Department of Distance and

Continuing Education
University of Delhi

Master of Business Administration (MBA)

Semester - I
Course Credit - 4.5
Core Course - MBAFT - 6106
 Editorial Board
Dr. Sunita Dwivedi
Dr. Amanjot Sachdeva

Content Writers
Ms. Veenu Shankar, Dr Malavika Srivastava,
Dr. Jyotika Bahl, Ms. Shalu Garg,
Dr. Saumya Aggarwal, Dr. Sneha Chaudhry
Academic Coordinator
Mr. Deekshant Awasthi

© Department of Distance and Continuing Education

ISBN: 978-93-95774-10-9
1st edition: 2022
e-mail: ddceprinting@col.du.ac.in
management@col.du.ac.in

Published by:
Department of Distance and Continuing Education under
the aegis of Campus of Open Learning/School of Open Learning,
University of Delhi, Delhi-110 007

Printed by:
School of Open Learning, University of Delhi
Disclaimer

DISCLAIMER

Corrections/Modifications/Suggestions proposed by Statutory Body,

DU/Stakeholder/s in the Self Learning Material (SLM) will be
published in the next edition. However, these
corrections/modifications/ suggestions will be uploaded on the
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 Human Resource Management

INDEX
Module 1
Lesson 1: Foundations & Contemporary Issues in Managing Human Resources .................. 1
1.1 Learning Objectives
1.2 Introduction
1.3 Foundations of Managing People
1.4 Principles of managing people
1.5 Contemporary Issues behind Human Resource Management
1.6 Indian laws related to Human Resource Management
1.7 Summary

Module 2
Lesson 2: Human Resource Planning .................................................................................... 24
2.1 Learning Objectives
2.2 Introduction
2.3 Human Resource Planning (HRP)
2.4 Quantitative Aspect of HRP
2.5 Downsizing
2.6 Employee Retention
2.7 Summary

Lesson 3: Job Analysis& Talent Acquisition ......................................................................... 48

3.1 Learning Objectives
3.2 Introduction
3.3 Job Analysis
3.4 Downsizing and Retention
3.5 Talent Acquisition and Recruitment
3.6 Selection and Induction
3.7 Summary
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Lesson 4: Learning, Training & Development: Process and Methods ................................. 82

4.1 Learning Objectives
4.2 Introduction
4.3 Basic Concepts
4.4 Learning Theories
4.5 Training Need Identification (TNA)
4.6 ADDIE Model
4.7 Training & Development Methods
4.8 Evaluation of Training & Development
4.9 E-Training & E-Development
4.10 Career Development & Succession Planning
4.11 Case Study
4.12 Summary

Lesson 5: Compensation & Reward Management............................................................... 105

5.1 Learning Objectives
5.2 Introduction
5.3 Concept of Compensation
5.4 Compensation Management
5.5 Types of Compensation
5.6 Reward Management
5.7 Summary

Module 3
Lesson 6: Performance Management: Systems &Strategies ............................................... 140
6.1 Learning Objectives
6.2 Introduction
6.3 Concept of Performance Appraisal
6.4 Methods of Performance Appraisal
6.5 Performance Management and Potential Appraisal
6.6 Summary
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 Human Resource Management

Lesson 7: Industrial Relations ............................................................................................. 179

7.1 Learning Objectives
7.2 Industrial Relations
7.3 Dynamics of Employee, Employer and the State
7.4 Trade Unions
7.5 Industrial Harmony & Worker’s Participation
7.6 Collective Bargaining
7.7 Summary

Lesson 8: Grievance, Conflict Management & International Dimensions of HRM ............ 218
8.1 Learning Objectives
8.2 Introduction
8.3 Grievance
8.4 Discipline
8.5 Conflict Management and Dispute Resolution
8.6 Employee Engagement
8.7 International Dimensions of HRM
8.8 Summary

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 Human Resource Management

LESSON 1

FOUNDATIONS & CONTEMPORARY ISSUES IN

MANAGING HUMAN RESOURCES
Veenu Shankar
Doctoral Scholar
Department of Management Studies
Indian Institute of Technology, Delhi
veenu.dms.iitd@gmail.com

STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Foundations of Managing People
1.3.1 What is Human Resource Management
1.3.2 Why is Human Resource Management Relevant to all Managers
1.3.3 Line Versus Staff aspects of Human Resource Management
1.3.4 Human Resource Department and its Responsibilities
1.3.5 Human Resource Development
1.4 Principles of managing people
1.4.1 The Strategic Human Resource Management Process
1.4.2 The New Human Resource Manager
1.4.3 Key Competencies of the Human Resource Manager
1.4.4 10 Cs of Human Resource Management
1.5 Contemporary Issues behind Human Resource Management
1.6 Indian laws related to Human Resource Management
1.7 Summary
1.8 Glossary
1.9 Answers to In-text Questions
1.10 Self-Assessment Questions
1.11 References
1.12 Suggested Readings

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1.1 LEARNING OBJECTIVES

The objective of this lesson is to thoroughly understand the concept of Human

Resource Management and its relevance in an organization. After this lesson, a student will
be able to understand the following:

• Foundations of Human Resource Management

• Line versus staff aspects of Human Resource Management
• Human Resource Management versus Human Resource Development
• Strategic Planning Process and its process
• Strategic Human Resource Management and its importance
• Human Resource Manager and his/her key competencies
• 10 Cs of Human Resource Management

1.2 INTRODUCTION

It has been said that when there is two or more people who exist and work together, the entity
they are working for becomes an organization. For instance, a bank is an organization. An
organization includes people with formal roles who work together to accomplish the
organizational goals. But to keep an eye on organizational goals, we need PEOPLE to
manage PEOPLE and supervise PEOPLE. That’s why, an emerging term, Human Resource
Management comes into the picture. In this lesson, we will see how Human Resource
Management is important for an organization through comprehending some real-life case
studies.

1.3 FOUNDATIONS OF MANAGING PEOPLE

Primarily, there are five M(s) in management: Materials, Machinery, Money, Methods, and
Men. Out of these, “Men”1 is the most important as it steers other 4M(s) to achieve
organizational goals by effectively coordinating and utilizing all available resources. The
significance of human resources cannot be replaced as all the organizations are heavily
dependent on them for swift functioning of operations. In this section, we will learn some
fundamentals or foundations of managing people.

1
By “men”, we mean human resources of all genders. Hence, not specific to ‘male’ gender.
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 Human Resource Management

1.3.1 What is Human Resource Management?

As we discovered above that human resource is the fifth M of management that helps in
effective coordination and utilization of organizational resources. The process of managing
all human resources of an organization becomes Human Resource Management (or HRM).
HRM “is the process of acquiring, training, appraising, and compensating employees, and of
attending to their labour relations, health & safety, and fairness concerns”.
The term "people at work" refers to a sizable population of people of different genders,
ages, socio-religious affiliations, and educational or literacy levels. In addition to sharing
some traits and behaviour patterns with one another, these people in the workplace also
display many differences. Every person who is a part of an organization has a unique
collection of requirements, motivations, objectives, and experiences. Despite having unique
physical and psychological characteristics, every human being is the outcome of interactions
with his environment as well as his biological inheritance.

Fig 1.1: HRM Overview

(Source: Authors’ Interpretation)
Therefore, management must be cognizant of both organizational needs and personnel
demands. All of these cannot be disregarded. An organised effort makes it feasible for
organizations, "people at work," "the people who manage them" (i.e., managers themselves),

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and other public groups (such as customers, shareholders, entrepreneurs, governments,

suppliers, etc.) to achieve their goals. The employee forms relationships on all four
dimensions: (i) between management and employees; (ii) within the workforce; (iii) among
the managerial staff; and (iv) throughout the business and community.
The focus of this lesson is to understand the fundamentals of HRM in detail. However, a few
nuances are presented in each section to define the process of HRM in brevity.
1.3.2 Why is ‘Human Resource Management ‘relevant to all managers
First, let’s discuss the definition of a manager. A manager is an individual who is
accountable for accomplishing organizational goals.

ACTIVITY
Imagine that you are a human resource manager at XYZ corporation. And you
conduct the following mistakes.
1. Hire the wrong person for the job
2. Waste time with useless interviews
3. People that you hired are leaving your company
Take a moment and discuss your thoughts with yourself only as you might be reading
this book on your own. If you have a bunch of friends around you, that’s even better,
share your reflections on the above 3 mistakes that you conducted hypothetically.

Remember that as a manager, you can do everything else right but still fail at the end. HRM
is about thirty percent of everything else and seventy percent of the mistakes that are
mentioned in above activity. As you go ahead with this book, you’ll learn HRM methods and
techniques that you make an effective human resource manager. The importance of human
resource is summed up in Lawrence Bossidy’s quote:
“I am convinced that nothing we do is more important than hiring and developing people.
At the end of the day, you bet on people, not on strategies.”
1.3.3 Line Versus Staff aspects of Human Resource Management

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Managers of different departments, in a sense, are human resource managers as they get
involved in the hiring process. For instance, when a financial company visits a University of
Delhi university college for finance-related placements, the candidates usually must go
through two rounds of interview – i) HR Round and ii) Technical Round. The HR round is
organized with the human resource (HR) manager and the technical round is organized with
the finance manager. In a way, both, finance, and HR manager are helping the company to
hire the best pool of candidates.
If a hiring can be done by a non-HR manager, then why do we need HR managers in the
workplace? To answer this dilemma, one needs to understand the basic distinction between
line authority and staff authority.
The line authority2 conventionally gives managers the right to issue orders, however, the
staff authority provides managers the right to advise other employees or managers. On an
organizational chart, the managers with line authority are called line managers and managers
with staff authority are called staff managers. Human resource managers are commonly staff
managers. The following are the staff functions of human resource managers:
1. Advises the top management (CEO, COO, CFO) on personnel aspects of an
organization
2. Assists in hiring, training, counselling, and firing of employees or managers
3. Administers benefits programmes like retirement, vacation etc.

2
“Authority is the right to make decision, direct others’ work, and give orders”
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IN-TEXT QUESTIONS
1. Ankur has the right the issue orders and Ankit has the right to assist other
employees. Choose the correct option:
a. Ankur is the line manager and Ankit is the staff manager
b. Both are line managers
c. Ankur is the staff managers and Ankit is the line manager
d. Both are staff managers
2. If you are responsible for accomplishing organizational goals, then you are?
a. Boss b. Manager
c. Supervisor d. CEO
3. ___________ includes people with formal roles who work together to
accomplish the organizational goals.
a. Organization b. Firm
c. Company d. All the above
4. Suppose you are the human resource manager at company XYZ, and the top
management wants you to conduct a survey to comprehend the determinants
that drive employees to perform better. What would you include in the survey?
a. Organizational goals b. Personal Demands
c. Both A and B d. None

1.3.4 Human Resource Department

A human resource department is responsible for effectively managing an organization’s
human resources, which are primarily its employees. Like a HR manager, the key
responsibility of human resource department is to collectively manage, compensate, and train
employees. The following are the core functions of HR department (including HR managers):
1. Recruitment and Selection
Recruitment is the process of attracting qualified pool of candidates whereas selection
is placing the right candidate for a job. An advertisement published in the newspaper
is a recruitment technique and conducting interviews is a selection technique. You
will learn this concept in detail in the lesson 2 of this book.

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 Human Resource Management

2. Training and Development

Training and development are educational or skill development initiatives that an
organization undertakes to improve the job-performance of employees. From
instilling motivation to providing resources for knowledge, are a few examples of
T&D (or training and development) activities. You will learn this concept in detail in
the lesson 3 of this book.
3. Industrial Relations
As the name comprises two terminologies, i) industrial & ii) relations. By industry,
we refer to the organization, and by relations, we mean the relationship between
employer and employees. In nutshell, the industrial relations are “the relationship
between employer and employees in an organizational setting”. You will learn this
concept in detail in the lesson 4 of this book.
4. Conflict Management
As the name suggests, conflict management is the process by which conflicts are
resolved in an organization. The primary responsibility of an HR manager is not to
avoid conflict but to deal with them and provide efficacious solutions to resolve the
conflict. You will learn this concept in detail in the lesson 5 of this book.
1.3.5 Human Resource Development
Human resource development (HRD) is the process of nurturing a company's workforce. It
means to provide the abilities and pertinent information that might help in employees’ overall
professional development. As a result, HRM includes human resource development as well.
HRD begins with a clear goal of employee development and is frequently met through
training activities that are conducted in an organization. These efforts help employees in their
career chart as well as in personal lives.
As Human Resource Developers oversee several areas within the human resources division
of an organization, including training, employee development, executive and leadership
development, human performance technology, and organizational learning, they have become
very important members of the HR team in some organizations. They may be responsible
for establishing mechanisms to recruit and retain talent, developing training programmes, and
organizing organizational development activities, such as planning workshops, among other
things.

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 MBA

Table 1:
Human Resource Development versus Human Resource Management
Particulars Human Resource Human Resource
Development Management
1. Function It is a proactive function. It is a service and reactive
function.
2. Objective It aims to ameliorate efficiency It aims to develop
of people. professional capabilities of
employees while enhancing
overall organizational culture.
3. Responsibility It is the responsibility of human It is the responsibility of
resource as well as technical human resource manager.
manager.
4. Terminology Human Resource ‘Developers’. Human Resource ‘Managers’.

5. Focus It usually focuses on ‘creative It usually focuses on

aspects’ to motivate employees. ‘organizational goals.’

Even though these two concepts are distinct, they have a lot in common. For instance, they
both require addressing problems. When disagreements emerge inside a company, HR
managers may be relied upon to find innovative, considerate solutions. Similar problem-
solving exercises may be assigned to HR developers when creating new training techniques
and systems. Since both positions need interaction with others, having interpersonal skills
may be advantageous in creating and maintaining positive working relationships between
workers and a company.

1.4 PRINCIPLES OF MANAGING PEOPLE

Many experts believe that managing people mainly involve five functions: planning,
organizing, staffing, leading, and controlling.
• Planning: In this stage, the planning related to tasks is formulated.

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 Human Resource Management

• Organizing: In this stage, whatever was planned in the planning stage, is allocated to
each employee.
• Staffing: After organizing stage, most of the times an organization feels lack of
adequate personnel, lack of skilled personnel. Therefore, in this stage, activities such
as recruitment and selection, training and development etc. are focussed.
• Leading: Once you are clear on the staffing process, it is consequential to motivate
and encourage employees. Hence, under this stage, motivation is given utmost
importance.
• Controlling: After planning, organizing, staffing, leading, it becomes important to
check how well an organization has achieved its goals. In this stage, evaluation of the
performance is done and based on that corrective measures are devised.

SWOT MATRIX WITH GENERIC EXAMPLES

Potential STRENGTHS: Potential OPPORTUNITIES:
- Market leadership - New market
- Cost advantage - Diversification
- High quality products - Merger with competitor
Potential WEAKNESSES: Potential THREATS:
- Negative market image - Takeover threat
- Lack of resources - Slow market growth
- Lack of research and development - Excessive regulations

1.4.1 The Strategic Human Resource Management Process

The strategic management process starts with the basic five functions
(explained above) of management and ends with scanning internal strengths (S) &

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weaknesses (W) and external opportunities (O) & threats (T) to establish a competitive
advantage in the market. This helps an organization decide its strategy.
Strategic human resource management (SHRM) process is “formulating and executing
human resource policies & practices the produce the employee competencies and behaviours
the company needs to achieve its objectives”. An effective SWOT analysis helps
organizations in their SHRM processes.
1.4.2 The New Human Resource Manager
Earlier, a human resource manager used to focus on only administrative activities like hiring
and firing employees, keeping an eye on compensation management etc. But today the
employer faces several challenges related to the functionalities of an organization. The HR
managers of today are expected:
1. To focus more on big picture issues (or strategic issues)
Human resources are more often used in helping companies address strategic and big
picture issues. As explained above in section 1.4.1, this is known as strategic human
resource management.
2. To focus on improving performance
The human resource managers of today are equally responsible for improving
performance of employees associated with the organization.
3. To measure performances of an employee and give timely results to the organization.
Measurability is another task that is very challenging. Human resource managers
make sure to provide well equipped benchmarks for evaluating current performance
of employees.
4. To manage ethics
Ethics is “the standards that someone uses to decide what his/her conduct should be”.
Human resource managers are also responsible to pen down workplace related
ethics.

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Human Resource Management

STRATEGIC MANAGEMENT PROCESS: PROCESS

Step 1 – Where are we now?

Here, the manager starts with defining company’s current business and mission.
Questions like, what products need to be sold, where to sell them and how to gain
competitive advantages are answered in this step.
Step 2 – Perform SWOT analysis
The next step is to ask, “are we heading in the right directions given the
challenges that we face”.
Step 3 – Create a few Strategic Options
Under this phase, several strategic options are created by the management for the
company.
Step 4 – Review Strategic Options
This step helps the management to review strategic options created in the third
step and shortlists viable options to purse.
Step 5 – Make a Strategic choice
Under this step, a strategic choice is decided after performing SWOT analysis of
each strategy shortlisted in the step 4.
Step 6 – Translate into Goals
Under this step, the strategic choice, decided in the step 5, is divided into
actionable strategic goals.
Step 7 – Implement the actionable strategic goals
Now, in this step hiring and firing of people is decided according to the actionable
strategic goals.
Step 8 – Evaluate Performance
“Things don’t always turnout as planned”. Therefore, a continuous evaluation is
required in the last step.

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IN-TEXT QUESTIONS
5. Developing skills of employees are needed to run business in
a. Short-term b. Medium-term
c. Long-term d. All of the above
6. Which of the following problems can be disguised in organizations?
a. Territorial b. Social
c. Environmental c. Economic
7. _______ is the process of acquiring, training, appraising, and compensating
employees, and of attending to their labour relations, health and safety, and
fairness concerns.
a. HRM b. HRD
c. SHRM d. None of the above
8. Which of the following does not imply the staff functions of human resource
management?
a. Advises the top management (CEO, COO, CFO) on personnel aspects
of an organization
b. Assists in hiring, training, counselling, and firing of employees or
managers
c. Administers benefits programmes like retirement, vacation etc.
d. Looking after profit and loss accounts
9. Suppose you are the CEO of XYZ company, which department should you be
giving your valuable time and efforts?
a. Marketing b. HRM
c. Finance and Operations d. All of the above

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Human Resource Management

CASE STUDY
The Tata Group
One of India's biggest and most reputable business giants, the Tata Group, has a
distinguished history of implementing some of the best human resources (HR) practices.
The group had significantly grown over the years, necessitating the need for a shared HR
platform inside the organization. A successful group-wide HR strategy was developed and
put into practice. It would be difficult to implement HR policies across all the different
entities as many group companies expand internationally. It remained to be seen if the Tata
group would uphold the basic principles and ideals in its pursuit of development and
international enlargement. Discussion of the difficulties huge corporations have adopting
uniform HR rules is made possible by the case. It also makes it easier to have conversations
about employer branding concerns and how to maintain brand equity in a globalized
environment. Students can also explore Tata's HR initiatives as a model employer, the Tata
brand's ability to be sustained in the face of global competition, and whether growth will
dilute the company's reputation.
Questions:
1. Is the Tata Group the best employer in the country? What are reasons for your answer?
2. Visit the Tata Group’s website and list down some of their best employee practices of the
following:
a. Tata Steel
b. Tata Motors
c. Tata Electronic Private Limited
d. Tata Consultancy Services

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1.4.3 Key Competencies of the Human Resource Manager

Figure 1.2:
Human Resource Manager Competencies
(Source: author’s interpretation)
Let’s discuss each competency3 one by one.
1. Strategic Managers
This competency is related to the ability required for strategic human resource
management which has been explained in detail in section 1.4.1. Through having this
competency, the managers help organization in creating the strategy.
2. Leaders
By having leadership attributes, a human resource manager is respected and admired
in the organization.
3. Innovators
With this competency, a human resource manager can create a platform for
meaningful work environment in an organization. They train, develop, and retain
talent with their innovative ideas.
4. Tech Savvy
Technology plays an important role in the lives of human resource managers. During
the COVID-19 pandemic also, it was HR managers’ responsibilities to connect people
via technology and colleagues do the same.

