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Unit 5 - Performance Evaluation and Control

Process

Performance management
Performance management
Performance management - Process through which companies ensure that
employees are working toward organizational goals.

It includes practices through which the manager defines the employee s goals
and work, develops the employee s capabilities, and evaluates and rewards the
person s efforts.

Definition:
It is the process of evaluating the performance and qualifications of the employees in
terms of the requirements of the job for which he is employed, for purposes of
administration including placement, selection for promotions, providing financial rewards
and other actions which require differential treatment among the members of a group as
distinguished from actions affecting all members equally.
- Heyel

Performance appraisal
It is a managerial process through which an individual employee s behaviour and
accomplishments for a fixed time period are measured and evaluated. It is a
formal or systematic process by means of which the job relevant strengths and
weaknesses of employees are identified, observed, measured, & developed.

The most important and valuable workers executives, managers, and


knowledge workers generally perform jobs that require subjective skills such
as analysis, problem solving, creativity, and judgment.

Objectives
Making reward decisions
Improving performance (training and development needs)
Motivating staff (feedback, assessment, setting targets)
Succession planning and identifying potential
Promoting manager-subordinate dialogue
Formal assessment of unsatisfactory performance

Purpose
Performance measurement
Performance improvement
Training & management development needs
Compensation decision
Placement decision
Feedback
Career planning & development
Human resource planning
Communication
Deficiencies in staffing process
Job design errors
Avoidance of discrimination

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Criteria for a good appraisal system
Relevance
Reliability
Distinguish between good and poor performers
Practicability
Acceptability
Freedom from contamination: it should be able to measure individual
performance without being contaminated by external factors that are beyond
employee s control like material shortage, inappropriate
equipment/procedures.

Performance Management vs. Performance Appraisal


Performance Management is an approach to managing people that entails
planning employee performance facilitating the achievement of work related
goals and reviewing performance as a way to motivate employees to achieve
their full potential in line with the organizations objectives. It can be regarded
as an ongoing process that involves planning, managing reviewing, rewarding
and development of performance.

Performance Appraisal systems are often no more than a system of


measurement, the concept of performance management signifies an attempt
to establish performance appraisal as a legitimate and integral part of a
manager s job of getting subordinates effectively to achieve the results and
goals expected of them.

Informal vs. Systematic appraisal


An informal appraisal is conducted whenever the supervisor feels it is
necessary. The day to day working relationship of a manager and an
employee offers an opportunity for the employee s performance to be judged.
This judgment is communicated through conversation on the job, or over
coffee or on the spot examination of the job.

A systematic or formal appraisal is a system set up by the organization to


regularly and systematically evaluate employee performance. This appraisal
is likely to occur at certain intervals throughout the employee s history of
employment.

Who does the appraising?


Immediate supervisor
Committee of several supervisors
Employee s peers
Employee s subordinates
Self evaluation
Someone outside the work station.

Evaluation Process
1. Establish performance standards
2. Measure actual performance
3. Communicate performance expectations to employees
4. If necessary, initiate corrective action
5. Discuss appraisal with employee
6. Compare actual performance with standards

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Appraisal methods
Performance Appraisal can be conducted by a number of methods.
They can be classified according to the main purpose that the procedure serves.
Absolute standard (Developmental purpose)
Relative standard (Comparative purpose)
Objectives

I. Absolute standard methods:


Absolute standards methods allow the evaluator to evaluate performance in
relation to trait or behavior criteria. Each employee is evaluated against the
standards. Performance is measured on a number of specific dimensions so that
employees can be given a more helpful feedback.

Common absolute rating techniques are


1. Grading method
2. Graphic or Linear rating scale
3. Checklist
4. Free Essay method
5. Critical Incident method
6. BARS
7. Forced choice method

1. Grading method
Certain categories of worth are first established and carefully defined.
Executives are compared with these grade definitions.
Grade definitions
A Outstanding
B Very good
C Fair
D Poor

2. Graphic or Linear rating scale


The rater evaluates an employee on each of the several performance dimensions using
a continuum made up of clearly defined scale points. He describes an employee as
falling at some points in the performance continuum such as unsatisfactory, average or
outstanding on each dimension. The scale points can be assigned scores and total score
can be computed for an employee by summing the ratings across all dimensions.

