are making a similarity error. Based on the perception that
evaluators have of themselves, they project those perceptions on others. For
example, the evaluator who perceives himself as aggressive may evaluate
others by looking for aggressiveness.
Ways for Improving Performance Appraisals

(i) Choosing the Appraisal Method

With a wide range of appraisal methods currently available, an organization
is faced with the difficult task of selecting the best approach to meet its needs.
Before selecting the method of appraisal to be followed we should examine
two areas with special care:
(a) Various factors that can help or hinder the implementation of a particular
appraisal programme and
(b) The appropriateness of the appraisal method for the special jobs to
which the appraisal system will apply.
(ii) Multiple Raters
As the number of raters’ increases, the probability of getting accurate
information increases. If a person has had ten supervisors, nine have rated him
excellent and one poor, we can discount the value of the one poor evaluation.
Therefore, by moving employees about within the organization so as to gain
a number of evaluations, we increase the probability of achieving more valid
and reliable evaluation.
(iii) Training Appraisers
If you cannot find good raters, the alternative is to make good raters. Evidence
indicates that the training of appraisers can make them more accurate raters.
Common errors such as halo and leniency have been minimized or eliminated
in workshops where managers can practice observing and rating behaviours.
(iv) Ongoing Feedback
Employees like to know how they are doing. If managers share with the
subordinate both expectations and disappointments on a day-to-day basis by
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Performance Appraisal providing the employee with frequent opportunities to discuss performance
before any reward or punishment consequences occur, there will be no
surprises at the time of the annual formal review.

NOTES (v) Selective Rating

It has been suggested that appraisers should rate in those areas in which
they have significant job knowledge. If raters make evaluation on only those
dimensions on which they are in a good position we increase the inter-rater
agreement and make the evaluation a more valid process.
(vi) Peer Evaluation
The main advantages of peer evaluation are as follows:
(a) There is a tendency for co-workers to offer more constructive insight
to each so that, as a unit, each will improve and
(b) The recommendations of peers tend to be more specific regarding job
behaviours.
However, for peer assessments to function properly, the environment
in the organization must be such that politics and competition for promotions
are minimized.
(vii) Post-appraisal Interviews
It is necessary to communicate to employees how they have performed. To
meet this need, managers must take the time to schedule a meeting with their
subordinates to discuss the results of the performance evaluation. Employees
need to know how they are doing, be recognized for outstanding achievements
and be notified about where there is room for improvement.
(viii) Rewards to Accurate Appraisers
The managers who are evaluating must perceive that it is in their personal
and career interests to conduct accurate appraisals. If they are not properly
rewarded for doing effective appraisals, they will take the easy way out by
first trying to avoid the process entirely. If pushed, they will complete the
appraisals, but these can be expected to suffer from positive leniency and
low differentiation. Encouraging and rewarding accurate appraisers will
remove this flow.
To conclude, we can say that performance evaluations are an integral
part of every organization. Properly developed and implemented, the
performance evaluation can help an organization achieve its goals by
developing productive employees.

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 Performance Appraisal
Check Your Progress
1. Who all are involved in performance appraisals?
2. What are objective performance measures? NOTES
3. What is unstructured method of appraisal?
4. When was Assessment Centre Method first applied?

9.3 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Performance appraisal involves at least two parties; the appraiser

who does the appraisal and the appraisee whose performance is being
evaluated.
2. Objective performance measures are indications of job performance
that can be verified by others and are usually quantitative.
3. Under the Unstructured Method of Appraisal, the appraiser has to
describe his impressions about the employee under appraisal in an
unstructured manner.
4. Assessment Centre Method of appraising was first applied in the
German Army in 1930.

9.4 SUMMARY

· According to Wendell French, performance appraisal is, ‘the formal,

systematic assessment of how well employees are performing their
jobs in relation to established standards, and the communication of
that assessment to employees.’
· It is a systematic and objective way of evaluating both work-related
behaviour and potential of employees.
· Through discussions with individual employees, a line manager can
find out why they perform as they do and what steps can be initiated
to improve their performance.
· Performance appraisal is a significant element of the information and
control system in organization.
· Performance appraisal is planned, developed and implemented through
a series of steps.
· It begins with job analysis, job description and job specification.

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Performance Appraisal · Appraisal systems require performance standards that serve as
benchmarks against which performance is measured.
· Performance appraisal involves at least two parties; the appraiser
NOTES who does the appraisal and the appraisee whose performance is being
evaluated.
· A number of different performance appraisal methods or techniques
are available for evaluating the performance of the employees.
· These methods try to explain how management can establish standards
of performance and devise ways and means to measure and evaluate
the performance.
· Ranking becomes more reliable and easier under the paired comparison
method. This method is an attempt to improve upon the simple ranking
method.
· A checklist represents, in its simplest form, a set of objectives or
descriptive statements about the employee and his behaviour.
· BARS were introduced to present results to improve the performance
of the employees of a company.
· The result-oriented appraisals are based on the concrete performance
targets that are usually established jointly by the superior and
subordinates.
· Human resource accounting deals with cost of and contribution of
human resources to the organization.
· Cost of the employee includes cost of manpower, planning, recruitment,
selection, induction, placement, training, development, wages and
benefits, etc.

9.5 KEY WORDS

· Evaluation: It is the process of judging something’s quality, importance,

or value, or a report that includes this information.
· Promotion: It is the advancement of an employee’s position within
the organization.
· Compensation: It is the total cash and non-cash payments given to
an employee in exchange for the work they do for business. It is more
than an employee’s regular paid wages.
· Administrative: Pertaining to activities related to an organization’s
or business’ administration and management.

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 Performance Appraisal
9.6 SELF ASSESSMENT QUESTIONS AND
EXERCISES

Short Answer Questions NOTES

1. State the objectives of performance appraisal.

2. What are the uses of performance appraisal?
3. State the three purposes of performance appraisal.
4. Write short notes on:
(a) Paired Comparison Method
(b) Grading Method
(c) Forced Choice Method
(d) Behaviourally Anchored Rating Scales (BARS)
(e) Psychological Appraisals
Long Answer Questions
1. What are the steps involved in the process of performance appraisal?
Discuss.
2. Describe the essentials of a good appraisal system.
3. Draw a comparative study between the traditional methods and modern
methods of performance appraisal.
4. Discuss post-appraisal analysis in detail.
5. Assess the ways to improve performance appraisals.

9.7 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.

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Wages and Salary

UNIT 10 WAGES AND SALARY

Structure
NOTES
10.0 Introduction
10.1 Objectives
10.2 Wage and Salary Administration
10.2.1 Nature and Significance of Wage and Salary Administration
10.2.2 Theories of Wages
10.2.3 Methods of Wage Fixation
10.3 Answers to Check Your Progress Questions
10.4 Summary
10.5 Key Words
10.6 Self Assessment Questions and Exercises
10.7 Further Readings

10.0 INTRODUCTION

In this unit, you will learn about and salary wage determination. Proper job
evaluation is the foundation for developing a sound wage structure. While job
evaluation is a formal and systematic comparison of jobs in order to determine
the worth of one job in relation to another, it is logical and, to some extent,
an objective method of ranking jobs relative to one another.
The basic purpose of wage and salary administration is to establish and
maintain an equitable wage and salary structure. Its secondary objective is the
establishment and maintenance of an equitable labour-cost structure, i.e., an
optimal balancing of conflicting personnel interests so that the satisfaction of
employees and employers is maximized and conflicts minimized. The wage
and salary administration is concerned with the financial aspects of needs,
motivation and rewards.

10.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the nature and significance of wage and salary administration
· Explain the theories of wages
· Describe the methods of wage fixation

10.2 WAGE AND SALARY ADMINISTRATION

The activities of wage and salary administration are as follows:

· Job evaluation
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 · Surveys of wage and salaries Wages and Salary

· Analysis of relevant organizational problems

· Development and maintenance of the wage structure
· Establishing rules for administering wages NOTES
· Wage payments
· Incentives
· Profit sharing
· Wage changes-adjustments
· Supplementary payments
· Control of compensation and other related items
10.2.1 Nature and Significance of Wage and Salary Administration
The basic purpose of wage and salary administration is to establish and
maintain an equitable wage and salary structure. Its secondary objective is
the establishment and maintenance of an equitable labour-cost structure, i.e.,
an optimal balancing of conflicting personnel interests so that the satisfaction
of employees and employers is maximized, and conflicts minimized. The
wage and salary administration is concerned with the financial aspects of
needs, motivation and rewards.
The objectives of the wage and salary administration are mentioned
as follows:
1. For employees
· Employees are paid according to requirements of their jobs.
· The chances of favouritism (which creep in when wage rates are
assigned) are greatly minimized.
· Job sequences and lines of promotion are established wherever they
are applicable.
· Employees’ morale and motivation are increased because a wage
programme can be explained and is based upon facts.
2. To employers
· They can systematically plan for and control their labour costs.
· In dealing with a trade union, they can explain the basis of their wage
programme because it is based upon a systematic analysis of job and
wage facts.
· A wage and salary administration reduces the likelihood of friction
and grievances over wage inequities.

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Absenteeism and 2. to employers
Labour Turnover
• They can systematically plan for and control their labour costs.
• In dealing with a trade union, they can explain the basis of their wage programme
NOTES because it is based upon a systematic analysis of job and wage facts.
Wages and Salary • A wage and salaryanadministration
· It enhances reducesand
employee’s morale the likelihood
motivationofbecause
friction and grievances
adequate
over and
wagefairly administered wages are basic to his wants and needs.
inequities.
• It enhances
· It attracts
an qualified
employee’semployees
morale andby ensuring
motivationanbecause
adequateadequate
paymentand
for fairly
NOTES all the jobs.
administered wages are basic to his wants and needs.
It attracts
•Wage qualified employees
Determination Process by ensuring an adequate payment for all the jobs.
6.4.2The
Wage
steps Determination Process
involved in the wage determination process steps are as follows:
· involved
The steps Performing job
in the analysis
wage determination process steps are as follows:
• Performing
· Wage surveys
job analysis
· Analysis of relevant organizational problems forming the wage
• Wage surveys
structure
• Analysis of relevant organizational problems forming the wage structure
· Framing rules of wage administration
• Framing rules of wage administration
· Explaining these to employees
• Explaining thesegrades
· Assigning to employees
and price to each job and paying the guaranteed wage
• Assigning
Figuregrades and pricethe
10.1 illustrates to each
stepsjob and paying
involved in thethe guaranteed of
determination wage
wage
rates.
Figure 6.1 illustrates the steps involved in the determination of wage rates.

Fig.
Fig.6.1 Steps
10.1  StepsInvolved
Involvedin
inDetermination
Determination ofofWage
WageRate
Rate

6.4.3Factors
FactorsInfluencing WageWage
Influencing and Salary Structure
and Salary and Administration
Structure and
Administration
The wage policies of different organizations vary somewhat. Marginal
units policies
The wage pay the of
minimum
differentnecessary to attract
organizations varythe required Marginal
somewhat. number and kind
units pay the
of labour. Often these units pay only the minimum wage rates required by
minimum necessary to attract the required number and kind of labour. Often these units
labour legislation and recruit marginal labour. At the other extreme, some
pay only the minimum wage rates required by labour legislation and recruit marginal
units pay well above the going rates in the labour market.
labour. At the other extreme, some units pay well above the going rates in the labour
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 A sound wage policy is to adopt a job evaluation programme in Wages and Salary
order to establish fair differentials in wages based upon differences in job
contents. Besides, the basic factors provided by a job description and job
evaluation, those that are usually taken into consideration for wage and salary
administration are as follows: NOTES
· The organization’s ability to pay
· Supply and demand of labour
· The prevailing market rate
· The cost of living
· Living wage
· Productivity
· Trade union’s bargaining power
· Job requirements
· Managerial attitudes
· Psychological and sociological factors
Principles of Wage and Salary Administration
The commonly suggested principles governing fixation of wage and salary
are:
· There should be a definite plan to ensure that differences in pay for
jobs are based upon variations in job requirements, such as skill, effort,
responsibility of job or working conditions, and mental and physical
requirements.
· The general level of wages and salaries should be reasonably in tune
with that prevailing in the labour market. The labour market criterion
is most commonly used.
· The plan should carefully distinguish between jobs and employees.
A job carries a certain wage rate, and a person is assigned to fill it at
that rate. Exceptions sometimes occur in very high-level jobs in which
the job-holder may make the offer large or small, depending upon his
ability and contributions.
· Equal pay for equal work, i.e., if two jobs have equal difficulty
requirements, the pay should be the same, regardless of who fills them.
· An equitable practice should be adopted for the recognition of
individual differences in ability and contribution. For some units, this
may take the form of rate ranges, with in-grade increases; in others, it
may be a wage incentive plan; in still others, it may take the form of
closely integrated sequences of job promotion.

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Wages and Salary · There should be a clearly established procedure for hearing and
adjusting wage complaints. This may be integrated with the regular
grievance procedure, if it exists.

NOTES · The employees and the trade union, if there is one, should be informed
about the procedure used to establish wage rates. Every employee
should be informed of his own position, and of the wage and salary
structure. Secrecy in wage matters should not be used as a cover-up
for haphazard and unreasonable wage programme.
· The wage should be sufficient to ensure for the worker and his family
a reasonable standard of living. Workers should receive a guaranteed
minimum wage to protect them against conditions beyond their control.
· The wage and salary structure should be flexible so that changing
conditions can be easily met.
· Prompt and correct payments of the dues of the employees must be
ensured and arrears of payment should not accumulate.
· For revision of wages, a wage committee should always be preferred
to the individual judgement, however unbiased, or a manager.
· The wage and salary payments must fulfil a wide variety of human
needs, including the need for self-actualization. It has been recognized
that ‘money is the only form of incentive which is wholly negotiable,
appealing to the widest possible range of seekers.... Monetary payments
often act as motivators and satisfiers interdependently of other job
factors.’
10.2.2 Theories of Wages
Different methods of wage payment are prevalent in different industries and
in various countries. There may be payment by time or payment by results,
including payment at piece rates.
Wages are fixed mainly as a result of individual bargaining, collective
bargaining or by public or state regulation. How wages are determined has
been the subject of several theories of wages. The main elements in these
theories may be summed up as follows:
1.  Subsistence Theory
This theory, also known as ‘Iron Law of Wages,’ was propounded by David
Ricardo (1772-1823). This theory (1817) states that ‘the labourers are paid to
enable them to subsist and perpetuate the race without increase or diminution.’
The theory was based on the assumption that if the workers were paid more
than subsistence wage, their numbers would increase as they would procreate
more, and this would bring down the rate of wages. If the wages fall below
the subsistence level, the number of workers would decrease as many would
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die of hunger, malnutrition, disease, cold, etc., and many would not marry; Wages and Salary
when that happened the wage rates would go up.
2.  Wages Fund Theory
This theory was developed by Adam Smith (1723–1790). His basic NOTES
assumption was that wages are paid out of a pre-determined fund of wealth
which lays surplus with wealthy persons as a result of savings. This fund
could be utilized for employing labourers for work. If the fund was large,
wages would be high; if it was small, wages would be reduced to subsistence
level. The demand for labour and the wages that could be paid them were
determined by the size of the fund.
3.  The Surplus Value Theory of Wages
This theory owes its development to Karl Marx (1849–1883). According to
this theory, the labour was an article of commerce which could be purchased
on payment of ‘subsistence price’. The price of any product was determined
by the labour time needed for producing it. The labourer was not paid in
proportion to the time spent on work, but much less, and the surplus was
utilized for paying other expenses.
4.  Residual Claimant Theory
Francis A Walker 1984 propounded this theory. According to him, there are
four factors of production/business activity, viz., land, labour, capital and
entrepreneurs. Wages represent the amount of value created in the production
which remains after payment has been made for all these factors of production.
In other words, labour is the residual claimant.
5.  Marginal Productivity Theory
This theory was developed by Phillips Henry Wicksteed (England) and
John Bates Clark (USA). According to this theory, wages are based upon an
entrepreneur’s estimate of the value that will probably be produced by the last
or marginal worker. In other words, it assumes that wages depend upon the
demand for, and supply of, labour. Consequently, workers are paid what they
are economically worth. The result is that the employer has a larger share in
profit as he does not have to pay the non-marginal workers. As long as each
additional worker contributes more to the total value than the cost in wages,
it pays the employer to continue hiring; where this becomes uneconomic,
the employer may resort to superior technology.
6.  The Bargaining Theory of Wages
John Davidson propounded this theory. Under this theory, wages are
determined by the relative bargaining power of workers or trade unions and
of employers. When a trade union is involved, basic wages, fringe benefits,
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Wages and Salary job differentials and individual differences tend to be determined by the
relative strength of the organization and the trade union.
7.  Behavioural Theories
NOTES Many behavioural scientists — notably industrial psychologists and
sociologists — like Marsh and Simon, Robert Dubin, Eliot Jacques have
presented their views or wages and salaries, on the basis of research studies
and action programmes conducted by them. Briefly, such theories are:
Employee’s Acceptance of a Wage Level: This type of thinking takes into
consideration the factors which may induce an employee to stay on with a
company. The size and prestige of the company, the power of the union, the
wages and benefits that the employee receives in proportion to the contribution
made by him—all have their impact.
Internal Wage Structure: Social norms, traditions, customs prevalent in the
organization and psychological pressures on the management, the prestige
attached to certain jobs in terms of social status, the need to maintain internal
consistency in wages at the higher levels, the ratio of the maximum and
minimum wage differentials, and the norms of span of control and demand
for specialized labour all affect the internal wage structure of an organization.
Wage, Salaries and Motivators
Money often is looked upon as a means of fulfilling the most basic needs
of men. Food, clothing, shelter, transportation, insurance, pension plans,
education and other physical maintenance and security factors are made
available through the purchasing power provided by monetary income-wages
and salaries. Merit increases, bonuses based on performance, and other forms
of monetary recognition for achievement are genuine motivators. However,
basic pay, cost of living increases, and other wage increases unrelated to
an individual’s own productivity may typically fall into the maintenance
category.
Compensation Plan
For the higher management, salaries are influenced by the size of a company
in a specific industry, and in part by the contribution of the incumbent to
the process of decision-making. The bigger the firm, the greater is the
compensation paid to the executives. The industries that are more highly
constrained by governmental regulation (banks, life insurance, air transport,
railroads, public utilities) pay relatively less than those that are more free to
carry on their business (private firms).
Straight salaries, bonuses, stock purchase plans and profit-sharing are
used to compensate major executives. Of these, the straight salary is the most
common method. The salary is determined by mutual agreement between
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the individual and the employer. The sales affected, the cost of production, Wages and Salary
reduction in expenses and the profits made are also taken into account.
Bonuses are also aid to executives at a certain percentage of the profits.
The bonuses may average from 30 per cent to 50 per cent of the basic salary.
NOTES
These bonuses operate most effectively in increasing motivation when the
following conditions exist:
· The amount paid is closely related to the level of individual
performance.
· The amount paid after taxes represents a clearly noticeable rise
above the base salary level.
· The amount paid is closely related to the level of company
performance.
· The amount paid is tied into the base salary in such a way that the
combined earnings are equitable both in relation to internal and
external standards.
· The amount paid is reduced drastically whenever an individual
experiences a real and continuing decrease in performance
effectiveness.
· The amount paid is based on an easily understandable system of
allocation, and the individual is provided with complete information
on the relationship between bonus and performance.
Moreover, executives are compensated for the various expenses
incurred by them, for taxation takes away a major portion of their salary.
Such payments are in the form of:
· Medical care
· Counsel and accountants to assist in legal, tax and financial problems
· Facilities for entertaining customers and for dining out
· Company recreational area (swimming pool and gymnasium)
· The cost of the education and training of executives, scholarships
for their children, and allowances for business magazines and books
· Free well-furnished accommodation, conveyance and servants
Wage Incentives
The term wage incentives has been used both in the restricted sense of
participation and in the widest sense of financial motivation. It has been
defined differently by different authors. We give here a few of these definitions.
‘It is a term which refers to objectives in the external situation whose
function is to increase or maintain some already initiated activity, either in
duration or in intensity.’ According to Hummel and Nicker son: ‘It refers to all
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Wages and Salary the plans that provide extra pay for extra performance in addition to regular
wages for a job.’ Florence observes: ‘It refers to increased willingness as
distinguished from capacity.’ Incentives do not create but only aim to increase
the national momentum towards productivity.’
NOTES
In the words of Scott, ‘it is any formal and announced programme
under which the income of an individual, a small group, a plant workforce
or all the employees of a firm are partially or wholly related to some measure
of productivity output.’
According to the National Commission on Labour, ‘wage incentives
are extra financial motivation. They are designed to stimulate human effort
by rewarding the person, over and above the time-rated remuneration for
improvements in the present or targeted results.’
‘A wage incentive scheme is essentially a managerial device of
increasing a worker’s productivity. Simultaneously, it is a method of sharing
gains in productivity with workers by rewarding them financially for their
increased rate of output.’ According to Sun, this definition is based on the
principle that ‘an offer of additional money will motivate workers to work
harder and more skilfully for a greater part of the working time, which will
result in a stepped-up rate of output.’
We may define a wage incentive as a system of payment under which
the amount payable to a person is linked with his output. Such a payment
may also be called payment by results. The term incentive has gradually
acquired a wide connotation and includes all the possible factors, besides
economic gains, which can possibly motivate human beings towards better
and greater performance.
Objectives of Wage Incentive Plans
Wage incentive plans aim at the fulfilment of one or more of the following
objectives:
· To improve the profit of a firm through a reduction in the unit costs of
labour and materials or both.
· To avoid or minimize additional capital investment for the expansion
of production capacity.
· To increase a worker’s earnings without dragging the firm in a higher
wage rate structure regardless of productivity.
· To use wage incentives as a useful tool for securing a better utilization
of manpower, better production scheduling and performance control,
and a more effective personnel policy.
Merits of Wage Incentive Plans
Such plans are regarded as beneficial to both employers and workers. They
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170 Material
on the grounds that workers would work at their best if they were offered Wages and Salary
monetary rewards for good performance. For employers the need for a
vigorous supervision is reduced, and consequently there is a cut in the
expenditure on supervision.
NOTES
· When well-designed and properly applied, payment by results may
generally be relied upon to yield increased output, lower the cost of
production and bring a higher income to the workers.
· A works study associated with payment by results is a direct stimulus
to workers to improve the organization of work and to eliminate lost
time and other waste.
· Labour and total costs per unit of output can be estimated more
accurately in advance.
· Less direct supervision is needed to keep output up to a reasonable
level.
· The conflicting interests of employers and employees are unified.
Increased efficiency and smooth working can therefore be promoted
and sustained.
Demerits of Wage Incentive Plans
· Quality tends to deteriorate unless there is a stricter system of checking
and inspection.
· Payment by results may lead to opposition or restriction on output
when new machines and methods are proposed or introduced. This is
because of the fear that the job may be restudied, and earnings reduced.
· When paid by result, workers tend to regard their highest earnings as
norms and, therefore, press for a considerable higher minimum wage.
· The amount and cost of clerical work increases.
· There is a danger of disregarding safety regulations and thereby
increasing the rate of accidents.
· Some workers tend to overwork and thus undermine their health.
· Jealousies may arise among workers because some are able to earn more
than others or because fast workers are dissatisfied with the slower or
older workers in the group.
· It is difficult to set piece or bonus rates accurately. If they are too
low, workers may be under pressure to work too hard and become
dissatisfied; and if too high, they may slacker their efforts to avoid a
revision of rates.
A successful wage incentives plan should consist of the following key
points:

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Wages and Salary · The management should recognize that the effectiveness of an incentive
depends on the total situation, which includes worker-management
confidence, relations with the trade union, the quality of communication
and supervision and the traditions in an industry.
NOTES
· The management should not introduce an incentive system until it has
taken action to ensure full understanding of what is involved. This may
call for procedures for the participation of employees and negotiations
with the trade union.
· The management should avoid any action that may be interpreted as
unfair. There must be proper machinery for handling grievances. The
management should avoid actions that resemble ‘rate cutting’ because
of the need to change methods and rates from time to time.
· It is essential that the management pay in proportion to output once
this output rises above the required amount of guaranteed pay.
· The management should train supervisors all the way down the line so
that foremen and department managers are able to deal with problems
within their own departments.
· Great care should be taken in setting up standards to avoid rates that
are too loose or too tight.
10.2.3 Methods of Wage Fixation
Wage incentive plans may be discussed as follows:
· Plans for blue-collar workers
· Plans for white-collar workers
· Plans for managerial personnel
Each of these categories of employees has separate and distinct needs
and specific plans tailored for each may prove beneficial.
1. Incentive Plans for Blue-Collar Workers: For Individuals:

Short-Term Plans
These systems may be broadly classified into three categories:
(a) Systems under which the rate of extra incentive is in proportion to the
extra output
(b) Systems under which the extra incentive is proportionately at a lower
rate than the increase in output
(c) Systems under which the rate of incentives is proportionately higher
than the rate of increase in output

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Long-Term Plans Wages and Salary

This is classified into three types:

1. A standard output
2. The ‘value added’ by manufacturer NOTES

3. Bonus can also be calculated on the increased value of sales where this
result is obtained by increased production
Some Important Wage Incentive Plans
The chief incentive plans are as follows:
(i) Halsey Premium Plan
(ii) Halsey-Weir Premium Plan
(iii) Rowan Premium Plan
(iv) 100 Per Cent Premium Plan
(v) Bedeaux Point Plan
(vi) Taylor’s Differential Piece Rate Plan
(vii) Merric’s Multiple Piece Rate Plan
(viii) Gnatt Task and Bonus Plan
(ix) Emerson Efficiency Plan
(x) Co-Partnership System
(xi) Accelerating Premium Systems
(xii) Profit Sharing Schemes
The group incentive plans are usually the following:
Scanlan Plan

(i)  Halsey Premium Plan

This is a time-saved bonus plan which is ordinarily used when accurate
performance standards have not been established.
Time saved
Formula: Bonus = ½ of ×Daily wage
Time taken
Merits
The merits of this plan are as follows:
· It guarantees a fixed time wage to slow workers and, at the same time,
offers extra pay to efficient workers.
· The cost of labour is reduced because of the percentage premium
system; the piece rate of pay gradually decreases with increased
production.
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Wages and Salary · The plan is simple in design and easy to introduce.
· As the wages are guaranteed, it does not create any heartburning among
such workers as are unable to reach the standard.
NOTES Demerits
The disadvantages of the plan are as follows:
· It depends upon past performance instead of making new standards.
· The workers can beat the game by spurting on certain jobs to capture
a premium and soldiering on other jobs to rest under the protection of
the guarantee of day wages.
· From the point of view of the administration, the policy is one of drift,
for, in this plan, the worker is left alone to decide whether or not to
produce more after the standard has been reached.
(ii) Halsey-Weir Premium Plan
This plan is similar to the Halsey Premium Plan except that 50 per cent of
the time saved is given as premium to the worker.
Formula: Bonus = ½ × Time Saved × Hourly Rate
(iii) Rowan Premium Plan
In the Rowan Plan, the time saved is expressed as a percentage of the time
allowed, and the hourly rate of pay is increased by that percentage so that
total earnings of the worker are the total number of hours multiplied by the
increased hourly wages.
Time saved
Formula: Bonus = Time taken × Time Taken × Hourly Rate
(iv) 100 Per Cent Premium Pla
A definite hourly rate is paid for each task hour of work performed. The plan
is identical with the straight piece rate plan except for its higher guaranteed
hourly rate and the use of task time as a unit of payment instead of a price
per piece. The worker is paid the full value of the time saved.
(v) Bedeaux Point Plan
This plan is used when carefully assessed performance standards have been
established. It differs from the 100 per cent plan in that the basic unit of the
time is the minute termed as B. Every job is expressed in terms of Bs (after
Bedeaux), which means that a job should be completed in so many minutes.
(vi) Taylor’s Differential Piece Rate Plan
This system was introduced with two objects: First, to give sufficient incentive
to workmen to induce them to produce up to their full capacity; and second,
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to remove the fear of wage cut. There is one rate for those who reach the Wages and Salary
standard; they are given a higher rate to enable them to get the bonus.
(vii) Merric’s Multiple Piece Rate Plan
This plan, too, is based on the principle of a low piece rate for a slow worker NOTES
and a higher piece rate for higher production; but the plan differs from Taylor’s
plan in that it offers three graded piece rates instead of two. (i) Up to, say 83
per cent of standard output a piece-rate + 10 per cent of time rate as bonus;
(ii) Above 83 per cent and up to 100 per cent of standard output—same
piece rate + 20 per cent of time rate; and (iii) Above 100 per cent of standard
output—same piece rate but no bonus.
(ix) Emerson Efficiency Plan
Under this system, a standard time is established for a standard task. The day
wage is assured. There is no sudden rise in wages on achieving the standard
of performance. The remuneration based on efficiency rises gradually.
Efficiency is determined by the ratio between the standard time fixed for
a performance and the time actually taken by a worker. Thus, if the period
of 8 hours is the standard time for a task and if a worker performs it in 16
hours, his efficiency is 50 per cent. A worker who finishes the task in 8 hours
has 100 per cent efficiency. No bonus is paid to a worker unless he attains
662/3 per cent efficiency, at which stage he receives a nominal bonus. This
bonus goes on increasing till, he achieves 100 per cent efficiency. The bonus
is 20 per cent of the guaranteed wage. At 120 per cent efficiency, a worker
receives a bonus of 40 per cent and at 140 per cent efficiency the bonus is
60 per cent of the day wage.
(x) Co-Partnership System
This system tries to eliminate friction between capital and labour. Under this
system, not only does a worker have a share in the profits of the undertaking
but he also takes part in its control and, therefore, shares responsibilities.
There are different degrees of this partnership and control allowed to the
operatives in different cases; but in a complete co-partnership system, the
following factors exist:
· The payment of the existing standard wages of labour.
· The payment of a fixed rate of interest on capital.
· The division of the surplus profit between capital and labour in an
agreed proportion.
· The payment for a part of the worker’s labour by the allotment of a
share in the capital.
· The sharing in the control of the business by the representatives of
labour.
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Wages and Salary The system arouses and sustains the interest of the workers in their
work. By giving them a voice in the management of the factory it raises their
status as well. As they have become partners in the business, they try to make
it a very profitable enterprise.
NOTES
(xi) Accelerating Premium Systems
These are the systems which provide for a guaranteed minimum wage for
output below standard.
(xii) Profit Sharing Scheme
Profit sharing is regarded as a stepping stone to industrial democracy.
Professor Seager observes: ‘Profit-sharing is an arrangement by which
employees receive a share, fixed in advance of the profits.’
Features of Profit Sharing
The main features of the profit sharing scheme are:
· The agreement is voluntary and based on joint consultation made freely
between the employers and the employees.
· The payment may be in the form of cash, stock of future credits of some
amount over and above the normal remuneration that would otherwise
be paid to employees in a given situation.
· The employees should have some minimum qualifications, such
as tenure, or satisfy some other condition of service which may be
determined by the management.
· The agreement on profit sharing having been mutually accepted is
binding and there is no room on the part of the employer to exercise
discretion in a matter which is vital to the employees.
· The amount to be distributed among the participants is computed
on the basis of some agreed formula, which is to be applied in all
circumstances.
· The amount to be distributed depends on the profits earned by an
enterprise.
· The proportion of the profits to be distributed among the employees
is determined in advance.

Check Your Progress

1. What is the basic purpose of wage and salary administration?
2. What is a sound wage policy?
3. State the subsistence theory.
4. Who developed wage fund theory?
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 Wages and Salary
10.3 ANSWERS TO CHECK YOUR PROGRESS
QUESTIONS

1. The basic purpose of wage and salary administration is to establish NOTES

and maintain an equitable wage and salary structure.
2. A sound wage policy is to adopt a job evaluation programme in order
to establish fair differentials in wages based upon differences in job
contents.
3. The subsistence theory (1817) states that ‘the labourers are paid to
enable them to subsist and perpetuate the race without increase or
diminution.’
4. This theory was developed by Adam Smith (1723–1790).

10.4 SUMMARY

· The basic purpose of wage and salary administration is to establish

and maintain an equitable wage and salary structure.
· Its secondary objective is the establishment and maintenance of an
equitable labour-cost structure, i.e., an optimal balancing of conflicting
personnel interests so that the satisfaction of employees and employers
is maximized, and conflicts minimized.
· A sound wage policy is to adopt a job evaluation programme in order
to establish fair differentials in wages based upon differences in job
contents.
· Wages are fixed mainly as a result of individual bargaining, collective
bargaining or by public or state regulation.
· Subsistence theory, also known as ‘Iron Law of Wages,’ was propounded
by David Ricardo (1772-1823).
· This theory (1817) states that ‘the labourers are paid to enable them
to subsist and perpetuate the race without increase or diminution.’
· The theory was based on the assumption that if the workers were paid
more than subsistence wage, their numbers would increase as they
would procreate more, and this would bring down the rate of wages.
· Wages fund theory was developed by Adam Smith (1723–1790).
· His basic assumption was that wages are paid out of a pre-determined
fund of wealth which lays surplus with wealthy persons as a result of
savings.

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Wages and Salary · For the higher management, salaries are influenced by the size of a
company in a specific industry, and in part by the contribution of the
incumbent to the process of decision-making.

NOTES · The salary is determined by mutual agreement between the individual

and the employer.
· Wage incentives: ‘It is a term which refers to objectives in the external
situation whose function is to increase or maintain some already
initiated activity, either in duration or in intensity.’
· We may define a wage incentive as a system of payment under which the
amount payable to a person is linked with his output. Such a payment
may also be called payment by results.
· Wage Incentive Plans are regarded as beneficial to both employers and
workers.
· They are accepted as a sound technique for the achievement of greater
production on the grounds that workers would work at their best if they
were offered monetary rewards for good performance.
· In the Rowan Plan, the time saved is expressed as a percentage of the
time allowed, and the hourly rate of pay is increased by that percentage
so that total earnings of the worker are the total number of hours
multiplied by the increased hourly wages.

10.5 KEY WORDS

· Wages: It refers to the fixed regular payment earned for work or

services, typically paid on a daily or weekly basis.
· Survey: It means to ask (many people) a question or a series of
questions in order to gather information about what most people do
or think about something.
· Union: It is a society or association formed by people with a common
interest or purpose.

10.6 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Describe the nature and purpose of wage and salary administration.
2. Explain the wage determination process.
3. What factors influence the wage and salary structure and administration?

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 4. What are the commonly suggested principles governing fixation of Wages and Salary
wage and salary?
5. What is Halsey premium plan? Discuss its merits and demerits.
6. Discuss the features of profit sharing. NOTES
Long Answer Questions
1. Give a detailed explanation of the main elements in various theories
of wages. Explain each theory in detail.
2. Discuss compensation plan.
3. What are wage incentives? Explain its objectives and merits and
demerits in detail.
4. Describe the various types of wage incentive plans.

10.7 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
Contemporary Perspective. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.

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Incentives

UNIT 11 INCENTIVES
Structure
NOTES
11.0 Introduction
11.1 Objectives
11.2 Concept of Incentives
11.2.1 Effective Incentive System
11.2.2 Types of Incentive Schemes
11.3 Answers to Check Your Progress Questions
11.4 Summary
11.5 Key Words
11.6 Self Assessment Questions and Exercises
11.7 Further Readings

11.0 INTRODUCTION

Services rendered by individuals to organizations have to be equitably paid

for. This compensation generally comprises cash payments which include
wages, bonus, and shared profits. Good compensation plans have a salutary
effect on the employees. They are happier in their work, cooperative with
management and productivity is up. Although, there can be both monetary
and non-monetary forms of compensation, it is the monetary which is the
most basic element by which individuals are attracted to an organization and
are persuaded to remain there.
A wide variety of incentive wage plans has been devised by industries
under which the worker’s earnings are related directly to some measurement
of work done either by himself or by his group. In this unit, you will study
about the concept of incentives in detail.

11.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of incentives
· Analyse effective incentive system
· Describe the types of incentive schemes

11.2 CONCEPT OF INCENTIVES

Wages in the widest sense mean any economic compensation paid by

the employer under some contract to his workers for the services rendered

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by them. The Payment of Wages Act 1936, Sec 2 (vi) defines wages as, ‘any Incentives
award of settlement and production bonus, if paid, constitutes wages.’
Methods of Wage Payment
Compensation paid to the labour for the service offered is called as wages NOTES
or salary. Giving satisfactory and fair amount of compensation, can
probably eliminate most of the labour disputes. The fundamental methods
of compensating the workers are:
(a) Time Wage  
(b) Piece Wage
1. Time Wage
It is based on the amount of time spent. Wage is measured on the basis
of unit of time, e.g., per day, per month, etc. Wages do not depend on the
performance of the employee.
Features of time wage
· It is more widely used as it is very simple to compute the earnings.
· It provides guaranteed and secured income, thereby removing the fear
of irregularity of income.
· It facilitates payroll function.
Advantages of time wage system
· Sense of security of income. The worker knows exactly the amount he
is to get.
· Conducive climate is provided for better labour–management relations
as disputes are minimized.
· The worker will give greater care and attention on quality and, therefore,
workmanship can be assured.
Disadvantages of time wage system
· Time Wage System offers no incentive for the employees to put forth
their best efforts. Efforts and reward have no direct positive correlation.
· There is no encouragement for better performance. Merit is discounted
and inefficiency is at a premium as all receive the same salary. It is an
unsound, unscientific and arbitrary basis of wage payment.
· Ambitious workers receive no monetary reward for their talents.
· It demands intensive and strict supervision.

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Incentives (b) Piece Wage System
It is based on the amount of work performed or productivity. The earnings of
the employee are directly proportional to his output or performance. Features
NOTES of piece wage system are:
· It can offer direct connection between effort and reward. Hence, it is
the best method to ensure higher productivity.
· Wage cost determination is easy.
Advantages of piece wage system
· Direct connection between effort and reward.
· It is simple and easy to understand.
· The worker is interested in higher efficiency.
· Cost accounting and control by management is made easy.
Disadvantages of piece wage system
· Danger of overwork. This leads to risk of accident and excessive
fatigue.
· We require a lot of supervision to maintain the quality and standard of
work.
· It is an ineffective method, if quality is to be given top preference.
Incentive Wage Plans
A system of wage payment that would maintain both quality and quantity
is called incentive wage plan, and it is naturally a judicious combination of
both basic systems of wage payments, i.e., time and piece wages. Under the
incentive plans of wage payment, both time wage and piece wage systems are
blended together in such a manner that the workers are induced to increase
their productivity.
Essentials of a Sound Wage Incentive Plan:
· Measurement of the amount of work done.
· Establishment of standard output on the basis of which the incentive
has to be worked out.
· Setting up a suitable rate of incentive.
Types of incentive plans: The following are some important plans of
incentive wage payment:
(a) Halsey Plan: It is a plan originated by F.A. Halsey to encourage
efficiency among workers as well as to guarantee them wages
according to time basis. The standard time required for a job is
determined beforehand on the basis of time and motion studies.
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 Workers who perform the job in less than the standard time and Incentives
thus save time are rewarded with a bonus but the worker who takes
longer than the standard time is not punished and is paid wages
according to time wage system. The total earnings of a worker
under this plan consist of wages for the actual time plus a bonus NOTES
which is equal to the money value of 33 per cent of the time saved
in case of standard time set on previous experience, and 50 per
cent of the time saved when the standards are scientifically set.
(b) Rowan Plan: Wages, according to time basis, are guaranteed
and the slow worker is not made to suffer. A standard time is
determined before and a bonus is paid according to time saved.
The only difference between Halsey Plan and Rowan Plan relates
to the calculation of bonus. Under this plan bonus is based on that
proportion of the time saved which the time taken bears to the
standard time. It can be expressed as follows:
Time Taken × Hourly Rate
Bonus = Time Saved ×
Standard Time
Thus, if a 20 hour job is done in 16 hours and if the hourly rate
is 80 paisa, the total earnings of the worker will be:
[16 × .80] + [4 × (16 ÷ 20) × .80]
= 12.80 + 2.56 = `15.36
(c) Taylor’s Differential Piece Wage Plan: Under this plan, there is
no guarantee of wages. The standard of output is fixed per hour
or per day and two piece wage rates are laid. Those exceeding the
standard or even just attaining it, are entitled to the higher rate and
those, whose output is less than the standard output are paid at a
lower rate. For example, the standard may be fixed at 40 units per
day and the piece rates may be 30 paisa and 25 paisa per unit. If
a worker produces 40 units he should get wages at the rate of 30
paisa, i.e., ` 12. If he produces only 39 units he would be paid at
the rate of 25 paisa per unit so his wages will be ` 9.75.
(d) The Emerson Efficiency System: In this system, the worker is
allowed a certain time within which he is required to complete
his job. If he completes the job within the required time, he is
paid bonus. If he takes longer then the required time, he receives
a lower bonus. Under this system, the daily wage is guaranteed.
(e) The Gantt System: This system is similar to the Emerson
efficiency system. The worker receives the bonus only if he attains
the required standard of efficiency. No bonus is paid to a worker
where his efficiency is less than 100%. The foreman is also given
a bonus if the worker under his care attains the required standard
of efficiency. Self-Instructional
Material 183
Incentives (f) Bedeaux Point Premium Plan: The chief novelty of this plan
is that the value of time saved is divided between workers and
foreman, 3/4 to workers and 1/4 to foreman. This is done on
the basis that a worker cannot show good results if his foreman
NOTES does not fully cooperate with him. Therefore, the foreman is also
entitled to an incentive.
Variable Compensation Individual and Group
Incentive compensation, also called ‘payment by result’, is essentially a
managerial device for increasing workers’ productivity. Further, it is a method
of sharing gains in productivity with workers by rewarding them financially
for their increased rate of output. The payment by results scheme is directly
related to an employee’s productivity. There are many variations of incentive
wage system. The simplest method is that of paying a workman by the number
of units of a product he produces. The objective of an incentive wage system
is relating wages to output, thereby stimulating greater output at lower costs.
Incentive system also helps in narrowing the gap between management and
workers and bringing them closer together with a commonality of goals and
targets. Many authors have defined the term wage incentives.
In the words of Hummel and Nickerson, wage incentives ‘refers to all
the plans that provide extra pay for extra performance in addition to regular
wages for a job.’
According to Scott, Wage incentives ‘is any formal and announced
program under which the income of an individual, a small group, a plant
work force or all the employees of a firm are partially or wholly related to
some measure of productivity output.’
Broad Categories of Wage Incentive Schemes
There are three broad categories of incentive schemes as classified by Dunn
and Rachel. They are:
1. Simple Incentive Plan: The simplest of all wage incentives may be
described as the straight piece-rate system. The piece-work method
is perhaps one of the oldest and simplest of the incentive plans. The
basis of computation is the rate per piece multiplied by the number
of pieces produced. For example, if the piece-rate is ` 2 for each unit
of output, then a worker who produces 10 units in a given time, say 8
hours, will be paid ` 20. Another worker whose production is 12 units
in the given time (i.e., 8 hours) will receive ` 24, and so on.
This  method of payment is suitable if the process of production is
standardized and large quantities are produced by repetitive work. The
system is not suitable where workers by working rapidly to earn more
wages are likely to lower the quality of the goods they produce.
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 2. Sharing Incentive Wage Plan: There are a large number of plans Incentives
in this category. These plans are the modifications of the Taylor’s
differential piece rate incentive plan. Under this plan, the workers
exceeding the standard or even just attaining it, are entitled to the higher
rate and those, whose output is less than the standard output are paid NOTES
at a lower rate. Taylor’s philosophy was to attain a high level of output
and, therefore, there was a differential piece rate, low rates for output
below the standard, and high rate for output above the standard.
3. Group Incentive Plan: Individual incentive scheme is not suited to
cases where several workers are required to perform jointly a single
operation. In such cases, a team approach is called for, with all the
members of that team doing their share to achieve and maintain the
output. The advantage of group incentive plans is that they encourage
team spirit and a sense of mutual cooperation among workers. Under
the group incentive plan, each member of the group is determined
first of all by measuring the amount of the production which passes
inspection as it leaves the group. The total earnings for the group
are then determined and if all the members are of equal skill, these
earnings are usually divided among them equally. There are three broad
categories of incentive schemes (i) Simple Incentive Plan. (ii) Sharing
Incentive Wage Plan. (iii) Group Incentive Plan.
11.2.1 Effective Incentive System
An incentive scheme is based on three basic assumptions. They are
· The belief that money is a strong motivator.
· There is a direct relationship between effort and reward.
· The worker is immediately rewarded for his efforts.
Though monetary incentive plans do motivate employees, these plans
will not be effective unless certain requisites are met. Several authorities on
the subject have suggested a list of requisites that monetary incentive plans
should meet if they are to be attractive to the employees. These requisites
are given as follows:
· The relations between management, supervisory staff and workers
should be cordial and free from suspicion. Management must, therefore,
ensure association of workers during the development and installation
of the scheme.
· The incentive plan should reward employees in direct proportion to
their performance. The standard set has to be attainable; necessary
tools, equipment, training etc., should be provided and the employee
should have adequate control over the work process.