3
An ability or skill required for a task
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1.4.4 10 Cs of Human Resource Management

Since its inception in the 1970s, the area of human resource management has been
developing. Numerous models have been put out by HRM specialists to interpret, clarify, and
promote HR practices and policies that are in line with a certain ideology and philosophy.
The Ten C model of HRM is recognised as an all-inclusive and practical model within this
new genre. This model was created by Alan Price, who published it in his 1997 Book
‘Human Resource Management in a Business Context’. The 10 Cs, or the ten fundamental
principles, comprise this approach. These are:

1. Comprehensiveness -An organization's HRM plan must cover employee-

related strategies right from their selection to the time they decide to exit the
organization.
2. Credibility -The HRM practices must promote employee engagement and
foster trust between workers and senior management.
3. Communication -All workers need to understand and accept the
organizational and HRM goals. Organizational culture must promote
transparency and be devoid of any obstacles.
4. Cost effectiveness -Fairness is required in the promotion and reward system.
5. Creativity -The company's distinctive HR initiatives must be the source of its
competitive advantage.
6. Coherence -HRM strategies and activities need to make sense.
7. Competence -The HRM strategy should be designed in way that the
organization develops the capacity to accomplish its goals with the aid of
individual competences.
8. Control -HRM methods and policies must make sure that HR performance is
in line with corporate goals.
9. Change -The fundamental tenet of any HRM strategy must be that existence
depends on ongoing development and improvement.
10. Commitment -The last C emphasises that the individual must be inspired to
pursue organizational objectives.

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1.5 CONTEMPORARY ISSUES BEHIND HUMAN RESOURCE

MANAGEMENT

Organizational environments will inevitably alter because of changes in socioeconomic and

political circumstances. Due to quickly evolving business environment, it becomes important
to regularly update the knowledge and abilities after considering the goals and objectives of
an organization. Five of the contemporary issues include:
1. Setting up an adequate internal environment
The foremost crucial aspect of managing management employees is weaving an
environment that is i) adaptable to external changes, ii) satisfactory for current
employees, and iii) sustainable in the long term.
2. Coping up with the increasing workforces
The organizational size and complexities keep growing just like the number of
individuals who work in the organization. The management of a larger workforce
presents significant difficulties and obstacles, particularly when employees'
awareness of their rights increases.
3. Dealing with the legal environment
Adjustments will need to be made to better utilise human resources to keep up with
the legal environment.
4. Maintaining a psychological state of employees
The paradigm of managers would involve encouraging the employees to maintain a
psychological state of preparedness for any sudden change if ever occurs. From
helping them to developing new knowledge & skills, working on the psychological
state is a never-ending process and requires continuous attention of human resource
managers.
5. Keeping up with the technological advancements
An accurate evaluation of the new technology and providing training to the existing
employees based on it, becomes a daunting task as it sometimes leads to attrition and
retrenchment which results in lowering the motivation of employees.

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 Human Resource Management

IN-TEXT QUESTIONS
10. The responsibilities of HRM managers are now expanded to
a. Tasks b. Organizational Strategies
c. Goals c. None of the above
11. Which is NOT one of the competencies of human resource managers?
a. Leaders b. Strategic Managers
c. Tech Savvy d. Outdated Knowledge
12. ______________gave the 10Cs of the human resource management in the year
_________. Choose the correct option
a. Joshua Stuart in 1997 b. Alan Price in 2007
c. Alan Price in 1997 d. Joshua Stuart in 2007

1.6 INDIAN LAWS RELATED TO THE HUMAN RESOURCE

MANAGEMENT

The laws related to the human resource management (or labour laws) are inspired by British
laws. The widespread perception is that Indian Labour laws (or human resource laws) are
outdated and inflexible. However, India as a country, has implemented various labour laws
catering to industrial relationships, wages, working hours, equality & empowerment of
women, and social security. As an HR manager, one should know the following Indian labour
laws.
1.6.1 Laws related to industrial relations
These laws help in establishing cordial relationships between management and human
resources (or labour). There are specifically three laws pertaining to the industrial relations:
1. The Trade Unions Act, 1926
The law was passed even before independence, and it stated that all trade unions
should be registered under this act.
2. The Industrial Employment (Standing Orders) Act, 1946

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This law acts as a medium of communication between labour and management.

3. The Industrial Disputes Act, 1947
This act allows the government to interfere in the conflict if required.
1.6.2 Laws related to wages
The two pioneer laws under this section are:
1. The Payment of Wages Act, 1936
The objective of this law is to make sure that certain groups of employees get regular
income without any unauthorized deductions.
2. The Minimum Wages Act, 1948
This law ensures the minimum rate of wages to all types of employees as well as
labour
1.6.3 Laws related to working hours
The following laws help the employees/workers/labours to protect their health:
1. The Factories Act, 1948
This law acts as a safeguard for workers to protect their health and provides safety at
the workplace.
2. The Shops and Commercial Establishments Act, 1961
This act is also in similar lines with the factories act. But it deals with the IT
(Information Technology) and ITES (Information Technology Enabled Services)
sector.
1.6.4 Laws related to equality and empowerment of women
1. The Maternity Benefit Act, 1961
This act provides benefits to all women employees working in certain organizations.
This act specifically aims at empowering women.
2. The Equal Remuneration Act, 1976
This act encourages organization to pay equal remuneration to men and women. This
is an anti-discrimination act that focuses on equal pay for equal work.
1.6.4 Laws related to social security
1. The Workmen’s Compensation Act, 1923
The act makes employer responsible for any mishap occurring to an employee while
working. It allows employees to receive compensation for injuries arising out of
accidents during work.
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2. The Employees State Insurance Act, 1948

The objective of this act is to provide financial relief to the employees in case of any
emergency.
Please note that only a few important labour laws have been mentioned in brief.
Please refer Taxman Labour Laws, 2019 edition for deeper understanding on the
labour laws.

IN-TEXT QUESTIONS
13. One of the employees’ unions of your organizations have started
protesting for their unfair demands. As a manager, you feel that the
government can provide better decision and solutions in this scenario.
Which act would allow government to sort out this tussle?
a. Trade Union Act b. Maternity Act
c. Industrial Dispute Act d. Industrial Employment
14. Aman and Naina are working in the ACG company as HR managers at
the same level. However, Naina’s annual package is 6 lacs lower than that
of Aman’s. Which law can help Naina for her remuneration?
a. Equal Remuneration Act b. Maternity Act
c. Trade Union d. Employee’s State Insurance
15. The full form of SWOT is:
a. Strength, weakness, opportunities, tasks
b. System, weakness, opposition, threats
c. System, weakness, opportunities, threats
d. Strength, weakness, opportunities, threats

1.7 SUMMARY

After reading this lesson, all students should be able to answer what is human resource
management, and why is it important? An adequate understanding of this would help
upcoming managers to not commit any hiring mistakes while hiring personnel for their
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organization. The section on the new human resource manager will help the students to work
on the key competencies that are required for strategizing and creating high performance
work systems. A little snippet on the Indian labour laws will help students to comprehend
employments laws.

1.8 GLOSSARY

Strategy: A course of action the company can pursue to achieve its strategic aims.
Strategic Aims: Strategic aims are nothing but organizational objectives.
Benchmarking: The practice of comparing business models with industrial best standards
and practices.
Competitive Advantage: Any factor that allows an organization to differentiate its product
or services from those of its competitors to enhance market share.
Attrition: The involuntary or voluntary departure of employees from the organization.
Retrenchment: An involuntary firing of employees due to the replacement of labour with
technological advancement.
Mission Statement: Summarizes the answer to the question, “what business are we in”.
Employee Awareness: A level to which an employee knows certain policies, situation,
documents, or any other important information specific to his/her organization.
Interpersonal Skills: Interpersonal skills are “the skills we use every day when we
communicate and interact with other people, both individually and in groups”

1.9 ANSWERS TO IN-TEXT QUESTIONS

1. A 10.B
2. B 11. B
3. D 12. C
4. C 13. C
5. C 14. A
6. A 15. C

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7. A
8. D
9. D

1.10 SELF-ASSESSMENT QUESTIONS

Discussion Questions:
1. Explain the concept of human resource management. Discuss major contemporary
issues associated with the concept.
2. What are the basic differences between line and staff managers? Explain with an
organizational example.
3. Define key competencies of the new human resource manager.
4. How HR managements concepts are relevant to other department in an organization?
Individual/Group Activity:
1. Working individually or in groups, develop an outline showing how trends like
workforce diversity, technological innovation, globalization, and changes in work
have affected the college or university you are attending now. Present in the class.
2. Working individually or in groups, interview an HR manager. Based on that
interview, write a short presentation regarding HR’s role today in building
competitive organizations.
Application Case:
India Cleaning Centers
Priyanka Sharma graduated from State University in June 2010, and after considering several
jobs’ offers, decided to do what she always planned to do – go into business with her father,
Amar Sharma.
Amar opened his first laundromat in 1995 and his second in 1998. The main attraction of
these coin laundry businesses was that they were capital rather than labour intensive. Thus,
once the investment in machinery was made, the stores could be run with just one unskilled
attendant and none of the labour problems one normally expects from being in the retail
service business.
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Notwithstanding, Amar had decided by 1999 to expand the services in each of his stores to
include the dry cleaning and pressing of clothes. He embarked, in other words, on a strategy
of ‘related diversification’ by adding new services that were related to and consistent with his
existing coin laundry activities. He added these for several reasons. He wanted to better
utilise the unused space in the rather large stores he currently had under lease. Furthermore,
he was, as he put it, “tired of sending out the dry-cleaning ad pressing work that came in from
our coin laundry clients to a dry cleaner 5 miles away, who then took most of what should
have been our profits”. To reflect the new, expanded line of services, he renamed each of his
two stores Indian Cleaning Centres and was sufficiently satisfied with their performance to
open four more of the same type of stores over the next 5 years. Each store had its own site
manager and, on average, about seven employees and annual revenues of about $500,000. It
was this six-store chain that Priyanka joined after graduating.
Her understanding with her father was that she would serve as a trouble-shooter/consultant to
the elder carter with the aim of both learning the business and bringing to it modern
management concepts and techniques for solving the business’s problems and facilitating its
growth.
Questions:
1. Make a list of five specific HR problems you think Indian Cleaning will have to deal
with in future.
2. What would you do first if you were Priyanka Sharma?

1.11 REFERENCES

Becker, B., & Gerhart , B. (1996). The impact of human resource management on
organizational performance: Progress and prospects. Academy of Management Journal.
Bowen, D. E., & Ostroff, C. (2004). Understanding HRM–Firm Performance Linkages: The
Role of the “Strength” of the HRM System. Academy of Management Review, Vol. 29, No. 2.
Dessler, G., & Varkkey, B. (2016). Human Resource Management, Indian Edition. Delhi,
Chennai: Pearson.
Gary, D., & Biju, V. (2016). Human Resource Management, Indian Edition . Delhi, Chennai:
Pearson.

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 Human Resource Management

Hui, Z. (2009). Notice of Retraction: Practice of Strategic Human Resource Management In

the Enterprise. 2009 International Conference on Computer Technology and Development.
Kota Kinabalu, Malaysia: IEEE.
Lado, A. A. (2000). Strategic Human Resource Management. Academy of Management
Review, Vol. 25, No. 3.
Taxmann. (2019). Taxmann Labor Laws. Delhi: Taxmann.
Ulrich, D., Jon, Y., Brockbank, W., & Ulrich , M. (2012). HR from the Outside In: Six
Competencies for the Future of Human Resources. Newyork, The USA: McGraw Hill
Professional.
Wright, P. M., & Snell, S. A. (1998). Toward a Unifying Framework for Exploring Fit and
Flexibility in Strategic Human Resource Management. Academy of Management Review,
Vol. 23, No. 4.

1.12 SUGGESTED READINGS

Becker, B., & Gerhart , B. (1996). The impact of human resource management on
organizational performance: Progress and prospects. Academy of Management Journal.
Bowen, D. E., & Ostroff, C. (2004). Understanding HRM–Firm Performance Linkages: The
Role of the “Strength” of the HRM System. Academy of Management Review, Vol. 29, No. 2.
Dessler, G., & Varkkey, B. (2016). Human Resource Management, Indian Edition. Delhi,
Chennai: Pearson.
Lado, A. A. (2000). Strategic Human Resource Management. Academy of Management
Review, Vol. 25, No. 3.
Ulrich, D., Jon, Y., Brockbank, W., & Ulrich , M. (2012). HR from the Outside In: Six
Competencies for the Future of Human Resources. Newyork, The USA: McGraw Hill
Professional.
Wright, P. M., & Snell, S. A. (1998). Toward a Unifying Framework for Exploring Fit and
Flexibility in Strategic Human Resource Management. Academy of Management Review,
Vol. 23, No. 4.

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LESSON 2
HUMAN RESOURCE PLANNING
Dr. Malavika Srivastava
Associate Professor
Institute of Information Technology & Management
GGSIPU
Malavika.iitm@gmail.com

STRUCTURE

2.1 Learning Objectives

2.2 Introduction
2.3 Human Resource Planning (HRP)
2.3.1 Nature of HRP
2.3.2 Objectives of HRP
2.3.3 Steps in HRP
2.4 Quantitative Aspect of HRP
2.4.1 Demand Forecasting
2.4.2 Supply Forecasting
2.4.3 Problems in HRP
2.4.4 Guidelines for Effective HRP
2.5 Downsizing
2.5.1 Role of HR Manager in Downsizing
2.6 Employee Retention
2.6.1 Importance of Employee Retention
2.6.2 Employee Retention Strategy
2.7 Summary
2.8 Glossary
2.9 Answers to In-text Questions
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2.10 Self-Assessment Questions

2.11 References
2.12 Suggested Readings

2.1 LEARNING OBJECTIVES

After reading this lesson you will be able to:

• Understand the importance and concept of human resource planning in managing
human resources.
• Understand the process of Human resource planning.
• Understand how to maintain a balance between Human Resource Supply and Demand
• Understand the concept of downsizing and retention and will be able to analyse
conditions where they need to be used.

2.2 INTRODUCTION

Human Resource or manpower may be defined as the total knowledge, skills, creative
abilities, talents and aptitudes of an organization’s workforce, as well as the values, attitudes
and beliefs of the individuals involved. It is the sum total of inherited abilities acquired
knowledge and skills represented by the talents and aptitude of the employed person. Thus,
Human Resource includes not only human beings but also their knowledge, skills, attitudes,
aptitudes etc. Human resource is considered the most dynamic resource of the organization.
Other factors are useless without their effective use by the Human Resources Hence, proper
management of such a vital resource in an organization is inevitable for organizational
success. With that view let us understand the concept of Human Resource Management.
Human Resource Management may be defined as that activity in an enterprise which strives
to mould human resources into an effective organization, provides an opportunity for
maximum individual contribution under healthy working conditions, promotes individual
development and encourages confidence and understanding between the employees and the
employers and between the employees themselves.
Primary to any managerial process are the functions of management. Among these functions
Planning is the vital function of management in any organization. The major focus of
planning is majorly on important tasks like product development, methods of production,
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procurement of raw materials, machinery tools etc. implementation of the methods of

production, sales and marketing, quality maintenance and so on. In addition to these, some
focus is now being placed on planning the manpower of the organization, led from the
increasing people centrism in organizations. In commercial and Industrial undertakings,
planning has been focused on profit taking, procurement production, marketing, quality
control, and recently on manpower. Manpower has now been recognised as the intellectual
asset, that needs to be procured wisely and managed effectively in order to utilise them
optimally for maximum benefits to the organization. Human Resource is not only a resource
that needs to be planned but is important as one of the most important factors that is needs for
execution of all other organizational plans. an important part of the overall planning of an
organization. HRP is essential to realise all other plans and putting them into action in order
to achieve organizational goals.

2.3 HUMAN RESOURCE PLANNING:

In a narrow sense HRP may be defined as the replacement planning which encompasses the
analysis of labour turnover and recruitment policies and developing models for planning
recruitment and promotion of employees. But broadly, HRP is a process that can be realised
in two phases, in the first phase by projecting future manpower requirements and in the
second phase by developing manpower action plans to accommodate the implications of
projection. Thus, manpower planning works for ascertaining objectives, policies and
programmes that will help in developing, utilising and distributing manpower for the
achievement of organizational goals.
In the words of Vetter “In the process of Human Resource Planning, management discuss and
finalise strategies for an organization to bridge the gap between existing manpower condition
to its desired manpower condition.”
2.3.1 Nature of Human Resource Planning:
(i) Manpower planning is forward looking in nature. It aims at ascertaining the future
manpower needs of the organization both in number and kind.
(ii) Human Resource Planning is an integral part of corporate planning. Without a
corporate plan, there can be no manpower plan.
(iii) HRP is a continuous process due to changing demand and supply

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(iv) It presents an inventory of existing manpower of the organization to ascertain the

status of the available personnel and to discover untapped talent presently available
with the organization.
(v) It helps in determining the surplus & deficit of manpower by comparing the total
manpower needs with the present supply of manpower.
(vi) HRP is helpful in case future needs exceeds presently available talent, organizational
programme for recruitment and training begins. And, if the presently available talent
exceeds the future needs, organizational programmes of transfer, deployment,
discharge etc. begins.

ACTIVITY
Considering yourself as a Human Resource Manager, in case of surplus of
employees in your organization, what actions will you take? Enumerate the
suitable steps in sequence.

2.3.2 Objectives of Human Resource Planning:

The main objective of any Planning is to achieve something or the other by doing it according
to the planned way. So is the case with Human Resource Planning, it is a process aimed at
procuring and managing human resource in such a way in an organization that it maximizes
its gains and make it more competitive in nature. To be more specific about objectives of
manpower planning are as follows:
1. Forecasting future requirements for manpower in an organization for its goal
achievement.
2. Calculating the manpower surplus and deficit in the organization.
3. Analysing the effect of technology on the human aspect of an organization.
4. Analysing favourableness of conditions for expansion and diversification related
decisions.
5. Managing and optimally utilising human resource of organization.
6. Ensuring that the human resource needs are timely fulfilled with the adequate quantity
and quality of human resource.

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7. Ensuring insubordination of HRP with the overall organizational planning.

8. Directing to take necessary actions in case of surplus or deficit of human resource.
9. Developing foundation for conducting Management Development Programmes as and
when required.
2.3.3 Steps in Human Resource Planning:
The process of human resource planning involves the following steps:
1. Deciding objectives of HRP: The main purpose of Human Resource Planning is to
maintain a balance between human resource demand and supply. Through effective
planning the future enterprise needs should be assessed in advance so as to increase
preparedness of the enterprise in terms of manpower availability. Also, planners need
to be extra careful while making assessment of availability and requirements of
human resource in the organization, in order to take correct decisions and develop
right strategies.
2. Inventory Management: The management of deficit and surplus of human resource
can be smooth if the organization will be able to manage its human resource
inventory. From the existing skill in the inventory people can be trained, placed,
developed and utilised as and when required, cutting down the cost of hiring and
procuring new set of skills as the requirements occur. It is even helpful in developing
management succession plans or calculating replacements, the need of which may
arise due to retirement, resignations etc.
3. Demand forecasting: Demand is created when there appears a gap between ‘what is’
and ‘what should be’. To foresee the demands of human resource, current manpower
analysis needs to be done by department with major emphasis on functions,
occupation that needs to be filled, level of skills or qualification required. On the basis
of a detailed analysis appropriate decisions can be taken to satisfy the human resource
demands of the organization.

