HRM has been defined as the function or unit in organization that facilitate the most
effective utilization of human resources to achieve the objective of both the organization
and the employee.
HRM is that part of management refers to the polices, practices and systems that
influence employees behavior, attitude and performance.
HRM is the management function that help managers recruit, select, train and develop
members for organization
Comprehensive function: HRM is concerned with managing people at work. It covers all
type of people at all level in the organization. It applies to workers, supervisors, officers,
managers and other type of personnel.
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the process of bringing people and organizations together so that the goals of each are
met.
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Future oriented: HRM is concerned with helping an organization achieve its objectives in
the future by providing competence and well motivated employees.
Continuous function: MHR is an ongoing or never ending exercise rather one shot
function.
Pervasive function: HRM is inherent in all organizations and at all levels. Each and every
manager is involved with human resource function.
Corporate(enterprise) dimension
Professional dimension
National dimension
1. Significance for enterprise: HRM can help the enterprise in achieving its goal more
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Attracting and retaining the required talent through effective human resource
planning (HRP), recruitment, selection, placement, orientation, and compensation
and promotion policies.
Developing the necessary skills and right attitudes among the employees through
training, development, performance appraisal etc.
Ensuring the enterprise will have in future a team of competent and dedicated
employees.
3. Social significance: Sound HRM has a great significance for the society. It help to
enhance the dignity of labor in the following ways:
Maintaining a balance b/n the job available and the job seekers in terms of
numbers, qualifications, needs and aptitudes.
4. National Significance: HR and their management play a vital role in the development of a
nation. The effective exploitation and utilization of nations natural, physical and
financial resources require an efficient and committed manpower.
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Developing and maintaining a quality of work life that makes employment in the
organization desirable.
Managing change to the mutual advantage of individuals groups, the enterprise and
the public.
1.5.
Recruitment
Selection
Induction
3. Performance Management
Performance Monitoring
Rewards
Development
4. Exit
1.6.
Redundancy
Retirement
Dismissal
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maintenance)
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1.7.
Roles of human resource management: The most common roles played by human
resource management are:
As a specialist
As an information source
As a change agent
As a housekeeper
As a fire fighter
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Chapter Two
2.1. Definitions
Environment is referred to as those forces/ influence that affect the functioning of human
resource department internally or externally. This forces/ influences may affect the functions
positively or negatively.
organization does not operate in a vacuum. It is influenced by and influences are the external
environment and internal environment.
2.2. An external influence includes:
Union procedures
Economic conditions
Union procedures: The presence of a union directly affects most aspects of HRM
recruiting, selection, performance evaluation, promotion, compensation and benefits,
among others. A union is an organization that represents the interest of employees on
such issues as working conditions, wages and salaries, fringe benefits, employees on such
issues as working hours.
Economic conditions: Two aspects of economic conditions affects HRM programs. These
are: productivity and the work sector of the organization.
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economic condition. mangers are concerned with productivity b/c they feel
Alemayehu Fanta (BSc, MPA, MA)
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material, fuel and energy. Productivity problems will not solved without
utilization of HRM activities.
The labor forces. The level of education has increased leading to significant changes in
employee values. Understanding the characteristics and composition of the labor force is
important when designing a HRM.
Strategy
Goal
Organization culture
Nature of task
Work group
The internal Environmental influences , such as strategy, goals, organizational couture, nature
of the task, work group and leaders style and experiences and factors that that are found within
the organization.
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change. How much the HRM functions is valued and how it implemented is affected by
these goals.
the behavior
o productivity and
o expectation of employees
It can provide a benchmark of standards of performance among employees. it can also
provide clear guidelines on attendance, punctuality, concern about quality and customer
service.
Nature of task: HRM serve as the effective matching of the nature of the task with
the nature of the employees performing the task. The nature of the task obviously
affect recruiting and selection, since employees will probably be more satisfied
and productive if their preferences are met. With jobs that are difficult, dirty, or
in smoky or hot environment, the manager must provide additional incentives
(more pay, shorter hours, priority in vacations)b/c few people prefer such jobs or
the manger should try to find employees who can handle the conditions better.
Work group: Work group directly related to the success of HRM activities. If
work group opposes HRM programs, it can damage them. HRM programs that
can be success or failure depending on the support or resistance they receive from
work groups include incentive compensation, profit sharing, sharing, and safety
and labor relations. Operational and HR managers who desire success in such
programs should at least consider permitting work-group participation in
designing and implementing HRM.
