Human Resource Management II 471 v2

Human Resource Management
II
Sub Code - 471
Developed by
Prof. Nitasha Gutgutia
On behalf of
Prin. L.N. Welingkar Institute of Management Development & Research
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Advisory Board
Chairman
Prof. Dr. V.S. Prasad
Former Director (NAAC)
Former Vice-Chancellor
(Dr. B.R. Ambedkar Open University)
Board Members
1. Prof. Dr. Uday Salunkhe  2. Dr. B.P. Sabale  3. Prof. Dr. Vijay Khole  4. Prof. Anuradha Deshmukh 
Group Director  Chancellor, D.Y. Patil University, Former Vice-Chancellor  Former Director 
Welingkar Institute of Navi Mumbai  (Mumbai University) (YCMOU)
Management Ex Vice-Chancellor (YCMOU)
Program Design and Advisory Team
Prof. B.N. Chatterjee Mr. Manish Pitke

Dean – Marketing Faculty – Travel and Tourism
Welingkar Institute of Management, Mumbai Management Consultant
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Dean – Finance Dean – Marketing
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai
Prof. Dr. V.H. Iyer Mr. Smitesh Bhosale

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Welingkar Institute of Management, Mumbai Founder of EVALUENZ
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Dean – Marketing Faculty – Rural Management
Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Director – Intraspect Development Faculty – Healthcare Management
Manager Medical – Air India Ltd.
Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

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Welingkar Institute of Management, Mumbai Former Manager-Catering Services – Air India Ltd.
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Faculty – IT Publisher
Welingkar Institute of Management, Mumbai Management Books Publishing, Mumbai
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Welingkar Institute of Management, Mumbai Dean – Quality Systems
Welingkar Institute of Management, Mumbai
Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Dean – Banking Dean – Marketing
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Faculty – Operations Prof. Dr. Rajesh Aparnath
Former Quality Chief – Bosch Ltd. Head – PGDM (HB)
Welingkar Institute of Management, Mumbai
Mr. Ajay Prabhu Ms. Kirti Sampat

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Corporate Consultant Welingkar Institute of Management, Mumbai
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Ex Senior V.P. (Sify) Welingkar Institute of Management, Mumbai
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1st Edition (june-2015)
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CONTENTS
Contents
Chapter No. Chapter Name Page No.
1 STRATEGIC ROLE OF HUMAN RESOURCES 3-36

MANAGEMENT
2 TALENT MANAGEMENT 37-58

3 EMPLOYEE ENGAGEMENT 59-89
4 MANAGING DIVERSITY 90-114
5 MEASURING HRM EFFECTIVENESS 115-142
6 FOUNDATION AND UNDERSTANDING OF EMPLOYEE 143-170
BEHAVIOR
7 EMPLOYEE MOTIVATION 171-199

8 FOUNDATION AND UNDERSTANDING OF EMPLOYEE 200-236
TEAMS
9 POWER, CONFLICT, NEGOTIATION AND INTERGROUP 238-267

BEHAVIORS
10 ORGANIZATION STRUCTURE AND DESIGN 268-294

11 ORGANIZATION CULTURE 295-320
12 ORGANIZATION CHANGE AND EFFECTIVENESS 321-349
13 HR POLICIES, PRACTICES AND WORK DESIGN 350-383
14 QUANTITATIVE TECHNIQUES IN HRM 384-411
15 RECENT TRENDS AND PRACTICES IN HRM 412-436
APPENDIX I: CASE STUDIES 437-442
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STRATEGIC ROLE OF HUMAN RESOURCES MANAGEMENT
Chapter 1
STRATEGIC ROLE OF HUMAN RESOURCES
MANAGEMENT
Objectives
After studying this chapter, you should be able to:
• Understand the HRM roles of human resource and line managers

• Understand strategy, strategic management process and planning and
linking this to HRM
• Understand the emerging role of HR, concept and approaches of strategic
HRM
• Understand the various strategic models of HR and arriving at the HR
strategy
• Understand the alignment of HR strategy to the organizational strategy
• Understand the skills needed by today’s HR managers
Structure:
1.1 Human Resource Management Roles

1.2 Strategic Management, Process and Planning
1.3 Types of Organizational Strategies
1.4 Strategic HRM (SHRM)
1.5 Strategic Models of HR
1.6 Aligning HR to Corporate Strategy
1.7 Skills of HR Professionals in a SHRM Scenario
1.8 Summary
1.9 Self Assessment Questions
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1.1 HUMAN RESOURCE MANAGEMENT ROLES
Most managers agree that they perform numerous functions in their jobs.
These functions include the management functions of planning, controlling,
leading, organizing and staffing. The specific activities covered in these
functions include:
Planning - Establishing goals and standards; developing rules and

procedures; developing plans and forecasting.
Organizing - Giving each subordinate a specific task; establishing

departments; delegating authority to subordinates; establishing channels
of authority and communication; coordinating the work of subordinates.
Staffing - Determining what type of people should be hired; recruiting

prospective employees; selecting employees; setting performance
standards; compensating employees; evaluating performance; counseling
employees; training and developing employees.
Leading - Getting others to get the job done; maintaining morale;

motivating subordinates, giving direction to team members, decision
making
Controlling - Setting standards such as sales quotas, quality standards, or

production levels; reviewing actual performance vis-á-vis standards; taking
corrective action as needed.
However, in this book we will focus on the Staffing function or Human

Resource Management of the managers. Human Resource
Management (HRM or simply HR) is defined as a function in
organizations designed to maximize employee performance in service of
their employer’s strategic objectives. HR is primarily concerned with how
people are managed within organizations, focusing on policies and
systems. It covers those aspects of the manager’s job which concentrates
on the ‘people’ or “Human Resources’ aspect of the manager’s job. It
involves activities and techniques as listed in the Exhibit 1.1
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Exhibit 1.1: Human Resource Management Activities

• Conducting job analyses (determining the nature of each
employee’s job)
• Planning labor needs and recruiting job candidates
• Selecting job candidates
• Orienting and training new employees
• Managing wages and salaries (compensating employees)
• Providing incentives and benefits
• Appraising performance
• Communicating (interviewing, counseling, disciplining)
• Training and developing managers
• Building employee commitment
Why understanding Human Resource Management is critical for a

manager’s job?
The knowledge of HRM will aid a manager in avoiding various Human

Resource-related mistakes such as –
• Wrong hiring of personnel

• Facing high attrition in the team or organization
• Receiving low commitment from people
• Experience poor performance of people
• Having the company face legal hassles due to discriminatory practices
• Having the company held for unsafe work conditions
• Letting some employees feel discriminated owing to unfair salaries and
benefits compared to others in the company or as per market standards
• Allowing people’s ineffectiveness and inefficiency in work due to lack of
learning opportunities
This understanding needs to change, that a manager will be effective if he

lays down structured plans, prepares brilliant strategies and organization
structures and uses world-class accounting norms and controls. This is
maybe necessary but not sufficient. A manager needs to hire right people
to execute those plans or implement such brilliant strategies or exercise
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those accounting controls. There are various examples of highly successful

senior managers who may not be having the adequate plans, strategies,
organizations or controls but possess the right ability to pick right people,
motivate them, evaluate them and develop them.
Line and Staff Roles

Though many companies have Human Resource Department with a Human
Resource Management Team, every manager is a Human Resource
manager in his/her capacity. They carry out various Human Resources
related activities like interviewing, training, inducting, recruiting and
selecting.
Line versus Staff Authority

Authority is the right to make decisions, to direct the work of others, and
to give orders. In management, we usually distinguish between line
authority and staff authority. Line managers are authorized to direct the
work of subordinates and are responsible for accomplishing the
organizational goals. (Example - Sales Managers, Production Managers).
Staff managers, on the other hand, are authorized to assist and advise line
managers in accomplishing these goals. HR managers are staff managers
who are responsible for assisting and advising line managers in areas like
recruiting, hiring, and compensation. Line Managers’ HRM Responsibilities
involve direct handling of people. For example, placing the right person on
the right job, Training employees for superior performance, controlling
labor costs, etc. The human resource department provides specialized
assistance to line manager. In doing so, HR manager performs three roles:
1. A line function - The HR manager directs activities of his/her team and

in related service areas. In other words, he/she exerts line authority
within the HR department.
2. A coordinative function - HR managers also coordinate personnel
activities or exert functional control. Here the HR manager ensures that
line managers are implementing the company’s HR objectives, policies,
and procedures
3. Staff (service) functions - Assisting and advising line managers in
their people matters like hiring, training, evaluating, rewarding,
counseling, promoting, and firing of employees.
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1.2 STRATEGIC MANAGEMENT, PROCESS AND PLANNING
Defining Strategy
The word strategy has been used in English since 1656 and originates from
“Strategies”, a Greek noun meaning ‘commander-in-chief’. Oxford
dictionary defines it as ‘generalship’. In management context it is
interchangeably used with long-term planning, an action which senior
management carries out to achieve organization’s long-term goals. ‘
Glueck defined strategy as, ‘unified, comprehensive and integrated plan

designed to ensure that the basic objectives of the enterprise are
achieved.’
Facebook’s acquisition of Instagram is an instance of management

strategy. In April 2012, Facebook acquired the photo sharing start-up,
Instagram, for an unprecedented $1Bn. Facebook’s strategy in acquiring
Instagram was to (a) corner the fledgling mobile image sharing market,
and (b) hedge its bets for future growth. The $1Bn price tag may have
seemed exorbitant in 2012, but looks almost cheap today. Instagram
allows Facebook to compete in a market where it doesn’t have a very
strong presence, and helps it retain younger users. This is so since
Instagram is the dominant photo sharing app on all mobile platforms and
more importantly, it attracts the adolescents and teens that are leaving
Facebook in droves. Furthermore, by buying Instagram, Facebook ensured
that it has a competitive advantage over Google, Microsoft, and other
competitors.
Other definitions of strategy -

A strategy, whether it is an HR strategy or any other kind of management
strategy, must have two key elements: there must be strategic objectives
(i.e., things the strategy is supposed to achieve), and there must be a plan
of action (i.e., the means by which it is proposed that the objectives will be
met). (Richardson and Thompson, 1999)
The emphasis (in strategy) is on focused actions that differentiate the

company from its competitors. (Purcell, 1999)
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Understanging Strategic Management

Wheelen and Hunger (1995), define strategic management as ‘that set of
managerial decisions and actions that determines the long run performance
of a corporation’
Strategic management is considered a continuous activity, undertaken by

the senior management of the organization that requires constant
adjustment of three major interdependent poles: the values of senior
management, the environment, and the resources available. Strategic
management emphasizes need to monitor and evaluate environmental
opportunities and threats in the light of an organization’s strengths and
weaknesses (Fig. 1.1). Hence, any changes in the environment and the
internal and external resources must be monitored closely so that the goals
pursued can, if necessary, be adjusted.
Senior Management
Environment Resources
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Fig. 1.1: Three Major Interdependent Poles of Strategic Management
The Strategic Management Process
The Figure 1.2 depicts the Strategic Management Process. As shown, this is
a step-wise process and this process is broken down into five steps –
1. Mission and Objectives

2. Environment Assessment
3. Formulating Strategy
4. Implementing Strategy
5. Evaluating Strategy
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These steps are explained below -
1. The senior leaders of the organization evaluate their position vis-á-vis to

the present mission (the direction in which the organization is going;
the organization’s values and aspirations) and objectives (short-term
measurable outcomes; desired ends) of the organization.
2. Focuses on the strengths and weakness of the organization internally

and the threats and opportunities of the external environment. These
factors are most important to the organization’s future and are called
strategic factors. They are arrived at through a SWOT (Strengths,
Weaknesses, Opportunities, and Threats) analysis.
3. Involves the assessment of various strategic factors and strategic

choices by the senior leaders, interaction of which guides them to
achieve organizational objectives. Such strategies may be formulated at
the organizational, business unit or functional levels. Strategic decision
making can be seen as a political process, since decisions and actions
on different issues are taken by some ‘power-dominant’ groups.
4. Focuses on various techniques that managers use to execute their

strategies and particularly includes dealing with leadership style,
organization structure, systems control, information flow and managing
people resources.
5. The final step involves determining gap between desired change and
performance vis-á-vis to the actual change and performance post the
implementation of the strategy.
As per the above process steps, we can say that strategic management
process is rational and linear process. However, it is a normative process,
showing how ideally strategic management should be carried out rather
than how it is actually carried out in organizations. Strategic decision
making being a political process implies that there would always be a gap
between reality and theoretical process.
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Mission and Objectives

Management Philosophy
Step 1 Values
Environment Assessment
Step 2 Internal Scan
External Scan
Formulating Strategy
Step 3 Strategic Choice
Organization
Business
Functional
Implementing Strategy
Leadership
Step 4 Structure
Control Systems
Human Resources
Evaluating Strategy
Step 5 Operating Performance
Financial Performance
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Fig. 1.2: The Strategic Management Process
Strategic Planning
As discussed earlier, strategies may be formulated at three levels, hence,
strategic planning happens at three levels.
Organizational Level Strategy Planning: At the topmost level, this

planning involves identifying portfolios of businesses comprising the
organization and inter relationship between the businesses.
Business Unit Level Strategy Planning: At the next level down, this
planning involves how the business heads would build and strengthen their
long-term business competitiveness in the market.
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Functional Level Strategy Planning: Each business comprises of

different functions like marketing, production, sales, human resources etc.
Such a planning involves identifying course of actions for each of the
functions in order to aid the business in its competitive strategy.
The Strategic Planning process

The core of the strategic planning process is a SWOT analysis. An ideal
strategic plan will balance the internal strengths and weaknesses of the
organization with the external threats and opportunities. Most senior
managers constantly look out for threats and opportunities in the
environment. However, what maybe a critical threat or an opportunity for
one organization may be completely meaningless for another organization.
There have been several strategic environmental trends that are impacting
most organizations today, determining the strategic directions or paths
they may be taking or may take.
Strategic Trends
Some basic strategic trends impacting majority organizations across the
globe include –
• Globalization
• Features of Workforce
• Advances in Technology
• Work Nature
Globalization – refers to tendency of the companies to extend their

business operations to new markets aboard. The globalization rate of the
past decade (2000-2010) has been striking. For example, the total value of
Indian imports and exports broadly grew from ` 4.1 lakh crores in 2001-02
to ` 23.4 lakh crores in 2010-11. This is very obvious growth in global
markets from India’s perspective, with similar trends across the globe.
Globalization has strategic impacts. Companies that once competed locally,
now face foreign competitors. An excellent example for this would be the
Indian Auto Industry with only 2-3 players in the beginning of 90’s to now
numerous global players along with Indian players. More globalization
means more competition, higher pressure to improve in terms of lower
costs, higher employee productivity and need for innovation.
Feature of Workforce – Demographics of the workforce is changing. The

workforce is becoming more diverse as women, minority-group members,
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and older workers enter the workforce. Diversity includes such factors as
race, gender, age, values, and cultural norms. Also a striking emerging
feature of workforce is that labor force is aging. The median age of the
labor force across the globe is projected to rise.
Advances in Technology - The internet, information technology and

social media have been forcing—and enabling—companies to become more
competitive. For example, Banking through internet has emerged as a
strategic resource for achieving higher efficiency, control of operations and
reduction of cost by replacing paper-based and labor intensive methods
with automated processes thus leading to higher productivity and
profitability. Companies that cannot match up to the demands of
technology simply can not compete in the market place since technology is
reducing costs and introducing innovative ways of doing business.
Nature of Work - Technology has also been changing the nature of work
not only in the new e-commerce companies but also in the factory jobs
which are becoming more and more technologically challenging. Further,
there is a continuing shift from manufacturing to service jobs. This implies
that the center of gravity in employment is moving fast from manual and
clerical workers to knowledge workers, who resist the command and
control model that business took earlier.
1.3 TYPES OF ORGANIZATIONAL STRATEGIES
As discussed earlier, companies formulate strategies at different levels by

following the strategic management process. Let us discuss the types of
strategies at the different levels – organizational, business unit and
functional level.
1. Organizational Level Strategies - They describe a corporation’s

overall direction in terms of its general philosophy towards growth and
the management of its various business units. Such strategies
determine the type of businesses a corporation wants to be in and what
business units should be acquired, modified or sold. This strategy
addresses the question what business are we in?
The different kinds of Organizational Level strategies are that ‘Gluek and
Jaunch’ identified –Stability, Growth, Retrenchment and Combination
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!
Fig. 1.3: Types of Organizational Level Strategies
2. Business Level/Competitive Strategies- They deal with decisions

and actions pertaining to each business unit. The main objective of a
business-level strategy is to make the unit more competitive in its
marketplace. This level of strategy addresses the question how do we
compete? In the 1970s, Michael Porter (1980) made a significant
contribution to our understanding of business strategy by formulating a
framework that describes three competitive strategies: low-cost
leadership strategy, differentiation strategy, and focus strategy.
• The low-cost leadership strategy attempts to increase the

organization’s market share by emphasizing low unit cost compared to
competitors.
• In a differentiation competitive strategy, managers try to distinguish
their services and products – such as brand image or quality – from
others in the industry.
• With the focus competitive strategy, managers focus on a specific buyer
group or regional market.
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3. Functional Level Strategies - They pertain to the major functional

operations within the business unit, including marketing, manufacturing,
finance and human resources. Typically, this strategy level is primarily
concerned with maximizing resource productivity and addresses the
question how do we support the business-level competitive strategy?
Some important functional strategies could include –
• Production – Flexible manufacturing

• Lean production
• Six Sigma
• Marketing – Customer focus
• Customization
• Rationalizig intermediaries
• Research and Development – New products
• New processes
• HRM – Build skills
• Selection based on attitude and emotion
• Create Self-managing teams
• Make employees think as customers
Exhibit 1.2: Business and Functional Level Strategy Example

A Food Company offered a line of organic foods that ranged from cereal
and soups to cheese and chicken. These products were currently sold at
three company stores, and those products that can be easily shipped
were also sold through their company website. Company was targeting
both students and working adults interested in a healthy lifestyle as their
customers. This company attracted and retained a talented staff who
provided product information along with a high level of service to its
customers—creating a strong competitive advantage. The following goals
and business and functional strategies were developed using the strategic
planning process using their SWOT analysis and three-year vision.
Goals
• Develop incentives to maintain high employee retention with a turnover
rate of less than 20% annually for those at or above the assistant
manager level and less than 30% for all other employees.
• Build the brand.
• Increase profits by 15% each year for the next three years.
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Strategy
The company will provide its customers with the freshest and finest
organic food available. Its team will ensure each customer has an
outstanding shopping experience by providing a high level of service and
product information. At key functional levels the company decided the
following strategies:
• Human Resources –
• Implement an employee stock ownership program for those
employees who have worked for the business for minimum one
year.
• Develop an employee training program to further enhance all
employees’ product knowledge and customer service skills.
• Marketing –
• Create a unified look for the stores, the website, and product
packaging.
• Design a marketing plan to increase purchases by current customers
and attract new customers within the existing target markets.
• Logistics and Distribution –

• Improve operational efficiencies
• Improve shipping capability so that perishable products can be
ordered from the website and shipped anywhere in the country.
1.4 STRATEGIC HRM (SHRM)
Emergence of SHRM
The various latest strategic trends as highlighted above and the
developments in the field of HRM bring forth the contribution HRM can
make towards business success and hence, there is an increasing emphasis
on HRM to become an integral part of business strategy. The emergence of
the term ‘Strategic Human Resource Management’ (SHRM) is an outcome
of such efforts. It is largely concerned with ‘integration’ of HRM into the
business strategy and ‘adaptation’ of HRM at all levels of the organization
(Guest, 1987; Schuler, 1992).
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Definition of SHRM
The field of strategic HRM is still evolving and there is little agreement
among scholars regarding an acceptable definition. Broadly speaking,
SHRM is about systematically linking people with the organization; more
specifically, it is about the integration of HRM strategies into corporate
strategies. Strategic HRM thus links corporate strategy and HRM, and
emphasizes the integration of HR with the business and its environment.
Other definitions of Strategic HRM include:
‘Asset of processes and activities jointly shared by human resource and line
managers to solve people-related business problems’ (Schuler and Walker,
1990).
‘The central premise of strategic human resource management theory is

that successful organizational performance depends on a close fit or
alignment between business and human resource strategy’ (Batt R., 2007)
Exhibit 1.3: HR’s Evolving Role

Today, it’s the company’s workforce—its knowledge, commitment,
skills, and training— that provides the competitive advantage for
world-class companies like Microsoft, Sony, AOL, and GE. And it’s
HR’s job to build that competitive advantage. That means an
upgrading of HR’s traditional role. In the early 1900s, personnel
people first took over hiring and firing from supervisors, ran the
payroll department, and administered benefit plans. The job
consisted largely of ensuring that procedures were followed. As new
technology in areas like testing and interviewing began to emerge,
the personnel department began to play an expanded role in
employee selection, training, and promotion. However, for decades
the emphasis was still on what HR could do to protect and support
the organization rather than the positive contribution it made to the
company’s effectiveness. Today, HR’s role is shifting from protector
and screener to strategic partner and change agent. In today’s
flattened, downsized, and high-performing organizations, trained
and committed employees—not machines—are the company’s
competitive key.
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Aim of SHRM
The fundamental aim of Strategic HRM is to generate strategic capability by
ensuring that the organization has skilled, engaged and well-motivated
employees to achieve sustained competitive advantage. Schuler (1992)
states that: Strategic human resource management is largely about
integration and adaptation. Its concern is to ensure that: (1) human
resource (HR) management is fully integrated with the strategy and
strategic needs of the company; (2) HR policies cohere both across policy
areas and across hierarchies; and (3) HR practices are adjusted, accepted
and used by line managers and employees as part of their everyday work.
Significance of SHRM
Staffing the organization, building teams, developing people skills,
identifying approaches to performance and customer service improvement,
and rewarding employees are equally critical for line managers as they are
for HR managers. An effective line manager needs to understand his
people, work with them effectively, and possess knowledge about various
systems and processes to form a skilled and motivated team. The manager
also must be aware of economic, technological, social, and legal issues
affecting employees and ultimately facilitate efforts to achieve
organizational objectives.
Organizations can gain a competitive advantage by effectively managing

their human resources. This competitive advantage may be in the form of
cost leadership (e.g., being a low-cost provider) or product differentiation
(e.g., having high levels of service quality). However, achieving a
competitive advantage through human resources must be based on the
unique combination of an organization’s human resources, strategy, and
core capabilities which is different for different organizations. Organizations
achieve competitive advantage through SHRM for these reasons:
• SHRM encourages proactive rather than reactive behavior.

• Company goals are communicated explicitly.
• Gaps between the current situation and a vision of the future are focused
on.
• Line managers are involved in the human resource planning process.
• Human resource opportunities and constraints are identified in
implementing strategic plans.
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HR’s Role as a Strategic Partner

HR’s long history as a staff or advisory function had been responsible for
it’s impoverished reputation either as an operational function or an
adaptive function to fit to specific corporate and competitive strategies. A
recent view is that of an equal partner in the strategic planning process,
i.e., both in the formulation and the implementation of the company’s
strategies. HR tends to have their greatest strategic impact on executing a
company’s plans; however, opportunity exists for their greater involvement
in strategy formulation.
HR’s Role in Executing Strategy

Traditionally execution has been the core of HR’s strategic role as per the
belief that a company’s functional strategies should support its competitive
strategies. A different company with a different competitive strategy might
have a very different approach to HR. HR supports strategy implementation
in many different ways. For example, HR handles the execution of most
companies’ downsizing and restructuring strategies—by outplacing
employees, instituting pay-for-performance plans, and retraining
employees. HR execution usually involves identifying and reducing costs,
and therefore, prompts value chain analysis which poses questions such
as: “How do our costs for this activity compare with our competitors’?” “Is
there a more efficient way for us to deliver these services?” “And do we
have to perform these services in house?” By applying value chain analysis,
HR managers are finding ingenious ways to deliver their own services more
cost effectively. IBM’s HR group, faced with drastic cost cutting in the
1990s, first slimmed down from 3,400 to 2,000 employees. Told to cut
costs by another 40% to 50%, the HR team consolidated all its service
functions into a centralized human resource service center based in
Raleigh, North Carolina. This technology-rich call center helps more than
700,000 IBM “customers” (employees and their families), handling over 7
million transactions a year. It reportedly saved IBM over $180 million in its
first six or so years.
HR’s Role in Formulating Strategy

Formulating a strategic plan requires identifying, analyzing, and balancing
the company’s external opportunities and threats, and its internal strengths
and weaknesses. HR plays a role here, too. For example, HR management
can help with what strategic planners call environmental scanning,
identifying and analyzing external opportunities and threats that may be
crucial to the company’s success. Formulating plans requires competitive
! !19
intelligence, and HR management can supply useful information. Details

regarding new competitors’ incentive plans, and information about pending
legislation like labor laws or mandatory health insurance are some
examples. Knowledge of how brands are sorted among sales divisions and
who reports to whom can give important clues as to a competitor’s
strategic priorities. HR also supplies information regarding the company’s
internal strengths and weaknesses.
Different Approaches to SHRM

There are five approaches to strategic HRM. These consist of resource-
based strategy, achieving strategic fit, high-performance management,
high commitment management and high-involvement management, as
described below.
1. The resource-based approach: A fundamental aim of resource-based

HR strategy, as Barney (1991) indicates, is to develop strategic
capability – achieving strategic fit between human resources and
opportunities and obtaining added value from the effective deployment
of human resources. This approach will address methods of increasing
the company’s strategic capability by the development of people who
can think and plan strategically and who understand the key strategic
issues. A convincing rationale for resource-based strategy has been
produced by Grant (1991).
When the external environment is in a state of flux, the company’s own

resources and capabilities may be a much more stable basis on which to
define its identity. Hence, a definition of a business in terms of what it is
capable of doing may offer a more durable basis for strategy than a
definition based upon the needs (e.g., markets) which the business seeks
to satisfy.
Unique talents among employees, including superior performance,

productivity, flexibility, innovation, and the ability to deliver high level of
personal customer service, are ways in which people provide a critical
ingredient in developing an organization’s competitive position. One of the
clear benefits arising from competitive advantage based on the effective
management of people is that such an advantage is hard to imitate.
2. Strategic fit : The HR strategy should be aligned to the business

strategy (vertical fit), i.e., it should be an integral part of the business
! !20
strategy, contributing to the business planning process. Vertical

integration is necessary to provide congruence between business and
human resource strategy so that the latter supports the accomplishment
of the former and, helps to define it. Horizontal integration with other
aspects of the HR strategy is required so that its different elements fit
together. The aim is to achieve a coherent approach to managing people
in which the various practices are mutually supportive.
3. High-performance management: High-performance management

aims to make an impact on the performance of the company through its
people in such areas as productivity, quality, and levels of customer
service, growth, and profits and, ultimately, the delivery of increased
shareholder value. These practices include rigorous recruitment and
selection procedures, extensive and relevant training and management
development activities, incentive pay systems and performance
management processes.
4. High-commitment management: High-commitment management

has been described by Wood (1996) as: ‘A form of management which
is aimed at eliciting a commitment so that behavior is primarily self-
regulated rather than controlled by sanctions and pressures external to
the individual, and relations within the organization are based on high
levels of trust.’
5. High-involvement management: This approach involves treating

employees as partners in the enterprise whose interests are respected
and who have a voice on matters that concern them. It is concerned
with communication and involvement. The aim is to create a climate in
which a continuing dialogue between managers and the team members
takes place in order to define expectations and share information on the
organization’s mission, values and objectives. This establishes mutual
understanding of what is to be achieved and a framework for managing
and developing people to ensure that it will be achieved.
Limitations to Concept of SHRM

The concept of strategic HRM appears to be based on the belief that the
formulation of strategy is a rational and linear process, as modelled in
Figure 1.2. This indicates that the overall HR strategy flows from the
business strategy and generates specific HR strategies in key areas. The
process takes place by reference to systematic reviews of the internal and
! !21
external environment of the organization, which identify the business,

organizational and HR issues that need to be dealt with. But strategic HRM
in real life does not usually take the form of a formal, well-articulated and
linear process that flows logically from the business strategy, as Mintzberg
(1987) and others have emphasized. Strategic fit is a good idea but one
that is difficult to attain, Strategic HRM is, in some ways, an attitude of
mind that expresses a way of doing things. It is realized in the form of HR
strategies. Strategy formulation, whether business or human resources
management, itself is a political process which brings in complexity and
uncertainty into the simple linear strategic HRM process.
!
Fig. 1.4: A Linear Strategic HRM Model
1.5 STRATEGIC MODELS OF HR
Before looking at the different strategic models of HRM, we must

understand the different types of HR strategies and the criteria to
understand the effectiveness of these strategies.
! !22
Types of HR Strategies
All organizations are different from each other and thus, their HR
strategies. There may not be a set of standard characteristics. However,
two basic types of HR strategies can be identified. These are classified as:
1. Overarching strategies; and

2. Specific strategies relating to the different aspects of HRM
Overarching HR Strategies
Overarching strategies describe the general intent of the organization
about how human resources should be managed, developed and what
steps be taken to attract and retain the resources organization requires
and further, ensure such resources are committed, motivated and engaged.
They may be broad statements of aims and purpose, which lead to more
specific strategies. They are focused on overall organizational effectiveness
– achieving human resource advantage by, as Boxall and Purcell (2003)
point out, employing ‘better people in organizations with better process’,
developing high-performance work processes and generally creating ‘a
great place to work’. The following is an example of overarching HR
strategy statements:
GlaxoSmithKline: We want GSK to be a place where the best people do

their best work.
Specific HR Strategies
Specific HR strategies are created to describe what the organization
intends achieving in areas such as:
• Talent management – how the organization intends to ‘win the war for
talent’;
• Continuous improvement – providing for focused and continuous
incremental innovation sustained over a period of time;
• Knowledge management – creating, acquiring, capturing, sharing and
using knowledge to enhance learning and performance;
• Resourcing – attracting and retaining high-quality people;
• Learning and developing – providing an environment in which employees
are encouraged to learn and develop;
• Reward – defining what the organization wants to do in the longer term
to develop and implement reward policies, practices and processes that
! !23
will further the achievement of its business goals and meet the needs of
its stakeholders;
• Employee relations – defining the intentions of the organization about
what needs to be done and what needs to be changed in the ways in
which the organization manages its relationships with employees and
their trade unions.
The following is an example of specific HR strategies:
Diageo:
These are the three broad strands to the Organization and People Strategy:
(1) Reward and recognition: use recognition and reward programs to
stimulate outstanding team and individual performance contributions. (2)
Talent management: drive the attraction, retention and professional growth
of a deep pool of diverse, talented employees. (3) Organizational
effectiveness: ensure that the business adapts its organization to maximize
employee contribution and deliver performance goals. It provides direction
to the company’s talent, operational effectiveness and performance and
reward agendas. The company’s underlying thinking is that the people
strategy is not for the Human Resource function to own but is the
responsibility of the whole organization, hence, the title ‘Organization and
People Strategy’.
Criteria for an Effective HR Strategy

HR strategy will be considered effective only if it achieves what it is created
to deliver. Its effectiveness will depend on the extent to which it
• will satisfy business needs;

• can be founded on detailed analysis and study, not just wishful thinking;
• can be turned into actionable programs that anticipate implementation
requirements and problems;
• is coherent and integrated, being composed of components that fit with
and support each other;
• takes into account of the needs of line managers and employees
generally as well as those of the organization and its stakeholders.
The Models
Three specific models as defined by Richardson and Thompson (1999) are
Best Practice and Best Fit, and ‘Configurationally’ or Bundling. These
models are described below.
! !24
The Best Practice Model

The Best Practice Model has been based on the assumption that there is a
set of best HRM practices and that adopting them will inevitably lead to
superior organizational performance. They are considered universal as they
are assumed to be best in any circumstances. A number of lists of ‘best
practices’ have been produced, the best known of which was produced by
Pfeffer (1994), namely:
1. employment security;
2. selective hiring;
3. self-managed teams;
4. high compensation contingent on performance;
5. training to provide a skilled and motivated workforce;
6. reduction of status differentials;
7. Sharing information.
The following list was drawn up by Guest (1999):

1. Selection and the careful use of selection tests to identify those with
potential to make a contribution;
2. Training, and in particular a recognition that training is an ongoing
activity;
3. Job design to ensure flexibility, commitment and motivation, including
steps to ensure that employees have the responsibility and autonomy
fully to use their knowledge and skills;
4. Communication to ensure that a two-way process keeps everyone fully
informed;
5. Employee share ownership programs to increase employees’ awareness
of the implications of their actions on the financial performance of the
company.
The ‘best practice’ model has been highly debated owing to varying views
on what constitutes the best practices. It is also criticized since it does not
have any discussion pertaining to organizational strategy. Moreover,
business is dynamic and ever evolving and any standard static best
practice will be shortlived and inconsistent with the business since what
was once a best practice may not always be.
! !25
Exhibit 1.4: David Guest’s (1989, 1997) Model of HRM
According to Guest’s Best Practice model there are 6 dimensions of

analysis:
• HRM Strategy
• HRM Practices
• HRM Outcomes
• Behavior Outcomes
• Performance Outcomes
• Financial Outcomes
The model is prescriptive as it is based on assumption that HRM is distinctly
different from traditional personnel management and present in strategic
management. It implicitly assumes the belief that fundamental HRM elements
such as commitment, possess a direct relationship with valuable business
outcomes. In such a sense this model is idealistic. Guest has acknowledged the
concept of commitment is ‘messy” and that the relationship between
commitment and high performance is difficult to establish. It also employs a
“flow” approach, seeing strategy underpinning practice, leading to variety of
desired outcomes.
! !26
Best Fit Model

The best fit model emphasizes the importance of ensuring that HR
strategies are appropriate to the organizational circumstances, including its
culture, operational processes and external environment. HR strategies
have to take account of the particular needs of both the organization and
its people. It is widely accepted that ‘best fit’ is more important than ‘best
practice’. This is not to say that ‘good practice’, or ‘leading edge practice’
should be ignored. ‘Benchmarking is a valuable way of identifying areas for
innovation or development that are practiced to good effect elsewhere. But
having learnt, it is up to the company to decide what may be relevant in
general terms and what can be adapted to fit its requirements. The starting
point should be an analysis of the business needs within its context
(culture, structure, technology and processes). Thereafter, it may be useful
to pick and mix various ‘best practice’ ingredients, and develop an
approach that is appropriately aligned to the identified business needs.
There are issues with the best fit model, relies on classical rational
planning approach which does not take into account the dynamic and fluid
nature of strategy, focus is on fit rather than needs of the people and
greater emphasis on external context than internal context.
The Configurational Model (Bundling)

As Richardson and Thompson (1999) comment, ‘A strategy’s success turns
on combining “vertical” or external fit and “horizontal” or internal fit.’ They
conclude that a company with bundles of associated HR practices should
have a higher level of performance, providing it also achieves high levels of
fit with its competitive strategy. ‘Bundling’ is the development and
implementation of several HR practices together so that they are
interrelated and therefore complement and reinforce each other. The aim of
bundling is to achieve high performance through coherence. Coherence
exists when a mutually reinforcing set of HR policies and practices have
been developed that jointly contribute to the attainment of the
organization’s strategies for matching resources to organizational needs,
improving performance and quality and, in commercial enterprises,
achieving competitive advantage.
The problem with the bundling approach is that of deciding what the best
way to relate different practices together is. There is no evidence that one
bundle is generally better than another.
! !27
1.6 ALIGNING HR TO CORPORATE STRATEGY
The issue of aligning HR practices to business strategy is becoming

increasingly important and relevant for both HR and line managers.
Aligning HR involves ensuring HR practices are relevant and aid the
organization in achieving its mission and objectives. This alignment
involves three aspects of HR fit as discussed previously:
• Vertical fit: This involves integration between HR practices and overall

business strategy.
• Horizontal fit: This relates to the extent to which HR activities are

mutually consistent as it ensures mutual reinforcement of the HR
practices
• External fit: This focuses on how well HR practices meet with the
demands of organization’s external environment.
In order to ensure these HR fits, HR practice choices are required. The

challenge exists in developing internally consistent HR practice choices
combination that help implement the organization’s strategy and enhance
its competitiveness. Hence, there is a need for flexibility along with
alignment at the strategic level for the long-term competitive advantage of
the company. Fit is defined as temporary state in an organization, whereas
flexibility is defined as the organization’s ability to match the demands of
dynamic environment. The two types of flexibility identified are:
• Resource Flexibility is the extent to which a company can apply its

resources to a variety of purposes and the cost, difficulty, and time
required to move resources from one use to another.
• Coordination flexibility involves the extent to which an organization
possesses decision making and other systems allowing it to switch
resources quickly between different uses. This requires an effective
understanding between HR and line managers.
HR Strategies Aligned to Organizational and Business Unit Level

Strategies – In Practice
The Table 1.5 below highlights corresponding HR strategies aligned to

major Organizational and Business Unit Level Strategies.
! !28
Table 1.5
A. Organizational Strategies HR Strategies
Stability Motivation and retention of skilled
employees – Job rotation, job
enrichment and empowerment
Growth (Internal Growth) Training and elevating existing
employees, hiring junior level
employees and outsourcing some
category of jobs
Concentration Training and developing employees,
outsourcing specialized skills
Mergers and Acquisitions Improving employee morale,
managing and unifying cultural
diversity, integrating wage and
benefits structures, creating new
organization structures, plan
outplacement and devise severance
package policies
Horizontal Integration Training existing employees on new
skills required, hiring new people
for new line of business, devising
new HR policies and processes
Joint Ventures Managing cultural diversity, training
employees to systems and
technology of the partner company,
devising compensation packages,
agreements, etc., for deputed
employees
! !29
Retrenchment Open communication, employee

counselling, enhancing labor
productivity, attitudinal changes,
outplacement assistance, re-
deploying employees in sister
concerns, cut in salaries of exiting
employees, creating awareness
strategies, employees morale
building,
B. Business Unit Level HR Strategies
Strategies
Differentiation Developing creative skills of
employees, empowering employees,
high participation, broad career
paths, egalitarian pay, extensive
training, cooperative labor/
management relations
Low cost leadership Enhancing labor productivities,
improving skills, few incentives, low
employment security, low
expenditure on training, short–term
criteria, traditional labor/
management relations
Focus/Niche High employee participation, narrow
career paths, short-term results
criteria, egalitarian pay, extensive
training, cooperative labor/
management relations, medium
employment security
When HP and Compaq merged in 2001, HP charged its Chief HR officer

with the responsibilities such as blending the two companies ‘cultures,
designing the new organization and helping select the executive team
along with calculating the cost considerations regarding health care plans,
pensions and the number of employees the combined company can afford.
These were the various HR strategies devised to support the overall
organizational strategy of a smooth integration and transition.
! !30
IBM’s overall business strategy focuses on four areas: (1) innovation, (2)
business value, (3) global integration, and (4) on-demand infrastructure.
Behind this overall strategy are all of the employees who make it work.
Hence, IBM’s HR strategy identifies company characteristics that motivate
and energize those employees. And IBM motivates its employees through -
Performance-based opportunities, leadership, hiring diverse and talented
people, flexibility, A value-based climate. At IBM, the goals are clear and
HR is expected to - Anticipate and build skills, lead transformation and
grow IBM.
The above examples illustrate the significance of HR strategically

partnering the overall business strategies.
Exhibit 1.5: The Ultimate in Strategic Flexibility

Haier, a Chinese home-appliance manufacturer, may have taken strategic
flexibility just about as far as it can go. The company has devised a
system in which units as small as individual can effectively use differing
styles.
How does it manage this? Haier’s organization comprises thousands of
mini-companies, each accountable for its own P&L. Any employee can
start one of them. But there are no cost centers in the company – only
profit centers. Each mini-company bears the fully loaded costs of its
operations, and each party negotiates with others for services; even the
finance department sells its services to the others. Every employee is
held accountable for achieving profits. An employee’s salary is based on
simple formula:-
Base salary X percentage of monthly target achieved + bonus (or
deduction) based on individual P&L.
In other words, if a mini-company achieves none of its monthly target
(0%), the employee in it receives no salary for that month.
Operating at this level of flexibility can be as rewarding as it is daunting.
Near bankruptcy in 1985, Haier has since become the world’s largest
home-appliance company – ahead of L.G., Samsung, GE and Whirlpool.
Source: HBR September 2012 article “Your Strategy Needs a Strategy”
! !31
1.7 SKILLS OF HR PROFESSIONALS IN A SHRM SCENARIO
Today, most HR professionals are tending to move towards more strategic

activities. Those HR professionals who possess a strong business
understanding, who are able to talk financial language and who are able
express the impact of their work with respect to the bottom line are
increasingly becoming critical for the future business success. Keeping this
in mind, there are several core skills that are becoming imperative for all
HR professionals to support the strategic role of HR:
• Business skills – Understanding the business dynamics and possessing

the financial knowledge to evaluate and communicate the impact of HR
strategies on the bottom line. Process management and project
management skills are also included here.
• Leadership skills – Ability to build a vision and strategy and ensuring
alignment of the organization and strategy. Greater need for efficiency in
managing and motivating teams
• Consulting skills – Act as an advisory to the strategic leaders within

their scope of work. Ability to market HR work within the organization.
• Technology skills – Possess a systems approach and a proficiency in

broad HR applications with their delivery systems. Ability to apply this
know-how to the strategy-planning process.
• Global mindset – A strong understanding of global market nuances and

dynamics. Ability to apply this understanding to build HR strategies
relevant in global context.
Activity
1. Having understood the strategic demands on HRM, please highlight the

various reasons why business skills and business understanding are
critical for a HR manager.
.........................................................................................................
.........................................................................................................
.........................................................................................................
.........................................................................................................
! !32
1.8 SUMMARY
This chapter has introduced you to concepts of strategy, strategic planning,

types of strategies and the strategic role of Human Resources function.
This chapter also brought forward the need and significance of Strategic
HRM for today’s HR managers and Line managers both. It highlights the
definition, process and types of Strategic Human Resource Management.
Further, the chapter takes us through the different approaches and models
of the strategic role of human resources in today’s world. Through the
various examples it explains us the alignment of HR strategy with the
organization strategy and also the linkage of strategic Human Resource
Management with the organization’s performance. Finally, the chapter
illustrates the various critical skills and abilities today’s HR managers must
possess to deal with the various strategic trends and demands of strategic
Human Resource Management.
! !33
1.9 SELF ASSESSMENT QUESTIONS
Multiple Choice Questions
1. __________________ involves integration of HR strategies with

the overall business strategy.
(a) External fit
(b) Vertical fit
(c) Horizontal fit
(d) All of the above
2. Which of the following is not a core skill, critical for HR professionals in

the SHRM Scenario.
(a) Business skills
(b) Consulting skills
(c) Global mindset
(d) Networking
3. The “High Involvement Approach”of Stratigic HRM aims ____________.

a. To create a climate in which a continuing dialogue between managers
and the team members takes place in order to define expectations
and share information on the organization’s mission, values and
objectives.
b. To achieve a coherent approach to managing people in which the
various practices are mutually supportive.
c. To make an impact on the performance of the company through its
people in such areas as productivity, quality, and levels of customer
service, growth, and profits and, ultimately, the delivery of increased
shareholder value.
d. To elicit a commitment so that behavior is primarily self-regulated
rather than controlled by sanctions and pressures external to the
individual, and relations within the organization are based on high
levels of trust.’
4. Why is understanding of HRM critical for business managers’ role?

(a) to ensure unsafe working conditions in the organization
(b) to increase attrition level in the team and organization
(c) to hire the right personnels for the jobs
! !34
5. Disinvestment is a ____________________.
(a) Growth Strategy
(b) Combination Strategy
(c) Retrenchment Strategy
(d) Stability
Answers of MCQs: 1. - (b); 2. - (d); 3. - (a); 4. - (c); 5. - (c).
! !35
REFERENCES
1. ‘Human Resource Management’ – Gary Dessler.
2. ‘Strategic Human Resource Management – A Guide to Action’ – Micheal

Amrstrong.
3. ‘Fundamentals of Human Resource Management – Content,

Competencies and Application’ – Gary Dessler.
4. ‘Business Policy and Strategic Management’ – Lawrence R. Jaunch and

William F. Gluek.
5. “The Impact of People Management Practices on Business Performance”

– Ray Richardson and Marc Thompson.
6. “Strategy and Human Resource Management” – Peter Buxall and John

Purcell.
7. ‘Strategic Management and Business Policy” – Wheelen and Hunger.
8. ‘Competitive Strategy: Techniques for Analyzing Industries and

Competitors’ – Michael E. Porter.
9. ‘Strategic Human Resource Management’ – Randall S. Schuler and

Susan E. Jackson.
10.“Service Strategies: Marketing, Operations, and Human Resource

Practices” – Rosemary Batt.
11.‘Human Resource Management and Industrial Relations’ – David E.

Guest.
12.‘Competitive Advantage Through People: Unleashing the Power of the

Workforce’ – Jeffrey Pfeffer.
13.‘Human Resource Management’ – Alan Price.
14.‘A Handbook of Human Resource Management Practice’ – Michael

Armstrong.
! !36
REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter
Summary
PPT
MCQ
Video Lecture - Part 1
Video Lecture - Part 4 
! !37
TALENT MANAGEMENT
Chapter 2
TALENT MANAGEMENT
Objectives
• Understand what is talent for an organization and how do they define

talent management
• Understand the various drivers of talent management
• Understand the process which is followed while managing talent
• Understand how a talent management strategy is built
• Understand the various best practices of talent management from across
the globe
• Understand what challenges managers face while implementing
Structure:
2.1 Introduction
2.2 Meaning of Talent and Talent Management
2.3 Drivers of Talent Management
2.4 The Process of Talent Management
2.5 Building a Talent Management Strategy
2.6 Talent Management Best Practices
2.7 Challenges Faced in Talent Management
2.8 Case
2.9 Summary
! !38
TALENT MANAGEMENT
2.1 INTRODUCTION
In today‘s global environment with stiff competition, organizations

experience great pressure to perform. In order to respond to market
changes, building and maintaining knowledge has become critical to
enhance organizational competitiveness and capabilities to respond to
market change. Knowledge sits with people and deploying people skills and
personalities appropriately for optimizing performance, has become one
imperative and a challenge. Furthermore, a need has been felt to identify
and develop talent with leadership capabilities. To achieve this,
organizations should build and engage talented resources who can relate to
and work for the organizational vision. It is necessary for an organization
to hire the right people but it is not sufficient. The challenge that
organizations face today is in retaining the right people. It is a known fact
that it is the people resources of an organization that drive it to success or
failure. The key to long-term success of an organization is managing the
talent of key people, which involves people and organizational development
in relation to a changing and complex external environment. It also
involves building and sustaining a supportive, people-oriented culture
within the organization, as ‘talent’ is a competitive advantage. Figure 2.1
broadly depicts the evolution of Talent Management from a simple
personnel control model with low alignment to business strategy and low
integration of any talent management activities towards a Talent
Multiplication model with high alignment to business strategy and high
integration of talent management activities.
!
Figure 2.1: The Evolution of Talent Management Models
! !39
TALENT MANAGEMENT
Source: The Talent Powered Organization – Peter Cheese, Robert J Thomas and Elizabeth
Craig.
2.2 MEANING OF TALENT AND TALENT MANAGEMENT
Defining Talent
Defining Talent should be the first issue to be dealt with before starting to
manage talent. An agreement on the meaning of talent is the base of
talent management. The dictionary meaning of talent is “a natural ability to
be good at something, especially without being taught” (Cambridge
dictionary). In general, terms, talent is as an inborn disposition and ability
to do well in a particular field. However, in an organizational context talent
generally refers to an employee who significantly contributes to the
organization´s performance. According Topomoy Deb (2005), “Talent refers
to the recurring patten of thought, feeling or behavior that can be
productively applied.”
An exclusive definition by SHRM (2007) defines talent as a core group of

leaders, technical experts and key contributors who can drive their
business forward. Similarly, many experts only consider senior managers to
be talents. Alternatively, an inclusive approach views all employees as
potential talents; all are considered as talent and have the capacity to
contribute to the organizational success. According to Armstrong (2006),
everyone in organization has talent; therefore, talent management should
not be limited to the favored few. Since, there are various ways of looking
at talent and it will be specific to any organization, hence it should be
defined in the context of a specific organization.
Defining Talent Management

Talent management is a multifaceted concept that may be an
organizational mindset, a discipline with specific subjects and research
methods or a set of HR practices in a particular organization. Talent
management has been used either more exclusively - focusing on one
process or a specific group of people - or more inclusively – including
various processes, components and entire workforce. Despite, term being
commonly and widely used, there is yet not a single all-inclusive definition
and, hence, various definitions are being used.
Talent management maybe defined as a conscious and purposeful approach
to attract, develop and retain people with capabilities to achieve present
and future organizational goals.
! !40
TALENT MANAGEMENT
“Talent management is identification, development and management of the

talent portfolio – i.e., the number, type and quality of employees that will
most effectively fulfill, the company’s strategic and operating objectives.”-
Berger (2004)
“Talent management is a systematic attraction, identification, development,

engagement, retention and deployment of those individuals with high
potential who are of particular value to an organization.” (CIPD, 2006)
Talent management focuses on:
• The appropriate selection of talent; it is not just the selection of best

talent but it is the search for the “appropriate talent” which will grow
along with and boost long-term company strategy;
• Identifying positions where talents are to be placed;
• Motivating talent to perform at their best;
• Building potential of talent to aid the company get as good business
results as possible.
Organizations face difficulty in finding suitable candidates and if they do, its
tough to retain them. Hence, talent management can be called an
integrated process to ensure an organization has a continuous flow of
talent for the right job at the right time. Effective talent management is a
key component of a high performing business culture and its successful
integration requires support from senior management. Consequently, talent
management is seen as significant as other business processes.
2.3 DRIVERS OF TALENT MANAGEMENT

Talent management as a key business process has gained momentum over
time. Various drivers of Talent management determine its need and form in
organizations across the globe. The drivers for talent management
strategies in organizations include –
• Workforce trends
• Changing environment of work and expected skill shortage
• Globalization
• The knowledge economy
• Technology
! !41
TALENT MANAGEMENT
Workforce Trends
Factors such as an increasingly global and virtual workforce, different
generations working together, longer life expectancies and an empowered
and autonomous workforce have forever changed the workplace. Due to
demographic changes, the workforce is also increasingly diverse—from
age, gender and ethnicity to lifestyles, migration patterns and cultural
norms. Organizations are already taking advantage of these workplace
trends. For example, P&G believes that hiring the right set of people forms
majority of talent management and follows the norm of hiring many of its
future leaders as campus hires. Demographic changes are happening in the
age profile of the people (ageing workforce vs. generation Y and younger
generations) and in the structure of the workforce (increasing diversity,
different skill sets, varied expectations).
Changing Environment of Work and Expected Skill Shortage

Though lack of skills may not be consistent in all industries or
organizations, the competition for talent is stiffening. Finding the right skill
is increasingly becoming tough for the jobs. Moreover, with increase in
global and virtual workplaces, new forms of work and jobs are being
created, putting demand pressure for appropriate highly skilled people
creating imbalance between available and required resources. For example,
though many reports claim this to be an advantage for India the growing
younger workforce of India compared to the ageing workforce across the
globe, however, a cover story by Business Today (March, 2013 edition)
showed the downside. The India’s ‘Demographic Bulge’ which will comprise
mainly of white-collar workers and very limited blue-collar workers,
creating a shortage of such skills for organizations particularly in primary
and secondary sectors. Another shortage will be seen in middle
management leaders to guide and support the upcoming generations as
shown by another study. Key business strategies are driving the talent
management initiatives and programs. An important example of this is
Ford Motor Company that links its competency development to the
strategic business goals, due to need for global specialists. Employer
branding, a key organizational strategy, is focused on driving talent
management. More and more organizations are connecting their brand and
employees as well as organizational behavior. For example, JP Morgan
Chase promotes its leadership concept for all employees under employer
branding.
! !42
TALENT MANAGEMENT
Globalization
Globalization has provided people and organizations with immense
opportunities, making the economies more diverse yet integrated. The
competition is becoming many folds; it is intensifying and spreading wide.
The Knowledge Economy

Knowledge has gained significance as the key factor adding to
organization’s competitive edge and hence the knowledge workers are
becoming strategically significant for all organizations across the globe.
Technology
Technology is increasingly making the world swifter and connected, thereby
significantly impacting people and organizations. Technology in the form of
web-based systems, internal and external social media, smarter mobile
phones, cloud computing and big data and various other technology-based
applications, cannot be ignored as they drive today’s workforce to be more
active and productive.
These drivers may not be applied in all organizations evenly. Certain

drivers may be strong in an organization while certain others may be weak
to the extent that some of them may not be present at all. However, in a
broad general context, these factors drive talent management across the
organizations.
2.4 THE PROCESS OF TALENT MANAGEMENT
Talent management can be looked at as ‘bundle’ of connected smaller

processes. Aim of talent management is to build and sustain a pool of
talented people as an organization strives to meet its business goals. The
Talent Management process is shown in Figure 2.2 and outlined here.
! !43
TALENT MANAGEMENT
!
Figure 2.2: The Talent Management Process
Each sub-process has been explained here -
• HR Planning: Integrated with the organizational strategic plan, this

process establishes workforce plans, hiring plans, salary budgets, and
hiring targets for the year.
• Hiring: Through an integrated process of sourcing, evaluation, and

selection the organization brings in talent.
• Induction and Orientation: Through this, the organization trains and

enables employees to become productive and integrated into the
company as soon as possible
• Performance Evaluation: Based on the organizational strategic plan,

the organization establishes processes to measure and manage
employees.
• Development and Performance Aid: This is a critical sub-process

focusing on training and development programs for all levels of the
organization.
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TALENT MANAGEMENT
• Succession Planning: This is a very important function supporting

business managers identify the right next candidates internally for a
position. The target of succession planning must be to ensure talent for
critical positions for the next 3-5 years and hence, must be aligned to
organizational strategy. However, earlier it was only meant for senior
leaders, but now it has been extended across the organization.
• Salary and Benefits: It is an integral part of talent management. Under

this process the salary plan is linked to performance evaluation ensuring
salary, incentives, bonuses and benefits are aligned to organizational
strategic plans. This is so since salary, incentives, etc., are the extrinsic
motivating factors for talent across levels.
• Identifying Skills Gap: This is a critical process and needs to be carried

out continuously. For example, many organizations in public sector have
large number of retiring employees. They need to identify the gap that
will be created in knowledge, experience level and skills once these
people move and to plan and fill this gap.
In the middle of Talent Management process are the job specifications and
competency framework that impact each of the sub-processes.
2.5 BUILDING A TALENT MANAGEMENT STRATEGY
A talent management strategy involves ideas on how the process would

integrate together with an overall business needs and focus on acquiring
and nurturing talent whenever and wherever it is required, using various
interrelated practices.
A Talent management strategy involves
• Defining who is covered under the talent management program;
• Defining the meaning of talent with respect to requisite competencies

and potential;
• Defining the strategic talent needs of the organization;
• Developing the ‘employment brand’ of the organization as an ‘employer

of choice’ or a ‘great place to work’;
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TALENT MANAGEMENT
• Using hiring methods that ensure high quality recruits with high levels of
stability and inclination to stay with organization for substantial time
• Designing jobs and roles providing people opportunities for application

and development of their skills. Also, provide people with independence,
interest and challenge.
• Providing talent with career development and growth opportunities and

creating an environment of conducive designing and developing
rewarding jobs and roles.
• Aiding people in striking a reasonable work life balance
• Developing a positive psychological contract;
• Building the leadership capabilities of managers;
• Recognizing talent by rewarding excellence, enterprise and achievement.
• Ensuring conduction of regular talent audits
• Introducing succession planning procedures and related management

development activities.
Talent Management is a “forward-looking” function. The talent

management strategy must be such that it improves the organization’s
flexibility and performance and provides the information and tools to plan
for growth, change, acquisitions, and critical new product and service
initiatives.
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TALENT MANAGEMENT
Exhibit 2.1: 5Cs – The 5 Talent Risk Categories
Capability Risks: Associated with building the skills an organization needs to

compete now and in the future—the breadth and depth of skills and capabilities
present within a workforce, and how well aligned these are to an organization’s
needs.
Cost: What is the risk of a workforce becoming unaffordable? What will it cost
an organization to recruit and retain the people it needs? Will it be able to
afford the overall cost of its workforce?
Compliance: Risks relating to employee behavior, regulations and laws. This

category covers both the need to ensure talent processes comply with local
laws and regulations, as well as whether talent management is seen as a
business critical process or an administrative process simply to ‘be complied
with’.
Capacity: Risks around the succession into critical roles and retention of critical
people and teams. In other words, will an organization be able to create and
maintain the size and shape of workforce needed to deliver its business plan?
Connection: What is the risk of an organization’s top talent becoming

disengaged? In addition, will an organization’s talent-related processes remain
sufficiently joined-up? Will it be able to share talent between units in the way it
needs to? Is it able to connect groups of high-potential people together? Are
leaders able to create an emotional connection between high-potentials and the
business?
Source: “Time for a more holistic approach to talent risk”- KPMG International
The qualities required by the leadership and talent management owners for
developing and implementing talent management strategies –
• Committed leadership and HR function.

• Mindset of treating talent development as a key element of the business
strategy,
• Complete clarity about the competencies and qualities that matter,
• High focus on well defined career paths for key talent
• Coaching and mentoring approach
• High demand and emphasis on high performance.
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TALENT MANAGEMENT
2.6 TALENT MANAGEMENT BEST PRACTICES
Organizations, in order to succeed, try hard to meet the demands of global

competition that leads to a massive war for talent. Building highly enriched
working experiences to hire and retain the talent is necessary. However, it
is critical for organizations to assign greater focus on retention than hiring.
Keeping this in mind, there are many best practices organizations can
follow. They are as follows:-
1. Experiential learning: Majority of organizations tend to define their

jobs and roles to their people very narrowly and with very limited scope
to experiment or understand other areas of work. Hence, making their
work monotonous and boring. Organizations need to expand their scope
of work and ensure there is sufficient exposure to creative work, this
will lead to the employee learning on the job and thereby, accentuated
performance. Consequently, the attrition of talent will reduce.
2. Mentoring: This is defined as particular form of relationship or an

employee development system under which a senior leader or more
experienced employee (mentor) is assigned to act as an advisor,
counselor or guide to the junior or trainee employee at both personal
and professional front. Mentoring is needed, particularly, for newly
joined talent for comfortable on boarding and weaving the person into
organization culture. It may help keeping talent engaged and avoid
early job-hopping.
3. Focus on business: Organizations are understanding that their biggest

competitive advantage comes from their people and hence, they are the
greatest assets to the business. Organizations are developing their
talent management strategies aligned to key business initiatives in
order to respond to new business opportunities and challenges. Hence,
Talent management contributes to higher organizational performance by
improving talent productivity and motivation to perform.
4. Ensure skill alignment of talent: One of the greatest tasks facing the
talent management is matching right people with the right skills and
systematically identifying the competencies of their talent. Hence,
organizations are focusing on building robust systems for assessing the
skills of current talent and forecasting the skills required. This enables
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TALENT MANAGEMENT
implementation of business plans by managing the flow of right skilled

talent.
5. Building leadership: Organizations are greatly focusing on developing

future leaders from within, who possess a shared vision and can
empower the talent. They are ensuring that organizational values and
personal accountability are instilled in future leaders along with building
a strong understanding of economic trends and technological
advancement in them.
6. Focus on employee feedback: Employee feedback is an effective tool

in providing valuable insights into several aspects of the organizations
like organizational culture, working conditions, development programs,
rewards and recognition, supervision, etc. Organizations put a great
emphasis on these employee feedback surveys and utilize them
constructively to understand employee attitudes and opinions that affect
employee retention in the long run.
7. High level of involvement of top management: A continuous

interaction and commitment from senior management is imperative for
an effective talent management strategy. Talent management strategy
to be aligned to overall business strategy is achieved largely through the
support and involvement of the senior leaders of the organization. For
e.g., Infosys, where the HR Department is in constant touch with the
Board of Directors about talent development.
8. Build a return on investment (ROI) culture for HR function:

Return of Investment helps measure the real contribution by calculating
the payback period. Focus on ROI can revolutionize and transform the
HR function, bringing greater value to the organization. It also helps in
comparing interdepartmental returns.
9. Create teams comprising of HR, IT and line managers to own and

manage the talent management process: Such a team will bring
multiple perspectives along with greater buy-in from senior leaders.
These teams will contribute to the strategizing, execution, measuring
and refining of talent management process largely than purely HR
managers’ teams.
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TALENT MANAGEMENT
10.Long-range plans: The talent management requires setting of long-

term, achievable and measurable objectives, such as what competencies
will the company need in one to two years, or in three to five years?
There is a strong need for organizations to ensure that long-term
planning is done to build an understanding of where it is heading, kind
of talent required, the competencies required in particular jobs and the
total employees required skill-wise.
11.Review mechanisms: The strategic plan of talent management is

subjected to progress checks in the form of quarterly or six monthly
reviews. These checks evaluate change in strategies and explore,
anticipate internal and external threats and opportunities, which could
necessitate course corrections. Many companies build competency
frameworks and never review them, this leads to their ineffectiveness in
managing talent.
12.Developing a talent mindset: Managers across all levels of the

organization must have a talent mindset that drives them to actively
participate in the hiring, engaging and developing talent. Such a
mindset is created only if it is ingrained in the company’s culture by top
executives through sustainable, engaging, rewarding and high
performance work culture.
13.Integrating all talent management sub-processes: The initiatives

undertaken to recruit, select, on-board, engage, guide, develop, reward
and retain talent are required to be integrated with each other.
Individuals responsible, along with their business neads, for each of
these functions should participate in the annual talent management
planning process and review. A fully integrated talent management
system provides answers to various queries, specifically, current and
future development needs of the talent.
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TALENT MANAGEMENT
Exhibit 2.2: Learning Faster, Learning Better: Seven Key Principles
Learning with a purpose: Close alignment of learning objectives with the

organization’s strategic goals
Learning with impact: Measuring the business contribution of the learning

function
Learning with outreach: movement of learning outside the ‘four walls ‘of the
organization to reach and influence suppliers, customers and other partners in
the organization’s value chain
Learning with leverage: Focusing on developing competency in the places

where it is most critical to the organization’s success
Learning with integration: Ensuring that learning is integrated with other

talent management processes and functions, including knowledge management,
performance support and reward systems
Learning with variety: Using a blend of learning methods to greatest effect,

including classroom teaching as well as synchronized electronic learning
Learning with maturity: Mature design and delivery of leadership

Source: The Talent Powered Organization – Peter Cheese, Robert J Thomas and
Elizabeth Craig
2.7 CHALLENGES FACED IN TALENT MANAGEMENT
1. Hiring and retaining sufficient talent across levels to satisfy the

requirements of organic and inorganic growth – Organizations are
expanding in numbers of employees, however, they still face talent
crunch. An example of this would be Essar that grew its employee base
threefolds in three years yet, it faced the talent crunch since, and a
large portion of its employees had less than two years of service. This
only shows that hiring as well as retaining is equally critical.
2. Developing employee experiences appealing to diverse age

groups operating in organizations - These diverse groups have
diverse requirements, ideas and preferences, leading to a need to build
diverse value propositions within the same set-up.
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TALENT MANAGEMENT
3. Developing a robust leadership pipeline - One of the biggest

potential threats to many corporations is deficiency of a robust talent
pool for selecting future leaders. This is critical as internally grown
managers understand the needs of the organization much better than
hiring new, such leaders show greater commitment to the organizational
cause and are likely to be more stable in the system.
4. Determining the global leadership capabilities of people - It is

comparatively straightforward to identify and assess people in specific
functional or technical areas, but far more difficult to determine whether
they possess the people skills, leadership dynamism, business acumen,
and global diversity sensibilities, which are prerequisites for the future
leaders. Further, the challenge of developing these leadership
capabilities lies with the organizations.
5. Transferring key knowledge and relationships - Organizations,

particularly, those with business dependent largely on knowledge and
relationship management face the challenge of transferring both from
retiring employee population to upcoming one.
6. Retention of middle management talent - Organizations face a big

threat of exodus of mid-career talent, in whom it has invested heavily to
create a future leadership talent pipeline. It is becoming imperative to
create business infrastructure that is attractive to generation Y that
implies the talent management practices must focus on attracting and
retaining young talent, particularly in industries highly people dependent
with large need for top talent.
7. Encouraging ‘second careers’ and getting rid of age prejudice -

Progressive organizations are welcoming back older talent in the
workforce. Consequent challenges faced by such organizations are
relooking at roles and work relationships.
8. Transforming the “norm” of short tenure and frequent shifts -

Some industries, such as specialty retail, ITES, etc., are known to
possess a disposable view of talent. Changing such norms requires
addressing both market influences and internal mindsets. Retaining
talent for minimum three years will add to future organizational growth.
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TALENT MANAGEMENT
9. Shifting mindset of certain senior leaders from ‘buy talent’ to

‘build talent’ strategy - Many business leaders still believe that talent
will be lined up outside the door because of the power of the company’s
brand. The challenge lying in obtaining support for the movement from
a talent culture traditionally run by “buy” strategy to one focusing on
“build” strategy is immense.
Exhibit 2.3: Recommendations for employers to set up a

successful ‘returnship’ program –
• Keep it small
• Identify an internal champion
• Model the returnship on your existing internship program
• Introduce hiring managers to participants
• Identify current employees who are good role models
• Expand campus recruitment to include returnees
• Partner with an academic program
Source – HBR November 2012 issue Article “The 40-Year-Old Intern”
2.8 CASE
Source – The Talent Powered Organization: Peter Cheese, Robert J Thomas, and
Elizabeth Craig
SAP America
SAP America, the northern American sales and services division of
enterprise software giant SAP, embarked on a new business strategy in
2002, in order to turnaround its declining revenue and market share. SAP
America’s future depended on its ability to deliver a steady stream of
innovative software applications to its customers and tailor them to their
targeted market segments. Executive’s therefor, wanted to ensure that the
company focused on the human capital processes that could help it
innovate. The senior leaders felt that the people component of executing
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TALENT MANAGEMENT
their strategy was the most critical and if they did not get that part right,
they would not win. In addition, it was critical for them to win.
SAP gathered empirical data to establish priorities in human capital

investments. The data showed that the company would be best served by
focusing investments on a limited set of human capital processes -
learning, management, human capital infrastructure (e.g., the firm’s HR
processes) and succession planning. These three processes were identified
as those that would have the greatest impact on workforce performance
and thus, business performance. SAP subsequently invested in three
aspects:
• Identifying clear learning and training requirements for its job families
and ensuring managers work more with employees as coaches and
mentors to develop learning plans;
• Improving the accuracy and user-friendliness of processes involving

payroll and benefits administration, with an HR call center to boost
employee satisfaction and engagement;
• Establishing processes to give managers a clearer picture of people who

might later qualify for key positions and to ensure that high-potential
individuals received development plans to help them build their skills.
One year into the turnaround efforts, many initiatives were paying off in
improved process and capability.
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TALENT MANAGEMENT
2.9 SUMMARY
This chapter summarizes the concept of talent management. It begins with
briefly introducing the concept along with touching upon the evolution of
talent management from personnel control to talent multiplication. It
further goes on to define the concept of talent, which varies from
organizations to organizations. The different ways of defining talent
management has been comprehensively covered here and the chapter
provides us with both narrow and broad understanding of talent
management. The chapter further explains us the process of talent
management and briefly explains the various steps involved in this
process. The development of talent management strategy is an imperative
for HR managers and the components of this strategy building have been
explained in this chapter briefly. The chapter also covers the numerous
best practices followed across organizations in the arena of making talent
management a successful process. It also, aligns us to the several
challenges faced by organizations and talent management professionals in
the development and execution of talent Management strategy and
process. Finally, the chapter, through a case explains talent management
and its key focus areas in practice.
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TALENT MANAGEMENT
2.10 Self assessment Questions
1. What is the correct order showing the evolving models of Talent

Management?
(a) Personnel Control ! Talent Multiplication ! People Development
(b) Personnel Control ! People Development ! Talent Multiplication
(c) Talent Multiplication ! Personnel control ! People Development
(d) People Development ! Talent Multiplication ! Personnel Control
2. Talent Management focuses on ____________.

a. Identifying positions where talents are to be placed
b. Motivating talent to perform at their best
c. Building potential of talent to aid
d. All of the above.
3. In the Talent management process, which step is between Performance

Evaluation and Succession planning?
a. Hiring
b. HR planning
c. Development and performance aid
d. None of the above
4. “This is defined as particular form of relationship or an employee

development system under which a senior leader or more experienced
employee is assigned to act as an advisor, counselor or guide to the
junior or trainee employee at both personal and professional front.”
Which Talent Management Best Practice is defined in the given
statement?
a. Mentoring
b. Review Mechanisms
c. Experiential Learning
d. Long-range plans
5. Which of the following is not a key challenge faced in Talent

Management?
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TALENT MANAGEMENT
a. Shifting mindset of certain senior leaders from ‘buy talent’ to

‘build talent’ strategy
b. Retention of middle management talent
c. Defining the meaning of talent with respect to requisite
competencies and potential;
d. Hiring and retaining sufficient talent across levels to satisfy the
requirements of organic and inorganic growth
Answers of MCQs: 1. - (b); 2. - (d); 3. - (c); 4. - (a); 5. - (c).
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TALENT MANAGEMENT
REFERENCES
1. The Talent Powered Organization – Peter Cheese, Robert J Thomas and

Elizabeth Craig.
2. The Talent Management Handbook – Berger.
3. A Handbook of Human Resource Management Practice – Michael

Armstrong.
4. “Time for a More Holistic Approach to Talent Risk” – KPMG International.
5. One Page Talent Management: Eliminating Complexity, Adding Value –

Marc Effron, Miriam Ort.
6. The Executive Guide to Integrated Talent Management edited by Kevin

Oakes, Pat Galagan.
7. TALENT MANAGEMENT: Process of Developing and Integrating Skilled

Workers – Ravinder Shukla.
8. Talent Management Pocketbook - Andy Cross.
9. A Conceptual Approach to Strategic Talent Management – Tapomoy Deb.
10. Global Talent Management – Hugh Scullion, David G. Collings.
11. Human Resource Management – Gary Dessler.
12. Smart Talent Management: Building Knowledge Assets for Competitive

advantage – edited by Vlad Vaiman, Charles Vance.
13.The Value of Talent: Promoting Talent Management Across the

Organization – Janice Caplan.
14.Organization Behaviour – Stephen P. Robbins & Timothy A. Judge. 
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TALENT MANAGEMENT
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !59
EMPLOYEE ENGAGEMENT
Chapter 3
EMPLOYEE ENGAGEMENT
Objectives
• Understand and define the concept of employee engagement and its

different dimensions
• Understand the significance of employee engagement
• Understand the key factors that drive engagement in an organization and
the related strategies
• Understand the guidelines to follow while designing employee
engagement initiatives
• Understand the impact employee engagement has on business
performance
• Understand the need and ways of measuring employee engagement
Structure:
3.1 Introduction and Evolution of Employee Engagement

3.2 Definition and Significance of Employee Engagement
3.3 Key Dimensions of Employee Engagement
3.4 Factors Influencing or Drivers of Employee Engagement
3.5 Employee Engagement Strategies
3.6 Designing Employee Engagement Initiatives – Guidelines
3.7 Employee Engagement and Business Performance
3.8 Measuring Engagement
3.9 Case
3.10 Summary
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EMPLOYEE ENGAGEMENT
3.1 Introduction and Evolution of Employee Engagement
Introduction
Today Managers experience a far greater demand of efficiency and
productivity than any other times in history. Managers have been grappling
with many challenges to succeed over competition. Owning to fast paced
technological advances in techniques of operation, organizations require
employees with increased technical and professional skills. They expect
operational autonomy, job satisfaction and status and cannot be dealt with
traditional management styles. This has shifted manager’s attention
towards employees’ side of organizations and are realizing that employees
engaged in their work and committed to their organizations offer
competitive advantages to the organization in the form of higher
productivity and stability. Thus, different organizations are heavily
investing in policies and practices that foster engagement in their people.
Jack Welch from GE, cited employee engagement as first, customer
satisfaction as second and free cash in-flow as third, as the top three best
measures of an organization’s health. Previously organizations possessed
greater power; however, today the power balance has changed with
employee owing to the larger power in the form of knowledge and
professional skills. In short, the organization now needs the employee
more significantly than the reverse. It is not enough to merely satisfy or
keep employees pacified. Today, the key is connecting with the core values
and beliefs of people and creating a passion, rather than just providing
tasks. All management initiatives can be fruitfully realized only with willful
involvement and engagement of employees. Successful organizations of
future are following a holistic approach to managing the human side and
engaging.
Evolution of Employee Engagement

There is no complete information about when the term “engagement” was
first used in work and it is known that the Gallup Organization is
responsible for coining the term in the 1990s. Since 1998, Gallup
conducted surveys on “strong workplaces” which involved taking
employees’ perceptions and assessing through a “measuring stick”
comprising of 12 questions. Later this “measuring stick” became known as
the Q12, Gallup’s engagement questionnaire.
Beginning of the 21st century organizations were found to be suddenly

interested in engagement. Why? Since, the turn of the century saw a
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EMPLOYEE ENGAGEMENT
profound development: the increasing significance of human resources and

their psychological involvement in business. This can be further explained
that numerous changes like organizational change, diversity, teamwork,
vertical structures, self-controlled and self-management, own responsibility
and accountability, boundary-lessness, continuous learning, etc., were
slowly taking place in the work environment formed the basis for
establishing of engagement in business. Such changes reflected
requirement of massive psychological adjustment and involvement by
human resources. Moreover, for the success of such changes people
required greater psychological abilities to ensure their sustenance and
organizational survival. For instance, organizational change required
adaptation, diversity required perspective taking, teamwork required
assertiveness, etc. According to Ulrich, Firstly, the organization’s human
capital becomes increasingly important because more has to be done with
fewer people and hence, people matter more than they did in the past.
Secondly, modern organizations require people who are able and willing to
psychologically invest in their jobs. To summarize employees in today’s
organizations bring their entire self to work rather than just their physical
self and this is exactly what engagement is all about. Thus, the companies
became increasingly interested in engagement at a time of such substantial
changes in the world of work.
3.2 DEFINITION AND SIGNIFICANCE OF EMPLOYEE

ENGAGEMENT
Definition
Nevertheless, what is employee engagement exactly? Though different
organizations define engagement differently, some common themes
emerge. These themes include employees’ satisfaction with their work and
pride in their employer, the extent to which people enjoy and believe in
what they do for work and the perception that their employer values what
they bring to the table. The greater an employee’s engagement, the more
likely he or she is to “go the extra mile” and deliver excellent on-the-job
performance. In addition, engaged employees may be more likely to
commit to staying with their current organization. A global software
company for example, found that highly engaged employees are more
likely to be high performers than less engaged employees and they are far
less likely to voluntarily leave the company.
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EMPLOYEE ENGAGEMENT
To date, there is no single and generally accepted definition for the term
employee engagement. Gallup organization defines employee engagement
as the involvement with and enthusiasm for work. Gallup as cited by
Dernovsek (2008) likens employee engagement to a positive employees’
emotional attachment and employees’ commitment.
Exhibit 3.1: Employee Engagement vs. Employee Satisfaction

Satisfaction is a “one-way street” (what can you do for me), and
Engagement is a “two-way street” (what can we do together, in
partnership). Engagement is a two-way contract. Engagement is more of
a multidimensional construct and has greater validity and linkages to
business outcomes such as revenues, profitability, growth, attrition, etc.
In other words, “Employee Satisfaction” is “the extent to which
employees are happy and contented, fulfilling their desires and needs at
work”. “Employee Engagement” is defined as “the degree to which an
employee is involved in and enthusiastic about his or her work;
committed to the values of the organization; and goes beyond the basic
responsibilities to drive the business forward”.
An important distinction is that employee satisfaction centers on how

employees feel – how satisfied they are with their employment
experience. Although a high level of employee satisfaction can sometimes
benefit an employer in terms of staff retention, it is determined primarily
from a “what’s in it for me” perspective. In contrast, employee
engagement serves both employees and their employers well. Research
shows that employees who are fully engaged in their work are likely to
have higher morale, exhibit greater loyalty, progress in their careers, and
even enjoy a more rewarding personal life. The employer gains
significantly through a measurable reduction in turnover and positive
employee behaviors that provide a competitive advantage and contribute
to organizational success.
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EMPLOYEE ENGAGEMENT
An employee can be satisfied with a job without being engaged in the

job. Employee engagement is much more than being content with pay
and the ability to leave at 3 pm. That contentedness is merely job
satisfaction, and though satisfaction is generally enough to retain
employees, it is not enough to ensure productivity. On the other hand,
employee engagement does promote increased productivity. Managers
must understand that an engaged employee is an employee who is
deeply involved and invested in their work. This occurs when an
employee is simultaneously satisfied, effective, and motivated. Employee
satisfaction is not the same as employee engagement; it is only one of
the three essential components.
Organizations with genuinely engaged employees have higher retention,

productivity, customer satisfaction, innovation and quality. They also
require less training time, experience less illness, and have fewer
accidents. Employee satisfaction is the minimum entry fee that needs to
be met in order for an employee to be fully engaged.
Source: http://www.oregon.gov/oha/OHPR/PCO/Pages
“Employee engagement is personified by the passion and energy

employees have to give of their best to the organization to serve the
customer. It is all about the willingness and ability of employees to give
sustained discretionary effort to help their organization succeed.” - Sarah
Cook (2008)
Everyday connotations of engagement refer to involvement, commitment,

passion, enthusiasm, absorption, focused effort, zeal, dedication and
energy. The Merriam-Webster dictionary describes the state of being
engaged as “emotional involvement or commitment” and as “being in
gear”.
Significance
The significance of engagement is that it is at the heart of the employment
relationship. It is about what people do and how they behave in their roles
and what makes them act in ways that further the achievement of the
objectives of both the organization and themselves. Owing to its
overwhelming contribution to increasing business performance, great
significance has been tagged to employee engagement by senior leadership
across organizations.
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EMPLOYEE ENGAGEMENT
Exhibit 3.2: What is an engaged employee?

