BA4203 HUMAN RESOURCE

MANAGEMENT
UNIT I PERSPECTIVES IN HUMAN RESOURCE MANAGEMENT 9

Evolution of human resource management – The importance of the human capital – Role of human resource manager – Challenges for
human resource managers - trends in Human resource policies – Computer applications in human resource management – Human resource
accounting and audit.

UNIT II HUMAN RESOURCE PLANNING AND RECRUITMENT 9

Importance of Human Resource Planning – Forecasting human resource requirement –matching supply and demand - Internal and External
sources- Organizational Attraction-. Recruitment, Selection, Induction and Socialization- Theories, Methods and Process.

UNIT III TRAINING AND DEVELOPMENT 9

Types of training methods –purpose- benefits- resistance. Executive development programme – Common practices - Benefits – Self-
development – Knowledge management.

UNIT IV EMPLOYEE ENGAGEMENT 9

Compensation plan – Reward – Motivation – Application of theories of motivation – Career management – Mentoring - Development of
mentor – Protégé relationships- Job Satisfaction, Employee Engagement, Organizational Citizenship Behavior: Theories, Models.

UNIT V PERFORMANCE EVALUATION AND CONTROL 9

Method of performance evaluation – Feedback – Industry practices. Promotion, Demotion, Transfer and Separation – Implication of job
change. The control process – Importance – Methods – Requirement of effective control systems grievances – Causes – Implications –
Redressal methods.
 UNIT I - PERSPECTIVES IN HUMAN RESOURCE MANAGEMENT

Meaning and Definition of HRM

 Human Resource Management (HRM) is a strategic and comprehensive approach to
managing people within an organization, with the goal of aligning employee
performance with organizational objectives.
 HRM involves various functions such as recruitment, training, performance
management, compensation, employee relations, and legal compliance. It emphasizes
viewing employees as valuable assets who contribute to the overall success and
competitiveness of the organization.
According to Edwin B. Flippo, “Human resource management is the planning,
organizing, directing, and controlling of the procurement, development, compensation,
integration, maintenance and separation of human resources to the end that individual,
organizational and societal objectives are accomplished.”
Objectives of HRM
 Achieving Organizational Goals
 Integration of Individuals and Teams
 Opportunities for Growth
 Retention of Employees
 Maintaining High Morale
 Encouraging Participation and Leadership
 Fostering Belongingness
 Ensuring Employment Stability
SCOPE of HRM
 Recruitment and Selection: This is the first step in HRM and involves attracting, screening, and selecting
qualified candidates for the organization. HRM’s role is to ensure the hiring process is efficient, effective, and
aligned with organizational needs. This includes job postings, interviewing, testing, and onboarding new
employees.
 Training and Development: HRM focuses on improving the skills and knowledge of employees through training
programs and continuous professional development. Training may be role-specific, while development aims to
prepare employees for future roles and challenges. This is essential for improving productivity and ensuring long-
term growth within the organization.
 Performance Management: This involves assessing and managing employee performance through regular
feedback, evaluations, and goal setting. HRM ensures that performance management systems are fair, transparent,
and align with the organization’s objectives. It also includes identifying areas for improvement and facilitating
career development.
 Compensation and Benefits: HRM designs and implements competitive compensation and benefits packages to
attract, retain, and motivate employees. This includes salary, bonuses, health insurance, retirement plans, and
 Employee Relations: HRM is responsible for managing relationships between employees and the organization. This includes
handling grievances, ensuring compliance with labor laws, promoting fair treatment, and fostering a positive work environment .
Maintaining strong employee relations helps reduce conflict and enhances organizational culture.

 Health, Safety, and Well-being: HRM ensures the organization adheres to health and safety regulations and promotes the well-being
of employees. This involves creating a safe work environment, providing wellness programs, and supporting employees' physical and
mental health. It is crucial for maintaining productivity and employee satisfaction.

 Legal Compliance: HRM ensures that the organization complies with labor laws and employment standards. This includes
regulations related to equal employment opportunity, wages, working hours, employee rights, and safety standards. HRM helps the
organization avoid legal risks and create a fair, inclusive workplace.

 Organizational Development: HRM plays a key role in shaping the organization’s culture and structure. Organizational
development focuses on improving the efficiency and effectiveness of the organization through strategic planning, leadership
development, and fostering teamwork. It involves initiatives that drive change and align the workforce with business goals.

 Succession Planning: Succession planning is part of HRM’s long-term strategy to ensure the continuity of leadership and key
positions. It involves identifying potential future leaders within the organization and preparing them for higher responsibilities. This
ensures that the organization has a pipeline of talent ready to step into critical roles as needed.
 EVOLUTION OF HRM

Introduction to HRM
 Human Resource Management (HRM) emerged as a term during the 1970s, replacing traditional
titles like personnel management and personnel administration. It reflects a shift from merely
managing administrative tasks to focusing on employee engagement, development, and strategic
alignment with organizational goals. HRM has undergone significant transformation over the
decades, adapting to the evolving needs of businesses and workforce dynamics.
Historical Background of HRM