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Incentives · The plan should be easily understood by the employees so that they can
easily calculate personal cost and personal benefit for various levels
of effort put in by them. Complicated plans and formulae sow seeds
of doubt and mistrust in the worker’s mind.
NOTES
· The plan should provide for rewards to follow quickly after the
performance that justifies the reward. Employees do not like to be
rewarded next month for extra effort expended today.
· The plan must be within the financial and budgetary capacity of
the organization. In other words, the plan should not be very costly
in operation. It should be ascertained in advance that these costs
(incentives) are amply covered by the resultant benefits.
· The work standard once established should be guaranteed against
change. The work standard should be viewed as a contract with the
employees. This rule must be strictly adhered to by management. Once
the plan is operational, great caution should be used before decreasing
the size of the incentive in any way.
· The plan should be set on reasonable standards, i.e., it should not be
too difficult or too easy. If the standards set are too difficult they make
the employees unenthusiastic about it. If the standards set are too easy,
the employees would hardly experience any competition. Thus, a fair
and just standard is the key to any incentive plan.
· The reward must be valuable to the employees. The incentive payments
under the plan should be large enough in relation to the existing income
of employees.
· The incentive plans must encourage employees to support each other
rather than be non-cooperative.
· The plan should not be detrimental to the health and welfare of the
employees. It should therefore include a ceiling on the maximum
earnings by way of incentives.
· Individual’s or group’s contributions and efforts must be clearly
identifiable, if rewards are to be given for specific performance.
· A guaranteed base rate should be included in any plan. Employees want
to be assured that they will receive a minimum wage regardless of their
output. This introduces a element of security for the employees.
Fringe Benefits
Fringe benefits are the additional benefits and services that are provided by a
company to its employees in addition to their direct salary. Therefore, fringe
scan be defined as the additional benefits and services that a company provides
to its employees on the basis of their performance. Both the terms, benefits
and services, are considered similar by most people but some believe that
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they are entirely different. According to them, benefits are applicable only Incentives
for those items that can be associated with some monetary value whereas
services is applicable for the items that cannot be associated with any direct
money values. However, more or less, both the terms, benefits and services,
mean the same in reference to fringe benefits. NOTES
Today, mostly every company provides additional benefits to its
employees along with the scheduled salary. Employees are attracted and get
encouraged with these additional benefits and services. There are a lot of
advantages of fringe benefits that attract the employees. Firstly, as most of
the fringe benefits are not taxed benefits, they are not included in the taxable
income. Another advantage of fringe benefits is that the employees can
avail the fringe benefits, such as health and insurance with less expenditure.
Companies also use these benefits to attract and maintain the existing
employees by providing them additional benefits. Along with attracting the
employees, fringe benefits such as vacations along with holidays and rest
break also help the employees to get fresh and perform their duty with more
encouragement. Therefore, we can say that the fringe benefits help:
· Lessen fatigue
· Oppose labour unrest
· Satisfy employee objectives
· Promote recruitment
· Minimize turnover
· Reduce overtime costs
Principles of Fringe Benefits
There are few factors that must be considered while determining the fringe
benefits, which must be provided to the employees of a company. These are:
· Benefits and services must be provided to the employees of a company
to provide them better protection and encourage their wellbeing. The
top management should not feel as if they are doing some charity by
giving incentives to their employees.
· The benefits that are provided to the employees should fulfil the real-
life requirements of the employees.
· The benefits and services should be cost effective.
· Fringe benefits should be monitored with proper planning.
· While determining the fringe benefits, the requirements of employees
that are communicated by union representatives must be considered.
· The employees of a company should be well informed so that can make
better utilization of fringe benefits.

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Incentives Table 11.1  Some Examples of Monetary Benefits

Benefits Example

Legally required payments Old age, survivors and health insurance

Worker's compensation
NOTES Unemployment compensatio

Dependent and long term benefits Pension plan

Group life insurance
Group Health insurance
Prepaid legal plans
Sick leave
Dental benefits
Maternity leav

Payments for time not worked Vacations

Holidays
Voting pay allowanc

Other benefits Travel allowance

Company car and subsidies
Child care facilities
Employee meal allowances
Moving expense

Types of Fringe Benefits

As we have discussed in the concept, fringe benefits can of two types. One
that can be measured in terms of money value and the other type of benefits
are those that cannot be measured in terms of money value. Fringe benefits
such as medical insurance and holiday pay that can be associated with money
value, are known as monetary benefits (see Table 11.1) whereas benefits such
as company newspaper and company service that cannot be associated with
any money value are known as non-monetary benefits, as shown in Table 11.2.
Table 11.2  Examples of Non-monetary Benefits

Benefits Example

Treats Free lunch

Coffee breaks
Picnics
Birthday treats
Dinner for the family

Knick-Knacks Company watches

Desk accessories
Wallets
T-shirts
Diaries and planner

Important Fringe Benefits

In the previous section, we came to know about the various fringe benefits
that are provided by a company to its employees. Out of those benefits, there
are few benefits that are much important for the employees. These are:
· Payment for the time employees have not worked
· Insurance benefits
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188 Material
 · Compensation benefits Incentives

· Pension plans
Payment for the time employees have not worked: This fringe benefit
forms an important benefit for the employees of company. Mostly every NOTES
company provides the payment for time not worked benefit to its employees.
Payment for time not worked benefit can be of two types, on-the-job free timer
payment and off-the-job free time payment. On-the-job free time includes
lunch periods, coffee breaks, rest periods, get-ready times and wash-up times
whereas off-the-job free time includes vacations, sick leaves, public holidays
and casual leaves.
Insurance benefits: Insurance benefits are also an important fringe benefit
for the employees of a company. Nowadays, every company provides its
employees the facility of purchasing insurance policies at prices, which is
much less than the cost the employees have to pay for if they buy insurance
themselves.
Compensation benefits: Companies also provide compensation benefits to
its workers against some disability or injuries to the employees or their family
members. Other employees of the company contribute to the funds that are
collected for the ill or injured employees. All these compensation benefits
are synchronized by the Workmen’s Compensation Act.
Pension plans: Companies also provide supplementary income or pension to
its employees after their retirement. These pension plans can be company paid
or both company and employee paid. In addition to the pensions, companies
also provide bonus to the employees reaching to superannuation.
Monitoring Fringe Benefits
Implementing the fringe benefits in a company is not enough for the proper
functioning of the company and employee satisfaction. It is necessary to
monitor the fringe benefits to ensure that they are implemented properly and
utilized fully by the employees of the company. The following are the steps
that must be performed to monitor the fringe benefits:
· Setting up benefit objectives
· Assessing environmental factors
· Determining competitiveness
· Conveying benefit information
· Controlling benefit costs and evaluation
Figure 11.1 shows the sequence of various steps involved in monitoring
fringe benefits.

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Material 189
Incentives

Setting up
benefit objectives

E
NOTES N Assessing environ-
V mental factors
I
R
O Determining
N Competitiveness
M
E
N Conveying benefit
T information

Controlling
benefits costs
and evaluation

Fig. 11.1  Various steps of Monitoring Fringe Benefits

Setting up benefit objectives: To ensure the proper implementation of

fringe benefits, a company needs to set up certain objectives for the benefit
programmes. The following are the main objectives that must be accomplished
while setting up fringe benefits:
· Encouraging external competitiveness
· Enhancing cost effectiveness
· Fulfilling the needs and preferences of each employee
· Adhering to the legal compulsion
Assessing environmental factors: While monitoring the fringe benefits, a
company needs to identify various internal and external environmental factors
that may affect the fringe benefits provided to the employees. External factors
include government policies and regulations, unions and economic factors.
Internal factors include the economic conditions. It means that if a company
is well established, they can provide better fringe benefits to its employees
than an emerging company.
Determining competitiveness: While monitoring the fringe benefits, a
company also need to assess the fringe benefits provided by its competitors
to their employees. To monitor the competitor’s strategies of providing fringe
benefits, the company needs to conduct surveys to obtain information about
various benefits offered by their competitor.
Conveying benefit information: The employees of a company must be
informed about the different types of benefit programmes through different
communication media such as booklets, regular employee meetings,
brochures and slide presentations. The most effective method of conveying
the benefits information to the employees is through calendars, in which
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each month shows the benefits and services availed by the employees of the Incentives
company every month.
Controlling benefit costs and evaluation: An important method of
determining the usefulness of the fringe benefits is to ascertain that to which
NOTES
extent the non-monetary fringe benefits are helpful to the employees. To obtain
the correct feedback about the non-monetary fringe benefits, the following
questions should be answered:
· Have the earnings of the employees enhanced?
· Have the benefits provided by the company able to attract the
employees?
· Has the confidence of the employees risen?
· Have the industrial relations of the company improved?
The answers of the above-mentioned questions help the HR manager
to assess the effectiveness of the fringe benefits.
Concept of Variable Compensation
Variable compensation refers to the incentive schemes that are given to the
workers on the basis of their productivity. These schemes may use bonuses
or variety of rates as incentives to compensate for the superior performances
of workers. These schemes are popular all over the world and are used
extensively for raising productivity. The various incentive schemes are
discussed in the next section.
11.2.2 Types of Incentive Schemes
Incentives schemes are several and varied. They are broadly classified under
2 heads:
· Individual incentive scheme
· Group incentive scheme

Fig. 11.2  Individual lncentive Schemes and Group Incentive Schemes Self-Instructional
Material 191
Incentives Individual incentive schemes: Individual incentive scheme may be
time based or production based. ILO has classified the schemes of payment
by results into four categories (refer to Figure 11.2):

NOTES (a)  Schemes where the workers’ earnings vary in the same
proportion as output
The chief characteristic of this scheme is that any gains or losses resulting
from a workers output accrue to him.
Whereas when the worker is paid on hourly, daily or monthly basis, all
gains or losses resulting from the change of his output accrue to the employer.
The success of this kind of scheme depends upon accurate measurement
of standard and individual outputs.
The two methods under this scheme are:
(i) The straight piecework method: It is the simplest, oldest and most
commonly used method. Under this system, the rate of output is fixed
per unit and the total earning of a worker is arrived by multiplying the
total output (measured in terms of units) by the rate per unit. Therefore,
the earning of the worker directly depends upon his performance. For
example, if the total output of an employee is 100 units and the rate
per unit is 10 paise, then his earnings would be 100 × 0.10 = ` 10.
However, the one limitation under this method is that a worker has to
go without wages if he fails to produce the required output. In order to
overcome this limitation, this method is modified in one respect, that
is, the workers time rate is guaranteed. Under average conditions the
time rate is fixed below piece rate. It is designed to protect the worker
against unduly low earnings caused due to factors beyond his control.
(ii) The standard hour method: This method is also called as 100 per cent
gains- sharing. Under this method, standard time in terms of hours
is fixed for the compensation of a job and the rate per hour is then
determined. The worker is paid on a standard time_rate for completion
of job on or before standard time. In any case, time wages are not
guaranteed a worker will be paid same wages calculated on the basis
of standard time even if he takes more than the standard time. If time
wages are guaranteed, then he is paid on the basis of the time taken
multiplied by the time rate.
The following example illustrates this method:
Standard time = 10 hrs
Rate per hour = ` 1
Case (i) Time taken = 8 hrs
Earnings = 10 × 1 = ` 10
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Case (2) Time taken = 12 hrs
192 Material
 (a) Earnings if time wages are not guaranteed = 10 × 1 = ` 10 Incentives

(b) Earnings if time wages are guaranteed = 12 × 1 = ` 12

(b)  Schemes where the workers’ earnings vary less proportionately
as output NOTES

Under this scheme, four allied but different plans come under these methods:
· Halsey plan
· Rowan plan
· Barth plan
· Bedaux plan
The most common feature of all these plans is that bonus is paid on the
time saved. These are called the gain sharing schemes as both the employer
and the employee share the gains from the time saved. The worker would be
paid for half (or any other fraction) of the time saved and employer would
be getting the balance amount.
These plans are often applied in cases where it is not possible to set
standards or to measure the workers output accurately. Under some of these
plans, it is possible for the worker to earn more for a certain level of outputs
as when compared to piece wage method under production difficulties.
Halsey plan: Under this plan, standard time is fixed for the completion
of a job and the rate per hour is then determined. The worker will be paid
wages on time rate in case he takes standard time or more. However, if he
takes less than the standard time than he is paid for the actual time plus a
bonus, which is calculated on a specified percentage of the time saved. The
percentage may vary from 30 to 70 per cent. The usual share is 50 per cent,
the remaining go to the employer.
The following example illustrates the plan:
Standard time = 10 hrs
Rate per hour = ` 1
Case (1) Time taken = 10 hrs
Earnings = 10 × 1 = ` 10
Case (2) Time taken = 12 hrs
Earnings = 12 × 1 = ` 12
Case (3) Time taken = 8 hrs
Earnings:
Time wages = 8 × 1 = ` 8
Bonus = 1/2 × 2 × 1 = ` 1
`9
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Incentives Rowan plan: Under this plan, standard time and rate per hour are fixed.
If the time taken to complete the job is equal to or exceeds the standard time,
then the employee is paid for the actual time taken at the rate per hour. If the
time taken is less than the standard time, then the employee is paid entitled to
NOTES bonus in addition to time wages. The bonus takes the form of the percentage
of the workers time rate. This percentage is equal to the proportion of the
saved time, to the standard time.
The following example illustrates the plan:
Standard Time = 10 hrs
Rate per hour = ` 1
Case (1) Time taken = 10 hrs
Earnings = 10 × 1 = ` 10
Case (2) Time taken = 12 hrs
Earnings = 12 × 1 = ` 12
Case (3) Time taken = 8 hrs
Earnings = 8 × 1 = ` 8
Bonus = 2/10 × 8 = ` 1.6
` 9.60
Barth Plan (variable sharing plan): Unlike Halsey and Rowan, it does
not guarantee the time rate. The workers earning is ascertained by multiplying
the standard hour by the number of hours actually taken to complete the
job and then taking the square root of the product and multiplying it by the
workers hourly rate.
The following examples illustrates this plan:
Standard time = 10 hrs
Rate per hour = ` 1
Case (1) Time taken = 12 hrs
Earnings = Ö12 × 10 = 10.95 × 1 = ` 10.95
Case (2) Time taken = 10 hrs
Earnings = Ö10 × 10 = 10 × 1 = ` 10
Case (3) Time taken = 8 hrs
Earnings = Ö8 × 10 = `. 8.94 × 1 = ` 8.94
Bedaux plan: Under this plan, the standard time for the job is
determined. Each minute of the allowed time is called a point or B, thus there
are 60 Bs in an hour. Each job has a standard number of Bs. The worker
receives bonus in addition to his hourly rate earns, which under the original
plan is equal to 75 per cent of the number of points earned in excess of 60
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per hour multiplied by one sixth of the workers hourly rate. The worker is Incentives
paid time rate if he does not achieve the standard time.
The following examples illustrate the Bedaux plan:
Standard time = 10 hrs NOTES
Rate per hour = ` 1
Case (1) Actual time = 12 hrs
Earnings = 12 × 1 = ` 12
Case (2) Actual time = 8 hrs
Earnings: Time wages = 8 × 1 = ` 8
Bonus:
Standard Bs = 10 × 60 = 600
Actual Bs = 8 × 60 = 480
Bs saved = 120
Bonus = 75/100 × (120 × 1)/60 = 1.50
Total earnings = 8 + 1.50 = ` 9.50
(c) Schemes where the workers’ earnings vary proportionately more
than output
Under this scheme we have two methods:
(a) The high piece rate method
(b) The high standard hour method
Under the high piece rate method, the earnings of the worker are in
proportion to his output as in straight piece method but the increment in
earnings for each unit of output above the standard is greater. For example,
for each one percent increase in earnings as compared to one per cent increase
in output above the standard, there may be 4/3 times increase in earnings as
compared to one per cent increase in earnings under the straight piece rate
method. The higher rates start applying after the standards have been reached.
Similarly, high standard hour method can be understood by applying logic.
The main feature of these two methods is that the direct labour cost per
unit increases for levels of output above standard, making workers also share
the earnings in overhead costs. The amount that the workers share depends
on the size of the increments in earnings payable at different levels of output.
(d) Schemes where the workers’ earnings differ at different levels of
output
This scheme involves several methods such as:
The Taylor’s differential piece rate method: Under this method, there
is low piece rate fixed for output below standard and high piece rate fixed Self-Instructional
Material 195
Incentives for output above standard plus a bonus of 50 per cent of the time rate on
attainment of standard output or more.
The following example will illustrate this method:
NOTES Standard output = 100 units
Rate per unit = 10 paise
Differential to be applied:
120% of piece rate at or above the standard
80% of piece rate when below the standard
Case (1) output = 120 units
Earnings = 120 × 120/100 × 0.10 = 14.40
Case (2) output = 90 units
Earnings = 90 × 80/100 × 0.10 = 7.20
The Merrick differential piece rate system: This method is a modification
over the Taylor’s method in a sense that it uses three rates instead of two.
One large step is broken into two in order to encourage new and average
workers. Straight piece rates are paid up to 83 per cent of the standard output
at which a bonus of 10 per cent of the time rate is payable with a further 10
per cent bonus on reaching the standard output. High piece rates are paid for
outputs above the standard.
The following example will illustrate this method:
Standard output = 100 units
Piece rate = 10 paise
Case (1) Output = 80 units
Efficiency = 80/100 × 100 = 80%
Earnings:
As the efficiency is less than 83 per cent, only the base piece rate applies:
80 × 0.10 = ` 8
Case (2) Output = 90 units
Efficiency = 90/100 × 100 = 90%
Earnings: As the efficiency is more than 83% but less than 100%, 110%
of the base piece rate applies:
90 × 110/100 × 0.10 = `.9.90 Case (3) Output = 110 units
Efficiency = 110/100 × 100 = 110%
Earnings: As the efficiency exceeds 100 per cent therefore 120 per cent
of the base piece rate applies:
110 × 120/100 × 0.10 = ` 13.20
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 The Gantt task method: Under this method, the worker is guaranteed Incentives
time rate for output below the standard. On reaching the standard output,
the worker is given a bonus of 20 per cent of the time wages. For the output
above the standard, high piece rates are paid.
NOTES
The following example illustrates the method:
Rate per hour = 0.50
High piece rate = ` 0.10
Standard output = 80 units
Time taken = 8 hrs
Case (1) output = 70 units
As the output is less than the standard, only time wages are paid to
the worker.
Earnings = 8 × 0.50 = ` 4
Case (2) output = 80 units
As the output is equal to the standard, the worker is entitled to time
wages plus 20% of time wages as bonus.
Time wages = 8 × 0.50 = `. 4
Bonus = 20/100 × 4 = Re 0.80
Total earnings = ` 4.80
Case (3) output = 110 units
As the output is more than the standard, the worker is given high piece
rate = 110 × 0.10 = ` 11
Emerson’s plan: Under this method, standard time is fixed for each job and
the efficiency of each worker is determined by dividing time taken with the
standard output. Up to 67 per cent of efficiency, the worker is paid by time
rate thereafter 100 per cent efficiency he is paid a bonus of 29 per cent. He is
paid an additional 1 per cent bonus for every additional 1 per cent efficiency.
The following example will illustrate this method:
Standard output in 8 hours = 100 units
Rate per hour = ` 1
Case (1) output in 10 hours = 50 units
Earnings: Efficiency = 50%
As the efficiency is below 67% the worker is entitled to time ages only.
10 × 1 = ` 10
Case (2) output in 10 hours = 100 units
Earnings: Efficiency = 100%
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Incentives The worker is entitled to time ages plus a 20 per cent of time wages
as bonus.
Time wages = 10 × 1 = ` 10
NOTES Bonus = 20/100 × 10 = ` 2 ` 12
Case (3) output in 10 hours = 130 units
Earnings: Efficiency = 130 per cent
At the rate of 20 per cent at 100 per cent efficiency and 1 per cent
increase for every 1 per cent increase in efficiency the worker gets 50 per
cent of time wage as bonus.
Time wages = 10 × 1 = ` 10
Bonus = 50/100 × 10 = ` 2
` 15
The accelerated premium method: Under this method, with the increase in
the level output, there is a proportionate increase in the earnings of a worker.
This motivates the worker to produce, more since by producing more they
can earn more. This method is complicated to understand and implement.
Group incentive schemes: Group incentive schemes are common in
most of the industrial establishments.
Any individual scheme discussed before can be applied to a group of
worker, the most common among them is piece rate method.
Depending upon the incentive scheme that is followed, the total
earnings of a group are determined, and then the earnings are divided among
the members of group on some equitable basis:
· If the group consists of members with equal skills, then the earnings
are equally divided among them.
· If the group consists of members with unequal skills, then the
earnings will be divided among the members in proportion to their
individual time rates or specified percentages.
Some of the advantages of group incentive schemes are:
· Better cooperation among the workers.
· Less supervision
· Reduced incidence of absenteeism
· Reduced clerical worker
· Shorter training time
Some of the disadvantages of group incentive schemes are:
· An efficient worker may be penalized for the inefficiency of the
other members of the group
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 · The incentive may not be strong enough to serve its purpose Incentives

· Rivalry among the members of the group defeats the very purpose
of teamwork and cooperation
NOTES
Check Your Progress
1. Define wages.
2. State one disadvantage of time wage system.
3. What is incentive compensation?
4. What are fringe benefits?

11.3 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. The Payment of Wages Act 1936, Sec 2 (vi) defines wages as, ‘any
award of settlement and production bonus, if paid, constitutes wages.’
2. Time Wage System offers no incentive for the employees to put forth
their best efforts. Efforts and reward have no direct positive correlation.
3. Incentive compensation, also called ‘payment by result’, is a method
of sharing gains in productivity with workers by rewarding them
financially for their increased rate of output.
4. Fringe benefits are the additional benefits and services that are provided
by a company to its employees in addition to their direct salary.

11.4 SUMMARY

· Wages in the widest sense mean any economic compensation paid

by the employer under some contract to his workers for the services
rendered by them.
· The Payment of Wages Act 1936, Sec 2 (vi) defines wages as, ‘any
award of settlement and production bonus, if paid, constitutes wages.’
· Compensation paid to the labour for the service offered is called as
wages or salary.
· Time Wage: It is based on the amount of time spent. Wage is measured
on the basis of unit of time, e.g., per day, per month, etc. Wages do not
depend on the performance of the employee.
· Time Wage System offers no incentive for the employees to put forth
their best efforts. Efforts and reward have no direct positive correlation.

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Incentives · Piece Wage System: It is based on the amount of work performed or
productivity. The earnings of the employee are directly proportional
to his output or performance.