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appraisal of
Human Objectives of
Resource HRP
Planning

Training & Inventory of

Development Human
Program Resource skills

Demand &
Employment
Supply
Program
forecasting

Redeployment
Determine net
and
manpower
redundancy
requirement
plan

Factors influencing future manpower demands are:

a. Employment Trend Analysis: The manpower planners must make a
thorough analysis of employment trends i.e., employments conditions in the
organization during past five years. This in return will help understanding
stability or instability of people in the organization, this will also clarify that
whether the trend has expanding or contracting.
b. Replacement Need Analysis: In an organization there can be various reasons
for replacement, such as death, retirement, resignation and termination of
employees. An analysis of the same may help in finding better replacements
for vacant positions.
c. Productivity: Organizational productivity is closely linked with productivity
of people in the organization. Therefore, caution needs to be taken while
making hiring decisions as a wrong hire may have an adverse effect on the
overall productivity of the organization.
d. Growth & Expansion: Growth and expansion of any organization needs more
human resource. This need should be carefully analysed in advance so as to
have adequate quantity of human resource that favours the decision regarding
expansion of organization.
4. Supply Forecasting: Whatever is the demand, it can be fulfilled only with an
adequate amount of supply. Therefor they carry equal importance in case of human

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resource forecasting. There are specifically two sources of supply of human resource-
Internal and external. Both are utilised depending upon the nature and type of
demand. Internal supply is considered to be more important in comparison to the
external sources. It is so because of accessible availability. It comprises of the
employees working in the organization who can be promoted or transferred to fill up
various vacant positions as and when required. The only thing needed is the
evaluation and tallying of needs with available supply of personnel to understand their
suitability. Tools used for supply forecasting is HR Audit and Replacement charts
This would require an evaluation of the present personnel abilities, strengths and
weaknesses, so as to gauge their suitability for different jobs. In order to estimate the
internal supply of personnel, it is necessary to conduct HR Audit and prepare
replacement charts in advance.
a. Human Resource Audit: Process of HR audit systematically examines the
executive personnel or managers leading to the creation of management
inventories and for non-managerial employees it leads to the preparation of
skill inventories.
b. Replacement Charts: It clearly shows that who will replace whom in the long
run. They are prepared for listing key positions in the organization and
indicating time when it is likely to fall vacant. Also list the most likely
candidates in the organization who ca suitably fills vacancies and the time
when they are ready for promotion.
5. Gap Analysis: Gap is what lies between supply and demand. Manpower planning
experts can identify this gap by comparing demand forecasts with supply forecasts.
With the help of which they will be able to assess either deficit or surplus of human
resources in future. In case of deficit, decisions need to be taken regarding
procurement of human resource i.e., recruitment from outside whereas in case of
surplus, redundancy, redeployment, transfer or retrenchment can be the solution. Gaps
can also be in the form of knowledge, skills and aptitudes. If the employees are found
to be deficient of some specific skills or knowledge, they can be trained on the other
hand employees with higher skills may be diverted into more enriched jobs. As soon
as these gaps are identified, plans are prepared, and appropriate decisions are taken to
bridge these gaps.
6. Redeployment and Redundancy Program: On estimation of surplus manpower, a
decision regarding redeployment/retrenchment of such personnel needs to be taken.

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Redeployment may include the following measures:

(a) Transferring personnel from the departments having surplus manpower to those
having shortage of manpower.
(b) Transfer in sister concerns
(c) Creating ad hoc projects for accommodating surplus staff,
(d) Providing adequate training to personnel and place them in other projects.
Redundancy/retrenchment programme includes the following measures:
(a) Voluntary Retirement: Volunteer Retirement Scheme (VRS), introduced by The
Government of India. It is also termed as ‘Golden Handshake’. With the objective of
solving the problem of overstaffing in public sector undertakings including
nationalised banks, this scheme was introduced wherein management provide cash
rewards to those employees opting for VRS in addition to normal retirement benefits.
Hence this is called “Golden Handshake”. This aims at solving the problem of an
excessive supply of human resource over its demand.
(b) Compulsory Retirement: In contrast to golden handshake there exist the concept of
‘’Iron Handshake’. Under this scheme, the retirement is not volunteer but compulsory,
here management spot the surplus employees and discharges them from service.
Discharged employees do not receive any cash or non-cash benefits other than normal
retirement benefits hence, the name ‘iron handshake’.
(c) Attrition: In a lot of incidents every day in organizations, employees decide to leave
their current organizations. It may be due to various personal and professional
reasons. These positions are kept vacant till it needs to be filled. Such ban on
employment can be implemented organization, department or job wise.
(d) Layoffs: It can either be temporary or permanent. A temporary layoff can be because
of sloppiness in business, machinery or power breakdown or the recent pandemic that
we all went through. Ones the conditions are back to normal, workers are called back.
Permanent layoff is due to shut down or winding up of the company.
(e) Leave of absence without pay: Many a times employee prefer to be on leave without
pay rather being jobless. Therefore, this technique is also used to helps company cut
the labour cost and the employee to pursue his/her self-interest of fulfil other personal
responsibilities while being on leave without pay.
7. Employment Plan: Above was done in case of surplus of manpower but is case of
deficit, there has to be decisions regarding employment of people to fill the gap. For
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this decision to be effective major emphasis should be on the quality and quantity of
manpower to be employed. These decisions will lead to processes like recruitment,
selection, placement, transfer, promotion etc.
8. Designing Training Programme: In many cases what is mostly required to fill the
gap between human resource requirement and availability is the skill only and not a
new hire. This requirement can be fulfilled to an extent by just training people in such
a way that they can harness their skills to be utilised for new projects and
assignments. Hence, employees in the organization must be given appropriate training
for their and organization’s benefit. Development programmes should also be
designed and conducted for them so that enrich their knowledge. Long-term
9. Appraisal of HRP: An appraisal of Human Resource Planning process must be made
to check its effectiveness. Deficiencies must be pointed out corrective actions should
also be taken whenever it is feasible and necessary to remove the deficiencies in
manpower planning. An appraisal of the existing manpower plays will also serve as a
guide in the future manpower planning.

IN-TEXT QUESTIONS
1. Manpower planning is _______________ looking in nature.
2. Human Resource Planning identifies gaps in existing manpower in terms of
their quantity and talent. True / False
3. Right Estimation of manpower requirements is the objective of:
a) HRD b) Human Resource Policy
c) Recruitment Process d) Human Resource Planning
4. Examination of number of employees during past five years is
____________________ trends.
5. Planners can identify ____________________ by comparing demand
forecast with supply forecast.

2.4 QUANTITATIVE ASPECT OF MANPOWER PLANNING

The analysis of manpower planning leads to its two broad aspects, viz. quantitative aspect
and qualitative aspect. The former relates to the determination of the right number of
personnel required for each job in the organization and the later relates to specifying the
quality of personnel in terms of laying down the educational, professional qualification, work
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experience, psychological traits, etc. We will now discuss the quantitative aspect of human
resource planning which consists of the following aspects:
(i) Demand forecasting: estimating future manpower needs by reference to corporate
and functional plans and forecasts of future activity levels.
(ii) Supply forecasting: estimating the supply of manpower by reference to analysis of
current resources and future availability, after allowing for wastage.
(iii) Determining manpower requirements: analysing the demand and supply forecasts
to identify future deficits and surpluses.
(iv) Productivity and cost analysis: analysing manpower productivity, capacity
utilization and cost to identify the need for improvements in productivity or
reductions in cost.
(v) Action planning: preparing plans to deal with forecast deficits or surplus of
manpower, to improve utilization and productivity to reduce manpower costs.
(vi) Manpower budgeting and control: setting manpower budgets and standards and
monitoring the implementation of the manpower plans against them

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Demand Supply

Business Plan Analysis of present

resources

Organization Plan Activity Forecast Internal supply External Supply

analysis analysis

Demand Forecast Supply forecast

Analysis of Human
Resource utilization

Forecast
Deficit/Surplus

Human Resource
Plan

Recruitment Training Improved Alternative Re-

Productivity Sources deployment

Human Resources Budgets/Standards

Human Resources Controls

Fig. 1.1 Human Resource Forecasting

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2.4.1 Demand Forecasting:

Demand forecasting is the process of estimating the future quantity of manpower required.
The manpower forecasts should be based on the annual budget and long-term corporate plan,
translated into activity levels for each function and department. Only a well-conducted
Demand forecast may lead to an accurate estimate of the human resource requirement leading
to the most appropriate decisions.
There are three basic demand forecasting methods:
a. Managerial Judgement.
b. Statistical techniques, including ratio trend analysis and econometric models.
c. Work study techniques.
In many cases, a combination of the above techniques would be used. Now, let us discuss the
above techniques in detail:
a. Managerial Judgement: The most convenient method of forecasting used in smaller
companies is managerial judgment. In this method discussions and brainstorming
sessions of managers come into play. Managers try to analyse their upcoming
departmental workload and on the basis of that decide upon their future requirements
for human resources. It might be done on a ‘bottom up’ basis with line managers
submitting a proposal for approval by top management.
Alternatively, a ‘top down’ approach can be used in which company and departmental
forecasts are prepared by top management, which is thereafter reviewed and discussed with
the departmental managers. Guidelines for departmental managers should be prepared
indicating broad company assumptions about future activity levels which will affect their
departments.
b. Statistical technique: Under this head there are two methods viz Ratio-trend
analysis, most commonly used statistical manpower forecasting and Econometric
Model, more complex and less used technique.
(i) Ratio Trend Analysis: It is carried out by studying past ratios between the
number of direct and indirect workers in a manufacturing plant, and
forecasting future ratios, having made some allowance for changes in
organizations and methods. This technique, although crude, is easy to
understand and use. Its value depends upon accurate records and realistic

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estimates of future activity levels and the effect of improved performance or

changed methods.
(ii) Econometric Model: To build an econometric model for manpower planning,
it is necessary to analyse past statistical data and to describe the relationship
between a number of variables in a mathematical formula. The variables
affecting manpower requirements may be identified under headings such as
investment, sales or the complexity of the product line. The formula could
then be applied to forecast movements in these variables to produce manpower
forecast. This is a complex process only for large organizations.
c. Work Study Technique: In order to calculate that how long operations should take
the amount of labour required, this technique is used by applying work measurement
technique.
2.4.2 Supply Forecasting:
Supply forecasting measures the quantity of manpower that is likely to be available from
within and outside the organization. The supply analysis covers:
1. Existing manpower resources: The basic analysis should classify employees by
function or department, occupation, level of skills and status. The aim should be to
identify from this analysis ‘resource centres’ consisting of broadly homogeneous
groups for which forecasts of supply need to be made. From the management
perspective of their succession planning and preparation of management development
programmes, it may be equally important to know how many people with potential for
promotion exist and where they can be found. The analysis of current resources
should look at the existing ratios between different categories of staff. Recent
movements in these ratios should be studied to provide guidance on trends and to
highlight areas where rapid changes may result in manpower supply problem.
2. Labour Wastage: Labour wastage should be analysed in order to forecast future losses
and to identify the reasons for people leaving the organization. Plans can then be
attached to the problems causing unnecessary wastage and to replace uncontrollable
losses. The manpower planner therefore has to know how to measure wastage and
analyse its causes.
3. Internal promotions and transfers: The supply forecast should indicate the number of
vacancies that will have to be filled to meet the demand forecast. Vacancies arise
because people leave. In order to fill these vacancies, the first strategies to think about
should be internal promotions and transfers as it has various benefits, as it will enable

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the organization to make optimum utilization of resources and it even saves cost of
training new hires in the organization.
4. Effect of changing conditions on work and absenteeism: This assessment should
cover factors operating within the firm such as changes in normal weekly hours of
work; overtime policies; holidays; retirement policies; policies for hiring part-timers
and shift system. Trends in absenteeism should also be analysed to trace causes and
identify possible remedial actions.
5. Sources of supply: Internal sources of labour include the output from established
training schemes or management development programmes and the reservoirs of
skills and potential that exist within the organization. Besides that, external sources of
supply are also equally vital source of supply of human resource. The factors which
can have an important bearing on the supply of manpower are listed below:
Local Factors:
i. Population densities within reach of the company
ii. Current and future competition for labour from other employers.
iii. Local unemployment levels.
iv. The traditional pattern of employment, and the availability of people with the required
qualification and skills
v. The output from the local educational system and government or other training
institutes
vi. Availability of part-time labour
vii. Local housing shopping and transport facility
viii. Attractiveness of area or company.
National Factors:
i. Trends in the growth of the working population
ii. National demands for special categories of manpower
iii. The output of the universities, polytechnics and professional institutions.
iv. The effect of changing educational patterns
v. The impact of national government training schemes
vi. The impact of government employment regulation.
2.4.3 Problems in Human Resource Planning:
(i) Identity Crisis: Many managers as well as Human Resource specialists do not
understand the Human Resource Planning process completely. There can be little doubt that

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unless the Human Resource specialist develop a strong sense of purpose, they are more likely
to fail.
(ii) Lack of support from top management: Human Resource Planning cannot be
fruitful without top management support. As planning is always said to happen at the
top level, it needs complete support from them so that it should flow down to the
other levels and are executed in its true sense.
(iii) Insufficient initial efforts: Any sort of planning requires initiation, and so is the case
with Human Resource Planning. After a plan is initiated, it flourishes slowly and
gradually by placing things in place, developing a full proof plan and then executing it
well. Without initiation human resource planning may not come in its required shape
and form to benefit the organization.
(iv) Resistance from employees: Manpower Planning is very often resisted by employees
and trade unions. What lead them towards this is their feeling that if this planning
increase it will result in higher workload and may also restrict them from bargaining.
This also drive them to feel that it would lead to widespread unemployment,
especially for unskilled labour.
(v) Coordination with other Managerial function: Planning is always more fruitful and
effective when done in consultation with others. Similarly, HRP if done after
understanding departmental requirements also through a thorough discussion and
consultation with the departmental managers, it would be much better.
(vi) Expensive and time consuming: Human Resource planning is mostly resisted by the
employers because of the expense associated with it and high time-consuming quality
which in turn increases the overall cost of manpower.
(vii) Uncertainties: Planning is always done for future, and future is always unpredictable
and uncertain. There are various factors like absenteeism, labour turnover,
technological transformations and market fluctuations that feed this uncertainty, that
becomes the biggest constraints to Human Resource Planning.
(viii) Insufficient Information: Planning cannot dwell in the absence of vital information.
If there will be insufficient information regarding HR requirement and availability,
human resource planning cannot be done effectively.
2.4.4 Guidelines for effective Human Resource Planning:
(i) Organised Effort: Human Resource Planning function should be properly organized.
A separate cell, section, or committee may be constituted within the Human Resource
Department to provide adequate focus, and to coordinate the planning efforts at
various levels.
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(ii) Support of top Management: Planning cannot come to the execution stage without
top management. It is essential to ensure the necessary resources, cooperation, and
support for successful Human Resource Planning.
(iii) Adequate Initial Effort: Human Resource Planning fails because of lack of
sufficient initial effort. To be successful, human resource planning should start slowly
and expand gradually. Development of accurate skill inventory and preparation of
replacement charts are an integral parts of manpower planning.
(iv) Coordination with other Management Functions: To be effective, human resource
planners must coordinate with other management functions rather than being totally
absorbed in their own specialized areas keeping themselves aloof from the other
operating managers.
(v) Integration with organization plans: Human Resource Planning must go hand in
hand with the organizational objectives, as the basic objective of HRP is to procure
such human resources in the organization that can contribute to the achievement of
organizational goals. An important requisite for this is open communication between
planners. The organization lacks such integration will fail in planning constructively.
(vi) Involvement of Operating Managers: Human Resource Planning must happen at all
levels and departments of the organization. It is not only the task of the Human
Resource department. The involvement of all operating managers can make the
process much more constructive in nature

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Human Resource Management

CASE STUDY
RovoNov Testing Ltd. has planned for computerization of nearly 50% of the production
operations and control. It has taken care of all resources in the computerization plan including
human resources. The present inventory of human resources and future requirements of the
production department were specified as given hereunder:

Category of Human Resources Present Inventory Requirements Surplus

after
computerization
Chemical Engineers (Operation) 15 8 7
Chemical Engineers (Maintenance 10 6 4
& Control)
Mechanical Engineers 2 2 0
(Maintenance)
Supervisors 10 2 8
Operators 30 10 20
Quality controllers 5 1 4
72 29 43
The Human Resource Planners suggested the redeployment of chemical engineers in their
newly started sister concern, i.e., Lamant Textiles Ltd. and retrench surplus employees of all
other categories. They also recommended to the management that there was no need for any
other action plan.
The computerization was over by the end of 2001. When the management wanted to start the
production on the newly computerized process, they were shocked to note that not many
employees in the production department were suitable for the new positions and the
information supplied by the Human Resource Planners in this regard did not match the reality.

Questions:

1. What is the main problem in this case?

2. Who is responsible for the present state of affairs?
3. What measures would you suggest dealing with the problem?
4. How can the interests of surplus staff be protected?

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IN-TEXT QUESTIONS

6. Human Resource Planning does not facilitate succession planning in the

organization. True / False
7. _______________ is the process of estimating the future quantity of manpower
required.
8. Which of the following is not associated with Human Resource planning?
a) Information b) compensation
c) Integration d) Welfare
9. ____________________ is the measure of quantity of manpower that is likely to
be available from within or outside the organization.
10. Identity ____________________ is one of the major problems of HRP.

2.5 DOWNSIZING

Downsizing involves organizational restructuring which results in decreasing the size of the
organization and often results in a flatter organizational structure to respond more rapidly to
the pace of environmental changes. Downsizing as a strategy has been adopted throughout
the world to achieve operational economies and increase efficiency to be able to survive and
grow in the uncertain environment. In the context of human resource management,
downsizing involves elimination of certain jobs with a view to improve work efficiency. The
organization reduces staff exceeding its need. As a result, some of the employees get
separated from the organization.
Downsizing may become necessary due to the following reasons:
(i) An organization might suffer from overstaffing due to faulty human resource
planning.
(ii) A change in man-machine ratio may occur due to technological advances.
(iii) An organization may start outsourcing some of its business functions. As a result,
people employed in these functions become surplus.
Downsizing may create a feeling of insecurity causing low morale and high stress among
employees. Employees may feel that they are paying the price for mismanagement.

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Moreover, when competent employees leave the organization, downsizing may erode the
skill base.
2.5.1 Role of HR Manager in Downsizing:
(i) HR Manager must ensure proper communication to minimise the negative effects of
rumours and ensure that individuals are kept informed with factual data.
(ii) In order to sell the idea of downsizing to the employees, HR manager has to convince
trade unions and win their support for downsizing.
(iii) HR manager must also deal with the actual layoffs. He must have programs to assist
the laid off employees. When informed about layoff, employees face many
uncertainties about service pay, retirement benefits, search for alternative job,
transition assistance etc. These uncertainties need to be anticipated and taken care of.
Downsizing of workforce is generally implemented through Voluntary Retirement Scheme
(VRS). Under this scheme, the organization and its employees enter into a mutual agreement
under which employees agree to voluntarily retire on payment of agreed compensation by the
employer. VRS has been recognised as GOLDEN HANDSHAKE because of the benefits for
both employees and employer.
An organization may resort to voluntary retirement scheme involving handsome
compensation to employees to get rid of surplus staff. VRS involves separation of employees
based on mutual agreement between the organization and its employees. VRS is not new to
Indian corporate sector as it has been practised in the past though the magnitude was not large
enough to attract attention.

2.6 EMPLOYEE RETENTION

Rightsizing an organization is important but retaining human assets in it is even more
important as ‘a bird in hand is better that two in the bush’, i.e., retaining existing talent in the
organization is much better than hiring new ones. Employee Retention refers to the various
policies and practices which let the employees stick to an organization for a longer period of
time.
2.6.1 Importance of Employee Retention:
1. The cost of turnover: Increased turnover leads to increased cost due to new hiring
and training of people in replacement of those who have left the positions vacant and
work incomplete for the organizations to deal with. In order to avoid this cost of
turnover, employees must be retained in the organizations.

