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HRM notes

Reference Books:-
¬ Human Resource and Personnel Management - K.Aswathappa
¬ Human Resource and Management - Subba Rao
¬ Personnel Management and Industrial Laws - P S Narayan and P C K Rao
¬ Human Resource Development and Management - Biswanath Ghosh
¬ Personnel Management - C B Mamoria

»Meaning and Definition:
¬ Personnel Management is a method of developing potentials of
employees so that they get maximum satisfaction out of their work and
give their best efforts to the organization.
- P. Pigors and Charles Myers.
¬ Personnel Management is that part of management process, which
is primarily concerned, with the human constitution of an organization.
-E F L Brech
¬ The personal function is concerned with the procurement,
development, compensation, integration and maintenance of the personnel
of an organization for the purpose of contributing towards the
accomplishment of that organizations major goals and objectives.
Therefore, Personnel Management is planning, organizing, directing, and
controlling of performance of those operative functions.
-Edwin B. Flippo

» Objectives of Personnel Management:

¬ Recruitment and Selection of right people at the right time and in
the right
¬ Induction of employees to the respective jobs.
¬ Educating employees about the jobs, results expected, goals of the
and climate, etc.
¬ Providing employees with training.
¬ Providing better working conditions in organization.
¬ Retaining qualified and competent people.
¬ Ensuring an effective and fair compensation structure within an
¬ Providing employees monetary incentives and motivate them to
¬ Providing opportunities for research and help people keep abreast
of the
developments in their respective fields.

» Functions of Personnel Management:

HRM notes

HRP: The actual Personnel Mgt. Process begins with the

estimation of the number and the type of people needed during the coming
period. HRP is the process by which an organization ensures that it has the
right number and kind of people, at the right place, at the right time,
capable of effectively and efficiently completing those tasks tat will help
the organization achieve its overall objectives.
1. Recruitment and Selection: Recruitment is the process of
searching for and obtaining
applications for jobs, from among when the right people can be
selected. A formal definition of recruitment is:
it is the process of finding and attracting capable applicants for
employment. The process begins when new recruits are sought and
ends when their applications are submitted. The result is a pool of
applicants from which new employees are selected.

Training and Performance

Development Mgt.
Human Resource

and Selection


2. Performance Management: Performance management is a

formal, structural system of measuring and evaluating an employee’s job,
related behaviors and outcomes to discover how and why the employee is
presently performing on the job and how the employee can perform more
effectively in the future so that the employee, organization, and society all
3. Training and Development: It is an attempt to improve
current or future employee’s performance by increasing an
employee’s ability to perform through learning, usually by
HRM notes

changing the employee’s attitude or increasing his/her skills and

knowledge. The need for training and development is
determined by the employees performance deficiency,
computes as follows:
Training and development need = Standard performance – Actual
4. Compensation and Benefits: It is what an employee receives in
return for his/her contribution to the organization. The HR specialist has a
different task of fixing wages and wage differentials acceptable to
employees and their leaders. It comprises of wages and salary, incentives,
fringe benefits and non-monetary benefits.
5. Industrial Relations: It is concerned with the system, rules and
procedures used by unions and employees to determine the reward for
effort and other conditions of employment to protect the interest of the
employed and their employers, and to regulate the ways in which
employers treat their employees.
Specifically, it covers the foll.:
i. Collective bargaining.
ii. Role of mgt., unions, and govt.
iii. Labour legislation.
iv. Industrial relations training.
v. Machinery for resolution of industrial disputes.
6. Employee Maintenance: After employees have been hired,
trained and remunerated, they need to be retained and maintained to
serve the organization better. Welfare and Maintenance facilities are
designed to take care of well being of the employees-they do not generally
result in any monetary benefit to the employees. Nor are these facilities
provided by employers alone. Governmental and non-governmental
agencies. and trade unions too, contribute towards employee maintenance.
7. Employee Motivation: HR specialists must use several ways to
motivate employees. Motivation is the result of processes that arouse
enthusiasm and persistence to pursue a certain course of action.
Motivational strategies include attractive compensation, job enrichment
leading to job satisfaction, better working conditions and a good career

» Personnel Principles:
If policy is a guide for managerial decisions and actions,
principle is the fundamental truth established by research, investigation
and analysis. Many personnel principles have been established through
practices, experience and observation, Principles are universal truths
generally applicable to all organizations. Policies, on the other hand, vary
from organizations to organizations. Principles guide managers in
formulating policies, programmes, procedures, and practices. They also
come handy in solving any vexing problem. Some of the personnel
principles are:
HRM notes

1. Principle of individual development to offer full and equal

opportunities to every employee to realize his/her full potential.
2. Principle of scientific selection to select the right person for the right
3. Principle of free flow of communication to keep all channels of
communication open and encourage upward, downward, horizontal, formal
and informal communication.
4. Principle of participation to associate employee representative at
every level of decision making.
5. Principle of fair remuneration to pay fair and equitable wages and
salaries commensurating with jobs.
6. Principle of incentive to recognize and reward good performance.
7. Principle of dignity of labor to treat every job and every job holder
with dignity and respect.
8. Principle of labour mgt. co-operation -to promote cordial industrial
9. Principle of team spirit to promote co-operation and team spirit
among employees.
10. Principle of contribution to national prosperity to provide a higher
purpose of work to all employees and to contribute to national property.

» The Role of Personnel Manager:

Personnel play an important role in the mgt. of change in an
organization. He accomplishes organization goals by building a capable and
dynamic work force. He tries to create a sense of involvement and
commitment on the part of employees. He creates a sound and favorable
working climate and working relationships by motivating employees and
achieves organizational goals by effective utilization of human resources.
He is responsible for administrative and personnel functions and carries out
a number of duties in this regard. The Personnel Manager commonly plays
interpersonal role, informational role and decisional role. The interpersonal
role helps in interacting with number of people in the organization. The
informational role helps in acquiring sufficient knowledge to arrive at timely
decisions. The decisional role helps in taking innovative steps and increases
the organizations effectiveness.
Policy Initiator and Formulator: The personnel manager is required to
formulate policies to effectively guide the organization structure and
maintain a level of morale necessary for maximizing satisfaction. Personnel
policies are concerned with placing the right man on the right job, providing
adequate job training, opportunity and recognition to deserving employees.
Advisor: The personnel manager advises the line mgt. in resolving
routine operational problems. He assists mgt. in various activities while
conducting negotiations with union or service matters, arrangement of
training and development programmes, welfare activities, manpower
planning, communication o bulletins, reports and procedural guidelines.

HRM notes

Problem Solver: the personnel manager contributes towards

organizational effectiveness by advising solutions to the problems that
require more knowledge, expertise, experience and judgment. The
personnel mgrs. Provide expert guidance on personnel problems to line
mgrs. that are unable to manage smoothly.
Mediator: The personnel mgr. plays a mediator role to maintain peace
and harmony in the organization. This is achieved under the premises of an
open and effective system of communication that clarifies doubts and
removes confusion in the organization.]
Well-wisher: Here, the mgr. deals with devising policies relating to social
clubs, sports facilities, canteens, saving schemes, superannuation and
pension funds, legal and fringe benefits. These policies help in providing
security to the employees and motivate and retain them.
Representative: The personnel mgr. plays a dual role of mgt.
spokesperson and workers representatives and tries to resolve conflicts
between them.
Decision-maker: The personnel mgr. handles crisis situations by taking
innovative and safeguards the timely decisions and interests of both the

» Changing scope of Personnel Management:

A historical perspective can provide a better picture of the
changing scope of Personnel Mgt.

¬ The Historical Perspective

The earliest recognition of the need for Personnel Mgt. was the
institution of Labour Officer in India which can be traced back to the
recommendations of the Royal Commission on Labour in India (1929-31). It
recommended the employment of a labour officer and “the exclusion of the
jobber from engagement and dismissal of labour.”
The Royal Commission emphasized recruitment and dismissal as the
primary responsibilities of labour officer which were so far enjoyed by the
The labour officers, at this stage, were also visualized as having to
perform police functions as the position between the employers and
workers was often viewed as a law and order problem. Subsequently, the
labour officer’s function changed from mere employment function to
welfare activities and he really became a welfare officer. Thereafter, the
Factories Act 1948 and the State Rules hereunder created the institution of
labour welfare officers making it compulsory for factories with 500 or more
workers to employ the prescribed number of welfare officers.
Subsequent yrs saw a gradual shift from emphasis on labour welfare
to personnel administration. Thus, the function of personnel mgr. Today
includes, in addition to labour welfare and recruitment, the important
aspect of industrial relations as the industrial relations fast deteriorated.
The advent of trade unions on the scene accelerated this shift in emphasis.
It may be said that personnel administration came to be recognized in India
HRM notes

in 1951, when a personnel officer was appointed in a chemical concern in

Bombay with regular personnel mgt. functions as we understand them
today. Thereafter many big concerns set up their own personnel depts.
headed by personnel mgrs. and in still larger organizations by personnel
In course of time, two professionals bodies, the Indian Institute of
Personnel Management (IIPM) and the National Institute of Labour
Management (NILM), were set up. IIPM had its headquarters at Calcutta and
NILM at Mumbai. These two places were the premier centers of traditional
industry. in pre-independent India.
The aftermath of the Second World War and the countries political
independence witnessed increased awareness and expectations of workers.
During the 1960’s, the personnel function began to expand beyond the
welfare aspect, with labour welfare, Industrial Relations and personnel
administration integrating into the emerging profession called “personnel
management” (PM). Simultaneously, the massive thrust given to the heavy
industry in the context of planned economic development, particularly
since the Second Five Year Plan and the accelerated growth of the public
sector in the national economy resulted in a shift in focus towards
professionalisation of management.
By the 1970’s, a shift in professional values was discernible. It shifted
from a concern for welfare a focus on efficiency. In the 1980’s professionals
began to talk about new technologies, HRM today challenges and HRD. The
two professional bodies, IIPM and NILM, merged in 1980to form the National
Institute of Personnel Management (NIPM).
In the 1990’s the emphasis shifted to human values and productivity
through people. Reflecting this trend, the American Society for Personnel
Administration (ASPA) was renamed as the society or Human Resources
Management (SHRM). Thus, beginning in the 1920’s, the subject of HRM
has growth into a matured profession. Table shows the evolution of HRM.

Evaluation Of HRM in India

Period Development Outlook Emphasis

1920s-1930s Beginning Pragmatism Statutory,

of capitalists welfare,

1940s-1960s Struggling for Technical, Introduction

recognition legalistic. of techniques

1970s-1980s Achieving Professional Regulatory,

HRM notes

sophistication legalistic, confirming,

impersonal. Imposition of
standards on
other functions.

1990s Promising Strategic Human values,

business productivity
partner through people

¬ The Modern Context

It is necessary to go a step forward in view of changing environment
and behaviour patterns of the people. Even today manpower planning and
development is a neglected field in India being practiced only in case of
handful of large companies. With the advent of fresh problems such as
those faced by organizations desiring more automation. mechanization or
computerization, a great skill is required in performing the personnel mgt.
function to avoid interference from govt. as well as agitation from labour
and trade unions. Besides, as the organizations in India move from sellers
to a buyers market, productivity and effectiveness will become increasingly
important. More competent mgrs. will be required.
Thus, manpower planning and development will be the need of the future
in the personnel mgt. function.


» Meaning and Definition:
¬ Human Resource Management relates to the total set of
knowledge, skills and attitudes that firm need to compete. It involves
concern for action in the mgt. of people, including selection, training and
development, employee relations and compensation.
¬ HR Mgt. is a process of formulating, implementing and evaluating
HR strategies to achieve organizational objectives. It encompasses the
entire gamut or human resource development in an organization, including
manpower planning, transfer and promotions, compensation and benefits.

» Difference between HRM and Personnel


Personnel Management Human Resource Management

1. Personnel means person employed. HRM is the mgt. of

employee’s skills,
Personnel Mgt. is the mgt. of people knowledge, abilities, talents,
HRM notes

2. Employee in personnel mgt. is mostly Employee in HRM is treated

not only as
treated as economic man as his services economic but also as
social and psychological
are exchanged for salary/wages. Man. Thus, the complete
man is viewed
under this approach.

3. Employee is viewed as a commodity or Employee is treated as a

tool or equipment which can be
purchased and used.

4. Employees are treated as cost centre and Employees are treated

as profit centre and
therefore mgt. controls the cost of therefore, invests capital for
labour. resource development and
future utility.

5. Employees are used mostly for organiz- Employees are used for the
multiple mutual
ational benefit. Benefit of the organization,
employees and
their family members.

» Meaning and Definition of Strategic HRM:

Strategic human resource mgt. has been defined as “the linking of
HRM with strategic goals and objectives in order to improve business
performance and develop organizational cultures that foster innovation and
flexibility.” Put another way, it is “the pattern of planned human resource
deployments and activities intended to enable an organization to achieve
its goals.” Strategic HR means accepting the HR function as a strategic
partner in both the formulation of the company’s strategies, as well as in
the implementation of these strategies through HR activities such as
recruiting, selecting, training, and rewarding personnel.

Clarify the Business Strategy

¬ New markets.
¬ Operating changes.
¬ New products.
¬ Enhanced technologies.
¬ Improved customer service.
Management Has Direct Control

HRM notes

Realign the HR functions and

Key People Management Practices
¬ HR services
¬ HR systems
¬ HR function structure
¬ People management practices:
» Performance Management.
» Rewards and recognition.
» Communications.
» Training and career development.
» Rules and policies.
» Staffing, selection and succession.
» Leadership development.
* These are systematic in that they interact with
other to influence individual and organizational
Management Has Direct Control

Create Needed Competencies

and Behaviours
¬ Individual
¬ Organizational
People and the link between business Realization Of
Business Strategies
strategy and realization of results. and Results
Management Has No Direct ¬ Growth
Control Only Influence ¬ Profitability
¬ Market Share
Management Has No
Evaluate Control Only
and Refine

HR’s Role in Formulating Strategy:

HR can supply competitive intelligence that may be useful as
the company formulates its strategic plans. Details regarding new incentive
plans being used by competitors, opinion survey data from employees that
provide information about customer complaints, and information about
pending legislation like labour laws or mandatory health insurance are
some examples.
HR also participates in the strategy formulation process by
supplying information regarding the company’s internal strengths and

HRM notes

E.g. IBM’s decision to buy Lotus was probably prompted in part by IBM’s
conclusion that its own human resources were inadequate for the firm to
reposition itself as an industry leader in networking systems.

HR’s Role In Executing Strategy:

HR mgt. supports strategic implementation in other ways.
E.g. HR is involved in the execution of most firms’ downsizing and
restructuring strategies, through outplacing, employees, instituting pay-for-
performance plans, reducing health care costs, and retaining employees.