The concept of Human Resource Management (HRM) has existed for

centuries. In ancient times, societies understood the need for managing
people effectively.
 India(4th Century BC): Kautilya’s Arthashastra emphasized organized
resource management, employer-employee relations, and public welfare.
 Babylon (1800 BC): The Code of Hammurabi introduced rules like
minimum wages and performance-based rewards, ensuring fair treatment
of workers.
These early practices laid the foundation for modern HRM, which focuses on
worker welfare and productivity.
Growth of HRM in India
 HRM became more structured in the 1920s, especially after World War I, when workers faced
harsh conditions.
 Trade unions emerged, demanding better wages and working conditions.
 The government stepped in to protect workers’ rights.
 The Royal Commission (1931) suggested hiring labor welfare officers to handle worker
issues.
 The Factories Act (1948) made it mandatory for factories with over 500 workers to appoint
welfare officers to ensure employee well-being.
 Formation of HRM Professional Bodies in India
 To improve HRM practices, professional bodies were established:
 Indian Institute of Personnel Management (IIPM), Kolkata – Focused on HR in industries like
jute.
 National Institute of Labour Management (NILM), Mumbai – Specialized in HR for the
cotton industry.
 In 1980, these two institutes merged to form the National Institute of Personnel Management
(NIPM), creating a unified HRM approach in India.
HRM After Independence (1950s–1960s)
After India gained independence in 1947, companies started managing employees in a
more structured way. The government played a big role in improving labor laws and
working conditions.
 Focus on employee welfare and industrial relations.
 Growth of public sector enterprises (government-run industries).
 Introduction of professional HR practices to boost productivity.
Technology and Professionalism in HR (1970s–1980s)
The 1970s saw a major shift in HR from just welfare to improving efficiency and
performance. The 1980s brought computers and technology into HR, allowing companies
to track employee data more efficiently.
 HR began using Human Resource Information Systems (HRIS) for better record-
keeping.
 Companies started focusing on employee performance instead of just labor laws.
 New challenges emerged, such as globalization and workforce diversity.
HRM Becomes More Employee-Focused (1990s)
The 1990s saw a shift towards valuing employees as key contributors to business success.
Companies understood that happy employees lead to better performance.
 HR departments started focusing on employee satisfaction and company culture.
 HR became more involved in business strategy.
 The American Society for Personnel Administration (ASPA) changed its name to the Society
for Human Resource Management (SHRM) to reflect the growing importance of HR.
Modern HRM Trends (Late 1990s–Today)
As businesses became more global, HR professionals had to adapt to new challenges like hiring
the right talent, diversity, and employee engagement. Technology also became an important
part of HR.
 HR professionals started helping CEOs in business decision-making.
 Companies began focusing on diversity, leadership development, and AI-powered HR tools.
 Globalization and skill shortages made talent management crucial.
Future of HRM
HR is evolving into Human Capital Management (HCM), which
focuses on maximizing employee potential and aligning HR
with business goals.
 Remote work and digital transformation will shape HR
policies.
 HR will focus more on reskilling employees to match new
industry needs.
 HRwill play a key role in fostering innovation and business
growth.
 Period Development Outlook Emphasis Status
Status
1920-1930s Beginning Pragmatism Statutory, Clerical
of capitalists Welfare,
Paternalism
1940-1960s Struggling for Technical, Introduction Administrative
recognition Legalistic of techniques
1970-1980s Achieving Professional, Regulatory, Managerial
sophistication Legalistic, Conforming,
Impersonal Imposition of
standards on
other
functions
1990s Promising Philosophical Human Executive
values,
productivity
through
people
 HUMAN CAPITAL MANAGEMENT

 Human Capital refers to the knowledge, skills, abilities, values, and experience
an individual brings to an organization.

 Employees are viewed as assets that can be improved through investment,

similar to physical resources like buildings or equipment.

 Unlike traditional HRM, HCM sees people as investors of their personal

human capital, which is the main source of value for the organization.
Why HCM ?
 Attracts and Retains
 Enhances Employee Productivity
 Aligns Workforce with Business
 Develops Leadership and Skills
 Improves Employee Engagement and Satisfaction
 Ensures Compliance with Labor Laws
 Encourages Innovation and Adaptability
 Enhances Decision-Making with Data
 Boosts Organizational Agility
 Drives Business Growth and Profitability
Conditions Favorable for HCM Implementation
 The organization is people-oriented.
 The business is large and operates in a complex and dynamic environment.
 Investors or stakeholders prioritize long-term growth over short-term gains.
 The organization focuses on growth through differentiation, not cost leadership.
 A clear and strategic business strategy is in place, supported by tools like a
strategy map or business scorecard.
 Both top-down and bottom-up planning are embraced.
 The organization relies on networks and relationships rather than rigid hierarchies.
 Managers take responsibility for people management.
 The organization has a sophisticated culture.
 Effective use of technology supports HCM initiatives.
 ROLE OF HUMAN RESOURCE MANAGER

ROLE OF HR MANAGER

Administrative Roles Operational Roles

Strategic Roles
Policy maker Recruiter
Change agent
Administrative expert Trainer, Developer and
Strategic partner
Advisor Motivator
Housekeeper Coordinator/linking pin
Counsellor Mediator
Welfare officer Employee Champion
Legal consultant
 CHALLENGES FOR HUMAN RESOURCE MANAGERS