3. Check list
The rater or supervisor is given a series of questions or words and asked to
check those representing the characteristic of the employee.
E.g. (manager):
- Is he respected by his subordinates?
- Does he give recognition and praise to employees for work done well?

4. Free Essay method


The rater makes a free form, open-ended appraisal in his own words.
Puts down his impressions about the employee.
It contains subjective evaluation of the reported behavior.

5. Critical Incident method


Measures performance in terms of certain events or episodes that occur
(critical incidents).
Certain significant acts make the difference between success and failure.
A written record of the events is kept.

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6. Behaviourally Anchored Rating Scale (BARS)
The BARS consists of a series of five to ten vertical scales - one for each
important dimension of job performance anchored by the incident judged to be
critical.
Behavioural anchors in the form of statements are established for each
dimension
Many dimensions of performance are identified in behavior-specific terms

7. Forced choice method


It is a type of checklist where the rater chooses between two or more statements
about the employee being rated. Each statement may be favorable or
unfavorable. The appraiser s job is to identify which statement is more descriptive
of the individual being evaluated. Each statement is given a weight according to
its relevance to the particular job. The employee getting the highest score is
judged the better performer

8. Other methods
i. Assessment center method
Testing job-related simulations that managers feel are important to the job
success.
Assessments are made to determine managerial potential for purpose of
promotion.
Paper-and-pencil test, interviews and situational exercises.

ii. 360 Degrees Appraisal


The subordinates and colleagues of the manager appraise his or her
performance.
Each of these evaluators rates the manager on certain qualities listed in the
Appraisal Format.
Managers become keenly aware about the need to have good relations with their
subordinates and colleagues.

iii. 540 Degrees Appraisal


In this, the customers and suppliers of a manager also evaluate him.
General Electric Company, USA, was the first to try out this concept in early
1990s.
This practice has found many takers in India too - Reliance Industries, Godrej-
GE, Godrej Soaps, Tata Steel, Telco, Voltas, Crompton Greaves, Infosys, Wipro,
Eicher, American Express, Thomas Cook, and Thermax, to name a few.

iv. Alternation Ranking Method


Ranking employees from best to worst on a trait
Alternates between highest and lowest until all employees to be rated have been
addressed

II. Relative rating methods


1. Paired Comparison Method
Every subordinate to be rated is paired with and compared to every other
subordinate on each trait. The number of comparisons can be calculated using
the formula
N(N-1)/2
Where, N is the number of people rated.
The rater then selects the better employee and the final rank is determined by the
number of times the employee was rated higher than the other employees.

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2. Forced Distribution Method:
It is founded on the principle of bell shaped curve or normal distribution which
requires the rater to assign a specific proportion of employees to predetermined
performance category. Thus this method assumes the widely known bell shaped
curve of performance exist in the given group.

3. Group order ranking:


The rater is required to place the employees into a particular classification like top
10 % or second 10 %. Raters are asked to rank the employees of the same
department doing similar jobs on the basis of one or multiple job factors.

4. Individual ranking:
It includes the rank ordering of individuals according to overall merit or according
to other performance factors from the best performer to the worst performer.
Raters are asked to select the best performer and worst performer.

III. Management by Objectives


Objectives set at each level should be quantifiable and measurable.
Manager and subordinates have to establish specific times when goals are to be
reviewed and evaluated.
Each employee goal must be accompanied by a description of how that goal will
be accomplished.

Web based performance management


With electronic performance monitoring (EPM), computer network technology is
used to provide managers with access to their employees computer terminals
and telephones,
Allows managers to determine the pace at which employees are working, their
degree of accuracy, log-in and log-off times, and the amount of time spent on
breaks

Feedback Interview:
One of the most important uses of appraisal is to provide performance feedback
to employees. The feedback interview is the discussion between the supervisor
and the employee concerning the employee s past performance and how that
performance can be improved in future.
Supervisor and subordinate review the appraisal and make plans to remedy
deficiencies and reinforce strengths.

Purpose
Encouraging present behavior
Explaining what is expected of employees
Communicating results of salary or promotion decision
Planning for future performance improvement
Improving supervisor subordinate relationship

Preparing for the Appraisal Interview


First, give the subordinate at least a week s notice to review his or her work, and
to read over his or her job description, analyze problems, and compile questions
and comments.
Next, study his or her job description, compare the employee s performance to
his or her standards, and review the files of the person s previous appraisals
Finally, choose the right place for the interview and schedule enough time for it.
The interview should be done in a private area

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Interview s main aim is to reinforce satisfactory performance or to diagnose and
improve unsatisfactory performance
Get agreement before the subordinate leaves on how things will be improved and
by when.

