Introduction

Human Resource Management

Human resources are the most valuable and unique assets of an organization.
The successful management of an organization's human resources is an
exciting, dynamic and challenging task, especially at a time when the world
has become a global village and economies are in a state of flux. The scarcity
of talented resources and the growing expectations of the modern day worker
have further increased the complexity of the human resource function. Even
though specific human resource functions/activities are the responsibility of
the human resource department, the actual management of human
resources is the responsibility of all the managers in an organization.

Meaning of Human Resource

Human resources (HR) is the company department charged with finding,
screening, recruiting and training job applicants, as well as administering
employee-benefit programs

Definition of Human Resource

According to Michael J. Jucius, human resources are a whole consisting of
inter-related, inter-dependent and interacting physiological, psychological,
sociological and ethical components

According to Leon C. Megginson, human resources are knowledge, skills and

attitude obtained in the population; while for individual enterprises, they
represent the total of the abilities, knowledge and skills of its employees

Human resources (HR) is the company department charged with finding,

screening, recruiting and training job applicants, as well as administering
employee-benefit programs. As companies reorganize to gain competitive
edge, human resources plays a key role in helping companies deal with a
fast-changing environment and the greater demand for quality employees.

Human resources (HR) is the department within a business that is responsible

for all things worker-related. That includes recruiting, vetting, selecting,
hiring, onboarding, training, promoting, paying, and firing employees and
independent contractors. HR is also the department that stays on top of new
legislation guiding how workers need to be treated during the hiring, working,
and firing process

Scope of HRD
Human Resource Planning
Design of the Organization and Job
Selection and Staffing
Training and Development
Organizational Development
Compensation and Benefits
Employee Assistance
Union/Labour Relations
Personnel Research and Information System

a) Human Resource Planning: The objective of HR Planning is to ensure that

the organization has the right types of persons at the right time at the right
place. It prepares human resource inventory with a view to assess present
and future needs, availability and possible shortages in human resource. HR
Planning develops strategies both longterm and short-term, to meet the manpower requirement.

b) Design of Organization and Job: This is the task of laying down organization
structure,
authority, relationship and responsibilities. This is done by :job description.
Another important step is Job specification. Job specification identifies the
attributes of persons who will be most suitable for each job which is defined

by job description.

c) Selection and Staffing: This is the process of recruitment and selection of

staff. This involves matching people and their expectations with which the job
specifications and career path available within the organization.
d) Training and Development: This involves an organized attempt to find out
training needs of individuals to meet the knowledge and skill which is needed
not only to perform current job but also to fulfill the future needs of the
organization
e) Organizational Development: This is an important aspect whereby Synergetic
effect is generated in an organization i.e. healthy interpersonal and inter-group
relationship within the organization.
f) Compensation and Benefits: This is the area of wages and salaries administration
where wages and compensations are fixed scientifically to meet fairness and equity
criteria. In addition labour welfare measures are involved which include benefits and
services.
g) Employee Assistance: Each employee is unique in character, personality,
expectation and temperament. By and large each one of them faces problems
everyday. Some are personal some are official. In their case he or she remains
worried. Such worries must be removed to make him or her more productive and
happy.
h) Union-Labour Relations: Healthy Industrial and Labour relations are very
important for enhancing peace and productivity in an organization. This is one of
the areas of HRM.
i) Personnel Research and Information System: Knowledge on behavioral science
and industrial psychology throws better insight into the workers expectations,
aspirations and behavior. Advancement of technology of product and production
methods have created working environment which are much different from the past

Features of HRM
Human resource management is concerned with employees both as
individual and as group in attaining goals. It is also concerned with behavior,
emotional and social aspects of personnel.

It is concerned with the development of human resource i.e., knowledge,

capability, skills, potentialities and attaining and achieving employee goals,
including job satisfaction.
Human resource management covers all levels and categories of employees.
It covers both organized and unorganized employees
Human resources management is a continuous and never ending process.
Organization goals may include survival, growth and development in addition
to profitability, productivity, innovation, excellence, etc.
It is concerned mostly with managing human resources at work.
Human resource management aims at securing unreserved cooperation from
all employees in order to attain predetermined goals

Importance of HRM

It helps in managing, preparing and completing all personnel policies &

programs.
It increases the benefits of any organization through training and
development of human resources.
Change management is one of the main and necessary factors of
organization to develop and compete in market, HR Managers prepare and train a
workforce for change management.
HRM motivates people and encourage them to enable for short & long term
goals of companies and organizations.
It helps in cost reduction through innovative and experimental values in an
organization.
Workers career management and reward system with best compensation, all
are the responsibilities of HR Managers, through which they can get the best work
and energies from them.

Objectives of HRM

Accomplish the basic organizational goals by creating and utilizing an able

and motivated workforce.
Develop co-ordination among individual and group within organization to
secure the integration of organization.
To attain an effective utilization of human resources in the achievement of
organizational goals.
To identify and satisfy individual and group needs by providing adequate and
equitable wages, incentives, employee benefits and social security and measures

for challenging work, prestige, recognition, security, status.

To strengthen and appreciate the human assets continuously by providing
training and development programs
To provide an opportunity for expression and voice management.
To provide fair, acceptable and efficient leadership.
To provide facilities and conditions of work and creation of favorable
atmosphere for maintaining stability of employment.

HRM v/s Performance Management

1. Personnel management is a traditional approach of managing people in the
organization. Human resource management is a modern approach of
managing people and their strengths in the organization.

2. Personnel management focuses on personnel administration, employee

welfare and labor relation. Human resource management focuses on
acquisition, development, motivation and maintenance of human resources in
the
organization.
3. Personnel management assumes people as a input for achieving desired
output. Human resource management assumes people as an important and
valuable resource for achieving desired output.

4. Under personnel management, personnel function is undertaken for

employee's
satisfaction.
Under
human
resource
management, administrative function is undertaken for goal achievement.

5. Under personnel management, job design is done on the basis of division

of labor. Under human resource management, job design function is done on
the basis of group work/team work.

6. Under personnel management, employees are provided with less training

and development opportunities. Under human resource management,
employees are provided with more training and development opportunities.

7. In personnel management, decisions are made by the top management as

per the rules and regulation of the organization. In human resource
management, decisions are made collectively after considering employee's
participation, authority, decentralization, competitive environment etc.

8. Personnel management focuses on increased production and satisfied

employees. Human resource management focuses on effectiveness, culture,
productivity
and
employee's
participation.

9. Personnel management is concerned with personnel manager. Human

resource management is concerned with all level of managers from top to
bottom.

10. Personnel
management

management
is

is

routine
a

function. Human
strategic

resource
function.

Functions of HRM
The functions of HRM can be broadly classified into two categories, viz.,
(i) Managerial functions and
(ii) Operative functions
I. Managerial Functions
Managerial functions of personnel management involve planning, organizing,
directing and controlling. All these functions influence the operative functions

Functions of HRM

Managerial Functions
Planning

Operative Functions
Employment

Organizing
Resource Development

Human

Directing

Compensation

Controlling

Human Relations
Industrial

Relation
Recent
Trends In HRM

(i) Planning: It is a predetermined course of action. Planning pertains to

formulating strategies of personnel programmes and changes in advance that
will contribute to the organizational goals. It involves planning of human
resources, requirements, recruitment, selection, training etc. It also involves
forecasting of personnel needs, changing values, attitudes and behaviour of
employees and their impact on the organization.
(ii) Organizing: An organization is a means to an end. It is essential to carry
out the determined course of action. In the words of J.C. Massie, an
organization is a structure and a process by which a co-operative group of
human beings allocates its task among its members, identifies relationships
and integrates its activities towards a common objective. Complex
relationships exist between the specialized departments and the general
departments as many top managers are seeking the advice of the personnel
manager.