» Process of Strategic HRM:

Environmental Strategy Strategy

Scanning Formulation Implementation
and Control

External Corporate Strategy

Formulation Programmes
Budgets Control
Internal Business Procedures
Process and
Strategy Formulation

Functional Strategy

Environmental Scanning:
Environment needs to be scanned in order to determine trends and
projections of factors that will affect fortunes of the organizations. Scanning
must focus on task environment. Not those elements outside the task
environment are ignored, but they receive less attention. Scanning helps
identify threats and opportunities prevailing in the environment.

Strategy Formulation:
Strategies are formulated at 3 levels:
1. Corporate level
2. Business unit level and
3. Functional level

Corporate - level Strategy:

HRM notes

This is formulated by the top mgt. of an organization made up

of more than 1 line of business. The major questions that need to be
answered at this stage are – What kind of business should the
company be engaged in? What are the goals and expectation for
each business? How should resources be allocated to reach these
Business - level Strategy:
While the major question at the corporate – level is, “In what
industries or businesses should we be operating?,” The appropriate
question at the business unit level is, “How should we compete in the
chosen industry or business?” A business unit is an organizational
subsystem that has a market, a set of competitors, and a goal
distinct form those of other subsystems in the group.

Functional – level Strategy:

Each business unit will consist of several depts., such as sales,
finance, HRD, etc. Functional level strategies identify the basic
courses of action that each of the depts.. must pursue in order to
develop the business unit to attain its goals. In formulating functional
level strategies, managers must be aware that the different functions
are interrelated. Each functional area, in pursuing its purpose, mesh
its activities with the activities of other depts.

Strategy Implementation:
Strategy formulated need to be implemented. Implementation
of strategies is, often more difficult than their formulation. Although
implementation is the logical step to formulation, the two differ in the
following ways:
Strategy formulation is positioning forces before action.
Strategy implementation is managing forces during the action.
Strategy formulation focuses on effectiveness.
Strategy implementation focuses on efficiency.
Strategy formulation is primarily an intellectual process.
Strategy implementation primarily is an operational process.
Implementing strategies requires such actions are altering
sales territories, adding new depts., closing facilities, hiring new
employees, etc.
Strategy formulation concept and tools do not differ vastly for
small, large or non-profit organizations. However, strategy
implementation varies substantially among different types and sizes
of organizations.

Strategy Evaluation:
Strategy evaluation helps determine the extent to which the
company’s strategies are successful in attaining its objectives. Basic
activities involved in strategy evaluation are:

HRM notes

1. Establishing performance targets, stds. and tolerance limits

for the objectives, strategies and implementation plans.
2. Measuring the performance in relation to the targets at a
given time. If outcomes are outside the limits, inform managers to tale
3. Analyze deviations from acceptable tolerance limits.
4. Execute modifications where necessary or feasible.
Strategy evaluation can be a complex and sensitive task. Too
much emphasis on evaluating strategies may be expensive and
even counter productive. No mgr. wants to be evaluated too
closely. Little or no evaluation can create even worse problems.

» Framework of Strategic HRM:

For HR professionals to become strategic business partners,
they would have to work within the following framework:
1. Know the business: All round knowledge of the business would be
the prime requirements for HR to be a strategic partner in business. It
would need a thorough understanding of:
- the type of business activity performance by the activity.
- the goals and objectives of the company
- the environment in which the business exist and operates
- the working of different depts. in the organization.
- The target markets and customers of the business, and
- In-depth know-how of the products or services offered.
2. Formulation of an Efficient Recruitment and Selection System: The
HR professionals should be in a position to design and administer an
efficient recruitment system. This is because a job is to be given to right
person who can perform it at an optimal level benefiting the organization.
HR should identify and recruit such individuals who can translate the
organization’s goals into reality. Because by doing this only, HR would go
on to become a team member or strategic partner.
3. Drafting of good HR policies: HR needs to draft good and
consistent policies because, if the policies of the organization were clear to
everybody, it would ensure smooth and effective business operations by
which HR would signify the importance of being a strategic partner in
4. Building a Conducive Environment in the Establishment: The
climate of an organization is of utmost importance since, if it is an
environment is not conducive to the needs and requirements of the
employees they will not be able to perform their best. This creation of an
ideal organizational climate would be the responsibility of the HR
professionals in order to realize the company goals.
HRM notes

5. Follow Scrupulously the Concept of Management by Objective

(MBO): HR professionals also believe that no function or activity can be
done if it is not done with an aim/mission or objective behind it. The HR
with good amount of coordination with other depts. should device an
Objective Plan scaling the entire organizational hierarchy i.e. setting
objectives for the employees at every level of the organization which would
complement the achievement of the ultimate goals of the establishments.
Off course the setting up of goals would be done with considerable amount
of discussion with employees.
6. Play the role of a team builder: It is an accepted fact that none of
the organizational objectives can be achieved in isolation. The present era
is the era of empowering and building long lasting teams. It is the concept
of synergy which works in team building. The HR professionals should know
the art of getting done through wining teams. Because teams can achieve
much more than what can be achieved by a single individual. Even HR
professionals, should see to that they also be a team member occupying a
central position in a team as it supplements the working of other depts..



Finance Union

7. Percolation of the values of the Company to all levels of the

Organization: In order to be a strategic business partner. HR should make
all efforts to percolate and channelize the vision of the company to all the
employees of the company. It should show the employees, that this is the
place where we want to see our company in the near future. Just doing this
will not suffice. HR will have to tell them that it is they who can actually
take the company to such high ranks as envisioned.

HRM notes

8. HR professionals should take active initiative in Corporate

Planning and Decision Making
9. HR should also be proactive in identifying training needs of all the
employees and try to motivate them to increase their performance.
10. Lastly HR professionals should also deploy an efficient feedback
mechanization which would facilitate control and also opportunities for
improving their own and the organizations performance.

» Changing environment of HRM:

Most changes in this world don’t take place in a vacuum-artists
and poets create their works in response to the times in which they live,
wars emerge out of economic and political pressure, and companies
change their structures in responses to the need to follow their customers
overseas, for instance
Therefore, to better understand HR’s role in, organizations
today it’s useful to understand how companies themselves are changing
and the trends that are causing these changes to occur. Perhaps most
importantly, organizations today are under intense pressure to be better,
faster, and more competitive-HMO’s are squeezing more productivity out of
hospitals, companies like City group are merging and downsizing, and
Universities are working hard to boost enrolments and faculty productivity.
Why is this the case? Globalization, technical advances and deregulations
are three of the trends accounting for these competitive pressures.

» Challenges facing HRM today:

The most striking challenge in HR’s role today is its growing
involvement in developing and implementing the company’s strategy.
Strategies increasingly depend on strengthing organizational
competitiveness and on building committed work teams, and these put HR
in a central role. We’ve seen that in a fast-changing, globally competitive
and quality oriented industrial environment, it’s often the firm’s employees-
its human resources- who provide the competitive key. It is thus now
increasingly common to involve HR in the earliest stages of developing and
implementing the firm’s strategic plan, rather than to let HR react to it.
Globalization refers to the tendency of firms to extend their sales
or manufacturing new markets abroad, and, for business everywhere, the
rate of globalization in the past few years has been nothing short of
From boosting the productivity global labour force to formulating
compensation policies for expatriate, managing globalization and its effects
on competetitiveness will thus be a major HR challenge in the next few
Technological Advances: Technology has been forcing - and
enabling- firms to become more competitive. Technology is also changing
the nature of work . For example, telecommunications already makes it
relatively easy for many to work at home, and the use of computer-aided
design/computer-aided manufacturing (CAD/CAM) systems plus robotics is
HRM notes

booming. Manufacturing advances like these will eliminate many blue-collar

jobs, replacing them with more highly skilled jobs, and these new workers
will require a degree of training and commitment that their parents
probably never dreamed of. As a result, to remain competitive, jobs and
organization charts will have to be redesigned, new incentive and
compensation plans instituted, new jobs description written, and new
employee selection, evaluation, and training programs instituted-all with
the help of HR mgr.
Trends in the Nature Of Work: There has been a pronounced
shift from manufacturing jobs to service jobs. These service jobs will in turn
require new types of “knowledge” workers, new HR mgt. Methods to
manage them and new focus on human capital. Human capital refers to the
knowledge, education, training of a firm’s workers and it’s more important
than it has been ever before. One reason is the rise in service jobs: service
jobs like consulting put a bigger premium on worker education and
knowledge than do traditional manufacturing jobs. Another is the fact that
even factory jobs are becoming more demanding. New HR systems and
skills will be required to select, train and motivate such employees and to
win their commitment. Implementing them won’t be easy: Insecurity and
shorter job tenure are diminishing employee commitment today, in the
opinion of some experts.
Workforce Diversity: It is another major work-related trend.
Creating unanimity from a diverse workforce may also turn out to be a
considerable challenge for HR. Establishing HR programs that don’t just pay
lip service to diversity may thus be a challenge for many employers.
New Management Practices: The quest to be more competitive
has led many firms to change hoe they are organized and managed.
E.g. The traditional, pyramid-shaped organization is going out of style. At
firms like AT&T, the new way of organizing stresses cross-functional teams
and boosting interdepartmental communications. There is a corresponding
de-emphasis on “sticking to the chain of command” to get decision made.
Employees are being empowered. Some experts argue that today’s
organization should put the customer on top, and emphasize that every
move the company’s makes should be toward satisfying the customer
needs. Flatter organizations are becoming the norm. Instead of the
pyramid-shaped organization with 7 to 10or more layers of mgt., flat
organizations with just 3 or 4 layers will prevail. Work is increasingly
organized around terms and processes rather than specialized functions.

» HRIS (Human Resource Information System)

A HRIS is a systematic procedure for collecting, storing,
maintaining, retrieving and validating data needed by an organization
HRM notes

about its human resources. The HRIS is usually a part of the organizations
larger mgt. system(MIS). The HRIS need not be complex or even
computerized. But computerization has its own advantage of providing
more accurate and timely data for decision making.
The areas of application of HRIS are many. Some of them
include training mgt., risk mgt., turnover analysis, succession planning,
flexible benefits administration, compliance with govt. and legal
environment, etc.
Steps in implementing HRIS:
As with any major change, proper planning is an absolute
necessity for successful implementation of an HRIS. The steps outlined
below describe the specific procedures involved in successfully developing
and implementing an HRIS.
Step 1: Inception of idea. The idea of an having an HRIS must
originate from somewhere. The originator of the idea must prepare a
preliminary report showing the need for an HRIS and what it can do for the
Step 2: Feasibility study. Feasibility study evaluates the present
system and details the benefits of an HRIS. It evaluates the costs and
benefits of an HRIS.
Step 3: Selecting a project team. Once the feasibility study has been
accepted and the resources allocated, a project team should be selected.
The project team should consist of an HR who is knowledgeable about the
organization’s HR functions and activities and about the organization itself
and representatives from both management information systems and
payroll. As the project progresses, additional clerical people from the HR
department will be needed to be added.
Step 4: Defining the requirements. A statement of requirements
specifies in detail what exactly the HRIS will do. A large part of the
statements of requirements normally deals with the details of the reports
that will be produced. Naturally, the statement also describes other specific
requirements. This typically includes written descriptions of how users
collect and prepare data, obtain approvals, complete forms, receive data
and performa other non-technical tasks with HRIS use. The key here is to
make sure that the mission of the HRIS truly matches management’s needs
for an HRIS.
Step 5: Vendor Analysis. This step determines what hardware and
software are available that will best meet the organizations needs for the
lowest price. This is a difficult task. The best approach is usually not to ask
vendors if a particular package can meet the organizations requirements
but how it will meet those requirements. The results of this analysis will
determine whether to purchase an ‘off-the-shelf’ package or develop the
system internally.
Step 6: Package contract negotiation. After vendor has been selected,
the contract must be negotiated. The contract stipulates the vendor’s
responsibilities with regards to software, installation, service, maintenance,
training, and documentation.

HRM notes

Step 7: Training. Training usually begins as soon as possible after the

contract has been signed. First, the members of the project team are
trained to use the HRIS. Towards the end of the implementation, the HR
representative will train managers from other depts.. in how to submit
information to the HRIS and how to request information from it.
Step 8: Tailoring the system. This step involves making changes to
the system to best fit the need of the organization. A general rule of thumb
is not to modify the vendor’s package, because modifications frequently
cause problems. An alternative approach is to develop programs that
augment the vendor’s program rather than altering it.
Step 9: Collecting the data. Prior to start up of the system,, data must
be collected and entered into the system.
Step 10: Testing the system. Once the system has bee tailored to the
organization’s needs and the data entered, a period of testing follows. The
purpose of testing phase is to verify the outputs of HRIS and to make sure it
is doing what it is supposed to do. All reports should be critically analyzed
for accuracy.
Step 11: Starting up. Start-up begins when all the current actions are
put into system and reports are produced. It is wise to attempt start- up
during a lull period so that maximum possible time can be devoted to HRIS.
Even though the system is tested, some additional error often surface
during start-up.
Step 12: Running in parallel. Even after the new HRIS has been
tested, it is desirable to run the new system in parallel with the old system
for a period of time. This allows for the comparison of outputs of both the
system and examination of inaccuracies.
Step 13: Maintenance. It normally takes several weeks or even
months for the HR people to feel comfortable with the new system. During
this stabilization period, any remaining errors and adjustments should be
Step 14: Evaluation. After the HRIS has been in place for a reasonable
length of time, the system should be evaluated. Is the HRIS right for the
organization and is it being properly used?