Types of feedback interview approaches


Tell and sell approach: The supervisor acts as a judge and persuades the
employee to change his or her behavior in a prescribed way

Tell and listen approach: during the first phase of interview the employee s
strong and week areas of performance are addressed and in the second phase
the focus falls on the employee s feeling about the appraisal.

Problem solving approach: The supervisor acts as a helper and facilitator and
discusses the problem, needs, innovations dissatisfaction that the employee
might have experienced since the last performance review.

Common appraisal problems


Unclear standards
Halo effect
Leniency and strictness error
Bias
Central tendency
Contrast error
Regency error
Similarity or same as me error

DO s
Base performance appraisal on job performance only.
Use only those rating scales that are relevant to the job itself. Sincerely work at
the appraisal interview process.
Be problem solving oriented.
Encourage the employee to discuss and to address the issues that are in the
evaluation process themselves.

DON Ts
Don't criticize. Be proactive.
Carefully avoid the halo effect and leniency errors.
Do not let the conversation stray away from the topic of performance.
Avoid general prescriptions to fix performance. Always present concrete and
realizable objectives.

Different views
Appraiser:
Need to see the total comparative picture of performance for a group.
Need to see where employees stand relative to each other.
Get all the information they need with 4 to 7 dimensions or broad performance
factors.
Need retrospective performance data that will back them up when they have to
make tough decisions.

Appraisee
Need to see information about themselves.
Need to see where they stand relative to their manager's performance
expectations.

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Employees benefit more from knowing about their competencies and skills, so
they can focus on improvement.
A forward-looking dialogue with the manager that focuses on growth and
development.

Framework for the appraisee


Prepare properly: You need to review your job specification to ensure you are
meeting expectations, as well as the standards/goals set at the last appraisal,
assess your own strengths and weaknesses and know how you want to progress.
Listen to what your manager has to say: Be open and receptive to what is
being said.
Put your own point of view: Ask for examples, where constructive criticism has
been made.
Plan your progress for the next period: The sign of a successful appraisal is
where future standards/objectives are mutually agreed and they are clear,
specific and achievable with measurable expectations
.
SMART rules for appraiser:
Specific - Base ratings on explicit performance and targeted to the area you are
measuring.
Measurable - direction of good and bad must be clearly distinguishable.
Achievable -When setting performance goals, they must be easy to understand
and can be accomplished by the majority of individuals if given the proper
resources. Relevant - Do not measure things that are not important.
Timely - The individual knows the time period for which he or she is accountable
for and knows when goals must be completed.

Job Change Promotion, Demotion, separation and


Transfer
Purpose of Job change
Job changes serve the following purposes:
To improve organizational effectiveness
To maximize employee efficiency
To cope with changes in operation
To ensure discipline

Promotion
Promotion is a term which covers a change and calls for greater responsibilities and
usually involves higher pay and better terms and conditions of service and therefore
a higher status or rank.

It may be defined as an upward advancement of an employee in an organization to


another job which commends better pay/wages, better status/prestige, higher
responsibilities and more authority.

A promotion is the transfer of an employee to a job which pays more money or one of
that carries preferred status
- Scott and Clothier

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Promotions are usually given:
To retain proved skill, training and ability
To reduce discontent
To attract suitable and competent employees
To recognize and reward suitable performance
To increase an employees individual & organizational effectiveness
To promote job satisfaction among employees
To build loyalty and a sense of belongingness among the employee
To create among employees a feeling of contentment with their present conditions.

Types of promotions
Multiple chain promotions: They identify multi promotional opportunities through
clearly defined avenues of approach to and exit from each position in the
organization.

Up or out promotions: in this type of promotion the individual must either earn a
promotion or seek employment elsewhere.

Dry promotion: These promotions are given in lieu of increases in compensation.


When compensation is increased to keep pace with the cost of living it is called as
dry promotion.

Elements of Promotion policy


Promotion policy statement.
- Establish as plan of jobs.
- Trace transfer routes.
- Prepare employees for advancement through training.
- Communicate the policy.
- Detail personnel and service records are kept ready.