As per various sources, an engaged employee is one who
• Is positive about the job.

• Believes in, and identifies with, the organization.
• Works actively to make things better.
• Treats others with respect, and helps colleagues to perform more
effectively.
• Can be relied upon, and goes beyond the requirements of the job.
• Sees the bigger picture, even sometimes at personal cost.
• Keeps up to date with developments in his or her field.
• Looks for, and is given, opportunities to improve organizational
performance.
What makes employee engagement significant for organizations?
• Human Resources have become the main source of competitive edge -

Two to three decades back an organization’s market value largely came
from its tangible assets and a small percentage from its intangible
assets. Tangible assets include machinery, products, facilities, etc.
Intangible assets include brand, intellectual property, and the people
talent. However, today a much larger proportion of market comes from
the intangible and a very limited proportion from tangible assets. We all
know products can easily be imitated and a technological edge lasts no
longer but the quality of an organization’s talent, its passion and
commitment, is almost impossible to replicate. The fuel driving the value
of intangible assets is Engagement.
• The tussle for talent and its retention - In the knowledge hungry
environment, it is a growing challenge for every organization to identify
the right hire with appropriate skills and knowledge. There exists a
dearth of knowledge workers, further accentuated by aging workforce
issues across the globe. This scenario causes a major talent tussle in the
human resources market among organizations across industries or globe.
The tussle for talent does not end once the talent is hired, a bigger
challenge faced by organizations today, is retaining this talent in its right
job. Thus, hiring and retaining talent are critical for organizations to
survive and thrive in future. Organizations are beginning to realize the
enormous financial costs of attrition and re-training and increasingly
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EMPLOYEE ENGAGEMENT
looking at employee engagement as an imperative to address both these

challenges.
• Popular appeal - As compared to the complexities of implementing

Business Process Re-engineering methodologies like Six Sigma, etc.,
employee engagement initiatives are far simpler to implement and
execute. However, it requires immense patience, but is still appealing to
both organizations and employees since it is viewed as achieving “hard
stuff” by focusing on “soft stuff”. It is equated to positive psychology,
which is about creating passion and focusing on what people do well,
their development and recognition.
• Overwhelming impact - Numerous researches done across the global and

across industries has proven the fact that employee engagement
positively impacts business performance – the higher the engagement,
the higher the business results. This overwhelming impact of employee
engagement provides the Human Resources function a way to
substantiate its contribution to the business, which has been always
questionable. Owing to a lack of convincing evidence on the value of HR
initiatives, HR professionals scramble to prove that their activities and
investments are both efficient and positively influential to business
strategy. Employee engagement helps provides sufficient evidence in this
regard.
3.3 KEY DIMENSIONS OF EMPLOYEE ENGAGEMENT
There can be three types or dimensions of employee engagement:
• Intellectual engagement: The degree to which people are absorbed in

their work and think of ways performance can be improved.
• Affective engagement: The degree to which people feel positive

emotional connect with their work and thereby, the organization.
• Social engagement: The degree to which people speak to their

colleagues about work-related improvements and changes.
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3.4 FACTORS INFLUENCING OR DRIVERS OF EMPLOYEE

ENGAGEMENT
Various factors or drivers have an impact on employee engagement levels

across different organizations. A list of such drivers has been given below –
• Organizational reputation
• Pay
• Recognition
• Leadership
• Engaging managers
• Employee voice
• Integrity
• The nature of work
• The work environment and culture
• Opportunities for learning and development
Organizational reputation: is one of the key drivers of sustainable

employee engagement. It is assessed through employee’s perceptions
about the organization being considered as a good place to work by the
outsiders. This is also because people beleave working for an organization
with a known name and good reputation gives them a sense of stability
and security. Further, it endorses a sense of personal pride that creates an
emotional connection from the employee’s end. Ultimately, it enhances
attraction strategy of an organization by spreading a positive buzz among
the prospective employees.
Pay: is an important factor that can drive engagement to the extent that a
lack of it may act as an impediment to employee engagement. It is seen as
an important factor to engagement with the organisation to reach the base
level of engagement with the employees. In the times of low pay rises or
none at all and rising prices, it does become an important driver. An article
in Business Standard referred to a study by Aon Hewitt done in 2013,
which showed pay as the number three driver for employee engagement.
Recognition: Clear focus on performance outcomes is an important factor

driving employee engagement within organizations. When employees feel
they are recognized for good work and performance, they feel valued and
connected with the organization. This has a spiral impact of employees’
wanting to do more for the organization for want of greater recognition.
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This feeling of being valued translates into employees being engaged with
their work and organization.
Leadership: is a strong factor that is at the heart of employee

engagement. Only leadership can build a shared vision and sense of
contribution in the minds of people. The manner in which people are led
and managed determines their level of engagement with the organization,
since it’s the managers and team leaders who have the discretion to design
their jobs, allocate work, provide work autonomy, create opportunities to
perform and grow and provide feedback that recognizes their contribution.
Engaging managers: Engaging managers can create engaged individuals

and teams. They can provide clarity of expectations from individuals and
teams, focus on appreciation and training not purely on results, treat their
people as individuals, with fairness and respect and they possess a concern
for employee’s well-being. They can be big motivators for people to put
their hearts into their work.
Employee voice: Seeking out employees’ views instills a sense of

ownership in their minds. They feel being listened to and see that their
opinions count and make a difference. They express their opinions or
challenge organizational views when appropriate, building a strong sense
of listening and responsiveness enabling effective communication in the
organization.
Integrity: Most organizations have clearly laid down value system and
behavioral norms. A sense of trust in the minds of people for their
organization is a very big enabler of engagement. This trust is built when
the employees clearly understand the organizational values and do not see
a gap between what is stated and what is practiced. If they experience that
leadership and colleagues live the stated behavioral norms and values,
mistrust can never set in.
The nature of work: Job satisfaction leads to intrinsic motivation and

accentuated engagement. The factors of work that lead to satisfaction are
interesting and challenging work, sense of responsibility, freedom to act,
scope to use and develop skills, the availability of the resources, and
opportunities for growth.
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The work environment and culture: An enabling and supportive work

environment creates experiences that impact on engagement by
influencing how people regard their roles and carry them out. An enabling
environment will provide conditions that encourage high-performance and
effective discretionary behavior. These include work processes, equipment
and facilities, and the physical working conditions. A supportive
environment will be one in which proper attention is paid to achieving a
satisfactory work life balance, emotional demands are low, attention is paid
towards healthy and safe working conditions, job security and personal
growth needs are taken into consideration. The internal environment is
influenced by the quality of work and HR practices. As Purcell (2001) points
out, “the way HR practices are experienced by employees is affected by
organizational values and operational strategies, such as staffing policies or
hours of work, as well as the way they are implemented. He also
emphasizes that work climate (how people get on in the organization) and
the experience of actually doing the job (pace, demand and stress) all
influence the way employees experience the work environment. This has
an important effect on how they react to HR and reward practices and how
these influence organizational outcomes. Employees react in a number of
different ways to practices in their organization, and this affects the extent
to which they want to learn more and are committed and satisfied with
their jobs. This, in turn, influences engagement – how well they do their
jobs and whether they are prepared to contribute discretionary effort.”
Opportunities for learning and development: Any opportunity to learn

and develop oneself is very satisfying and rewarding acting as a strong
intrinsic motivation factor which directly impacts one’s engagement levels.
Overall, people welcome learning and organizations may treat this
opportunity to grow as a means of rewarding them. Continuous learning
and development opportunities carry immense value in the minds of people
by satisfying their need to grow and reflects an important principle, “treat
people right” for both organizations and people.
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3.5 EMPLOYEE ENGAGEMENT STRATEGIES
Engagement strategies can be developed under the heading of the factors

affecting engagement set out above.
Leadership
• Commitment from the top: The vision, mission and values of employee
engagement must be established with top management commitment as
unless the leadership believes in it, owns it, transfers it down the line, it
will always be viewed as an “another HR thing”. The attempt should be
that employee engagement be an action-oriented meaningful service
from top management rather than a mere lip service.
• Building engaged leaders: The focus should be on developing line

managers to prepare them as leaders playing vital and immediate role in
increasing engagement levels. This will include the implementation of
training programs helping them understand expected actions and skills
required. Further, commitment of these leaders should be built towards
making performance management process an effective framework in
which they can deploy their skills in improving performance through
increased engagement.
Engaging Managers and Employee Voice

• Establishing two-way communication: Two-way communication process
should be promoted across the organization. Managers need to
understand that people are not merely sets of pots to which the
management just pours out its ideas with no opportunity to have a say
on matters pertaining to their jobs and lives. Thus, a clear and consistent
communication of what is expected of them ensures engaged people. In
addition, people need to be involved and a reasonable respect needs to
be given to their inputs. Participative decision making would instill a
sense of belongingness thereby, increasing their engagement in realizing
it.
Integrity
• Build a distinctive corporate culture: Organizations must promote a
strong work culture in which the goals and values of managers are
aligned across all functions as well to the organizational goals and
values. Build a culture of mutual respect by keeping success stories alive
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will ensure engagement of existing people and enculturate the new

incoming people with contagious spirit of work culture.
• Bridging the gap between practiced and laid down organizational values:
Managers across all levels must ensure the organizational values and
norms are well understood and practiced in the manner they are stated.
No disconnect should be allowed to creep in actions and value systems,
particularly by the senior leaders. This ensures an environment of faith
and trust is created in the organization, taking engagement to higher
levels.
The Work Itself

• Ensure availability of key resources to employees: Managers must ensure
that all the requisite resources (physical, material, financial or data) are
available to employees to aid them in being effective in their job and
enhance performance.
• Design the roles to be intrinsically motivating: Managers are responsible

for designing jobs and roles for their employees and hence, they must be
educated to understand the criticality of good work and job designs. They
must also be made to understand that benefits arising from such work
systems and jobs would enhance employee engagement. Three
characteristics must be part of good work design as distinguished by
Lawler (1969) and being required in jobs if they are to be intrinsically
motivating:
○ Feedback – Individuals must receive meaningful feedback about their

performance, preferably by evaluating their own performance and
defining the feedback. This implies that they should ideally work on a
complete product, process or service, or a significant part of it that can
be seen as a whole.
○ Use of abilities – The job must be perceived by individuals as requiring

them to use abilities they value in order to perform the job effectively.
○ Self-control (autonomy) – Individuals must feel that they have a high

degree of self-control over setting their own goals and over defining the
paths to these goals.
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The Work Environment and Culture
• Begin with on-boarding: Most organizations established talent acquisition

strategies; however, they lack employee retention strategies. An effective
on-boarding plan is the first building block towards engaging and
retaining the new joiner. The orientation on joining must include a
general orientation related to the company mission, vision, values,
policies and procedures and job-specific orientation such as his/her job
duties, and responsibilities, goals and current priorities of the function.
This enables the individual to develop realistic job expectations and
reduces any future role conflicts.
• Developing a positive culture: A positive culture encourages positive

attitudes to work, promoting interest and excitement in the jobs and
reduce stress. People who are enjoying themselves, who are being
supported and developed and who feel fulfilled and respected at work will
feel engaged to the organization and attempt to perform their best.
• Healthy working conditions: Various critical aspects of the job

environment must be kept healthy for enabling employee engagement.
These include communications, involvement, work life balance, etc. It
also involves encouraging effective relationships among employees and
also fair treatment of all individuals.
• Encourage a strong feedback system: Conducting regular survey of

employee engagement level bring out factors that make employees
engaged. Besides the frequency of such surveys, organization must
determine the laundry list of factors driving engagement and finally taper
it down two or three most critical areas as it may be difficult to address
all factors at once. Leaders must be focused on such survey results and
set specific, measurable, accountable and time-bounds goals to deal with
issues emerging.
Opportunities for Learning and Development

• Provide agreeable opportunities for growth and development:
Independent thinking and autonomy to work fosters growth and
development among employees, hence, both these must be emphasized
for increasing engagement levels. Greater job autonomy will be
satisfying, employees will feel responsible for their performance, and
managers should encourage this as long as the employees are producing
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desired results. Managing through results rather than micro-managing

results is achieved and outcome is greater engaged employees.
• Ensuring appropriate training for people: Help the people update

themselves by enhancing their knowledge and skills through imparting
right learning. When employees gain more knowledge about their work
and requisite skill development, their confidence level increases. They
are able to work with very little supervision that in turn builds their self-
efficacy and commitment.
• Creation of a learning culture: Top management and the line managers

must drive learning. They must be committed to it and engage
continuously, further driving it down the line across the organization. A
learning culture will have the following features - empowerment, self-
managed learning, and long-term capacity building. It should be based
on the philosophy that everyone (not few select employees) has the
ability to succeed, and the aim should be to ‘achieve extraordinary
results with ordinary people’. Then only can an organization engage
everyone and align them to learn and grow strategically.
Pay and Recognition

• Incentivize performance: Both financial and non-financial benefits must
be provided to people who display greater engagement levels in their
jobs. When people receive more pay, recognition and praise, they tend to
exert more effort into their job. There should be a clear link between
performance and incentives given to the employees.
• Focus on top-performing employees: A study conducted by Watson Wyatt

Worldwide in 2004/05 on HR practices of 50 large USA firms shows that
high-performing organizations are focusing on engaging their top-
performing employees. According to the finding of the same research,
what high-performing firms are doing is what top-performing employees
are asking for and this reduces the turnover of high-performing
employees and as a result leads to top business performance.
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Exhibit 3.3: Ten Tips for Keeping Employees Engaged During Change
1. Plan ahead - We can focus our planning efforts on the people we support--think
about what the change means on an individual level, how you want each person to
feel about the change, their differences in work and communication styles, and
prepare to pull each employee into the vision.
2. Know where you are going - There is nothing more grounding during change
than knowing where you are going, and nothing more reassuring than believing you
can get there. It is our job to articulate the purpose and advocate the change in a
way that is meaningful and actionable at the team and individual level.
3. Give them something to stand behind - Re-energize employees around the

organization’s core mission–the WHY you exist. Re-engage each one in the big
picture, and show them where their contribution has been, and continues to be,
meaningful.
4. Set the tone - During times of change, communicate early, communicate with
intent, and communicate often. Influence attitudes and behavior by communicating
confidently and positively. If you are not sold on the change yourself, share your
reservations and set the example for moving toward acceptance.
5. Acknowledge the loss - Change involves loss and we cannot move people
towards change unless we understand and acknowledge what it is they stand to
lose without challenging it. Make time to meet each person and ask them how they
feel about the change; discuss current experiences, pain points and fears.
6. What’s in it for them - Champion the change by building connections between the
goals of the organization and the individual talents and aspirations of those on the
team. If you do not know what your people aspire to, ask them! Find out where
they want to go, and identify opportunities that help them get there.
7. Think inclusion - It’s not feasible to include everyone impacted by an

organizational change in its planning, however, take action to broaden the level of
inclusion once the change is actionable at the team level. Engage them through
open dialogue and give them an opportunity to be heard.
8. Favor freedom - When employees perceive an organizational change as infringing

on the level of autonomy prior to the change, they are less likely to adapt
gracefully. Nevertheless, if we paint a clear picture of the desired outcomes for
individual and company success, we provide employees with a broad, mission-
focused, framework from which they can define their own path to success.
9. Lean into the dip - Move people towards acceptance of the change by celebrating
small wins and rewarding the successes of the new team. Be proactive and mediate
conflict in ways that embody the new team mindset, and use problem solving as an
opportunity to foster collaboration.
10.Observe and reassess - Be observant and notice what is going on around you,
build feedback loops into the process wherever possible, create dialogue, encourage
team members to share information openly, and listen. Tell them what you can do,
and always do what you say.
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Source: The Top Tens of Employee Engagement – edited by David Zinger
Organizational Reputation
•Strong internal brand communication - In order to retain and engage
employees it is important to build a strong employer brand through the
various good practices, however, this should be backed by strong internal
brand communication and reinforcement. This helps overcome the
tendency of employees to focus on smaller negatives while building an
image of the organization.
• Participate in CSR activities – A socially responsible organization, makes

employees proud to be part of and it is perceived as a good place to
work. Through the sensitivity shown by the organization towards the
society and people at large, it is able to convince employees regarding its
sensitivity towards their issues. The strong socially responsible image
helps organization build a positive image not only externally, but also
internally, consequently increasing engagement levels.
• Employer Branding – This includes various initiatives an organization

takes to build its positive image in the eyes of the existing and
prospective employees, in order to retain and attract them respectively.
The objective is to be perceived as an “employer of choice” and a “good
place to work” in the minds of the internal and external talent. These
activities would include being accessible on social media, leveraging the
strong product and services brand, participating in various good
workplace surveys, keeping up the pulse of the employees, etc.
3.6 DESIGNING EMPLOYEE ENGAGEMENT INITIATIVES –

GUIDELINES
As the HR leaders consider adopting or changing these strategies, the

following guidelines must be kept in mind –
Ensure Sound Investment of Organizational Resources

There is a need for thinking strategically that how the organization
currently utilizes its human resource practices. A question maybe asked
what’s more important to the organization—people highly engaged in their
jobs, or those who possess a strong sense of commitment towards the
organization. On the other hand, are both equally important? In addition,
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one may ask how much is the organization willing to invest in specific HR
practices designed to encourage engagement, commitment or both.
Once the organization’s objectives are understood, the HR leaders in some

cases may choose to use specific HR practices to foster engagement in
work but not commitment to the organization. In some other cases, they
may choose employee engagement and short-term commitment. For
example, if the HR strategy requires increasing the use of temporary
employees to cut costs and create more flexible staffing, the steps taken
will focus on enhancing both temporary employees’ engagement and short-
term commitment.
Design Compelling Business Cases for Improving Engagement

In order to gain investment in engagement initiatives, the HR leaders
require using their persuasion powers through a compelling business case
for these initiatives. This may increase the chances of success in such an
investment. Such a business case would involve displaying how these
investments have paid off for the organization in the past or for other
organizations by providing measurable business outcomes such enhanced
customer satisfaction, etc.
Consider Unintended Consequences

While implementing some employee engagement initiative, HR leaders
must take into account plausible unintended consequences that may be
brought by the initiative. For example, including flexi-time to the
organization’s overall work policies when demographics differ across
business units, may not be sufficient as may not impact a certain set of
employees and produce desired results. As flexi time may be more
aggressively utilized by only working mothers or single parents with young
children, while not by other age groups.
It must be kept in mind that each individual values different things about
the organization’s work experience and benefits. Hence, while planning an
initiative time must be dedicated to understand the impact on employees
with different life situations—married, single, older, children at home,
childless and so forth. After considering, HR leaders must ensure the
initiative has a net positive for the majority of people. If possible, they may
consider operationalizing several initiatives at once that benefit different
groups, ensuring none feeling disillusioned.
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Back Investment Decisions with Sound Data

It is important to back decisions about engagement initiatives with sound
data. Linking research conducted within an organization specific HR
practices likely to produce the best results. To base decisions on research,
it must be ensured that employee engagement is measured at least once a
year. This can be done by choosing an engagement survey done
professionally or in-house. Such survey items must be linked to
organization’s performance measures including profitability, productivity,
efficiency, quality, safety, employee attendance, employee retention,
customer satisfaction and customer loyalty etc.
Post the results of the survey, it is imperative to determine which aspects

of engagement are most important for business success. Then the HR
function must work with line managers to create an Employee Engagement
Action Plan function-wise or Business unit-wise and determine ownership
and accountability along with resources required.
Build an Engagement Culture

A highly receptive foundation for the engagement initiatives can be built by
an “engagement culture.” Such a culture is created by rigorous
communication of the value of employee engagement through company’s
mission statement. Commitment towards employee engagement should be
also reflected in any communication from top management. HR function
must regularly follow up and ensure that all functions/business units
execute their engagement action plans and must monitor progress on
engagement-improvement efforts, and align strategies and plans as
required. It is also imperative for endorsing engagement culture to
recognize and celebrate progress and positive outcomes.
3.7 EMPLOYEE ENGAGEMENT AND BUSINESS

PERFORMANCE
Employee engagement has been shown to impact on business performance

by various researches. An early research by Gallup had found low to
moderate correlations between employee engagement and a range of
business outcome measures, including customer satisfaction, profit,
productivity, turnover and safety (Harter et al., 2002). Since then, through
various researches the positive correlation between employee engagement
and key business metrics has been affirmed. Let us look at how
engagement impacts key business metrics.
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Positively Impacts Productivity

Employees engaged with their work and organizations are highly
productive as they are motivated beyond personal factors. Since engaged
employees work more efficiently with organization success in mind, they
tend to be more focused and motivated compared to their disengaged
counterparts. Research over the years, has consistently shown that low
levels of employee engagement are harmful to performance.
!
Figure 3.1: Employee Engagement and Productivity
Reduces Absenteeism
Employee engagement has a negative correlation with rates of
absenteeism. Engaged employees display very low absenteeism and are
completely dedicated while they are at work, because they value what they
do and are able to see the significance of their effort in contributing to the
organizational success.
Encourages Retention
Replacing an employee may cost one and a half times the employee salary;
hence, retention has a substantial positive effect on the profitability.
Research confirms that engagement lowers employees’ intention to leave
and hence, engaged employees are less likely to quit their jobs and pursue
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a job that offers extrinsic benefits such as higher remuneration or greater

flexibility in work conditions.
Simply stated, engaged employees are less likely to leave their job. If an
employee has no emotional commitment to their job, there is a greater
chance that they will leave to pursue a job that offers, for example, higher
remuneration or more flexible work conditions. Figure 3.2 shows how high
employee engagement leads to retention.
!
Figure 3.2: Employee Engagement and Retention
Enhances Customer Loyalty
There exists a strong link between high employee engagement and

increased customer satisfaction. Customers are more likely to recommend
an organization’s product or services, provided they have had a positive
experience, which in all likelihood has been formed through positive
interactions with frontline employees. The behaviors and attitudes of these
employees are affected by their level of engagement. Engaged employees
tend to be more customer focused since they are motivated to exert
greater effort to achieve business success, rather than individual benefit.
Engagement impacts customer loyalty in other ways as well. Engaged
employees are more likely to produce quality products, tend to make lesser
errors that could negatively impact customer and tend to be brand
ambassadors positively impacting organization’s reputation externally.
Figure 3.3 shows the impact of higher engagement on customer loyalty.
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EMPLOYEE ENGAGEMENT
!
Figure 3.3: Employee Engagement and Customer Loyalty
Profitability
Employee engagement indirectly impacts profitability positively, through
improving retention, customer loyalty and productivity. Various researches
reflect that organization with higher number of engaged employees are
more likely to exceed the industry average of annual growth. Further
research also shows that high performing organizations attract highly
engaged employees.
3.8 MEASURING ENGAGEMENT
Why there is a need to measure engagement?

A need for measuring engagement has been felt for the following broad
three reasons –
• Measuring engagement is not very complex and is quite reliable.

Moreover, does not involve too much time (10-15 minutes per employee)
and is economical.
• There is a high degree of positive correlation between employee
engagement levels and organizational performance. Any opportunity to
improve engagement levels will amount to an opportunity for business
improvement.
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• The outcomes of engagement measures are highly controllable and

actionable, enabling the dedicated senior leaders and HR teams to
undertake impactful initiatives.
Employee engagement is an important component of a business’s success.

By measuring the level of engagement of employees, most employers are
attempting to gauge the overall success of the organization.
Creating an employee engagement strategy alone is essential but it is not

sufficient. Once the visions for engaging employees is established, it
cannot be left alone if long-term results are desired. Such a vision requires
constant measurement, restructuring and improvements. Thus,
engagement initiatives that are measured, monitored and improvised reap
the most successful results. This means measuring levels of engagement
regularly in order to identify successes and failures and analyze any gaps
between what is wanted and what is actually going on. This measurement
is done through engagement surveys.
Engagement Surveys
Engagement data is generally collected via employee responses to a
survey, usually delivered online. Employees indicate the extent to which
they agree or disagree with the items in the survey.
An engagement survey may be –
• Published survey conducted by professional agencies like Gallup

• Or in-house developed by the HR function
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Exhibit 3.4: Gallup Employee Engagement Survey

One of the most widely used engagement measures of engagement was
devised by Gallup organization, and is published every year, quarter based on
Q12 survey: 12 standard questions on standard engagement issues.
Overview
Seven out of the twelve questions relate to the immediate personal contacts of
the respondent in the workplace. Two of the questions relate to alignment – the
relationship of the respondent’s job to the goals of the organization, three
questions highlight the importance of personal development, and three
questions emphasize the need for workers to feel personally valued.
Based on the survey responses, Gallup divides workers into three categories:
engaged, not engaged and actively disengaged. The descriptor for ‘engaged’ is
worth noting as it sets a quite a high benchmark. Engaged workers are deeply
committed to their job and organization. Strongly energized, they exult in using
their individual talent to fulfil the objectives of their organization. They make
suggestions and launch new ideas. They enjoy taking individual responsibility.
They strive constantly to improve their performance. They thrive on strong
relationships with their managers and co-workers. They spread positive energy
to their colleagues.
Conversely, Gallup defines ‘actively disengaged’ as being seriously unhappy

with the organization, trying to spread to others, and being resistant to change.
‘Not engaged’ is broadly neutral; these employees do their jobs but do not put
in any additional effort unless pushed.
Source: The Talent Powered Organization: Peter Cheese, Robert J Thomas, and
Elizabeth Craig
A good survey not only helps you determine the levels of engagement/
disengagement of employees but also brings forth the efficacy of the
elements that help drive engagement within the organization. In general,
the following are characteristics of a good survey –
• Short
• Valid and reliable
• Limited flexibility
• Actionable
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Results of Survey and Data Analysis

Results can be tabulated and presented in a number of different ways.
Most organizations look at an overall engagement composite score, which
averages responses across all survey items and is often presented at the
work unit, department, division, and corporate levels. Generally, when we
talk about organizations with high or low engagement scores, we usually
are referring to their overall composite scores.
Most organizations also pay attention to the responses to individual items,

at the work unit, department, division, or organizational level. This allows
the organization to zero in on specific strengths and weaknesses relative to
engagement from an organizational perspective down to individual work
units and leaders. In addition, it is also common for organizations to seek
comparisons, at a composite or item level, to internal or external norms.
For example, a company might want to see how each division is doing
relative to the entire organization. On the other hand, it might want to look
at how well the organization is doing relative to a broad-based external
norm.
Exhibit 3.5: Sample Employee Engagement Questions

Rating Scale:
(1) Never
(2) Almost Never (a few times a year)
(3) Rarely (once a month or less)
(4) Sometimes (a few times a month)
(5) Often (once a week)
(6) Very often (a few times a week)
(7) Always (everyday)
Area For each of the statement rate how you Rate from
feel 1 to 7
Job I feel energetic at work

engagement
I feel like coming to work
I am proud of the work I do
I can work for long duration
I find my job challenging
I get inspired by my job
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Leadership My manager explains company

objectives
My manager works as hard as anyone in the

group
My manager treats all team members equally
My manager encourages team to solve issues

together
My manager sets high performance standards

by his own behavior
My manager listens to my team’s ideas and

suggestions
Quality and The organization holds the quality of our

Customer products and services as very important
Focus
People are held accountable for the quality of
work
We maintain very high standards of quality.
Organization understands its customers’ needs
Customer needs are the top priority for the

organization.
We constantly search ways to improve our

products and services.
Work Salary is closely linked to performance

Practices
Training is placed on high priority at my work
I have access to formal grievance procedure
High importance placed on the staffing process

in my work unit
The salary is not competitive for the industry

Selection emphasizes ability to collaborate and
teamwork
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EMPLOYEE ENGAGEMENT
3.9 CASE
Source: The Talent Powered Organization: Peter Cheese, Robert J Thomas,

and Elizabeth Craig; http://www.google.co.in/jobs/
Google
‘Enjoy what you do, where you do it, and the people you do it with.’
“What is it that you really want to do? Your master plan is not just your 5-
year plan. At Google, our strategy is simple: we hire great people and
support them in turning their aspirations into reality. We work hard here,
and play here, and dream here. Googlers are bright, passionate people
with diverse backgrounds, coming together to create a unique culture. One
where the open exchange of ideas is encouraged and thinking beyond the
norm is expected; no matter what position you happen to hold. Working at
Google is as much a mindset as it is a job.”
Top reasons to work at Google
1. Lending a helping hand. Within millions of visitors every month,

Google has become an essential part of everyday life – like a good
friend – connecting people with the information they need to live lives.
2. Life is beautiful. Being a part of something that matters and working

on products in which you can believe is remarkably fulfilling.
3. Appreciation is the best motivation. So we have created a fun and

inspiring workspace you will be glad to be part of, including doctor and
dentist; massage and yoga; professional development opportunities;
on-site day care; shoreline running trails; and plenty of snacks to get
you through the day.
4. Work and play are not mutually exclusive. It is possible to code and
pass the buck at the same time.
5. We love our employee, and we want them to know it. Google

offers a variety of benefits, including a choice of medical programs,
company–matched 401(k), stock options, maternity and paternity leave
and much more
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EMPLOYEE ENGAGEMENT
6. Innovation is our bloodline, Even the best technology can be

improved. We see endless opportunity to create even more relevant,
more useful, and faster products for our users. Google is the technology
leader in organizing the world’s information.
7. Good company everywhere you look. Googlers range from former

neurosurgeons, CEOs, and US puzzle champions, alligators wrestlers
and former marines. No matter what their background Googlers make
for interesting cube makes
8. Uniting the world, one user at a time. People in every country and
every language use our products. As such, we think, act, and work
globally – just our little contribution to making the world a better place.
9. Boldly go where no one has gone before. There are hundreds of

challenges yet to solve. Your creative ideas matter here and are worth
exploring. You will have the opportunity to develop innovative products
that millions of people will find useful.
10.There is such a thing as a free lunch after all. In fact, we have

them every day: healthy, yummy and made with love.
Fortune Magazine and the Great Place to Work Institute named Google in
the 2014 “Best Company to Work For.” This marks their fifth time at the top
of the list.
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3.10 SUMMARY
This chapter attempts to build an understanding of the critical HR concept
“employee engagement”. It briefly introduces the concept and takes us
through its evolution. There has been a thorough attempt to define the
concept, despite there being multiple varying definition with no consensus
on a common definition. The chapter further briefly highlights the different
dimensions of employee engagement. It focuses on the factors influencing
employee engagement such as organizational reputation, leadership, the
work environment, etc. Based on these drivers, the chapter defines the
various employee engagement strategies organizations can execute for
success. The various guidelines to be kept in mind while designing
employee engagement initiatives are also established in this chapter. The
chapter explains through numerous points and examples how high
employee engagement can positively impact business performance. The
significance of measurement is known to all, the chapter explains us why
employee engagement must be measured and it lays down how the
measurement can be done. Finally, through a case study, the chapter
attempts to through greater light on the concept of employee engagement.
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EMPLOYEE ENGAGEMENT
1. ______________ the degree to which people speak to their colleagues

about work related improvements and changes.
(a) Affective engagement
(b) Social engagement
(c) Intellectual Engagement
(d) None of the above
2. Which of the following is a characteristic of a good employee

engagement survey?
(a) Lengthy
(b) Unusable
(c) Valid and reliable
(d) Highly flexible
3. “Participation in CSR activities” is an employee engagement strategy

corresponding to which driver of engagement?
(a) Pay
(b) The work environment and culture
(c) Leadership
(d) Organizational Reputation
4. Which of the following statements is correct?

(a) Employee engagement impacts business performance by
positively impacting productivity
(b) Employee engagement impacts business performance by
lowering customer loyalty
(c) Employee engagement impacts business performance by
increasing absenteeism
(d) Employee engagement impacts business performance by
discouraging employee retention
Answers of MCQs: 1. - (b); 2. - (c); 3. - (d); 4. - (a).
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EMPLOYEE ENGAGEMENT
REFERENCES
1. Employee Engagement Through Effective Performance Management: A

Practical Guide for Managers – Edward M. Mone , Manuel London.
2. Employee Engagement for Everyone: 4 Keys to Happiness and

Fulfillment at Work – Kevin Kruse.
3. Louder Than Words: Ten Practical Employee Engagement Steps That

Drive Results – Bob Kelleher.
4. Manager’s Guide to Employee Engagement – Scott Carbonara.
5. The Talent Powered Organization – Peter Cheese, Robert J. Thomas, and

Elizabeth Craig.
6. The Essential Guide to Employee Engagement – Better Business

Performance through Staff Satisfaction – Sarah Cook.
7. Handbook of Employee Engagement: Perspectives, Issues, Research and

Practice – Simon L. Albrecht.
8. Employees first, Customers second : Turning Conventional Management

Upside Down – Vineet Nayar.
9. Delivering Results: A New Mandate for Human Resource Professional –

David Ulrich.
10.The Essential Guide to Employee Engagement : Better Business

Performance Through Staff Satisfaction – Sarah Cook.
11.The Leadership Code: Five Rules to Lead – Dave Ulrich, Norm

Smallwood, Kate Sweetman.
12.The Top Tens of Employee Engagement – edited by David Zinger.
13.The Oxford Handbook of Human Resource Management – Peter F.

Boxall, John Purcell, Patrick M. Wright. 
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EMPLOYEE ENGAGEMENT
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
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MANAGING DIVERSITY
Chapter 4
MANAGING DIVERSITY
Objectives

• Understand what is diversity, diversity management and what are diverse
workplaces
• Understand the various factors that encourage diversity
• Understand the features of diversity
• Understand the various advantage as well as disadvantages of diversity

management
• Understand the diversity initiatives, programs and the associated best

practices
• Understand what are the barriers to diversity management and what will
be the outcomes of ignoring diversity
• Understand the role HR function plays in diversity management
• Understand the impact of diversity of individuals as well as groups
Structure:
4.1 Definition – Diversity, Workplace Diversity, Diversity Management

4.2 Factors Encouraging Diversity
4.3 Characteristics of Diversity Management
4.4 Advantages and Disadvantages of Diversity Management
4.5 Diversity Initiatives, Programs and Best Practices
4.6 Barriers to Effective Diversity Management and Outcomes of Ignoring
diversity
4.7 Role of Human Resource Function in Diversity Management
4.8 Effects of Workforce Diversity on Individuals and Groups
4.9 Summary
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4.1 DEFINITION – DIVERSITY, WORKPLACE Diversity,

DIVERSITY MANAGEMENT
Defining Diversity
“Diversity refers to differences among people in terms of dimensions such
as age, ethnicity, gender, race, or physical ability.” - Richard Daft (2007)
Why is it when many of us think of diversity, we think of ethnicity and race
first, and then gender? Diversity is a much broader concept. Diversity
means those human attributes that are distinct from our own and out of
the groups to which we belong, yet present in other individuals and groups.
Defining Workplace Diversity

At the workplace, people are different in their ideologies, drives and
perceptions and thus, respond differently to the stimuli from the
organization regarding managing their performance. The people are
different in their age, gender, culture, ethnicity, academics, personal
experience, nationality, talent, skills, etc.
Diversity of can be bifurcated into following types -
• Social diversity: age, ethics, gender

• Value diversity: psychological differences in personality and attitude
• Informational diversity: education, functional tenure in the organization
Diversity being so dynamic and some people in the organization are so

different from some others that a standard manner of managing them is
impossible. Hence, the attempt should not be to mold people in the
organization’s culture but should be to manage them individually to exploit
what their diversity offers, such as cost effectiveness (using manpower
from low cost countries), enhancing creativity, etc.
“Workforce diversity means a workforce made of different human qualities

or who belong to various cultural groups.” - Richard Daft (2007)
Defining Diversity Management

Though the term diversity management originated in North America, now
is widely used in other parts of the world.
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Diversity management involves taking proactive actions regarding climate

of the organization that can minimize the threats from diversity and
maximize the opportunities.
The growing trend of working in teams is furthering the need for

individuals to work together for the benefit of the organization. This in turn
is emphasizing that people must better manage by taking benefit of the
positives of the team and reducing their negatives. This involves
harnessing of individual differences, which would generate a much larger
pool of competencies for the team. Hence, people must remember, if team
working is not properly managed it can reduce cohesion of team and
internal conflicts will crop up.
“Diversity management may refer to the actions of the organization

designed to build high level inclusion of people from diverse backgrounds
into the formal and informal organizational structures through conscious
policies and practices.”
With the globalization and rise in global companies, the sphere of diversity
management has enlarged. It not only involves managing differences of
workforce within one country or region but also the workforce differences
across countries and regions.
“Diversity management refers to a strategic organizational approach to

workforce development, organizational culture change and empowerment
of the workforce.” – Patricia Arredondo (1996)
4.2 FACTORS ENCOURAGING DIVERSITY
Diversity at workplace is an unignorable phenomenon. This is being driven

by various factors, Figure 4.1, shows the interplay of various factors
encouraging diversity.
1. Globalization – Owing to globalization, the market barriers have been

removed resulting in free flow of goods, services, skills, resources,
ideas, etc. Operations are spreading globally, organizations are facing
new type of competitions, varied consumers and diverse human
resources. They face diversity not only internally but also external
market conditions are diverse.
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2. Migration – Movement of people across the globe for work, education

etc. is happening on a large scale. Particularly, this movement is of
people from developing regions, with increasing population of younger
people, to developed regions, with declining population of young people.
Hence, availability of human resources in these regions is increasingly
becoming multicultural.
3. Women at work – There are changes that are happening in the family
dynamics such as structuring of tasks among members, size of the
families, level of education and changing consumption patterns has
increased the number of women active in the working population. In
fact, professions which were erstwhile dominated by males are seeing
women joining in and very much being part of the job market and
critical roles. However, the glass ceiling (Exhibit 4.1) might operate but
attempts are being made to break the glass ceiling for growth of
women.
4. Increasing value of older population – Particularly in developed

economies, the working population is aging. The organizations are
facing shortage of skills, and with development of health care facilities,
the older population is staying active at work. Hence, the work
environment is being adapted to them and many processes are being
changed to include the senior profiles.
5. Political diversity – In most organizations different individuals have

different political ideologies and affiliations. This is a source of conflict
among them, especially in situations requiring decisions regarding
crucial national actions, such as petitions, strikes, and public
demonstrations.
6. Different types of employees – The expansion of businesses globally,

the mobility of people and advancement in technologies has created
different categories of employees within an organization such as
expatriate, locals, contract employees, etc. The working conditions such
as compensation, benefits, work hours, growth opportunities etc. of
different types of employees working side by side are different.
7. Caste or racial diversity – In many countries, there is existence of

caste system or racial differences. The talented and skilled worker may
belong to different castes or races. People of different castes or races
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are employed with common organizations, work in common teams and

produce the desired results, synergistically.
8. Economic payback and social responsibility – Various groups have

been disadvantaged, have been excluded from workforce, and are
reliant on tax-funded social service programs run by governments. Skill
and knowledge building in such groups and diversifying the workforce to
include such groups can convert them into tax payers rather than
continuing as tax users. Further, this amounts to a good Corporate
Social Responsibility, by providing them opportunity to earn a living and
fulfill their dreams.
9. Legal requirement – In most countries, there are legislative mandates

to be non-discriminatory in their employment practices such as Equal
Employment Opportunity or Affirmative Action Legislation. Non-
compliance to such legal requirements can lead to fines or loss of
government contracts. In the context of such legislation, organizations
tend to utilize a diverse workforce to the best of their businesses.
10.Capacity-building strategy – Rapid change is the norm in the

business environment of this century and organizations that proper
possess the capability to effectively find solutions, rapidly adapt to new
circumstances, quickly identify and capitalize on new opportunities.
Such capability is built by a varied range of talent, experience,
knowledge, ideas, and creativity existing in their employees. While
hiring, such organizations ensure that in addition to their job-specific
abilities, people are selected for the unique qualities and perspectives
they can bring to the organization. In recruiting employees, successful
companies recognize conformity to the status quo as a distinct
disadvantage. Organizations that diversify their workforce tend to have
competitive edge over others.
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!
Figure 4.1: Factors Interplaying to Influence Diversity
4.3 CHARACTERISTICS OF DIVERSITY MANAGEMENT
The objective of diversity management is to bring about a change in the

culture of the organization from a majority-oriented to a diversity-oriented
where different value systems are given equal importance. Diversity
management focuses on two things: firstly enhancing social justice by
fostering an environment where no one is advantaged or disadvantaged
owing to features such as race, gender, caste etc.; and secondly enhancing
productivity and profitability of business. Diversity management has the
following three key characteristics:
1. Diversity management is self-initiated – It is a largely a voluntary

principle adopted by organizations and not enforced or coerced. Only in
cases where the organization attempts to meet the legal requirements,
it may be involuntary; however, this forms a very small portion of the
overall initiatives undertaken by organizations towards this end.
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2. Diversity management is highly inclusive – It does not focus on

only certain specific groups that are to benefit according to laws.
Organizations implementing diversity management usually use a very
broad and open definition of diversity. The reasons being to make their
programs inclusive, reap the best merits from diverse employees and
avert any potential objections from the majority group.
3. Diversity management targets to provide tangible benefits – It is

a business strategy with a goal to tap the full potential of the human
resources for a competitive edge. It encourages every employee of the
organization to bring forth his or her unique perspectives and skills
benefiting the organization as a whole in terms of creative ideas,
multiple solutions, broad base of clients, enhanced productivity etc.
Infosys felt the need to be inclusive about gender due to stiffening “war
for talent” and demands of globalization necessitated formation of
“inclusive” culture. However over the years, Infosys has done a lot of
work towards this end has been awarded for excellence in gender
inclusion by NASSCOM. This has also paid off in terms of higher
productivity, creative ideation, brand image building, etc.
4.4 ADVANTAGES AND DISADVANTAGES OF DIVERSITY

MANAGEMENT
There are few advantages and disadvantages of managing a diverse

workforce, of which management must be aware while making decisions in
the organization.
Advantages
• Increased productivity: Increasing employee productivity has been one of

the major challenges for organizations. A key strategy is to adopt
diversity at work and manage it effectively. With larger diverse pool of
talent available organizations are able to pick up right talent for the right
job. Further, with the equitable treatment employees feel a sense of
loyalty and belongingness and work hard towards increased productivity
and organizational profits.
• Enhanced creativity and quality of team problem solving: Teams with

members of diverse backgrounds have diverse perspectives in a
discussion leading to more creative ideas and solutions. In such teams
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people see the same point with different frames of reference and when
they are put together, they are likely to come out with best solutions to
the issues and problems at hand.
• Learning and growth: With diverse workforce, opportunity for employee’s

personal growth is high. Managing diversity positively offers new
cultures, ideas and perspectives for people to learn and adapt. It also
enhances perspectives of people and builds an understanding of global
environment in which the organization is operating.
• Effective customer communication: Diverse workforce can help

strengthen company’s communication with some specific customer
groups. Tagging a specific group employee with the same group
customer can make the communication effective making the customer
feel comfortable interacting with the individual as well as the
organization.
• Diverse experience: A diverse culture possesses its own strengths and

weaknesses. Along with their individuality, every diverse employee has
unique strengths and weaknesses derived from their own culture. When
these individual unique traits are managed properly and effectively, the
strengths are leveraged and weaknesses are complemented impacting
performance positively.
• Increased understanding of the marketplace: The consumer base is

becoming more and more diverse. A diverse workforce in an organization
is better able to anticipate and respond to ever changing diverse
consumer requirements.
• Enhanced breadth of understanding in leadership positions:

Heterogeneous top management teams tend to be far-sighted in their
perspectives. With their rich diverse experience, they bring a breadth of
understanding of the internal and external environments. They also bring
to the table a fusion of the very best of values of diverse cultures and
varied perspectives from across the globe.
• Reduced costs associated with high turnover, absenteeism, and legal

hassles: In many cases especially, women or aged employees, family
responsibilities or health issues may lead to turnover and absenteeism.
Most organizations managing diversity offer child-care and elder-care
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benefits, flexible work arrangements, telecommuting, and part-time

employment to accommodate diverse workforce needs. Lawsuits due to
discrimination can increase costs for discriminatory organizations.
Disadvantages
• Addition to total cost: Diversity training, child-care and eldercare

benefits, flexible work arrangements and many other diversity
management practices tend to add to the overall cost of the organization.
These cost may be direct costs example, participations fees and
travelling cost for a cross-cultural training program or may be indirect
costs example, opportunity cost of managing flexible work timings for
employees.
• Hidden discrimination: Encouraging diversity is one aspect; however,

managing it effectively is another. In a poorly managed diverse workforce
a hidden workforce discrimination may exist. This can affect the
discriminated employee’s ability to perform and might also affect the
perception of equity and lead to litigation.
• Communication issues in the short-term: In case of short-term project

teams, where immediate synergy and cohesion is critical, diversity may
interfere with communication building. People’s first impressions can be
difficult to control in case of cultural conflicts and this may affect the
productivity and cohesiveness of the team in the orientation period as
well as in short-term. Though in the long run, these impressions may be
eradicated and an effective communication may be built, but in short run
it can be harmful.
Exhibit 4.1: FACTORS AFFECTING WOMEN’S CAREERS

Despite years of progress by women in the workforce, many find their career
goals are still unattainable or difficult to achieve. In addition, men as a group
still have the benefit of higher wages and faster promotions. In the United
States in 2005, for example, women employed full-time earned 81 cents for
every dollar that men earned. Both the glass ceiling and the decision to “opt
out” of a high-pressure career have an impact on women’s advancement
opportunities and pay. Yet women are sometimes favored in leadership roles for
demonstrating behaviors and attitudes that help them succeed in the
workplace, a factor called “the female advantage.”
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Glass Ceiling: The glass ceiling is an invisible barrier that separates women
from top management positions. They can look up through the ceiling and see
top management, but prevailing attitudes and stereotypes are invisible
obstacles to their own advancement. This barrier also impedes the career
progress of minorities. In addition, women and minorities are often excluded
from informal manager networks and often do not get access to the type of
general and line management experience that is required for moving to the top.
Research suggests the existence of glass walls that serve as invisible barriers to
important lateral movement within the organization. Glass walls, like exclusion
from manager networks, bar experience in areas such as line supervision that
would enable women and minorities to advance vertically. Evidence that the
glass ceiling persists is the distribution of women and minorities, who are
clustered at the bottom levels of the corporate hierarchy. Among minority
groups, women have made the biggest strides in recent years, but they still
represent only 15.7 percent of corporate officers in America’s 500 largest
companies, up from 12.5 per cent in 2000 and 8.7 per cent in 1995. In 2007,
just 7 companies, or 1 per cent, among the Fortune 500 companies had female
CEOs.
Opt-out Trend: Many women are never hitting the glass ceiling because they
choose to get off the fast track long before it comes into view. In recent years,
an ongoing discussion concerns something referred to as the opt-out trend. In
a recent survey of nearly 2,500 women and 653 men, 37 per cent of highly
qualified women report that they voluntarily left the workforce at some point in
their careers, compared to only 24 per cent of similarly qualified men. Quite a
debate rages over the reasons for the larger number of women who drop out of
mainstream careers. Opt-out proponents say women are deciding that
corporate success is not worth the price in terms of reduced family and
personal time, greater stress, and negative health effects. For example, Marge
Magner left her job as CEO of Citigroup’s Consumer Group after suffering both
the death of her mother and a personal life-changing accident in the same year.
Although some women are voluntarily leaving the fast track, many more
genuinely want to move up the corporate ladder but find their paths blocked.
The greatest disadvantages of women leaders stem largely from prejudicial
attitudes and a heavily male-oriented corporate culture. Some years ago, when
Procter & Gamble asked the female executives it considered “regretted
losses” (that is, high performers the company wanted to retain) why they left
their jobs, the most common answer was that they did not feel valued by the
company.
• Meeting all demands can be cumbersome: Since the basis of workplace

diversity is mutual respect, organizations tend to accommodate each
diverse worker´s needs to uphold this premise. However, this can be
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very taxing and burdensome on the organization, making it tough to

manage diversity. Sometimes the degree of diversity may be highly
excessive and overwhelming and organizations tend to feel a need to
have dedicated resource or department to handle diversity and thereby
meet all diverse needs.
• Incorporation issues at informal levels: Diversity management may not

be able to influence the social incorporation at the workplace and
exclusive social groups can be formed which cannot be controlled at
times. Informal divisions amongst people are formed in organizations
and diverse employees avoid interaction during leisure times or on work
completion. Although this scenario does not seem fundamentally correct
there is no issues with such a scenario, however, it decreases effective
knowledge sharing amongst teams and hence, productivity.
4.5 DIVERSITY INITIATIVES, PROGRAMS AND BEST

PRACTICES
Initiatives and Programs for Managing Diversity

Organizations work towards diversity efforts in the form of initiatives and
programs that may address their diversity issues. The various initiatives
maybe:
• Changing structures and policies,

• Focusing on diversity hiring,
• Establishing mentor relationships,
• Accommodating special needs,
• Offering training and education.
• Multicultural teams
Changing structures and policies – Traditionally most organizational policies

were devised in such a manner to meet the needs of the stereotypical male
employees. However, organizations are taking initiatives to bring out
changes in their structures and policies to accommodate diverse
employees. Today organizations are devising formal policies against racism
and gender discrimination, putting in place formal grievance procedures
and complaint review mechanisms, devising policies to encourage the
hiring and career growth of diverse employees. In addition, companies are
employing specific staff exclusively dedicated to diversity management.
Organizations such as Procter & Gamble, Ernst & Young, etc., are also
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linking employee incentives and growth to their ability to manage and grow
diversity.
Focusing on diversity hiring and selection – Many organizations are moving

away from the traditional recruiting focusing on only majority available in
the talent pool. They are devising strategies of recruitment and selection in
order to increase focus on diversity. A recruitment and selection strategy
focused at increasing diversity involves the following points –
• Broadening recruitment efforts via proactive approach to reach out to

new and diverse target audience by spreading the word through wider
variety of channels rather than the older ones, by building relationships
with minority organizations working with diverse people, by connecting
with business schools to hire minority students and by offering
scholarships to minority students.
• Eliminating the biases in selection tools by creating barrier free job

descriptions specifying need rather than what is needed to fulfill it and
the knowledge and ability required rather than a specific credentials.
Further, the interviewing processes can be sensitized for promoting
diversity as well through a team interview rather than individual,
interview careful and sensitive verbal and non-verbal communication and
clear, consistent guideline to focus on skills and abilities irrespective of
caste, culture, race, gender etc.
Exhibit 4.2: Blind Evaluation

Blind evaluation is an interesting attempt to remove biases of diversity from
the hiring process. This was attempted by some orchestra conductors. The New
York Philharmonic Orchestra recently carried out an experiment. At no stage
was the hiring panel able to speak to the candidates before hiring decision was
made. The decisions could be made purely based on their skill as a musician.
The result was they landed up hiring a much larger percentage of women
musicians. Much of the vetting process was done through a blind evaluation
process. That creates a larger pool of candidates to choose from.
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In case of musicians, the artist may be judged largely by their musical

prowess. The hiring process used the blind evaluation process to create a
larger candidate pool on at least one parameter. The interview was still used to
evaluate other competencies like team work etc. In some other jobs, there may
be a broader range of competencies that need to be evaluated –
communication skills, strategic thinking etc. With some imagination it is
possible to create blind evaluation processes for each competency if the goal is
to create a larger talent pool.
Source: Article “Over Looking biases: Tech firms hire women and minorities” -
Human Capital, Jan 2015
Establishing mentor relationships – Mentor relationships is one of the best

ways to overcome glass ceiling which acts against growth of diverse group
members. A mentor is a senior organizational leader who is committed to
driving upwards and supporting to a protégé’s professional career.
Mentoring will provide minorities and women with guidance and
information on the organizational norms and expectations. A mentor also
acts as a friend or counselor, enabling the employee to feel more confident
and capable. ONGC, for instance, has a robust mentoring system, which is
effective and acts as source of morale and motivation for diverse
workforce. Research shows that high-potential minorities grow mainly with
the help a strong mentor or network of mentors who have aided their
professional growth. Thus, organizations must drive strong mentor
relationships, particularly, for minority employees, in order to increase
diversity in the middle to senior management portfolios as well.
Accommodating special Needs – Many diverse employees may have special

needs, which the traditional male workforce might not have had as a result
the managers may not be aware of such needs. The various special need
scan be as follows –
• If numerous women entering the organization at the lower level are new
mothers, the organization can reevaluate job plans and develop
opportunities for childcare.
• If a large workforce in non-English–speaking, then training materials and

organizational information may be provided in another language, or such
people be given English language classes.
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• To deal with working parents issues organizations are introducing

practices like maternity or paternity leave, flexi hours, telecommuting,
work from home or part-time roles etc.
• Attracting and retaining elderly or disabled workers may include long-

term-care insurance and special health, life insurance benefits or
alternative work scheduling also may be important for these groups of
workers.
• For multigenerational issues, organizations are striking a balance

between meeting both their needs. For example, for younger generation
special help to deal with issues like finding their first apartments or cars
while the older ones in identifying childcare or getting home loans and
even older ones planning retirement and researching insurance and long-
term care options.
Providing diversity skills training – Diversity training refers to training

program having the objective of elevating the participants’ cultural
awareness, knowledge, and skills and increasing the inclusion of different
identity groups, and by promoting better teamwork. Most organizations
today provide diversity training, for the purposes explained. It is known
that organizations are heavily investing in this kind of training out of the
total cost spent on diversity initiatives. The various benefits of diversity
training include –
• Helps make managers more effective in managing issues pertaining to

diversity in their scope of work
• Diverse employees feel better motivated and committed to the

organization
• Increases sensitivity and tolerance among majority employees and

thereby creating positive open culture.
• The overall environment of the organization improves, productivity of

people goes up, hence profitability improves and lowered turnover saves
costs.
There different types of diversity trainings that include –
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• Awareness-based diversity training – This is the most popular

diversity training. This involves making employees aware of the
stereotypes in their minds and increase their sensitivity and openness to
those different from them. The objective is to provide information about
diversity, increase awareness and sensitivity by uncovering hidden
assumptions and biases, evaluate attitudes and values, clarify myths and
stereotypes, and foster individual and group sharing. Awareness-based
training is designed to promote feelings of unity, tolerance, and
acceptance within the existing organizational culture and structure.
• Skill-based diversity training – This is the next level training going

above consciousness-raising. This provides people with skills and abilities
that would aid them to work efficiently and effectively within a diverse
workplace. The focus is to change the performance at work. Such
programs build emphasis on specific actions helping manage diversity
more effectively and enhance job performance and include negotiation
skills, conflict resolution skills, problem solving abilities, etc. According to
Carnevale and Stone (1994), skill-based diversity training has the
following aims -
○ Developing diversity-interaction skills,

○ Reinforcing existing skills, and
○Inventorying skill-building methodologies
• Integrated diversity training – Many times organizations include the

learning objectives of diversity into existing trainings such as team
building, leadership training programs etc. This involves coordinating
with necessary parties to ensure that the diversity context is integrated
into the other programs. This can be cost saving for the organizations to
some extent.
Online training tool helps managers tap into various diversity scenarios
that might occur in the workplace and see how they can manage them in
an appropriate way. In addition to online training, companies may also use
classroom sessions, experiential exercises, videotapes or DVDs, and
outside consulting firms that help organizations with diversity management
issues.
Multicultural teams – Organizations are aware that diverse teams have

higher problem solving and decisions making abilities. Thus, now the
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multicultural teams are preferred and put together, especially where there
is a great need for creativity and innovation in meeting the objectives at
hand. However, it must be kept in mind that such teams are tough to
manage due to high scope for miscommunication and misunderstanding.
However, they have greater difficulty in learning to communicate and
working smoothly, but if effectively managed along with one or more of
other initiatives like diversity awareness training their effectiveness can be
enhanced and might operate at higher productivity than homogeneous
teams
Best Practices for Managing Diversity

The GAO (Government Accountability Office, USA) had conducted an
extensive study in the area of diversity and had identified nine leading best
practices. These practices complement Aronson’s Best practices presented
in an article by him and can be universally applied. They are –
1. Top leadership commitment - A vision of diversity demonstrated and

communicated throughout an organization by top-level management.
2. Diversity as part of an organization’s strategic plan - A diversity

strategy and plan that are developed and aligned with the organization’s
strategic plan.
3. Diversity linked to performance - The understanding that a more

diverse and inclusive work environment can yield greater productivity
and help improve individual and organizational performance.
4. Measurement - A set of quantitative and qualitative measures of the

impact of various aspects of an overall diversity program.
5. Accountability - The means to ensure that leaders are responsible for

diversity by linking their performance assessment and compensation to
the progress of diversity initiatives.
6. Succession planning - An ongoing, strategic process for identifying a

diverse talent pool and developing them into an organization’s potential
future leaders.
7. Recruitment - The process of attracting a supply of qualified, diverse

applicants for employment.
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MANAGING DIVERSITY
8. Employee involvement - Employee’s contributions in driving diversity

throughout an organization.
9. Diversity training - Organizational efforts to inform and educate

management and staff about diversity’s benefits to the organization.
Exhibit 4.3: Qualities of leaders to support diversity
Since diversity management is a top driven agenda, the qualities, which

support diversity, are very necessary in a leader managing a diverse
organization. Some of the qualities have been put down here -
• Approaching the diversity agenda with patience

• Display of optimism towards diversity
• High level of creativity while executing diversity plans
• Strong level of persistence to overcome forces working against diversity
• A strong bias for input and evaluation
• Strong aversion towards perfection
• Desire to learn from failure
• Highly responsiveness during discomfort and disagreement
• Drive multiple options and rationales to further diversity,
• Willingness to revisit organizational structures and norms to promote
diversity initiatives.
4.6 BARRIERS TO EFFECTIVE DIVERSITY MANAGEMENT

AND OUTCOMES OF IGNORING DIVERSITY
Barriers to Effective Diversity Management

However, diversity is desirable and diversity management is critical. But
diversity management is not free from the various forces acting against its
effectiveness. Listed below are some of the common barriers to
implementing diversity management effectively are-
• Challenge of balancing family and work: Mostly, women are posed with
this challenge. Even today, in most cultures women are expected to
manage the household and take care of their children, despite being in
high pressure jobs. A change in attitudes is happening, however, the
greatest responsibility of the household lies with the women still.
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MANAGING DIVERSITY
• Hostile and unsupportive environment at work: In most social activities,

diverse employees are not included and are prevented from networking
with other employees.
• Discrimination fear: In the minds of many people a fear of discrimination

exists which causes them to avoid being part of organizations employing
people of different nationalities, race, caste, etc., than theirs.
• Diversity not viewed as priority of the organization: The people may not
see diversity efforts by the organization as contributing towards the
organizational success. Hence, it is not viewed as a priority.
• Resistance to change: People tend to resist any change owing to lack of

trust, fear of failure and peer pressure.
• Efforts on the part of the leadership: This can help overcome the other
barriers by proper communication and management of any change
efforts and perceptions when the people feel threatened. Many times,
leadership efforts may be insufficient.
Outcomes of Ignoring Diversity

If diversity is ignored and not managed properly, it can have various
harmful effects in terms of loss of time, money, and efficiency. Some
consequences that can affect the overall organizational productivity and
peace include -
• Conflicts increase and hence, employee productivity goes down.
• Ignored diversity shrinks the talent pool as the organization is unable to

attract and retain talent with different skills.
• There is increased level of complaints and legal actions against the

organization both internally and externally.
• Poorly managed diversity leads to disillusionment in minority employees

and organization may lose valued people.
• Massive loss of investment occurs in hiring, training and retraining.
! !108
MANAGING DIVERSITY
Exhibit 4.4: Three skills every 21st century manager needs
The world of work has changed dramatically over the past decade. Companies
are more global and employee groups more diverse than ever before.
Organizational structures are less hierarchical and more collaborative. And
today’s networked offices are full of technological distractions that would have
been unimaginable to the 20th-century manager.
We asked experts in cross-cultural communication, information networks, and

the science of attention, what specific skills executives should cultivate to
tackle these new challenges. Here are their answers.
Skill 1: Code Switching Between Cultures

To work well with foreign colleagues, you may have to risk feeling inauthentic
and incompetent.
Skill 2: Wielding Digital Influence

As companies become less hierarchical, the effective use of online networks will
be crucial to success.
Skill 3: Dividing Attention Deliberately

Instead of battling distraction, embrace your brain’s proclivity for it.
Source: https://hbr.org/2012/01/three-skills-every-21st-century-manager-
needs
4.7 ROLE OF HUMAN RESOURCE FUNCTION IN DIVERSITY

MANAGEMENT
Diversity management is the responsibility of the organization at large and
calls for efforts from all ends of the organization. However, HR fiction plays
a highly critical role in managing diversity since it involves people
resources. The various aspects of the role of Human Resource function in
diversity management have been illustrated below -
1. Designing and implementing the various diversity initiatives, according

to the organizational needs, external environment, etc. Their role
involves designing and implementing the following –
• Diversity-based structures and policies,
• Diversity-based recruitment and selection
• Mentoring programs
• Work culture accommodation diverse needs
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MANAGING DIVERSITY
• Diversity training and development

• Multicultural teams
2. Maintaining compensation equality among the various types of

employees, particularly in true global organizations with people of
diverse backgrounds are working. HR must ensure there is no
differentiation happening with respect to pay or any other related
benefits owing to gender, caste, ethnicity, age, marital status, etc.
3. Building knowledge of different legal perspectives with respect to

diverse workforce. Global companies operating in different countries are
subject to different legal requirements regarding employment. HR
Managers must gain the knowledge in these areas to avoid any legal
hassles their organizations have to face owing to any kind of diversity
issues. Understanding different legal norms is highly critical even before
the organization decides to enter new countries and regions.
4. Ensuring information especially in the form of important documents is

available to all employees. For example, companies operating in
different countries maintain an intranet site in different languages
making it easy to understand for people belong to diverse language
backgrounds.
5. Establishing review mechanisms to follow up and checkup the on-going

diversity initiatives and understand their level of effectiveness. If need
be, must intervene and introduce course corrections to improve
effectiveness of the initiatives.
6. Developing a diversity framework of competencies and building them

through various training and development activities. These
competencies include – being aware of external pressure points, change
management, inclusion and global perspective, anticipating and
managing stakeholders etc.
7. Devise need-based actions to overcome the barriers to effective

diversity management, for example helping diverse employees be part
of informal social networks by providing various opportunities in terms
of meets, trainings, etc., for them to interact with others outside of
working space.
! !110
MANAGING DIVERSITY
4.8 EFFECTS OF WORKFORCE DIVERSITY ON INDIVIDUALS

AND GROUPS
Effects of Workforce Diversity on Individuals

At the individual level, various researches confirm that workforce diversity
has positive association with performance ratings and compensation. The
increase in workforce diversity leads to a more favorable attitude of
individuals towards diversity and thereby a better performance rating and
salary. In this regard demographic diversity plays a bigger role. However,
the effects of diversity on individuals is often overlapped with effects on
groups.
Effects of Workforce Diversity on Groups

At a group level, it has been seen, that diverse groups tend to outperform
their homogeneous counterparts in the following three skills –
• Problem solving – different people bring their different personal and

professional perspective, which affect the manner in which a group
approaches a problem and attempts to solve them. Hence, diversity of
different perspectives helps ensure the best possible solution.
• Conflict resolution – When in homogenous groups, conflicts are limited

and do not surface. However, in case of diverse groups the conflict are
unavoidable and differences are in the face and the group has no choice
but to resolve them in order to make the group work effectively towards
its goals. In order to do so, various innovative conflict resolution
techniques are applied, making the diverse group a better conflict
resolver in future.
• Creativity and innovation – The highly diverse experiences lead to

differences in people’s thought processes and the ability to generate new
ideas in such a group is enhanced compared to a non-diverse group. One
can expect a diverse group to display creativity and innovation in their
daily working, their processes, their work culture etc.
Activity
1. Having understood the various aspects of diversity, please explain what

do you think are the ways by which women can increase their own
participation and growth in workplaces.
! !111
MANAGING DIVERSITY
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
4.9 SUMMARY
This chapter begins by explaining the definitions of the three terms –
Diversity, Diversity at Workplace and Diversity management to help us
understand them better. This then highlights the various factors that are
affecting diversity including Globalization, Migration, Women at work,
Increasing value of older population, Political diversity, Different types of
employees, Caste or Racial diversity, Economic payback and Social
responsibility, Legal requirement and Capacity-building strategy. Then the
chapter explains the different characteristics of the diversity management
along with its various advantages and disadvantages. Further covered in
the chapter are the various diversity initiatives such as diversity trainings,
multicultural teams, etc., that organizations undertake to meet their
diversity objectives. Along with the initiatives, we also study the nine best
practices of diversity management. This chapter also explains the
numerous barriers to effectiveness of the diversity management initiatives
and highlights the consequences of ignoring diversity. Then it explains the
critical role of human resources function in diversity management. Finally,
the chapter covers the effects diversity has on individuals and groups.
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MANAGING DIVERSITY
1. Which of the following refers to an effect of diversity on groups?

