Human Resource Management

What is Human Resource Management?

HRM is the study of activities regarding people working in an organization. It is a managerial function
that tries to match an organization‟s needs to the skills and abilities of its employees.
Definitions of HRM

Human resources management (HRM) is a management function concerned with hiring, motivating
and maintaining people in an organization. It focuses on people in organizations. Human resource
management is designing management systems to ensure that human talent is used effectively and
efficiently to accomplish organizational goals.

HRM is the personnel function which is concerned with procurement, development, compensation,
integration and maintenance of the personnel of an organization for the purpose of contributing
towards the accomplishments of the organization‟s objectives. Therefore, personnel management is
the planning, organizing, directing, and controlling of the performance of those operative functions
(Edward B. Philippo).

According to the Invancevich and Glueck, “HRM is concerned with the most effective use of
people to achieve organizational and individual goals. It is the way of managing people at work, so
that they give their best to the organization”.

According to Dessler (2008) the policies and practices involved in carrying out the “people” or
human resource aspects of a management position, including recruiting, screening, training,
rewarding, and appraising comprises of HRM.

Generally HRM refers to the management of people in organizations. It comprises of the activities,
policies, and practices involved in obtaining, developing, utilizing, evaluating, maintaining, and
retaining the appropriate number and skill mix of employees to accomplish the organization‟s
objectives. The goal of HRM is to maximize employees‟ contributions in order to achieve optimal
productivity and effectiveness, while simultaneously attaining individual objectives (such as having a
challenging job and obtaining recognition), and societal objectives (such as legal compliance and
demonstrating social responsibility).

In short Human Resource Management (HRM) can be defined as the art of procuring, developing and
maintaining competent workforce to achieve the goals of an organization in an effective and efficient
manner.

Nature of Human Resource Management (HRM)

Human resource management (HRM) is an inevitable part of
every organisation. It is crucial to have an in-depth knowledge
of HRM to realise organisational goals and simultaneously
creating a happy and contented workforce.
To get a better understanding of the nature of human
resource management, we must go through the following
points:
 Pervasive Function: HRM is practised at all levels of
management and applies to all kinds of organisations, even to
non-profit organisations.
  Result Oriented: It aims at achieving organisational objectives through the optimum
utilisation of human resources.
 Tactful Approach: HRM deals with the people who are distinct from one another; thus the
manager needs to apply different strategies at different point of time and in different situations.
 People-Centric: Human resource management is concerned majorly with the employees
working in an organisation.
 Integrative Action: It focusses on maintaining cordial relations among the employees at
different levels and also addresses employee grievances.
 Continuous Process: HRM is an ongoing process of procurement, development and
redirection of personnel towards the organisational goals. It cannot be completed in a day, a
week or a month.
Objectives of Human Resource Management (HRM)
The primary aim of human resource management (HRM) is to meet the human capital requirement of
an organisation. Further, we will discuss four other vital objectives of HRM:
Societal Objectives: HRM is essential to comply with the laws of the society such as labour law or
reservation system. It is obligatory for any organisation
to fulfil its ethical and social responsibilities which can be
done only through HRM.
 Organisational Objectives: In an organisation,
human resource management is not an independent
unit, but it is a department which aims at facilitating the
other departments of the organisation to function
smoothly.
 Functional Objectives: HRM ensures that every
department is supplemented with the employees
possessing the required set of skills and talent, at the desired cost. It also provides for the
optimum utilisation of the human capital.
 Personal Objectives: To ensure employee‟s long-term association with the organisation and
to enhance employee‟s commitment and contribution towards the organisation, HRM helps
the employees to reach their personal goals.
Functions of Human Resource Management (HRM)
Human resource management (HRM) is a systematic approach to fill in the gap between the
organisation and its employees. To simplify the task of managing the human capital of the
organisation, various functions of HRM have been developed. These functions are categorised
broadly as:

1. Managerial Functions: Human

resource management is essential at all levels
of an organisation. The top management is
responsible for forming strategies and giving
directions for the successful application of such
plans. In the process, they perform the
following functions:
o Planning: Firstly, the
management must be aware of the vacant
positions or workforce requirement of the
organisation. Then, they need to formulate the
strategies for meeting the requirements.
o Organising: The manager has to establish a framework for the operative functions,
bringing together the human resources and physical resources available with the
organisation.
o Directing: Once the framework is ready, the manager instructs and guides the team to
work accordingly, to meet the organisational objective.
 o Controlling: The management predefines the standard for performance, and later
analyses the results based on such criteria through performance appraisal and job
analysis. The management has to take corrective measures if necessary.
2. Operative Functions: The operative functions are those which are taken on the departmental
level or middle level and mainly concerned about the execution of the plans and strategies
formulated at the managerial level. To know more about the different operative functions, read
below:
o Procurement: The acquisition of human resource is the primary function of a
manager. It involves the estimation of personnel requirement, recruitment and
selection of suitable candidates, placement and orientation of the workforce in the right
position.
o Development: To develop the required skills and talent within the employees, the
managers have to use various training techniques.
o Compensation: Compensation in the form of remuneration, given to employees
instead of their services to the organisation should be adequate and fair. The
employees are liable to get other benefits such as a bonus or incentives.
o Integration: Integration means making the new employees familiar with the
organisation and to their task or process. It introduces them to the organisational
environment and their colleagues.
o Maintenance: The most important of all is the retention of the employees which
requires providing them with various benefits and facilities like PF, life insurance,
accidental insurance, health insurance, pension, gratuity, allowances and taking other
health and safety measures.
Importance of Human Resource Management (HRM)
Over the years, human resource management (HRM) has gained importance in the business sector,
as well as the non-profit organisations. Human capital is equally important as the financial capital is to
an organisation, since „people perform a task‟.
To add further to the knowledge about the
need for human resource in an
organisation, go through the following:
 Fulfil the Human Resource
Requirement: Human resource
management fills in the gap between the
vacancies in the organisation and the
suitable candidates for such positions.
 Employee Retention: HRM not
only functions to acquire the manpower but
also concentrates on the maintenance and
retention of the human capital.
 Enhance the Quality of Work Life:
It focusses on the continuous enhancement
of the job facilities, hence improving the quality of employee‟s work life.
 Redressing Grievance and Conflict: HRM addresses the problems among employees or
with the management since it is essential for any organisation to resolve its internal conflicts
and grievances to ensure a sound and co-operative work environment.
 Achieving Organizational Goals: To reach the set objectives and targets on time, it is
necessary to direct the employee‟s efforts towards the organisational goals. All this is possible
only through the practice of human resource management.
 Long-term Existence in the Market: As we all know that employees are the inevitable part of
any organisation, therefore to survive in the competition, it is imperative that the organisation
brings HRM into functioning.
  Developing Team Spirit and Feeling of Belongingness: It brings together the different
employees as a team to accomplish the goals of the organisation. HRM also make the
employees feel valuable to the organisation.
 Employee Satisfaction and Welfare: HRM works for the welfare, safety and security of the
organisation. It is majorly concerned about the level of satisfaction derived by an employee
from his job.
Challenges of Human Resource Management (HRM)
The human resource managers go through many obstacles in the management and development of
human resource, all due to the emergence of new technology and the changing of political and socio-
economic conditions. To get an overview of these challenges, read further:
Growing Employee Expectations: With the
learning of new skills and better qualification,
the employee‟s expectations keep on
increasing, and at times it is difficult for
managers to meet such high expectations.
 Growing Size of Workforce: With
the growth of any organisation, the workload
increases and the number of employees also
multiply. This leads to the excessive
workload on the human resource manager
and the HR team.
 Emergence of New Technology:
The technological advancement has though simplified the business process but has emerged
as a challenge in front of the managers to either provide training to their old staff or seek for
the new talent.
 Internal Politics: Sometimes, the human resource manager has to face situations where
employees either mislead or influence other employees to restrict them from performing their
task if the problem pertains the organisation may experience employee turnover or
resignations.
 Human Psychology: HRM somehow deals with human psychology and its impact on the
business which is a complex system and unlike the problems related to other physical
resources and assets, have no particular solution.
 Changes in Law and Regulations: To safeguards the interest of employees, government
bring in specific rules and regulations which have to be followed by organisations. At times, it
is difficult for the HR manager to adhere to such laws.
 Maintenance of Human Relations: A human resource manager not only acts as a mediator
between the management and the employees but also tries to maintain a cordial relationship
among the two, which requires a lot of tactics and diplomacy.

Job Analysis: Concept, Uses and Process of Job Analysis

Job:
In simple words, a job may be understood as a division of total work into packages/positions.
According to Dale Yoder, “A job is a collection or aggregation of tasks, duties and responsibilities
which as a whole, is regarded as a regular assignment to individual employees and which is different
from other assignments”. Thus, a job may be defined as a group of positions involving some duties,
responsibilities, knowledge and skills.
Job Analysis:
Job analysis refers to the process of collecting information about a job. Job analysis is performed
upon ongoing jobs only. It contains job contents. According to Jones and Decothis “Job analysis is
the process of getting information about jobs: specially, what the worker does; how he gets it done;
why he does it; skill, education and training required; relationship to other jobs, physical demands;
environmental conditions”.
There are two major aspects of job analysis:
These are:
1. Job Description
2. Job Specification
Job Description:
Job description is a functional description of the contents what the job involves. It is a narration of the
contents of a job. It is a description of the activities and duties to be performed in a job, the
relationship of the job with other jobs, the equipment and tools involved, the nature of supervision,
working conditions and hazards of the job and so on. In sum, job description is a written statement of
what a job holder does, how it is done, and why it is done.
Job Specification:
While job description focuses on the job, job specification focuses on the person i.e, the job holder.
Job specification is a statement of the minimum levels of qualifications, skills, physical and other
abilities, experience, judgment and attributes required for performing job effectively.
Contents of Job Description and Job Specification:
The contents of job description and job specification are presented in the following Table -

Why job analysis? (Uses):