(iii) Directing: The next logical function after completing planning and
organizing is the execution of the plan. The basic function of personnel
management at any level is motivating, commanding, leading and activating
people. The willing and effective co-operation of employees for the
attainment of organizational goals is possible through proper direction.
Tapping the maximum potentialities of the people is possible through
motivation and command.

(iv) Controlling: After planning, organizing and directing various activities of

personnel management, the performance is to be verified in order to know
that the personnel functions are performed in conformity with the plans and
directions of an organization. Controlling also involves checking, verifying and

comparing of the actual with the plans, identification of deviations if any and
correcting of identified deviations. Thus, action and operation are adjusted to
pre-determined plans and standards through control.

II. Operative Functions

The operative functions of human resources management are related to
specific activities of personnel management, viz., employment, development,
compensation and relations. All these functions are interacted with
managerial functions. Further, these functions are to be performed in
conjunction with management functions.

1. Employment: It is the first operative function of Human Resources

Management (HRM). Employment is concerned with securing and employing
the people possessing the required kind and level of human resources
necessary to achieve the organizational objectives. It covers functions such
as job analysis, human resources planning, recruitment, selection, placement,
induction and internal mobility
(i) Job Analysis: It is the process of study and collection of information relating
to the operations and responsibilities of a specific job.

(ii) Human Resources Planning: It is a process for determination and assuring

that the organization will have an adequate number of qualified persons,
available at proper times, performing jobs which would meet the needs of the
organization and which would provide satisfaction for the individuals involved

(iii) Recruitment: It is the process of searching for prospective employees and

stimulating them to apply for jobs in an organization.

(iv) Selection: It is the process of ascertaining the qualifications, experiences,

skills, knowledge etc., of an applicant with a view to appraising his/her
suitability to a job.

(v) Placement: It is the process of assigning the selected candidate with the

most suitable job in terms of job requirements. It is matching of employee

specifications with job requirements.
(vi) Induction and Orientation: Induction and orientation are the techniques by
which a new employee is rehabilitated in the changed surrounding and introduced
to the practices, policies, purposes and people etc., of the organization.
2. Human Resources Development: It is the process of improving, molding and
changing the skills, knowledge, creative ability, aptitude, attitude, values,
commitment etc., based on present and future job and organizational requirements.
This function includes:
(i) Performance Appraisal: It is the systematic evaluation of individuals with respect
to their performance on the job and their potential for development.
(ii) Training: It is the process of imparting to the employees technical and operating
skills and knowledge.
(iii) Management Development: It is the process of designing and conducting
suitable executive development programmes so as to develop the managerial and
human relations skill of employees.
(iv) Career Planning and Development: It is the planning of ones career and
implementation of career plans by means of education, training, job search and
acquisition of work experiences. It includes internal and external mobility.

(v) Internal Mobility: It includes vertical and horizontal movement of an

employee within an organization. It consists of transfer, promotion and
demotion.

(vi) Transfer: It is the process of placing employees in the same level jobs
where they can be utilized more effectively in consistence with their
potentialities and needs of the employees and the organization.

(vii) Promotion: It deals with upward reassignment given to an employee in

the organization to occupy higher position which commands better status
and/or pay keeping in view the human resources of the employees and the
job requirements.
(viii) Demotion: It deals with downward reassignment to an employee in the

organization.
(ix) Retention and Retrenchment Management: Employers prefer to retain
more talented employees while they retrench less talented employees.
Employers modify existing human resource strategies and craft new
strategies in order to pay more salaries, provide more benefits and create
high quality of work life to retain the best employees. And managements pay
less to the less talented employees and plan to retrench the misfits as well as
unwanted employees depending upon the negative business trends.
(x) Change and Organization Development: Change implies the creation of
imbalances in the existing pattern or situation. Organization development is a
planned process designed to improve organizational effectiveness and health
through modifications in individual and group behaviour, culture and systems
of the organization using knowledge and technology of applied behavioural
sciences.

3. Compensation: It is the process of providing adequate, equitable and fair

remuneration to the employees. It includes job evaluation, wage and salary
administration, incentives, bonus, fringe benefits, social security measures
etc.

(i) Job Evaluation: It is the process of determining relative worth of jobs.

(ii) Wage and Salary Administration: This is the process of developing and
operating a suitable wage and salary programme.

(iii) Incentives: It is the process of formulating, administering and reviewing the

schemes of financial incentives in addition to regular payment of wages and salary
(iv) Bonus: It includes payment of statutory bonus according to the Payment of
Bonus Act, 1965 and its latest amendments.

(v) Fringe Benefits: These are the various benefits at the fringe of the wage.
Management provides these benefits to motivate the employees and to meet

their lifes contingencies.

(vi) Social Security Measures: Managements provide social security to their
employees in addition to the fringe benefits.

4. Human Relations: Practicing various human resources policies and programmes

like employment, development, compensation and interaction among employees
create a sense of relationship between the individual worker and management,
among workers and trade unions and the management. It is the process of
interaction among human beings. Human relations is an area of management in
integrating people into work situations in a way that motivates them to work
together productively, co-operatively and with economic, psychological and social
satisfaction. It includes:
Motivating the employees.
Boosting employee morale.
Developing the communication skills.

5. Industrial Relations: The term industrial relations refers to the study of relations
among employees, employers, government and trade unions. Industrial relations
include:
Indian labour market
Trade unionism
Collective bargaining

6. Recent Trends in HRM: Human Resources Management has been advancing at a

fast rate. The recent trends in HRM include:
Quality of work life
Total quality in human resources
HR accounting, audit and research and
Recent techniques of HRM

Role Of HRM
Human Resources Management plays the most crucial role in the
management of an organization. Human resources play crucial role in the
conversion process of inputs into outputs. Product design, quality
maintenance, rendering services etc., depend upon the efficiency of human
resources. Human resource also plays significant role in managing finances

and managing information systems.

HR Manager
Role

In conjunction with the Head of HR, ensuring all company policies and procedures
are up to date in line with current employment law. Ensuring line managers are up
to date with changes to any policies.

Working with senior managers, coaching them and advising on all people
issues.Dealing with complex disciplinary/grievance and HR issues, using HR and
company knowledge evidencing appropriate decision making skills

Crafting of business and people solutions

Managing HR budgets
Responsibility

To develop a thorough knowledge of corporate culture, plans and

policies.

To act as an internal change agent and consultant.

To initiate change and act as an expert and facilitator.

To actively involve himself in companys strategy formulation.

To keep communication lines open between the HRD function and

individuals and groups both within and outside the organization.

To identify and evolve HRD strategies in consonance with overall

business strategy.

To facilitate the development of various organizational teams and their

working relationship with other teams and individuals.