» VRS (Voluntary Retirement Scheme):

VRS is an innovative concept evolved in India in the post
Economic Reform Environment. The Scheme was initially implemented in
the financial year 00-01. VRS is an attempt to synthesize an operation
aimed towards downsizing the workforce, with employees willing
acceptance & participation. In other words it is retrenchment without tears.
A very package of terminal benefits & compensation favorably motivated
employees in large numbers of voluntarily seek early retirement & leave
service, thus realizing the objective of the companies to shed part of the
surplus manpower & become leaner. The initial experience gained in VRS
scheme operated by the companies has enabled the government to extend
the methodology to a wider scale in the subsequent period & to accomplish
the process of rationalization of manpower & shedding excess flap in other

HRM notes

Public Sector & Private Sector undertakings all of which have become
overcrowded with heavy surplus workforce, consequent to the
rationalization of systems & procedures in the post Reform period shedding
a host of redundant controls & restrictive provisions, transferring several
functions hither to performed by the government to private enterprise, &
switching over to computerized operations everywhere, rendering huge
workforce manually carrying on these operations redundant. The result is
high cost wage component with low productivity, & making Indian Industry
& business less competitive in the global market. It is an anomaly that the
Indian worker is paid comparatively low scales of wages, while the
employers are suffering from a high cost of labour content in their cost
structure. It is the number employed that creates the situation of low wage
& high cost. This both the worker & the business/industry stand to benefit
by rationalization of work force & improve productivity.
Why such an elaborate system & why are companies forced to
downsize their workforce by such a steep level? They recruit employees
initially incurring considerable cost, & subsequently have to train them for
several years continuously. At clerical level an employee needs six months
training, while an officer at a junior level is given training on direct
recruitment for three years. It may need for such an officer another 5 years
to be eligible to become a branch manager & so on for different higher
positions, most of which are filled through internal promotions. All these
involve huge expenditure. Banks pertain to the category of service industry
providing a specialized professional service. Its main stock-in-trade is
expert knowledge, an intangible asset. This prime asset of the banks is not
stored in its show rooms or godowns, but rests with its officers &
employees. A part of the same may be structured & retained in instruction
manuals, guidelines & job charts, but predominantly it rests with
employees, who are repositories of its knowledge-wealth. A huge turnover
of skilled & trained employees at a point of time from n institution will
disrupt its normal working, in addition to the loss of heavy resources
already spent on their recruitment & elaborate training incurred under the
consideration that their service will be continuously available for the full
term or entire span of their career.
The fast changing economic paradigms affect business models so
frequently that in the event of a business model redefinition, restructuring
of the workforce becomes a necessity. Each time this necessity arises, we
see corporate wooing employees with severance schemes that are
extremely severe on the companies’ finances & quality of the workforce. It
is unknown that competent employees use this opportunity to make the
best of both the worlds. Given the scheme of things voluntary severances is
best replaced with compulsory severance. While this may seem as
anathema to corporate it is extremely hard on the employees themselves
who have developed a certain skill set over a period of time & now finds
themselves redundant.
Thus to make this model operative in India it is necessary to institute
compensation schemes that are commensurate to the extent of damage

HRM notes

borne by the individual. The logical scheme/instrument that can address

this issue is Insurance. The scheme should cover the employees against
structural unemployment for a period of time he remains unemployed. This
is of course subject to the fact that the employee is wiling & capable to
take up a job requiring commensurate or higher skill. LIC has variants to
such insurance but it does not address the issues raised here. Job insurance
has been in vogue in the US for many years now. The premium is partly
paid by the employer, partly subsidized by the government. In India
however the scheme has to be defined differently. For one, ours is a
government that has a huge fiscal deficit to contend with. Moreover the
extent of unemployment is so high in the country that to take care of this
extra load of structurally unemployed workforce would mean an
unmitigated assault on the exchequer. In light of such circumstances it is
difficult to conceive the government as lending a helping hand to hole the
safety net. Thus the question related to who pays for the cover has to be
tackled differently.
Who suffers the most by this shake out? Probably, the reader will
agree that the sufferer be exempted, if not wholly, at least partially, the
pain of having to pay for the cover. In the Indian context, as in the rest of
the world, the employee is the loser in such shake out. Companies typically
shed weight to avoid suffering or do so to come out of their malady of over
weight. To shed weights these corporate have to pay heavily. It is in this
sense that the organization now benefits from such a scheme & therefore
must pay for the benefit. On the other hand, the individual finds
termination a bolt from the blue. It is in this sense that he must be
exempted from bearing the major burden of the premium.


» Meaning and Definition:
Human resource planning (HRP) is the foundation of an
effective HRM. It typically involves forecasting HR needs of the
organization, and establishes and implements plans, trains and develops
various programmes to ensure timely availability of quality people in the
organization. In fact, the strategic planning and HRP are intimately related.
This also aids the HR mgr. in performing the duties effectively in the
process of recruitment and selection. Therefore, HRP is an indispensable
process in the organization that streamlines all the activities.
¬ Human resource planning is “the process by which the mgt.
determines how an organization should move from its current to desired
manpower position. Through planning, mgt. strives to equip with the right
number and the right kinds of people at right places, at the right time to do
things which result in both the organization and the individual receiving the
maximum long-range benefit.”
(Eric W. Velter)
¬ “Manpower planning is the strategy for the acquisition, utilization,
improvement, and preservation of an enterprise’s human resources. It
relates to establishing job specifications or the quantitative requirements of
HRM notes

jobs determining the number of personnel required and developing source

of manpower.” (G.
¬ “Manpower planning is the process of determining the
requirements and the means of meeting those requirements in order to
carry out the integrated plan of the organization.”

» Importance of HRP:
1. Future Personnel Needs: Planning is significant as it helps
determine future personnel needs. Surplus or deficiency in staff strength is
the result of the absence of or defective planning. The problem of excess
staff has become so heavy that many units are restoring to VRS to remove
the excess staff.

2. Coping with change: HRP enables an enterprise to cope

with changes in competitive forces, markets, technology, products and
govt. regulations. Such changes generate changes in job content, skill
demands, and number and type of personnel. Shortage of people may be
induced in some areas while surplus in other areas may occur.

3. Creating Highly Talented Personnel: As was mentioned

earlier, jobs are becoming highly intellectual and incumbents are getting
vastly professionalized. L&T, an engineering giant, has MBA’s, engineers,
technicians who collectively constitute 70% of the total employee strength
of 20,000. The HR mgr. must use his/her ingenuity to attract and retain
qualified and skilled personnel.
Another fact of the high-talent personnel is mgt. succession planning.
Who will replace the retiring chief executive? From what pool of people will
top executives be selected and how will these individuals be groomed for
their increased responsibilities? HRP is an answer to these and other
related questions.

4. Protection of Weaker Sections: SC/ST candidates,

physically handicapped, children of socially and physically oppressed and
backward-class citizens enjoy a given % of jobs, not withstanding the
constitutional provision which guarantees equal opportunities for all.

5. International Strategies: HRP will grow increasingly

important as the process of meeting staff needs from foreign countries and
the attendant cultural, language and developmental considerations grow

6. Foundation for Personnel Functions: Manpower

planning provides essential information for designing and implementing
personnel functions, such as recruitment, selection, personnel movement
and training and development.
HRM notes

7. Increasing Investments in Human Resources: Another

compelling reason for HRP is an investment an organization makes in its
human resources. Human assets, as opposed to physical assets, can
increase in value. An employee who gradually develops his/her skills and
abilities becomes a more valuable resource.

8. Resistance to Change and Move: There is a growing

resistance among employees to change and move. There is also a growing
emphasis on self-evaluation and on evaluation of loyalty and dedication to
the organization. All these changes are making it more difficult for the
organization to assume that it can move its employees around anywhere
and anytime it wants, thus increasing the importance and necessity of
planning ahead.

9. Other Benefits: Foll. are other potential benefits of HRP:

¬ Upper mgt. has s better view of the HR dimensions of business
¬ Personnel costs may be less because the mgt. can anticipate imbalances
before they become unmanageable and expensive.
¬ More time is provided to locate source talent.
¬ Better opportunities exist to include women and minority groups in future
growth plans.
¬ Better planning of assignments to develop mgrs. can be done.
¬ Major and successful demands on labour markets can be made.

» Objective of HRP:
The important objectives of manpower planning in an organization
i) to recruit and retain the human resource of required quantity and
ii) to meet the needs of the programmes of expansion,
diversification, etc;
iii) to improve the standards, skill, knowledge, ability, discipline,
iv) to estimate the cost of human resources;
v) to make the best use of its human resources;
vi) to foresee» the impact of technology on work, existing
employees and future human resource requirements;
vii) to assess the surplus or shortage of human resource and take
measures accordingly;
viii) to minimize imbalances caused due to non-availability of
human resources of right kind, right number in right time and right

» Specific Goals of HRP:

HRM notes

HRP anticipates not only the required number of employees but

also determines the action plan for all the functions of personnel mgt. The
major goals of HRP are:
i) It checks the corporate plan of the organization.
ii) It helps to anticipate the cost of salary enhancement, better benefits,
iii) It provides scope for advancement and development of employees
through training, development, etc.
iv) It helps to anticipate the cost of salary, benefits and all the cost of
human resources facilitating the formulation of budgets in and
v) To foresee the changes in values, aptitude and attitude of human
resources and to change the techniques of interpersonal, mgt., etc.
vi) It causes the development of various sources of human resources
to meet the organizational needs.
vii) It helps to take steps to improve human resources contributions in
the form of increased productivity, sales, turnover, etc.
viii) It facilitates the control of all the functions, operations,
contribution and cost of human resources.
ix) It gives an idea of type of tests to be used and interview
techniques in selection based on the level of skills, qualifications,
intelligence, values, etc., of future human resource.
x) To plan for physical facilities, working conditions and the volume
of fringe benefits like canteen, schools, hospitals, conveyance, etc.

» The HRP Process:

Process of HRP consists of following steps:
1. Analyzing organizational plans.
2. Demand Forecasting: Forecasting the overall human
resources requirements in accordance with the organizational
3. Supply Forecasting: Obtaining the data and information about
the present inventory of human resources and forecast the
future changes in the human resource inventory.
4. Estimating the net human resources requirements.
5. In case future surplus, plan for redeployment, retrenchment
and lay-off.
6. In case future deficit, forecast the future supply of human
resources from all sources with references to plan of other
7. Plan for recruitment, development and internal mobility if
future supply is more than or equal to net human resource
8. Plan to modify or adjust the organizational plan if future
supply will be inadequate with reference to future net

HRM notes

HRM notes

Analyzing Organizational (1) Adjust or Modify the Organizational Plans

Objectives Plans and
Programmes Control and
Present Review
Programmes Mechanisms
Demand Forecast Resource (3) (4)
Requirement Skill wise Minus
Knowledge wise etc. Supply Forecast Present Net Human Resources
Inventory of Human Requirement for Future-
Resources + Additions - Skill- Knowledge- Values
Losses – Skill wise etc Forecast
the Future.
Knowledge wise etc. Supply of
ource in all
(5) (7)
Sources if Supply is
Surplus of Future Available Shortage of Future
Human Resources within Available Human Resource
The Organization within the Organization

Plan for (6) Plan for (8)

HRM notes

Redeployment Retrenchment/ Redundancy Employment Training Development

Internal Mobility

Human Resource Planning Model

HRM notes

1. Analyzing the Organizational Plans:

The process of human resource planning model planning should start with
analyzing the organizational plan into production plan, technological plan,
plans for expansion, diversification, etc.

2. Forecasting the Overall Human Resource Requirements:

The existing job design and analysis may thoroughly be reviewed
keeping in view the future capabilities, knowledge and skills of present
employees. Further, the jobs should be redesigned and reanalyzed keeping
in view the organizational and unit wise plans and programmes, future
work quantum, future activity or task analysis, future skills, etc.

3. Supply Forecasting:
The first step of forecasting the future supply of human resource is to
obtain the data and information about the present human resource
Existing Inventory
The data relating to present human resource inventory in terms of
human resources components, number, designation-wise should be
obtained. Principal dimensions of human resources inventory are:
i) Head counts regarding total, dept.-wise, sex-wise, designation-wise, skill-
wise, etc.
ii) Job Family Inventory: It includes number and category of employees of
each job family i.e., all jobs related to same category like clerks, cashiers,
typists, etc. each sub-job family i.e., all jobs having common job
characteristics (skill, qualification, similar operations) like production
engineer (mechanical) and maintenance engineer (mechanical) and broad
job families like general administration, production, etc.
iii) Age Inventory: It includes age-wise number and category of employees.
It indicates age-wise imbalance in present inventory which can be
correlated in future selections and promotions.

4. Estimating the Net Human Resource Requirements:

Net human resource requirements in terms of number and components are
to be determined in relation to the overall human resource requirements
for a future date and supply forecast for that date. The difference between
overall human requirements and future supply of human resources is to be
found out.

5. Action Plan for Redeployment, Redundancy/Retrenchment:

If future surplus is estimated, the organization has to plan for
redeployment, redundancy, etc. If surplus is estimated in some jobs/depts.,
employees can be redeployed on other jobs/depts. Where the deficit of the
employees is estimated.

6. Forecast Future Supply for All the Sources:

If deficit is estimated in any dept. and in the entire organization mgt.
has to forecast the future supply of human resources from various sources
like internal sources, comparable organizations, labour market, etc.

7. Action Plan for Recruitment, Development:

HRM notes

If the forecast relating to future supply of manpower from internal

sources of the organization shows favorable trends, the mgt. may prefer
internal candidates and plan for promotion, transfer, training and
development. If suitable candidates are not available from internal sources
and, if the forecasts relating to future supply from external sources indicate
the availability of required human resources, plan for recruitment and

8. Modify the Organizational Plan:

If future supply of human resources from all the external resources is
estimated to be inadequate or less than the requirements, the manpower
planner has to suggest the mgt. to alter or modify the organizational plan.

9. Retention Plan:
Though there is a problem of unemployment, organizations
experience shortage of some categories of employees. and some
organizations experience shortage of some other categories of employees
due to employee mobility. Hence, the organizations have to plan for
retention of the existing employees.

» Steps For Establishing Successful HRP:

HRP refers to the estimation of the number and the type of people
needed during the ensuing period. HRP is influenced by several factors,
such as the type and strategy of organization; environmental uncertainties;
time horizons; type and quality of information; and type of jobs being filled.
The HRP is a five-step process. The steps are:
1. Defining organizational objectives and policies:
The HR plan must be derived from organizational objectives.
Organizational objectives are defined by the top mgt. and the role of HRP is
to sub serve the overall objectives by ensuring availability and utilization of
human resources.
Once the organizational objectives are specified, communicated and
understood by all concerned, the HR dept. must specify its objectives with
regard to HR utilization in the organization.

2. Forecast of personnel needs and supplies:

Demand forecasting is the process of estimating the future quantity
and quality of people required. The basis of the forecast must be the
annual budget long-term corporate plan, translated into activity levels for
each function and department.
Personnel demand analysis provides the manager with the means of
estimating the number and the kind of employees that will be required. The
next local step for the management is to determine whether it will be able
to procure the required number of personnel and the sources for such

3. HR programming:
Once an organization’s personnel and supply are forecast, the two
must be reconciled or balanced in order that vacancies can be filled by the
HRM notes

right employees at the right time. HR programming, the third step in the
planning process therefore, assumes greater importance.

4. HRP implementation:
Implementation requires converting an HR plan into action. A
series of action programmes are initiated as a part of HR plan
implementation. Some such programmes are recruitment, selection and
placement; training and development, retraining and redeployment; the
retention plan; and the redundancy plan.

5. Control and evaluation of programmes:

The HR plan should include budgets, targets and standards. It
should clarify responsibilities for implementation and control, and establish
reporting procedures, which will enable achievements to be monitored
against the plan. These may simply report on the numbers employed
against establishment and on the numbers recruited against the
recruitment targets. But they should also report employment costs against
budget, and trends in wastage and employment ratios.