Job analysis is useful for overall management of all HR activities. The uses are as follows:
1. Human Resource Planning:
The estimates the quantity and quality of people will be required in future. How many and what type
of people will be required depends on the jobs to be staffed. Job-related information available
through job analysis is, therefore, necessary for human resource planning.
2. Recruitment and Selection:
Recruitment succeeds job analysis. Basically, the goal of the human resource planning is to match
the right people with the right job. This is possible only after having adequate information about the
jobs that need to be staffed. It is job analysis that provides job information. Thus, job analysis
serves as basis for recruitment and selection of employees in the organisation.
3. Training and Development:
Job analysis by providing information about what a job entails i.e., knowledge and skills required to
perform a job, enables the management to design the training and development programmes to
acquire these job requirements. Employee development programmes like job enlargement, job
enrichment, job rotation, etc.
4. Placement and Orientation:
As job analysis provides information about what skills and qualities are required to do a job, the
management can gear orientation programmes towards helping the employees learn the required
skills and qualities. It, thus, helps management place an employee on the job best suited to
him/her.
5. Job Evaluation:
The job evaluation refers to determination of relative worth of different jobs. It, thus, helps in
developing appropriate wage and salary structures. Relative worth is determined mainly on the
basis of information provided by job analysis.
6. Performance Appraisal:
Performance appraisal involves comparing the actual performance of an employee with the
standard one, i.e., what is expected of him/her. Such appraisal or assessment serves as basis for
awarding promotions, effecting transfers, or assessing training needs. Job analysis helps in
establishing job standards which may be compared with the actual performance/contribution of
each employee.
7. Personnel Information:
Increasing number of organisations maintain computerised information about their employees. This
is popularly known as Human Resource Information System (HRIS). HRIS is useful as it helps
improve administrative efficiency and provides decision support^ Information relating to human
resources working in the organisation is provided by job analysis only.
8. Health and Safety:
Job analysis helps in identifying and uncovering hazardous conditions
and unhealthy environmental factors such as heat, noise, fumes, dust, etc. and, thus, facilitates
management to take corrective measures to minimise and avoid the possibility of accidents
causing human injury
Process of job analysis:
Though there is no fool-proof process of making job analysis, following are the main steps
involved in job analysis:
1. Organisational Job Analysis:
Job analysis begins with obtaining pertinent information about a
job.
2. Selecting Representative Jobs for Analysis:
Analysing all jobs of an organisation is both costly and time
consuming. Therefore, only a representative sample of jobs is
selected for the purpose of detailed analysis.
3. Collection of Data for Job Analysis:
In this step, job data features of the job and required
qualifications of the employee are collected.
4. Preparing Job Description:
The job information collected in the above ways is now used
to prepare a job description. Job description is a written
statement that describes the tasks, duties and responsibilities
that need to be discharged for effective job performance.
5. Preparing Job Specification:
The last step involved in job analysis is to prepare job specifi-
cation on the basis of collected information. This is a written
statement that specifies the personal qualities, traits, skills,
qualification, aptitude etc. required to effectively perform a
job.
Human Resource Planning (HRP)

Human resource planning is important for helping both organizations and employees to prepare for
the future. The basic goal of human resource planning is to predict the future and based on these
predictions, implement programmes to avoid anticipated problems. Very briefly humans resource
planning is the process of examining an organization‟s or individual‟s future human resource needs
for instance, what types of skills will be needed for jobs of the future compared to future human
resource capabilities (such as the types of skilled employees you already have) and developing
human resource policies and practices to address potential problems for example, implementing
training programmes to avoid skill deficiencies.

Definition of Human Resource Planning

According to Vetter, “HRP is the process by which management determines how the organization
should move from its current man power position to desired manpower position. Through planning,
management strives to have the right time, doing things which result in both the organization and
individual receiving maximum long run benefits”.
According to Beach, “HRP is a process of determining and assuming that the organization will have
an adequate number of qualified persons, available at proper times, performing jobs which meet the
needs of the enterprise and which provides satisfaction for the individuals involved”
Simply HRP can be understood as the process of forecasting an organization‟s future demands for
and supply of the right type of people in the right number. In other words HRP is the process of
determining manpower needs and formulating plans to meet these needs.

Objectives of Human Resource Planning

The objectives of human resource planning may be summarized as below:
Forecasting Human Resources Requirements: HRP is essential to determine the future needs of
HR in an organization. In the absence of this plan it is very difficult to provide the right kind of people
at the right time.
Effective Management of Change: Proper planning is required to cope with changes in the different
aspects which affect the organization.
Realizing the Organizational Goals: In order to meet the expansion and other organizational
activities the organizational HR planning is essential.
Promoting Employees: HRP gives the feedback in the form of employee data which can be used in
decision-making in promotional opportunities to be made available for the organization.
Effective Utilization of HR: The data base will provide the useful information in identifying surplus
and deficiency in human resources. The objective of HRP is to maintain and improve the
organizational capacity to reach its goals by developing appropriate strategies that will result in the
maximum contribution of HR.

