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Structure
1.1 Introduction
1.2 Why is Human Resource Planning Important?
1.3 Meaning and Definition of HRP
1.4 Need for Planning
1.5 Types of Plans
1.6 The Planning Process
1.7 Forecasting Techniques
1.8 Examining External and Internal Issues
1.9 Determining Future Organisational Capabilities
1.10 Determining Future Organisational Needs
1.11 Implementing Human Resource Programmes to Address Ancitipated Problems
1.12 Role of HRP Professionals
1.13 Barriers to HRP
1.14 Summary
1.15 Self-Assessment Questions
1.16 Further Readings
1.1 INTRODUCTION
Planning the right man for right job and developing him into effective team member is
an important function of every manager. It is because HR is an important corporate
asset and performance of organisations depends upon the way it is put in use. HRP is
a deliberate strategy for acquisition, improvement and preservation of enterprise’s
human resources. It is a managerial function aimed at coordinating the requirements,
for and availability of different types of employees. This involves ensuring that the
organisation has enough of right kind of people at right time and also adjusting the
requirements to the available supply.
5
Basics of Human HRP is a forward looking function and an organisational tool to identify skill and
Resource Planning competency gaps and subsequently develop plans for development of deficient skills
and competencies in human resources to remain competitive. HRP is influenced by
technological changes and other global business compulsions. HRP ensures benefits to
the organisations by creating a reservoir of talent, preparing people for future cost-
cutting and succession planning besides creating a back-up plan in case of
diversification and expansion.
Human resource planning should be an integral part of business planning. The
planning process defines projected changes in the types of activities carried out by the
organisation and the scale of those activities. It identifies the core competencies
required by the organisation to achieve its goals. Human resource planning interprets
people requirements in terms of stalls and competencies. As Quinnmills indicates,
human resource planning is a decision making process that combines three important
activities (1) identifying and acquiring the right number of people with the proper
skills, (2) motivating them to achieve high performance, and (3) creating interactive
links between business objectives and resource planning activities.
Human resource planning is indeed concerned with broader issues about the
employment of people than the traditional quantitative model approach of manpower
planning. But it specifically focuses on those aspects of human resource management
that are primarily about the organisation’s requirements for people from the viewpoint
of numbers, skills and how they are deployed.
However, it must be recognized that although the notion of human resource planning
is well established in the HRM vocabulary it does not seem to be established as key
HR activity.
Environment
Organisational
s
s
Objectives and Policies
s s
HR Programming
s
HRP
Implementation
s
Control and
Evaluation of Programme
s s
Surplus Shortage
Restricted Hiring Recruitment
Reduced Hours and Selection
VRS, Lay Off, etc.
HR Supply Forecast
Personnel Demand analysis provides the manager with the means of estimating the
number and kind of employees that will be required. The next step for the management
is to determine whether it will be able to procure the required number of personnel and
the sources for such procurement. This information is provided by supply forecasting.
Supply forecasting measures the number of people likely to be available from within
and outside an organisation, after making allowance for absenteeism, internal
movements and promotions, wastage and changes in hours and other conditions of
work.
12
Introduction to
1.11 IMPLEMENTING HUMAN RESOURCE Human Resource
PROGRAMME TO ADDRESS ANTICIPATED Planning System: The
Emerging Context
PROBLEMS
In this step the organisation must determine the gaps between future capabilities and
future needs and then employ the necessary human resource programmes to avoid the
problems arising from these gaps.
In implementing a new human resource programme, following basic steps are
recommended to obtain employee acceptance.
1) Communicate need for the programme: Employees would like to know why
the programme is being reduced. Many people believe the old saying “If it aint’s
broke, don’t fix it”. It is imperative to explain, then exactly why the change is
needed.
2) Explain the programme: Management must explain precisely what the
programme is, how it will be implemented and what its effects will be on other
practices and programmes.
3) Explain what is expected of the employees: Management must discuss how the
behaviours of employees are expected to change as a result of the new
programme system. For example, implementation of a new pay for performance
system may also redirect employee activities.
4) Establish feedback mechanisms: No matter how carefully planned and
implemented, almost any new policy or practice is likely to lead to questions and
problems. It is critical, therefore, for mechanisms to be established to resolve
problems and answer concerns that arise. Such mechanisms may include a
telephone hotline, ongoing survey programme as well as a dispute resolution
policy.
Finally, utility analysis is a relatively recent approach to choosing which, if any,
human resource programmes should be implemented. Utility analysis and related
approaches such as human resource accounting, consider the financial benefits versus
the costs of any human resource programme and attempt to base choice of a
programme on its rupee value of the organisation. Using such techniques organisations
are able to determine the best way to invest money in employees.
Activity A
As a HR Manager, what factors you would like to consider for human
resource planning? Briefly explain, how these factors are contributing in planning
process.
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
Activity B
What are the forecasting techniques that have been used for human resource planning
in your own organisation or any organisation you are familiar with? Briefly mention
reasons why these techniques are being used.
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
Impact of HRP
HRP itself is a process of determining human resources needs in the future and of
monitoring responses to these needs. HRP links a company’s business plans and
broad objectives with the specific programmes and other HRM activities.
Organisations need to learn to forecast HR needs more effectively. More analytic
techniques, driven by strategic planning are vital. Organisations must learn to
manage employee performance more effectively. Even though performance
measurement is complex and ill-defined, yet it is critical to effective management for
this very reason. Organisations must also learn to manage careers of their employees
more effectively.
14
Impact of Technology on HRP Introduction to
Human Resource
In order to cope with the competition, organisations have to ensure on: Planning System: The
Emerging Context
a) Producing goods and services more efficiently and economically.
b) Innovating product and processes so as to gain competitive advantages.
Advances in computer technology have offered organisations new opportunities to
enhance and streamline their processes. Computer aided design (CAD), and computer
aided manufacturing (CAM) reduce human resource involvement and shrink the cycle
time. Advances in information technology has reduced efforts required in impacting,
retrieval, processing, and sharing of data. Accurate and timely information can be
made available to different levels of management for decision making. All these
changes in technology result in a change in occupational and skill profile of
manpower.
Different manufacturing technologies have different skills required to design, operate
and maintain the machines and equipment. Also, the same technology can have a
different impact on different categories of workers and industries. The actual skill
implications of technology change will depend on:
a) Management policy for deployment of manpower
b) Attitudes bargaining strength of the union
c) Ability of manpower to adjust and adopt to the new technology.
According to ILO, introduction of new technology can affect other aspects of working
like workers responsibilities, skill requirements, job-content, physical and mental work
load, career prospects and communication and social relationships at workplace.
Skills and knowledge are required for operating and maintaining new technology and
participating in innovative processes. The manual content of skill tends to decrease for
skilled workers and office staff but requirements for mathematical skills and ability to
plan and anticipate future situations tend to increase. The methods, systems and style
of management also need changes in line with high skill demands on personnel. A
more democratic and decentralized management style is necessary to motivate highly
educated employees.
The present education system of our country is inadequate to match the technological
needs. The syllabus is outdated, teachers are not fully acquainted with the new
technology and there is a lack of infrastructure facilities. Therefore, companies will
have to provide appropriate training to add these skills. Manpower planners should
keep in mind this requirement and also the requirement of retraining. There may also
be a need for rationalization of the trade structure because of multi-skilling. For
example, traditional and relatively conceived metal trades which date back to 1930s
have been replaced by six broadly defined occupations. Lathe, mulling, grinding could
be clubbed as cutting mechanics, production engineering, machine and systems.
Engineering, precision engineering and light engineering could be put as industrial
mechanics. In office context, we now require persons who are computer trained and
also operate other office equipment such as fax, and xeroxing machines – this will
also require restructuring of employees.
Changes in work and work design are to be created.
HR Programming
Once an organisations personnel and supply are forecast, the two must be reconciled
in order that vacancies can be filled by the right employees at the right time. HR
programming assumes greater importance in the planning process.
15
Basics of Human HR Plan Implementation
Resource Planning
Implementation is nothing but converting an HR plan into action. A series of action
programmes are initiated as a part of HR plan implementation. Some such
programmes are recruitment, selection and placement, training and development,
retraining and redeployment, the retention plan and the redundancies plan.
1.14 SUMMARY
Today, human resource planning is viewed as the way management comes to grasp the
ill-defined and tough-to-solve human resource problems facing an organisation.
Human resource planning as a process of determining the human resources required
by the organisation to achieve its goals. Human resource planning also looks at
broader issues relating to the ways in which people are employed and developed in
order to improve organisational effectiveness. HRP is a decision making process that
16 combines activities such as identifying and acquiring the right number of people with
the proper skills, motivating them to achieve high performance and creating interactive Introduction to
links between business objectives are resource planning activities. HRP sets out Human Resource
Planning System: The
requirements in both quantitative and qualitative terms. Accurate manpower plan is a Emerging Context
dream. A common error of many managers is to focus on the organisation’s short term
replacement needs. Any human resource plan, if it is to be effective, must be derived
from the long term plans and strategies of the organisation. The various approaches to
human resource planning under which a number of major issues and trends in today’s
work plan that will affect organisation and employees are (1) Examine external and
internal isses, (2) Determining future organisations capabilities, (3) Determining
future organisational needs, and (4) Implementing human resources programmes to
address anticipated problems.
Although change is occuring very rapidly in the work world it is important for both
organisations and employees to monitor issues and events continuously and consider
their potential effects.
17
Basics of Human
Resosurce Planning UNIT 2 PROCESS AND FUNCTIONS OF
HUMAN RESOURCE PLANNING
(HRP)
Objectives
After reading this unit, you should be able to:
l the concept and process of HRP,
l the determination of the manpower required and the means of supplying those
requirements,
l the review process of manpower plan and how it balances the competing and
conflicting elements, and
l the manning and utilizations of manpower.
Structure
2.1 Concept and Process of HRP
2.2 Preliminaries to Review
2.3 Manning Standards and Utilization
2.4 HR Information Systems
2.5 HR Inventory and Analysis
2.6 HR Supply Planning
2.7 HR Control and Audit
2.8 Management HR Planning
2.9 Application to Individual Decisions
2.10 Summary
2.11 Self-Assessment Questions
2.12 Further Readings
P
Market Forecast Production Objectives/process Capital/financial plans H
A I
S
Time horizon (Short/long term) E
Action Plans
l Recruitment
l Retraining
l Redundancy
l Productivity
l Retention P
H
s A III
S
Monitoring and Control E
Source: Personnel Management and Human Resource by C.S. Venkat Ratnam and B.K. Srivastava,
Tata McGraw Hill Publishing Co. Ltd. New Delh, p. 57 19
Basics of Human new requirement emerges, the considerations noted in the original review should help
Resosurce Planning define the updated options quickly, and the implications of alternative actions. Should
the scale of unplanned change of extensive, a fresh review might be initiated, at least locally.
In the review process itself, the management task is to balance the many competing
and sometimes conflicting elements. Some examples might be:
l conflicting demands for available research and development resources at peaks of
activity, with an excess supply available;
l imbalance of skills emerging as technology alters the product range; and
l uncertain timing of developments, which affects the timing of deployments.
These reviews cannot anticipate situations which develop at short notice, but should
take into account the need for flexibility to cope with the manpower implications of
events such as intended future acquisitions, new business opportunities not allowed for
in plans or retention actions needed to avoid the loss of key individuals which might
damage establishment plans.
The review process may be viewed as the master programme which integrates
resourcing activities with business planning at an operational level to ensure that
organization structures and the prepration of manpower resources are matched with
the manpower requirements necessary to achieve business objectives and respond to a
changing and possibly hostile enviroment. In parallel, the process should optimize the
utilization and growth of the human resources available. The emphasis in most
reviews may be on the short-term (one to two year) actions, but there must be a longer
term (three to five or five to ten year) perspective – particularly for management
continuity, which is a special section of the same process – as the lead time for supply
can require this notice.
Meaningful manpower plans are only possible if the review process brings together all
of the relevant information at regular intervals and uses these data to re-examine, at
every level, the relevance of present and planned future organizations and the
competencies which will be required against those available. Outputs from each
review should include: detailed decisions on future organization changes and
anticipated manpower deployments for a period through two to three months after the
next scheduled review; outline decisions on longer term organization changes,
deployments and culture change plans; plus confirmation that business requirements
can be adequately resourced (or not).
All manpower supply plans and actions should stem from this process and should
incorporate provision for continuous reappraisal to identify fresh problems, to respond
to new or changed needs, and then to implement actions or monitor progress towards
action. This is essentially the means of driving the process of effective resourcing
within the business and involves management at every level in a network of associated
decisions and action.
Flows
Analyses of the patterns or flows of people through parts of the organization are
invaluable to the manpower planner; flows provide the major part of our supplies data
and identifying changes in flow patterns can point to possible difficulties, such as
when an existing flow pattern becomes insufficient to meet a changing demand.
Flows tell us about the availability of people who are ready to advance to their next
career stages and also provide information such as the average rates at which
individual’s progress through job, and how those rates vary for different types of
people in different functions.
Corporate culture
How a company is managed, its organization structure, its manning standards and
thinking on ‘how we do things around here’ are also determined within a corporate
culture. Any significant change in efficiency is almost certainly going to be culture
related, but culture is both difficult and slow to change.
If the business demands a change of pace or efficiency, or a different way
of doing things, it is not going to come about solely from planning changes in
manpower standards or utilization. There will be a need for some radical
action to change what people accept as norms for many aspects of their work
behaviour, which may well result in a severe disturbance in current manpower
and organization.
Frequency
The frequency of this process should be determined by need. One company in a
rapidly changing high-technology sector runs through it at quarterly intervals with
strong line management support for what they see as sensible discipline which keeps
their organization and manpower utilization finely tuned. In less dynamic industries, a
major annual review plus a less formal, but ongoing, mid year update may be
sufficient.
The drive to carry through the review process must come from the top and from the
line, who must recognize its value to themselves and to the business or they will not
spend the time doing it! The human resource function may need to provide some of the
drive plus some strong supporting back up. Reviews compete for management time
and must demonstrate their contribution to business development and profitability.
Local management is generally supportive if the process is working properly and they
can see value for their efforts but, even then, resistance to allocating sufficient time
may arise as a result of operational pressures.
Essential actions triggered by these reviews, such as manpower movement between
divisions, may be difficult to arrange without the involvement of higher management.
Usually, these moves need to capitalize on knowledge of the immediate business and
be local to those business areas the individuals concerned know well. Movement
should generally be within functional disciplines, so that the fast learning is limited to
the new business area.
24
Activity A Process and Functions
of Human Resource
Assuming you are a HRD Manager in a organisation, you need to create an HR Planning (HRP)
staffing plan. Briefly explain what criteria will be undertaken and why?
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
Activity B
Briefly describe the practices of human resource planning of your organisation or any
organisation you are aquainted with. List out the reasons, why this practice is being
adopted.
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
2.10 SUMMARY
Human resource planning is a process of human resource development.
The objective of human resource planning is to provide continuity of efficient
manning for the total business and optimum use of manpower resources, although
that optimum utilization of people is heavily influenced by organisation and corporate
culture.
Human resource planning constitutes an integral part of corporate plan and serves the
organisational purposes in more than one way. Human resource planning influences
corporate strategy and is in turn influenced by it. The planning process may not
always give exact forecasts and to be effective it should be a continuous process with
provision for control and review.
The review process, which brings needs and supply together, is frequently given
insufficient time and attention. The purpose of the comprehensive periodic review is to
consider all of the needs across the business and to match these with the career
preferences and development of the people.
The appropriate requirement plans should be based on manning standards
associated with work demand factors to facilitate modification as volumes or
systems change. Modern management depends on HR information system, HR
inventory and flow of people through parts of the organisation. Flows tell us
about the availability of people who are ready to advance to their next career stages
and also provide information such as the average rates at which individuals progress
through jobs, and how those rates vary for different types of people in different
functions.
26
Process and Functions
2.11 SELF-ASSESSMENT QUESTIONS of Human Resource
Planning (HRP)
1) Explain the review process of human resource planning. Discuss how it balances
the competing and conflicting elements.
2) Explain the concept of human resource forecasting. Discuss the manning and
utilization of manpower.
3) Describe the various forecasting techniques. Explain how these techniques are
being used in forecasting process.
27
Basics of Human
Resosurce Planning UNIT 3 METHODS AND TECHNIQUES OF
DEMAND MANAGEMENT
Objectives
After going through this unit, you should be able to:
l the concept of human resource forecasting and the various factors contributing to
demand forecasting,
l the issues in demand forecasting and its relevance to the factors influences to
change,
l the various techniques used in forecasting human resource requirements, and
l the creation of an HR/staffing plan.
Structure
3.1 Introduction
3.2 HR Forecasting
3.3 Forecasting Demand for Employees
3.4 Issues in Demand Forecasting
3.5 Forecasting Techniques
3.6 Other Forecasting Methods
3.7 Creation of an HR/Staffing Plan
3.8 Summary
3.9 Self-Assessment Questions
3.10 Further Readings
3.1 INTRODUCTION
In this unit, the focus is on the understanding of business shifts in a dynamic
environment and, on the basis of such shifts, preparation of estimates of human
resource needs. An understanding of the trends and an estimation of the needs of an
enterprise provide possible clues to planners on the future, and thereby enables them
to take suitable steps to bridge the gap between demand and supply. In the absence of
any systematic work in this area, an organisation may face surprises and therefore be
unable to face challenges. The absence of the right resources at the right time, may
prohibit the accomplishment of corporate plans, and also lead to losses because of the
organisations’ inability to cash in on opportunities.
Forecasting of demand of human resource needs is the first and most important step in
any human resource planning process. This step results in an estimation of staffing
requirement of an organisation, for both the short and long term and is, therefore, the
foundation of the planning activity. Here, both the quantitative as well as qualitative
aspects of human resource requirements are dealt with.
It is pertinent to note at this point that demand forecasting is not a very accurate
exercise over a long-term period. For short range planning of less than a year,
a fairly accurate forecast is perhaps possible. No processes or techniques exist that
can take into account all the parameters and circumstances required for accurate
long-term estimation of manpower needs. Dynamic business circumstances, rapidly
28
changing technologies and their impact on products and methods of production, Methods and Techniques of
political and social changes and ever increasing competition keep changing the set of Demand Management
circumstances assumed at the time to forecast. Exhibit 1 illustrates the set of
assumptions that a human resource planner has to make at the time of demand
estimation.
In the 1980s, because of international economic competition, staffing planning had to
reorient its contribution to organisations, focussing more on reducing staffing levels
and building in a capacity for flexibility and change. The 1987 report of the
Staffing Services Commission (UK) emphasised ‘competence, commitment and the
capacity to change’ and drew little on the traditions of staffing planning. More
realistically, therefore, the state of contemporary staffing planning will have
restructure itself and reorient its own values and approach to the regulation of
employment. In a 1990 study, it has been reported that organisations ‘prefer neither to
use the term “staffing” nor to return to the large and elaborate planning documents
produced by head offices a decade age’. Many organisations are placing the
responsibility for staffing planning with production line managers while maintaining
strategic hold and direction at corporate level as against the earlier practice of
centralised and specialised staffing planning. You will appreciate, no doubt, that
this is consistent with some of the supposed moves towards human resource
management in general.