Leaders style and experience: the experience and leadership style of the
operating manager or leader directly affect HRM activities b/c many, if not most ,
program must be implemented at the work unit level. thus, operating manger is a
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1. Environmental analysis
2. organizational mission and goals analysis
3. Analysis of organizational strengthen and culture
4. Analysis of organizational strategies
Choice and implementation of human resource strategies
Planning human resource
Human resources
Maintaining high
Performance
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Chapter three:
Job analysis and Human resource planning
Job analysis has been defined as the process of determining by observation and
studies the tasks, which comprise the job, the methods, and equipment used and
skilled and attitude required for the successful performance of the job. Job analysis is
essentially a process of collecting and analyzing data related to a job. It is the part of
overall work planning called work design. Job analysis may also called, task analysis
or skills analysis.
Job analysis provides the following information about the job: These are;
the operation and task involved in the job including the training, significance,
complexity and sequence
Duties involved in the job along with the frequency of occurrence of each
duty.
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Job: It is a group of positions involving some duties, responsibilities, knowledge and skill
Position: It implies collection of tasks and duties regularly assigned to one person.
Occupation: it implies a group of jobs which are similar as to the type of work which
contains common characteristics. e.g. business is an occupation consists of several types
of jobs like production, sale, etc.
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Duty: it means related sequences of tasks. e.g. Pickup, sort and delivering incoming mail.
Task: it refers to a distinct work activity with identifiable beginning and end. eg. Sorting
mail into appropriate boxes.
Job analysis: a purposeful, systematic process for collecting information on the important
related aspects of a job.
Job description: A factual statement of tasks and duties involved in the job.
Job specification: A written explanation of the knowledge, skills, abilities, traits and
characteristics necessary for effective performance on given job.
Job redesign: A job may be analyzed to simplify the process and methods involved. work
simplification helps to improve productivity
Organizational chart: it shows the relation of jobs with other jobs in the
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organization.
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2. Organizing job analysis program: it is necessary to plan and organize the program of
job analysis. A budget and a time schedule should be developed.
3. Deciding the uses of job analysis information: It is true that information generated by
job analysis can be utilized for practically of all functions of HRM
4. Selecting representative jobs for analysis: it would be highly time consuming and costly
to analysis all jobs. it is, therefore, desirable to select a representative simple of jobs for
the purpose of detailed analysis.
5. Collection of data: Data may be collected from employees who actually perform the job
or from their supervisors.
6. Developing job description: the information collected in the previous step is used in
preparing a job description. This is a written statement that describes in brief the task,
duties, and responsibilities which need to be discharged for effective job performance.
7. Preparing job specification: the last step in job analysis is to prepare a job specification
or employee specification. This is the written statement which specifies the personal
attributes in terms of education, training, experience and aptitude required to perform the
job.
Job analysis provides information necessary for organizing work in ways that allow employees
to be both productive and satisfied.
Summary
organizational chart
Class specification
procumbent
development
compensation
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integration
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maintenance
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job design
planning
recruitment
performance evaluation
Job analysis is a very important HRM component. Using this, companies are able to analyze and
document the requirements for each job in the company. The company identifies the skills
needed for each job. On the basis of this, the company is able to decide on the authority,
responsibility,
accountability
and
pay
for
each
position.
Organizational design: job analysis is useful in classifying jobs and interrelationships among
them. Responsibility commensurate with authority and accountability for various jobs can be
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experience. One particular job may need only entry-level employees. Another may need
employees with a particular educational qualification. Yet another job may need a minimum
degree of education as well some a specific level of prior experience. By determining job
requirements, the company is able to match the right employees to the right jobs.
Placement and orientation: A clear understanding of job requirements helps in matching these
requirements with abilities, interest and aptitudes of the people. Each job must ne assigned to the
person who is best suited for it. The orientation program can geared towards the employees
learn the activities, task and other duties that required to perform a given job more effectively.
Performance appraisal: job analysis helps in determine performance standards sets and its
critical part of the job. the superior can compare actual performance with standards set with help
of job analysis
Job evaluation: Job analysis serves as a basis for determining the relative worthiness of
different jobs. it is , therefore, helps in determining appropriate wage and salary structure with
internal pay equity b/n jobs.
Labor relations: information obtained through job analysis is helpful for management and labor
union for collective bargaining. it is also help to resolve disputes and grievances related to work
load, work procedures.
Growth Plans: The Company is able to evaluate the areas where it wishes to grow and the
requirements for the new openings that would come up. For example, if the company presently
manufactures shoes and is planning to start manufacturing clothes as well, it would need
additional manpower with the required skills. It would need textile engineers, tailors and
individuals who have prior experience in marketing garments.
Evaluation of Safety Standards: With job analysis, the company is able to evaluate whether it
is providing the minimum safety standards to its employees. Some jobs need employees to work
with very high-power machines. For this, the employees are required to wear protective clothes.
Also, some employees involved in the production process may be exposed to noxious fumes. The
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company then takes the apt measures to mitigate the dangers associated the jobs.