To try and relate people and work so that the organization objectives
are achieved effectively and efficiently.

To diagnose problems and

particularly in the human resources areas.

Powers

to

determine

appropriate

solution

Coercive Power- This kind of power involves the usage of threat to make people do
what one desires. In the organizational set up, it translates into threatening
someone with transfer, firing, demotions etc. it basically forces people to submit to
ones demand for the fear of losing something.

Reward Power- As the name suggests, this type of power uses rewards, perks, new
projects or training opportunities, better roles and monetary benefits to influence
people. However an interesting aspect of this type of power is that, it is not
powerful enough in itself, as decisions related to rewards do not rest solely with the
person promising them, because in organizations, a lot of other people come into
play like senior managers and board.

Legitimate Power- This power emanates from an official position held by someone,
be it in an organization, beurocracy or government etc. The duration of this power is
short lived as a person can use it only till the time he/she holds that position, as well
as, the scope of the power is small as it is strictly defined by the position held.

Expert Power- This is a personal kind of power which owes its genesis to the skills
and expertise possessed by an individual, which is of higher quality and not easily
available. In such a situation, the person can exercise the power of knowledge to
influence people. Since, it is very person specific and skills can be enhanced with
time; it has more credibility and respect.

Referent Power- This is a power wielded by celebrities and film stars as they have huge following
amongst masses who like them, identify with them and follow them. Hence, they exert lasting influence
on a large number of people for a large number of decisions; like from what car to buy to which candidate
to choose for a higher office in the country.

Duties
1. Handling recruitment process: One of the common responsibility that people
know about the HR director is that he / she is the person who monitors the
recruitment process of the company. The HR director takes the responsibility of
hiring responsible employees and the employers who can invest their skills and
abilities in the overall development of the company. It is essential to have a
knowledgeable and responsible HR director because without resourceful man power
the company cannot move in the right direction of success .

2. Organization structure and planning: An HR director should be responsible for

building a organizational structure. HR helps in laying foundation for the
organization. They participate to form different pillars in an organization that is
responsible for its development. They develop different strategies to meet the goals
of the organization and contribute their support to all the departments of their
company. They also acknowledge team leaders with their results VS actual and
make them understand their target and how to achieve them. They take different
kind of models and survey them by implementing in the organization. They take
care that each and every member is contributing to the organization.

3. Build HR policies and maintain them: HR managers responsibility is to

infuse the governments HR policies in their organizations HR policy and
keep revising policies for the better performance of employees. One must be
aware of all the government policies to reflect them in their policy. They keep
track of whether the policies they implemented are working successfully and
if not they take necessary action and inform their reporting executives to
check out with their employees on this. It includes leaves, promotions,
regulations, pay, incentives, abscond policy, working hours etc.
4. Rewards and Recognition: It is Human resource managers key task to
recognize their employees and reward them for their performance and
contribution to the organization. They encourage the employees to perform
well. According to their grading or rating they will collect the information from
the department managers and recognize the employees as per their
performance. They nominate some members to form a team for this reward
and recognition. They make sure that this process underlies with
organizational policies.
5. Employee development programs: Once the hiring process is done, the
human resource management will take care of their training process. They
prepare the program depending on the department and the nature of work
and enhance the new hires by making them experience with the
organizations environment. They provide opportunity for them to learn skills
and develop in their career. They also conduct employee engagement
program in which one can interact with their co-employee. They do give

training on awareness programs for women employees on how to protect

themselves.

Components of HRM
1. Human Resource Planning
This is one of the most important component of HRM. Through this function, HR
Managers identify and respond the needs of organizations; it may also involve in
forming new policies, systems, and updated programs for assuring the effective
human capital and its management for changing conditions. Strategic planning and
future of HR needs is discussed under this process.

2.
Recruitment
The next step is recruitment, which collects a pool of candidates for getting
the best and suitable candidate for any post or position. Internal or external
announcements and gathering of initial data of candidates are collected for
their selection.
3.
Selection
The next component is selection. Under this section, the selection of
suitable and job match persons is completed. Different types of test,
interviews and examinations are completed in this section. Candidates arrive
forward after passing all these different types of educational, mental, physical
and managerial tests. This is most important and necessary part of Human
Resource Management.
4.
Training & Development
This component has two parts, training & development. Both are completed
for the betterment of new and old employees, so that they can be matched
with their jobs. The training process is specifically for new employees and
development for old ones. Introduction to job, functions and work
environment is provided that help to understand the whole job and the
organization. Different on and off job classes, workshops and training
sessions are included in this component too.
5.
Performance Appraisal
For a frequent check & balance or control over workers, employees and
managers performance appraisal plays important role in Human Resource
Management. Through different ways and techniques, monthly, quarterly and

annually, a performance check process is completed. If there is felt any

deficiency, then different strategies are applied for getting the best results in
the future, otherwise firing takes place.

6. Compensation
The step deals with salaries, jobs, bonuses and all financial issues of HR.
Wages and salaries are managed under this function. Different types of
packages including GP funds, golden handshakes and pensions are controlled
by HR Managers here. Updated software and tools are used for competitive
and best salaries of employees. This section keeps an eye on market trends
and tries to provide the competitive salaries to each employee.
7.
Employee Separation
The final and most important component to complete the HRM process is
Employee Separation. This deals with firing or retirement of workers and
managers. A complete record is taken, and golden handshakes, GP fund
details, facilities and retirement programs are completed. The basic purpose
of this component is to separate the human asset of any organization
according to his/her value, working and importance.

Performance Appraisal
Performance appraisal may be defined as a structured formal
interaction between a subordinate and supervisor, that usually takes the form
of a periodic interview (annual or semi-annual), in which the work
performance of the subordinate is examined and discussed, with a view to
identifying weaknesses and strengths as well as opportunities for
improvement and skills development.
In many organizations - but not all - appraisal results are used, either directly
or indirectly, to help determine reward outcomes. The appraisal results are
used to identify the better performing employees who should get the majority
of available merit pay increases, bonuses, and promotions.
By the same token, appraisal results are used to identify the poorer
performers who may require some form of counseling, or in extreme cases,
demotion, dismissal or decreases in pay.
Whether this is an appropriate use of performance appraisal - the assignment
and justification of rewards and penalties - is a very uncertain and
contentious matter.