(a) Problem solving
(b) Creativity and innovation
(c) Conflict resolution
(d) Strategic Thinking
2. “Dicrimination Fear” is ______________.

(a) An outcome of ignoring diversity
(b) A barrier to diversity management
(c) A best practice for managing diversity
(d) A diversity initiative
3. Which of the following is not an advantage of diversity management?

(a) Hidden discrimination
(b) Increased productivity
(c) Learning and growth
(d) Diverse experience
4. ´Diversity management is self-initiated´ implies ______________.

(a) Diversity management does not focus on only certain specific
groups that are to benefit according to laws
(b) Diversity management is a business strategy with a goal to tap
the full potential of the human resources for a competitive edge
(c) Diversity management is largely a voluntary principle adopted
by organizations and not enforced or coerced
5. “Informational diversity” includes ______________.

(a) education, functional tenure in the organization
(b) age, ethics, gender
(c) psychological differences in personality and attitude
(d) Values, attitudes and behaviours
Answers of MCQs: 1. - (d); 2. - (b); 3. - (a); 4. - (c); 5. - (a).
! !113
MANAGING DIVERSITY
REFERENCES
2. Handbook of Workforce Diversity – Alison M Konrad, Pushkala Prasad,

Judith Pringle.
3. http://adellefrank.com/blog/review-best-practices-managing-
organizational-diversity
4. Diversity beyond the Golden Rule – magazine article, Carnevale,

Anthony P.; Stone, Susan C. (Training & Development, Vol. 48, No. 10,
October 1994).
5. The Leadership Experience – Richard Daft.
6. Successful Diversity Management Initiatives: A Blueprint for Planning

and Implementation – Patricia Arredondo.
7. Managing the Diversity Revolution: Best Practices for 21st Century

Business; Article (2002) by Aronson, David.
8. Addressing Cultural Issues in Organizations: Beyond the Corporate

Context – edited by Robert T. Carter.

Armstrong.
10.The Talent Powered Organization – Peter Cheese, Robert J. Thomas and

Elizabeth Craig.
11.Diversity Management: Expert – Identified Leading Practices and

Agency Examples - GAO.
12.Organization Behaviour – Stephen P. Robbins & Timothy A. Judge.
13.Managing Diversity: Towards a Globally Inclusive Workplace – Michalle

E. Mor Barak.
14.Cultural Diversity Management in Organizations: The Role of

Psychological Variables in Diversity Initiatives – Alena Romanenko.  
! !114
MANAGING DIVERSITY
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !115
MEASURING HRM EFFECTIVENESS
Chapter 5
Objectives
• Understand the meaning of HR effectiveness measurement and its

significance
• Understand what are the various objectives of measuring effectiveness of
HR
• Understand the different approaches to measure HR and selecting the
most appropriate approach
• Understand the HR scorecard
• Understand the various challenges involved in measuring HR
effectiveness
Structure:
5.1 Definition and Importance of HRM Effectiveness Measurement

5.2 Objectives of Measuring HR Effectiveness
5.3 Approaches to Evaluating HRM Effectiveness
5.4 Selection of Approaches
5.5 HRM Measurement as Part of Balanced Scorecard
5.6 HR Scorecard
5.7 Measurement Challenges
5.8 Summary
! !116
5.1 DEFINITION AND IMPORTANCE OF HRM

EFFECTIVENESS MEASUREMENT
Definition
Defining Measurement – A group of observations expressed in numerals

aiding in establishing certainty, will be termed as measurement.
Human resource effectiveness measurement can be seen as to how the

HRM function contributes to the overall business strategy. HRM
effectiveness can be seen in following ways –
• Internal customer responses

• Impact of HRM functions
• Cost and benefit assessment of HRM initiatives
• Combination of all the three above
Compared to other functional metrics, HR metrics capabilities are not very

well developed within organizations. However, the focus has been to turn
as many HR outcomes quantifiable and thereby, measurable.
A Brief History of Metrics

Measuring work and workforce analysis is not new; it has a brief history
and measuring effectiveness of an organization’s employees can be traced
back to the days of Scientific Management (Taylor, 1911) –
• Methods of quantitative analysis and its use in decision making were

developed during the build-up of both men and materials occasioned by
World War II (1940)
• Further advancement in measuring occurred during the post-world war

industrial expansion in the United States that continued during 1970s.
Many of the most common HR Metrics in existence today were first
considered and developed (Hawk, 1967)
• Kaplan and Norton’s (1996) introduction of the balanced scorecard

further refined managers’ thinking about metrics. The balanced scorecard
recognizes the limitations of organizations’ heavy reliance on financial
indicators of performance. Such measures focus on what has already
happened rather than providing managers information about what will
! !117
happen. Balanced scorecards focus on developing leading indicators of

performance from several important perspectives, including customer
satisfaction, process effectiveness, and employee development, as well
as financial performance.
Exhibit 5.1: Key Questions to Ask

Before actually establishing metrics, there is a need to understand the
basic philosophy of such metrics in the overall context of the business
and the organization. The following questions must be answered:
1. What are the activities that are being subjected to the measurement
system?
2. What is the level of criticality for measurement systems in respect of
those transactions?
3. By tracking those activities and transactions, what business outcomes
can be achieved?
4. Is the business manager keen on that measurement?
5. Is it a priority for the HRM or business manager?
6. What is the history of such measurement?
7. On how many occasions in the past, did the business manager need
or use such data?
The above questions may not be comprehensive and the objective of

these questions is to make sure that the HRM keeps the measurement
exercise relevant to the business and that it is actually meeting a ‘felt
need’ of the business manager.
Importance of Measuring HRM Effectiveness

HRM effectiveness measurement is important for the following key
reasons:
• In order to decide the future investments to be made in HR.

• To improve existing HR processes.
• To confirm the alignment of HR processes with organizational strategies.
• To develop intellectual capital within the organization.
• In order to discontinue those activities that are effective.
• To be accountable to stakeholders and ensure employee and
management accountability.
! !118
• To reflect upon and better the overall climate and health of the
organization.
• To avoid the fads and “flavors of the month” approach within HR and
evaluate whether the new intervention is truly a quality improvement.
• To ensure that employees stay motivated and productive.
• To enhance HR’s image within the organization by linking its contributions
to organizational success.
• To ensure that the HR resources are managed effectively as well as
efficiently.
• To determine the effect of HR activities on people and their performance.
• To understand the impact of people on business performance.
• To bring objectivity in the understanding of HR outcomes.
5.2 OBJECTIVES OF MEASURING HR EFFECTIVENESS

The various objectives of HRM effectiveness measurement include -
• A system of HR effectiveness to be measured must be in place

• Must ensure accuracy of data collected, as it may impact outputs
• Ensure more than one metrics for any work practices, to ensure reliability
of data
• Able to link HR measurement output to business outcomes
• Measurement of HR effectiveness should generate meaningful and
actionable metrics
• The metrics should be easy to understand yet all-encompassing
• The measurement should cover as maximum HR functions as possible
Exhibit 5.2: HR effectiveness measures - Sample

“Employee turnover” metrics: HR performance: “Recruiting”
metrics:
• Cost per Hire
• Turnover Cost • Vacant Period
• Turnover Rate • New Hires Performance Appraisal
• Time to Fill • Hiring Manager Satisfaction
• Length of Employment • Turnover Rates of New Hires
• Financial Impact of Bad Hire
! !119
HR performance: “Retention” HR performance: “Training and

metrics: development” metrics:
• Overall Employee Turnover • Learning and Growth

• Preventable Turnover • Opportunities
• Diversity Turnover • On-the-job learning Content
• Financial Impact • Opportunities for New Hires
5.3 APPROACHES TO EVALUATING HRM EFFECTIVENESS
Over the years, numerous approaches have developed for measuring the
effectiveness of HR. Some approaches measure the whole of HR; some
measure a part of HR. Some approaches may be less effective while the
others may be more effective. Depending upon the context of organization
and measurement content, the different approaches may be adopted.
However, here we have bifurcated the approaches based on their use and
look at the most commonly used approaches by organizations and the
others not so common ones. We will also study the commonly used
approaches in detail.
Commonly used Approaches
HR Auditing
An HR audit is an analytical, investigative and comparative process that is
devised to evaluate the efficacy and efficiency of the HR function. It
involves a systematic research and data analysis that can aid to improve
the HR function. However, it falls short of a valid approach to measuring
the contribution of the HR function.
HR Benchmarking.
Benchmarking refers to comparing key measures representing HR output
with that of organizations seen to be having best practices. It began as a
quality movement, but, now is viewed as a learning process that can help
improve overall HR effectiveness.
Return on Investment.
Return on Investment (ROI) approach to HR measurement involves
comparing the cost of HR initiatives to the financial benefits achieved
through them. The cost of HR initiatives can be easily estimated, however,
! !120
there is some difficulty in determining financial benefits. Such benefits can

be either calculated using analytical techniques or through expert input
assigning monetary values in case of intangible benefits. The entire
evaluation is based on the basic financial equation, earnings divided by
investment, or net benefits divided by costs.
HR Cost Monitoring
Another approach to evaluate HR performance is to monitor HR costs and
compare with benchmark cost data from the industry. Examples of some
HR costs and cost ratios are costs per new hire, training costs per
employee, absenteeism costs, and turnover costs.
Other Approaches
HR Management by Objectives (MBO)

MBO was a technique introduced by Peter Drucker, in 1954 as a way to
“manage managers.” Later it started getting used to evaluate performance
of the organization and across the organization. And the MBO approach for
measuring HR became popular in the 1960s. The essence of this approach
is purposeful goal setting for periods of time; recording and monitoring of
goals. Under this approach, the HR function lays its goals and objectives
and then assesses it’s achievement against those goals and objectives.
These objectives reflect what the organization expects HR to achieve and
define the minimum level of required performance from HR function.
Employee Attitude Surveys

Employee attitude surveys aid the organization in measuring and
understanding their employees’ attitude, opinions, motivation and
satisfaction. They can also be used to assess HR function effectiveness.
These surveys measure satisfaction levels of employees regarding various
key HR issues and indicate any connections with organizational
performance. Such surveys may be essential but not sufficient and may be
supplemented by other approaches.
HR Case Studies
Under this approach, any successful HR practice or initiative is recorded of
specific audiences. For example, a report on successful implementation of
new performance management system may be presented to senior
management. Case studies can be spread with minimal expenditure and
are highly significant. Data on HR performance, employee views, or inputs
! !121
from participants of HR programs or practices are used in developing HR

case studies.
HR Key Performance Indicators

Key Performance Indicators (KPI) or Key Success Indicators (KSI), are
metrics that an organization define and measure achievement against
them. Similarly, key measures are defined to reflect the major efforts of
the HR function and may include accident frequency rate, absenteeism
rate, turnover rate, and average time to fill positions. KPIs can be in any
functional area of HR such as recruitment and staffing, compensation,
training, employee relations, etc.
Table 5.1: Sample KPIs for HR Manager

S. Key Result Key Performance Weight Target Actual Score
No Areas Indicators (KPIs) s of
(KRAs) KPI
Target
1 Recruitment Average turnaround

time from request for
till joining of resource
Performance rating of
new employees after 6
months
2 Training Training man days/

and year
Development
Percentage change in
employee performance
before and after
training
3 Performance Percentage of
and Career employees
Management participating in career
development program
Percentage of
employees who fully
complete their IDPs
! !122
HR Profit Center
Many researcher recommend that HR as a profit Centre approach is the
ultimate for HR effectiveness measurement. This approach means that the
traditional perspective of HR as a cost - center needs to be replaced by a
perspective of HR as an investment that can add to the bottom-line
actually operating as a profit center. The fundamental premise in this is
that the other functions be charged for the services of HR and have the
option to use external services instead of in-house HR services. In this
manner the HR function may be profitable or breakeven, or incur a loss.
Assuming the services are priced on a competitive basis the profit, the
profit represents a financial return on the investment allocated to the HR
function. Though profit center approach is the ultimate objective of many
HR functions, however, it has yet to be successfully applied.
HR Effectiveness Index
Some organizations are trying to build a single composite index of
effectiveness for HR. An early instance of one such an index was developed
and used by the GE in 1950s. This was known as Employee Relations Index
(ERI) and was based on eight indicators identified after a detailed study of
employee behavior. The indicators included were absenteeism, initial
dispensary visits, terminations, grievances, and work stoppages. Post that,
study and development of such an index continues. A comprehensive study
involved 71 organizations across eight industry segments. The index
developed represented a combination of the six measures; and important
correlations were developed between productivity and profit. The main
benefit of this approach is that a single composite index is easy to calculate
and comprehend. Other benefits include usefulness in making inter-
organizational comparisons, in establishing internal control and goal
setting. However, development of such an index is still being researched
and studied.
Human Capital Measurement or Human Resource Accounting

During the 1960s and 70s, a new and innovative approach to measurement
was popularized i.e. Human Resource Accounting (HRA). However, it was
not very widely accepted and the importance diminished by 80s. However,
it recently gained attention again as the concept of Human Capital
Measurement (HCM). This approach attempts to tag a value on employee
abilities and attributes and any improvements or changes in such values
are kept track of. The measures may be converted to values using
accounting principles. In this approach employees are seen as assets for
! !123
the organization and HR programs and practices are considered

investments. As organizations view knowledge and intellectual capital as a
competitive advantage, this approach of measuring HR is gaining
tremendous significance.
Now, let us look at few common approaches in detail -
HR Audits
The HR Audit is the main tool that most organizations use to measure the
effectiveness and efficiency of their HR functions. HR audits may be
conducted by an external audit agency or in-house teams. The HRM audit
facilitates:
• evaluation of the performance of the HR function

• compliance with laws, policies, regulations and procedures
• contribution by the HR function to the organization’s strategic objectives
• development of the professionalism of HR personnel by subjecting their
function to management scrutiny
• Improvement in the HR function’s image with management by
demonstrating its impact on profits.
HR Audit Process - Essential Steps

Though the process would vary from organization to organization, generally
it involves the following steps:
1. Initial briefing and orientation

2. Scrutinizing available information
3. Employee surveying
4. Conducting interviews
5. Information collation and synthesizing
6. Sharing and Reporting information
1. Initial Briefing and Orientation: The HR audit process begins with

the initial briefing and orientation step, which involves a preparatory
meeting of team members involved, for :
• Discussions on specific issues considered critical,

• Agreeing and deciding upon the audit procedures
• Building plans and schedule of audit.
! !124
2. Scrutinizing Available Information: This is the next step after

having laid down the plans and schedules of Audit, a scanning of all
available information and data pertaining to the employees, employee
handbooks and manuals, standard operating procedures (SOPs), guides,
various forms including appraisal forms, recruitment data, computer
capabilities and other related HR information.
3. Employee Surveying: After scrutinizing information, more information

is collected through surveying employees. This requires interviewing key
managers, functional experts, senior managers and employee
representatives, as well. The objective of this surveying is to gather
more data regarding existing people concerns, current positives and
strengths, projected needs and managerial philosophies regarding
human resource.
4. Conducting Interviews: The critical aspect while conducting

interviews is the kind of questions to be asked. Though the direction of
audit gets determined while scanning the data gathered, there must be
clarity which key factors of HRM is selected and related questions are
considered. These key factors may include –
• Succession planning
• Training and development
• Performance measurement
• HR planning
• Compensation and benefits
• HR communication
• Special management projects
• Human resource information systems
• Relationship management or employee relations
These are the wide range of topics of major interest pertaining to HRM
practices in any organization and questions on each of these factors must
be very carefully prepared either by the interviewer or by the audit team.
Next, what are critical in conducting interviews are process of the

interviews and the order of questions to be asked. One effective way for
this is ‘focus interview’. This involves interactions between a trained
interviewer and identified employees with focus on variety of questions
pre-planned and prepared in advance.
! !125
5. Information Collation and Synthesizing: Post the data collection

through secondary as well as primary sources, it is collated and
synthesized to present the -
• Present scenario
• Key priorities
• Employee pattern
• Issues identified.
This step also involves identifying future needs, developing appropriate

criteria for highlighting the HR priorities and putting forth specific
recommendations.
6. Sharing and Reporting Information: Similar to step one involving

discussions over meetings, the outcomes of the audit are discussed
through numerous meeting rounds with the managers and specialists.
During this process, the issues that are crystallized are shared with the
senior management via a formal report. Follow-ups are recommended
after an audit to find out whether the planned actions to resolve the
problems identified during the audit process are effective or not.
Audit Reports
Audit report is detailed elucidation of HR processes and practices
containing both acclamation for effective processes and practices and
suggestions for the improvement areas. The idea of giving credit and
discredit in the audit is a balanced approach ensuring greater acceptance
of the analysis and recommendations. There are various sections in the
audit report. These include –
1. Section for line managers

2. Section for specialist HR managers
3. Section for generalist HR managers.
1. Section for Line Managers: This section of the report summarizes

their HR objectives, responsibilities and duties. Some of the instances of
the duties include performance appraisal, interviewing applicants,
developing subordinates, motivating workers and handling employee
grievances. In this section, the people’s issues are highlighted along
with identifying the violations of policies, processes and employee
! !126
reactions. Finally, the report highlights the poor management practices

along with the recommendations to improve.
2. Section for Specialist HR Managers: This section handles feedback

to the functional specialist with the HR department that would be
managers who handle employment, training, compensation, and other
processes. The audit report section received by them highlights their
good and poor performance areas. For instance, one audit team
observed that many performance appraisal forms did not have the
rating calculations done. This information was provided with the
recommendation to have forms filled properly with all details, especially
the calculation of ratings and the steps to ensure such errors do not
happen in the future. The report also focuses on other feedback, for
instance, beliefs and attitudes of line managers about the HR specialists’
work.
3. Section for Generalist HR Managers: This section of the report

meant for generalist HR managers contains all the information provided
to both line managers and HR specialist’s managers. In addition, the HR
manager gets feedback about:
1. Attitudes of line managers and employees regarding the benefits and

services of HR department.
2. An analysis of the HR function’s objectives and plans to accomplish
them.
3. The various HR issues and their implications.
4. Suggestions for requisite alterations along with prioritization of their
implementation.
The information provided in the audit report provides the general HR

manager an overview of the function and rather than focusing on solving
problems randomly, the manager can focus on the identified areas having
highest potential for increasing the contribution HR department makes to
the organization. The critical and most important thing here is that the
audit acts as a future road map directing efforts and a reference for future
audits. After obtaining the information regarding the HR function’s existing
performance level through the audit report, the manager is equipped with
data to aid in preparing strategic long-term plans to upgrade critical
processes and practices of the function. Such plans include new objectives
for the function, which act as benchmarks for future audit processes.
! !127
Benchmarking
Benchmarking is the process of an organization comparing its key metrics
of performance with those of other comparative organizations. It forms
another approach to assessing HR performance and is an important
methodology for bringing about quality improvements in processes. This
approach allows the organization to learn and adapt ‘the best’ practices in
the functional area by the process of comparison of its performance on
specific activities with those in ‘best practice’ organizations. The
benchmarking process is increasingly being seen as very critical for
survival. However, it is not about just imitating, as each organization is
different from the other and the best practice may be directly applicable to
all organizations. Hence, the words of caution lies in “adapt” and not adopt
and to understand the real basis behind each practice and adjust it
according to specific needs of the organization and them implement.
Advantage of Benchmarking
Benchmarking can be seen as a way for an organization to become
competitive. By looking at what other comparative organizations are dong,
they can identify own areas of improvement. This approach also provides
the ways of improvement for the reorganization, with limited effort and
without reinventing the wheel. The change process gets accelerated with
help of available best practices models from similar companies within their
industry guiding the change process
Benchmarking Process
Listed below are the seven essential phases in benchmarking process –
Phase 1. Establishing the benchmark focus – During this phase, the

HR function lays down the specifics of the benchmarking project. For
instance what areas and related HR metrics to compare, which
organizations to be compared with, what research methodology to be used
etc.
Phase 2. Planning and research – During this phase, the HR function

plans the research and prepares the resources required for conducting the
benchmarking research. For instance designing survey questionnaire, look
for secondary data, seek cooperation from HR departments of other
organizations etc.
! !128
Phase 3. Collecting data – During this phase, the HR function collects

information from other companies and related sources with the help of
research tool devised in phase 2.
Phase 4. Data analysis – During this phase, the data collected is

analyzed with the use of various statistical tools and techniques in order to
examine and generate findings.
Phase 5. Recommending improvements – During this phase, the

analyzed data is used to identify areas of improvement and develop
recommendations for improvement based on the information collected
regarding HR practices of other organizations.
Phase 6. Implementation of recommendations – During this phase

the HR functions studies the feasibility of the recommendations and finally
implements those, which are feasible and most critical.
Phase 7. Monitoring progress – During this phase, the actions taken

towards improvement are kept under track with regular reviews and checks
on progress. This is done to ensure the impact of actions taken or change
are moving in the intended direction and the desired goals will be achieved.
Exhibit 5.3: The few words of caution with respect to

benchmarking!!
• This should not be a fishing expedition
• Must be careful and keep away from any legal hassles
• Must be prepared for a mutual exchange of information
• Involve the people who will be responsible for making the changes.
• Ensure that the data collected is kept confidential.
The process of benchmarking may be a one-time activity not linked to any

other benchmarking exercises the HR department undertakes or it could be
a cyclical process happening on regular basis building on each of the
benchmarking exercises as further standards of improvement.
Benchmarking requires a large alteration in attitudes and practices only
then it can be a powerful measurement and change tool for HR function.
! !129
The ROI Approach

The ROI process is a balanced approach to measure the bottom-line impact
of HR initiatives. It works well in organizations across the globe,
particularly in high budget and resource constraint situations today. This
approach is gaining importance owing to its ability to aid HR in displaying
the real value it can bring to the organization’s strategic objectives or can
impact the bottom line through its initiatives.
The ROI Framework

Building a credible approach for calculating the ROI in HR requires solving
and integrating several pieces of an evaluation puzzle, consisting of five
important elements as explained by Jack Phillips and Patricia Phillips –
• An Evaluation Framework (Types of Data)

• A Process Model (A Systematic Process)
• Operating Standards (With a Conservative Philosophy)
• Applications and Practice (A Quick Success)
• Implementation
An Evaluation Framework (Types of Data)

An evaluation framework required to define the different levels of
evaluation, which indicate how data are captured at different times from
different sources.
A Process Model (A Systematic Process)

The process is complex as data are developed at different times and
gathered from different sources. Each part of the process is outlined below
-
1. Evaluation planning - This focuses on critical planning issues and
develop appropriate objectives for the HR initiatives for each of the
levels of data collection. A data collection plan is developed to outline
the kind of data collected, the method of collecting data, data sources,
the timing of collection, and the various responsibilities for collection.
Details about separating the influence of HR initiative from other
influences, converting data into financial terms, reporting of analysis,
appropriate costing, qualitative measures and target audience for
information sharing, all form part of the ROI analysis plan.
! !130
2. Collecting data - Data is collected during and after the launch of the
HR initiative using various methods such as survey questionnaires,
interviews, focus groups etc.
3. Separate the effects of the HR initiative - This step tends to be

overlooked in most evaluations but is very important, as there would be
many other factors that may impact performance data after the
initiative has be operationalized. Strategies specifically identifying the
actual impact directly related to the HR initiative need to be used. Some
of the most common strategies include control groups, trend-line
analysis and expert estimation.
4. Converting data to monetary values - To calculate the ROI, business

impact data must be converted to monetary values and compared with
HR initiative costs. This need a value to be placed on each unit of data
of the HR initiatives.
5. Tabulating the cost of the HR program - The typical cost

components include initial analysis and evaluation, design cost for the
HR initiative, stakeholder time for the HR initiative, execution costs,
maintenance costs, administration costs, and evaluating and reporting
costs. The conservative approach suggest to consider all these costs.
6. Calculating ROI - The return on investment is calculated using benefits

and costs. The benefits to cost ratio is represented by the monetary
benefits of the HR initiative divided by its costs. In formula form it is :
BCR = HR Initiative monetary benefits / HR initiative costs
The ROI formula uses the net benefits of the HR initiative divided by the
costs. The formula is:
ROI = Net HR initiative benefits / HR initiative costs
The use of these formulas can be shown through an example – An

innovative sourcing method led to savings of Rs. 1,600,000 with a cost of
Rs. 800,000. Therefore,
BCR = Rs. 1,600,000 / Rs. 800,000 = 2
! !131
This shows, for every Rs. 1 of cost Rs. 2 was returned as monetary
benefits.
ROI = (Rs. 1,600,000 - Rs. 800,000) / Rs. 800,000 = 1
This shows, for every Rs. 1 of cost Rs. 1 was returned as net monetary
benefits, after covering the investment cost.
Thus, it can be seen that both BCR and ROI provide similar information
with slightly different angles.
For short-term initiatives, benefits are calculated over one year, while for
long-term initiatives the benefits are spread over several years. This
duration must be determined during the planning phase.
7. Identifying intangible benefits - The attempt while analyzing data

must be to convert all data to monetary values. In case, conversion
process gets highly subjective or inaccurate and outcome loses
credibility then the data must be regarded as intangible benefits with an
apt explanation.
8. Reporting results - This final step generates report, highlighting the

outcomes of the HR initiative and communicate it to the target
audiences. There are variety of reports and formats used to provide the
information such as a detailed impact study or a one-page summary
etc.
Standards–Guiding Principles
To ensure consistency in measurement, standard processes and operating
procedures must be implemented. Outlined in the exhibit 5.4 these guiding
principles make sure that a proper conservative approach is taken and the
principles build credibility and support among senior management who
evaluate the outcomes.
! !132
Exhibit 5.4: Guiding Principles
The following guiding principles should be used as operating standards when

implementing the ROI process:
1. When conducting a higher-level evaluation, collect data at lower levels.

2. When planning a higher level evaluation, the previous level of evaluation is
not required to be comprehensive.
3. When collecting and analyzing data, use only the most credible sources.
4. When analyzing data, select the most conservative alternatives for
calculations.
5. Use at least one method to isolate the effects of the program or project
6. If no improvement data are available for a population or from a specific
source, assume that little or no improvement has occurred.
7. Adjust estimates of improvements for the potential error of the estimates.
8. Avoid use of extreme data items and unsupported claims when doing ROI
calculations.
9. Use only the first year of annual benefits in the ROI analysis of short-term
solutions.
10.Fully load all costs of the solution, project, or program when analyzing ROI.
11.Intangible measures are defined as measures that are purposely not
converted to monetary values.
12.Communicate the results of the ROI Methodology to all key stakeholders.
Source: Proving the Value of HR: How and Why to Measure ROI, 2nd edition,
Jack J. Phillips and Patricia Pulliam Phillips
Application
A speedy application is very critical during any change or new process in
order to utilize optimally what has been learnt.
Implementation
For any tool to be successful, it must be appropriately utilized and
internalized within HR function. Any change tends to receive realistic or
perceived barriers from the key stakeholders and hence, must be dealt
with to overcome any resistance and successful implementation of change.
Implementation includes assigning responsibilities, developing requisite
skills, and building plans and setting goals. It also includes readying the
environment, team members, and support for such comprehensive
analysis. The challenge in implementation is that HR managers tend to
view ROI as an individual performance assessment rather than a process
improvement tool and hence, be unsupportive and vary of this approach. A
! !133
properly planned implementation, aids in overcoming barriers and meeting

challenges.
5.4 SELECTION OF APPROACHES

As seen, there are varieties of approaches available to measure the HR
performance using both qualitative and quantitative data from different
sources, the challenge lies in selecting the appropriate or appropriate mix
of measurement approaches that best suit the organization. The following
five factors drive the decision to select the measurement approaches:
Requirement of Senior Management

This is a critical factor as HR is an important function and any
measurement and evaluation system of this function must satisfy
the needs of leadership team. Their requirements and input can be
obtained through formal meetings designed for the same or through
interactions on various other occasions.
Specific Drivers for Enhanced Measurement in the System

Various reasons are demanding increased accountability from Human
Resource Function such as cost efficiencies, focus on productivity, legal
requirements, etc. In the organization such drivers also influence the
actual measures adopted.
Measurement Focus within the Organization.

There are organizations that thrive on data and measurement and their
data collection system type determines measurement focus, demand for
databased decisions, instruments used for data collection etc. A
high measurement focused organization tends to demand more
measurement from the HR than others. Accordingly, HR must select the
more data-driven analytical approaches of measurement in such
organizations.
Availability of Resources to Conduct Evaluation

Measurement requires time and investment, which may not be readily
available. Balance needs to be established between the need for evaluation
and the ability to provide resources for the same. Some organizations may
have dedicated measurement resources while others need to put additional
effort to generate such resources.
Desire of the HR Function to be Leading Edge
! !134
The level of desire of HR leads and senior management to put their HR

function in the leading edge category by focusing on quantifiable HR
contribution, determines their approach to HR measurement. This desire
for building HR reputation as business-aligned function, pushes the
processes of measurement and evaluation to higher levels.
Besides the factors mentioned above that drive the selection of the
approach to measurement, it must be kept in mind the main three types of
information which organization’s necessarily requires from HR, which will
also drive any measurement of HR function
Attitudinal information – This is data collected directly from people, which

involves their reactions and satisfaction levels with HR practices and
initiatives. This gives measure of their commitment levels towards the
organization and is very critical to monitor and take necessary actions.
Comparative information – This includes Information on key indicators,

such as HR costs, turnover, absenteeism, etc., that are compared to other
organizations. Such comparative data is very critical as it indicates where
the HR practices and processes stand vis-à-vis comparable organizations
especially the ones most admired and best practice organizations.
Cost/Benefit comparison information – Selected HR initiative, particularly

those highly critical, strategic and requiring many resources, need high
level of accountability. In such cases, the organization seeks the pay-off of
these initiatives, which can be measured through a cost benefit analysis,
such as ROI approach.
!
Figure 5.1: Essential Information from HR
! !135
5.5 HRM MEASUREMENT AS PART OF BALANCED

SCORECARD
The basic premise behind balanced scorecard is that a business will be

considered successful if it satisfies the needs of investors, customers, and
employees - the three key stakeholders of business. Investors need
financial performance mainly measured through economic profitability,
market value, and cash flow. Customers need quality and service is mainly
measured by market share, customer commitment, customer retention,
etc. Employees need healthy place to work mainly measured by employee
and organizational actions. As the firms use balanced scorecard to measure
the performance of their business, they face measuring the people factor
most difficult as employee metrics have less acceptability and low rigor
compared to other measures. Consequently, a lot of experimenting is
taking place in integrating people measures into the balanced scorecard,
with focus in three areas–productivity, people, and process.
Productivity Measures – These measures involve some indicators of

output per employee. Number of employees is taken from headcount, man-
hours, or compensation. Huselid et al., used revenue per employee as an
overall productivity measure, which varies from industry to industry.
Besides the overall productivity measures, specific industry productivity
measures may also be used as part of the balanced scorecard. For
instance, in banking productivity may be measured by transactions per
employee; manufacturing productivity may be measured by output per
employee; etc. The benefits of using employee productivity metric on the
balanced scorecard are that such measures are relatively simple,
comprehensible, and comparable. However, these measures may not be
true indicators of employee competence as the employee performance
might be impacted by factors other than employee’s competence. In
addition, it is difficult to translate productivity measures into specific
actions as they reflect outcomes not means.
People Measures – These measures as part of the balanced scorecard

may include what people do, how they feel, and what they know and link
to people’s response to the policies and practices of the organization.
• What People Do - Involves their behavior, which reflects their attitude.

The employee behavior can be tracked by numerous ways, and the most
common one include turnover, absenteeism, and time analysis. Turnover
! !136
is used to reflect employee commitment. Therefore, if employees are

unhappy with a business, they display their dissatisfaction by exiting
voluntarily. Absenteeism and grievances may also be indicators of
employee attitude reflecting their level of employee commitment.
• How People Feel - Morale or attitude surveys are used to understand

how people feel about their work. These surveys can be customized or be
generic. Such survey results are useful to be part of balanced scorecard
when the data is credible, longitudinal, and lead to action.
• What People Know - This measure of people identifies their knowledge

or competencies. It indicates the employee backup and depth.
Process Measures – These measures focus on the systems and dynamics

within the organization, the processes related to organization, and people
are tracked. The types of processes which may be tracked include
compensation and benefits management, performance management,
human resource planning, succession planning, employee communication,
etc. AT&T, GE and Motorola are extensively using the process measures as
part of the balance scorecard.
5.6 HR SCORECARD
On the lines of a balanced scorecard for business the HR scorecard has
been developed. HR scorecard is a mechanism to describe and assess the
value of people and people management systems are created within the
organizations and a mechanism to communicate key organizational goals
to the employees. This is an HR measurement system based on
organizational strategy and the capabilities and the behaviors of the
employees needed to implement that strategy. The scorecard provides
quick and instant feedback about the HR function’s performance The HR
scorecard includes the key HR measures as defined in the HR strategy and
the business strategy. Thus, organizational strategy defines the main
priorities for Human Resource.
The HR Scorecard has five key elements as indicated by Brian Becker &
Dave Ulrich (2001)
• The first element is what they called Workforce Success. It asks: Has the
workforce accomplished the key strategic objectives for the business?
! !137
• The second element is what they called Right HR Costs. It asks: Is our
total investment in the workforce (not just the HR function) appropriate
(not just minimized)?
• The third element they describe as Right Types of HR Alignment. It asks:

Are our HR practices aligned with the business strategy and differentiated
across positions, where appropriate.
• The fourth element is Right HR Practices. It asks: Have we designed and

implemented excellent HR management policies and practices throughout
the business?
• The fifth element is Right HR Professionals. It asks: Do our HR

professionals have the skills they need to design and implement a world-
class HR management system
5.7 MEASUREMENT CHALLENGES

Following are some challenges associated with evaluating HR performance
-
• Majority of HR measures report history, in terms of what happened in
previous quarter or previous year. HR measurement approaches are not
forward looking and hence, add limited value to decision makers.
• Most HR measurement approaches provide low impact cost metrics (cost

per hire, etc.). The concern of management is mainly with direct money
impact, i.e., revenues, sales, etc., which these measures are unable to
provide.
• HR measurement techniques do not provide estimates of risk associated

with impactful problems like key employee turnover, poor skill
development, weak hiring, etc.
• Results of HR evaluation in most cases do not generate options that lead

to specific actions on part of management. Moreover, such results are
unable to provide guidance tools that facilitate accurate decision making
and further change or action. This could be owing to the fact that HR
metrics do not capture the “why” part of the issues but only the “what”
part.
! !138
• HR measurement is mainly on broad areas covering large number of

parameters at one time, and measurement priority is not exercised. Such
a large scope of measurement can be time consuming and cumbersome
and may eventually cause confusion and frustration to the users of HR
measurement results.
• HR professionals identify HR measurement approach, with very limited

involvement by the business. This isolation may result in HR carrying out
measurement, which may not be relevant or useful to the organizational
outcomes.
• Most HR measurements at a point in time cover internal aspects of the

organization and may not present the real picture, since an organization
does not exist in isolation. Industry information in terms of competitor
hiring plans, interest rates, etc., if included simultaneously, will add
value.
Activity
1. After having understood the concept of measuring HR effectiveness and

the various approaches for measurement, which approaches according
to you would be most effective?
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! !139
5.8 SUMMARY
This chapter begins by defining the word measurement and then connects
it to HRM explaining what is meant when we say measuring HR
effectiveness. It further explains the significance of measuring HRM
effectiveness as well as the objectives an HR measurement should have.
Then the different approaches to measuring HRM are highlighted, which
include the commonly used and other not so commonly used approaches.
The commonly used approaches include HR audit, Benchmarking, HR cost
monitoring and ROI approach while the other approaches include HR MBO
approach, employee attitude surveys, HR Case studies, HR Profit centre,
Human Capital Measurement, HR KPIs and HR Effectiveness Index. Then
the chapter explains the processes in detail of the commonly used
approaches. It also provides us various parameters that help in
determining which approach to be selected while measuring HR
effectiveness. Also, highlights the significance of HR measurement as part
of the overall business balanced scorecard. The chapter further focuses on
the concept of HR scorecard as an ultimate measurement tool for HR
effectiveness. Finally, the chapter brings out the various challenges
associated with the measurement of HR effectiveness.
! !140
1. An employee productivity enhancing initiative that resulted in savings

worth ` 5,00,000, costed ` 1,75,000. What was the Return on
Investment?
(a) 2.86
(b) 1.86
(c) 2.76
(d) 1.76
2. “HR professionals identify HR measurement approach, with very limited

involvement by the business. This isolation may result in HR carrying
out measurement, which may not be relevant or useful to the
organizational outcomes.” State whether the statement is true or false.
(a) True
(b) False
3. Which of the following is a commonly used approach for measuring HR

effectiveness?
(a) HR Case Studies
(b) HR Profit Centre
(c) HR Audit
(d) HR Effectiveness Index
4. According to, Brian Becker & Dave Ulrich (2001), which one of the
following does not form a part of the five elements of HR scorecard?
(a) Right Manager
(b) Right HR professionals
(c) Right HR costs
(d) Right Practices
5. Which of the following is a factor that drives the selection of approach to

measure HR effectiveness?
(a) Requirement of senior management.
(b) Measurement focus within the organization.
(c) Availability of resources to conduct evaluation
! !141
Answers of MCQs: 1. - (b); 2. - (a); 3. - (c); 4. - (a); 5. - (d).
REFERENCES

Armstrong.
3. Proving the Value of HR: How and Why to Measure ROI – Jack J. Phillips
and Patricia Pulliam Phillips.
4. The HR Scorecard: Linking People, Strategy and Performance – Brian

Becker & Dave Ulrich.
5. Organization Behaviour – Stephen P. Robbins & Timothy A. Judge.
6. Effective HR Measurement Techniques – Maureen J. Fleming, Jennifer

Bross Wilson.
7. The Talent Powered Organization – Peter Cheese, Robert J Thomas and

Elizabeth Craig.
8. HR Business Partners – Ian Hunter.
9. Accountability in Human Resource Management – Jack J. Phillips.
10.The Balanced Scorecard: Translating Strategy into Action – Robert

Kaplan, David P. Norton.
11.Benchmarking for People Managers – John Bramham.
12.The Practice of Management – Peter Drucker.
13.How to Conduct a Human Resources Effectiveness Audit: A Systematic

Approach for Creating Value-added Human Resources Services –
Raymond A. Borbidge
! !142
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !143
FOUNDATION AND UNDERSTANDING OF EMPLOYEE BEHAVIOR
CHAPTER 6
FOUNDATION AND UNDERSTANDING OF
EMPLOYEE BEHAVIOR
Objectives
• Understand the biographical characteristics and abilities impacting

individual behavior
• Understand the role, emotions, moods and emotional intelligence play in
shaping individual behavior
• Understand the personality traits and values that impact individual
behaviour
• Understand the concept of learning and its influence on behavior.
• Understand the relationship of attitude with individual behaviour
• Understand what is perception and what affects perception formation
• Understand how perception and decision making are linked and how they
influence individual behavior
Structure:
6.1 Introduction
6.2 Biographical Characteristics and Abilities
6.3 Emotions and Moods
6.4 Personality and Values
6.5 Learning
6.6 Attitudes and Job satisfaction
6.7 Perception and Individual Decision Making
6.8 Summary
! !144
6.1 INTRODUCTION
Individual behaviors are shaped by our personalities and experiences.

Various individual level variables impact the employee performance and
satisfaction. These variables include biographical characteristics or personal
traits, ability, emotions and moods, personality, values, learning, attitude,
perceptions and decision making. Let us study the impact of each on
individual behaviors in the organizational context.
6.2 BIOGRAPHICAL CHARACTERISTICS AND ABILITIES

Biographical Characteristics
Personal characteristics such as age, gender, disability, race, length of
service and marital status are objective and easily obtainable from
personnel records. Let us look at the following biographical characteristics
in greater detail–
Age
Age of an individual affects behavior at work. The aspects of behavior that
gets impacted by age includes job performance, flexibility, judgement,
work ethics, level of commitment, absenteeism, productivity and job
satisfaction. Job performance, flexibility, absenteeism and productivity are
viewed to decline with age. Judgement, work ethics, level of commitment
and job satisfaction are seen to improve with age. However, these are
general trends pertaining to age and may not reflect individual cases.
Gender
There are not too many key differences between men and women. Those
that get affected include problem solving, analytical skills, competitive
drive, motivation, sociability and learnability. Further, it is also seen that
women tend to confirm to authority much easily than men and men are
more aggressive with a higher expectation to succeed compared to women.
As regards absenteeism and preference for flexibility in work schedule,
women score higher than men.
Tenure
The tenure of individual impacts the work-related behaviors like
absenteeism, productivity, and turnover and job satisfaction. Job
productivity and job satisfaction have positive relationship with tenure
while absenteeism and turnover are negatively related to tenure. Further,
no concrete link has been found between job performance and tenure.
! !145
Abilities
Ability can be defined as a person’s capacity to perform the various tasks in
a job. Abilities comprise of two factors –
• Cognitive ability is arranged in a hierarchy with general intelligence being

on the top. Other types include verbal, numerical, reasoning, deductive,
ability to see relationships, memory, spatial, and perceptual.
• Physical ability can be of two types first, motor skills (the ability to
manipulate objects) and second, physical skills (a person’s fitness and
strength).
The Ability-job Fit

Job performance is improved in case of a high ability-job fit.
• The type of ability is required depends on the requirements of the job.
For example, financial experts require strong data analytical abilities.
• The interaction between the individual’s ability and the ability
requirements of the job, determines the level of performance and not
any of them individually. Hence, when there is a poor fit, the
performance dips.
• In case the abilities of individual supersede the job ability requirement,
though the performance will be sufficient but will lead to boredom and
inefficiency resulting in low job satisfaction. This happens due to
frustration from non-challenging work.
6.3 EMOTIONS AND MOODS

Emotions and Moods - Defined
Emotions are intense feelings directed at someone or something.
Moods are less intense feelings than emotions and often (though not
always) arise without a specific event acting as a stimulus.
Differentiating between Emotions and Moods

1. Emotions are temporary than moods – emotions do not last for very
long while moods tend to be sticky as they are instant reactions to an
individual or an action. For instance, if someone criticizes you, there is
an instant reaction to be angry but it will go away immediately with the
cause, however, bad mood persists for few hours.
2. Emotions are directed towards a person or event whereas moods are
not. However, emotions can become moods when one loses sight of the
event or person responsible. In addition, moods can affect the degree of
emotion or in response to an event.
! !146
3. Unlike moods, emotions like anger and disgust are expressible.

4. Emotions may be more action-oriented while moods may be more
cognitive
The Basic Emotions

There are numerous emotions in the world including anger, happiness,
hope, enthusiasm, disgust, envy, fear, frustration, pride, surprise, sadness,
love, etc. However, most researchers have agreed upon six universal
emotions —
• anger
• fear
• sadness
• happiness
• disgust
• surprise
These six universal emotions are set up in succession as follows: happiness

— surprise—fear—sadness—anger—disgust.
The closer any two emotions are to each other on this succession, they are
more likely to be confused with each other. This implies that sometimes
happiness might be mistaken for surprise, being next to each other in the
succession. However, happiness can rarely be confused for disgust, being
extremely far from each other.
The Basic Moods
Positive and Negative Moods

Emotions can be classified as negative (Expressing an undesirable feeling
or assessment) or positive (Expressing a favorable feeling and
assessment). Being in the middle of positive and negative is being neutral,
i.e., being non-emotional. When we club the emotions into negative or
positive, we are considering them generically rather than of any specific
emotion. Hence, they become mood states when combined.
Positive Mood is a mood aspect comprising of positive emotions such as

excitement, self-assurance, and cheerfulness at the higher end and
boredom, sluggishness, and tiredness at the lower end.
! !147
Negative Mood is a mood aspect compromising of negative emotions of

nervousness, stress, and anxiety at the high end and relaxation,
tranquility, and poise at the low end.
Effect of moods – Positive or negative moods can impact our perceptions

with a risk of them becoming reality. There is a tendency of people to give
five times greater thought to negative emotions than to the positive ones.
Hence, people remember negative experiences more than their positive
experiences. This happens due to positivity offset, which means that when
nothing is happening (neither positive nor negative) people experience a
mildly positive mood. Positivity offset makes people view negative not
normal and positive moods becoming more common for people.
The Function of Emotions
• Emotions are critical to rational thinking - Ability to have emotions

helps people in rational decision making as emotions provide important
puts regarding the environment around us. Hence, using both thinking
and feelings are significant for making a good decision. For example, a
manager must make a decision to fire a team member only after
consideration of his and the team member’s emotions.
• Emotions drive Ethics - Feelings such as sympathy for the suffering of

others, guilt about our own immoral behavior, anger about injustice done
to others, contempt for those who behave unethically are examples of
people’s moral emotion and are not based on mere haughty reasoning. It
implies that, when people behave ethically, their decisions are partially
their emotions, and this emotional reaction will often be a desirable.
Various Sources of Emotions and Moods are -
• Personality Traits
• Timing
• Stress levels
• Social activities
• Quality of Sleep
• Workout
• Age
• Gender
! !148
• Personality Traits - People have inherent tendencies to experience

certain moods and emotions more often compared to others or
experience identical emotions with different degrees. People’s mood
intensity, i.e., degree of experiencing emotions varies, hence, emotionally
intense individuals experience both positive and negative emotions more
profoundly: if they feel sad, they feel extremely sad, and if they feel
happy, they feel extremely happy.
• Timing - People’s emotions and moods vary according to the days as

well as the time of the day. For example, people tend to be in their worst
moods beginning of the week and in their best moods later in the week.
In addition, irrespective of the when one goes to sleep at night or wakes
up in the morning; levels of positive mood tend to reach highest at
around the halfway between waking and sleeping. Negative mood,
however, displays minimal variation throughout the day.
• Stress - Stress has as negative correlation to moods, which builds over

time. Continuous stress can worsen moods leading to emotions that are
more negative.
• Social Activities - Social activities tend to enhance positive mood while

having minimal impact on negative mood. Various studies suggest that
more energetic or informal social activities like friend’s parties, skiing or
picnics with friends, etc., have a much stronger relation to positive
moods than formal or sedentary social activities like an office meeting or
watching TV with friends.
• Quality of Sleep - Sleep quality affects mood as it impairs decision

making rendering controlling of emotions more difficult. Sleep-deprived
individuals experience greater feelings of tiredness, anger and hostility,
hence, poor sleep hampers job satisfaction, as individuals feel tired,
irritable and lethargic at work.
• Workout - Some workout daily does impact moods, however the impact
is not very powerful. It does increase positive mood for particularly those
depressed.
• Age - Emotional experience tends to be better with age with people

experiencing lesser negative emotions. Hence, it is seen that duration of
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positive moods last longer for older people, and even their bad moods
fade away quickly.
• Gender - Difference in gender does lead to differences in experience as

well as expression of emotions. Females tend to be more emotional, i.e.,
more emotionally expressive, experience emotions more deeply and tend
to stick to emotions longer than men. They express both positive and
negative emotions equally deeply, except anger. In addition, males
express powerful emotions like anger, while females express more
powerless emotions like sadness and fear.
Exhibit 6.1: Emotional labor
Emotional labor is an employee’s expression of organizationally desired

emotions during interpersonal transactions at work. Even though there were
days when you did not feel cheerful, you knew management expected you to
be upbeat when dealing with customers. Therefore, you faked it. Every
employee expends physical and mental labor by putting body and mind,
respectively, into the job. Nevertheless, jobs require emotional labour, the true
challenge arises when employees have to project one emotion while feeling
another. This disparity is emotional dissonance and it can take a heavy toll.
Bottled-up feelings of frustration, anger, and resentment can eventually lead to
emotional exhaustion and burnout. Emotional labor creates dilemmas for
employees. There are people with whom you have to work that you just plain
do not like. Maybe you consider their personality abrasive. Separate emotions
into felt or displayed emotions. Felt emotions are an individual’s actual
emotions. In contrast, displayed emotions are those that the organization
requires workers to show and considers appropriate in a given job. They are
not innate; they are learned. How we experience an emotion isn’t always the
same as how we show it. Displaying fake emotions requires us to suppress real
ones. Surface acting is hiding inner feelings and forgoing emotional expressions
in response to display rules. Deep acting is trying to modify our true inner
feelings based on display rules. A health care provider trying to genuinely feel
more empathy for her patients is deep acting. Surface acting deals with
displayed emotions, and deep acting deals with felt emotions. Research shows
that surface acting is more stressful to employees because it entails denying
their true emotions. Displaying emotions, we do not really feel is exhausting,
so it is important to give employees who engage in surface displays’ a chance
to relax and recharge.
Source: Organizational Behavior – by Stephen Robbins and Timothy A. Judge
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Emotional Intelligence
“Emotional intelligence is the ability to perceive emotions, to access and
generate emotions so as to assist thought, to understand emotions and
emotional knowledge, and to reflectively regulate emotions so as to
promote emotional and intellectual growth.” - Mayer & Salovey, 1997
Emotional Intelligence (EI) is a person’s ability to (1) perceive emotions in

self and others, (2) understand the meaning of these emotions, and
(3) regulate one’s emotions accordingly in a cascading model.
Individuals who understand their own emotions and are proficient at

reading emotional cues tend to be more effective in dealing with people.
For example, if an individual is angry and is aware of why and how to
behave without exceeding the limits of decent behavior, he or she will be
very effective in managing his or her anger. Comparatively, someone who
is unable to understand his or her anger and the degree of reaction
warranted to stay within behavioral norms would be completely ineffective
in managing his or her behavior.
Positives of EI
• EI has an intuitive appeal
• EI can predict parameters that make a difference
• EI is biologically based
Negatives of EI
• Absence of a common agreeable definition
• Measurement is difficult
• Seen as personality with a new name
Emotion Regulation
Emotion regulation is to identify and modify the emotions you feel and
thereby, moods. Some example of activities that help in emotion regulation
- change your emotions include
• thinking more pleasing thoughts

• suppressing negative thoughts
• distracting yourself
• reappraising the situation
• engaging in relaxation techniques
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Emotions and Moods at Workplace

• Selection - While hiring, employers must consider EI as a factor,
specifically for high social interaction roles.
• Decision Making - Moods and emotions impact decision making, in the

sense Positive moods and emotions aid in decision making and negative
ones have the reverse impact. Positive moods or emotions encourage
individuals to use heuristics or rules of thumb to make good quick
decisions and enhance problem solving skills for superior solutions. On
the other hand, poor moods and emotions make people slow at
processing information weighing too many options rather than the most
probable one. Hence, consuming too much time searching for perfect
solution that may not exist.
• Creativity - Positive moods have positive correlation to creativity while

negative moods have negative correlation to it. Positive moods aid in
generating more original ideas and options. It is so, as people
experiencing positive moods or emotions tend to be more flexible and
open in their thinking, making them more creative. Thus to bring greater
creativity and innovation in the people’s work, managers must ensure
their people are happy by various means.
• Motivation - Various researches have displayed the significance of moods

and emotions on motivation. If an individual is in a positive mood owing
to appreciation of performance, he will be further motivated to perform.
In case of negative feedback, it cannot be said clearly, since failures have
different influences on people. Some take it as a challenge and are
motivated to do better, while others can get dejected and be
demotivated.
• Leadership - Emotional appeals in messages tend to make the leaders
effective, as emotional expressions are critical to people’s agreeing or
disagreeing to the leader’s message. Senior managers understand that
emotional content can help employees buy into their vision and accept
change. In fact, any distant vision offered through an unfeeling message
is less likely to be accepted or supported by employees. Further,
leadership’s enthusiasm and positive emotions energize the employees as
it conveys sense of confidence, competence, positivity and fun.
• Job Attitudes - People who had a satisfying day at work tend to be in a

better mood at home that evening, and vice versa. In addition, after a
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stressful day at work people have trouble relaxing after they get off
work, however, it has been observed that the effect of work on mood
generally wears out by next day.
• Deviant Workplace Behaviors - This implies behaving in manner that

violates organizational norms. Mostly, this can be attributed to negative
emotions. For instance, angry individuals look for others to blame for
their bad mood and elucidate others’ behavior as antagonistic. People
experiencing negative emotions, specifically, anger, tend to resort to
deviant behaviors. This results in a chain reaction since due to their
hostile behavior, others become antagonistic and negative mood prevails
throughout the organization.
Organizations and Employee Moods

Various actions on part of organizations and managers can work on
employee moods –
• Use of humor and light conversations to cheer up team members.

• Appreciating employees more often and offering small tokens of
appreciation for good work.
• Managers ensuring own positive moods, which positively impact
employee moods resulting in greater cooperation from them.
• Hiring team members with positive attitudes and moods that are
transpired within the team.
6.4 Personality and Values

Personality
“Personality is the dynamic organization within the individual of those
psychophysical systems that determine his unique adjustments to his
environment” – Gordon Allport
“Personality is the set of emotional qualities, ways of behaving, etc., that

makes a person different from other people” – Merriam Webster
“Personality as the sum total of ways in which an individual reacts to and

interacts with others. We most often describe it in terms of the measurable
traits a person exhibits” - Robbins
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Measuring Personality
The main reason for measuring personality is that various studies have
proved that a number of personality tests are beneficial in hiring decisions
and predicting right fit for the job. The two most commonly used modes of
measuring personality are –
• Self-report surveys involve self-assessment of individuals on various
parameters.
• Observer-ratings surveys involve an independent evaluation of an
individual’s personality by another observer such as co-worker, manager,
interviewer, etc.
In case of hiring or promotion decisions, both these modes are generally
used.
Personality Determinants
Various studies have revealed that an individual’s personality maybe a
result of heredity or of environment or both. Let us look at heredity more
closely.
Heredity
This refers to the genetic transmission of attributes from parent to
offspring. These attributes maybe physical, physiological and psychological.
The heredity approach states that the fundamental elucidation of an
individual’s personality is the molecular construct of the genes. When an
attribute is displayed in majority of the situations, they become the
personality traits of the individuals. One of the famous approaches
identifying and classifying primary traits that govern behaviors are the
Myers-Briggs Type Indicator.
The Myers-Briggs Type Indicator (MBTI)

MBTI is the most widely used personality assessment tool, having 100-
question personality test that asks individuals how they usually feel or act
in specific situations. Based on their responses people are classified on the
basis of four pairs of opposite traits -
• extraverted or introverted (E or I),

• sensing or intuitive (S or N),
• thinking or feeling (T or F), and
• judging or perceiving (J or P).
Each of these traits is defined as follows:-
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• Extraverted (E) versus Introverted (I) – Reflects where people prefer to

use their energies. Extraversion refers to spending time in the outer
world and people while introversion is spending time in your inner world
and images.
• Sensing (S) versus Intuitive (N) – Reflects where people pay more
attention for information. Sensing refers to focusing on information
through their own five senses. While Intuitive is focusing on the patterns
and possibilities people view in the information received.
• Thinking (T) versus Feeling (F) – Reflects how people like to take
decisions. Thinking refers to putting greater emphasis on objective
principles and impersonal facts. Feeling refers to putting greater
emphasis on personal concerns and the people involved.
• Judging (J) versus Perceiving (P) – Reflects people’s orientation to the
outer world which is how they like to live their outer life and what are the
behaviors others tend to view. Judging refers to preference of a more
structured and decided lifestyle while perceiving refers to more flexible
and adaptable lifestyle.
Four of these eight attributes (E or I, S or N, T or F, J or P) together

describe a person’s personality type. As people act on their preferred type,
they form their unique approach towards the world, towards information,
towards decisions, and towards others. For example, Introverted/ Sensing/
Thinking/Perceiving individuals (ISTPs) are independent logical, quiet
analyzers who are practical, adaptable, curious and problem solvers. The
MBTI has been widely used by organizations including Apple Computer,
AT&T, Citigroup, GE, etc. The value of MBTI largely lies in creating self-
awareness and giving career advice and may not be useful as selection
tool.
Other Key Personality Traits Relevant to Organizations

Core Self-evaluation is the basic assessment, individuals make about their
self-worth and capabilities. Individuals with positive core self-evaluations
tend to like themselves and see themselves as effective and capable. Such
people tend to perform better of ambitious goals, highly committed and
persistent.
Machiavellianism (Mach) – Suggesting the principles of conduct laid down

by Machiavelli marked by cunning, duplicity or bad faith. High in
Machiavellianism implies practicality and result-orientation.
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Narcissism – Refers to excessive interest in or admiration of oneself.

Narcissists require superfluous appreciations, have a high sense of
prerogative, and tend to be conceited. However, they may also more
charismatic emerging as leaders, but narcissism is undesirable.
Self-monitoring is a personality trait that makes an individual pay greater

attention to a social situation in order to alter their behaviors to fit that
situation. High self-monitors easily blend into social situations, appear
friendly and relaxed, are sensitive to social cues and are more concerned
with acting appropriately than being true to themselves. Low self-monitors,
acts themselves regardless of the situation, is less sensitive to social cues
and has a greater consistency between their attitudes and their behavior.
Risk Taking – The act of doing something that involves taking chances in
order to achieve a goal. This determines the time and information people
take to make a decision. High risk taking people tend to make more rapid
decisions and use less information than did the low risk takers.
Other-orientation – People have varying levels of other-orientation, i.e.,

that is thinking, caring and acting in accordance with the interests of those
who are other-oriented, feel more obligated to help others who have
helped them, whereas those who are more self-oriented will help others
when they expect to be helped in the future.
Values
Values are our fundamental beliefs or principles we use to define the mode
of conduct or a state of existence that is right, good and just. Values have
two attributes - content and intensity.
• The content attribute defines whether a mode of conduct or end-state of
existence is significant.
• The intensity attribute specifies level of this significance
The hierarchy of values, bases the content and intensity attributes form our
value system. A major part of the values, individuals hold is established in
the early years—by parents, teachers, friends, and others.
Significance of Values
Values lay the basis of people’s comprehension of other’s attitudes and
behaviors and influence their views about them. When people join
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organizations, they have value-based preconceived notions about right and

wrong, this clouds objectivity and rationality and impact attitudes and
behavior
Classification of Values
Values can be classified into Terminal and Instrumental Values -
• Terminal Values are desirable states of existence and signify the life
objectives of a person to be achieved through his or her behavior.
Terminal Values include things like happiness, self-respect, family
security, recognition, freedom, comfortable life, professional excellence,
etc.
• Instrumental Values are core values, permanent in nature, comprise
personal traits, signify preferable modes of behavior, and include values
like honesty, ambition, sincerity, independence, imaginativeness,
courageousness, competitiveness, etc.
6.5 Learning
Learning is defined as a relatively permanent transformation in behavior
(or behavioral tendency) occurring owing to individual’s interaction with his
or her environment.
It is a powerful incentive for many employees to continue in their
organizations. Learning tends to impact individual behavior significantly by
influencing abilities, role perceptions, motivation and knowledge. Learning
can also be referred to as modification of behavior through practice,
training, or experience.
The five important components of learning -

• Learning involves change which may be good or bad
• Not all changes reflect learning and to constitute learning, change should
be relatively permanent.
• Learning is reflected in behavior and any change in an individual’s
thought process or attitude not accompanied by behavior change, is not
learning.
• Behavior that is caused from maturity, disease, or physical damages does
not constitute learning.
• Any practice or experience must be reinforced for learning to occur and if
reinforcement does not happen, the behavior will eventually disappear.
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Torrington et al., (2005) stated that there are a number of ways people
learn and outlined the following as some of the effective means of work-
related learning techniques:
• Action learning
• Coaching
• Mentoring
• Peer relationships
• Learning logs.
Huczynski and Buchanan (2007) stated that changes in behavior can be

measured or quantified using learning curves that are strong learning
concepts valid for a wide range of situations. It is a diagrammatic
presentation of the amount of learning in relation to time.
Learning Theories and Organizational Implications

There are four theories of learning that provide different ways of individual
learning and implications for organizations to manage individual behavior.
Thus the four theories that explain how learning occurs. They are -
• Classical conditioning theory by Pavlov (1927)
• Operant conditioning theory by Skinner (1953)
• Cognitive theory by Torrington et al., (2005)
• Social learning theory by various including Albert Bandura (1977)
Classical Conditioning Theory - It is based on the premise that a

physical event termed a stimulus that initially does not elicit a particular
response gradually acquires the capacity to elicit that response because of
repeated pairing with a stimulus that elicits a reaction.
Operant Conditioning Theory - This learning theory states that people

learn by continually looking for ways to achieve more positive
reinforcement in terms of rewards and avoid negative reinforcement in
terms of punishment.
Social Learning Theory - Also known as observational learning, states

that people learn through observing others’ behavior, attitudes, and
outcomes of those behaviors.
Cognitive Theory - This theory not concerned with the relationship

between stimuli and responses, but with the plans that people choose and
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the way they adopt to pursue and how these plans are modified by
experience.
6.6 Attitudes and Job satisfaction

Definition
“Attitude is a settled way of thinking or feeling about something.” – Oxford
Dictionary
“Attitudes are evaluative statements—either favorable or unfavorable—

about objects, people, or events. They reflect how we feel about
something.” – Robbins
Attitude Components
There are three components of attitude –
• Cognition reflects the information or belief about something. For e.g.,

“My pay is low”
• Affect reflects the emotions or feelings about something. For e.g., “I am
unhappy about my low pay.”
• Behavior reflects tendency of an individual to behave in a particular way
towards something. For e.g., “I am going to quit because of my low pay.”
Cognition and affect are generally interwoven; it is the behaviors that

reflect the attitudes largely.
Cognitive dissonance is an uncomfortable feeling of arising from holding

conflicting thoughts at the same time. In such a situation involving
conflicting attitudes and behaviors, the feeling of discomfort leads to a
change in one of the attitudes or behaviors to reduce the discomfort and
restore balance. They change either their attitudes or behavior, or they
form a justification for the conflict.
Festinger proposed the Cognitive Dissonance Theory. Under this theory, he

stated that the inclination to minimize dissonance depends on three
moderating factors –
• Significance of causal elements - Motivation to minimize dissonance

is high when the attitudes or behavior are significant for the individual
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• Level of control - Motivation to minimize dissonance is high when they

perceive the dissonance to be owing to something they control.
• Benefits of dissonance - Motivation to minimize dissonance will be low

if the benefits from minimizing are trivial.
Attitudes and Organizations

The following three attitudes reflect the main job attitudes: job
satisfaction, job involvement, and organizational commitment
Job Satisfaction describes how content or satisfied employees are with their
jobs. Bases their assessment of it features, a person with a high level of
job satisfaction holds positive feelings about his or her job, while a person
with a low level holds negative feelings. Two approaches may be used to
measure job satisfaction. The single global rating that is a response to one
question. The second approach is a combination of several aspects of the
job like pay, supervision, etc., to give an overall job satisfaction score. The
numerous causes of satisfaction include enjoying the work or team
members, ample training and variety or the salary and benefits.
Job Involvement - The degree to which an employee is engaged in and
enthusiastic about performing their work. High level of job involvement
among people leads to lower absenteeism and turnover.
Organizational Commitment is the individual’s psychological attachment to

the organization and its goals. There is a moderate positive correlation
between organizational commitment and individual productivity and an
individual is likely to withdraw from work despite being dissatisfied, owing
to high organizational commitment.
6.7 Perception and Individual Decision making
Perception
Oxford dictionary defines perception as “the ability to see, hear,
or become aware of something through the senses” or as “an intuitive
understanding and insight”.
“Perception is a process by which individuals organize and interpret their
sensory impressions in order to give meaning to their environment.
However, what we perceive can be substantially different from objective
reality”– Stephen P. Robbins
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Factors That Influence Perception

Various factors define or contort perception, which can be either the
perceiver; in the object/ target of perception or in the context of
perception. Figure 6.1 shows the interplay of different factors influencing
perception of the target, lies in the center.
• Perceiver – The perceivers’ interpretation of the object is influenced by

the individual attributes, i.e., attitudes, personality, motives, interests,
past experiences and expectations.
• Target – Features of the target as well as its relationship with the

background also affect perception, loud people are more likely to be
noticed in a group than quiet ones.
• Context – Situational factors such as time, location, light, heat, etc., in

which the object is observed affects our attention and thereby
perception.
!
Figure 6.1: Factors affecting Perception
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Attribution Theory of Perception

Attribution theory tries to explain the manner in which we evaluate
individuals differently, depending on the meaning we assign to a given
behavior. The theory states that when we observe an individual’s behavior,
we try to establish its cause, whether internal or external. Internal causes
include behaviors that are perceived to be under individual’s personal
control. External causes include behaviors that are perceived to be
situationally forced on the individual. The determination of the cause
depends largely on three factors:
1. Distinctiveness is defined as whether there is a display of different

behaviors in different situations by the same individual. If the behavior
is found unusual it attached an external attribution and if not it will be
assessed as an internal attribution.
2. Consensus is defined as the same response of different people facing a

similar situation. If consensus in high, the behavior is attributed to
external causes and where the consensus is low, it is attached to an
internal attribution.
3. Consistency is defined as the same response of the same individual
over a period to same situation. The higher the consistency in behavior,
greater the chances are that it is attributed to internal cause and vice
versa.
Attribution Error – While making judgements about people’s behaviors we

tend to overestimate the impact of internal causes as compared to that of
external causes. This is referred to as attribution error. Self-serving Bias –
is referred to the tendency of Individuals and organizations to attribute
their own successes to internal factors such as ability or effort, while
attributing failure on external factors such as bad luck or unproductivity of
others.
Common Distortions in Perceptions

The shortcuts we use in judging others are frequently valuable; they allow
us to make accurate perceptions rapidly and provide valid data for making
predictions. However, they are not foolproof. They can and do get us into
trouble when they result in significant distortions.
Selective Perception is a continuous process in which an individual

perceives only what he or she intends to and ignores other perceptions or
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viewpoints. This happens, as individuals cannot subsume all that they

observe and can take in only certain stimuli and we choose these stimuli
basis our interests, background, experience, and attitudes.
Halo Effect refers to forming a general perception about an individual

based on a single feature such as intelligence or appearance. Hence,
general views tend to corrupt specific ones under halo effect.
Contrast effect is a phenomenon where individuals perceive greater or

lesser differences than are actually present because of prior or
simultaneous exposure to something with similar base characteristics, but
different key qualities. This means we do not evaluate an individual in
isolation.
Stereotyping is a widely held but fixed and oversimplified image or idea

of a particular type of person or thing. Judging someone because of a
stereotype is called stereotyping. Issues arise when we generalize
inaccurately or excessively. Stereotypes may be based on gender, age,
race, religion, ethnicity, weight, etc.
Link between Perception and Individual Decision Making

Today’s organizations being characterized by low formalization and greater
decentralizations have empowered employees across levels in decisions
making. Though individual decision making is highly significant, the
methods and quality of decision making is largely impacted by individuals –
• Decision making happens when a discrepancy exists between the current

state and some desired state, requiring us to consider alternative
courses. However, it may happen that one person’s problem may be
viewed by another as a satisfactory state. Thus the view of a problem
and hence, decisions making is required is a perceptual issue.
• Elucidation and assessment of information is required in decision making.