» Meaning and Definition:

Job analysis is the procedure through which you determine
the duties of these positions and the characteristics of the people who
should be hired for them. The analysis procedure information on job
requirement; this information is then used for developing job descriptions
and job specification.
¬ Job analysis is the process of studying and collecting information
relating to the operation and responsibilities of a specific job. The
immediate product s of this analysis are job descriptions and job
¬ Job analysis is a systematic exploration of the activities within a
job. It is a basic technical procedure, one that is used to define the duties,
responsibilities and accountant abilities of a job.
¬ A job is a collection of tasks that can be performed by a single
employee contribute to the production of some product or service provided
by the organization. Each job has certain ability requirements with it. Job
analysis is the process used to identify these requirements.

» Job Description:
A job description is a return statement of what the job holder
actually does, how he/she does it, and under what conditions job is
performed. This information is in turn used to write a job specification that
lists the knowledge, abilities, and skills needed to perform the job
There is no standard format you must use in writing job description,
but most description contains section on:
1. Job Identification.
2. Job Summary.
3. Responsibilities and Duties.
4. Authority of Incumbent.

HRM notes

5. Standards of performance.
6. Working conditions.
7. Job specifications.

1. Job Identification: The job title specifies the title of job, such as
supervisor of data processing operations, mktg. mgr. or inventory
control clerk. Job titles and descriptions should be kept current.
2. Job Summary: The job summary should describe the general nature
of the job, listing only its major functions or activities. Thus, the mktg.
mgr. “plans, directs, and coordinates the mktg. of the organizations
products and / or services.”
3. Relationships: There is occasionally a relationships statement,
which shows the job holder’s relationship with others inside and
outside the organization.
4. Responsibilities and Duties: This section presents a list of jobs
major responsibilities and duties. Each of the job’s major duties
should be listed separately and described in a few sentences.
This section should define the limits of the jobholder’s
authority, including his/her decision-making authority, direct
supervision of other personnel, and budgetary limitations.
5. Standards of Performance: Some job description contains
standards of performance sections. This state the standards the
employee is expected to achieve under each of the job description’s
main duties and responsibilities.
6. Working Conditions and Physical Environment: The job
description may also list the general working conditions involved on
the job these might include things like noise level, hazardous
conditions, or, heat.

» Job Specification:
A statement of human qualifications necessary to do the
job. Usually contains such items as:
¬ Education.
¬ Experience.
¬ Training.
¬ Judgment.
¬ Initiative.
¬ Physical Effort.
¬ Physical skills.
¬ Responsibilities.
¬ Communication skills.
¬ Emotional characteristics.
¬ Unusual sensory demands such as sight, smell, hearing.

» Process of Job Analysis:

Process Of job analysis

HRM notes

Strategic Choices

Gather Information
Uses of Job Description and Job
Process Information ¬ Personnel Planning
¬ Performance Appraisal
¬ Hiring
Job Description
¬ Training and Development
¬ Job Evaluation and Compensation
Job Specification ¬ Health and Safety
¬ Employee discipline
¬ Work Scheduling
¬ Career Planning

The figure illustrates the process of job analysis. The figure

also points out the uses of information about jobs. As may be seen from the
fig. job analysis is useful for several purposes, such as personnel planning,
performance appraisal and the like.
Strategic Choices: With regard to job analysis, an organization is
required to make at least 4 choices:
1. The extent of employee involvement in job analysis.
2. The level of details of the analysis.
3. Timing and frequency of analysis.
4. Past-oriented versus future-oriented job analysis.

Information Gathering: This step involves decisions on 3 issues

1. What type of data is to be collected?”
2. What methods are to be employed for data collection?
3. Who should collect the data?
Information Processing: Once the job information has been
collected, it needs to be processed, so that it would be useful in various
personnel functions. Specifically, job-related data would be useful to
prepare job description and job specification.
Job description implies objective listing of the job title, tasks,
duties and responsibilities involved in a job. Job specifications on the other
hand, involve listing employee qualifications, skills and abilities. These
specifications are needed to do the job satisfactorily.
Job Description: Same as notes above.
Job Specification: Same as notes above.

» Methods of collecting job data:

The methods of collecting job- elated data are: - i)
Observational method, ii) Interviews, iii) Questionnaire, iv) Checklists, v)
Technical conferences and vi) Diary. A combination of these approaches
may be used depending upon the situation and the organization.

HRM notes

i) Observation: In this method, the job analysts carefully observes the

job holder at work and records what he or she does, and how much time
is needed for completion of a given task.
ii) Interview: In this, analyst interviews the job holder and his/her
supervisor to elicit information about the job. Usually a structured
interview form is used to record the information. During the interview,
the analyst must make judgments about the information to be included
and its degree of importance.
iii) Questionnaire: Job holders fill in the given structured
questionnaires which are then approved by their supervisors. The filled-
in questionnaires offered enough data or jobs. Standards questionnaires
are available or they may be prepared for the purpose by the analyst.
Standard or prepared questionnaire should contain following basic
¬ The job title of the job holder;
¬ The job title of the job holder’s mgr./supervisor;
¬ The job titles and numbers of the staff reporting to the job
¬ A brief description of the overall role or purpose of the job;
¬ A list of the main task or duties that the job holder has to
carry out; as appropriate, these should specify the resources controlled,
the equipment used, the contracts made and the frequency with which
tasks are carried out.
i) Checklists: A checklists is similar to a questionnaire but the
response sheet contains fewer subjective judgments and tends to be
either-yes-or-no variety. Checklists can cover as many as 100 activities
and job holders tick only those tasks that are included in their jobs.
He/she may also be asked to write any additional tasks he/she performs
which is not stated in the checklist. The checklist, thus answered, will be
the basis for tabulating job-related data.
ii) Technical Conference Method: In this method services of
supervisors who possess extensive knowledge about the job are used. It
is from these experts that details about the job are obtained here, a
conference of supervisors is used. The analyst initiates discussion which
provides details about jobs.
iii) Diary Method: This method requires job holders to record in detail
their activity each day. If done faithfully, this technique is accurate and
eliminates errors caused by memory lapses the job holder makes while
answering questionnaires and checklists.
Conclusion: The methods described above are not being viewed as
mutually exclusive. None of them is universally superior. The best
results can be obtained by a combination of these methods.

» Quantitative Techniques:
The methods of collecting job-related data, described above,
are used by most employers. But there are locations where these narrative
approaches are not appropriate. For example there is a desires to assign a
quantitative value to each job so that jobs can be compared for pay
purposes, a more quantitative approach will be appropriate. The position
analysis questionnaire, mgt. position description questionnaire, and
functional job analysis and the three popular techniques of job analysis.

HRM notes

Position Analysis Questionnaire: The Position Analysis

Questionnaire (PAQ) is a highly specialized instrument for analyzing any job
in terms of employee activities. The PAQ contains 194 job elements on
which job are created depending on the degree on which an element is
present. These elements are grouped into 6 general categories. They are:
i. Extent of use
ii. Importance of the job
iii. Amount of time
iv. Possibility of occurrence
v. Applicability
vi. Special Code
Management Position Description Questionnaire (MPDQ): The
MPDQ is a highly structured questionnaire containing 208 items relating to
managerial responsibilities, restrictions, demands and other miscellaneous
position characteristics. These 208 items are grouped under the 13
categories they are:

1. Product, Mktg. and Financial Strategy Planning.

2. Co-ordination of other organizational units and personnel.
3. Internal business control.
4. Products and services responsibility.
5. Public and Customer relations.
6. Advanced consulting.
7. Autonomy of actions.
8. Approval of financial commitments.
9. Staff service.
10. Supervision.
11. Complexity and stress.
12. Advanced financial responsibility
13. Broad personnel responsibilities.
Functional Job Analysis (FJA): FJA is a worker-oriented job analytical
approach which attempts to describe the whole person on the job. The
main features of FJA include the foll.:
1. The fundamental distinction must be made between what has
been done and what employees need to do to get things done. For
example, bus crew do not carry passenger but they drive vehicle and
collect fare.
2. Jobs are performed in relation to data, people and things.
3. In relation to things, employees draw on physical resources; and
in relation to people, employees drawn on interpersonal resources.
4. The level of difficulty required in dealing with data, people and
things are hierarchical and can Feedback
be represented by an ordinal scale.

» Factors Affecting Job Design:

Job design is affected by organizational, environmental, and
behavioral factors.
Job Productive
Design and
Environmental Satisfying
Factors Job

Factors Affecting Job Design
HRM notes

Organizational Factors
It includes characteristics of task, work flow, ergonomics, and work
¬ Characteristics of Task: Job design requires the assembly of
number of tasks in to a job or group of jobs. An individual may carry out
one main task which consists a number of interrelated elements or
functions. On the other hand, task functions may be split between a team
working closely together or strung along an assembly line.
¬ Work Flow: The flow of work in an organization is strongly
influenced by the nature of product or service. The product or service
usually suggests the sequence and balance between jobs if the work is to
be done efficiently.
¬ Ergonomics: It is concerned with designing and shaping jobs to fit
the physical abilities and characteristics of individuals so that they can
perform their jobs efficiently. It helps employers to design jobs ins such a
way that workers’ physical anilities and job demands are balanced.
¬ Work Practices: They are set ways of performing work. Work
practices were till now, determined by time and motion study which
determine standard time needed to complete a given job. A new technique
has now emerged, which if introduced, could rustically alter the work
practices in industrial undertakings. Called Maynard Operating Sequence
Technique (MOST), the technique uses a standard formula to list the motion
sequence ascribed in index values.

Environmental Factors
Environmental elements affect all activities of HRM, and job design is
no exception. The external factors that have a bearing on job design are
employee abilities and availability and social and cultural expectation.
¬ Employee Abilities and Availabilities: Efficiency consideration
must be balanced against the abilities and availabilities of the people who
are to do the work.
¬ Social and Cultural Expectations: Their were days when getting
a job was a primary consideration. The worker was prepared to work on any
job and under any working conditions. Not any more. Literacy, knowledge
and awareness among workers have improved considerably, so also their
expectations from jobs. Hence jobs must be designed to meet the
expectations of workers.

Behavioral Elements

HRM notes

Behavioral factors have to do with human needs and the necessity to

satisfy them. Higher-level needs are more significant in this context.
Individuals inspired by higher-level needs find jobs challenging and
satisfying which are high on the following dimensions:
¬ Feedback: Individuals must receive meaningful feedback about their
performance, preferably by evaluating their own performance and defining
the feedback.
¬ Autonomy: Autonomy is being responsible for what one does. It is
the freedom to control one’s responses to the environment.
¬ Use of Abilities: The job must be perceived by individuals as
requiring them to use abilities they value in order to perform the job
¬ Variety: By injecting variety into jobs, personnel specialists can
reduce errors caused by fatigue.

» Techniques of Job Design:

Job Enlargement: It involves expanding the number of tasks
or duties assigned to a given job. It is naturally opposite to work
simplification. Adding more tasks or duties to a job does not mean that new
skills and abilities are needed to perform it.
Job Enrichment: It seeks to improve both task efficiency and
human satisfaction by building into people’s job, quite specifically, greater
scope for personal achievements and recognition, more challenging and
responsible work, and more opportunity for individual advancement and
growth. An enriched job will have more responsibility and autonomy, more
growth opportunities.
Autonomous or Self-directed Teams: As was stated
above, job enrichment necessitates empowerment. Empowerment results
in self-directed work teams. A self-directed work team is an instant group of
employees who are responsible for a ‘whole’ work process or segment that
delivers a product or service to an internal or external customer. To varying
degrees, team members’ work together to improve their operations, handle
day-to-day problems, and plan and control their work.
High-Performance Work Design: It is a means of
improving performance in an environment where positive and demanding
goals are set. It starts from the principle of autonomous group working and
develops an approach which enables group to work effectively together in
situations were the rate of innovation is high. Operational flexibility is
important and there is, therefore, the need for employees to gain and apply
new skills quickly with minimum supervision.

» Objectives of Job Evaluation:

Following are the objectives of Job Evaluation:
1. To gather data and information relating to job description, job
specification and employee specification of various job in an
2. To compare the duties, responsibilities and demands of job with
that of other jobs.
3. To determine the hierarchy and place of various jobs in an
4. To determine the ranks or grades of various jobs.

HRM notes

5. To ensure fair and equitable wages on the basis of relative worth

or value of jobs. In other words equal wages are fixed to the fobs
of equal worth or value.
6. To minimize wage discrimination based on sex, age, caste,
religion, region, etc.

» Methods of Job Evaluation:

Job evaluation methods are of two categories-non-analytical
and analytical.
Non-analytical Methods:
Ranking and job-classification methods come under this category
because they make of detailed job factors. Each job is treated as a whole in
determining its relative ranking.
¬ Ranking Method: This is the simplest, the most expensive and
the most expedient method of evaluation. The evaluation committee
assesses the worth of each job on the basis of its title or on its contents, if
the latter is available. But the job is not broken down into elements or
factors. Each job is compared with others and its place is determined.
The method has several drawbacks. Job evaluation may be subjective
as the jobs are not broken into factors. It is hard to measure work jobs.
¬ Job-grading Method: As in the ranking method, the job-grading
method does not call for a detailed or quantitative analysis of job factors. It
is based on the job as a whole. The essential requirements of the job-
grading method are to frame grade descriptions to cover discernible
differences in degree of skill, responsibility and other job characteristics.
Job grades are arranged in order of their importance. Each succeeding
grade reflects a higher level of skill and responsibility, with less and less
Analytical Methods:
These include the point-ranking method and the factor-
comparison method.
¬ Point-Ranking Method: The system starts with selection of job
factors, construction of degrees of each factor, and assignment of points to
each degree. Different factors are selected for different jobs, which
accompanying differences in degrees and points.
The advantages of this method are:
1. The procedure adopted is systematic and can easily be explained to the
2. The method is simple to understand and easy to administer.
¬ Factor-Comparison Method: This method yet another approach
for job evaluation in the analytical group. Under this method, one begins
with the selection of factors, usually 5 of them-mental requirements, skill
requirements, and physical exertion, responsibility and job conditions.
These factors are assumed to be constant for all the jobs. Each factor is
ranked individually with other jobs. Then total point values are then
assigned to each factor. The worth of a job is then obtained by adding
together all the point values.

» Job Evaluation Process:

The job-evaluation process starts with defining objectives of
evaluation and ends with establishing wage and salary differentials.