Performance appraisal refers to all the formal procedures used to evaluate an

individual, his contribution and potential. In other words, it is to plan a-nd
measure the performance of an individual in terms of the requirement of the
job or it is a process of finding out how effective the organization has been at
hiring and placing an employee.
Performance appraisal is a formal system of review and evaluation of
individual or team task performance. While evaluation of team performance
is critical when teams exist in an organization, the focus of performance
appraisal in most firms remains on the individual employees. Regardless of
the emphasis, an eff ective appraisal evaluates accomplishments and
initiates plans for development, goals and objectives.
Performance appraisal is a method of evaluating the behavior of employee.
Performance appraisal is one of the oldest method and most universal
practices of in the work spot. Normally including both the qualitative and
quantitative aspects of job performance.
Performance appraisal can be an effective instrument for helping people grow
and develop in organizational setting through a well organized appraisal
system. An employee can create learning spaces for himself in an
organization.
Effective practiced and developed oriented performance appraisal and review
system, substantially contribute to the organizational health. Organization
cannot do away with performance appraisal. Some form of assessment of
performance on continuing basis is essential for survival as well as growth of
an organization.
Performance appraisal is a systematic appraisal of the employees personality
traits and performance on the job and is designed to determine his
contribution and relative worth to the firm.
A formal definition of performance appraisal is that, it is the systematic
evaluation of the individual with respect to his or her performance on the job
and his or her potential for development.
Performance appraisal is a formal structured system of measuring and
evaluating an employees job, related behaviors and out comes to discover
how and why the employee is presently performing on the job and how the
employee can perform effectively in the future so that the employee,
organization and society all benefit

Meaning
A performance appraisal is a systematic general and periodic process that
assesses an individual employee's job performance and productivity in
relation to certain pre-established criteria and organizational objectives .
Definition

Dale S. Beach, "Performance appraisal is systematic evaluation of the

individual with respect to his or her performance on the job and his or her
potential for development".
Randall S. Schuler, "Performance appraisal is a formal, structured system of
measuring and evaluating an employees job, related behaviour and outcomes
to discover how and why the employee is presently perfuming on the job and
how the employee can perform more effectively in the future so that the
employee, organization, and society all benefit."
Heyel, "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."
Dale Yoder, ''Performance appraisal includes all formal procedures used to
evaluated personalities and contributions and potentials of group members in
a working organization. It is a continuous process to secure information
necessary for making correct and objective decisions on employees."
Advantages
1 Promotion: Performance appraisal can help a lot when it comes to
managers and their employees. Not only does it allow the supervisor to chalk
out all programmes of promotion but also makes a lot of work easy for them.
In that way, those who dont work hard enough or are inefficient are
dismissed or demoted.

2 Compensation: A second thing that performance appraisal helps in is called

compensations. Seniors can chalk out the packages for their employees in
that way. Merit rating is always possible throughout the appraisal of
performance. Several packages of compensation which include high rates of
salary, extra benefits bonus, allowances which are very much dependent on
the appraisal of performance. The criteria must also be merit instead of
seniority.
3 Development of employees: The procedure is also helpful when it comes to
development of employees. It helps them to frame the policies of training and
several other programmes alongside. Not just that, it also helps them analyse

their weaknesses and strengths so that all new jobs are given to those who
perfectly fit in. It may also allow them to frame the development programmes
in the future.
4 Validation and selection: Performance appraisal also allows all managers
and supervisors to understand what the selection procedure is all about and
who deserves a promotion and validity and who doesnt. The supervisors at
this point understand their workers and colleagues in a much better way.
Future changes made in the methods of selection can be made in such
regards.
5 Communication: For all organizations, effective methods of communication
between all employees and employers are needed. Though appraisal of
performance is needed, the communication must be sought in several ways
such as using the help of performance appraisal where the employers are
able to understand the skills and accept them. Second is helping in the
maintenance of cordial relationships with other workers, developing team
spirit and h
6 Motivation: Appraisal of performance can be used as a tool for motivation.
Through the process of evaluation of the employees, the efficiency of the
person can be determined once all targets have been reached. This could
motivate a person quite well and also help them improve their jobs in the
upcoming years.
Disadvantages

1 The Halo effect

Halo effect is defined as the influence of a raters general impression on
ratings of specific rate qualities. It tends to occur when an evaluation rates
an employee high on all jobs criteria, even if he has performed well only in
one area.

2 Contrast error

The rating is always based on performance standards. The contrast error

occurs when employee is rated without taking into account the performance
standard. This can also occur if a rater compares an employees present
performance with their past performance.

3. Rater bias
The raters prejudices and biasness can also influence rating. For example, a
supervisor can underrate an employee based on race, sex, religion,
appearance and favouritism.

4. Central tendency error

When the supervisor rates all the employees within a narrow range, thinking
all employees are of average level, this type of error occurs.

5. Leniency or severity
Performance appraisal demands that the rater should objectively draw a
conclusion about employees performance.

6. Sampling error
If the rater uses a very small sample of the employees work, it may be
subject to sampling error.

7. Primary and regency error

Behaviour of an employee at the initial stage of rating and at the end of
appraisal can affect the rating. For example, a salesmans performance may
be very low for some part of the year.
Importance
1. Performance appraisal helps supervisors to assess the work performance of
their subordinates.

2. Performance appraisal helps to assess the training and development needs

of employees.

3. Performance appraisal provides grounds for employees to correct their

mistakes, and it also provides proper guidance and criticism for employee's
development.

4. Performance appraisal provides reward for better performance.

5. Performance appraisal helps to improve the communication system of the
organization

6. Performance appraisal evaluates whether human resource programs being

implemented in the organization have been effective.

7. Performance appraisal helps to prepare pay structure for each employee

working in the organization.

8. Performance appraisal helps to review the potentiality of employees so

that their future capability is anticipated.

Analysis

Needs
There are certain requirements expected from the employees for which
performance appraisal are conducted.

1. Providing information about the performance ranks on which decision

regarding salary fixation, promotion, etc. are taken.
2. Review of the performance of the subordinates.
3. Providing information that helps to counsel the subordinates.
4. Getting information to diagnose deficiency in employees regarding skills,
knowledge, etc.
5. To prevent grievance and in disciplinary activities.
Cycle
Performance management involves much more than just assigning ratings. It
is a continuous cycle that involves:
1. Planning work in advance so that expectations and goals can be set;
2. Monitoring progress and performance continually;
3. Developing the employee's ability to perform through training and work
assignments;
4. Rating periodically to summarize performance and,
5. Rewarding good performance.

Objectives
a. To provide employees feedback on their performance.
b. Identify employee training needs.
c. Document criteria used to allocate organizational rewards.
d. A basis for decisions relating to salary increases, promotions, disciplinary
actions, bonuses, etc.
e. Provide the opportunity for organizational diagnosis and development.
f. Facilitate communication between employee and employer.
g. Validate selection techniques and human resource policies to meet
regulatory requirements.
h. To improve performance through counseling, coaching and development.
i. To motivate employees through recognition and support.

Characteristics

1. Clear Objectives:
The objectives of performance appraisal should be clear, specific, timely and
open. The appraisal system should be fair and beneficial to both the
individual employee and the organization should be linked with other
subsystems of personnel management.
2. Reliable and Valid:
Appraisal system should provide consistent, reliable and valid information
and date. Appraisals should measure what they are supposed to measure. For
example, if the objective of appraisal is to show potential of an employee for
promotion, it should supply the date relating to potentialities of the
employee.
3. Standardization:
The appraisal form, procedures and rules should be standardized. There
should be well-defined performance criteria and standards. Employees should
be made fully aware of these standards as appraisal decisions affect all
employees of the group.
4. Training:
Evaluators should be given training in procedures and principles of appraisal.
They should be provided with knowledge and skills in designing appraisals,
conducting post appraisal interviews and correcting rating errors.
5. Fob Relatedness:
The appraisal system should focus attention on job-related behaviour and
performance. It should provide information on job related activities and areas.
6. Mutual Trust:
Before introducing the appraisal system, a climate of mutual trust,
cooperation and confidence should be created in the organization. Under the
system, the employees should be treated in a supportive manner.