Our perception helps us weed out unnecessary data and focus on the
relevant. Further, identifying pros and cons of different alternatives is
also based on perception.
While making decisions, any distortions in perceptions can lead to biases in

analysis and conclusions.
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Decision Making in Organizations

Approaches to Decision Making - The Rational Model, Bounded Rationality
and Intuition
1. Rational Decision Making – Under such model, it is stated best

decision maker is rational and makes consistent, value-maximizing
choices within specified constraints. The rational decision making model
relies on a number of assumptions such as the decision maker has
complete information, has the ability to identify all the relevant options
in an unbiased manner, etc. People are usually content to find an
acceptable or reasonable solution to a problem rather than an optimal
one. There are six steps in the rational decision making model -
Steps in the Rational Decision Making Model

• Define the problem.
• Identify the decision criteria.
• Allocate weights to the criteria.
• Develop the alternatives.
• Evaluate the alternatives.
• Select the best alternative.
This requires large amount of data gathering, calculating weightages and

values across large number of criteria, costing, time, energy and money.
2. Bounded Rationality - Individuals have limited information-processing

capability that render impossible to assimilate and understand all the
information necessary to optimize. Hence, people respond to a complex
problem by reducing it to a readily understandable level. Since the
human mind is unable to formulate and solve complex problems with
full rationality, it operates within the bounded rationality. People build
simplified models having essential features of problems and then
behave rationally within the boundaries of the simple model. Process of
bounded rationality –
• Once the problem is identified, search for criteria and alternatives

begins. However, the criteria tend to be inexhaustible.
• Alternatives easy to find, clearly visible and familiar are identified.
• Alternatives are reviewed with focus on those similar to the current
option until an acceptable (need not be optimal) alternative is
identified.
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Such methodology may be more sensible than the traditional rational

decision making model, in some cases where fast-and-frugal problem
solving might be essential.
3. Intuition – It is the least rational way of making decisions. It is an

intuitive decision making and an inadvertent process formed from
refined experience. Intuition happens out of conscious thinking, depends
on integrated associations, is quick and involves emotions. However, it
may not be rational, but is not necessarily wrong or goes against
rational analysis. It may complement rational thinking and involving
intuitions sometimes improves decision making. However, on the
downside it is unmeasurable.
Common Decision Making Biases and Mistake
• Overconfidence Bias - Overestimating ones performance and ability

while making decisions can hamper decisions.
• Anchoring Bias - Tendency to basing a judgment on a familiar reference

point that is incomplete or irrelevant to the problem that is being solved.
This happens, as our mind tends to give a disproportionate emphasis to
the initial or familiar reference point.
• Confirmation Bias - Tendency to filter information in order to retain

only that information which conforms to one’s preferences, and ignore
that do not conform. Moreover, one accepts such information that
confirms the preconceived notions without questioning and is critical and
doubtful of information that challenges them.
• The Availability bias - Tendency to base views on readily available

information. Emotional events, being particularly, vivid, or recent events
tend to be more available in our memory.
• Escalation of Commitment - Tendency to stick to decision despite clear

evidence of it being incorrect. This happens, when individuals view
themselves as responsible for the failure or they have invested excessive
time and energy in making their decisions.
• Randomness Error - Tendency to believe one can predict the outcome

of random events. This adversely affects decision making as individuals
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attempt to cull out some meaning from random happenings, specifically,

when they imagine patterns that do not exist, convert them into
superstitious beliefs and act accordingly.
• Risk Aversion - Tendency to prefer a sure thing to taking chances. Such

individuals stick with the established work methods instead of trying out
innovative or creative methods. Continuing with strategy successful in
the past minimizes risk, but eventually leads to inactivity.
Factors Influencing Decision Making – Can be Individual or

Organizational
Individual Differences - individual differences create deviations from the

rational model.
• Personality – Individual personality influences our decisions, particularly,

achievement striving and dutifulness may affect escalation of
commitment. Achievement-striving people likely to escalate their
commitment, whereas dutiful people may not.
• Gender - Rumination in context of decision making, it refers to

overthinking problems. Women are found to ruminate more than men
leading to careful consideration of problems and choices, on one hand,
while on the other making problems harder with increased regret and
depression.
• Mental Ability - People with higher mental ability though are expected to
be less susceptible to common decision errors, they fall prey to
anchoring, overconfidence, and escalation of commitment. However, once
warned about errors, they learn quickly to avoid them. .
• Cultural Differences - Cultural backgrounds significantly influence

problem selection, analysis depth, importance of logic and rationality,
time orientation, belief in the individual abilities and preference for
collective decision making. These aspects affecting decisions vary across
cultures.
Organizational Constraints – Organizations can constrain decision

makers, creating deviations from the rational model
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• Performance Assessment – People get strongly affected by the

performance evaluation criteria.
• Reward Systems –People are influenced by organization’s reward system

as it shows choices with better personal pay-offs.
• Formal Regulations - Rules and regulations fixes individuals to act in the

intended manner and limit decision choices.
• System-imposed Time Constraints - Deadlines along with decisions are

necessary, making it difficult for individuals to gather all possible
information needed to arrive at an optimal solution.
• Historical Precedents – All decisions are made in a context, particularly

the historical background. Hence, the largest determinant of any budget
is based on previous year’s budget.
Activity
During an interview process, an interviewer is meeting 6 to 7 candidates
one after another without any gap in between two candidates. What kind of
perception error is he likely to make in such a situation? Explain why?
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6.8 SUMMARY
This chapter deals with the foundation of individual behavior and the
various factors that affect it. It focuses on understanding individual
behaviors as employees within an organizational set-up. The chapter
highlights how biographical characteristics and human abilities shape
individual behavior. It further explains the effect of emotions, moods and
the related concept of emotional intelligence on the employee behavior. In
addition, the chapter focuses on the individual personality shaping their
behaviors. Individual learning ways impact their action is shown the
chapter. It also explains how attitudes and values manifest themselves as
individual behavioral outcomes, particularly at workplaces. Finally, the
chapter talks about the individual perception, how they are formed and
how they result in actions on part of people. It highlights how perception
and individual decision making are related to each other.
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1. Which of the following is a source of moods or emotions?

a. Stress levels
b. Perception levels
c. Social activities
d. Quality of sleep
2. _________________ is the basic assessment individuals make about

their self-worth and capabilities.
a. Core Self-evaluation
b. Narcissism
c. Self-Monitoring
d. Other-orientation
3. “Confirmation Bias” means ________________.

a. Overestimating ones performance and ability while making decisions
can hamper decisions.
b. Tendency to prefer a sure thing to taking chances.
c. Tendency to base a judgment on a familiar reference point that is
incomplete or irrelevant to the problem that is being solved.
d. Tendency to filter information in order to retain only that information
which conforms to one’s preferences, and ignore that does not
conform.
4. Which of the following is not a technique of individual decision-making?

a. Rational Decision Making
b. Bounded Rationality
c. Brainstorming
d. Intuition
5. The degree to which an employee is engaged in and enthusiastic about

performing their work is known as ___________.
a. Job involvement
b. Job satisfaction
c. Organizational Commitment
Answers of MCQs: 1. - (b); 2. - (a); 3. - (d); 4. - (c); 5. - (a).
! !169
REEFERNCE
1. Emotional Intelligence: Why It Can Matter More Than IQ – Daniel

Goleman.

Armstrong.
4. Science and Human Behavior – B.F Skinner.
5. Organization Behaviour – Stephen P. Robbins & Timothy A. Judge.
6. Emotional Intelligence: Key Readings on the Mayer and Salovey Model –

Peter Salovey, Marc A. Brackett, John D. Mayer.
7. Becoming; Basic Considerations for a Psychology of Personality –

Gordon Willard Allport.
8. www.myersbriggs.org/my-mbti-personality-type/mbti-basics/
9. Essentials of Myers-Briggs Type Indicator Assessment – Naomi L.

Quenk.
10.Human Resource Management – Derek Torrington, Laura Hall, Stephen

Taylor.
11.Organizational Behaviour – David A. Buchanan, Andrzej Huczynski.
12.Conditioned Reflexes – Ivan Petrovich Pavlov, G. V. Anrep.
13.Social Learning Theory – Albert Bandura.
! !170
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
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EMPLOYEE MOTIVATION
Chapter 7
EMPLOYEE MOTIVATION
Objectives
• Understand what employee motivation is
• Understand the different types of motivation
• Understand what are the various early theories of motivation
• Understand the various contemporary theories of motivation
• Understand the application of employee motivation to organizational set-

up
Structure:
7.1 Defining Motivation
7.2 Different Types of Motivation
7.3 Early Motivation Theories
7.4 Contemporary Motivation Theories
7.5 Motivation from Concept to Application
7.6 Summary
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EMPLOYEE MOTIVATION
7.1 DEFINING MOTIVATION
One of the most frequently researched topics is motivation. It is not only

about working hard but is also one’s view of one’s own skills and abilities.
Some people appear to have the drive to succeed, whereas others do not.
A child who has trouble reading his schoolbook continuously for 15 minutes
may spend hours with his comic book without interruption. What is the
difference? The circumstances are different. Hence, when we look at the
concept of motivation, we must remember that motivation level varies
from people to people and from time to time.
“Motivation is a reason or reasons for acting or behaving in

a particular way” – Oxford dictionary
“The forces within us that activate our behavior and direct it towards one
goal rather than another.” – Phares and Chaplin (1997)
Thus, we view motivation as the processes that determine individual’s

vigor, direction, and diligence of effort toward achieving an objective. There
are three key elements while defining motivation, i.e., vigor, direction and
diligence. Vigor describes level of effort an individual puts. Most of the
times people refer to this element when they talk of motivation. However,
note that high vigor alone is not likely to result in desirable results unless
the effort is directed towards organizational gain. Hence, the effort quality
or the direction it takes along with vigor needs to be considered. Lastly,
motivation also involves diligence. This describes duration for which the
vigor is sustained. People who are motivated continue exerting effort long
enough to attain their target.
7.2 DIFFERENT TYPES OF MOTIVATION

After defining motivation let us look, at why the same objectives or goals
do not motivate everyone in the same manner. This is because motivation
may be Intrinsic or Extrinsic. It is critical to understand this as individuals
are not all same and the drivers of vigor, direction and diligence of effort
are not necessarily the same. This can be explained to large extent by the
two types of motivation mentioned before. Let us understand them in
detail.
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Intrinsic Motivation
Intrinsic motivation means that the motivational triggers lie within the
individual. An individual performs the task and gives it due vigor, direction
and diligence since its outcomes would be in line with his or her self-belief
or satisfies an intrinsic need. Thus, it can be said that intrinsic motivation
reflects the want to do something because it is enjoyable. If one were
intrinsically motivated, he or she would not seek out external rewards such
as praise or awards and perform the task for its own sake.
Thus, we can say that our deep-rooted desires including acceptance,

curiosity, honor, independence, power, social status, etc., tend to have the
highest motivational power. Below are some examples:
• Playing chess because you enjoy effortful thinking

• IT support professional working hard to learn as much as possible about
how users interact with various computer networks
• A musician writing quality music for his interest and pleasure rather than
for selling
Extrinsic Motivation
Extrinsic motivation means that the motivational triggers lie outside of the
individual. An individual performs the task and gives it due vigor, direction
and diligence since its outcomes would be in line with desires controlled by
an external source or satisfy an extrinsic need. It is important to note that
though the trigger is external but the outcome will still be rewarding for the
individual. Thus, it can be said that extrinsic motivation reflects the want to
do something because of external rewards such as awards, money, and
praise. If one is extrinsically motivated he or she may not enjoy the task
but is engaged in it to earn some external reward or avoid some
punishment.
Thus, we can say that extrinsic motivation is external in nature and the
best known and the most controversial motivation is money. Given below
are some examples:-
• Playing chess to win the gold medal

• IT support professional working hard to get a high performance rating
and hence, high salary increment.
• A musician writing quality music for selling purpose rather than for his
own interest and pleasure
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EMPLOYEE MOTIVATION
Extrinsic versus Intrinsic Motivation

The main difference between the two types of motivation is that extrinsic
motivation is due to external factors while intrinsic motivation due to
internal factors. Studies have found that the two type of motivation differ
in the manner in which they drive individual behavior.
Many believe that intrinsic motivation is better than extrinsic. This can be
because nothing can be more ideal than being self-motivated towards a
task that arises due to internal factors only. On the workplace, such people
require very little supervision to get work done. Also seen that, intrinsically
motivated individuals tend be on time, and are more likely to excel in their
work. Thus managers, seek to increase intrinsic motivation, which can be
achieved by greater autonomy, fun at work and encouraging creativity.
However, it may not always be the case that intrinsic motivation is the
best, even though it is preferable. In scenarios, where the task is critical to
be done and the expert may not have intrinsic motivation to do it, a strong
extrinsic reward may be necessary to get the task done. Thus, extrinsic
motivation may be useful in certain circumstances -
• Interest and participation in something critical may be induced by

external rewards
• Motivate to acquire new skills and knowledge by extrinsic rewards. Once
skills acquired may trigger intrinsic motivation to pursue the task.
• Feedback allowing people to know when their performance can come in
the form of external rewards and might act as reinforcement of
performance standard.
However, extrinsic motivation should be avoided when:
• The task is already intrinsically motivating for an individual.

• A fun activity, which may seem work and burden with extrinsic motivator.
In such cases, extrinsic motivators will work to reduce intrinsic motivation,

which is undesirable.
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7.3 EARLY MOTIVATION THEORIES

During the 1950s some employee motivation theories were formulated.
The four main early theories form the foundation of latter theories.
• Hierarchy of Needs Theory

• Theory X and Theory Y
• Two-Factor Theory
• McClelland’s Theory of Needs
Hierarchy of Needs Theory

This is the best-known early motivation theory and was proposed and
formulated by Abraham Maslow’s. According to Maslow, every human being
has a hierarchy of five needs:
• Physiological - Includes hunger, thirst, shelter and other bodily needs.

• Safety - Security and protection from physical and emotional harm.
• Social - Affection, belongingness, acceptance, and friendship.
• Esteem - Internal factors such as self-respect, autonomy, and
achievement, and external factors such as status, recognition, and
attention.
• Self-actualization - Drive to become what we are capable of becoming;
includes growth, achieving our potential, and self-fulfillment.
He states that though none of the needs is ever fully satisfied but a
substantially satisfied need may no longer motivate. As each need
becomes substantially gratified, the higher one becomes dominant.
According to Maslow, in order to motivate a person, one must figure out at
what level of hierarchy the person is presently and focus on satisfying
needs at or above that level, and ultimately moving up the hierarchy.
Further as per Maslow the five needs may be classified into higher and
lower orders. Lower order needs are starting needs including physiological
and safety needs. Higher order needs include social, esteem, and self-
actualization. Figure 7.1 depicts the Maslow’s Hierarchy of needs.
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EMPLOYEE MOTIVATION
!
Figure 7.1 Maslow’s Hierarchy of Needs
The theory states that higher-order needs are internally satisfied (within
the person), while lower-order needs are mainly externally satisfied
(through salary, goods and tenure). Accordingly, knowing at what need the
individual is helps in understanding what factors can motivate him/her to
perform.
Despite being intuitively logical and popular, Maslow’s motivation theory

faces criticism since there is very limited evidence showing need being
organized as Maslow has proposed, that unsatisfied needs motivate, or that
a satisfied need shifts motivation to a new need level.
Theory X and Theory Y

This theory has been proposed and formulated by Douglas McGregor.
McGregor because of his studying the dealings of managers with their
people, he concluded that managers’ views of human nature are based on
some assumptions that shape their behavior. He proposed the two distinct
views of human beings: Theory X - basically negative and Theory Y -
basically positive.
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Theory X - Under this theory, managers believe that people inherently

dislike work and must therefore, be directed or even coerced into
performing it.
Theory Y - Under this theory, managers believe people are able to see their
work as being as natural as play or rest, and hence, an average person can
learn to take responsibility.
Linking it to Maslow’s hierarchy, we can see that Theory Y states that

higher-order needs dominate people. McGregor himself believed Theory Y
assumptions as more valid than Theory X. However, there is very little
evidence confirming that either set of assumptions is valid or that behaving
according to Theory Y assumptions will result in more motivated people.
Two-Factor Theory
This theory has been proposed and formulated by Frederick Herzberg and
is called Motivation-Hygiene Theory. Herzberg believed that an individual’s
relation to work is basic, and that attitude toward work decides success or
failure. During his study, he asked individuals to describe situations when
they felt exceptionally good or exceptionally bad about their work. Because
of the significantly different responses, Herzberg understood that
dissatisfaction may not be the opposite of satisfaction and eliminating
dissatisfying features from a job does not necessarily make it satisfying. He
found that intrinsic factors such as advancement, recognition,
responsibility, and achievement to be related to job satisfaction since
respondents who felt good about their work tended to attribute these
factors to themselves, while dissatisfied respondents tended to attribute it
to extrinsic factors, such as supervision, pay, company policies, and
working conditions.
Consequently, Herzberg proposed a dual continuum: The opposite of

“satisfaction” is “no satisfaction,” and the opposite of “dissatisfaction” is
“no dissatisfaction.” As per Herzberg, the factors that lead to job
satisfaction are completely different from those that lead to job
dissatisfaction. Hence, managers who would like to reduce features that
can lead to job dissatisfaction may bring about a settlement, but not
motivation. He identified two types of factors –
• Hygiene factors – When these factors are sufficient people will be neither
dissatisfied nor satisfied but will not be motivated on the job. These
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factors include quality of supervision, salary, company policies, physical

working conditions, relationships with others, and job security
• Motivating factors – When these factors are provided in the job people
feel intrinsically rewarded and hence motivated on the job. These factors
are associated with work itself or outcomes derived from it such as
promotional opportunities, personal growth opportunities, recognition,
responsibility, and achievement.
The key criticisms of Herzberg’s theory include:
• Herzberg’s method may be limited as it relies on self-reports and when

things are good, individuals tend to take credit while they blame failure
on external causes.
• Herzberg’s reliability of data collection may be questionable since
respondents have to make interpretations leading to high degree of
subjectivity in their responses.
• Herzberg did not formulate an overall measure of satisfaction as an
individual may dislike part of a job yet find it overall satisfying.
McClelland’s Theory of Needs

This theory was developed by David McClelland and his associates.
It focuses on three needs:
• Need for achievement is the drive to excel, to achieve in relationship to a

set of standards.
• Need for power is the need to make others behave in a way they would
not have otherwise.
• Need for affiliation is the desire for friendly and close interpersonal
relationships.
McClelland and subsequent researchers focused mainly on need for

Achievement. As per the theory high achievers perform best when they
view their success probability as a 50% chance to succeed. They may not
be interested in high odds, as they get no achievement satisfaction from a
success by chance. They are also not interested in low odds (Success
probability too high) as they see no challenge to their abilities. They prefer
to set targets that require stretching to a reasonable extent.
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The relationships between achievements need and job performance as

stated –
• Jobs with high level of self-responsibility and feedback as well as an

average level of risk, motivates the high achievers. Such people may be
successful entrepreneurs managing either their own businesses or self-
contained business units in large organizations.
• A very high achievement need may not make a person a good manager.
Such people are more interested in personal success and not in
influencing others to perform.
• Other two needs, i.e., need for power and affiliation tend to be more
closely connected with managerial success. The performing managers
tend to have high power need than affiliation need, which tends to
increase their effectiveness as managers.
McClelland’s theory had the best research support among the early
theories. However, it had limited practical use as McClelland had argued
that these three needs are subconscious and may not be easy to measure.
7.4 CONTEMPORARY MOTIVATION THEORIES
All contemporary theories have reasonable degree of supporting

documentation that is also valid; however, this does not make them
unquestionable. They are called “contemporary theories” as they attempt
to represent the present thought explaining people motivation. The
contemporary theories include –
• Self-determination Theory
• Job Engagement
• Goal-setting Theory
• Self-efficacy Theory
• Equity Theory
• Interactional Justice
• Expectancy Theory
Self-determination Theory
This theory proposes that individuals prefer that they have control over
their actions, hence, any task undertaken by own choice will be more
motivating than a task imposed upon them. Self-determination theory
draws focus from cognitive evaluation theory, which hypothesizes that
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extrinsic rewards will reduce intrinsic interest in a task. Hence, when

people are paid for work, it appears something they have to do rather than
something they want to do.
Further, this theory also proposes that along with being driven by a need
for autonomy, people look for ways to achieve competence and positive
connections with others.
This theory’s major implications relate to work rewards. It is seen that in

certain situations even extrinsic rewards such as verbal praise and
feedback on competencies may improve intrinsic motivation. Even
deadlines and specific work standards do, too, provided people believe they
are in control of their behavior. Such extrinsic factors would decrease
motivation if people view them coercive. A recent branch of this theory that
is self-concordance considers how strongly people’s reasons for pursuing
goals are consistent with their interests and core values. If people pursue
goals due to an intrinsic reason, they are more likely to achieve them and
be happy even if they do not as the process of working for them is fun. On
the other hand, people who pursue goals due to extrinsic reasons (money,
status etc.) are less likely to achieve them and be less happy even when
they do. As such, goals are meaningless to them. This suggests that people
who work towards job targets for intrinsic reasons are more satisfied, feel
part of the organization and tend to perform high. This implies that
individuals must choose their jobs for intrinsic reasons mainly and
organizations must focus on both intrinsic and extrinsic rewards.
Job Engagement
Job engagement would mean the investment of individual’s physical,
cognitive and emotional energies into job performance. Most managers are
realizing that something deeper than merely liking or finding a job
interesting, drives performance. For over 30 years, the Gallup organization
has been using 12 questions to assess link of employee engagement to
positive work outcomes. Various studies have found that a highly
successful organization would have far larger number of engaged
employees than an averagely successful organization. Further, groups with
more engaged employees have higher productivity levels and lower safety
incidents and turnover.
What factors could lead individuals to be highly engaged in their jobs.
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• Level to which an individual finds it meaningful to engage in work, which

is partly fixed by job features and availability of essential resources for
effective work.
• Alignment of individual’s values with those of the organization.
• Inspiring leadership attitudes driving individuals towards a larger purpose
or mission
Criticisms of job engagement
• Concept is partly similar with job attitudes like job satisfaction

• There are evidences of positive relationships between job engagement
and work–family conflict as people may become so engaged in their work
that find family responsibilities as an obstruction.
Goal-setting Theory
In the late 1960s, Edwin Locke proposed the goal-setting theory that
states that the intentions to work toward a goal form a major source of
work motivation. This implies that goals aid an individual, determine what
is to be done and how much effort is required. This means specific, difficult
and accepted goals backed by feedback, drive performance -
• Goals specificity – This enhances performance than compared to

generalized goals, since specificity act as an internal trigger.
• Goals difficulty - When difficult goals accepted, lead to increased

performance compared to easy accepted goals. Further, if level of
acceptance stays the same, the higher the level of difficulty of the goal
the higher the level of performance. Though easy goals are easily
accepted, but once a difficult goal is accepted, the individual tends to put
higher effort in an attempt to achieve it. This is because -
❖ Challenging goals tend to catch our attention and thereby, helping
focus.
❖ Difficult goals energize us as hard work is required to attain them
❖ Difficult goals result in higher persistence to achieve them
❖ Challenging goals drive to find strategies that help perform more
effectively. Any struggle to resolve a tough issue, forces us to think of

a creative way.
• Goals Feedback on goal achievement results in higher performance

compared to lack of feedback. Individuals when receive feedback on the
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progress of goal achievement, they tend to perform better as they are

able to identify gaps in their actions. Thus, it can be said that feedback
guides behavior, however, mainly self-generated feedback rather than
externally generated feedback.
Besides feedback, three other factors that moderate the goals –

performance relationship:
• Goal Commitment
• Task Characteristics
• National Culture
Goal commitment: Though the reaction towards performance of a goal may

vary whether the individual had participated in goal-setting or not.
Nevertheless, it is clear, that when there has been participation, the
commitment towards the goal to be achieved is higher. Thus, the main
advantage of participation is that it increases acceptance of the goal as
wanted. Goal-setting theory assumes an individual is committed to the goal
and determined not to lower or abandon it, i.e., the individual (1)
believes he or she can achieve the goal and (2) wants to achieve it. Goal
commitment is most likely to occur when –
• goals are made public

• the individual has an internal locus of control
• goals are self-set rather than assigned.
Task characteristics: Performance is impacted very strongly by goals

themselves in situations when tasks are not complex, well learned and
independent. Although goal-setting has positive outcomes, however (1)
sometimes goals can be overeffective and (2) goals can generate single
focus and excluding others. Despite this, it has been universally agreed
that goals are powerful in shaping behavior.
National Culture: Setting specific, difficult and acceptable goals would

mean different in different cultures. It is known that group goals are more
effective in collectivist cultures than individualist cultures or assigned goals
generate greater commitment in high power distance cultures than in low
power distant cultures.
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!
Figure 7.2 Edwin Locke’s Goal Setting Theory
Exhibit 7.1: SMART Goals Concept

In line with the Goal-setting Theory, the concept of SMART goal has been
popularized. It is said that SMART goals tend to be motivating for the
employees. What do SMART goals mean?
SMART is an acronym, which refers to five specific features of the goals that
make them effective. By effective goals, it is meant that they generate drive for
effort and desire to perform. What are these features?
S – Specific
M – Measurable
A – Achievable
R – Relevant
T – Time bound
There are various other terms used for each of the letters by different scholars,
however, these are the most common.
Source: Various
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Self-efficacy Theory
This theory is also known as social cognitive theory or social learning
theory and was developed by Albert Bandura. Self-efficacy means a
person’s belief about himself being capable of carrying out a task. The
higher one’s self-efficacy, the greater the confidence one has in one’s
ability to succeed. Hence, in tough situations, individuals having low self-
efficacy tend to reduce their efforts or completely give up and those with
high self-efficacy attempt harder to complete the challenge at hand. Self-
efficacy creates a positive spiral where high efficacy leads to increased
engagement and performance and in turn further increases in efficacy.
People with high self-efficacy tend to increase effort and motivation post
negative feedback whereas those with low self-efficacy tend to reduce their
effort.
Albert proposed the following four ways to increase self-efficacy:
1. Enactive mastery – This is the most important way. It stands for

obtaining requisite experience with the task or job. Previous success in
the job drives confidence for future success in the same job.
2. Vicarious modeling – It refers to gaining more confidence as one views
others doing the task. This is most effective when one sees similarity
with the person being observed.
3. Verbal persuasion – This refers to gaining more confidence by others
convincing one of possessing skills essential to be successful.
4. Arousal – This leads to an energized condition in which individual is
“psyched up” and tends to perform better.
The key implications of self-efficacy theory, is training programs, which use

enactive mastery to make individuals practice and develop their skills and
abilities. Training programs are effective, as they tend to increase self-
efficacy. Another implication is that managers use verbal persuasion with
their team in order to motivate them to chase a target.
Critics of Self-efficacy theory believe that intelligent, conscientiousness,

and emotionally stable people tend to have much higher self-efficacy than
others do. In fact, they argue that self-efficacy is partly a by-product in an
intelligent individual having confident personality.
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Equity Theory
This theory is about equity and motivation and was proposed by J. Stacy
Adams. The theory states that people tend to compare their job rewards
with their inputs and arrive at an outcome-input ratio which they assessed
with respect to similar others in the system. If this ratio is equal to that of
others, a state of equilibrium or equity is perceived. A dissonance arises
when the ratio is unequal, the form of anger when perceived undervalued
and guilt when perceived as overvalued. Adams proposed that this
negative state of dissonance motivates people to act to eliminate it and set
in equity. This can get more complex by the reference of comparisons the
people choose. As per the theory, there can be four referent comparisons:
1. Selfinside - Own experience in a different position within the current

organization
2. Selfoutside - Own experience in a situation or position outside the
current organization.
3. Otherinside - Other individual or group within the current organization.
4. Otheroutside - Other individual or group outside the current
organization.
What points of reference a person uses depends on the available

information about the referent and its attractiveness to the person. Further,
the four moderating variables affecting the choice of referent and
comparison standards are gender, length of service, level in the
organization, and amount of education or professionalism. For instance,
women, who are typically paid lower than men in similar jobs tend to have
lower pay expectations than men for the same work but would use another
woman as a referent at a lower comparative standard.
Exhibit 7.2: Equity Theory
Outcome – Input Ratio Perception

Comparison
Outcome of A > Outcome of B State of Inequity owing to being

Input of A = Input of B overvalued
Outcome of A = Outcome of B State of Equity

Input of A = Input of B
Outcome of A < Outcome of B State of Inequity owing to being

Input of A = Input of B undervalued
Where A is the employee and B is the similar other person or referent.
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Based on equity theory, people who experience inequity tends to choose

one of six choices:
• Change inputs
• Change outcomes
• Distort perceptions of self
• Distort perceptions of others
• Choose a different referent
• Leave the field
One of the major concern with equity theory is that not all inequities lead
to motivation to act. These would be cases of a favorable inequity
perceived by a person or a case of a tolerant person unaffected by
unfavorable inequity.
Interactional Justice
Interactional justice describes a person’s view of the level to which he or
she is treated with dignity, concern, and respect. When individuals feel
treated in an unfair way, they tend to get back in hostile manner. Evidence
suggests that people’s view of injustice is more closely related to their
managers since they relate interactional justice or injustice to the
conveyor. There are three forms of justice- Interactional, Distributive and
Procedural. Distributive justice that is mostly related to satisfaction and
commitment of organization with outcomes like salary. Then, Procedural
justice which relates mostly to job satisfaction, employee trust, withdrawal
from the organization, job performance, and citizenship behaviors.
However, there is least evidence for interactional justice.
Studies suggest that supervisors tend to nurture people’s views about

justice, as they want compliance, a positive image, and justice at
workplace. To increase views about fairness, they need to understand that
they must be specifically sensitive to injustice in procedures when negative
information has to be shared. In such cases, it becomes imperative to
openly share information about allocation decisions, follow consistent and
fair procedures, etc., enhance the views of procedural justice. Also, when
addressing perceived injustices, supervisors must divert their efforts
towards the problem source. The need for retribution tends to reduce if in
case of unjust treatment people are provided opportunities to express their
frustrations.
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Expectancy Theory
This theory is developed by Victor Vroom and it argues that the strength of
our tendency to act in a certain way depends on the strength of our
expectation of a given outcome and its attractiveness. Practically, it means
that people tend to be motivated for exerting high level of effort only when
they expect it will result in good appraisal leading to rewards such as
increments, elevation, bonuses, etc. These rewards in turn will satisfy their
personal goals. This theory involves three relationships
1. Effort–performance relationship – Describes the estimation of the

individual regarding a level of effort leading to desirable performance.
2. Performance–reward relationship – Describes the extent of individual’s
perception about a performance level leading to achievement of desired
result.
3. Rewards–personal goals relationship – Describes the extent of
organizational rewards meeting individual’s personal goals and thereby,
their attractiveness to the individual.
!
Figure 7.3: Expectancy Theory
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EMPLOYEE MOTIVATION
Expectancy theory can help understand the reason behind they many
employees are not motivated and put the minimum efforts to get by. To
understand better we look at the theory’s three relationships as questions
people need to respond positively for their motivation to be maximized.
• First, if I put in maximum effort, will it be recognized in my performance

appraisal? For many people, the response maybe “no.” This could be as
their skill level may be deficient and despite increasing effort, they are
unlikely to perform high. Another explanation could be that people
correctly or incorrectly view that their manager dislikes them and hence,
expect a bad appraisal, irrespective of effort. This suggests that a
probable source of poor motivation is people’s perception that despite
hard work, likelihood of a good performance evaluation is low.
• Second, if I get a good performance appraisal, will it lead to

organizational rewards? In most organizations, rewards are based on
factors such as seniority, level of cooperation, or relationship with the
manager, etc. and not purely performance. In such a case, people believe
the performance–reward linkage as weak and demotivating.
• Finally, if I am rewarded, are the rewards attractive to me? An individual

puts effort with the expectation of receiving a promotion however, ends
up receiving only a salary hike. In another case, a person desires a more
interesting and challenging role but gets only an encouraging talk. Sadly,
it is wrongly assumed that all expect similar rewards and ignore how
differentiating rewards impact motivation.
In all the above situations, people’s motivation is not maximized.
Expectancy theory is a widely accepted contemporary theory. Despite that,

it has been criticized as its use being limited and its validity is more only
where people are able to clearly view effort performance and performance
reward relationships. Such cases are few, is argued by the critics,
rendering the theory highly idealistic.
7.5 MOTIVATION FROM CONCEPT TO APPLICATION

Though pay is one central means of motivation we consider— what we call
extrinsic motivation—it is not the only one. The other is intrinsic. We start
applying motivation concepts to practices such as employee involvement
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EMPLOYEE MOTIVATION
and skill-based pay. Why? Because it is one thing to know specific theories,
it is quite another to see how, as a manager, you can use them.
1. Motivating by Job Design –The Job Description Model

Evidence suggests a strong link between motivation and the work structure
or job design. Which means that the organization of different elements in a
job may enhance or reduce effort. Various studies also suggest what those
elements are. One of the significant model supporting this is the job
characteristics model.
The Job Characteristics Model (JCM) Developed by J. Richard Hackman and

Greg Oldham
According to JCM, any job can be described in terms of five core job
dimensions:
1. Skill variety is the extent of a job requiring multiple activities and

employee using variety of skills.
2. Task identity is the extent of a job requiring finishing a complete and

distinguishable piece of work.
3. Task significance is the extent of a job influencing lives or work of

others.
4. Autonomy is the extent of a job allowing an individual independence

and authority to plan his work and work methods.
5. Feedback is the extent to which one receives direct and clear

information about performance on the job
The first three dimensions—skill variety, task identity, and task significance
—together form a meaningful work an individual will perceive as important,
valuable, and worthwhile. All dimensions can be combined into a single
predictive index, called the motivating potential scores (MPS), and
calculated as follows:
MPS = Meaning fulness of work Autonomy Feedback
Meaningfulness of work = (Skill variety + Task identity + Task significance)

3
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EMPLOYEE MOTIVATION
Keeping motivation in mind, this model proposes that people receive

intrinsic rewards when -
• They learn, i.e., have knowledge of results

• They personally have performed well on a task, i.e., experienced
responsibility
• They care about the task and outcome, i.e., experienced meaningfulness.
The greater the presence of these three psychological states, the higher
will be people’ motivation, performance, and satisfaction, and lowered will
be absenteeism and attrition. The work with high autonomy gives people a
sense of personal responsibility towards results and with feedback, people
will know their effectiveness on the job. We can see from the formula, that
for any work to be high on MPS, it may be higher on minimum one of the
first three dimensions of meaningful work but must be high on autonomy
and feedback both. Ultimately, this model proposes that if jobs have high
score on MPS, performance and satisfaction will improve and consequently
absenteeism and turnover will reduce.
Redesigning Jobs for Higher Motivation

Job rotation, Job enrichment and Alternative work arrangements are
practical applications of JCM -
Job Rotation
To avoid excessive routinisation of work people may be shifted from one
task to other requiring similar skills and at the similar organizational level.
This is termed as job rotation. This aids in reducing boredom, enhancing
motivation, and building employee understanding of their work contribution
to the organizational goals.
Job Enrichment
This refers to enriching jobs by increasing the level to which the people can
control the planning, execution, and evaluation of their work. An enriched
job allows people carry out activities holistically, increase autonomy and
responsibility, and provides feedback self-improvement. Based on JCM, a
few guidelines are provided for enriching jobs. Combining tasks that put
together smaller tasks back to create a different and bigger work module.
Establishing customer relationships improves the direct relationships
between employees and their customers (internal or external). Vertically
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EMPLOYEE MOTIVATION
expanding jobs provides people with responsibility and control not formerly
available.
Alternative Work Arrangements

This is another approach to motivation, which involves changing work
arrangements with flextime, job sharing, or telecommuting. In case of
diverse workforce these may be effective in enhancing job satisfaction and
thereby motivation. Such diverse workforce may include dual-career
couples, single parents, and people caring for sick or aging family member.
• Flextime – Under this work arrangement people are required to work

certain number of hours per week but have the flexibility to vary their
timings within specified limits. It involves a common core, usually 6
hours, with flexibility band for the remaining hours per day. For example,
the core hours may be 10:00 a.m. to 4:00 p.m., with the office actually
opening at 7:00 a.m. and closing at 7:00 p.m. People are expected to be
at work in the core period and can accumulate their other 2 hours in the
flexible band. Under other flextime programs, people may accumulate
extra hours and use them as free day off each month. Flextime has
become extremely popular among working women with children. It helps
reduce absenteeism, improve productivity, decrease overtime expenses,
increase independence etc. that further enhance job satisfaction.
• Job Sharing – Involves sharing of the regular 40-hour-a-week job

among two or more people. For example, one individual may carry out
the same work from 8:00 a.m. to noon and the other from 1:00 p.m. to
5:00 p.m., or the two could work full day on alternate days. This helps
organization to use a larger pool of talent for a given job and for an
individual flexibility and motivation increase in turn increasing
satisfaction in a case where 40-hour-a-week job is not possible.
• Telecommuting – It is described as working at home for minimum 2

days in a week on a computer connected to workplace. Some of the well-
known organizations practicing telecommuting include AT&T, IBM,
American Express, Sun Microsystems etc. The positive outcomes for an
organization are larger candidate pool for selection, increased
productivity, low turnover, improved morale, and decreased space costs.
For individuals telecommuting can lead to greater flexibility and job
satisfaction and may come close to an ideal job for some.
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EMPLOYEE MOTIVATION
2. Motivating by Employee Involvement

Employee involvement refers to various participative processes that utilize
people’s input to enhance their commitment towards success of the
organization. If the employees are engaged in decision making which
impacts them and are provided with greater autonomy and control in their
work, they tend to get more motivated and committed to the organization,
thereby becoming more productive, and satisfied with their work. The two
major forms of employee involvement are participative management and
representative participation.
Participative Management
It is a joint decision making program where employees possess a
significant amount of decision making authority along with their managers.
Many times, it is used to boost morale and productivity in the teams, but it
will motivate employees only if they are involved in decisions that are for
their interests. Participative management also needs employees to have
the requisite competence and knowledge for making a fruitful contribution
to decision making and there must be trust and confidence among all
involved. With participative management, organizations may have higher
stock returns, lower turnover rates, higher productivity, etc., and
individuals may experience an impact on their productivity, motivation, and
job satisfaction. Evidence shows such effects on organizations and
individuals to be not very significant, hence, it cannot be said a sure way
for performance improvement.
Representative Participation
The objective of this is to redistribute power within an organization;
ensuring employees get an equal footing through a representation of a
small group of employees in decision making processes. The two most
common forms are Works Councils and Board Representatives. Works
Councils are groups of nominated or elected employees who must be
consulted when management makes decisions about employees. Board
Representatives are employees who sit on a company’s board of directors
and represent employees’ interests. Evidence suggests very little efficacy
of representative management in increasing motivation and thereby
organizational performance.
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Relationship between Employee Involvement Programs and

Motivation
Employee involvement uses various motivation theories. Theory Y, which is
basically positive links to participative management and Theory X, which is
basically negative, links to more autocratic management styles. In terms of
two-factor theory, employee involvement has the potential to trigger
internal motivation by enhancing growth opportunities, provide
responsibility, and high work involvement. A chance to be involved in
decision making help satisfy needs for responsibility, autonomy,
recognition, growth etc.
3. Motivating through Use of Salary

Salary may not be the primary factor leading to job satisfaction but it does
motivate people to perform. Many times organizations underestimate its
strength to retain top talent. Even if organizations recognize it importance,
they face various questions in terms of deciding the appropriate pay that
will lead to job satisfaction and thereby motivate them to perform.
• Deciding the compensation structure - Employees are compensated in

many ways. One of the ways to fix compensation is based on internal
equity, i.e., worth of the job to organization arrived at using job
evaluation. Another method is by establishing external equity as per the
market competitiveness using salary and benefits surveys. An ideal
salary structure would combine both these system. Some organizations
prefer to pay higher than market, while some lower as they may not be
able to afford the high market rates. Higher than market pay can get
organizations better qualified and highly motivated employees who tend
to stick to organization longer. Maintaining high pay than market may
increase the overall costs for the organization raising the prices of their
products and services. This trade-offs organizations have to strategically
decide.
• Rewarding through variable-pay programs - Many organizations have

moved towards pay for performance. Such programs include piece-rate
plans, merit-based pay, bonuses, profit sharing, gainsharing, and
employee stock ownership plans. Pay of an individual fluctuate basis the
performance. When compensation is linked to performance, people are
motivated to perform, as they perceive their earning as recognition of
their contribution rather than an entitlement. With time, compensation of
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EMPLOYEE MOTIVATION
high performers rises in relation to their efforts while that of low

performers almost stagnates.
• Developing a flexible benefits package – Flexible benefits customize

rewards allowing people to pick the compensation package that meets
their personal goals, this follows the expectancy theory. A flexible
benefits package does away with the “one-benefit-plan-fits-all” concept
and can accommodate diverse needs of people based on age, marital
status, spouses’ benefit programs etc. There is three most popular types
of benefits plans - modular plans, core-plus options, and flexible
spending accounts.
• Recognition programs – There is an increased use of contribution

recognition programs to motivate people. In global organizations having
centralized programs across various locations makes employees feel
valued irrespective of work location. However, recognition programs may
not always be motivating, as they may not always be viewed just and fair
by employees. When the criteria are objective like sales numbers, they
may appear fair to employees but when the parameters become
subjective, biases and favoritisms may creep in affecting the faith of
employees in the system.
Activity
1. A woman, who has recently joined back after maternity leave, is facing
issues managing her work timings in office due to pressures of childcare
and her work. This is affecting her work productivity and is demotivating
her. She is contemplating quitting her job to meet her family needs and
has a discussion with her manager regarding the same. Suggest what
would be the most appropriate way to motivate and retain this
employee.
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
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7.6 SUMMARY
The chapter explains the concept of people motivation, particularly,
focusing on workplace and employee motivation. Further, classifies
motivation into intrinsic and extrinsic motivation that helps understand
individuals better. It also explains which of the two types of motivation may
be useful when. The chapter then explains the different theories of
motivation. The chapter classifies motivation theories into early theories
and contemporary theories. The early theories include Hierarchy of Needs
Theory, Theory X and Theory Y,-Factor Theory and McClelland’s Theory of
Needs. The contemporary theories include Self-Determination Theory, Job
Engagement, Goal-setting Theory, Self-Efficacy Theory, Equity Theory,
Interactional Justice and Expectancy Theory. Finally, the chapter highlights
the various application of employee motivation in the organizational
context. It explains how employees can be motivated using motivations
through Job design, through employee involvement and through use of
salary.
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EMPLOYEE MOTIVATION

1. “An employee working late in office to impress his manager and receive
the recognition for most hard working employee.” This is an example of
which type of motivation?
(a) Intrinsic
(b) Extrinsic
(c) Both
(d) Neither
2. Theory X and Theory Y has been proposed by _______________.

(a) Abraham Maslow
(b) Edwin Locke
(c) Douglas McGregor
(d) J. Richard Hackman and Greg Oldham
3. Representative participation is a way of motivating through

_______________.
(a) Employee involvement
(b) Use of salary
(c) Job Redesign
(d) Use of delegation
4. Under Job characteristic model, “Meaningfulness of work” includes

_______________.
(a) Skill Variety, Autonomy and Feedback
(b) Skill Variety, Task Identity and Feedback
(c) Skill Variety, Autonomy, Task Significance
(d) Skill Variety, Task Identity and Task Significance
5. J. Stacy Adams proposed, which famous contemporary theory of

motivation?
(a) Equity Theory
(b) Expectancy Theory
(c) Goal-setting Theory
Answers of MCQs: 1. - (b); 2. - (c); 3. - (a); 4. - (d); 5. - (a).
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EMPLOYEE MOTIVATION
REFERENCES
1. Handbook of Motivation Science – James Y. Shah, Wendi L. Gardner.
2. Prin of Mgmt & Ob, 2E – Mukherjee.
3. Handbook of Competence and Motivation – Andrew J. Elliot, Carol S.

Dweck.
4. Self-theories: Their Role in Motivation, Personality, and Development –

Carol S. Dweck.
5. Motivation: A Biobehavioural Approach – Roderick Wong.
6. Motivation, Emotions, and Leadership: The Silent Side of Management –

Richard C. Maddock, Richard L. Fulton.
7. Rewards and Intrinsic Motivation: Resolving the Controversy – Judy

Cameron.
8. Organizational Behavior – By Don Hellriegel, John Slocum.
9. Human Resource Management – Derek Torrington, Laura Hall, Stephen

Taylor.
11.Conditioned Reflexes – Ivan Petrovich Pavlov, G. V. Anrep.
12.Social Learning Theory – Albert Bandura.
13.Becoming; Basic Considerations for a Psychology of Personality –

Gordon Willard Allport.
14.Human Resource Management – Gary Dessler.
15.A Handbook of Human Resource Management Practice – Michael

Armstrong.
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EMPLOYEE MOTIVATION
16.Science and Human Behavior – B.F. Skinner.
17.Organization Behaviour – Stephen P. Robbins & Timothy A. Judge.
18.Introduction to Personality – Phares, E.J., & Chaplin, W. F.
19.A Theory of Human Motivation – Abraham H. Maslow.
20.The Human Side of Enterprise – Douglas McGregor.
21.The Motivation to Work – Frederick Herzberg, Bernard Mausner, Barbara

Bloch Snyderman.
22.Human Motivation – David C. McClelland.
23.A Theory of Goal Setting & Task Performance – Edwin A. Locke, Gary P.
Latham.
24.The Study of Organizations – Daniel Katz, Robert Louis Kahn, J. Stacy

Adams.
25.Work and Motivation – Victor H. Vroom.
26.Work Redesign – J. Richard Hackman , Greg R. Oldham.
□□□ 
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EMPLOYEE MOTIVATION
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
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FOUNDATION AND UNDERSTANDING OF EMPLOYEE TEAMS
CHAPTER 8
FOUNDATION AND UNDERSTANDING OF
EMPLOYEE TEAMS
Objectives
• Understand what are groups, their development, their properties and

related concepts
• Understand what are teams and how are they different from work groups
• Understand what are the different types of teams
• Understand the various factors that make teams effective
• Understand the drawbacks of the team
• Understand the team communication and its various aspects
• Understand leadership in teams and its various aspects
Structure:
8.1 Groups, Group Properties and Decision Making

8.2 Teams – Differentiating from Work Groups
8.3 Types of Teams
8.4 Factors Responsible for Effectiveness of Teams
8.5 Drawbacks of Teams
8.6 Team Communication
8.7 Leading Teams
8.8 Summary
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8.1 GROUPS, GROUP PROPERTIES AND DECISION MAKING

Group may be defined as two or more interacting and interdependent
persons coming together for achievement of a common goal. According to
Oxford dictionary, a group is people or things that are located, gathered
or classed together. Groups can be -
• Formal defined by the design of the organization having specified tasks

and responsibilities.
• Informal are not defined by design of the organization and naturally
formed by people for satisfying their social needs.
Groups maybe formed due to –
• Similarities in values or features of the people

• Distinctiveness that people experience being part of a group.
• Status and self-esteem needs are met by associating with high-status
groups.
• Reduction of uncertainty reduction about themselves and their fitment in
the world.
Stages of Group Development

Most groups follow the four-stage model of development. This model
involves groups going through the following four stages –
• Forming – This being the first stage, there is high degree of uncertainty
regarding goals, design, and leadership of the group. Group members
are “testing the waters” to find out what behavior is acceptable and what
is not. The stage will be complete when members feel part of the group.
• Storming – This is a stage of conflict within the group since members
accept the group’s formation but tend to resist the restraints it poses on
their individual identities. In addition, there exists a conflict on the
leadership of the group. The stage will be complete with a formation of a
leadership hierarchy in the group.
• Norming – This is the stage when group experiences cohesiveness and
close relationships are formed along with a deep bond and sense of
group identity. The stage is complete with the structure crystallizing and
common expectations being set regarding appropriate member
behaviors.
• Performing – This is the stage when the group structure is operational
and accepted. The energy of the group shifted towards task performance
! !202
from understanding and familiarizing with each other. This would be the
final stage for permanent groups.
Though in principle groups would follow this four-stage model, however

deviations are very normal. In some groups storming and performing may
happen together while others, performing may happen after storming.
Even the pace at which groups move from one stage to another varies
drastically. In addition, there may be a fifth stage of Adjourning for
temporary groups, where the performing group dismantles after the goals
have been met.
!
Figure 8.1: Stages of Group Development
Group Properties
Some of the key properties of the groups are - roles, norms, status, size,
cohesiveness and diversity.
Group Roles
This refers to group of expected behaviors from an individual in a given
position in a group. People play different roles in different groups. Given
below are various dimensions of group role.
• Role Perception - It is an individual’s view of how one is supposed to

behave in a given situation that is formed by stimuli surrounding us such
as TV, social media, books, movies, friends etc.
• Role Expectations - Refer to way others view about how one should
behave in a given situation. At work, role expectations are defined
through psychological contract (an unwritten agreement that exists
between employees and employer). It lays down expectations of
management from employees and vice versa. If the expectations are not
met, it may result in low performance and satisfaction.
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• Role Conflict - Role conflict may arise when requirements of different

roles contradict each other. Various studies show conflict between family
and work roles as one of the most significant sources of stress for
people. Most people tend to be in various groups simultaneously, leading
to clash of expectations of one from the other.
Group Norms
Groups have fixed norms that refer to agreed behavioral principles among
members that convey what they can and cannot to do in given situations.
They affect individual behavior with limited external controls, once
members have agreed and accepted them. Norms vary from group to
group and can cover any facet of group behavior. Performance norm is one
of the most common norm that lays down clear indications about level of
hard work, level of output, ways of doing the tasks etc. Other norms
include appearance norms (such as dress codes), social arrangement
norms (such as whom to have lunch with), and resource allocation norms
(such as distribution of resources like equipment, salary etc.).
Conformity - Any group member wants acceptance from the group hence,
tends to conform to the group norms. Individuals experience immense
pressure to transform their attitudes and behaviors in order to conform to
the norms. The key reasons for conformity include need for accurate view
of reality as per group consensus, developing a meaningful social
relationship and maintaining a favorable self-perception. People do not
conform to the pressures of norms from all the groups they are part of.
They tend to conform to the important groups. This clearly implies that all
groups impose different conformity pressures.
Group Status
This a socially defined position or rank assigned to groups or group
members by others and is a major motivator. It can result in significant
behavioral outcomes when people view difference between their perception
of their status and others perception of their status.
Status characteristics theory – As per the theory status is determined

by any of following three sources:
1. Power an individual wields over others – People probably controlling the

group’s resources or having control over outcomes tend to be viewed of
high status.
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2. Individual’s ability to contribute to group’s goals – People whose

contributions are key to the success of the group tend to be seen of
high status.
3. An individual’s personal characteristics – People whose personal

characteristics are positively viewed by the group (good looks,
intelligence, money, or pleasing personality) tends to have higher status
than others do.
Status and Norms - Status tend to impact the power of norms and
conformity pressures. High-status tends to provide greater freedom to
deviate from norms than low status. Individuals with high-status are better
able to resist conformity pressures, need not care about the group’s social
rewards and enjoy greater freedom as long as their actions are not majorly
harmful to the group.
Status and Group Interaction - Status differences can be detrimental to

the group’s overall performance by inhibiting diversity and creativity of
ideas in the group. This is so because individuals with high-status being
more assertive tend to speak out more, criticize more, be more
commanding, and interrupt others. While the low-status individuals, who
may bring in creative ideas or possess expertise that may help the group
goals tend to participate less in group discussions.
! !205
Exhibit 10.1: The Hawthorne Studies
Full-scale appreciation of the influence of norms on worker behavior did not

occur until the early 1930s, following studies undertaken between 1924 and
1932 at the Western Electric Company’s Hawthorne Works in Chicago. The
Hawthorne researchers began by examining the relationship between the
physical environment and productivity. As they increased the light level for the
experimental group of workers, output rose for that unit and the control group.
But to their surprise, as they dropped the light level in the experimental group,
productivity continued to increase in both groups. In fact, productivity in the
experimental group decreased only when the light intensity had been reduced
to that of moonlight. As a follow-up, the researchers began a second set of
experiments at Western Electric. A small group of women assembling telephone
relays was isolated from the main work group so their behavior could be more
carefully observed. Observations covering a multiyear period found this small
group’s output increased steadily. The number of personal and out-sick
absences was approximately one-third that was recorded by women in the
regular production department. It became evident this group’s performance
was significantly influenced by its status as “special.” The members thought
being in the experimental group was fun, that they were in an elite group, and
that management showed concern about their interests by engaging in such
experimentation. In essence, workers in both the illumination and assembly-
test-room experiments were really reacting to the increased attention they
received. A third study, in the bank wiring observation room, was introduced to
study the effect of a sophisticated wage incentive plan. The most important
finding was that employees did not individually maximize their outputs. Rather,
their output became controlled by a group norm that determined what a proper
day’s work was. Interviews determined the group was operating well below its
capability and was leveling output to protect itself. Members were afraid that if
they significantly increased their output, the unit incentive rate would be cut,
the expected daily output would be increased, layoffs might occur, or slower
workers would be reprimanded. Therefore, the group established its idea of a
fair output—neither too much nor too little. Members helped each other to
ensure their reports were nearly level. The norms the group established
included a number of “don’ts.” Do not be a rate-buster, turning out too much
work. Do not be a chiseler, turning out too little work. Do not squeal on any of
your peers. How did the group enforce these norms? The methods included
sarcasm, name-calling, ridicule, and even punches to the upper arm of any
member who violated the group’s norms. Members also ostracized individuals
whose behavior was against the group’s interest.
Source: Organizational Behavior – Stephen P. Robbins, Timothy A. Judge
! !206
Status Inequity - To maintain equilibrium in a group, its members need

to believe the status hierarchy is equitable as a perceived inequity leads to
imbalance resulting in behavior such as resentment among lower-status
members, poor performance and high intentions to leave. Within a group,
if there is agreement on status criteria, possibility of concurrence of status
hierarchy exists as individual expect rewards in proportion to costs
incurred. However, individuals may be in conflict when they are part of
different groups that have different status criteria.
Group Size
Group size tends to affect group behavior but the impact depends on
dependent variables in consideration. Smaller groups tend to be good in
quick completion of task and encourage individuals to perform better, while
larger groups score better in problem solving. Hence, if the group goal is
fact finding, then a larger group (approximately size of 12 or more
members) will generate better outcomes, whereas a smaller group
(approximately 7 members) might utilize these facts into a productivity
output more effectively.
Social Loafing is the inclination of people to put lower effort while working
jointly than alone. This is a major concern regarding the size of the group
and it goes against the assumption that the group productivity must be at
least equal to the sum of the individual productivities. In the late 1920s, a
German psychologist Max Ringelmann compared the outcomes of individual
and group performance on a rope-pulling task. He found that though group
performance increases with group size, but the adding more members has
diminishing returns on productivity. Hence, larger group size, say of 5, may
be more productive than a group of four, but the individual productivity of
each member declines moving from four to five members. One of the
causes for social loafing could be the belief that others are not doing their
fair share and one reinstates equity by decreasing ones effort. Another
cause could be is the spreading of responsibility that means since group
outcomes cannot be attributed to any one person, the link between an
individual’s input and the group’s output is unclear. People tend become
free riders and rely on overall group efforts.
There are various ways to minimize social loafing:

1. Establish group goals to drive all member towards a common purpose
2. Enhance intergroup competition that leads to a shared outcome
! !207
3. Encourage peer evaluation where each person evaluates others

contribution;
4. Choose individuals with high motivation and preference for group work.
5. Design group rewards in part based on each member’s individual
contributions, if possible.
Group Cohesiveness
Different groups have different levels of cohesiveness, i.e., the extent to
which members are attracted to one another and motivated to be part of
the group. High cohesiveness could be due to members having spent large
amount of time together, the small size fosters high interaction, or some
common external threats brought members close. Cohesiveness impacts
group productivity and relation between the two depends on group’s
performance norms. High performance norms and high cohesiveness leads
to higher productivity than in low cohesiveness. However, with high
cohesiveness but low performance norms, productivity will be low. When
both cohesiveness and performance norms are low, productivity is in the
low-to-moderate range.
Group cohesiveness can be enhanced by
1. Having smaller group,

2. Ensuring agreement on group objectives
3. Increasing time spent together by members
4. Enhancing the group status and the viewed difficulty of becoming a
member
5. Encourage intergroup competition
6. Distribute group rewards rather than individual rewards
7. Physically isolate the group
Group Diversity
Group members are similar or dissimilar to each other to the extent. Group
diversity could be due to various factors age, ethnicity, gender, culture etc.
It could be both beneficial and detrimental to the group. Diversity may
increase group conflict, especially in the forming stage. However, if the
members are able to iron out their short-term differences, diversity
enhances creativity in the group. In addition, though groups where values
or views of members differ, a conflict may arise but a strong leader
focusing on group task and encouraging learning can reduce this conflict.
! !208
Group Decisions Making

Today, many decisions in organizations are made by groups, teams or
committees. There has always been a debate between which is better -
group decision making or individual decision making. Let us look at the
pros and cons of group decision making.
Pros of group decision making

• Produce complete data and information.
• Result in diverse and creative views with alternative approaches
• Lead to greater acceptance of a solution, particularly by group members
itself.
Cons of group decisions making

• Tend to take longer time to arrive at a solution.
• Owing to conformity pressures, effectiveness of decisions suffer as risk of
decisions, being made by low-to-medium ability more assertive members
exists.
• Lead to ambiguity in responsibility, as single member accountability is
diluted in group decisions.
From the above pros and cons, we can figure out that group decision
making scores high on effectiveness but low on efficiency. Hence, while
decision making organizations need to keep the trade-off in mind.
Groupthink and Groupshift

These two significant phenomena can affect group decision making
negatively.
Groupthink - Relates to pressure of conformity and is described as

situations in which group conformity pressures interfere with members
critically evaluating different, minority, or unpopular views. It tends to
hinder their performance. Some of the ways groupthink can be minimized
include ensuring a smaller group size, less than 10 members, group
leaders playing an impartial and encouraging role and appointing one
member to challenge the majority decisions.
Groupshift – It is also termed as group polarization and refers to the

manner in which members exaggerate their earlier stands while discussing
alternatives and arriving at a solution. Conservative individuals take on
more cautious stand, and aggressive individuals take on more risky stand.
! !209
What the final decision is depends on the dominant pre-discussion norm.