HRM notes

(1) Objectives of Job


(2) Job Analysis

2(a) 2(b)
Job Description Job Specification


Wage Survey


1. Objectives: The main objective of job evaluation, as was studied

earlier, is to establish satisfactory wage and salary differentials. Job
analysis precedes the actual programme of evaluation.
2. Job Analysis: It provides job-related data which would be useful in
drafting job description and job specification.
a. Job description provides the information relating to duties and
b. Job specification provides information relating to the minimum
acceptable quality of an employee
3. Job Evaluation: A job-evaluation programme involves answering
several questions. The major ones are:
i. Which jobs are to be evaluated?
ii. Who should evaluate the job?
iii. What training do the evaluators need?
iv. How much time is involved?
v. What should be the criteria of evaluation?
vi. What methods of evaluation are to be employed?
4. Wage Survey: Now that the job hierarchy has been established
with the help of evaluation methods, it is time to fix wage and salary
differentials. Before fixing such differentials, the wage rate must be
ascertained. It is here that wage survey assumes relevance.
The first step in a wage survey is to select key jobs, the duties of
which are clearly defined, reasonably stable, and representative of all
levels of job. Thus, a sample of jobs is created. Secondly, a sample of firms
in the labour-market area must be chosen. The labour market for different
jobs can vary from local to regional to national in scope. With both samples
being selected, the final task is to obtain appropriate wage information,
taking care to ensure that the job comparisons being made are valid. Job
content, the varying qualities of personnel of these jobs, and the total

HRM notes

comparison programme must be carefully analyzed, compared, and

5. Employee Classification: The last phase in the job evaluation process
is to establish classification. Employee classification is the process of
assigning a job title to every employee in the organization.


» Meaning and Definition:
Recruitment is defined as, “a process to discover the sources of
manpower to meet the requirements of the staffing schedule and to
employ effective measures for attracting that manpower in adequate
numbers to facilitate effective selection of an efficient workforce.” Edwin B.
Flippo defined recruitment as “the process of searching for prospective
employees and stimulating them to apply for jobs in the organization.”
Those definitions can be analyzed by discussing the processes of
recruitment through systems approach.
Recruitment is the process of finding and attracting capable applicant
for employment. The process begins when new recruits are sort and ends
when their applications are submitted. The result is a pool of applicants
from which new employees are selected.

» Purpose and Importance of Recruitment:

The general purpose of recruitment is to provide a pool of
potentially qualified job candidates. Specially, the purposes are to:
i. Determine the present and future requirements of the organization in
conjunction with
personnel-planning and job-analysis activities.
ii. Increase the pool of job candidates at minimum cost.
iii. Help increase the success rate of the selection process by reducing the
number of
visibly, under qualified or overqualified job applicants.
iv. Help reduce the probability that job applicants, once recruited and
selected, will leave
the organization only after a short period of time.
v. Meet the organizations legal and social obligations regarding the
composition of its
vi. Begin identifying and preparing potential job applicants who will be
vii. Increase organizational and individual effectiveness in the short and
long term.
viii. Evaluate the effectiveness of various recruiting techniques and sources
for all types of
job applicants.
Recruitment represents the first contact that a company makes with
potential employees it is through recruitment that many individuals will
come to know a company and eventually decide whether they wish to work
for it. A well-planned and well-managed recruiting effort will result in high
quality applicants, whereas, a haphazard and piecemeal effort will result in
HRM notes

mediocre once. High-quality employees cannot be selected when better

candidates do not know of job openings, are not interested in working for
the company, and do not apply. The recruitment process should inform
qualified individuals about employment opportunities create a positive
image of a company, provide enough information about the jobs so that the
job applicants can make comparisons with their qualifications and their
interests, and generate enthusiasm among the best candidates so that
they will apply for the vacant positions.

» Factors Governing Recruitment:

Given its key role and external visibility, recruitment is
naturally subject to influence of several factors. These include external and
internal forces.
External Forces: Of particular importance is the supply and demand of
specific skills in the labour market. If the demand for a particular skill is
high relative to the supply, an extraordinary recruiting effort may be
When the unemployment rate in a given area is high the companies’
recruitment process may be simpler. The number of unsolicited applicants
is usually greater, and the increased size of the labour pool provides better
opportunities for attracting qualified applicants. On the other hand, as the
unemployment rates drops recruiting efforts must be increased and new
sources explored.
Labour-market conditions in a local area are of primary importance in
recruiting for most non-managerial, supervisory and middle-mgt. positions.
However, so far as recruitment for executive and professional positions are
concerned conditions of all India market are important.
Another external factor is political and legal considerations.
Reservation of jobs for SCs, STs, minorities, and other backward classes
(OBCs) is a political decision. The companies’ image also matters in
attracting large number of job seekers. Blue-chip companies’ attract large
number of applications. Often, it is not the money that is important. It is the
perception of the job seekers about the company that matters in attracting
qualified prospective employees.
Internal Factors: There are certain internal forces which deserve
consideration while recruiting personnel. One such internal factor is the
recruiting policy of the organization. Most organizations have a policy on
recruiting internally (from own employees) or externally (from outside the
organization).Generally, the policy is to prefer internal sourcing, as own
employees know the company well and can recommend candidates who fit
the organizations culture.
Another related policy is to have temporary and part-time employees.
An organization hiring temporary and part-time employees is in a less
advantageous position in attracting sufficient applications.
MNCs operating in our country prefer local citizens as they can
understand local languages, customs and business practices well.

HRM notes

A major internal factor that can determine the success of the

recruiting programme is whether or not the company engages in HRP.
Effective HRP greatly facilitates the recruiting efforts.
Size is another internal factor having its influence on the recruitment
process. An organization with one hundred thousand employee will find
recruiting less problematic than an organization with just one hundred
Cost of recruiting is yet another internal factor that has to be
considered. Recruiting cost are calculated per new higher and fig. is
considerable now-a-days. Recruiters must, therefore, operate within
budgets. Careful HRP and forethought by recruiters can minimize
recruitment costs. One cost-saving measure, for instance, is recruiting for
multiple job openings simultaneously. The best solution is to use proactive
personnel practices to reduce employee turnovers, thus, minimizing the
need for recruiting. Evaluating the quality, quantity and cost of recruitment
helps ensure that it is efficient and cost-effective.
Finally, an organization registering growth and expansion will have
more recruiting on hand than the one which finds its fortunes declining.

HRM notes

Personnel Job Employee

Planning Analysis Requisition

Recruitment Searching Applicant Potential

Job Planning Activation Screening To
Vacancies Pool Hires Selection
¬ Number “Selling”
¬ Types ¬ Message
¬ Media

Strategy and
Applicant Control
¬ Where
¬ How
¬ When

Recruitment Process

HRM notes

» Recruitment Process:
Recruitment refers to the process of identifying and attracting job
seekers so as to build a pool of qualified job applicants. The process comprises
five interrelated stages, viz; (i) planning (ii) strategy development, (iii)
searching, (iv) screening, and (v) evaluation and control. The ideal recruitment
programme is the one that attracts a relatively larger number of qualified
applicants who will survive the screening process & accept positions with the
organization, when offered. Recruitment programmes can miss the ideal in
many ways: by failing to attract an adequate applicant pool, by under/over
selling the organization, or by inadequately screening applicants before they
enter the selection process. Thus, to approach the ideal, individuals responsible
for the recruitment process must know how many and what types of employees
are needed, where and how to look for individuals with the appropriate
qualifications and interests, what inducement to use (or avoid) for various types
of applicant groups, how to distinguish applicants who are unqualified from
those who have a reasonable chance of success, & how to evaluate their work.
Recruitment Planning
The first stage in recruitment process is planning. Planning involves
the translation of likely job vacancies and information about nature of these jobs
into a set of objectives or targets that specify the (i) number and (ii) type of
applicants to be connected.
Number of contacts: Organization, nearly always, plan to attract more
applicants than they hire. Companies calculate yield (yRs) which express the
relationship of applicant inputs to outputs at various decision points. For
example, assume that an organization attempting to recruit sales people ran a
series of newspaper advertisements. The advertisement generated resumes
from 2000 applicants, of which 200 were judged to be potentially qualified (yR =
Type of Contacts: This refers to the type of people to be informed about
job openings. The type of people depends on the tasks and responsibilities
involved and the qualifications and experience expected. These details are
available through job description and job specification.
Strategy Development
Once it is known how many and what type of recruits are required,
serious consideration needs to be given to i) ‘make’ or ‘buy’ employees; ii)
techno logical sophistication of recruitment and selection devices; iii) geographic
distribution of labour markets comprising job seekers; iv) sources of recruitment;
and v) sequencing the activities in the recruitment process.
‘Make’ or ‘Buy’: Organizations must decide whether to hire less skilled
employees and invest on training and education programmes, or they can hire
skilled labour and professionals.
Technological Sophistication: The second decision in strategy
development relates to the methods used in recruitment and selection. This
decision is mainly influenced by the available technology. The advent of
computers has made it possible for employers to scan national and international
applicant qualifications.

» Sources of Recruitment:
International Recruitment

HRM notes

Internal recruitment seeks applicant for positions from those who

are currently employed. Internal sources include present employees, employee
referrals, former employees, and former applicants.
Present Employees: Promotions and transfers from among the present
employees can be a good source of recruitment. Promotion to higher positions
has several advantages. They are - (i) it is good public relations; (ii) it builds
morale; (iii) it encourages competent individuals who are ambitious; (iv) it
improves the probability of good selection, since information on the individual’s
performance is readily available; (v) it is cheaper than going outside to recruit;
(vi) those chosen internally are familiar with the organization; and (vii) when
carefully planned, promoting from within can also act as a training device for
developing middle-level and top level managers.
Employee Referrals: This can be a good source of internal recruitment.
Employees can develop good prospects for their families and friends by
acquainting them with the advantages of a job with the company, furnishing
cards of introduction, and even encouraging them to apply.
Previous Applicants: Although not truly an internal source, those who
have previously applied for jobs contacted by mail, a quick and inexpensive way
to fill an unexpected opening.
External Recruitment
External sources far outnumber the internal methods. Specifically,
source external to an organization are professional or trade associations,
advertisements, employment exchanges, college/university, institute placement
services, walk-ins and write-ins, consultants, contractors, displaced persons,
radio and television, acquisitions and mergers, and competitors.
Profession or Trade Associations: Many associations provide
placement services for their members. These services may consist of compiling
job seekers lists and providing access to members during regional or national
Advertisement: These constitute a popular method of seeking recruits as
many recruiters prefer advertisements because of their wide reach.
Want ads describe the job and the benefits, identify the employer, and tell
those who are interested and how to apply. They are the most familiar form of
employment advertising.
Employment Exchanges: Employment Exchanges have been set up all
over the country in deference to the provision of the Employment Exchanges
(Compulsory Notifications of Vacancies) Act, 1959. The act implies to all
industrial establishments having 25 workers or more each.
Campus Recruitment: Colleges, universities, research laboratories, sports
fields and institutes are fertile ground for recruiters, particularly the institutes. In
fact, in some companies, recruiters are bound to recruit a given number of
candidates from these institutes every year.
Walk-ins, Write-ins, and Talk-ins: The most common and least
expensive approach for candidates is direct applications in which job seekers
submit un solicited application letters or resumes. Direct applications can also
provide a pool of potential employees to meet future needs.
Consultants: ABC Consultants, Ferguson Associates, Human Resource
Consultants, Head Hunters, Batliboi and Company, Analytic Consultancy Bureau,
Aims Mgt. Consultants and The Search House are some among the numerous
recruiting agencies. These and other agencies in the profession are retained by
organizations for recruiting and selecting managerial and executive personnel.

HRM notes

Acquisitions and Mergers: Another method of staffing organizations is a

result of the merger or acquisitions process.

» Evaluation and Control Of Recruitment:

Evaluation and control is necessary as considerable costs are
incurred in the recruitment process. The costs generally incurred are:
1. Salaries for recruiters.
2. Mgt. and Professional time spent on preparing job description, job
specifications, advts., agency liaison, and so forth.
3. The costs of advts. r other recruitment methods, i.e., agency fees.
4. Cost of producing supporting literature.
5. Recruitment overheads and administrative expenses.
6. Costs of overtime and outsourcing while the vacancies remain unfilled.
7. Cost of recruiting unsuitable candidates for the selection process.
Questions should always be asked as to whether the recruitment methods
used are valid and whether the recruitment process itself is effective.
Evaluation of Recruitment Process
The recruitment process has the objective of searching for and obtaining
applications from job seekers in sufficient numbers and quality. Keeping the
objective in mind, the evaluation might include:
1. Return rate of applications sent out.
2. Number of suitable candidates for selection.
3. Retention and Performance of the candidates selected.
4. Cost of the recruitment process.
5. Time lapsed data.
6. Comments on image projected.

Evaluation of Recruitment Methods

The evaluation of recruitment methods might include:
1. Number of initial enquires received which resulted in completed
2. Number of candidates at various stages of the recruitment and
selection process, especially those short listed.
3. Number of candidates recruited.
4. Number of candidates retained in the organization after 6 months.

» Philosophies of Recruiting:
The traditional philosophy of recruiting has been to get as many
people to apply for a job as possible. A large number of job seekers waiting in
queues would make the final selection difficult, often resulting in wrong
selections. Job dissatisfaction and employee turnover are the consequences of
A persuasive agreement can be made that matching the needs of the
organization to the needs of the applicants will enhance the effectiveness of the
recruitment process. The result will be a workforce which is likely to stay with
the organizations longer and performance at a higher level of effectiveness. Two
approaches are available to bring about this match. They are i) realistic job
preview (JRP), ii) job compatibility questionnaire (JCQ).
Realistic Job Previews (RJP)

HRM notes

RJP provides complete job-related information, both +ve and -ve, to

the applicants. The information provided will help job seekers to evaluate
the compatibility among the jobs and their personal ends before hiring
decisions are made.
Research on realistic recruiting shows a lower rate of employee
turnover in case of employees recruited through RJPs, particularly for more
complex jobs and higher level of job satisfaction and performance, at the initial
stages of employment.
Job Compatibility Questionnaire (JCQ)
The JCQ was developed to determine whether an applicants preference for
work match the characteristics of the job. The JCQ is designed to collect
information on all aspects of a job which have a bearing on employee
performance, absenteeism, and turnover and job satisfaction. The underlying
assumption of the JCQ is that the greater the compatibility between an
applicants preferences for a job and the characteristics of the job as perceived
by the job seeker, the greater the probability of employee effectiveness and
longer the tenure.

» Role of Selection:
The role of selection in an organization’s effectiveness is crucial for
at least, two reasons. First, work performance depends on the individuals. The
best way to improve performance is to hire people who have the competence
and the willingness to work.
Second, cost incurred in recruiting and hiring personnel speaks volumes
about the role of selection.
Costs of wrong selection are much greater,
In organization with wrong selection incurs these types of costs. The first
type is incurred while the person is employed. This can be the result of
production or profit, losses, damaged co. reputation, accidents due to
negligence, absenteeism and the like. The second type of cost is associated with
the training, transfer or terminating the services of the employee. Costs of
replacing an employee with fresh one-costs of hiring, training and replacement-
constitute the third type of cost. Generally, the more important the job, the
greater the cost of selection error.

» Organization for selection:

Selection is now centralized and is held by the human resource
department. This arrangement is preferable because of the following
1. It is easier for the applicant because they can their applications to a
single centralized department/agency.
2. It facilitates contact with applicants because issues pertaining to
employment can be cleared through one central location.
3. It helps operating managers to concentrate on their operating
responsibilities. This is especially helpful during peak hiring periods.
4. It can provide for better selection because hiring is done by specialist
trained in staffing techniques.
5. The applicant is better assured of consideration for a greater variety of
6. Hiring cost may be cut because duplication of effort is minimized.