Training and Development: The job analysis establishes all the areas where the employees
need to be trained and developed. The company may have acquired new assets and the
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employees may need to be trained on how to operate them, or the company may have recently
developed new software and may need its employees to be taught how to use it.
3.4. Methods of collecting job analysis information
1. Job performance: In this method the job analyst actually performs the job in question. The
analyst, thus, receives first hand experience of contextual factors on the job including physical
hazards, social demands, emotional pressures and mental requirements. This method is useful for
jobs that can be easily learned. It is not suitable for jobs that are hazardous (e.g., fire fighters) or
for jobs that require extensive training (e.g., doctors, pharmacists).
2.
Personal observation: The analyst observes the worker(s) doing the job. The tasks
performed, the pace at which activities are done, the working conditions, etc., are observed
during a complete work cycle. During observation, certain precautions should be taken
The analyst should observe without getting directly involved in the job.
The analyst must make note of the specific job needs and not the behaviors
specific to particular workers.
The analyst must make sure that he/she obtains a proper sample for
generalization.
This method allows for a deep understanding of job duties. It is appropriate for manual, short
period job activities. On the negative side, the methods fail to take note of the mental aspects of
jobs.
3.
Critical incidents: The critical incident technique (CIT) is a qualitative approach to job analysis
used to obtain specific, behaviorally focused descriptions of work or other activities. Here the job
holders are asked to describe several incidents based on their past experience. The incidents so
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collected are analyzed and classified according to the job areas they describe. The job
requirements will become clear once the analyst draws the line between effective and ineffective
behaviors of workers on the job. For example, if a shoe salesman comments on the size of a
customer's feet and the customer leaves the store in a huff, the behavior of the salesman may be
Alemayehu Fanta (BSc, MPA, MA)
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judged as ineffective in terms of the result it produced. The critical incidents are recorded after
the events have already taken place both routine and non-routine. The process of collecting a
fairly good number of incidents is a lengthy one. Since, incidents of behavior can be quite
dissimilar, the process of classifying data into usable job descriptions can be difficult. The
analysts overseeing the work must have analytical skills and ability to translate the content of
descriptions into meaningful statements
4. Interview: The interview method consists of asking questions to both incumbent and
supervisors in either an individual or a group setting. The reason behind the use of this method
is that job holders are most familiar with the job and can supplement the information obtained
through observation. Workers know the specific duties of the job and supervisors are aware of
the job's relationship to the rest of the organization.
Due diligence must be exercised while using the interview method. The interviewer must be
trained in proper interviewing techniques.
It is advisable to use a standard format so as to focus the interview to the purpose of analyst.
Although the interview method provides opportunities to elicit information sometimes not
available through other methods, Interviewing is a flexible method for all levels and types of job.
An interview may focus on what a hypothetical job might involve. Interviews generate
descriptive data and enable job-holders to interpret their activities. A good interviewer can probe
sensitive areas in more depth. Structured questionnaires cannot easily do this. Jobholders can
give overviews of their work and offer their perceptions and feelings about their job and the
environment. Rigid questionnaires tend to be less effective where the more affective aspects of
work are concerned.
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It has limitations.
Second, the value of data is primarily dependent on the interviewer's skills and may be
faulty if they put ambiguous questions to workers.
Last, interviewees may be suspicious about the motives and may distort the information
they provide. hard to bring together
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there are problems in interpretation and analysis with the possibility of distorted
impressions
If seen as an opportunity to improve their positions such as to increase their wages, workers may
exaggerate their job duties to add greater weight age to their positions.
Interviewing as the sole method of job analysis in any particular project has disadvantages.
Interviews are time consuming and training is needed. Co-counseling may remove the analyst
and enable jobholders to discuss work between themselves. Through inexperience however they
may miss items and there is the natural problem of people not establishing and maintaining
rapport with each other during an interview.
4. Questionnaire method: The questionnaire is a widely used method of analyzing jobs and
work. Here the job holders are given a properly designed questionnaire aimed at eliciting
relevant job-related information. After completion, the questionnaires are handed over to
supervisors. The supervisors can seek further clarifications on various items by talking to the job
holders directly. After everything is finalized, the data is given to the job analyst. The success of
the method depends on various factors.
The structured questionnaire must cover all job related tasks and behaviors.
The job holders should be asked to properly rate the various job factors and
communicate the same on paper.
The ratings thus collected are then put to close examination with a view to find out
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Proper care must be taken to see that the respondents do not misunderstand the
questions.
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In short HRP is the process by which management determines how an organization should move
from current manpower position to its desired manpower.
HRP is helpful in selection and training activity: It ensures that adequate number of
persons are selected and trained well in advance to fill future job vacancies in the
organization.
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HRP is useful in anticipating the cost of human resources: Through proper manpower
planning, management can avoid both shortage and surplus of manpower and thereby
control labor cost.