Talent Employee Diversity, Compliance with

Acquisition and Engagement Equity, and Labor Laws and
Retention and Productivity Inclusion (DEI) Regulations
Creating a Positive Creating a Positive
Finding the Right Eliminating Bias in Workplace Culture
Talent Workplace Culture
Hiring and
Promotions
Work-Life Balance Work-Life Balance
High Employee
Turnover Addressing
Cultural
Job Satisfaction and Job Satisfaction and
Differences
Career Growth Career Growth
Employer Branding
Gender and Pay
Equity
CHALLENGES FOR HUMAN RESOURCE MANAGERS

Adapting to Managing Remote Leadership

Technological and Hybrid Compensation
Development and
Changes Workforces Succession and Benefits
Planning Management
HR Automation and Communication and Managing Salary
AI Collaboration Issues Identifying Future Expectations
Leaders
Customizing
Use of Data Monitoring Employee Benefits
Analytics Employee
Performance Resistance to
Change
Handling Payroll
Cybersecurity
and Tax Compliance
Concerns Employee Well-being
and Mental Health Building a Strong
Succession Plan
HR POLICY

 HR policies guide action. They offer the general standards or parameters based on which
decisions are reached. They serve as a road map for managers on a number of issues such as
recruitment (the job, for example, reserved for physically challenged only), selection (selection
based on merit only), promotion (performance leads to promotion) and compensation (only star
performers would get performance bonus, not everyone).
 HR policies encourage fair and consistent treatment of employees.
 HR policies serve as a guide to employees on how to conduct themselves in the workplace.
 They provide rules on how employees should perform their jobs and interact with one another.
 Established norms of behaviour contribute to creating a positive work environment for all.
TYPES OF POLICIES
1. Originated policies: These are established by top management deliberately so as to guide executive thinking at various levels.

2. Appealed policies: These are formulated to meet the requirements of certain peculiar situations which have not been covered by
the earlier policies. Such requests usually came from subordinates who fail to handle the cases based on guidance offered by
existing policies.

3. Imposed polices: These are formed under pressure from external agencies such as government, trade associations and unions.

4. General polices: They reflect the basic philosophy and priorities of the top management in formulating the broad plan for
mapping out the organisation's growth chart.

5. Specific policies: These policies cover specific issues such as hiring, rewarding and bargaining. Such policies, however, should
be in line with the basic framework offered by the general policies.

6. Written or implied policies: implied policies are inferred from the behaviour of members (such as dress code, gentle tone while
talking to customers, not getting angry while at work etc.). Written policies, on the other hand, spell out managerial thinking on
paper so that there is very little room for loose interpretation.
Benefits of HR Policies
 Delegation

 Uniformity

 Better control

 Standards of efficiency

 Confidence
Computer Applications in Human Resource
Management
Computers help HR managers handle employee-related information quickly and accurately. This is done using
Human Resource Information System (HRIS), which is a computer-based system for managing HR data like
employee records, salaries, recruitment, and performance.
1. Data vs. Information
Data: Raw facts that are stored but not yet used for decision-making.
Information: Processed data that helps in making decisions.
2. Decision Support System (DSS)
DSS is a computer system that helps HR managers make better decisions by providing data and expert advice.
Example: If a company needs to decide whom to promote, a DSS can analyze employee performance, attendance,
and past achievements to recommend the best candidate.
3. Database Management System (DBMS)
DBMS is software that helps HR departments store, organize, and retrieve employee data easily.
Example: Instead of maintaining physical files for each employee, HR can use a DBMS like Oracle HRMS or SAP
HR to quickly search and update employee records.
4. Management Information System (MIS)
 A Management Information System (MIS) is a system that helps managers and employees
collect, organize, and use information to make decisions.
 However, with the introduction of computers, MIS has become faster, more accurate, and more
efficient.
 Employees and executives still handle many tasks manually, but a computer can process large
amounts of data much faster.
Example: Imagine a company with 1,000 employees. The HR department needs to keep track of
employee details like attendance, salaries, performance records, and promotions.
Before computers (Traditional MIS): HR staff used paper files and registers to maintain records.
This was time-consuming and sometimes prone to errors.
With Computerized MIS: The HR department uses HR software to store, update, and access
information instantly. If a manager wants to check an employee’s attendance, they can get the data
within seconds instead of searching through files.
Why Computers Are Important in HRM?
 Speed and Accuracy: Computers can process large amounts of HR data quickly and without

errors.

 Automation: Payroll processing, leave management, and recruitment can be automated, saving

time.

 Easy Access to Information: HR managers can instantly retrieve reports on salaries, performance,

and employee history.

 Better Decision-Making: Systems like DSS help managers make informed decisions by providing

real-time data and trends.