NOTES · A system of wage payment that would maintain both quality and
quantity is called incentive wage plan, and it is naturally a judicious
combination of both basic systems of wage payments, i.e., time and
piece wages.
· Under the incentive plans of wage payment, both time wage and piece
wage systems are blended together in such a manner that the workers
are induced to increase their productivity.
· Halsey Plan: It is a plan originated by F.A. Halsey to encourage
efficiency among workers as well as to guarantee them wages according
to time basis.
· Rowan Plan: Wages, according to time basis, are guaranteed and the
slow worker is not made to suffer.
· In the words of Hummel and Nickerson, wage incentives ‘refers to all
the plans that provide extra pay for extra performance in addition to
regular wages for a job.’
· The simplest of all wage incentives may be described as the straight
piece-rate system.
· Fringe benefits are the additional benefits and services that are provided
by a company to its employees in addition to their direct salary.
· There are a lot of advantages of fringe benefits that attract the
employees. Firstly, as most of the fringe benefits are not taxed benefits,
they are not included in the taxable income.
· Insurance benefits are also an important fringe benefit for the employees
of a company.
· Variable compensation refers to the incentive schemes that are given
to the workers on the basis of their productivity.

11.5 KEY WORDS

· Incentive: It is a payment or concession to stimulate greater output or

investment.
· Insurance: It is an arrangement by which a company undertakes to
provide a guarantee of compensation for specified loss, damage, illness,
or death in return for payment of a specified premium.
· Pension: It is an amount of money paid regularly by the government
or a private company to a person who does not work anymore because
they are too old or have become ill.
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 Incentives
11.6 SELF ASSESSMENT QUESTIONS AND
EXERCISES

Short Answer Questions NOTES

1. State the fundamental methods of compensating workers.

2. Write a short note on incentive wage plans.
3. What are the requisites for the success of an incentive plan?
4. How can we monitor fringe benefits?
Long Answer Questions
1. Describe the broad categories of incentive schemes as classified by
Dunn and Rachel.
2. Analyse the principles of fringe benefits.
3. Discuss the types and importance of fringe benefits.
4. Assess the types of incentive schemes in detail.

11.7 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.

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Employee Relations
BLOCK - IV
DEVELOPMENT & GROWTH
NOTES
UNIT 12 EMPLOYEE RELATIONS
Structure
12.0 Introduction
12.1 Objectives
12.2 Concept of Employee Relations
12.3 Managing Discipline
12.3.1 Aspects and Objectives of Discipline
12.3.2 Causes of Indiscipline
12.3.3 Disciplinary Procedure
12.3.4 Code of Discipline
12.4 Employee Counselling
12.5 Managing Grievance
12.6 Answers to Check Your Progress Questions
12.7 Summary
12.8 Key Words
12.9 Self Assessment Questions and Exercises
12.10 Further Readings

12.0 INTRODUCTION

Industrial relations is an integrative domain that analyses employment

relationship. Industrial relations is more widely being referred to as
employment relations or employee relations, reason being the importance
of non-industrial employment relationships; this approach is at times
visualized as additional expansion of the human resource management drift.
Certainly, a few of the authors now explain human resource management
as interchangeable with employee relations. Other authors view employee
relations as pertaining only to non-unionized personnel. On the other hand,
labor relation is referred to as dealing with syndicated employees.
This unit will examine various aspects of employee relations in detail.

12.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of employee relations
· Explain how discipline and grievance are managed
· Describe the concept of employee counselling
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 Employee Relations
12.2 CONCEPT OF EMPLOYEE RELATIONS

Industrial relations deal with the relationship between labour and management,
and their organization. The concept of ‘industrial relations’ is very broad and NOTES
includes in its fold all the relationships in modern industrial society which
arise out of employee-employer exchanges and also the role of the state in
these relations. Explaining the concept of industrial relations, R A Lester
observed:
It involves attempt to workable solutions between conflicting objectives
and values—between incentive and economic security, between discipline
and industrial democracy, between authority and freedom and between
bargaining and cooperation.
According to the Encyclopedia Britannica, ‘the concept of industrial
relations has been extended to denote the relations of the state with employers,
workers and their organizations’.
The International Labour Organization (ILO), while dealing with
industrial relations, states that they deal with either the relationship
between the State and employers and workers’ organization or between the
occupational organizations themselves.
The significance of industrial relations is aptly described by the (First)
National Commission on Labour (1969) as follows:
A quest for industrial harmony is indispensable when a country plans to make
economic progress. Economic progress is bound up with industrial harmony for
the simple reason that industrial harmony leads to more cooperation between
employers and employees which results in more productivity and thereby
contributes to all-round prosperity of the country. Healthy industrial relations
on which industrial harmony depends cannot, therefore, be regarded as a matter
in which employers and employees are concerned. It is of vital significance for
the community as a whole.

The scope of industrial relations varies from time to time and place to
place. According to Professor Richardson, the scope of industrial relations
includes: ‘How people get on together at their work, what difficulties arise
between them, how their relations including wages and working conditions
are regulated, and what organizations are set up for the protection of different
interests.’

12.3 MANAGING DISCIPLINE

Discipline means systematically conducting the business by the organizational

members who strictly adhere to the essential rules and regulations. It pertains
to improving employee performance through a process of assisting the
employee (at least at first) to learn so he or she can perform more effectively.
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Employee Relations 12.3.1 Aspects and Objectives of Discipline
There are two aspects of discipline. They are:
(a) Positive aspect
NOTES (b) Negative aspect
(a) Positive aspect: Employees comply with rules not out of fear of
punishment but out of an inherent desire to cooperate and achieve goals.
Where the organizational climate is marked by two-way communication,
clear goals, effective leadership, and adequate compensation employees
need not be disciplined in the traditional way. This type of approach is
called positive approach or constructive discipline or self-discipline.
According to Spriegel, ‘positive discipline enables an employee to have
a greater freedom in that he enjoys a greater degree of self-expression
in striving to achieve the group objective, which he identifies as his
own.’
(b) Negative aspect: Employees sometimes do not believe in and support
discipline. As such, they do not adhere to rules, regulations and desired
standards of behaviour. Hence, disciplinary programme forces and
constraints the employees to obey orders and function in accordance
with set rules and regulations through warnings, penalties and other
forms of punishment. This approach to discipline is called negative
approach or corrective approach or punitive approach. Negative or
punitive discipline is one in which management has to exert pressure
or hold out threat by imposing penalties on wrongdoers. When this
pressure becomes increasingly severe each time a man is disciplined, it
is called ‘progressive’ or ‘corrective’ discipline. The fear of punishment
puts the employee back on rails. According to Spiegel, ‘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.’
Negative discipline connotes that personnel are forced to observe rules
and regulations on account of fear or reprimand, fine, demotion, or transfer.
But these are helpful in extracting just minimum standards of work from the
employees since they work on account of fear. In contrast, if the authority is
exercised arbitrarily, or if rules of conduct are unreasonable or if employees
do not have sense of adhering to the rules and regulations, discipline is
threatened and if it is prolonged, it affects the organizational health. Any
programme of discipline will be effective and successful only when it is used
to supplement and strengthen self-discipline.
V.S.P. Rao summarizes the differences between the two approaches
as follows:

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 Table 12.1  Differences between Positive and Negative Discipline Employee Relations

Point Negative Discipline Positive Discipline

CONCEPT It is adherence to established It is the creation of a conducive

norms and regulations, out of climate in an organzation so NOTES
fear of punishment. that employees willingly
conform to the established
rules.

CONFLICT Employees do not perceive the There is no conflict between

corporate goals as their own. individual and organizational
goals.

Source: VSP, Rao. 2000. Human Resource Management—Text and Cases. New Delhi:
Excel Books, p. 433.

Objectives of discipline
The objectives of discipline are:
(a) To gain willing acceptance of the rules, regulations, standards and
procedures of the organization from the employees
(b) To develop the feeling of cooperation among the workers
(c) To create an atmosphere of respect for the human personality and human
relations and to maintain good industrial relations in the organization
(d) To increase the working efficiency and morale of the employees so that
their productivity is stepped up and the cost of production is decreased
(e) To develop a sense of tolerance and respect for human dignity
(f) To give and seek direction and responsibility
12.3.2 Causes of Indiscipline
The common causes of indiscipline in an organization may be stated as
follows:
· Lack of effective leadership: Effective leadership is a must for
maintaining the discipline, which means to seek cooperation of the
followers (subordinates) to achieve the desired objectives. In India,
effective leadership could not be provided either by the management
or by the trade unions which caused indiscipline in the industries.
· Defective supervision: Supervisor is the immediate boss of the workers
and many disciplinary problems occur because of faulty supervision.
The attitude and behavior of the supervisor may create many problems.
As the maintenance of the discipline is the discipline is the core f
supervisory responsibilities, indiscipline may spring from the want of
the right type of supervision.

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Employee Relations · Varying disciplinary measures: Consistent disciplinary actions must
be there in the organization to provide equal justice to all concerned.
At different times and for everyone, the same standard of disciplinary
measures should be taken otherwise it may give rise to growing
NOTES indiscipline in the industry in future i.e., the judicious function on
the past of management must be free form may bias, privilege or
favouritism.
· Divide and rule policy: Many mangers in the business obtain secret
information about other employees through their trusted assistants. The
spying on employees is only productive of a vicious atmosphere and
of undesirable in the organization. Henry Fayol has rightly pointed out
that dividing enemy forces to weaken them is clever but dividing one’s
own team is grave sin against the business. No amount of management
skill is necessary for dividing personnel but integrating personnel into
a team is the challenging task of sound management.
· Lack of well-defined Code of Conduct: There must be a code of
discipline in every organization enlisting sufficient rules regulations or
customary practices for the guidance and information of all employees.
Such code should be communicated to all concerned in a clear and
simple language so as to be followed by the concerned in a clear and
simple language so as to be followed by the concerned parties in its
true spirit. To be effective, the code should be adopted by the joint
consultation of managers and the subordinates. In the absence of a
well-defined code of discipline, the disciplinary actions emanate from
personal whims and temperaments which create indiscipline.
· Deferring settlement of employee grievances: The employee
grievances cannot be put off by deferring or neglecting their solutions.
The grievances should properly be inquired into and settled by the
managers in a reasonable period. Neglect of grievances often results
in reduced performance, low morale and indiscipline among the
employees. Strikes and work stoppages stem in many cases form the
utter neglect of employee grievances.
· Inadequate attention to personal problems: Actions or reactions
of people are the direct outcome of their attitudes. Attitudes influence
human beings and their activities. Discipline is the by-product
of these attitudes and the attitudes in turn, is determined by the
personal problems of employees. In order to maintain the discipline,
understanding of the personal problems and individual difficulties as
well as counselling with employees, is necessary. Inadequate attention
to the personal problems, thus, gives rise to indiscipline.
· Victimization and excessive pressures: Sometimes the manager or
the supervisor develops ill-feelings in him about some persons and
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 victimizes them in his own way. It contributes to indiscipline. Moreover, Employee Relations
the supervisor puts excessive pressure of work on the employees
under his strict control which they feel suffocative. It may result in
indiscipline.
NOTES
· Misjudgment in promotion and placements: Misjudgment in
personnel matters like promotion and placements contribute to the
growth of indiscipline in an enterprise. Cases of mis-judgment are
carefully noted, widely circulated, and hotly debated by the employees.
Expecting discipline from misruled people is not possible. Sometimes,
undesired persons are placed on the jobs which makes the employees
discontented, then giving rise to the problem of indiscipline.
12.3.3 Disciplinary Procedure
The following should be the steps for taking disciplinary action:
(a) Preliminary investigation: The first step should be to hold preliminary
investigation in order to find out whether a prima facie case of
misconduct exists. Only if a prima facie case of misconduct exists,
the management should proceed further. Otherwise, the case should
be dropped.
(b) Issue of a charge sheet: If a prima facie case of misconduct exists,
the management should proceed to issue a charge-sheet to the worker.
The following guidelines may be followed in framing the charges:
· Each charge must be very clear and precise.
· There should be a separate charge for each allegation.
· Charges must not relate to any matter which has already been
decided upon.
· Proposed punishment should be avoided in the charge sheet.
(c) Suspension pending enquiry (if needed): If the nature of misconduct
is grave and if it is in the interest of discipline and security in the
establishment, the management may suspend a worker even before
the chargesheet is issued. In case the worker is suspended he should
be paid subsistence allowance at the following rates:
· For the first ninety days of suspension, half his wages
· For the remaining period of suspension, three-fourths of his wages
(d) Notice of enquiry: On receipt of reply to the chargesheet, either of the
following two situations may arise:
(i) The worker may admit the charge. In such a case, the employer
may award punishment without further enquiry.
(ii) The worker may deny the charge. In this case, the employer must
hold the enquiry.
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Employee Relations (e) Conduct the enquiry: The enquiry officer is a judge, so it is necessary
that he must be impartial and qualified to act in that capacity. A fair
opportunity should be given to the charge sheeted employee to examine
the management witnesses.
NOTES
(f) Recording of findings by the enquiry officer: At the conclusion of
the enquiry proceedings the enquiry officer should decide as to whether
the charges made are valid or not along with reasons for his findings.
(g) Awarding punishment: The punishment awarded to the accused
employee should be communicated to him quickly. The letter should
contain the following:
· Reference to (i) the chargesheet (ii) the enquiry and (iii) findings
of the enquiry
· Decision
· Date from which the punishment is to be effective
The strict law of master and servant conferred upon the employer
an unfettered right to hire and fire his employees. This traditional law of
employer-workmen relationship was based purely on contract. Quite apart
from the law of contract, it is obvious that in the day-to-day running of the
industry, the management is required to take disciplinary action against
erring workmen. Initial decisions as to maintenance of discipline rest with
the employer. These decisions, when made bona fide, are related to, and
dependant upon considerations of the overall needs of the industry. But the
reports of committees and commissions on labour and reported decisions
are full of instances that managements have victimized their workmen for
their union activities, and in particular, for inciting other workers to go on
strike or fomenting a strike. Instances are not lacking when assertive striking
employees were discharged en masse. Further, instances of dismissal of
workmen by the management without complying with the provisions of the
standing orders of the company or rules of natural justice are not infrequent.
Under the circumstances, the need to protect workmen against capricious
and vindictive action of the management becomes obvious. It was realized
in most industrially advanced countries that if the law of master and servant
was given free play, workers would hardly have any security of tenure.
On the other hand, in day-to-day administration, management is called
upon to take bona fide decisions against erring workmen. It is also called
upon to take disciplinary action against a workman who is found guilty of
serious misconduct where such misconduct consists of intentional damage
to the property of the concern or serious personal injury to other employees
of the concern or where there is reasonable apprehension of their committing
acts of sabotage or instigation, abetment or incitement of workers of the
concern to participate in the aforesaid activities. Under the circumstances,
the mere fact that the management’s order of dismissal of the workman is
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wrongful, disproportionate or mala fide and affects the workman cannot Employee Relations
altogether deprive the management from taking disciplinary action against
the workman. To do so is to encourage indiscipline and render day-to-day
running of the concern impossible.
NOTES
To meet this situation, courts have evolved various norms to regulate
management’s power to dismiss its workmen. They have tried to maintain a
balance between the power of the management to discipline the workmen and
security of tenure of workmen. Further, the courts have not only interpreted
the existing law but made new laws to meet the needs of the industry and to
avoid hardship and unfairness to workers.
12.3.4 Code of Discipline
The need for Voluntary Code of Discipline was felt in 1957 in order to create
awareness among the parties to industrial relations about their obligations
under labour laws, as also to create in them an attitude of willing acceptance of
their responsibilities and a readiness to discharge them. It was in this context
that the Code of Discipline found approval at the sixteenth Indian Labour
Conference and was formally announced in June 1958. The Code was ratified
by the central organization of workers and employers. The Code has been
accepted by a majority of private and public sectors. The Code, primarily as
a result of the persuasive efforts of Central Implementation and Evaluation
division, has been accepted by 166 trade unions and 180 employers affiliated
to Central Workers’ and Employers’ Organization.
The Code applies to all public-sector undertakings run as companies
and corporations except in defense, railways and ports and docks. Among
those, where the Code of Discipline applies with certain modifications include
Reserve Bank of India, State Bank of India and the Department of Defence
Production. Under the Code, management and union(s) agree that:
(i) No unilateral action should be taken in connection with any industrial
matter and that disputes should be settled at appropriate level.
(ii) The existing machinery for settlement of disputes should be utilized
with the utmost expedition.
(iii) There should be no strike or lockout without notice.
(iv) They affirm their faith in democratic principles and they bind
themselves to settle all future differences, disputes and grievances by
mutual negotiation, conciliation and voluntary arbitration.
(v) Neither party will have recourse to (a) coercion (b) intimidation, (c)
victimization, or (d) go-slow.
(vi) They will avoid (a) litigation, (b) sit-down and stay-in strikes, and (c)
lockouts.

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Employee Relations (vii) They will promote constructive cooperation between their
representatives at all levels and as between workers themselves and
abide by the spirit of agreements mutually entered into.
(viii) They will establish upon a mutually agreed basis, a grievance procedure
NOTES
which will ensure a speedy and full investigation leading to settlement.
(ix) They will abide by various stages in the grievance procedure and take
no arbitrary action which would bypass this procedure.
(x) They will educate the management personnel and workers regarding
their obligations to each other.
In order to ensure better discipline in industry, the Code provides for: (i)
a just recognition by employers and workers of the rights and responsibilities
of either party as defined by the laws and agreements, (including bipartite and
tripartite agreements arrived at all levels from time to time) and (ii) proper
and willing discharge by either party of its obligations consequent on such
recognition.
In the second set, the management agree (i) not to increase work-loads
unless agreed upon or settled otherwise; (ii) not to support or encourage
any unfair labour practice; (iii) to take prompt action for (a) settlement of
grievances, and (b) implementation of settlements, awards, decisions and
others; (iv) to display in conspicuous places in undertaking the provisions of
this Code in local language(s); (v) to distinguish between actions justifying
immediate discharge and those where discharge must be preceded by a
warning, reprimand suspension or some other form of disciplinary action and
to arrange that all such disciplinary actions should be subject to an appeal
through normal grievance procedure; (vi) to take appropriate disciplinary
action against its officers and members in cases where enquiries reveal
that they were responsible for precipitating action by workers leading to
indiscipline; (vii) to recognize the union in accordance with the prescribed
criteria.
The third set imposes an obligation upon the unions:
(i) Not to engage in any form of physical duress.
(ii) Not to permit demonstrations which are not peaceful and not to
permit rowdyism in demonstration.
(iii) That their members will not engage or cause other employees
to engage in any union activity during working hours, unless as
provided for by any law, agreement or practice.
(iv) To discourage unfair labour practices such as, (a) negligence
of duty, (b) careless operation, (c) damage of property and (d)
insubordination.
(v) To take prompt action to implement awards, agreements,
settlements and decisions.
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 (vi) To display in conspicuous places in the union offices, the Employee Relations
provisions of this code in the local language(s).
(vii) To express disapproval and to take appropriate action against
office-bearers and members for indulging in actions against the
NOTES
spirit of this Code.
The Supreme Court in General Secretary, Rourkela Shramik Sangh
vs Rourkela Mazdoor Subha, held that although Section 11 of the Code is
headed ‘implementation machinery’, it consists of two separate organizations,
viz. implementation units and tripartite implementation committees which
is obvious from the language of Section 11 itself and also from the separate
constitution and functions of the two organizations. The Court ruled that
to hold that the implementation unit in the respective labour department
together with the respective tripartite committee at Centre, state or local
level would constitute the implementation machinery jointly and not each of
them separately would run not only counter to the intention of the Code as
is manifest from the language of Section 11 and their separate composition
and functions, but would also be impracticable in working.
However, the Code of Discipline has not been effectively implemented
and it is respected more in breach than in observance. Several reasons may
be accounted for the same: (i) the absence of a genuine desire for and limited
support to self-imposed voluntary restraints on the part of employers’ and
workers’ organizations, (ii) the worsening economic situation which eroded
the real wage of workers, (iii) the liability of some employers to implement
their obligations, (iv) a disarray among labour representatives due to rivalries,
and (v) conflict between the Code and the Law. In view of this, the National
Commission on Labour recommended that the part of the Code which enjoins
stricter observance of obligations and responsibilities under the various labour
laws may be left to the normal process of implementation and enforcement
by the labour administration machinery, some others need to be formalized
under law. These are: (a) recognition of a union as bargaining agents; (b)
setting up of a grievance machinery in an undertaking: (c) prohibition of
strike/lockout without notice; (d) penalities for unfair labour practices; and
(e) provision of voluntary arbitration.
With the removal of these provisions from the Code and on giving them
a legal form, the Code will have no useful function to perform.

Check Your Progress

1. What does industrial relations deal with?
2. What is discipline?
3. When and why was the need for voluntary code of discipline felt?

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Employee Relations
12.4 EMPLOYEE COUNSELLING

This section is devoted to the study of employee counselling.