Now let us look at the nomenclature, HR Planning. Traditional practices are giving
way to flexible staffing use, novel forms and contracts of employment, together with
innovative approaches and succession planning. Does the term “HR Planning” capture
the essence of contemporary and HR Planning? Bennison and Casson (1984) do not
seem to think so. According to them, planning ‘belongs to the world of calculation,
computers and big bureaucracies’. Many theories recommending that organisations
seek to develop strategies and policies that address ‘labour shortages and cultural
change rather than hierarchical structures, succession plans, and mathematical
modelling’ (Cowling and Walters 1990: 3).
3.2 HR FORECASTING
What is certain is the uncertainty of the future. As time passes, the working
environment changes internally as well externally. Internal changes in the
organisational environment include product mix and capacity utilisation, acquisition
and mergers, and union-management relations among many other areas. Changes in
the external environment include government regulations, consumerism, and
competence levels of employees, among a host of other factors.
HR plans depend heavily on forecasts, expectations, and anticipation of future events,
to which the requirements of staffing in terms of quality and quantity are directly
linked. Uncertainty adds complexity of forecasting. However, change does not obviate
the need for staffing planning, though this is the argument raised by those who oppose
the concept. Where the futures are certain, there would be no need to plan.
Justifications for planning are threefold:
l Planning involves developing alternatives and contingency plans.
l As long as survival and success are the main objectives of any enterprise, the
uncertainty future is no excuse for not trying.
l Science has developed a lot of knowledge for the use of mankind. Scientific
management has developed operations reearch techniques and statistical methods
to predict the future with accuracy and reliability.
29
Basics of Human
Resosurce Planning 3.3 FORECASTING DEMAND FOR EMPLOYEES
Economic factors: As business is an economic activity, forecasts must consider
economic aspects like per capita income, employees’ expectations of wages and
salaries, cost and price of raw materials, inflation rate, etc. Fiscal policies and
liberalisation of trade will also influence requirements.
Social factors: Here, we consider the expectations of existing and potential employees
on wages, working condition and government regulations and future trends in political
influences and public opinions.
Demographic factors: Decisively influential upon future requirements, these include
availability of youth, training facilities, women in the active labour force, sex ratio,
facilities for professional education, income level, education/literacy, etc.
Competition: Competitors strategies, including advertising, quality of product,
pricing, and distribution influence future staffing in a variety of ways. For
example, if we can only preserve our market share by improving the quality of our
product, we may have to employ conpetent R & D engineers to tackle the product
design.
Technological factors: Technology has to be statge of the art if company is to survive
the competition. Technology, both in terms of quality and extent to which it is used,
will determine the capital and labour force requirements. Given that our future staffing
needs obviously depend on expected trends in technology, ‘technology forecasting’ has
become a specialist field in modern management.
Growth and expansion of business: Future growth and expansion plans will affect
future staffing requirements. Growth is possible through:
l Product diversification
l Increased capacity of production.
Managerial Dilemma
Questions that always confront the mnangers are: why should I worry about future
needs when the future is uncertain? Why should I spend my time in human resource
planning when I know for sure that the forecast made today will not survive over the
long term? Examples of giants like IBM and Digital which had to layoff or retrench
several thousand employees loom large in the minds of planners.
Exhibit 1 : Assumptions at the Time of demand Forecasting
Assumptions of
social
environment
Assumptions of Business
political Plans
environment
s
DEMAND
s
s s
FORECASTING
s
EXERCISE
s
Assumptions of Assumptions of
technology labour market
conditions
Assumptions of
economic
trends
Social Factors
It is common experience that a number of well-conceived projects either do not take
off or get delayed due to social pressures. For example, a large-scale petrochemical
project might get delayed or even shelved due to the pressures created for
environmental and other reasons. In such an event, the human resource demand
forecasts made by the planners will undergo substantial changes. Delays result in cost
escalation, changes in technology to accommodate the needs/sentiments of society,
changes in the location of the project etc. If careful, conservative hiring is not done by
the enterprise, when such major changes occur, there is a possibility that the enterprise
will be saddled with surplus staff right at the beginning of the project. A change of
location or of technology may result in the non-availability of planned resources and
32 therefore further delay the activities.
More examples can be seen in the form of product formulations, which are Methods and Techniques of
unacceptable because of religious or cultural reasons, such as the unacceptability in Demand Management
the Indian market of food products using fat extracted from beef.
Technological Factors
Rapid changes in technology many a times adversely affect human resources
forecasts. From the time a project is conceived to the time is implemented, substantial
time lag may occur during which, changes in technology may make the entire project
unviable. Businesses then have to quickly catch up with new technology in order that
the losses are minimized. Several examples of this can be found in the electronic
industry.
Political Factors
Unforeseen political factors might make considerable impact on the business plans of
enterprises. This is true especially for those organisations which depend mostly only
on international markets either for the sourcing of their raw materials or for selling of
their products and services. Several examples can be seen in the recent past. Indian
enterprises were dependent on the export market to the erstwhile USSR. With the
changed political scenario, the market suddently vanished, compelling some
enterprises to either close or restructure their business. The Gulf War similarly made a
major impact on some enterprises, which were dependent on the construction business
in that part of the world.
Economic Factors
Economic factors often result in several planned activities being forced to undergo
considerable change. Recent examples are found in India, with economic reforms
being introduced in the early nineties. The traditional concept of manufacturing
everything indigenously, even if it meant just assemble at the component level had to
undergo substantial change and several organisation that had set up or were in the
process of setting up manufacturing activities suddenly found local manufacturing an
unviable proposition. This resulted in major changes in business strategies and for
some enterprises, even the threat of closure.
Demand Generation
Before dwelling on demand forecasting techniques, it is essential to examine the
reasons for the creation of employee demands. This will help us focussing only on
those factors that create demands.
Growth
Growth, in traditional business, may lead to demand for higher levels of production,
sales volumes and services. If all possible productivity technique are already applied
and there is no further scope of improvement at that relevant time, simple statistical
models discussed in the later part of this chapter can be applied to forecst future
manpower needs of an enterprise.
Employee Turnover
Employee turnover or attrition is another reason for generation of manpower demands
in an organisation. Exhibit 2 shows a model of the trends employee turnover of certain
jobs and the resultant demand that gets created in an enterprise. While it is necessary
to look at the trends of employee attrition, it might not be appropriate to simply make
a forecast based on the trends. Changing business scenario and environment have to
be considered before any assumptions on future turnover of employees can be made.
To illustrate this point, in India, till the end of the eighties and before the opening of 33
Basics of Human the Indian economy, a turnover of not more than 5-6 per cent amongst the profession
Resosurce Planning and managerial personnel is stable, well managed organisations could be safely
assumed. This picture, however, changed with the economic reforms, which brought
several new multinationals into the country and woke up traditionally managed Indian
business houses. Past trends of low turnover have now changed to moderate and might
go up still further. Such changes in employee turnover trends vary from profession to
profession and skill to skill depending on the demand and supply position. In Exhibit
2, based on business forecast and the analysis of employee turnover, a gap between
the existing inventory of skills and future demand is worked out for certain jobs. Such
an analysis gives ample time to the staffing group to fill the vacancies.
Technological Shifts
Changes in technology makes an impact on an enterprise in more than one fashion.
This may change the methods of manufacturing, processes and techniques, selling
strategies could also become different and in the office, automation could bring about
a major change in the nature of work. Such changes may result in a redundant and
surplus workforce and might also bring about shortages in the new skills required to
manage the technology. A technological change in an enterprise does not happen
overnight but is always forewarned, over a short or long period of time. Hence,
whenever any shift is planned, either on the basis of previous experience with similar
technology or on the basis of the experience of other enterprises, a demand forecast
can be made of the skills that might soon be in short supply internally.
There are several good reasons to conduct demand forecasting. It can help:
(i) quantify the jobs necessary for producing a given number of goods, or offering a
given amount of services; (ii) determine what staff-mix is desirable in the future;
(iii) assess appropriate staffing levels in different parts of the organisation so as to
avoid unnecessary costs; (iv) prevent shortages of people where and when they are
needed most; and (v) monitor compliance with legal requirements with regard to
reservation of jobs.
34
Activity A Methods and Techniques of
Demand Management
Suppose HR planners estimate that because of several technological innovations, your
company will need 25 per cent fewer employees in three years. What action would you
take today?
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Activity B
Why should HR plan be integrated with the overall organisational strategic plan? How
can this integration be achieved?
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Ratio-trend Analysis
This is the quickest forecasting technique. The technique involves studying past
ratios, say, between the number of workers and sales in an organisation and
forecasting future ratios, making some allowance for changes in the organisation or its
methods. Exhibit 4 shows how an analysis of actual and forecast ratios, between the
number of routine proposals to be processed by an insurance company’s underwriting
department and the number of underwriters employed could be used to forecast future
requirements.
Exhibit 4 : Demand Forecast – Inspectors
Work-study techniques for direct workers can be combined with ratio-trend analysis to
forecast for indirect workers, establishing the ratio between the two categories. The
same logic can be extended to any other category of employees.
Delphi Technique
The Delphi technique is a method of forecasting human resource needs. It is a
decision Making tool. It is been used in estimating personnel needs from a group of
experts, usually managers. The HR experts act as intermediaries, summarises the
various responses and reports the findings back to experts. The experts survey again
after they get this feedback. Summaries and surveys are repeated until the experts
opinions begin to agree. This agreement reached is the forecasting of the human
resource needs.
Flow Models
Flow models are very frequently associated with forecasting personnel needs. The
simplest one is called the Markov model. In this technique, the forecasters will :
1. Determine the time that should be covered. Shorter lengths of time are generally
accurate than longer ones. However, the time horizon depends on the length of
the HR plan which, in turn, is determined by the strategic plan of the
organisation.
2. Establish categories, also called states, to which employees can be assigned.
These categories must not overlap and must take into account every possible
category to which an indivdual can be assigned. The number of states can neither
be too large nor too small.
3. Count annual movements (also called ‘flows’) among states for several time
periods. These states are defined as absorbing (gains or losses to the company)
or non-absorbing (change in position levels or employment status). Losses
include death or disability, absences, resignations and retirements. Gains include
hiring, rehiring, transfer and movement by position level.
4. Estimate the probability of transitions from one state to another based on past
trends. Demands a function of replacing those who make a transition.
37
Basics of Human There are alternatives to the simple Markov model. One, called the semi-Markov,
Resosurce Planning takes into account not just the category but also the tenure of individuals in each
category. After all, likelihood of movements increases with tenure. Another method is
called the Vacancy Model, which predicts probabilities of movement and number of
vacancies. While the semi-Markov model helps estimate movement among those
whose situations and tenure are similar, the vacancy model produces the best results
for an organisation.
Markove analysis is advantageous because it makes sense to decision makers. They
can easily understand its underlying assumptions. They are, therefore, likely to accept
results. The disadvantages include: (i) heavy reliance on past-oriented data, which
may not be accurate in periods of turbulent change, and (ii) accuracy in forecasts
about individuals is sacrificed to achieve accuracy across groups.
E n = (Lagg n + G ) lx
y
where, En is the estinated level of personnel demand in n planning periods (e.g. years).
Lagg is the overall or aggregate level of current business activity in rupees. G is the
total growth in business activity anticipated through period n in today’s rupees.
Rupees.
x is the average productivity improvement anticipated from today through planning
period n (e.g. if x = 1.08, it means an average productivity improvement of 8%).
y is a conversion figure relating today’s overall activity to personnel required (total
level of today’s business activity divided by the current number of personnel). It
reflects the level of business activity per person.
The main purpose of this model is to predict En , the level of personnel
necessary in n periods. Prior to applying this model, estimates of G, x and y must be
made. Such estimates may be based on the previous experiences of management, as
well as on future strategic choices to which the organisation’s decision-makers are
committed.
3.8 SUMMARY
The best business plans are subject to change in today’s dynamic world and no matter
how well a planner considers the various contributing factors, there always exists a
certain amount of uncertainty and chance. This requires that instead of attempting to
forecast the precise number of people required by an organisation, the trends be
studied, in order to understand the possible changes in the business and evolve a
strategy to cope with an emergent scenario.
It may be prudent to make two different forecasts:
l A forecast of manpower requirements as per the business plan. Here the
assumption is that the plans will go through without any major changes.
l A forecast needs, which is conservative. Here, the impact of various negative
factors on the business can be considered.
When it comes to actual advance hiring, it is wise to hire people against only the key
positions of the first forecast and the balance staff based on the second forecast. Such
a strategy will enable an enterprise to sail through without any major problems. Here,
key jobs are defined as those where skills are scarce and therefore require a longer
lead time to hire, or those jobs where skills are not available in the market, therefore
requiring the organisations to invest training where once again the lead time is
considerable.
40
Methods and Techniques
UNIT 4 METHODS AND TECHNIQUES FOR for Supply Management
SUPPLY MANAGEMENT
Objectives
After going through this unit, you will be able to:
l the concept and dimension of manpower supply,
l the various methods of manpower supply in an organisation — internal as well
external, and
l the different techniques to supply of HR within an organisation.
Structure
4.1 Introduction
4.2 Human Resource Inventory
4.2.1 Age Distribution
4.2.2 Skills Inventory
4.2.3 Length of Service
4.3 Factors Affecting Internal Levels
4.3.1 Reasons for Increase in Employee Groups
4.3.2 Reasons for Decrease in Employee Groups
4.4 Employee Turnover Analysis
4.5 The Cohort Method
4.6 The Census Method
4.7 Markov Chain
4.8 Renewal Models
4.9 Summary
4.10 Self-Assessment Questions
4.11 Further Readings
4.1 INTRODUCTION
HR demand analysis provides the Manager with the means of estimating the number
of kind of employees that will be required. The next logical step is to determine
whether it will be able to procure the required number of personnel. This information
is supplied by supply forecasting. Supply forecasting measures the number of people
likely to be available from within and outside an organisation; after making allowance
for absenteeism; internal movement and promotion, wastage and change in hours and
conditions of work.
Reasons for supply forecast are the following:
a) Helps quantify number of people and positions likely to be available in future to
achieve objectives;
b) Helps clarify the staff mixes that will exist in future;
c) Assess staff level in different parts of organisation;
41
Basics of Human d) Prevent shortage of people where they are needed most; and
Resource Planning
e) Monitor future conditions with legal requirement for job reservations.
Forecasting the internal supply human resources is an important activity in manpower
planning. Human resource planners need to look at the sources of supply and evaluate
them through in-depth studies to ensure that suitable strategies are evolved to meet
business demands. For the purposes of discussion, the supply source will be divided
into two categories, viz.:
A – Internal supply
B – External supply
In this chapter, the salient features of internal supply are discussed along with the
techniques used to evaluate and study the same.
One of the obvious sources of manpower supply is the internal group of employees. It
is essential to understand and evaluate this internal group in order to assess its
possibilities in meeting future business demand. Studies on this source of supply are
therefore focussed on evaluating internal circumstances, possible changes in its
character and complexion, and the impact on their availability in future.
Promotions In
One of the obvious methods for increasing the level of the existing work group is
through promotion of employees from within. Planners consider this aspect to assess
the number of likely entrants into a particular job level and it is therefore important to
study the trends of past promotions and, evaluate the feeder stock to assess its
potential for promotion, training needs, etc. Other aspects of employee feeder groups,
such as their retention analyses, age and performance profiles, skills and knowledge
profiles should also be studied. It is always desirable to fill positions from within
through internal promotions. Depending on the needs, one can plan strategies to work
on the feeder groups to facilitate promotions.
Some organisations follow a policy of promotion by time-scale irrespective of the
needs of the organisation. This is an undesirable method of promotions. If such a
system exists in an enterprise, planners should, during the planning cycle itself,
assess the number of employees that will be promoted due to the lapse of time
and put in special efforts to ensure that employees are adequately trained before
they move up.
Redeployment In
Redeployment is another method of filling in positions in a group. Redeployment
strategies can be adopted by an enterprse to utilise excess employees of one job group
to fill in the gaps of another. Such redeployment strategies have to be carefully
chalked out, considering the actual redeployability of employees, the investments that
will have to be made in order to provide training to make these employees effective in
the new job, etc. One will also have to consider issues related to implications on
industrial relations, salary, benefits structure and other such factors.
44
Exhibit 1: Influences on HR Inventory Levels Methods and Techniques
for Supply Management
s
s
s
s HUMAN
RESOURCE
INVENTORY
s
s
s s
s s
s s s
External Hiring
Planners proposing external hiring have to consider issues of the supply position, lead
time to hire, lead time to induct, time to provide core training, the ability of the
enterprise to retain new employees, the wastage rate for at least the first twenty four
months, the ability of the enterprise to attract right talents, etc. It is, however, always
preferable to fill the gap between demand and supply through internal promotions and
redeployments as far as possible, before resorting to external hiring.
s Promotions
out
Job Group Under
Consideration
Voluntary Separations
Voluntary separations are primarily a result of employees resigning from the services
of a company for various reasons. In this unit a detailed discussion on employe
turnover is available, which will give a fairly good insight on the handling of reduction
of employee turnover.
Voluntary separations may also arise due to employees opting for early retirement or
because of voluntary separation plans announced by the enterprise. While announcing
such plans the organisation must make an assessment of their likely fall-out.
Depending on how the scheme is designed, the percentage of loss from a particular
group can be assessed and the enterprise must therefore design schemes taking into
consideration the age and service profiles of the target groups, that is, those groups
from where the enterprise expects maximum separations to take place.
Distribution
Marcom Channel
Executives Managers
Retirement
In most countries, organisations specify the age of retirement or superannuation. Once
a person attains the specified age, he/she automatically retires from employment and
thus planners can easily calculate the number of retirees for a particular year. In those
countries/enterprises where the age of retirement is not specified, an assessment can be
made on what percentage of employees are likely to be lost due to retirements based
on the trends of the past and the current age profile.
Other Reasons
In organisations where there are excesses all over, and redeployment strategies are
either not possible or are inadequate, and where the organisation is incapable of
offering “golden handshakes” in the form of voluntary separation plans,
involuntary separations in the form of retrenchment can be used to reduce
the workforce to an optimum level. This strategy, however, should be the last
resort. Depending on the legal framework, different methods will have to
be used. Such strategies will vary from country to country and enterprise
to enterprise.
Involuntary separations could also be due to disciplinary or performance related
factors where the management of an enterprise initiates the separation of the
employees. The proportion of such separations could be minimal, though the
planners must be conscious of this factor. Prolonged illness, deaths and
incapacities due to accidents are some more reasons for depletion in the human
resource inventory. However, these numbers are generally insignificant in most
of the organisations.
Activity A
Identify the techniques being used for forecasting the internal supply of human
resources in your organisation or any organisation you are familiar with.