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2. Loss of Company knowledge: With people moving out of the organizations, their
skills, knowledge, expertise also move out, and regaining the same becomes a
difficult task for the organizations. Human Resource which is also referred to as
intellectual assets must be retained into the organization as much as possible.
3. Interruption of Customer service: In service industries many a times person
rendering services highly matters as the customers establish rapport with them and
wants to be served by them in future as well. In such a scenario if they will leave the
company, it may also lead to losing the customer as well.
4. Turnover leads to more turnover: Many at times it is observed that a person
moving out of the organization can influence other too to take such steps, leading to
mass resignations increasing the overall turnover of the organization. This may be due
to dissatisfaction, discontent, grievance and so on. In such case the root cause needs to
be found out in order to sort it out.
5. Goodwill of the company: Too many people leaving the organization can go in the
bad name of the company losing its reputation and goodwill, which is vital for
organizational growth and success. Hence, this needs to be dealt with in an efficient
manner.
6. Regaining Efficiency: Efficiency ones lost takes too long to gain back. Efficiency in
terms of knowledge, skill, experience if will be lost with the people turning out of the
organization will again require a lot of time, cost and energy to be regained.
Therefore, retention of employees is given importance in the organizations.
2.6.2 Employee Retention Strategies:

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Growth Opportunities

Grievance Redressal Attractive Package

Retention

Training &
Recreation
Development

Fig 1.1 Employee Retention Strategies

In addition to above there are many other important things that can be taken care of for
higher retention:
1. Most important is to hire the Right Person at the Right Place
2. Empower the employees
3. Make employees realize that they are the most valuable assets of the organization
4. Have faith in the employees, trust them and respect them
5. Furnish them with crucial information
6. Keep providing them feedback on their performance
7. Recognize and appreciate their performance
8. Keep their morale high
9. Create a conducive environment for them to work

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Middle
Low Level High Level
Level
Appreciating and
Promoting worklife
recognizing a well done Appreciating and effectiveness
job recognizing a well done
job Understanding employee
Recognizing professional
needs
as well as personal Benefit programs for
significant event family support Encouraging professional
training and development
Providing benefits, perks Providing convenience at and/or personal growth
and workplace workplace opportunities
convenience
Providing Training & Provide an environment
Ocassional Stress Development & P of trust
relievers ersonal Growth
opportunites Respect opinions and
Support in tough time and
suggestions
professional crisis

Fig. 1.2 Retention strategies at various levels.

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 Human Resource Management

IN-TEXT QUESTIONS
11. ____________________ involves organization restructuring resulting in
flatter organizations.
12. Downsizing of workforce is generally implemented through
____________________.
13. VRS is also termed as IRON HANDSHAKE. True / False
14. _______________ is the process in which the employees are encouraged to
remain with the organization for maximum time.
15. Which is not one of the retention strategies:
a) Growth Opportunities b) Authoritative environment
c) T&D d) Recreation

2.7 SUMMARY
For an organization it is very necessary plan each and every function, activity,
process etc. as it is only effective planning that leads to its effective execution. Human
Resource being such a vital asset for any organization, its management needs planning too.
Human Resource Planning forms a base for various other important processes viz.
recruitment selection, deployment, retrenchment and so on. For correct planning it is very
important to be aware of the present state of affairs in the organization, hence, demand and
supply forecast of human resource are referred to as the most important tools for human
resource planning. Through this analysis surplus or deficit of human resource is calculated
which works as reference for decisions regarding recruitment, hiring, retention, downsizing,
retrenchment etc.

2.8 GLOSSARY
Forecast: To say what will probably happen in the future.
Quantitative: Connected with the amount or number of something rather than with how
good it is.
Downsizing: To reduce the number of people who work in the company in order to reduce
cost.
Retention: The action of keeping something or of being kept.

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2.9 ANSWERS TO IN-TEXT QUESTIONS

1. Forwards 9. Manpower Supply
2. True 10. Crisis
3. Human Resource Planning 11. Downsizing
4. Employment Trends 12. VRS
5. Gaps 13. False
6. False 14. Employee Retention
7. Demand Forecasting 15. Authoritative environment
8. Integration

2.10 SELF-ASSESSMENT QUESTIONS

5. Define Human Resource Planning and outline the steps in the manpower planning
process.
6. Briefly discuss the quantitative aspect of Human Resource Planning.
7. How are the requirements of manpower determined in a large organization? Discuss.
8. “The logical approach to staffing begins with a careful assessment and planning of
current and prospective requirements of human resource”. Comment.
9. Explain the concept of Downsizing. Why is it conducted?
10. Explain the concept of Employee Retention. Explain its importance and strategies for
maintaining it.

2.11 REFERENCES
Vetter, Eric W. (1967). Manpower Planning for High Talent Personnel, Bureau of Industrial
Relations, p. 15
Coleman, Bruce P. (1970). An Integrated System of Manpower Planning. Business Horizon,
Vol. 13, p. 89.
Flippo, Edwin B. (1981). Personnel Management, McGraw-Hill, New York, 1981. P. 110.

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 Human Resource Management

Mathis, Rebert L. and Jackson, John H. (1987). Personnel: Contemporary Perspective and
Applications, West Publishing Company, p. 69.
Mackey, C.B. (1981). Human Resource Planning; A Four Phased Approach. Management
Review, p. 17.
Chhabra, T.N. & Chhabra, Monica S. (1988). Essentials of Human Resource Management,
Sun India Publications, New Delhi, p. 6.3-6.24.
Chhabra, T.N. (2019). Principles and Practices of Management, Dhanpar Rai & Co., Delhi, p.
271.

2.12 SUGGESTED READINGS

Coleman, Bruce P. (1970). An Integrated System of Manpower Planning. Business Horison,
Vol. 13, p. 89.
Chhabra, T.N. & Chhabra, Monica S. (1988). Essentials of Human Resource Management,
Sun India Publications, New Delhi, p. 6.3-6.24.

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LESSON 3
JOB ANALYSIS AND TALENT ACQUISITION
Ms. Shalu Garg
Assistant Professor
Guru Gobind Singh Indraprastha University
shalugarg11901@gmail.com

STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 Job Analysis
3.3.1 Concept of Job Analysis
3.3.2 Job Description
3.3.3 Job Specification
3.3.4 Comparison of Job Description and Job Specification
3.3.5 Uses of Job Analysis
3.3.6 Process of Job Analysis
3.3.7 Techniques of Data Collection for Job Analysis
3.4 Downsizing and Retention
3.4.1 Downsizing
3.4.2 Retention
3.5 Talent Acquisition and Recruitment
3.5.1 Talent Acquisition
3.5.2 Recruitment
3.6 Selection and Induction
3.6.1 Selection
3.6.2 Induction
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3.7 Summary
3.8 Glossary
3.9 Answers to In-text Questions
3.10 Self-Assessment Questions
3.11 References
3.12 Suggested Readings

3.1 LEARNING OBJECTIVES

After studying the lesson, the students will be able to:
• Get acquainted with job analysis, job descriptions and job specifications.
• Learn the various techniques for data collection for job analysis.
• Explain the steps involved in recruitment process, selection process and the induction.
• Understand meaning of talent acquisition and downsizing.

3.2 INTRODUCTION
This lesson will be very helpful for the future job seekers and job providers. In this lesson we
will be learning how to tackle the problem of over staffing, how we will hire the new
employees, how we will be creating a fit between the right people and the right job. We will
be gaining knowledge about how the job analyser analyses the job, develops job descriptions,
and prepares job specifications. We will also learn how can retain the talented employees so
that they do not leave our organization. We will be looking at various internal and external
sources of recruitment, whole process of selection. And lastly, we will also see how we
should orient the new employee in the organization.

3.3 JOB ANALYSIS

3.3.1 Concept of Job Analysis:
Job Analysis is the process of collecting data for a particular job which will distinguish this
job from the other jobs in the organization. It involves collecting the data which will guide
about the skills, knowledge, abilities, and qualifications required for the job. Job analysis also
instructs about the tasks, duties, and responsibilities related to the job. The management will
collect the data related to the job and then will analyse it.
The meaning of the terms involved in the Job Analysis:
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a) Job- Job means grouping of tasks, positions involving some duties, responsibilities,
knowledge, and skills.
b) Position- Position is the collection of tasks and duties regularly assigned to one
person.
c) Duty- Duty is the related to sequence of tasks to be performed.
d) Task- It is a specific activity which has a process and few steps.
e) Occupation- Occupation is grouping of jobs.
f) Job Family- Job family consists of jobs of similar nature like all jobs of doctors.
Job Analysis has two by-products which are Job Description and Job Specification. The
purpose of analysing the job is to develop the differentiation between the various jobs so that
not job is same in the organization as it will lead to duplication of work. Job analysis involves
studying the aptitude required, skills required, level of understanding required for a particular
job. Also analysing the physical and mental characteristics required by the job holder for the
job like personality, confidence, learning skills, communication skills, etc.
3.3.2 Job Description:
Job Description talks about the requirements of a particular job which is necessary before
advertising any vacancy. It is a detailed facts about the job which consists of content related
to the job likes roles and responsibilities of the job. It is a factual written document giving
descriptions about the job.
Details which can be included in Job Description are as follows:
a) Name or the Title of the Job- Like Manager, Financier, CEO (Chief Executive
Officer), CFO (Chief Finance Officer).
b) Location of the Job- It includes the name of the department for which the job would
be advertised.
c) Summary of the Job- It will include the task to be performed in a summarised
manner.
d) Usage of Tools, Machines or Equipment- Whatever machinery or tools or
equipment will be used should be described in the job description as it will give
indication about the job.
e) Nature of Relationship- It should clearly indicate the nature of relationship of job
with other jobs in the organization as it will give clearer picture about the job.
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f) Work Environment- For interpreting the work environment, condition of work,

condition of physical environment all should be written under job description.
3.3.3 Job Specification:
Job Specifications talks about the requirements of a job. It translates the job descriptions into
physical characteristics which are necessary to perform a job. These are the minimum
acceptable qualities of human beings which should be possessed for a particular job.
The Job Specifications include:
a) Mental Skills
b) Educational Qualifications
c) Training
d) Experience
e) Health
f) Personality
g) Creativity
h) Initiative
i) Aptitude
j) Interests
Job Specifications serve as a guide which helps the management in hiring right people for the
right job. It acts as a parameter which needs to be fulfilled for the candidates and helps the
management in judging the eligible candidates.
3.3.4 Comparison between Job Description and Job Specification:
S.No. Basis Job Description Job Specification
1. Meaning Job Description talks about Job Specifications talks about the
the contents of a particular qualities required for a job.
job
2. Importance It is important to define the It is important because it aids in
job. recruitment, selection, etc.
3. Includes It includes title, It includes qualifications, training,
responsibilities, location of experience, etc.
job, job summary, etc.

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4. Precedes or It precedes Job Specification. It succeeds Job Description.

succeeds

3.3.5 Uses of Job Analysis:

The Job Analysis is used in various fields which are given below:
a) Human Resource Planning- Job analysis helps in knowing the qualifications of the
human resource which is required in the organization.
b) Recruitment- When job analysis provides the description of the job then it becomes
easy to gather the application from the eligible candidates.
c) Selection- Job specifications help in hiring right people for the right job. It creates a
fit between the prospective employee and the job.
d) Placement- With the job analysis, the interests, knowledge, skills all these traits can
be matched with the potential employees, and they can be hired and placed to the right
positions in the organization according to their abilities.

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e) Training and development- If the employees are clearly acquainted with what is
expected from them then they can also indulge in some skill development and
training.
f) Job Evaluation- Evaluating the job will help in fixing the compensation for that job.
Job description helps in knowing the worth of the job to calculate the remuneration
for the job.
g) Performance Appraisal- Job analysis gives the benchmarks or the yardsticks against
which the performance of the employees can be judged. The standards can be
matched with the actual performance of the employee, whether he is able to achieve
the targets given top him or not.
h) Employee Counselling- The employees which are not able to cope with the present
job according to the needs of the job then they can be guided and counselled to adopt
another job which will relate to their domain.
i) Job Design- Job analysis helps in designing the jobs according to the specifications
and descriptions. It also helps in re formulating some jobs.
j) Organisational Design- Job analysis helps in grouping and classifying different types
of jobs which helps in building the structure of organization in terms of authority and
relationship building.
k) Safety and Health- Lastly, job analysis helps in finding the work environment which
guides any hazardous conditions of working or any unhealthy environment. There can
be dust, heat or noise in the industry which can cause issues to the employees.
3.3.6 Process of Job Analysis:
There are number of steps in the process of Job Analysis which are discussed below:
a) Organisational Analysis- The very first most step in the process of Job Analysis is to
find the number of jobs available in the organization to know the linkages and the
relationship between them. It would help the job analyser to know the goals and the
objectives of the organisation and in developing the jobs.
b) Acquiring Knowledge about Jobs- It is critically important to know all the job titles
available in the organization because sometimes the titles which are similar are not
related and vice-versa. After knowing the tittles, the analyser would fetch information
related to different jobs. The information should answer what, when why and how
about the job.

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c) Taking Samples for Jobs- The analyser of course could not analyse all the jobs so he
takes some jobs which will be acting as a representative of other jobs for analysing
and judging.
d) Gathering Information- Now the question arises is who will collect all the required
information. So, the analyser can take the help from trained officials from outside or
can take help from the staff already working in the organization.
e) Data Collection- After this is decided that who is going to collect the data, the phase
of data collection comes into picture. Now the data collection should involve the
duties, tasks, role, responsibilities, etc. related to the job.
f) Development of Job Descriptions- The information which is gathered will be used to
prepare a factual statement describing the roles and responsibilities which are required
for performing a job.
g) Preparation of Job Specifications- The last step is to prepare the specifications for
the job which will specify the physical and mental characteristics required to perform
a job.
3.3.7 Techniques of Data Collection for Job Analysis:
There are some techniques which are used by the management for collecting the data for
analysing the various jobs which are explained below:
a) Questionnaires- The questionnaire is a popular method of collecting data for
analysing jobs. It is distributed to the employees and supervisors for fetching the
information. It consists of questions related to the description of duties, working
conditions, tasks, responsibilities, etc. This method would be impactful if the
respondents understand the questions carefully and provide the answers with
objectivity.
b) Written Narratives- In the organizations where the supervisors maintain detailed
records of their tasks, timings of the task, this information can serve as written
narratives. This method is little unsystematic and unorganised. This method should be
coupled with other methods so as to fetch the correct details.
c) Observation- In this method, the analyser of the job observes the workers performing
their tasks, duties, and responsibilities. After observing, he makes the notes for the
same. But this method has limited applicability because observing every job is not an
easy task. For example, observing the salesman would mean that the analyst should
follow him wherever he goes to sell his products for several days.
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d) Log Records- Under this method, job holders are provided with a logbook under
which they need to enter every detail of the work performed. The type of tasks they
have done, type of duties they have performed, starting time, and ending time of each
work. But this logbook provides incomplete information because it does not consist of
the type of equipment used, the type of machine used, and the type of tools used. And
also, it suffers from one more limitation that is not everyone will maintain this
logbook properly and enter every detail. This method is used for the jobs which are
not easy to observe, like job of scientists, senior executives, researchers, etc.
e) Interviewing- Under this method, the job analyst interviews the employee and the
supervisor of the employee to get the information about the job. From this method, the
job analyst can easily get the information related to the job. Structured questions can
be asked to fetch the information from the job holder and the supervisors. After this
the job analyst can make judgements which information is useful for his job
designing.

ACTIVITY
Suppose you are given the responsibility of hiring a financier for your company.
Prepare the job descriptions and job specifications for the job of financier.

IN-TEXT QUESTIONS
6. The two by products of Job Analysis are _____ and ______
7. Observing is one of the techniques of data collection. True/False.
8. The _______ explains the characteristics of the job.
9. Job Specifications explains the roles and responsibilities of the job.
True/False.
10. Does safety and health are
11. 5included in Job Analysis? Yes/No.

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CASE STUDY
A Case Study on Job Analysis
ABC Pesticides Company is 9-year-old pesticides making company in Kerala,
decided to expand their business in 4 other states namely Jammu, Gujrat, Punjab and
Maharashtra where the product is having good demand. They planned to approach
farmers directly to understand their demands and also the dealers in the said state to
establish the products.
Mr. Arjun is the head of HR department of the company. The senior executive told him to
select four best candidates for marketing purpose who can sell company’s product and
capture good market share. Mr. Arjun started finding the best personnel for this task and
found four candidates who have good experience and have good track record in top
pesticides making companies. So, Mr. Arjun selected these four candidates and also
introduced them to the senior executive and assigned them with their duties and
responsibilities.
After a month, the senior executive was very disappointed with the performance of these
candidates who have been placed. He called up Mr. Arjun and gave him the feedback
about all those candidates. He told Arjun that only one candidate was able to bring the
business from one state, rest of the candidates didn’t add in the business anything and
also, they are quitting. He also added that Mr. Arjun shouldn’t be paid as he was unable to
do his basic HR job.
1. What went wrong in the case?
2. Who is at fault the senior executive or Mr. Arjun or the three failed candidates?
3. How can the pesticides company come out of this issue?
4. What are the HR concepts that you can correlate with this case?

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3.4 DOWNSIZING AND RETENTION

3.4.1 Downsizing:
Downsizing refers to the process of reducing the number of employees in the organization. It
involves terminating the contract of many employees at the same time. Downsizing is also
referred to as Restructuring or Rightsizing. It leads to flat structure of organization which is
more competitive and eligible to adopt to the threats and opportunities coming. It is a planned
and deliberate action taken by management to reduce the number of staff in the organization.
During downsizing, many workers are waved off and others are forced to work in the
environment which is not certain. Downsizing is a permanent reduction of the employees
unlike the case of layoff which is a temporary elimination of employees. An organization can
also give option of VRS (Voluntary Retirement Scheme)
There can be various reasons for downsizing-
a) Reducing the increased expenses of the organization.
b) Improving the company’s overall operations.
c) Removing the unprofitable projects which will lead to termination of jobs.
d) Meeting the challenges of the environment.
e) Upgradation of technology due to which some employees become obsolete.
f) Changing the location of the business like moving the business from one place to
another which will create difficulty for some of the employees.
g) Solving the problem of overstaff.
h) Reducing duplicate work.
i) To save the organization from recession like in the case of Covid.
j) To adapt to the latest technology.
k) Giving more concentration on core activities and outsourcing the non-core activities.
Measures taken by Human Resource Manager during Downsizing:
a) Communicating with Employees- HR manager plays a critical role during
downsizing as he plays the mediating role between the management and the
employees. He conveys the reasons for the termination of employees. If the manager
will communicate everything positively then chances of negative word of mouth and
rumours about the organization will get somehow reduced.

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b) Gaining Employee’s Union Trust- The manager should gain the support of trade
union by convincing them the need for downsizing. To tackle union can become a
challenge for the management because the union can protest against the organization.
In India, this policy is much opposed by the trade unions.
c) Giving Outplacement Services- The manager can help the displaced employees in
finding alternate jobs by referring them in other organizations or by finding them
other jobs or by helping them in preparing resume according to the industry’s
requirement or helping them with career counselling.
d) Looking at Other Possible Alternatives- The HR manager should try to convince
the top-level management that downsizing should be the last option, first try other
alternatives which can help in overcoming the problem of over staffing. The various
alternatives can be:
i. Reducing the number of work hours of all the current employees which will
lead to cost reduction and the termination of employees will not be required.
ii. If the number of employees is more in one department, then they can be
shifted to some other department which in understaffed.
iii. Giving the option of VRS to the employees.
iv. Laying-off employees which mean temporary elimination of the workers for
some period of time so as to cut down the cost.

ACTIVITY
You are working as the HR manager in ABC company, due to Covid your
business has faced recession. Earlier the company had 120 employees but now
the production of the company got reduced. So, what all other alternatives can
you take except permanently eliminating the workforce?

3.4.2 Retention:
Acquiring talent is not only the challenge faced by the organization, but the bigger challenge
is to retain those employees with the organization for a longer period. There are lots of
opportunities for talented people out there also the problem of poaching and raiding is going

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on there in the industry. If we will not provide the employees with job satisfaction and with
all the facilities, then they may switch to a job with higher pay and higher facilities.
Measures for Retention of Talent:
a) Acquiring Right Talent- It is very important to employ the right people for the right
job as if they will properly fit in the job then they would feel more satisfied with their
work. If there is a misfit between the employee and the job then that employee should
be transferred to the department where he fits well according to his interest,
qualifications, and skills.
b) Providing Attractive Remuneration- If the management wants to retain their current
employees, then it should provide them with good compensation packages so that
they cannot be easily poached.
c) Encouraging the Involvement of Employees- When the management engages their
employees in the decision-making, planning, and formulating of strategies then the
employees feel that they are being valued and they are a vital part of the organisation.
This will increase the loyalty and the commitment of the employees towards the
organization.
d) Challenging Projects- Providing the motivated employees with meaningful and
challenging projects makes them feel satisfied and increases their dedication towards
their work and organization.
e) Recognising Performance- When the employees are recognised for their work, they
feel being valued in the organization because their work is getting appreciated and
praised. This will improve their relationship with the management.
f) Job Security- For retaining the employees, the very simple step a management can
make is to provide the employees with the job security. Some employees prefer
secured jobs even if they are offering little less pay than the unsecured jobs. So, if the
employees feel job insecurity, they may leave our organization for a secured job.
g) Career Development- The employees at higher positions want professional growth
also with the personal growth. So, the organization should try to inculcate some sort
of training programmes for such employees so that they can advance in their careers
simultaneously with their work schedule.
h) Positive Work Environment- Last but not the least, the organization should provide
the employees with positive and cordial work environment. The atmosphere of the
workplace leads a great impact on the effectiveness and the efficiency of the
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employee. The management should understand work-life balance of employees and

provide an atmosphere with great communication, trust for each other and cooperation
among all.