Need for HRP in Organizations

Major reasons for the emphasis on HRP at the Macro level:
1) Employment-Unemployment Situation: Though in general the number of educated
unemployment is on the rise, there is acute shortage for a variety of skills. This emphasizes on the
need for more effective recruitment and employee retention.
2) Technological Change: The changes in production technologies, marketing methods and
management techniques have been extensive and rapid. Their effect has been profound on the job
contents and job contexts. These changes have caused problems relating to redundancies, retention
and redeployment. All these suggest the need to plan manpower needs intensively and
systematically.
3) Demographic Change: The changing profile of the work force in terms of age, sex, literacy,
technical inputs and social background has implications for HRP.
4) Skill Shortage: Unemployment does not mean that the labour market is a buyer‟s market.
Organizations generally become more complex and require a wide range of specialist skills that are
rare and scare. A problem arises in an organization when employees with such specialized skills
leave.
5) Governmental Influences: Government control and changes in legislation with regard to
affirmative action for disadvantages groups, working conditions and hours of work, restrictions on
women and child employment, causal and contract labour, etc. have stimulated the organizations to
be become involved in systematic HRP.
6) Legislative Control: The policies of “hire and fire” have gone. Now the legislation makes it difficult
to reduce the size of an organization quickly and cheaply. It is easy to increase but difficult to shed
the fat in terms of the numbers employed because of recent changes in labour law relating to lay-offs
and closures. Those responsible for managing manpower must look far ahead and thus attempt to
foresee manpower problems.
7) Impact of the Pressure Group: Pressure groups such as unions, politicians and persons
displaced from land by location of giant enterprises have been raising contradictory pressure on
enterprise management such as internal recruitment and promotion, preference to employees‟
children, displace person, sons of soil etc.
8) Systems Approach: The spread of system thinking and advent of the macro computer as the part
of the on-going revolution in information technology which emphasis planning
Importance of HRP
HRP is the subsystem in the total organizational planning. Organizational planning includes
managerial activities that set the company‟s objective for the future and determines the appropriate
means for achieving those objectives. The importance of HRP is elaborated on the basis of the key
roles that it is playing in the organization.
1. Future Personnel Needs: Human resource planning is significant because it helps to determine
the future personnel needs of the organization. If an organization is facing the problem of either
surplus or deficiency in staff strength, then it is the result of the absence of effecting HR planning. All
public sector enterprises find themselves overstaffed now as they never had any planning for
personnel requirement and went of recruitment spree till late 1980‟s. The problem of excess staff has
become such a prominent problem that many private sector units are resorting to VRS „voluntary
retirement scheme‟. The excess of labor problem would have been there if the organization had good
HRP system. Effective HRP system will also enable the organization to have good succession
planning.
2. Part of Strategic Planning: HRP has become an integral part of strategic planning of strategic
planning. HRP provides inputs in strategy formulation process in terms of deciding whether the
organization has got the right kind of human resources to carry out the given strategy. HRP is also
necessary during the implementation stage in the form of deciding to make resource allocation
decisions related to organization structure, process and human resources. In some organizations
HRP play as significant role as strategic planning and HR issues are perceived as inherent in
business management.
3. Creating Highly Talented Personnel: Even though India has a great pool of educated
unemployed, it is the discretion of HR manager that will enable the company to recruit the right
person with right skills to the organization. Even the existing staff hope the job so frequently that
organization face frequent shortage of manpower. Manpower planning in the form of skill
development is required to help the organization in dealing with this problem of skilled manpower
shortage
4. International Strategies: An international expansion strategy of an organization is facilitated to a
great extent by HR planning. The HR department‟s ability to fill key jobs with foreign nationals and
reassignment of employees from within or across national borders is a major challenge that is being
faced by international business. With the growing trend towards global operation, the need for HRP
will as well will be the need to integrate HRP more closely with the organizations strategic plans.
Without effective HRP and subsequent attention to employee recruitment, selection, placement,
development, and career planning, the growing competition for foreign executives may lead to
expensive and strategically descriptive turnover among key decision makers.
5. Foundation for Personnel Functions: HRP provides essential information for designing and
implementing personnel functions, such as recruitment, selection, training and development,
personnel movement like transfers, promotions and layoffs.
6. Increasing Investments in Human Resources: Organizations are making increasing
investments in human resource development compelling the increased need for HRP. Organizations
are realizing that human assets can increase in value more than the physical assets. An employee
who gradually develops his/ her skills and abilities become a valuable asset for the organization.
Organizations can make investments in its personnel either through direct training or job assignment
and the rupee value of such a trained, flexible, motivated productive workforce is difficult to
determine. Top officials have started acknowledging that quality of work force is responsible for both
short term and long term performance of the organization.
7. Resistance to Change: Employees are always reluctant whenever they hear about change and
even about job rotation. Organizations cannot shift one employee from one department to another
without any specific planning. Even for carrying out job rotation (shifting one employee from one
department to another) there is a need to plan well ahead and match the skills required and existing
skills of the employees.
8. Uniting the Viewpoint of Line and Staff Managers: HRP helps to unite the viewpoints of line
and staff managers. Though HRP is initiated and executed by the corporate staff, it requires the input
and cooperation of all managers within an organization. Each department manager knows about the
issues faced by his department more than anyone else. So communication between HR staff and line
managers is essential for the success of HR Planning and development.
9. Succession Planning: Human Resource Planning prepares people for future challenges. The
„stars‟ are picked up, trained, assessed and assisted continuously so that when the time comes such
trained employees can quickly take the responsibilities and position of their boss or seniors as and
when situation arrives.
10. Other Benefits: (a) HRP helps in judging the effectiveness of manpower policies and
programmes of management. (b) It develops awareness on effective utilization of human resources
for the overall development of organization. (c) It facilitates selection and training of employees with
adequate knowledge, experience and aptitudes so as to carry on and achieve the organizational
objectives (d) HRP encourages the company to review and modify its human resource policies and
practices and to examine the way of utilizing the human resources for better utilization.
HRP Process
HRP effectively involves forecasting personnel needs, assessing personnel supply and matching
demand – supply factors through personnel related programmes. The HR planning process is
influenced by overall organizational objectives and environment of business.
Environmental Scanning: It refers to the systematic monitoring of the external forces influencing the
organization. The following forces are essential for pertinent HRP.
Economic factors, Technological changes, Demographic changes, Social concerns
By scanning the environment for changes that will affect an organization, managers can anticipate
their impact and make adjustments early.
Organizational Objectives and Policies: HR plan is usually derived from the organizational
objectives. Specific requirements in terms of number and characteristics of employees should be
derived from organizational objectives. Once the organizational objectives are specified,
communicated and understood by all concerned, the HR department must specify its objective with
regard to HR utilization in the organization.
HR Demand Forecast:
Demand forecasting is the process of estimating the future quantity and quality of people required to
meet the future needs of the organization. Annual budget and long-term corporate plan when
translated into activity into activity form the basis for HR forecast.
For eg: in the case of a manufacturing company, the sales budget will form the basis for production
plan giving the number and type of products to be produced in each period. This will form the basis
upon which the organization will decide the number of hours to be worked by each skilled category of
workers. Once the number hours required is available organization can determine the quality and
quantity of personnel required for the task.
Demand forecasting is influenced by both internal factors and external factors: external factors
include-competition, economic climate, laws and regulatory bodies, changes in technology and social
factors whereas internal factors are budget constraints, production level, new products and services,
organizational structure and employee separations.
Demand forecasting is essential because it helps the organization to 1. Quantify the jobs, necessary
for producing a given number of goods, 2. To determine the nature of staff mix required in the future,
3. To assess appropriate levels in different parts of organization so as to avoid unnecessary costs to
the organization, 4. To prevent shortages of personnel where and when, they are needed by the
organization. 5. To monitor compliances with legal requirements with regard to reservation of jobs.
Techniques like managerial judgment, ratio- trend analysis, regression analysis, work study
techniques, Delphi techniques are some of the major methods used by the organization for demand
forecasting.
HR Supply Forecast:
Supply forecast determines whether the HR department will be able to procure the required number
of workers. Supply forecast measures the number of people likely to be available from within and
outside an organization, after making allowance for absenteeism, internal movements and
promotions, wastage and changes in hours, and other conditions of work.
Supply forecast is required because it is needed as it 1. Helps to quantify the number of people and
positions expected to be available in future to help the organization realize its plans and meet its
objectives 2. Helps to clarify the staff mixes that will arise in future 3. It assesses existing staffing in
different parts of the organization. 4. It will enable the organization to prevent shortage of people
where and when they are most needed. 5. It also helps to monitor future compliance with legal
requirements of job reservations.
Supply analysis covers the existing human resources, internal sources of supply and external
sources of supply.
Recruitment
Meaning:
Recruitment is a positive process of searching for prospective employees and stimulating them to
apply for the jobs in the organization. When more persons apply for jobs then there will be a scope for
recruiting better persons.
The job-seekers too, on the other hand, are in search of organizations offering them employment.
Recruitment is a linkage activity bringing together those with jobs and those seeking jobs. In simple
words, the term recruitment refers to discovering the source from where potential employees may be
selected. The scientific recruitment process leads to higher productivity, better wages, high morale,
reduction in labor turnover and enhanced reputation. It stimulates people to apply for jobs; hence it is
a positive process.
Recruitment is concerned with reaching out, attracting, and ensuring a supply of qualified personnel
and making out selection of requisite manpower both in their quantitative and qualitative aspect. It is
the development and maintenance of adequate man- power resources. This is the first stage of the
process of selection and is completed with placement.
Definitions:
“It is a process of searching for prospective employees and stimulating and encouraging them to
apply for jobs in an organization.” He further elaborates it, terming it both negative and positive”.
- Edwin B. Flippo
“Recruitment is the process to “discover the sources of manpower to meet the requirements of the
staffing schedule and to employ effective measures for attracting that manpower in adequate
numbers to facilitate effective selection of an efficient working force.” -Dale Yoder
Process of Recruitment:
Recruitment Process Passes through the Following Stages:
(i) Searching out the sources from where required persons will be available for recruitment. If young
managers are to be recruited then institutions imparting instructions in business administration will be
the best source.
(ii) Developing the techniques to attract the suitable candidates. The goodwill and reputation of an
organization in the market may be one method. The publicity about the company being a professional
employer may also assist in stimulating candidates to apply.