7. Feedback and Participation:

The ratings should be communicated to both the employees and the raters.
The appraisal r system should be open and participative. The employees
should get information on their performance. The system should involve
employees in the goal setting process.
8. Help Focus:
Appraisal should not judegemental. It should not be purely control- oriented.
The evaluator should also play the role of coach and counselor. He shouldhelp people reach their full potential. The overall purpose of appraisals should
be developmental.
9. Recognition of Differences:
Organization differs in terms of work, size, resources, needs and environment.
Hence, the appraisal system must be designed to meet the needs of
particular organization. It should be specific and tailor - made for the
particular company.
10. Post Appraisal Interview:
An appraisal system is only as effective as the manager is iii communications.
Hence, an interview with the employee should be arranged after appraising
his performance. It will help to know the difficulties of work and training
needs of employees. In interview, problem solving approach should be
adopted and counseling should be provided for improving performance.

Process

1. Establish Performance Standards:

The appraisal process begins with the establishment of performance

standards. The managers must determine what outputs, accomplishments
and skills will be evaluated. Standards should not be expressed in an
articulated or vague manner such as a good job or a full days work as
these vague phrases tells nothing.

2. Communicate Performance Expectations to Employees:

Once the performance standards are established, this need to be
communicated to the respective employees so that they come to know what
is expected of them. Past experience indicates that not communicating
standards to the employees compounds the appraisal problem.
The feedback from the employees on the standards communicated to them
must be obtained. If required, the standards may be modified or revised in
the light of feedback obtained from the employees. It is important to note
that communication is a two-way street.
3. Measure Actual Performance:
This is the third step involved in the appraisal process. In this stage, the
actual performance of the employee is measured on the basis of information
available from various sources such as personal observation, statistical
reports, oral reports, and written reports.
Needless to mention, the evaluators feelings should not influence the
performance measurement of the employee. Measurement must be objective
based on facts and findings. This is because what we measure is more critical
and important to the evaluation process than how we measure.

4. Compare Actual Performance with Standards:

In this stage, the actual performance is compared with the predetermined
standards. Such a comparison may reveal the deviation between standard
performance and actual performance and will enable the evaluator to
proceed to the fifth step in the process, i.e., the discussion of the appraisal
with the concerned employees.
5. Discuss the Appraisal with the Employee:
The fifth step in the appraisal process is to communicate to and discuss with
the employees the results of the appraisal. This is, in fact, one of the most
challenging tasks the managers face to present an accurate appraisal to the
employees and then make them accept the appraisal in a constructive
manner.
A discussion on appraisal enables employees to know their strengths and
weaknesses. This has, in turn, impact on their future performance. Yes, the
impact may be positive or negative depending upon how the appraisal is
presented and discussed with the employees.

6. Initiate Corrective Action:

The final step in the appraisal process is the initiation of corrective action
when it is necessary. The areas needing improvement are identified and then,
the measures to correct or improve the performance are identified and
initiated.

Policy

Reasons For Failure

1. Managers personal judgment or assessment based on preferences
Many a times, managers provide their personal views, judgments and
opinion other than the performance appraisal parameters. They keep their
biased view ahead of measure and analyzing employee performance against
the assigned goals and objectives. They show less interest in the
performance appraisals system and belief on their own method of
performance judgments.

2. Unstructured methods of performance appraisal systems

There are many organizations which do not set the parameters of measuring
performance levels of employees. They create Key result areas in
performance appraisal but do not include key performance indicators which
resulted the qualitative appraisal system instead of quantities appraisal
process. Thus, this approach involves lots of managers perception, likes or
dislikes and personal favors. Such appraisal processes also lack of feedback
system between employee and managers.
3. Lack of interest and ownership of manger
Performance appraisal process is a long and time consuming process. It
involves lots of discussion, feedback and designing techniques of managers.
Too often, managers do not show their much involvement and interest in
designing and developing the performance standards and set goals for their
team members objectively. In other words, instead of collaborative approach
of human resources department, function/ department head and reporting
manager, whereas it becomes coordinating approach for executing this
activity in few organizations.

4. Lack of proper channel of communication

In many organizations, managers avoid to provide direct feedback to
employees on their performances. They resist and close the channel of
exchanging feedbacks with their subordinates.

5. Lack of reward and recognition policy

In many organizations, management resist to give reward and recognition to
the employee performer in view to avoid any biasness or unrest among other
team members.

6. Lack of leadership
Implementation of performance appraisal system in company is a
responsibility of organization management and its managers respectively. In
the absence of proper leadership and communication channels, it loses its
objectivity in the eyes of employees. Performance appraisal system is a drive
of continuous process which flows from top level to bottom in an
organization.

Employee Attrition Rate:

Attrition in business can mean the reduction in staff and employees in a company through normal
means, such as retirement and resignation, the loss of customers or clients to old age or growing
out of the company's target demographic.
Employee attrition and candidate absconding are significant business concerns for every
organization, one ever bigger than attracting talent. Employee attrition is a serious issue,
especially in todays knowledge-driven market place where employees are the most important
human capital assets; attrition impacts an organizations competitive advantage. The tangible cost
of employee attrition would be the cost of training new employees , the recruitment and selection
cost, adjustment time, possible product and/or service quality problems, cost of agency

workers/temporary staff, the cost of training, the cost of loss productivity, the cost of lost
knowledge and the cost of the position remaining vacant till a suitable replacement is found. The
intangible cost, which may be even more significant than the tangible, involve the effect of
attrition on organizational culture, employee morale, social capital or organizational memory. All
these cost would significantly take away the profitability and the competitive advantage of the
firm.
Employee attrition is a very big problem globally. Attrition rate is increasing day by day, and
especially the software industry is affected the most in the present era. Why an employee leaves a
company is the question asked by most of the employers. Companies even hire private HR
professionals to study the companys work and find out why an employee is dissatisfied.
HR department does the recruiting of new employees and then send them for
training so that they can understand work and work culture and become
better professionals. Each and every company faces employee turnover
problem whether big or small. An employee leaves his present job for another
job to get better pay package and good working conditions.
Every company calculates employee attrition rate and takes measures to
reduce it. The facts and figures are not made public as it may tarnish the
image of the company in front of its own employees and its loyal customers.
Definition
According to Ivancevich and Glueck (1989), employee turnover is the net
result of the exit of some employees and entrance of others to the
organization.
Kossen (1991) defined the staff turnover as the amount of movement in and
out (of employees) in an organization
Meaning
Attrition, in Human Resource terminology, refers to the phenomenon of the
employees leaving the company. It is usually measured with a metric called
attrition rate, which simply measures the no of employees moving out of the
company (voluntary resigning or laid off by the company). It is also referred
as churn rate or turnover.

Advantages
1. Higher manpower costs:
There are times when employees stay with the organization for long, which
might mean that they are getting top of their pay scale. This means that
these employees are being paid a lot more than others who are doing similar
job but are comparatively new in the process. This excessive manpower costs
leads to financial burden which is generally not identified on a regular run of
the companies.
2. Negative effect of people:
There are some employees in an organization who work against the culture of
the organization and even affect the working environment. Such employees
even go to an extend to impact the loyalty of others and their outlook
towards the organization. This could mean they are working against the
organization from inside. When such employees leave the organization they
lead to more profit than loss.
3. New idea:
Many a time when some people leave an organization they open gates for
new talent and new ideas. Mostly employees who are in the organization get
used to the working atmosphere and get complacent. This means lack of risk
and definitely no new ideas. When they leave there is space for people who
have high risk taking caliber and stop the firm from becoming stagnant.