HRM notes

7. With increased government regulations on the selection process, it is

important that people who know about these rules handle a major part
of the selection process.

» Selection Process:
Selection is a long process, commencing from the preliminary
interview of the applicants and ending with the contract of employment.
Environmental Factors Effecting Selection: Selection is influenced by
several factors. More prominent among them are supply and demand and of
specific in the labour market, unemployment rate, labour-market conditions,
legal and political considerations, company’s image, company’s policy, HRP, and
cost of hiring. The last three constitute the internal environment and the
remaining form the external environment of the selection process.
Preliminary Interview: the purpose of a preliminary interview is scrutiny
of applications, that is, elimination of unqualified applications.
Selection Tests: Job seekers who pass the screening and the preliminary
interview are called for tests. Different type of tests may be administered,
depending on the job and the company. Generally, tests are used to determine
the applicant’s ability, aptitude and personality. Ability tests. (also called
achievement tests) assist in determining how well an individual can perform
tasks related to the job. An excellent illustration of this is the typing test given to
a prospective employee for secretarial job. An aptitude test helps determine a
person’s potential to learn in a given area.
Personality tests are given to measure a prospective employee’s
motivation to function in a particular working environment.

Employee Interview: The next step in the selection process is

employment interview. Interview is a formal, in-depth conversation conducted to
evaluate the applicant’s acceptability. It is considered to be an excellent
selection device. Its popularity stems from its flexibility. Interview can be
adopted to unskilled, skilled managerial and professional employees. It allows a
two-way exchange of information, the interviewers learn about the applicant,
and the applicant learns about the employer. The employment interview can be
(i) one-to-one (ii) sequential (iii) panel.
Reference and Background Checks: Many employers request names,
addresses, and telephone numbers of references for the purpose of verifying
information and, perhaps, gaining additional background information on an
applicant. Although listed on the applicant form, references are not usually
checked until an applicant has reached the fourth stage of a sequential selection
process. Organizations normally seek letters of reference or telephone
references. The latter is advantageous because of its accuracy and low cost. The
telephone reference also has the advantage of soliciting immediate, relatively
candid comments, and attitudes can sometimes be inferred from hesitations and
inflections in speech.
Selection Decision: After obtaining information through the preceding
steps, selection decision-the most critical of all the steps-must be made. The
other stages in the selection process have been used to narrow the number of
candidates. The final decision has to be made from the pool of individuals who
pass the tests, interviews and reference checks.
Physical Examination: After the selection decision and before
the job offer is made, the candidate is required to undergo a physical

HRM notes

fitness test. A job offer is, often, contingent upon the candidate being
declared fit after the physical examination.
Job Offer: Job offer is made through a letter of appointment. Such a letter
generally contains a date by which the appointee must report on duty. The
appointee must be given reasonable time for reporting. This is particularly
necessary when he or she is already in employment, in which case the
appointee is required to obtain a relieving certificate from the previous
Contracts of Employment: There is a need of preparing contract of
employment. Contracts for employment serve many useful purposes. Such
contracts seek to restrain job-hoppers, to protect knowledge and information
that might be vital to a company’s health bottom-line, and to prevent
competitors from poaching highly valued employees.
Concluding the Selection Process: Contrary to popular perception, the
selection process will not end with executing the employee contract. There is
another step-a more sensitive one-reassuring those candidates who have not
been selected. Such candidates must be told that they were not selected, not
because of any serious deficiencies in their personalities, but because their
profiles did not match the requirements of the organization. They must be told
that those who were selected were done purely on relative merit.
Evaluation of Selection Programme: The broad test of effectiveness of
the selection process is the quality of the personnel hired. An organization must
have competent and committed personnel. The selection process, if properly
done, will ensure availability of such employees. How to evaluate the
effectiveness of a selection programme? A periodic audit is the answer. Audit
must be conducted by people who work independent of the HR department.

» Barriers to Effective Selection:

The main objective of selection is to hire people having competence
and commitment. This objective is often defeated because of certain barriers.
The impediments which check effectiveness of selection are perception,
fairness, validity, reliability and pressure.
Perception: Our inability to understand others accurately is probably the
most fundamental barrier to selecting the right candidate.
Selections demand an individual or a group of people to asses and
compare the respective competencies of others, with the aim of choosing the
right persons for the jobs. But our views are highly personalized. We all perceive
the world differently. Our limited perceptual ability is obviously a stumbling
block to the objective and rational selection of people.
Fairness: Fairness in selection requires that no individual should be
discriminated against on the basis of religion, race, caste or gender. But the low
numbers of women and other less-privileged sections of the society in middle
and senior mgt. positions and open discrimination on the basis of age in job
advts. and in the selection process would suggest that all the efforts to minimize
inequity have not been very effective.
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 will not. However, a validated
test does not predict job success accurately. It can also increase possibility of

HRM notes

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 precision.
Pressure: 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. Appointments to public
sector undertakings generally take place under such pressures.

» New Methods of Selection:

In recent years, new methods of selection have been found out by
HR specialists. These approaches are deemed to be alternatives to the
traditional methods of selection.
Three interesting alternatives are participative selection, employee leasing
and assessment centre. Participative selection means the subordinates
participate in the selection of their co-workers and supervisors. The idea is that
such participation will improve quality, increase support for the selected
supervisors and co-workers, and improve employee morale. In employee
leasing, the client company leases employees from a third party, not on
temporary basis, but rather are leased as full-time, k\long-term help. An
interesting feature of this method is that the client company needs to perform
such personnel activities as hiring, compensation or record keeping. Employees
already working elsewhere are leased. They are not directly employed by the
company where they are working. The advantages of employee leasing are
significant. The client is relieved of many administrative burdens, as well as the
need to employ specialized personnel employees. Further, employees not
recruited by one client are sent to another client company for employment. A
very effective new method is assessment centre. Candidates are selected not by
a single method but by a battery of tests and methods viz, panel interviews,
group discussions, role plays, case studies, in-basket exercise, focused
behavioral interview.


» Meaning and Definition:
Training refers to the methods used to give new or present
employees the skills they need to perform their jobs. Training might thus mean
showing a machinist how operate his new machine, a new salesperson how to
sell her firm’s product, or a new supervisor how to interview and appraise
Training’s focus has broadened in the past few years. Training used to focus
mostly on teaching technical skills, such as training assemblers to solder wires
or teachers to device lesson plans. Employees today need skills(and thus
training) in team building, decision making, and communication, as well as
technological and computer skills.

» Nature of Training and Development:

Training and development is … it is an attempt to improve current
or future employee performance by increasing an employee’s ability to perform
through learning, usually by changing the employee’s attitude or increasing his
or her skills or knowledge. The need for training and development is determined
by the employee’s performance deficiency, computed as follows:
Training and development need= Standard performance- Actual performance.

HRM notes

Development refers to those learning opportunities designed to help

employees grow. Development is not primarily skills-oriented. Instead, it
provides general knowledge and attitudes which will be helpful to employees in
higher positions. Efforts towards development often depend on personal drive
and ambition

» Objectives of training and Development:

The HR formulates the following training objectives in keeping with
the Company’s goals and objectives:
a) To prepare the employee both new and old to meet the present as
well as the changing requirements of the job and the organization.
b) To prevent obsolescence
c) To impart the new entrance the basic knowledge and skill they need
for an intelligent performance of definite job.
d) To prepare employee’s for higher level tasks.
e) To assist employee’s to function more affectively in their present
positions by exposing them to the latest concepts, information and
techniques and developing their skills they will need in their particular
f) To build up a second line of competent officers and prepare them to
occupy mare responsible positions
g) To broaden the mind of senior managers by providing them with
opportunities for an interchange of experiences within and outside with a
view to correcting the narrowness of outlook that may arise from over
h) To develop the potentialities of the people for the next level job.
i) To ensure smooth and efficient working of a department
j) To ensure economical output of the required quality.
k) To promote individual and collective moral, a sense of responsibility,
co-operative attitudes and good relationships.

» Training Process:

Organizational Objectives
and strategies

Assessment of Training

Establishment of
Training Goals

Devising Training

Implementation of
Evaluation of Results
Training Programme
HRM notes

Organizational Objectives and Strategies: The first step in the training

process in an organization is planning i.e. the assessment of its objectives and
strategies. What business are we in? At what level of quality do we wish to
provide this product or service? Where do we want to be in the future? It is only
after answering these and their related questions that the organization must
assess the strengths and weakness of its human resources.
Needs Assessment: Needs assessment diagnoses present problems and
future challenges to be met through training and development. Needs
assessment occurs at two levels-group and individual. An individual obviously
needs training when his or her performance falls short of standards, that is,
when there is performance deficiency. Inadequacy in performance may be due
to lack of skill or knowledge or any other problem. The problem of performance
deficiency caused by absence of skills or knowledge can be remedied by
Assessment of training needs occurs at the group level too. Any change in
the organization’s strategy necessitates training of groups of employees. For
example, when the organization decides to introduce a new line of products,
sales personnel and production workers have to be trained to produce, sell and
service the new products. Training can also be used when high scrap or accident
rates, low morale and motivation, or other problems are diagnosed.
Training and Development Objectives: Once training needs are
assessed, training and development goals must be established. Without clearly-
set goals, it is not possible to design a training and development programme
and, after it has been implemented, there will be no way of measuring its
effectiveness. Goals must be tangible, verifiable, and measurable. This is easy
where skills training is involved. Behavioral objectives like attitudinal changes
can be more difficult to state. Nevertheless, clear behavioral standards of
expected results are necessary so that the programme can be effectively
designed and results can be achieved.

Designing Training and Development Programme: Every training and

development programme must address certain vital issues- i) who participates
in the programme? ii) who are the trainers? iii) what methods and techniques
are to be used for training? iv) what should be the level of training? v) what
learning principles are needed? vi) where is the programme conducted?
Implementation of the Training Programme: Once the training
programme has been designed, it needs to be implemented. Implementation is
beset with certain problems. In the first place, most managers are action-
oriented and frequently say they are too bust to engage in training efforts.
Secondly, availability of trainers is a problem. In addition to possessing
communication skills, the trainers must know the company’s philosophy, its
HRM notes

objectives, its formal and informal organization, and the goals of the training
programme. Training and development requires higher degree of creativity than,
perhaps, any other personnel speciality.
Scheduling training around the present work is another problem. How to
schedule training without disrupting the regular work? There is a problem of
record keeping about the performance of trainee during his or her training
period. This information may be useful to evaluate the program of the trainee in
the company.
Programme implementation involves action on the following lines:
1. Deciding the location and organizing training other facilities.
2. Scheduling the training programme.
3. Conducting the programme.
4. Monitoring the progress of trainees.
Evaluation of the Programme: The last stage in the training and
development process is the evaluation of results.

» Impediments to Effective Training:

There are many impediments which can make a training
programme ineffective. Following are the major hindrances:
¬ Management Commitment is Lacking and Uneven: Most
companies do not spend money on training. Those that do tend to concentrate
on mgrs., technicians and professionals. The rank-and-file workers are ignored.
This must change, for, as a result of rapid technological change, combined with
new approaches to organizational design and production mgt., workers are
required to learn 3 types of new skills: i) the ability to use technology, ii) the
ability to maintain it, and iii) the ability to diagnose system problems. In an
increasingly competitive environment, the ability to implement rapid changes in
products and technologies is often essential for economic viability.
¬ Aggregate Spending on Training is Inadequate: Companies
spend minuscule proportions of their revenues on training. Worse still, budget
allocation to training is the first item to be cut when a company faces a financial
¬ Educational Institutions Award Degree but Graduates Lack
Skills: This is the reason why business must spend must sums of money to
train workers in basic skills. Organizations also need to train employees in
multiple skills. Managers, particularly at the middle level, need to be retrained in
team-playing skills, entrepreneurship skills, leadership skills and customer-
orientation skills.
¬ Large-scale Poaching of Trained Workers: Trained work-force
is in great demand. Unlike, Germany, where local business groups pressurize
companies not to poach on another company’s employees, there is no such
system in our country. Companies in our country, however, insist on employees
to sign ‘bond of tenure’ before sending them for training, particularly before
deputing them to undergo training in foreign countries.
¬ No Help to Workers Displaced because of Downsizing:
Organizations are downsizing and de-layering in order to trim their work-forces.
The government. should set apart certain fund from the National Renewal Fund
for the purpose of retaining and rehabilitating displaced workers.
¬ Employees and B Schools Must Develop Closer Ties: B
Schools are often seen as not responding to labour-market demands. Business is
seen as not communicating its demands to B Schools. This must change.

HRM notes

Businessmen must sit with Deans and structure the courses that would serve
the purpose of business better.
¬ Organized Labour can Help: Organized labour can play a positive
role in imparting training to workers. Major trade unions in our country seem to
be busy in attending to mundane issues such as bonus, wage revision,
settlement of disputes, and the like. They have little time in imparting training to
their members.

» Importance Of Training and Development:

Training and development programmes help remove performance
deficiencies in employees. This is particularly true when- i) the deficiency is
caused by a lack of ability rather than a lack of motivation to perform, ii) the
individuals involved have the aptitude and motivation needed to learn to do the
job better, and iii) supervisors and peers are supportive of the desired
There is greater stability, flexibility, and capacity for growth in an
organization. Training contributes to employee stability in at least two ways.
Employees become efficient after undergoing training. efficient employees
contribute to the growth of organization. Growth renders stability to work-force.
Further, trained employees tend to stay with the organization. They seldom
leave the company. Training makes the employees versatile in operations. All
rounders can be transferred to any job. Flexibility is therefore ensured. Growth
indicates prosperity, which is reflected in increased profits from year to year.
Who else but well-trained employees can contribute to the prosperity of an
Accidents, scrap and damage to machinery and equipment can be avoided
or minimized through training. Even dissatisfaction, complaints, absenteeism,
and turnover can be reduced if employees are trained well.
Further needs of employees will be met through training and development
programmes. Organizations take fresh diploma holders or graduates as
apprentices or mgt. trainees. They are absorbed after course completion.
Training serves as an effective source of recruitment. Training is an investment
in human resources with a promise and it serves as an effective source of
recruitment. Training is an investment in HR with a promise of better returns in

» Evaluation Of Training Programme:

The process of training evaluation has been defined as “any attempt
to obtain information on the effects of training programme, and to assess the
value of training in the light of that information.” The various methods of
training evaluation are:
i) Immediate assessment of trainees’ reaction to the programme.
ii) Trainees’ observation during training programme.
iii) Knowing trainees’ expectations before the training programme and collecting
their views regarding the attainment of the expectations after training.
iv) Seeking opinion of trainees’ superior regarding his/her job performance and
behavior before and after training.
v) Evaluation of trainees’ skill level before and after training programme.
vi) Measurement of improvement in trainees on the job behavior.
vii) Examination of testing system before and after sometime of the training
viii) Measurement of trainees’ attitude after training programme.
HRM notes

ix) Cost-benefit analysis of the training programme,.