Promotion policy
- It helps to state formally the organizations broad objectives and to
formulate both the organizations man power and individual career plans
- The basic requirement of a promotion policy is a statement of the ratio of
internal promotions to external recruitment at each level, the method &
procedure of selection and qualification desired.

Requirements of a sound promotion policy


It should provide for a uniform distribution of promotional opportunities throughout the
organization.
It should inform the employees about the various avenues of development
There should be definite and clear cut criteria for promotion in the organization
It should be fair and impartial
It should have a suitable system of follow up counselling and review

Factors considered for promotion


The results of performance appraisal
Personal records of an employee
Skill and proficiency in the existing job
Seniority of the employee
Ability of employee on other jobs taken till date
Medical records of the employee to meet the challenges of higher jobs.
Qualification possessed by the employee as per the demands of the higher job.

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Promotion methods: Seniority & Merit
Seniority refers to the length of service in the company.
Under straight plant wise seniority in all jobs, promotions go to the oldest employees,
provided that he is fit for the job.
Generally trade unions are of the view the promotions should go on basis of seniority
while management prefers merit and ability.

Arguments for promotion by seniority systems


Simple to understand.
Satisfies personal aspirations.
System is much more economical than open market recruitment.
Reduces employee turnover
Builds morale of the employee
It is impartial and eliminates feelings of favoritism.

Arguments against promotion by seniority systems


Necessity of new blood to be infused in organization for up-to-date knowledge.
Worth of an individual is Internal sources may be quite inadequate.
Not appreciated.

Promotions by Merit
Brings rewards for meritorious work
Encourages employees to work hard so that they may get an opportunity for
advancement in the organization
Leads to increased productivity

Demotion
Demotion is defined as the assignment of an individual to a job of lower rank and pay
usually involving lower level of difficulty and responsibility.
It can be called as downward transfer.

Causes of demotion
Demotions may be caused by factors beyond employees control.
When departments are combined and jobs eliminated.
Inadequacy on the part of the employees in terms of job performance.
Change in technology.
Demotion is also used as a disciplinary measure.

Demotion policy
A clear and reasonable list of rules should be framed.
It should be clearly communicated to the employees.
If violations are discovered there should be a consistent and equitable application of
the penalty.
There should be provision for review.
A competent authority should be appointed to investigate any violation

Transfer
A lateral shift causing moment of individuals from one position to another usually
without involving any marked change in duties, responsibility, skills needed and
compensation.
- Yoder

It consists of a reassignment of an employee to another job of equal pay status and


responsibility.

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It is a horizontal move from one job to another it is different from promotion, which is
a vertical move in rank and responsibility.

Purposes of transfer
To satisfy needs of an organization.- organizational transfer
To meet an employees own request. Personal transfer
To utilise properly the services of an employee.- Remedial transfer
To increase the versatility of the employee.- versatility transfer
To adjust the work force of one plant with that of another.- plant transfer
To help employees work according to their conveniences so far as timings are
concerned. shift transfer

Transfer policy
Every organization should and must have a just and impartial transfer policy which
should be known to each employee.
A policy must have the following characteristics:
- Specify the type of transfer.
- Locate the authority in some officer who may initiate and implement
transfers.
- Indicate the basis for transfer.
- Decide the rate of pay to be given to the transferee.
- Intimate the fact of transfer to the person concerned well in advance.
- Be in writing and duly communicated to all concerned.
- Not to be made frequent.

Types of transfers
Personal & organizational transfer
Temporary transfer& permanent transfer
Intra-departmental transfers & Inter- departmental transfers

Separation
Separation means cessation of service with the organization for one or other reason.
Employee may be separated from the payroll of a company as a result of
1. Resignation.
2. Discharge (or) Dismissal.
3. Suspension.
4. Lay-off
5. Retirement
1. Resignation
Resignation may be put in voluntarily by the employees on grounds of health, physical
disability, better opportunity elsewhere or maladjustment with the company policy.

2. Discharge
A discharge involves permanent separation of an employee from the payroll for
violation of company rules or for inadequate performance.

Discharge becomes necessary:

- When the volume of business does not justify the continuing employment of
the persons involved.
- When fails to work according to the requirements of the job either because of
incapacity or because he has deliberately slowed down on work.
- When an individual forfeits his rights to a job because of his violation of a basic
policy often involving safety of others.