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
Activity B
Write briefly about the assessment of staff level being done in different departments of
your organisation or any organisation you are aquainted with.
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
47
Basics of Human
Resource Planning 4.4 EMPLOYEE TURNOVER ANALYSIS
Although discussion on employee turnover analysis appears in the previous chapter
under the section on demand generation, its relevance to the forecasting of supply
renders is important enough to warrant further discussion here.
Annual employee turnover is a method of measuring the attrition or wastage of
employees. It is also known as the index of turnover or percentage of wastage, being
the percentage of employees who quit employment. Generally this analysis is done for
those employees who voluntarily separate from the services of an enterprise. To
calculate the turnover, the following formula is generally used:
Number of employees
Who leave during the year
× 100 = Annual employee turnove
Average number of employees
employed during the year
For example, if in an organisation the average number of employees during 1996 were
5,000, and sixty out of these left during the year, the annual rate of employee turnover
is calculated as follows:
60/5000 × 100/1 = 1.2 per cent
This means that 1.2 per cent of the employees left this organisation during 1996.
Employee turnover analysis can be done in many ways for the entire organisation,
department or location wise, by reasons for turnover, and by performance rating.
In addition to internal supply, the organisations need to look out for prospective
employees from external sources. External sources are important for specific reasons.
i) Availability of new blood and new experience;
ii) Replenishment of lost personnel; and
iii) To meet expansion/diversification needs.
Sources of external supply vary from organisation to organisation, industry to
industry, geographical locations to locations.
% of
Survivors
Year III
Year II
Year I
20
10
0
1 2 3 4 5 6 7
Time in years
Leavers Level
s
VI
s
Leavers Level
s
s
V
s
Leavers Level
s
III
s
II entry
s
Leavers Level
s
The model in Exhibit 7 is classified as Young & Almond’s model and can be described
as a model for understanding the ‘Markov Chain’. Young & Almond devised this
model in 1961 for a company. Here, the assumption is that an employee moves up the
ladder by means of a ‘push’ promotion. In this model there exists no requirement of a
vacancy, and the employees move up the hierarchy as long as he/she meets with
certain predetermined criteria, such as length of service and attainment of a particular
level of skills or performance rating.
Level
VI
s
s
s
s
s
s s
V V V
s
s s
Level Level
s s
III III
s
s s
Level Level
II II
s s
s
Level Level
s
I I
s s
Entry Entry
Stream ‘A’ Stream ‘B’
51
Basics of Human As an illustration, consider a typical hierarchy where the following situation exists:
Resource Planning
At the end of the first year, in Level II, the scenario will be as follows:
i) 60 × 0.15 = 9 will exit (A)
ii) 60 × 0.1 = 6 will sget promoted to Level III (B)
iii) 40 × 0.6 = 24 will get into Level II from Level I (C)
Level III
s
s s
s s
s s s
s
s
Level II
s
s s s
A B C
s
s
s
Level I
4.9 SUMMARY
Human resource planners need to look at the sources of supply and evaluate them
through in-depth studies to ensure that suitable strategies are evolved to meet business
demands. The supply source will be divided into two categories viz., Internal supply
and External supply. External supply is determined by factors extraneous to the
company or enterprise level. Internal supply over which a company or enterprise has
control is governed by the wastage rate (i.e. the rate of leavers from the company) and
the internal flows caused by transfers and promotions. Methods of analysis and
forecasting is, however, a well defined MIS based on personnel history records of each
individual employee.
Annual employee turnover is a method of measuring the attrition or wastage of
employees. There are several methods to be used to measure various aspects related to
employee service, age, employee exit, etc. In turnover analysis, this analysis is known
as “Long-normal wastage curve”. Most mathematical models can be applied to big
organisations only, where the population is large enough for the projection to be correct.
54
Contemporary Trends in
UNIT 5 CONTEMPORARY TRENDS IN Managing Demand
and Supply
MANAGING DEMAND AND SUPPLY
Objectives
After going through this unit, you will be able to:
l the concept of emerging organisational structure,
l the transformations through social, economic, organisational and technological
changes at workplace,
l building an organisational culture, and
l the various resource systems supported through performance appraisal system in
an organisation.
Structure
5.1 Introduction
5.2 Emerging Organisational Structures
5.3 Transformations at the Workplace
5.4 Flexible Workforce
5.5 Building a Culture
5.6 Performance Appraisal
5.7 Staffing
5.8 Compensation and Benefits
5.9 Dealing with Relocations and Redundancies
5.10 Human Resource Measures and Adult
5.11 Trends in Labour Supply
5.12 Trends in Labour Demand
5.13 Summary
5.14 Self-Assessment Questions
5.15 Further Readings
5.1 INTRODUCTION
“The new organisation equation for success is that profit and productivity are best
created by half of the workforce, paid twice as well as producing three times as
much” — Charles Hardy.
In fast changing world, there have been qualitative shifts in pattern of employment, yet
the importance of deploying the right human resource at right times has not
diminished. In the modern world, due to continuous changing technology and dynamic
character of business, there is an increasing demand for skilled, multi-skilled
knowledge workers and professionals who are difficult to find and retain. Increasing
demands of consumers to get “value for money” and global competition, keep
enterprises on their toes, resulting in increased demand for people with appropriate
talents along with the right values and beliefs. Shifts in demographics, globalization of
markets, rapidly changing technologies, increasing consumer demands, curtailment of
product life cycles, excess or shortage of workforce, continuously shifting political
and economic alliances and several other environmental factors have posed several
challenges for industries and, in turn, for human resource management. 55
Basics of Human
Resosurce Planning 5.2 EMERGING ORGANISATION STRUCTURES
Today’s dynamic and fast changing environment has given rise to flatter
organizational structures. Some organizations like to display flat and reversed
pyramids, with the customer at the top level and the first line staff at the second level
and so on as shown in Exhibit 1.
Exhibit 1: Organization Structures
Customer
Customer
Traditional Pyramid
In reality, however, and for long-term survival, the organisational structure should be
like a flexible ring, with the customer and the market place at the centre. The ring has
to be organic with the fluid organistion changing its complexion to suit the demands of
the market place.
These are the days of neo-conglomerates, where multiple organisations get together to
manage specific demands of the market. At the same time, two organisations might be
competing for one product line in a market and working as partners for a second
product line, acting as distributors for each other for a third and for a fourth might be
indifferent to each other. In this ever changing, dynamic corporate world, new
definitions of hierarchy, chains of command and reporting relaltionships continuously
emerge. Self-managed work groups, with focus on providing quality services and
products that cater to specific customer demands are the realities of today. There is a
clear shift from function centered to process centered organisation structures, where
every process that the organisation evolves is with a specific purpose to satisfy some
customer need. Performance measures are established to evaluate and continuously
improve processes with irrelevant processes being abolished and new ones being
evolved continuously. This type of an organisation is organic, relevant and stand the
test of time. Long-term survival, however, depends on the organisation culture. Values
and beliefs evolved by the enterprise would have their focus on people and the market
in order to sustain over a long period. If values and beliefs do not focus on these key
factors (customers and employees) the probability of the enterprise surviving for a
long-term will be dismal.
This is indeed a challenging era for the human resource planner who has to plan for a
dynamic flexible work force which cannot be precisely defined.
Trend – 2
A shift from the agricultural to the service sector. The old trend of rural to urban
movement still continues and even within a rural setting there is rapid growth in the
service industry.
Trend – 3
Growth in the educated, skilled work force as opposed to the semi- and unskilled
employees of the past. This changing pattern of the work force has its own
behavioural and attitudinal implications in this work place.
Trend – 4
Decline of traditional occupational groups. New classifications, based on broad
skill sets, are emerging in today’s industry mainly due to multi-skilling and multi-
tasking. We can, in today’s context, see teams of production workers and teams of
maintenance engineers with hardly any difference within them in terms of
grades/skills.
Trend – 5
With the increasing focus on productivity improvement, employment in the higher
occupational grades is increasing and the number of jobs in the lower grades is on the
decline. This is because the knowledge and skills required to manage and operate new
technologies and work processes are of higher levels than those in the past.
Enterprises are, therefore, continuously demanding advanced skills. General workers
are using fewer manual skills since advanced machines at their disposal make
increasing demands on their mental skills. Thus, in the modern production
environment, requirements of the mental, mathematical and abstract skills is greater
than that of manual skills. Employees seem to almost establish intellectual
relationships with their machines.
Trend – 6
In the service sector, technical skill requirements are slowly reducing and being
replaced by social skills including interpersonal, communication skills and so on. Soft
skills to improve customer interfaces are of great value, since service is more at a
modular than at a component level.
Trend – 7
The formal, centralized management practices of the past are slowly giving way to
looser, more democratic and informal styles of management. This change is necessary
because of the changing profile of people and of the work itself. Employees at all
levels need to acquire broader skills and abilities in order to adjust to new technology
and work organisations. Since organisations or educational institutions cannot teach
every skill or technology, today’s workers need to be intelligent, with broad conceptual
skills so that they can acquire the right knowledge at the right time in an ever-
changing world.
57
Basics of Human
Resosurce Planning 5.4 FLEXIBLE WORKFORCE
In the present dynamic business environment, the traditional concept of a specialized
workforce trained to do one job well is fast fading. The traditional workforce came to
an organisation with a skill set or learned a skill set and performed the same tasks
over a long period, perhaps even for a lifetime. Restricted, narrow skills and specific
job design was traditionally the most accepted for job structure. Employees were
proud of the skills they possessed and unions resisted and change in job descriptions.
These rigid occupational demarcations of the past gave a tremendous sense of security
to employees but put limits on the progress of their careers. Time bound promotions,
primarily aimed at giving remuneration and social status, were the norm. Such
promotions did not necessarily change the nature of the work and nor did they indicate
the attainment of higher skills or good performance. They did, however, indicate
seniority. Under such circumstances, any attempt of the management to introduce
changes or induce flexibility in job design met with strong resistance.
In today’s world of ever changing technologies and dynamic market conditions, a need
for multiple tasking and several careers in one’s lifetime is the differentiating factor
between a successful and an unsuccessful enterprise. It is, therefore, imperative that
planners attempt to create a culture that enables smooth technological and process
transitions and makes an organisation flexible and adaptable. The need for continuous
reorganization in order to meet changing business needs requires a flatter and less
hierarchical structure. All these are possible only if the workforce is qualified, skilled,
flexible and in a continuous learning mode. (These are pre-requisites not only for the
organization’s but even for the individual’s survival).
For human resource planners this new environment poses new challenges. Instead of
planning for specific jobs, they have to plan for broad job groups. Strategies for
hiring, training and re-training the workforce should revolve around the broad-based
skills required for a particular job group, rather than around specific occupations. Job
descriptions and performance measures have to be reviewed and revised on a regular
basis. In addition, the planner has to create a flexible, adaptive work culture that will
provide opportunities and stimulate continuous learning.
5.7 STAFFING
Staffing is another key area of focus for a human resource planner. Traditional focus,
while staffing or hiring employees, used to be hiring the best possible people, based on
their qualifications, experience and general backgrounds. In today’s dynamic business
climate, however, the focus should be on the following qualities:
l The candidates must possess the knowledge and skills required to perform the job
for which they are being hired.
l Values and beliefs of the candidates should be in conformity with that of the
organisation.
l The candidate should have an open mind and should be adaptable.
l Conceptual skills of a high level are important so that the employee is able to
grasp and learn new processes and technologies with ease.
l The employee should be in the learning mode. The concept of lifelong learning is
extremely important in order to succeed in the competitive environment of
modern days.
l Aspirations and objectives of the employee should be such that they will not
conflict with the organisation.
l In transient organisations creativity is another aspect that the candidates must
possess.
Employment of people who meet the requirements not only of today’s job but also that
of emergent jobs is extremely important.
In order that the enterprise is able to hire the right people, preparation of job
descriptions and performance measures should be coupled with a listing of knowledge
and competencies required for effective performance. The selectors should devise
appropriate tests and direct the interviews in order to identify the qualities listed. The
success of any HR planning process lies in giving adequate lead time to recruiters in
selecting the right persons who will perform well.
60
Contemporary Trends in
5.8 COMPENSATION AND BENEFITS Managing Demand
and Supply
With the increased mobility of labour and crossing of national borders, the need for a
competitive compensation and benefits system is paramount. C&B plans should be
oriented both to attracting as well as retaining key professionals and should be
designed so as to provide considerable flexibility in organisational restructuring.
Multiple grades, catering to various professions, occupations or trades, create
impediments and reduce the ease of organisational restructuring. C&B plans, in
today’s scenario, have to be simple, with minimal classifications to meet broad skills
levels. There should be adequate schemes and processes to enable the corporation to
transfer people from one location to another and one job to another with ease.
Incentives for easy mobility have to be built in.
Rewards should cater to one-time achievements and be short-term in nature rather
than long-term salary increases. Since employees in a fast-changing scenario might
not have the ability to sustain good performance over long durations, recognition
should be in the form of improved assignments, jobs and higher visibility. C&B
professional should design schemes that enable managers to provide rewards and
recognition to good performers at the right time. Empowering managers by
decentralizing the decision-making process is the ‘key’ in today’s competitive
scenario.
Concern over the rentention of employees was never so great in the past as it is today.
Increasing labour mobility, a highly competitive labour market and virtual war
between corporations to attract the right talents is forcing managements to design
“Golden Handcuff” plans. These plans should not be of a very long-term duration
again because of the question of the employee’s ability to sustain his performance. A
plan to retain an employee for four to five years, with the right vesting period is
adequate. Through yearly administration of the schemes the handcuff can always be
extended.
Another challenge that today’s enterprises face is in the selling of C&B plans to
employees. The concept of total compensation, benefits tailor made to meet the
individual’s needs and visibility of the total structure are the keys to success. The
importance of fair play, equity and merit-linked rewards continue to be the
foundations of any successful C&B plan.
In the perspective of a human resource planner the C&B plans become extremely
critical as they have to cater to retention, attraction and flexibility that a human
resource planner is continuously looking for.
l How does the department go about determining the short-term and long-term
plans? How often is the progress reviewed? What are the course corrective
strategies and contingency plans?
Is the depatment effective in its communication processes across the organisation? Do
customers of the department feel involved in the department’s activities and plans?
Does the entity management provide resources and commitment to the human resource
department’s activities?
From among the various issues that need to be reviewed, critical ones will be the
following:
1. Effectiveness and cost of C&B plans, its competitiveness, packaging and
employee acceptance. System of periodic reviews and revisions. Question of
equity and fair play.
2. Training and development activities, their relevance, timeliness and effectiveness.
3. Employee attitude survey, corrective action plans, periodicity of the surveys,
their relevance, etc.
4. Hiring processes, their cost, quality of hires, etc.
5. Frequency, effectiveness and relevance of the two-way communication processes.
6. Grievance handling systems, etc.
An effective audit and performance measure tracking system will ensure not only that
the human resosurce plans are successfully implemented but also they are relevant.
Succession Planning
What really do you understand by this term? It is basically a plan for identifying
who is currently in post and who is available and qualified to take over in the
event of retirement, voluntary leaving, dismissal or sickness. A typical succession
chart includes details of key management references to their possible
successors. 67
Basics of Human Succession planning is a strategic activity in an organisation. As such it should be
Resosurce Planning managed not as a year round activity but as a year round guide. It is unreasonable to
expect that when a key position opens, it will be filled by the chosen successor and
things will proceed from there. A succession plan, like all other plans, is simply a
plan. Let us go back to the basics to understand the rationale behind plans. A plan is a
set of intentions based on a set of assumptions at a given time. Over time, both the
assumptions and the intentions may change, given new information. In organisations
today, actual succession decisions are made as the need arises based on the latest
information that includes, but is not limited to, the succession plan. Succession
planning should provide a framework in which to make everyday decisions it should
not provide the absolute decisions. With this understanding managers should redefine
their expectations of succession planning and conceive of it as a strategy.
Activity A
As a HRD manager how you deal with relocation and redundancies on account of
technological changes in a company?
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Activity B
Do you think that there is any change in the trends of demand and supply? If so, list
out the major changes that took place in organisations.
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Assessment Centres
When job vacancies are anticipated, several policy decisions must be made. A basic
one involves the relevant candidate pool. We could limit our discussion to those
already in the organisation, meaning we will only discuss filling the anticipated
vacancy from among internal candidates.
Assessment centres provide a means of systematically gathering and processing
information concerning the promotability (as well as the development needs) of
employees. Such centres provide a more comprehensive approach to selection,
incorporating a range of assessment techniques. Some of the salient features of
assessment centres are as follows:
l Those assessed are usually lower to middle level managers.
l Multiple predictors are used, at least some of which are work samples (for
example, in-baskets, leaderless group discussions).
l The focus of the assessment centre is on behaviour.
l Exercises are used to capture and simulate the key dimensions of the job. These
include one-to-one role-plays and group exercises. The assumption here is that
performance in these simulations predicts behaviour on the job.
l Assessments are made off-side to ensure standarised conditions.
l A number of people (raters) are used to assess or rate the candidates. They are
carefully trained and their ratings are made using standarised formats. Using
68 multiple raters increases the objectivity of assessments.
l Raters must reach consensus on those being assessed wherever possible. Contemporary Trends in
Managing Demand
l Final reports may be used to make decisions about both internal selection and and Supply
employee development, although assessment centre results are rarely the only
input in either area.
l Assessment centres are costly to run, but the benefits have the potential to
outweight these costs by a substantial margin.
Considerable research has been conducted to determine the reliability, validity, and
fairness of the assessment centres (unlike other promotion predictors). Most has been
supportive, inter-rater reliability is generally high, as have been the validity
coefficients.
Although the costs of running assessment centre are high, they can provide real
benefits, indicating the extent to which candidates match the culture of the
organisation. Assessment centres are most appropriate when candidates who are being
considered for jobs with complex competence profiles. A well-operated centre can
achieve a better forecast of future performance and progress than judgements made by
line or even personnel managers in the normal, unskilled way.
5.13 SUMMARY
In a traditional sense, staffing planning attempted to reconcile an organisation’s need
for human resources with the available supply of labour in the local and national
labour market. In many organisations, specialist units within personnel departments
may be established to concentrate exclusively on staffing planning. In the current
pursuit of HRM, many organisations appear to be replacing staffing planning with
employment planning, the personnel process that attempts to provide adequate human
resources to achieve future organisational objectives.
All organisations perform HR or employment planning, informally or formally. The
major reasons for formal HR planning are to achieve more satisfied and more
developed employees and more effective equal employment opportunity planning.
HRM theory recognises that the HR department should be an integral part and
member of the business strategy-making body. As time passes, working environment
changes internally as well as externally. HR plans depend heavily on forecasts,
expectations, and anticipation of future events. Planning involves developing
alternatives and contingency plans.
A number of factors will influence what is required of forecasting to assure
satisfactory future staffing. Planners have a choice of employment forecasting
techniques of different levels of sophistication to focus on both the inernal
considerations and the external factors that influence the final outcome of the staffing
plan. However, only a few organisations practice the most theoretical and statistically
sophisticated techniques for planning, forecasting and tracking of employees.