Reasons for polarization could include members becoming familiar and
comfortable in due course, members desire to show they are different from
others and no single member being accountable for the final choice.
Group Decision Making Techniques

These techniques may help in reducing the negatives associated with group
decision making. These techniques are – interacting groups, brainstorming,
the nominal group technique, and electronic meetings.
• Interacting group – This is the most common and traditional technique in

which members meet face to face in a discussion. It relies on both verbal
and non-verbal communication. This tends to become dysfunctional due
to groupthink phenomenon.
• Brainstorming – Involves around 6-7 people sitting around a table and

encourages all possible alternatives to emerge without any criticism. In a
typical brainstorming session, the group leader explains the issue at
hand and encourages all members to freely think and generate as many
ideas as possible, including the unusual ones, which are recorded for
future discussions. This helps overcome the groupthink phenomena. One
drawback of brainstorming is “production blocking” which implies that
while generating ideas in a group, many people speak at once and that
blocks people’s thought process and hinders idea sharing, which does not
happen in case of individual idea generation.
• Nominal group technique – This technique follows restrictive

interpersonal communication during the decision making discussions.
However, members are physically available but they operate
independently. Once the issue is explained to the group, the following
steps take place:
1. Without any discussion, each member independently pens down his/

her ideas.
2. Each member shares one idea with the group with no discussion
happening until all ideas are presented and recorded.
3. A discussion follows to clarify and assess the ideas
4. Finally, each member individually, without any discussions, ranks all
the ideas. The idea that receives the highest aggregate ranking leads
to the final decision.
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The main strength of the nominal group technique is that it allows a formal
group interaction yet does not constrain individual thinking and tends to
make up for the drawback of brainstorming.
• Electronic meeting – This a recent approach to group decision involves

blending the nominal group technique with electronic technology and is
called a computer assisted group. A maximum of 50 people sit around a
horseshoe-shaped table having series of networked laptops. Once
problem is explained, individuals type their responses into their
machines. Their comments and aggregate votes are eventually projected
on a screen. It lets individuals be honest; it is fast-paced and allows
many to contribute without disturbing others. Though electronic meetings
proposed various benefits however, various weaknesses have been
observed in practice such as reduced group effectiveness, time-
consuming and decreased member satisfaction.
8.2 TEAMS – Differentiating FROM WORK GROUPS

Teams are inseparable from organizational environment. The popularity of
teams is owing to various factors -
• Teams aide in better utilization of individual talents which helps

organizations to compete more effectively and efficiently,
• Teams have greater flexibility and responsiveness to change than
traditional departments.
• Teams are an effective in increasing individual participation in decisions
making and increase employee motivation.
Difference between Work Group and Work Team

Groups and teams are not the same; let us look at their various differences
here.
Work group is a group that connects mainly to share information and make
decisions in order to help each member perform within his or her
respective area of responsibility. The members of these groups may have
different goals to achieve and need not engage in joint work requiring
combined effort. Hence, the performance is a simple addition of individual
contributions with no positive synergy.
Work team is a group that connects to perform and achieve a common goal
through a collaborative effort. This coordinated effort generates positive
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synergy, i.e., individual efforts lead to performance greater than simple

addition of individual contributions. Table 10.1 highlights the differences
between work groups and work teams.
Table 8.1: Differences between a Work Group and Work Team

Work Group Work Team
Sharing of information among Collectively perform towards a
Objective
members common purpose
Limited feeling of ownership Strong feeling of ownership as
Ownership as low commitment towards high commitment towards team
group tasks tasks.
Mostly neutral and sometimes
Synergy Mostly positive
may be negative
Low interdependence among High interdependence among
Interdepen group members who operate team members who operate in
-dence highly disconnected with each high degree of coordination with
other each other
Formal No clearly defined roles or Clearly defined roles or
Structure behavioral norms behavioral norms
Accountabi Individual and mutual
Individual accountability
lity accountability
Skills and The skills and abilities tend be The skills and abilities tend to be
Abilities random and varied complimentary
This positive synergy is the very reason why organizations extensively use
work teams to build a potential to generate larger outputs with zero
increase in inputs.
8.3 TYPES OF TEAMS

The four most common types of teams in an organization are: problem
solving teams, self- managed work teams, cross-functional teams, and
virtual teams.
• Problem Solving Teams - Traditionally, problem solving teams were

formed by 5 to 12 employees of a department met for a few hours on a
weekly basis to discuss and identify alternatives of improving quality,
efficiency, and the work environment. Such teams had no authority to
execute their recommendations; they were purely formed for coming out
with ideas and suggestions connected to critical organizational issues.
Such teams are currently also used.
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• Self-managed Work Teams - Unlike problem solving teams such

teams are created to both resolve the issue and execute the solution and
be responsible for consequences. Self-managed work teams are teams
with 10 to 15 members performing highly interconnected tasks and
assume responsibilities of their previous managers. These responsibilities
include planning and scheduling work, allocation of work, decision
making, and solving problems and at times even select their own
members and assess each other’s performance. Thus in them,
managerial roles are reduced to nil. One major downside of self-managed
teams is poor management of conflict and in a conflict situation members
do not cooperate, struggle for power and team underperforms. In some
teams, higher absenteeism and turnover rates have been observed as
well.
• Cross-functional Teams - These teams made up of people from

different functional areas but same hierarchical level who have come
together to achieve a common goal. Many organizations like Starbucks,
Toyota, Honda, IBM, BMW, Cisco, etc., use this form of team on complex
projects. The advantage of cross-functional teams is that people from
diverse areas contribute to exchange information, create new ideas,
resolve issues, and coordinate complex projects. They are very difficult to
manage especially in their forming stages when members are learning to
work with diversity and complexity and overtime trust and teamwork is
built.
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Exhibit 8.2: Deviant Workplace Behavior
LeBron Hunt is frustrated by a co-worker who constantly spreads

malicious and unsubstantiated rumors about him. Debra Hundley is tired
of a member of her work team who, when confronted with a problem,
takes out his frustration by yelling and screaming at her and other
members. What do these three episodes have in common? They
represent employees exposed to acts of deviant workplace behavior.
Deviant workplace behavior (also called antisocial behavior or workplace
incivility) is voluntary behavior that violates significant organizational
norms and, in doing so, threatens the well-being of the organization or
its members. Few organizations will admit to creating or condoning
conditions that encourage and maintain deviant norms. Yet they exist.
Employees report an increase in rudeness and disregard toward others
by bosses and co-workers in recent years. In addition, nearly half of
employees who have suffered this incivility say it has led them to think
about changing jobs. Evidence demonstrates deviant workplace behavior
is likely to flourish where it is supported by group norms. Workers who
socialize either at or outside work with people who are frequently absent
from work are more likely to be absent themselves. What this means for
managers is that when deviant workplace norms surface, employee
cooperation, commitment, and motivation are likely to suffer. What are
the consequences of workplace deviance for teams? Some research
suggests a chain reaction occurs in a group with high levels of
dysfunctional behavior. The process begins with negative behaviors like
shirking, undermining co-workers, or being generally uncooperative. As a
result of these behaviors, the team collectively starts to have negative
moods. These negative moods then result in poor coordination of effort
and lower levels of group performance, especially when there is a lot of
non-verbal negative communication between members. One study
suggests those working in a group are more likely to lie, cheat, and steal
than individuals working alone. Groups provide a shield of anonymity, so
someone who might ordinarily be afraid of being caught can rely on the
fact that other group members had the same opportunity, creating a
false sense of confidence that may result in behavior that is more
aggressive. Thus, deviant behavior depends on the accepted norms of
the group—or even whether an individual is part of a group.
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• Virtual Teams - Such teams comprise of members physically spread

over different geographical areas, united together by computer
technology. The team members collaborate online—using wide-area
networks, videoconferencing, or e-mail. Such teams are so pervasive and
almost all teams today do some of their work remotely. One of the
challenges of virtual teams is that there is very less social rapport and
direct interaction among members; consequently, they are good at
sharing unique information but overall less information. In order to make
virtual teams to be effective, it must be ensured that
• There is trust among the team members

• Progress of the team is reviewed and tracked regularly
• Team’s combined efforts and outcomes are publicized throughout the
organization
8.4 FACTORS RESPONSIBLE FOR EFFECTIVENESS OF
TEAMS
The various factors responsible for making teams effective are -
• Adequate Resources - The various resources any team may require

include information, equipment, staff, etc., and these resources may be
available externally. Availability of adequate resources, helps team to be
effective in their work and any scarcity leads to reduction in
effectiveness. Teams being part of larger organization system rely on the
organizational support for resources.
• Leadership and Structure - For smooth functioning of the team,

leadership and structure is required. This ensures that there is
agreement on norms and division of work within the teams and all efforts
are synergistically coordinated towards common goal. This leadership
and structure is provided either by the management or by members
themselves.
• Climate of Trust - Trust among the team members and in the

leadership makes the teams effective. This interpersonal trust fosters
cooperation, bonding and self-drive to perform. Trust lays foundation of
leadership and allows team feel one with its leader’s goals and decisions.
• Performance Evaluation and Reward Systems - Effectiveness of the

team will be high if team members are made both individually and jointly
! !215
accountable. This can be done by having a group performance evaluation

and reward system, in addition to Individual performance evaluations
and incentives. Having only individual systems might interfere with the
development of high-performance teams.
• Abilities of Members - Team effective performance depends on the

knowledge, skills, and abilities of the members. Even though a team’s
performance is not the simple sum of each members’ abilities, but these
abilities do define the limits for performance and effectiveness. High
ability teams are able to increase effectiveness by evenly distributing the
workload, by being adaptable to changing scenarios and under the
guidance of an able leader.
• Personality of Members - The individual personality traits affect team

performance in addition to individual behavior. Presence of certain
individual personality traits that impact the team performance positively
include conscientiousness, openness to experience, agreeableness,
personal organization, cognitive structuring, achievement orientation,
and endurance.
• Allocation of Roles - All teams have varied requirements and it must be

ensured that members chosen fill in all the various roles. This requires
allocating roles appropriate where capable members occupy most critical
roles. Teams select members basis their skills and preferences keeping in
mind the roles within the teams. In order to enhance the team
coordination, leaders must consider strengths of each member and their
preferred style while allocating work.
• Diversity of Members - Different forms of diversity have different

impacts on team’s effectiveness, but most cases tend to impact
negatively. However, a strong leader can drive the performance of
diverse teams providing an inspirational common goal and focus on work
tasks. Cultural diversity to some extent may have a positive impact on
diverse team’s performance with initial adjustment issues.
• Size of Teams - Smaller sized teams (5-9 members) tend to have

higher group effectiveness. Hence, it is recommended using the smallest
possible team size required to complete the task. Creativity in the team
may be achieved with 4-5 members and adding more members may
exponentially increase coordination issues. Excess members tend to
! !216
reduce group cohesiveness, and mutual accountability, increase social

loafing communication issues.
• Member Preferences - When people who prefer to work alone are

required to team up, there is a direct threat to the team’s morale and to
individual satisfaction. When selecting team members, managers should
consider individual preferences and include people who prefer working in
a team.
• Common Plan and Purpose - Establishing the shared mission and plan
is key to the effectiveness of a team. Thus, members of effective team
tend to devote time and energies towards arriving at a shared plan and
purpose, giving them a sense of direction, guiding them towards the
common objective under all circumstances. Effective teams tend to be
strong in their review mechanisms and they make necessary adjustments
in their plans with changing situations
• SMART Goals - Effective teams must set SMART goals for themselves.
SMART implies specific, measurable, achievable, and relevant and time
bound. Such goals ensure clear communication and help maintain focus
on results. .
• Team Efficacy - Team efficacy implies the degree of confidence and

belief to succeed the team has in itself. Earlier successes enhance
confidence for future successes resulting in motivation to work harder.
Team efficacy may be increased helping it achieve small successes
building confidence and providing training to improve skills and abilities.
• Team Conflicts - Contrary to the belief not all conflicts in a team are
necessarily undesirable and it is seen that conflict and team performance
have a complex relationship. Though relationship conflicts (interpersonal
incompatibilities) may be dysfunctional, however, task conflicts
(disagreements in task content) tend to be productive by stimulating
discussions, critical evaluation of alternatives and better decisions. It can
be said that neither too much nor too little conflict is desirable for a
team’s performance. Resolution of team conflicts helps to differentiate
between effective and ineffective teams. In case of effective teams,
resolution is based on discussions of concerned issues, while ineffective
teams tend to focus on individual personalities and mannerisms.
! !217
• Social Loafing - Social loafing can negatively impact the effectiveness of

the team. Effective teams minimize this tendency by making members
individually and jointly accountable. Hence, if there is clarity what each is
individually and jointly responsible, social loafing tends to take back seat.
8.5 DRAWBACKS OF TEAMS

Despite the various advantages that we have seen from working in teams,
there does exist dysfunctional aspects of team working as well. The various
drawbacks include –
• Teams require greater time and resources than individuals

• Teams have high demands of communication and adjustment
• Teams have larger degree of conflicts to manage
• Team’s initial formation period can be unproductive for work
• Team’s generation of new ideas requires constant discussions which could
lead to undesirable delays
• Team working benefits do not get realized, when some members of the
team possess poor team spirit
• Teams experience social loafing, and hence, all energies are not
channelized for a common goal, as expected.
• Team decision making may be rendered ineffective by groupshift and
groupthink phenomena
8.6 TEAM COMMUNICATION

One of the biggest source of interpersonal conflicts within groups is poor
communication. Since, no individual or group can sustain without
communication, it being effective is very critical for evading conflicts and
enhancing performance. Communication includes both the transfer and the
understanding of the information being shared. Ideal communication would
happen only when the information transmitted is perceived by the receiver
exactly how it has been pictured by the sender.
Functions of Communication
Functions of communication within a team are given below. Almost every
group communication performs one or more of these functions.
• Control of member behaviors - E.g., Formal guidelines employees are
required to follow in terms of job descriptions, company policies, etc.
• Motivation - By setting SMART goals, continuous feedbacks and
rewarding desirable behaviors, motivation is stimulated
! !218
• Emotional expression - Work teams may be primary source of social

interaction for many people, where they could express their satisfaction
or frustrations providing a platform for emotional expression.
• Facilitate decision making - Communication provides the necessary
information for identifying and assessing alternatives to make decisions.
Communication Process
The figure 8.2 Below depicts the common communication process. The
main parts of this process are
1. Sender – person desiring to convey a thought and initiates a message
2. Encoding – the sender converts a thought into transferable form, the

message
3. Message – is the actual physical product of sender’s encoding (when we
write down a thought, the written part is the message)
4. Channel – is the medium selected by the sender through which the

message travels, which maybe formal or informal
5. Decoding – translating the message symbols into understandable form
6. Receiver – is the person to whom the message is directed
7. Noise – represents the communication barriers that distort the clarity of

message example semantic difficulties, too much information etc.
8. Feedback – is the check on how successfully the original message is

transferred and determines if understanding is achieved.
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!
Figure 8.2: The Process of Communication
Communication Direction
Depending upon the directing of flow the communication may flow
vertically or horizontally. Further, vertical communication maybe upward or
downward.
Vertical Communication
Downward Communication - Communication directed from higher level

of a group to a lower level is termed as downward communication. It may
be used to convey host of information from managers to subordinates such
as goals, job instructions, company policies, issues requiring attention,
performance feedback etc.
Upward Communication - Communication directed from lower to higher

levels of a group is termed as upwards communication. It may be used to
convey host of information from subordinates to managers such as reverse
feedback, progress report, issues at hand problems, improvement ideas
etc.
! !220
Horizontal Communication
Communication happening among same work team members, peer groups,
or any other laterally equivalent employees is termed as horizontal
communication. Such communication saves time, facilitates coordination,
and may be formally sanctioned when there is need to circumvent
hierarchy and speeden the actions.
Interpersonal Communication
In order to transfer meaning among themselves, group members mainly
depend on the given three forms of interpersonal communications - oral,
written, and non-verbal communication.
Oral Communication is the main mode of transferring messages. Some

of the popular forms of oral communications include speeches, formal one-
on-one discussions, group discussions and informal form known as
grapevine. Its key merit are speed and feedback. On conveying a verbal
message, response is received immediately. Moreover, immediate feedback
helps in quickly altering the message. A major demerit of potential
distortion occurs when message needs to be passed through various
people; with each person, decoding the message in his or her own way and
the message content reaching the final destination may not be the original
intended version.
Written Communication – This is mainly tangible and verifiable mode of

communication transmitted through written words or symbols. It may
include memos, letters, faxes, e-mails, instant messaging, notices on
bulletin boards etc. The various merits include a record with both sender
and receiver, storing for an indefinite period, message physically accessible
for clarifications, and message tends to be more thoroughly thought
through, logical, and clear. Demerits of this communication form include
time-consuming and lack of instant feedback.
Non-verbal Communication – Whenever we are engaging in verbal

communication we may be also engaging in non-verbal communication and
sometimes this non-verbal component may be independent. Non-verbal
communication may include body language, voice tone, facial expression,
physical distance between the sender and receiver etc. Body language
involving actions like lifting one eyebrow for disbelief, rubbing our noses for
puzzlement may complicate or enhance verbal communication. Our body
! !221
position or movement can communicate something of the emotion behind a

message. Facial expressions communicate something to the receiver for
example, frowning and smiling faces convey different meanings. Physical
distance also has meaning. The proper spacing while communicating varies
from culture to culture. Since, non-verbal communication tends to convey
strong messages in addition to verbal communication, they cannot be
ignored either by sender or by receiver. Sender must ensure his verbal and
non-verbal messaging is not contradictory to avoid confusion while a
receiver to gather the full meaning of the message must seek out the non-
verbal cues of the sender along with the verbal ones.
Exhibit 8.3: Organizational Communication
Organizational communication maybe formal or informal (Grapevine). Let us

look at them individually.
1. Formal Communication Networks - These maybe of three types : chain,

wheel, and all channel
• The chain network strictly follows the formal chain of command across the
organization structure.
• The wheel network has a central figure (a strong leader) acting as channel
for the entire group’s communication
• The all-channel network allows all group members to communicate actively
as in case of self-managed teams, where all members freely contribute with
no single leader.
No single network is flawless or will be suitable in all situations. Hence, with

strong leader wheel network will be most effective, to achieve high member
satisfaction all-channel network will be effective and to achieve communication
accuracy the chain network will work best.
! !222
2. The Grapevine - The informal communication network in a group or

organization is called the grapevine. Although the rumors and gossip
transmitted through the grapevine may be informal, it is still an important
source of information. A recent report shows that grapevine or word-of-
mouth information from peers about a company has important effects on
whether job applicants join an organization. Rumors emerge as a responseto
situations that are important to us, when there is ambiguity, and under
conditions that arouse anxiety. The fact that work situations frequently
contain these three elements explains why rumors flourish in organizations.
The secrecy and competition that typically prevail in large organizations—
around the appointment of new bosses, the relocation of offices, downsizing
decisions, or the realignment of work assignments—encourage and sustain
rumors on the grapevine. A rumor will persist until either the wants and
expectations creating the uncertainty are fulfilled or the anxiety has been
reduced. Certainly, it’s an important part of any group or organization
communication network and is well worth understanding. It gives managers
a feel for the morale of their organization, identifies issues employees
consider important, and helps tap into employee anxieties. The grapevine
also serves employees’ needs: small talk creates a sense of closeness and
friendship among those who share information.
Electronic Communications
It has become an indispensable and primary mode of communication in
organizations and includes e-mail, text messaging, social networking,
blogs, and video conferencing.
e-Mail - This electronic-communication utilizes the Internet to send and

receive computer-generated text and documents. Such messages can be
promptly written, edited, stored and distributed to one person or many
persons with very nominal cost compared to that of other traditional forms
of written communication. However, there are limitations to e-mail
communication which include -
• It can result in misinterpreting the message

• It may be an inappropriate means to communicate negative information
• It can be time-consuming in nature
• It provides limited alternatives for expression of emotions
• It may have privacy concerns, especially, in case of confidential
information being transferred
! !223
Instant Messaging (IM) and Text Messaging (TM) - IM and TM may take
place in real time or use portable communication devices like handphones
etc. They are preferable for one- or two-line messages that would just
clutter up an e-mail inbox. As a disadvantage, users find this technology
intrusive and distracting while at work. In addition, because such messages
can be interfered with easily, there is a concern about the security of IM
and TM. Further, informality of such messaging may not be appropriate for
business communication.
Social Networking - Communication highly advanced with the rise of social
networking sites like Facebook and LinkedIn. Any social networking site has
millions of active users and is actually composed of separate networks
based on schools, companies, or regions. In an attempt maintain control
over people’s use of social networking for professional purposes, many
organizations have developed their own in-house social networking
applications as well. For effective use of social network must one avoid
annoying the contacts by every day or weekly unimportant items and also
keep in mind that prospective employer might view the social networking
profiles.
Blogs or Web logs - A blog is website about a single person or organization

example Twitter (a micro-blogging site). Many people send Twitter
messages (“tweets”) about any work-related topic, leaving no information
control with organizations. However, some companies have policies
governing blog contents many do not. Despite individuals ‘view that their
personal blogs are out of employers’ purview, any work-related negative
blog entry, if it reaches the employer, can impact negatively on the
person’s career. Hence, it is advisable to be careful in posting personal blog
entries regarding work or organizations.
Video Conferencing - This aids people in an organization to have real-time

meetings with others at different locations. There are live audio and video
images that help let participants view, listen and speak with each other
despite being in physically different locations. On the downside, such
meeting may have participants being disengaged despite being linked and
requires special efforts to stimulate queries and involve all participants.
Choice of Channel Communication

Channels tend to vary in their ability to communicate information. Some
maybe termed as rich as they can
! !224
• handle multiple cues simultaneously,

• facilitate rapid feedback,
• be very personal.
Others may not be rich and possess these factors. Face-to-face interactions
score highest in channel richness being strong on all three factors whereas
Impersonal written communication score the lowest. However, the choice
of channel depends o the type of message. Routine messages being
straightforward having low ambiguity can be carried by low richness
channels efficiently while non-routine complicated messages will require
channel high in richness.
Barriers to Effective Communication

A number of barriers can retard or distort effective communication
1. Filtering - This means sender intentionally fabricating information to

ensure receiver views it favorably. Some filtering happens wherever
there is status hierarchy and larger the number of vertical levels greater
the opportunities for filtering. Among others, factors like discomfort of
communicating bad news and the need to impress the manager may
often drive filtering.
2. Selective Perception – Individuals receiving the communication
selectively perceive it based on their own needs, motivations,
experience, expectations etc. and may ignore the key message
rendering communication ineffective. In simple terms people may not
see reality, interpret what they view and term it as reality.
3. Too much Information - People have a limited capacity to process

information and when it exceeds our capacity, there is overloading of
information. This is a huge challenge for people as well as organizations
as individuals may tend to ignore, pass over, or forget critical
information or delay processing.
4. Emotions - People may perceive the same communication differently

based on their emotional states. Negative moods are more likely to
make people scrutinize messages, while positive moods make them to
accept messages as is. Moreover, extreme emotions such as jubilation
or depression tend to harm effective communication, as people tend to
ignore rational and objective thinking and rely on emotional judgments.
! !225
5. Withholding Communication - This is very troublesome and implies that

managers may not have information about various issues at hand such
as silence regarding discrimination, harassment; corruption etc. It
means senior management cannot take action to eliminate these
undesirable behaviors. This withholding communication could be due to
a prior experience of ignoring or belittling for expressing concerns and
by staying silent such people may experience psychological stress.
6. Individual Apprehensions - Some people experience undue stress and

anxiety in oral or written or both communication and may find it very
tough to interact with others. They may rely on e-mails when call would
be quicker and ideal. This may severely limit their communication and
they may tend to undermine the need for communicating on their job,
resulting in under performance.
7. Inaccurate information sharing - individuals tend to out rightly

misrepresent or simply lie. The problem arises due to lack of unique
verbal or non-verbal cues to identify this misrepresentation or
preparedness of the person indulging in lying in order to convince.
Hence, the frequency of inaccurate information sharing and
ineffectiveness in identifying it makes this a strong barrier to effective
communication.
8. Cultural Issues - Cross-cultural factors increase communication issues.

The main factors are language difficulties and contextual difference in
cross-cultural communications.
Language and contextual difficulties include -
• Words mean different things to different people, particularly people

from different national cultures.
• Same words imply different things in different languages.
• Tone differences such as in some cultures, language is formal; in
others, it’s informal
• Differences in tolerance for conflict and methods for resolving conflicts.
• Contextual differences impact the quality of communication. As we can
see in high context cultures messages need not be explicit or specific
and understood through verbal cues or context, while the reverse is the
case in low context cultures.
! !226
8.7 LEADING TEAMS

Defining Leadership
Leadership is the capability to influence a group toward the attainment of a
vision or targets. The source of this influence may be formal, such by the
virtue of a managerial position or informal mode such as emergence from
the group. Hence, not all leaders may be managers; neither all managers,
leaders. Organizations need strong leaders as well as managers for optimal
effectiveness. Let us look at various Leadership theories to understand who
may be the leaders.
Trait Theories
Various strong leaders from past such Buddha, Napoleon, Mahatma
Gandhi, etc., are generally described in terms of their traits. Consequently,
Trait theories of leadership focus on personal qualities and characteristics.
A number of studies and analyses confirm that most leaders are different
and the specific traits that characterized them immensely vary. However,
through various researches, mainly The Big Five personality Framework, it
has emerged that good leaders do have key traits in common including
extraversion, sociable, dominant, conscientiousness, openness to
experience and emotional intelligence (core being empathy). The Big Five
personality framework also helped understand that –
• Traits can help predict leadership.

• Traits are better able to predict the emergence and appearance of
leaders rather than actually differentiating between effective and
ineffective leaders. This means that if a person displays the traits and
others view him or her as leader, he or she need not be successful in
getting the group to attain its objectives.
Behavioral Theories
Unlike trait research that lay down the basis for choosing the right
individuals for leadership, behavioral theories propose to train people to
become leaders. The Ohio state study in behavioral theory lists two
behaviors that majorly accounted for most of the leadership behavior:
• Initiating structure - It is the degree to which a leader may define and

structure his or her role and of people in the search for goal
achievement. Behaviors such as attempts to organize work, work
relationships etc. are included here. Such a leader tends to allocate
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members to different tasks, “expects fixed performance standards and

highlights deadlines.”
• Consideration - It is the extent to which an individual’s job relationships

are based on mutual trust, respect for people’s ideas, and regard for
people’s feelings. A leader who possesses high consideration tends to aid
people with personal problems, is friendly and approachable, treats all
equal, and expresses appreciation and support.
In another study by the Michigan group, two behavioral dimensions were

outlined: the “employee-oriented leader” which is on the lines of
consideration and the “production-oriented leader” which is on the lines of
initiating structure. It has been found that followers of high consideration
leaders are more satisfied with their jobs, highly motivated, and show high
respect for their leader whereas followers of high Initiating structure
leaders have high levels of productivity and performance. Hence,
consideration and initiating structure may both be important.
Contingency Theory
Some leaders tend to gain success in a particular situation while in another
they may not be effective. Such leaders may be appointed temporarily and
are dismissed as circumstances settle. The rise and fall of such leaders
demonstrates that predicting leadership success is not as simple as
identifying a few traits or behaviors. In their cases, what worked in tough
times and in smooth times does not appear to translate into long-term
success. Contingency theory of leadership can be explained through the
most widely used model: the Fiedler model.
The Fiedler Model

This model is developed by Fred Fiedler and proposes that effective group
performance depends on the proper match between the leader’s style and
the degree to which the situation gives the leader control.
Leadership Style: Fiedler believes the main factor in leader’s success is

the individual’s basic leadership style. He captures the leadership style
through his “least preferred co-worker” (LPC) questionnaire. This
questionnaire once responded measures whether the individual is task
oriented or relationship oriented. Once the individual’s leadership style is
known, which Fiedler assumes to be fixed, the situation is considered. If a
situation calls for a task-oriented leader while the individual in the
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leadership position is relationship oriented then either the situation needs

to be changed or the leader in order to achieve optimal effectiveness.
Defining the Situation: Fiedler has identified three contingency or

situational dimensions:
1. Leader–member relations is the degree of confidence, trust, and

respect members have in their leader.
2. Task structure is the degree to which the job assignments are

procedurized (that is, structured or unstructured).
3. Position power is the degree of influence a leader has over power

variables such as hiring, firing, discipline, promotions, and salary
increases.
The model evaluates the situation in terms of these three variables. Fiedler
states that the better the leader–member relations, the more highly
structured the job, and the stronger the position power, the more control
the leader has. From a leader’s perspective a situation in which all the
above three factors score high is the most favorable one.
Matching Leaders and Situations: As per the theory, leaders find

themselves in situations formed by combining the three contingency
dimensions. This gives eight possible situations, which in recent years
Fiedler has condensed to three High, Moderate and Low control. This model
proposes matching an individual’s LPC score and these situations to
achieve maximum leadership effectiveness. Fiedler concluded that task-
oriented leaders perform best in situations of high and low control, while
relationship-oriented leaders perform best in moderate control situations.
Overall, the validity of the model is quite high, with sufficient evidence to
support it. However, the downside to the model maybe that logic behind
the LPC questionnaire is not clear, subjectivity exists in scores of
respondents and contingency models tend to be complex to assess
practically.
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Charismatic Leadership and Transformational Leadership

Charismatic Leadership
Max Weber, a sociologist, defined charisma (from the Greek for “gift”) as “a
certain quality of an individual personality, by virtue of which he or she is
set apart from ordinary people and treated as endowed with supernatural,
superhuman, or at least specifically exceptional powers or qualities. These
are not accessible to the ordinary person and are regarded as of divine
origin or as exemplary, and on the basis of them the individual concerned
is treated as a leader.”
Charismatic leaders:
• have a vision,
• are willing to take personal risks to attain the vision,
• tend to be empathetic to people needs,
• display outstanding behaviors,
• are born with attributes making them charismatic,
• are likely to be extraverted, self-confident, and achievement-oriented.
Process by which charismatic leaders Influence followers
• Pronouncing clearly and distinctly an appealing vision of a better future

for the organization.
• Presenting a formal statement of an organization’s vision or mission. In
addition, build people’s self-efficacy with high performance expectations
and perceptions of achievement.
• Communicating through words and actions, new set of values and set a
tone of cooperation and mutual support.
• Engaging in emotion-inducing and unconventional behavior to display
courage and conviction about the vision.
Many charismatic leaders may allow their personal gains to supersede the
organizational goals. In many cases success depends on the situation and
visions rather than the charismatic leader. Some charismatic leader may be
successful in convincing people to chase a disastrous vision. Individuals
can be trained for charismatic behaviors.
Transformational Leadership
Leaders they inspire people to surpass their interests for the betterment of
the organization and tend to have an outstanding impact on people.
Transformational leaders –
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• Pay attention to the concerns the individual

• Encourage individuals’ to ne creative in their problem solving
• Excite and inspire people to exert extra effort to attain group objectives
• Improve performance by building an agreement among group members
• Enhance the individuals efficacy and build a ‘can do’ attitude
• Command trust and commitment from people
Organizations with transformational leaders tend to have greater

decentralization of authority, managers with high risk-taking approach,
compensation programs focusing on long-term outcomes and greater
agreement among senior management on organization’s goals yielding
superior organizational performance. However, Transformational leadership
may not be equally effective in all circumstances and tends to have larger
effect in smaller, privately held organizations than in larger organizations.
Such kind of leadership can be learnt.
Leading for the Future - Mentoring

Most Leaders tend to take on the onus of building future leaders. One of
the valuable methodology used by them is mentoring
Mentoring - A mentor is a senior employee who sponsors and supports a

less-experienced employee, a mentee. Mentors, who successful leaders are
good teachers as they put forth ideas with clarity, listen attentively, and
empathize with mentees issues. Mentoring relationships serve both career
functions and psychosocial functions. Informal mentoring relationships
develop when leaders identify a less experienced individual displaying
leadership potential who is assessed through a challenging task. If the
performance is acceptable the mentor will develop an informal relationship
sharing the functioning for the organization outside of formal structures
and procedures. Many organizations are now beginning formal mentoring,
particularly, for minorities and women.
Reasons for mentoring:

• Leaders believe their experience should be shared with the younger
generation and want to provide a legacy.
• It provides direct access to the attitudes of employees indicating any
early warning signs of potential organizational problems.
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Limitations to mentoring:
• Not all people may participate with equal rigor and diversity of race,
gender, ethnicity, etc., may be restrictive for mentoring.
• Formal programs may not be as effective as the informal ones owing to
poor planning and design, lack of mentor commitment, mismatch
between work style and need of the mentor and mentee.
• People view mentors more as a source of expanding networking and
further their needs of networking.
Barriers to Effective Leadership

One or any combination of the following behaviors on part of the leaders
tend to act as barriers to the effectiveness of their leadership -
• Tendency to hide own shortcomings – No individuals are perfect, and

hence, so the leaders are not either. However, by the influence of their
position, many leaders tend to shy away from the fact that they may not
be experts in everything and tend to pretend as experts. This can be
very damaging not only for the organization or group but also for the
image of the leader. Greater respect will be received by the leader, if he
or she owns up his or hers shortcomings and seeks help.
• Poor delegation – Many leaders being insecure, do not transfer all the
requisite jobs to their subordinates, especially, if the subordinate is high
performing. This leads to clutter and too much on the leaders plate and
hampers overall performance. In certain cases, the leader over delegates
tasks to his people, where those that need to be carried out by an
individual of his caliber are also transferred to subordinates. In such
cases, also the tasks tend to be poorly done due to over burdening and
lower caliber of subordinates. Hence, poor delegation reduces the
effectiveness of the leaders. The effective leaders should strike a balance
in his delegation of tasks.
• Being close–minded – One of the biggest advantage of teams or groups

of diverse people together is numerous ideas and high creativity resulting
in higher performance. However, if the leader is close-minded and not
open to new innovative ideas and suggestions, then new idea generation
may not take place and the best alterative may not emerge to achieve a
goal or task. This impacts the effectiveness of the group and thereby the
effectiveness of the leader. In order to take the advantage of the diverse
group, the leader must be open-minded.
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• Inappropriate leadership style – There can be numerous leadership styles

including telling, telling and selling, consultation, participation and
empowerment. It is the art of an effective leader to vary his or her style
because of the situation, team composition and the context. For
example, in times of urgency you might need to go for a very directive,
telling style. Inability to adapt and use an appropriate leadership style
can render the leader ineffective.
• Self before others approach – It is not philanthropy that is expected of

the leader to be effective, however, rather than focusing on self-serving
interests the leaders should focus on his team‘s progress and growth. A
failure to do so, leads to poor relations, low morale and commitment
from the team members. A team which views its leaders self-centered
and working for his own interests is likely to be ineffective.
• Inability to handle power dynamics – Many leaders are not comfortable

with the power that comes with leadership and the pressures of the
leadership responsibility may render even dynamic leaders unable to fully
embrace their role. Consequently, the needs of the role suffer and make
the leader ineffective. Hence, a leader must become comfortable with his
or her higher status and learn to use power effectively and ethically.
• Poor consistency – Many leaders tend to be inconsistent in their

interpersonal interactions with team members. This is very challenging
for the team members as they are unable to understand their leader.
Ultimately, this inconsistency in behavior from the leaders leads to
disengagement of the team. Hence, to keep the team engaged and
committed leaders must ensure consistency in their interpersonal
interactions.
• Favoritism – It is a known fact that people get along better with some
people than others. This compatibility issues can exist between the
leaders and his team members, where the leaders may get along better
with some members in comparison to others. However, it is the leader’s
maturity to handle this compatibility difference sensitively to ensure it
does not result in favoritism on his part. If it does, it can affect the teams
engagement levels and thereby effectiveness overall.
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Activity
1. In a multinational organization, An Indian and a Chinese are being put
together as a team on a particular project for 2 years. The HR manager
is worried about this team and it performance. If you are the HR
manager, please explain in detail why would you be worried and what
would do you think can be done to eliminate your cause of worry.
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………….
8.8 SUMMARY
This chapter explains us the concept of a group and explains its properties,
its development and its decisions making process. The chapter further
explains the concept of team and differentiates it from work group. It tells
us about the various types of teams and the factors responsible for
creating an effective team. It also highlights the various drawbacks of
working in teams. The chapter takes us through the concept of team
communication in detail, highlighting the communication process, direction,
channels and interpersonal communication. Finally, the chapter explains us
the concept of team leadership. Under this, it explains the various theories
of leadership, what are charismatic and transformational leaders, concept
of mentoring and the barriers to effective leadership.
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1. The last stage of development for temporarily formed group will be ___.
(a) Performing
(b) Storming
(c) Norming
(d) Adjourning
2. Tendency to hide shortcoming, poor delegation and inability to handle

power dynamics are all bariers to effective _____________.
(a) Leadership
(b) Communication
(c) Team-working
3. The Fiedler model of leadership explains the ____ theory of Leadership.

(a) Behavioural
(b) Trait
(c) Contingency
4. Any communication between the Marketing Head and the Finance Head
of an organization would be _____________.
(a) An upward communication
(b) A downward communication
(c) A vertical communication
(d) A horizontal communicxation
5. Virtual Teams are _____________.

(a) teams comprising of members physically spread over different
geographical areas, united together by computer technology.
(b) teams formed by 5 to 12 employees of a department met for a
few hours on a weekly basis to discuss and identify alternatives
of improving quality, efficiency, and the work environment.
(c) teams made up of people from different functional areas but
same hierarchical level who have come together to achieve a
common goal.
Answers of MCQs: 1. - (d); 2. - (a); 3. - (c); 4. - (d); 5. - ( a).
! !235
REFERENCES
1. Organizational Behavior – Stephen P. Robbins, Timothy A. Judge.
3. Organizational Behavior – Don Hellriegel, John Slocum.

Taylor.
5. Organizational Behaviour – David A. Buchanan, Andrzej Huczynski.

Armstrong.
8. Science and Human Behavior – B.F. Skinner.
9. The Human Side of Enterprise – Douglas McGregor.

Adams.
11.Work Redesign – J. Richard Hackman , Greg R. Oldham.
12.The Leadership Code: Five Rules to Lead – Dave Ulrich, Norm

Smallwood, Kate Sweetman.

Boxall, John Purcell, Patrick M. Wright.
14.A Contingency Model of Leadership Effectiveness – Fred Edward Fiedler.
15.Leading Teams: Setting the Stage for Great Performances – J. Richard

Hackman.
16.An Introduction to Group Dynamics – Donelson R. Forsyth.
! !236
17.Handbook of Communication Models, Perspectives, Strategies – Uma

Narula.
18.Effective Communication in Organisations – Michael Fielding.
19.Leadership – Philip Sadler.
20.High Performance Teams: How to Make Them Work – Marc Hanlan.
21.Coaching and Mentoring: Theory and Practice – Bob Garvey, Paul

Stokes, David Megginson. 
! !237
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !238
POWER, CONFLICT, NEGOTIATION AND INTERGROUP BEHAVIORS
Chapter 9
POWER, CONFLICT, NEGOTIATION AND
INTERGROUP BEHAVIORS
Objectives
• Understand the concept of power, its bases, power tactics and factors
affecting effectiveness of the tactics.
• Understand the concept of politics
• Understand the concept of conflict
• Understand the process of conflict resolution and types of conflicts
• Understand the concept of negotiation and the various negotiation

techniques
Structure:
9.1 Power and Politics
9.2 Defining Conflict
9.3 Process of Conflict
9.4 Negotiation
9.5 Summary
! !239
9.1 POWER AND POLITICS
In any organization or group, both power and political behavior are natural
processes. In order to understand individuals and their interpersonal
behaviors one must understand both these concepts as well as how power
is attained and applied. Though it may be said that “Power corrupts” but it
may not always be seen in a negative light. It is critical to understand what
role power plays and how it operates in groups and organizations.
Definition of Power
Power implies the ability of one individual to impact the behavior of
another so the other individual behaves according to the first individual’s
desires.
“Power means ability to influence or control what people do or think or it

means ability to achieve something or make something happen”-
Macmillan Dictionary
Power is a capacity or potential and one may possess power but may or
may not use it. A key aspect of power is that it is linked to dependence. In
a relationship, the higher a person’s dependence on another, the higher the
other person’s power. Dependence is based on options that a person views
and level of significance he or she attaches to these options other person
controls, which implies that an individual can have power over someone
only if the individual controls something the other desires.
Leadership versus Power

The concepts of leadership and power are closely connected yet are quite
different from each other. The difference include –
• Leadership utilizes power as a means of achieving group goals with some

commonness of goals between the leader and followers, while power
needs no goal compatibility simply dependence.
• Leadership focuses on the downward influence on followers and
minimizes the importance of horizontal and upward influence patterns,
while it is not so in case of power.
• Leadership mostly emphasizes on style of leaders to be effective, while
power focuses on tactics for gaining compliance, extends beyond an
individual as user of power, and incorporates groups as well as power
users over other individuals or groups.
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Bases of Power
The bases or sources of power can be categorized into two general groups:
1. Formal and
2. Personal
1. Formal Power - This is based on a person’s position in an organization

arising out of individual’s capacity to coerce or reward, or from formal
organizational authority.
• Coercive Power - This thrives on the individual’s fear of undesirable

outcomes when he or she fails to comply. This kind of power uses
application of physical sanctions or even the threat of that such as
frustrating a person by confining in one place, subjecting to pain etc. In
an organization, a person will have coercive power over other person
only when the first person is in a position to dismiss, suspend, or demote
the second person under the pretext that the job is valuable to the
second person. Such power can also come by holding back key
information and hence individuals own data or knowledge others require
can make others dependent on themselves, in a way exercising coercive
power.
• Reward Power - This is complete opposite of coercive power and

involves compliance by individuals by the virtue of desirable outcomes.
Thus, a person who is in a position to disburse rewards which others
perceive as valuable tend to have power over them. Such rewards may
be monetary like controlling salary rates, increments, incentive etc. or
may be non-monetary like recognition, preferable transfer location,
promotion, job enrichment etc.
• Legitimate Power - This is the most common basis of power that is

legitimate power emerging from formal authority to control and utilize
organizational resources owing to the structural position in the
organization. Such a power is much broader than the above two powers
legitimate power has complete acceptance by the members of the
authority of the position. This power is simply driven from the concept of
hierarchy in the organizational charts.
2. Personal Power - This is based on individual’s unique personal

characteristics. Expertise and the respect and admiration of others, form
the two bases of personal power.
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• Expert Power - It is the power exercised by the virtue of an expertise, a

unique skill, or knowledge. With jobs increasingly becoming specialized,
dependency on experts or specialists is increasing in order to attain our
objectives. Computer specialists, tax consultants, lawyers, doctors,
industrial psychologists, and other experts wield power consequent to
their specialization.
• Referent Power - It is based on identification with a person having

desirable resources or personal traits. In such cases, feelings people
have of like, respect or admiration for an individual, and hence, they
allow the individual to exercise power over them as they would want to
please the individual. This power clearly emerges out of admiration for a
person and a keen desire to be like that person. Hence, certain
individuals who may not be in formal leadership roles yet possess
referent power and influence others owing to the charismatic dynamism,
likability, and emotional effects on us. For example, various corporate
use famous personalities like Sachin Tendulkar, Amitabh Bachchan, Shah
Rukh Khan, etc., to endorse and promote their products and services.
This is because even though they may not be holding any leadership or
commanding position over the consumers, however, they possess a
strong referent power over the consumers.
Effectiveness of Bases of Power

Various studies show that of three bases of formal power (coercive,
reward, legitimate) and two bases of personal power (expert, referent), the
personal sources of power are most effective. This is because both the
expert and referent power positively correlate to the people’s satisfaction
with supervision, their organizational commitment, and their performance,
while reward and legitimate power appear to have no correlation to these
outcomes. The only source of power that is seen to have a negative
correlation to people’s satisfaction and commitment is coercive power.
Perceived Justice and Power

It is observed that employees feel that powerful leaders should have the
volition to design organizational practices and transform unfair norms, and
if they fail to do so, they are specifically critically viewed. Hence, people in
positions of power tend to be reprimanded for their failures and ascribed
for their successes largely than those who have less power. Studies
suggest that leaders tend to pay larger costs for unfairness and reap larger
! !242
benefits for fairness, as in authorities with fairly operating organizations

get maximum trust when they possess immense power and same
authorities with unfairly operating organizations get minimum trust when
they possess immense power.
Dependence: Key to Power

The most important aspect of power is that it is a function of dependence.
Understanding dependence helps understand power itself.
The General Dependence Postulate

The general postulate states that the greater B’s dependence on A, the
more power A has over B. When you own anything that, you control alone
and which others need, you make them dependent on you; therefore, you
gain power over them. If something is available in abundance, possessing
it will not increase your power. Moreover, the more you can expand your
own alternatives, the less power you leave out in the other’s hands. This is
the reason why most organizations work with multiple vendors rather than
give their business to only one. Dependence increases when the resource
you control is important, scarce, and non-substitutable.
• Importance - Dependence will not be created if no one desires what

you have. Since organizations actively seek to avoid uncertainty,
hence, it can be expected that individuals or groups that can minimize
uncertainty will be viewed as controlling an important resource. This is
the reason why marketers are most important resource for
organizations since the most critical uncertainty faced by an
organization is selling their products. This further, implies that
engineers would be more powerful at technology company Matsushita
than at consumer products giant Procter & Gamble. Matsushita, which
is heavily technologically oriented, depends heavily on its engineers to
maintain its products’ technical edge and quality making them a
powerful group. Whereas, at Procter & Gamble, marketing is critical,
and marketers would be most powerful occupational group.
• Scarcity - The scarcity–dependence relationship can be seen in the

power of occupational categories. Where the supply of labor is low
relative to demand, workers can negotiate compensation and benefits
packages far more attractive than can those in occupations with an
abundance of candidates. Hence, scarcity increases dependency on the
source giving the source a higher bargaining power.
! !243
• No substitutability - If a resource has fewer viable substitutes the

resource experiences more power control. Conversely, those resources
that can be easily replaced, do not command much power control on
those who require it.
Power Tactics
People use power tactics to translate power bases into specific action.
There have been identified nine distinct influence tactics:
• Legitimacy – This power tactic involves relying on one’s organizational

authority position or saying a request is in accordance to organizational
policies or rules.
• Rational persuasion – This power tactic involves putting forth logical

viewpoints and fact based evidence to show that a request is reasonable.
• Inspirational appeals – This power tactic involves building an emotional

commitment by appealing to an individual’s or group’s values,
requirements, hopes, and aspirations.
• Consultation – This power tactic involves increasing the individual’s or

group’s support via inclusion in decision making about accomplishment
plan.
• Exchange – This power tactic involves rewarding the individual or group

with benefits or favors in return for following a request.
• Personal appeals – This power tactic involves seeking compliance based

on loyalty or friendship
• Ingratiation – This power tactic involves use of flattery, praise, or

amicable approach before making the request.
• Pressure – This power tactic involves use of pressure in the form of

warnings, threats or constant demands.
• Coalitions – This power tactic involves enlisting the aid or support of

others to persuade the target to agree.
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Some of the tactics may be more effective than others. When the people
concerned are highly interested in the decision process outcomes then
rational persuasion, inspirational appeals, and consultation tend to be the
most effective. The least effective of all tactics is pressure, which may have
a reverse effect at times.
Factors that Affect the Effectiveness of these Power Tactics Include
• Direction of influence - Rational persuasion is the single tactic that is

effective across different levels of the organization. Inspirational appeals
most effective in case of influencing down the line. Pressure tactic only
works in case the direction of influence is downwards. Personal appeals
and coalitions are most effective with peer groups.
• Order of usage of tactics - Chances of success of translating power into

actions is quite high with the use of two or more tactics simultaneously
or sequentially, depending upon the situational demands. To be effective,
one must start with “softer” tactics that use personal power like personal
and inspirational appeals, rational persuasion, and consultation. In case
these do not work one, can try “harder” tactics like exchange, coalitions,
and pressure that use formal power leading to bigger costs and risks. It
is observed that an individual soft tactic tends to have greater
effectiveness than an individual hard tactic. A combination of two soft
tactics or one soft tactic and rational persuasion has larger effect than
any one or more hard tactics.
• Individual skill using the tactic - The level of political skill or their
capability to influence others to further their own goals is different for
different people. Those who are politically skilled are the one who use all
the influence tactics effectively. High stakes tend to make the political
skill appear more effective. Politically effective people exert influence on
others without them realizing. However, in highly open, fair and just
environments politically skilled people tend to be ineffective in utilizing
their influencing tactics.
• Culture of the organization - Organizational cultures are varied while

some may be warm, comfortable, and supportive others maybe formal
and conservative. Some cultures may encourage participation and
consultation others encourage reason or pressure. When an individual is
able to fit into the organizational culture, he or she may be able to gain
! !245
greater influence in the organization. Particularly, extraverts are more

influential in places where focus is teamwork, and highly conscientious
people are more in places focusing on individual work. Fitting into the
culture brings greater influence as such individuals are viewed as
competent since are able to perform in the space that is the most critical
for organizational success. It can be said that the organization itself
influences which power tactics is viewed as acceptable for use.
• National cultures - Different power tactics are preferred in different

countries. Individualistic countries perceive power in personalized terms
and as a legitimate means of furthering their personal ends, while
collectivistic countries perceive power in social terms and as a legitimate
means of aiding others.
• Target group - The effectiveness of the tactics depends on the traits of

the people being influenced. Those who are influenced by soft power
tactics are themselves more reflective and internally motivated
possessing high self-esteem and greater need for control. On the other
hand, those who are influence by hard power tactics are themselves
more action-oriented and externally motivated with greater focus on
getting along with others.
Power in Action - Politics

Grouping together tends to exert much greater power can be exerted than
staying individual. Most people want to make own space from where they
want to exert influence, receive rewards, and grow in their careers. A
person will be said to be engaging in politics when he or she is able to
translate his or her power into action and those having strong political
skills, are able to use their power bases much more effectively.
Defining Organizational Politics

“Politics is the ideas and activities used by people within a particular group
to try to get power.” - Macmillan Dictionary
There are numerous definitions of organizational politics. Organizational

politics mainly involves using of power to impact decision making in the
organization, or to engage in self-benefitting and undesirable behaviors.
Another definition, which would cover a large part of political behavior
states that political behavior in organizations comprises of actions that do
not naturally emerge from individual’s formal role but tend to influence, or
! !246
attempt to influence, the allocation of benefits and detriment within the

organization. In simple terms, political behavior is outside of the purview of
job description. Such behaviors as withholding key information from
decision makers, joining a coalition, whistle-blowing, spreading rumors,
leaking confidential information, etc., all fall under the purview of politics.
It is an attempt to use power bases towards influencing the goals, criteria,
or processes used for decision making.
Existence of Politics
It is a widely understood fact that the political behavior is a major part of
organizational life. Many managers believe some political behavior, as long
as not detrimental to others, can be considered ethical and necessary.
Many see it as a necessary evil and believe that those who do not use it
will have trouble getting things done. Overall, it is difficult for organizations
to be completely free of politics. The reason being organizations have
individuals and groups with different values, objectives, and interests and
the resources available in organizations are limited. This fact is the main
reason for conflict over the allocation of these limited resources like
budgets, space, responsibilities, and salary increments. Had the resources
been abundant, then all would have been able to satisfy their needs,
however, since they are limited, everyone’s goals are not met. Further,
people tend to view others gains coming at their own expense. Hence, the
conflict arises. Such forces lead to competition for the limited
organizational resources. This competition results into politics only since
people believe that the criteria for allocation of these limited resources is
subjective. These criteria being performance, improvement, satisfactory
work etc. The degree of such criteria for example, good performance,
adequate improvement, etc., that will determine allocation of resources is
open to interpretation. People may not view others efforts or performance
as sufficient to be considered good and warrant a resource allocation in
others favor. Existence of such subjectivity in decision-making and lack of
objective factors in the organization tends to encourage politics. Since
majority, decisions are to be made in this climate of ambiguity individuals
or groups will use any influence possible to twist the facts in order to
advance their needs and objectives. This leads to actions termed as
politicking. An organization may be politics –free only if all people share
the same objectives and interests, if organizational resources are
abundant, and if performance outcomes are free from subjectivity.
However, this is an idealist situation non-existence in the real world.
! !247
Factors Contributing to Political Behavior

There is variation in the level of politics in organization. In some
organizations levels of politics is high and obvious while in some others
politics has a minor role in affecting outcomes. This is so because of the
numerous factors those appear to encourage political behavior. These
factors may be arising from individual characteristics or be a result of the
organization’s culture or internal environment. Certain individual and
organizational factors can increase political behavior and provide favorable
consequences.
Individual Factors
• Personality Traits – Certain personality traits lead to higher political
behavior. These traits are high self-monitors, possess an internal locus of
control and high need for power.
• Individual investment in the organization, if high, less likely use of
illegitimate means.
• Perceived alternatives are high the more individual tends to risk
illegitimate political actions.
• Expectations of success impact use of illegitimate political actions and
higher expectations lead to a greater use.
Organizational Factors
Certain situations and cultures promote politics -
• In case of organization’s decreasing resources, people may resort to
political behavior to save their portions.
• Major changes, particularly those leading to reallocation of resources,
lead to conflict and politicking
• In case of opportunities of growth, politicking may prevail.
• Cultures characterized by low trust, role ambiguity, and unclear
performance measurement systems, self-serving senior managers,
encourage political behavior largely.
How Do People Respond to Organizational Politics?

Most people—who have modest political skills or are unwilling to play the
politics game — outcomes tend to be predominantly negative.
• Very strong evidence indicates, for instance, that perceptions of
organizational politics are negatively related to job satisfaction. The
perception of politics also tends to increase job anxiety and stress,
possibly because people believe they may be losing ground to others who
! !248
are active politicks or, conversely, because they feel additional pressures
from entering into and competing in the political arena.
• Politics may lead to self-reported declines in employee performance,

perhaps because employees perceive political environments to be unfair,
which demotivates them. Not surprisingly, when politicking becomes too
much to handle, it can lead employees to quit.
• The politics–performance relationship appears to be moderated by an

individual’s understanding of the “hows” and “whys” of organizational
politics. “An individual who has a clear understanding of who is
responsible for making decisions and why they were selected to be the
decision makers would have a better understanding of how and why
things happen the way they do than someone who does not understand
the decision making process in the organization.” When both politics and
understanding are high, performance is likely to increase because the
individual will see political actions as an opportunity. This is consistent
with what you might expect among individuals with well-honed political
skills. However, when understanding is low, individuals are more likely to
see politics as a threat, which can have a negative effect on job
performance.
• Political behavior at work moderates the effects of ethical leadership. One

study found that male employees were more responsive to ethical
leadership and showed the most citizenship behavior when levels of both
politics and ethical leadership were high. Women, on the other hand,
appear most likely to engage in citizenship behavior when the
environment is consistently ethical and apolitical.
• When employees see politics as a threat, they often respond with

defensive behaviors - reactive and protective behaviors to avoid action,
blame, or change. Defensive behaviors are often associated with
negative feelings toward the job and work environment. In the short run,
employees may find that defensiveness protects their self-interest, but in
the long run, it wears them down. People who consistently rely on
defensiveness find that, eventually, it is the only way they know how to
behave. At that point, they lose the trust and support of their peers,
bosses, employees, and clients.
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9.2 DEFINING CONFLICT
Hocker and wilmont define “Conflict as an expressed struggle at least

between two interdependent parties who perceive incompatible goals,
scarce resources and interference from others in achieving their
goals.”(1995)
“Conflict is a lack of agreement or harmony or an earnest effort for

superiority or victory over another.” – Merriam Webster
The most common idea about conflict is that it is a perception and if no one
is aware of a conflict, then it can be said that conflict does not exist.
Therefore, for conflict to start some antagonism or discordance and some
kind of interaction is necessary.
Few typical type of conflicts people experience in organizations include

incompatibility of goals, differences over interpretations of facts,
disagreements based on behavioral expectations etc. Conflicts can range
from being obvious and violent acts to subtle disagreements.
9.4 Process of Conflict

This process has five stages:
(i) Potential antagonism or discordance

(ii) Understanding and personalization
(iii) Intents
(iv) Conduct
(v) Consequences
Stage I: Potential antagonism or discordance

This involves appearance of conditions that lead to circumstances for
conflict and such conditions may directly or indirectly cause conflict. Note
that existence of one of the conditions is necessary for conflict to occur.
These conditions are categorized into three general categories and maybe
seen as factors of conflict:
• Communication,
• Structure,
• Personal variables.
! !250
Communication – This can be a source of conflict in the form of opposing

forces arising from semantic difficulties, misunderstandings, and “noise” in
the communication channels. As shown in Chapter 8, any of the barriers to
communication if acting can lead to conflict between the communicating
parties. A study shows that likelihood of conflict increases with either too
little or too much communication. Increasing communication between the
two parties is functional up to a certain level after that over communication
can result in potential for conflict
Structure – It can also be a source of conflict and includes variables such

as team size, level of specialization in the tasks, clear authority, member–
goal compatibility, leadership styles, reward systems, and level of
interdependence among groups. Size and specialization are directly related
to potential for conflict, while tenure and conflict are inversely related. The
greater the roles and responsibilities clarity, the lower the potential for
conflict. These unclear authority situations lead to intergroup tussle to
control resources and territory. Member-goal compatibility is inversely
related potential for conflict. In case of rewards, conflict occurs when there
is a tradeoff of gains among members. Finally, potential for conflict is
higher with higher interdependence between groups compared to two
mutually independent groups.
Personal Variables – These can be strong source of conflict too and

include personality, emotions, and values. Personality affects people’s
tendency to get into conflicts, those with traits like disagreeableness,
neuroticism, or self-monitoring have a greater tendency to get into
conflicts. Emotions of individuals like anger, sadness, happiness are all
translated into behaviors and may have an impact on others leading to
conflicts.
Stage II: Understanding and Personalization

In this stage the factors mentioned in Stage I go beyond existence and
tend to negatively impact one party and the potential for opposition or
incompatibility becomes real. This stage involves having awareness of the
conflict by one or more parties and the conflict has been personalized. A
conflict is personalized when one or more parties become emotionally
involved in the conflict and experience either anxiety, tension, frustration,
or hostility. In this stage, two aspects are important –
! !251
• This stage is critical as the actual conflict is defined and the parties
understand the conflict issues. Defining conflict is important as it outlines
the possible settlements.
• Emotions impact perceptions, thus negative emotions lead to
oversimplification of issues, loss of trust, and lead to negative view of
others’ behavior and positive emotions have reverse and favorable effect
during a conflict situation.
Stage III: Intents

These are individual decisions to behave in certain manner and interfere
between perceptions and emotions, on one hand and behaviors, on the
other. Intentions are important as it can be a cause of escalation of conflict
if people infer others intentions to behave in a certain manner incorrectly.
While predicting person’s intentions, combination of intellectual and
personality features can be helpful.
Exhibit 9.1: The primary conflict handling intentions
Using two dimensions — cooperativeness (the degree to which one party

attempts to satisfy the other party’s concerns) and assertiveness (the degree
to which one party attempts to satisfy his or her own concerns) — we can
identify five conflict-handling intentions:
1. Competing (assertive and uncooperative)

2. Collaborating (assertive and cooperative)
3. Avoiding (unassertive and uncooperative)
4. Accommodating (unassertive and cooperative)
5. Compromising (midrange on both assertiveness and cooperativeness)
Competing - When one person seeks to satisfy his or her own interests
regardless of the impact on the other parties to the conflict, that person is
competing. You compete when you place a bet that only one person can win,
for example.
Collaborating - When parties in conflict each desire to fully satisfy the
concerns of all parties, there is cooperation and a search for a mutually
beneficial outcome. In collaborating, the parties intend to solve a problem by
clarifying differences rather than by accommodating various points of view. If
you attempt to find a win–win solution that allows both parties’ goals to be
completely achieved, that is collaborating.
! !252
Avoiding - A person may recognize a conflict exists and want to withdraw from
or suppress it. Examples of avoiding include trying to ignore a conflict and
avoiding others with whom you disagree.
Accommodating - A party who seeks to appease an opponent may be willing

to place the opponent’s interests above his or her own, sacrificing to maintain
the relationship. We refer to this intention as accommodating. Supporting
someone else’s opinion despite your reservations about it, for example, is
accommodating
Compromising - In compromising, there is no clear winner or loser. Rather,

there is a willingness to ration the object of the conflict and accept a solution
that provides incomplete satisfaction of both parties’ concerns. The
distinguishing characteristic of compromising, therefore, is that each party
intends to give up something. Intentions are not always fixed. During the
course of a conflict, they might change if the parties are able to see the other’s
point of view or respond emotionally to the other’s behavior.
Source: - Organization Behavior – Stephen Robbins and Timothy A. Judge

Stage IV: Conduct
Most people in focus on this stage as conflict becomes visible here in the
forms of their actions and conduct including statements, actions, and
reactions of the conflicting parties. These are conspicuous attempts to
implement intents and sometimes may deviate from the original intents
owing to wrong calculations or unskilled ratifications. This we can say that
the Conduct stage is a dynamic process of interaction.
Stage V: Consequences
This is the stage where consequences of a conflict present themselves.
Such consequences may be due to the action–reaction interplay between
the conflicting parties. When these conflicts improve group’s performance
they may be called constructive and when they hinder the group’s
performance, they may be called destructive.
Constructive consequences - Happen in case of low to moderate level of

conflict increasing effectiveness of the group. When, in a group, conflicts
lead to the quality decisions by avoiding groupthink, fosters creativity,
interest and curiosity within the group by challenging status quo, act as
means to release tensions, and encourage an environment of self-
evaluation and change. Further, we see that diversity in groups though
leads to conflicts, but also tends to produce higher quality solutions.
! !253
Destructive consequences - These consequences of conflict on the

performance are well known as uncontrolled opposition breeds
dissatisfaction, dissolving common bonds and leading to the group’s
destruction or lower its effectiveness. These dysfunctional consequences
include poor communication due to lowered trust, lowered group
cohesiveness, and priority to conflicts over group’s achievement of goals.
Managing Constructive Conflict

Some approaches to effectively managing conflict –
• By recognizing when the disagreement arises, destructive conflict can be

minimized. One of the source of conflict can be communication and
understanding each other, which can be worked upon by fostering open
and frank discussion focusing on interests instead of issues.
• By allowing, the groups split the solution into areas of their top priority
and focusing on how to satisfy their top priorities. In such a way both
conflicting parties may not get all of what they want but can get most
important of what they want.
• By encouraging an open discussion regarding differences in opinions and

preparedness to manage conflict. This leads to a common view of
problem. An open discussion makes it much easier to develop a shared
perception of the problems at hand; it also allows groups to work
towards a mutually acceptable solution.
• By laying emphasis on common interests in resolving conflicts, to avoid

excessive entrenchment of individual viewpoints and tending to take
conflicts personally. Hence, cooperative conflict styles and a strong
identification with group goals tend to be more effective for group
performance than competitive styles.
9.4 NEGOTIATION
“Negotiations are formal discussions in which people or groups try to reach
an agreement, especially in a business or political situation” – Macmillan
Dictionary
“Negotiation is defined as a process that occurs when two or more parties

decide how to allocate scarce resources.”- Robbins
! !254
The terms bargaining can be interchangeably used for negotiation.

Negotiations are present in almost all interpersonal interactions within
groups and organizations. These include labor- management bargaining,
managers negotiating with employees, peers, and supervisors, sales
mangers negotiating with customers and purchase department negotiating
with vendors. In the current scenarios of flexible organizations with organic
organization structure (explained later in chapter 10) having low
departmentalization and formalization, negotiation skills for individuals and
teams become very critical.
Negotiations in organizational context impact inter-relationships between

negotiators and the perceptions of negotiator about each other. Whether
maintaining the social relationship and behaving ethically will be more or
equally important than obtaining an immediate result of bargaining,
depend on how closely the negotiating parties need to interact socially.
Negotiation or Bargaining Strategies

The two general approaches to negotiation are different from each other in
their focus, interest areas, their goal and motivation, information sharing,
and duration of relationship
1. Distributive bargaining or negotiation

2. Integrative bargaining or negotiation.
1. Distributive Bargaining - “Negotiation often means distribution, ‘dividing

up the negotiating pie’. The procedure is known as distributive
bargaining.” – Saner (2008)
For instance, a woman negotiating with the fruit seller to reduce the price
per kilograms of the mangoes is said to be engaging in distributive
bargaining. The main characteristic of such type of bargaining is that it
operates under zero-sum conditions—that is, any benefit one gets is at the
expense of the other and vice versa. Every rupee she gets to reduce from
the fruit seller is a rupee she saves and every rupee more the fruit seller
can get the woman to spend comes at her expense. The crux of distributive
bargaining is negotiating over getting a larger share of a fixed pie, which
means a fixed quantity of goods or services to be shared. Negotiating
parties tend to bargain distributively when the pie is fixed or they perceive
it to be. Most common organizational instance of distributive negotiation is
labor– management wage negotiations. Here the labor representatives are
! !255
determined to procure as higher wages as possible from management as

every rupee labor negotiates increases management’s costs and each of
them bargain aggressively to win over other who is treated as an
opponent. Every negotiating party has two points – target point and
resistance point. Target point indicates what the negotiation would like to
achieve. Resistance point indicates minimum expected outcome below
which the negotiator will break off negotiations. The gap between the
target point and resistance point is the aspiration range and the overlap of
both negotiating parties aspiration range becomes the settlement range, in
which both parties’ aspirations can be met.
Distributive bargaining tactics –

a. A key tactic in distributive bargaining is to be the first one to make an
aggressive offer. This is an effective strategy as –
• It displays power on behalf of the negotiator and powerful individuals

tend to make initial offers, speak first at meetings, and gain the
advantage during a bargaining process.
• An anchoring bias sets in, i.e., people tend to get fixated on initial
information, and fail to sufficiently adjust the anchor on the basis of
subsequent information.
• Such anchors greatly favor the negotiator who sets them.
One must be cautious while making initial offer as it sets an anchor about
the following –
• The initial offer must be on the high end but be reasonable, i.e., not
higher than other party’s target point.
• Should not, over cautious and set in something much lower than what
one could have got as a settlement.
b. Another key tactic is revealing a deadline during the bargaining process,

this helps to speed up concessions from the other party making them
reconsider their position.
! !256
2. Integrative Bargaining - “Integrative or cooperative bargaining is

expanding the pie by negotiating for mutual gain and creating value to
be shared by both negotiators” – Guasco & Robinson (2007)
Integrative bargaining is about reaching a win-win situation in a

negotiation, where both parties are able to make optimal benefits. The
main advantage of this is that even though one party may have larger
gains, the other party yet feels good about the negotiation. This ensures
that “lesser gaining” party, if is left feeling good about the negotiation
process over many occasions of negotiations between the two parties, it
tends to become increasingly more cooperative in future negotiations.
Integrative bargaining may not be possible always, as it requires the

following conditions to be met –
• Transparency of information between both parties

• Honest confession of issues and concerns
• Sensitive to each other’s issues
• High level of established trust
• Willingness to maintain flexibility.
Various ways to ensure more integrative outcomes –

• Negotiating in teams help generate more creative ideas.
• Ensuring greater number of negotiable issues on the table, generating

more trade-off options has individuals have different preferences.
• Focusing on the underlying interests rather than on issues as in such

negotiations, the joint outcomes are much higher. This is because both
parties are interested on learning and understanding the other side
rather than their individual bottom-line outcomes
• Avoid compromising as it decreases the pressure on integrative

bargaining as if one party gives in then creativity from the process
disappears and both parties together may settle with a lower total
outcome of the negotiation.
! !257
Some key differences between distributive and integrative bargaining are

given in Table 9.1.
S.No. Distributive Bargaining Integrative bargaining
1 There can be only one winner Win-win solution can be achieved
2 Builds animosities and Fosters long-term relationships
creates rifts
3 Not preferred but commonly Preferred yet difficult to achieve
takes place
The Negotiation Process

This is a simple step-wise negotiation process made up of five steps:
1. Preparation and planning,

2. Definition of ground rules,
3. Clarification and justification,
4. Bargaining and problem solving,
5. Closure and implementation.
Preparation and Planning – This step involves gathering information and

building a strategy of negotiation basis the information collected. The
information to be collected varies from negotiation to negotiation but
mainly include one’s own goals, own issues, information about the other
party and their issues, reasons for negotiation, possible goals of the other
party, change in relationship post negotiations etc. For instance, a
Purchase manager at Dell Computer must keep track of his goal of
maximum possible reduction in costs from the supplier. To keep track of
one’s goals they must be written down from the target point to resistance
point. While anticipating others goals and interests, one must be ready
with points in favor of your goals and interests. As regards, negotiation
affecting relationship, one must weigh the pros of distributive and
integrative barging then adopt the style before straining relations. Once
you have gathered your information, use it to develop a strategy.
Definition of Ground Rules – Post preparation and planning ground rules

and procedures of the negotiation are set between the two parties
involved. The ground rules are would be about who would the negotiators
will be, time, place, any time constraints, limited issues and procedure in
case of deadlock is reached. Finally, the parties exchange their initial
proposals or demands.
! !258
Clarification and Justification – The next step is of explanation, clarification

and justification between the two parties regarding their original positions.
This may not be confrontational but an opportunity to understand each
other, their issues and the criticality of their issues. It is advisable to
provide each other with any possible documentation in your support.
Bargaining and Problem Solving – This is the key step where the actual
discussions take place in order to reach a settlement. Here, both parties
are expected to make concessions.
Closure and Implementation – This is the final step in negotiation involving

formalization of the settlement reached and plans for implementing and
monitoring it. In many cases, it maybe just a formal handshake between
the negotiators.
Impact of Individual Differences on Effectiveness of Negotiation

It has been seen that some individuals are more effective negotiators than
others are. This can be attributed to the various individual differences.
Most commonly four factors impact the negotiation ability of the individual.
These four factors are –
• Individual Personality Traits

• Moods and Emotions,
• Cultural Differences
• Gender Differences
Personality Traits – By knowing an individual personality, we may be able

to predict about his or her negotiation style and tactics only to a limited
extent as because personality and negotiation outcomes are weakly
related. Agreeable or extraverted individuals may not be very successful in
distributive bargaining as being outgoing and friendly tend to share more
than required information. In addition, the agreeable individuals tend to be
keener on ways to cooperate rather than contradict. Such traits support
integrative negotiations but may be a hindrance in case of interests that
are opposed. Consequently, it can be a disagreeable introvert that is more
self-centered and focused on his own interests, would make a great
disruptive negotiator. Hence, individuals desirous of positive relationships
with others and very bothered about their own outcomes; tend to be poor
negotiators as they are very anxious about disagreements tending to give
! !259
in quickly to avoid unpleasant conflicts even before negotiations start.

However, in such people intelligence increases negotiation effectiveness as
one can learn to negotiate even though one is an agreeable extrovert,
particularly if they are aware of their weakness.
Moods/Emotions – The impact of moods and emotions on negotiation

varies with type of negotiation for example, in distributive negotiations,
those negotiators in a position of power or equal status who display anger
tend to negotiate better as their anger generates compromising from other
party and the angry negotiators feel more focused and assertive in striking
a bargain. On the other hand, anger displayed by those negotiators who
are in a low power situation generates antagonistic outcomes. For instance,
supervisor negotiating with a peer or a subordinate, displaying anger, will
be helped in negotiation process while subordinate negotiating with his
supervisor displaying anger negotiating with a boss, will be at a loss in
negotiation process. In other scenarios, two parties negotiating at more
than one occasions involves perception of a tough opponent by one part of
the other in case in the first negotiation the other has displayed anger.
Anxiety also tends to have an effect on negotiation. Thus, those
experiencing more anxiety about a negotiation tended to use greater
deceptions in dealing with others and but they tend to expect lower
outcomes, respond to offers fast, and tend to exit the bargaining process
more quickly, leading to worse outcomes. These aspects of mood relate to
distributive bargains. However, in integrative negotiations positive moods
and emotions tend to lead to more integrative agreements as positive
mood is related to creativity.
Culture Differences – Cultural difference tend to affect negotiation styles of

people. In a study of U.S. and Japanese negotiators, it was found that
conflict-avoidant Japanese negotiators tended to communicate indirectly
and adapted behaviors to the situation. A follow-up study showed that,
whereas early offers by U.S. managers led to the anchoring effect we noted
when discussing distributive negotiation, for Japanese negotiators, early
offers led to more information sharing and better integrative outcomes.
People in position of power and belong to high power distant cultures tend
to exercise greater restraints in positions of power .A study looked at
differences between U.S. and Indian negotiators, in which Indians reported
having lesser trust in their opponents than Americans. These lower levels
of trust were associated with lower discovery of common interests between
parties, which occurred because Indian negotiators were less willing to
disclose and solicit information. However, in both cultures, using a
! !260
question-and-answer methods of negotiation lead to superior negotiation

outcomes. This proves that though cultural differences impact negotiation
styles but some tactics generate similar outcomes irrespective of cultures.
Gender Differences – The negation styles between men and women may
not be different but the outcomes of negotiations are. Though popular
stereotype is that women are more cooperative and pleasant in
negotiations than men but evidence suggest that men negotiate better
outcomes than women do, although the difference is relatively small. The
values placed on outcomes vary between men and women. For instance,
for women interpersonal relationship hold bigger than having the corner
cubicle and a larger salary or the corner office. Evidence also shows that
women’s own attitudes and behaviors tend to harm the negotiations.
Women managers have less confidence than men have in anticipation of
negotiating and are less satisfied with their performance afterward despite
their outcomes being similar to those for men. Men tend to see an
ambiguous situation as an opportunity for negotiation while women do not.
Studies suggest that women tend to be less aggressive in negotiations as
they tend to be concerned about reprisal from others. Another finding
shows that women are more likely to engage in assertive negotiation when
they are bargaining on behalf of someone else than for themselves.
Third-party Negotiations
Negotiations that cannot be completed without an external intervention
either in the form of a mediator, arbitrator or conciliator are called third-
party negotiations. A need for third party negotiations arises when the
individuals or group representatives reach an impasse and are unable to
come to a mutually beneficial outcome through the direct negotiations. In
third party negotiations, there may be any of the three roles the third party
may play –
1. Mediator
2. Arbitrator
3. Conciliator
Role of a mediator - A neutral third party who enables a negotiated

outcome with the help of logic and coaxing, recommending options are
termed as Mediators. In case of labor–management negotiations and legal
disputes, mediators can be very helpful and effective. Their intervention
results in a high settlement rate of approximately 60 % and a quite high
! !261
satisfaction of approximately 75%. However, the success of a mediator is

situation-driven. The given three situations have an influence on the
effectiveness of mediation -
• For the mediator to be effective in bringing about a successful
negotiation, the negotiating groups or individuals must be motivated to
bargain and bring about a resolution.
• Mediator will be effective in moderate to low intensity conflict, hence in

case of high intensity conflict, mediation will not be effective
• Perceptions of the mediator by the negotiating parties are critical in

determining the success of the mediator. Only if the mediator is viewed
as neutral and non-coercive, will he receive the necessary cooperation
and will be able to bring about a resolution.
Role of an arbitrator - A third party possessing the authority to enforce

an agreement between the negotiating parties is termed as Arbitrator.
There are two types of arbitrations –
• Voluntary Arbitration – Such an arbitration is requested by the

negotiating parties
• Compulsory Arbitration – Such an arbitration is enforced on the

negotiating parties by law or contract.
One major point in the favor of arbitration is that it necessarily brings

about a settlement between the conflicting parties. The point that may go
against arbitration is the degree to which the arbitrator is perceived as
heavy-handed and one party is left at a loss then the party is likely to be
dissatisfied and resulting in reoccurrence of the conflict.
Role of a Conciliator - A third party that is trusted and provides an

informal communication link between the negotiating parties. In terms of
effectiveness, both conciliation and mediation are comparable. Conciliators
play a much larger role than just being communication link as they also
engage in fact-finding, understanding messages, and convincing both
parties to build a consensus.
Activity
! !262
1. After having, understood the concept of power here, can you comment
on the powerful situation of the Oil-owning Nations in the world and
explain the reasons for their situations.
…………………………………………………………………………………………………………………………
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…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
! !263
9.5 SUMMARY
This chapter explains the concept of power and the bases for power. Under
power, it also explains the various power tactics used by individuals and
groups. Additionally, covers the factors affecting the effectiveness of these
power tactics. It further explains the term politics and explains various
related concepts such as factors contributing to political behavior and
response of individuals to organizational politics etc. Then the chapter
moves on to explain the concept of Conflict. Here, it highlights, in detail,
the process of conflict and the ways of managing constructive conflict.
Finally, the chapter covers the concept of negotiation and its various
nuances. Under negotiation, the chapter covers the two types of bargaining
strategies– distributive and integrative – an attempt to differentiate
between them. It further explains the negotiation process, the various
individual factors affecting negotiation styles and ultimately the concept of
third party negotiations.
! !264

1. “Referrent Power is a type of Formal Power”. State “True” or “False”

(a) True
(b) False
2. “A third party that is trusted and provides an informal communication

link between the negotiating parties.” The given statement decribes the
role of a ____________.
(a) Arbitartor
(b) Mediator
(c) Conciliator
(d) Mediator or conciliator
3. “Integrative bargaining may not be possible always, as it requires the

certain conditions to be met.” Which of the following is a condition under
which integrative bargaining may not be possible?
(a) Transparency of information between both parties
(b) Honest confession of issues and concerns
(c) High level of established mistrust
(d) Sensitive to each other’s issues
4. _________________ is the Fourth stage in the process of conflict.

(a) Potential antagonism or discordance
(b) Conduct
(c) Consequences
(d) Intents
5. “This power tactic involves increasing the individual’s or group’s support

via inclusion in decision making about accomplishment plan.” Choose
the correct option.
(a) Consultation
(b) Exchange
(c) Pressure
(d) Legitimacy
Answers of MCQs: 1. - (b); 2. - (c); 3. - (c); 4. - (b); 5. - (a).
! !265
REFERENCES
1. Principles of Negotiation: Strategies, Tactics, Techniques to Reach

Agreement – Matthew Guasco, Peter R. Robinson.
2. The Expert Negotiator: Strategy, Tactics, Motivation, Behavior,

Leadership – Raymond Saner.
3. An Introduction to Group Dynamics – Donelson R. Forsyth.
4. High Performance Teams: How to Make Them Work – Marc Hanlan.
5. The Oxford Handbook of Human Resource Management – Peter F.


Taylor.

Armstrong.