ACTIVITY
Imagine you are the manager of the company, and your rival company is
poaching your talented employees.
What all measures will you take to retain your employees?

CASE STUDY for Retention

Attracting and Retaining Talent at ABC Company
ABC Company is a diversified advertising agency company with more than
21,000 associates in the U.S., Canada, and the UK. Relatively early in its growth cycle,
the company realised that the requirement to create a lean, engaged, and productive
workforce. Given the turbulent environment in which it operates, ABC Company
realised the need to align its organisational design and staffing to meet current and
future business requirements while accommodating rapid and unexpected changes. To
meet this challenge, ABC Company developed an integrated workforce-planning
framework using a cross functional team that homed in on both the staffing mix and
staffing dynamics of the business. Using multi-dimensional scenario modelling, optimal
mixes of internal and external human capital could be determined- laying out the
number of positions available at each level for Marketing, Operations, IT and Staff
groups. The modelling helped identify which groups should focus on attracting talent at
any given time and establish ceilings on attrition rates by allowing for greater control
over promotion rates. The impact on the company has been positive and measurable.
Not only has ABC Company been able to better maintain stable executive headcount,
but it has also broadened its control over staffing issues and set a floor for promotion
rates. The latter has had a positive effect on retention of talent.

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3.5 TALENT ACQUISITION AND RECRUITMENT

3.5.1 Talent Acquisition:
Talent Acquisition is the function of the human resource department which involves
finding the people which can be hired. The talent acquisition is the work of top-level
management. It is related to making strategies and plans about how to proceed with the
acquisition of new talent in the organization. It involves inviting applications from eligible
candidates and then choosing the right people for the right job. It is the process of hiring,
deploying human resources and providing them with fair compensation. It is the process
which involves:
➢ Recruitment
➢ Selection
➢ Induction
➢ Training
Talent acquisition is important from the viewpoint of the organization because if the
employees will be less or more in number it would be a problem for the organization. If the
number of employees is less in number, then it would hamper the work and the growth of the
company. If the number of employees is more than it would increase the unnecessary cost of
the company. Also finding the right personnel is vital as lots of time, effort and money are
involved in the process of hiring any employee. We will be learning the meaning of the
terms, recruitment, selection and induction in the next section of the lesson.
3.5.2 Recruitment:
Recruitment is the process of bringing pool of applications. It involves making people
apply for the vacant positions in the organization. It fosters attracting various suitable
candidates to enable the organization to choose the best one among them. Recruitment is a
positive process which involves finding the prospective employees for the current or future
position of job opening. For recruitment process various sources have to be identified through
which personnel can be attracted. This process of searching different sources is known as
process of Recruitment.
Recruitment process precedes the selection process and is related to making all the
applications available at a single place for management to choose the suitable candidate. For

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collecting various applications, the human resource department advertises the vacancy in
various sources so that people can apply.
Process of Recruitment-
a) Identification of various sources from where personnel can be attracted.
b) Analysing their feasibility and viability.
c) Choosing the appropriate source which will provide us with the desired candidates.
d) Inviting applications from the candidates for the vacant positions.
The scope of recruitment is widespread, and the prospective and potential employees can be
invited from various internal sources and external sources.
Internal Sources- Internal sources of recruitment means when we recruit the employees
which are already working in the organization. Sometimes, the candidate which is required
by the organization is easily available inside the organization only. So, there is no need to
hunt the employees from outside sources.
There are three types of internal sources which are given below:
a) Transfer- Transfer means when an employee is shifted from one job to another, one
unit to other or from one shift to another which carries same set of responsibilities,
compensation, and same designation. It is generally done so that the problem of over
staffing can be overcome. Transfer is a horizontal shift of the employee in the job
status. For example, a manager of a company is shifted from its Mumbai branch to
Delhi branch.
b) Promotion- Promotion means when an employee is shifted to a job with greater set of
responsibilities, higher compensation and with higher position. Promotion is a vertical
shift of an employee in terms of job status. The existing employees may be given
some sort of training for getting promoted to higher positions or higher designations.
Promotion acts as a motivating factor for the employees to work harder in the organization.
For example, promoting an eligible Assistant Professor to the vacant position of
Associate Professor.
c) Re-employment of Ex-employees- Re-employment of existing employees means
employing the people who was working with the organization in the past but left the
organization due to some personal reasons. It is cheaper for the organization to
employee the ex-employees as the company already have a data of them and the
organization knows them too well.

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Advantages of Internal Sources:

a) The internal candidates have all the insider knowledge about the organization.
b) Promotion will boost the motivation among the existing employees.
c) Promotion will lead to the increased efficiency among the existing employees as they
have a motivating factor to work upon.
d) Training costs will be reduced if the existing employees will be promoted to the
senior designations.
e) When the internal sources are used then the capabilities of employees can be used in
the best possible manner.
f) The cost involved in recruitment through internal sources is very low.
Limitations of Internal Sources:
a) Young blood cannot be found out from the internal sources which act as a demerit of
recruiting through internal sources.
b) Better talent which can be hired from the external sources cannot be achieved if we
rely on internal sources only.
c) Employee mobility is reducing which is little healthy for the organization.
d) There can be partiality in promoting the employees to higher positions. For example,
the manager will give promotions to his favourites regardless of their inability for that
position and not promoting the deserving candidate because he doesn’t like a
particular employee.
e) Growth of the organisation becomes limited as fresh talent is not hired from the
external sources.
External Sources- External sources of recruitment means when we hire the employees from
outside the organization. Sometimes, the suitable candidates are not available inside the
organisation, so the organization must search the external sources like through advertising or
placement agencies, etc.
There are various types of external sources which are given below:
a) Direct Recruitment- Many organizations are approaches by some unskilled workers
checking whether they can get employment there. Also, some organizations give
recruitment at factory gate, it means whenever there is more work, or many workers
have taken a leave together than these workers can be called to fill the gap. These

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unskilled workers can be kept at temporary basis, and they are also known as Budli
Workers.
b) Casual Callers- In many reputed organizations, qualified people also approach by
sending their CV. These people can be called whenever the need arises and are also
called Unsolicited Applicants. The organization can maintain a file of these
applications so that whenever vacancy is there, these people can be called.
c) Advertising- Advertising the vacant position has become a fashion these days as it
helps in getting applications from world-wide. The advertisement can contain the
minimum qualifications necessary to appear for the interview which will weed out
some unsuitable candidates.
d) Employment Exchanges- There are some employment exchanges made by
government under which government has also made it mandatory top fill some
vacancies through these exchanges.
e) Placement Agencies- Like employment agencies there is a network of private
companies which provide personnel. These professional companies provide various
categories of personnel to the organizations.
f) Management Consultants- Management consultancy firms specialise in providing
the personnel, the also advertise the vacancy on the behalf of their clients
(organizations). These consultants have a data bank of qualified personnel and
specialises in providing top-level and middle- level executives.
g) Campus Recruitment- Campus recruitment is a very popular method of finding
qualified personnel as in colleges they complete their degrees which makes them
qualified for the job. The organizations can visit the institutions and can conduct
interviews there to find the suitable candidates.
h) Recommendations or Referrals- The organizations prefer referrals of the existing
employees as some knowledge of their background can be easily found. Also, the
recommendation by some business friends, family also acts as a good source of
recruitment.
i) Labour Contractors- Labour contractor b rings labour in the organization, while he
also works in the same organization. But there is a limitation in this method that if the
labour contractor leaves the organization, then the labour which he brought will also
leave with him. So, this method is not very popular but used in construction industries
even nowadays.

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j) Web Publishing- Nowadays putting advertisement on the internet has gained a lot of
popularity. Even some websites are also meant specifically for job findings like
www.naukri.com and www.jobstreet.com, etc.
k) Telecasting- When the organization posts the vacant position on television through
some channels like Door darshan, this method is called telecasting. The advertisement
should be with every details along with the job specification.
Advantages of External Sources:
a) When we use external sources, qualified personnel can be attracted.
b) When the advertisement is given in newspaper, the organization receives lots of
applications and has a wider choice to choose from.
c) Fresh and young blood can be catered to when the organization hires the employees
from the external sources which is not possible in the case of the internal source of
recruitment.
d) If the organization caters to external sources, then the existing employees will work
harder to prove their worth to the organisation.
Limitations of External Sources:
a) When the organization caters to the external sources for recruitment, it acts as a
source of dissatisfaction among the existing employees.
b) The hiring from the external sources is a time-consuming process.
c) Also, the hiring the employees form the external environment is a costly affair as
searching candidates needs investment in the whole procedure.
d) Uncertainty factor is there when hiring from external sources as there is no guarantee
of finding the right person for the right job.
Comparison of Internal Recruitment and External Recruitment:

S.No. Basis Internal Sources External Sources

1. Meaning Searching candidates from Searching candidates from
within the organization outside the organization
2. Cost involved It is economical in nature. It is costly.
3. Level of Existing employees become Existing employees become
motivation highly motivated. highly de motivated.

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4. Fresh Talent Fresh talent cannot be found Fresh talent can be found out
out. easily.
5. Time taken It is a quick process. It is a time-consuming process.

Recent Trends in Recruitment:

a) Outsourcing- When the organization hires the personnel from some outside agencies
on temporary basis rand does not offer them job as employee, this process is known as
Outsourcing. It means when we hire the personnel on lease. The agencies which
outsource the personnel has a contract with these organizations. These organizations
pay these agencies their payment and these agencies in turn pay the remuneration to
the personnel. Under outsourcing, the businesses do not have to trouble themselves in
finding the right candidate and does not need to give advertisements which is a time-
consuming process and costly affair.
b) Poaching or Raiding- Poaching means giving employment to the personnel who are
already employees with some rival organization. This can be done by giving them
higher pay and more benefits than they are getting in their current organization. For
example, the employees of Pizza Hut can be raided by the Domino’s which will also
bring the insider information of the organization along with the employee.
c) Website or E-Recruitment- With the digitalisation all around the globe, we can
easily advertise our vacant position on the internet and the potential candidates can
send their CV (Curriculum Vitae) through emails. The applications of candidates
which seems to be suitable can be chosen from the various applications. This process
is cheaper and takes less time. The organization can easily find the right people for the
right job.
d) Internships- Internships refers to employing during the summer before graduation
from college. These can be in some technical courses. Employer tries to find talented
interns and can also give them job on their completion of training period if they work
well.
e) Walk-In Interview- Under walk-in interview, the employer advertises its vacant
position with a tag walk-in interview, it means anyone who is eligible for that vacant
position can come and contact HR department and give interview. The candidate is
also asked to fill the application form during the time of interview so that his details
can be collected.

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ACTIVITY
Imagine you have been appointed as a recruiting manager in an Automobile
Industry in India, how will you recruit for entry level positions in different
departments.
Prepare a draft for the same in brief.

IN-TEXT QUESTIONS

11. Write down the two sources of external recruitment- _____ and ______.
12. Does employment exchange a part of internal source of recruitment?
True/False.
13. Downsizing involves VRS. Yes/No.
14. Is promotion a part of internal source of recruitment? True/False.
15. _______is the process of gathering a pool of applications.

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CASE STUDY
The XYZ Company Recruitment Process
One of the most notable statements of the CEO of XYZ Company is that “XYZ
Company invests in people.” The main reason why people from different cultures, have
been dreaming of being recruited and hired by XYZ Company is that the company offers
possibly the most outstanding job compensation packages any normal employee could
ever enjoy.
In order to attract the best employees, XYZ Company draws them by the promise of
wealth and luxury, providing their employees with almost everything an employee could
possibly need, from absurdly high compensations to extravagant and luxurious benefits
like gourmet food, carwash, gym, snacks, exercise classes, dry cleaning services, car
services, haircuts, oil changes, massages, check-ups and many more, all for free.
Nevertheless, the recruitment process was also far beyond ordinary. Several people who
have had experience in the XYZ Company recruitment process narrates that the
experience was totally nerve-wracking. One applicant who underwent interviews for XYZ
Company has had five to seven interviews in one day for two to three straight days. That
applicant claims that the interviews were really tough with some of the brightest people in
the world, conducting the interviews filled with brain teasers, algorithmic problems, and
IQ tests.
Another applicant who also have had experiences in the recruitment process of XYZ
Company claims that his XYZ Company experience was one of the most nerve-wracking
adventures of his life. The interviewers were looking for extremely bright individuals and
so the recruitment method was filled with IQ tests, brain teasers, algorithms, data
structures, and a lot of mathematics involved in it.
Questions:
1. How was the experience of the employees of the recruitment process at the XYZ
Company?
2. Why the XYZ company was so popular regarding its recruitment?
3. How the XYZ company finds the most suitable candidate for the company?

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3.6 SELECTION AND INDUCTION

3.6.1 Selection:
Selection is the process of choosing the right candidate for the right job. It involves
screening the various applications and from them choosing the best candidate which fits
optimally for the required position. It is the process of differentiation which differentiates a
candidate from the other based on skills, talent, and qualifications.
Selection is a negative process because it involves rejection. In the process of
selection, the selection committee rejects the unsuitable candidates from the list of the
candidates. There are various stages to weed out certain candidates for a job.
Selection is a vital process for the organisation as it involves lot of time and money of
the organisation. It is the process including heavy investment. If the employer has chosen the
wrong candidate for a job in consideration, then there will be a loss of time, money, and
effort which was used during the selection period of the employee. Hence, a systematic
procedure for selecting employee should be made by the organization so that right people can
be employed.
Every phase in the process of selection procedure should be eligible in getting more
and more knowledge about the various applicants or candidates. When the company will
select right people for the right job then the employee will prove to be an asset for the
business and lead the business to great heights.
The benefits for selecting right candidate are as follows:
a) Rate of Absenteeism- When right candidate is employees which is dedicated towards
the organisation then he the rate of absenteeism will also get reduced.
b) Labour Turnover- When the employees feel satisfied with the organisation and they
are valued then they do not think about switching their jobs and therefore, the labour
turnover also gets reduced.
c) Rate of Industrial Accidents- When suitable candidate who have knowledge and
skills about that job then the chances for industrial accidents will also be less.
d) Job Satisfaction- When employees have the job of their interest, and which is of their
choice then they feel more satisfied with their jobs and contended towards the
organisation. It will also increase their efficiency.

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e) Motivation of Employees- When the organization values their employees, listens to

them, and treat them as asset for the business then the employees feel highly
motivated to give their best for the organization.
Difference in Recruitment and Selection:
S.No. Basis Recruitment Selection
1. Meaning Recruitment is the process Selection is the process
of actively searching and of choosing the right
finding candidates to candidate among all
apply for a specific candidates who have
position or job. applied for the job.
2. Nature Recruitment is a positive Selection is the
process as it involves all negative process as it
candidates to apply for the involves weeding out
vacant position. the unsuitable
candidates.
3. Aim The aim of recruitment is The aim of selection is
to make a pool of to choose the right
candidates that means candidate for the right
bringing a greater number job which matches the
of applications. skills and qualifications
required.
4. Procedure The organization The organization
advertises its vacancy makes the candidate to
through various sources pass through various
and distribute the stages like filling form,
application from through employment tests,
which the candidate can interview, etc.
apply in online mode and
offline mode.
5. Contractual No contractual A contractual
Relationship relationship is made relationship is made
because there is only between employer and
communication about the the employee as the

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vacancies in the candidate is hired to

organization. perform services.
6. Number of There is no limit on the There is a limit on the
Candidates number of candidates number of candidates
applying in the process of getting selected in the
recruitment. process of selection.

When we have recruitment plan ready, and we have plenty of options to choose from then we
can start with the process of Selection. The process of selection involves various steps to
choose the right candidate to choose for the present job or for the future opening of the job.
The responsibility for hiring people lies with the managers and supervisors but Human
Resource Management also plays a critical role in helping the managers in the process of
selection. HRM helps in providing the guidelines and defining the roles for which job
openings are there. The process of selection is an expensive process because of the amount of
money and time involved. The process of hiring involves screening out the various
applications, then weighing the resumes which are more superior than the others.

ACTIVITY
Visit yours or another person’s LinkedIn page. Consider the content from an
interviewer’s point of view. Should anything be removed or changed?

The candidates must pass through various stages during the process of selection. He has
different hurdles in front of him and if he is not able to clear a hurdle then he won’t be
proceeded to the further stages.
The process of Selection included various steps which are given below:
a) Preliminary Interview- The first most step in the process of selection is the
interview of the candidates. It is generally brief in nature and weeds out the unsuitable
candidates in the earlier stage only. For example, the qualifications which is necessary
for the job, or the experience required or some kind of training, all these are not
possessed by a candidate then he stands unsuitable for further stages in the process of
selection. He would be eliminated then and there only.

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The candidate who clears the interview will be allowed to fill the application form for more
details of the candidate. This step helps the employer as well as employee.
The benefits of the preliminary interview:
i. To Applicant- Applicant does not have to pass through the long process of selection if
he is unsuitable for a particular job then he will be saved from getting troubled by
giving all the tests taken by the organization.
ii. To Organization- Organization can save its money and the expenses which would have
been on the unsuitable candidate if the organization takes him to the remaining steps of
the process.
b) Screening of Application Forms- After preliminary interviews the candidates which
are still suitable for the vacant position can be provided with application form wither
in the physical form or the form can be downloaded from the organization’s website.
The application form should be very simple and incorporate all questions which can
fetch the details required of the applicant. The form is required to have a written
record of the qualifications, experience, skills possessed and other qualities of the
applicant.
Usefulness of Application Forms-
i. Application form give detailed knowledge about the candidate to the interviewer.
ii. The record can be collected in written from through application forms.
iii. It makes the processing of the applications an easy task.
iv. It helps in eliminating unsuitable candidates.
v. It also helps in taking the suitable candidates to the next stage of employment tests.
c) Employment Tests- These tests are mostly used by the organization to select the
candidates for various jobs. These tests help in matching the right person for the right
job. All the individuals are different from each other in the form of qualifications,
skills acquired, mental capacity, potential to learn and their personality. S these
various employment tests helps in knowing the candidate better.
The following are the employment tests which can be taken by the organization to select
suitable personnel:
i. Intelligence Tests- These tests check the mental capacity of the candidates. These tests
see the ability of the candidates to learn, to understand, to recall and to catch. These

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tests also check the reasoning and judgements made by the candidates in the given
situations. These tests measure the logical ability of the candidates. There are different
types of intelligence tests made by the psychologists, these can be verbal or non-verbal
in nature.
ii. Aptitude Tests- Aptitude tests measure the potential of the candidates to learn and
adapt any new skills which are required for the job. It checks whether there is capacity
and motivation among candidates for learning. These tests help the organization in
knowing whether the candidate will be able to adapt to the new situations and the
problems which will arise in the business in the coming future.
iii. Occupational Tests or Professional Tests- These tests are also called as Proficiency
tests, Performance tests or trade tests. These test helps in measuring the skills already
possessed by the candidates. Proficiency tests are different from aptitude tests as the
former measures the skills already acquired by the candidate while the latter measures
the potential of learning new skill by the candidate. Trade tests take some sample of
candidate’s behaviour which will replicate his actual behaviour.
iv. Interest Tests- These tests measure the level of interest of the candidates in different
areas. These tests help in finding the right job for the candidate according to his
interests.
v. Personality Tests- These tests help in knowing the different personalities of the
candidates. It reflects their interests, their qualities, their aptitude in a combined
manner. It shows how much mature the candidate is, his emotional side and many more
aspects which does not came out from the other tests conducted.
d) Employment Interview-After all the employment tests has been conducted, the
candidates which clears these tests are called for the final interview. It would be
conducted by the board members consisting of the Human Resource Manager and the
people from other departments. This interview will check whether the candidate is
suitable or not and also give him clearer picture about the role and responsibilities of
the vacant position. In interview, there is a face-to-face conversation between the
board members and the candidate. Apart from oral communication there is also
constant observation regarding body language, confidence and situation handling of
the candidate. The conducting interviews are very important for the organisation.
Importance of Interviews:

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i. Face-to-face Contact- There is a face-to-face communication which helps in knowing

more personality traits of the candidate.
ii. More Information- The candidate can also get more knowledge about the organization
and the job and therefore improves understanding about the role of the job.
iii. Communication Skills- The communication skills can be judged by looking at
confidence, fluency, and smoothness in speaking.
iv. Applicable in cases of Non-Elaborated Selection- When the organization is not
following all the steps like not conducting the employment tests then interview can
really help in weeding out the unsuitable candidates and selecting the appropriate one.
e) Reference Checking- After the interviews, the candidates are asked to give reference
details of some people. The details of the references include their name, address,
mobile number. These details are necessary for investigation purpose and getting
some more information about the candidate. The references can be previous
employer, university’s teachers, professors, known persons.
f) Medical Examinations- After all the tests have been conducted, interview have been
taken and the references have been checked the selected candidates has to pass
through medical examinations which will ensure that the candidate is physically apt
for the job. Medical examination will help the organization in saving the expenses
form hiring the medically unfit candidate.
g) Appointment Letter or Job Offer- Now, this is the last stage in the process of
selection. When the candidate has successfully cleared all the hurdles in the process of
selection, he will be provided with an appointment letter for joining the organization.