In staffing planning, the manager is concerned with the numerical elements of
forecasting, supply-demand matching and control. HR planning is defined as a long-
term, strategic planning of human resources concerned more with the development of
69
Basics of Human skill, quality and culture change than statistical numerical forecasting, succession
Resosurce Planning planning and hierarchical structure. The term labour market refers to the large number
of changing influences and activities involving labour demand and supply, which,
themselves greatly depend on economic conditions. From the organisation’s point of
view, the numbers and types of employees needed during a given period reflect the
relative demand for labour. The age at which people are considered to be active in the
labour force varies from country to country. A variety of factors influence the labour
force participation of the people.
Part-time work has increased for decades. To understand well the notion of
parti-time work, we have to draw a distinction between voluntary and involuntary
part-time employees.
If you are engaged in personnel or HR activities in your organisation you would
realise that major trends in the supply and demand of labour concern you. Succession
planning is a strategic activity in an organisation. A succession plan, like all other
plans, can change as its determinants change. Many companies are now engaged in
comprehensive career management programmes comprising the three major
components: planning, development and counselling. A typical career planning
involves four major steps. Career development is the process through the action plans
are determined. Career development, therefore, is of significance for both individual
and organisation and for human resource development.
70
Job Analysis
UNIT 6 JOB ANALYSIS
Objectives
After going through this unit, you should be able to understand:
l the concept of job analysis and its significance to the organisations,
l the different methods of collecting information for job analysis, and
l job-anlaysis and its relationship vis-a-vis job description and job specification.
Structure
6.1 Introduction
6.2 Job Analysis
6.3 Some Considerations
6.4 Method of Collecting Information
6.5 Job Analysis: Process
6.6 Steps in the Job Analysis Process
6.7 Job Description
6.8 Design of Job Description
6.9 Uses of Job Description
6.10 Job Specification
6.11 Summary
6.12 Self-Assessment Questions
6.13 Further Readings
6.1 INTRODUCTION
Organisation is described as a rational coordination of the activities of employees
through division of labour, responsibility, authority and accountability. Built in this
description is the realisation that organisations perform a series of activities and that
to perform these activities different kinds of skills are required. Each activity carries
its own set of responsibilities and the employees are given appropriate authority to
perform these activities. Not only this, they are also accountable to the organisation
through their immediate supervisors for accomplishing these activities according to
specifications. Hence, a clear understanding of what they are supposed to do becomes
a pre- requisite for effective utilisation of organisational resources. Job analysis helps
us to achieve this objective.
5
Approaches to Job analysis is the process by which data, with regard to each job, is systematically
Analysing Job observed and noted. It provides information about the nature of the job and the
characteristics or qualifications that are desirable in the jobholder. The data from job
analysis could be used for a variety of purposes. The job analysis study attempts to
provide information in seven basic areas:
1. Job Identification or its title, including the code number, if any.
2. Distinctive or significant characteristics of the job, its location setting, supervi-
sion, union jurisdiction, and hazards and discomforts, if any.
3. What the typical worker does: Specific operations and tasks that make up the
assignment, and their relative timing and importance; the simplicity, the routine,
or complexity of tasks, responsibility for others, for property, or for funds.
4. What materials and equipment the worker uses: Metals, plastics, grain, yarns;
and lathes, milling machines, electronic ignition testers, corn huskers, punch
presses, and micrometers are illustrative.
5. How the job is performed: The emphasis here is on the nature of operations, and
may specify such operations as handling, feeding, removing, drilling, driving,
setting up, and many others.
6. Required personnel attributes: Experience, training apprenticeship, physical
strength, coordination or dexterity, physical demands, mental capabilities,
aptitudes, and social skills are some attributes.
7. The conditions under which the work is performed: Working conditions and
work environments is a major contributing factor in the performance of the job,
and the satisfaction of the employee. A dimly highlighted, poorly ventilated and
crowded place of work hampers efficiency. The workers are forced to spend
more energy to accomplish tasks, which they can do, in much lesser efforts in
otherwise conditions. Poor working conditions have been found to cause greater
fatigue, negligence, absenteeism, indiscipline and insubordination among the
employees.
Each of these piece of information is essential; it is not sufficient to merely list a
series of tasks or duties, because each piece of information is used in determining the
level of work and responsibility and the knowledge, skill and abilities needed to
perform them to an acceptable level of proficiency.
The process of assembling and recording information on such essential
characteristics of jobs is known as job analysis. In other words, jobs are subjected to
analysis to find out precisely what the duties, responsibilities, working environment
and other requirements of a job are and to present these in a clear, concise and
systematic way. Job analysis should be undertaken by trained job analyst working in
close collaboration with managers and jobholders.
Before proceeding further, certain terms used in job analysis and related stages in the
job evaluation process need to be clarified.
Element: The smallest unit into which work can be divided.
Task: A distinct identifiable work activity, which comprises a logical, and
necessary step in the performance of a job.
Duty: A significant segment of the work performed in a job, usually
comprising several tasks.
Post (or): One or more duties, which require the services or activities of one
worker for their performance;
Job: A group of posts that are identical or involve substantially similar tasks.
Occupation: A group of jobs similar in terms of the knowledge, skills, abilities,
training and work experience required by workers for their successful
6
performance.
Job Analysis
6.3 SOME CONSIDERATIONS
Job analysis might give the impression that while identifying components of job, we
are looking at everything that concerns the job. However, in analysing the job,
following considerations must be kept in mind:
1. Job analysis is not a one-time activity. Jobs are changing continuously. What
was a job yesterday is not the same job today and would not remain the same in
future. These changes are caused by changing technology, competition, chang-
ing profile of the workforce, changing expectations of end users and a host of
other factors. Hence, analysis must be continuously done to update the nature of
job.
2. The Job and not the person—an important consideration in job analysis is
conducted of the job and not of the person. While job analysis data may be
collect from incumbents through interviews or questionnaires, the product of the
analysis is a description or specifications of the job, not a description of the
person doing the job.
3. All activities relating to job analysis give us only the minimum requirements of
the job. No analysis can identify either the ultimate or full and complete require-
ments. What it does is simply highlights what are minimum activities that are
entailed in a job. The reason is simple. No one can foresee the final outcome
because of changes taking place in the nature of job.
1. Job Questionnaire
To make a start, a job questionnaire could be administered to all concerned
employees asking them about the job, its various components, time spent on each of
them, and so forth. The completed questionnaire could be given to the supervisors for
their comments. In some cases, job-reviewing committees are formed, consisting of
union representatives and specialists from the personnel, work-study, or industrial
engineering department.The questionnaire has the following advantages:
1. First of all, it is the most cost effective method, since it can elicit information
from a wide number of workers and their immediate superiors in a relatively
short period of time. The main task of the analyst becomes one of planning the
questionnaire well and checking the responses provided.
2. Secondly, workers take an active part in completing the questionnaire providing
intimate detailed knowledge of their jobs, which is not available elsewhere.
3. Thirdly, the questionnaire has to be structured in advance, and this facilitates the
processing of the results.
4. In some cases, once the responses to the questionnaire have been verified, they
can conveniently be used with little further processing to prepare a job
description. 7
Approaches to The questionnaire method however has the following disadvantages:
Analysing Job
1. To start with, the people required to complete it must have a certain level of
education; and even then, questions may be interpreted in different ways so that
the answers may be beside the point.
2. Furthermore, not everyone is able to describe fully and exactly the task that
constitute their job. One may, for example, over-emphasise some features of it
and completely ignore others when they are important.
3. There is less risk of this with a detailed questionnaire that includes a checklist of
points, questionnaire suited to all jobs is not easily drawn up and may be unduly
long.
In practice, while a well-structured questionnaire can get essential information
quickly, it is virtually impossible to get complete comparable information solely by
questionnaire, and this method is generally used in combination with interviews and
direct observation.
2. Interview
In practice, an interview is almost always necessary in order to obtain precise,
complete and comparable information. The interview conducted by the analyst is an
effective way of checking on the information already available on job. The analyst
asks the jobholders questions on the duties and main tasks of their job, generally
working from a previously prepared list of questions as with a questionnaire. After
the interview, the analyst draws up a report, which is shown, to the jobholder and his
immediate superior for their approval. The analyst usually drafts the report in the
form of a job description, which effectively speeds up the preparatory work of job
evaluation.
Following are some of the disadvantages of this method:
1. Interviews are time consuming. At least an hour or two may be necessary for
each case, plus the time spent by the analyst in drawing up his report and by the
jobholder and his immediate superior in checking it. In a large enterprise a team
of analysts would be necessary.
2. The main difficulty of the interview lies in finding high quality analysts who
can win the jobholder’s confidence. As has been noted, “ too many imagine
interviewing to be relatively simple whereas nothing could be farther from the
truth.” Obtaining information from a jobholder about his job is difficult.
3. Many workers show a natural distrust of the analyst who comes to examine their
work, while others will give a lot of information, much of it useless. It is
accordingly essential to have a well trained and experienced team of analysts if
the interview is to be the only method used.
However interview has some advantages:
1. Interview does provide in- depth information, which cannot be achieved through
any other method.
2. It also helps in collecting data about tasks that are not part of the job and yet the
jobholder has to do it.
3. At the same time it can also help in finding ways and means to simplify some of
the operations involved in the job.
3. Observation
For jobs of a simple and repetitive nature, the observation technique could provide
adequate information on the job being performed. A clear picture may be obtained
8 regarding the working conditions, equipment used, and skills required. Although all
jobs could be usefully observed, this technique alone is not enough for more complex Job Analysis
jobs, especially those that have many components or interactions.
Some advantages of this method are:
1. It is most suitable for simple and repetitive jobs.
2. Direct observation by the analyst can clear up points left unclear by other
methods.
At the same time, some of the disadvantages of this method are:
1. The presence of analyst causes stress. The workers may dislike being observed.
2. The jobholders may purposely reduce the pace of activity to justify overtime.
3. Observation cannot be a suitable method where the job calls for considerable
personal judgment and intellectual ability.
4. It may not take into account all the tasks in a work cycle stretched over a week
or a month.
4. Independent observers
In addition to the employees themselves providing information about the jobs they
are doing, trained observers could also be used to supplement the employees’ data
and to discover inadequate performance in “ crucial tasks”, which would lead to job
failure.
In addition there are some not so often used method of job analysis. Some of them
are presented here:
1. Diary: One or more incumbents are asked to keep a diary of duties noting the
frequency of the tasks performed. These diaries then become the basis for doing
job analysis.
2. Critical incidents: Ask one or more incumbents to brainstorm (if there is only
one person you will have to participate in the brain storming) about critical
incidents that happen routinely and infrequently while working. Separate these
into two lists. Generate one list of incidents indicating good or excellent perfor-
mance and one, which indicates poor performance. This approach is excellent
for determining training and selection strategies. The results lend themself to
meeting discrimination complaints concerning selection choices where the
person chosen clearly possesses the skill and knowledge to perform the most
critical duties indicating success on the job. The analyst will have to extrapolate
a list of duties to be performed from the incidents.
3. Photo tape recording of job performance: This is a good approach because it
can be watched over and over again to perform analysis and because it can be
pulled out later to re-evaluate. Having such a tape is excellent source for
undertaking job analysis.
4. Review of records: Records of work such as maintenance requests is reviewed
and a list of requested repairs is made. In this situation it is important to take
representative samples so that seasonal variations in work requests do not
mislead. This is a good approach for such jobs as mechanic or electrician. The
kinds of repairs being performed and, thus, the duties being performed most
often can be itemized. However, this approach could also be used for computer
programming and computer trouble-shooting jobs in which incumbents have
records of work requests or work competed.
The data to be gathered by all these methods is dependent in large part on the purpose
the analysis is to be put to. Information about training needs requires information
about the transaction of the work so that the trainer can determine the critical skills
and knowledge that must be improved. Selection decisions require the same
information usually on a broader scale. A lot of information can be inferred from 9
well-written task statements.
Approaches to Some of the examples of the kind of data, which can be gathered for job analysis, are
Analysing Job given below.
l List of tasks
l List of decisions made
l Indication of results if decisions are not made properly
l Amount of supervision received
l Supervision exercised
l Kind of personnel supervised
l Diversity of functions performed by supervised staff
l Interactions with other staff (description of the staff interacted with)
l Physical conditions
l Physical requirements (For instance how heavy are the objects that are lifted.
How much stooping and bending is conducted and under what conditions)
l Software used
l Programming language used
l Computer platform used
l Interpersonal contacts with outsiders (customers)
l Interpersonal persuasive skills or sales skills
l Amounts of mental or psychical stress
l Necessity to work as a team member
l Needed contributions to a work group
l Authority or judgment exercised
l Customer service skills
Generally, it is preferable to use a combination of several methods to get information
about the job. One method could well supplement the other, where the objective is to
gain as much information as possible about the job, the crucial tasks, and the
essential qualifications required to perform them satisfactorily. An objective data
gatherer would avoid introducing his own ideas, and also avoid describing the
employees performing the job, rather than the “job” itself, for many of the
employee’s personal traits may have little or no relevance to the job.
Activity A
“Smaller organisations do not need job analysis for their jobs because most of their
employees conduct a myriad of activities, too far-reaching for a standard job
analysis”. Give your view point.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
Activity B
Discuss the sources of errors in your own organisation or any organisation you are
familiar with, that can distort or render job analysis information inaccurate.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
6.11 SUMMARY
Job Analysis is the process of job-related data. The data collected will be useful for
preparing job description and job specification. Job description lists job title, duties,
machines and equipment involved, working conditions surrounding a job and the
like. Job specification lists the human qualifications and qualities necessary to do the
job.
Job analysis is useful for HRP, recruitment and selection, training and development,
job evaluation, remuneration, performance appraisal, personnel information and
safety and health programmes. It also aides analysis of the organisation structures and
the work systems/procedures and contribute towards improving the productivity of
the organisation.
A logical sequence to job analysis is job design which is nothing but organisation of
tasks, duties and responsibilities into a unit of work.
16
Changing Nature
UNIT 7 CHANGING NATURE OF ROLES of Roles
Objectives
After going through this unit, you will be able to understand:
l the concept of role, the need and significance of roles,
l the various approaches to role definition, and
l the factors leading to changes required in role description.
Structure
7.1 Introduction
7.2 Role Description
7.3 Kinds of Roles
7.4 Need for Role Descriptions
7.5 Uses of Role Descriptions
7.6 Changing Roles: Approaches
7.7 The Changing World of Work
7.8 Factors Contributing to Role Changes
7.9 Role Expectations
7.10 Summary
7.11 Self-Assessment Questions
7.12 Further Readings
7.1 INTRODUCTION
The concept of role and changes taking place in roles can best be understood in the
context of the expectations an organisation has with its employees.
An organisation can be described as the rational coordination of the activities of a
number of people for the achievement of some common objective through division of
labour, hierarchy of authority and accountability. Such a description highlights the
following ingredients of organisations:
1. Organisations are rational entities. This means that they have clearly defined
goals and most economic means to achieve these goals. Rationality demands
maximisation of returns on minimum investment.
2. Organisational goals must be equally understood, shared, and subscribed to by
all the employees in the organisation.
3. A single person does not make an organisation. It requires a minimum of two or
more persons to fulfil the requirements of coordination.
4. One person cannot do all the roles of the organisation; hence these have to be
done through division of labour and function. Each individual has a clearly
defined responsibility that is non-overlapping. Along with responsibility comes
the authority to complete the role.
5. For every individual in the organisation there is an immediate supervisor.
Subordinates are accountable to their immediate supervisor. This is true for all
the levels in the hierarchy except the very top-level employee who does not
have a structurally defined supervisor and the very bottom level employee who
17
does not have subordinates.
Approaches to Given this general description of organisation, roles that are clearly defined play a
Analysing Job significant part in accomplishing the goals of the organisation. Roles can be seen in a
variety of ways.
19
Approaches to negotiations.
Analysing Job
5. Traditionally having one job title was the requirement. Now there is a range of
roles and a person may perform many functions.
6. In the past employees joined one occupational stream and retired from the same.
Today, organisations are insisting on transferring skills into many work fields.
7. Previously change was avoided. Today change is embraced.
8. Earlier career success was defined by others. Today the worthwhileness of the
job is realised by individual employee himself/ herself.
1. Technology upgradation
Technology continues to advance rapidly offering wider choices. There are very
sophisticated machines that provide rapid output with zero defects. Manual work has
been replaced by automation. Not only this machine upgradation is taking place at a
very fast pace, and hence there is an urgent need to upgrade the skill level of the
employees. They need to be continuously sent for training programmes to keep them
updated. How many people in accounts still count on fingers, though their roles have
changed to using computers for accounts purposes.
2. Information Technology
Today much of the focus is on Internet and World Wide Web Information technology
has brought a revolution in access, storage and retrieval of information. Electronic
mail is making it easier to seek guidance and advice from specialists around the
world. Transition from printed information to electronic publicity has resulted in
multimedia information service. None of these applications of information
technology can be achieved without trainers and users having the appropriate skills.
It will therefore be vital not only to develop program to improve the skills of users,
but ensure that the information professional has the skills to be able to change roles.
With the availability of high-speed networks, new services and applications, training
becomes an even more urgent issue.
On top of this there is a need for improvement of information and knowledge
handling in the “ subject content”. Content is king, without quality data any system
is devoid of use.
3. Competition
With the globalization and creating a world without border competition has become
the force to reckon with. It has given boost to consumer preferences, better product
quality expectations, and reliable service. Just about 20 years ago, there were only
2-3 models of cars. Today we have as many as 30-35 models available in the easiest
possible way. Business executive cannot afford to live in their own world and sell
whatever they produce. It is a buyers market now. They have to get out from the
comforts of their offices, identify customers’ preferences and satisfy them before they
loose out in the competition.
4. Women in work
Taking care of others is the primary role of women. Traditionally, women have 23
Approaches to tended the home. It was their duty, honour, and obligation to devote themselves to the
Analysing Job young, the sick, and the elderly. Women were raised to be “good wives and wise
mothers,” and still are. Yet there is a quiet revolution going on. Women make up 40
percent of the labour force. More than half of all the married women work.
Management positions held by women in India have doubled as compared to ten
years ago. Though this figure still represents only about 1 percent of all management
positions, as opposed to over 10 percent, as is the case in the United States. In
addition, women are shedding their traditionally subordinate roles and using the
courts to assert their rights. If one goes by the number of women students in
professional courses, their number in workforce is going to increase. Hence some of
the traditional roles have to be modified to suits the requirements of female
workforce.