NOTES
Meaning and Significance of Counselling
In general, as a human relations technique, counselling is essential for
effectiveness in managing human resources. Specifically, it forms a
prerequisite to perform the preceding personnel functions of performance
appraisal, promotion, transfer and separation.
Counselling refers to the process of advising an employee or preferably in
most cases, listening to his problem and enabling him to find from his own
thinking and talking a solution for it which is satisfactory to himself. It relates
to a method of understanding and helping people who are emotionally upset.
Thus, it can also be defined as a discussion of an emotional problem with
an employee with the general objective of minimizing it. As this definition
implies, counselling deals with emotional problems and relates to ‘trouble
of the heart’ rather than ‘bother on the hands’. It precludes job difficulties
which do not have much emotional repercussion. Moreover, as counselling
involves discussion, it forms a process of communication.
Effective counselling is a product of good communication skills,
largely oral, by which an individual tends to share his emotions with another
individual. Explicitly, a simple social discussion of an emotional problem
between two persons is not counselling. For counselling, there must be an
understanding on the part of the employee (counselee), while the other person
(counsellor) must come forward to facilitate it. Finally, counselling is not
merely limited to professionally trained counsellors who are usually required
in cases of serious emotional difficulties. Supervisors and managers of the
organization can effectively counsel employees having less serious problems.
In this context, the term ‘emotional difficulty or problem’ deserves
explanation and illustration. It excludes serious mental illness. Although
the emotional problems may not appear to be very significant or complex to
others, they are important to the individual who has them and thus, whose
productive efficiency or performance is affected by them. These problems also
exert an impact on the individuals’ ‘off-the-job’ activities in other settings.
The examples of such emotional problems cited in literature include: an
employee who feels that his progress is very slow and that he has no chance for
promotion in the company; an employee who expects to be transferred soon
and thus, who is disturbed by the insecurity caused by this situation; a woman
employee upset by her supervisor’s criticism of her work; an employee who
has a higher paid job elsewhere but cannot decide whether to accept it or
not; an employee in friction with co-workers on the job. Majority of problem
employees in industry suffer from such minor emotional difficulties. If these
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people are given timely help, their productive energies are released, and they Employee Relations
become more effective in their jobs.
Significance
The need for counselling stems from the complexity of human beings. It is NOTES
almost impossible for any human being to always have an optimal emotional
balance. However, the point of ‘blow-up’ varies with every human being
because of individual differences with respect to tolerance of emotional
problems. Suppression of emotional problems which gets reflected in an
individual’s low morale and reduced performance, is dangerous both to the
individual and the organization. As the management cannot afford to ignore
any mechanical faults, so also it cannot overlook the emotional problems
of its people. Keeping in view the necessity for maintaining a reasonable
emotional balance and directing the emotions of employees towards
constructive applications, the need for counselling was realised for the first
time in Hawthorne Works in 1928. The counselling programmes received
further momentum during World War II through staff services. After the war,
the personnel function of counselling was assigned to the line supervisors.
Today, the need for counselling may arise from varied on- and off-the-job
conditions such as dissatisfaction, resistance to change, alienation, frustration,
conflict and stress. Among these conditions, stress deserves special attention
in view of its major contribution to emotional problems in today’s complex
work environment. Although counselling forms an important technique to
prevent and treat emotional problems stemming from stress at work, there
are a number of other techniques which can also be used independently to
accomplish this goal. One of the most promising of such techniques is the
bio-feedback process which enables the individual to gauge the undesirable
effects of stress from the feedback provided by instruments that measure
symptoms of stress such as heartbeat, oxygen consumption, stomach acid
flow and type of brainwaves. Thus, he can reduce undesirable effects of stress.
Likewise, practice of Zen, Yoga and transcendental meditation also help to
manage stress. Specifically, in transcendental meditation, attempt is made to
meditate daily for two periods of 20 minutes through concentration on silent
repetition of a mantra. One survey of several organizations in the USA where
employees actively practiced meditation for about a year revealed that the
meditators had significantly more job satisfaction, better performance skills,
less desire to leave the job and improved interpersonal relationships than a
controlled group. Notwithstanding the growing use of meditation in reducing
emotional strains, counselling forms the most frequently used technique of
dealing with emotional problems at work. As pointed out earlier, the general
objective of counselling is to provide support to the emotionally disturbed
employee to deal with his problem so that he develops self-confidence,
understanding, self-control and ability to work effectively in the organization.
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Employee Relations Functions of Counselling
Counselling accomplishes the objectives discussed earlier by performing
one or more of the following six functions: (i) advice, (ii) reassurance, (iii)
NOTES communication, (iv) release of emotional tension, (v) clarified thinking, and
(vi) reorientation.
(i) Advice. Advice is mistakenly considered as equivalent to counselling.
However, it forms one of its several functions. Advising involves
judging an individual’s emotional problems and marshalling a course
of action. It causes complications because of the inability of a person
to understand another person’s problem and suggest a solution for
it. It also provides an inferior status to a counselee who remains
dependent on the counsellor. Despite its ineffectiveness in resolving
emotional problems of an employee, advice-giving is the most natural
phenomenon practised between a superior and a subordinate in day-
to-day work situations.
(ii) Reassurance. Counselling performs the function of reassurance which
refers to a way of providing courage to an individual to deal with a
problem or developing confidence in him that he is facing towards an
appropriate course of action. However, the difficulty with such assurance
is that the counselled does not accept counselling intrinsically. Even
when he is reassured, the counsellor’s re-assurance fades away with
the reemergence of the problem. Despite its weaknesses, reassurance
is useful in certain situations, if handled carefully.
(iii) Communication. Counselling facilitates both upward and downward
communication. It provides the employee with an opportunity to
express his feelings in an upward direction to the management.
Thus, the management comes to know how the employees feel.
The counsellor should keep in confidence the names of individual
employees and interpret their feelings and convey to the management.
These feelings expressed through logically classified statements
may relate to their emotional problems with varied aspects of the
organization. Counselling also facilitates downward communication
where the counsellor helps to interpret varied policies and programmes
of the company to people who tend to discuss their problems related
to them.
(iv) Release of Emotional Tension. Release of emotional tension or catharsis
forms a significant function of counselling. By expressing the emotional
problem during the process of counselling, the counselled gets an
emotional release from his frustration and allied problems. Indeed,
as soon as an individual starts explaining the problems to an active
listener, his tensions tend to subside and his speech becomes coherent
and rational. Although this release of tension may not necessarily
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 solve the problems, it removes mental barriers and enables the person Employee Relations
to again face his problems boldly.
(v) Clarified Thinking. Counselling facilitates clarified thinking which
is an outcome of emotional release. It can be generated quickly by a
NOTES
skilled counsellor acting as a catalyst. It may partly or entirely take
place outside the counselling session as a result of certain developments
during the counselling relationships. With the emergence of clarified
thinking, the individual tends to accept responsibility for solving his
emotional problems in a realistic way.
(vi) Reorientation. Last but not the least, counselling performs the function
of reorientation which relates to a change in an individual’s psychic
self stemming from a change in his basic goals and values. It involves
a shift in one’s level of aspiration corresponding to reality and enables
one to recognize and accept one’s own limitations. However, it can
be largely generated by a professional counsellor rather than a line
executive.
Types and Processes of Counselling
Depending upon the extent of direction provided by the counsellor to a
counselee, Davis classifies counselling in three forms: directive, non-directive
and cooperative.
1.  Directive counselling
Directive counselling is a process of listening to an employee’s emotional
difficulty, deciding with him what can be done and then telling and motivating
him to do it. In usual practice, although its major role relates to advice, it
also performs to a certain extent other functions of communication, release
of emotional feeling and, in some cases, clarification of thinking. However,
advice is generally unwise and thus, of questionable value. In situations
where the counsellor is an effective listener, there is an enhanced possibility
on the part of the counselee to experience emotional release and to clarify
his own thinking. The advice and reassurance provided during the course of
directive counselling may become worthwhile if the employee is enthused
by the counsellor to take a workable course of action.
2.  Non-directive counselling
Because of its focus on the counselee rather than on the counsellor, this form
of counselling is also called client-centred counselling. It refers to the process
of skilfully listening and inducing an employee to describe his bothersome
emotional difficulties, so that the counsellor can understand them and
ascertain plausible courses of action. It allows the individual, overwhelmed
by emotional problems to speak about them as long as he wishes without any
interruption with an empathetic and an appreciative listener in the counsellor,
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Employee Relations who shows a feeling of empathy rather than of sympathy and who acts with an
attitude of deep respect for the individual having a problem. He understands
that the individual himself is best qualified to resolve his own problems.
Accordingly, the counsellor helps the individual realize that goal and thus,
NOTES allows him to talk about anything which may even seem to be irrelevant. The
counsellor is required to have an agile and a receptive mind and mirror each
individual’s feelings to enable the person to solve his problem. The counsellor
encourages him to express his thoughts on the problem and concentrate on it.
The counsellee may proceed from mere superficialities to deeper problems
and with the release of his feelings, tends to reconcile himself with other
persons and himself.
3.  Cooperative counselling
As Davis indicates, while the use of pure non-directive counselling is not quite
widespread in work settings because of its varied limitations, the adherence to
directive counselling appears to be inappropriate in modern day democratic
work situations. This indicates the need for application of a counselling
method which falls between the two extreme forms of non-directive and
directive counselling. Modern executives can integrate the two forms of
counselling to accomplish their advantages and throw off their disadvantages.
Cooperative counselling meets this need of the present industrial settings.
It is neither entirely counselee-centred nor counsellor-centred but requires
both of them to come forward with their varied knowledge, perspectives and
insight to resolve the counselee’s problems in a cooperative way. Thus, it can
be defined as a cooperative process of mutual discussion of an individual’s
emotional problems and establishment of conditions conducive to their
solutions. It can be practised by people who do not necessarily possess full-
time professional training in counselling. This form of counselling is also
free from the autocratic approach of directive counselling.
Although it demands some amount of training and time to practice,
it is certainly within the reach of managers. It initiates the active listening
technique of non-directive counselling. However, the cooperative counsellor
tends to play a more positive role than the non-directive counsellor with
progress of the discussion. The cooperative counsellor tends to provide the
counselee with whatever knowledge and insight he himself possesses and
discusses the situation from a broad organizational perspective. Adherence to
this approach enables the counselee to see different perspectives for purposes
of comparison. This form of counselling accomplishes the four functions of
counselling including reassurance, communication, emotional release and
clarified thinking. However, it is not possible to accomplish reorientation
through this type of counselling for which the counselee can be referred
to as a professional counsellor. Likewise, if there is a need for directive
action, the management can do so through its supervisory powers rather than
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through its counselling role. This type of counselling is most appropriate Employee Relations
for practising managers to help resolve day-to-day emotional problems of
their employees. Its major contribution to management practice relates to a
shift of the traditional management role of directive counselling towards a
participative management role of non-directive counselling. NOTES

Indian Perspectives on Counselling

Counselling has vast potential for accomplishing an effective performance
in industries. It can foster superior-subordinate relationships, help the
management to understand the limitations of seniors and problems of juniors,
improve communications and thus quality of decisions, help employees to
recognize their strengths and weaknesses, accomplish goal clarity, and assess
the impact of management decisions. Although several Indian organizations
encourage counselling, most of them go about it incorrectly. It is usual to come
across managers who mistakenly regard counselling as ‘giving feedback in a
threatening way’, correcting the undesirable or unsatisfactory behaviour of
employees by pointing it out and warning them not to repeat these behaviours
further. As described earlier, counselling is helping the employee to recognize
his own strengths, weaknesses and potentials with a view to prepare action
plans for his own development and not for the counsellor to abuse information
thus gleaned by giving feedback and warning and pointing out and enforcing
norms of performance, which relate to functions of other executives.
Findings of a survey
The above observations are based on a survey conducted by Rao and Abraham
on the current status of counselling practices in Indian industries. As the
survey indicates, out of 53 organizations under study, 41 (80 per cent) required
their executives to counsel their subordinates, and 12 (20 per cent) did not have
such a requirement. Thirteen (32 per cent) of these 41 organizations required
their executives to counsel their subordinates once a year. Two (5 per cent)
organizations required their executives to counsel twice a year, and one (2.5
per cent) organization required counselling four times a year. Twenty-seven
(61 per cent) organizations reported that their executives were required to
counsel their subordinates as often as it was possibly needed and that they did
not have any established pattern of counselling. However, Rao and Abraham
remark that it is a very deceptive factor of the counselling practice. It was
common for some organizations to assert that they required their executives
to ‘correct’ their subordinates through counselling as often as possible. These
organizations did not really have performance counselling which necessitates
a review of the performance of an employee on all aspects periodically. It is
essential to have the time schedule stated and to adhere to it.
In conjunction with the objectives of counselling, the extent of time
and attention devoted to it also deserves mention. It provides the counsellor
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Employee Relations with an opportunity to know and understand the employee’s strengths, his
perceptions, his ability to interpret the organization, its process and allied
issues. There is need to help each individual to identify his strengths and
weaknesses rather than tell him about them. A lack of proper understanding
NOTES of counselling and its skills forms a vital reason why some employees do
not take counselling seriously. In response to a question about how many
employees take counselling seriously, only 7 (17 per cent) organizations
indicated in the affirmative, 27 (64 per cent) organizations asserted that only
some of the employees took it seriously, and 8 (19 per cent) organizations
declared that very few took it seriously.

12.5 MANAGING GRIEVANCE

Experience shows that in the day-to-day running of business, the disputes

between the employer and workman are resolved by administrative processes
referred to as grievance procedures. The Indian Labour Conference has also
adopted a similar concept of a grievance in its following recommendations:
Meaning and Concept of Labour Grievance
Complaints, affecting one or more individual workers in respect of their wage
payments, overtime, leave, transfer, promotion, seniority, work assignment,
working conditions and interpretation of service agreement, dismissal and
discharges would constitute grievance. Where the points of dispute are of
general applicability or of considerable magnitude, they will fall outside the
scope of grievance procedure.
The aforesaid concept has also been adopted in the guiding principles
for a grievance procedure appended to the Model Grievance Procedure in
India. Further, clause 15 of the Model Standing Orders in Schedule I of the
Industrial Employment (Standing Orders) Central Rules, 1946, specifies that
‘all complaints arising out of employment including those relating to unfair
treatment or wrongful exaction on the part of the employer or his agent,
shall be submitted to the manager or the other person specified in this behalf
with the right to appeal to the employers.’ Moreover, the State Governments
have framed rules under the Factories Act, 1948, requiring a welfare officer
to ensure the settlement of grievances.
The Voluntary Code of Discipline adopted by the Sixteenth Session of
the Indian Labour Conference in 1958 also provides that: (a) the management
and unions will establish, upon a mutually agreed basis, a grievance procedure
which will ensure a speedy and full investigation leading to settlement,
and (b) they will abide by the various stages in the grievance procedures.
However, there is no legislation in force which provides for a well-defined
and adequate procedure for redressal of day-to-day grievances in industrial
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establishment. In order to meet the shortcoming, the Industrial Disputes Employee Relations
(Amendment) Act, 1982, provides for setting up of Grievance Settlement
Authorities and reference of certain individual disputes to such authorities.
Section 9C of the amended Act provides:
NOTES
(1) The employer in relation to every industrial establishment in
which 50 or more workmen are employed or have been employed
on any day in the preceding 12 months, shall provide for, in
accordance with the rules made in that behalf under this Act, a
Grievance Settlement Authority for the settlement of industrial
disputes connected with an individual workman employed in the
establishment.
(2) Where an industrial dispute connected with an individual
workman arises in an establishment referred to in sub-section
(1), a workman or any trade union of workmen of which such
workman is a member, refer, in such manner as may be prescribed,
such dispute to the Grievance Settlement Authority provided for
by the employer under that sub-section for settlement.
(3) The Grievance Settlement Authority referred to in sub-section (1)
shall follow such procedure and complete its proceedings within
such period as may be prescribed.
(4) No reference shall be made under Chapter III with respect to any
dispute referred to in this section unless such dispute has been
referred to the Grievance Settlement Authority concerned, and the
decision of the Grievance Settlement Authority is not acceptable
to any of the parties to the dispute.
The Industrial Disputes (Amendment) Act, 1982 excludes hospitals,
educational institutions, institutions engaged in any charitable, social or
philanthropic service, khadi or village industries and every institution
performing sovereign functions. For these institutions, the Hospitals and other
Institutions (Settlement of Disputes) Bill, 1982, enjoins upon an employer to
constitute, within a specified period, a Grievance Settlement Committee for
the resolution of individual disputes and Consultative Council and a Local
Consultative Council for the resolution of industrial disputes of a collective
nature. The Bill also provides for the arbitration of disputes not resolved by
the Grievance Settlement Committee or the Local Consultative Council or
Consultative Council. However, these provisions of the Industrial Disputes
(Amendment) Act, 1982, have not yet been enforced presumably because the
Hospitals and other Institutions (Settlement of Disputes) Bill, 1982, has not
so far been passed. Further, no rules have been framed under the unenforced
Section 9C. The (Second) National Commission on Labour has recommended
that a Grievance Redressal Committee for organisation employing 20 or more
workers be constituted.
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Employee Relations Grievance Redressal Procedures
In 2010, the Industrial Disputes (Amendment) Act, 2010 inserted new
chapter IIB on grievance redressal machinery. Section 9C of the Amendment
NOTES Act provides as follows:
1. Every industrial establishment employing 20 or more workmen shall
have one or more grievance redressal committees for the resolution of
disputes arising out of individual grievances.
2. The grievance redressal committee shall consist of equal number of
members from the employer and the workmen.
3. The chairperson of the grievance redressal committee shall be selected
from the employer and from among the workmen alternatively on
rotation basis every year.
4. The total number of members of the grievance redressal committee
shall not exceed six:
Provided that there shall be, as far as practicable, one woman member
if the grievance redressal committee has two members and in case the
number of members are more than two, the number of women members
may be increased proportionately.
5. Notwithstanding anything contained in this section, the setting up of
grievance redressal committee shall not affect the right of the workman
to raise industrial dispute on the same matter under the provisions of
this Act.
6. The grievance redressal committee may complete its proceedings
within 30 days on receipt of a written application by or on behalf of
the aggrieved party.
7. The workman who is aggrieved of the decision of the grievance
redressal committee may prefer an appeal to the employer against the
decision of grievance redressal committee and the employer shall,
within one month from the date of receipt of such appeal, dispose of
the same and send a copy of his decision to the workman concerned.
8. Nothing contained in this section shall apply to the workmen for
whom there is an established grievance redressal mechanism in the
establishment concerned.

Check Your Progress

4. What is counselling?
5. List the six functions of counselling.

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 Employee Relations
12.6 ANSWERS TO CHECK YOUR PROGRESS
QUESTIONS

1. Industrial relations deal with the relationship between labour and NOTES
management, and their organization.
2. Discipline means systematically conducting the business by the
organizational members who strictly adhere to the essential rules and
regulations.
3. The need for Voluntary Code of Discipline was felt in 1957 in order to
create awareness among the parties to industrial relations about their
obligations under labour laws.
4. Counselling is defined as a discussion of an emotional problem with
an employee with the general objective of minimizing it.
5. The six functions of counselling are advice, reassurance, communication,
release of emotional tension, clarified thinking, and reorientation.

12.7 SUMMARY

· Industrial relations deal with the relationship between labour and

management, and their organization.
· According to the Encyclopaedia Britannica, ‘the concept of industrial
relations has been extended to denote the relations of the state with
employers, workers and their organizations’.
· Discipline means systematically conducting the business by the
organizational members who strictly adhere to the essential rules and
regulations.
· According to Spriegel, ‘positive discipline enables an employee to have
a greater freedom in that he enjoys a greater degree of self-expression
in striving to achieve the group objective, which he identifies as his
own.’
· Negative discipline connotes that personnel are forced to observe rules
and regulations on account of fear or reprimand, fine, demotion, or
transfer.
· In Ravi Yashwant Bhoir v. District Collector, Raigad, the Supreme Court
observed that ‘the word “misconduct” though not capable of precise
definition, receives its connotation from the context of delinquency in
its performance and its effect on the discipline and nature of the duty.
· The need for Voluntary Code of Discipline was felt in 1957 in order to
create awareness among the parties to industrial relations about their
obligations under labour laws, as also to create in them an attitude of
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Employee Relations willing acceptance of their responsibilities and a readiness to discharge
them.
· It was in this context that the Code of Discipline found approval at the
sixteenth Indian Labour Conference, and was formally announced in
NOTES
June 1958.
· The Code applies to all public-sector undertakings run as companies
and corporations except in defense, railways and ports and docks.
· In general, as a human relations technique, counselling is essential for
effectiveness in managing human resources.
· Counselling refers to the process of advising an employee or preferably
in most cases, listening to his problem and enabling him to find from
his own thinking and talking a solution for it which is satisfactory to
himself.
· The need for counselling stems from the complexity of human beings.
· Counselling accomplishes the objectives discussed earlier by
performing one or more of the following six functions: (i) advice, (ii)
reassurance, (iii) communication, (iv) release of emotional tension, (v)
clarified thinking, and (vi) reorientation.
· Depending upon the extent of direction provided by the counsellor
to a counselee, Davis classifies counselling in three forms: directive,
non-directive and cooperative.
· Some practical considerations in counselling relate to responsibility of
counselling; length and number of sessions; time and place of sessions;
and need for keeping confidence.

12.8 KEY WORDS

· Penalty: It is a punishment imposed for breaking a law, rule, or contract.

· Socio-Economic: It is relating to or concerned with the interaction of
social and economic factors.
· Demotion: It means to lower someone or something in rank or position.

12.9 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Briefly discuss the concept of international relations.
2. What causes indiscipline in an organization?

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222 Material
 4. Discuss the characteristics of code of conduct. Employee Relations

5. What is counselling? Why is it significant?

6. Write a note discussing the accomplishments of counselling.
Long Answer Questions NOTES

1. What is discipline? Discuss its aspects and objectives in detail.

2. Write a detailed note on code of discipline. Give examples.
3. Explain the functions of counselling in detail.
4. Describe the various types and processes of counselling. Assess their
merits and demerits.
5. Discuss the concept and applicability of counselling in the Indian
scenario.

12.10 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.

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Employee Empowerment

UNIT 13 EMPLOYEE
EMPOWERMENT
NOTES
Structure
13.0 Introduction
13.1 Objectives
13.2 Concept and Process of Employee Empowerment
13.3 Empowerment in Indian Scenario
13.4 Empowerment in Global Scenario
13.5 Answers to Check Your Progress Questions
13.6 Summary
13.7 Key Words
13.8 Self Assessment Questions and Exercises
13.9 Further Readings

13.0 INTRODUCTION

In this unit, you will learn about empowerment of employees. The concept of
empowerment of employees is an innovative approach. It is the most visible
outcome of the recent globalization and liberalization of the market economy
and a corresponding competitive and rapidly changing market economy.
The concept of empowerment has different meanings for different people.
However, at its most practical level, it can be defined as the recognition
and proper channelization of the existing strength, skills and knowledge
of the people for the benefit of the organization. This unit will also explain
the process of empowerment. Employee empowerment can be achieved by
developing multiple skills, by giving people more authority and responsibility
on their jobs, by giving them access to information on developments and
genuinely involving them in decision-making.

13.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the concept of employee empowerment
· Explain the process of empowerment
· Assess empowerment in the Indian scenario
· Analyse empowerment in global scenario.

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 Employee Empowerment
13.2 CONCEPT AND PROCESS OF EMPLOYEE
EMPOWERMENT

Notwithstanding its culture-specific nature, empowerment has been defined NOTES

in varied ways in behavioural science literature. It can be succinctly defined as
the authority of subordinates to decide and act. People empower themselves by
discovering a positive way of being political. They have to become political
without being manipulative. Thus, empowerment involves positive political
skills at work. People can also be empowered by involving themselves in
work through a process of inclusion. Empowered people believe that they are
competent and valued, that their jobs have meaning and impact, and that they
have opportunities to use their talents. Likewise, from the standpoint of the
assumption that powerlessness gives rise to low self-efficacy, attempts have
been made to define it as a process of identifying and removing the conditions
that cause powerlessness while increasing feelings of self-efficacy. From this
perspective, empowered people are encouraged to use their initiative as well
as assigned resources to ensure that their decisions are implemented.
As a basis for the redistribution of power in work settings, the process
of empowerment can be defined as the reorientation of all forces, values and
beliefs that determine human behaviour in organizations so that they support
and liberate the individual rather than reduce their range of thought and action.
This process releases the full potential of every individual to contribute to the
common enterprise. Another approach defines empowerment the recognition
and proper channelization of the existing strength, skills and knowledge of
the people for the benefit of the organization.
Empowerment: Facilitators and Barriers
The concept of empowerment has recently been applied in different
organizational settings across the globe with varied success and failure. In
USA, Chrysler Corporation, Johnsonville Foods and the state of Kentucky
have accomplished significant results from empowerment. However, available
research literature also report the failure of empowerment efforts.
The analysis of different empowerment efforts provides an understanding
of its facilitators and barriers in organizational settings. The prerequisites
of empowerment are participation, innovation, access to information and
accountability. Likewise, delegation, which involves the distribution of power,
is more about truly empowering people than participation, which involves
only sharing of power. Barriers to empowerment include incongruence
between empowerment’s goal of inclusion and organizational culture, low
need for autonomy among people, managerial fear related to distribution of
power, and need for more power among managers.