Computer use in HRM

 E-HR
E-HR refers to the use of computers, the internet, and software to manage human resources
efficiently. It helps HR managers save time, reduce paperwork, and make better decisions using digital
tools.
 E-Job Design (Matching Skills with Jobs Using Technology)
Modern organizations are moving away from rigid job roles and instead focus on flexible work
schedules, multi-skilling, and employee empowerment. HR managers identify employee skills and
match them with job requirements using skill databases and competency mapping (skills, knowledge,
abilities and behaviors) stored on the internet.
 E-HR Planning (Using Software for Workforce Planning)
HR managers use computer programs to predict how many employees are needed for different
job roles based on sales and production forecasts. They also use the internet to find qualified
professionals from other companies when needed (outsourcing).
 E-Recruitment (Hiring Employees Online)
Companies advertise job vacancies on websites or send job openings via email to potential candidates.
Job seekers submit their applications online or upload their CVs on job portals like LinkedIn, Indeed, or
[Link], where employers can find them.
 E-Selection (Online Screening & Interviews)
Companies conduct online tests, email candidates, and even hold audio or video interviews through
platforms like Zoom, Google Meet, or Skype. Employers also receive reference letters via email.
 E-Performance Management (Using Software for Employee Appraisal)
Companies use HR software to measure employee performance, set goals, and give improvement
suggestions. This helps in tracking progress efficiently.
 E-Training & Development (Online Learning for Employees)
Companies offer online training programs where employees can learn new skills using e-learning
platforms, virtual classrooms, and digital collaboration tools without leaving their workplace.
 E-Compensation Management (Automated Salary & Benefits Calculation)
Companies use computer systems to manage salaries, bonuses, and benefits. This ensures accuracy and
reduces errors in payroll processing.
 E-Grievance Redressal (Handling Employee Complaints Digitally)
Employees can send their complaints via email or online portals instead of meeting HR
face-to-face. This speeds up the process and avoids discomfort.
 E-HR Records (Digitized Employee Records)
HR teams maintain employee records (personal details, performance, salaries, etc.)
digitally. These records can be transferred between offices easily through intranet or cloud storage.
 E-HR Information (Fast and Accurate Data Sharing)
HR-related information is generated, stored, processed, and shared using software with
high speed and accuracy. This makes decision-making faster.
 E-HR Audit (Automatic HR Compliance Checks)
HR managers use software to compare company HR policies with industry standards.
The system analyzes actual HR practices and produces an HR audit report. Managers can review
and make necessary changes.
HUMAN FESOURCE ACCOUNTING
 Human Resource Accounting (HRA) is a method used to measure and
report the value of employees in an organization. Just like companies
keep track of their financial and material resources, they should also
consider their employees as valuable assets.
 Currently, when companies prepare financial statements, they include
expenses for hiring, training, and developing employees as costs, but
they do not record the value of employees as assets.
 According to the American Association of Accountants (AAA), HRA is
"a process of identifying and measuring data about human resources
and communicating this information to interested parties".
Recruitment costs: Include advertising, travel expenses, consultant's fee,
incidental expenses.
Selection costs: Include costs of application forms, testing and interview
expenses and other administrative costs.
Orientation costs: Costs incurred in offering orientation courses to new
employees (about company policies, procedures, programmes, rules,
regulations, etc.)
Training costs: Trainers' salary, facilities cost, trainees' time spent in the
programme measured financially, low productivity during training.
Development costs: Costs incurred in enhancing employee skills and
expertise.
 Objectives of HRA

According to Likert, the objectives of HRA are:

 To provide cost value information about acquiring, developing, allocating

and maintaining human resources so as to meet organisational goals.
 To enable management to effectively monitor the use of human resources.
 To find whether human assets are appreciating or depreciating over a
period of time.
 To assist in the development of effective management practices by
Approaches to HRA
Monetary Measures

 These measures focus on cost or economic value. Such measures are needed to
translate manpower resources int a common denominator on which many
organisational decisions are taken. The monetary measures include the following:
Historical Cost Method
 This method treats the costs involved in hiring, training,
and developing an employee as an investment.
 The total cost is spread over the expected period the
employee will stay in the company. If the employee
leaves early, the remaining cost is written off
immediately.
 This method is simple and helps link costs to revenue
but ignores the potential value employees can bring and
does not clearly define how long to spread the costs.
Replacement Cost Method
This method calculates the cost of replacing an
employee with another who provides similar services.
It includes hiring, training, lost productivity, and any
extra wages needed to attract a competent
replacement.
While this method updates valuation, it is subjective
and can lead to overestimation if an inefficient
company spends too much on hiring.
Opportunity Cost Method
 This method is used for employees with rare skills. Managers
within a company "bid" for an employee’s services, and the
highest bid becomes the value assigned to that employee.
 If a similar employee can be easily hired externally, no
opportunity cost is assigned
R&D department (30LPA)