Adams.
16.Interpersonal Conflict: Ninth Edition – William Wilmot, Joyce Hocker.
! !266
17.Power and Organizations – Stewart R Clegg, David Courpasson, Nelson

Phillips.
18.Power Dynamics and Organizational Change – Jaap J. Boonstra.
19.Power, Politics, and Organizational Change: Winning the Turf Game –

David Buchanan, Richard Badham.
20.Organizational Power Politics: Tactics in Organizational Leadership –

Gilbert W. Fairholm.
21.How To Manage Conflict in the Organization – Gregg Lee Carter, Joseph

Francis Byrnes.
22.Resolving Personal and Organizational Conflict: Stories of

Transformation and Forgiveness – Kenneth Cloke, Joan Goldsmith.
□□□
! !267
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !268
ORGANIZATION STRUCTURE AND DESIGN
Chapter 10
Objectives
• Understand what is organization structure and what are the different

elements of organization structure
• Understand the different organization designs and models
• Understand why structures differ and what are the determinants of the
structures
• Understand the impact of organization structure on employee behavior
Structure:
10.1 Organization Structure – Definition and Elements
10.2 Organization Design
10.3 Determinants of Organization Structure
10.4 Organizational Designs and Employee Behavior
10.5 Summary
! !269
10.1 ORGANIZATION STRUCTURE – DEFINITION AND

ELEMENTS
Definition
An organizational structure refers to the manner in which the various job
tasks are formally divided, grouped and coordinated.
“The established patterns of relationships between the component part of

an organization, control and authority patterns. Structure distinguishes the
parts of an organization and delineates the relationship between them.” –
Wilson and Rosenfield (1990)
“The formal pattern of interactions and coordination designed by

management to link the tasks of individuals and groups in achieving
organizational goals”. – Bartol and Martin (1994)
Elements
There are six key elements of organization’s structure:
• Division of labor or work specialization

• Departmentalization
• Chain of command
• Span of control
• Centralization and Decentralization
• Formalization
Division of Labor or Work Specialization

It refers to the extent to which activities within an organization are
bifurcated into separate jobs. The key is to split a job into numerous steps
and each step is assigned to separate individual to complete. This implies
that individuals specialize in a part of the activity rather than the whole
activity. Ford Company applied the concept of assembly line very early.
Every worker was given a specific, repetitive activity like attaching the left-
back wheel or fitting headlights. Ford split the jobs into smaller
standardized activities to be conducted repeatedly, enabling it to produce a
car at an extremely high rate of a car per 10 seconds. Through this, it
utilized the very limited skills of its workers in an effective manner,
demonstrating that jobs can be performed more efficiently when
employees do specialized work. The need for specialization arises as not all
individuals have similar skills and specialization can be viewed as a means
! !270
of utilizing employees’ skills in the most efficient manner and improving

them by constant practice. Work specialization is time saving as people
spend no time in changing tasks and tools or equipment of a prior task to
get ready for next. Division of labor leads to simplicity and economy in
highly sophisticated and complicated operations by selecting and training
individuals for specific and repetitive tasks. Work specialization increases
efficiency and productivity by encouraging the creation of special
inventions and machinery. However, after a certain stage or level of
specialization individual diseconomies from specialization began to surface
as boredom, fatigue, stress, low productivity, poor quality, increased
absenteeism, and high turnover, which might erase the economic
advantages. In such cases, productivity can be restored by enlarging or
enriching the jobs, i.e., within the given scope of people’s tasks providing
them with a variety of related activities or assigning them to teams with
interchangeable skills. Most managers today must recognize both the
benefits and limits of work specialization.
Departmentalization
After splitting the tasks based on specialization, they are grouped as
common tasks for coordination. The basis of grouping the tasks for
coordination is known as departmentalization. Departmentalization can be
done in various ways; the most common ones are as follows –
• Function-wise
• Product or Service-wise
• Geography or territory-wise
Function-wise – A common method of grouping activities would be

because of the functions performed. Hence, a manufacturing set up would
have these departments - engineering, accounting, production, and supply
departments. In functional departmentalization, similar specialists are
grouped together, which leads to higher efficiency.
Product or Service-wise – Another method could be to group jobs by the

type of product or service the organization produces. Procter & Gamble
places each major product—such as Tide, Pampers, Charmin, and Pringles
—under an executive who has complete global responsibility for it. Since all
the activities related to a single product or service, and thereby its success
and failure, is under the responsibility of one department, the level of
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accountability increases. This increased accountability leads to greater

push for performance and is a major merit of this type of
departmentalization.
Geography or territory-wise – In this departmentalized jobs are

grouped together on the basis of geography, or territory, the sales function,
for instance, may have north, south, central, east and west regional sales
teams. These regional sales teams carry out all jobs for their geography.
Such departmentalization is beneficial only if the customers are spread
over a large geographic area and have similar requirements based on their
locations.
Process departmentalization – This category of departmentalization is

based on the specific kind of customer the organization attempts to reach.
Microsoft, for example, is organized around four customer markets:
consumers, large corporations, software developers and small businesses.
The rationale behind this departmentalization is that customers in each
department have a common set of issues and requirements that are best
served by assigning specialists for each.
Chain of Command
The chain of command is a hierarchy of authority that determines who is in
charge and those on top of the hierarchy direct and controls the activities
of the organizational members below them. Two key elements of chain of
command are - authority and unity of command. Authority refers power
obtained formally. It is institutionalized and legal right inherent in a
particular job, function or position that enable its holder to successfully
carry out responsibilities by directing others to perform. To ensure proper
coordination activities, each position occupies a place in the chain of
command, and each position is assigned a degree of authority in order to
have the responsibilities fulfilled. The principle of unity of command aid in
preserving the concept of an unbroken line of authority. This principle
states that an individual would be responsible to only one supervisor, who
in turn is responsible to only one supervisor and so on up the
organizational hierarchy. This is because dual command will be a source of
conflict, as an individual might have to cope with parallel demands from
more than one superior. Though with times changing concepts like
empowered employees, self-managed teams, cross-functional team,
project based teams have led to multiple reportings in various scenarios,
! !272
however, most organizations today still follow the chain of command to

ensure highest productivity.
Span of Control
Span of control simply refers to the number of subordinates a supervisor
has or in more detail, it refers to the number of subordinates that a
supervisor can directly supervise effectively and efficiently. The concept of
span of control is important as it helps to decide the number of levels and
managers an organization has. All things being equal, the wider the span of
control, the more efficient the organization is, particularly, in terms of cost.
Too large spans of control may lead to ineffectiveness and lead to
performance dip as with large teams a supervisor may not have sufficient
time and energy to manage all subordinates and is unable to provide the
ideal quality of leadership and support. Small spans of control, say having
five or six subordinates, may be more effective as the manager can
maintain close supervision. However, narrow spans have their own
demerits.
• First, they add to cost by adding levels of management.

• Second, they make vertical communication more cumbersome as
increased levels of hierarchy reduce pace of decision making and tend to
isolate senior management.
• Third, they result in excessive close control and lower subordinate
autonomy.
Recent needs of the organization to reduce costs, cut overhead costs,

speedy decision making, increasing flexibility, etc., are tending the
organizations towards wider spans of control. Under a wide span of control,
the effectiveness can be higher if the employees know their jobs very well
and can support others in the team. This can be achieved by investing in
employee training and development.
Centralization and Decentralization

Centralization refers to the concentration of management and decision
making power at a single point in the organization, i.e., the top
management. Thus, in centralized organizations, top managers take all the
decisions, and junior-level managers carry out commands. Centralization
includes only formal authority, i.e., authority by position. Decentralization
refers to transfer of decision making and management away from a central
authority, i.e., top management, down the line closer to action. Thus,
! !273
decentralized organization can respond quickly to problems, larger inputs

into decisions, and employees feel engaged and involved. Recently,
organizations are moving towards greater employee flexibility and
responsiveness have tending them towards decentralized decision making.
This is helpful to the organizations as the employees who are closer to the
action and typically have more detailed knowledge about problems than
top managers directly work on the solution. In Procter & Gamble,
decentralization is used extensively in the form of empowered small
employee groups taking many decisions about various areas such as new-
product development, irrespective of the hierarchy.
Formalization
According to Price and Mueller (1986), Formalization is the degree to which
the norms of an organization are explicitly formulated. It implies the extent
to which jobs and roles in an organization are standardized. Owing to
standardization, employee has very limited autonomy over his work
methods and plans. Under formalization, people are expected always to
handle the same input in exactly the same manner, resulting in a
homogeneous and sustained output. There exist fixed job descriptions,
various organizational norms, and clear standard operating procedures in
the organizations with high level of formalization. In organizations with low
formalization, job behaviors are not fixed, and employees enjoy great deal
of autonomy in their work methods and plans. Standardization discourages
employees to engage in alternative behaviors by removing the need to do
so. The level of formalization can vary widely within and among
organizations. For instance, the entire organization may have clearly laid
down procedures to operate along with norms and rules, however, within
the same set up a newly started department, say, Public relations might
currently be operating without any formal procedures or norms.
Table 10.1: Key Design Questions and Answers for Proper Organization
Structure
The answer is provided
The Key Design Question
by
To what degree are the tasks divided into
1 Work Specialization
separate jobs?
2 On what basis will jobs be grouped together? Departmentalization
3 To whom do individuals and groups report? Chain of Command

How many individuals can a manager
4 Span of Control
effectively and efficiently direct?
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Centralization and
5 Where does decision making lie?
Decentralization
To what degree will there be rules and
6 regulations, to direct employees and Formalization
managers?
Source: Organizational Behavior, Stephen Robbins and Timothy A. Judge
10.2 ORGANIZATION DESIGN
Defining Organization Design

“Organization Design is a process of choosing and implementing a
structural configuration for an organization” – Charlette Rayner, Gary Reese
and Sally Rumbles
“Organization design refers to the formal system of accountability that

defines key positions in an organization and legitimates rights to set goals,
receive information and influence the work of others.” – Robert Simons
(2013)
There are numerous organization designs that can be formed basis the
definitions given above, the most common designs seen in organizations
across the globe are -
• The Simple Structure

• Bureaucratic Structure
• The Matrix Structure
• The Virtual Organization
• The Boundaryless Organization
The Simple Structure

A simple structure can be defined in terms of the six elements of
organizational structure, as a structure not very elaborate with low degree
of departmentalization, larger spans of control, centralized authority and
very low formalization. Organization with simple structures are “flat”
organization with two or three vertical levels, a loose body of employees,
and one individual having centralized decision making authority. It is
adopted by small business generally and an example of simple structures
would be a small retail outlet, a small law firm etc. Large companies, in
crises, adopt simple structures to build focus on their resources. The
benefits of simple structure are its simplicity, fast decision making,
! !275
flexibility, inexpensive and clear accountability. As an organization grows a

simple structure tends to become insufficient, which is one of its major
disadvantage. This happens because of its low formalization, high
centralization there is information overload at the top with the size
increasing, and decision making lying in one person’s hands tends to
become slower and finally may come to a standstill. Hence, as the
organization grows the structure needs to be changed and turned into
something more complex and sophisticated. Another disadvantage is the
risk of everything dependent on an individual. Figure 10.1 shows a sample
of a simple structure.
!
Figure 10.1: Sample Simple Structure
Bureaucratic Structure
Bureaucracy is a management system that relies on a set of rules and
regulations, separation of function and a hierarchical structure
implementing controls over an organization. Standardization is the key
concept underlying all bureaucracies. This is so as standardized work
processes lead to better coordination and control. Bureaucratic structures
are mainly seen in government offices or public sector units. Such
structures are distinguished by highly routine operating tasks achieved by
rigid division of labor, high level of formalization, specialized tasks,
departmentalized function-wise, centralized authority, small spans of
control, and clear hierarchy of authority and decision making following
chain of command. Figure 10.2 depicts a sample bureaucratic structure.
Merits of this structure include –

• Bureaucracies have the ability to perform standardized activities in a
highly efficient manner.
• Grouping like specialties together in functional departments leads to
economies of scale, minimum duplication of people and equipment, and
employees who can speak “the same language” among their peers.
! !276
• Dearth of talent may not be a concern as in bureaucracies work can be

done by lesser talented managers since rules and regulations substitute
for managerial discretion.
Demerits of this structure include –

• Bureaucratic specialization can create inter functional conflicts as
functional goals are treated with greater importance than organizational
goals.
• Highly inflexible and written down rules, regulations and procedures,
leading to obsessiveness about them. Issues get resolved efficiently only
if the people face familiar problems and solve with programmed
procedures.
• Bureaucracies have clear hierarchies building only impersonal
relationships.
• Once instituted bureaucracies are tough to dislodge or modify.
!
Figure 10.2 Sample Bureaucratic Structure
The Matrix Structure

Figure 10.3 shows a typical matrix structure. Matrix structure combines
two forms of departmentalization: functional and product. Matrix structure
is generally found in advertising agencies, construction companies
management consulting firms, and entertainment companies. Companies
that use matrix-like structures include ABB, Boeing, BMW, and IBM. Matrix
structure attempts to benefit from the strengths of each of type of
departmentalization and do away with their weaknesses. The strength of
! !277
functional departmentalization is grouping like specialists together reducing

their number required and allowing the pooling and sharing their services
for all products. The major weakness of functional departmentalization is
the difficulty of coordinating the activities of varied functional specialists
timely and within budget. Product departmentalization fosters coordination
among specialties to achieve on time completion and meet budget targets
and provides clear responsibility for all activities related to a product. Its
main weakness is duplication of specialist activities and higher costs. The
key structural characteristic of the matrix is that it goes against the
principle of unity of command and people have two supervisors: their
functional supervisor and product managers.
The major advantage of matrix structure include –
• It enables coordination in case of numerous complex and interrelated

tasks.
• Information easily spreads within the organization and is quickly
available to people who require it owing to direct and frequent contact
among functional specialist.
• Owing to dual reporting people’s tendency to focus on functional goals
rather than organizational goals decreases.
• It helps reach economies of scale and enables effective and efficient
allocation as well as deployment of specialists.
The major disadvantages of the matrix structure include –
• The dual reporting creates confusion and this ambiguity can lead to
conflict.
• It can lead to power struggles as usually the product managers tend to
compete for the best specialists to be assigned to their products. Under
bureaucracy, rules eliminate the struggles for power while matrix leaves
scope for power struggles between functional and product managers.
• It puts stress on people, particularly, those who prefer security and shun
ambiguity. Dual reporting causes role conflict and low clarity of
expectations that leads to insecurity and role ambiguity as against the
comfort of bureaucracy’s predictability.
! !278
!
Figure 10.3 Sample Matrix Structure
The Virtual Organization

This is also termed as the network, or modular organization, which is
mainly a small, core organization that outsources its major business
functions. Structurally it is highly centralized, with minimalistic
departmentalization. Such an organization might be able to draw on the
best talent temporarily and not just rely on its existing talent pool. Virtual
structures are formed for a project and are disbanded post the task is over,
hence, they reduce the bureaucratic overheads, long-term risks, and
related costs, since there is no long-term organization to maintain. A major
need of the virtual structure is a strong leadership, ensuring organization
moves towards its long-term purpose despite being in a constant state of
flux. In this set up managers, utilize majority of their time coordinating and
controlling external relations via computer network links.
The major advantages of the virtual organization are -

• It enables flexibility allowing people with creative ideas and limited funds
to successfully compete with larger established set-ups.
• It is highly cost effective as there are no permanent offices and
hierarchical roles.
• It facilitates utilizing the best talent available from the market for each
project without getting into staffing hassles.
! !279
The major disadvantages of virtual organizations are –

• Virtual organizations tend to be in a state of constant flux and
reorganization resulting in lack of unclear roles, goals, and
responsibilities and thereby, scope for political behavior.
• There exists no cultural alignment or common goals owing to low
interaction levels among members.
• Geographically spread employees who interact infrequently face difficulty
in sharing information and knowledge. This can limit creativity and
increase response time.
• Contrary to the belief, virtual organizations may be less adaptable and
creative than those with well-established communication and
collaboration networks. This is where a presence of strong leader is very
essential
!
Figure 10.4: Sample Virtual Organization
The Boundaryless Organization

It is that type of organization that seeks to eliminate the chain of
command, have limitless spans of control, and replaces departments with
empowered teams. In other words, boundaryless organizations eliminates
vertical (hierarchical) and horizontal (departmental) boundaries, as well as
breakdown external barriers to customers and suppliers. Exhibit 10.1
explains boundaryless organizations in details with examples.
! !280
Exhibit 10.1: The Boundaryless Organization
This term was coined by GE’s former chairman, Jack Welch. It was Jack Welch’s
dream for GE, that despite its huge size he should be able to remove vertical
and horizontal boundaries internally and break down barriers between GE and
its external stakeholders. The boundaryless organization attempts to get rid of
the chain of command, have limitless spans of control, and replace
departments with empowered teams. Although GE has not yet achieved this
boundaryless state—and probably never will—it has made significant progress
towards that end. So have other companies, such as Hewlett-Packard, AT&T,
Motorola, and 3M. Let us see what a boundaryless organization looks like and
what some firms are doing to make it a reality. By removing vertical
boundaries, management flattens the hierarchy and minimizes status and rank.
Cross-hierarchical teams (which includes overseeing directly any activities done
in-house and to coordinate relationships with the other organizations that
manufacture, distribute, and perform other crucial functions for the virtual
organization.), participative decision making practices, and the use of 360-
degree performance appraisals (in which peers and others above and below the
employee evaluate performance) are examples of what GE is doing to break
down vertical boundaries. Xerox now develops new products through
multidisciplinary teams that work on a single process instead of on narrow
functional tasks. Some AT&T units prepare annual budgets based not on
functions or departments but on processes, such as the maintenance of a
worldwide telecommunications network. Another way to lower horizontal
barriers is to rotate people through different functional areas using lateral
transfers. This approach turns specialists into generalists. When operational,
the boundaryless organization also breaks down geographic barriers. Today,
most large U.S. companies see themselves as global corporations; many, like
Coca-Cola and McDonald’s, do as much business overseas as in the United
States, and some struggle to incorporate geographic regions into their
structure. The boundaryless organization provides one solution because it
considers geography more of a tactical, logistical issue than a structural one. In
short, the goal is to break down cultural barriers. One way to do so is through
strategic alliances. Firms such as NEC Corporation, Boeing, and Apple each
have strategic alliances or partnerships with dozens of companies. These
alliances blur the distinction between one organization and another as
employees work on joint projects. In addition, some companies allow
customers to perform functions previously done by management. Some AT&T
units receive bonuses based on customer evaluations of the teams that serve
them. Finally, telecommuting is blurring organizational boundaries. The security
analyst with Merrill Lynch who does her job from her ranch in Montana or the
software designer in Boulder, Colorado, who works for a San Francisco firm are
! !281
just two of the millions of workers operating outside the physical boundaries of
their employers’ premises.
Source: Organization Behavior, Stephen P. Robbins, Timothy A. Judge
The Leaner Organization: Downsizing

Today’s organizations would like to be lean, focused, and flexible.
Downsizing is as one of the key means to achieve this. Downsizing is a
systematic process of decreasing the size of the organization by eliminating
non-value adding employees and or departments within the organization.
Downsizing is carried out by organizations for various reasons including –
• In order to sustain in situations of market share loss and consumer

demand changes.
• In order to divert all efforts toward the core competencies.
• In order to decrease bureaucracy and speed up decision making.
The advantages of being a lean organization –

• Lower salary costs.
• Improved strategic focus positively affecting stock prices
The disadvantages of being a lean organization –

• Downsizing organizations that do not restructure, experience a decline
in their profits and stock prices
• Downsizing has negative impact on employee attitudes, as they feel
stress about future downsizing and may lose feeling of commitment
towards the organization. Stress results in increased sickness
absences, lower concentration lower creativity and ultimately high
voluntary turnover of desirable human resources.
Organizations use some of the following strategies to alleviate the negative

impacts of downsizing –
• Investment – Post downsizing, carried out to increase focus on core

competencies, organizations must invest in high-involvement work
practices to ensure effectiveness of downsizing.
• Communication – An early discussion by the employers with the

employees regarding downsizing lowers worry about the outcomes in
their minds and makes the employees feel involved.
! !282
• Participation – Having the employees participate in the downsizing

process in any way, reduces their stress.
• Assistance – Options like Voluntary Retirement Schemes or severance

packages can help in becoming lean without layoffs. Further, these
options show that the company cares about and honors employee
contributions.
These strategies show that in case organizations want to make themselves

lean, agile, efficient, and productive, they would need to be careful in
downsizing and help employees through the process.
Organizational Design Models

Based on the above different types of common organizational designs two
basic models merge. These are the Mechanistic Model and The Organic
Model.
The Mechanistic Model – A structure characterized by extensive

departmentalization, high formalization, a limited information network and
centralization. Shown in Figure 10.5.
The Organic Model – A structure that is flat uses cross–hierarchical and

cross-functional teams, has low formalization, possesses a comprehensive
information network and relies on participative decision making. Shown in
Figure 10.6.
Table 10.2: The Mechanistic Model versus the Organic Model
Structure
Dimension Mechanistic Model Organic Model
Stability Change Unlikely Change Likely

Specialization Many specialists Many journalists
Formal rules Rigid rules Considerable flexibility

Centralized in a few top Decentralized, diffused throughout
Authority people the entire organization
Source: Organization Behavior, Stephen P. Robbins, Timothy A. Judge
! !283
!
Figure10.5 The Mechanistic Model
!
Figure 10.6: The Organic Model
10.3 DETERMINANTS OF ORGANIZATION STRUCTURE

Let us consider the major determinants of organization structures, which
may help understand why designs differ –
• Organizational Strategy
• Organizational Size
• Technology
• Environment
! !284
Organizational Strategy
Structure is a means to attain goals, which are derived from organizational
strategy. Hence, structure should follow strategy. Any changes in strategy
would result in structural changes. Let us understand the relationship of
strategy and structure through the three strategy dimensions—innovation,
cost minimization and imitation.
• Innovation strategy - Under this strategy organization strives towards

achievement of meaningful and unique innovations. Innovative strategy
requires use of competitive salary and benefits to attract best talent and
motivate employees for risk-taking. In such a scenario, to some extent a
bureaucratic structure can be beneficial. For rapid changes to take place
in a smooth manner, the highly developed communication channels,
policies for enhancing long-term commitment, and clear lines of authority
of a mechanistic structure will be useful. The greater use comes from the
flexibility of organic structures.
• Cost-minimization strategy - Organizations following the cost minimizing

strategy follow tight control costs; refrain from making unnecessary
expenses, and cuts prices of basic product. Such organizations do not
focus on polices and thereby, structures that are meant to facilitate
employee commitment. They seek efficiency and stability of bureaucratic
structures.
• Imitation strategy - Organizations following an imitation strategy attempt

to minimize risk and maximize profits, introducing new products or
entering new markets only after innovators have proven their viability.
Imitator organizations combine the two structures - mechanistic and
organic. They use a mechanistic structure to have tight controls and low
costs in their present tasks but create organic subunits in which to
pursue new undertakings.
Organization Size
The size of the organizations determines its structure. Large organizations
that employ 2000 or more people tend to have more specialization, more
departmentalization, more vertical levels, and more rules and regulations
than do small organizations. However, size becomes less important as an
organization expands.
! !285
Technology
Technology is the manner in which an organization transfers inputs into
outputs. Every organization may have at least one technology for
converting financial, human, and physical resources into products or
services. While understanding structure–technology relations, technology is
seen through degree of routineness. Routine activities have automated and
standardized operations. Non-routine activities are customized and require
frequent revision and updating. In general, organizations engaged in non-
routine activities tend to prefer organic structures, while those performing
routine activities prefer mechanistic structures.
Environment
Outside institutions or forces that can impact an organization’s
performance like suppliers, customers, competitors, government regulatory
agencies, and public pressure and groups constitute the organization’s
environment. A dynamic environment forms greater uncertainty for
managers than does a static environment. In order to minimize
uncertainty, managers tend to broaden their structure to sense and
respond to threats. Some of the companies may form strategic alliances, to
better compete in the market. Any organization’s environment can be
looked at through the three dimensions:
• Capacity means the extent to which the environment supports

organizational growth. Rich and growing environments generate excess
resources, which can buffer the organization in times of relative scarcity.
• Volatility means the extent to which the environment is unstable.

Dynamic environments with high levels of unpredictable change render
organization to make inaccurate predictions. Fast paced information
technology changes are making organization’s environments more
volatile.
• Complexity means the extent of heterogeneity and concentration among

environmental elements. Simple environments are homogeneous and
concentrated. Environments characterized by heterogeneity and
dispersion are complex and diverse, with numerous competitors.
Organizations that operate scarce, dynamic, and complex environments

come across greatest level of uncertainty because of high unpredictability
with little scope for mistakes and have variety of elements to monitor
! !286
constantly. Some general conclusions based on the three dimensions are -

The scarcer, dynamic, and complex the environment, the more organic
structure should be and in reverse conditions, a more mechanistic
structure might be preferred.
!
Figure 10.7: Determinants of Organizational Structure
1 0 . 4 O R G A N I Z AT I O N A L D E S I G N S A N D E M P L O Y E E
BEHAVIOR
People have different preferences about their work environment and not
everybody may prefer the freedom and flexibility of an organic structure.
In addition, every structure has its different factors, which are preferred or
not preferred by individuals, these differences and their preferences affect
the employee behavior. Research with respect to organization designs and
employee behavior shows that –
• Mechanistic organizations provide high level of fairness owing to formal

policies and procedures which predicts high employee satisfaction, while
organic organizations predicts high value on interpersonal justice tagged
by employees.
• Work specialization up to a certain level results in higher employee

productivity, however, may decrease job satisfaction.
Also, seen is that after that level of work specialization, productivity gets
affected negatively owing to human diseconomies of performing repetitive
! !287
and specialized tasks overtaking the economies of specialization. With level

of education and need for intrinsically satisfying jobs increases, the point
where employee productivity drops because of specialization, reaches
much faster. However, there may still be people who prefer repetitive,
highly specialized routine jobs with very minimalistic intellectual needs but
offering high job security. For such individuals high work specialization may
lead to increased job satisfaction also. Thus, it can be said that undesirable
behaviors emerge with high work specialization mostly in highly
professional jobs with people having high personal development needs.
!
Figure 10.8: Relationship between Work Specialization and Employee
Productivity
• The relationship between span of control and employee performance is

dependent on individual differences and abilities, task structures, and
other organizational factors.
• There is an inverse relationship between centralization and job

satisfaction, in general.
! !288
A decentralized structure offers greater autonomy, which is positively

related to job satisfaction. However, not all view autonomy positively and
view it as ambiguity. Thereby, it can also be said that the relationship
between centralization and job satisfaction is contingent on individual
differences like experience, personality and cultural differences.
Activity
1. Finance executive, reports to the Accounts Head of his department,
however, he also reports into the Business Unit of a particular business,
which he caters to for all the finance functional needs. Please explain if
it is possible for an individual to have more than one reporting in an
organization. If yes, explain in detail what such type of structure is.
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
! !289
10.5 SUMMARY
This chapter defines what organization structure is and explains the
different elements of organization structure, namely, division of labor or
work specialization, departmentalization, chain of command, span of
control, centralization and decentralization, and formalization. It takes us
through the commonly used organization designs namely, the simple
structure, the bureaucratic organization, the matrix structure, the virtual
organization and the boundaryless organization. It also explains the two
basic models of organization design – The mechanistic model and the
organic model. The chapter highlights the various determinants of
organization structure, which are responsible for different structures across
the globe. Finally, the chapter takes us through the relationship between
employee behavior and organizational design.
! !290
10.6 SELF ASSESSMENT questions

1. “After a certain level of work specialization, productivity gets affected

negatively owing to human diseconomies of performing repetitive and
specialized tasks overtaking the economies of specialization.” State
whether “True” or “False”.
a. True
b. False
2. The dimensions of environment that determine the organization
structure include ______.
a. Capacity
b. Volatility
c. Complexity
d. All of the above
3. Which one of the following options is not a disadvantage of “The Virtual

Organization”?
a. Geographically spread employees who interact infrequently face

difficulty in sharing information and knowledge. This can limit
creativity and increase response time.
b. There exists no cultural alignment or common goals owing to low
interaction levels among members.
c. It facilitates utilizing the best talent available from the market for
each project without getting into staffing hassles.
d. Contrary to the belief, virtual organizations may be less adaptable
and creative than those with well-established communication and
collaboration networks. This is where a presence of strong leader is
very essential.
4. _________________ refers to the number of subordinates that a

supervisor can directly supervise effectively and efficiently.
a. Formalization
b. Division of labor
c. Departmentalization
d. Span of control
! !291
5. The boundaryless organization is ______________.
a. An organization that eliminates vertical (hierarchical) and horizontal

(departmental) boundaries, as well as breaks down external barriers to
customers and suppliers.
b. An organization that seeks to eliminate the chain of command, have
limitless spans of control, and replaces departments with empowered
teams.
c. Both (a) and (b)
d. Neither (a) nor (b)
Answers of MCQs: 1. - (a); 2. - (d); 3. - (c); 4. - (d); 5. - (c).
! !292
REFERENCES
1. Organizational Behavior – Charlotte Rayner, Gary Rees, Sally Rumbles.
2. Levers of Organization Design: How Managers Use Accountability

Systems for Greater Performance and Commitment – Robert Simons.

4. 0Organizational Behavior – Stephen P. Robbins, Timothy A. Judge.

Taylor.

Armstrong.

Adams.
14.Managing Organizations: Text, Readings, and Cases – David Charles

Wilson, Robert Harold Rosenfeld.
15.Management – Kathryn M. Bartol, David C. Martin.
16.Handbook of Organizational Measurement – Price, J. L.; Mueller, C. W.
! !293
17.Leading Organization Design: How to Make Organization Design

Decisions to Drive the Results You Want – Gregory Kesler, Amy Kates.
18.Strategic Organization Design: Concepts, Tools & Processes – David

Nadler, Michael Tushman.
19.Theories of Organizational Structure and Process – John B. Miner.
20.Organizational Strategy, Structure, and Process– Raymond E. Miles,

Charles Curtis Snow.
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REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
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ORGANIZATION CULTURE
Chapter 11
Objectives
• Understand what organization culture is

• Understand the significance of organization culture and importance
• Understand the differences between organizational climate and
organizational culture
• Understand the disadvantages of a strong culture
• Understand the process of creating the culture and how to sustain the
created culture
• Understand how culture is transmitted to the employees
• Understanding how to create an ethical organizational culture
• Understanding how to create a positive culture
Structure:
11.1 Organization Culture Defined

11.2 Significance of Culture
11.3 Organizational Climate and Culture
11.4 Disadvantages of a Strong Culture
11.5 Building and Maintaining Culture
11.6 Transmitting Culture to Employees
11.7 An Ethical Organizational Culture
11.8 A Positive Organizational Culture
11.9 Organizational Culture and National Culture
11.10 Summary
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11.1 ORGANIZATION CULTURE DEFINED

“The ideas, customs or social behavior of a particular people or society” –
Oxford Dictionary
“Organizational culture refers to a system of shared meaning held by

members that distinguishes the organization from other organizations” –
Stephen P Robins
“Organization Culture is defined as a cohesion of values, myths, heroes,

and symbols that has come to mean a great deal to the people who work
there.” – Deal & Kennedy (1991)
Organization culture is defined in terms of its seven key characteristics give

below. A study conducted by J.A. Chatman and K.A. Jehn in 1994,
identified these seven characteristics of the organization culture. Each of
these characteristics mentioned measure from high to low. When one
assesses the organization basis these characteristics, one understands its
culture, the way things are done and expected behaviors.
• Innovation - The extent to which the organization is flexible, adaptable

and experiments with new ideas.
• A g g r e s s i ve n e s s - T h e e x t e n t t o w h i c h o r g a n i z a t i o n va l u e s
competitiveness over easy going and strives to outperform competitors.
• Outcome orientation - The extent to which the organization emphasizes

achievement, result and action as important values.
• Stability - The extent to which organization is predictable, risk oriented

and bureaucratic and focuses on maintaining the status quo over growth.
• Detail orientation - The extent to which organizations emphasize

precision, analysis, and attention to detail.
• Team orientation - The extent to which organizations are collaborative

and emphasize cooperation among people.
• People orientation - The extent to which organizations value fairness,

supportiveness and respect for individuals and consider people’s interest
while taking decisions.
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!
Figure 11.1: Characteristics Defining Organizational Culture
Uniformity of Cultures
Culture of the organization is a common view about the organization held
by its people, despite coming from diverse backgrounds. However, most
large organizations have a dominant culture and various subcultures.
• Dominant culture is unique to an organization, displays its core values

that are shared by the majority members, and provides the members
with boundaries and guidelines that shape their behavior thereby, giving
a distinct personality to the organization.
• Subcultures is a culture that tends to develop in large organizations

within the broader dominant culture that differentiates itself to reflect
common issues, practices, values and beliefs members hold within a
function or space. The marketing function, for example, has a subculture
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that has the core values of the dominant culture and the additional
values unique to its members.
In situations where organizations primarily have various subcultures then

the organizational culture as a stand-alone variable would be quite weak.
The “shared meaning” portion of culture makes it a powerful concept
steering and constructing organizational behavior. However, subcultures
may also affect individual behaviors.
Strong versus Weak Cultures

• Strong culture – A strong organizational culture is internally consistent
with organization’s core values being extensively shared and arduously
held, i.e., majority employees have the same views about the
organization’s goals and values.
• Weak culture – A weak organizational culture is internally inconsistent

with organization’s core value being held weakly and shared narrowly,
i.e., the views of employees about the organization’s goals and values
vary extensively.
It can be seen that if larger number of people adopt the core values with a
greater level of commitment, the culture tends to be stronger and has
much larger impact on people’s behavior since the high level of acceptance
and vigor results into climate of high behavioral control. An advantage of a
strong culture is it checks employee turnover by showing strong agreement
regarding what the organization stands for and this consensus on motive
builds solidarity, faithfulness and organizational allegiance reducing
people’s tendency to quit. A negative effect of strong culture can arise in
case there is disagreement between the perceptions of managers and team
disagrees about organizational support resulting in negative mood of team
members dropping their performance. Such negative effects would be
more pronounced when managers believe the organization provides more
support than the team think it does.
Culture versus Formalization

A strong culture builds standardization, systemization, and regularity and
high formalization in an organization can lead to the same effect. The only
difference being that culture creates these without any formal written
documentations in the form of policies, procedures and regulations. Hence,
culture and formalization can be viewed as two different means to the
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same end. However, the stronger an organization’s culture, the less

management feels a need for formalization by way of building formal rules
and regulations to direct employee behavior. Such directives will be
internalized when the employees adopt the organization’s culture strongly.
11.2 SIGNIFICANCE OF CULTURE

Let us view the different roles culture perform, which would give us an
understanding of its importance to the organization -
• Culture plays a borderline-defining role and creates differentiation among

organization.
• Build a sense of identity among the members of the organization
• Enables allegiance towards larger organizational goals rather than
individual goals.
• Increases the steadiness of the social system by acting as social adhesive
holding the organization together by providing yardsticks for employee
behaviors.
• Acts as sense-making and restraint tool that steers and defines people’s
attitudes and behavior.
How culture features in current scenario of trend towards decentralized

organizations is critical. Today culture becomes more important than before
when the formal authority and control systems have been minimized, only
a shared understanding of culture can keep the employees bonded
together and commitment towards a common goal. However, a team
culture tends people to show greater commitment towards their team and
its values rather than to the organization as a whole. Further, in virtual
organizations, the lack of regular personal interactions constrains the
creation of common set of norms. This shows that establishing a strong
culture in today’s scenario is more difficult and strong leadership that
constantly conveys common goals and purpose is particularly important. A
high compatibility between individual attitudes and organization culture is
also necessary as it determines who is selected for a job, who receives a
good performance review, or a promotion.
11.3 ORGANIZATIONAL CLIMATE AND CULTURE
Organizational climate is defined as how members of an organization

experience the culture of an organization. The distinct culture of an
organization forms a unique atmosphere that is experienced by the people
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who are part of the organization, and this atmosphere is known as the
climate of an organization. The climate of an organization is subject to
frequent changes and can be shaped by the top management of an
organization. If culture represents the personality of the organization,
climate is the organization's mood. Organizational climate is much easier to
experience and measure than organizational culture and much easier to
change.
Link between Organizational Climate and Performance

A positive overall organizational climate is linked to higher customer
satisfaction and financial performance as well. A person who encounters a
positive organizational climate towards performance will introspect about
doing a good job more often and will trust others to support his or her
success. Someone who encounters a positive climate for diversity will feel
more comfortable collaborating with co-workers regardless of their
demographic background. Climates can interact with one another to
produce behavior. For example, a positive climate for worker empowerment
can lead to higher levels of performance in organizations that also have a
climate for personal accountability. Climate also influences the habits
people adopt. If the climate for safety is positive, everyone wears safety
gear and follows safety procedures even if individually they would not
normally think very often about being safe.
11.4 DISADVANTAGES OF STRONG CULTURE

Though Culture can increase organizational allegiance and enhance the
regularity of employee behavior, and is overall valuable to people, but one
cannot overlook the negative aspects of culture especially, the strong ones
–
• Institutionalization - Refers to the process by which an organization gets
valued for itself rather than its outputs. When an organization undergoes
institutionalization it tends to take a life of its own, separate from its
founders or members and may not go out of business even if its original
goals no longer remain relevant. The acceptable behavioral norms are
obvious and ingrained in all, resulting in blind acceptance of behaviors
and habits that must be queried and scrutinized. This further suffocates
creativity and preserving the organizational culture becomes the key
objective.
• Barriers to Change - Culture can be a big cause of rigidity in the

organization becoming a deterrent to change. The widely shared values
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and norm, if they interfere with the organizational effectiveness a need

arises to change them, however, a strongly built culture generate an
inertia and organization tends to resist the change. In conditions when
the organization’s environment is undergoing rapid change, and its
culture may no longer be appropriate, consistency of behavior, viewed as
an asset in a stable environment, seem a burden and make organization
slow to change.
• Barriers to Diversity - Culture may not foster diversity. Hiring people

from diverse backgrounds creates an anomaly though management
desires to show encouragement for the differences, diverse employees
bring to the organization, but they are required to concede to the core
cultural values in order to fit in the system. This results in diminishing of
diverse behaviors and unique strengths as these employees attempt to
modify themselves to be part of the larger culture. Thus, strong culture
can be a liability when they undermine the effectiveness of such
practices. Owing to strong culture, corporate diversity policies do not
work effectively since the culture ignores prejudice, encourages bias, and
may be insensitive to diverse employees.
• Barriers to Acquisitions and Mergers - Earlier while evaluating a merger

and acquisition decision, the key factors management considered were
financial advantage and product synergy. However, recently,
compatibilities of culture have become the primary concern. Everything
being equal, an acquisition or a merger will be successful will depend
more on how well the two organizations’ cultures match up. There are
various evidences to show that mergers have an unusually high failure
rate and it is always because of people issues, i.e., conflicting
organizational cultures. In 2001, Hewlett Packard (HP), a global
computing giant that was struggling in its business announced its
acquisition of another struggling competitor Compaq. However, the newly
formed organization has sustained in the end, but it was seen that the
merger of these two giants was ill fated. This was mainly due to their
stark differences in culture. The HP’s strong engineering, driven culture
based on consensus did not merge with Compaq’s strong sales-driven
culture based on rapid decision making. This poor cultural fit lead to
many years of bitter inside tussles within the new company and resulting
in estimated losses worth 13 billion dollars in market capitalization.
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11.5 BUILDING AND MAINTAINING CULTURE

An organization’s culture is not built in a day and once established it is
difficult to do away with. Let us look at the various steps in building and
maintaining a culture.
Initiation of a Culture
The organization’s exciting way of doing things and the various norms are
mainly, owing to what it has done before and how successful it was in
doing it. This implies paramount source of an organization’s culture is its
founders. When the organization begins, it is small and free from any
earlier customs or ideologies, the founders have a vision for the
organization and they are easily able to impose that on all members.
Formation of culture can happen in three ways –
• First, founders recruit and retain only people whose thoughts and
feelings are compatible with those of the organization.
• Second, founders condition and fraternize these employees to their own
way of thinking and feeling.
• Finally, founders endorse their values and beliefs by their own behavior,
which influences employees to identify with them and internalize them.
The founders’ personality gets ingrained in the culture, once the
organization succeeds.
Some founders with immeasurable impact on their organization’s culture

include Bill Gates at Microsoft, Steve Jobs at Apple and Azim Premji at
Wipro.
Keeping Culture living

Once the foundation of the culture is laid and it is formed, the daily
practices within the organization sustain it by providing its people a series
of similar experiences. The various people processes and practices like
staffing, performance appraisal, learning, etc., ensure those hired settle in
with the culture, requite the supporters, and penalize the challengers. The
three factors that play a key role in maintaining a culture include –
1. Selection
2. Top management
3. Socialization methods
Selection - The primary objective of the selection process is to discern and

hire people with the knowledge, skills, and abilities to be successful on the
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job. However, the final decision is based on the judgement of the decision
maker regarding the fitment of the candidate in the organization
ascertained via the consistency level between the individual’s values
system and that of the organization, at least major portion of that.
Besides, aiding the organization in making judgment about the candidate,
selection also provides important insights to the applicants. Those who find
a conflict between their values and those of the organization can decide to
be out of the selection process. Selection is a thus a two-way street,
allowing both employer and applicant avoid a mismatch and sustaining the
organization’s culture by weeding out those who might be deterrent to its
core values.
Top Management - The actions and behaviors on part of the senior

executives also have an impact on the culture of the organization. Their
words and conduct lays down the norms that define for organization
whether risk taking is desirable, level of freedom managers can give
employees, the appropriate dressing, and the level of performance and
actions that can earn increments, higher roles, and other accolades. The
employees at junior levels observe and learn the cultural norms from the
senior executives and in order to sustain the culture a constant
reinforcement through their behaviors and actions is highly essential.
Socialization - It refers to the process through which a newly joining

employee 'learns the ropes,' by sensitizing towards the formal and
informal power structure and the explicit and implicit rules of behavior.
Irrespective of how effective the activities of recruitment and selection
have been in identifying the most compatible hires, the new joiners need
aid in adapting as well as adopting the existing culture of the organization.
That aid is socialization. The socialization process, shown has an impact on
the new hire’s productivity, allegiance to the organizational goals, and
ultimately the decision to continue with the organization. This process can
be bifurcated into three stages:
1. Pre-joining
2. Interface and
3. Transformation
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Exhibit 11.1: How employee attitudes change during Socialization?
Researchers have begun to examine how employee attitudes change during

socialization by measuring at several points over the first few months. One
study has documented patterns of “honeymoons” and “hangovers” for new
workers, showing that the period of initial adjustment is often marked by
decreases in job satisfaction as their idealized hopes come into contact with
the reality of organizational life. Other research suggests that role conflict
and role overload for newcomers rise over time, and those workers with the
largest increases in these role problems experience the largest decreases in
commitment and satisfaction. It may be that the initial adjustment period for
newcomers presents increasing demands and difficulties, at least in the
short-term.
Source: Organizational Behavior – Stephen P. Robbins and Timothy A. Judge
1. The pre-joining stage – Acknowledges that each person comes with

one’s own set of values, attitudes, and expectations about both the
work and the organization. In case of fresh business graduates,
business schools help them socialize towards attitudes and behaviors
business firms require. In addition, the previous impression about an
organization, drives the new joiners to build own assumptions about the
work and culture of the organization. For example, majority of the new
hires in Nike will expect it to be dynamic and exciting. Thus, the two
most important factors that determine the level of adjustment new
joiners will have to the culture are – first, their knowledge about the
organization prior to joining and second, extent to which they have a
proactive personality. So no matter how well managers think they can
socialize new joiners, the most important predictor of future behavior
will be seen as past behavior. The best way to socialize in the pre-
joining stage is to use the selection process to align prospective
employees about the organization as a whole. Selection process ensures
bringing in of only those candidates who will fit in. Thereby, it can be
said that an individual’s ability to put forward his appropriate face
during the selection process determines his ability to move into the
organization in the first place. This implies that likelihood of the new
hire to successfully fit into the culture depends on the degree to which
the aspiring candidate has appropriately anticipated the expectations
and wishes of the selection panel representing the organization.
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2. Interface stage – This stage begins once the candidate joins the
organization as a new employee at this stage he faces the possibility
that expectations—about the job, colleagues, supervisor, and the
organization as a whole—may differ from reality. The interface stage will
concretize previous beliefs, if the expectations were accurate. However,
this may not always be the case, a new joiner may become very
disappointed and resign. This can be evaded if the recruitment and
selection is done carefully and properly and friendship ties are
encouraged building higher commitment from the new joiners.
3. Transformation stage – This is the final stage of socialization and the

new joiner may undergo changes in order to respond to any issues
problems unearthed during the encounter stage. There can be two
major types of socialization practices. First, is a more formal approach
with collective, fixed and ordered programs resulting in new joiner’s
differences being replaced by systematized predictable behaviors.
Second, is a more informal approach with random, disjoint programs.
Such informal programs tend to provide the new joiners an innovative
sense of their role and work methods. A successful transformation likely
to have a positive effect on productivity and commitment of new
employees and decreases their tendency to quit the organization.
!
Figure 11.2: Pictorial Representation of Socialization Process
This socialization three-step process will be complete when -
• New employees have internalized and accepted the organizations as well

as team, are confident about their skills and abilities, and receive a sense
of being trusted and valued.
• New employees understand the system, not only their own job but also
the rules regulations and even the informal norms
• New employees have the knowledge of what is expected and what
parameters will be used to measure performance
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!
Figure 11.3 Formation of Cultures
Source: Organizational Behavior – Stephen P. Robbins and Timothy A. Judge
Levels of Culture – Organization Culture Model by Edgar Schein

Edgar Schein suggests that, fundamentally, culture is: “A pattern of shared
basic assumptions that the group learned as it solved its problems that has
worked well enough to be considered valid and is passed on to new
members as the correct way to perceive, think, and feel in relation to those
problems.” However, because these ingrained assumptions are tacit and
below the surface, they are not easy to see or deal with, although they
affect everything the organization does.
Schein further suggested that there are three levels of organizational

culture -:
1. Artefacts and Symbols – These mark the surface or the observable

level of the organization. They include the typical organizational
behavior manifested as visible elements such as logos, architecture,
processes and dress code, perks provided to managers, level of
technology utilized etc. These are highly discernable and are visible not
only to people within but also to the external parties. Yet, artefacts and
symbols are said to be difficult to understand.
2. Espoused Values – Beneath the artefacts lie the espoused values,

which are standards, strategies, and philosophies, rules of conduct or
goals. Espoused values determine behavior but are themselves not
directly visible. Sometimes there may be a gap between stated
(espoused by organization) and operating values (actually “in
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use”). Further, issues arise if ideologies of managers are not aligned to

basic assumptions of the organization.
3. Basic Underlying Assumptions – These are at the deepest level and

form the core or essence of the culture. These exist at the unconscious
level and are hard to discern. They are experienced as self-evident and
unconscious behavior. The key to understanding the culture lies in these
deeply embedded basic assumptions.
!
Figure 11.4: Edgar Schien Three Levels of Organization Culture
11.6 TRANSMITTING CULTURE TO EMPLOYEES

A number of forms are used to transmit the culture to the employees. The
most effective forms used are
• stories,
• rituals,
• material symbols,
• organizational language.
Stories
Inspiring Stories coming from senior managers, particularly, the founders
of the organization help create an impression in the minds of employees
regarding the organizational culture. They tend to be prescriptive as in
advising people about what is OK to do and what is not. Such stories flow
through the organization, binding the present to the past and justifying
current practices. These stories could be either general experiences of the
organization’s founders or senior leaders, narratives about breaking rules,
rags-to-riches successes, relocation of employees, reactions to past
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mistakes etc. They may often answer questions like - How does the
manager react to mistakes? How the organization deals with crises? How
do people rise to the top of the organizations? Who, if anyone, can break
rules? Even individual employees develop their own stories regarding how
they became either fit or unfit within the organization during socialization,
including first days at work, initial interactions with others, and first
impressions regarding life at the organization.
Rituals
Rituals are recurrent series of activities that articulates and emphasizes the
core values of the organization and practices such as what objectives are
most critical or which people are key. For instance, celebrating people’s
personal milestones like birthdays, anniversaries etc. (cake – cutting with
snacks in office premises on birthday), annual off-site parties or get-
together with families etc., new hire welcome lunches, exiting employees
farewell lunches, etc.
Material Symbols
Material symbols include various physical or tangible aspects of the
organization that can been seen by the employees. Such material symbols
are also consistent with and reinforce the organizational culture. Such
material symbols include layout of corporate office, the types of vehicles
senior executives are provided, size of offices, the elegance of furnishings,
executive benefits and attire. These symbols communicate to an employee
who is important, the degree of equality top management want to
maintain, and what behaviors are appropriate, such as risk taking,
conservative, individualistic, social, etc.
Organizational Language
The language used at workplaces tell us a lot about the organization’s
culture as well as the values held by the organization’s subcultures. The
various phrases, metaphors and words used by senior leaders of the
organization also, reflect the corporate culture. Some organizations also
rely on language to help new members identify with the culture, build an
acceptance for it, and further aid in preserving it. Organizations have their
own unique terminologies for things like equipment, officers, key
individuals, suppliers, customers, or products that relate to the business.
New employees may first find difficult in understanding and adopting the
organizational acronyms and jargon. However, once they have been able to
internalize them they act as a common platform to bond with members of
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a given culture. An instance of an organizational specific language would be

the constant uses of “grocery store” metaphor by Jack Welch, with the
intention of making employees perceive GE as a small business rather than
a giant electrical manufacturing company. This he did to reinforce the
values of customer service and constant search for new opportunities that
keep the small “shop” in business. Sometimes, these values reflected in
senior managements language might be their espoused values and not the
in-use values
Exhibit 11.2: Managing Cultural Change
1. Match Strategy and Culture

Too often, a company’s strategy, imposed from above, is at odds with the
ingrained practices and attitudes of its culture. Executives may
underestimate how much a strategy’s effectiveness depends on cultural
alignment. Culture trumps strategy every time. They do not clearly connect
their desired culture with their strategy and business objectives.
2. Focus on a Few Critical Shifts in Behavior

Where do you start? First observe the behavior prevalent in your
organization now, and imagine how people would act if your company were
at its best, especially if their behavior supported your business objectives.
Ask the people in your leadership groups, “If we had the kind of culture we
aspire to, in pursuit of the strategy we have chosen, what kinds of new
behaviors would be common? And what ingrained behaviors would be gone?”
When choosing priorities, it often helps to conduct a series of “safe space”
discussions with thoughtful people at different levels throughout your
company to learn what behaviors are most affected by the current culture—
both positively and negatively. The behaviors you focus on can be small, as
long as they are widely recognized and likely to be emulated. When a few
key behaviors are emphasized heavily, employees will often develop
additional ways to reinforce them.
3. Honor the Strengths of Your Existing Culture

It is tempting to dwell on the negative traits of your culture, but any
corporate culture is a product of good intentions that evolved in unexpected
ways and will have many strengths. They might include a deep commitment
to customer service (which could manifest itself as a reluctance to cut costs)
or a predisposition toward innovation (which sometimes leads to “not
invented here” syndrome). If you can find ways to demonstrate the
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relevance of the original values and share stories that illustrate why people
believe in them, they can still serve your company well. Acknowledging the
existing culture’s assets will also make major change feel less like a top-
down imposition and more like a shared evolution. Further, to harness the
cultural elements you want to support is by acknowledging them. Another
strength companies can leverage is the employees who are already aligned
with their strategy and desired culture. Most companies, if they look hard
enough, will find that they have pockets of activity where people are already
exhibiting the new, desired behaviors everyday.
4. Integrate Formal and Informal Interventions

As you, promote critical new behaviors, making people aware of how they
affect the company’s strategic performance; be sure to integrate formal
approaches—like new rules, metrics, and incentives—with informal
interactions. Only a few companies understand how to do this well. In our
experience, most corporate leaders favor formal, rational moves and neglect
the informal, more emotional side of the organization. They adjust reporting
lines, decision rights, processes, and IT systems at the outset but overlook
informal mechanisms, such as networking, communities of interest, ad hoc
conversations, and peer interactions. Google is a good example of a
company that makes the most of its informal organization. A senior leader
we interviewed there compared the company to universities that plan paved
walkways when they expand their campuses. At Google, he said, “we would
wait to do the walkways until the employees had worn informal pathways
through the grass—and then pave over only those getting the most use.”
Whether formal or informal, interventions should do two things: reach
people at an emotional level (invoking altruism, pride, and how they feel
about the work itself) and tap rational self-interest (providing money,
position, and external recognition to those who come on board).
5. Measure and Monitor Cultural Evolution

Finally, it is essential to measure and monitor cultural progress at each stage
of your effort, just as you would with any other priority business initiative.
Rigorous measurement allows executives to identify backsliding, correct
course where needed, and demonstrate tangible evidence of improvement,
which can help to maintain positive momentum over the long, haul.
Executives should pay attention to four areas - Business performance,
Critical behaviors, Milestones and Underlying beliefs, feelings, and mindsets.
Source: https://hbr.org/2012/07/cultural-change-that-sticks
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11.7 AN ETHICAL ORGANIZATIONAL CULTURE

The features of an organizational culture that shapes high ethical standards
among its members are –
• High in risk tolerance - Employees are supported for taking risks and
innovating,
• Low to moderate in aggressiveness - Employees are discouraged from

engaging in unbridled competition
• Focused on means as well as outcomes - Employees are guided to heed

not just, to what goals are achieved but also how.
Such a culture takes a strategic perspective and takes equally into account
the rights of various stakeholders like employees, shareholders and the
community. A strong ethical culture has a very strong and positive impact
on employee behavior. There can be severe negative outcomes of a culture
of unethical behavior such as include customer boycotts, fines, lawsuits,
etc. Hence, the managers must drive towards an ethical culture. Some of
the principles and practices that can promote an ethical culture -
• Having role model - Senior Manager must act as role models for the
employees setting ethical examples and sending out positive message.
This is because employees observe behaviors and actions of senior
management as a standard for ideal behavior.
• Clear communication of ethical expectations - An organizational

code of ethics and conduct must be circulated among employees in order
to eliminate any ambiguities in the stand of organization with respect to
ethics. Such codes provide the organizational core values and ethical
rules people must observe.
• Encourage learning in ethical standards - Managers must ensure all

employees go through seminars, workshops, and training programs
educating and reinforcing the organization’s standards of conduct, and
address existing dilemmas pertaining to ethical behavior.
• Reward ethical actions and reprimand unethical actions - The

performance evaluation system must include an assessment of alignment
of manager’s decisions with the organization’s code of ethics. In addition,
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the review must include not only outcomes but also the means to the
outcomes. Consequently, those taking actions and decisions as per code
of ethics must be specifically rewarded while those who do not must be
specifically reprimanded.
• Set up protective mechanisms - The management must ensure formal

mechanisms such as ethical counselors, ombudsmen, or ethical officers
are set up within the organization. This can aid employees to openly and
fearlessly discuss ethical dilemmas and report unethical behaviors.
Senior management commitment in setting up a positive ethical climate is

very essential. This is because if strong ethical values are endorsed from
the top, supervisors are more likely to practice ethical leadership. This
further transfers positive ethical attitudes down to line employees leading
to much lower degree of digressive behavior and high accord and
collaboration. If a perceived pressure exists from organizational leaders to
behave unethically, employees down the line experience increased
intentions to engage in unethical practices and so an inappropriate
organizational culture can negatively impact people’s ethical behavior.
11.8 A POSITIVE ORGANIZATIONAL CULTURE

A positive culture tends to be nurturing, democratic and progressive.
When a culture is in positive mode it nurtures and values the contributions
of its members; as a result ideas grow and flourish. A positive culture is
flexible to change and adapts to meet the needs of its members in a
dynamic and constantly changing world. With the combined energy of all
its members, a positive culture can actively pursue the challenges of the
future.
A positive work culture is seen as the ideal/healthy work culture which

promotes productivity, growth and employee satisfaction through
the creation of a conducive working environment for all employees.
Features of a positive work culture, though there are many feature of a
positive work culture, the following are noted as the most salient ones by
Armstrong (2010):
• Employee empowerment and effective communication

• Open, honest and flowing communication
• Long-term, quality, service and excellence
• Individual responsibility
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• Embracing new ideas

• Flexible, fluid and rapidly responsive
11.9 ORGANIZATIONAL CULTURE AND NATIONAL CULTURE

Organizational culture tends to be very strong and many times, it
surpasses national boundaries. Despite that, organizations cannot and
should not overlook local culture. Very often, it is also seen that
organizational cultures reflect national cultures. Exhibit 11.3 explains the
“Greek Hofstede’s Six Dimensions of National Culture”, based on which a
nation’s culture can be described and comparisons can be done between
different national cultures. Since, there is a strong relationship between
national cultures and organizational cultures, it is imperative for today’s
organizations, operating in global environment, to keep into consideration
the following points -
• Even a very powerful corporate culture is unable to dampen national

culture influences. In a conflict situation between the two employees are
likely to respond in ways typical of their national culture, not their
organizational culture.
• Organizations while operating in foreign locations must carefully assess

its organizational culture against the local cultures in all countries and
regions. This helps understand compatibility as well as understand any
need for transformation to achieve smooth operations.
• In case of any potential conflicts between organizational and foreign

national cultures, an organization must be sensitive to local culture in
order to keep local employees motivated and committed. This may
require changing or toning down aspects of the organization’s culture,
which may work well elsewhere
! !314
Exhibit 11.3: Hofstede’s Dimensions of National Culture
Professor Geert Hofstede conducted one of the most comprehensive studies of

how values in the workplace are influenced by culture. He analyzed a large
database of employee value scores collected within IBM between 1967 and
1973. The data covered more than 70 countries, from which Hofstede first used
the 40 countries with the largest groups of respondents and afterwards
extended the analysis to 50 countries and 3 regions.
Dimensions of National Culture

The values that distinguished country cultures from each other could be
statistically categorized into four groups. These four groups became the
Hofstede dimensions of national culture:
• Power Distance (PDI)

• Individualism versus Collectivism (IDV)
• Masculinity versus Femininity (MAS)
• Uncertainty Avoidance (UAI)
Later, two more dimensions have been added

• Long-term Orientation versus Short-term Orientation (LTO).
• Indulgence versus Restraint (IND)
Power Distance Index (PDI)

This dimension expresses the degree to which the less powerful members of a
society accept and expect that power be distributed unequally. The
fundamental issue here is how a society handles inequalities among people.
People in societies exhibiting a large degree of power distance accept a
hierarchical order in which everybody has a place and which needs no further
justification. In societies with low power distance, people strive to equalize the
distribution of power and demand justification for inequalities of power.
Individualism versus Collectivism (IDV)
The high side of this dimension, called individualism, can be defined as a
preference for a loosely knit social framework in which individuals are expected
to take care of only themselves and their immediate families. Its opposite,
collectivism, represents a preference for a tightly knit framework in society in
which individuals can expect their relatives or members of a particular in-group
to look after them in exchange for unquestioning loyalty. A society's position on
this dimension is reflected in whether people’s self-image is defined in terms of
“I” or “we.”
! !315
Masculinity versus Femininity (MAS)

The masculinity side of this dimension represents a preference in society for
achievement, heroism, assertiveness and material rewards for success. Society
at large is more competitive. Its opposite, femininity, stands for a preference
for cooperation, modesty, caring for the weak and quality of life. Society at
large is more consensus-oriented. In the business context, Masculinity versus
Feminity is sometimes also related to as "tough versus gender" cultures.
Uncertainty Avoidance Index (UAI)

The uncertainty avoidance dimension expresses the degree to which the
members of a society feel uncomfortable with uncertainty and ambiguity. The
fundamental issue here is how a society deals with the fact that the future can
never be known: should we try to control the future or just let it happen?
Countries exhibiting strong UAI maintain rigid codes of belief and behavior and
are intolerant of unorthodox behavior and ideas. Weak UAI societies maintain a
more relaxed attitude in which practice counts more than principles.
Long-term Orientation versus Short-term Normative Orientation (LTO)

Every society has to maintain some links with its own past while dealing with
the challenges of the present and the future. Societies prioritize these two
existential goals differently. Societies who score low on this dimension, for
example, prefer to maintain time-honored traditions and norms while viewing
societal change with suspicion. Those with a culture, which scores high, on the
other hand, take a more pragmatic approach: they encourage thrift and efforts
in modern education as a way to prepare for the future.
Indulgence versus Restraint (IND)

Indulgence stands for a society that allows relatively free gratification of basic
and natural human drives related to enjoying life and having fun. Restraint
stands for a society that suppresses gratification of needs and regulates it by
means of strict social norms.
Source: http://geert-hofstede.com/national-culture.html
Activity
1. Compare national cultures of any two countries of your choice based on
the Hofstede’s dimensions of National Culture.
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
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11.10 SUMMARY
This chapter starts by defining culture and organizational culture and then
moves on to explain the significance of the organizational culture. It then
explains the difference between organizational culture and organizational
climate along with the relation of organizational climate and performance.
The chapter highlights the various disadvantages associated with extremely
strong organizational cultures. The process of building and maintaining the
culture has also been outlined here. The chapter then explains the key
ways by which organizational culture is transmitted among employees. It
then explains what ethical organizational culture is and how it is built. It
further highlights the features of the most desirable positive organizational
culture. Finally, the chapter explains the connection between the
organizational culture and national culture and provides a brief
understanding of different dimensions of national culture.
! !317

1. ‘Agressiveness’ as a characteristic of culture is defined as __________.

a. The extent to which the organization emphasizes achievement, result
and action as important values.
b. The extent to which organizations are collaborative and emphasize
cooperation among people.
c. The extent to which organization is predictable, rile oriented and
bureaucratic and focuses on maintaining the status quo over growth.
d. The extent to which organization values competitiveness over easy
going and strives to outperform competitors.
2. _____________ is defined as how members of an organization

experience the culture of an organization.
a. Organizational climate
b. Organizational season
c. Organizational weather
d. Organizational culture
3. Which of them is not a disadvantage of strong organizational culture?

a. Barriers to diversity
b. Barriers to change
c. Barriers to effective communication
d. Barriers to mergers and acquisitions
4. “A very powerful corporate culture is able to dampen national culture

influences. In a conflict situation between the two employees are likely
to respond in ways typical of their organizational culture, not their
national culture.” State whether the statement is correct or incorrect.
a. Correct
b. Incorrect
5. Which of the following is one of the effective forms used to transmit the
culture to the employees?
a. Prayers
b. Articles
c. Plays
d. Rituals
Answers of MCQs: 1. - (d); 2. - (a); 3. - (c); 4. - (b); 5. - (d).
! !318
REFERENCES
1. Understanding Organizational Culture – Mats Alvesson.
2. Organizational Culture, Team Climate, Workplace Bullying and Team

Effectiveness – Ilke Inceoglu.
3. Organizational Culture and Leadership – Edgar H. Schein.
4. Organizational Culture and Performance – R.K. Dwivedi.
5. Managing Organizational Culture for Effective Internal Control: from

Practice to Theory – Jan A. Pfister.

10.Organizational Behavior – Don Hellriegel, John Slocum.

Taylor.
14.Handbook of Human Resource Management Practice – Michael

Armstrong.
15. Science and Human Behavior – B.F. Skinner.
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Adams.

19.'Assessing the relationship between industry characteristics and

organizational culture: how different can you be?' Academy of
Management Journal, June 1994, J.A. Chatman and K.A. Jehn.
20.The New Corporate Cultures: Revitalizing the Workplace after

Downsizing – Terrance E. Deal, Allan A. Kennedy. 
! !320
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !321
ORGANIZATION CHANGE AND EFFECTIVENESS
Chapter 12
ORGANIZATION CHANGE AND
EFFECTIVENESS
Objective
• Understand the term organizational change and its concept

• Understand the various forces of change influencing organizational
change
• Understand the process of planned change and its various nuances
• Understand the causes of resistance to change and way to reduce this
resistance
• Understand the various approaches to managing change
• Understand how to institutionalize change by ingraining it into the
organizational culture
• Understand stress and its management, which is a major outcome of
change within an organization
Structure:
12.1 Defining Organizational Change

12.2 Forces of Change
12.3 Planned Change
12.4 Resistance to Change
12.5 Approaches to Managing Organizational Change
12.6 Transformational Culture
12.7 Organizational Change and Stress
12.8 Summary
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12.1 DEFINING CHANGE

The organizations do not stay static they undergo changes. Change in
organizations may be due to environmental forces but people and
organizations tend to resist change. However, such resistance can be
overcome. In order to overcome resistance to change organizations employ
formal processes for managing organizational change. Let us begin by
understanding change and go on to understand its management.
Change is defined as “An act or process through which

something becomes different”- Oxford dictionary
Organizational change is about reviewing and modifying management

structures and business processes. Organization change occurs
when business strategies or major sections of an organization are altered.
Also known as reorganization, restructuring and turnaround. An
organization going through a transformation is said to be undergoing the
change process.
 
“Organizational Change refers to planned alterations of organizational
components to improve effectiveness of the organization. Organizational
components refer to organizational mission and vision, strategy, goals,
structure, processes or systems, technology and people in an
organization.”- Tupper F. Cawsey, Gene Deszca, Cynthia Ingols
12.2 FORCES OF CHANGE

The environment in which organizations today operate is never in a stable
state and even organizations in market leadership positions need to
change. Even though Apple has been successful with its iPad, the growing
number of competitors in the field of tablet computers suggests that Apple
will need to continually update and innovate to keep ahead of the market.
“Transform or perish” appears to be the motto among the managers today
across the globe. There are six specific forces stimulating change. They are
-
1. Nature of workforce is changing - Organizations must adapt to the
global environment, the demographic changes, cross border movement
of people, and outsourcing.
2. Constantly evolving technology - The nature of jobs and organizations is

continually transforming owing to technological advancements. .
! !323
3. Varied competition - Organizations are facing global competition, with

competitors local or foreign.
4. Need for flexibility - In order to be successful organizations need to be

quick and able to develop and market new products at fast pace. Hence,
there is a strong need for flexibility with equally agile employees.
5. Changing social trends - The social trends are ever evolving, as

consumers are constantly in touch with each other via various social
media. Hence, companies feel the need to adjust product and marketing
strategies to be sensitive to changing social trends.
6. Increasing environmental concerns - Sensitivity towards environment is

on the rise among consumers, employees, and organizations. “Green”
practices are literally expected from organizations and concern for
environment practices act positively on the organizational image.
!
Figure 12.1: Forces of Change
! !324
12.3 PLANNED CHANGE

Either changes can just happen, with no prior planning or they can be
planned and brought about in structured manner. Though some
organizations treat all change as an adventitious happening, however, we
consider here change as purposeful, target-driven activity. The two main
goals of a planned change are –
• First, it attempts to better the organizational potential to adjust to

environmental changes.
• Second, it attempts to transform employee behavior.
Change Agents
The onus of any kind of change sits with them. Change agents can see
futuristically unlike others, able to drive motivation and invention, and
efficiently execute the vision. Change agents can be managers or team
members, new or existing employees, or external consultants. They may
face failure owing to resistance from others in the organization. HR
managers in companies like Hindustan Unilevers, Godrej, and LG
electronics are strong change agents for these organizations.
12.4 RESISTANCE TO CHANGE

Most people find change intimidating to the extent that despite having data
backed information of need for change, they tend to seek out data that
goes against the change and stick to it. Even when the organization
attempts to execute the change process, such employees attempt to cope
with change by avoiding it, increasing absenteeism or leaving the
organization. This action on part of employees drains all the much-needed
organizational energy.
The positive implication of resistance to change is that it may lead to open

discussion and debate, which is a much-preferred reaction to silence and
avoidance. Such discussions give the change agents an opportunity to
illustrate the change attempt as well as to tweak the change according to
the ideas of others. In order to avoid any wasteful conflict, the change
agent must not view every resistance response as threat.
There are no standard ways by which resistance to change surfaces.