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ACTIVITY
A new HR manager has been appointed in the company and you are the assistant
of that HR manager. You are given the task of preparing the manager for taking
interviews. At the point when you offer assistance to manager, he says he has
talked with many individuals and needn't bother with your assist in arranging the
meeting with handling. At the point when you sit in the meeting with him, he
poses improper inquiries that you do not feel truly evaluates the capacities of the
competitors. How might you deal with this?

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CASE STUDY
The XYZ Interview Process
In 2013, Since XYZ company is known to be the ultimate recruitment and
selection machine, its processes are also the most gruelling experiences an applicant could
ever have. Usually, the interviews begin using the telephone. Once the phone interviews
conducted have been successful, the applicant would be scheduled by the recruitment
officer and be invited for a series of five to ten interviews in one day with ten different
people. Some people who have successfully undergone this process, described it as the
most excruciating employment experience of their lives as a lot of mental gymnastics
were necessary to prove your skills.
There were many instances when the applicants were asked to write codes, brainstorm,
role play or solve mathematical equations on the spot just to prove that they are highly
skilled and competent. In other instances, the applicants are even tested of their marketing
skills even though the position an applicant is applying for is highly technical. The
interviewers seem to have control and power over the applicants letting them do
everything just to prove that they are worthy for the position. Common questions involved
computer network problems, Java programming and algorithms by which XYZ company
is known for.
Moreover, other applicants can rate and share comments on another applicant which XYZ
Company can track and use as another basis for hiring or not hiring an applicant. Overall,
the process was a lengthy, tedious and nerve-wracking experience which can possibly
traumatize anyone whose dream is to work for one of the most prestigious companies in
the world. Nevertheless, the perks and benefits are limitless and are more than enough to
compensate for such a tough employment experience.
Questions:
1. Was the interview process too time consuming for the organization?
2. How this system can be shortened and made simpler? Give your suggestions.
3. Does this process actually able to analyse the skills of the interviewee?

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3.6.2 Induction:
When the whole procedure of selection has been done, and the candidate is given
appointment letter, then comes the turn for the induction process. Induction is the process in
which the employee is introduced to the organization. It is the process of orientation where
the employee is welcomed at made to feel at home in the organization. This process is the
first communication between the new employee and the existing employees. It helps in
building cordial relationship among all the employees.
The whole process of orientation helps the new employee in knowing everyone in the
organization and to get adjusted smoothly with his colleagues. He also gets acquainted with
the work environment. A senior employee has been delegated with the work of systematically
introducing the new joiner to the whole organization. Every organization has different ways
of orientation. Some companies show some small video depicting the company’s past and the
company’s mission and future vision. The new joiner is also given information about the
lunch break, washroom facilities, canteen facilities, tea breaks, etc.
The objectives of Induction are-
a) To build the confidence of the newcomer.
b) To give the new employee all the necessary information.
c) To develop cordial relationships among all the employees.
d) To develop a positive attitude of the new employee towards the organization.
e) To develop a sense of belonging to the organization.
Benefits of Induction-
a) It encourages developing two-way communication between the new employee and the
management.
b) It helps in reducing the nervousness of the new employee.
c) It helps in knowing what the new employee is expecting from the organisation.
d) It fosters developing positive attitude towards the company.
e) It reduces the time of socialisation process.
Induction Procedure-
a) New employee has been provided with the timings and the place where he needs to
work.
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b) When the new employee comes for the duty, the senior employee should meet him
and welcome him.
c) All information related to working hours, number of leaves available, medical leaves
should be conveyed to the employee.
d) After this an introduction to the department should be given in which he will work
and to whom he will report should be told to him.
e) Some printed material related to information should also be provided to the employee
apart from the oral communication.
f) The orientation programme should be conducted by the senior employee who is well
versed with the organization so that he leaves a positive impression about the
organization on the new employee.

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CASE STUDY

The Induction Process

XYZ company, a FMCG company recruited ten new employees. On the very first day of the
introduction, the manager of the company introduces the new employees with the company. Also,
the manager gave instructions to the new employees about the company’s rules and regulations, the
timings of the break, the dress code which needs to be followed in the company. The induction
program lasted till lunch.
After lunch, the manager took all the employees on a guided tour in a company van to all the
departments. Meanwhile, the employees were not given any work or training in the initial two days.
And they were asked to acquaint themselves with each other. It will help them in knowing the
company informally.
On the first day, the workers were extremely formal and amiable to one another. They asked their
names and data about one another's instructive foundation and past work insight. On the subsequent
day, they talked about their perspectives on different issues - public governmental issues, global
governmental issues, social issues, changes in innovation, contamination, and business morals, etc.
Assuming any individual offered any expression on any issue, individuals who concurred with him
talked in his help. Most individuals who couldn't help contradicting him didn't stand up. Regardless
of whether they communicated their conflict, they did not do it in a strong way and stayed away
from contentions.
Following two days, the new representatives were given preparation for a week and afterward they
were appointed work obligations and obligations. As they worked, connection among them
expanded. A few representatives fanned sub-gatherings. Assuming contrasts in feelings emerged on
any issue, workers contended fervently and were upheld by their sub-bunch. Following a couple of
months, the representatives got comfortable with their work. They additionally understood the
significance of collaboration and coordination in finishing the work without a hitch. The
representatives additionally educated the significance of tuning in. They attempted to pay attention
to their associates' perspectives and figure out their perspective. Thusly, the recurrence of brutal
contentions diminished, and the workplace moved along. Every individual from the gathering had
the option to straightforwardly communicate his perspectives. The gathering took choices solely
after thinking about the assessments of the relative multitude of individuals. Since everyone partook
in navigation and arranging, the gathering had little trouble in execution. The gathering finished any
venture allocated to it effectively.
1. What is the type of group described in the above case?
2. How the group developed in company XYZ?

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IN-TEXT QUESTIONS
16. ______ is the process of choosing the right people for the right job.
17. Induction helps in creating two-way communication between the management
and the employee. True/False.
18. ______ is the process of introducing the new employee to the organization.
19. Selection precedes Recruitment. True/False.
20. Recruitment acts as a base for the process of selection. Yes/No.

ACTIVITY
Suppose you are appointed as the HR Manager of ABC Company which is a
fastest growing company in a FMCG industry. The company needs to hire some
interns, so keeping this in mind explain the procedure of recruiting and selecting
the personnel.
Write the steps in brief.

3.7 SUMMARY
This lesson taught us the job analysis, the two by-products of job analysis, recruitment
process, selection process, induction process. We have also learnt the meaning of downsizing
and how it should be introduced in the organization to face less resistance from the
employees and how can we retain our talented employees in the organization.

3.8 GLOSSARY
Poaching- Hiring the employees of the rival companies by giving greed of money and
facilities.
Compensation- All the remuneration given by the employer to the employee.

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3.9 ANSWERS TO IN-TEXT QUESTIONS

1. Job Description and Job Specification 9. Yes
2. True 10. Recruitment
3. Job Specification 11. Selection
4. False 12. True
5. Yes 13. Induction
6. Direct Recruitment and Web Publishing 14. False
7. False 15. Yes
8. Yes

3.10 SELF-ASSESSMENT QUESTIONS

11. Considering yourself as a Human Resource Manager, answer the following question:
(a) What will your workforce look like when the “new normal” becomes the actual
norm?
12. Consider yourself as an employee of the company and try answering the following
questions:
(a) How likely are you to stay at this organization if you were to receive a 10% salary
increase from another organization?
(b) How enthusiastically would you reapply for a job here?
(c) How likely are you to be working here in one year?
(d) How likely would you be to refer someone to work here?
(e) How likely would you be to recommend our organization's products or services to a
friend or colleague?
13. An organization is planning to fill up vacancies in the higher positions from amongst
the employees. Do you agree or disagree with the proposal? Explain. (Source: Book-
Essentials of Human Resource Management by T.N. Chhabra and Monica S.
Chhabra)
14. Even though interviews have been widely criticised, they are heavily used in selection
of candidates for employment. Discuss why this selection device still rates high
although we know it can provide unreliable information. (Source: Book- Essentials of
Human Resource Management by T.N. Chhabra and Monica S. Chhabra)
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15. How is Job Analysis information helpful in human resource management? (Source:
Book- Essentials of Human Resource Management by T.N. Chhabra and Monica S.
Chhabra)
16. Describe the advantages and disadvantages of hiring an internal and external
candidate. Give an example of when you do not think an external candidate should be
considered for a position. (Source: Book- Human Resource Management by K
Aswathappa and Sadhna Dash)
17. Discuss the significance of employment tests and describe any three types of
employment tests commonly used in industry. (Source: Book- Essentials of Human
Resource Management by T.N. Chhabra and Monica S. Chhabra)
18. Define Orientation and discuss its importance for the organization and the employees.
(Source: Book- Essentials of Human Resource Management by T.N. Chhabra and
Monica S. Chhabra)
19. “Job Description and Job Specification are the two by-products of job analysis.”
Discuss the statement. (Source: Book- Essentials of Human Resource Management by
T.N. Chhabra and Monica S. Chhabra)

3.11 REFERENCES
Chhabra, T.N. (2019). Principles and Practices of Management, Dhanpar Rai & Co., Delhi, p.
271
Amos, T., Ristow, A., Ristow, L., & Pearse, N. (2008). Human Resource Management, JUTA
and company ltd.
Chhabra, T.N. & Chhabra, Monica S. (1988). Essentials of Human Resource Management,
Sun India Publications, New Delhi.

3.12 SUGGESTED READINGS

Pande, S., & Basak, S., (2015). Human Resource Management Text and Cases, Vikas
publishing house
Chhabra, T. N., & Chhabra, M. S. (2016). Essentials of Human Resource Management (2nd
ed.). Sunindia.

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LESSON 4
LEARNING, TRAINING AND DEVELOPMENT: PROCESS
AND METHODS
Dr. Saumya Aggarwal
Assistant Professor
Shri Ram College of Commerce
University of Delhi
aggsaumya9@gmail.com

Ms. Bhawna Rajput

Assistant Professor
Motilal Nehru College (Evening)
University of Delhi
bhawnarajput.16@gmail.com
STRUCTURE
4.1 Learning Objectives
4.2 Introduction
4.3 Basic Concepts
4.3.1 Learning
4.3.2 Training
4.3.3 Development
4.4 Learning Theories
4.4.1 Cognitive Learning Theory
4.4.2 Behaviourism Learning Theory
4.4.3 Social Learning Theory
4.4.4 Experiential Learning Theory
4.4.5 Happenstance Learning Theory
4.5 Training Need Identification (TNA)
4.5.1 Job-Task Analysis

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4.5.2 Organizational Analysis

4.5.3 Person Analysis
4.6 ADDIE Model
4.6.1 Analyse
4.6.2 Design
4.6.3 Development
4.6.4 Implementation
4.6.5 Evaluation
4.7 Training & Development Methods
4.7.1 Coaching or Mentoring
4.7.2 Lecture
4.7.3 Modelling
4.7.4 Active Participation
4.7.5 Role Playing
4.7.6 Job Rotation
4.7.7 Simulation
4.7.8 Case Study Method
4.7.9 Game-Based Training
4.7.10 Internship
4.7.11 Sensitivity training
4.7.12 Apprenticeship training
4.7.13 Understudy
4.7.14 Vestibule training
4.8 Evaluation of Training & Development
4.9 E-Training & E-Development
4.10 Career Development & Succession Planning

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4.10.1 Evaluate the organisation

4.10.2 Assess the organisation’s status in development of resources
4.10.3 Assess current opportunities
4.10.4 Identify potential staff to mentor
4.10.5 Identify training gaps
4.10.6 Develop an integrated program
4.11 Case Study
4.12 Summary
4.13 Glossary
4.14 Answers to In-text Questions
4.15 Self-Assessment Questions
4.16 References
4.17 Suggested Readings

4.1 LEARNING OBJECTIVES

• To understand basic interrelated concepts like learning, training, and development.
• To understand different applicable learning theories.
• To know and learn to apply different available T & D techniques.
• To understand the concept of succession planning and the transitioning T & D in the
virtual world.
The application-based approach is followed by adopting activity doing method and case study
approach is followed to ensure a better understanding of the concept of the learner and
develop his problem-solving skills.

4.2 INTRODUCTION
The chapter first discusses the basic understanding of the concepts like difference between
Learning, Training, and Development. The learner may have layman idea about these
concepts. But before understanding different aspects of Training and Development, it’s
important to learn to differentiate between these concepts.
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This lesson would help the learner to comprehend the different learning theories and its
applications. Learner could differentiate between different techniques of training and know
which is the most suitable one to apply under a particular situation. One would learn about
ADDIE model and the TNA concept. The lesson will develop the understanding on the
changing role of T&D approaches in the e-learning environment.
The last part of the lesson discusses contemporary issues like e-training and e-development
concepts. The latest research on the concept of succession planning is shared with the readers
and it is discussed that how succession planning can be achieved. To gauge the understanding
of the reader on the subject, the relevant case study is shared towards the end of the chapter.

4.3 BASIC CONCEPTS

The concepts like ‘Training’, ‘Learning’, and ‘Development’ appears to be synonymous to
each other but there is actually a wide difference across these terms. The differences can be
understood by comprehending the meaning of these concepts. These terminologies are
explained as follows:
4.3.1 Learning:
Learning refers to permanent change in the behaviour of an individual or an organization as a
result of an experience. There are three aspects of learning: change in behaviour, permanent
change, and experience. Learning involves changing of the status quo position which can be
through acquiring new skills or changing of the existing way of doing things. The change is
not brief or temporary but is imbibed. It becomes a normal course of reflex action of an
individual. The third aspect is experience. This change in behaviour can be after experiencing
a better way of doing thing or new skills that can be acquired by way of learning by doing
approach or a mere observation, and reading can also create learning.
There are different perspectives on learning. But over years it has emerged as a long-term
orientation that emerges as a result of various formal and informal on the job and outside job
experiences. Learning may not happen just through formal training or seminars or workshop
programs. But it can happen through informal interactions and through different work and
personal life experiences. It is also not a concept that is limited to the individual level. But
learning can be acquired at the team level as well as at the organisational level.
The changing nature of work requires individuals, teams, and organisations to have
continuous learning. Increased customer demands, changing technology, and increasing
complexity of the jobs require learning to be a continuous part of the system. Learning can

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cause change in cognitive skills, behavioural outcomes, and affective results like attitudinal
and motivational changes.
4.3.2 Training:
Unlike learning which can be voluntary, training is a planned effort by an organization
towards enhancement of current knowledge, on the job skills, and changing of the existing
behavioural patterns of the employees so that they can be successful in their current jobs. In
other words, training is a practical education imparted to enable better functioning on the job.
Training has more focused outcomes and is short term oriented.
Training is not an intuitive process. There is a science involved in designing a right training
program. Training when designed systematically yields positive results. Effective training
occurs when employees learn required knowledge, skills, and attitude (KSAs) to do the job in
the best possible way. Research shows that employees have a favourable attitude towards
training if they are included in its designing process or when they voluntarily chose it rather
than made to attend under compulsion. Training also adds value only when employees get the
opportunity to apply the newly learned skills and behaviours on their jobs. If trainees
continue doing what they were doing earlier than the entire training gets redundant and is
easily forgotten.
Transfer of training is a crucial problem faced after the training programs where in the
training acquired is not applied to the job. Post training climate particularly supervisory
support determine the transfer of training. Peer support also has a positive effect on the
transfer of training to the job. In the post training environment constant coaching, knowledge
repositories, and debriefs can be used as powerful tools of reinforcing learned training to the
job.
4.3.3 Development:
Development focuses on the personal and professional growth and is not restricted to the
enhancement of job-related skills. Development involves making the maximum benefit out of
the available opportunities. It is neither restricted to a formal institutional set up and nor time
bound. It can happen anytime, anywhere, and at any place. It focuses on enhancing employee
and not just his job performance.
One can say that both training and development leads to learning. These concepts are
different yet connected to each other. These three concepts are complementary to each other.
Training is a mechanical phenomenon whereas development involves changing the thinking,
actions, and behaviour. Development is a lifelong concept. Training and learning are also

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different concepts. Every training may not lead to learning and learning can happen without
any training also. But learning is a desired outcome of training.

Figure 1: Understanding basic concepts, (source: Self-developed by the author)

IN-TEXT QUESTIONS
12. _______________ concept is restricted to the enhancement of job-related
skills.
13. Training & Development involves learning. True / False
14. KSA stands for Knowledge, _______, & _________:
a) Skills & Attitude b) self-actualization & Attitude
c) Skills & Aptitude d) Self-development & Aptitude
15. Learning can happen without training. True / False
16. ________of training is a crucial problem.

4.4 LEARNING THEORIES

Different theories have evolved over a period of time as given by different researchers from
time to time. Some of the most prominent learning theories are discussed as followed:
4.4.1. Cognitive Learning Theory:
Learning is dominated by the thinking process that takes place inside the mind of an
individual. Jean Piaget has an important contribution to the cognitive learning theory.
According to him learning is a process of assimilation, accommodation, and equilibration.

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Assimilation involves acquisition of knowledge into existing mental structures.