Activity A
List out the factors contributing to role changes in your organisation or any
organisation you are acquainted with.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
Activity B
What kinds of roles do you feel that are more useful in any organisation. List out the
defferent approaches to roles followed in your organisation or any organisation you
are familiar with.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
7.10 SUMMARY
The concept of role can better be understood in the context of the expectations an
organisation has with its employees. A single person does not make an organisation,
it requires two or more persons to fulfil the requirements of coordination. One person
cannot do all the roles of the organisation. Each individual has a clearly defined
responsibility which is completely different from others, along with responsibility
comes the authority to complete the role. Each role has its written descriptions define
the work of the organisation and its reasons for existence as an employer of human
resources.
There are different kinds of roles, these are Interpersonal, Informational and
Decisional. These roles can be grouped as being primarily concerned with
interpersonal relationship.
The role of description is needed as a communication tool; it effectively
communicates a great deal of information about a role, especially between the
manager and employee. Role descriptions have the potential to be used for selection
and recruitment, induction and orientation, analysing work flows and methods, job
structuring, etc.
Roles will be changing from time to time according to prevailing situation. There is a
shift from description of duties to description of responsibilities; when considering a
career action one needs to assess the changes occurring at the work place. Most
employment environments are changing from what they have been once. Some of the
major factors contributing to the need for change are: technology, information
processing, competition, changing gender profile of workforce and changing culture.
Roles and job requirements must be examined regularly to accurately reflect the work
being performed or skills required.
JOB ANALYSIS
Objectives
After going through this unit, you will be ale to understand
l the concept of competency and competency mapping,
l the various methods of the competency mapping, and
l the benefits of competency approach to job analysis.
Structure
9.1 Introduction
9.2 What is Competency Approach
9.3 How is it Used by Organisations
9.4 The Benefits of the Competency Approach
9.5 Competency Mapping
9.6 Approaches to Competency Mapping
9.7 Summary
9.8 Self-Assessment Questions
9.9 Further Readings
9.1 INTRODUCTION
We presume that you are doing this course to acquire or enhance your knowledge
about the modern management concepts and techniques. This understanding should,
undoubtedly, improve your skills as a manager, especially as a manager of men. You
will also appreciate that an effective manager is one who is able to handle his people
efficiently. In order to be a good manager of men, it will also be imperative for you to
have an adequate understanding of the jobs assigned to them as also the relative job
differentials in terms of their level of difficulty, responsibility, knowledge and skill.
Activity A
Do you think that the competency approach is being followed in your organisation?
If yes, then list out the benefits of competency approach to the organisation.
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Activity B
Are you aware of the competency mapping process of your organisation? If yes,
identify key competencies required to fulfil the job requirements.
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41
Approaches to
Analysing Job 9.6 APPROACHES TO COMPETENCY MAPPING
It is not easy to identify all the competencies required to fulfil the job requirements.
However, a number of methods and approaches have been developed and
successfully tried out. These methods have helped managers to a large extent, to
identify and reinforce and/or develop these competencies both for the growth of the
individual and the growth of the organisation. In the following section, some major
approaches of competency mapping for job analysis have been presented.
1. Assessment Centre
Employees are not contented by just having a job. They want growth and individual
development in the organisation. “Assessment Centre “ is a mechanism to identify
the potential for growth. It is a procedure (not location) that uses a variety of
techniques to evaluate employees for manpower purpose and decisions. It was
initiated by American Telephone and Telegraph Company in 1960 for line personnel
being considered for promotion to supervisory positions. An essential feature of the
assessment centre is the use of situational test to observe specific job behaviour.
Since it is with reference to a job, elements related to the job are simulated through a
variety of tests. The assessors observe the behaviour and make independent
evaluation of what they have observed, which results in identifying strengths and
weaknesses of the attributes being studied.
The International Personnel Management Association (IPMA) has identified the
following elements, essential for a process to be considered as assessment centre.
1. A job analysis of relevant behaviour to determine attribute skills, etc. for
effective job performance and what should be evaluated by assessment center.
2. Techniques used must be validated to assess the dimensions of skills and
abilities.
3. Multiple assessment techniques must be used.
4. Assessment techniques must include job related simulations.
5. Multiple assessors must be used for each assessee.
6. Assessors must be thoroughly trained.
7. Behavioural observations by assessors must be classified into some meaningful
and relevant categories of attributes, skills and abilities, etc.
8. Systematic procedures should be used to record observations.
9. Assessors must prepare a report.
10. All information thus generated must be integrated either by discussion or
application of statistical techniques.
Assessment centre is multi-technique approach to individual assessment which
focuses on individual behaviour. That is grouped under various competencies.
Competencies is a group of behaviour the some total of individual’s competencies is
his potential. This can be classified under the following groups.
1. Intellectual competencies–Analytical ability, organisation ability, communica-
tion skills, creativity and innovativeness and decisions taking ability etc.
2. Emotional competencies–self confidence, tolerance to pressure, leadership skills
etc.
3. Social competencies–inter-personal skills, team spirit, sense of responsiblity,
etc.
4. Motivational competencies–Achievement drives willpower, risk taking
42
ability, etc. Competency Approaches
to Job Analysis
Data thus generated can become extremely useful in identifying employees with
potential for growth. Following are some of the benefits of the assessment centre.
1. It helps in identifying early the supervisory/ managerial potential and gives
sufficient lead time for training before the person occupies the new position.
2. It helps in identifying the training and development needs.
3. Assessors who are generally senior managers in the organisation find the
training for assessor as a relevant experience to know their organisation a little
better.
4. The assessment centre exercise provides an opportunity for the organisation to
review its HRM policies.
Assessment Centre is a complex process and require investment in time. It should
safeguard itself from misunderstandings and deviations in its implementation. For
this, the following concerns should be ensured:
1. Assessment Centre for diagnosis are often converted as Assessment Centre for
prediction of long range potential.
2. The assessors’ judgement may reflect the perception of reality and not the
reality itself.
3. One is not sure if the benefits outweigh the cost.
Advantages
1. Some of the human errors that are unconsciously committed can be traced and
rectified by this method. For example, a case study on pilots obtained detailed
factual information about pilot error experiences in reading and interpreting
aircraft instruments from people not trained in the critical incident technique
(i.e., eyewitness or the pilot who made the error).
2. Users with no background in software engineering or human computer interac-
tion, and with the barest minimum of training in critical incident identification,
can identify, report, and rate the severity level of their own critical incidents.
This result is important because successful use of the use reported critical
incident method depends on the ability of typical users to recognise and report
critical incidents effectively.
Disadvantages
1. It focuses on critical incidents therefore routine incidents will not be reported. It
is therefore poor as a tool for routine task analysis.
2. Respondents may still reply with stereotypes, not actual events. Using more
structure in the form improves this but not always.
3. Success of the user reported critical incident method depends on the ability of
typical end users to recognise and report critical incidents effectively, but there
is no reason to believe that all users have this ability naturally.
9.7 SUMMARY
The individual’s level of competency in each skill is measured against a performance
standard established by the organisation. A skill is a task or activity required for
competency on the job. Competency in a skill requires knowledge, experience,
attitude and feedback. Competency approach to job analysis depends on competency
mapping. Competency mapping is a process to identify key competencies for an
organisation. There are different methods and approaches to competency mapping,
these methods have helped managers to a large extent, to identify and reinforce and
develop these competencies both for the growth of the individual and the growth of
the organisation.
47
Approaches to
Analysing Job 9.8 SELF-ASSESSMENT QUESTIONS
1. Explain the concept of competency and competency approach to job analysis.
2. Describe the various methods of the competency mapping.
3. Explain the major benefits of competency approach to job analysis.
48
Recruitment
UNIT 10 RECRUITMENT
Objectives
After going through this unit, you should be able to:
l formulate a recruitment policy for your company,
l understand the importance of recruiting right people for the right jobs and at
the right time,
l evaluate various sources of recruitment of employees in the Indian context,
l realise the importance of executive search in a dynamic business environment.
Structure
10.1 Introduction
10.2 Recruitment Function
10.3 Recruitment Purpose
10.4 Recruitment Policy
10.5 Recruitment Process
10.6 Sources of Manpower Supply
10.7 Methods and Techniques of Recruitment
10.8 Executive Search
10.9 Assessment and Improvement of Recruiting
10.10 Summary
10.11 Self-Assessment Questions
10.12 Case
10.13 Further Readings
10.1 INTRODUCTION
Recruitment is the development and maintenance of adequate manpower sources.
It involves the creation of a pool of available human resources from which the
organisation can draw when it needs additional employees. Recruiting is the
process of attracting applicants with certain skills, abilities, and other personal
characteristics to job vacancies in an organisation. According to Denerley and
Plumblay (1969), recruitment is concerned with both engaging the required
number of people, and measuring their quality. It is not only a matter of satisfying a
company’s needs, it is also an activity which influences the shape of the company’s
future. The need for recruitment may arise out of: (i) vacancies due to promotion,
transfer, termination, retirement, permanent disability, or death; (ii) creation of
vacancies due to business expansion, diversification, growth, and so on.
Activity A
Give a brief outline of recruitment policy of your organisation or any other
organisation with which you are familiar.
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Activity B
What are the important methods used in your organisation for recruiting
management trainees, managerial, and supervisory personnel?
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10.10 SUMMARY
Recruitment forms a significant function in the personnel process. It involves
seeking and attracting qualified candidates from a wide variety of internal and
external sources for job vacancies. There is little agreement over the relative
effectiveness of these sources; each has unique advantages and disadvantages that
depend on the particular position to be filled. Questions that are addressed in the
recruitment process include: “What are the sources of qualified personnel?” “How
are these qualified personnel to be recruited?”, “Who is to be involved in the
recruitment process?” “And what inducement does the organisation have to attract
qualified personnel?” Indeed, without a sufficient flow of qualified candidates to
build up an efficient working force, the enterprise cannot function efficiently.
An effective recruitment programme necessitates a well-defined policy, a
proper organisational structure, effective procedures for locating sources,
proper techniques and methods for tapping them, and constant assessment and
improvement.
12
Recruitment
10.12 CASE
Powermat, Inc. has encountered difficulty over the last few years in filling its
middle-management positions. The company, which manufactures and sells
complex machinery, is organised into six semi-autonomous manufacturing
departments. Top management believes that it is necessary for these departmental
managers to know the product lines and the manufacturing process, because many
managerial decisions must be made at that level. Therefore, the company originally
recruited employees from within. However, they soon found that employees
elevated to the middle-management level often lack the skills necessary to
discharge their new duties.
A decision then was made to recruit from outside, particularly from educational
institutes with good industrial management programmes. Through the services of
a professional recruiter, the company was provided with a pool of well qualified
management graduates. Some of them were hired and placed in lower management
positions as preparation for advancement to the middle-management jobs. They all
left the company, however, within two years of their recruitment.
Management reverted to its former policy of promoting employees from within and
experienced basically the same results as before. Faced with the imminent retirement
of employees in several key middle management positions, the company decided to
call in a consultant who could suggest solutions.
Discussion Questions
1. What is the problem of recruiting in this company?
2. If you were the consultant, what would you recommend?
13
Key HR Practices
UNIT 11 SELECTION
Objectives
After going through this unit, you should be able to:
l appreciate the dynamics of various selection tests for different categories of
employees;
l understand the problems inherent in interviewing and workout suitable
guidelines to interviewers;
l realise the importance of exit interview and how to conduct the same;
l develop a comprehensive executive retention programme for an organisation.
Structure
11.1 Introduction
11.2 Selection Process
11.3 Selection Procedures
11.4 Selection Tests
11.5 Test Construction
11.6 Interview
11.7 Physical Examination
11.8 Reference Checks
11.9 Placement Processes
11.10 Placement
11.11 Exit Interviews
11.12 Retention
11.13 Summary
11.14 Self-Assessment Questions
11.15 Case 1
11.16 Case 2
11.17 Further Readings
11.1 INTRODUCTION
The most valuable asset of any large-scale organisation is the high-calibre
personnel. Good morale and motivation bind the employees together and breed
enthusiasm and goodwill in them, leading to better output. An important part of
personnel selection, therefore, is to make reasonably sure that the person appointed
to any position is interested in the work he has to do. The acquisition of new
employees is the most important and complex task. To find and employ the best
individuals available is every personnel manager’s goal.
Finding people and putting them to work is an expensive affair. Therefore, the
selection process has to be very sound to build a first-rate staff. One of the
important aspects in personnel selection is individual difference. Individuals differ
in their ability to perform the different types of activities. They differ in their
physical characteristics, intelligence and intellectual aptitudes, in interests, in
temperament, and in character. These differences in the individuals are to a large
14
extent uncorrelated. Because of these large differences in human abilities, the Selection
problem of proper selection becomes a very important one for modern industry.
A systematic and accurate occupational information is necessary before the
employees can be recruited, selected or placed on the job. Though, in the recent
past, the need for a systematic occupational information has been recognised, not
much work has been done in this regard by most personnel or employment
departments. A careful and thoughtful preparation of a job specification for each
important type of work, followed by regular and conscientious use of these
specifications, reduce errors in selection process.
After a complete job analysis, the planning of a recruitment programme can be
done. In this process, we may also consider the likely needs of the applicants.
Recruiting is selling the idea that a particular organisation is a better place to work
than the other competing organisation. A recruitment and selection programme can
be made more positive and successful if (a) there is a cultivation of the best
employment market for the positions involved; (b) use of attractive recruiting
literature and of adequate publicity; (c) employment of up-to-date tests of high
selectivity and reliability; (d) adequate search for candidates from within the
service; (e) a placement programme that puts the right man on the right job; and
(f) a follow-up probationary programme as an integral part of the selection
process.
11.6 INTERVIEW
The interview is the heart of the employment process. The personal interview,
along with the application blank, continues to be used by almost every employer.
Interviewing is considered to be the most useful selection method. The interview is a
conversation with a purpose. Its aim is to provide the candidate with information
about the job and the company and also to give the candidate a favourable
impression of the company. There are three purposes that may be served:
obtaining information, giving information, and motivation. The employment interview
should serve each of these three purposes. It should provide an appraisal of
personality by obtaining relevant information about the prospective employee’s
background, his training, work history, education and interests. Interview should
give information about the company, the specific job, and the personnel policies.
The interview should also help to establish a friendly relationship between the
employer and the applicant and motivate the applicant to work for the company,
whereas, in practice, we find that interviews lack mostly in one aspect or the other
and fail to achieve these purposes. For instance, obtaining information is commonly
found in many interviews rather than giving information or motivating the
prospective employees. It has been criticised because of the scope for bias.
Interview Content : Knowing what to discuss with an applicant is central to effective
interviewing. The applicant’s previous life history, education, work experience, and
personal qualifications form the basic content of the interview.
1. Personal Qualities: This area includes the personal qualifications required
in the position: physical appearance, health, dress and grooming, voice
quality, diction, vocabulary poise, alertness, and aggressiveness. Most of these
qualities are assessed by the interviewer’s observations rather than by the
applicant’s answers to his questions.
2. Academic Achievement: This area covers the type of schooling, quality of
grades, class standing, social activities, relationship with teachers, honours
and awards, and athletic accomplishments. Questions in this area can provide a
good indication of an applicant’s initiative, independence, reliability, intellectual
competence, and emotional stability.
18
3. Occupational Experience: This area emphasises not merely an applicant’s Selection
technical competence but also the level of responsibility and skill he has
attained in previous jobs, the position level and salary progression achieved,
and reasons for leaving former jobs. Questions in this area should focus at
obtaining evidence of good judgment, initiative, drive and energy, and
ability to assume responsibility.
4. Interpersonal Competence: This area includes the applicant’s ability to get
along with others. It is not enough to evaluate this area on the basis of the
applicant’s behaviour during the interview. Specific questions must be asked
about his family history, leisure-time activities, hobbies, and community
interests to ascertain his degree of social adjustment.
5. Career Orientation: This area covers the applicant’s career aspirations, his
immediate and long-range goals, and his potential for advancement. Answers to
questions in this area form the heart of a managerial applicant’s qualifications.
The interview is the most indispensable tool, not because of its information potential,
which is considerable, but also because of its distinctly human aspects. It is a two-
way street. No applicant wants to be judged for a position without an opportunity to
discuss it face- to-face in a meeting with a company representative. The interview
gives the applicant the feeling that he matters,and that he is being considered by a
human being rather than by a computer.
Interview Problems: Some of the typical problems are as follows:
l Interviewers do not seek applicant information dimensions needed for
successful job performance. Often, they do not have a complete job
description or an accurate appraisal of the critical job requirements. In addition,
the interviewer often does not know the conditions under which the job is
performed.
Interviewers may make snap judgements early in the interview. Consequently,
they block out further potentially useful information.
l Interviewers permit one trait or job-related attribute to influence their
evaluation of the remaining qualities of an applicant. This process, called the
halo effect, occurs when an interviewer judges an applicant’s entire potential
for job performance on the basis of a single characteristic, such as how well
the applicant dresses or talks.
l Interviewers have a tendency to be swayed by negative information about
the applicants.
l Information from interviews is not integrated or discussed in a systematic
manner. If several interviewers share information on an applicant, they may do
so in a haphazard manner. They do not identify job-related information or
seek to examine any conflicting information. This casual approach may save
time and confrontation, but only in the short run. In the long run, everyone in the
organisation will pay for poor hiring decisions.
l Interviewers’ judgements are often affected by the pressure to favour a
candidate or fill the position, hence they lower the standards.
l Interviewer’s judgement regarding an applicant is often affected by the list
of available applicants. For example, a good person looks better in contrast to
a group of average or below average applicants.
l Some interviewers may place more weight on certain attributes than others, or
they may combine attributes differently, as they make their overall decisions.
For instance, some interviewers may give emphasis to educational
experiences while others give weightage to work experiences.
19
Key HR Practices Do’s
l Sex, race and attitudes similar to those of the interviewer may lead to
favourable evaluation. Guidelines to Interviewers : Some do’s and dont’s of
interviewing are as under:
l Use a quiet comfortable place.
l Put the interviewee at ease.
l Be interested in the person as well as the job.
l Outline clearly the requirements of the job.
l Explain fully the conditions of employment.
l Tell about benefits, promotions, opportunities, and so on.
l Avoid certain types of questions.
l Encourage the applicant to ask questions.
l Guide the interview.
l Listen, let him talk freely.
l Be natural, use a conventional tone.
l Know when and how to close the interview.
l Announce your decision or explain your next step.
Dont’s
l Keep the applicant waiting.
l Build false hopes.
l Oversell the job.
l Interrupt the applicant or the interview.
l Rush through the interview.
l Repeat questions already answered on the application form.
l Develop a “canned” interview approach.
l Give opinions, just answers.
l Pry into his personal life needlessly.
l Prejudge and reflect prejudices.
l Use a phony excuse for turning him down.
l Send him away with a bad taste in his mouth.