Rahul
AI Engieer
Data Analytics team (25 LPA)
(Deep
Learning)
Cybersecurity division (20 LPA)
Standard Cost Method
This method sets a standard cost for recruiting,
hiring, and training employees for each job level.
 It is used for accounting and control purposes,
but determining standard costs for all employee
levels can be challenging.
Economic ValueMethod
Employees are valued based on the contribution
they are expected to make to the company.
Future payments like salary, benefits, and
allowances are estimated and discounted to
calculate their present value.
Asset Multiplier Method
Employees are categorized into different levels
(e.g., top management, middle management,
supervisors, clerical staff).
The total salary bill for each category is
multiplied by a factor (multiplier) to determine
their value. This links employee worth to the
overall value of the company.
Discounted Present Value of Future
Earnings Method
This method calculates an employee’s value based
on their expected earnings until retirement, adjusted
for the present value using a discount rate.
 It considers employee classification (e.g., skilled,
managerial) but ignores job changes and voluntary
exits. Some Indian companies like ONGC, NTPC,
and BHEL use this method with a 12% discount rate.
Non-Monetary Measures in Human Resource
Accounting (HRA)
Unlike monetary methods, non-monetary measures
focus on qualitative aspects of employees, such as
performance, potential, motivation, and effectiveness,
rather than assigning them a direct financial value. These
measures help organizations understand how human
resources contribute to overall effectiveness.
Expected Realisable ValueMethod
This method evaluates employees based on three key
factors:
Productivity – How efficiently and effectively an
employee contributes to the company’s goals.
Transferability – The ability of an employee to shift
roles or departments successfully.
Promotability – The potential of an employee to take
on higher responsibilities.
Discounted Net Present Value of Future Earnings
 Thismethod, proposed by Rensis Likert, focuses on measuring employee
effectiveness over time using three types of variables:
 Causal Variables – Factors influencing employee behavior, such
as leadership style, work culture, and company policies.
 Intermediate Variables – Outcomes of causal variables, such as
employee morale, motivation, and commitment to
organizational goals.
 Output Variables – The final impact on company performance,
such as production levels, sales revenue, and net profit.
Controlling Manpower Costs
 Manpower costs (employee salaries, recruitment, training, etc.)
are a major part of a company’s operating expenses.
 Businesses that manage these costs effectively tend to perform
better in competitive markets. The following are key
approaches used to analyze and control manpower expenses
Management by Objectives (MBO)
Proposed by Peter Drucker, MBO focuses on setting clear goals
for employees and measuring performance based on those goals.
Employee Costs Control:
Employee expenses should be controlled by linking them to
productivity and indexing them to fixed and semi-variable costs.
Productivity-Based Cost Sharing:
If wages increase due to agreements with trade unions, at least
66.6% of that increase should be covered by improvements in
employee productivity.
 Operational Efficiency Targets: Companies should aim to reduce:
Machine downtime
Waste of materials
Unnecessary absenteeism
 Performance Incentives:
One-third of cost savings from efficiency improvements should be
shared with employees.
 Career Growth:

Employees should have structured career progression plans, with a

portion of managerial positions filled through internal promotions.
Ratio Analysis
Recruitment Cost Analysis: Measures all expenses related to
hiring (advertising, interviews, agency fees, etc.).
Formula:
Cost per hire=Total recruitment costs/Number of new
hires
Recruitment Cycle Time:
Tracks the time taken to hire new employees, helping identify
delays and inefficiencies.
Turnover Cost:
Employee turnover is expensive. It includes direct costs (hiring, training) and indirect costs (low morale,
lost productivity).

Turnover Rate (in %) = (No. of separations /Average strength of employees) x100

Training Cost:
 Training expenses are calculated per employee or per training session. Training effectiveness is often
difficult to measure due to cost allocation challenges.

Cost of training per trainee = Training costs / No. of employees trained

Cost of training per employee = Training costs / No. of employees

Training ratio = No. of training / No. of employees

Personnel Productivity
• Definition: Productivity is the ratio of an organization’s
output (goods/services) to its input (employees, resources).
• How to Improve Productivity: Companies can use:
• Work simplification (streamlining processes)
• Quality circles (employee-driven problem-solving groups)
• Performance-based rewards
• Optimal workforce utilization
Personnel Reports, Budgets & Audits
• Reports & Budgets: Regular tracking of workforce-related
costs (wages, training, benefits) helps prevent overspending.
• Personnel Audit: Evaluates HR policies and identifies areas
for improvement.
• Human Resource Accounting (HRA): Some companies
(BHEL, Infosys, NTPC) have started including workforce-
related data in financial statements. This shift from focusing
only on capital assets to valuing human resources could help
in better decision-making.
HR Audit
HR Audit is like a check-up for a company’s human resources (HR)
department. It helps ensure that HR policies, programs, and practices are
working effectively.
Why is it needed?
 Employee records and reports provide useful data, but they don’t always
show the full picture.
 A deeper analysis is needed to identify areas for improvement in HR
management
What does it include?
• Measuring and evaluating HR programs, policies, and
practices.
• Finding gaps between company goals and actual results.
• Deciding future actions—what should continue, change, or
stop.
HR Audit Process

An HR audit is a structured review of a company's HR

policies, practices, and systems. It helps ensure that HR
functions are aligned with company goals and industry
standards. Instead of just checking employee records, the audit
dives deeper to evaluate HR effectiveness.
Setting the Scope and Depth
•Before starting, the company decides how detailed the audit should be.
•It can be a basic review or an in-depth investigation into HR strategies
and effectiveness.
Data Collection and Analysis
The audit collects and studies HR-related data using surveys and
statistical methods to identify patterns and areas for improvement. This
involves:
•Identifying key HR metrics – Important numbers like employee
turnover rate, hiring efficiency, training effectiveness, etc.
•Comparing past and present performance – Checking if HR
functions have improved or declined over time.
•Analyzing department-wise differences – Finding out if some departments
are performing better or worse than others.
•Benchmarking with other companies – Comparing HR performance with
similar businesses in the industry.
•Studying trends and relationships – Using statistical tools to understand
HR patterns and connections.
Reporting and Action
• A detailed report is prepared for senior management, highlighting
strengths, weaknesses, and areas needing improvement.
• Based on findings, HR strategies can be adjusted to enhance efficiency and
employee satisfaction.
 UNIT II HUMAN RESOURCE PLANNING AND RECRUITMENT
HUMAN RESOURCE PLANNING

According to Geisler (2005), “Manpower planning (HRP) is the process – including

forecasting, developing, implementing and controlling, by which a firm ensures that
it has the right number of people and right kind of people, at the right place, at the
right time, doing things for which they are economically most suitable”.