Accommodation is altering the existing mental structures that contradict with the new
experience. Finally reaching to the state where there is no conflict between new and existing
knowledge is called as equilibration. It believes in the formal education system and the
requirement of professionals’ help and assistance. In this process learning is to be internalized
by memorizing the content and reproducing the syllabus on demand that has been taught to
the student. It involves acquiring, internalizing, storing, and retrieval of the information by
the student.
4.4.2. Behaviourism Learning Theory:
The theory involves discussion on classical conditioning and operant conditioning. As per
classical conditioning approach, the natural reflex actions can be reinforced as a response to a
particular stimulus. This theory evolves from the experiment conducted by Ivan Pavlov on
the dogs where they were conditioned to salivate at the ringing of a bell. The second is the
operant conditioning that is based on the belief that reward can reinforce a positive
behaviour. Skinner studied the behaviour of rats where they learnt that pressing lever in the
box would give them food. The operant conditioning approach is based on the use of rewards
and punishments to control the majority of human behaviours.
4.4.3. Social Learning Theory:
Albert Bandura pioneered the concept of social learning theory that he developed after
studying the behaviour of children. He observed in his Bobo doll experiment that children
can be influenced by just observing the behaviour of others. Bandura extended the
behavioural theory by adding the concept of observational learning. Children will be most
likely imitating the behaviour that they see is positively reinforced. Attention, retention,
reproduction, and motivation are the four components of social learning theory. Many of the
daily behaviours may not be noted. Attention is the foremost thing for imitation to take place.
After observing the behaviour, it has to be retained and remembered. Every behaviour learnt
could not be imitated. The modelled behaviour needs to be demonstrated. The last is the
motivation. If there is a reward associated with the demonstrated behaviour, then it is most
likely to be performed.
4.4.4. Experiential Learning Theory:
David Kolb gave the concept of experiential learning theory. It is the combination of grasping
and transforming the experience that results in knowledge creation. Kolb proposed the four
elements of an experiential learning cycle: Concrete learning, Reflective observation,
Abstract conceptualization, and active experimentation. The first is the encountering stage,
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where the person experiences a new situation or may reinterpret an existing notion based on a
new experience. Reflective involves pondering about what is already known. It reflects on
incongruency between existing knowledge and new knowledge. Based on the experience, the
person may form a new idea or change his existing thinking leading to abstract
conceptualization. Finally, the new knowledge is applied by the learner in the active
experimentation stage.

Figure 2: Experiential learning cycle, (source: https://www.simplypsychology.org/learning-

kolb.html)
4.4.5. Happenstance Learning Theory:
The theory proposed by John Krumboltz states that the human behaviour is based on many
learning experiences arising from both planned and unplanned situations that the individuals
encounter. Some of the situations may be within the control of an individual and some may
be out of control. The consequences of these different situations are difficult to predict and
thus called as happenstance. From the education perspective, theory suggests that every child
has their own starting point. Every individual can have their own level of success bar.
Individual achievement needs to be focused on over group achievement. Students learn best
from their own actions and learning should be an enjoyable process.

4.5TRAINING NEED IDENTIFICATION (TNA)

Identification of the needs for which the training program is required is the very first step of
designing any training program. It involves three components: job-task analysis,

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organizational analysis, and person analysis. These three components are explained as
follows:
4.5.1. Job-task analysis:
This involves determining critical requirements of a job and understanding different KSAs
required for performing that job. Training designing process involves task analysis to
determine what training program is best suitable for job? Humans cannot retain everything.
There are limitations to one’s cognitive skills. This step enables trainers to know what is
required to be known and remembered by the trainees so that the focus could be done on
those areas. This also requires team-task analysis that identifies different coordination
patterns among the work groups. This will also help in deciding which set of groups of
people should need to attend the training together.
4.5.2. Organizational analysis:
This step involves determining the preparedness of the organisation to be able to conduct the
training program. It refers to analysing the culture, strategic priorities, and resources that can
be provided by the organisation. Training has to ensure that organisational needs are
addressed. This would require determining the organization’s core competencies and
knowing the critical jobs and functions in the organization. Social supporting environment
also need to be examined for the effectiveness of the training program. There should be a
learning supporting environment for the training to be successful.
4.5.3. Person analysis:
This finally involves deciding if the employee is having the required skills and knowledge for
performing the assigned task. What are the skills that he is lacking and should form the basis
of the training program? Many demographic variables also need to be considered such as age,
diversity in the organisation. Training can vary from an individual to individual. Age is
considered to be positively associated with the training time and negatively correlated with
training performance. Sufficient time must be given to the aged employees and more
structured and self-paced training models might work for the older employees.

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IN-TEXT QUESTIONS
Identify theories associated with each example:

21. Mother rewards his child with chocolates after he cleans the room. Child
starts cleaning the room on his own every time his mother is around to get
the chocolate.
22. A child is told that white object in the kitchen is a cooker and should not be
touched as it is hot. As the Child walks towards the next white object in the
room, which is fridge, he remembers that white objects are hot and should
not be touched.
23. A younger child imitates the dancing style of his elder brother on seeing that
he is being appreciated by others for his dance form.
24. John was used to working in an offline environment and always thought that
the job can never be performed remotely. During Covid-19, he learnt to work
online effectively and now prefers to do the remote working.

4.6 ADDIE Model

Before we understand different training and development techniques that are adopted by
managers across different industries, lets first understand the ADDIE model. ADDIE
framework stands for analysis, design, development, implementation, and evaluation. This
model enables managers to follow a consistent training and development process. Using this
model managers can also monitor and evaluate the effectiveness of the program in fulfilling
various learning objectives. Details on each phase of this model are as follows:
4.6.1. Analyse:
This stage involves setting of the learning objectives. Based on prior training programs also
the learning modules can be designed. This involves determining the skills sets required for
the job, existing knowledge level of the people, and the resources that can be provided by the
organisation.

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4.6.2. Design:
This phase sets the tone for the entire training program. Based on the learning objectives, the
training strategy is decided. Method to be followed for the delivery of the content, type of
material to be gathered are the decisions to be made during this stage.
4.6.3. Development:
Once the layout of the training program is set, next step involves developing the lectures,
content, and required training material. A small training test can also be done to check the
working of the program and its effectiveness in achieving the desired goals.
4.6.4. Implementation:
This involves implementing the designed and developed training program. Any gaps between
what is desired and what is actually achieved are identified and analysed for future
improvements.
4.6.5. Evaluation:
The learning problems faced by the trainees, and the new learning opportunities are identified
and analysed during this stage. The main purpose of this phase is to refine and improvise the
future training programs.

Analyze Design Development Implementation Evaluation

Figure 3: ADDIE model, (source: https://doi.org/10.1108/14777281111125363)

4.7 TRAINING & DEVELOPMENT METHODS

There is a wide variety of methods to choose from for the training and development purposes.
But the adoption of these method is context specific and need to be adjusted to the specific
needs of the target organisation. Some of these techniques are discussed below:
4.7.1. Coaching or Mentoring:
Coaching is a very effective technique for modifying managerial behaviours in a direct and
personalised manner. It is a customized training program given on a one-to-one basis and
over a period of time. It is generally given in helping out employees with specific problems,

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or to prepare the employee for any new work assignment. This technique is generally used for
a continuous and generalized training program.
4.7.2. Lecture:
There is a single flow of information as it is transmitted from the instructor to the learner.
Learning is dependent upon the knowledge and experience of the trainer. However, this
method puts a cognitive burden on the learner. The knowledge is to be acquired, integrated,
and retained. The pace of every learner also varies from person to person. An improvisation
of this method is lecture-cum-demonstration method in which the lecturer reemphasizes
information by putting the same into action.
4.7.3. Modelling:
In this method, the new behaviour is acquired by observing others performing the same task.
Videotapes can be used for imparting instructions to the trainees. This helps in enhancing the
confidence level among trainees. This technique also enables old learners to understand how
to perform the task.
4.7.4. Active Participation:
This is like a trial-and-error approach where the learners learn by actually performing the task
rather than just observing someone performing it. This approach is based on self-discovery
and learners can learn at their own pace.
4.7.5. Role-playing:
Trainees are supposed to assume a character and play like that character in a particular
scenario or a series of scenarios. It is quite an effective method in changing the attitude of
people by encouraging brainstorming. It is found to be very effective when subjects take the
point of view opposite to their own and express this opposing viewpoint to others. Role-
playing is often used to teach skills such as negotiating, grievance handling, buying and
selling and effective communication.
4.7.6. Job Rotation:
The employee is made to experience working on other jobs while he is still working on a
given task or a project. This can be effective for career development of the employee and can
assist in the employees’ quick promotion. This training method also helps in reducing job
burnout and leads to effective management of existing staff members. This also helps in
dealing with the employee’s absenteeism. When an employee is on leave other employee
trained on the same job can take over. This can also help employee realise his different

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capabilities and areas of interest. But this type of technique might not be suitable to all type
of industries especially where highly specialised workforce is required. Employees may also
feel disgruntled and overburdened with frequent job rotations.
4.7.7. Simulation:
The real-life conditions are imitated, and trainees are repeatedly made to have a multisensory
experience of this simulated environment. It is used when there is high cost involved and the
real-life task is risky to handle. It involves mirroring of a real-life situation. It might be
suitable for industries such as aviation sector (training of pilots), driving schools, and medical
industry (training surgeons). The technique minimizes errors and can be used in creating a
team of experts.
4.7.8. Case Study method:
It is a narrative description of real-life incidents relating to the organization. Trainees are
required to propose a number of viable solutions to a given case. This is used for developing
analytical, reasoning and problem-solving skills. This method can be used to boost learner’s
motivation level. This method requires lower cost and trainee need to have the core
knowledge of the subject.
4.7.9. Game-based training:
It is an interactive approach of training. Trainees are made to compete in various decision-
making tasks that helps them in finding alternative options and also experience the
consequences of their actions. Such techniques enable faster & longer retention of
knowledge. Trainees while learning skills are also able to apply the knowledge at the same
time and so learn by doing approach. This makes training a fun process and keeps the
employees engaged in the training process. For example, taking quiz sessions in between of
the lectures or making employees compete on simulators. This method helps in improving
teamwork, leadership style, and communication skills while playing the games.
4.7.10. Internship:
The trainees learn to do work on the job but with certain restrictions and with less or no pay.
It involves giving a practical work related to student’s field of study. It helps in the career
development of the students. Students get the benefit of insights into real work experience,
constant support and guidance from the mentors, constant feedback, develop professional
contacts, and get new experience and work skills.

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4.7.11. Sensitivity training:

Sensitivity training is also known as laboratory or T group training. In this, an unstructured
group is created to make people aware of themselves and their impact on others. Participants
are encouraged to freely communicate their thoughts and feelings in an open, unstructured
manner. It helps employees to be more sensitive and work more harmoniously and
responsibly. It makes the trainees aware of constructive and correct emotional actions and
behavioural patterns.
4.7.12. Apprenticeship training:
It is a combination of classroom and on-the-job training where the trainee called the
“apprentice” work under the guidance of a skilled instructor. Traditionally, it is used in
skilled jobs, such as those of plumber, welder, craftsman, carpenter, etc. It is a long-term
method of training aimed at preparing the workforce to meet the growing need of the
industry.
4.7.13. Understudy:
In this, the superior gives training to his subordinate as his understudy or assistant. The
subordinate learns through experience and observation. The main objective of this method is
to prepare the subordinate to handle full responsibilities in case the supervisor is absent or
leaves the organization.
4.7.14. Vestibule training:
It is “near-the-job” training that takes place away from the factory or production area on
machinery or equipment that closely resembles the actual ones used on the job. Experiences
trainers are responsible for upskilling the employees and training them. The main advantages
of this training method are that it is effective when many people are to be trained for the same
job, it removes the pressure on employees to produce while learning, disturbances to
production at the actual workplace is minimized and workers can get over their nervousness
at work before they join the actual workplace.

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IN-TEXT QUESTIONS
Suggest a most suitable training & development technique in the following cases:

10. For the training of Law students.

11. Doctoral student working on a research project.
12. A newly joined employee in a hotel where his job is to keep the rooms tidy
and taking care of the need of arriving customers.
13. Senior teacher has to impart training session to a newly joined teacher in the
college.
14. Learning to develop an animated cartoon movie.
15. Training surgeons for difficult surgeries.

4.8 EVALUATION OF TRAINING & DEVELOPMENT

This is the most crucial stage of any training program that determines the overall
effectiveness of the program. It refers to the systematic assessment of the fact that training
objectives are achieved and is able to enhance the job performance. Through evaluation of
training & development programs organisations can know if an alternative training program
is required to be designed. Evaluation provides feedback to the trainees, trainers, and the
organisation and helps in deciding if the program can be replicated to the other organisations
or employees.
This effectiveness of the training and development program can be assessed through the
reactions of the employees (feedback survey), understanding acquired by them (small test
after the session), changing behaviour (changed behaviour on the job), and outcomes (higher
sales). Most of the organisations use trainee’s reaction and learning as a tool to decide the
effectiveness of the training program.
Experimental design can also be used in training evaluation in which trainee performance can
be compared with the performance of others who were not trained. The experimental group
consists of employees who received training and the control group consists of employees who
did not receive any training or intervention. Members of both groups should be drawn
randomly. At the conclusion of training, performance of both groups is compared and if the
performance of the experimental group is improved substantially the training program may be
rated effective.
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4.9 E-TRAINING & E-DEVELOPMENT

Training and development programs have expanded beyond the traditional classrooms. The
just-in-time technology now requires providing just-in-time training. Cost effectiveness,
timely availability of content, and flexibility are the major drivers of e-training programs. The
term ‘e-training’ refers to training involving technology. It can be face-to-face or even purely
online. Augmented Reality (AR) and Virtual Reality (VR) technology like 3D objects,
videos, sounds, and images can be applied in training of aviation personnel. For example,
pilots while being in air may encounter technical glitches and would need immediate just-in-
time learning tools. In such scenarios Learning on Demand (LoD) instruction manuals
containing 3D images and videos of the aircraft can be very useful. E-content and different
applications can enable the government to aware the citizens about development of smart
cities. Applications ranging from agriculture, education, to health care and safety can be
shared with people. E-training can encourage e-governance where people can be encouraged
for online payment of taxes, online documentation work, online bill payments, etc.
Since 1995, the enrolment of students has multiplied in the distance education courses.
Research shows that course content, video size, age of the participant, and environment
simulator are the factors having a great influence on the online training program. Satisfaction
of participants increase when the content is in narrative form rather than being in numbers or
a technical format. Young individuals are also found to recall content over a web module
more than the older participants. The e-content should be presented with a large video
display, limited use of coloured text, and large letter size. The philosophy to be followed
while designing e-content is “less is more” and “keep it simple”.
It is the support of the ICTs to learning and decision making that contributes significantly to
the process of development. Technology enables both economic and social development by
providing new opportunities to people. ICTs are ignored by the people who are fearful of the
technology. Rather an integrated approach is required. Integrated approach requires
identification of development objectives, identification of new information required to meet
the development objectives, and identification of the crucial role of ICTs in meeting the
information requirements. There are benefits of cost reduction, efficiency, and transparency
gains through e-development.

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4.10 CAREER DEVELOPMENT & SUCCESSION PLANNING

Succession planning is the process of selecting the employees to fill higher level positions in
the organisation. The process involves identification of the need of the senior managers. Then
shortlisting the most suitable candidate to fill the senior manager position and ensuring that
relevant core competencies are developed in the candidate for the job. The process provides
job successors for the important executive positions from the existing pool of candidates. A
sophisticated succession plan contains various components such as having a clear vision, a
proper business plan, assessment of current situation, developing potential candidates, and
implementing the plan. An effective succession plan can reduce the turnover rate, fulfil the
career development aspirations of the employees, and can provide the competitive advantage
to the organisation.
Leadership development and succession planning are the two sides of the same coin.
Leadership learning and development should be coupled with succession planning as this can
create a flow of talented successors from early stage of career of employees to being senior
leaders and even headship. In United Kingdom, it was observed that there were leadership
shortages in schools. Poor confidence among teachers, reluctance in taking up new
professional assignments, and lack of career advice were the identified reasons for restricting
teachers from their career advancement and achieving leadership progression. Culture related
factors like teamwork, trust, commitment, and leadership support encourages leadership
successors within schools. Teamwork needs to be created, a distributed leadership approach,
and job rotation can help in succession planning. Techniques like coaching, role-modelling
can also assist in the professional development of teachers.
The leadership development program should fit the organisation’s culture and serve the long
term and short-term objectives of the organisation. Managers can follow the following six
steps for a continuous leadership development model in the organisation:
4.10.1. Evaluate the organisation:
The current state of the organisation needs to be evaluated. This involves understanding the
policy, past practices, strategy, assessment of current resources, and knowing about the
culture of the organisation. It has to be assessed if the right employees are available within
the organisation for leadership roles and how their potential can be fully developed.

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4.10.2. Assess the organisation’s status in development of resources:

This involves getting an idea about the financial resources and the priorities of the
organisation. How much time the organisation is willing to give for the leadership
development programs.
4.10.3 Assess current opportunities:
Staff should be provided different opportunities to stand out for leadership roles by engaging
them in different work groups and committees of the organisation. Involve staff in the
revision of company’s policies and procedures. A staff meeting could be arranged where
different individuals can present their case studies. A culture of continuous learning has to be
developed.
4.10.4. Identify potential staff to mentor:
This refers to finding out the employee who has aspirations and potential to grow in his
career. Identifying the person who can lead and bear the burden of the organisational
responsibilities. This also involves assessing the value of the investment. The cost of training
or coaching the existing member must be compared to recruitment of an outside person for
the job.
4.10.5. Identify training gaps:
There should be five important traits in any case leader: leaders need to be aware about their
changes in their external environment, seek out simple solutions to big problems, have a
creative thinking, respects other team players and should drive engagement & commitment
towards the organisation, and must have complete knowledge and experience to handle the
situation. The training gaps based on these identified five traits can be identified and filled.
4.10.6. Develop an integrated program:
A comprehensive plan based on the cost assessment, judgement about the existing resources
of the organisation should be developed. If required a sponsor for the program or the
champion who can help out in the implementation of the leadership program should be hired.

4.11 CASE STUDY

GoIndia Airline started its operations in the year 2016. After covid-19 pandemic and the
rising turbine fuel has greatly damaged the profitability of the enterprise. Recently, the airline
is also in news for maintenance issues, frequently engineering related concerns are being
reported in the headlines. Ministry of State ordered a special audit of the airline to do a spot

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check on the airline. The audit results found that there is a deficiency of sufficient and
suitably qualified engineers, and experienced manpower. To add to the existing problems, the
competition has increased in the industry with the upcoming of new airlines. The attrition rate
for the existing engineers and maintenance staff has been going up for the airline. Employees
are lining up for interviews with the new airlines expecting not the salary hike but better
growth opportunities. There are two categories of engineers being employed by the airline:
Category A and B. Category A staff is cheaper and is responsible for simpler tasks like
refuelling, tyre change, handling cockpit defects, etc. Category B engineers do major
maintenance tasks in an aircraft and are paid higher. Category A employees are now
demanding higher wages and better opportunities. The engineers are facing extreme burnout
as they are working on double shifts at lower wages. This is creating safety concerns for the
airline as maintenance and overhauling of the aircrafts is compromised.
Please suggest the following:
1. Suggest which type of training and development methods can be adopted by the
airline?
2. Which learning theory is best suitable under the current situation?
3. Before organising a T & D plan, what are the factors that should be considered by the
airlines?
4. What can be the best method followed for evaluating the success of the T & D
program?
5. Is there an issue of succession planning that can be addressed? How?

4.12 SUMMARY
The chapter discusses the difference in the concepts of learning, training, and development
followed by the detailed discussion on different theories of learning and methods of training
and development that can be adopted by the organisations. The contemporary issues like e-
training, e-development, and the need for succession planning are also elaborated.

4.13 GLOSSARY
Augmented Reality: A technology that involves computer generating image on the user’s
view of the real world.

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Debriefs: Documentation of recent experiences that enables identification of what went well
and what can be improved.
Learning Transfer: The extent to which learning on one task facilitates learning on a second
task.
Virtual Reality: An immersive experience of a simulated real-life environment.

4.14 ANSWERS TO IN-TEXT QUESTIONS

1. Training 9. Experiential Learning Theory
2. True 10. Coaching
3. Skills & Attitude 11. Internship
4. True 12. Modelling
5. Transfer 13. Lecture
6. Behaviourism Learning Theory 14. Simulation
7. Cognitive Learning Theory 15. Game-Based Training
8. Social Learning Theory

4.15 SELF-ASSESSMENT QUESTIONS

Please answer the following questions based on your understanding of this chapter:
1. Is there any difference between training and development? Please elaborate.
2. How can the organisation assess its training needs?
3. What do you understand by the ADDIE training and development model?
4. How can the effectiveness of a training & development program be evaluated?
5. Is it necessary to focus on succession planning? How is leadership development related
to the concept of succession planning?
6. Explain the difference between cognitive and conditioning learning theories?