(iii) Using of good techniques to attract prospective candidates. There may be offers of attractive
salaries, proper facilities for development, etc.
(iv) The next stage in this process is to stimulate as many candidates as possible to apply for jobs. In
order to select a best person, there is a need to attract more candidates.
Factors Influencing Recruitment:
1. Size of the Enterprise:
The number of persons to be recruited will depend upon the size of an enterprise. A big enterprise
requires more persons at regular intervals while a small undertaking employs only a few employees.
A big business house will always be in touch with sources of supply and shall try to attract more and
more persons for making a proper selection. It can afford to spend more amounts in locating
prospective candidates. So the size of an enterprise will affect the process of recruitment.
2. Employment Conditions:
The employment conditions in an economy greatly affect recruitment process. In under-developed
economies, employment opportunities are limited and there is no dearth of prospective candidates. At
the same time suitable candidates may not be available because of lack of educational and technical
facilities. If the availability of persons is more, then selection from large number becomes easy. On
the other hand, if there is a shortage of qualified technical persons, then it will be difficult to locate
suitable persons.
3. Salary Structure and Working Conditions:
The wages offered and working conditions prevailing in an enterprise greatly influence the availability
of personnel. If higher wages are paid as compared to similar concerns, the enterprise will not face
any difficulty in making recruitments. An organisation offering low wages can face the problem of
labour turnover.
The working conditions in an enterprise will determine job satisfaction of employees. An enterprise
offering good working conditions like proper sanitation, lighting, ventilation, etc. would give more job
satisfaction to employees and they may not leave their present job. On the other hand, if employees
leave the jobs due to unsatisfactory working conditions, it will lead to fresh recruitment of new
persons.
4. Rate of Growth:
The growth rate of an enterprise also affects recruitment process. An expanding concern will require
regular employment of new employees. There will also be promotions of existing employees
necessitating the filling up of those vacancies. A stagnant enterprise can recruit persons only when
present incumbent vacates his position on retirement, etc.
Sources of Recruitment:
Internal Sources of Recruitment:
1. Promotions:
The promotion policy is followed as a motivational technique for the employees who work hard and
show good performance. Promotion results in enhancements in pay, position, responsibility and
authority. The important requirement for implementation of the promotion policy is that the terms,
conditions, rules and regulations should be well-defined.
2. Retirements:
The retired employees may be given the extension in their service in case of non-availability of
suitable candidates for the post.
3. Former employees:
Former employees who had performed well during their tenure may be called back, and higher wages
and incentives can be paid to them.
4. Transfer:
Employees may be transferred from one department to another wherever the post becomes vacant.
5. Internal advertisement:
The existing employees may be interested in taking up the vacant jobs. As they are working in the
company since long time, they know about the specification and description of the vacant job. For
their benefit, the advertisement within the company is circulated so that the employees will be
intimated.
Benefits of Internal Sources of Recruitment:
1. The existing employees get motivated.
2. Cost is saved as there is no need to give advertisements about the vacancy.
3. It builds loyalty among employees towards the organization.
4. Training cost is saved as the employees already know about the nature of job to be performed.
5. It is a reliable and easy process.
Limitations of Internal Sources of Recruitment:
1. Young people with the knowledge of modem technology and innovative ideas do not get the
chance.
2. The performance of the existing employees may not be as efficient as before.
3. It brings the morale down of employees who do not get promotion or selected.
4. It may leads to encouragement to favoritism.
5. It may not be always in the good interest of the organization.
External Sources of Recruitment:
1. Press advertisement:
A wide choice for selecting the appropriate candidate for the post is available through this source. It
gives publicity to the vacant posts and the details about the job in the form of job description and job
specification are made available to public in general.
2. Campus interviews:
It is the best possible method for companies to select students from various educational institutions. It
is easy and economical. The company officials personally visit various institutes and select students
eligible for a particular post through interviews. Students get a good opportunity to prove themselves
and get selected for a good job.
3. Placement agencies:
A databank of candidates is sent to organizations for their selection purpose and agencies get
commission in return.
4. Employment exchange:
People register themselves with government employment exchanges with their personal details.
According to the needs and request of the organization, the candidates are sent for interviews.
5. Walk in interviews:
These interviews are declared by companies on the specific day and time and conducted for
selection.
6. E-recruitment:
Various sites such as jobs.com, naukri.com, and monster.com are the available electronic sites on
which candidates upload their resume and seek the jobs.
7. Competitors:
By offering better terms and conditions of service, the human resource managers try to get the
employees working in the competitor‟s organization.
Benefits of External Sources of Recruitment:
1. New talents get the opportunity.
2. The best selection is possible as a large number of candidates apply for the job.
3. In case of unavailability of suitable candidates within the organization, it is better to select them
from outside sources.
Limitations of External Sources of Recruitment:
1. Skilled and ambitious employees may switch the job more frequently.
2. It gives a sense of insecurity among the existing candidates.
3. It increases the cost as advertisement is to be given through press and training facilities to be
provided for new candidates.
Selection:
Meaning:
Finding the interested candidates who have submitted their profiles for a particular job is the process
of recruitment, and choosing the best and most suitable candidates among them is the process of
selection. It results in elimination of unsuitable candidates. It follows scientific techniques for the
appropriate choice of a person for the job.
The recruitment process has a wide coverage as it collects the applications of interested candidates,
whereas the selection process narrows down the scope and becomes specific when it selects the
suitable candidates.
Stone defines, „Selection is the process of differentiating between applicants in order to identify (and
hire) those with a greater likelihood of success in a job‟.
Steps Involved in Selection Procedure:
Brief details of the various steps in selection procedure are given as follows:
1. Inviting applications: The prospective candidates from within the organization or outside the
organization are called for applying for the post. Detailed job description and job specification
are provided in the advertisement for the job. It attracts a large number of candidates from
various areas.
2. Receiving applications: Detailed applications are collected from the candidates which provide
the necessary information about personal and professional details of a person. These
applications facilitate analysis and comparison of the candidates.
3. Scrutiny of applications: As the limit of the period within which the company is supposed to
receive applications ends, the applications are sorted out. Incomplete applications get
rejected; applicants with un-matching job specifications are also rejected.
4. Written tests: As the final list of candidates becomes ready after the scrutiny of applications,
the written test is conducted. This test is conducted for understanding the technical
knowledge, attitude and interest of the candidates. This process is useful when the number of
applicants is large.
 5. Psychological tests: These tests are conducted individually and they help for finding out the
individual quality and skill of a person. The types of psychological tests are aptitude test,
intelligence test, synthetic test and personality test.
6. Personal interview: Candidates proving themselves successful through tests are interviewed
personally. The interviewers may be individual or a panel. It generally involves officers from
the top management. The candidates are asked several questions about their experience on
another job, their family background, their interests, etc. They are supposed to describe their
expectations from the said job. Their strengths and weaknesses are identified and noted by
the interviewers which help them to take the final decision of selection.
7. Reference check: Generally, at least two references are asked for by the company from the
candidate. Reference check is a type of crosscheck for the information provided by the
candidate through their application form and during the interviews.
8. Medical examination: Physical strength and fitness of a candidate is must before they takes
up the job. In-spite of good performance in tests and interviews, candidates can be rejected
on the basis of their ill health.
9. Final selection: At this step, the candidate is given the appointment letter to join the
organization on a particular date. The appointment letter specifies the post, title, salary and
terms of employment. Generally, initial appointment is on probation and after specific time
period it becomes permanent.
10. Placement: This is a final step. A suitable job is allocated to the appointed candidate so that
they can get the whole idea about the nature of the job. They can get adjusted to the job and
perform well in future with all capacities and strengths.
Induction:
Concept of Induction:
Introduction of a new entrant into any existing group of people has been a common feature we come
across in our everyday life. Recall, the bride on joining to (your) family was introduced to (your) family
members and manners. Remember your own joining to your present Department of Business
Administration.
On joining the Department, you may have been told about the Department‟s rules and regulations,
the procedure for academic activities such as sessional tests, assignments, seminar presentations,
summer training, semester examination, papers to be taught with the names of the teachers, etc.
You were probably introduced to your seniors by organizing „fresher‟s welcome‟. Similarly, when a
person joins a new job, he/she also needs the same type of introduction to his/her job and the
organization. This introduction is called „induction‟. Induction is also known as „orientation‟ and
„indoctrination‟.
Objectives of Induction:
An induction programme is designed to achieve the following objectives:
1. To reduce the initial anxiety all new entrants feel when they join a new job in a new
organization.
2. To familiarize the new employees with the job, people, work-place, work environment and the
organization.
3. To facilitate outsider – insider transition in an integrated manner.
4. To reduce exploitation by the unscrupulous co-workers.
5. To reduce the cultural shock faced in the new organization.
Contents of induction programme:
The induction programme may be informal or formal. These are discussed one by one.
Informal Induction:
This is an unplanned induction programme. This may be simply an introduction to the new entrant
about the job and organization. Such type of induction programme is generally carried out by the
medium and small-scale units. Usually, informal induction programme needs to be brief- lasting for
one hour or so.
Informal induction programme itself may be in the following two versions:
(i) Supervisory System: In this system, the immediate job supervisor conducts the induction
programme for the new entrant. The supervisor briefs the new comer about the job, the department,
introduces to the colleagues, and takes him round the sections/divisions which are related to his job.
(ii) Buddy or sponsor system: In the „Buddy System‟, the immediate supervisor assigns the
responsibility of induction of the new entrant to an old employee. The old employee acts as friend,
philosopher and guide to the new comer. In order to introduce the new comer to the job and the
organization, the guide, i.e., the old employee arranges meetings with other persons and
departments and also supplies him with relevant documents/literature regarding rules, regulations
and other details of the organization.
Formal Induction:
Formal induction is a planned programme carried out to integrate the new entrant into the
organization. This is usually carried out by the large size organization. A comprehensive induction
programme is carefully designed to introduce the new entrant to all about his job, colleagues and
organization. Accordingly, the contents of the formal induction programme cover the aspects ranging
from the mission, vision, rules and regulations of the organization to job related particulars like salary,
benefits, service conditions, safety and welfare measures, etc.
A formal induction programme, thus, includes the following contents:
1. Brief history of the organization.
2. Organizational mission, vision, objectives and philosophies.
3. Policies and procedures of the organization.
4. Rules and regulation of the organization.
5. Organizational structure and authority relationship.
6. Terms and conditions of job including remuneration, working hours, holidays, promotional avenues,
etc.
7. Welfare measures like subsidized canteen, transport, health and recreation facilities, etc.
8. Safety measures.