According to Beach, HRP is a process of determining and assuming that the

organization will have an adequate number of qualified persons, available at proper
times, performing jobs which meet the needs of the enterprise and which provides
satisfaction for the individuals involved.
OBJECTIVES
 Provide Information
HR planning gathers details about your current employees, such as their skills and
areas where they might be underused. This helps managers decide who is ready for a
promotion or additional responsibilities.
Example: If an employee is great at graphic design but only does basic tasks, HR
planning might reveal this skill so the employee could be promoted to a more creative role.
 Effective Utilisation of Human Resources
It ensures that every employee, whether current or new, is used in the best way
possible. HR planning works together with overall business plans to make sure the right
people are in the right positions.
Example: A company opening several new branches uses HR planning to assign
trained staff to each new location.
 Economic Development
At a national level, HR planning supports the economy by creating jobs and
ensuring workers have the skills needed for new industries. This is important during
educational reforms or when talent moves between regions.
Example: A government reforming its education system uses HR planning to
help graduates acquire skills that are in high demand, boosting job opportunities and
economic growth.
 Determine Manpower Gap
HR planning identifies the gap between the current skills of the workforce and
the skills needed in the future. Once the gap is known, companies can set up training
programs to fill it.
Example: A tech firm switching to artificial intelligence might find that its
current staff lacks AI expertise, so it initiates training sessions to upgrade their skills.
 Forecast Human Resource Requirements
It predicts the number and types of employees needed in the
future. Without this planning, a company might struggle to hire the right
people when needed.
Example: A startup expecting rapid growth may plan ahead to
recruit additional software developers before projects pile up.
 Analyse Current Workforce
HR planning reviews the skills and performance of current
employees to understand their strengths and areas for improvement.
Example: A hospital might analyze its nursing staff and find some
nurses with extra certification, helping them decide who can mentor
others or take on specialized roles.
 Effective Management of Change
HR planning helps organizations adapt when market conditions,
technology, or regulations change. It ensures that the workforce can be
reallocated or retrained as needed, preventing skills from being wasted.
Example: A company that adopts new technology might use HR
planning to retrain employees so they can effectively use the new systems.
 Realising Organisational Goals
Overall, HR planning supports a company’s growth and strategic
goals, such as expanding to new markets or diversifying products.
Example: When a business plans to launch a new product line, HR
planning ensures they have experts in marketing, production, and research
to support the expansion.
IMPORTANCE of HRP
 Future Personnel Needs
HR planning helps predict how many and what type of employees a company
will need in the future. Without it, a company might have too many workers or too
few.
Example: Imagine a restaurant that suddenly becomes popular. Without HR
planning, they might run out of chefs and waitstaff at peak times, affecting service
quality.
 Part of Strategic Planning
HR planning is a key part of overall business strategy. It ensures that the
organization has the right people in place to achieve its goals and makes decisions
about how to best use its workforce.
Example: If a company plans to launch a new product, HR planning helps
decide if current employees can handle the project or if new hires are needed to
support marketing, sales, and production.
 Creating Highly Talented Personnel
Even when there are many qualified job seekers, it is up to the HR team to
choose the right people with the right skills. It also involves developing
current employees to fill skill gaps.
Example: A tech firm might invest in training programs so that its staff can
learn new programming languages, ensuring they have the skills needed to
innovate.
 International Strategies
HR planning is crucial for companies expanding globally. It involves
decisions about hiring foreign talent, transferring employees between
countries, and managing cultural differences.
Example: A company opening a branch in another country may need to
decide whether to transfer experienced managers from the home office or hire
local experts who understand the regional market.
 Foundation for Personnel Functions
HR planning provides the necessary data to manage key HR activities like
hiring, training, promotions, and layoffs. It serves as the backbone for all
personnel decisions.
Example: When planning a new training session, HR planners use workforce
data to determine which skills need improvement and which employees should
participate.
 Increasing Investments in Human Resources
Many organizations are now investing more in employee development because
skilled workers add long-term value to the company. HR planning guides these
investments.
Example: A business might allocate budget for professional development
courses, recognizing that a well-trained workforce can lead to better overall
performance.
 Resistance to Change
Employees often resist changes such as job rotations or department shifts.
HR planning helps manage these changes by ensuring that employees have the
necessary skills and are prepared for transitions.
Example: Before moving someone from the sales department to customer
service, HR planning might include a training period to help the employee adjust
to the new role.
 Uniting the Viewpoints of Line and Staff Managers
Successful HR planning requires cooperation from both the HR department
and the managers who work directly with employees. Their combined insights lead
to better decisions for the entire organization.
Example: A manufacturing plant’s supervisor might share insights about
daily challenges that help the HR team design more effective training programs or
staffing plans.
 Succession Planning
HR planning identifies and prepares future leaders within the
organization so that when current leaders leave, there is a
smooth transition.
Example: A company might have a mentorship program where
promising employees are groomed to eventually take over
managerial roles, ensuring the business continues to run
smoothly when leaders retire or move on.
HRP PROCESS
 Environmental Scanning (Understanding External
Factors)
HR professionals analyze external factors that may
affect the availability and demand for employees.
 Key Factors:
• Economic Conditions – Job opportunities decrease
during a recession, but increase during economic growth.
• Technology Changes – Automation may reduce the need
for some jobs while creating new ones.
• Demographics – Age, education, and population size affect
workforce availability.
• Political & Legal Factors – Government regulations can
impact hiring policies.
• Social Concerns – Employee expectations (e.g., work-life
balance) influence HR policies.
Example:
A manufacturing company sees a rise in automation and
robotics. Many low-skilled jobs may disappear, so they plan to
train workers in operating and maintaining robotic systems
instead of hiring new employees.
 Organizational Objectives and Policies
HR planning is aligned with company goals. If a
company plans to expand, HR must ensure enough
skilled employees are available.
Example:
A retail chain wants to open 10 new stores. HR must
determine how many salespeople, managers, and
support staff are needed and start recruiting
accordingly.
HR Demand Forecast (Predicting Future Workforce Needs)
This step estimates how many employees the company will need
and what skills they should have.
Factors Affecting Demand Forecast:
• External Factors – Economic trends, competition, legal
requirements, and technology.
• Internal Factors – Company budget, expansion plans,
employee turnover, and workload.
 HR Supply Forecast (Checking Availability of Employees
Internally & Externally)
HR checks whether enough employees are available to fill future
roles.
 Sources of HR Supply:
Internal Supply – Promotions, transfers, training existing
employees.
External Supply – New hires from job markets, universities,
and competitors.
 HR Programming (Balancing Demand & Supply of
Employees)
After forecasting workforce needs and availability,
HR takes action to fill the gaps.
 Example:
An airline company finds that it will need 500 pilots
in the next 5 years, but only 200 are expected to be
available internally. They launch an academy to train
pilots and sign contracts with aviation schools to
recruit fresh graduates.
HR Plan Implementation (Executing the HR Strategy)
HR puts the plan into action through various programs
like:
• Recruitment & Selection – Hiring the right people.
• Training & Development – Upskilling employees.
• Retention Plans – Offering competitive salaries &
benefits.
• Succession Planning – Preparing employees for
leadership roles.
 Control and Evaluation
This step checks if the HR plan was effective and
makes improvements if needed.
 Example
A company planned to hire 200 employees in a year
but only managed to hire 150. HR evaluates why
the gap exists—maybe the salary offered was low
or recruitment was slow. Based on this, they adjust
their strategies for the future.
FORECASTING HUMAN RESOURCE
REQUIREMENT