HRP helps to effectively utilize the technological progress: to meet the challenges of
new technology existing employees need to be retained and new employees may be
recruited.
Forecasting demand for human resource: On the basis of corporate and functional
plans and future activity levels, the future needs for human resources in the organization
are anticipated. It is necessary to make projections for new positions to be created and the
vacancies arising in current manpower.
Forecasting supply of human resource: Every organization has two sources of supply
of human resource. These are: External and internal sources. Internally human resource
can be obtained for certain posts through promotion and transfers.
Action planning: once the manpower gaps are identified, plans are prepared to bridge
these gaps. Plan to meet the surplus manpower may be redeployment in other department.
Deficit can be made through recruitment, selection, transfer, promotion and training
plans.
Monitoring and control: Once the action plans are implemented, the human resource
structure and system need to be reviewed and regulated. This phase involves allocation
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Time and expense; manpower planning is time consuming and expensive exercise.
Employees resistance: Employee may also resist human resource planning feeling that
it increases the cost of manpower.
Unbalanced focus: There is too much focus on the quantitative aspect to ensure the flow
of people and out of the organization. due to this the quality human resource may be
overlooked.
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apply at the right time. The job may be vacant through retirement or some other reasons.
Recruitment of office staff has to done with great care because the efficiency of an
organization depends much upon the efficiency of the office.
Need for greater productivity. If the recruitment is scientific the productivity may
increase
Need for better wage for workers. As productivity is good the workers also get the
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Better morale. Since the recruitment is scientific, the morale of the work force is better.
Low labor turnover. Better job adjustment due to scientific recruitment, leads to lower
rate of labor turnover. Turnover is not only costly but it is also dislocates (disturb) work.
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Better image. Due to the above factors, an organization using scientific recruitment
techniques enjoys better reputation among the public.
abide by the relevant public policy and legislation on hiring and employment
relationship
provide each employee with freedom and opportunity to utilize and develop
knowledge and skills to the maximum possible extent
4.1.4. Sources and methods of recruitment: There are two sources of producing employees in
business houses. These are:
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Internal sources
External sources
Internal Recruiting: If vacancies are filled by internal candidates, that is, from those persons who
are already working in the organizations are known as internal sources. It includes:
Mail-adjusted employees
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Advantage:
Encourage inbreeding. Employee tent to demonstrate on the job only he/she has learned
in the organization.
Employee agencies
Advertising
employee referrals
Unsolicited applicants
recruiting at school and college
Employee Agencies: Public and private employment agencies are an important source of applicants
for office positions. Employment agency provides employers with an economical procedure for
contacting qualified applicants. These agencies are operated by:
state
charge no fee
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Unsolicited applications: Even if a vacancy does not exist, an organization may receive applications
and letter of inquiry (question) for employment.
Recruiting at schools and colleges: School and colleges provide selectivity and access to get
potential candidates. This may be because of a students progress is one index of his probable
success on job. In addition, options of teacher concerning:
personality
Alemayehu Fanta (BSc, MPA, MA)
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All school and colleges must have placement offices. These placement offices must arrange a time
for employment Managers to visit their school and interview students nearing graduation.
Merits of External recruitment
better choice
Expensive
Time consuming
1. Employee selection
Selection is the process of choosing the most suitable person out of all the applicants. In this
process relevant information about the applicant is collected through series of steps so as to
evaluate their suitability for the job to be filled.
Recruitment is identifying the source of manpower and stimulating them to apply for the jobs in
the organization. However, selection is the process of choosing the best out of those recruited.
4.1.1. Selection criteria
The selection process can be successful if the following conditions are satisfied.
Some one should have the authority to select. This authority comes from the employment
requisition as developed through analysis of work-load and work force.
There must be some standard with which applicants can be compared. or compressive job
description and job specification should be available beforehand.
There must be sufficient number of applicants from whom the required number of
employees may be selected.
an applicant must cross. Steps in employees selection may involve the following:
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may lead to the rejection of the applicant. It is a series of successive hurdler or barriers which
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Giving information to the candidate about the company, the specific job and
personnel policies.
6. Selection decision: In most of the organizations, selection process is carried out by the
human resource department. The candidate short listed by the department is finally
approved by the executives of the concerned department.
7. Physical examination: Applicant who has crossed the above stages is sent for physical
examination either to the companys physician or to medical officer approved for the
purpose. such examination serve for the following purposes:
4.3. Orientation/Induction
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After the hiring decision has been made, the final phase of selection process is introduction and
orientation. Orientation is the process that introduces new employees to their new work
environment. It mainly involves:
Some of the benefit that occurs from an effective orientation program is:
It create a positive attitude towards: his/her job, the company, his/her supervisor
Transfer the clear message that the new employee is valued and the organization is
willing to invest in them.