Training and Development

At the enterprise level, employee training and development are main areas of human resource
development. The efficiency of an organisation depends directly on the capability and talent of its
personnel, and how motivated they are. Capability of a person depends on his ability to work and the
type of training he receives. While his personal capability is evaluated through proper selection
procedure, his training is taken care of by the organisation after he has been employed by the
organisation. After employee have been selected for various positions in an organisation, training
them for those specific tasks to which they have been assigned assumes great importance. It is
true in many organisations that before an employee is fitted into a harmonious working
relationship with other employees, he is given adequate training. Training is the act of increasing
the knowledge and skills of an employee for performing a particular job. The major outcome of
training is learning. A trainee learns new habits, refined skills and useful knowledge
during the training that helps him improve performance. Training enables an employee to do his
present job more efficiently and prepare himself for a higher level job.

Training and Development

Training - Training is an act of increasing knowledge, skill and attitude of an employee for
improving his performance on the job. Training is concerned with imparting specific skill for doing
particular job. For example, a clerk on typing. It is task-oriented activity. It is for job related purpose
and short-term.
Development
Development has a broader meaning. Its aim is to grow or improve the overall personality of an
individual. It is continuous process and is on the initiative from individual. Development is to
meet an individual‟s future needs. Efforts tow ards development often depend on personal
drive and ambition. It helps individual‟s in the progress towards maturity and
actualisation of their potential capacities. Development is whole process by which employee
learns, grows, improves his abilities to perform variety of roles within and outside the
organisation. He acquires socially desirable attitudes and values.
Difference between Training and Development
Training Development
Short term process. Long term process.
Knowledge and skills for a specific purpose. For overall development.
Related to managerial, behavioral and attitude
Primary related to technical skills learning.
development.
Training is a reactive process to meet current need. Development is a reactive to meet future needs.
From management management-external motivation. From individual himself-internal motivation.
Develops specific job related skills. Develops total personality.
Training is for non-managerial personnel. Development is for managerial personnel.
Need for Training
 Employees selected for a job might lack the qualifications required to perform the job In
some cases, the past experience , attitudes and behaviour patterns of experienced
personnel might not be appropriate to the new organisation. Remedial training
should be given to such people to match, the needs of the organisation. New
employees need to provided orientation training to make them familiar with the job and
the organisation.
 Rapid technological innovations impacting the workplace have made it necessary for people
to constantly update their knowledge and skills.
 Training is necessary to preparing employees for higher-level jobs (promotion).
 Existing employees require refresh training so as to keep abreast of the latest development in
job operations. In the phase of rapid technological changes , this is an absolute necessity.
 Training is necessary when a person moves from one job to another (transfer).
 Training is necessary to make employees mobile and versatile. They can be placed on
various jobs depending on organizational needs.
 Training is needed for employees to gain acceptance from peers.
 Training is needed to make employees more productive and useful in the long run.
Training Needs Analysis
All training activities must be related to the specific needs of the organization and the individual
employees. A training programme should be launched only after the training needs are assessed
clearly and specifically. The effectiveness of a training programme can be judged only with the help of
training needs identified in advance. In order to identify training needs, the gap between the existing
and required levels of knowledge, skills performance and aptitudes should be specified. The problem
areas that can be resolved through training should also be identified.
Training need can be identified through the following types of analysis :
1. Organizational analysis - It involves a study of the entire organization in terms of its objectives, it
resources and the utilization of these resources, in order to achieve stated objectives and its
interaction pattern with environment. The important elements that are closely examined in this
connection are:
i.Analysis of objectives - This is the study of short term and long term objectives and the strategies
followed at various levels to meet these objectives.
ii.Resource utilization - How the various organizational resources (human,physical and financial)
are put to use is the main focus of this study. The contributions of various departments are also
examined by establishing efficiency indices for each unit. This is done to find out comparative labour
costs, whether a unit is undermanned or over-manned.
iii.Environmental scanning - Here the economic, political, socio cultural and technological
environment of the organization is examined.
iv.Organisational climate analysis - The climate of an organization speaks about the attitudes of
members towards work, company policies, supervisors, etc. Absenteeism, turnover ratios generally
reflect the prevailing employee attitudes. These can be used to find out whether training efforts have
improved the overall climate within the company or not.
2.Task or role analysis - It is a systemic and detailed analysts of jobs to identify job contents, the
knowledge skills and aptitudes required and the work behaviour. On the part of the job holder,
particular attention should be paid to the tasks to be performed, the methods to be used, the way
employees have learnt these methods and the performance standards required of employees. Also
called operations analysis, the purpose is to decide what should be taught. Questionnaire, interviews
human resource records, reports, tests, observation and other methods can be used to collect
information about jobs in the organisation.
3.Manpower Analysis - Here the focus is on the individual in a given job. There are three issues to
be resolved :
i.It is necessary to decide whether performance of individual is sub-standard and training is required.
ii.Whether the employees is capable of being trained .
iii.Whether poor performers on the job need to be replaced by those who can do the job.
Other options to training such as modifications in the job or processes should be looked into.
Personal observation, performance reviews, supervisory reports, diagnostic tests help in collecting
the required information and select particular training options that try to improve the performance of
individual workers.
Methods and Techniques of Training
A wide range of training methods and techniques have been developed over the years by various
organizations and training experts. Different training methods are suitable for different categories of
personnel in the organization: managerial and non-managerial, technical, administrative, skilled,
unskilled, senior, junior and so on. Each organization has to choose those methods and techniques of
training which are relevant for its training needs.
1. On-the-job Training
In this method, the trainee is placed on a regular job and taught the skills necessary to perform it. The
trainee learns under the guidance and supervision of the superior or an instructor. The trainee learns
by observing and handling the job. Therefore it is called learn by doing.
Several methods are used to provide on-the-job training e.g. coaching, job rotation, committee
assignments etc. A popular form of on-the-job training is Job Instruction Training (JIT) or step by step
learning. It is widely used in the United States to prepare supervisors. It is appropriate for acquisition
or improvement of motor skills and routine and repetitive operations. The steps involved in JIT
method are:
a) Present Overview
The trainee receives an overview of the job, its purpose and its desired outcome, with a clear focus
on the relevance of training.
b) Demonstrate and show the way
The trainer demonstrates the job in order to give the employee a model to copy. The trainer shows a
right way to handle the job.
c) Copy and handle the job independently
Next, the employee is permitted to copy the trainer‟s way. Demonstrations by the trainer and practice
by the trainee are repeated until the trainee masters the right way to handle the job.
d) Follow-up
In this step, trainer checks the trainee‟s job frequently after the training programme is over to prevent
bad work habits from developing.
JIT method provides immediate feedback, permits quick correction of errors and provides extra
practice when required. But it needs skilled trainers and preparation in advance.
2. Off-the-job Training
Off-the-job training, as the name itself suggest, occurs away from workplace. This is often necessary
to get people away from the work environment to a place where stress, frustration and bustle of work
are eliminated. A training away from work environment enables trainees to study theoretical
information or be exposed to new and innovative ideas. But the problem arises when what is learnt is
far away from what is happening in workplaces.
The main techniques used in off-the-job training are given below:
a) Vestibule Training
Vestibule training utilizes equipment which closely resemble the actual ones used on the job.
However, training takes place away from the work environment. A special area or room is set aside
from the main production area and is equipped with furnishings similar to those found in the actual
production area. The trainee is then permitted to learn under simulated conditions, without disrupting
ongoing operations. a primary advantage of vestibule training is that it relieves the employee from the
pressure of having to produce while learning. The emphasis is on learning skills required by the job.
Of course, the cost of duplicate facilities and a special trainer is an obvious disadvantage.
b) Apprenticeship Training
In this method, theoretical instruction and practical learning are provided to trainees in training
institutes. In India, the Government has established Industrial Training Institutes (it is) for this
purpose. Under the Apprenticeship Act, 1962 employers in specified industries are required to train
the prescribed number of persons in „designated trades‟. The aim is to develop all-round craftsmen.
Generally, a stipend is paid during the training period. Thus, it is an “earn when you learn” scheme.
Apprenticeship training is the oldest method of training. It is particularly suitable for scanning crafts
and technical trades wherever job proficiency s the result of a relatively long training period.
Draughtsman, machinist, printer, tool marker, pattern designer, mechanic, carpenter, weaver, fitter,
jeweller, engraver, electrician etc. are examples of such areas.
c) Classroom Training
Under this method, training is provided in company classroom or in educational institutions. Lectures,
case studies, group discussions and audio visual aids are used to explain knowledge and skills to the
trainees. Classroom training is suitable for teaching concepts and problem-solving skills. It is also
useful for orientations and safety training programmes. Some companies maintain their own training
institutes or schools. Special training courses are designed e.g. management course for foreman,
computer course or typists, etc. Courses in retraining and upgrading may also be conducted. Small
firms depend on outside schools and courses.
d) Internship Training
It is a joint programme of training in which educational institutions and business firms cooperate.
Selected candidates carry on regular studies for the prescribed period. They also work in some
factory or office to acquire practical knowledge and skills. This method helps to provide a good
balance between theory and practice. But it involves a long-time period due to slow process. This
method of training is used in professional work, e.g. MBBS, CA, ICWA, Company Secretaries etc.
e) E-Learning
Business firms are increasingly using electronic technology for training. E-learning methods include
training through CD-ROM, internet and intranet, satellite broadcasts, virtual classrooms and digital
collaboration between trainees. Most firms using e-learning invest in a learning management system.
This system provides a single log on pint for all e-learning, opportunities offered through the
company.
Evaluating Training Effectiveness
Concept of Training Effectiveness
Training effectiveness is the degree to which trainees are able to learn and apply the knowledge and
skills acquired in the training programme. It depends on the attitudes, interests, values and
expectations of the trainees and the training environment. A training programme is likely to be more
effective when the trainees want to learn, are involved in their jobs, have career strategies. Contents
of a training programme, and the ability and motivation of trainers also determine training
effectiveness.
According to Hamblin
Evaluating training is any attempt to obtain information(feedback) on the effects of a training
programme and to assess the value of the training in the light of that information.
According to Warr
Evaluation is the systematic collection and assessment of information for deciding how best to utilize
available training resources in order to achieve organizational goals.
Need for Evaluation
1. To determine whether the specific training objectives are accomplished or not.
2. To ensure that any changes in trainee capability are due to the training programme and not due to
any other conditions.
3. To identify which trainees benefit most or least from the programme.
4. To determine the financial benefits and costs of the training programme.
5. Credibility of training and development is greatly enhanced when it is proved that the organization
has been benefited tangibly from it.
6. Evaluation is critical not for assessing quality of training, but also to see that future changes in
training plan should be made to make it more effective, and achieve goals of the organization.
7. To compare the costs and benefits of training versus non- training investments like work redesign
etc.
Principles of Evaluation
Evaluation of the training programme must be based on the following principles:
• Training faculty must be clear about the goals and purposes of evaluation.
• Evaluation must be continuous.
• Evaluation must be specific.
• Evaluation must provide the means and focus for trainers to be able to appraise themselves, their
practices and their products.
• Evaluation must be based on objective (quantitative) methods and standards.
• Realistic target dates must be set for each phase of the evaluation process.
• Evaluation must be cost effective.
Evaluation Criteria
Evaluation of training effectiveness is the process of obtaining information on the effects of a training
programme and assessing the value of training in the light of that information. Evaluation involve
controlling and correcting the programme. The basis of evaluation and mode are determined when
the training programme is designed. According to Hamblin training effectiveness can be measured in
terms of the following criteria:
• Reactions
A training programme can be evaluated in terms of the trainee‟s reactions to the objectives, contents
and methods of training. In case the trainees considered the programme worthwhile and like it, the
training can be considered effective.
• Learning
Learning measures assess the degree to which trainees have mastered the concepts, knowledge and
skills of the training.
• Behaviour
Improvement in the job behavior of the trainees reflects the manner and extent to which the learning
has been applied to the job.
• Results
The ultimate results in terms of productivity improvement. quality improvement, cost reduction.
accident reduction, reduction in labour turnover and absenteeism are the best criteria for evaluating
training effectiveness.
The following figure provides a broad framework for evaluation in terms of types, levels and methods.
However, it may not always be possible to employee a comprehensive evaluation system due to
organizational constraints e.g.
1. Lack of clear training policy
2. Inadequate infrastructure
3. Unwillingness of the management to change human resource policies
4. Performance appraisal system
5. Organizational processes on the basis of feedback
 Methods of Evaluation
Several methods can be employed
to collect data on the outcome of
training. Some of these are:
1. The opinions and judgments of
trainers, superiors and peers,
2. Asking the trainees to fill up
evaluation forms,
3. Using a questionnaire to know the
reactions of trainees,
4. Giving oral and written tests to
trainees to ascertain how far they
have learnt,
5. Arranging structured interviews
with the trainees.
6. Comparing trainees performance
on-the-job before and after training,
7. Studying profiles and career
development charts of trainees.
8. Measuring levels of productivity,
wastage. costs, absenteeism and
employee turnover after training.
9. Trainees‟ comments and reactions
during the training period, and
10. Cost benefit analysis of the
training programme.

Performance Appraisal
Meaning
Performance Appraisal is the process of evaluating an employee‟s performance of a job in terms of
its requirements. Performance appraisal involves assessment of the actual performance of an
employee against what is expected of him/her. Such assessment is the basis for awarding
promotions, effecting transfers or assessing training needs.
According to Flippo
“Performance Appraisal is the systematic, periodic and an impartial rating of an
employee‟s excellence in matters pertaining to his present job and his potential for a better
job”.
According to Heyel
“Performance Appraisal is the process of evaluating the performance and qualifications of the
employees in terms of the requirements of the job for which he is employed, for purposes of
administration including placement, selecting for promotion, providing financial rewards and other
actions which require differential treatment among the members of the group as distinguished from
actions affecting all members equally”.
Characteristics/Features of Performance Appraisal
 It is different from merit-rating as it is wider than merit-rating.
 It aims to develop a rational bases for personnel decisions.
 It tries to find out how well the employee is performing the job and tries to establish a plan for
further improvement.
 It is not a past oriented activity rather it is a future oriented activity showing employees where
things have gone wrong, how to set everything in order, and deliver results using their
potential in a proper way.
  It is not job evaluation.
 Its focus is on employee development. It forces managers to become coaches rather than
judges.
 It may be formal or informal.
The Process of Performance Appraisal
The performance appraisal process follows a set pattern and it consists of the following
steps:
1.Establishing Performance Standards
•The appraisal process begins with the setting up of criteria to be used for appraising the
performance of employees.
•The criteria is specified with the help of job analysis which reveals the content of a job.
•This criteria should be clear, objective and in writing.
•It should be discussed with the supervisors to ensure that all the relevant factors have been
included.
•Where the output can be measured the criteria is clear. If work performance cannot be measured the
personal characteristics which contribute to employee performance must be determined.
•Who is to do the appraisal and how frequently appraisal is to be done should also be decided.
2.Communicating the Standards
•The performance standards specified in the first step are communicated and explained to the
employees so that they come to know what is expected of them.
•The reactions of employees to the standards should be obtained.
3.Measuring Performance
•Once the performance standards are specified and accepted, the next stage is the measurement of
actual performance.
•This requires choosing the right technique of
measurement. identifying the internal and external
factors influencing performance and collecting
information on results achieved.
•Personal observations, written reports and-face-to-
face contacts are the means of collecting data on
performance.
•The performance of different employees should be
so measured that it is comparable.
4.Comparing the Actual with the Standards
•Actual performance is compared with the
predetermined performance standards.
•Such comparison will reveal the deviations which may be positive or negative. Positive deviations
occur when the performance exceeds the standards. On the other hand, excess of standard
performance over the actual performance represents negative deviation.
5.Discussing the Appraisal
•The results of the appraisal are communicated to and discussed with the employees.
•Alongwith the deviations, the reasons behind them are also-analysed and discussed. Such
discussion will enable an employee to know his weaknesses and strengths. Therefore, he will be
motivated to improve himself.
6.Taking Corrective Actions
•Through mutual discussions with employees, the steps required to improve performance are
identified and initiated.
•Training, coaching, counseling, etc. are examples of corrective actions that help to improve
performance.
Methods of Performance Appraisal
Several methods and techniques are used for evaluating employee performance. They may be
classified into two broad categories :
a) Traditional Methods
i. Confidential Report
• Used in most government organizations.
• A report is prepared by the employee‟s immediate superior, which covers the strengths and
weaknesses, main achievements and failure, personality and behavior of the employee.
• It is descriptive in nature
• Used mainly used for promotions and transfers of employees.
• Employee is not provided with the feedback. Therefore the employees never get to know about his
strengths and weaknesses.
• The method focuses on evaluating rather than developing the employee.
ii. Free form or Essay
• The evaluator writes a short essay on the employee‟s performance on the basis of overall
impression.
• The description should be factual and concrete.
• The drawback is that the method may involve biasness as evaluation is not based on specific
performance dimensions related to the job.
• Another drawback is that quality of appraisal depends on the writing ability of the evaluator rather
than on employee performance.
iii. Straight Ranking
• In this method, the superior ranks his or her subordinates in the order of their merit, starting from the
best to the worst.
• Straight ranking is one of the oldest and Simplest methods.
• The „how‟ and „why‟ are not questioned, nor answered.
• The major drawback is that ranking of individuals having varying behaviour patterns or traits is
difficult especially when a large number of persons are to be rated.
• The method only indicates how a person stands in relation to others in the group but does not tell
how much better or worse he is than another.
iv. Paired Comparisons Method
 In this method one employee‟s performance is compared with that of the other employees.
Two employees are taken at a time and a decision is made on who is more competent. Then
another pair is compared and the same process is repeated until all are compared and
ranked.
 The number of times an employee is judged better than the other determines his
 Comparison is made on the basis of overall performance. The number of comparisons to be
made can be decided on the basis of the following formula:
v. Forced Distribution Method
 In this technique, the rater is required to distribute his ratings in the form of a normal
frequency distribution.
 The purpose is to eliminate the rater‟s bias of central
 Appraisers have to choose from among groups of statements those which best describes the
employee and those which least describes him.
 The statements are then weighted or scored. People with high scores are the better
employees those with low scores are the marginal ones.
 Since rater does not know what the scoring weights for each statements are , he cannot play
favourites.
vi. Graphic Rating Scales
 Typically, a graphic scale assesses an employee on a rating scale comprising lists of traits
and a range of performance values for each trait.
 Rating scale can be continuous, where degree of traits are measured in numbers say (1,2,3
and 4) scale and/or discontinuous say outstanding, above average, average or unsatisfactory.
  The approach is multi-dimensional as several significant dimensions of the job can be
considered in evaluation.
 In practice, ratings tend to cluster on the high side. A supervisor often tends to rate his
subordinates high to avoid criticism from them. To minimize this bias, the rater may be asked
to give reasons to justify his rating.
vii. Checklist Method
 A checklist is a list of statements that describe the characteristics and performance of
employees on the job.
 The rater checks to indicated if the behavior of an employee is positive or negative to each
statement.
 There are three types of checklists that can be used:
a) Simple Checklist – equal importance is given to each statement.
b) Weighted Checklist – weights are assigned to different statements.
c) Forced Choice Checklist – five statements are given for each trait.