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Causes of discharge
Frequent causes: inefficiency, dishonesty, carelessness .
Infrequent causes: accident, uncleanliness, personal conduct.
Other causes: laziness, lack of co-operation, frequent absence without leave

Discharge procedure
Demonstrate a discharge is justified following evidence need to be produced:
- Permanent records of all merit ratings made by the supervisors.
- A copy of any warning that had been sent to him.
- Letter of discharge, especially if the letter states the cause of the
discharge.

Suspension
This is a serious punishment and is generally awarded only after proper enquiry has
been conducted.
During suspension, the employee receives a subsistence allowance.
Retrenchment means permanent termination of services of an employee for
economic reasons in a growing concern.

Lay-Off
Lay-off refers to an indefinite separation of employee from the payroll due to factors
beyond the control of the employer; the employee is expected to be call back in the
foreseeable future.

These factors could be:


- Breakdown of machinery.
- Seasonal fluctuation in markets.
- Accumulation of stocks.
- Shortage of raw material.
- Production delays.
- Other technological reasons.

During a lay-off period a workman ceases to be eligible for lay-off compensation if:
- He refuses to accept alternative employment at a place within five miles of an
establishment from which he has been laid-off.
- If he does not present himself for work at the appointed time during normal
working hours at least once a day.
- If the lay-off is due to a strike or slowing down of production on the part of
workmen in another part of the establishment.

Retrenchment
It means permanent termination of an employee s services for economic reasons in a
growing concern.
Termination of services on account of disciplinary action, illness, retirement, or
closure of establishment does not mean retrenchment.
It creates a sense of insecurity and resentment among the staff.

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Control Process
Organizational Control
Controlling is a process by which management assures that actual activities confirm to
planned activities. It is a managerial process for measuring progress towards planned
performance and when required taking corrective action.

Purpose
It helps in merging short range and long range plans into a state of greater
consistency. It makes certain that the original goals and plans are still being followed
over long run.
It helps in bringing consistency to the activities and accomplishments throughout the
organization in an ends means manner. That is the final outcome of one s work unit
becomes the means or input by which the next work unit begins.
It can help in bringing individual behaviours in line with organizational goals by
monitoring absenteeism, and performance.

Importance
Adapting to changing situations
Minimizing mistakes and errors
Coping with organizational complexity
Minimizing costs
Delegation

Control Process
Establishing standards: A standard is defined as end state or target against which
subsequent performance will be compared. The first step in control process is to
establish performance standards to be controlled.
Measuring performance
Comparing measured performance against standards
Evaluate performance and take action
Following evaluation the manager has three alternative course of action maintain
the status quo, correct the deviation, change the standards.

Types of control
Preliminary or predictive or feed forward control: It takes place before operations
begin and includes development of policies and procedures that are designed to
ensure that planned activities will be carried out effectively. Ideally controls should
anticipate problems before they actually happen.

Concurrent control: it enables to take timely action before larger damage takes
place. It guarantees that the plan will be executed at the specified time and under
required conditions.

Feed back control: takes place after the activity is done


- Problems may already have caused damage or waste
- The most popular type of control
- Feedback may be only viable form of control available
- Feedback has two advantages
- Provides meaningful information on the effectiveness of planning
- Can enhance employee motivation

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Control Process

Requirements of an effective control system


Timeliness
Accuracy
Objective and comprehensiveness
Economically realistic
Organizationally realistic
Focused on strategic control points
Coordinated with the organizational work flow
Prescriptive and operational
Acceptance
Flexible

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Grievance Handling
Discipline
It is the force that promotes individuals or groups to observe rules, regulations, standards
and procedures deemed necessary for an organization. Discipline can be positive or
negative. Positive discipline can also be called as self discipline. Negative discipline is also
known as corrective or punitive discipline.

Red Hot Stove Rule


Mc Gregor has suggested this rule to managers to enforce discipline. The rule is an
analogy between touching a hot stove and violating rules of discipline. When a
person touches a hot stove:
The burn is immediate
He had a warning as he knew that he would get burned if he touches it.
The effect is consistent. Every one who touches it will get burned
The effect is impersonal. The person gets burnt because he touched it and not
because who he is.
The effect is commensurate with the gravity of misconduct. The person who
repeatedly touches it is burnt more than one who touched it only once.