4. Higher performance:
There are employees who just have been working on a slow pace for years
within an organization. They are reasons for poor performance and slow
growth. When they leave the organization the team becomes fast paced and
the turnover time is decreased considerably. This means reduced cost and
satisfied clients.
5. Setting the culture right:
There are times that employees do not care for a lot of organizations policies
which creates a brand for the organization. When strong actions are taken
against such employees like asking them to leave because they were
affecting the brand name in a negative way would lead to a strong message
and create a professional culture in an organization.

Disadvantage
1. Decreased overall performance:
The whole business process is affected when an employee leave the
organization. It is even more risky when this happen all of a sudden. There is
no time to train the new employee who is to take over the job and the whole
team gets affected. It can directly be seen in an overall decrease of
performance of the team. Sometimes this may even lead to drastic change in
customer relationship. Customers connect with employees in an organization
and those leaving all of a sudden may lead to doubts in customers minds as
well.

2. Daily task management:

Sudden attrition may lead to difficulty in managing daily tasks. Even large
organization struggle to manage their task when employees leave jobs,
getting small information and managing daily tasks become difficult as they
cannot be managed by small current team which is left behind. Organization
generally have notice period to ensure there is a smooth transition but
attrition states otherwise, employees who leave suddenly leads to
unmanageable daily routines.
3. Increased cost:
This has to be the highest disadvantage to a company when employees leave
their jobs. There is increased cost associated with every level of the process
losing and paying the previous employee, hiring a new one, training cost for
the new employee. Research shows that these costs are way more than the
losses incurred in managing and missing out on work.

4. Lack of knowledgeable employees:

This goes without saying when employees leave an organization they take
with them the experience they have gained overtime. With organizations
which has high attrition rate the average years of experience of employees is
really low. This result in low performance, lack of loyalty and cluelessness on
what company has been through. Older employees with their years of
experience can take over critical matters which can never be trusted with
these new employees. Even with employees who have experience are hired
they may suffer at taking care of critical business matter as they are new to
companys policies, culture and current employees.
5. Create a Negative image:
It is not just that employees are looking for job, even organizations are on the
outlook of qualified professionals. When any company has high attrition rate
it negatively impact the brand of the organization. Recruiters state that they
find it difficult to map qualified candidates to the organization, as candidates
opts out fearing the attrition rate. The reasons may vary but a negative
image work against the organization.

6. Employee development:
Many organizations have various employee development plans and higher
attrition rate means losing out on it. Employee development plans takes time
and huge investments. When there is disturbance within the organization due
to employees leaving the organization it affects the development process for
all. The money invested on the employee who leave is wasted; also it affects
others who have to jump in to fill in for the lost employee affecting their
career plan and growth. These plans are structured and require dedication
and time to reach the goals. A change mid way mostly means loss of the past
work done which benefits none.

Importance

Poor performers may choose to leave and can be replaced with better
employees.
Leavers are replaced with more junior employees who cost less and who may
also stay longer.
Morale improves following the departure of problematic employees.
Leavers are replaced with people with more up-to-date job skills.
Vacancies are created to allow for internal promotions of other employees,
thus increasing their career satisfaction and motivation.
Receptiveness to innovation and change may increase.
Voluntary turnover is less painful than retrenchment.

Analysis
1. Attrition rate
The rate of attrition or the inverse retention rate is the most commonly used metric
while trying to analyze attrition. The attrition rate is typically calculated as the
number of employees lost every year over the employee base. This employee base
can be tricky however. Most firms just use a start of year employee count as the
base. Some firms calculate it on a rolling 12 month basis to get a full year impact.
This ratio becomes harder to use if your firm is growing its employee base. For
example, let's say on Jan 1st of this year there were 1000 employees in the firm.
Over the next 12 months we've lost 100 employees. Is it as straight forward as a
10% attrition rate. Where it gets fuzzy is how many of those 100 employees that
were lost were in the seat on Jan 1st. Were all the 100 existing employees as of Jan
1st or were they new hires during the year that termed. Hence the attrition rate
must be looked at in several views.
2. Existing employee attrition
This type of a view asks the question "How many of my employees who worked here
a year ago today have left". This fixes the set of employees you're looking at to just
those that were employed 12 months ago. The figure below plots how many of
those employees hired 12 months ago are still in their seat over the 12 months. The
plot would always be a strictly decreasing curve. Here is a sample graph from a
firm.

Such a view is more important to look at because it tends to show you where
slightly more tenured employees leave. This leaves out those that joined and
quit in 3 months which is more of a localized recruiting issue rather than a
systematic issue in the company.

3.Total employee attrition

This type of a view displays total attrition by month. It does not discriminate
as to which employees quit, whether they were new hires or they were 3 year
tenured employees. The plot below shows how many employees quit each
month over the last 12 months.

4. Employee Tenure
Closely related to employee attrition is total employee tenure. The more the
employee attrition the less the average tenure of employees in the company.
Let's look at a few ways we can track employee tenure performance over
time. First let's define what a tenured employee means in the context of your
company. Some folks call this the break even period as to the time it takes for
a employee to mature. This may vary from 6 months to 1.5 years based on
the complexity of the sales process, the tools involved and the product sales
lifecycle.
5. Tenured employee proportion
First let's look at the proportion of employees who are tenured v/s those that
are new. Higher the tenured proportion the better job the company is doing at
retention. This also directly impact sales performance because tenured
employees tend to do better than new ones.

6. Tenured employee actual

In a growing company however just looking at the proportion of tenured
employees to new is not enough. As new hires come in to increase the
employee base the Tenured employee proportion would auto-decline. Hence
we should also look at the actual number of employees who are tenured.
Below is the graph of actual tenured v/s new hire employee counts for a firm.

Notice in the recent months that both tenured and new hire counts are
increasing. This means that while the company is hiring more to increase the
new hire counts it's doing a better job at retention as well since more tenured
employees are staying on.

7. Batchwise churn analysis

Is every batch of new hires that join your company the same. Do they
perform identically? A view of that can be very useful to study the
'employee lifecycle' to see how they start off and how they perform as
they mature. This information can be critical when cross-referenced
with the hiring sources and may also be used for recruitment
performance.
Below is a view of employees that were hired in a particular month and
how that batch churned over their lifetime at the company. This is
typically possible to do if we have atleast 2-3 years of company
performance history.