Interview Techniques: The most commonly used interviewing techniques are
briefly discussed below:
i) Preliminary Interview: It is also called screening interview. The purpose is to
decide through mutual information sharing whether a comprehensive interview
is desired. In this interview, besides providing information about the job and
the organisation, preliminary information is sought on past work experience,
education and motivation. Most of those interviews are generally conducted by
personnel people who, sometimes, involve people from the areas where the
applicant is finally going to be placed. This is usually done for jobs that are
technical in nature.
ii) Patterned Interview: In this kind of interview what is to be asked is already
structured and hence they are called structured interviews. Patterned
interviews are a combination of direct and indirect questioning of the
applicant in conjunction with the application blank and is considered to be much
20 more accurate than less standardised interviews.
iii) Non-directive Interview: In this interviewing technique, there is a minimum Selection
use of direct questions. Questions that can yield “yes” or “no” answers are
avoided, and instead broad general questions are asked in the interview. Such
questions help in revealing the applicant’s real personality. It is felt that the
more the applicant is allowed the freedom to talk about himself, the more he will
reveal his personality as it really is.
iv) Stress Interview: It is a deliberate attempt to create tension and pressure to
observe how an applicant performs under stress. Stress is induced by not
allowing him to complete his answers or too many questions are asked in quick
succession. Some may react in a mature way by keeping their cool and yet
try to answer the questions, others might lose their cool and react sharply.
The most important advantage of this interview is that it helps to demonstrate
important personality or characteristics which would be difficult to observe in
tension-free situations. Such interviews are useful in jobs where emotional
balance is a key requirement.
v) Depth Interview: The purpose of depth interview is to get total information on
an applicant in order to develop a comprehensive profile based on indepth
understanding of his personality. This kind of interview is usually is very time
consuming because a lot of time is spent with the applicant to get detailed
information on various core areas of knowledge and skills of the job. Its major
advantage, of course, is in getting a complete, detailed understanding of the
applicant. Its major drawback is the cost in terms of time. In any case it is not
a usual method of selection.
vi) Group Interview: It is a recently developed technique. It offers some promise
for the appraisal of leadership but it lacks proper validity. A topic of
discussion is assigned to the group of applicants and their performance is
evaluated by the observers. The observers’ main focus is to see whether any
one of the applicants assumes leadership, how this is done, and how it is
accepted by other members of the group.
vii) Panel Interview: Interviewing candidates by a single person may not be
effective as he cannot judge the candidates in different areas/skills. Hence
most organisations invite a panel of experts, specialised in different
disciplines, to interview candidates. The great advantage of this interview is
that it helps to coordinate the collective judgment and wisdom of members of
the panel. This type of interview is done usually for supervisory and managerial
positions.
The interviews for selection have advantages as well as limitations. On the
positive side, it is possible to determine from an interview whether or not the candidate
is impressive and how he reacts in conversation. The personality traits that can be
demonstrated in an interview are responsiveness, alertness in conversation,
manners, presence of mind and poise. The limitations of interview are that the
interviewer cannot judge from a man’s face such personality and character traits
as honesty. The employment interview can be made satisfactorily accurate if it is
carried out with sufficient care. We still have shortage of skilled interviewers. The
interviewer must maintain an objective attitude towards the applicant. In brief, an
interviewer needs the following qualifications:
1. He should have emotional maturity in order to avoid the errors of bias as
well as to provide a base for developing rapport with the applicants.
2. He should be a good listener.
3. He should be as intelligent as the upper quarter of those he will interview.
4. He should show objectivity rather than emotionality or softness in his
appraisal of others.
5. He should have a thorough knowledge of the job for which he is interviewing. 21
Key HR Practices We still have shortage of skilled interviewers. Hence every organisation must
surely see that administrators, supervisors and personnel managers handling
personnel selection get the necessary training to ensure high quality of performance
in interviewing.
The success of an interview depends on careful planning. The plan should cover such
elements as setting objectives, choosing the persons to be interviewed, evaluating
available information about the interviewees, designing questions and arranging the
physical setting.
Gathering information about interviewees and their performance is a most important
preparatory step. Then the interviewer prepares the questions likely to reveal the
required facts. An important step in interview planning is allocating sufficient time
for each interview.
Interview success can be enhanced by a suitable physical setting, which should
include privacy, comfort and freedom from interruptions and distractions.
The following checklist may help in getting adequate information:
l Convert job descriptions into questions that would help to assess whether the
applicant is really capable of excellent performance.
l Choose a physical setting which is comfortable and pleasant enough to
generate greater interaction and hence more information.
l Put the applicant at ease by asking certain general questions about his
journey, weather, sports, and so on. Such an attempt would help in developing
greater rapport.
l Start by asking simple questions and slowly move to more difficult questions.
l Ask open-ended questions instead of those that lead to yes-no answers.
l Avoid asking leading or loaded questions that might lead to debate instead of
dialogue.
l Listen carefully to what the applicant has to say without interruption. Provide
positive feedback to encourage him to talk.
l Ensure that sufficient time is taken by the applicant while replying to
questions.
l Terminate the interview naturally. An abrupt ending might convey the
meaning that more could have been achieved.
l First make independent ratings on the applicant and then discuss them.
l According to Goodrich and Sherwood, an HRM consulting firm, companies
look most often for the following six-pack skills when interviewing applicants
for management jobs.
l Public Speaking: The ability to convey a message to strangers in a less-than-
relaxed situation.
l Financial Management: Experience in operating a budget successfully, with an
eye on costs.
l People Management: An indication of leadership skills, and the abilities to
delegate, lead by example, and motivate employees.
l Interviewing: The ability to handle an interview effectively, as both interviewer
and interviewee.
l Training: The ability to train and develop subordinates, not only to ensure that
the work gets done properly, but also to ensure that competent managers are
available for succession.
22 l Writing: The ability to communicate clearly through the written word.
The interviewer can ask open-ended questions or close-ended questions. Open- Selection
ended questions, such as “tell me about your experience in financial analysis”,
or “what do you consider your weaknesses as an employee?” Allow the interviewer
to structure the response to the question and present information that he or she feels
is important. Close-ended questions, such as “tell me the first thing you would say to
a potential customer”, or “how many employees have you supervised during the past
year?” Allow the interviewer to focus a response more precisely. Some combination
of the two approaches is most effective. For example, in interviewing supervisory
candidates a manager might ask the following questions:
1. Why do you want to be a supervisor?
2. What are the functions and duties of a supervisor as you see them?
3. What personal characteristics and other qualifications do you have that would
help you to become a good supervisor?
4. How do you feel about taking on the added responsibilities and demands
that come with a supervisory job?
Avoid all questions which can be answered with a “yes” or ”no”. Use “what”,
“why”, “when”, “where” and “how”.
Don’t Ask
l Any question about caste or religious affiliations;
l Questions that might be considered overly personal, such as, “Do you intend to
have a family?” “Are you a single parent?” 23
Key HR Practices l Questions that might pry into someone’s socio-economic status, such as, “Do
you own a car?” “Do you have a telephone/fax?” You would only need to
know about such things if the job specifically requires them.
Activity A
Try to recollect your last selection interview you attended either as a candidate or
member of interview panel.
See if you can answer the following questions (Yes or No).
l did you like the physical setting?
l did the interview commence on time?
l was there more than one member in the interview panel?
l were the questions clear and precise?
l were the questions relevant to your position?
l did you get sufficient time to respond to questions?
l was the environment friendly and relaxing?
.....................................................................................................................................
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24
5. Does the applicant appear to be an emotionally and socially mature person? Selection
Exhibit 1
Employer Speak
11.10 PLACEMENT
After an employee has been hired and oriented, he or she must be placed in his/her
right job. Placement is understood as the allocation of people to jobs. Assignment of a
new employee to a job apparently seems to be a simple task but the task is not as
simple as it looks like. The difficulty with placement is that we tend to look at the
individual but not the job. Often, the individual does not work independent of
others. Jobs in this context may be classified into three categories: independent,
sequential, and pooled.
In certain cases jobs are independent, for example, postal service or field sales.
Here, non-overlapping routes or territories are alloted to each worker. In such
situations, the activities of one worker have little bearing on the activities of other
workers. In sequential jobs, activities of one worker are dependent on the
activities of a fellow worker. Assembly lines best exemplify sequential jobs.
Where jobs are pooled together, there is high interdependence among activities.
The final output is the result of contribution of all the workers. Project teams,
temporary task forces, and assembly teams represent pooled jobs. It is the teamwork
which matters.
27
Key HR Practices
11.11 EXIT INTERVIEWS
The exit interview is the final step in the employment procedure. It is conducted by
the human resource department during the terminating employee’s last day on
the job. This interview often discloses departmental or job-related problems. Its
purpose is to:
1. Try to uncover the real reason behind the quitting/ termination.
2. Locate the probable reasons that contribute to turnover.
3. Assure the departing employee of his rights and benefits.
4. Part as friends.
Exhibit 2
Exit Interview - Aide-memoire
Relationships Is there any indication that there was a poor relationship
between the departed employee and supervisor? If so, why?
Is there any indication that the departed employee did not
get on well with his colleagues? Why?
Finance Is there any indication of dissatisfaction concerning salary,
fringe benefits, and so on?
Conditions Is there any indication of bad working conditions?
Personal Is there any indication of domestic or personal reasons for
leaving? What are they?
Promotion Is there any indication that promotion or career
development prospects have not been realised?
Training Is there any indication that the departed employee has not
received appropriate training?
Others Are there other reasons for leaving?
An exit interview, like any other interview, is a ”conversation with a purpose”.
During the exit interview, the employee will be permitted to express himself freely
about the reasons for leaving. Any misunderstanding that might have resulted in his
leaving will be corrected. In most instances, a form is used by the interviewer to
record the substance of the interview. This interview often discloses departmental or
job-related problems, and serves as a storehouse of information.
Exhibit 3
Some Do’s and Don’ts in Exit Interview
Do’s Don’ts
l Listen 80% of the time instead l Defend your company against
of talking. criticism or attacks.
l Rely heavily on non-directive l Justify actions which may
techniques like eye-contact. have annoyed the employee.
l Listen for sensitive topics and l Attack the departee’s views
feelings to be probed. or choice of new company or job.
l Cover all topics on the checklist l Convince the employee to
while being flexible. change his mind about leaving the job.
l Keep the interview constructive l Counsel the interviewee about
instead of eliciting woes. career options or his future.
28
Activity B Selection
Is there exit interview in your organisation? If yes, who conducts the interview and
what feedback is obtained?
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
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.....................................................................................................................................
.....................................................................................................................................
11.12 RETENTION
Employee retention programme is a significant challenge for most companies today.
For most employers it is the most compelling problem they face. A key employee
retention programme will help the employer to retain key employees and ensure
their commitment to the organisation.
An organisation must have a comprehensive approach to attract and retain good
employees so that quality customer service can be given. There cannot be loyal
customers without loyal employees. There are six keys to comprehensive employee
retention plan.
1. Have a planned approach.
2. Retain people as individuals, not groups.
3. Value people through a strong organisational vision.
4. Invest in employees.
5. Boost retention with innovative compensation and training programmes.
6. Approach retention as a long-term and short-term strategy.
There are nine tips to help keep good employees:
1. Beware of anything that can become an entitlement, because it can become
expensive and you may not need it.
2. Develop processes by which people can increase their employability in the
areas of competencies, skills and intellectual growth.
3. Use special projects as incentives or rewards.
4. Have a positive corporate environment to foster employee development.
5. Realise that retention of valued people is a long-term process, not a knee-jerk
reaction.
6. Create a consistent corporate culture in which managers communicate corporate
vision and values uniformly to employees.
7. Build in rewards for supervisors and managers who keep good employees.
8. Use exit interviews to obtain important data that will provide information about
your organisation.
9. Provide anonymous suggestion programmes to make workers understand the
importance of their ideas.
29
Key HR Practices
11.13 SUMMARY
The acquisition of new employees is an important and complex task. To find and
employ the best individuals available is the goal of every human resource manager.
The purpose of the selection process is to choose individuals who are most likely to
perform successfully in a job from those available to do the job. A series of steps is
normally followed in the selection process. These include the completion and
screening of the application form, employee testing, diagnostic interview,
reference checking, physical and medical examination, and making the
decision on final selection. Each step in the sequence should contribute to
extracting new information data. The application blank can elicit more factual
information. A reference check can provide the experience of others.
Psychological tests can measure such qualities as intelligence and aptitude. Any
tests used should relate directly to the jobs for which the individuals have
applied. If information cannot be obtained in any other way, it can be done so
through the interview.
11.15 CASE 1
The Bharat Paint Company recruits sales people to sell its products to retail
stores. The company looks for employees who have the energy, ability to work
hard, and ability to speak enthusiastically and intelligently about the company’s
products. In addition to skill, the company expects flexibility, accuracy, and
patience from its sales employees.
Nirmala has applied for a sales job. The interviewer who is going to interview her has
noted the following entries on her application blank:
Nirmala is 26 years old.
She has completed one year of college education.
She has held two jobs since leaving school - clerk in a school (two years), and senior
assistant in a financial organisation.
There is a gap of one year in between. Nirmala indicates on her application that she
was sick during that period and was undergoing medical treatment.
Discussion Questions
1. If you were the interviewer, what objectives would you set for your interview
with Nirmala?
2. How would you phrase your questions?
30
Selection
11.16 CASE 2
As a result of rapid growth in sales, the Simpson company had to double the size of
the central secretarial pool. Many of the current secretarial staff, aged about 40 to
50, had been with the company since its inception. None had more than a high
school education. Subsequently, 10 new secretaries were recruited with advanced
data processing skills. They had college education and all were in their 20s.
Unexpectedly, the performance level of the pool fell off drastically even though
doubled in size. The manager interviewed a few of the old staff members and they
told him that the new secretaries just did not fit in. They were uncooperative, would
not listen, and would not take messages. When their mistakes were corrected, they
got offended. In interviewing, a few of the new secretaries resented that the older
secretaries refused to accept new and more innovative ideas. They complained their
inability to use new knowledge and skills and the older secretaries would not
socialise with them.
Discussion Questions
1. What are the reasons for the declining productivity of the group?
2. What are your recommendations for improving the situation?
31
Key HR Practices
UNIT 12 DISLOCATION AND RELOCATION
OF EMPLOYEES
Objectives
After going through this unit, you should be able to:
l understand the significance of dislocation and problem of dislocated
employee;
l identify various causes of job dislocation in an organisation; and
l appreciate the need to help the dislocated employee through the process of
retraining and relocating.
Structure
12.1 Introduction
12.2 When Dislocation Occurs
12.3 Coping with Dislocated Employee
12.4 Helping the Dislocated Employee
12.5 Summary
12.6 Self-Assessment Questions
12.7 Further Readings
12.1 INTRODUCTION
One of the most difficult problems facing the human resource manager is the
dislocated employee. Any discussion on dislocation involves the definition of
dislocated employee, how to cope with it and why it occurs. Broadly speaking, the
dislocated employee is any employee whose job has outgrown him or who is
incapable (for whatever reason) of satisfactorily performing the requirements of his
job. Usually an employee gets dislocated when he is incapable of performing, or
unwilling to perform, a significant portion of his work in a satisfactory manner. It is
obvious that employees seldom become dislocated overnight because job requirements
are rarely that flexible and employee skills are barely that stable.
Activity A
Suppose in your organisation some employees are in the process of dislocation of
their jobs due to different reasons. Your organisation has decided to retrain them as
an obvious solution to cope with the problem. Keeping in view retraining technique,
your focus will be on:
l how retraining needs are to be determined on the part of employees who are apt
to be dislocated in their jobs?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
l how to develop new skills and capabilities of dislocated employees?
..........................................................................................................................
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..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
34
Dislocation and
12.4 HELPING THE DISLOCATED EMPLOYEE Relocation of
Employees
Due to various reasons relocation is not a successful intervention. Any
dislocated employee who is relocated elsewhere in the organisation probably will not
be pleased with his circumstance. In fact, he may be outwardly hostile toward the
organisation and resentful of the change. The HR manager should not take it for
granted that a job relocation is necessarily successful just because a man accepts
such an offer. The outward acceptance by the man may be due to various pressures
generated by the job or the family or by the community. Before transferring an
employee, the HR manager must be carefully attuned to such mundane matters as
school, vacation, holidays, weather and various other factors which normally affect
the work life of the employee. The policy decision of relocation should take place at
the convenience of the company and must commensurate with the employee’s
convenience and needs.
The company should make its efforts to ameliorate or minimise the problems which
the employee and his family are likely to face as a result of dislocation, both
financially and emotionally. When it comes to the question of emotional problems of
relocation by the employee and the family, the obligation of the organisation is to
attempt to familiarise both with the new situation. Attempting to physically
relocate an employee at a new site is expensive. Therefore, the organisation should
make all necessary efforts to cope with the financial problems arising out of
dislocation of an employee.
Employers wish to retain the flexibility of moving key employees to new job
assignments to enhance the effectiveness of both the individual and the
organisation. The provision of various relocation services will fulfill both the
objectives.
Among the various services that may be provided are:
1. Helping in the sale of home, if any, of the relocated employee.
2. Transporting household goods, and disbursing employee travelling expenses.
3. Employment assistance for the employee’s spouse, if required.
4. Information and advice concerning the new area, such as schools, medical
facilities, conveyance facilities, and so on.
5. Helping in finding and purchasing a new home, if the employee so desires.
6. Providing relocation counseling service to the employee and his family.
Policies of companies who relocate employees vary tremendously and depend upon
many factors like the practice of the industry, the geographical location of the
company, and the level of the relocated employee in the organisation. Normally most
organisations lay down a policy for various levels of employees, e.g., top level
executives, middle management and supervisory personnel, and rank and file
employees.
Activity B
If an employee cannot be retrained, the other option is job relocation. If you
are planning for relocating an employee by taking into consideration the future
needs of your organisation, what are your avenues?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
.......................................................................................................................... 35
Key HR Practices
12.5 SUMMARY
Job dislocation which is a slow erosion process causes immense hardship to both
the HR manager and the employee(s) affected. The problem of the dislocated
employee is serious and can become acute under certain circumstances. The home
life of the employee has a considerable impact on performance at work. Financial
and other forms of relocation assistance appear to have been generally successful in
overcoming employee reluctance to move. Any policy designed to cope with this
problem must call for positive outlook and immediate, corrective and
humanitarian action. The HR manager must ensure that necessary preventive action
and purposeful implementation of job dislocation and relocation of employees is
carried out with all efforts that it deserves.
36
Orientation
UNIT 13 ORIENTATION
Objectives
After going through this unit, you should be able to:
l appreciate the importance of inducting new employees and re-orienting old
employees in an organisation;
l prepare an orientation checklist for supervisors and for those in charge of
orientation programme;
l evaluate the success of orientation in the context of organisational aims and
objectives.
Structure
13.1 Introduction
13.2 Orientation Objectives
13.3 Why Orientation?
13.4 Orientation Policy
13.5 Orientation Contents
13.6 Orientation Responsibilities
13.7 Orientation Programme
13.8 Orientation Checklist
13.9 Orientation Evaluation
13.10 Summary
13.11 Self-Assessment Questions
13.12 Further Readings
13.1 INTRODUCTION
Orientation or induction is the process of introducing new employees to an
organisation, to their specific jobs and departments, and in some instances, to their
community. Orientation also marks the beginning of the process by which employees
are integrated into the organisation. This process is primarily one of the
organisation members informing the new member of the company’s expectations.