viii. Critical Incident Method

 An appraiser keeps a diary to record critical incidents involving effective and ineffective job
behaviours.
 Appraisers pay attention to exceptional behaviours in some performances areas at certain
times and in other areas at different times.
 These critical incidents are later used as criteria for evaluating employee‟s performance.
 For example, a fire, a sudden breakdown of machinery, a serious accident, etc. may be
identified as critical incidents for the working of a factory.
 It is very time consuming and cumbersome for the superior to maintain a written record for
each employee during every major
 Critical incidents occur infrequently and therefore, a continuous record of performance might
not be available.
The following tables illustrates the behaviour of five workers during machine breakdown.
Worker Reaction Score
A Informed supervisor immediately. 5
B Became anxious of loss of output. 4
C Tried to repair the machine. 3
D Was happy to get forced rest. 2
E Complained of poor maintenance. 1
ix. Group Appraisal
 In this method, an employee is appraised by a group of appraisers. This group consists of the
immediate supervisor of the employees, other supervisors who have close contact with the
employee‟s work, manager or head of the department and consultants.
 The immediate supervisors enlightens other members about the job characteristics, demands,
standards of performance, etc.
  Then the group appraises the performance of the employee, compares the actual
performance with standards, find out deviations, discusses the reasons therefore, suggests
ways for improvement of performance, prepares an action plan, studies the need for change
in the job analysis and standards and recommended changes, if necessary.
 This method eliminates personal bias to large extent, as performance is evaluated by multiple
raters.
x. Field Review method
 In this method, a training officer from the human resource department interviews line
supervisors to evaluate their respective subordinates.
 The interviewer prepares in advance the questions to be asked.
 By answering these questions a supervisor gives his opinions about the level of
performance of his subordinate, the subordinate‟s work progress, his strengths and
weaknesses, promotion potential, etc.
 The evaluator takes detailed notes of the answer which are then approved by the concerned
supervisor. These are then placed in the employee‟s personal service file.
 It is time consuming and a skilled and competent interviewer is required.
b) Modern Methods
i. Assessment Centre Method
 An assessment center is a multiple assessment of several individuals performed
simultaneously by a group of trained evaluators using a variety of group and individual
exercises like role playing, business games and inbasket exercises.
 Experienced managers with proven ability serve as
 Employees are evaluated on job-related characteristics considered important for job
 The evaluators observe and evaluate employees as they perform jobs. Assessments are
done generally to determine employee potential for promotion.
 The evaluators prepare a summary report and feedback is administered on a face-to-face
basis to the employees who ask for
 Assessment centres are not only a method of appraisal but help to determine training
and development needs of employees and provide data for human resource planning.
 The main tools used in assessment centers are:
1. Psychometric Tests
Three types of tests or questinnaires such as aptitude tests, ability test and personality test are
employed. These tests are selected keeping in view:
 Measurement of objectives
 Reliablity and validity
 Time required for administration
 Cost involved
2. Interviews
Structured interviews are used to probe background, critical incidents, and situational and
behavioural event of the employees.
3. Leadership Group Discussion
A small group of employees are given a problem to solve and are instructed to arrive at a group
decision within a specified time frame.
4. In-basket Exercise
The in-basket exercise or in-tray represents day to day decision making situation which a manager is
likely to face. The in-tray consists of various written messages and communications from customers,
suppliers, government authorities, internal departments, seniors management etc. The objective is to
assess an employee‟s activity level, problem analysis skills, planning and organizing skills, time
management, delegation etc. The in-tray materials are given keeping in view the job duties and
competencies required of each employee.
5. Business Games/Simulation Exercises
A real life situation such as running a manufacturing operation, stock trading etc. is simulated to the
entire group of employees. The complexities varies in these games, the common denominator is the
relatively unstructured nature of interactions among the participants and the variety of actions that
can be taken by all participants. The interactive nature of the business game provides opportunities to
assess dimensions such as strategic planning, teamwork, team skills, leadership and analytical
ability.
6. Role playing
It is the method of human interaction which involves realistic behavior in an imaginary or hypothetical
situation. Role playing tends to evaluate the human relations processes and personal attitudes and
behavior in a particular role such as conflict management, leadership skills, group problem solving,
team skills, communication, interpersonal skills etc.
7. Presentations
Presentations on vision, organizational issues, case studies etc. are extensively used for assessing
employees/participants.
 Assessment center method is suitable for senior or middle management levels.
 It is costly and needs experts to carry out the processes
ii. Human Resource Accounting
 In this method, cost of and contribution of human resources are measured and compared.
 Cost of human resources include recruitment and selection cost, induction and placement
cost, training and development cost, compensation and benefits cost etc. and contributions
include the value addition made by the employee to the organization to further the goals and
objectives of the organization.
 Difference between cost and contribution will reflect the performance of employees.
iii. Behaviourally Anchored Rating Scale (BARS)
 This method combines graphic rating scales with critical incidents method.
 It is designed to assess behaviors required to successfully perform a job, where each job is
likely to have several job dimensions and separate scales are supposed to be developed for
each.
 It defines the dimesions to be evaluated in behavioural terms and uses critical events to
anchor different performance levels.
 This method identifies incidents that are relevant to the performance of jobs usually assisted
by job analysis.
 Each job is then assigned a numerical value, which shows the weight that is attached to it.
 These dimensions provide the criteria for assessing employees.
iv. 360 degree Method
 This method takes information from more than one source, that is, superiors, subordinates,
peers, customers and oneself in order to get a 360 degree view of an individual‟s
performance.
 For instance 360 degree evaluation of a manager involves evaluation of a manager by
everyone above, alongside and below him.
 Structured questionaires are used to collect responses about a manager from his bosses,
peers and subordinates. Several parameters relating to performance and behaviour are used
in the questionnaires. Each manager is assessed by a minimum of fifteen colleagues, at least
two of them being his bosses, four of them peers, and six of them subordinates. The
responses are presented collectively to the assess in the form of charts and
v. Management by Objectives (MBO)
 To avoid, or deal with , the feeling that they are being judged by unfairly high standards,
employees in some organizations are being asked to set or help set their own performance
goals.
 The main steps involved in performance appraisal through MBO are as follows:
1.Set Organisational Goals
First of all, goals of the organisation in key areas of performance are laid down. These goals are
defined in clear, precise and measurable terms. They should be challenging yet attainable. A
thorough analysis of internal environment (strengths and weaknesses) and external environment
(opportunities and threats) of the organisation is made to set these goals.
2. Defining Performance Targets
On the basis of organisational goals, performance standards for each employee are defined.
Every subordinate writes down his own performance goals which are work-related and career-
oriented. His manager also writes down the goals he thinks the subordinate should strive for. The
two then discuss them, reach an agreement and put agreed goals in writing. Thus, employees at
all levels are actively involved in goal-setting. Clear attainable goals help channel energies in the
right direction and let the employee know the basis on which he will be judged. The goals are
periodically reviewed and revised to keep them up-to-date.
The level of performance considered satisfactory to achieve the goal is defined. Measure checkpoints
are established to measure progress towards the goals. Action plans required to achieve the goals
are also decided through mutual consultation among an employee and his superior. Joint goal-
setting and joint action planning are essential elements of appraisal through MBO.
3. Performance Reviews
Frequent performance review meetings between the manager and the subordinate are held. Initially,
monthly reviews may be used and then extended to quarterly reviews. In the review meetings,
progress is assessed, weaknesses and constraints are identified and steps to be taken to improve
performance are decided. Subordinates actively participate in this process. This leads to self-control
by the employee.
4. Feedback
After every performance review, feedback on performance is communicated to employee so that
he can regulate and improve upon his own performance. On the basis of performance review
rewards are decided. New goals and performance targets are determined for the next period.
 The method measures performance and not personality of employees.
 The drawback is that setting targets and objects may not be possible for certain jobs.