Resistance may be –
• Apparent
• Tacit
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• Instant
• Delayed
Dealing with Apparent or instant resistance such as complaints, work

slowdown, or a strike threat is much simpler for the management to deal.
Challenge lies with dealing with tacit or delayed resistance such as
decreased loyalty or motivation, increased errors. This is because such
reactions are indistinct and unattributable. Delayed actions cloud the
relation between the change and the reaction to it and may surface weeks,
months, or years later.
Given below are the main forces driving resistance to change. They have
been categorized by their sources.
• Individual forces in the form of human features such as –

○ Perceptions
○ Personalities
○ Needs
• Organizational forces in the form of structural set-ups of organizations
A change is not always good because speed may result in poor decisions,
and sometimes those beginning the change are unable to realize the full
scale of the effects or their real costs. Changes that are high speed can be
risky and may result in collapse of the organizations, in some cases. Before
actioning change, the change agents must carefully evaluate the full
implications.
Overcoming Resistance to Change

The following tactics can help change agents to overcome resistance to
change -
1. Education and Communication

2. Participation
3. Building Support and Commitment
4. Develop Positive Relationships
5. Manipulation and Co-optation
6. Selecting People Who Accept Change
7. Coercion
! !326
1. Education and Communication – Educating and communicating the

employees on the change logic may help minimize employee resistance
on two accounts. First, it overcomes the impact of incorrect information
and poor communication and on receiving correct and real facts
resistance should alleviate. Second, communication can help market the
need for change through proper information sharing. Employee anxiety
reduces through formal change comminution sessions and commitment
increases through high-quality information regarding change.
2. Participation – Since it is difficult to go against the decision in which

one has participated, organizations can expect to reduce resistance from
employees by encouraging meaningful contribution and involvement
from them. However, this based on the assumption that the employees
have the requisite expertise and if it is not so, there could be possibility
of a poor decision and loss of time.
3. Building Support and Commitment – In order to build support and

commitment from employees for the change rather than preferring
status quo, organizations must eliminate their fears and anxieties
related to the change through counseling and therapy, training, or a
short vacation. Then organizations can expect some adjustment from
the employees towards change and a low emotional commitment to
change can be turned in to high commitment. An overall commitment
towards the organization also helps employee show lesser resistance to
change and efforts must be directed towards emphasizing employees’
general emotional commitment to the organization resulting in greater
support for change over status quo.
4. Develop Positive Relationships – When people trust their managers

and share positive relationship with their managers implementing
change, then they are more willing to accept changes. If managers are
able to foster positive relationships, they may be able to get support
from those employees who generally dislike changes.
5. Manipulation and Co-optation – Manipulation is surreptitious efforts

to influence individuals. Twisting facts to make them more attractive,
withholding information, etc., are all examples of manipulation.
Manipulation, in practice would be a false threat by management to shut
down a production site, where the workers are posing resistance to
wage cut. In this case, management would be said to be using
! !327
manipulation to overcome the resistance to change. On the other hand,

Co-optation is a combination of manipulation and participation.
Management would be using cooptation in the above case if it appoints,
in a prominent role, one of the leaders of the resisting group, in order to
get his or her endorsement on the change and not advice for a better
solution. Both tactics are relatively lowly means to win support of
opponents, but they may backfire.
6. Selecting People Who Accept Change – People’s personality

determines their ability to adopt change. Therefore, some people may
have a greater positive attitude towards change than others may. Some
of the personality traits that give individuals higher ability to accept and
cope with change are openness to experience, high-risk taking,
flexibility, a positive self-concept, high-risk tolerance, high growth-
needs, internal locus of control, and intrinsic work motivation and higher
general mental ability. Thus, it can be said that organizations can
decrease resistance to change by choosing people and teams who are
inclined to accept it.
7. Coercion – Last on the list of tactics is coercion, the application of

direct threats or force on the resisters. If management really is
determined to close a manufacturing plant whose employees do not
acquiesce to a pay cut, the company is using coercion. Other examples
are threats of transfer, loss of promotions, negative performance
evaluations, and a poor letter of recommendation. The advantages and
drawbacks of coercion are approximately the same as for manipulation
and co-optation.
! !328
!
Figure 12.2: Overcoming Resistance to Change
Politicking and Change

Political activity is triggered by change as it endangers the existing state of
affairs. This suggests that drive for change is likely to come from new
employees or managers who have been removed from current power
structure and not old managers as for them change is a threat to their
status and position. However, they do act as change agents in order to only
convey the message of their concern for issues in changing environment to
all stakeholders but implement only incremental changes and feel
threatened by radical changes. Many times organizational leadership is
changed when the management is looking at implementing radical
changes.
! !329
12.5 MANAGING ORGANIZATIONAL CHANGE

Since change is constant in an organizational set-up, coming up as sudden
or planned, it becomes imperative to manage the organizational change.
There are several approaches to managing change, let us look the three
most commonly used approaches –
1. Lewin’s classic three-step model of the change process

2. Kotter’s eight-step plan, action research
3. Organizational development
Lewin’s Three-Step Model

According to Lewin, change is a series of processes occurring over time.
Under his model, he recommends that for a successful change typically
three steps are required: unfreezing, moving, and freezing.
!
Figure 12.3: Lewin's 3-Step Model for Change Management
• Unfreezing: This step means decreasing the forces tending to keep the
organization in its existing state. Unfreezing might be accomplished by
moving away from the equilibrium state in three ways. First, use of the
driving forces in which behaviors are directed away from existing state
by providing new information indicating inadequacies in the current state
or by reducing the grip of current values and attitudes. Second by
enhancing the restraining forces that interfere with the movement away
from existing state by applying any of the tactics to overcome resistance
to change. Third, is using a combination of first two ways. If unfreezing
faces a very high resistance, then the change agents resort to both
alleviating resistance and enhancing the attractiveness of the change.
• Moving: Once the unfreezing of the organization is complete, it can be

moved to the desired end state. Movement involves the building new
values, attitudes, and behaviors through internalization, identification, or
change in structure. The change may be minor requiring few members or
may be major requiring many members. In addition, a quick change is
seen as more effective that the changes that are built up to and slowly
brought about.
! !330
• Freezing: Freezing is the final step involving stabilizing the change at a

new equilibrium by balancing the driving and restraining forces. For a
successful movement to change to sustain or a period it must be frozen
otherwise opposing people will try to revert to the earlier state of
equilibrium. Freezing, then, is to stabilize the new situation by balancing
the driving and restraining forces.
Kotter’s Eight-Step Plan for Implementing Change
John Kotter built on Lewin’s three-step model in order to build a more

detailed approach for implementing change. He began by listing common
errors leaders make when attempting to change -
• They may fail to create a sense of urgency about the need for change,
• Fail to create a coalition for managing the change process,
• Fail to have a vision for change and effectively communicate it, to
remove obstacles that could impede the vision’s achievement,
• Fail to provide short-term and achievable goals, and
• Fail to anchor the changes into the organization’s culture.
• They may also declare victory too soon.
Kotter then established eight sequential steps based on these eight

common errors. Note that Kotter’s first four steps relate to Lewin’s
“unfreezing” stage. Steps 5, 6 and 7 represent “moving,” and the final step
links to “freezing.” His contribution is in providing the change agents with a
detailed process for successfully implementing change. Refer to Table 12.1
below –
! !331
Table 12.1: Kotter’s Eight-Step Plan for Implementing Change

S.No Step Description
1 Increasing a sense of Unfreeze the organization by

urgency providing a compelling reason for need for
change and/or by minimizing resistance to
change.
2 Forming the powerful Form cross-functional, cross level teams with

guiding coalition strength and power to be change agents.
3 Develop a clear Develop a vision and strategic plan to guide the

vision change process.
4 Communicate the Build and execute a communication plan that

vision communicates the new vision and strategic plan
5 Empower others to Overcome barriers to change, and change

action systems and structure that are detrimental to
change. Encourage risk taking and creative
solutions.
6 Creating short-term Plan visible performance

wins improvements. Recognize and reward people
who contribute to these.
7 Consolidating The change agents use credibility from short-

improvements and term wins to further
produce more change change. Hiring, promoting and
developing people into the change process.
Attempt to rejuvenate the change process.
8 Institutionalizing the Reinforce the changes by articulating

change in the culture relationship of new behaviors and processes with
organizational
success. Develop means to ensure
leadership development and
succession.
! !332
Organizational Development
Organizational Development (OD) is a set of change methods that attempt

to improve organizational effectiveness and employee well-being.
“Organization Development is a system-wide application and transfer of

behavioral science knowledge to the planned development, improvement
and reinforcement of strategies, structure and processes that lead to the
organizational effectiveness.” - Thomas Cummings, Christopher Worley.
OD methods put stress on individual and organizational development,

synergistic and participatory processes, and a spirit of inquiry. The focus is
on how people interpret their work environment. However, change agent
may need to take the lead in organizational development, but collaboration
is necessary. The following values underlie majority OD efforts:
• Respect for individuals – The individuals’ dignity and respect must be
preserved. They are viewed as responsible, conscientious, and caring.
• Trust and support – Trust, genuineness, openness, and a nurturing
climate are characteristics of a healthy and effective organization.
• Power equalization – Emphasis on hierarchy and control is absent from
effective organizations.
• Confrontation – There should be open confrontation of issues rather than
avoidance.
• Participation – The greater participation of people in decisions, the
greater possibility of their commitment and drive for it.
!
Figure 12.4: Values Underlying Organizational Development
! !333
There are various OD techniques or interventions for facilitating of change.

They include the following:
1. Sensitivity Training
2. Survey Feedback
3. Process Consultation
4. Team Building
5. Intergroup Development
6. Appreciative Inquiry
1. Sensitivity Training – It is a training in small groups where individuals

learn how to interact with each other by building a sensitive awareness
and understanding of self and of their relationships with others. It is
known by various names like laboratory training, encounter groups, and
T-groups (training groups), which refers to the way of transforming
behavior through unstructured group interaction. In such a training
participants are allowed to interact with each other in free and open
environment, loosely guided by a professional behavioral scientist, not a
leader, who merely generates the opportunities to express ideas, beliefs,
and attitudes. This approach in process oriented which implies
individuals learn through being part of the process and observing rather
than being told. Many organizational interventions such as diversity
training, team-building exercises, etc., are on the lines of sensitivity
training.
2. Survey Feedback – Today’s globally competitive organizations

constantly seek information about hurdles to productivity and
satisfaction in workplace. Survey feedback is one tool that can help
these organizations. Survey feedback evaluates employee attitudes,
indicates differences in employee perceptions, and finds solutions for
these differences. Survey feedback aimed at the organizational level
requires participation from all employees, whereas if it is aimed at a
specific work unit for e.g., a strategic business unit (SBU) then requires
the head of the SBU and his SBU team to participate in it. Survey
feedback involves responding to a questionnaire containing questions
about topics such as working standards, work life balance, salary
structure and levels, communication effectiveness, decision making
practices, relationship with manager and peers, customer orientation,
level of autonomy etc. The responses collected from this questionnaire
are collated in tabular form and shared with leadership and the
! !334
respective work units. The data is analyzed to identify prevailing issues

and problems being faced by people. Team leaders are educated to
encourage discussions and focus on issues rather than individuals.
Action planning is carried out to resolve issues and address problem.
The leadership drives the implementation and progress review with
managers down the line.
Exhibit 12.1: The Five Original Principles of Appreciative Inquiry
The Constructionist Principle

• Reality and Identity are Co-created
• Truth is Local. There is no absolute truth
• We See Things as We Are
• We Are Deeply Interconnected
• Words Create Worlds. Reality is constructed through language
The Poetic Principle

• Life Experience is Rich
• We Have Habits of Seeing
• Whatever We Focus On, Grows
• Find What We Want More of, Not Less of
• Develop an Appreciate Eye
The Simultaneity Principle

• We Live in the World Our Questions Create
• Change Begins the Moment We Question
• The Unconditional Positive Question is transformational
• Develop Your Sense of Wonder
The Anticipatory Principle

• Positive Images Create Positive Futures
• Vision is Fateful
• Create Vision Before Decisions
• What We Believe, We Conceive
• Big Change Begins Small
The Positive Principle

• Positive Emotions Broaden Thinking and Build
• The Positive Core expands as it is affirmed and appreciated
• Identify and Leverage Strengths
Source: Appreciative Living: The Principles of Appreciative Inquiry in Personal

Life - Jacqueline Bascobert Kelm
! !335
3. Process Consultation – As per Edgar Schein, Process Consultation

(PC) is the creation of a relationship with the client that permits the
client to perceive, understand, and act on the process events that occur
in the client’s internal and external environment in order to improve the
situation as defined by the client. As per the definition, the clients are
typically the managers in the organizations who might sense that their
performance can be improved but are unable to identify the cause and
methods. Process events might include workflow, informal relationships
in the team, and formal communication channels. The main assumption
in PC is that organizational effectiveness can be improved by handling
interpersonal problems and stressing on involvement. The process
consultants usually work along with the managers to diagnose the
problems faced by them and then guiding and coaching them to find a
solution for their problems themselves. Hence, the PC is task oriented
and consultants are there to “give the client ‘insight’ into what is going
on around him, within him, and between him and other people.” One of
the advantage of PC is that the client builds the skill to analyze
processes and can continue to find solutions to his or her problems after
the consulting process is over. Another advantage is that due to the
end-to-end participation by the client, they build better understanding
of the process and solutions and tend be highly supportive of the action
plan chosen.
4. Team Building – This involves building trust, openness and mutual

respect among a group of people coming together to achieve a shared
goal. Use of teams, is becoming increasingly prevalent is organizations
today for accomplishment of various tasks. In order to ensure smooth
functioning of teams formed, team building uses high-interaction group
activities, which improve coordinative efforts, and enhance team
performance. In this context, teams include committees, project teams,
self-managed teams, and task groups. Team building would involve
goal-setting, building interpersonal relations, role analysis for role
clarification and team process analysis. It may focus or ignore certain
activities considering the goal of the development effort or specific
problems confronting the team. However, the main object of team
building is to use high interaction of members to increase team
effectiveness.
5. Inter Group Development – Inter group development attempts to

alter the attitudes, beliefs and perceptions that groups have about one
! !336
another. The undesirable attitudes, beliefs and perceptions about each

other is a major source of wasteful inter group conflict, which is a major
concern for organizations. The inter group development interventions
involve diversity training focusing on diversity in occupations,
departments, or divisions within an organization. One of the popular
approach to inter group development is problem solving. This involves
each group discussing independently and listing its perceptions about
itself and the other group and how it feels the other group views it. In
the next step, groups share their lists, discuss common and different
points, and attempt to identify reasons for differences. After identifying
the reasons, the groups move into the integration phase—build solutions
for relationships improvement between them. The members may form
further subgroups from each of the conflicting groups for further
diagnosis and developing alternative solutions.
6. Appreciative Inquiry – Appreciative Inquiry is an approach to

organizational change that focuses on identifying what is working well,
analyzing reasons for it working well and then doing more of it. The
basic premise of appreciative inquiry is that an organization will move in
the direction that its people focus on. Hence, when the focus is
problems, then identifying and handling them will be what the
organization will do best whereas when focus is on strengths then
identifying and leveraging them is what the organization will do best. It
can be said that Appreciative Inquiry accentuates the positive and
instead of looking at problems for solving it attempts to determine the
positives and strengths of an organization to capitalize on for enhancing
performance. In Appreciative Inquire, the focus is success rather than
failures. David Cooperrider and Diana Whitney describe four steps in the
appreciative inquiry cycle the four D’s are Discovery, Dream, Design and
Destiny.
a. Discovery - This is start of appreciative inquiry, by establishing

people’s views regarding organization’s strengths. People expected to
recall when though the organization performed best or when they
particularly felt highly satisfied with their jobs.
b. Dreaming - Under this step, the information from discovery step is
used by employees to create a compelling and ambitious picture of
organizations.
c. Design - Under this step, employees create a shared vision of a
preferred future and agree upon its unique qualities.
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d. Destiny - Under this final step, employees attempt to determine

organization’s destiny or and create innovative plans and strategies
to fulfill their dream.
12.6 TRANSFORMATIONAL CULTURE

Mostly organizations tend to have reactive approach to change, in the face
of changing environment organizations transform themselves to adapt to
the change. However, another way is proactive transformation where
change for continuous improvement is ingrained in the culture itself. In this
way organizations champion change by overhauling their cultures. There
are two such approaches of a transformational culture:
1. Inciting innovative culture

2. Building a learning organization
1. Inciting Innovative Culture – There is no formula or potion for inciting

innovation in an organization. However, various studies into this are
have revealed certain common characteristics in innovative cultures,
which are classified as follows -
• Structural variables
• Cultural characteristics
• Human resource features
Organizations seeking to be innovative should consider instituting these

characteristics into their organization. Let us define innovation and then
understand these characteristics in detail.
What is Innovation?
According to Merriam Webster, dictionary innovation is “the act or process

of introducing new ideas, devices, or methods”. Change is referred to
making things different and therefore, innovation can be said to a more
specialized change where a new idea is applied to introducing or improving
a product, process, or service. Thus, it can be said that all innovations are
change but not all changes are innovation. Innovations can range from
small incremental improvements to radical breakthroughs.
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Characteristics of Innovative Cultures
Structural variables – In an innovative cultures structure form the

potential source of innovation. The structure–innovation relationship is
characterized as follows -
• Organic structures have a positive impact and encourage innovation, as

there is low differentiation, formalization, and greater decentralization.
Such structures foster flexibility, reconstruction, and cross-fertilization
rendering acceptance of innovations easier.
• Long and stable career with the organization gives authority as well as
knowledge about ways and means of completing tasks and procuring
desired results. Thus, this long-term career encourages innovation.
• When there is no scarcity of resources, innovation can be nurtured as
abundant resources give the organization the capacity to buy
innovations, to spend on their introductions and to bear costs of failure
• Communication across work units tends to be high in innovative
organizations as they use committees, task forces, cross-functional
teams etc.
Cultural characteristics – Most organizations that are innovative have

similarity in their cultural practices. The common practices include
incitement of experimentation, rewarding both successes and failures,
celebration of mistakes. In organizations where reward is given for not
failing and not for succeeding, risk taking and innovation are curbed as
individuals will only recommended and attempt new ideas when they
believe such negative results of this will not be reprimanded. In innovative
cultures, it is recognized that failures are part of the whole deal of trying
something new.
Human resource features – In Innovative organizations employee

learning and development holds high significance in order to keep
employees updated with latest skills and knowledge. These organizations
also provide high job security to eliminate any skepticism in the mind of
employee about making mistakes and learning. Finally, innovative
organizations encourage employees to be the champions of change. On
development of a new idea, idea champions intensely and arduously
advance it, generate assistance, overcome opposition, and ensure its
execution. Change champions have common personality traits:
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• High self-confidence
• Persistence
• High energy levels and
• High risk appetite
• Ability to inspire and energize others
• Ability to gain commitment of others
The jobs of these champions provides them large amount of volition in

decision-making aiding them in introduction and implementation of
innovations.
2. Building Learning Organization – Encouraging continuous growth culture

within the organization is a proactive way of managing change. By this
way, organization is becoming a learning organization.
Defining Learning Organization
“A learning organization is one that can adapt to changes in the external

environment through a continuous renewal of its structures and practices.”-
Harold Koontz, Heinz Weihrich
Pedler, Burgoyne and Boydell describe learning organization as “an

organization which facilitates the learning of all its members and
continuously transforms itself.”
A learning organization has developed the continuous capacity to adapt

and change. – Robbins
“All organizations learn, whether they consciously choose to or not—it is a

fundamental requirement for their sustained existence.”
This means that like individuals organizations also learn. Some

organizations do it better learning than others. Organizational learning can
be –
• Single-loop learning
• Double-loop learning .
Single Loop learning involves detecting mistakes and correcting them.

The correcting methods here, based on past routines and existing policies.
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Double-loop learning involves correcting mistakes by evolving goals,

policies, and set routines. The double loop learning tends to question the
deeply rooted assumptions and norms while providing scope for innovative
solutions to issues with drastic improvement levels.
Characteristics of Learning Organizations
Learning organizations may be characterized in many ways. Given here are

the five basic features of a learning organization –
• Shifting from older thinking processes to newer ones

• Fostering openness and strong communication among each other
• Building a strong understanding of the organization’s operations
• Creating a commonly agreed and widely shared strategic plan and sense
of purpose
• Encouraging coordination and collaboration to work towards the common
purpose
!
Figure 12.5: Building Learning Organization
Learning organization provide solutions to three fundamental issues of the

traditional organizations, i.e. -
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1. Fragmentation – Bifurcation on the basis of specialization results in

boundaries isolating different functions into independent units that are
majority of the times in conflict with each other.
2. Rivalry – A healthy level of rivalry may be required but there is

excessive rivalry among different divisions that hampers collaboration.
Managers tend to compete with each other regarding who among them
is always correct, possesses greater knowledge, or is more influential.
Functional teams become rivals when there is need for coordination and
learning.
3. Affectability – Affectability tends the management towards problem

solving approach rather than creativity and innovation. This is an issue
since all energies are diverted towards getting rid of something rather
than building something new by learning. Such emphasis on affectability
drives away learning, innovation and continuous improvement and
simply replaces it with crisis management or firefighting.
Building a Learning Organization
There are numerous ways by which organizations are made into learning
organizations. Listed below are some keys suggestions for building
successful learning organizations -
• Building a learning strategy – Management needs to look at learning

from a long-term perspective and be committed towards this strategic
orientation. In addition, to ensure success must be blatant and candid
about it commitment to change, innovation, and continuous
improvement.
• Reconstructing organization structure – A rigid, inflexible

mechanistic structure may be a deterrent to learning. Instead building a
flexible structure that is flatter, least departmentalized with greater
number of cross-functional teams will foster learning since it supports
interdependence and shrinks borderlines.
• Transforming organizational culture – Culture necessarily has a

common shared understanding of what is right and what is wrong within
the organization. Owing to this, all employees speak the same language
avoiding conflict and choose agreement that handicaps learning. A
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learning culture fosters functional conflict and encourages people to

challenge each other rather than agree. Hence, employees who are high
on risk–taking and not afraid of committing as well as admitting their
mistakes must be rewarded by management. Their taking chances and
mistakes facilitate learning. The key lies in the fact that failures lead to
learning for improvement.
12.7 ORGANIZATIONAL CHANGE AND STRESS

Among the many consequences of Organizational Change is stress among
its people. Stress is defined by Robbins as “an unpleasant psychological
process that occurs in response to environmental pressure. Certain levels
of stress may be manageable or desirable as it builds pressure to perform
or move forward. However, after a certain level, stress can be harmful and
unproductive. Thus, managing stress during times of change and otherwise
is very critical. It is imperative to understand the consequences of stress
and various methods of managing stress.
Consequences of stress
• Physiological Symptoms – Stress can be connected with various
symptoms of poor health such as increase in heart rate, change in
metabolism, headaches, and increase in breathing rate, insomnia, upset
stomach and low energy levels.
• Psychological Symptoms – These symptoms may be hard to identify and
include isolation, disengagement, powerlessness, meaninglessness,
insecurity, depression, anxiety, tension and boredom.
• Behavioral Symptoms – Various studies have consistently shown the
behavior-stress relationship being consistent. The behavioral symptoms
of stress include suicidal talk or behavior, absenteeism, accident-prone,
risk-taking, unhealthy eating habits, addictive behavior, exhaustion,
withdrawal, low productivity, poor punctuality and sleeping difficulties.
Stress and job performance

As mentioned before, not all levels of stress may be undesirable and up to
a certain level stress can affect performance positively. After reaching a
peak or break point where stress starts having undesirable consequences
in the form of physiological and psychological symptoms, the behavioral
symptom of poor productivity and hence, decreasing performance levels
are experienced. Hence, completely managing change, this stress-
performance relationship must be kept in mind. Figure 12.6 shows the
stress – performance relationship in the form an inverted U-shaped curve.
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!
Figure 12.6 Relationship between Stress and performance: Inverted U-shaped
Curve
Source: Organization Behavior, Stephen P. Robbins and Timothy A. Judge
Stress Management
There may be no clear understanding of what is an acceptable level of
stress and discrepancies in views of management and individuals
concerning stress levels. A low level of stress may be perceived by
employees as undesirable, whereas organization may see it as desirable as
it may serve the source of energy for the employee to performance on the
job. However, despite the varying perceptions, it is commonly accepted
that any level of stress that is undesirable needs to be managed and
lowered. Stress cannot completely go away, but through proper
management, it can be brought handled to reduce or even eliminate its
undesirable consequences. Stress is managed at both individual and
organizational level.
Managing Stress at Individual Level
Individuals need to take personal responsibility for managing their stress

level. The various methods of managing stress at an individual level include
-
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• Physical Exercise
• Relaxation Techniques
• Time Management
• Social Support Network
Managing Stress at Organizational Level
Organizations apply a number of strategies to help individuals manage

their stress levels. These include –
• Effective selection and job fitment

• Realistic goal setting
• Job redesign
• Training
• Increase employee participation
• Better communication
• Employee sabbaticals and wellness programs
Activity
1. An IT organization has designed a new performance management
system, in which the incentives and growth is linked to performance.
This is a big change for the employees as earlier, the incentives and
growth in the organization was linked purely to tenure of service.
Consequently, the organization is facing high level of resistance from
within. As an HR head, what will be your recommendations to the senior
leaders of the organization to help implement this change?
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
……………………………………………………………………
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12.8 SUMMARY
This chapter explains us the concept of change as well as organizational
change. It further highlights the various forces acting to bring about
change in an organization. It then, takes us through the process of planned
change. The chapter attempts to bring out the various causes and
manifestation of resistance to change. It then highlights the various
methods of overcoming resistance to change. Change management is very
critical and the chapter covers it in detail, explaining the three main
approaches to managing change including Lewin’s classic three-step model
of the change process, Kotter’s eight-step plan, action research, and
organizational development. The chapter then brings forward the need for
a transforming culture and criticality for creating a culture for change. This
it shows via two approaches, i.e., inciting innovative culture and building a
learning organization. Finally, the chapter deals with one of the key side
effects of on-going change within the organization, i.e., stress. Also,
highlights the various stress management techniques.
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1. Which one of the following in not a ‘force of change’?

a. Constantly evolving technology
b. Need for flexibility
c. Changing social trends
2. “Time management is a technique to manage stress at an individual

level.” State true or false.
a. True
b. False
3. ___________________ learning involves correcting mistakes by

evolving goals, policies, and set routines.
a. Single loop
b. Triple loop
c. Double loop
4. What are the four D’s of the “Appreciative enquiry” cycle as suggested
by Cooperrider and Diana Whitney?
a. Destination, Dream, Design and Discovery
b. Discovery, Dream, Design and Destiny
c. Destination, Dream, Destiny, Design
d. Dream, Distinctiveness, Design, Discovery
5. Which of the following will not be an OD intervention?

a. Sensitivity training
b. Process Consultation
c. Appreciative Inquiry
d. Sales Training
Answers of MCQs: 1. - (d); 2. - (a); 3. - (c); 4. - (b); 5. - (d).
! !347
REFERENCES
1. Process Consultation: Its Role in Organization Development – Edgar

Schein.
2. Intervention Skills: Process Consultation for Small Groups and Teams –

Reddy, Q. Brendan.
3. Organizational Change: An Action-oriented Toolkit – Tupper F. Cawsey,

Gene Deszca, Cynthia Ingols.
4. Understanding Organizational Change: The Contemporary Experience of

People at work – Patrick Dawson.
5. Organization Development and Change – Thomas Cummings,

Christopher Worley.
6. Organization Development: Principles, Processes, Performance – Gary

McLean.
7. Essentials of Management – Harold Koontz, Heinz Weihrich.
8. The Fifth Discipline: The Art & Practice of The Learning Organization –
Peter M. Senge.

11.Organizational Behavior – Stephen P. Robbins, Timothy A. Judge.
12.Prin of Mgmt & Ob, 2E – Mukherjee.
13.Organizational Behavior – Don Hellriegel, John Slocum.

Taylor.
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Armstrong.

Adams.

22.The Learning Company: A Strategy for Sustainable Development – Mike

Pedler, John G. Burgoyne, Tom Boydell.
23.Appreciative Inquiry: A Positive Revolution in Change – David

Cooperrider, Diana D. Whitney.
24.Leading Change – John P. Kotter.
25.Appreciative Living: The Principles of Appreciative Inquiry in Personal

Life – Jacqueline Bascobert Kelm.
26.Personal Management – Edwin B. Flippo.
27.Frontiers of Group Dynamics – Article by Kurt Lewin. 
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REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !350
HR POLICIES, PRACTICES AND WORK DESIGN
Chapter 13
HR POLICIES, PRACTICES AND WORK
DESIGN
Objectives
• Understand the various selection practices HR function undertakes

• Understand the various learning and development initiatives and
programs
• Understand the performance management system
• Understand the career management system
• Understand the various practices for quality of work life
Structure:
13.1 Introduction
13.2 Selection Practices
13.3 Learning and Development Programs
13.4 Performance Management System
13.5 Career Management System
13.6 Quality of Work Life (QWL)
13.7 Summary
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13.1 INTRODUCTION
We must understand that for the overall organization’s effectiveness the
key HR processes and policies should be designed in the most effective
manner. These policies have a large impact on employees’ motivation and
daily job. The key HR processes and practices lie in the areas of selection,
training and learning and development, performance evaluation, career
management and managing quality of Work life.
13.2 SELECTION PRACTICES

Selection process and practices are highly critical for any organization,
since hiring is the most important HR function. This ensures that the
organization spends time and effort in screening and assessing the
workforce pool to find the right fit for each of its jobs or roles. A single
wrong fitment, can result in wastage of the time and effort on part of the
managers of the organization. In addition there are other costs associated
with this incorrect fitment including cost of hiring, training, cost of re-hiring
and re-training. Thus, highly sophisticated and thorough selection practices
are quite essential for any organization.
Selection Process
A typical selection process that is followed in majority of the companies is
shown in Figure 13.1. With a few modification in tools or skipping a
particular test, more or less majority organizations design their selection
process on the given lines. Let us examine each step in detail to
understand the effective practices.
!
Figure 13.1: A Typical Selection Process
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Application and Resumé Screening

Filling application form and resumé screening form mostly go hand in hand
as ideal initial screening tools. The candidates are asked to apply for a job
by filing up the company application form and providing their pre-prepared
resumé, which would give a detailed account of their qualification,
professional experience, achievements and various personal information.
Most organizations nowadays insist on online applications as it makes
availability of profile to different hiring decision makers quick and
convenient. Most major organizations have a career page on their website
where candidates can search for available positions by location or job type
and then apply online. Care must be taken in the kinds of questions
included in the application form. Any kind of sensitive personal information
such as caste, race, etc., must be avoided.
Written Tests
They are widely used selection tools and are recognized as valid tests that
can help predict who will be successful on the job.
Though such tests are widely used by organizations, candidates tend to be

skeptical regarding the validity of such test when compared to other
selection tools like interviews or performance tests. Main written tests
include -
1. Intelligence or cognitive ability tests - Such tests have been valid

for various skilled, semiskilled and unskilled jobs. Intelligence tests are
particularly good for cognitively complex tasks and are viewed as single
best selection measure across jobs.
2. Personality tests - Such tests are inexpensive and simple to

administer. Personality traits that best predict job performance are
conscientiousness and positive self-concept. However, there exist
concerns about applicant faking on the tests.
3. Integrity tests - Such tests have gained popularity as ethical problems

have increased in organizations and they measure factors such as
dependability, carefulness, responsibility, and honesty. They are good
predictors supervisory ratings of job performance and of theft, discipline
problems, and excessive absenteeism.
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4. Interest inventories - Such tests are instruments designed to

measure and assess the extent of a person’s interest in, or preference
for, various activities. Under this, the testing methods include direct
observation of behavior, ability tests, and self-reporting inventories of
interest in educational, social, recreational, and vocational activities.
Performance Simulation Tests

Performance simulation tests involve subjecting individuals to simulated
work environment and make a judgement based on their performance in
this environment. The three best-known are work samples, assessment
centers, and situational judgment tests.
1. Work sample tests – Such test are work samples devised to measure
candidate’s knowledge, skills, and abilities on the job. Each work sample
is matched with a job-performance. Work samples are used to hire
skilled workers like electricians, mechanics, production workers etc.
2. Assessment centers – Such tests are a method of evaluating aptitude

and performance; applied to a group of candidates by trained assessors
using various diagnostic performance simulated processes to obtain
information about suitability of candidate’s abilities for the roles.
3. Situational judgment tests – Such tests involve questioning

candidates about how they would perform in different job situations and
compare their answers to those of high-performing employees. For their
lower costs compared two the first two type of test, sometimes they
make better choice as selection tool.
Interviews
Interviews are one of the most widely used selection tool to assess not
only individual’s performance capabilities for the job but also the
organizational cultural fit. There are various types of interviews and the
most common types are –
• Unstructured – This type of interviews are short, informal and comprise

random questions
• Structured – This type of interviews tend to be lengthy, more formal

and comprise of fixed set and flow of questions.
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• Behavioral Event Interviews – This type of interviews are based on

the premise that post experience is a good predictor of future
performance and requires candidates to describe how they handled any
past problems and situations.
• Panel Interviews – This type of interviews may be structured or

unstructured but involve more than one interviewer.
Unstructured interviews may not be very effective, and using structured

interviews or BEIs removes its biases. Panel interviews remove individual
biases, if that is a concern. Providing interviewer training on information
gathering and probing can increase effectiveness of interviews.
Reference Check
Reference check is a process of an employer contacting a candidate’s
previous employers, schools and/or colleges to get information about
candidate’s previous job history or educational qualifications. The rationale
behind this is to know how the candidate performed previously and would
he or she be recommended for hiring by the previous employers or
educators. There are various difficulties involved, firstly the previous
employers may not keen to share complete information and the individuals
tend to provide details of referee who would give only favorable responses
about the individual. In today’s world of social media, reference check is
going to a different platform. With people’s profiles being easily accessible
on the social media, many employers today are checking them before
confirming their hiring decisions.
Pre-employment Medical Check Up

Once the candidate has been found fit for the job in terms of his skills,
abilities and attitudes his final selection is contingent on the pre-
employment health check-up. It informs and ensures the company of the
health status and well-being of the candidate.
13.3 LEARNING AND DEVELOPMENT PROGRAMS

High performing and high potential employees do not stay such forever,
their skills become obsolete and new skills need to be developed. Learning
and development must be a continuous process across all levels in the
organization.
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Common Types of Learning Programs
Induction Training
Induction Training involves learning imparted to new joiner to help them
adjust in their new job role and to familiarize them with working
environment, culture, behavioral norms and other concerned employees.
This also, incorporates other three types of training in very brief form;
sufficient enough to get the new joiner begin his work, before starting to
learn on the job. It also covers an overview of the business and the
products and services as well as the history, stories and rituals of the
organization. The duration of such training varies from one day to two
weeks.
Technical Training
This training varies from job to job and it is mainly a type of learning with
the aim of training the employee on any technology aspects of the job. For
instance, in a sales role, this will include learning of use of customer
relationship management (CRM) system for finding new prospect clients. It
is very important as firstly, technology keeps changing at a very fast pace
and its users must be regularly updated so that their productivity does not
drop. Secondly, new structural designs keep being introduced in the
organization, which affect the level of technology affecting individual roles.
Functional Training
These learning initiatives focus on developing a person in the area of his or
her own function for example, finance, marketing, sales, human Resource,
etc. The objective behind such programs is to train the individuals on the
various processes, standard operating procedures and effective ways of
working with respect to their specific functions. Many a times such a
training may also be termed as “Process Training”, since people learn to run
the various processes within their purview. A common example of such a
training is the Sales Training provided to sales employees.
Behavioral Skills Training

Behavioral skills or “soft” skills are the personality traits, ways of
communication, and personal habits that affect the manner in which
individual behave or any one in a particular manner. Soft skills training
aims to make individuals effective in their interpersonal interactions while
on their jobs. The various learning programs included here would be
presentation skills, communication skills, business etiquettes, decisions
! !356
making skills, goal setting abilities, ethics training, leadership training,

team skills, self-management skills, time management skills, etc. Such
learning programs are critical as no jobs are performed in isolation; in fact,
there is high degree of interdependence of individuals on one another to
carry out their tasks productively. Hence, it becomes imperative for
individuals to build or hone their interpersonal abilities through behavioral
training programs.
Training Methods
There are numerous ways learning can be imparted and people can be
developed. Given below are the various training methods –
1. Informal Training – These training methods are unstructured,

unplanned, and easily adapted to situations and individuals. It includes
people’s help to each other, share of information, and collaborative work
problem solving.
2. Formal Training – These training methods are characterized by advance

planning and a structured format. Formal training can be on-the-job
training or off-the-job training.
• On-the-job training includes job rotation, understudy assignments

and formal mentoring programs.
• Off-the-job training includes classroom lectures, video lectures,
public seminars, Internet courses, Webinars, podcasts, and group
activities using role-plays, simulations and case studies.
3. e-Learning – This mode of training deserves a special mention, as it is

fast growing and becoming dominant across organizations. Major
benefits are emphasis on learner control over the speed and content of
instruction, interaction via online communities, and use of other
methods like simulations and group discussions. It can be further
enhanced by providing learners constant prompts to set learning goals,
more effective learning plans, and measuring progress.
Evaluating Training Effectiveness

The effectiveness of training is to measure learning. The evaluation of
training is the systematic assessment of training to determine whether it
has met its objectives effectively. Effectiveness can be observed by the
! !357
degree to which learners are able to transfer the material from training to
their jobs, or by the return on investments in training.
Success of the training also depends on the individual learners. Hence, if

the learners are motivated to learn they would benefit more from the
training, thereby increasing its effectiveness. This training motivation can
come in the following three ways –
• Personality traits: Individuals who are motivated to learn have an
internal locus of control, high on conscientiousness, high on cognitive
ability, and high self-efficacy.
• Organizational climate: If individuals are able to relate the new skills
acquired through training to the organizational opportunities and
resources, motivation to learn is high.
• Post-training support: Strong support from managers and team members
to transfer the learnings on job motivates individuals to attend and learn
from trainings.
13.4 PERFORMANCE MANAGEMENT SYSTEM

The choice of a performance evaluation system and the way it is
administered can be an important force influencing employee behavior. As
per Stephen Robbins, various studies have identified three types of
behaviors constituting performance –
1. Task performance - Performing the duties and responsibilities that

contribute to the production of a good or service or to administrative
tasks. This includes most of the tasks in a conventional job description.
2. Citizenship - Actions that contribute to the psychological environment of

the organization, such as helping others when not required, supporting
organizational objectives, treating co-workers with respect, making
constructive suggestions, and saying positive things about the
workplace.
3. Counter productivity - Actions that actively damage the organization.

These behaviors include stealing, damaging company property,
behaving aggressively toward co-workers, and taking avoidable
absences.
In terms of the behaviors above, good performance will mean doing well on
both task performance and citizenship and reducing counter productivity.
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Reasons for conducting performance assessment –

• Helps decision making related to promotions, transfers, and
terminations.
• Aids in identifying learning and development needs.
• Provide feedback to individuals regarding the organization view on their
performance
• Form the main basis for allocation of rewards and increments.
Criteria for Performance Assessment

The criteria used by organization to measure individual performance
determine actions and behaviors of individuals. The three common sets of
criteria include –
• Results – This focuses on achievement and will include concepts like

quality produced per month, monthly sales targets, Lead-time in hiring or
any other quantifiable outcomes.
• Actions – This focuses on what the individual did rather than what he or
she achieved. It is mostly used when particular job roles do not have
quantifiable results to assess against. In such cases behavioral outcomes
such as submitting report on time, quality of report generation,
relationship management, etc., are taken into consideration.
• Individual Attributes – These are the weakest criteria, and the most
unconnected with the job at hand. They include agreeableness,
extraversion, organized, friendly, high confidence level etc. These cannot
be a lone criteria for performance assessment, can be used to
supplement other criteria.
Performance Assessor
The most common performance assessor for any individual is his or her
immediate supervisor and this has been the case traditionally. However, in
today’s empowered organization, simply relying on immediate supervisor’s
assessment may not be sufficient.
A need is being felt for multiple assessors, in addition to immediate

manager, which may be any one or a combination of more than one of the
following -
• The individual himself

• Peers
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• Subordinates
• Costumers
360 Degrees Appraisal – Involves obtaining feedback on individual’s

performance from full circle of his or her daily contacts from subordinates
to managers and customers to peers. The number of appraisals for an
individuals may range from anywhere between 3 and 25. Majority of the
organizations collect 5 to 10 appraisal for each individual. Benefits of a 360
Degree evaluation is that it receives views from multiple sources, removes
biases and likely to provide a more accurate picture of the individual.
Possible drawbacks include poorly trained assessors tend to not provide
very constructive feedback; many times the individual is given the freedom
to identify his or her own assessors and also there is difficulty in reconciling
different assessors views.
Performance Assessment Tools and Techniques

The various performance assessment tools and techniques are explained
below. Table 13.1 shows a comparison of these different tools and
techniques.
Graphic Rating Scale – This is a behavioral method which is among the

most popular approaches. The attributes are listed required for a job and
the manager rates the individual against those attributes. The rating scale
used here may be discrete or continuous. This scale is mostly used with
other approaches to strengthen its validity.
Essay Appraisal – In this the source answers a set of questions about the
individual’s performance in an essay form, which may include strengths
and weaknesses about the employee or statements about past
performance. They can also include specific examples of past
performance.
Checklist Scale – This method increases objectivity as in this a set of

question with yes or no as answers are asked to be filled by the managers.
Another method of responding in this could be ticking the boxes against
the criteria that employees meet and leaving other blank.
Critical Incident Appraisals – Under this method, the manager keeps track
of instances of effective and ineffective behavior on part of the employee
while on the job and formally records them during the appraisal time. This
! !360
may be a time-consuming method but effective as it helps provide real

instances of effective and ineffective behaviors.
Work Standards Approach – Under this approach, a minimum standard of

performance or productivity is defined and employee falling below that
standard is considered non performing. It is a results-driven approach
applicable to jobs where productivity is critical. For example, if a sales
executive does not meet ` 18 L target for the year, he would be regarded
as non performing under this approach.
Management by Objectives (MBO) – This concept developed by Peter

Drucker in his 1954 and is a highly results-driven on the lines of work
standards approach. Under this approach, objective setting is done in the
beginning of the evaluation period between manager and employee. In
addition, at the end of evaluation period or the performance appraisal time
both manager and employee review the achievement of the goals. Some
advantages of this approach include open communication between the
managers and the employee, greater employee “buy-in” and evaluation
can be used for developmental purposes. MBO is best applicable for non-
routine intellectual jobs and can be made effective by use of SMART criteria
for objective setting.
Behaviorally Anchored Rating Scale (BARS) – In this method, first the main
performance parameter such as effective communication is defined. Next
this method uses narrative information, such as from a critical incidents
file, and allocates a rating to each expected behavior. “Good” and “poor”
behavior for each category is clearly laid down under this method. The
main advantage of BARS is that it builds focus on desired behaviors critical
for job performance. It combines a graphic rating.
! !361
Exhibit 13.1: Sample BARS

Competency Behaviorally Anchored Rating Scale (BARS)
and
Definition
Decision 1 2 3 4 5
Making
Decisivenes, Hesitant & Reactive in Shows Tried to Took
Ownership delays taking ownership solve issues immediate
and decisions decisions, of responsibly decisions
Resolution and prefers selective decisions and and
others to in taking and arrives weighed looked at
take responsibil at multiple various
decisions. ity. Sticks decisions factors, and different
Shows No to using presented options to
ownership company predefined comprehen arrive at
or any norms, parameters sive the
attempt to tends to solutions. solution.
resolve be stuck in He
issues detail. completel
y owned
issues &
worked
owards
setting
systems
to avoid
future
issues.
! !362
Table 13.1: Merits and Demerits of Performance Appraisal Methods
Appraisal
Merits Demerits
Method
Graphic Rating Cost effective Limited objectivity
Scale
Simple to understand Limited contribution to salary
and promotion and decisions
Essay Appraisal Feedback on the positive High level subjectivity
attributes of the employee is
provided easily Validity influenced by written
communication of the
appraiser
Involves a lot of time
Checklist scale Measurable attributes Detailed responses are not
indicate behavioral allowed
expectations
Critical Increased specificity with real Negative incidents tend to be
Incidents instances observed and recorded more
often
Involves excessive time on

part of mangers
Work Specific job components get No scope for variance
Standards measured
Approach
MBOs Fosters clear and open Limited applicability
interactions
Greater support from
employees
BARS Desired behaviors are Excessive time involved in
stressed creation of BARS
Job specific scales
Clear definition of desired
behaviors
! !363
Improving Effectiveness of Performance Assessment

• Use Multiple Evaluators
• Evaluate Selectively
• Train Evaluators
• Provide Employees with Due Process
Performance Feedback
Managers find providing performance feedback as one of the most
unpleasant and difficult part of their roles. Unless they are not pressured
they prefer to avoid this. Reasons behind this behavior on part of
managers include –
• Tendency to avoid confrontation in case of negative feedback
• Poor acceptance and blame game for poor performance by employees of
negative feedback
• Discrepancy is employee and manager perception regarding level of
performance, even during positive feedback
To aid managers in feedback sessions, organizations must provide training

to managers in providing constructive feedback, since it is a very critical
aspect of their roles. A constructive feedback will –
• Focus on behaviors rather than individuals
• Supported with instances from the job performance to validate
• Have a fair and sincere manager
• Be specific rather than general
• Be more of counselling than evaluation
13.7 CAREER MANAGEMENT SYSTEM

“Career management is concerned with the provision of opportunities for
people to develop their abilities and their careers in order to ensure that
the organization has the flow of talent it needs and to satisfy their own
aspirations. It is about integrating the needs of the organization with the
needs of the individual.”- Armstrong
Career planning is an important part of career management; it determines

growth of the individual within the organization based on organizational
requirements and individual preferences, performance and potential.
Significance of Career Management System
! !364
Organizational Perspective –
• Building future leaders and specialists within the organization to ensure a
committed leadership driving towards strategic success
• Enabling effective resourcing and redeployment of people resources,
particularly in the times of change or crisis.
• Improving business performance by providing career opportunities and
build highly committed and productive workforce.
• Increasing employee engagement by meeting, the intrinsic needs of
growth and development of individuals by helping employees in
managing their careers and providing developmental opportunities and
growth in the form of promotion, job enrichment, preferred lateral
movements, etc.
• Becoming preferred employer in the eyes of external and internal talent
by providing an environment of progress and development. This aids in
attracting and retaining requisite talent.
Individual Perspective –
• Monitoring own skill set to ensure they are up to date as per the growth
of the environment.
• Understanding own skills and abilities and the alternative option available
for future growth.
• Moving up the leadership ladder and taking on senior and more
challenging positions.
• Preparing to take on larger and senior roles through transfers,
responsibility enhancements, development programs, etc.
• Opportunity to be guided by senor leaders as mentors
Goals of Career Management

• To ensure continuous supply and flow of talent within the organization,
particularly, for critical roles
• To provide the necessary advice, support and means to employees to
realize their potential and have successful careers in line with their own
skills and abilities
• To provide the top talent inputs and opportunities to develop and take on
larger roles as per their potential
Individual Career Stages

According to Greenhaus, Callanan and Godshalk, there are four stages of
career development, namely,
! !365
Stage 1 Occupational and Organizational Choices

Stage 2 Early Career
Stage 3 The Mid-career
Stage 4 The Late Career
Stage 1 Occupational and Organizational Choices

In this stage, specific tasks are to form and refine an occupational self-
image, explore the qualities of alternative occupations, develop at least a
tentative organizational choice, and pursue the type of education or
training required to implement the choice. The accomplishment of these
tasks require considerable insight into one’s abilities, interests, values, and
desired lifestyle as well as the requirement, opportunities and rewards
associated with alternate occupational fields. Once occupation selected the
second set of tasks include selecting and entering an organization, and
landing a job that can satisfy one’s career values and utilize ones talents.
Stage 2 The Early Career

This career stage, which encompasses two periods, reflects the dominant
issues of early adulthood: finding a niche for oneself in the adult world and
striving to ‘make it’ along the chosen path. The first critical task in this
stage is to become established in one’s career. The new employee must not
only master the technical aspects of his or her job, but also must learn the
norms, values and expectations of the organization. In this establishment
phase, one must make a place for his or herself in the occupation and the
organization.
Stage 3 The Mid-career

An individual’s mid-career is initiated by the midlife transition, which serves
as bridge between early and middle adulthood. A number of tasks and
concerns characterize the mid-career year. First, the individual is likely to
reappraise the lifestyle and demands that dominated the early career.
Next, it is necessary to begin to form a lifestyle to move into fully
adulthood. The major concerns treated in this phase are the dynamics of
mid-career change, the dangers of obsolescence, and the possibilities of
mid-career plateauing.
Stage 4 The Late Career

Two major tasks dominate this stage. First, the individual must continue to
be a productive contributor to the organization, and his or her sense of self
! !366
and dignity. However, the maintenance of productivity and self-esteem is

often hindered by changes within the individual and by society’s bias
against older people. The individuals in late career stage must anticipate
and plan for effective retirement, so that disengagement from work is not
devastating and that post retirement years are meaningful and satisfying.
Career Development Strategies

The following activities might be included in a career development strategy
–
1. Having a norm of internal promotions whenever and wherever possible
Promotions
As part of career management, companies move the employees from one
level to another level through promotional tests. Such upward movement is
called “promotion”. According to Paul Pigors and Charles A. Myers,
“promotion is advancement of an employee to a better job – better in
terms of greater responsibility, more prestige or status, greater skill and
especially increased rate of pay or salary.” The main conditions of
promotion are –
• Reassignment of higher-level job than what he is presently performing.

• The employee will naturally be delegated with greater responsibility and
authority than what he has had earlier.
• Promotion normally accompanies higher pay
Types of promotions - There are three types of promotions:
• Vertical promotion – Under this type of promotion, employee is moved to

the next higher level, in the organizational hierarchy with greater
responsibility, authority, pay and status.
• Upgradation – Under this type of promotion, the job is upgraded in the
organizational hierarchy. Consequently, the employee gets more salary,
higher authority and responsibility. For example, job of a sales manager
was in Grade 2 is upgraded to Grade 3.
• Dry promotion – Under this promotion, the employee is moved to the
next higher level in the organizational hierarchy with greater
responsibility, authority and status without any salary increase.
Purposes of Promotion - Organizations promote the employee with a

view to achieve the following purpose:
! !367
• Utilize the employee’s skill and knowledge at the appropriate level in the
organizational hierarchy resulting in organizational effectiveness and
employee satisfaction
• To develop competitive spirit and inculcate the zeal in the employees to
acquire the skill, knowledge, etc., required for higher-level jobs.
• To develop competent internal source of employees ready to take up jobs
at the higher level in the changing environment.
• To promote employee’s self-development and make them await their turn
of promotions. It reduces employee turnover.
• To promote a feeling of content within the existing conditions of the
company and a sense of belongingness
• To promote interest in training, development programs and team
development areas. To build loyalty and boost morale.
Bases of promotions - Organizations adopt different bases for promotion

depending upon their nature, size, management, etc. Generally, they may
combine two or more basis of promotion. The most common basis are
seniority and merit.
• Merit-based promotions: Merit is taken to denote an individual’s skills,

knowledge, ability efficiency and aptitude as measured from educational,
training and past employment record. However, among the many
benefits such as maximum utilization of human resources, motivation to
the high performer encouragement for employee for all-round
development, etc., it has certain drawback as well. These include
1. Measurement or judging of merit is very difficult

2. Techniques of merit measurement are subjective
3. Merit denotes achievement and efficiency but not the future success.
• Seniority-based promotion: Seniority refers to relative length of service

in the same job and in the same organization. The logic behind
considering the seniority as a basis of promotion is that there is a
positive correlation between the length of service in the same job and
the amount of knowledge and the level of skill acquired by an employee
in an organization. This system is also based on the customs that the
first in should be given first chance in all benefits and privileges. Though
this basis may have various advantages, including, length of service
! !368
being relatively easy to measure and gives a sense of certainty to every

employee, however, has certain disadvantages –
1. The learning curve may be an increasing one with increasing seniority.
2. It demotivates the young and more competent employees and results in

employee turnover, particularly, among the dynamic force.
It kills the zeal and interest to develop as everybody will be promoted

with improvement.
3. Organizational effectiveness may be diminished through the

deceleration of the human resource effectiveness as the human
resource consist of mostly undynamic and old blood.
Thus, the two main basis of promotion enjoy certain advantages and at the
same time suffer from certain limitations. Hence, a combination of both of
them may be regarded as an effective basis of promotion.
2. Establishing career paths that help talent to be promoted discussed

above or moves horizontally (transfers, discussed below) across the firm
for enriched roles and development.
Transfers
Transfer is a type of mobility that is restricted to movement of an employee
from one job to another in the same level of organizational hierarchy. It
can be defined as a lateral shift causing movement of individuals from one
position to another usually without involving any marked change in duties
responsibilities, skills needed or compensation. It may involve a promotion,
demotion or no change in job status other than moving from one job to
another. However, it can be viewed as change in assignment in which the
employee moves from one job to another in the same level of hierarchy
requiring similar skills involving approximately same level of responsibility,
same status and the same level of pay.
Reasons of Transfer: Organizations resort to transfers with a view to

attain the following purposes-
• Organizations may have to resort to transfer of employees due to
changes in technology, change in volume of production, production
! !369
schedule, product line, quality of products, change in job patterns caused

by change in organizational structure, fluctuations in the market
conditions like demand fluctuations, introduction of new lines and/or
dropping of existing lines. All these changes demand the shift in job
assignments with a view to place the right man in the right job.
• Employees do need transfer in order to satisfy their desire to work under
a friendly superior, in a department or region where opportunities for
advancement are bright, in or near their native place or place of interest,
doing a job where the work itself is challenging etc.
• To utilize employee's skill knowledge, etc., where they are more suitable
or badly needed.
• To improve employee's background by placing him in different jobs of
various departments, units, regions, etc. This develops the employee and
enables him to accept any job without any hesitation.
• To correct inter personal conflicts.
• To adjust the workforce of one section/plant in other section/plant during
lay-off closure or adverse business conditions or technological change.
• To give relief to the employees who are overburdened or doing
complicated or risky work for a long period.
Categories of Transfer: Transfers are of three categories, i.e., employee

initiated transfer, company initiated transfer and public initiated transfers.
Employee Initiated Transfers: These transfers are also known as

personal transfers. These transfers are primarily in the interest of the
employee and according to his convenience and desire. Further, these
transfers on be classified into temporary and permanent transfers.
Employee initiated temporary transfers: The reasons for employee initiated

temporary transfers:-
• Due to ill health or involvement of employees in accidents,

• Due to family problems like taking care of old parents and
• Due to other ad hoc issues like pursuing higher education.
Employee initiated permanent transfers: There are several reasons for

employee initiated permanent transfers:-
• Due to chronic ill health or permanent disablement caused by accident.
! !370
• Due to family problems like taking care of domestic affairs in his native
place.
• In order to relieve himself from the monotony or boredom caused due to
doing the same job for years together.
• To avoid conflicts with his superiors.
• With a view to search for a job with opportunities for advancement to a
higher level, job opportunities for financial gains, etc.
Company initiated transfers - Transfers are also at the initiative of the

company. They can be classified into temporary and permanent.
Company initiated temporary transfers - Reasons for the company initiated

temporary transfers are:-
• Due to temporary absenteeism of employees.

• Due to fluctuations in quality of production and thereby in workload.
• Due to short vacations.
Company initiated permanent transfers - Reasons for the company initiated

permanent transfers are:-
• Change in the quality of production lines of activity technology

organizational structure.
• To improve the versatility of employees.
• To improve the employee's job satisfaction.
Public initiated transfers - Public also initiates the transfers generally

through the politicians/government for the following reasons:
• If an employee's behavior in the society is against the social norms or if

he indulges in any social evils.
• If the functioning of an employee is against the public interest.
The major drawback of public initiated transfers is the politicization of the

issue. Some employees may be transferred frequently because of political
victimization and company initiated transfers of some employees may be
stopped due to political favoritism. This drawback is more severe in
government departments and public sector units.
Benefits of Transfer
! !371
Transfers benefit both the employees and the organization. Transfers

reduce employees’ monotony boredom, etc., and increase employees’ job
satisfaction. Further, they improve employees’ skills knowledge etc. They
correct erroneous placement and inter personal conflicts. Thus, they
improve employees’ morale. Further, they prepare the employee to meet
organizational exigencies including fluctuations in business and
organizational requirements. Thus, they enhance human resources
contribution to organizational effectiveness.
3. Conducting individual development planning part of the performance

management (discussed above) to grow individual’s knowledge and
skills;
4. Building knowledge management (discussed below) systems and

processes across the organization.
Knowledge Management
“Knowledge Management is the coordination and exploitation of
organizational knowledge resources, in order to create benefit and
competitive advantage" (Drucker 1999).
In simple terms, Knowledge management is about getting the right

information to the right person at the right time. However, it is not as
simple as it has been put here. It requires understanding where the critical
information is and in what form, devising processes across the organization
to ensure availability of information to the right individual in the required
form, creation of new knowledge.
Benefits of Knowledge Management

• Aids in learning from previous failures and successes.
• Helps in better utilization of existing knowledge by reusing in new areas
for example information from one department used in another
• Facilitates long-term focus building requisite skills and eliminating
obsolete knowledge.
• Enhances organizational capability in innovation
• Helps protect critical knowledge and competencies
Process of Knowledge Management

This process of knowledge management is divided into different steps.
These steps have been listed below –
! !372
• Unearthing and Determination of Knowledge

• Classifying and Evaluating Knowledge
• Dispensing Knowledge
• Reusing Knowledge
• Building Knowledge
• Procuring Knowledge
Barriers to Knowledge Management

Despite the various benefits of knowledge management, the organizations
are yet not able fully utilize its potential. This is due to the various
obstacles knowledge management faces -
• Support from management is insufficient

• Limited level of contribution to the knowledge base
• The skills of knowledge management resources are limited
• Poor design, planning and coordination
• No clear responsibility and accountability
5. Creating multifunctional project-based teams (discussed in Chapter 4)

providing developmental opportunities for a larger population of
employees.
! !373
Exhibit 13.2: Career Management Practices
Baruch and Peiperl (2000) identified 17 career management practices and

their survey of 194 UK companies established a rank order for their use. The
practices are listed below in order, from most frequent to least frequent use.
1. Postings regarding internal job openings.

2. Formal education as part of career development.
3. Performance appraisal as a basis for career planning.
4. Career counselling by manager.
5. Lateral moves to create cross-functional experience.
6. Career counselling by HR department.
7. Retirement preparation programs.
8. Succession planning.
9. Formal mentoring.
10. Common career paths.
12. Books and/or pamphlets on career issues.
13. Written personal career planning (as done by the organization or
personally).
14. Assessment centers.
15. Peer appraisal.
16. Career workshops.
17. Upward (subordinate) appraisal.
Source: Career Management Practices : An Empirical Survey & Findings -

Baruch and Peiperl
13.6 QUALITY OF WORK LIFE
Meaning
There has been much concern today about decent wages, convenient
working hours, conducive working conditions, etc. The term quality of work
life has appeared in research journals and the press in USA only in 1970s.
There is no generally acceptable definition about this term. However, some
attempts were made to describe the term quality of work life (QWL). It
refers to the favorableness or unfavorableness of a job environment for
people. QWL means different things to different people. J Richard and J Loy
define QWL as “the degree to which members of a work organization are
! !374
able to satisfy important personnel needs through their experience in the

organization.”
Quality of work life improvements are defined as any activity which takes
place at every level of an organization, which seeks greater organizational
effectiveness through the enhancement of human dignity and growth; a
process through which the stockholders in the organization management,
unions and employees - learn how to work together better to determine for
themselves what actions, changes and improvements are desirable and
workable in order to achieve the twin and simultaneous goals of an
improved quality of life at work for all members of the organization and
greater effectiveness for both the company and the unions.
Richard E Walton explains quality of work life in terms of eight broad

conditions of employment that constitutes desirable quality of work life. He
proposed the same criteria for measuring QWL. Those criteria include-
1. Adequate and Fair Compensation - There are different opinions about

adequate compensation. The committee on Fair Wages defined fair wage
as the wage which is above the minimum wage but below the living age
2. Safe and Healthy Working Conditions - Most of the organizations provide

safe and healthy working conditions due to humanitarian requirements
and/or legal requirements. In fact, these conditions are a matter of
enlightened self-interest.
3. Opportunity to Use and Develop Human Capacities - Contrary to the

traditional assumptions, QWL is improved to the extent that the worker
can exercise more control over his or her work and the degree to which
the job embraces an entire meaningful task but not a part of it. Further,
QWL provides for opportunities like autonomy in work and participation
in planning in order to use human capabilities.
4. Opportunity for Career Growth - Opportunities for promotions are

limited in case of all categories of employees either due to educational
barriers or due to limited openings at the higher level. QWL provides
future opportunity for continued growth and security by expanding one’s
capabilities knowledge and qualifications.
! !375
5. Social Integration in the Workforce - Social integration in the work force

can be established by creating freedom from prejudice, supporting
primary work groups, a sense of community and interpersonal
openness, egalitarianism and upward mobility.
6. Constitutionalism in the Work Organization - QWL provides

constitutional protection to the employees only to the level of
desirability, as it hampers workers. It happens because the
management’s action is challenged in every action and bureaucratic
procedures need to be followed at that level. Constitutional protection is
provided to employees on such matters as privacy, free speech, equity
and due process.
7. Work and Quality of Life - QWL provides for the balanced relationship
among work, non-work and family aspects of life. In other words, family
life and social life should not be strained by working hours including
overtime work, work during inconvenient hours, business travel,
transfers vacations etc.
8. Social Relevance of Work - QWL is concerned about the establishment of

social relevance to work in a socially beneficial manner. The workers
self-esteem would be high if his work is useful to the society and the
vice versa is also true.
Specific Issues in QWL

Trade Unions claim that they are responsible for improvement in various
facilities to workers whereas management takes credit for improved
salaries, benefits and facilities. However, HR manager has identified specific
issues in QWL, besides normal wages, salaries, fringe benefits etc. and
takes lead in providing them to maintain higher order QWL. Klott Mundick
and Schuster suggested 11 major QWL issues. They are:
• Pay and Stability of Employment

• Occupational Stress
• Organizational Health Programs
• Alternative Work Schedules
• Participative Management and Control of Work
• Recognition
• Congenial Worker-Supervisor Relations
• Grievance Procedure
! !376
• Adequacy of Resources
• Seniority and Merit in Promotions
• Employment on Permanent Basis
QWL and Fringe Benefits

HR manager has to build and maintain QWL, providing a wide range of
fringe benefits. Fringe benefits and social security benefits result in
improvement in productivity, reduction in absenteeism and turnover, sick
leave alienation etc. These benefits or maintenance activities include
medical and health benefits, safety measures, legal and financial services,
consumer services, retirements benefits, conveyance, canteen facilities,
recreational services, career counselling, employee information reports etc.
QWL and Productivity

The general perception is that an improvement in QWL costs much to the
organization. Nevertheless, it is not so as improvement over the existing
salary, working conditions and benefits will not cost much. However, the
rate of increase in productivity is higher than the cost of QWL. Thus,
increase in QWL results in increase in productivity. Nevertheless, continual
increase in QWL eventually leads to reduction in productivity due to
increase in cost of output. This is because the worker's output does not
increase proportionately after a certain level even though QWL increases.
Improved QWL leads to improved performance. Performance should mean

not only physical output but also the behavior of the worker in helping
colleagues in solving job-related problems, accepting orders with
enthusiasm, promoting a positive team spirit and accepting temporary
unfavorable work conditions without complaint.
Quality of Work Life and Human Resource Development

Quality of work life is broader than motivation, though these two terms
seem to be similar. All personnel related activities affect quality of work
life. Some examples are given in table 13.2. 
! !377
Table 13.2
HR Activity Effect on Quality of Work Life
Job Analysis Analyze the job in such a way that human needs like
freedom, challenging work autonomy can be satisfied.
Selection Selecting the right person and placing him/her in the right
position. This satisfies needs for reward and interesting
work, etc.
Job Enrichment Satisfies higher order needs like pride, ego, etc.
Job Evaluation Equitable wages.
Activity
1. One of the senior manager of an organization is facing issues guiding his
team members, delegating work and motivating them to perform. You
as HR manager, explain what type of training program will be provided
to this senior manager and why? Also, prepare a training plan with the
training methods and evaluation criteria listed.
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
………………………………………………………………………
! !378
13.7 SUMMARY
This chapter begins by explaining what selection is and the typical process
followed across all organizations. Next, it explains the learning and
development function and the types of learning programs. Further, the
performance management system is explained with various different types
of tools and techniques covered here. Then the chapter describes the
career management system, which is very a critical system. Under this,
concepts of promotion, transfers and knowledge management are also
highlighted. Finally, the chapter takes us through the concept of quality of
work life (QWL) and the eight broad conditions related to it. Under QWL, it
also covers the special issues of QWL and its relationships with fringe
benefits and employee productivity.
! !379
1. Which one of the following is a reason for company initiated temporary

transfer?
a. Ill health or involvement of employees in accidents
b. Change in the quality of production lines of activity technology
organizational structure
c. Due to fluctuations in quality of production and thereby in workload.
d. To avoid conflicts with his superiors.
2. In the process of Knowledge Management, the step which comes in

between Unearthing and Determination of Knowledge and Dispensing
Knowledge is
a. Reusing Knowledge
b. Classifying and Evaluating Knowledge
c. Building Knowledge
d. Procuring Knowledge
3. Who proposed the criteria for measuring QWL?

a. Peter Drucker
b. Fredrick Herzberg
c. Edwin Locke
d. Richard E Walton
4. “Under this promotion, the employee is moved to the next higher level
in the organizational hierarchy with greater responsibility, authority and
status without any salary increase. Choose the correct option.
a. Dry promotion
b. Down-gradation
c. Vertical promotion
d. Upgradation
5. “Checklist Scale” method for performance assessment refers to

a. an approach where a minimum standard of performance or
productivity is defined and employee falling below that standard is
considered non-performing.
b. A type of evaluation that lists traits required for the job and asks the
source to rate the individual on each attribute.
! !380
c. This method of performance measurement increases objectivity as in

this a set of questions with yes or no as answers are asked to be
filled by the managers.
Answers of MCQs: 1. - (c); 2. - (b); 3. - (d); 4. - (a); 5. - (c).
! !381
REFERENCES
1. Essentials of Management – By Harold Koontz, Heinz Weihrich.


Taylor.

Armstrong.

Adams.