The orientation process communicates basic organisational philosophy, policies,
rules, and procedures. Orientation programmes can be either formal or informal.
Formal programmes are planned, and structured sessions are conducted at a set
time. Informal programmes are unstructured in content and are typically conducted
by supervisors and/or co-workers in an employee’s first day at work.
A new recruit needs orientation. The orientation meeting is the official welcome from
the company. It should be conducted with warmth and understanding. The first few
days on the job are filled with doubts and fears. The new employee needs assurance,
confidence, and a nudge in the right direction until he finds his own way.
In most organisations, some form of orientation follows selection and hiring of new
employees. Orientation provides new employees with the basic information
regarding working conditions, policies, procedures, pay, and benefits, and
37
Key HR Practices introduces them to the management and its co-workers. Orientation does not include
training in the performance of job tasks and responsibilities. That comes in the
training programme. It includes those things that are done to introduce a new
employee to the work environment, to fellow employees, to the work station, and to
general policies and procedures that a new environment creates.
Performance appraisal relates to orientation function in that the new employees are
informed of the acceptable levels of performance. Orientation function typically
leads to the training and development function. For almost all jobs, some degree of
training follows orientation. While orientation provides new employees with
general information, training provides them with the specific knowledge and skills
necessary to perform the job.
l Supervisor who is entrusted with the job is not trained or is too busy.
l Employee is overwhelmed with too much information in a short time.
l Employee is overloaded with formalities to complete.
l Employee is pushed into the job with a sketchy orientation under the mistaken
belief that actual work at the work place is the best orientation.
l Employee is forced to fill in the gaps between a broad orientation by the
human resource department and a narrow orientation at the department level.
Activity A
Do you have formal orientation programme for new recruits in your organisation?
If so, how is it carried out in practice?
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
If you are aware of any informal orientation activity in your organisation, give a
brief account of the same.
....................................................................................................................................
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....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
42
Orientation
13.10 SUMMARY
Orientation is the guided adjustment of a new employee to the organisation, work
environment, and job. An orientation programme is the result of a plan. Though
orientation is basically meant for new employees, a company must continue to
orient all its employees as change and innovation develop the need. The objectives of
orientation are multifold. In carrying out such a programme, the management seeks to
create a favourable attitude toward the company, its policies, and its personnel. It
can instill a feeling of belonging and acceptance. It can generate enthusiasm and
high morale. A general company orientation presents topics of relevance and
interest to all employees. The responsibility for orientation is normally shared by
the human resource department and the new employee’s immediate superior.
However, someone should be made responsible to take periodic inventory of what
innovations have taken place and of what renewal-orientation seems to be
necessary and to develop special programmes for this need. An orientation kit
provides written material to supplement the verbal orientation programme.
Orientation programmes range from the brief informal introduction to lengthy
formal programmes. Formal and systematic follow-up of initial orientation is
essential.
43
Key HR Practices
UNIT 14 CAREER AND SUCCESSION
PLANNING
Objectives
After going through this unit, you should be able to:
l follow the aims and objectives of career planning and its various benefits;
l appreciate the role of key players in facilitating career development
programmes;
l develop succession planning by identifying high potential employees for key
executive positions.
Structure
14.1 Introduction
14.2 Aims and Objectives of Career Planning
14.3 Career Planning Process
14.4 Career Structure
14.5 Benefits of Career Planning
14.6 Career Planning: A Personnel Function
14.7 What People Want from their Careers?
14.8 Career Planning Programmes
14.9 Facilitating Career planning
14.10 Responsibilities in Career Development
14.11 Evaluating Career Management
14.12 Succession Planning
14.13 Summary
14.14 Self-Assessment Questions
14.15 Further Readings
14.1 INTRODUCTION
Career planning is a relatively new personnel function. Established
programmes on career planning are still rare except in larger or more progressive
organisations. Organisational involvement in career planning is increasing, however.
Many candidates, especially highly-educated ones, desire a career, not “just a job”.
Many of today’s workers have high expectations about their jobs. There has been
a general increase in the concern for the quality of life. Workers expect more
from their jobs than just income. A further impetus to career planning is the need
for organisations to make the best possible use of their most valuable resources -
people - in a time of rapid technological growth and change.
A career development system is a formal, organised, planned effort to achieve a
balance between individual career needs and organisational workforce
requirements. It is a mechanism for meeting the present and future human resource
needs of an organisation. Basically career development practices are designed to
44
enhance the career satisfaction of employees and to improve organisational Career and Succession
effectiveness. Planning
A career has been defined as the evolving sequence of a person’s experiences over
time. It is viewed fundamentally as a relationship between one (or more)
organisation(s) and the individual. To some a career is a carefully worked out plan
for self-advancement; to others it is a calling - a life role; to others it is a voyage of
self-discovery; and to still others it is life itself.
45
Key HR Practices Career Time: This relates to distance and velocity factors - how far one wants
to go in an organisation or on the career path and how fast that person expects to
get there.
Transition: This is the resistance one encounters while moving toward career goals.
Transition relates to the changes expected, say, in knowledge, skill and attitude en
route to a career goal. Outcomes: This relates to the probabilities that one’s
investment and sacrifices for career progress will pay off.
The important influences on careers are of course the organisation and the
individual themselves. Both the organisation and the individual are important and
career planning can be seen from the perspective of both parties.
46
Exhibit 1 Career and Succession
Benefits of a Career Development System Planning
Activity A
Is there any involvement of your organisation in career development of employees?
If yes, give a brief outline.
....................................................................................................................................
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....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
Activity B
Give a brief outline of succession planning programme, if any, for key positions in
your organisation.
....................................................................................................................................
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....................................................................................................................................
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....................................................................................................................................
....................................................................................................................................
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52
Career and Succession
14.13 SUMMARY Planning
53
Key HR Practices
UNIT 15 PERFORMANCE AND
POTENTIAL APPRAISAL
Objectives
After going through this unit, you should be able to:
l understand different objectives and uses of performance appraisal system in an
organisation;
l develop various approaches to performance appraisal and draw a distinction
between traditional and newer rating methods.
l identify various errors in performance appraisal in practice and the need for
periodic performance review and feedback.
Structure
15.1 Introduction
15.2 Objectives of Performance Appraisal
15.3 Uses of Performance Appraisal
15.4 Planning the Appraisal
15.5 Approaches to Performance Appraisal
15.6 Components of Performance Appraisal
15.7 Types of Performance Appraisal
15.8 Concerns and Issues in Appraisal
15.9 Steps in the Appraisal Programme
15.10 Methods of Performance Appraisal
15.11 Errors in Performance Appraisal
15.12 Potential Appraisal
15.13 Self Appraisal
15.14 Performance Appraisal Assessment
15.15 Performance Appraisal Guidelines
15.16 Performance Appraisal in Practice
15.17 Performance Review and Feedback
15.18 Strategies to Improve Performance
15.19 Summary
15.20 Self-Assessment Questions
15.21 Case
15.22 Further Readings
15.1 INTRODUCTION
Performance appraisal is a systematic evaluation of present potential capabilities
of personnel and employees by their superiors, superior’s superior or a professional
54 from outside. It is a process of estimating or judging the value, excellent qualities or
status of a person or thing. It is a process of collecting, analysing, and Performance and
evaluating data relative to job behaviour and results of individuals. The appraisal Potential Appraisal
system is organised on the principle of goals and management by objectives.
Management decisions on performance utilise several integrated inputs: goals and
plans, job evaluation, performance evaluation, and individual history. It connotes
a two-dimensional concept - at one end of the continuum lies the goals set by the
authority, and at the other end, the performance achieved by the individual or any
given group.
Performance appraisal can be either formal or informal. Usage of former systems
schedule regular sessions in which to discuss an employee’s performance.
Informal appraisals are unplanned, often just chance statements made in passing
about an employee’s performance. Most organisations use a formal appraisal
system. Some organisations use more than one appraisal system for different types of
employees or for different appraisal purposes. Organisations need to measure
employee performance to determine whether acceptable standards of performance
are being maintained. The six primary criteria on which the value of performance
may be assessed are: quality, quantity, timelineness, cost effectiveness, need for
supervision, and interpersonal impact. If appraisals indicate that employees are
not performing at acceptable levels, steps can be taken to simplify jobs, train, and
motivate workers, or dismiss them, depending upon the reasons for poor
performance.
The results of appraisal are normally used to: (1) estimate the overall effectiveness
of employees in performing their jobs, (2) identify strengths and weaknesses in job
knowledge and skills, (3)determine whether a subordinate’s responsibilities can be
expanded, •(4) identify future training and development needs, (5) review
progress toward goals and objectives, (6) determine readiness for promotion, and
(7) motivate and guide growth and development.•
57
Key HR Practices They require that manager and subordinate sit down at the start of each work
evaluation period and determine the work to be done in all areas of responsibility and
functions, and the specific standards of performance to be used in each area.
When introducing performance appraisal a job description in the form of a
questionnaire has to be preferred. A typical questionnaire addressed to an individual
would cover the following points:
l What is your job title?
l To whom are you responsible?
l Who is responsible to you?
l What is the main purpose of your job?
l To achieve that purpose what are your main areas of responsibility?
l What is the size of your job in such terms of output or sales targets, number of
items processed, number of people managed, number of customers? What
targets or standards of performance have been assigned for your job? Are there
any other ways in which it would be possible to measure the effectiveness with
which you carry out your job?
l Is there any other information you can provide about your job?
Activity A
What type of executive performance appraisal system exists in your organisation?
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
Activity B
Are you aware of any potential appraisal system in practice? If so, give a brief
account of the same.
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
Criteria
Periodicity of Appraisal (tick any one):
Quarterly Half-Yearly yearly
Performance Criteria (tick any one):
Activity C
Do you follow periodic performance review and give feedback to the assessee
during the appraisal process.
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
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72
Activity D Performance and
Potential Appraisal
What is the strategy of your organisation to improve overall performance of
employees?
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
There is great degree of unhappiness all around with performance appraisals. Rarely
does one come across managers who are happy with the appraisal systems in their
organisations. But managers find it difficult to do without them because in the
absence of an appraisal mechanism, howsoever weak it may be, it is difficult to get
work out of people. It is a good mechanism to control people. In practice, a
development-oriented performance appraisal system has to be evolved by combining
certain key elements such as performance analysis, self-appraisal, performance
ratings, and counseling. Voltas have evolved a development-oriented appraisal
system on the basis of their own experiments and experiences over the years.
Larsen & Toubro Limited is the first company in India to introduce a
development-oriented performance appraisal system almost a decade ago as a part
of an integrated human resource development system. The State Bank of India also
introduced such a system in some of its branches covering a large number of
officials. Any organisation interested in changing its appraisal system from
control-oriented confidential reports to a development oriented system is actually
initiating a change in its culture. Such a change is slow, and is likely to be resisted
even if it is good for the employees and, therefore, should be carefully planned
and monitored.
Exhibit 2
Performance Appraisal at Pepsi-Cola International
Pepsi-Cola International (PCI), with operations in over 150 countries, has
devised a common performance appraisal system that focuses on motivating
managers to achieve and maintain high standards of performance. Administrative
consistency is achieved through the use of a performance appraisal system of five
feedback mechanisms - instant feedback, coaching, accountability based
performance appraisals, development feedback, and a human resource plan. The
common system provides guidelines for performance appraisal, yet allows for
modification to suit cultural differences. For example, the first step of instant feedback
is based on the principle that any idea about any aspect of the business or about
an individual’s performance is raised appropriately and discussed in a sensitive
manner. The instant feedback message can be delivered in any culture; the important
thing is not how it is done but that it is done. The purpose of instant feedback is
always to improve business performance, not to criticise cultural styles. Using this
system, PCI tries to balance the cultural and administrative imperatives of
successful managing the performance of a diverse workforce.
15.19 SUMMARY
The performance appraisal system ideally is an organisation designed programme
involving both the organisation and the personnel to improve the capability of both.
The elements of performance management include: purpose, content, method, 73
Key HR Practices appraiser, frequency, and feedback. The appraisal process involves determining
and communicating to an employee how he or she is performing the job and
establishing a plan of improvement. The information provided by performance
appraisal is useful in three major areas: compensation, placement, and training and
development. Appraisal helps to improve performance by identifying the strengths
and weaknesses; it helps to identify those with a potential for greater
responsibility; and assists in deciding on an equitable compensation system. The
methods of performance appraisal include rating scale, critical incident, ranking
methods, and management by objectives. Several common errors have been
identified in performance appraisal. Leniency occurs when ratings are grouped at
the positive 7end instead of being spread throughout the performance scale. The
central tendency occurs when all or most employees are ranked in the middle of the
rating scale. The halo effect occurs when a manager allows his or her general
impression of an employee to influence judgment of each separate item in the
performance appraisal. A sound appraisal system involves assessing employee
performance on a regular basis. Performance appraisal can be done by superiors
who rate subordinates, subordinates who rate their superiors, and self-appraisal. A
suitable performance appraisal system has to be designed keeping in view the culture
and requirements of an organisation.
15.21 CASE
Johnson, age 25, has been with the advertising department as a copyman for three
years. His job is to design advertisements for use in newspapers and magazines. He
must work closely with the girls in the art department, with the members of the sales
department, and with the vice president, sales and promotion, who is in charge of the
whole division.
Johnson is an extremely enthusiastic worker with many good ideas. But he has
considerable trouble in dealing with people. He is too impatient with the girls in the
art department and constantly chasing them to finish his own work in time. He makes
it perfectly clear that his ideas are always best while dealing with the people in the
sales department. When the vice president was thinking loud during a
conference, Johnson cut short the speech of the vice president by an aggressive
answer. It was a good answer, and the vice president did not mind, but some of the
other people thought that Johnson had behaved badly. As a manager you are
concerned about the animosity he is creating in your department. As per the
company policy, each employee has to undergo an evaluation interview every six
months. There are no performance evaluation forms.
Discussion Questions
1. What should your strategy be in handling evaluation interview with Johnson?
2. What remedial measures do you suggest to tackle the situation?
74
Performance and
15.22 FURTHER READINGS Potential Appraisal
Corner, Bernard J., The Communication of Merit Rating, Personnel, vol. 30,
No. 2, p. 88.
Davis, Keith, Human Behaviour at Work, Tata McGraw-Hill, New Delhi, 1977.
Fisher, M., Performance Appraisals, Kogan Page Ltd., London, 1995.
Pigors, P., and Myers, C.A., Personnel Administration, McGraw-Hill, Tokyo, 1973.
Richard Henderson, Performance Appraisal: Theory to Practice, Reston Publishing
Co., 1980.
Strauss, G., and Sayles, L.R., Personnel - The Human Problems of Management,
Prentice-Hall Inc., Englewood Cliffs, New Jersey, 1960.
Yoder, Dale, Personnel Management and Industrial Relations, Prentice Hall of
India, New Delhi, 1975.
75
Human Resource
UNIT 16 HUMAN RESOURCE Information Systems
INFORMATION SYSTEMS
Objectives
After going through this unit, you should be able to :
l understand the criticality of systematizing information for effective planning;
l examine the significance of information systems in Human Resource
Management;
l appreciate various approaches to managing information at the macro and the
micro level;
l assess the disadvantages of the manually maintained information systems; and
l understand the advantages of computerizing HR information systems.
Structure
16.1 Introduction
16.2 Concepts of HRIS
16.3 Need of HRIS
16.4 Technolgy Shifts and HRIS
16.5 Effectiveness of HRIS
16.6 IT Supported HRIS
16.7 Designing and Implementing an HRIS
16.8 HRIS as a Tool
16.9 Prerequisites for Introduction of a Transformational HRIS
16.10 HRIS Leadership
16.11 Summary
16.12 Self-Assessment Questions
16.13 Further Readings
16.1 INTRODUCTION
An information system is an inter-related set of procedures and processes to provide
informaion for decisions. Information is data that have been processed so that they are
meaningful. It adds to the representation of an idea. It corrects and confirms previous
information. It tells us something which we did not know. Many organisations have
computer-assisted information systems.
An information system especially developed for human resource management is
referred to as HRIS – a human resosurce information system. Human resosurce
management, when it doesn’t include the human resource planning function, requires
only a basic HRIS. If this basic HRIS is computer-supported, it is likely to include a
transition processing system or mangement information system. An information
system provides for the accumulation by gathering, processing by deleting extraneous
information, deciding among divergent information and putting the information in a
logical arrangement that promotes its understanding. Finally, the information is stored
in a readily accessible configuration.
5
Intellectual Capital Information is maintained by ensuring its security and by updating it. Information is
Accounting delivered to potential users in a configuration and at a time most suited for its use.
Activity A
It is stated that “national strategy of education has to ensure the availability of highly
educated and motivated manpower for dealing with the challenges which are inherent
in the modernisation and globalisation of the economy”. Study the National Education
Policy Document and examine what directions does it provide towards attainment of
the stated objective.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
Activity B
In your organisation, analyse existing records, reports and forms to determine the
adequacy and requirements for data in the Human Resource Information System.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
Activity C
Study the existing Human Resource Information System (HRIS) in an organisation
and comment on the procedure followed for maintaining the security of confidential
data.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
Activity D
If there is not an existing human resource information system, carry out a rudimentary
investigation to identify what data are available in personnel files, dossiers, etc., which
could be easily collected for purposes of Human Resource Planning.
.......................................................................................................................................
.......................................................................................................................................
....................................................................................................................................... 7
Intellectual Capital
Accounting 16. 4 TECHNOLOGY SHIFTS AND HRIS
Technological advancements have resulted in a dramatic change in consumer
interaction and the methods of service delivery. Consumers are now experimenting
with new ways of conducting business. Take, for example, developments regarding
automated teller machines (ATMs). Over the course of their more than 15-year
history, ATMs have evolved to provide basic banking services 24 hours a day 7 days a
week. Finally, new technology is bringing banking services directly into the customer’s
home. In the medical industry, rising costs have increased the availability of at-home
diagnostic equipment and tests. Software packages let people construct their own
wills, and even design the house of their dreams.
Changes, such as those described above, in the external environment have serious
implications for strategic planning within the organisation, especially with regard to
the human resource planning and service delivery functions. As in other cases,
mentioned above, in the work-related matters too the employees are expecting greater
speed, transparency and empowerment. These in turn, need increased availability and
access to the information about their organisation, their work, themselves and their
colleagues. Some changes that have taken place within organisations to fulfill the
requirement of speed and quick response have been well chronicled. Organisations
have been restructured through downsizing, rightsizings, and re-engineering that trim
the work force, eliminate middle management, flatten the organization, and improve
communication and decision making functions. However, proper information
management and communication planning is seen to be the most critical and
sustainable move to satisfy employee expectations of self-regulation, greater control
over their work-life, and greater opportunity to contribute to the organisational goals.
HRIS is, therefore, often seen to be an imperative in a fast changing technological
environment.