Problems in Performance Appraisal/Limitations of Performance Appraisal

1.Errors in rating
Performance appraisal may not be valid indicator of performance and potential of employees due
to the following types of errors:
a) Halo effect - The halo error occurs when one aspect of the subordinate‟s performance affects the
rater‟s evaluation of other performance dimensions. If a worker has few absences, his supervisor
might give the worker a high rating in all other areas of work. Similarly, am employee might be rated
high on performance simply because he has good dress sense and comes to office punctuality.
b) Stereotyping - Stereotyping is a mental picture that an individual holds about a person because of
that person‟s sex, age, religion, caste etc. by generalizing behavior on the basis of such blurred
images, the rater grossly overestimates or underestimates a person‟s performance. For example,
employees from rural areas might be rated poorly by raters having a sophisticated urban background,
if they view rural background negatively.
c) Central Tendency - It means assigning average ratings to all the employees in order to avoid
commitment or involvement. This is adopted because the rater has not to justify or clarify the
average ratings. As a result, the ratings are clustered around the midpoint.
d) Constant Error - Some evaluators tend to be lenient while others are strict in assessing
performance. In the first case, performance is overrated (leniency error) while in the second type
it is underrated (strictness error). This tendency may be avoided by holding meetings so that the
raters understand what is required of them.
e) Personal Bias - Performance appraisal may become invalid because the rater dislikes an
employee. Such bias or prejudice may arise on the basis of regional or religiousbeliefs and habits
or interpersonal conflicts. Bias may also be the result of time. Recent experience or first impression
of the rater may affect the evaluation.
f) Spill Over Effect - This arises when past performance affects assessment of present
performance. For instance, recent behaviour or performance of an employee may be used to
judge him. This is called recency.
2. Lack of Reliability
 Reliability implies stability and consistency in the measurement. Lack of consistency over time
and among different raters may reduce the reliability of performance appraisal. Inconsistent use of
measuring standards and lack of training in appraisal techniques may also reduce reliability.
Different qualitiesmay not be givenproper wetghtage. Factors like initiativeare highlysubjective and
cannot be quantified.
3. Poor appraisal forms
The appraisal process might also be influenced by the following factors relating to the forms that are
used by raters:
 The rating scale may be quite vague and unclear
 The rating form may ignore important aspects of job performance.
 The rating form may contain additional, irrelevant performance dimensions.
 The forms may be too long and complex.
4. Incompetence
Raters may fail to evaluate performance accurately due to lack of knowledge and experience.
Post appraisal interview is often handled ineffectively.
5. Negative Approach
Performance appraisal loses most of its value when the focusof management is on punishment
rather than on development of employees.
6. Multiple Objectives
Raters may get confused due to two many objectives or unclear objectives of performance
appraisal.
7. Resistance
Trade unions may resist performance appraisal on the ground that it involves discrimination
among its members. Negative ratings may affect interpersonal relations and industrial relations
particularly when employees/unions do not have faith in the system of performance appraisal.
8. Lack of Knowledge
The staff appraising performance of employees might not be trained and experienced enough to
make correct appraisal.

Essentials of an Effective Performance Appraisal System

Performance appraisal system should be effective as a number of crucial decisions are made on the
basis of score or rating given by the appraiser, which in turn, is heavily based on the appraisal
system. An appraisal system, to be effective, should possess the following essentials characteristics:
1.Mutual Trust - An atmosphere of mutual trust and confidence should be created in
the organisation before introducing the appraisal system. Such an atmosphere is
necessary for frank discussion of appraisal. It also helps to obtain the faith of employees in
the appraisal system. Performance appraisal is an emotional process involving feelings of
fairness and equal treatment. The human element in it must be considered if it is to serve
the individual and organisational purposes.
2. Reliability and validity - Appraisal system should be provide consistent, reliable and valid
information and date, which can be used to defend the organization even in legal challenges. If two
appraisers are equally qualified and competent to appraise an employee with the help of the same
appraisal technique, their ratings should agree with each other. Appraisals must also satisfy the
condition of validity, by measuring what they are supposed to measure. For example, if appraisal is
made for potential of an employee for promotion, it should supply the information regarding
potentialities of the employee to take up higher responsibilities.
3. Clear Objectives - The objectives and uses of performance appraisal should be made
clear and specific. The objectives should be relevant, timely and open. The appraisal
system should be fair so that it is beneficial to both the individual employee and the
organisation. The system should be adequately and appropriately linked with other
subsystems of human resource management.
4. Job relatedness - The appraisal system should measure the performance and provide information
in job related activities/areas.
5. Standardisation - Well-defined performance factors and criteria should be developed.
These factors as well as appraisal form, procedures and techniques should be standardised.
It will help to ensure uniformity and comparison of ratings. The appraisal techniques
should measure what they are supposed to measure. These should also be easy to
administer and economical to use. Employees should be made fully aware of
performance standards and should be involved in setting the standards.
6. Training - Evaluators should be given training in philosophy and techniques of appraisal.
They should be provided with knowledge and skills in documenting appraisals,
conducting post appraisal interviews, rating errors, etc.
7. Documentation - The raters should be required to justify their ratings. Documentation
will encourage evaluators to make conscious efforts minimising personal biases. It will
also help to impart accountability for ratings.
8. Feedback and Participation - Most employee want to know how well they are performing the job.A
good appraisal system provides the needed feedback on a continuing basis. The appraisal interviews
should permit both the parties to learn about the gaps and prepare themselves for future. Managers
should clearly explain their performance expectations to their subordinates in advance of the
appraisals period. Once this is know, it becomes easy for employees to learn about the yardsticks
and if possible, try to improve their performance in future.
9. Individual Differences - While designing the appraisal system, individual differences in
organisations should be recognised. Organisations differ in terms of size, nature, needs
and environment. Therefore, the appraisal system should be tailor-made for the
particular organisation. The needs of ratees in terms of feedback, mobility, confidence and
openness should also be considered.
10. Post Appraisal Interview - After appraisal, an interview with the employee should be
arranged. It is necessary to supply feedback, to know the difficulties under which the
employees work and to identify their training needs. The rater should adopt a problem-
solving approach in the interview and should provide counseling for improving
performance.
11. Review and Appeal - A mechanism for review of ratings should be provided. The review
may be made by a committee consisting of line executives and personnel experts. The
committee will see whether the raters are unusually strict or lenient. It may compare
ratings with operating results and may require the raters to give specific examples or
tangible proof. Differences if any are discussed and dissent is recorded. Provision must be
made for an appeal in case the employee/ratee is not satisfied with the ratings.

Compensation management and benefits

Compensation management and benefits is vital function of human resource managing team of
companies who operate at international level. It is very important to compensate employees for their
contribution in business process of company. Compensation is explained as all forms of financial
rewards received by employees. It begins from their employment. It occupies a significant position in
the employee's personal and official life. It has a substantial cost to the managers. Compensation is
major human resource tools that organizations utilize to manage their employees. For an organization
to get its money worth and encourage and hold skilled employees, it needs to guarantee that its
compensation system is not an island by itself. It is important for firm to link compensation to its
general goals and strategies as well as its compensation system to align with its HR strategy.
Compensation Management is an organized practice that involves balancing the work-employee
relation by providing monetary and non-monetary benefits to employees. Compensation includes
payments such as bonuses, profit sharing, overtime pay, recognition rewards and sales commission.
Compensation can also include non-monetary perks such as a company-paid car, company-paid
housing and stock options. Compensation assists to motivate the employees and enhances
organizational effectiveness. Compensation displeasure can lead to absenteeism, turnover, job
dissatisfaction, low performance, strikes and grievances.
Importance of Compensation Management
Many studies have demonstrated that good compensation is essential for every industry and helps to
give proper return to the workers for their contributions to the organization. It communicates a positive
control on the competence of workers and encourages them to give their best and accomplish the
specific standards. It forms a basis of pleasure and satisfaction for the workers that minimizes the
labour turnover and presents a steady organization. It increases the job evaluation process which
consecutively helps in establishing more realistic and achievable standards. It is planned to obey with
the various labour acts and therefore does not result in disagreement between the worker union and
the management. This builds up a peaceable relationship between the employer and the employees.
It creates an environment of self-esteem, efficiency and cooperation among the workers and provides
satisfaction to the workers. It motivates the employees to increase efficiency and show their
excellence. It provides growth and development opportunities to the deserving employees.

Employee's benefit includes disability income protection, retirement benefits, work-life balance (for
example, sick leave, vacation, jury duty and etc), allowances (for example, dental, insurance,
medical, transportation, housing, mobile phone and etc.). There are many components of benefits to
bring out its effect of employees. Work life balance such as temporal flexibility, leave benefits, and
interpersonal relationships has the potential to decrease or increase strain on workers with life
responsibilities.
It has been seen that major labour management clashes relate to compensation. Compensation is
the extrinsic that employees receive in exchange for their work. It is composed of the base wage or
salary and incentives or bonuses and benefit. Compensation is a key factor to attract and keep the
best employees and ensuring that the organization has the competitive edge in a progressively more
competitive world. The Compensation Management factor enables to distinguish between the
payments strategies and those of competitors while still allowing flexibility, control and cost
effectiveness. It provides a toolset for strategic remuneration planning that reveals the organization
culture and pay strategies, and it makes powerful line managers within a framework of flexible budget
control. Compensation management permit to control bottom line expenditures and competitive and
motivating compensation, be it fixed pay, variable pay, stock options, merit increases, or promotion in
other words, total compensation.
Compensation management consists of designing the lowest cost pay structure that will attract, keep,
and stimulate the capable employees and which is perceived as fair by the employee satisfaction.
The major purposes of compensation management are as follows:
1. A perfect compensation system will have positive impact on the competence and results
produced by employees. It will encourage the employees to perform better and achieve the
standards fixed.
2. Compensation will raise the confidence, efficiency and cooperation among the workers. Being
just and fair will provide satisfaction to the workers.
3. Good compensation and Rewards system bring harmony in the relationship of manager and
employees, collective bargaining generally focus on compensation issues.
4. The ideal compensation system provides stand for cheerful and satisfied personnel. This
minimizes the labour turnover. The organization becomes stable in marketplace.
5. The industry can devise compensation strategy and growth if it has the support of skilful,
talented and happy workforce.
6. The effective compensation system is characteristic of organization success and wealth.
7. The success and constancy of the organization is measured with pay-package it provides to
its employees.
Components of Compensation -
An employee's total compensation comprises of four components. The relative proportion of each
constituent in the total compensation varies form firm to firm. The first and generally the major
component is base compensation which means the fixed pay an employee receives on a regular
basis, either in the form of a salary or as wages. The second component is allowances such as house
rent allowance (HRA), dearness allowance (DA) and city compensatory allowance (CCA). The third
component is incentive pay planned to reward employees for good performance, such as
performance-linked bonus, share in profit, etc. The fourth component is benefits or indirect
compensation or perquisites such as company accommodation, company car, paid holiday, club
membership, stock options. Compensation is evenly important for the employee as it determines life
standard and position in society. In other words, compensation has great impact on employees
economically, socially and psychologically.