» Meaning and Definition:
Performance appraisal is:
“it is the systematic evaluation of the individual with respect to his/her
performance on the job and his/her potential for development.”
“a formal, structured system of measuring and evaluating an employee’s
job, related behaviors and outcomes to discover how and why the employee is
presently performing on the job and how the employee can perform more
effectively in the future so that the employee, organization, and society all
The second definition includes employees’ behavior as part of the

» Objective Of Performance Appraisal:

Data relating to performance assessment of employees are
recorded, stored, and used for several purposes. The main purpose of employee
assessment are:
1. To effect promotions based on competence and performance.
2. To confirm the services of probationary employees upon their
completing the probationary
period satisfactorily.
3. To assess the training and development needs of employees.
4. To decide upon a pay raise where regular pay scales have not been
5. TO let the employees know where they stand in so far as their
performance is concerned and to assist them with constructive criticism
and guidance for the purpose of their development.
6. Finally, performance appraisal can be used to determine whether
programmes such as selection, training, and transfers have been
effective or not.

» Appraisal Process:
The Performance Appraisal Process

Objectives of
Performance Appraisal

Establish Job

Design an
Appraisal Programme


Use appraisal Data for
Appraisal Purposes
HRM notes

1. Objectives of Appraisal: Objectives of appraisal, as stated above,

include effecting promotions and transfer, assessing training needs, awarding
pay increases, and the like. The emphasis in all these is to correct the problems.
These objectives are appropriate as long as approach in appraisal is individual.
Appraisal, in future, would assume systems orientation. In the systems
approach, the objectives of appraisal stretch beyond the traditional ones.
In the systems approach appraisal aims at improving the performance,
instead of merely assessing it.
2. Establish Job Expectations: The second step in appraisal process is to
establish job expectations. This includes informing the employees what is
expected from him or her on the job. Normally, a discussion is held with his or
her superior to review the major duties contained in the job description.
individuals should not be expected to begin the job until they understand what
is expected of them.

3. Design the Appraisal Programme: Designing the appraisal programme

poses several questions which needs answers. They are, i) Formal versus
informal appraisal; ii) Whose performance is to be assessed? iii) Who are the
raters? iv) What problems are encountered? v) How to solve the problems?
vi) What should be evaluated? vii) When to evaluate? viii) What methods of
appraisal are to be used?
4. Performance Interview: Performance interview is another step in the
appraisal process. once appraisal has been made of employees, the raters
should discuss and review the performance with the ratees, so that they will
receive feedback about where they stand in the eyes of superiors. feedback
is necessary to effect improvement in performance, especially when it is
inadequate. specifically, performance interview has three goals: i) to change
the behavior of employees who’s performance does not meet organizational
requirements or their own personal goals, ii) to maintain the behavior of
employees who perform in an acceptable manner, and iii) to recognize
superior performance behaviors so that they will be continued.
5. Use of Appraisal Data: The final step in the evaluation process is the use
of evaluation data. the data and information generated through performance
evaluation must be used by the HR department. The data and information will
be useful in the following areas of HRM:
a. Remuneration administration.
b. Validation of selection programmes.
c. Employee training and development programmes.
d. Promotion, transfer and lay-off decisions.
e. Grievance and discipline programmes.
f. HR planning.

HRM notes

» Methods of Performance Appraisal:

The most commonly used appraisal techniques:
1. Essay appraisal
2. Graphic rating scale
3. Field review
4. Forced-choice rating
5. Critical incident appraisal
6. Mgt.-by-objectives approach
7. Work-standards approach
8. Ranking Methods
9. Assessment Centers
1. Essay Appraisal: In its simplest form, this technique asks the rater to
write a paragraph or more covering an individuals strength, weakness,
potential & so on. In most selection situations, particularly those involving
professional, sales, or managerial positions, essay appraisals from former
employers, teachers, and our associates carry significant weight. The
assumption seems to be that an honest & informed statement-either by
word of mouth or in writing-form someone knows a man well, is fully as
valid as more formal & more complicated methods.
The biggest drawback to essay appraisal is their variability in length
& content. Moreover, since different essays touch on different aspects of a
mans performance or personal qualifications are difficult to combine or
2. Graphic rating scale: This technique may not yield the depth of an
essay appraisal, but it is more consistent & reliable. Typically, a graphic
scale assesses a person on the quality & quantity of his work (is he
outstanding, above average, average or unsatisfactory?) & on a variety of
other factors that vary with the job but usually include personal traits like
reliability & cooperation. It may also include specific performance items
like oral & written communication.
3. Field review: When there is reason to suspect rather bias, when some
raters appear to be used in higher standards than others, or when
comparability of ratings is essential, essay or graphic ratings are often
combined with a systematic review process. The field review is one of
several techniques for doing this. A member of the personnel or central
administrative staff meets with small groups of raters from each
supervisory unit & goes over each employees rating with them to (a)
identify areas of inter-rater disagreement, (b) help the group arrive at a
consensus, & (c) determine that each rater conceals the standards
This group-judgment technique tends to be more fair & more valid
than individual ratings & permits the central staff to develop an awareness
of the varying degrees of leniency or severity-as well as bias-exhibited by
raters in different departments. On the negative side, the process is very
time consuming.
4. Forced-choice rating: Like the field technique, this technique was
developed to reduce bias & establish objective standards of comparison
between individuals, but it does not involve the intervention of a third
party. Although there are many variations of this method, the most
common one asks raters to choose from among groups of statements
those which best fit the individual being rated & those which least fit in.
The statements are then rated or scored, very much the way the
HRM notes

psychological test is scored. People with high scores are, by definition, the
better employees; those with low scores are the poorer ones. Since the
rater does not know what the scoring rates for each statement are, in
theory at least, he cannot play favorites. He simply describes his people, &
someone in the personal dept. applies the scoring rates to determine who
gets the best rating.
5. Critical incident appraisal: The critical incident technique looks like a
natural to some people for performance review interviews, because it
gives a supervisor actual factual incidents to discuss with an employee.
Supervisors are asked to keep a record, a “little black book,” on each
employee & to record actual incidents of positive or negative behavior.
The supervisor sets the standards if they seem un fair to a
subordinate, might he not be more motivated if he at least some say in
setting, or at least agreeing to, the standards against which he is judged?
6. Management by Objectives: It should be noted, however, that when
MBO is applied at lower organizational levels, employees do not always
want to be involved in their own goal setting. As Arthur N. Turner & Paul R.
Lawrence discovered many do not want self-direction or autonomy. As a
result, more coercive variations of MBO are becoming increasingly
common, & some critics see MBO drifting into a kind of manipulative form
of management in which pseudo-participation substitutes for the real
thing. Employees are consulted, but management ends up imposing its
standards & its objectives.
7. Work-standards approach: Instead of asking employees to set
their own performance goals, many organizations set measured daily
work standards technique establishes work improving productivity.
When realistically used, it can make possible an objective & accurate
appraisal of the work of employees & supervisors.
To be effective, the standards must be visible & fair. Hence a good deal of
time is spent observing employees on the job, simplifying & improving the
job where possible, & attempting to arrive at realistic output standards.
8. Ranking methods: For comparative purposes, particularly when it is
necessary to
compare people who work for different supervisors, individual
statement, ratings, or appraisal forms are not particularly useful.
Instead, it is necessary to recognize that comparisons involve as
overall subjective judgment to which a host of additional facts &
impressions must somehow be added. There is no single form or way
to do this.
Comparing people in different units for the purpose of, say,
choosing a service supervisor or determining the relative size of
salary increases for different supervisors, requires subjective
judgment, not statistic. The two most effective methods are
alternation ranking & paired comparison ranking.
Alternation ranking: In this method, the names of employees are
listed on the left-hand side of a sheet of paper-preferably in random
order. If the rankings are for salary purposes a supervisor is asked to
choose the “most valuable” employee on the list, cross his name off,
& put it at the top of the column on the right-hand side of the sheet.
Next, he selects the “least valuable” employee on the list, crosses
HRM notes

his name off, & puts it at the bottom of the right-hand column. The
ranker then selects the “most valuable” person from the remaining
list, crosses his name off & enters it below the top name on the
right-hand list, & so on.
Period-comparison ranking: This technique is probably just as accurate as
alternation ranking & might be more so. But with large numbers of
employees it becomes extremely time consuming & cumbersome.
To illustrate this method, let us say we have 5 employees: Mr.
Abbott, Mr. Barnes, Mr. Cox, & Mr. Eliot. We list their name on the
left-hand side of the sheet. We compare Abbott with Barnes on
whatever criterion we have chosen, say, present value to the
organization. If we feel Abbott is more valuable than Barnes, we put
a tally beside Abbott’s name. We then compare Abott with Cox, with
Drew & with Eliot. The process is repeated for each individual. The
man with the most tallies is the most valuable person, at least in the
eyes of the rater; the man with no tallies at all is regarded as the
least valuable person.
9. Assessment centers: Typically, individuals from different department
are brought together to spend two or three days working on individual & group
assignments similar to ones they will be handling if they are promoted. The
pooled judgment of observers-sometimes derived by period comparison or
alternation ranking-leads to an order of-merit ranking for each participant. Less
structured, subjective judgments are also made.


» Organizational Strategy & Performance Appraisal:
The performance-appraisal system serves many organizational objectives
& goals. Besides encouraging high levels of performance, the evaluation system
is useful in identifying employees with potential, rewarding performance
equitably, & determining employee needs for development. These are all the
activities that should support the organizations strategic orientation. Although
these activities are clearly instrumental in achieving corporate plans & long-
term growth, typical appraisal systems in most organizations have been focused
on short-term goals.
From the strategic mgt. point of view, organizations can be grouped into 3
categories- defenders, prospectors, & analyzers. Performance appraisal has
definite roles in all 3 strategies.
Typically, defenders have a narrow & relatively stable product-market
domain. Because of this narrow focus, these organizations seldom need to make
major adjustments in technology, structure or methods of operations. They
devote primary attention to improving the efficiency of their existing operations.
Because of the emphasis on skill building within the organization, successful
defenders us performance appraisal as a means for identifying training needs.
Performance appraisal is usually more behavior oriented. Finally, the focus is
often on comparing individual or group performance with the previous year’s
Organizations with a prospector strategy continuously search for different
product & market opportunities. In addition, these organizations regularly
experiment with potential responses to new & emerging environmental trends.

HRM notes

Prospectors are often the harbingers of change. Because of the emphasis on

skills identification & acquisition of human resources from external sources, as
opposed to skills building within the organization, prospectors often use the
performance appraisal as a means of identifying staffing needs. The emphasis is
on results. Finally, the focus is on division & corporate performance evaluation
as they compare with other companies during the same evaluation period.
Organizations with an analyzer strategy operate in 2 types of product
market domains. One domain is stable while the other is changing. In their more
innovative areas, managers watch their competitors closely & rapidly adopt the
ideas that appear promising. In general, analyzers use cost-effective
technologies for stable products & project or matrix technologies for new
products. Analyzers tend to emphasize both skill building & skill acquisition &
employ extensive training programmes. Thus, these organizations attempt to
identify birth training as well as staffing needs. The appraisal systems are
considered at the individual, group & divisional levels. Finally, successful
analyzers have a tendency to examine current performance with past
performance within the organization. Cross-sectional comparisons (comparisons
among companies) may also occur.

» Edward Deming on Performance Appraisal:

Deming is opposed to employees assessment, because it:
1. Rewards people for manipulating the system rather than improving it,
2. Is often self-defining,
3. Is consistent with team-work,
4. Acts as a substitute for proper management, &
5. Is inherently unfair.

His alternatives to performance appraisal are:

1. Meticulous selection of leaders.
2. Educating workers about their obligations, & improved training &
education after selection,
3. Getting leaders to function as colleagues rather than as judges,
4. Subordinate performance to be assessed using statistical data,
5. Three to four interviews annually, with subordinates aimed at support &
encouragement, &
6. Accommodation to lone workers.

» Theory of Remuneration:
Three theories are – reinforcement & expectancy theories, equity theory &
agency theory.
Reinforcement & Expectancy Theory: The reinforcement theory
postulates that a behavior which has a rewarding experience is likely to be
repeated. The implications for remuneration is that high employee performance
followed by a monetary reward will make future employee performance more
likely. By the same token, a high performance not followed by a reward will
make its recurrence unlikely in future. The theory emphasizes the importance of
a person actually experiencing the reward.

HRM notes

Equity Theory: Adams’s equity theory points that an employee who perceives
inequity in his or her rewards seeks to restore equity. The theory emphasizes
equity in pay structure of employees’ remuneration.
Agency Theory: The agency theory focuses on the divergent interests &
goals of the organizations stakeholders & the way that employee remuneration
can be used to align these interests & goals. Employers & employees are the
two stakeholders of a business unit, the former assuming the role of principals &
the latter the role of agents. The remuneration payable to employees is the
agency cost. It is natural that the employees expect high agency costs while the
employers seek to minimize it. The agency theory says that the principal must
choose a contracting scheme that helps align the interest of the agents with the
principal’s own interests. These contracts can be classified as either behavior-
oriented (e.g. merit pay) or outcome-oriented (e.g. stock option schemes, profit
sharing, & commission).

» Factors Influencing Employee Remuneration:

A number of factors influence the remuneration payable to
employees. They can be categorized into i) external & ii) internal factors.
External Factors
Factors external to an organization are labour market, cost of living, labour
unions, government legislations, the society, & the economy.
Labour Market: Demand for & supply of labour influence wage & salary
fixation. A low wage may be fixed when the supply of labour exceeds the
demand for it. A higher wage will have to be paid when the demand exceeds
supply, as in the case of skilled labour.
Going rate of pay is another labour-related factor influencing employee
remuneration. Going rates are those that are paid by different units of an
industry in a locality & by comparable units of the same industry located
Productivity of labour also influences wage fixation. Productivity can arise
due to increased effort of the worker, or as a result of the factors beyond the
control of worker such as improved technology, sophisticated machines &
equipment, better management.
Cost of Living: Next in importance to labour market is the cost of living.
A rise in cost of living is sought to be compensated by payment of dearness
allowances, basic pay to remain undisturbed.
Labour Unions: The presence or absence of labour organizations often
determines the quantum of wages paid to employees. Employers in non-
unionized factories enjoy the freedom to fix wages & salaries as they please. An
individual non-unionized company may be willing to pay more to its employees if
only to discourage them from forming one.
Labour Laws: We have a plethora of labour laws at the central as well at
the state levels. Some of the central laws which have a bearing on employee
remuneration are the Payment of Wages Act, 1936; the Minimum Wages act,
1948; the Payment of Bonus Act, 1965; Equal Remuneration Act, 1976; & the
Payment of Gratuity Act, 1972. The Payment of Wages Act was passed to
regulate payment of wages to certain classes of persons employed in the
industry. The Minimum Wages Act enables the central & state government to fix
minimum rates of wages payable to employees in sweated industries. The Equal
Remuneration Act provides for payment of equal remuneration to men & women
workers for same or similar work.