Advantages of Computerisation
While it is presumptuous to assume that computerization automatically remedies all
the problems associated with manual systems, in the fast changing technological and
information processing environment, it does present several potential benefits.
Convenience: In IT enabled systems, data entry, update and retrieval are all
significantly faster. Redundant data may be easily replaced.
Integration: A computerized system can greatly reduce fragmentation and duplication
of data. All data can be stored in a single system to enable retrieval of complete
picture of each employee or of each defined parameter in a desired number of
permutation and combinations. Moreover, depending on the requirement, reports can
be generated in different ways that provide an accurate picture. Verification of data
and error rectification are also relatively easy in computerized systems.
Multi-user benefit
Different people can access the data simultaneously, which facilitates quick
dissemination across geographical and structural boundaries and facilitates faster
decision-making. Moreover, on-line data entry is possible that leads to automatic
up-dating of data resulting into better informed decisions.
However, to obtain these advantages, it is important that the knowledge and expertise
is available to the organisation, internally or from outside, to develop and tailor- make
the system to suit the organisation’s unique needs.
9
Intellectual Capital
Accounting 16.7 DESIGNING AND IMPLEMENTING AN HRIS
According to Mathis and Jackson (2000) to design and implement an effective HRIS,
the following are necessary:
Details about the required data, such as:
l What information is available and what needs to be collected?
l To what use this information be put?
l In what format this information be presented?
l Who should have access to what information?
l When and how often this information is needed?
The answers to these questions will help in the choice of both the hardware and the
software.
Formation of a Project team: it is useful to establish a cross functional project team
to “ review user needs, identify desired capabilities of the system, solicit and examine
bids from software and hardware vendors and identify the implementation process
required to install the system.”( 58)
Training of those who will be managing and using HRIS: Both to ensure proper
inputs into the system and effective outputs from the system, training of users is
desirable. In some of the firms, where HRIS has been successfully implemented, a
complete team of trainers was established to give proper training to the employees.
Activity E
Your organisation proposes to establish a wholly separate information system for
Human Resource Planning purposes only. As personal manager, you are required to
prepare a note setting out several uses and applications of computerized personnel
records system to be used for purposes of staff orientation in Human Resource
Information System Concepts.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
16.11 SUMMARY
Information is the raw material of planning. A quality planning effort cannot be
accomplished without sound and adequate information. Information is provided in an
organisation by an inter-related set of procedures and process known as an
information system.
An information system especially developed for the human resource management
function is called an HRIS – a human resource information system.
There are certain basic requirements upto which the information must conform.
At the macro level, although there do exist institutional arrangements for providing
manpower data, but the need for improving the effectiveness of human resource
planning and policy has been articulated at several fora.
At the micro level the importance of having a well-defined and detached manpower
information system within the organisation has been emphasised. The point has been
made that at the enterprise level there is need for a comprehensive human resource
information system. In this context, the deficiencies and shortcomings of manual
13
Intellectual Capital human resource information system have been noted in order to develop a clearer
Accounting perspective for going in for a computerised personnel record system. Several
advantages and applications manually doing information system and of using
computerised information system have been brought into focus. Those of you
who may be interested in the design process of a computerised human resource
information would be well advised to read further the subject itself being so
specialised in nature.
14
Human Resource Audit
UNIT 17 HUMAN RESOURCE AUDIT
Objectives
After going through this unit, you should be able to:
l understand the concept of Human Resource Audit;
l to grasp the similarities and difference between the HR Audit and the Financial
audit;
l to appreciate the need, purpose and the scope of the HR Audit; and
l develop a perspective on how such Audits are carried.
Structure
17.1 Introduction
17.2 Concepts of Human Resource Audit
17.3 Nees of HR Audit
17.4 The Scope of HR Audit.
17.5 The Frequency of HR Audit
17.6 Conducting HR Audit
17.7 Audit Process : Essential Steps
17.8 Techniques in HR Audit
17.9 Summary
17.10 Self-Assessment Questions
17.11 Further Readings
17.1 INTRODUCTION
Conventionally, the independent accountant, after completing an audit, is in a position
to render a certificate covering his findings, mentioning the period covered by audit.
An assertion is included in the certificate that a review has been made of the
company’s internal control system and of the accounting procedure followed. A brief
statement of the scope of audit is made. Any qualification that are applicable to
execution of the assignment or to the company’s accounts are prefaced. Finally, the
independent accountant renders his opinion regarding the company’s financial
statements and the basis on which the accounts have been kept. Professional ethics is
observed by independent accountants. Material facts are neither missed nor
mis-stated.
Again, conventionally, during manpower audit disbursements made on account of
payrolls are checked to underlying records. This may even require verification of
employees’ signatures on payroll receipts to the extent considered necessary. Record
of the time of arrival and departure of employees is checked; so also the reports of the
number of pieces turned out by piece workers. Payroll records covering bonuses and
commission on sales to employees are subjected to scrutiny. Also, certain payroll
deductions and contributions in accordance with several social security and welfare
laws is checked to compliance and accuracy.
In the matter of quantum of audit and manner of selections, the auditor may introduce
the elements of last check and surprise being left to his sole discretion.
15
Intellectual Capital It is a general practice for independent accountants to analyse the changes which took
Accounting place in respect of employees of company during the period covered by the audit. The
net increase or decrease in the number of employees in any one function or occupation
is discussed with one of the company’s senior executives in order to obtain the benefit
of his comments regarding the situation.
Careful consideration is given by the independent accountant to the company’s system
of internal control and check while determining the scope of the programme of audit.
Obviously, much of the quantum and thrust of audit can be directly related to
effectiveness of the company’s internal control system.
The managerial control implies two things: one is checks and the other is
measurements. Checks imply monitoring the working of various parts of the
organisation by observing the working by getting feedback and take corrective action
wherever necessary. In the measurement process, control refers to standards of
measurement which are set in advance to determine how well the assigned functions
are being performed.
In human resource management, audit is one of the most important devices and
significant step in the human resources planning process. Rather, it is considered as
the first step in planning of human resources.
Auditing HR Practices
All HR departments provide several services that may be clustered into six key
domains (Ulrich and Lake,1990), staffing, training and development, appraisal,
rewards, oraganisation governance and communication. For each of these six
domains, Ulrich recommends four types of assessments. 17
Intellectual Capital The first is an assessment of activity that not only describes the services being
Accounting provided by the HR department but also assesses the focus of the HR strategies, the
distribution of responsibility, the resource utilisation, and the competencies of the HR
portfolio.
The second type of assessment is that of customer value. HR departments may be said
to be providing a range of services to customers, who are the employees of the firm.
Customer surveys are conducted to capture the employees’ perceptions about the
importance and the quality of the HR services.
Often Cost benefit or utility analyses of HR functions are made to define the value of
each of the HR functions. Formulae that can trace the cost and benefit of the services,
are developed and the results compared over time and with the results of other
companies, to make an assessment.
Research, involving HR experiments, are also sometimes conducted by using
experimental and control groups. These groups may be formed across sites, or across
departments. The purpose of these research studies is to identify the effective HR
practices by generating comparative data. This data enables the organisation to adopt
the best HR practices.
Auditing HR Professionals
An audit of HR professionals is essentially an assessment of the extent to which the
professionals demonstrate competence for HR function. Such an assessment requires a
360 degree feedback, and, according to Ulrich, usually employs the following five
steps :
1. Developing a Model of Competencies: Before embarking on an assessment of
competence, it is necessary to first determine what are the competencies that
make a successful HR professional. These competencies usually stem from
knowledge of business, knowledge of HR, knowledge of change and finally
personal credibility. In addition to determining the competencies that account for
a successful HR professional, it is also important to determine the behavioural
attributes that reflect these competencies. A model that reflects both these aspects
may be said to be a comprehensive model for auditing of HR professionals.
2. Collect data using the Model: Several techniques may be employed to collect
data about the extent to which an HR professional exhibits the modeled
competencies. These include interviews, questionnaires and focussed groups.
3. Summarise data and give feedback to the HR professionals: The quantitative
and qualitative data, that is collected in the above mentioned ways, needs to be
synthesised and codified so that specific themes emerge. These themes are then
used as aids to help the HR professionals identify his/her strengths and
weaknesses.
One of the key activities of an HR audit is to give feedback. This needs to be
done in a way that protects the confidentiality of the participants. The manner of
the feedback should take into account the sensitivities of the receiver. The tenor
of the feedback should neither be accusatory nor defensive. In addition, the
individual data that is collected may be integrated into an audit for the overall
HR function.
4. Create action plans: The HR audit goes beyond defining the competencies and
inadequacies of the HR function. It also identifies the measures to develop the
competencies at both, the individual and the departmental level. At the
institutional level, this may involve doing an ‘HR for HR.’ At the individual
level, the action plan will concentrate on developing a tailored set of trainings,
readings, assignments and training opportunities.
18
5. Continuous Improvement: Auditing of HR professionals is not a one time Human Resource Audit
activity but an ongoing continuous process through which HR professionals are
able to constantly build on their HR competencies and strengthen the HR
functions in the organisation.
20
Human Resource Audit
17.8 COMMON RESEARCH TECHNIQUES IN HRA
As mentioned above, there are several techniques that may be employed in conducting
an HR Audit, especially in collecting data. Most of these techniques are, however,
variants of Questionnaires, interviews, and methods of Observation.
Interviews
Interview of key HR stakeholders can provide a valuable insight into the strengths and
weaknesses of the HR practices, professionals and department, as perceived by the
stakeholders. Interviews can be part of either an exploratory or descriptive mode of
inquiry.
Interviews as a part of HR Audits may either be individual interviews or group
interviews. While the former is more time consuming, the data generated is less likely
to be influenced by group processes and dynamics, especially group think. At different
levels in the organisation, the context of the interview and its type varies. Hence, the
aim and scope of interviews with the CEO, top management and with HR
professionals, the line managers and the field staff are likely to be quite different.
Questionnaires
In HR Audits, questionnaires may be used for generating data that serves as input to
the HR Scorecard. There are several such questionnaires available. They measure
HRD systems and their comprehensiveness; the effectiveness of HR functions; the
competencies of the HR professionals and the HR staff; and the HR culture in the
organisation.
The questionnaires used usually comprise of a series of open-ended and closed - ended
questions that cover a number of dimensions like career systems, work planning,
development systems and planning, and the overall HRD climate and functioning.
Some of the commonly used questionnaires include the HRD Audit Questionnaire, a
102 item Map your HRD Practice Profile (see La Piana Associates, Inc, 2002) the
HRD Climate Survey, the Training Effectiveness Questionnaire, Performance
planning, analysis and development questionnaire and the Supervisory and Leadership
Beliefs Questionnaire, to name a few.
Activity A
Assuming you are required to conduct a HR audit interview in your organisation.
Prepare a suitable questionnaire covering compensation and performance appraisal.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
Activity B
Try and assess the major HR audit concerns of your organisation by talking widely to
line managers, personnel staff and other employees with useful knowledge. Before
doing that, prepare a checklist of key questions to be asked.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
............................................................................................................................... 21
Intellectual Capital
Accounting 17.9 SUMMARY
Finding out what is inadequate is the first step toward improvement. Similarly, there is
no meaning in carrying out an Audit if the management has no intention of taking
measures to plug the gaps pointed out by the Audit. HR Audit, therefore, should be
undertaken only as a part of the overall improvement/change strategy of the
organisation rather than as an isolated activity.
Human resource audit is an important approach to human resource planning. It is
practical because, if correctly conducted, it can increase the effectiveness of the design
and implementation of human resource policies, planning and programmes. A periodic
and systematic audit helps human resource planners develop and update employment
and programme plans.
An HR audit reviews the full range of HR activities, including how an organization is
structured to deliver the HR function, recruitment/selection, compensation and benefits
administration, performance management, employee communications, safety and
recordkeeping. Identifying “gaps” between policy and practice can not only increase
legal compliance but also increase efficiency and productivity of the organization’s HR
activities. It can significantly contribute to the quality improvement processes and
employee satisfaction.
However, a comprehensive audit will be most useful if an organization is ready to act
on the findings and develop its Human Resource functions to a level where the full
potential of HR to support the organization’s goals and objectives can be realized.
22
Human Resource
UNIT 18 HUMAN RESOURCE ACCOUNTING Accounting
Objectives
After going through this unit, the reader should be able to:
l understand and define the concept of Human Resource Accounting, its
objectives and its role in Human Resource Management;
l understand the measurements of Human Resource Costs; and
l understand the measurements of Human Resource Value.
Structure
18.1 Introduction
18.2 What is HRA?
18.3 Why HRA?
18.4 Historical Development of HRA
18.5 Information Management for HRA
18.6 Measurement in HRA: Two Approaches
18.7 The Cost Approach
18.8 The Economic Value Approach: Monetary Value Based Approaches
18.9 The Non-Monetary Value Based Approaches
18.10 Measurements of Group Value
18.11 Summary
18.12 Self-Assessment Questions
18.13 Further Readings
18.1 INTRODUCTION
The past few decades have witnessed a global transition from manufacturing to
service based economies. The fundamental difference between the two lies in the
very nature of their assets. In the former, the physical assets like plant, machinery,
material etc. are of utmost importance. In contrast, in the latter, knowledge and
attitudes of the employees assume greater significance. For instance, in the case of an
IT firm, the value of its physical assets is negligible when compared with the value of
the knowledge and skills of its personnel. Similarly, in hospitals, academic
institutions, consulting firms etc., the total worth of the organisation depends mainly
on the skills of its employees and the services they render. Hence, the success of
these organizations is contingent on the quality of their Human Resource- its
knowledge, skills, competence, motivation and understanding of the organisational
culture. In knowledge –driven economies therefore, it is imperative that the humans
be recognised as an integral part of the total worth of an organisation. However, in
order to estimate and project the worth of the human capital, it is necessary that some
method of quantifying the worth of the knowledge, motivation, skills, and
contribution of the human element as well as that of the organisational processes, like
recruitment, selection, training etc., which are used to build and support these human
aspects, is developed. Human resource accounting (HRA) denotes just this process of
quantification/measurement of the Human Resource.
23
Intellectual Capital
Accounting 18.2 WHAT IS HRA?
The American Accounting Association’s Committee on Human Resource Accounting
(1973) has defined Human Resource Accounting as “the process of identifying and
measuring data about human resources and communicating this information to
interested parties”. HRA, thus, not only involves measurement of all the costs/
investments associated with the recruitment, placement, training and development of
employees, but also the quantification of the economic value of the people in an
organisation.
Flamholtz (1971) too has offered a similar definition for HRA. They define HRA as
“the measurement and reporting of the cost and value of people in organizational
resources”.
As far as the statutory requirements go, the Companies Act, 1956 does not demand
furnishing of HRA related information in the financial statements of the companies.
The Institute of Chartered Accountants of India too, has not been able to bring any
definitive standard or measurement in the reporting of human resources costs. While
qualitative pronouncements regarding the importance of Human Resources is often
made by the chairmen, in the AGM, quantitative information about their contribution
is rarely recorded or communicated. There are a few organizations, however, that do
recognize the value of their human resources, and furnish the related information in
their annual reports. In India, some of these companies are : Infosys, Bharat Heavy
Electricals Ltd (BHEL); the Steel Authority of India Ltd. (SAIL), the Minerals and
Metals Trading Corporation of India Ltd. (MMTC), the Southern Petrochemicals
Industries Corporation of India (SPIC), the Associated Cement Companies Ltd,
Madras Refineries Ltd. , the Hindustan Zinc Ltd. , Engineers India Ltd, the Oil and
Natural Gas Commission, Oil India Ltd., the Cement Corporation of India Ltd. etc.
employees are determined annually. The total costs for all the personnel signify the
worth of the human resources.
Flamholtz’s Model
Detriments Elements of
of conditional conditional
value value
Activation
level Individual’s
s Transferability Expected
s
s realizable
s
value
s to a formal
s organization
Probability of
Satisfaction
s
maintaining
s
organizational
membership
s
Role
s
Hypothesized determinant
s s s s
Rewards
A subset
Possible determinant
T Y T
where E (Vy) = expected value of a ‘y’ year old person’s human capital
T = the person’s retirement age
Py (t) = probability of the person leaving the organisation
I(t) = expected earnings of the person in period I
r = discount rate
The basic theme of Lev, Schwartz model is to compute the present value of the future
direct and indirect payments to their employees as a measure of their human resource
value. While doing so, the common assumptions set by the Indian companies are the
pattern of employee compensation, normal career growth, and weightage for
efficiency. Moreover, companies adapt this model to their practical requirements by
making necessary alterations. For instance, different organisations use different
discount rates for ascertaining the present value of future cash flows.
This method of accounting is basically oriented towards measuring changes in the
employees’ value rather than employers’ gains from the employees. Unless the
employees’ payments are directly linked to employee productivity or the company
performance, the changes in the value of employees will not reflect the changes in the
employees’ contribution. As pointed out by Prabhakara Rao (1993) under the Lev,
Schwartz model, the value of human resources will be more or less increasing, even
if the organisations continuously incur losses/decrease in profitability. The attitude
and morale of the employees, the contribution of the employees to the organisation,
and such other factors are out of the purview of the Lev, Schwartz model.
Source: Rensis Likert and David G. Bowers, “Improving the Accuracy of P/L Reports
by Estimating the Change in Dollar Value of the Human Organization”,
Michigan Business Review, March 1973.
Capitalization
The capitalisation method involves capitalizing a person’s salary and using it as a
surrogate measure of human value. This value may be ascertained for groups as well
as individuals. The value of the group is essentially the aggregate value of the
individuals compromising the group.
Capitalization of compensation method is not considered an ideal method of group
valuation because it ignores the possible effects of synergy. However, this method
may be used to arrive at an approximation of a group’s value to the firm.
Activity A
Identify an actual organisation for which human resource accounting may be
appropriate:
a) How would you determine if human resource accounting is appropriate for this
organisation?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
b) What kind of information is this organisation likely to require about its human
resources?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
c) Outline how you would plan to obtain the information.
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
Activity B
Identify an organisation and make an attempt to work out the human resource costs
of.
a) Recruitment and selection
b) Training for a period of one year.
Compare the cost figures worked out by you independently with the
accounting figures maintained by the organisation. Analyse the differences
and comment.
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
18.11 SUMMARY
During the past decade, the concept of HRA has been tuned to the requirements of a
knowledge economy by focusing on such intangible assets as intellectual capital ,
relationship capital, etc. Various tools for this purpose have been developed, some of
them being Skandia Navigator, HR Balance Score Card, Knowledge Capital 35
Intellectual Capital Earnings, Economic Value Added, Intellectual Asset Valuation, Knowledge Audit
Accounting Cycle etc. ( For a comprehensive summary see Karl-Erik Sveiby, 2004).
Whatever the tool or approach to HRA, much of the potential for developing human
resource accounting capability and gaining its advantage depends upon the
availability of and accessibility to the required data. In those organisations, where
the data is not readily available or routinely maintained, the first step towards HRA
will have to be HRIS.
36