Needs

Cycle

Objective
1. To fulfill the future needs and aspiration of employees in the organization.
2. To verify the satisfaction level of employees in the organization.
3. To ensure co-ordination between the employees and the organization.
4. To protect the interest of the employees in the organization.
5. To bring out proper work between employees and the organization to
improve the companys image.
6. To make employees proud of their own company.
7. To take efforts and measures to improve the situation and conditions of the
employment.
8. To understand the rules and policies followed by the organization.
Characteristics

Process

Policy
1.Stress on hiring the right fit
The process of employee retention begins much before the actual signing of
the work agreement between an employer and an employee.
A lot of organizations, especially those dependent on technical know-how,
have a pre placement test for the interviewees.
This lets you understand the adaptability of the talent beforehand. Though
these tests might give you a fair idea of the technical capabilities of the
individual, only a personality test can help you evaluate whether or not the
candidate has the right mental and social aptitude to be a right fit to your
organization.
2.Handhold New Employees through Orientation and Induction
The first couple of days at a new workplace can be a very overwhelming. A
new employee has to understand and absorb how things work at a new place.
She is getting introduced to a new culture. Instead of leaving the employee to
figure her way around, create a plan for the first week at least to let her sync
in to the new milieu. Give her a tour of the workplace, assign a buddy,
introduce her to key people he or she might be working with, and introduce

her to the ways of the organization. An induction program helps a new

employee feel less like an outsider and more like a part of the organization
she has just joined.
3.Listen to your Employees (Take Feedback)
Keep it informal by embracing the open door policy. Listen to them and
encourage them to come up feedback so that you as an organization keep
improving. Most organizations mistake feedback to be only a tool of relevant
criticism. Instead you can make it a two way communication to improve
transparency.
Feedback also achieves another very important goal of letting the employee
know that the organization is watching out for her. A feedback makes the
employee feel that his work is not going unnoticed. When you let your new
team member feel that her work counts, it makes her feel more responsible
for it and in turn feel a deeper sense of responsibility towards the
organization.
4.Employee appreciation goes a long way
An annual appraisal based on employee assessment is sometimes not
enough to keep your team member motivated. Everybody loves a pat on the
back every now and then. There is a sense of accomplishment when your
work is appreciated by your seniors and coworkers. Appreciations can be
circulated within the organization with mentions in fortnightly or monthly
newsletters. It can be appreciation of an individual or a team. Good work
when rewarded results in more good work.
Happy employees will be loyal to the organization. Introduce small but
lucrative incentives to encourage a competitive attitude. Make the employee
feel that there is more to work than earning his monthly dues.
5. Have fun with your team
Take this fun thing very seriously because all work and no play can make the
whole team dull. Your organization will only be as good as your employees
are. Take your team to offsite, let them pursue their hobbies, let them be who
they are, this will not only keep them active but also accountable. Get to
know whether your employees to lead a healthy life or not engage them in
yoga and music sessions. Do respect the personal space of your employees
but let them know they will be backed up when they need organizational
help. Employees tend to stay longer with organization that show respect to
employees and have a lot of fun.
6.Have a Growth Plan For your Employees
Your employee will love to have a clear career graph charted out in front of
her if she keeps on doing everything right. If you have not done it already, do
it. Also, plan the role of your employee beyond the current project. Cross

mentorship programs are a great way to encourage her to interact with other
teams and to also help her understand other verticals within the organization.
Employees like to stick to an organization which cares about their individual
success.
7. Update/change Human Resource Policies
We are living in the communication age hence the policies suitable for
industrial era might not be of much use now. You might need an overhaul to
your human resource policy. You will have to have an employee centric policy
that is dynamic and that adapts to the changing ways of the world. The more
rigid it stays the more problems your organization will face retaining talent.
Keeping your HR policies updated at all times in accordance with the best
practices is a must.
8. Communicate with the employees
If you want to build a robust team you need to trust them. Make a
transparent mechanism to share any developments within the organization.
Being a part of the success story of an organization, increases employee
loyalty. Sharing future plans with the employees, helps them see the larger
picture and understand their concern help achieve organizational goals faster.
It instils in them a sense of responsibility of working towards a larger goal
together.

9. Introduce Stay Interviews

While Exit interviews are quite the norm, while you get to know the reasons
why people leave your organization, stay interviews are more proactive.
Here is a great way to understand what makes your employees stay in your
organization and what are the reasons they may not want to continue.
This can be done through asking questions such as :
Whats the most exciting part of your job?
Or
What would you miss the most in your present role, if you went for a role
change?
You can also ask them about role change or a suitable department they would
want to work in.
The concept of stay interviews helps you spot potential damage and gives
you enough time to act on it.
Conduct stay interviews periodically
Reasons For Failure
1. No Vision
Most employees dont get out of bed each morning trying to hit a profit
number. In the majority of companies there are only a handful of people that

truly care about it or, in some cases, even understand exactly what it means
to hit that number. As a manager, dont confuse your financial objectives with
vision. Vision feeds financials and not the other way around.
2. No Empathy
Employers let hundreds and thousands of people go each year while
employees are just as likely to leave companies for other opportunities.
Generally speaking, there is very little loyalty on either side. But there is an
almost ridiculously simple and inexpensive solution for that problem: Take the
time to listen to your people.
This is not just talk therapy they should leave the conversation believing
that you will take whatever action may be helpful and possible or at least
logically explain why nothing can be done. But by leaving your door open to
employee concerns and suggestions, leaders encourage them to feel that
they have a stake in an organization that considers them important and cares
enough to listen.

3. No Future
Jacquelyn Smith cites a recent study that shows that the majority of
graduating students are looking for career advancement over anything else.
This is certainly not a new concept, but a big disconnect from todays burn
and churn, transient employment market.
Creating career paths that are well communicated and understood by
employees is not something most companies do well. Even in the best-case
scenario where managers are holding regular performance reviews with their
employee, employees often dont understand how to move either horizontally
or vertically in an organization. Of course, not every employee is going to end
up as the CEO. Likewise, a person who is brilliant at product design wont
necessarily succeed in sales. But, for any employee that is worth retaining, a
manager must make clear to them how and where they can move forward on
their career path.
4. Lack of Training
New-hire orientation and skills training are two required components of job
preparation for which employers are responsible. Job preparation begins with

the initial step in training during new-hire orientation. Employees who start
new jobs without any kind of orientation or training are often unaware of
workplace policies and processes that would benefit their job performance.
Additional training throughout the employment relationship keeps employee
skill sets up-to-date and enables a more productive and efficient workforce.
When employees lack the training necessary to become more productive,
their performance suffers and they will either leave of their own volition for
jobs that provide training and employee support or they will be terminated for
poor performance.

5. Poor Working Conditions

Employees must have the necessary tools to perform their duties. This
includes the proper equipment, machinery and computer technology as well
as adequate lighting, work space and ergonomically-correct seating. Poor
working conditions due to physical elements lead to low productivity and
overall job dissatisfaction. The latter, particularly when left unaddressed,
leaves employees feeling unappreciated and they ultimately leave.

6. Ineffective Leadership
Leadership training, employee development and professional-level seminars
and workshops demonstrate the employers interest in tapping current
human resources for higher-level roles within the organization through
promotion-from-within policies and succession plans. Ineffective leadership
results from employers failure to provide support for employees who
demonstrate aptitude and interest in promotional opportunities. Promoting
employees without the benefit of basic leadership training puts the employer
at risk for high turnover and low productivity. Its akin to setting the
supervisor up for failure and it jeopardizes employee-supervisor relationships.
For example, an employee receiving a promotion based on job competency
alone may not have the skills necessary to manage employees who now
report to her. Leadership training and employee development can help the
new supervisor understand how to balance her dual responsibilities
managing department functions and managing people. Without leadership

training, however, the supervisor can fail because she did not receive the
training she needed and employees who report to her suffer because of
potentially poor employee-supervisor relationships.