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Employee Empowerment The Process of Empowerment
It can be done via developing multi-skills, by giving people more authority
and responsibility in their jobs, by giving them access to information on
NOTES developments and genuinely involving people in decision-making. An
empowering leader has to go through four stages: (i) empowering yourself,
(ii) demonstrating empowerment, (iii) giving management guarantees, and
(iv) taking risks.
Based on their research experience, several researchers such
as Blanchard describe the process of empowerment and what makes
empowerment work. The keys to empowerment are apparently simple
to understand, but frequently difficult to implement. The change from a
bureaucratic system to an empowering organization involves massive efforts.
It necessitates adequate understanding of the nature of an empowerment as
well as techniques of shifting from a bureaucratic management to empowering
leadership. The journey from bureaucracy to empowerment is long and
challenging, involving a great deal of value changes and controversies. It
cannot occur just by announcement; the top management must first change
itself.
Keys to Empowerment
There are three keys to empowering people and organizations: (a) information
sharing, (b) creating autonomy through structure, and (c) replacing the
hierarchy with teams.
1. Information sharing
(i) Need for information: Why do people need information? They need it
to know how they are doing, how their company is doing, and whether
their efforts make any difference. Experience has invariably shown that
information is instrumental in initiating the process of empowerment.
Informed people are bound to act with responsibility. If the employees
understand clearly the critical financial position of the company, they
tend to provide ideas for saving money as well as enhancing revenue
through better customer service. Like the owner, everyone attempts to
do whatever he can to help the organization. Even where the situation
is not a critical one, the employees provide ideas for expanding the
business. They may furnish ideas for new ventures. They may also
come forward to satisfy customers’ needs in creative ways.
(ii) Building trust: The most crucial contribution of sharing information is
of building trust. Bureaucratic organizations are bankrupt in terms of
trust. Hence, a lot of their energy is wasted in protecting themselves.
The sharing of sensitive information itself promotes trust.

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 (a) Handling mistakes: The first issue is the way management handles Employee Empowerment
mistakes. Asking ‘who did it?’ is not the way of an empowering
culture. Information is used here for fixing blame rather than
solving problems. This is a situation of trust-breakdown. The
most appropriate question would be, ‘what went wrong and how NOTES
to correct it?’ This is indicative of an empowering culture; it
empowers people to take risks; to learn and to grow in a trusting
climate.
(b) Perception of goals: The second issue is related to where the goals
fit into the empowerment process. Goals are merely milestones of
growth on the route of continuous betterment. Information helps in
clarifying the level of their achievement. People with information
about current performance levels happen to set challenging goals;
and they enjoyed breaking these records.
(c) Blockage of information: The third issue is concerned with the
question: ‘Is the act of sharing information blocked somewhere
in the organization?’ Yes, it is. Some managers may be afraid of
losing control. They tend to withhold part of the information.
Despite their overt sincerity to empowerment, they divert from
its implementation.
The final issue is ‘does information sharing alone cause empowerment
of people and organizations?’ Certainly, not. It is merely a first step towards
it. As soon as information is shared, and trust is built, the management has
to move towards the second and third keys to empowerment simultaneously.
2. Creating autonomy through structure
Empowerment is initiated with increased rather than no structuring.
Organizations that start the programme with a participative and supportive
leadership style invite problems. Successful companies use strong leaders
to show the path, teach them new skills and clarify different parameters
of empowerment. However, as soon as people become familiar with the
new culture, there is less need for structure. There are several problems in
organizations starting with little initial structure. People are only familiar with
bureaucratic ways of working, and thus they feel discomfort in the hierarchy-
less structure. There is need to change their habits and expectations.
What are the structural elements of empowerment? It is not merely the
organizational chart. The parameters of operation must be clarified. These
parameters or elements of structure include vision statements, goal-setting,
decision-making rules, performance appraisal process and training.
(i) Vision statement: The vision statements should be so simple that every
employee can understand them in the context of their jobs. Companies

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Employee Empowerment which use the ‘big picture’ vision, fail to communicate anything real
to them. There is need to convert it into action. So, when they obtain
information in terms of their ‘little picture’, they have a clear vision
to which they become committed.
NOTES
(ii) Goal-setting: Goals are the milestones rather than the ends. Goal-setting
involves a collaborative relationship. It has been observed that most
employees are not aware of how to collaborate in the process of goal-
setting. Without this understanding, the goals and responsibilities are
not clear to them. Successful companies tend to coach the people in
the process of setting specific, measurable and realistic goals linked
with the company’s vision. In addition, managers help the empowering
partnerships leading to outstanding performance. These goals are set
on a continuous improvement basis.
(iii) Decision-making rules: It is mistakenly assumed that empowerment
will provide people with power to make all decisions. This causes
frustration when they find that they are required to make only the
operational decisions. They tend to back off from making even such
decisions when they learn that they would be accountable for the
outcome. Therefore, successful companies make it clear at the outset
that the strategic decisions will always be the domain of management.
(iv) Performance appraisal: The typical performance appraisal, which is
disempowering, needs to be redesigned. It can be oriented towards
collaboration and continuous improvement. Companies that have been
successful in managing their cultures embody three elements in their
performance review process: (a) performance planning (including
collaborative goal-setting and discussion of appropriate leadership
style), (b) continuous coaching for employee growth, and (c) focus
on both manager and employee. Now, performance management is
each individual’s responsibility. It has become a collaborative rather
than a top-down system. Thus, it embraces assessment of employee’s
achievement and the manager’s leadership.
(v) Training: There is a need to provide continuous training to people so
that they acquire the desired empowerment skills, i.e. negotiation of
performance plans, decision-making, conflict management, leadership,
budgeting and technical competence in multiple jobs. Of course, before
they can learn these skills, they must unlearn bureaucratic habits.
Successful companies provide intense training to both managers and
employees that are linked with their jobs.
What are the key issues of structuring? The process of structuring is
gradual because people cannot handle all the changes at one time. It
is also not feasible to determine what are the structural elements to
be altered. Companies learn this by trial and error. As soon as people
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 understand where the company is and where it intends to reach, they Employee Empowerment
consider the new structure as a help rather than a barrier. With growth
of trust, employees tend to inform the management what boundaries,
procedures and decision-making patterns in the old structures hampered
them in becoming responsible. As soon as the people are tuned to the NOTES
new attitude and behaviour involved in empowerment, they change to
the new structure.
3. Replacing hierarchy with teams
While the above structural measures are taken to create autonomy, there is
a need for minimizing dependence on hierarchy. This leads us to the third
key. A vacuum is created by downsizing management layers and enhancing
spans of control. The question still remains: ‘Who has to make important
management decisions?’ The complexity of the present situation necessitates
collaborative decision-making. Empowered people can be provided support
as well as synergy by the empowered teams. These teams are quite different
from participative teams, quality circles or semi-autonomous teams. Instead
of merely recommending ideas, they make decisions, implement them, as
well as accept accountability. In one particular company, these teams were
provided training on effective teamwork. Thereafter, they started acting
with autonomy and took responsibilities earlier held by their managers. In
another company, after several years of training, the teams started working
as managers. Thus, as self-managed teams, they tended to make recruitment,
performance appraisal, work schedule, budgetary and other decisions. This
arrangement provided an outstanding bottom-line as well as satisfaction to
the people.
(i) Key steps: Then the question arises, what are the key steps for teams
to become the hierarchy? These steps include: extensive team training,
the leadership vacuum and the fear factor.
(a) Extensive team training: People have problems in working as
effective members of high-performing teams. This problem has
been handled by companies through extensive team training. It
exposed them to such issues as team decision-making, conflicts
as a positive element, team goal-setting, self-monitoring and
responsibility in leading themselves.
(b) Leadership vacuum: The most complicated situation arises when
teams start replacing the hierarchy. There is disillusionment
during the development phase towards empowered teams. At this
phase, the teams have a feeling of incompetence and low levels
of motivation to work towards empowerment. Thus, at the very
outset of their journey, they are exposed to severe setbacks. There
is an urgent need for a strong leader who could provide support,
guidance, encouragement and help.
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Employee Empowerment (c) Fear factor: There is also a high level of fear among managers with
respect to empowerment. Indeed, when they do not know what to
do, they resort to their bureaucratic mentality. This worsens the
problem and leads to delays.
NOTES
(d) Conclusion: Companies do not become empowered overnight; it
takes several years to attain the desired level of empowerment.
It is a tough task, and many companies fall out by the wayside.
However, in a year or so, they start getting flashes of empowerment
that propel them to continue the journey. It is not a soft attitude
towards people. Rather, it is expecting more from people who
come with their best because of ownership.

13.3 EMPOWERMENT IN INDIAN SCENARIO

The legal provisions and gazette notifications of the Indian government

enable indirect empowerment of workers by the representatives of the
workers who are usually elected by the workers. Since independence, the
Indian government has initiated many schemes which provide for employee
empowerment both at the enterprise and shop-floor level. Such schemes
include the following:
· Works committee: The Industrial Disputes Act of 1947 provides for
limited participation of workers representatives in bipartite works
committee in order to ensure good relations between employers and
employees. Committees like the canteen committee and the safety
committee are statutory.
· Joint Management Council (JMC): JMCs were introduced in 1958
to administer employee welfare, training, changes in work practices,
formulation of standing orders, organisational productivity and so on.
· Employee directors in nationalised banks: Banks were nationalised
in 1969. The Indian government made it mandatory for nationalised
banks to have employee directors representing both workers and
officers. The Board of Hindustan Antibiotics (Pune), HMT (Bangalore),
the Tatas and DCM, also have adopted this practice.
· Amendment of the Indian Constitution: The Indian Constitution
was amended in 1976 and Section 43A was inserted in the Directive
Principles. This enabled workers’ participation in management at floor
and plant levels in manufacturing and mining industries which employ
500 or more workers. Councils were given powers to deal with issues
relating to production, waste management, absenteeism, safety and
resource utilisation.

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 · Scheme for workers’ participation in management: This scheme Employee Empowerment

was introduced in 1977 and was applicable to commercial and services

organisations which have 100 or more employees.
· Scheme of 1983: The 1983 scheme regulating employee participation NOTES
was applicable to all central public-sector enterprises. It set up a
tripartite committee.
· Workers’ share in equity: The Union Budget of 1985–1986 had
provisions for offering stock options up to five per cent of the total
shares in order to increase workers’ participation in management.
· Participation of workers in Management Bill of 1990: According
to this Bill, every industrial enterprise needs to constitute one or more
‘Shop-Floor Councils’ at the shop floor level and ‘Establishment
Council’ at the establishment level. These councils must have equal
representation of employers and employees.
In India, the twin processes of globalisation and liberalization, that
began in 1990 and gathered momentum in 2000, have increased the need for
a flexible, more qualified and a versatile workforce. Nowadays, managements
have started using Japanese methods of direct participation like two-way
communication, kaizen, suggestion schemes, quality circles, 5S and so on.
BHEL, Mahindra and Mahindra, Godrej and Boyce have implemented quality
circle groups.
Direct methods of employee empowerment
The direct methods of employee participation include the following:
· Newsletters: These communicate the latest happenings and events
within a company to the employees and the clients, both potential and
existing, of the company.
· Employee reviews: These are conducted by the immediate supervisor
of the employees to review employee performance.
· Self-managed teams: These require higher levels of autonomy,
satisfaction, job security, and support from management.
· Team briefings: These are regular meetings between the managers
and their teams to exchange information and ideas.
· Team meetings: These provide a forum for problem solving, and
decision-making. Managers also provide important information to the
team members in these meetings.
· Suggestion schemes: These are informal ways of obtaining ideas from
employees.
· Quality circles: These are mechanisms which develop and utilise the
potential of people in order to enhance product quality and productivity.
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Employee Empowerment These require the development of skills, capabilities, confidence and
creativity of the people through the combined process of training, on the
job experience and participation. The work conditions need to facilitate
an environment which creates and sustains employee motivation and
NOTES commitment towards work excellence.
· Profit sharing: This is an arrangement by which the owner(s) of a
company shares a percentage of the profit earned with the employees.
· Problem-solving groups: These focus on understanding issues,
considering all possible factors and finding a solution.
· Employee surveys: These are formal mechanisms for collecting
employee opinions.
Indirect methods of employee empowerment
The different forms of indirect participation are as follows:
· Joint Consultation Committee (JCC): These are commonly used
in public sector companies in India. Both managers and employees
value this as a useful form of participation. The flexibility of the
JCCs enables a consultative approach. They can either be dominated
by the management or enable employee representatives to influence
organisational decisions. JCCs are based on the three following
principles: (a) A clear separation between consultation and negotiation
issues; (b) Regular participation of managers and implementation of
decisions; and (c) Legitimate employee representation
· Work councils: These are used by the management to consult with
the employee representatives on issues related to production and
employee relations. They provide a forum for discussing contentious
issues. Work Councils are more formal than JCCs and often have
some rules regulating them. Work Councils appoint employee
directors. The management informs the work council about important
issues. Employee representatives can consult experts to get a better
understanding of the issues.
· Worker directors schemes: Worker directors represent the workers
in the board of the company. This enables workers to have a stake
in formulating the long-term goals of the business. Workers become
more committed when they participate in setting the objectives of the
organization.
Empowerment and performance
The results of empowerment on employee performance are as follows:
· It makes employees responsible for performance outcomes
· It helps in maintaining consistent performances of teams
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 · It enables employees to identify and resolve obstacles and hence achieve Employee Empowerment

job performance
· It improves job efficiency
· It makes employees more knowledgeable about their work and hence NOTES
they are able to plan and schedule their activities in a better way
· It makes employees work harder as they view themselves as able to
influence organisational outcomes
· It enables employees to face difficult situations in a better way and
thus increases their performance
· It improves the employees feelings of self-worth and confidence and
this translates into higher levels of performance

Check Your Progress

1. Name the stages an empowering leader has to go through.
2. When were JMCs introduced and why?

13.4 EMPOWERMENT IN GLOBAL SCENARIO

Empowerment is the process of enabling workers to set their own goals,

make decisions and solve problems within their spheres of responsibility
and authority. In recent years, many organizations have actively sought ways
to empower their employees. One method some firms use to empower their
workers is the use of work teams. This method grew out of early attempts to
use what Japanese firms called quality circles.
A quality circle is a group of employees who voluntarily meet regularly
to identify and propose solutions to problems pertaining to quality. This use of
quality circle grew to encompass a wider array of work groups, now generally
called ‘work teams’. These teams are collections of employees empowered
to plan, organize, direct and control their own work. Their supervisor, rather
than being a traditional ‘boss’, plays the role of a facilitator.
The other methods that some leaders use to facilitate empowerment
are to change their overall method of organizing. The basic pattern for an
organization is to eliminate layers from its hierarchy, thereby turning more
decentralized. Power, responsibility and authority are delegated down the
organization as much as possible and the control of work is squarely in the
hands of those who actually do it.
Irrespective of the precise practices used, empowerment enhances an
organization if certain conditions exist. These conditions have been defined as:

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Employee Empowerment · Companies must be honest in their efforts to spread power and
self-governance at their lower levels. Nominal efforts to promote
empowerment in just a small number of areas are not likely to
succeed.
NOTES
· Organizations must be dedicated to maintain empowerment. If
workers are given more power only to later have it reduced or taken
away altogether, they will become indignant.
· Organizations must be methodical and enduring in their efforts to
empower employees. Passing over much control rapidly can result
in disaster.
· Organizations should gear up to increase their commitment towards
training. Employees who are given more liberty in their sphere
of work would probably require additional training to help them
exercise that liberty effectively.
When people are provided with the power and responsibility to take
decisions that affect their work with a minimum of level of interference, they
get empowered. Empowerment is an expression which is hackneyed and
under-practised. People bring their minds to work when they are provided
with empowerment. They are occupied in deciding on areas that affect their
work in the business. They accept the onus for their activities. They keep
themselves away and out of petty bureaucratic hassles that result in weakening
of values and wastage of time. Value is added to the organization when they
embrace the principles of quality and service.
The majority of organizations require knowledge workers—men
and women whose prime resource is their aptitude to think and act on
their knowledge. Computer programmers, system analysts, accountants,
lawyers, managers, sales team and even factory workers utilize their finest
judgments to resolve problems and use opportunities. This makes the issue
of empowerment more critical.
Most of the employees want a few basic things from their work:
(i) Meaning: They want their work to be meaningful so that they
are able to derive satisfaction from it.
(ii) Results: Employees are motivated by the outcome of their efforts.
If the results are positive and rewards follow, there is a great deal
of satisfaction from the work.
(iii) Challenge and an opportunity to learn: Work should be seen
as challenging and it should give them a scope to grow and learn.
(iv) Respect and recognition: Employees seek respect and recognition
from whatever they are expected to do in their organizations.

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 (v) Autonomy and control over their own work: Employees Employee Empowerment
desire to have autonomy and control over whatever they do in
their organization. This provides them with a sense of greater
satisfaction.
NOTES
(vi) Affiliation or knowing that they are part of a big team:
Employees in any organization have social needs and want to
affiliate with others. The awareness that they are a part of the
larger team provides them with a sense of security.
Empowerment in Action
The six items listed in the preceding paragraph form the foundation of the
efforts pertaining to good empowerment. If the leader tries to remove any
one of them, the employees’ commitment to work tends to get weakened. For
empowerment to work effectively, the leader needs to consider the following
actions:
(i) Clear vision and direction: He must know the reason for want of
empowerment. There should be very clear vision and direction for
implementing empowerment within organizations. There are certain
issues which need to be addressed by the leader before he begins to
implement the process of empowerment in the organization. These are:
(a) The leader needs to clarify the motive for empowerment in the
organization. He needs to be clear whether the empowerment is
beneficial to him or to the complete organization.
(b) The leader also needs to emphasize whether the empowerment
is for a few, selected people in the organization or for the entire
organization. The effectiveness of empowerment would depend
upon the scope and range of the empowered employees in the
organization.
(c) The commitment of the leader for empowerment affects its
effectiveness. Some leaders may want to use this practice as a lip
service only and may not be totally committed to it. The leader
needs to clarify whether it is actually required by the organization
or is it simply something that would be nice to have.
(ii) Examining corporate actions: To expect beneficial outcomes from
empowerment, leaders need to examine their corporate actions in terms
of:
(a) Policies: Leaders need to keep an account of major policies of
the organization. For example, it is said, ‘what gets rewarded gets
done and what gets punished gets avoided’. Business policies
and events such as review of performances and increase of merit

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Employee Empowerment show people what really matters to the top-level management. If
people are asked to work in collaboration but their performance
review pitches them against each other in an appraisal ranking
which is forced, they will defend their own interests. If cross-
NOTES functional teamwork is promoted and supported, but performance
reviews only recognize the targets achieved within a department,
interdepartmental alliance will suffer.
(b) Unwritten rules: These norms advise people about the way the
work is actually carried out in organizations. People find that
these rules, though not written, are as significant as any guidelines
that are written. For example, a manager may instruct his staff
to speak the truth always but punish the messenger who delivers
bad news.
(c) Structure: Structure of the organization should be such that
it gives autonomy and control to employees to perform their
tasks according to their approach. The structure should provide
employees situations where they are encouraged to learn different
tasks which could add value to their performance in organization
and enhance their satisfaction. In such situations, they are said to
be empowered.
Use of Empowerment
Corporations are undergoing a revolution which have been experimenting
with ways to increase the empowerment for employees. Even governments are
trying to recreate themselves with the help of the principles of empowerment.
Some associations succeed while others fail, but all of them provide learning
factors. We see some examples of the ways in which organizations use the
principles of empowerment.
(i) Large system change: Organizations focus on bringing everyone (or
at least one sample representative from every level of the organization)
in a room to restructure their domain of the company. This planning
process involves those who must implement changes. It causes a
decrease in resistance, an increase in commitment, compression of the
duration of planning and implementation and exceeding of the quality
of the plan over that created by external consultants or a small team.
(ii) Cross-functional team: Organizations collect capable people from
within and empower them for tackling vital business challenges. These
squads are not just task forces but they have the authority to suggest
and implement changes.
(iii) Access to information: Many organizations are investigating the way
work is done in an effort to provide more efficient service to customers.
They are developing new procedures that would ensure that people
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 have instantaneous access to the tools and information they require. In Employee Empowerment
conventional organizations, information is power and those who need
it most are often not provided access to it.
(iv) Promote the best: In General Electric’s 1991 Annual Report, Jack
NOTES
Welch introduced his theory of leadership: ‘GE needs people who
keep commitments (meet deadlines and financial targets) as well as
people who promote values of the company (empowerment)’. In the
past they only gave lip service to ‘value’ goals. Welch went on record
to say that those days are over. He wanted men and women who could
accomplish both these goals.
It is important to remember that empowerment does not come from a
wand that the leader waves over a firm, or from a memo he writes. It cannot
result from the systems, and commands and control structures alone that
exist in the organization.
Empowerment does not happen because the leader wishes it to be so.
It occurs when the leader delegates, as well as when he consistently and
repeatedly transfers ownership and responsibilities for issues, problems,
solutions and goals to employees. The May–June 1995 Harvard Business
Review makes the following statement:
“Empowerment is not an overnight transfer or an abdication of responsibility
from a boss to a subordinate. It is a gradual delegation process that requires
substantial top-management involvement.”