Human Resource Demand Forecasting is about

predicting how many employees an
organization will need in the future and what
skills they should have. This prediction helps
ensure that the company has the right number
of people with the right skills at the right time.
To make this estimate, companies consider
various factors, such as:
• Past hiring trends
• Employees leaving due to retirement,
resignation, or other reasons
• Employee productivity levels
• Company growth and expansion plans
• Absenteeism and employee turnover
HR Demand Forecast
HR Demand Forecast is a process where a company
estimates how many employees it will need in the future.
• The company’s annual budget is the main reference for
short-term forecasts.
• For long-term forecasts, the corporate plan (which
includes future sales and business growth estimates) is
used.
• The company breaks down its overall plan into
department-wise activities.
• In manufacturing companies, sales projections help
determine how much needs to be produced.
• In other businesses, the work volume is calculated
based on activities.
• The total work required is measured in man-hours
(work done in an hour) and man-days (work done in a
day).
• Finally, this data is used to calculate how many
employees will be needed.
Factors Affecting HR Demand Forecasting

1. Past Hiring Trends:

The company looks at its hiring patterns over the last
five years to predict future employee needs.
2. Employee Replacements:
The company needs to replace employees who leave due
to retirement, resignation, death, or termination.
Productivity Improvements:
 If the company wants to improve efficiency, it
needs skilled employees.
 More productivity can lead to company
growth, but hiring depends on market demand for
the company's products.
Business Expansion:
If the company is growing, it will need more
skilled employees to support increased work.
Hiring decisions depend on the annual budget
and manufacturing plans.
More production means more demand for skilled
workers and better technology.
Techniques for HR demand forecasting
Managerial Judgment:
• Managers estimate workforce needs based on their
experience and send them to department heads.
• Suggestions are collected from different departments and
finalized by HR or senior management.
• Can be done in two ways:
• Bottom-up approach: Lower-level managers estimate needs,
and higher-ups finalize.
• Top-down approach: Senior managers estimate first, then
review with departments.
Ratio Trend Analysis:

• Looks at the past ratio of sales/production

to the number of employees.
• Based on historical data, future manpower
needs are calculated.
• Also helps determine how many managers
and supervisors are needed.
Regression Analysis:
A mathematical method to find the relationship
between two factors, such as sales and
manpower.
Example: If sales increase, how many more
employees will be needed?
Uses a formula: Y = a + bX, where Y is
manpower and X is sales/production.
NGT (Nominal Group Technique)
• Similar to brainstorming, where department
heads discuss workforce needs.
•Members prioritize suggestions and refine the list
through discussion or voting.
•Helps in decision-making for tricky workforce
planning issues.
Flow Models:
Mathematical models that track employee movements
(promotions, transfers, resignations, retirements, etc.).
Different types:
• Markov Model: Tracks employees in categories (e.g.,
promotions, exits).
• Semi-Markov Model: Also considers how long
employees stay in a category.
• Vacancy Model: Predicts how vacancies will be filled.
Delphi Technique
The Delphi Technique is a structured decision-
making method where a group of experts
provides their opinions on workforce needs
through questionnaires.
The process is repeated several times until a
final agreement (consensus) is reached.
Work Study Technique:
Measures how much time and effort employees take to
complete work.
Converts total work into man-hours to estimate
workforce needs.
Adjustments are made for absenteeism and leave.
Direct workers are estimated this way; supervisors and
managers are calculated using ratio trend analysis.
Workforce Analysis
Studies current employee numbers and skills to
predict future needs.
Factors in resignations, retirements, and
business demands.
Identifies gaps (shortage or excess of
employees) for hiring or restructuring.
New Venture Analysis:
Estimates workforce needs by comparing
with similar businesses.
Used when launching new projects or
businesses.
HR Supply Forecasting
 HR Supply Forecasting is a way for companies to figure
out how many employees they will have in the future.
 Ithappens after they have already estimated how many
employees they need (HR demand). This helps businesses
plan for hiring or training people to avoid shortages.
 To estimate the supply of employees, companies look at
two main sources:
Internal Supply
 Employees who can be transferred (shifted to another role)
 Employees who can be promoted (moved to a higher position)
 Retired employees who may come back temporarily
 Employees who were laid off but can be called back

External Supply
 New job seekers available in the market
 Candidates from universities or job fairs
 Experienced professionals looking for a new job
HR Supply Forecasting Methods
 Trend Analysis:
• This method looks at past data to predict future HR availability.
• It assumes that employee movement trends (such as
resignations, retirements, and promotions) will remain stable
over time.
 Competency Model
• This method focuses on skills, knowledge, and attitudes required
for different jobs.
• It helps identify the right employees for future positions based on
competencies rather than just experience.
Replacement Chart
• A chart that helps identify who can replace whom within
an organization when key positions become vacant.
• It shows which employees are ready for promotions or
transfers.
Staffing Table
• A visual chart that shows the number of employees in
each job position within the company.
• It helps in planning for future workforce needs.
Succession Planning
 A process where companies identify and prepare employees for key
positions in advance.
 It ensures that leadership roles and other critical positions always have a
backup plan.
Markov Analysis (Flow Modeling)
 This method tracks and predicts employee movement within the
company. It uses historical data to calculate the probability of employees:
 Staying in the same job
 Getting promoted or demoted
 Transferring to another department
 Leaving the company
 Supply Forecasting in Detail
 Existing Resources
Companies analyze their current employees based on:
• Age (Young employees may need training; older employees may retire soon)
• Qualifications (To match skills with job requirements)
• Experience & Service Length (Loyal employees may be less likely to resign)
• Marital Status (Married employees may prefer stability, affecting transfers)
• Training & Skills (To see if current employees can be promoted or
reassigned)
• Language (Useful for transfers to different locations)
• Performance Levels (High performers can be promoted or given key roles)
Internal Supply Forecasting Methods
Inflows and Outflows Method
• This method adds inflows (new hires, promotions, transfers) and
subtracts outflows (retirements, resignations, terminations) to
estimate the future workforce.
• Helps organizations track employee numbers over time.
A company has 500 employees today. Next year, they expect:
• 50 new hires (inflows); 30 resignations and retirements
(outflows)
• So, next year’s workforce = 500 + 50 - 30 = 520 employees
Employee Turnover Analysis
• Turnover rate measures how many employees leave
a company in a given period.
• Helps HR predict how many employees they will
have in the future.
• Example: If a company has a 10% turnover rate
and currently 1,000 employees, they can expect to
lose 100 employees next year. This helps them plan
for hiring replacements.
 Cohort Method
• A cohort is a group of employees who joined at the same
time (e.g., new trainees in 2020).
• Instead of counting those who leave, this method tracks how
many stay over time.
• Useful for predicting how long employees will remain in the
company.
• Example: If a company hires 100 trainees in 2015, and by
2022 only 30 remain, the company knows that 30% of
trainees typically stay after 7 years. This helps plan future
hiring and training programs.
 Census Method
• Similar to the cohort method but based on age or years of service.
• Tracks how many employees remain each year and calculates
survival rates.
• Not very useful because it assumes employee survival patterns
will remain the same.
• Example: If a company tracks employees who joined in 2010 and
finds that 80% remain after 1 year, 60% after 2 years, and
40% after 3 years, they can predict survival rates for future hires.
Markov Chain Method
• Employees move through different grades or job
levels over time (e.g., Junior → Senior → Manager).
• This method analyzes past employee movement to
predict future workforce changes.
• Helps estimate promotion rates, transfers, and exits.
Example: If 60% of junior engineers are promoted to
senior engineers after 3 years, a company can plan for
future staffing needs based on these probabilities.
Renewal Models
• These models estimate workforce renewal
based on hiring and attrition patterns.
• Useful for specific job roles like technicians,
chemists, or welders.
• Helps plan skill-based hiring.
External Supply Forecasting
• External Supply refers to employees recruited from outside the
company.
• Some companies hire only when needed, while others hire
continuously to maintain a talent pipeline.
• The availability of workers depends on the industry and company
policies.
Example:
• A construction company may hire workers only when they get new
projects.
• A tech company may hire fresh graduates every year as part of a long-
term workforce strategy.