Reduce the amount of fear of job failure that new employee experience.
The supervisor should be responsible (in charge) of orienting the new employees. To whom he/s
should report, the organizational chart etc. Visual aids and illustrated booklets to be distributed
among the new employees must be included during the orientation period.
Chapter Five
Training and Development
Training is teaching of lower-level or technical employees on how to do their present jobs. Whereas
future jobs.
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development is teaching of mangers and professionals the skill needed for both present and the
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Training involves the specific: Skills, Knowledge and Attitudes needed by individuals to perform the
present job.
Development helps to provide adequate knowledge and educate employees beyond the current
requirement of the job. Generally both development and training help to develop an individuals:
Knowledge, Skills and Attitudes so as to improve present and future organization performance.
The objective of training is not always the same for every organization. The major objectives of the
training are as follows:
Less error.
Higher productivity.
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The model below traces the steps necessary in the training process:
1.
Organizational Objectives
2.
Needs Assessment
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3.
Is There a Gap?
4.
Training Objectives
5.
6.
7.
8.
Administer Training
9.
1. Organizational objective
Your business should have a clearly defined strategy and set of objectives that direct and drive
all the decisions made especially for training decisions. Firms that plan their training process are
more successful than those that do not.
Most business owners want to succeed, but do not engage in training design that promise to
improve their chances of success. Why?
The five reasons most often identified are:
Time - Small businesses managers find that time demands do not allow them to train
employees.
Getting started - Most small business managers have not practiced training employees.
The training process is unfamiliar.
Broad expertise - Managers tend to have broad expertise rather than the specialized
skills needed for training and development activities.
Lack of trust and openness - Many managers prefer to keep information to themselves.
By doing so they keep information from subordinates and others who could be useful in
the training and development process.
Skepticism as to the value of the training - Some small business owners believe the
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future cannot be predicted or controlled and their efforts, therefore, are best centered on
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A well-conceived training program can help your firm succeed. A program structured with the
company's strategy and objectives in mind has a high probability of improving productivity.
Identifying Training Needs
Training needs can be assessed by analyzing three major human resource areas: the organization
as a whole, the job characteristics and the needs of the individuals. This analysis will provide
answers to the following questions:
Where is training needed?
1. What specifically must an employee learn in order to be more productive?
2. Who needs to be trained?
Begin by assessing the current status of the company how it does what it does best and
the abilities of your employees to do these tasks. This analysis will provide some
benchmarks against which the effectiveness of a training program can be evaluated. Your
firm should know where it wants to be in five years from its long-range strategic plan.
What you need is a training program to take your firm from here to there.
3. Selection of Trainees
who should be trained? For a small business, this question is crucial. Training an employee is
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Once you have decided what training is necessary and where it is needed, the next decision is
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expensive, especially when he or she leaves your firm for a better job. Therefore, it is
important to carefully select who will be trained.
4. Training Goals
The goals of the training program should relate directly to the needs determined by the
assessment process outlined above. Course objectives should clearly state what behavior or
skill will be changed as a result of the training and should relate to the mission and strategic
plan of the company. Goals should include milestones to help take the employee from where
he or she is today to where the firm wants him or her in the future. Setting goals helps to
evaluate the training program and also to motivate employees. Allowing employees to
participate in setting goals increases the probability of success.
5.3. Methods of training
Orientation training.
Job rotation
Apprenticeships
On-the-job raining and job rotations: this is when an experienced employee is asked to take a new
employee and show the newcomer how to perform job duties. The organization senior employees
often conduct in-house training. It can reduce costs for training facilities, materials, or instructor fees
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Off-the-job training (class room training includes): lectures, films and audiovisual techniques and
Simulations (imitation) such as university management and apprenticeship.
Orientation training
Orientation training in which newcomers are introduced to the organizations culture using company
owned training centers
Programmed and computer assisted instruction in which the employee works at his/her pace to learn
from the text that includes exercises and quizzes to enhance learning.
Conference and case discussion groups in which participants analyze cases or discuss topics assisted
by a training leader.
Job rotation
Job rotation involves moving an employee through a series of jobs so he or she can get a good feel
for the tasks that are associated with different jobs. It is usually used in training for supervisory
positions. The employee learns a little about everything. This is a good strategy for small businesses
because of the many jobs an employee may be asked to do.
Apprenticeships
Apprenticeships develop employees who can do many different tasks. They usually involve several
related groups of skills that allow the apprentice to practice a particular trade, and they take place
over a long period of time in which the apprentice works for, and with, the senior skilled worker.
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Career development is an organized approach used to match employee goals with the business
needs of the agency in support of workforce development initiatives.
The purpose of career development is to:
Step
Action
Conduct self-assessment.
It is important to know your overall goal. Think about where you would like to be at the end of
your career and set your plan to get there. The best way to ensure compatibility and balance in
your life and career is to consider all aspects of your life from the beginning of your plan.