Grievance
Grievance can be defined as any discontent or dissatisfaction with any aspect of the
organization.
It is a specific formal written notice of employee dissatisfaction expressed through an
identified procedure.
It is more formal than a complaint. It must usually be expressed. A complaint is
merely an indication of employee dissatisfaction which has not taken the formal
grievance settlement route.
Management should be concerned with both grievances and complaints as many
complaints can become grievances. Complaints are good indicators of potential
problems within the workforce.
It usually relates to problems of interpretation or perceived non fulfillment of one s
expectations from the organizations.
Jucius defines a grievance as any discontent or dissatisfaction arising out of
anything connected with the company which an employee thinks believes or even
feels to be unfair, unjust, or inequitable.
It can be individual or group grievance.
It may be written or verbal.
It arises out of something related to employee s employment contract.
It is a feeling of injustice to one s job by the employer or management.
If they are not readdressed on time they may give rise to frustration, discontent, poor
morale, and low productivity.

Need for a grievance procedure


Most grievances seriously disturb the employees. They effect their morale,
productivity,& their willingness to cooperate with the organization. A grievance
handling machinery can properly handle the situation.
It is not possible for the supervisor to settle all the complaints of the employees as
they may not have the necessary training for the purpose & may lack authority. There
may be personality conflicts also.
It serves as a check on the arbitrary actions of the management as the supervisors
know that employees would like to see their protest reach the higher management.
It serves as an outlet for employees discontent & frustrations. The employees are
entitled to legislative, executive & judicial protection& they get this through the

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grievance redressal procedure which also acts as a means of upward
communication.
It provides an established known procedure for processing grievances.
It gives an assurance to the employee that there is a mechanism available to
consider the grievance in a dispassionate manner.
It brings the grievance to the knowledge of the management.
It helps in improving the morale & productivity of the employee.

Understanding employee grievance


The best approach to understand grievance is to anticipate them and tackle them
before they assume dangerous proportions. A manager can address grievance as
and when they arise. They can understand grievance through the following methods:
Exit interview
Opinion surveys
Gripe boxes
Open door policy

Causes of Grievances
1. Grievances arising out of working conditions:
Poor physical conditions of workplace
Very tight production standards
Non availability of proper tools and machines
Unplanned changes in schedules and procedures
Mismatch of worker with the job
Failure to maintain proper discipline
Poor relationship with supervisor

2. Grievance arising out of management policy:


Wage rates & methods of wage payment
Seniority
Transfers
Promotions
Lack of opportunity for career growth
Leave
Penalties imposed for misconduct

3. Grievance arising out of alleged violations of:


The collective bargaining agreement
Company rules and regulations
Government laws

4. Grievances arising out of personal malpractice:


Over ambition
Excessive self esteem
Impractical altitude in life

Types of grievance
Legitimate Grievance: It occurs when there is a reasonable cause to think there has been a
contract violation. Misunderstanding of an agreement causes the legitimate grievance.

Imagined grievance: This occur when employee believe that the agreement has been
violated even though the management is exercising its contract rights reasonably.

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Political grievance:
They occur when a complaint is pursued to further someone's political aspirations. These
are the most difficult to solve.

Grievance procedure
It is a formal channel of communication designed to resolve formal complaints (grievance).
It normally manifests itself in a document which spells out the steps to be followed when
employees have grievances.

Purpose/objectives of grievance procedure


To serve as an orderly channel for reducing pressures and anxieties of employees
To serve as a mechanism for equitable just interpretation and application of
negotiated items
To prevent arbitrary unreasonable actions against employees.

Pre-requisites of a grievance procedure


Conformity with the prevailing legislation-legal sanctity.
Acceptability
Timely
Clarity
Simplicity
Promptness
Training
Follow-up

The Grievance Procedure


Timely action
Accepting the grievance
Identifying the problem
Collecting the facts
Analyzing the cause of grievance
Taking decision
Implementing the decision

Model Grievance Procedure suggested by National Commission on labour


The grieved employee conveys his grievance to the officer designated verbally.
If not satisfied or does not receive answer within 48 hrs. He presents case in writing
before departmental head.
Grievance committee.
Appeal to management
Voluntary arbitration.

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