15.The Learning Company: A Strategy for Sustainable Development – Mike

Pedler, John G. Burgoyne, Tom Boydell.
16.Human Resource Management – Klott, Mundick and Schuster.
! !382
17.Career Management – Jeffrey H. Greenhaus, Gerard A. Callanan,

Veronica M. Godshalk.
18.Human Behaviour at Work – Keith Davis and John W. Newston.
19.Quality of Work Life Activities: A Research Agenda – Richard E. Walton.
20.Managing for Results: Economic Tasks and Risk-taking Decisions – Peter

Ferdinand Drucker.
21.Readings in Personnel Administration – Edited by Paul Pigors and

Charles A. Myers.
22.Career Management Practices: An Empirical Survey & Findings – Baruch

and Peiperl. 
! !383
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !384
QUANTITATIVE TECHNIQUES IN HRM
Chapter 14
Objectives
• Understand what is meant by quantitative techniques

• Understand the significance of quantitative techniques
• Understand the significance of quantitative techniques in HRM
• Understand the various quantitative techniques used and their
application in HRM
• Understand the shortcomings of the quantitative techniques
Structure:
14.1 Define Quantitative Techniques
14.2 Significance of Quantitative Techniques
14.3 Quantitative Techniques in HRM
14.4 Common Quantitative Techniques in HRM
14.5 Application of Quantitative Techniques in HRM
14.6 Shortcomings of Quantitative Techniques
14.7 Summary
! !385
14.1 DEFINING QUANTITATIVE TECHIQUES

Quantitative techniques may be defined as tools and techniques based on
quantitative data providing systematic and strong means of analysis. They
are mainly statistical methods used for problem solving and decision
making by the management. Thus, we can also say that they are methods
involving use of numbers symbols, mathematical expressions, other
elements of quantities, and are complimentary to the judgment and
intuitions of the decision makers.
14.2 SIGNIFICANCE OF QUANTITATIVE TECHNIQUES

After defining what are quantitative tools and techniques, let us look at
their significance in an organizational context. Statistical tools and
techniques help -
1. To enable decision making – Increasing complexities and uncertainties

in the business environment, it is not advisable to rely on unscientific
methods such as intuitions while making decisions. Hence, the use of
quantitative techniques that provide a scientific basis for solving various
problems of today’s business environment is highly critical.
2. To give ways and methods for scientific study – Quantitative techniques

provide large number of tools from mathematics, statistics, economics
and operational research, which provide managers more precise
interpretation and solution to the problem. Solutions obtained using
these tools and techniques tend to be free from human biases.
3. To identify the optimal strategy – Using various scientific tools,

organizations can determine the optimal business strategy and plan
actions to work towards it.
4. To facilitate appropriate allocation and deployment of resources – A

resource is said to be appropriately allocated if a given level of output is
being produced at minimum cost or maximum output is produced at
given cost. Various quantitative techniques help measure these levels
and aid managers in optimally allocating and deploying the resources.
5. To minimize costs – Various quantitative techniques help find the

inefficiencies in the different organizational processes. By helping,
identify these inefficiencies and aiding in finding solutions to eliminate
! !386
them, the quantitative techniques play a significant role in minimizing

costs.
6. To improve the efficiency of job performance – As discussed earlier,

these tools help in identifying inefficiencies in methods and processes
applied to perform various jobs. Once, the efficiencies have been
identified, they can be worked upon to eliminate them. This helps in
improving job performance.
7. To measure the effectiveness of various systems, processes across the

organization – These tools and techniques help to determine the
effectiveness and help organization change or implement new systems
and processes in order to improve and ensure its strategic objectives
are met.
14.3 QUANTITATIVE TECHNIQUES IN HRM

It is increasingly being seen that in order to stay competitive in the
business environment organizations are using quantitative methods in their
human resource (HR) management functions. A quantitative approach to
HRM tends to aid the organization in achieving its business goals, seem
attractive to its potential customers and employees and be competitive. Big
organizations use detailed, advanced data gathering and statistical
analysis techniques to measure the success of their initiatives and base
various critical processes like human resource planning, salary and benefits
management, etc., on these quantitative tools and techniques.
Numerous advanced set of quantitative tools and techniques help HR

manage effectively as well as efficiently. The various ways in which
quantitative tools add value to HR include –
1. Standardizing manpower – Devising standardizations of manpower

for different departments of the organization and creating and executing
manpower control models.
2. Cost cutting efforts – Setting up cost management programs using

various techniques and identifying areas where costs can be contained
and controlled for the organization.
3. HR cost budgeting – Planning and controlling the HR cost budgets as

well as forecasting for next year.
! !387
4. Key performance indicators (KPI) – Devising measures to indicate

employee performance and tracking progress of employees and
managers towards achievement of goals.
5. Rewards management policy – Devising a rewards management

policy for the organization under the employment strategy.
6. Benchmarking – Carrying out comparative analysis on key processes

and practices for bringing about quality improvements in the existing
processes and practices of salaries, benefits, performance
measurement, training evaluation, etc.
7. Manpower demand and supply forecasting – Understanding the

various trends in manpower within the organization and external job
markets to generate internal manpower demand and project quantities
and methods of meeting demands.
8. HRIS – Implementing quantitative controls and reporting system for

the management regarding the people resources.
9. Accuracy in measurement – Establishing quantitative metrics of HR

effectiveness and bringing greater accuracy in outcome measurement.
10.Validating selection tools – As seen in chapter 13, various selection

tests are applied while assessing the suitability of candidates for the job
roles. A number of quantitative techniques help in establishing reliability
and validity of these tests before using them.
14.4 COMMON QUANTITATIVE TECHNIQUES IN HRM

In this section we study, the most commonly used statistical methods and
few other quantitative techniques useful in HRM. They have been clubbed
under the following heading for the ease of understanding and their
purpose of use –
1. Collection and presentation of data

2. Diagrammatic/Graphical representation of data
3. Measures of central tendency or location
4. Measures of dispersion
5. Sampling
! !388
6. Relationship analysis
7. Ratio measures
1. Collection and Presentation of Data

Quantitative data may be either primary or secondary. Primary data are
gathered directly from the field of investigation for desired purpose and is
original. Secondary data have already been collected by some agency, are
compiled from that source by the enquirer for his or her use, and is not
original. The numerical data recorded in its original form as it is measured
or recorded is called raw data. A characteristic or phenomenon that is
capable of being measured and changes it values over time or the
individual value or observation of the whole data is also called a variable.
The list of all the variables of the data presented, generally, in a tabular
form is called series. When the data are arranged chronologically or a set
of observations taken at specified times (usually at equal intervals) are
called Time Series.
1. Collection of data - Data may be collected by various methods,

including –
• Surveys questionnaires
• Interview methods
• Mail questionnaire
• Direct personal observation
• Telephonic interviews
2. Scrutiny of data – Once the raw data has been collected; it must be
thoroughly scrutinized for any inconsistencies or observational or
recording errors of the variable values.
3. Presentation of data – To bring focus into the data it is necessary to

present the data in a neat systematic manner. Different modes of
presentation of data are available, depending upon whether it is a
frequency data or non-frequency data.
Frequency refers to the number of times a variable value is repeated in

the given data. For example, there are 7 employees at a monthly salary of
` 35,000; then 7 is the frequency of ` 35,000.
Frequency distribution is arrangement of variables in tabular form

showing the frequency of different variables. The table is called the
! !389
frequency distribution table. For example, Performance rating distribution

of an organization given in the Table 14.1 below is a frequency distribution
table.
Table 14.1
Performance Rating Number of employees
1 5
2 10
3 25
4 12
5 6
The example above illustrates frequency distribution for a discrete variable,

i.e., a quantitative character that can take certain isolated values only in its
range of variable.
In case, the variable is continuous, i.e., a variable that can assume any
value within its range of variation, the data is arranged in different classes
within a range, the range to called class interval. Example of such a
frequency distribution can be represented by an age distribution of
employees within the organization in Table 14.2.
Table 14.2
Age (years) Number of employees
25 – 30 150
30 – 35 250
35 – 40 200
40 – 45 120
45 – 50 75
50 – 55 30
2. Diagrammatic/Graphical Representation of Data

The most common diagrammatic representation used in HRM include –
! !390
• Line and Bar diagrams

• Histograms
• Pie chart
• Line graph
• Frequency Polygon
• Frequency Distribution Curve
Line and Bar Diagrams

Line or Bar diagrams are suitable for discrete variables, i.e., for data given
according to a some periods, places or timings. These periods, places or
timings are represented on the base line (X-axis) and the corresponding
frequencies or values are shown on the ordinate (Y-Axis). The lines or Bars
equivalent to these values or frequencies are erected on the points marked
on X-axis. Given below in Figures 14.1 and 14.2 are sample of Bar and Line
diagrams respectively.
!
Figure 14.1: Bar Diagram
! !391
!
Figure 14.2: Line Diagram
Histograms
This is suited for frequency distributions with continuous variable having
continuous classes (upper limit of a class is the lower limit of following
class). The magnitudes of the class intervals are plotted along the X-axis
and the corresponding frequencies along the Y-axis (ordinate). The
rectangles are drawn on each class intervals with height in proportion to its
frequency. The number of such rectangles will be equal to the number of
such classes. Figure 14.3, shows sample histograms based on data from
the Table 14.2.
!
Figure 14.3: Histograms
! !392
Pie Charts
A pie chart is a circle divided into component sectors according to the
break-up of components given in percentage. A circle represents an angle
of 360 degrees, around the center, and then this 360-degree angle is
divided in proportion to the percentages. In the circle of the desired size, a
radius is drawn and the calculated angles of various percentages are
constructed one after another. Each sector is shaded differently by lines,
dots or different colors to look unique. A pie chart is good to represent the
component break-up of something. For example, Total employee strength’s
functional divide shown in Figure 14.4.
!
Figure 14.4: Pie Chart
Line Graphs
In this kind of graph, we have two variables under consideration. A variable
is taken along X-axis and another is taken along Y-axis. The variable values
are suitably scaled along the axes and all distances are measured from the
origin. The independent variable is taken on the X-axis and the dependent
variable is taken on the Y-axis. The corresponding points are plotted and
joined by a line segment in order. These graphs represent a trend or
variability occurring in data, used in correlation and regression analysis
covered later.
! !393
Frequency Polygon
It is formed by joining mid-points of all the rectangles of a histogram. It
can also be drawn without constructing a Histogram. The corresponding
points of the frequencies corresponding to the mid points of the classes are
plotted on the chart. Then the points are joined to make the graph. Both
the sides of the frequency polygon are extended to meet the X-axis of the
mid-points of the immediately lower and higher-class intervals of zero
frequency. This is done to ensure that the area of the Frequency polygon is
the same as that of corresponding histogram. In the Figure 14.5, a
frequency polygon has been drawn on the histograms of Figure 14.3.
!
Figure 14.5 Frequency Polygon
Frequency Distribution Curve

This graphical representation of data involves a histogram, however, the
total frequencies on Y-Axis are gradually increased and the width of each
class is gradually decreased (so that the total number of classes gradually
increases). Then the histogram will gradually approach a smooth curve.
The frequency distribution curve is the limiting form of histograms when
the total frequencies tend to infinity and the class width tends to zero. The
area under the curve will be unity. These frequency curves may be of
different shapes – Bell shaped (symmetrical or moderately asymmetrical),
U-shaped, J-shaped etc.
! !394
Normal distributions – Are defined as a "bell shaped curve." They

represent a standard distribution where equal number of values lie on both
sides of the modal value in the given data. In such a distribution, values of
the mean, the mode and the median coincide. Around this model, many
statistical tests have been devised.
Skewed distributions – Often the top of the curve will be displaced to the
right or left, when total number of values on either sides of the mode is not
equal. In such a distribution, values of the mean, the mode and the median
do not coincide. This is known as a "skewed distribution." Figure 14.6
below shows the normal and skewed distribution curves.
!
Figure 14.6 Normal and Skewed Distribution Curves
3. Measures of Central Tendency or Location

• Mean (Arithmetic Mean)
• Median
• Mode
• Quartiles
• Interquartile
• Percentiles
• Minimum Maximum
Mean, Median and Mode are described as averages. An Average has been
described as a single figure, which has certain characteristics, representing
the whole data.
1. Means (Arithmetic Mean) - They can be of two types simple or

weighted.
! !395
Simple mean is the sum of variables divided by the total

number of variables. For example, if the age of the 10
participants in a training program is as follows (in years) – 23,
28, 29, 23, 34, 32, 33, 27, 27, 26. Then simple mean will be
calculated as follows
(23+ 28 + 29 + 23+ 34 + 32 + 33+ 27 + 27 + 29)

Simple Mean=! = 28.2
10
This shows that average age of participants in the training program
is 28.2 years. The above method applies for ungrouped data,
however, if the data is grouped as frequencies are given then, simple
mean will be sum of the products of variables and their frequencies
divided by the total of frequencies. Let us look at the following
example given in Table 14.3, where for every age the frequency of
people in that age is given. Now let us calculate the average age
using the data in Table 14.3.
Table 14.3
Age (Variable) Number of people
(Frequency)
23 5
24 2
25 6
26 10
27 2
28 3
29 7
30 1
31 3
32 1
(23X5) + (24X2) + (25X6) + (26X10) + (27X2) + (28X3) + (29X7) + (30X1) + (31X3) + (31X1)
Simple Mean =
! 5 + 2 + 6 +10 + 2 + 3+ 7 +1+ 3+1
= 26.75
! !396
Hence, we can say, if the variable is X with values X1, X2, X3, X4, X5
and their frequencies F with values f1, f2, f3, f4, f5, then simple
mean will be as follows ,
ΣFX
! Simple Mean =
ΣF
Σ – Summation
FX – Product of X and F
Weighted mean is used when the importance of variables in the

series varies and weights denote the relative importance of each
variable. How to calculate weighted mean –
1. Multiply the variables with respective weights and add them

2. Divide the total by the sum of weights.
Formula is shown below.-
ΣWX
! Weighted Mean =
ΣW
W – Stands for weights

Values of W = w1, w2, w3, w4, w5
Values of X = X1, X2, X3, X4, X5
In case, of a frequency distribution weighted series, formula becomes

–
ΣW(FX)
! Weighted Mean =
ΣW
Values of W = w1, w2, w3, w4, w5.
Values of X = X1, X2, X3, X4, X5
Values of F = f1, f2, f3, f4, f5
2. Median is the value of variable, in a set of observations, which

has half of the population lying above it and half below it. In an
ordered series, the variable lies exactly in the middle will be its
median. Median can be obtained easily by arranging the series in
either ascending order or descending order. In a series of variable
! !397
where the number of variables are odd, then the median is the exact
center variable, however, if the number of observations is even, then
median will be the simple mean of the center two variables.
Considering, the same example of the ages of participants in a
training program, we can calculate median age.
Ages (in years) arranged in ascending order – 23, 23, 26, 27, 27, 28,
29, 32, 33, 34
Since the total number of ages is even, we take the simple mean of
the center two values that is 27 and 28. The simple mean of the two
is 27.5. Hence, the Median age is 27.5 years.
3. Mode or Modal value is that variable which occurs most

frequently in the series. In other words, that variable has highest
frequency. Considering the same example given in Table 14.1, we
can say that the mode or modal value for this data is 26 years, with
highest frequency of 10.
4. Quartiles are those values of the statistical data that divide the
whole set of statistical observations into four equal parts. Hence,
there are three quartiles in a series, with median being the middle
quartile.
• Lower quartile or first quartile - If the variables are arranged in

ascending order, then the variable lying mid-way between the lower
extreme and the median is called Lower quartile or first quartile
(Q1).
• Upper (or Third) quartile - If the variables are arranged in

ascending order, then the variable lying mid-way between the
median and upper extreme called Upper quartile or third quartile
(Q2).
5. Percentile are those values of the statistical data that divide the
whole set of statistical observations into 100 equal parts. Hence,
there are 99 percentiles in a series.
! !398
4. Measures of Dispersion
1. Range
2. Interquartile range
3. Variance
4. Standard Deviation
1. Range - It is the difference between the Maximum (Max) and Minimum

(Min) variable values in the series.
Range = Max – Min
2. Interquartile range - The difference between upper quartile and lower

quartile is called interquartile range.
Interquartile range = Q1 - Q2
3. Variance - It is the average of the squares of the deviations from the

mean.
1
Variance = ! × (Xi - Xm)2
N
N - Stands for number of variables

X - Stand for variable value
i - 1,2,3,4 …N
Xm - Mean
Example: - Using the data given in Table 14.1, we can calculate the
Variance for the data. The mean of this data is 26.75 and we have
calculated the deviations from the mean and their respective square values
in Table 14.4. The sum of frequencies is 40 and the sum of squares of
deviations is 88.125.
! !399
Age Number of people Deviation from Squares of

(Variable) (Frequency) the Mean deviations
23 5 3.75 14.0625
24 2 2.75 7.5625
25 6 1.75 3.0625
26 10 0.75 0.5625
27 2 -0.25 0.0625
28 3 -1.25 1.5625
29 7 -2.25 5.0625
30 1 -3.25 10.5625
31 3 -4.25 18.0625
32 1 -5.25 27.5625
Hence, on the basis of Table 14.2, Variance = 88.125/ 40;
= 2.203125
4. Standard Deviation - The positive square root of the variance is called

standard deviation. In simple terms, standard deviation explains the
average amount of variation on either side of the mean.
! S.D. = variance
From Table 14.2, we calculated the variance and using the same
information, we can calculate the standard distribution for this data. Hence,
S.D. = 2.203125
!
=1.4842927309 = 1.4843(rounded off to 4 decimal places)
5. Sampling
Population – It includes all members of a defined group with certain

characteristics. It can be finite or infinite.
Sampling Units – The population may be regarded as consisting of units

that are to be used for purpose of sampling. Each unit is regarded,
individual and indivisible when the selection is made. Such unit are called
sampling units.
! !400
A sample is a scientifically drawn group that actually possesses the same

characteristics as the population – if it is drawn randomly. It is a finite
portion of the population or subset of set of sampling units, selected by
some process with the objective of investigating the properties of the
population. There are a number of ways in which samples may be
obtained.
Sampling is a device that makes one able to draw inferences about the
whole population, simply by observing, or measuring few of the sampling
units.
Parameter – Any population constant is called a parameter. For example,

the population mean or population variance is a parameter.
Estimator – An estimator is a rule or method of obtaining the population

parameter.
Estimate – A particular value of the estimator obtained from set of values

of a random sample.
The use of type of sampling scheme depends on –

• Type of population
• Information available about sampling units
• Object of study
• Availability of resources like time, money, trained personnel, etc.
• Knowledge and experience of the person selecting the sample
Random sampling – Most common method used for sampling. The

process ensures no single variable is selected for the sample in a way that
it is favored over any other variable. Each observation in the population
has an equal chance of being included in the sample. When one or another
observation is favored for inclusion in the sample, the sample is no longer
considered random and is not representative of the population; it is then
said to be "biased."
6. Relationship Analysis
1. Correlation
2. Regression
3. Scatter Diagram
4. Trend Analysis
! !401
5. Markov Analysis
1. Correlation - Correlation techniques aid in predicting the value of one

variable when given the value of another variable. Correlation itself is a
measure of the association of values of x and y populations. That is to say,
correlation does not measure "causality," but it does show the extent to
which one is likely to find a given value of y (say ‘a’) when one knows the
value of x (say ‘b’). If you find ‘a’, you are likely to find ‘b’, that does not
mean that ‘a’ causes ‘b’. For instance, statistically, there is a high degree of
correlation between the number of births in Iowa and the rainfall in
Mumbai. There is no indication that one causes the other.
Correlation is exhibited on a scale of -1 to 1. A correlation of 0 means that

there is no correlation between x and y. A positive correlation means that x
and y move in the same direction in a like manner. A negative correlation
means that x and y move in different directions. Figure 14.7, shows the
correlation charts of two variable. The above chart shows a negative
correlation, while the lower chart shows a positive correlation.
!
Figure 14.7: Examples of a Negative & Positive Correlation
2. Regression - Closely related to correlation is regression analysis. A

linear relationship between two variables is shown by a straight line and it
is known as regression line. It is also the line of average relationships. This
is a procedure used to make predictions based on correlated data. For
instance, given two variables (such as height and weight) one may predict
the average of one (e.g., height) when given the value for the other (i.e.,
weight).
! !402
In a linear relationship between two variable, X & Y, if Y is dependent on X

then it is called the regression line of Y on X and vice versa if X is
dependent on Y. To find the regression line, the observations on the
variables X and Y are taken in pairs.
One of the methods to plot the regression line is Scatter diagram, which is
shown below in Figure 14.9.
3. Scatter Diagram - When regression is to be established between two

variables, and their paired observations are plotted on the graphs points,
with dependent variable on Y-axis and independent variable on X-axis, we
obtain a scatter diagram. From the plotted points, it can be visualized
whether the plotted point lie on straight line or not. Scatter diagram may
be used as a basis for deciding the regression relationship between two
variables. In case the plotted points are scattered all over forming no
pattern, then it can be said that the variables are not related.
In a scatter plot diagram, when a line is drawn suitability it will pass

through many paired points, however, not all. The best line will be the one,
for which the algebraic sum of the perpendicular distance of all the points
from the line is zero. That will be the regression line or the “Line of Best
Fit”. Thus, scatter diagram will let us know how closely the two variables
are related and how they are related.
!
Figure 14.8: Scatter Diagram
! !403
!
Figure 14.9: Scatter Diagram with Regression Line
4. Trend Analysis - It is analytical method using time series data

(information in sequence over time) analysis studying trend of the same
item (such as monthly training costs figures) over a significantly long
period of time to determine any general pattern of a relationship among
connected variables, and forecast the future direction of this pattern. It
involves studying past data and using it to project future outcomes.
5. Markov Analysis - Statistical technique used in forecasting the future

behavior of a variable or system whose current state or behavior does not
depend on its state or behavior at any time in the past in other words, it is
random. For example, in the flipping of a coin, the probability of a flip
coming up heads is the same regardless of whether the previous result was
heads or tails. The technique is named after Russian mathematician Andrei
Andreyevich Markov; it is a technique of forecasting random variables.
7. Ratio Measurements
Ratio shows how much of one thing there is in comparison to the other
thing or for every amount of one thing how much is another. It is a
commonly used qualitative measure that can be defined as a relationship
between two numeric values of similar kind (e.g., money, objects, persons,
etc.). They are used to make comparison between two things and may be
expressed as decimals. For example, an individual’s total annual salary is
! !404
Rs. 10,00,000 and his annual expenditure is Rs.6,00,000. Hence, the ratio
of his expenditure to his salary will be calculated as follows –
Ratio = Expenditure / Salary

= 6, 00,000 / 10, 00,000
= 0.6
The ratio of 0.6 that implies for every Rs. 1 of salary the individual spends
Rs. 0.6.
There are numerous types of ratios used in HRM, the common ones include
Cost benefit ratio, Return on investment (ROI) ratio and compa–ratio. We
have already discussed Cost Benefit ratio and ROI in Chapter 5. Let us
briefly understand Compa–ratio.
Compa-ratios – These are a percentage representation of an

organization's compensation levels in comparison either to the own
structure or to competitive levels. For instance, for a position an
organization pays ` 9, 000 for which the competitive level is ` 10, 000.
Then, the compa-ratio will be 9/10 or 90%. In other words, the compa-
ratio is determined by dividing the organization’s level by the competitive
structure:
Compa-ratio = Company Level / Competitive Structure
14.5 APPLICATION OF QUANTITATIVE TECHNIQUS IN HRM

The above quantitative techniques and tools are intensively used in various
HR functions. Let us look at briefly the application of these techniques in
HR functions. The following Table 14.3 shows the different HR sub-
functions or practice areas and what kind of quantitative techniques are
used most commonly in these areas of HRM.
! !405
Table 14.5
S. HR Sub-function Quantitative Techniques most
No. or practice area commonly used
1 Human resource Collection and presentation of data, graphical

planning representation of data, relationship analysis
2 Hiring Collection and presentation of data, graphical

representation of data, measures of dispersion,
sampling and ratio measurement
3 Learning and Collection and presentation of data, measures of

development central tendency, measures of dispersion, sampling
and relationship analysis
4 Performance Collection and presentation of data, measures of

management dispersion and graphical representation of data
5 Compensation and Collection and presentation of data, measures of

benefits dispersion, graphical representation of data,
management measures of central tendency, sampling and ratio
measurements.
6 Employee Collection and presentation of data, graphical

retention and representation of data, sampling and relationship
engagement analysis
7 Career Collection and presentation of data, graphical

management representation of data and relationship analysis

separation representation of data, relationship analysis, sapling
and ratio measurements

movements representation of data, sampling and relationship
analysis
10 Measuring HRM Collection and presentation of data, graphical

effectiveness representation of data, Measures of central tendency,
measures of dispersion and ratio measurements
! !406
14.6 SHORTCOMINGs OF QUANTITATIVE TECHNIQUES

Despite, quantitative tools having various benefits, there are some
shortcomings, which we must be aware of. Once aware of these
shortcomings, we would be able to use the tools and their outputs in a
better light. The various shortcomings are as follows -
• Restrictiveness of the mathematical expressions themselves

• Use of many of these techniques involves high costs.
• The intangible factors or non-measurable human factors like skills;
attitudes are ignored while using quantitative tools.
• The outcomes of these tools are mere techniques of analysis and does
not represent the decisions.
• These tools are based on many assumptions, which must be kept in
mind while taking decisions.
• Quantitative analysis is highly dependent on data, and any inaccuracy
in data will affect the conclusions
Activity
1. An HR head wants to evaluate the effectiveness of an initiative
undertaken to reduce turnover costs. What would be an appropriate
quantitative technique to carry out this measurement? What kind of data
would be required, explain with the help of an example?
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
! !407
14.7 SUMMARY
This chapter explains us the meaning of quantitative techniques. It then
highlights the significance of such technique in an organization and its
business. Further, focuses on the various uses of quantitative techniques in
Human Resource, Management. Next, the chapter briefly explains the
quantitative techniques that are commonly used in HR which can be
categorized as Collection and presentation of data, Diagrammatic/Graphical
representation of data, Measures of central tendency or location, Measures
of dispersion, Sampling, Relationship analysis and Ratio measures. In the
next section, the different quantitative techniques that are used in different
sub-functional are presented in tabular form. Finally, the chapter shows us
the other side of the coin, i.e., the various shortcomings associated with
using quantities techniques.
! !408

1. Which of the following options is not a significance of Quantitative

techniques?
a. The intangible factors or non-measurable human factors like skills;
attitudes are ignored while using quantitative tools.
b. Facilitating appropriate allocation and deployment of resources
c. Giving ways and methods for scientific study
d. Both (a) and (c)
2. Pay for a role of Sales executive in an organization is ` 15,000 per

month. As per a salary survey, the salary paid by a comparable
company for the same role is ` 18,000 per month. What will be the
compa-ratio for this role?
a. 5/8
b. 5/6
c. 1/2
d. 6/5
3. The first quartile of the data on “number of years of experience” in an

organization is 3 years and the third quartile is 24 years. Calculate the
inter-quartile range of the given data.
a. 27 years
b. 13.5 years
c. 10.5 years
d. 21 years
4. The table given below provides an exit data for 2013-2014 of an

organization, showing how many people had left after different years of
service. What will be the modal value of this data?
No. of years after joining No. of employees leaving

(years) organization
1 8
2 14
3 7
4 5
! !409
5 5
6 4
7 4
8 3
9 4
10 2
Total 56
a. 5 years
b. 8 years
c. 2 years
5.“Measures of dispersion” are not useful in _____________.

a. Compensation and benefits management
b. Career management
c. Measuring HRM effectiveness
d. All of the above
Answers of MCQs: 1. - (a); 2. - (b); 3. - (d); 4. - (c); 5. - (b).
! !410
REFERENCES
1. Statistics for Economics and Indian Economic Development – T.R. Jain,

V.K. Ohri.
2. Introduction to Statistics – P.K. Giri & J.Bannerjee.
3. Basic Statistics – B.L. Agarwal.
4. Research Methods in Human Resource Management – Valerie Anderson.
5. Human Resource Management – Trevor Amos, Adrian Ristow, Noel J.

Pearse, Liezel Ristow.
6. Business Mathematics and Statistics (Quantitative Techniques for

Business) – T.R. Jain, S.C. Aggarwal, N. Ranade, S.K. Khurana.
7. Quantitative Techniques for Decision Making – Gupta M.P., Khanna R.B.
8. Statistics for Compensation: A Practical Guide to Compensation Analysis

– John H. Davis.
9. Human Resource Planning – D.K. Bhattacharyya.


Taylor.

Armstrong.
14.Human Resource Management – Klott, Mundick and Schuster.
□□□ 
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REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !412
RECENT TRENDS AND PRACTICES IN HRM
Chapter 15
Objectives

• Understand the current business trends that are affecting human
resource management
• Understand the various trends in human resource management
• Understand specific function-wise trends in human resources
• Understand the human resource technology trends
• Understand the implications of the various trends for HR professionals
Structure:
15.1 Global Trends Reshaping the Future of HR
15.2 Recent Trends and Practices in Human Resource Management
15.3 HR Function-wise Trends
15.4 HR Technology Trends
15.5 Implications for HR Professionals
15.6 Summary
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15.1 GLOBAL TRENDS RESHAPING THE FUTURE OF HR

The HR function does not operate in silos; it is very much impacted by any
changes or transformations happening to the external environment. The
various trends and practices which the HR function adopts at organizational
levels are primarily driven by the ongoing global trends –
1. The increasing globalization and interdependence of the world economy

2. Ongoing explosion of technology in the form of mobile, social and cloud
computing
3. Diverse multigenerational workforce on the rise
4. Change in the business focus owing to changing social, political and
regulatory global environments.
Let us understand them in detail.
1. The increasing globalization and interdependence of the world

economy
The world economies are increasingly becoming boundaryless and
interdependent, with the share of developing economies in the world GDP
tremendously increasing. There is an ever-growing dependence of the
world on these economies in terms of business opportunities and customer
base - in the form of global middle class. Thereby, with interactions within
different cultures happening, trends in leadership, talent acquisition,
capability development, analytics, and HR transformation are all getting
impacted. Organizational success is depending on the ability to balance
their global and local HR strategies in such a scenario.
2. Ongoing explosion of technology in the form of mobile, social

and cloud computing.
Major transformation is going on in the workplaces owing to technological
advancements. With number of mobile users, social media website users
and demand for cloud computing on a tremendous rise, people are more
connected and agile than before. Technology has expanded the flow and
availability of information, interactions have become just a click away and
driven the pace of business growth. The world of hiring, education and
learning, need for analytics and the manner of operating have all been
impacted. People are practically connected 24X7 and flooded with
information and messages and hence, technology has become a critical and
pivotal part of human resources.
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3. Diverse multigenerational workforce on the rise

With globalization, people of different countries are interacting on a more
regular basis and are becoming dependent on each other for progress.
Further as the world’s population grows, the demographics of workforce is
constantly transforming with younger people getting into workforce, middle
aged productive workers and managers getting older and overall
p o p u l a t i o n b e c o m i n g u r b a n i ze d . T h e s e c h a n g e s a r e b r i n g i n g
multigenerational diversity in workforce and getting together different
mindsets under one roof. It is a challenge for the organizational leaders to
cater to the needs of the diverse workforce and drive them towards shared
visions and common goals. HR function is relooking at its functions to
satisfy the diverse workforce at all levels whose needs vary widely.
Processes like hiring, performance management, learning and
development, career management, rewards and recognition and
compensation and benefits management are transforming according to the
new workforce dynamics.
4. Change in the business focus owing to changing social, political

and regulatory global environments
With corporate social responsibility and conscious capitalism are catching
up within the social fabrics across the globe, organizations are experiencing
thinning of boundaries between business issues and social issues. This
implies that people either as consumer or as talent are putting new
demands on businesses since the concerns for society and community are
taking high priority with them. With globalization and increase in business
complexities on the rise, financial markets are facing more and more
regulations and role of regulators is expanding. Considering the social,
political and regulatory environmental dynamics, HR function faces
challenges in terms of building culture strengthening and ethos of mission,
purpose, and conscious capitalism in order to engage and retain people
conscious of all these issues.
15.2 RECENT TRENDS and PRACTICES IN HUMAN

RESOURCE MANAGEMENT
The HR function is being shaped by the global trends mentioned above.

There numerous trends and consequent practices are being adopted by HR
across the globe. Listed here are ten key trends shaping the look of current
HR departments.
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1. Talent management is becoming a priority

2. HR technology gaining significance prominence
3. HR analytics gaining significance
4. Diversity becoming a business need
5. Future leadership development is the key focus
6. Demand for business focused and enterprising workforce
7. Strategic human resource planning (HRP) becoming ever more
significant
8. Increasing drive and focus on succession planning
9. Outsourcing the HR function is on the rise
10.Increasing emphasis on building shared organizational culture and
values
1. Talent management is becoming a priority –

Talent Management over the years has gained significance and forms part
of overall organizational strategy.
• No longer, the organizations are able to follow “One size fits all “approach
towards their people owing to increasing expectations of employees from
their work, diversity in workforce (presence of both generation X and
generation Y employees), organizations are realizing talent to be their
competitive advantage for success and “war for talent” is intensifying.
Thus, Talent management is becoming the top priority for HR
professionals across sectors.
• In today’s time and place, workforce is getting more and more diversified
and it is becoming critical to identify their common and diverse needs
and devise development strategy in an unbiased manner. Organizations
are increasing their focus on more effectively segmenting the different
layers of talent based on their performance and potential, as this will aid
in long-term success of the organization.
• On the hiring front HR has shifted focus from merely talent acquisition to
talent identification and talent life cycle management within the
organization. Simply hiring best talent is not sufficient, Need is being felt
for developing future leaders, engaging talent and deploying them
effectively after on-boarding.
• Talent management becoming highly critical, but a shortage of requisite
talent is pushing HR professionals to tap into newer talent pools across
the globe for e.g., rehiring retired employees.
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2. HR technology gaining significance prominence –

Use of newer technology in HR processes and systems is on the rise
• The main aim of all HR functions is to “simplify” while adopting

sophisticated technologies, the attempt will be to make technology easy
to use and a distinct experience.
• With the new age workforce, fixed office locations is changing with
people working from home, cafes, etc., to suit their convenience. This
makes using old systems of tracking attendance or monitoring entry and
exit of employees will become outdated. Thereby HR teams need to
move up the value change and be connected with workforce through
social collaborations, mobility and cloud technologies.
3. HR analytics gaining significance –

HR analytics or talent analytics refers to the application of
sophisticated data mining and business analytics techniques to human
resource (HR) data to improving employee performance and getting a
better return on investment. It is not about gathering data on employee
efficiency but targets to provide insight into each process with the data and
using data to make significant decisions regarding improving processes.
What HR analytics does is correlate business data and people data, by
establishing a cause-and-effect relationship between what HR does and
business outcomes and then create strategies based on that information.
Analytics is not much about numbers but about logic and reasoning and is
different from analysis, which is the equivalent of number crunching.
Analytics uses analysis but then builds on it to understand the 'why' behind
the figures and/or to predict decisions. It is not about the quantity of data
churned; it is about the logic used to link metrics to results
• The value being driven from HR analytics is becoming more and more
prominent with organizations gaining strong understanding of Big data.
• The HR decisions driven by hunch and intuition earlier are increasingly
relying on data backed by analytics.
• Analytics concept being relatively new, experimentation in this field is
excepted to grow manyfold with emergence of newer models
• Usage of the analytics will range from developing talent strategies to
various hypothetical scenarios as well. The HR metrics if derived
accurately from analytics, may also maximize effectiveness of tangible
! !417
office assets like equipment, office space, working capital, technology,

etc., in addition to that of human resources.
Exhibit 15.1: HR Analytics
Let us consider the benefits to HR departments making an investment in
stronger analytics.
• They can redirect the money they spend today on the wrong employee
initiatives to more beneficial employee initiatives. Specifically, those
initiatives that impact critical business metrics and outcomes instead of the
latest unquantified HR fads that promise to make employees happier, more
engaged and satisfied.
• The investments that they decide to make that focus on employees will result
in tangible outcomes that benefit shareholders, customers and employees
themselves.
• The returns on such investments, via their impact on the top and/or bottom
lines, can be quantified.
• HR departments can be held accountable for impacting the bottom line the
same way business or product leaders are held accountable.
• HR executives will be included in the conversation, because they can now
quantify their numerous impacts on business outcomes.
HR Analytics Metrics
Workforce Management - Contingent representation, Demographic

representations, Time lost due to absences, Days/absence, Cost due to
absences, involuntary separations due to absenteeism
Planning & Staffing - Net hire ratio, Cost per hire, Cost/fill, Cost/candidate,
Time to fill, Time to productivity, Candidate satisfaction, Decline rate, Selection
rate, Hires vs projections, Separations vs projections, Productivity differential,
Recruiting cost ratio, Time to start, Time to productivity, New hire turnover
Performance & Development - Readiness, Performance rating distribution,

Development spend/ employee
Compensation - Total pay, Base, Incentive, Overtime spends, Spends/

employee, Average base salary change, Average total pay at target, Place in
range distribution, Avg. compa-ratio, Compa-ratio distribution, Offer declines
due to compensation
Safety - Absence days/LOAs due to accidents, Penalty spend, Cost per

accident, OSHA investigations and actions, Time lost due to accidents
! !418
4. Diversity becoming a business need

More and more organizations are striving for diversity in their workforce.
• Large emphasis on gender diversity with increased emphasis on retaining

and hiring women across levels. A strong need for an unbiased society
promoting gender equality is necessary for growth of diversity culture.
• Practices which would be taking top priority in this regard would include
– ○ Paying both genders equally for comparable work
○ Eliminating barriers to equal opportunity
○ Institutionalizing work practices after considering diversity needs
• Managing diversity of workforces and particularly, the needs of younger

generation, which are much dexterous with technology, prefer the
independence and value for merit and want to be part of any changes.
• Senior leaders are working towards role modelling and giving directions
to the new generation in the workforce
• Senior management is increasingly driving diversity on a personal level
5. Future leadership development is the key focus

Leadership crisis being the major issue plaguing the organizations, hence
building leaders from within is increasingly becoming critical for HR.
• There being a dearth of leaders with skills of critical thinking, engaging

and motiving employees and building strategic visions, HR is focusing on
developing young managers to take on future leadership roles.
• Focus on leadership development arises from the fact that strong leaders
drive the mission of the organization and lead to profitable growth.
• Leadership is becoming the core competence that the L&D is focusing on.
The leadership aspects which need greater focus are -
○ ability to communicate organizational visions,
○ integrating with employees across levels, and
○ Inspiring employees to follow the shared vision.
6. Demand for business focused and enterprising workforce

With globalization reaching newer heights and ecommerce business
trending, organizations are increasingly hunting for people with
entrepreneurial skills.
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• HR professionals are hiring managers at middle and senior management

levels with experience to scale business to higher levels.
• HR needs to focus on skilling and reskilling employees, considering the
changing and volatile environment. The employees showing inclination to
learn and grow along with the business are being preferred over those
who prefer status quo.
7. Strategic Human Resource Planning (HRP) becoming ever more

significant –
With the highly volatile and uncertain external environment, it becomes
imperative for HR to put in place robust and business driven HRP strategy.
• Strategic HRP should not be conducted on a need basis, but should be a

regular exercise following scientific methodologies.
• It involves –
○ Building human resource development model for medium to long-

term
○ Critically evaluating areas to be outsourced
• Strategic HRP will be driven by –

○ HR cost considerations
○ Speed to market
○ Resilience to respond to change
○ Bandwidth of management
8. Increasing drive and focus on succession planning

Succession planning is finding and building prospective successors for the
critical positions in an organization, via
a systematic assessment and training. It is different from replacement
planning as that is mainly relying on individual’s past performance in
similar roles whereas succession planning involves evaluating individuals
for a role they may never have been in. Majority of the organizations,
attempt to have a succession plan in place but fail to operationalize.
However, to be successfully having a robust and active succession planning
process will give the competitive edge for the organizations today.
• Organizations must continue to evaluate the critical positions in the

ever changing environment and work up their succession plans.
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• HR function must focus on building bench strength and grooming them

for larger roles, not only at top management level, but also at the next-
in line management.
9. Outsourcing the HR function is on the rise

HR outsourcing refers to downsizing the internal transitional HR processes
to external expert agency or consultants.
• Previously outsourcing of HR was restricted to larger organization, but

this trend is catching with SMEs as well.
• The in-house HR function is expected to focus on critical challenges of
talent management and employee engagement
• HR outsourcing is rising due to its various advantages –
○ Reduces administrative burden on internal team
○ Specific work areas is handled by specialists
○ Internal HR team is freed to focus on larger business or strategic
objectives
○ Reduces cost and increases efficiencies
• The HR activities that are generally outsource include –

○ Retirement benefits administration
○ Employee payroll and benefits programs
○ Initial screening process in selection
10. Increasing emphasis on building shared organizational culture

and values
• Organizations are realizing the competitive edge that emerges due to a

shared culture and values. And that this shared culture is extremely
dependent on the behaviors of the leaders and their relationship with
their employees.
• Values that make up the organizational culture might be a reflective of
the beliefs of the current leaders or the heritage of past leaders. Most
organizations operate with “default” cultures and since there is no
measuring of culture, the underlying values and beliefs of the leaders
become “the way things are done around here.”
• The leaders who share the common vision and values, work towards
common good, and focus on internal community creation build internal
cohesion and values alignment.
! !421
• Organizations with strong cultures which are based on shared values

tend to outperform other organizations significantly
• In case of high performance, brand differentiation, or retention of talent
the organizational success is directly related to the extent of alignment
that is between the values of the leaders and employees.
• In the long run sustainable success is highly dependent on the shared
culture of the organization created by the leaders.
15.3 HR FUNCTION-WISE TRENDS

Hiring Trends
• Focused hunting for talent and matchmaking would be key, rather than
mass sourcing. Efforts being made towards better screening and
enhancing the quality of talent accessed. Focused and matchmaking
approach in hiring will lead to business growth and expansion.
• Outsourcing the initial screening and transactional segments of hiring, is
picking up speed.
• Social media is emerging as an effective sourcing channel, particularly for
middle management levels.
• Use of technology increasing in all aspects of hiring from sourcing to
selections.
• Use of analytics is increasing in hiring decisions, which are more
information based than purely intuition or judgment.
• More than assessing the individual, the HR professionals are focusing on
enhancing every candidate’s hiring experience with the organization, as
part of building employer image.
• Online assessments are changing the game.
• Employer branding is on the rise, with “talent war” intensifying,
attracting candidates is becoming as critical as attracting the customers.
Hence, recruiting operates more on the lines of marketing function.
• With mobile being inseparable device from people, HR is developing tools
to reach prospective applicants through mobile devices and aid them in
applying and connecting through them.
Compensation and Benefits Trends

• Compensation is being looked at as total “cost to company,” (CTC) rather
than net pay alone. This is because of competitive environment and such
approach helps organizations with a holistic view of the costs and the
operating margins.
• Variable pay based on performance continues to be the norm; however, a
larger proportion of pay is being based on performance.
! !422
• To promote a highly performance-oriented culture, organizations are

implementing the highly evolved system of “economic value
added” (EVA) framework to the employee incentives. This is because
through various studies, it has been seen that EVA has positive
relationship with incentive-based compensation. When the contribution to
EVA is as expected, below or above expectations, a managers incentive
vary accordingly.
• The basic or guaranteed pay has seen a gradual decrease over the years
and there is an increasing emphasis on variable pay or others.
• Benchmarking of compensation and benefits with comparable
organizations, both locally and globally, has been on the rise. This forms
are large source for understanding and adopting best practices across the
globe.
• Employee stock options (ESOPs) are no longer one of the most attractive
form of compensation for employees owing to the erratic nature of the
stock markets and the high lock-in periods.
• With changing taxation structures, there is a strong review of merits of
non-taxable benefits, which previously increased the net “take-home” of
an employee.
• Provident funds and retirement benefits are provided only up to the limits
what are made necessary by the government.
• Pension benefits and other similar social security benefits are currently
not being valued by employees who are preferring higher present income
vis-á-vis future income and hence, such benefits are not very high in the
consideration list of organizations.
Learning and Development Trends

• Increased use of technology for training delivery owing to availability of
low cost technology means, high effectiveness and increased reach to
geographically spread teams.
• e-Learning gaining high popularity across the globe, for its ease of
availability 24X7, autonomy of speed and content to learner and easy to
keep updated.
• Organizations are demanding high-speed designing, content focus, and
multiple delivery methods in the learning and development initiatives.
• Growing training partnerships and training outsourcing because of access
to specialized knowledge and best practices as well as cost savings.
• Greater focus on development of leadership and strategic business skills.
L&D programs are being devised to help managers grow their skills
required for leading across cultures and contributing towards global
! !423
business development in the near future. The HR function is expected to

focus their leadership development activities on the following three
areas: -
○ Enabling the organization to attain its strategic objectives
○ Building the skill-sets of leaders enabling them to have a more
strategic and focused thought process
○ Developing high potential employees who would be value to the
organization in future.
• Learning based on mobile devices such as mobiles, tablets, handheld
computers, etc. The main benefits of this form of learning are greater
access to learning material, engagement with learning at convenience,
much quicker compared to a laptop or desktop and much greater recall
due to easy availability.
• Use of alternate methods for training. i.e., use of theatre-based training
has grown as an effective tool for developing diverse skill-sets. This
training method involves behavioral adjustments and managing change.
One of the large organizations in India, ITC is tending towards
developing its training methods for frontline managers into a theatre and
drama-based programme.
• Multigenerational training has picked up drastically. Organizations are
seeing value in interventions bringing together participants from all levels
and generations, through diversity. It is being viewed everyone in the
organization brings something on the plate and hence, senior executives
can learn from younger generations and vice versa. Young talent can, for
example, share their expertise in areas such as technology and social
media, whilst older and participants that are more senior can offer up
their wealth of experience, amassed expertise and understanding of the
company’s history, culture and values.
• The concept of “Learning from others” is gaining unparalleled
significance. Mentoring is playing a key role here. It forms part of that
proportion of learning that is to come “through others”, and other
activities in the same space are feedback and coaching.
Performance Management Trends

• Automation – With technology affecting every corner of HR function,
Performance management is a key function that has seen a growth in
automation. With high-end systems, with proper checks and controls, HR
is able to monitor the whole process smoothly. From goal setting to
recording feedback discussions, the system is self-service involving the
! !424
appraiser and appraisee, also being web-based giving the ease to them
of access at their convenience and comfort.
• Appraising team performance – In today’s workplaces, teams have
become more prevalent, however, erstwhile appraisals were designed to
measure individual performance. HR professionals are increasingly
devising ways to incorporate team appraisal. However, only team
appraisals become difficult hence, a combination of both team and
individual appraisals are being adopted by the companies.
• Greater decentralizaion in the process – There is greater flexibility and
high level of customization being introduced in performance
management, department or business unit wise. This is giving a high
level of belief and ownership in the process and it is being viewed a
strategic tool to cater to their needs rather than a process enforced on
them. With the process being customized to the specific unit’s context
largely, the output tends to be more meaningful and value adding to the
organization.
• Increased participations and ownership of employees – Performance
management tends to be more effective when the individuals are active
and are part of goal setting, progress monitoring and feedback collection
for their own work performance.
• Strong need for all-rounded feedback – Previously 360 degrees feedback
was sought more for a developmental purposes; however, it has been an
increasing requirement to obtain performance evaluation from peers,
subordinates, customers in addition to the managers’ feedback. The
objective being well-rounded and accurate assessment.
• Simplifying the system and encourage meaningful interactions – Strong
shift towards making the process, form filling and goal setting less
complicated. Greater emphasis is being built around encouraging
meaningful dialogue between the appraisers and appraises. Simpler
systems are more flexible and hence, receive greater acceptance from
appraisers and appraisees.
• Year round feedback and continuous recording – Shift from a one or two
times a year activity to a continuous activity. This is made to keep the
process active in the form of performance logs, update sections and
continuous recording methods.
Rewards and Recognition Trends

• Organizations are moving from earlier recognition with respect to long
service awards. Instead of waiting for 3-5 years of completion of service,
employees are being rewarded and recognized for first work anniversary
! !425
and, in fact, all work anniversaries in order to appeal to the emotional

attachment angle of the individuals. This, clubbed with engagement
initiatives, positive work culture, content encouragements and small
acknowledgements of even small achievements, goes a long way in
employee retention.
• Rewards and Recognition via Social Media like Facebook, Twitter, etc., the
in-house company’s social media have far larger impact for employee
than the traditional forms of rewards and recognition.
• The time gap between recognition and worthy action has dramatically
reduced with immediate mobile recognition. Managers and employees
with greater access to mobile devices like smartphones and tablets, use
them to acknowledge and praise team members, peers, etc.
• Recognition becoming more interactive via face-to-face video or the
recorded messages are being explored as next medium for sending
messages of praise and acknowledgement in addition to the written and
graphic formats.
• Rewards are being made flexible and customized rather than “one fits all”
approach. For similar achievements, employees are being given options
to choose from rewards rather than a standardized gift or a voucher as
earlier provided.
• Increased demand for peer-to-peer recognition and gives opportunities
even though not managing teams, to award and recognize ‘good work’
done by a team member or a cross-functional co-worker.
• With increasing work environments with team-oriented efforts rather
than individual focus, team rewards are gaining greater significance over
individual recognitions.
• Organizations are moving away from specific days of employee
recognitions and appreciation, instead focusing on building a recognition
culture where employee appreciation is a daily activity and not one time.
A high recognition culture requires a drive from the top, empowerment to
managers, encouraging fun at work, showering employees with
recognition both at informal and formal interaction more often. It
involves more than just a thanks but building a rapport and display of
genuine affection and appreciation.
15.4 HR TECHNOLOGY TRENDS

Technological advancement is affecting every aspect of human life being it
the personal space or the professional space. Technology has become
inseparable and an integral part of people’s life and since it’s the people
who really form the working environment, the practices and process
! !426
devised for them will necessarily be impacted by fast-paced technological

changes and advancements. If the HR function in the organizations will not
embrace these technological changes, they will be left behind in catering to
the needs of today’s technology savvy workforce. The various technological
trends HR is facing today are listed here -
• Increased use of workforce analytics
• Mobile HR
• Simple intuitive and user-friendly interfaces
• HR on cloud
• Social media and HR
• Extensive use of videos
Let us understand these trends in detail.

• Increased use of workforce analytics – This is era of Big Data and though
HR is drowning in data but is not completely adept about how to use it to
the best advantage. Besides, recruitment function, other HR functions
have been slow to adopting analytics, but they are picking strongly now.
The analytics and Big data help HR to better understand employee
performance over time through insights into areas such as analyzing
career steps taken by high-performance individuals to understand growth
paths of leaders within their own organization. HR professionals would be
ready to move from intuition-based decision making to data-driven
decision making.
• Mobile HR – Data shows that sales for mobile devices currently exceeds
that of personal computers and keeping this in consideration HR
professionals recognize the need to connect with their prospective
candidates via their mobile devices. HR professionals are optimizing the
mobile experiences of applicants by making it easy for them to carry out
activities such as apply for a job via mobile device as they eat their
lunches or while walking, etc.
• Simple intuitive and user-friendly interfaces – HR departments are
focusing on fresh, integrated, simple user experience for HR software.
Being simple and intuitive with user-friendly interfaces are the reasons
for shift to cloud. The legacy HR software are in the process of being
replaced completely.
• HR on cloud – HR professionals are interested in cloud-based systems
that means move from “systems of record” to “systems of engagement.”
This makes software much simpler to learn and navigate and also
enabling employees to make use of the systems. From an HR
! !427
department’s perspective, cloud services will do away the need to

upgrade and/or reinstall backup services every few years.
Exhibit 15.1: Cloud Computing and HR
What is Cloud Computing?

Cloud Computing is basically off-premise computing, essentially where HR, the
customer, do not have the computing environment located physically in the
offices. Remote machines owned by another company run everything from e-
mail to word processing to complex data analysis programs. Thus, it can
describe different scenarios in which computing resource is delivered as a
service over a network connection (usually, this is the Internet). Cloud
computing is, therefore, a type of computing that relies on sharing a pool of
physical and/or virtual resources, rather than deploying local or personal
hardware and software. It is somewhat synonymous with the term ‘utility
computing’ as users are able to tap into a supply of computing resource rather
than manage the equipment needed to generate it themselves; much in the
same way as a consumer tapping into the national electricity supply, instead of
running their own generator.
Benefits to HR
A cloud-based HR system can help remove the administrative stress from a
growing HR team and allow them to concentrate on their business. So let us
look at some of the most important benefits of cloud computing for HR
professionals:
Mobility - The cloud offers users access to information from everywhere and
anywhere. This allows greater flexibility for HR and recruiting professionals on
the move thanks to improved access to critical information. Mobile cloud
applications also allow recruiting and HR managers to take action on
management self-service transactions from anywhere without having to wait to
get to a desktop or laptop. Whether you’re in the office, traveling or working
from home, everyone has access to critical business information.
Affordable costs - With the cloud, there is no need for costly financial
installments, in-house IT technicians, server space or expensive software and
site licenses. Transitioning to the cloud also reduces the cost of system
upgrades because the vendor manages the bulk of the upgrade tasks. Also,
personalization and extensions move forward with the upgrade, allowing users
to take advantage of the new features and functions.
! !428
Easy to use - HR cloud computing system can track applications, search

resumes, generate reports, calculate payroll, track performance appraisals and
maintain data on employees. Basically, all the data is available anytime for
everyone involved, just a click away.
Simplified workflows - Using cloud HR can simplify workflows, reduce

absence costs and improve the way information is reported, enabling HR staff
to delegate their time much more proactively on supporting the development
and growth of the company.
Continuous access to legal issues - Cloud computing also ensures that

companies have instant and continuous access to the latest advances and legal
issues as they may affect human resources issues. All information is
automatically updated, meaning team members can be sure their information
is current.
Advanced security - Security is another concern for HR professionals, who

deal with sensitive information. Virtual services have some of the most
sophisticated security systems imaginable, reassuring the HR department and
the entire workforce. Additionally, access to sensitive information can readily be
limited to certain individuals within a company.
• Social media and HR – HR professionals are increasingly using social
media networks to track and engage prospective talent. Even the
talented candidates are seeking opportunities via work and personal
social networks, HR can leverage automated job feeds on social networks
for announcing job openings. Besides hiring social tools are also
becoming part of other HR process as well such as training, on-boarding,
employee communications, and even performance management and
recognition.
• Extensive use of videos – Videos are becoming a top tool for HR with
software solutions needing to be video-friendly. Videos are being used in
almost all HR activities from job interviews, employee on-boarding,
employee communications, learning activities, etc. HR is exploring many
possibilities with video and focusing on making processes and software
video compatible.
15.5 Implications for HR professionals

We have studied the global trends shaping HR trends and practices. We
have also looked at the ten key trends for HR, the HR function-wise trends
and the HR technology trends. With so much movement happening in all
arenas, HR professionals face immense pressure and need to cope with the
! !429
various implications of the trends mentioned above. Let us look at the key
implications for the HR professionals -
• HR department will become leaner by outsourcing
• Strategic thinking for HR will become an imperative
• Increasing demand for specialists
• Increasing use of analytics and big data in HR
• Increasing imperative to deal with remote workforce
• HR to become more like marketing
HR department will become leaner by outsourcing

HR professionals will focus on core functions with the transactional
administrative processes will be outsources to external agencies. This is
possible with increasing use of highly advanced and sophisticated
technology in HR processes. This will lead to more self-service on part of
employees and them doing a lot on their own. For example, on joining
employees enter their information into self-service employee. Various
processes and HR jobs that would be more to external agencies. These
would include entry-level transactional jobs, benefits administration,
payroll administration etc.
Strategic thinking for HR will become an imperative

HR professionals will need to give up their operational and transactional
roles to outside agencies and focus on becoming strategic partners to the
business leaders. Hence, strategic thinking will be a key competency
required to be developed within HR. Even the new hires will be evaluated
on this competency before being absorbed. Thus, HR will be a smaller,
more strategy-focused function. Being a strategic partner requires HR to
make accurate projections based on understanding the business objectives
and organizational goals. It will involve use of metrics that describe more
forward looking indicators and future trends. Hence, the strategy role of HR
cannot be outsourced and strategic planning will require in-house
expertise. This result in strategic HR professionals being titled as HR
Business Professionals who not only understand HR innuendos but also
business operations and strategy.
Increasing demand for specialists

With outsourcing of various HR functions or use of external consultants, in-
house HR will have more specialized roles than generalist’s roles. There will
increased focus on individual contributors having some specialized
! !430
knowledge and guiding organization on those areas and administrative

functions being handled by external vendors.
Increasing use of analytics and big data in HR

The HR professionals can no more focus on qualitative outcomes only and
in order to become strategic leaders and advisors to business, require
embracing analytics and “big data”. Increasingly, the career path of HR
professionals will be determined more by data analysis and metrics.
Although HR already uses some metrics such as turnover ratios and
employee engagement levels, but newer and more usable metrics will be
used such as the average timeframe for promotion readiness.
New entrants into the HR field will have to be prepared for this increased
use of analytics. And this will provide them opportunity to be part of
greater value adding HR function. Therefore, HR will look for such
professionals strong on analytical skills and are able to utilize HR analytics
in the best possible way, make projections and drive positive
transformations using the available information.
Increasing imperative to deal with remote workforce

HR professionals will increasingly need to deal with challenge of managing
a remote workforce. The companies are attempting to leverage employees
where and when they are most productive whether, working from home, or
halfway around the world. Managing remote workforce needs three-fold
effort on part of HR professionals. Firstly, educating managers who have
difficulty in managing people from a distance. Second, keeping employees
in remote locations well-engaged and bonded with the organization.
Thirdly, ensuring proper norms and practices to encourage such a work
environment and enhanced productivity. Hence, it is becoming clearer that
remote management is not a skill one can learn in a moment.
HR to become more like marketing

Hiring is becoming more like marketing, with identifying targeted
candidates and reaching out to them directly or indirectly. HR recruiting is
focusing on employer brand building and the external image of the
organization to attract talent to the organization. This is similar to the
marketing function, building brand of the products or services, targeted to
attract customers to buy the products or services.
! !431
It is also believed that HR’s role as marketing will need to extend beyond
hiring and will require “internal focus” and building employees as brand
ambassadors and having brand ownership.
Exhibit 15.3
The key points to create and establish an effective employer brand –

• Attracting and retaining top talent
• Be known for quality customer service
• To become a recognized Icon
• To be viewed as employer of choice
• Establishing shared core organizational values
Activity
1. Based on your understanding list down the various creative ways HR
function can use the new age media - social media - to increase its
effectiveness.
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………
! !432
15.6 SUMMARY
This chapter focuses on the current trends that are being faced by the HR
functions of organizations. Organizations in the face of transforming
business environments are experiencing people challenges, which are
influencing the changes in the people practices and policies. HR function is
experiencing a dynamic environment and thereby new trends. There are
macros trends which the function as a whole is experiencing, however at
the micro level or sub-function level like recruitment and selection,
compensation and benefits, learning and development etc. are also facing
various changes impacting their operations. Overall business environment
is experiencing technological advancements and changes in technology are
setting new trends. Thus, the chapter highlights that these technological
advancements have not left the HR function alone and have greatly
affected the function with its changing trends. HR technology is also rapidly
undergoing transformation. The chapter finally highlights the implications
for the HR professionals of the given scenarios of massive transformations
in all arenas of HR function. It tells us how the roles and responsibilities
are being impacted with the changing face of the workplace and its people.
! !433

1. Which one of the following is a key global trend, reshaping the future of
HR?
a. Ongoing explosion of technology in the form of mobile, social and
cloud computing.
b. Diverse multigenerational workforce on the rise
c. Change in the business focus owing to changing social, political and
regulatory global environments.
d. All of the above
2. “Increasing imperative to deal with remote workforce”.
Which of the following options is an explanation for the given statement?

a. The companies are attempting to leverage employees where and
when they are most productive whether, working from home, or
halfway around the world.
b. HR’s role as marketing will need to extend beyond hiring, will require
“internal focus”, building employees as brand ambassadors, and
having brand ownership.
c. There will increased focus on individual contributors having some
specialized knowledge and guiding organization on those areas and
administrative functions being handled by external vendors.
d. HR professionals will need to give up their operational and
transactional roles to outside agencies and focus on becoming
strategic partners to the business leaders.
3. Which one of the following is not a key HR technology trend?

a. Increased use of workforce analytics
b. Extensive use of videos
c. Strong need for all-rounded feedback
d. Mobile HR
4. Which one of the following is key hiring trend?
a. Increased demand for peer-to-peer recognition and gives
opportunities even though not managing teams, to award and
recognize ‘good work’ done by a team member or a cross-functional
co-worker.
b. Outsourcing the initial screening and transactional segments of
hiring, is picking up speed.
! !434
c. e-Learning gaining high popularity across the globe, for its ease of
availability 24X7, autonomy of speed and content to learner and easy
to keep updated.
5. The HR activities that are generally outsourced may include –

a. Performance appaisal
b. Salary fitment
c. Retirement benefits administration
d. Both (a) and (b)
Answers of MCQs: 1. - (d); 2. - (a); 3. - (c); 4. - (b); 5. - (c).
! !435
REFERENCES
1. Analytics at work: Smarter Decisions, Better Results – Thomas H.

Davenport, Jeanne G. Harris and Robert Morison.
2. Future Insights : Top Ten trends of 2014 according to SHRM’s HR

subject Matter expert panels – SHRM.
3. Talent Trends 2014 – LinkedIn Talent Solutions.
4. Key Trends in Human Capital 2012 : A global perspective – PWC.
5. What’s next for HR? – Dave Ulrich.
6. The New HR Analytics: Predicting the Economic Value of Your Company's

Human Capital Investments – Jac Fitz – Enz.
7. Top 12 HR Trends – Human Capital, Feb, 2015.
! !436
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !437
APPENDIX I: CASE STUDIES

CASE 1 - SALARY DISCUSSIONS
Raghav is a recruitment manager and after a long search for the position of
Regional Business Head (East), he has finalized a candidate, Ashish Mehra.
Currently, he is in talks for negotiating compensation with Ashish. Ashish is
very comfortable in his current job and is highly sought-after candidate,
owing to his known high performance in the industry. Because Ashish
knows the company needs him, he decides to play hard -to-get and
demands an extraordinary compensation and many benefits. Raghav
informs Ashish that the company would not be able to meet his
requirements. To this Ashish responds with a lot of attitude saying he
would need to think things over about the offer and about joining the
company. Worried the company is going to lose Ashish to a competitor;
Raghav decides to tell Ashish that he is under time pressure from his
senior managers to close this role and needs to reach an agreement with
him immediately else he will have to offer the job to another candidate,
who is also equally competent.
Questions
1. Would you consider Raghav to be a savvy negotiator? If yes. Why?
2. What kind of bargaining is taking place between Raghav and Ashish?
Explain.
3. If you were in Ashish’s place, how would you deal with the situation
further?
CASE 2 - PARITY IS IT FAIR OR UNFAIR.

Mr. C.S Sharma joined in 1970, the Indian Institute of Technology, a
premier educational institution in the country imparting higher-level
education in technology. His job demands higher level and latest
knowledge, higher level teaching skill and other skills in introducing and
practicing different teaching methods and bringing coordination between
the institute and the industry. The institute implemented the pay scales in
1976, recommended by the University Grants Commission, which were at
par with the pay scales of teachers in Universities and Colleges. The
demands of the jobs in Universities and Colleges are quite low compared to
those of the Institute.
The pay of Mr. Sharma has been fixed at that level of Mr. Singh, who joined
the Institute in 1974, as the University Grants Commission did not
! !438
recommend any weightages for the teachers who put up less than five
years’ experience. Mr. Sharma was quite unhappy over the parity of salary
of the teachers of the institute with those of University teachers and
college teachers on the one hand and equalizing his pay with his junior Mr.
Singh on the other hand.
The institute again revised the pay scales of the teachers in 1987 based on
the pay scales recommended by the University Grants Commission in
1986. University Grants Commission again maintained parity in pay scales
of Institute teachers, University teachers and College teachers. The pay
scale of Mr. Sharma was revised and it was fixed at 3,700, which was equal
to the pay of Mr. Singh, Mr. Kulkarni who joined the institute in 1984 and
Mr. Prasad who joined the Institute in 1986.
Mr. Sharma rushed to the chambers of the Director of the Indian Institute
of Technology on 20th July 1988 and told him he was quitting the job in
the institute and he was going to join Government Degree College,
Rajahmundry. He further said that he was going to get the same salary in a
small town. The Director was shocked after listening to Mr. Sharma.
Questions
1. Do you justify the decision made by Mr. Sharma?
2. Do you suggest any measures to stop Mr. Sharma from quitting the job?
3. Do you think that there is something wrong with the institute pay
practices and the University Grants Commission’s recommendations? If
yes, what are they? How do you rectify them?
CASE 3 - ALMOST FRIENDS

Rama and Preeti both work at the 24X7 Furniture Mart— a large discount
furniture retailer. Rama is a salesperson on the floor, and Preeti is the
company’s credit manager. The two women have known each other for
years and have much in common: they live in the same complex with two
floors apart, and their oldest sons attend the same middle school and they
are best friends. If Rama and Preeti had different jobs, they might be best
friends themselves, but they are constantly fighting battles with each other.
Rama’s job is to sell furniture, and she does it well. But most of her sales
are made on credit. Because Preeti’s job is to make sure the company
minimizes credit losses, she regularly has to turn down the credit
application of any customer with whom Rama has just closed a sale. There
! !439
is nothing personal between the two women; the requirements of their jobs
just bring them into conflict.
Questions
1. What is the kind of conflict that exists between Rama and Preeti?
2. What steps do you recommend to be taken to manage the conflict
between them?
CASE 4 - PATERNITY LEAVE

Mr. Kishore, an Andhra boy aged 22, has been working as an officer in the
Indian Bank, Mumbai branch since 1996. He loved Miss Kiranmayi, a
Tamilian girl, working as an Engineer in Chaitanya Engineering Company,
Mumbai and married her in September, 1997 though their parents did not
agree to this marriage. They did not have any assistance from any side.
Mrs. Kiranmayi was pregnant and applied for maternity leave in September
1998. Her employer granted leave and provided her all the benefits to be
provided legally and sanctioned her an additional amount of ` 5,000 for
extra medical care. She faced various health problems two weeks before
and one week after the delivery. Mr. Kishore also applied for paternity leave
in October 1998 for three weeks and requested the employer to grant
leave, as he ought to help and render physical and psychological support to
his wife, as there was none to help his wife. Branch Manager of the Indian
Bank, Mumbai branch forwarded this letter to the Head office with adverse
comments. The letter was sent to the Chief Personnel Manager and to the
Legal Adviser of the bank. However, the General Manager of the bank had
to finally settle this issue.
Questions
1. What is the peculiarity of this case?
2. What would be the comments of the Legal Adviser and the Chief
Personnel Manager?
3. How would you settle the issue if you were the General Manager of the
Bank?
CASE 5 - TWIST VS TRUST

Mr. Murthy, the General Manager Personnel of Coromandel Cements Ltd.,
Mumbai, is going to retire within two weeks after rendering his services to
the company for 18 years in various capacities. He is assisted by the
Personnel Manager in all the personnel functions. He directly reports to the
Managing Director of the Company. The General Manager (Production) was
! !440
elevated to the position of Managing Director just two months ago. Mr.
Murthy has been performing various personnel functions since 1976 as
Chief Personnel Manager. He has been given complete freedom and
authority regarding all personnel functions including wage fixation,
adjustments, revisions, bargaining etc. The employees several times
reported their dissatisfaction about the wage level to the Managing
Director. But the Managing Director used to convince them about the
systems and techniques followed by Mr. Murthy in fixing wages.
The employees got a doubt about the information supplied by Mr. Murthy
about the wage levels in comparable industries and the living cost index.
Consequently, they approached Mr. Murthy for clarification. Mr. Murthy did
not clarify their doubt immediately and asked them to meet him after 10
days so that he will collect and provide all the facts, data and information.
Accordingly, they met him after 10 days. Then he simply said that “the
information provided in the latest collective bargaining meeting is correct
but the information supplied in the earlier meetings was not completely
correct. He further added that he was forced by the top management to
supply such incorrect information.” The situation resulted in industrial
unrest in the company for 14 days and the new Managing Director solved
the issue by enhancing the wages by 100 per cent.
Question
1. What is the communication problem involved in this case?
CASE 6 - TOO EASY OR TOO DIFFICULT GOALS

A program director works at a small, family-owned gym in an affluent
neighborhood. There he works closely with the owner and one other
manager managing the day to day operations of the gym. The program
director’s main job is to oversee the front staff of the gym, which ranged
from 5-7 people. In an effort to motivate the staff, the owner occasionally
comes up with monthly sales goals that are not clearly laid down or precise
and are randomly assigned to the staff. The gym is in a great location and
has great potential of performing well in terms of sales. The owner always
sets low targets for the staff randomly and does not encourage them when
they try to set higher goals on their own. If at all feedback is given by the
owner on the progress made toward attaining his assigned goals, it is
usually negative and seldom includes solutions or suggestions for
correcting the issues that are hindering the staff performance. When this
month again goals were not reached, the owner reacted harshly toward the
manager and staff, holding them responsible for the failures. The owner
! !441
has approached the program director to find a solution for this

underachievement of goals by the staff month on month.
Questions
1. Why the staff is finding it difficult to achieve such simple goals set by
the owner?
2. You as a program director must find solution for the issues and make
suggestions for improving performance?
3. What is the impact of poor performance on the motivation levels of the
team? Which theory will be applicable here? Explain
4. Would you like to give some feedback to the owner? If yes, what would
it be?
CASE 7 - WHICH IS MORE IMPORTANT - Recruiting OR

RETAINING?
Uptron Electronics Ltd is a pioneering and internationally reputed firm in
the Electronics industry. It is one of the largest firms in the country, it
attracted employees from internationally reputed institutes and industries
by offering high salaries, perks etc. It had advertised for the position of an
Electronics Engineer recently. Nearly 150 candidates working in various
electronics firms applied for the job. Mr. Sashidhar, an Electronics
Engineering Graduate from Indian Institute of Technology with 5 years
working experience in a small electronics firm, was selected from among
the 130 candidates who took the tests and interview. The interview board
recommended an enhancement in his salary by ` 500 more than his
present salary at his request. Mr. Sashidhar was very happy to achieve this
and he was congratulated by a number of people, including his previous
employer, for his brilliant interview performance and good luck.
Mr. Sashidhar joined Uptron Electronics Ltd. on 21st January 1996 with
great enthusiasm. He also found his job to be quite comfortable and a
challenging one and he felt it was highly prestigious to work with this
company during the formative years of his career. He found his superiors
as well as subordinates to be friendly and co-operative. But this climate did
not live long. After one year of his service, he slowly learnt about a number
of unpleasant stories about the company management, the superior-
subordinate relations, rate of employee turnover, especially at higher level.
But he decided to stay on as he promised several things to the
management in the interview. He wanted to please and change the attitude
of the management through his diligent performance firm commitment and
! !442
dedication. He started maximizing his contributions and the management

got the impression that Mr. Sashidhar has settled down and will remain in
the company. After some time, the superiors started riding over Mr.
Sashidhar. He was over-loaded with multifarious jobs. His freedom in
deciding and executing was cut down to size. He was ill-treated on a
number of occasions before his subordinates. His colleagues also started
assigning their responsibilities to him. Consequently, there were
imbalances in his family life, social life and organization life. But he seemed
to be calm and contented. The management felt that Mr. Sashidhar had the
potential to bear many more organizational responsibilities.
It was quite surprising for the General Manager to see the resignation
letter of Mr. Sashidhar along with a cheque equivalent to a month's salary
one fine morning on 18th January 1998. The General Manager failed to
convince Mr. Sashidhar to withdraw his resignation. The General Manager
relieved him on 25th January, 1998. The General Manager wanted to
appoint a committee to go into the matter immediately but dropped the
idea later.
Questions
1. What prevented the General Manager from appointing a Committee?
2. What is wrong with the recruitment policy of the Company?
3. Why did Mr. Sashidhar’s resignation surprise the General Manager?
! !443

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Human Resource Management

Program Design and Advisory Team

Prof. B.N. Chatterjee Mr. Manish Pitke

Prof. Kanu Doshi Prof. B.N. Chatterjee

Prof. Dr. V.H. Iyer Mr. Smitesh Bhosale

Prof. B.N. Chatterjee Prof. Vineel Bhurke

Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

Prof. Sandeep Kelkar Mr. Anuj Pandey

Prof. Dr. Swapna Pradhan Course Editor

Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Mr. P.M. Bendre Course Coordinators

Mr. Ajay Prabhu Ms. Kirti Sampat

Mr. A.S. Pillai Mr. Kishor Tamhankar

COPYRIGHT © by Prin. L.N. Welingkar Institute of Management Development & Research.

NOT FOR SALE. FOR PRIVATE CIRCULATION ONLY.

1st Edition (june-2015)

Chapter No. Chapter Name Page No.

1 STRATEGIC ROLE OF HUMAN RESOURCES 3-36

2 TALENT MANAGEMENT 37-58

7 EMPLOYEE MOTIVATION 171-199

9 POWER, CONFLICT, NEGOTIATION AND INTERGROUP 238-267

10 ORGANIZATION STRUCTURE AND DESIGN 268-294

After studying this chapter, you should be able to:

• Understand the HRM roles of human resource and line managers

1.1 Human Resource Management Roles

1.1 HUMAN RESOURCE MANAGEMENT ROLES

Planning - Establishing goals and standards; developing rules and

Organizing - Giving each subordinate a specific task; establishing

Staffing - Determining what type of people should be hired; recruiting

Leading - Getting others to get the job done; maintaining morale;

Controlling - Setting standards such as sales quotas, quality standards, or

However, in this book we will focus on the Staffing function or Human

Exhibit 1.1: Human Resource Management Activities

Why understanding Human Resource Management is critical for a

The knowledge of HRM will aid a manager in avoiding various Human

• Wrong hiring of personnel

This understanding needs to change, that a manager will be effective if he

those accounting controls. There are various examples of highly successful

Line and Staff Roles

Line versus Staff Authority

1. A line function - The HR manager directs activities of his/her team and

1.2 STRATEGIC MANAGEMENT, PROCESS AND PLANNING

Glueck defined strategy as, ‘unified, comprehensive and integrated plan

Facebook’s acquisition of Instagram is an instance of management

Other definitions of strategy -

The emphasis (in strategy) is on focused actions that differentiate the

Understanging Strategic Management

Strategic management is considered a continuous activity, undertaken by

The Strategic Management Process

1. Mission and Objectives

These steps are explained below -

1. The senior leaders of the organization evaluate their position vis-á-vis to

2. Focuses on the strengths and weakness of the organization internally

3. Involves the assessment of various strategic factors and strategic

4. Focuses on various techniques that managers use to execute their

Mission and Objectives

Organizational Level Strategy Planning: At the topmost level, this

Functional Level Strategy Planning: Each business comprises of

The Strategic Planning process

Globalization – refers to tendency of the companies to extend their

Feature of Workforce – Demographics of the workforce is changing. The

Advances in Technology - The internet, information technology and

1.3 TYPES OF ORGANIZATIONAL STRATEGIES