Once you have a sense of what you are trying to accomplish overall, it is important for you to
abilities
interests and
attitudes
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strengths and
weaknesses
Looking for a match between your strengths and the work you are doing or considering is the
most important step before making any decisions. Assessing your personality and attitudes
will help you determine the best way for you to move toward your goal:
When you are clear on these things, you will be able to make better choices about the direction
you want your career to take - and do a better job of convincing prospective employers that
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Chapter Six
Performance appraisal
Evaluating performance against planned objectives developed initially for each individual is another
important technique for developing an effective work force. Performance appraisal is the process of
determining the degree to which an employee is performing a job effectively. It is the process of
observing and evaluating: An employees performance, Recording the assessment and providing
feedback to the employee.
It provides employees with feedback. So that they will know how well they are
performing.
It develops valid data for pay (salary and bonus) and promotion decision.
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2. Communicating the standards: the performance standard specified in the first step are
communicated and explained to the employees so that they come to know what is
expected from them.
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3. Measuring performance: once the performance standards are specified and accepted,
the next stage is the measurement of actual performance.
4. Comparing the actual with the standards: Actual performance is compared with the
predetermine performance standards. it will reveal the deviations which may be negative
or positive.
5. Discussion the appraisal: the result of appraisal are communicated to and discussed with
employees. Along with the deviations the reason behind them are also analyzed and
discussed.
6. Tacking corrective action: through mutual discussions with employees, the steps required
to improve performance are identified and initiated. Training, coaching and consulting
are examples of corrective actions that help to improve performance.
Errors in rating: performance appraisal may not be valid indicator of performance and
potential of employees due to the following types of errors:
Halo effect: it is the tendency to rate an employee again and again high or low on the
basis of overall impression. One trait of employee influences the raters appraisal on all
other traits. E.g. an employee may be rated high on performance just b/c of sits on the job
late in the evening. Similarly, a person who does not shave regularly may be considered
lazy at work and may be underrated. This error may be minimized by rating all the
employees on one trait before taking up another trait.
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Stereotyping: this implies forming a mental picture of a person on the basis of his/ her
age, sex, caste, religion etc. it results in an over simplified view and shadow the
assessment of jobs performance.
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Central tendency: assigning average ratings to all the employees in order to avoid
commitment or involvement. This is adopted b/c the raters do not have to justify or
clarify the average ratings. As a result the ratings are clustered around the midpoint.
Constant error: some evaluators tend to lenient (soft) while others are strict in assessing
performance.
Personal bias: it may become invalid b/c the rater dislikes an employee. Such bias may
arise on the basis of regional or religious beliefs and habit and or personal conflicts. Bias
may also be the result of time. Recent experience or first impression of the rater may
affect the evaluation.
Spill over effect: this arises when past performance affects assessment of present
performance. For instance, recent behavior or performance of an employee may be used
to judge him/her.
quantified.
Negative approach: performance appraisal loses most of the value when the focus of the
management is on punishment rather than on development of employees.
Multiple objectives: Raters may get confused due to too many objectives or unclear
objectives of performance appraisal.
Resistance: Trade union may resist performance appraisal on the ground that it involves
discrimination among its members. Negative ratings may affect interpersonal relations
and industrial relations particularly when employees/ unions do not have faith in the
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6.4.
Mutual trust: An atmosphere of mutual trust and confidence should be created in the
organization before introducing the appraisal system. such atmosphere is importance
for frank discussion of appraisal. it also help to obtain the faith of employees in the
appraisal system.
Clear objectives: The objective and use of performance appraisal should be made
clear and specific. The objective should be relevant, timely and open. The appraisal
system should be fair so that it is beneficial to both the individual employee and the
organization. The system should be adequately and appropriately linked with other
subsystem of HRM.
Job relatedness: The evaluators should focus attention on job-related behavior and
performance of employees
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Post appraisal interview: After appraisal, an interview with the employee should be
arranged. it is necessary to supply feedback, to know the difficulty under which the
employee work and to identify the training need.
Review and appeal: A mechanism for review of rating should be provided. The
review may be made by committee consists of line executives and personnel experts.
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The committee will see whether the raters are usually strict or lenient.
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Chapter Seven
Employee Compensation
6.1. Definition:
Compensation refers to all forms of pay and rewards received by employees for the performance
in their jobs including all forms of cash, benefits, services, and bonus. It is important to
recognize and communicate your "total" compensation as "all" the pay you are providing your
employees. This should be done so that the value of what you are offering in compensation is
clear and that it in turn attracts and retains the people you need
In other words, Compensation is the HRM function that deals with every type of reward
individual receive in exchange for performing organizational tasks. It is the major cost of doing
business for many organizations at the start of 21st century. From the employee point of view,
pay is necessity of life. It is one of the chief reasons people seek employment. It also more
provide for the physiological need of employees. Employee compensation may be classified into
two categories.