People want to learn and are greatly motivated and satisfied when they
do so. The top management’s challenge is not only to help people develop
themselves, but also to ensure that they do so in way that supports and
reinforces the company’s objectives.
Reasons for Slow Adoption of Empowerment
Employee involvement could be another term for empowerment. According to
a recent survey carried out by University of California’s Centre for Effective
Organizations, American companies have been slow in integrating such
exercises into their business processes. A few of the key conclusions of this
study are listed below:
(i) About 37 per cent of the workforce is not involved in activities
pertaining to the involvement of employees and have no say in the
process of decision-making.
(ii) While 31 per cent of the employees are answerable for suggesting
improvements to management, they have not been given any
information or training to help them in making decisions.
(iii) Of the 12 per cent employees who take part in groups and are given
some level of control over daily decisions applicable to their work,
most receive information linked to their responsibilities.
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Employee Empowerment Unless they are motivated to change, people do not change easily.
Business transitions of transferring empowerment to workforce, work on
the same lines. Unless employees know the reason for empowerment, the
advantage it holds for them and the advantage it holds for the company,
NOTES the momentum to doing things differently will never arise. Things will not
change only if the leader wants them to. The only thing that matters is whether
employees want to change and believe they can influence the company’s
performance.
There are five major reasons because of which leaders have been slow
in adopting employee-centred management or empowerment. These are:
(i) Complacency and inertia: Till date, many executives never
ventured to question or change the moderately comfortable status
quo because of complacency and inertia.
(ii) Short-term focus: The short-term focal point of the management
systems in general and reward systems in particular, restrains the
procedure of empowerment. Executive performance bonuses and
incentive plans are attached to one year and are definitely not
meant to build a dedicated workforce over the long term.
(iii) Inability to measure the impact of human resource practices:
Schuster contends: ‘Until recently, little attention has been paid
to executive performance regarding effective utilization of human
resources, in part because the standards for comparison did not
exist. Our lack of control over efficient utilization of the most
expensive single cost of operation in many organizations is indeed
remarkable’.
(iv) Fear of losing status: Reluctance to give up their special status,
executive privileges and managerial power hampers with the
process of empowerment.
(v) Lack of surety: Possibly, the most noteworthy explanation of all is
that a lot of managers would prefer to bring in high-improvement
practices but are not sure how to start or proceed.
Leaders need to chalk out programmes and define processes that
enlighten and engage employees. Leaders must be supportive towards them
through words and deeds. A business leader must be spending as much time
with senior human resource professionals to discuss ways to connect and
align employees to business targets and objectives, as they must do with
top-level financial persons. The leader will then understand the essence of
empowerment.
There are certain characteristics of the leaders who believe in
empowering their employees and organizations. Some of these are:

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 (i) They house the belief that leadership belongs to every employee Employee Empowerment
and not only to some of them.
(ii) They are aware that the organization is likely to be successful
when employees are equipped, trained and possess the authority
NOTES
to perform in the best way.
(iii) They believe that knowledge is power and are therefore ready to
share it with all employees.
(iv) They value the workforce enough to build a culture that respects
and is supportive of individuals.
(v) They create opportunities to find solutions.
They comprehend that nurturing empowerment is an uninterrupted
effort.
Motivation through Empowerment
Years ago, leaders had started to discover the motivational supremacy of
empowerment. Some leaders have always empowered people through the
delegation of extensive autonomy, by providing sufficient information and
by supporting projects that were creative or depicted initiatives. Similarly,
many people have learned to be self-motivated and self-empowered. They
grab hold of opportunities to render their work more meaningful and are
prepared to choose, experiment and create an impact on the organization. But
until empowerment found its way to the leader’s dictionary, scarce efforts
were carried out to encourage it as a practice for promoting self-motivation,
innovation and system-wide improvements. The process of empowerment
plays a vital role in motivating employees of the company. Some of the ways
by which the process of empowerment motivates employees in organizations
are discussed below.
Enhancing self-perceptions and behaviours empowerment
Conditions that facilitate people to feel competent, in control, energized to take
initiatives and persevere at meaningful tasks, are defined as empowerment.
Empowerment is a many-sided and extremely personal force that motivates
people. Empowerment can rise from within the individual, from a peer or
from managers. It seeks to bring about constructive self-perceptions (self-
concept, self-esteem and self-efficacy) and behaviours that direct tasks. Figure
13.1 graphically displays these factors and the text below defines some of
the relationship among them.
Modified self-perceptions are important manifestations of empowerment.
Self-concept is how a person thinks about himself or sees himself in a role.
Self-concept changes as roles shift, for example, from friend student or

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Employee Empowerment employee. Self-esteem is a general feeling about one’s own worthiness. A
precise feature of self-esteem is self-efficacy, a notion directly associated to
empowerment. Self-efficacy is a person’s perceived capacity to perform a
certain type of function. One’s feelings of self-efficacy are essential since
NOTES they manipulate performance and brings in a sense of personal well-being.
Individuals build up a feeling of self-efficacy that depends on past
experience with authentic or comparable tasks with others and feedback from
them. A person’s self-realization of capacity (information and expertise),
common physical and emotional state and personality (including overall
self-esteem), influence his feeling of task-specific self-efficacy. The level
of skills and effort with which an individual approaches a task influences
his personal feat and the successive feeling of self-efficacy. Empowering
conditions render self-efficacy strong.

OTHERS
Accepting
PRECEPTIONS
Modeling
Self-concept
Mentoring
Self-esteem
Self-efficacy
SELF
MANAGERS Predisposition
OUTCOMES
Job designs Competence BEHAVIOURS
Goal reward Self-initiated
Expectations
Leadership Persistent
Adaptive

Fig. 13.1  Forces Enhancing Empowerment

This sense of empowerment can emanate from a set of sources as

given below.
(a) Self-initiated empowerment: A person can initiate self-
empowerment and a feeling of self-efficacy through a positive
change in his behaviour. Individuals who are fundamentally
motivated most often make efforts to expand the nature of their
jobs. They are enthusiastic to take on further responsibilities and
creatively work on means to improve organizational processes
and products. Self-initiated empowered people are, in reality,
entrepreneurs who work actively to alter the organization in ways
that make them proud of their results.
(b) Empowerment by others: Colleagues and co-workers hugely
impact self-perceptions related to work. Peers who promote
empowerment, influence the way people within a group feel
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 about themselves and the group. Within groups, people get the Employee Empowerment
feeling of being empowered when they are valued and treated
as professionals. Co-workers are encouraged by them to be
accountable and be sponsored by a personal mentor. Individuals
are empowered when peers look for their suggestions, confide NOTES
in them and involve them in projects which help them learn and
come in contact with others who might help their careers.
(c) Empowerment by managers: The most widespread basis of
empowerment is the behaviour of managers or leaders when they
interact with the staff. The empowering leader energetically gives
power to individuals and allows them to be self-motivated. This
is done through a shift in the expectations of employees so that
they feel that they are in control of their future and can outline
their work and make it meaningful within their organizations.
Empowering leaders also share knowledge so that their teams can
perform their jobs with a higher rate of accuracy and confidence.
Information technology and systems providing access on
demand to employees for whatever information they need are by
themselves a key empowering factor.
As a management application, empowerment also allows leaders to
communicate, delegate authority, share information and alter the incapacitating
knots of corporate bureaucracy. The leader who consciously strives to
empower his employees provides them with the drive to pursue their visions,
win projects and to progress on practices in tune with the organization’s
mission and goals. The leader who shares tasks with subordinates and treats
them as associates is likely to get the best from them. Due to this, it is logical
to think of empowerment as the most important quality of leaders.
Empowerment results in personal changes
The empowered individual undergoes two types of special transformations.
One is motivational enhancement, particularly when the supply of
empowerment is a positive change instigated by a manager. Empowered
people typically deepen the focus of their mission and are eager to become
more dedicated to a cause or goal. They experience self-efficacy, which
inspires motivation by facilitating people to see themselves as proficient and
capable of high performance.
Empowerment is also patented in active behaviour to resolve problems
and concentrates its force on an objective. The empowered person is more
elastic in behaviour, tries alternate means when one is blocked and actively
begins new tasks. Behaviour becomes self-motivated when the individual
seeks to shape out a greater personal autonomy in undertaking tasks without
the support of the manager.
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Employee Empowerment W.L. Gore and Associates, a privately held firm of over 6,000
associates, noted for its Gore-Tex and other products made from Teflon, has
an unusual organization culture that supports empowerment. All activities
are structured around teams, the firm has sponsors rather than managers and
NOTES hiring decisions are a team-based process. Once a team decides that another
person is needed, they recruit, interview and select and then assign that person
a sponsor who acts as a mentor. ‘Usually we choose the person (or the team)
who has invested the most in making the new person successful’ says Sally
Gore She further remarks: ‘If you sponsor someone, you want him or her to
be successful. You will offer them appropriate opportunities to sit in meetings
and seminars and do things so that they will be successful. Then teams and
individuals are rewarded with profit sharing based on the value they add to
the company. Seniority and education are not the criteria. The criterion is
contribution, pure and simple (to create) an atmosphere where associates are
motivated to innovate’.
Empowering Today’s Organizations
As scientific management was a suitable philosophy to organizing and
controlling the massive bureaucracies of the 1920s and 1930s, similarly,
empowerment is the philosophy for running organizations. The 21st century
organizations are learning organizations. Most organizations are going
through a rapid transformation, changing their style and the way they work,
in response to the changed environment in which they have to operate.
Competition in the new environment will be intense, both at home and in
abroad. Part of the challenge will come from developing industries of the Far
East which will take full advantage of low labour rates, the new computer
technology and improved global communications. Every organization will
have to innovate and create new products and markets or be left behind.
Change, which is both rapid and profound, will bombard every part
of an organization’s activity. Products, customers, competitors, suppliers
and others will change. Some of these factors will change almost instantly
while others will have longer timescales. Organizations will have to respond
effectively to the change, otherwise, they will be at a disadvantage with their
competitors.
Another important feature of the today’s organizations is that they
have to deal with far more complex environments. The market demands a
more diverse range of products which have shorter life span. The length of
time required to respond to customers’ needs is shorter. These factors require
systems and management procedures that are efficient and responsive to
customers’ needs.
The change in the environment and the greater demands of customers
will have an impact on the structure of organizations. To cope with shorter
response times and the requirement for more rapid communication,
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management hierarchies will be reduced. There will be fewer layers in Employee Empowerment
organizations enabling faster decision-making. Organizations will have to
be more flexible to cope with the priorities changing rapidly. All employees
will have to possess a wider range of skills so that they can be transferred
quickly from one job to another. The new demands of the market and increased NOTES
technology will result in a more skilled and educated workforce. People will
have higher expectations and demand a satisfying job and worthwhile careers.
Rewards and recognition will also have to be increased to match the new
skills and personal expectations. Table 13.1 depicts some of the commonly
felt differences between the empowered and unempowered organizations.
Table 13.1  Behaviour Descriptions of Empowered and Unempowered Organization
Empowered Organization Unempowered Organization
She made the mistake; we will help her She made the mistake, she can clear it up.
clear it up.
To try and fail is applauded. To try and fail is punished.
Every person has latent talents that can Some people are dumb and will never do
be developed. anything.
The criteria for success and promotion If you are not in the club, you will never
in this organization are talent and job succeed in this organization.
performance.
There are motivated and creative people The only innovators and creative people are in
at all levels within the organization. the marketing and research departments.
Work is as enjoyable and exhilarating You work from 9.00 to 5.00 and then you
as the rest of my life. escape.
Enterprise, initiative and the challenge You keep your head down and your nose
of trying new things are the norm. clean.
We thrive on new ideas. We have seen it all before.
Most people try to be open and genuine. You have to be cynical in this organization.
Volunteering for special assignments is Never volunteer for anything.
the pathway to growth.
The products and services we give to What we produce is no better or worse than
our customers are world class. anyone else’s.
There is genuine concern for an No one takes an interest—you just swim
individual’s welfare and development. around in your own cul-de-sac.

Check Your Progress

3. What is empowerment?
4. What is a quality circle?

13.5 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. An empowering leader has to go through four stages: (i) empowering

yourself, (ii) demonstrating empowerment, (iii) giving management
guarantees, and (iv) taking risks.

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Employee Empowerment 2. JMCs were introduced in 1958 to administer employee welfare,
training, changes in work practices, formulation of standing orders,
organisational productivity and so on.
3. Empowerment is the process of enabling workers to set their own
NOTES
goals, make decisions and solve problems within their spheres of
responsibility and authority.
4. A quality circle is a group of employees who voluntarily meet regularly
to identify and propose solutions to problems pertaining to quality.

13.6 SUMMARY

· Notwithstanding its culture-specific nature, empowerment has been

defined in varied ways in behavioural science literature.
· It can be succinctly defined as the authority of subordinates to decide
and act.
· The analysis of different empowerment efforts provides an understanding
of its facilitators and barriers in organizational settings.
· The prerequisites of empowerment are participation, innovation, access
to information and accountability.
· An empowering leader has to go through four stages: (i) empowering
yourself, (ii) demonstrating empowerment, (iii) giving management
guarantees, and (iv) taking risks.
· . The Indian government made it mandatory for nationalised banks to
have employee directors representing both workers and officers.
· In India, the twin processes of globalisation and liberalization, that
began in 1990 and gathered momentum in 2000, have increased the
need for a flexible, more qualified and a versatile workforce.
· Empowerment is the process of enabling workers to set their own
goals, make decisions and solve problems within their spheres of
responsibility and authority. In recent years, many organizations have
actively sought ways to empower their employees.
· One method some firms use to empower their workers is the use of work
teams. This method grew out of early attempts to use what Japanese
firms called quality circles.
· A quality circle is a group of employees who voluntarily meet regularly
to identify and propose solutions to problems pertaining to quality.
· Employee involvement could be another term for empowerment.
· According to a recent survey carried out by University of California’s
Centre for Effective Organizations, American companies have been
slow in integrating such exercises into their business processes.
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 · The change in the environment and the greater demands of customers Employee Empowerment

will have an impact on the structure of organizations.

· To cope with shorter response times and the requirement for more rapid
communication, management hierarchies will be reduced. NOTES

13.7 KEY WORDS

· Globalization: It is the process by which businesses or other

organizations develop international influence or start operating on an
international scale.
· Liberalization: It refers to the removal or loosening of restrictions on
something, typically an economic or political system.
· Bureaucracy: It is a system for controlling or managing a country,
company, or organization that is operated by a large number of officials
employed to follow rules carefully.
· Empowerment: A management practice of sharing information,
rewards, and power with employees so that they can take initiative
and make decisions to solve problems and improve service and
performance.

13.8 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. Describe the keys to empowerment. What makes empowerment work?
2. How does empowerment impact employee performance? Discuss.
3. How does empowerment help in enhancing self-perceptions?
4. What are the types of transformations that an empowered employess
goes through?
Long Answer Questions
1. What do you understand by employee empowerment? Discuss its
facilitators and barriers in detail.
2. Discuss employee empowerment in India. Explain the direct and
indirect methods of employee empowerment in detail.
3. Give a detailed analysis of empowerment in the global scenario. What
are the reasons for slow adoption of empowerment?

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Employee Empowerment
13.9 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

NOTES Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.
Decenco, David A. and Stephen P. Robbins. 1989. Personnel/HRM, 3rd
Edition. New Delhi: Prentice-Hall of India.

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 International HRM

UNIT 14 INTERNATIONAL HRM

Structure NOTES
14.0 Introduction
14.1 Objectives
14.2 International HRM: An Introduction
14.3 Comparison of Domestic and International HRM
14.4 Challenges in International HRM
14.5 Answers to Check Your Progress Questions
14.6 Summary
14.7 Key Words
14.8 Self Assessment Questions and Exercises
14.9 Further Readings

14.0 INTRODUCTION

Any business is done in environments of different textures—social, cultural,

economic, political, technical, etc. International business is not an exception
to this impingement of environment. The context in which international
human resource management (IHRM) has to function, therefore, is decided
by these environmental flows. IHRM professionals have their hands full with
the different types of influences they are supposed to face while carrying out
their responsibilities. This unit is poised to trace the contextual framework
in IHRM.

14.1 OBJECTIVES

After going through this unit, you will be able to:

· Discuss the comparison of domestic and international HRM
· Explain the challenges in international HRM

14.2 INTERNATIONAL HRM: AN INTRODUCTION

Among the various activities of HRM, the following are the most common
ones:
1. human resource planning
2. staffing (recruitment, selection, placement)
3. performance management
4. talent management
5. knowledge management
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International HRM 6. training and development
7. job analysis
8. compensation (remuneration) and benefits
NOTES 9. industrial relations
P. Morgan (1986), while acknowledging that most of the activities are
common for all HRM, presents three distinct dimensions of IHRM:
1. the broad HR activities of procurement, allocation and utilization
2. the national or country categories involved in IHRM activities:
· the host country where the subsidiary is located
· the home country or parent country where the firm is
headquartered and
· ‘other’/‘third’ countries that may be the source of labour,
finance and/or other inputs.
3. the three categories of employees of an international firm:
· host-country nationals (HCNs)
· parent-country nationals (PCNs)
· third-country nationals (TCNs)
Hence Morgan defines IHRM as the interplay among these three
dimensions, namely, HR Activities, Types of Employees and Countries of
Operation (ATECO). Broadly, domestic HRM is involved within one national
boundary while IHRM is concerned with HRM issues outside the boundaries
of one country.
Perhaps the definition offered by Paul Sparrow et al. is a simple and
practical one. According to them, global management of human resources
(in other words IHRM) is the possession of the skills and knowledge of
formulating and implementing policies and practices that effectively integrate
and cohere globally dispersed employees, while at the same time recognizing
and appreciating local differences that impact the effective utilization of
human resources.
The term expatriate has different connotations depending upon the
frame of reference. In the event of a PCN going out to a host country, or in
the case of a TCN going either to parent or to host country, the employee
would become an expatriate. Even if a HCN/TCN moves to the home country,
then also he/she can be termed as an expatriate. However, terminologies
such as ‘impatriates’ and ‘transpatriates’ are being used of late to distinguish
from among the various combinations of expatriates mentioned above. For
example, Korean multinational Hyundai may draw personnel from one of its
subsidiaries in India to man some of its operations in Korea (home country),
making them ‘impatriates’. If an Indian is posted to another subsidiary of
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Hyundai in, let us say China, he will be known as a ‘transpatriate’. Well, International HRM
all these terms are coined to make matters worse. But suffice it to say that a
person who is displaced from his own country to work for his company in
another country—whether it is to the parent country or the third country—is
an expatriate. NOTES

14.3 COMPARISON OF DOMESTIC AND

INTERNATIONAL HRM

As indicated by Morgan earlier, the main characteristic of IHRM lies in the

complexities of operating in different countries with different categories of
employees. Though on the face of it HRM activities remain the same both in
domestic and international arenas, there are varying degrees of intensity with
which the complexities arising out of IHRM activities have to be addressed.
P.J. Dowling (1988) attributes these complexities to the following six factors:
· More HR activities
· The need for a broader perspective
· More involvement in employees’ personal lives
· Changes in emphasis as the workforce mix of expatriates and locals
varies
· Risk exposure
· Broader external influences
More HR Activities
In order to operate in an international environment, the HR department should
involve itself in a number of activities which otherwise would not be necessary
for a domestic environment: international taxation, international relocation
and orientation, administrative services for expatriates, host-government
relations and language translation services.
International taxation
As we shall elaborate in the chapter on ‘Compensation’, amidst various laws
one has to abide by in a foreign country to continue the company’s operation
there, income tax laws are those that cannot obviously be evaded or avoided.
At the same time, the expatriate cannot afford to do away with the taxation
of his country of origin. Sometimes this may lead to double taxation. This is
a disincentive for anyone to take up a foreign assignment. Therefore, IHRM
has to take care of compensating the individual adequately so that he does
not feel the pinch of double taxation. This may give rise to anomalies in the
salary structure of employees in the home country. A balancing act has to be
done by the IHRM accordingly.
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International HRM International relocation and orientation
Whenever a transfer of an employee is affected within the country the HR
professional is not burdened with the additional responsibility of arranging
NOTES for the employee’s passage from one location to another. His job is done
by providing for expenses to the employee as per company policy. But
in the case of an expatriate, the job of arranging passports, visas, tickets,
accommodation, etc., not only for the concerned expatriate, but also for his/her
spouse and family, falls on the IHRM professional. Finalizing compensation
details such as delivery of salary overseas, determination of various overseas
allowances, etc. are the extras added on to IHRM. Further, the expatriate’s
training to prepare him to cope with the new environment and culture is an
added activity. For domestic HRM personnel this is not an issue because
the cultural impact of workers/employees will be homogeneous. Once the
expatriate reaches foreign soil, the orientation he has to be given is certainly
different from what it is at home.
Administrative services for expatriates
Providing these services can often be a complex and time-consuming activity
because policies and procedures are not always clear-cut and may at times
conflict with local conditions. For example, if in the host country which is
not secular there is a requirement that a place of worship has to be provided
for the employees, whereas in the parent country which is a secular state
such provisions may not be necessary, HRM has to address this dichotomy
administratively to suit local diktats. These issues add to the complexities
of providing administrative services to expatriates.
Host government relations
This aspect represents an important activity for an HR department, particularly
in developing countries where work permits, and other important certificates
are more easily obtained when a personal rapport exists between the relevant
government officials and multinational managers. Having such rapport
helps resolve problems that may arise from ambiguous eligibility and/or
compliance criteria for documentation such as work permits. But this can at
times become quite volatile.
The Need for Broader Perspective
HR managers working in an international environment have to deal with
more than one national group of employees (e.g., PCN, HCN and TCN).
Therefore, narrow domestic walls have to be removed and parochialism,
regionalism or even nationalism cannot, or should not, find its way into the
operation of administration of programmes for the multinationals. Sometimes
the allowances or incentives for foreign service permitted to parent-company

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expatriates are withheld from third-country expatriates. This is a narrow International HRM
outlook which should be eliminated by the HR manager in IHRM. Even
in domestic HRM, partialities due to regionalism should be shunned. All
the more so, IHRM should shun any such attitude and embrace a broader
perspective for the employees. NOTES

More Involvement in Employees’ Personal Lives

In the domestic environment the HR department’s involvement with an
employee’s family is limited. But in the international environment the
department should be much more involved in order to provide the level of
support required and to know more about the employee’s personal life. For
example, despite the best effort of a company to avoid any discriminatory
selection process, a married person may be rejected just to escape some of the
stringent legislations in the matter of immigration into the country of posting.
Even if the employee has to be sent single to the host country, the family’s
requirements in the absence of the employee need to be taken care of by the
HR department. These can range from housing to education of children to
their health benefits. Sometimes the HR department has to take care of the
children left behind in boarding schools when both husband and wife stay
together in the host country on an assignment from parent country. In India,
extended families with dependant parents or other elders need to be taken
care of too in order to facilitate the employee to carry out his assignment
abroad without any worries back home. For a domestic assignment most of
these matters either would not arise or would be primarily the employee’s
responsibility rather than that of the HR department.
Change in Emphasis as the Workforce Mix of PCNs and HCNs Varies
As foreign operations come of age and locals are able to manage the
subsidiaries themselves, it becomes wise and prudent to withdraw PCNs and
TCNs from the scene. Before that the HCNs need to be trained to handle
the business all by themselves. Further, as activities hitherto connected to
benefits extended to expatriates are being withdrawn, activities pertaining
to the selection and training of local talent emerge as the predominant ones
for international HR managers.
Risk Exposure
More often than not, the human and financial consequences of failure in
the international arena are more severe than in the domestic arena. If an
employee sent abroad to carry out an assignment after considerable training
and development, travel and maintenance expenses returns to his base either
due to his inability to adjust physically or mentally to the foreign environment,
or due to his failure to deliver, the firm incurs a huge loss, apart from incurring

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International HRM additional expenditure in repatriation of such an employee. Direct costs per
failure to the parent firm may be as high as three times the domestic salary
plus relocation expenses, depending on the exchange rate of currency and
location of assignments. Indirect costs, such as loss of foreign market share
NOTES and damage to host country relationships, may also be considerable.
Risk exposure is high in domestic HRM. Unfair hiring practices may
result in a firm being charged with the violation of Constitutional provisions
and be liable for penalties. Failure to maintain cordial relations with unions
may result in strikes and other forms of labour unrest. In IHRM, these risks
exist, and, in addition, there are other hazards that are unique and more
threatening. Depending on the countries where the MNC operates, the
headquarters and subsidiary HR managers may also have to worry about the
physical safety of the employees. In one case a representative of a consulting
firm doing an overseas project became curious about a pistol he saw in a
gas station owned by a person of Indian origin. He was lured by the ‘owner’
of the pistol to try his hand at it and have the thrill of shooting. When the
representative, out of curiosity, fired a couple of shots and the police arrived,
it became a complicated situation and the expatriate found it very difficult to
extricate himself from it. In many countries, kidnapping and terrorism are
common and the international HR managers must learn to live with them.
In the recent past, Taliban activists in Afghanistan took an Indian engineer
hostage and killed him to press their demand that all Indians should leave
their country within 24 hours. Terrorism poses a great risk to international
operations. The cost of kidnapping may be as high as $2-3 million, and it
has been seen that there are 10,000 to 15,000 kidnappings a year worldwide.
Every day newspapers carry stories about Indians working abroad going
missing. Firms are therefore forced to spend 1–2 per cent of their revenues
on protection against terrorism. The HR department may also be required to
devise emergency evacuation procedures for highly volatile locations. The
invasion of Kuwait and the ensuing Gulf War in 1991 is an example of such
a situation. Even in our domestic scenario some public-sector undertakings
(PSUs) having operations in sensitive states insure their employees against
terrorist attacks. It is all the more necessary for international HR managers
to be alert in this respect.
Besides these risks, it has been estimated that an average expatriate
manager, with family, costs an MNC nearly US$2,50,000 per year, and the
total compensation package American expatriate managers has ranged from
25 to 40 per cent between 1965 and 1985. If managers do not perform well
and have to be recalled to the home country, their failure represents huge
financial losses for their employers. The risks associated with poor selection
decisions are high.