HRM notes

Society: Remuneration paid to employees is reflected in the prices fixed

by an organization for its goods & services. For this reason, the consuming
public is interested in remuneration decisions.
The Economy: The last external factor that has its impact on wage &
salary fixation is the state of economy. While it is possible for some
organizations to thrive in recession, there is no question that economy affects
remuneration decisions. For example, a depressed economy will probably
increase the labour supply. This, in turn should serve to lower the going wage

The Internal Environment

Among the internal factors which have an impact on pay structure are the
company’s strategies, job evaluation, performance appraisal, & the worker
himself or herself.
Business Strategy: The overall strategy which a company pursues determines
the remuneration to its employees. Where the strategy of the enterprise is to
achieve rapid growth, remuneration should be higher than what competitors
pay. Where the strategy is to maintain & protect current earnings, because of
the declining fortunes of the company, remuneration level needs to be average
or even below average.
Job Evaluation & Performance Appraisal: Job evaluation helps establish
satisfactory wage differentials among jobs. Performance appraisal helps award
pay increases to employees who show improved performance.
The Employee: Several employee-related factors interact to determine his or
her remuneration. These include performance, seniority, experience & potential.
Performance is always rewarded with pay increase. Rewarding
performance motivated the employees to do better. Experience makes an
employee gain valuable insights & should therefore be rewarded. Potential is
useless if it is never realized. Yet, organizations do pay some individuals on their

» Linkage of Remuneration Strategy with Business

Remuneration plans, like any other HR activity, must become an
input to formulating a business strategy. Wage & salary plans must derive from
an assessment of what must be paid to attract & retain the right people, what
the organization can afford, & what will be required to meet the organization’s
strategic goals.

Business Strategy Marhet Position Remuneration Blend of

& Maturity Strategy
Invest to grow Merging or growth Stimulate etrepre- High
cash with
Rapidly neurialism above
HRM notes

Manage earnings- Normal growth to Reward mgt. skills. Avg.

cash with
protect markets maturity
moderate incentive
on individual, unit,
or corporate perfo-
rmance. Standard
Harvest earnings- No real growth or Stress on cost Below-
average cash
reinvest elsewhere decline control with
incentive tied to
cost control.
Standard benefits.

Companies do the following, viewing remuneration from a strategic

1. They recognize remuneration as a pivotal control & incentive
mechanism that can be used flexibly by the management to attain
business objectives.
2. They make the pay system an integral part of strategy formulation.
3. They integrate pay considerations into strategic decision-making
processes, such as those that involve planning & control.
4. They view the company’s performance as the ultimate criterion of the
success of the strategic pay decisions & operational remuneration

» Steps for devising a Remuneration Plan:

The persons responsible for determining a remuneration plan are
advised to employ sequential steps as described below:
Job Descriptions: Job descriptions are crucial in designing pay systems, for,
they help to identify important job characteristics. They also help determine,
define & weigh compensable factors (factors for which an organization is willing
to pay-skill, experience, effort, & working environment).
Job Evaluation: The next step in pay fixation is to establish relative worth of
jobs by employing job evaluation. A number of techniques are available to
evaluate jobs. For example, in the point-ranking method of job evaluation, each
job is analyzed & defined in terms of the compensable factors an organization
has agreed to adopt. Points are assigned to each degree of a compensable
factor, such as responsibility.

Job Hierarchy: The points assigned to all compensable factors are

aggregated. Total points scored will help to establish the hierarchy of job worth,
starting from the highest point total to the lowest point total.
Pay Surveys: Job hierarchy being established, the next step is to establish
pay differentials. Before fixing wage & salary differentials, prevailing wage &
salary rates in the labour market need to be ascertained. Hence the relevance of
pay surveys.

» Challenges Affecting Remuneration:

HRM notes

The more important of the challenges are skill-based pay,

salary reviews, pay secrecy, comparable worth, & international pay.
Skill-based pay: In traditional job-based pay, employees are paid on the
bases of jobs they do. In the skill-based system, workers are paid on the basis of
number of jobs they are capable of doing, or on the depth of their knowledge.
The purpose of this system is to motivate employees to acquire additional skills
so that they become more useful to the organization.
Skill-based pay & job-based pay compared

Factors Job-based Skill-based

Pay structure Based on job performance Based on ability to

Employer’s focus Job carries wage Employee carries wage,
Employee linked to job Employee linked to skills
Employee focus Job promotion to earn Skill acquisition to earn
greater pay greater pay
Procedures required Assess job content; Assess skills;
Value jobs Value skills
Advantages Pay based on value of work Flexibility;
work performed Reduced workforce
Disadvantages Potential personnel Potential personnel
Bureaucracy; Inflexibility Bureaucracies; Cost

Pay Reviews: Pay, once determined, should not remain constant. It must be
reviewed & changed often, but how often becomes a relevant question. Pay
reviews may be made on predetermined dates, anniversary dates or there could
be flexible reviews.
In organized industrial establishments, pay reviews take place once in
three years. Managements enter into wage & salary agreements with labour
unions & the agreement will be valid for 3 yrs.
Pay Secrecy: Equity in remuneration is a significant factor in employee
performance. Perceived inequity in wages & salaries will demotivate &
demoralize employees which will lower employee performance. One way of
avoiding this problem is for managements to maintain secrecy.
Comparable Worth: One of the popular principles in employee remuneration
is equal pay for equal work. Infact, this principle has been the inspiration behind
the enactment of the Equal Remuneration Act. Under this act, male & female
nurses are to be paid the same if their merit & seniority match.
International Pay: In increasing globalization of business, international pay
assumes great relevance.
» Concepts Of Wages:
While evolving, wage policy, three concepts of wages, viz, i)
minimum wages, ii) fair wages, iii) living wages are generally considered. These
are broadly based on the needs of workers, capacity of the employee to pay, &
the general economic conditions prevailing in a country.
Minimum Wage
Minimum wage is one which provides not merely for bare sustenance of life, but
also for the preservation of the efficiency of worker. For this purpose, the

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minimum wage must also provide for some measure of education, medical
requirements & amenities.
Fair Wage
Fair wage is understood in two ways. In a narrow sense, wage is fair if it is equal
to the rate prevailing in the same trade & in the neighborhood for similar work.
In a wider sense, it will be fair if it is equal to the predominant rate for similar
work throughout the country.
Living Wage
Living wage is a step higher than fair wage. Living wage may be described as
one which would enable the wage earner to provide for himself/herself & his/her
family not only the bare essentials of life like food, clothing, & shelter, but a
measure of frugal comfort including education for children; protection against ill
health; requirements of essential social needs; &/or measure of insurance
against the more important misfortunes including old age.

» Meaning & Definition:
Employee participation means associating representatives of
workers at every stage of decision making. Participative management is
considered as a process by which the workers’ share in decision making extends
beyond the decisions that are implicit in the specific contents of the job they do.
This, in actual practice, amounts to the workers having a share in the reaching
of final managerial decision in an enterprise.
A clear & more comprehensive definition is:
“Workers’ participation, may broadly, be taken to cover all terms of
association of workers & their representatives with the decision-making process,
ranging from exchange of information, consultations, decision & negotiations to
more institutional forms such as the presence of workers’ member on
management or supervisory boards or even management by workers

» Scope & Ways of Participation:

There are three group of managerial decisions which have a direct
impact on the workers of any industrial establishment. They are social,
personnel & economic decisions. Economic decisions include financial aspects-
the methods of manufacturing, automation, shut-down, lay-offs, mergers &
similar other functions. Personnel decisions refer to recruitment & selection,
promotions, demotions, transfers, grievance settlement, work distribution, & so
on. Social decisions relate to hours of work, welfare measures, questions
affecting work rules & conduct of individual workers, safety, health, and
sanitation & noise control. The workers must have a say in the decisions on the
issues mentioned above.
But there is a difference of opinion about the scope & the extent to which
workers can participate in social, personnel & economic decisions. One school of
thought is of opinion that the workers or trade unions should, on parity basis, sit
with the management as equal partners & make joint managerial decisions on
all matters. The other school propounds the view that the workers should only
be given an opportunity, through their representatives, to influence managerial
decisions at various levels. The first old view could lead to workers actual
participation in the decision-making process of the management, while the

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second aspect will work out to be consultation of workers in managerial

i) Participation at the Board level: The workers’ representative on the
board can serve as a control element & a guide to the management in its
exercise of personnel & social functions. He or she can guide the Board
members on matters of investment in employee benefit schemes like housing, &
so forth.
ii) Participation through Ownership: Workers may become more
involved in industries by making them shareholders of the company. This may
be done by including them to buy equity shares. The management may promote
the scheme by allowing the workers to make payments in installments. It may
also advance loans or even give financial assistance to such workers to enable
them to buy equity shares.
iii) Participation through Complete Control: Workers require complete
control of the management through elected boards. The system of self-
management in Yugoslavia is based on this concept. It gives complete control to
workers to manage directly all aspects of industries through their
iv) Participation through Staff or Works Councils: Staff councils or
works councils are bodies on which the representation is entirely of the
employees. There may be one council for the entire organization or a hierarchy
of work councils forms the shop-floor to the Board level. The members of the
councils are elected by the employees of respective sections.
v) Participation through Joint Councils & Committees: Joint councils
are bodies comprising representatives of employers & employees. The function
of these bodies may range from decision making on some issues, to merely
advising the management as consultative bodies.
vi) Participation through Collective Bargaining: The principle of collective
bargaining confers on the management & workers the right, through collective agreements, to lay
down certain rules for the formulation & termination of the contract of employees, as well as the
conditions of service in an establishment.
vii) Participation through Suggestion Schemes: Employees’ views on such matters as machine
utilization, waste management, energy conservation & safety measures are invited, & rewards is
given for the best suggestion. This procedure enables the management to arouse & maintain the
employees’ interests in the problem of their concern & its management.
viii) Participation through Quality Circles: A quality circle consists of 7 to 10 people from the
same work area who meet regularly to define, analyze, & solve quality & related problems in their
area. Employees are involved in decision making. This privilege makes them acquire communication
& analytical skills & improve the efficiency at the workplace.
ix) Empowered Teams: Empowering refers to passing on authority & responsibility.
Empowerment occurs when power goes to employees who then experience a sense of ownership &
control over their jobs.

» Pre-Requisites For Successful Participation:

To make any of the participative methods successful, the following
conditions have to be fulfilled:
1. The participants, namely, the management & the operatives, must
have clearly defined & complementary objectives. And the objectives of
one party should not work at cross-purposes with the objectives of the
other party.

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2. There must be a free flow of information & communication between the

management & workers. In this way, distrust & suspicion are avoided,
& workers become responsible & mature when they discuss their
demands with the management.
3. The representatives of workers must be drawn from the workers
themselves. The participation of outside trade union leaders should be
discouraged. This is necessary because the problems & difficulties of
the workers are better understood by the workers themselves than by
others. The workers, therefore, can put across their point of view to the
management with confidence.
4. Strong & effective trade unionism is necessary for the success of
participative management. Politicization & multiplicity of trade unions
defeat the purpose of participation & management.
5. Workers’ education & training make a significant contribution to the
purposive working of participative management. Trade unions & the
government can play a vital role in organizing & conducting training
6. Neither party should feel that its position is threatened by participation.
If workers that their status will be adversely, affected they will not
participate. If managers feel that their authority is threatened, they will
refuse participation or will be on the defensive.
7. Consultative bodies, collective bargaining & suggestion schemes make
a mockery of participative management. To make workers’
participation meaningful & purposeful, workers should be associated at
all levels of decision making.
8. The success of participation depends on a suitable participative
structure & a change of heart on the part of employers & employees,
which may take a long time to develop. To expedite this development,
some sort of legislative action is necessary.
9. There could be the danger of a major portion of the resources of the
enterprises being diverted to workers without much consideration for
further investments. It may be desirable to reserve a certain
percentage of the resources for reinvestment, either through mutual
agreement or legislation.
10. The financial cost of participation should not exceed the values,
economic & otherwise, that come from it. Employees cannot spend all
their time in participation, to the exclusion of all other work.

» Importance of Participation:
The greatest benefit of participative management is that the
employee identifies himself or herself with work & this leads to an improved
performance. Participation tends to improve motivation because employees feel
more accepted & involved in the situation. Their self-esteem, job satisfaction, &
co-operation with management will also improve. The results often are reduced
conflict & stress, more commitment to goals, & better acceptance of a change.
Employees may also reduce turnover & absences when they begin to feel that
working conditions are satisfactory & that they are becoming more successful in
their jobs. Finally, the act of participation in itself establishes better
communication, as people mutually discuss work problems. The management
tends to provide workers with increased information about the organizations
finances & operations, & this helps employees to give better quality

HRM notes

Whatever may be the objective, the form or the level of participation,

there is hardly a study in the entire work literature which fails to demonstrate
that satisfaction in work is enhanced, or that generally acknowledged beneficial
consequences accrue from a genuine increase in the workers’ decision-making
powers. It is not really difficult to explain why participation works. It is almost a
matter of common sense that humans will take greater pride & pleasure in their
work if they are allowed participatory freedom in shaping the policies &
decisions which affect their work.


» Personnel Policies:
A policy is a plan of action. It is a statement of intention committing
the management to a general course of action. When the management drafts a
policy statement to cover some features of personnel programmes, the
statement may often contain an expression of philosophy & principle as well. A
policy statement is more specific & commits the management to a definite
course of action. The following is a policy:
Our policy is to institute every practical method for engineering safety into
our processes & equipment, to provide protective clothing where necessary,
to train employees in safe operating procedures, & to vigorously enforce
established safety rules. Our policy is to provide a healthy plant by giving
adequate attention to cleanliness, temperature, ventilation, light &
Advantages of Personnel Policies:
Organizations should have personnel policies as they ensure the following
1. The work involved in formulating personnel policies require that the
management give deep thought to the basic needs of both the
organization & employees. The management must examine its basic
convictions as well as give full consideration to the prevailing practices in
the organization.
2. Established policies ensure consistent treatment of all personnel
throughout the organization. Favoritism & discrimination are, thereby,
3. Continuity of action is assured even though top-management personnel
change. Policies promote stability.
4. Policies serve as a standard of performance. Actual results can be
compared with the policy to determine how well the members of the
organization are living upto the professed intentions.
5. Sound policies help guide employee motivation & loyalty. This is especially
true where the policies reflect established principles of fair play & justice &
where they help people grow within the organization.
6. Sound policies help resolve interpersonal, interpersonal & intergroup