Base or primary compensation: it refers to basic pay in the form of wages and
salaries. It is a fixed and non-incentive payment on the basis of time expended
on the job.
The basic purpose of compensation management is to establish and maintain an equitable wage
and salary structure and an equitable labor cost structure.
7.2.
Objective of compensation
The objective of compensation function is to create a system of rewards that is equitable to the
employer and employee alike. A sound compensation management seeks to achieve the
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following objectives:
To establish a fair and equitable remuneration: there should be internal and external
equity in remuneration paid to employees. Internal equity means similar pay for similar
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work. External equity utilizes pay for a job should be equal to pay for a similar job in
other organization.
To attract competent personnel: a sound compensation management helps to attract
qualified and hard working people by ensuring an adequate payment for all jobs.
To retain the present employees: By paying at competitive levels, the company can
retain its personnel. it can minimize the incidence of quitting and increase employee
loyalty.
To improve productivity: Sound compensation management help to improve the
motivation and morale of employees which in turn lead to higher productivity.
To establish job sequences and lines of promotion wherever applicable.
To improve public image of the company: wage and salary program also seeks to
protect the image of a progressive employer and to comply with legal requirements
relating to wages and salaries.
Meet legal requirements
Motivate performance
Motivate personal growth
Sustain high morale
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A fair compensation system is a must for every business organization. The fair compensation
system will help in the following:
An ideal compensation system will have positive impact on the efficiency and results
produced by employees. It will encourage the employees to perform better and achieve
the standards fixed.
It will enhance the process of job evaluation. It will also help in setting up an ideal job
evaluation and the set standards would be more realistic and achievable.
Such a system should be well defined and uniform. It will be apply to all the levels of the
organization as a general system.
The system should be simple and flexible so that every employee would be able
to compute his own compensation receivable.
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It will raise the morale, efficiency and cooperation among the workers. It, being just and
fair would provide satisfaction to the workers.
Such system would help management in complying with the various labor acts.
Such system should also solve disputes between the employee union and management.
It should motivate and encouragement those who perform better and should provide
opportunities for those who wish to excel.
It aims at creating a healthy competition among them and encourages employees to work
hard and efficiently.
The system provides growth and advancement opportunities to the deserving employees.
The perfect compensation system provides platform for happy and satisfied workforce.
This minimizes the labour turnover. The organization enjoys the stability.
The organization is able to retain the best talent by providing them adequate
compensation thereby stopping them from switching over to another job.
The business organization can think of expansion and growth if it has the support of
skillful, talented and happy workforce.
The sound compensation system is brand of organizations success and prosperity. The
success and stability of organization is measured with pay-package it provides to its
employees
7.4. Factor affecting employee compensation
The Overall Macroeconomic situation where in the state of the economy of the country
in which the firm is situated plays a major role in determining the compensation to be
paid. For instance, if an economy is booming or is in a high growth trajectory, chances
are that the employers would pay the employees more and conversely, if the economy is
We often hear about how because of the recession, salary hikes have been deferred or cut
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in a downward trajectory, chances are that the employers would pay the employees less.
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down. This is a direct result of the linkage between firm performance and the
performance of the economy.
The Demand for a particular skill weighs heavily on the way in which the employer
fixes the compensation for the employee. For instance, premium skills like Consulting
and Accountancy are paid more as are the Technology Professionals who might be
experts in their chosen field. As discussed in earlier articles, it is the expertise and the
relative scarcity of such experts that determines how much the employer is willing to pay.
The Position of the company in the Business Cycle often determines how much the
company is willing to offer to the employee. For instance, if a company is a start-up,
chances are that the company would pay more because of the need to get the best possible
talent into the company. Further, many start-ups give their employees ESOPs or
Employee Stock Option Plans wherein the employees can redeem their stocks after the
lock-in period.
Finally, the urgency of the firm in filling up the position plays an important role in
determining how much the employer is willing to pay the employee and in many cases, if
the time to get on board the employee is less, staffing managers along with the line
manager in charge of hiring the employee might decide to pay more because they want
the employee to come on board as quickly as possible.
7.5.
Indirect financial compensation is called benefits and services. Employees are paid several
benefits in addition to wage, salaries, allowances and bonus. This benefits and services are
called fringe benefits. The international labor organization has described fringe benefits as:
These benefits are paid to workers not for any job or performance but to stimulate
their interest in the work.
Benefits and service involve a labor cost for the employer and are not meant directly
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to improve efficiency.
Benefits like paid holidays, provident fund, pensions, housing etc, or service like
legal aid, dispensary etc.