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More External Influence International HRM

Countries like the US and UK are nowadays on careful about outsourcing

their activities for the fear that personnel from countries like India or China
will displace their own workforce and create unemployment. That is why they NOTES
are cautious about being ‘bangalored’. Also, they are imposing restrictions
on foreign nationals in their own countries. The recent threat to Indian
doctors serving in England is a case in point. Legal frameworks in the host
countries are another parameter within which HR managers need to operate.
The subsidiary HR manager must spend more time learning and interpreting
the local ways of doing business and the general code of conduct regarding
activities such as giving gifts. He should also dole out benefits and facilities
not readily available in the local economy, to his employees.
Variables that Moderate Differences between Domestic and
International HRM
Apart from the complexities involved in IHRM more than in domestic HRM,
P.J. Dowling enumerates four other variables that moderate differences
between domestic and international HRM. They are:
· the cultural environment
· the industry/industries with which the multinational is primarily
involved
· the extent of reliance of the multinational on the home country domestic
market
· the attitudes of senior management
The Cultural Environment
The word ‘culture’ many a time is confused with nation. But it should not be
assumed that national differences necessarily represent cultural differences.
Culture normally describes a shaping process, which means that members of a
group or society share a distinct way of life with common values, attitudes and
behaviours that are transmitted over time in a gradual, yet dynamic, process.
Normally there is a tendency to believe that what has worked
successfully for so long in one culture should work in another environment
also. This is a generalization which usually does not hold water. This is
what researchers call an etic approach to culture. According to them the
emic approach, on the contrary, is culture specific. This means there is no
universality of culture. Each culture is unique in nature and the employee
should adapt him/herself to the new culture rather try to change it to suit
oneself. This is where guidelines for structuring teamwork can be linked
to the strategic imperatives of local responsiveness, global efficiency and
organizational learning.
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International HRM Being aware of the local culture and adapting oneself to it enables
one to cope with the requirements of the local market with much better
responsiveness than a person who thinks what is done back home is the best
way to do it. This naturally leads to global efficiency and organizational
NOTES learning. What is considered as nepotism in some cultural environments may
not be so in others. Mumbai dabbawalas who have the remarkable reputation
of transporting about 2,00,000 tiffin carriers each way within a radius of 60
km in the city (4,00,000 transactions every day) for their clients to have their
own home-cooked food for lunch every day for the last one century without a
single mistake thus beating even the six sigma level of quality service engage
personnel from within their own clan and community to ensure reliability.
Moreover, they do this business more as a service. Hence this cannot be
labeled as nepotism!
Just like perception in the behavioural science is in the eye of the
beholder, so is meaning of people’s actions. To greet a person with flowers
can have formidable consequences if the wrong colour flower is presented
to a guest from a different culture. Hence to win or lose a market may fatally
lie in the accurate knowledge of local culture.
Industry Type
Depending on the industry, global competition varies and accordingly HRM
activities also vary. What is most talked about these days as a blue-chip
industry is information technology (IT) which has suddenly taken Indians all
over the world. This industry has definitely earned India pride of place in the
global arena. However, the same cannot be said of all other industries, though
Indian presence is felt all over the world in diverse industries. Each of these
industries has its own way of managing their human capital. Porter suggests
that the industry in which a multinational firm is involved is of considerable
importance because patterns of international competition vary widely
from one industry to another. At one end of the continuum of international
competition is the multidomestic industry, that is, the one in which competition
in each country is essentially independent of competition in other countries
examples being retailing, distribution and insurance. At the other end of the
continuum is the global industry, wherein a firm’s competitive position in one
country is significantly influenced by its position in other countries, examples
being commercial aircraft, semiconductors and copiers. Porter accentuates
the key difference between these two industries as follows:
The global industry is not merely a collection of domestic industries
but a series of linked domestic industries in which the rivals compete against
each other on a truly worldwide basis … In a multidomestic industry, then,
international strategy collapses to a series of domestic strategies. The issues
that are uniquely international revolve around how to do business abroad,
how to select good countries in which to compete (or assess country risk),
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and mechanisms to achieve the one-time transfer of know-how. There are International HRM
questions that are relatively well developed in the literature. In a global
industry, however, managing international activities like a portfolio will
undermine the possibility of achieving competitive advantage. In a global
industry a firm must in some way integrate its achievements on a worldwide NOTES
basis to capture the linkage among countries.
The main role for the HRM function would be to support the primary
activities of the firm in each domestic market to achieve a competitive
advantage through either cost/efficiency or product/service differentiation.
If the multinational is in a global industry, however, the ‘imperative for
coordination’ propounded by Porter would require an HRM function
structured to deliver the international support required by the primary
activities of the multinational.
The IT/ITES sector has been the forerunner in making ‘India Shining’
because Indian IT services exports (including BPO services) touched Rs
1,04,130 crore from a mere Rs 250 crore in 1991 and is slated to become Rs
2,70,000 crore by 2010. In the manufacturing domain apart from automobiles,
pharmaceuticals, leather and leather goods, textiles and garments, capital
goods, electronic hardware, handicrafts, gems and jewellery have the potential
of taking the Indian manufacturing saga to the next level. This is an indication
that industrial climate necessarily dictates different approaches to IHRM in
the ways discussed earlier.
Reliance of the Multinational on its Home-country Domestic Market
It is often assumed that a global market perspective would be dominant in
a firm’s culture and thinking because of the large size of its operations. But
size is not the only key variable when looking at a multinational; the extent
of reliance of the multinational on its home-country domestic market is also
very important. As a matter of fact, for many firms, a small home market is
one of the major motives for ‘going international’. For example, towards the
end of twentieth century, many of the European Power-Generating-Equipment
Manufactures experienced a poor domestic demand for their products and
so they went looking for international markets to dump their products even
if at a very nominal price and extended soft loan facilities to their buyers in
Asian underdeveloped countries.
A very large domestic market influences all aspects of how a
multinational organizes its activities. It is more likely, in this case, to use an
international division to organize its international activities and, even if it
uses a global product structure, the importance of the domestic market will
be pervasive.
A large domestic market will also influence the attitude of senior
managers towards their international activities. It will help generate a large
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International HRM number of managers with experience of predominantly, or even exclusively,
the domestic market. The demands of a large single, national market present a
challenge to the globalization efforts of senior managers of many firms. Hence
senior managers need to address the task of developing global HR managers.
NOTES
Check Your Progress
1. Name any two activities of HRM.
2. Define IHRM.

14.4 CHALLENGES IN INTERNATIONAL HRM

Trends of globalization, market liberalization, deregulation and technical

evolution are restructuring global markets and challenging traditional
approaches to gaining competitive advantage. It is only the possession of
specific capabilities and resources that now enables firms to conceive and then
implement strategies that can generate what the economists describe as above-
average rates of return. The term ‘organizational capability’ was adopted by
Ulrich for the HR field. Ulrich and Lake brought together perspectives from
the fields of the management of change, organizational design and leadership,
and argued that organizational capability was about competing from the
inside out. Organizational capability focuses on the ability of a firm’s internal
processes, systems and management practices to meet customer needs and
to direct both the skills and the efforts of employees towards achieving the
goals of the organization.
The idea also has its root in the resource-based view of the firm with
the argument that in an environment characterized by the globalization of
markets, changing customer demands and increasing competition, it is the
people and the way they are managed that are more significant than other
sources of competitive advantage. These newer models of strategy argue that
competitive advantage is derived from both internal knowledge resources and
the strategic resources or capabilities of the firm. It is ‘bundles of resources’
rather than any particular product-market strategy that provide an organization
with the capability to compete. These bundles of resources are generally
considered to be complex, intangible and dynamic.
In addition to the management of people, developing organizational
capability includes the means through which organizations implement
policies and procedures. These means are centered around—and require HR
professionals to understand—economic and financial capability, strategic/
marketing capability and technological capability. As the HR profession
becomes more involved in developing organizational capability, it has to
build alliances with—or, from the individual’s view point, has been forced
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to work with—the dictates of the last two of these capabilities. Strategic International HRM
or marketing capability is based around offering uniqueness to customers.
The marketing perspective has been, in fact, a significant driver behind
approaches to talent management. The second alliance is based around
technological capability. Perceived customer value is considered to result NOTES
from responsiveness (meeting needs more quickly than competitors), the
formation of endearing and enduring relationships, and the pursuit of service
quality through guarantees. Later in the unit we shall see that the development
of shared service models and the e-enablement of HR systems are but two
ways of delivering this organizational capability.
Organizational Capability and Globalization
Many current models of multinational firms have been described as having
a ‘capability-recognizing’ perspective. This means that they possess some
unique knowledge-based resources. However, these resources are typically
treated as being based on the home country or somehow belonging to the
corporate function and top team. There is a possibility that foreign national
units could take a major strategic role within the multinational firm. What
we need is a ‘capability-driven’ perspective—an understandable theory of
multinational strategy based on how multinational firms attempt to build,
protect and exploit a set of unique capabilities on three axes:
· Strategies of international expansion or global integration
· The necessity to continue generating competitive advantage or to
innovate through global learning
· Skills and activities operating at the business level or corporate level
routines that integrate these skills across operations
Tallman and Fladmoe-Lindquist make it evident that globalization is a
strategic effort to treat the world (or a significant part of it) as a single market.
This does not, however, imply creating single research and development
or production centres, unitary logistic networks or, indeed, HR systems
and processes. Rather, it is the international networking that surrounds
these activities and the conduct of these activities in the global contexts
that provides significant organizational capability: ‘The world becomes an
important source for new knowledge as well as new markets’.
Understanding and Building Centres of Excellence
In practice, multinational organizations have increasingly dispersed activities.
They have relied on specialized and often network-based structures to
coordinate these activities. The corporate headquarters typically adjusts its
level of coordination and control to reflect the role of the subsidiary and the
strategic importance of its mandate. A variety of missions can be assigned
to subsidiaries. One particular type of subsidiary, the centre of excellence,
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International HRM has of late gained more prominence. These take on a strategic role in the
global organization that reaches beyond their local undertakings. Centres
of excellence have to be tightly integrated with their surrounding technical
or professional communities. They tend to be established as a general
NOTES consequence of a long and slow internationalization process within the
organization or as part of a deliberate part of organizational design where
the managers at the headquarters decide to grant autonomy to units that
have also been given a specific strategic mandate. A centre of excellence
must have both high competence and high use of its competence throughout
surrounding units.
Increasingly, small teams or units within subsidiaries are taking a lead
role in one area of the centre of excellence, with other units taking the lead
in different areas of capability. Indeed, although the leadership of a centre
of excellence might still be vested in a physical location, the actual centre
itself may be quire virtual, spread across networks of teams in many different
geographies. In many cases, experts argue that these centres actually need to be
quite loosely tied into the organization and coordinated with other units if they
are to help search for new knowledge and augment the capability of the MNC.
Control typically varies between being direct or indirect and through personal
or impersonal mechanisms—what Harzing calls centralized personal control,
formal bureaucratic control, output control or control through socialization
and networks. Recent research suggests that controlling these centres of
excellence through socialization proves to be dysfunctional. Understanding
and building these more globally distributed centres of excellence into viable
operations has, therefore, become a significant challenge.
There is now quite some insight into how such centres should be
fostered. Holm and Pedersen found that they must be more than just
specialized in their knowledge. They have to be able to maintain one or
several critical fields of knowledge that have a long-term impact on the
development of activity in the other subsidiaries and units of the MNC.
In the long term, global HR functions that themselves establish their own
centres of excellence will begin to learn from the research that has already
been conducted into research and development and other technical centres
of excellence already established.
Developing Organizational Capability
Another opportunity for a more strategic role in this process of capability
development comes through process theories. Montealegre has developed
a model of the process skills needed to provide such development of
capability. Five key resources were used throughout the process—all things
that international HR managers can help build. These are:

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 · Leadership, through the expression and subsequent articulation of International HRM

strategic intent
· Organization culture, through the mobilization of supporting routines
already embedded in the culture NOTES
· Information technology, not in the sense of technical investments but
more in the way that these investments are leveraged to create unique
resources and skills that improve the effectiveness of the organization
· Long-term view—developing a longer-term view of the strategy by
developing and nurturing commitment
· Social networks, through the cultivation of strong relationships with
stakeholders inside and outside the organization.
We pick up on several of these processes a little later. However, at this
stage, the key message is to recognize that the role of HR managers can be
driven by this ‘patterned sequence of phases that takes place along the road
to capability development.
In the context of such globalization, organizational capability involves
managing the conflicting demands of corporate control, global coordination
and standardization of HR processes. This does not imply building totally
standardized HR processes on a global scale but it does entail building
a degree of common insight into the nature of shared HR processes and
adherence to an overarching philosophy in the design of these processes.
The mantra of organization capability, supported by developments in both
the use of technological capability (service centres, e-enablement of HR and
HR process standardization) and marketing capability (talent management
and employee value propositions considered at a global level) has, in some
firms, begun to dominate the activity of international HR professionals.
Streamlining HR Support Functions: HR Service Centres
Considerable attention as been paid to the development of shared services
in this regard. Shared services are created when the organization chooses to
concentrate its administrative personnel activities into a centralized ‘back
office’ function. Administrative processing is carried out separately from
the main HR group. Although ‘shared services’ tend to denote centralized
provision, a better term to use is ‘common provision’. The centre structures are
more balanced by the presence of more HR managers close to the customer,
bringing in elements of decentralized service. The central organization of
HR resources comes hand-in-hand with local (or in an international sense,
more probably regional) tailored advice, policy and practice designed around
business needs. Administrative functions may be centralized but decision-
making remains decentralized. Moreover, a wide range of services can be

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International HRM considered in terms of this need for common provision to recipients—not
just administrative work.
The relevance of this development to international HRM is
considerable. Shared service thinking—and the associated technologies used
NOTES
to enhance delivery—represents a force for a fundamental realignment of
the HR function. It carries implications for the level of centralization and
devolvement evidenced across countries, regions and corporate headquarters.
Moreover, it changes the economics of HR service provision and introduces
competing dynamics not only for the standardization of HR processes but
also the potential for mass customization. Few international HR functions
will be able to ignore this development.
Separating out those elements of the HR function that are concerned
with business strategy from those elements of the role that are concerned with
service delivery, will have deep implications for the skills and competencies
of HR professionals. The radical perspective also links the development
of shared service structures to parallel changes in technology that have
enabled greater outsourcing of HR activity. Although technology (notably
organizational intranets, web-based portal, interactive voice responses, and
document and information management systems) has been an important part
of the equation, it is a facilitator rather than a driver of change. Technical
innovation has enabled organizations to consider a much wider range of
HR services on a common basis around the globe. However, the reasons for
introducing shared service have been more to do with cost, quality and the
general nature of organizational change.
Issues that involve cross-national working and interpretation are of
course more likely to be escalated upwards to international specialists or
centres of HR excellence. Shared services, then, can change the way in which
international HR professionals are sourced within their work, and can also
bring with them new control systems to govern and monitor their response.
Another implication of the move to shared services is that the structures
of HR at the country level change. By the end of the 1980s, most multinational
organizations had decided that splitting up the HR function on a country-
by-country basis when the rest of the organization was increasingly aligned
with global lines of business was not helping HR to achieve its objectives.
However, concerns about diversity in employment law and the continuance
of strong national influences on the employment relationship meant that
total alignment of the HR function with other business processes remained
problematic. As a compromise, many organizations installed global HR
directors as an extra layer in the reporting structure in order to create a position
that acted as a strategic business partner.

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Outsourcing or In-sourcing HR International HRM

The issue of outsourcing the transactional aspects of HRM has been a

source of considerable debate in recent years. Advocates of outsourcing
HR activities point to reduced costs, increased service quality produced NOTES
by greater economies of scale, increased incentives and accountability for
service providers, and increased access to experts in specialized areas. The
most common targets for outsourcing are those HR activities that can most
easily be ring-fenced, and include: payroll, training, recruitment, pensions
administration and benefits administration.
In the global context, one can see host country managers arguing
that much of the corporate HR armoury requires a deep tacit understanding
of the national culture and should therefore not be a candidate either for
operation through shared services or indeed for any subsequent outsourcing.
Organizations must make sensible assessments of this tacit knowledge
constraint.

Check Your Progress

3. State the fifth type of integration identified by Scullion and Starkey.
4. What is the most common target of outsourcing?

14.5 ANSWERS TO CHECK YOUR PROGRESS

QUESTIONS

1. Two activities of HRM are human resource planning and staffing

(recruitment, selection, placement).
2. Morgan defines IHRM as the interplay among these three dimensions,
namely, HR Activities, Types of Employees and Countries of Operation
(ATECO).
3. The fifth type of integration as identified by Scullion and Starkey (2000)
is the effective management of international management talent.
4. The most common targets of outsourcing are HR activities like payroll,
recruitment, pensions, and so on.

14.6 SUMMARY

· Morgan defines IHRM as the interplay among these three dimensions,

namely, HR Activities, Types of Employees and Countries of Operation
(ATECO).

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International HRM · In the event of a PCN going out to a host country, or in the case of a
TCN going either to parent or to host country, the employee would
become an expatriate.

NOTES · Whenever a transfer of an employee is affected within the country the

HR professional is not burdened with the additional responsibility of
arranging for the employee’s passage from one location to another.
· HR managers working in an international environment have to deal
with more than one national group of employees (e.g., PCN, HCN and
TCN).
· In the domestic environment the HR department’s involvement with
an employee’s family is limited.
· But in the international environment the department should be much
more involved in order to provide the level of support required and to
know more about the employee’s personal life.
· As foreign operations come of age and locals are able to manage the
subsidiaries themselves, it becomes wise and prudent to withdraw
PCNs and TCNs from the scene.
· Apart from the complexities involved in IHRM more than in domestic
HRM, P.J. Dowling enumerates four other variables that moderate
differences between domestic and international HRM.
· Many current models of multinational firms have been described as
having a ‘capability-recognizing’ perspective.
· Tallman and Fladmoe-Lindquist make it evident that globalization is a
strategic effort to treat the world (or a significant part of it) as a single
market.
· Issues that involve cross-national working and interpretation are of
course more likely to be escalated upwards to international specialists
or centres of HR excellence.
· Advocates of outsourcing HR activities point to reduced costs,
increased service quality produced by greater economies of scale,
increased incentives and accountability for service providers, and
increased access to experts in specialized areas.
· In the global context, one can see host country managers arguing that
much of the corporate HR armoury requires a deep tacit understanding
of the national culture and should therefore not be a candidate either
for operation through shared services or indeed for any subsequent
outsourcing.

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 · Talent management on a global basis is a far broader concept than International HRM

plotting a series of international assignments for young high-potentials.

· The development of intellectual integration through the creation of
shared knowledge bases is the next integration activity that the IHRM NOTES
function can pursue.
· To deliver these competencies, IHRM needs to be able to understand,
develop an insight into, and take an overview of the links between HR
processes and effective business performance across a global network
of operations.

14.7 KEY WORDS

· Expatriate: It refers to a person temporarily or permanently residing

in a country other than their native country.
· Domestic: It refers to something existing or occurring inside a particular
country; not foreign or international.
· Staffing: It is the managerial function of recruitment, selection, training,
developing, promotion and compensation of personnel.
· Tax: It is a compulsory contribution to state revenue, levied by the
government on workers’ income and business profits, or added to the
cost of some goods, services, and transactions.

14.8 SELF ASSESSMENT QUESTIONS AND

EXERCISES

Short Answer Questions

1. What are the challenges faced by international HRM?
2. Write a descriptive note on centres of excellence.
Long Answer Questions
1. Explain in detail the meaning of international human resource
management.
2. Draw a comparative study between domestic and international HRM.

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International HRM
14.9 FURTHER READINGS

Venkataraman, C.S. & B. K. Srivastava. 1991. Personnel Management and

NOTES Human Resources. Tata McGraw Hill.
Yoder, Dale & Paul D Standohar. 1990. Personnel Management and Industrial
Relations. Sterling Publications.
Well, Ian Beard and Len Holden. Human Resource Management - A
contemporary perspectives. Macmillan.
Aquinas, P. G. 2005. Human Resources Management – Principles and
Practice. New Delhi: Vikas Publishing House Pvt Ltd.

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