Financial compensation package of employees comprises of the following components:

1. Basic Pay. The main part of pay package is basic pay. For blue-collar workers basic wage
may be based on work done (price wage system) but for white-collar employees, supervisory
staff and managers, basic salary is generally time bound. Basic pay is generally determined
through job evaluation which is the process of systematically ascertaining the relative worth of
a job.
2. Allowances. Several allowances are paid in addition to basic pay. Some of these allowances
are given below:
o Dearness Allowance: This allowance is given to protect real income against inflation.
Generally, dearness allowance (DA) is paid as a percentage of basic pay.
o House Rent Allowance: Employers who do not provide living accommodation and
pay house rent allowance (HRA) to employees. This allowance is calculated as a
percentage of basic pay (Percentage varies according to Class of city from 10% to
35% of basic pay in case of government employees).
 o City Compensatory Allowance: This allowance is paid generally to employees in
metros and other big cities where cost of living is comparatively high. City
compensatory allowance (CCA) is generally a fixed amount per month.
o Transport Allowance/Conveyance Allowance: Some employers pay transport
allowance (TA) to their employees. A fixed sum is paid every month to cover a part of
traveling charges.
In some cases, medical allowance, education allowance for children, Tiffin allowance are also
paid.
3. Incentives: Incentive compensation is performance-linked remuneration paid with the aim to
encourage employees to work more and perform better. Both individual incentives and group
incentives are used. Bonus, profit-sharing, commissions on sales are some examples of
incentive compensation.
4. Fringe Benefits/Perquisites: Different types of benefits are paid particularly to senior
managers. Provident funds, pensions, gratuity, encashment of earned leave, company house,
company car, leave travel concession (LTC), medical aid, interest free loan, holiday homes,
entertainment, stock options, etc. are examples of such benefits.

Needs of compensation management

1. A good compensation package is significant to
stimulate the employees to increase the
organizational productivity.
2. Compensation is provided to work for the
organization. Compensation helps in running an
organization successfully and to achieve its goals.
3. Salary is just a part of the compensation system,
the employees have other psychological and self-
actualization needs to fulfil. Thus, compensation serves the purpose.

Major phases of compensation management

Compensation Management consists of four phases which are shown with the help of diagram given
below

Compensation challenges: HR experts in most of the companies have major compensation-related

concerns. Most specifically, the problem is money.
Compensation structures are major issue for human
resources departments in all types of organizations.
Another problem for HR professionals is a
compensation budget and salery. Key issues are
depicted in below figure.

To summarize, compensation is human resource

mechanism that organizations use to manage their
workforce. Compensation emphasizes fair day pay
for fair day work. Compensation and benefits are
more multifarious than simple remuneration. Many
staff considers professional development, workplace culture, and other benefits when assessing
workplace satisfaction.
Job Design

Job design is of comparatively recent origin. The human resource managers have realized that the
design of a job has considerable influence on the productivity and job satisfaction; poorly designed
jobs often result in boredom to the employees, increased turnover, job dissatisfaction, low productivity
and an increase in overall costs of the organization. All these negative consequences can be avoided
with the help of proper job design.

According to Jon Werner and DeSimone, “Job design is the development and alteration of the
components of a job (such as the tasks one performs, and the scope of one‟s responsibilities) to
improve productivity and the quality of the employees‟ work life.”

Job design has been defined by Davis (1966) as: “The specification of the contents, methods, and
relationships of jobs in order to satisfy technological and organizational requirements as well as the
social and personal requirements of the job-holder.”

Job design is an attempt to create a match between job requirements and human attributes. It
involves organizing the components of the job and the interaction patterns among the members of a
work group. It helps in developing appropriate design of job to improve efficiency and satisfaction.

Principles of Job Design:

Principles are the bases of the approach used in job design. Robertson and Smith (1985) have
suggested the following five principles of job design:
 To influence skill variety, provide opportunities for people to do several tasks and combine tasks.
 To influence task identity, combine tasks and from natural work units.
 To influence task significance, form natural work units and inform people of the importance of their
work.
 To influence autonomy, give people responsibility for determining their own working systems.
 To influence feedback; establish good relationship and open feedback channels.

Methods of Job Design

The various techniques of job design and redesign are discussed below:

1. Job Simplification: In job simplification, the complete job is broken down into small subparts; this
is done so that employee can do these jobs without much specialized training. Moreover, small
operations of the job can also be performed simultaneously so that the complete operation can be
done more quickly. For job simplification, generally time and motion studies are used.

2. Job Rotation: Another technique designed to enhance employee motivation is job rotation, or
periodically assigning employees to alternating jobs or tasks. For example, an employee may spend
bumpers to vehicles and the following two weeks making final checks of the chassis During the next
month, the same employee may be assigned to two different jobs. Therefore, the employee would be
rotated among four jobs. The advantage of job rotation is that employees do not have the same
routine job day after day. Job rotation only addresses the problem of assigning employees to jobs of
limited scope; the depth of the job does not change. The job cycle of the actual daily work performed
has not been lengthened or changed. Instead, employees are simply assigned to different jobs with
different cycles. Because job rotation does not change the basic nature of jobs, it is criticized as
nothing more than having an employee perform several boring and monotonous jobs rather than one.
Some employees dislike job rotation more than being assigned to one boring job because when they
are assigned to one job they know exactly where to report and what work to expect each day.
Workers quickly realize that job rotation does not increase their interest in their work. Although it
seldom addresses the lack of employee motivation, it give manages a means of coping with frequent
absenteeism and high turnover. Thus when absenteeism or turnover occurs in the work force,
managers can quickly fill the vacated position because each employee can perform several jobs.
Job rotation is often effectively used as a training technique for new, inexperienced employees. At
higher organizational levels, rotation also helps to develop managerial generalists because it exposes
them to several different operations.
3.Job Enlargement: Another means of increasing employee‟s satisfaction with routine jobs is job
enlargement, or increasing the number of tasks performed (i.e. increasing the scope of the job). Job
enlargement, like job rotation, tries to eliminate short job cycles that create boredom. Unlike job
rotation, job enlargement actually increases the job cycle. When a job is enlarged, either the tasks
being performed are enlarged or several short tasks are given to one worker. Thus, the scope of the
job is increased because there are many tasks to be performed by the same worker. Job
enlargement programs change
many methods of operation- in contrast to job rotation, in which the same work procedures are used
by workers who rotate through work stations. Although job enlargement actually changes the pace of
the work and the operation by reallocating tasks and responsibilities, it does not increase the depth of
a job.

The focus of designing work for job enlargement is the exact opposite of that for job specialization.
Instead of designing jobs to be divided up into the fewest of tasks per employee, a job is designed to
have many tasks for the employee to perform. An enlarged job requires a longer training period
because there are more tasks to be learned. Worker satisfaction should increase because is reduced
as the job scope is expanded. However, job enlargement programs are successful with jobs what
have increased scope; such workers are less prone to resort to absenteeism, grievances, slowdowns
and other means of displaying job dissatisfaction.

Enlargement is done only on the horizontal level. Thus, the job remains the same, but becomes of a
larger scale than before. In the words of Geroge Strauss and L.R. Sayles “Job enlargement implies
that instead of assigning one man to each job, a group of men can be assigned to a group of jobs and
then allowed to decide for themselves how to organize the work. Such changes permit more social
contacts and control over the work process.”

4. Job Enrichment: The concept of job enrichment has been derived from Herzberg‟s two-factor
theory of motivation in which he has suggested that job content is one of the basic factors of
motivation. If the job is designed in such a manner that it becomes more interesting and challenging
to the job performer and provides him opportunities for achievement, recognition, responsibility,
advancement and growth, the job itself becomes a source of motivation to the individual.
According to Richard W. Beatty and Graig Eric. Schneider, “Job enrichment is a motivational
technique which emphasizes the need for challenging and interesting work. It suggests that jobs be
redesigned so that intrinsic satisfaction is derived from doing the job. In its best applications it leads
to a vertically enhanced job by adding function from other organizational levels, making it contain
more variety and challenge and offer autonomy and pride to the employee.”

Techniques of Job Enrichment: In order to enrich the jobs. The management should adopt the
following measures:

 Freedom in decisions
 Assign a natural work unit to an employee.
 Encouraging participation
 Allow the employee to set his own standards of performance.
 Minimize the controls to provide freedom to the employees
 Make an employee directly responsible for his performance.
 Encourage participation of employees in deciding organizational goals and policies.

JOB ENLARGEMENT vs. JOB ENRICHMENT

Job enlargement and job enrichment are both important forms of job design in order to enhance
productivity and satisfaction of the employees. They differ from each other in the following respects:
1. Nature of Job: The major difference between job enrichment and enlargement lies in the nature
of additions to the job. Enlargement involves a horizontal loading or expansion, or addition of tasks of
the same nature. Enrichment involves vertical loading of tasks and responsibility of the job holder; it
improves the quality of the job in terms of its intrinsic worth.

2. Purpose: The purpose of job enlargement is to reduce the monotony in performing repetitive
jobs by lengthening the cycle of operation. On the other hand, the purpose of job enrichment is
making the job lively, challenging and satisfying. It satisfies the higher level needs such as ego
satisfaction, self expression, sense of achievement and advancement of Job holders.

3. Skill Requirement: Job enlargement may not necessarily require the use of additional skills
which the job holder was using in performing the job before the enlargement. This is due to similarity
of additional tasks. Enrichment calls foe development and utilization of higher skills, initiative, and
innovation on the part of the job holder in performing the job.

4. Direction and Control: Job enlargement requires direction and control from external sources,
say supervisor. In fact, the job holder may require more direction and control because of enlargement
of his responsibility. Enrichment does not require external direction and control as these come from
the job holder himself. He requires only feedback from his supervisor.