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Vacation
Most employee benefit packages include vacation time. These days off are usually paid,
though some employers may offer unpaid vacation time as well. The amount of vacation
time varies greatly and depends on the company's policy, but amounts typically range
from five to 20 vacation days per year. Vacation time is usually accrued on a per month
basis. The employee must schedule the use of vacation days in advance and gain approval
from his immediate supervisor or human resources.
Sick Days
Employees may receive paid or unpaid sick days as part of their employee benefit
package. The amount of sick days an employee receives varies depending on company
policy and seniority. The amount of sick time given to an employee typically ranges from
five to 10 days, though employers may offer more or less time. Some companies may
require a note from a physician that verifies illness before approving the use of a sick
day.
Retirement
An employer may offer pension or savings plans for employees to save for retirement. An
employer may set specific amount of money to be contributed to an employees on an
incremental basis or the employer may offer a matching benefits program. Typically, this
means the employer will match the amount of money an employee contributes to her or
his
up
to
certain
amount.
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45
Unemployment compensation
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2. Voluntary benefits
3. Employee services
Education program
Financial incentives
Child care
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CHAPTER EIGHT
INTEGRATION AND MAINTENANCE
8.1. Employee discipline
Discipline means neatness or absence of disorder, chaos, and confusion in human behavior and
action. It occurs when employees behave in an orderly and responsible manner. According to
Richard, discipline may be considered as the force that prompts (on time) individual or groups
to observe rules, regulations, standards and procedures deemed necessary for an organization.
to gain willing acceptance of the rules, regulations, standards and procedures of the
organization from the employees
Types of discipline
There are two types of discipline: positive and negative discipline
Positive discipline implies a sense of duty to observe the rules and regulations. It is also called
self-discipline. It can be achieved through rewards and effective leadership. Positive discipline
promotes cooperation and coordination with a minimum of formal organization. it reduces the
need for personal supervision required to maintain standards.
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Minor penalties:
Oral warning
written warning
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Loss of privilege
Suspension
Major Penalties
Withholding increment
Demotion/ stopping promotion
Discharge
Dismissal
Negative discipline does not eliminate undesirable behavior rather in merely suppress (holdback)
it. Punishment also causes resentment (anger) and hostility (unfriendly).
negative discipline
While exercising
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wage scales
working hours,
training
health and safety
overtime
grievance mechanisms and
rights to participate in workplace or company affairs
The union may negotiate with a single employer (who is typically representing a company's
shareholders) or may negotiate with a group of businesses, depending on the country, to reach an
industry wide agreement. A collective agreement functions as a labor contract between an
employer and one or more unions. Collective bargaining consists of the process of negotiation
between representatives of a union and employers (generally represented by management, in
some countries[which?] by an employers' organization) in respect of the terms and conditions of
employment of employees, such as wages, hours of work, working conditions and grievanceprocedures, and about the rights and responsibilities of trade unions. The parties often refer to the
result of the negotiation as a collective bargaining agreement (CBA) or as a collective
employment agreement (CEA).
8.3. Grievance handling
Grievance may be any genuine or imaginary feeling of dissatisfaction or injustice which an
employee experiences about his job and its nature, about the management policies and
procedures. It must be expressed by the employee and brought to the notice of the management
and the organization. Grievances take the form of collective disputes when they are not resolved.
Also they will then lower the morale and efficiency of the employees. Unattended grievances
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result in:
Frustration
dissatisfaction
low productivity
Alemayehu Fanta (BSc, MPA, MA)
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In short, grievance arises when employees expectations are not fulfilled from the
organization as a result of which a feeling of discontentment and dissatisfaction arises. This
dissatisfaction must crop up from employment issues and not from personal issues.
Grievance may result from the following factorsa. Improper working conditions such as strict production standards, unsafe workplace, bad
relation with managers, etc.
b. Irrational management policies such as overtime, transfers, demotions, inappropriate
salary structure, etc.
c. Violation of organizational rules and practices
The manager should immediately identify all grievances and must take appropriate steps to
eliminate the causes of such grievances so that the employees remain loyal and committed to
their work. Effective grievance management is an essential part of personnel management. The
managers should adopt the following approach to manage grievance effectively1. Quick action- As soon as the grievance arises, it should be identified and resolved.
Training must be given to the managers to effectively and timely manage a grievance.
This will lower the detrimental effects of grievance on the employees and their
performance.
2. Acknowledging grievance- The manager must acknowledge the grievance put forward
by the employee as manifestation of true and real feelings of the employees.
Acknowledgement by the manager implies that the manager is eager to look into the
complaint impartially and without any bias. This will create a conducive work
environment with instances of grievance reduced.
3. Gathering facts- The managers should gather appropriate and sufficient facts explaining
the grievances nature. A record of such facts must be maintained so that these can be
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Chapter Nine
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