7. Workplace Conflict
Employees involved in workplace conflict especially when management or
human resources fails to investigate or resolve the issues leave for other
employment or simply become disengaged employees whose performance
suffers. Unresolved workplace conflict has a detrimental effect on employee
morale. Employer precautions include enforcing workplace policies that
support fair employment practices and implementing a process for
employees to report incidents that often rise to the level of workplace
conflict, such as harassment or bullying.

8. Employee Communication
Employers who communicate regularly with employees lessen the risk of
creating a workforce that feels undervalued and unappreciated. Keeping
employees informed about organizational changes, staffing plans and
fluctuating business demands is one way to ensure employees remain with
the company. Neglecting employee concerns about job security through lack
of communication or excluding employees from discussions that can affect
their job performance, such as policy or procedural changes, negatively
impacts the way employees view their employer. Their views transform to
dissatisfaction and finally low productivity due to low morale and
disengagement.

9. Decreased Performance
One of the simplest but highly impacting negative effects of turnover is
decreased performance in the workplace. In their December 2007 Harvard
Business School article "Managing the Impact of Employee Turnover on
Performance: The Role of Process Conformance," Zeynep Ton and Robert S.
Huckman cite a 48-month study conducted in a large United States retail
chain that revealed that both profit margin and customer service were

adversely affected by turnover. Less experienced workers are less likely to

sell higher value solutions and deliver optimized service.

10. Unfulfilled Daily Functions

Many of the negative effects of turnover relate to performance quality, but
the "Encyclopedia of Business" points out companies with higher turnover
may struggle to complete all necessary or important daily functions. For
instance, if it takes 10 workers to a complete a given work task or function in
a day, and only seven workers are currently employed in that area, the
company has to figure out how to deal with the unfulfilled daily work
requirement.

11. Costs
High costs are one of the more discussed negatives of high turnover. Every
time an employee leaves and is replaced, there are costs associated with the
process of losing the first employee and hiring and training the new one. The
Rain Maker Group indicates that it can cost about one-half of an unskilled
worker's salary to replace a lost employee. Replacing a technically skilled
employee or a high level manager can cost as much as three to five times the
annual salary. Training costs are commonly discussed, but many people forget
costs to complete exit interviews, market new openings and complete
necessary background, reference and drug checks.

12. Lower Knowledge Base

In organizations with high turnover, constant change in employee ranks
means average years of experience and background of employees are low.
This means employees are generally less familiar with work tasks they
complete and working effectively with customers. The "Business Link"
website indicates that the more valuable the positions being turned over are
to the company, the more impact the turnover will have on current and future
performance

1.

Rude behavior. Studies have shown that everyday indignities have an

adverse affect on productivity and result in good employees quitting. Rudeness,
assigning blame, back-biting, playing favorites and retaliations are among reasons
that aggravate employee turnover. Feeling resentful and mistreated is not an
enticement for a good work environment.

2.

Work-life imbalance. Increasing with economic pressures, organizations

continue to demand that one person do the work of two or more people. This is
especially true when an organization downsizes or restructures, resulting in longer
hours and weekend work. Employees are forced to choose between a personal life
and a work life. This does not sit well with the current, younger workforce, and this
is compounded when both spouses or significant others work.

3.

The job did not meet expectations. It has become all too common for a job
to significantly vary from the initial description and what was promised during the
interviewing stage. When this happens it can lead to mistrust. The employee starts
to think, What else are they not being truthful about? When trust is missing, there
can be no real employee ownership.

4.

Employee misalignment. Organizations should never hire employees

(internal or external) unless they are qualified for the job and in sync with the
culture and goals of the organization. Managers should not try to force a fit when
there is none. This is like trying to force a size-nine foot into a size-eight shoe.
Neither management nor employee will be happy, and it usually ends badly.

5.

Feeling undervalued. Everyone wants to be recognized and rewarded for a

job well done. Its part of our nature. Recognition does not have to be monetary. The
most effective recognition is sincere appreciation. Recognizing employees is not
simply a nice thing to do but an effective way to communicate appreciation for
positive effort, while also reinforcing those actions and behaviors.

6.

Coaching and feedback are lacking. Effective managers know how to help
employees improve their performance and consistently give coaching and feedback
to all employees. Ineffective managers put off giving feedback to employees even
though they instinctively know that giving and getting honest feedback is essential
for growth and building successful teams and organizations.

7.

Decision-making ability is lacking. Far too many managers micromanage

to the level of minutia. Micromanagers appear insecure regarding their employees
ability to perform their jobs without the manager directing every move.

Organizations need employees to have ownership and be empowered! Empowered

employees have the freedom to make suggestions and decisions. Today
empowerment seems to be a catch-all term for many ideas about employee
authority and responsibility. However, as a broad definition, it means an
organization gives employees latitude to do their jobs by placing trust in them.
Employees, in turn, accept that responsibility and embrace that trust with
enthusiasm and pride of ownership.
8.

People skills are inadequate. Many managers were promoted because

they did their jobs very well and got results. However, that doesnt mean they know
how to lead. Leaders arent bornthey are made. People skills can be learned and
developed, but it really helps if a manager has a natural ability to get along with
people and motivate them. Managers should lead by example, reward by deed.

9.

Organizational instability. Managements constant reorganization,

changing direction and shuffling people around disconnects employees from the
organizations purpose. Employees dont know whats going on, what the priorities
are or what they should be doing. This causes frustration leading to confusion and
inefficiencies.

10.

Raises and promotions frozen. Over the years, studies have shown that
money isnt usually the primary reason people leave an organization, but it does
rank high when an employee can find a job earning 20 to 25 percent more
elsewhere. Raises and promotions are often frozen for economic reasons but are
slow to be resumed after the crisis has passed. Organizations may not have a goal
to offer the best compensation in their area, but if they dont, they better pay
competitive wages and benefits while making their employees feel valued! This is a
critical combination.

11.

Faith and confidence shaken. When employees are asked to do more and
more, they see less evidence that they will ultimately share in the fruits of their
labor. When revenues and profits increase along with workload, organizations
should take another look at their overall compensation packages. Employees know
when a company is doing well, and they expect to be considered as critical enablers
of that success. Organizations need to stop talking about employees being their
most important asset while treating them as consumables or something less than
valuable. If an organization wants empowered employees putting out quality
products at a pace that meets customer demand, they need to demonstrate
appreciation through actions.

12.

Growth opportunities not available. A lot of good talent can be lost if the
employees feel trapped in dead-end positions. Often talented individuals are forced
to job-hop from one company to another in order to grow in status and
compensation. The most successful organizations find ways to help employees
develop new skills and responsibilities in their current positions and position them
for future advancement within the enterprise. Employees who can see a potential
for growth and comparable compensation are more inclined to stay with an
organization

13.

Monetary factor

14.

Lack of good working condition

15.

No flexible work schedule

16.

Very few supportive colleagues

17.

Lack of appreciation

18.

Lack of challenges in job

19.

Mismatch between job and person

20.

Lack of coaching and feedback

21.

Work life imbalance