4.16 REFERENCES

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Callahan, J. (2003). Does Method Matter? A Meta-Analysis of the Effects of Training

Method on Older Learner Training Performance. Journal of Management, 29(5), 663–680.
https://doi.org/10.1016/s0149-2063(03)00029-1
Carroll, S. J., Paine, F. T., & Ivancevich, J. J. (1972). the relative effectiveness of training
methods? Expert opinion and research. Personnel Psychology, 25(3), 495–509.
https://doi.org/10.1111/j.1744-6570.1972.tb00833.x
Christian, J., Krieger, H., Holzinger, A., & Behringer, R. (2007). Virtual and Mixed Reality
Interfaces for e-Training: Examples of Applications in Light Aircraft Maintenance. Lecture
Notes in Computer Science, 520–529. https://doi.org/10.1007/978-3-540-73283-9_58
Fox, S. (1997). Situated learning theory versus traditional cognitive learning theory: Why
management education should not ignore management learning. Systems Practice, 10(6),
727–747. https://doi.org/10.1007/bf02557922
Garavan, T. N. (1997). Training, development, education and learning: different or the same?
Journal of European Industrial Training, 21(2), 39–50.
https://doi.org/10.1108/03090599710161711
Garg, S., Mittal, S., & Sharma, S. (2017). Role of e-trainings in building smart cities.
Procedia Computer Science, 111, 24–30. https://doi.org/10.1016/j.procs.2017.06.005
Heeks, R. (2002). I-development not e-development: Special issue on ICTs and development.
Journal of International Development, 14(1), 1–11. https://doi.org/10.1002/jid.861
Huang, T. (2001). Succession management systems and human resource outcomes.
International Journal of Manpower, 22(8), 736–747.
https://doi.org/10.1108/eum0000000006508
Krumboltz, J. D. (2008). The Happenstance Learning Theory. Journal of Career Assessment,
17(2), 135–154. https://doi.org/10.1177/1069072708328861
Martin, B. O., Kolomitro, K., & Lam, T. C. M. (2013). Training Methods. Human Resource
Development Review, 13(1), 11–35. https://doi.org/10.1177/1534484313497947
Mayfield, M. (2011). Creating training and development programs: using the ADDIE
method. Development and Learning in Organizations: An International Journal, 25(3), 19–
22. https://doi.org/10.1108/14777281111125363
Miodonski, K., & Hines, P. (2013). Leadership Development and Succession Planning in
Case Management. Professional Case Management, 18(1), 5–12.
https://doi.org/10.1097/ncm.0b013e31826b12a7
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Rekalde, I., Landeta, J., Albizu, E., & Fernandez-Ferrin, P. (2017). Is executive coaching
more effective than other management training and development methods? Management
Decision, 55(10), 2149–2162. https://doi.org/10.1108/md-10-2016-0688
Rhodes, C., & Brundrett, M. (2009). Growing the leadership talent pool: perceptions of
heads, middle leaders and classroom teachers about professional development and leadership
succession planning within their own schools. Professional Development in Education, 35(3),
381–398. https://doi.org/10.1080/19415250902987122
Rivera-Nivar, M., & Pomales-García, C. (2010). E-training: Can young and older users be
accommodated with the same interface? Computers & Education, 55(3), 949–960.
https://doi.org/10.1016/j.compedu.2010.04.006
Salas, E., Tannenbaum, S. I., Kraiger, K., & Smith-Jentsch, K. A. (2012). The Science of
Training and Development in Organizations. Psychological Science in the Public Interest,
13(2), 74–101. https://doi.org/10.1177/1529100612436661
Sonnentag, S., Niessen, C., & Ohly, S. (2005). Learning at Work: Training and Development.
International Review of Industrial and Organizational Psychology 2004, 249–289.
https://doi.org/10.1002/0470013311.ch8
Zainab, B., Awais Bhatti, M., & Alshagawi, M. (2017). Factors affecting e-training adoption:
an examination of perceived cost, computer self-efficacy and the technology acceptance
model. Behaviour & Information Technology, 36(12), 1261–1273.
https://doi.org/10.1080/0144929x.2017.1380703

4.17 SUGGESTED READINGS

Bandura, A. (1976). Social Learning Theory (1st ed.). Prentice-Hall.
Bhattacharyya, D. K. (2018). Statistical Tools and Analysis in Human Resources
Management (Advances in Human Resources Management and Organizational
Development) (1st ed.). IGI Global.
Clark, R. C. (2020). Evidence-Based Training Methods: A Guide for Training Professionals
(3rd ed.). ASTD Press.
Kavanagh, M. J., & Johnson, R. D. (2017). Human Resource Information Systems: Basics,
Applications, and Future Directions (4th ed.). SAGE Publications, Inc.
Kolb, D. (2014). Experiential Learning: Experience as the Source of Learning and
Development (2nd ed.). Pearson FT Press.

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Mondy, W. (2022). Human Resource Management. Generic.

Pritchard, A. (2013). Ways of Learning: Learning theories and learning styles in the
classroom (David Fulton Books) (3rd ed.). Routledge.
Robbins, S., & Judge, T. (2021). Organizational Behavior, Updated 18e, Global Edition
(18th ed.). Pearson.

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LESSON 5

COMPENSATION AND REWARD MANAGEMENT

Dr. Sneha Chaudhry
Assistant Professor
Gitarattan International Business School
Guru Gobind Singh Indraprastha University
Sneha2261@yahoo.com

STRUCTURE
5.1 Learning Objectives
5.2 Introduction
5.3 Concept of Compensation
5.3.1 Objectives of compensation planning
5.3.2 Need for and Importance of designing effective compensation plan
5.3.3 Factors influencing compensation
5.3.4 Theories of Motivation appreciating compensation
5.4 Compensation Management
5.4.1 Principles of compensation management
5.4.2 Importance of Compensation Management
5.4.3 Compensation management and other HRM functions
5.4.4 Components of compensation management
5.4.5 Job Evaluation method
5.5 Types of Compensation
5.5.1 Monetary Compensation
5.5.2 non-monetary compensation
5.5.3 Compensation Process
5.5.4 Total Compensation equation

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5.5.5 Challenges in Compensation Design

5.6 Reward Management
5.6.1 Types of Rewards
5.6.2 Objectives of reward management
5.6.3 Principles for setting proper reward management system
5.6.4 Designing Effective Reward System
5.6.5 Total reward system
5.6.6 The significance of total reward
5.7 Summary
5.8 Answers to In-text questions
5.9 Self-Assessment Questions
5.10 References
5.11 Suggested Readings

5.1 LEARNING OBJECTIVES

• To be familiar with the notion of compensation and its administration
• To elucidate the elements, types and theories of compensation
• To comprehend the relevance of compensation management in organisational HR
strategies
• To classify the various components of compensation system

5.2 INTRODUCTION
The determination of monetary compensation rates is one of the most critical and challenging
aspects of human resource management. Employee compensation decisions are critical to the
success of any organisation because of the total operating costs, effective employee
compensation management is critical from a financial perspective alone. Another rationale
for studying compensation from an organizational point of view is to examine its impact on a
wide range of employee attitudes and behaviours, and, ultimately, the organization's and its
units' effectiveness. Compensation can influence employee attractiveness, retention,
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performance, job satisfaction, skill acquisition, cooperation, and flexibility. The remuneration
that an employee receives in exchange for their efforts to the organisation is referred to as
compensation. A good remuneration strategy encourages people to work harder and more
zealously. Compensation policies should be well integrated with HRM practices. It also
assists firms in establishing employment criteria that are relevant, realistic, and measurable.

5.3 CONCEPT OF COMPENSATION

“Compensation is a comprehensive term which includes everything an employee receives in
return for his work such as wages, salaries, allowances, benefits and services. “
Cascio has defined compensation as “Compensation includes direct cash payments, indirect
payments in the form of employee benefits, and incentives to motivate employees to strive
for higher levels of productivity.”
Dale Yoder believes, “Compensation is paying people for work.”
Keith Davis stated, “Compensation is what employees receive in exchange for their
contribution to the organization.”
According to Edwin B. Flippo, “The function compensation is defining as adequate and
equitable remuneration of personnel for their contributions to the organizational objectives.”
Compensation is a form of trade in which both employees and organisations contribute
something in exchange for something else. It is an essential consideration in human resource
management decisions. Employees regard a pay package to be fair if it meets basic living
needs while also saving some money for, possibly for retirement and recreation. HRM
determines remuneration using strategies such as job evaluation and performance appraisal.
Compensation is described as money received in exchange for labour performed, as well as a
variety of services and benefits supplied to employees by an organisation. Designing an
efficient compensation programme is a crucial function of organisational effectiveness in the
globalisation period, where the corporate environment has become increasingly complicated
and tough.
5.3.1 Objectives of compensation planning:
Compensation matters were frequently kept private in the past and were governed by
individual employer preferences and choices. Employees now make their own judgments
based on the remuneration package, and compensation policies are more transparent.
Balancing salary costs and retaining personnel has become a significant challenge for
organisations.
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Edwin B. Flippo believes, “as far as the organisation is concerned, employee compensation
programs are designed to do three things:
• To attract capable employees to the organisation.
• To motivate them towards superior performance.
• To retain their services over an extended period of time.”
The objectives of compensation are:
• Ensure Equity: It covers income distribution by reducing inequities, raising the
wages of the lowest-paid employees, protecting real wages, and the principle of equal
pay for equal effort. Internal equity requires that remuneration be tied to the relative
worth of a work in such a way that comparable pay is guaranteed for similar tasks.
• Enhanced Efficiency: Attempts to link a portion of salaries to production or profit,
group or individual performance, skill acquisition and application, and so on.
Preparations for efficiency are equitable if they appropriately reward performance, but
inequitable if the incentive is perceived to be unfair.
• Macro-economic stability: An excessively high minimum wage would have a
negative influence on employment numbers. Low inflation contributes to
macroeconomic stability. Two of the many factors that influence economic stability
are compensation and compensation policy. They either help or inhibit balanced and
long-term economic development.
• Efficient allocation of labour: It relates to the idea of labour/employee leaving a
position for a net benefit. This migration could be from one location to another, within
or outside of an enterprise, or between two locations. Employers evaluate staff
attrition while employees consider net gain.
• Attracting competent personnel: A competitive salary and other benefits helps an
organisation attract qualified candidates.
• Complying with regulations: A good wage and salary system takes into account the
legal challenges imposed by the government and guarantees that firms follow the law.
• Controlling costs: A practical compensation system assists the firm in obtaining and
retaining employees at a fair cost.
• Enhancing administrative efficiency: A well-designed good wage and salary
scheme aids in the efficient management of human resource information systems.
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• Facilitating understanding: The compensation management system should be really

clear and understandable
• Retaining employees: When pay levels do not meet employees' expectations,
attrition may rise.
• Motivating desirable behaviour: Compensation is likely to promote desired
behaviours from employees and act as an incentive for behavioural adjustment and
future.
• Retaining talent: Properly designed compensation helps in retaining the competitive
employees in the organisation.
• Self-assurance to the organisation to compete in the employment market
• Promote flexibility in the pay structures offered to employees
• To administer pay equitably and consistently
• Ensure achievement of organisational objectives by aligning compensation with
employee performance
5.3.2 Need for and Importance of designing effective compensation plan:
A company's most valuable asset is its human resources. To get the best out of each
employee, pay and compensation must be handled exactly like any other function. It goes
without saying that competitive remuneration will assist to attract and retain great
individuals. It is now time to study executive and strategic compensation. Over time,
compensation plans and procedures have evolved substantially. Traditional employees were
relieved to receive their pay checks and little bonuses. They only needed to obey commands,
carry out managerial orders, and produce outcomes to obtain job-related rewards. Their
expectations were also low, but behavioural specialists have radically changed the scenario.
As a result of the Industrial Revolution, work became monotonous, uninteresting, and
exhausting thus comes the need to lure the talent with competent pay.
Compensation is one of the most critical components of human resource management, and it
can make or break a business. A competent compensation plan can assist organisations in
thriving and competing in their respective markets. Some of the benefits of offering a
competitive wage plan to employees include:
• Ensures equity
• Encourage desired behaviour

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• Control HR costs
• Attracting competent personnel
• Adhere to regulatory requirements
• Enhanced employee motivation in the workplace
• Enhanced employee efficiency
• Increased productivity and profitability through employee loyalty
• Improves staff engagement and job satisfaction
• Enhanced organisational efficiency
• Aids in the retention of exceptional employees
• Goodwill in the employment market
• Improved industrial relations
5.3.3 Factors influencing compensation:
The main issue that any organisation faces is establishing a fair and equitable compensation
system. This requires understanding of the various factors that influence compensation, such
as the composition of decision-making bodies. The emphasis of an employee may be on
higher pay to offset their increased cost of living and the price they demand in a competitive
job market. One of the most common differences of opinion between employers and
employees is compensation. An employee's pay is determined by the amount of effort he puts
in, the nature of his job, and his competence. In addition, various other internal and external
factors influence compensation directly or indirectly. Thus, the numerous elements impacting
pay are as follows:
• Labor supply and demand: Wage rates rise when labour demand exceeds supply,
and vice versa.
• The ability to pay refers to the employer's financial situation and willingness to pay
the employee.
• Employee’s relative worth: The maximum output that workers achieve on average
based on their ability to execute. Compensation based on the employees’ worth plays
an important role in motivating employees to increase their worth too.
• Cost of Living- Wage rate changes can be caused by the cost-of-living index,
considering that if the cost of living is high, wages and salaries will be higher.

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• Government regulations intended to provide justice and fairness in compensation

payments.
• Prevailing market rate: Compensation rates set in accordance with competitors'
wage levels in order to achieve both external and internal equality.
• Psychological and Social Factors: People feel that equal work should carry equal
value and wages should be commensurate with their efforts.
• Skill Levels Available in the Market: There is a shortage of skilled workers in many
parts of the world. The wage levels have to keep up to meet the needs of the industry's
need-to-achieve workforce.
• Employee union: Wage levels are also influenced by trade unions' collective
bargaining power.
• Nature and worth of job: Organizations base pay levels on the value of a job. Wages
and incomes are greater in vocations that need mental strength, jobs with a lot of
responsibility, positions that require innovation, and technical jobs.
• Organizational strategy and attitude: An organization's pay approach is heavily
influenced by its business strategy; Companies that implement a defensive approach,
for example, will maintain salary levels that are average or lower than the market
standard.
• Organizational culture: Compensation decisions are influenced by organisational
characteristics such as management philosophy, remuneration plans used by
enterprises in the same industry, manner of compensation, equality criterion,
performance appraisal, and so on.
5.3.4 Theories of Motivation appreciating compensation:
Theories, in general, provide a solid foundation and framework for implementing thoughts
and ideas. These theories have created a number of excellent suggestions for providing a
foundation for implementing compensation systems in businesses. According to Goodin, the
employee compensation system is critical in efforts to improve human resource management.
Every component of compensation has a behavioural purpose and seeks to meet a need and
achieve a goal. It is necessary to understand some motivational theories in order to
understand how compensation contributes to motivation.

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Figure 1: Motivational Theories

• Need Hierarchy theory: the base pay is a means of satisfying only the lower order
needs like: Physiological, Safety and Social needs but it goes further. Therefore, the
compensation has to be a perfect combination of monetary and non-monetary
components in order to carter to the different needs of the employees.
• Existence, Relatedness and Growth (ERG) theory: According to ERG Theory, if a
higher-level need is not met, a person may regress and seek to meet lower-level needs
instead. For example, if an ambitious employee is not given possibilities for
advancement, their motivation would suffer, and they may feel disillusioned. Thus,
the form of compensation to be reimbursed for the employees' efforts in accordance
with their expectations.
• Herzberg's Motivation Theory: also identified as the Two Factor Theory, identifies
two elements that influence workplace motivation. These are both hygiene and
motivating elements. If hygiene variables are not present, an employee will work less.
If motivating stimuli are available, they will be encouraged to work harder. He stated
that money is not the primary motivator for employees.
• Equity theory: According to this theory, employee perceptions of their contribution
to the firm and what they receive in return impact how fair they believe their work
relationships are. Employees will adjust their job behaviour to create equity if they
perceive there is imbalance.

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• Expectancy theory: This idea is based on the assumption that human behaviour is
driven by perceived requirements. This theory defines motivation strength as the
value of the consequence of doing behaviour and the anticipated likelihood that the
outcome would materialise as a result of the activity undertaken. The possibility that a
certain behaviour will result in a specific first level consequence is defined as
expectancy. Employees are asked to prioritise important personal goals and
instruments in order to determine valence. The more certain employees are about their
expectations, the more likely it is that their behaviour can be predicted properly.
• Reinforcement theory: The repercussions of an individual's behaviour, according to
this theory, will affect the level of motivation.
• Achievement motivation theory: This theory distinguishes three types of basic
needs: the need for power, the need for affiliation, and the need for achievement. The
significance of these non-monetary requirements should not be underestimated when
developing compensation plans.

5.4 COMPENSATION MANAGEMENT

“Compensation management is an integral part of human resource management and helps in
motivating the employees and improving organizational effectiveness.”
Managing compensation is a complex process. An effective compensation management
programme can be segregated into various sub-goals. These include equitable compensation
based on relative work to the organisation; Payment consistency among comparable
occupations; Individual capability and proficiency are recognised; Procedures for solving
compensation issues logically.
5.4.1 Principles of compensation management:
In his book, “The Management of People at Work”, D.S. Beach outlines seven principles of
compensation management:
1. The organisation should have a defined mechanism in place for determining
differential pay levels based on divergent job needs such as differing abilities, effort,
responsibility, and working conditions.
2. An attempt should be made to keep the overall wage and salary levels of the firm in
accordance with those obtained in the labour market or industry.

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3. Adequate precautions should be made to keep people separate from occupations.

Although workers are compensated based on the rate of pay for certain duties,
professional and executive people should be compensated based on their abilities and
accomplishments.
4. Care should be taken to achieve equal pay for equal labour, subject to job flexibility;
variances within a pay range may be acceptable.
5. A strategy for developing an equal process for recognising individual differences in
ability and contribution, such as rate ranges with in-grade increments, wage incentive
schemes, and a job promotion system, should be in place.
6. A mechanism for dealing with salary grievances should be established. This might be
successfully represented in the enterprise's standard grievance procedure.
7. There should be no confidential wage issues, and each employee should have a clear
grasp of his or her unique wage or salary structure. Adequate attention should be
made to notify employees and, if applicable, unions about the mechanism used to
determine wage rates.
5.4.2 Importance of Compensation Management
An effective compensation plan is vital for every business organisation since it provides an
incentive for employees to stay with the company. A corporation benefits from structured
compensation management in the following ways:
• It strives to adequately compensate employees for their contributions to the company.
• It sets a foundation for employee happiness and satisfaction, which decreases labour
turnover and provides a solid organisation.
• It is meant to comply with several labour acts, avoiding difficulties between the
employee union and management. This promotes a positive working connection
between the company and the employees. It boosts employee morale, efficiency, and
cooperation while also ensuring their satisfaction.
To summarise, compensation management is vital since it drives individuals to do better and
demonstrate their excellence while also giving competent personnel with possibilities for
growth and development.

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5.4.3 Compensation management and other HRM functions:

Source: NOUV Brosh

Figure 2: Relation between Compensation management and other HRM functions
5.4.4 Components of compensation management:
The full compensation process should proceed as follows: An organization's HR initiatives
must be consistent with its entire business plan, and compensation strategy, as an essential
component of HR strategy, comprises outlining what strategic HR objectives can be met.
Compensation is designed and implemented in the organisation in accordance with the
compensation strategy and inputs from the external environment and internal reality. If
effectively designed, compensation leads the organisation to the targeted performance levels.

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Figure 3: Total Compensation process

Compensation management is to equip employees with equal compensation based on their
job nature, job position, and responsibilities. As a result, comprehension is split into
compensation management components, they are:

Job Description

Policies and
Job analysis
Regulations
Components of
Compensation
Management
Salary Surveys Job Evaluation

Pay Structure

Figure 4: Components of compensation Management

1. Job Descriptions: A job description is an important component of both pay and
selection systems since it outlines the functions and responsibilities of a position.
Employment descriptions define out all the responsibilities, requirements, functions,
duties, location, environment, and other features of the job. Work descriptions can be
created for individual occupations or for entire job families.

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2. Job Analysis: The process of assessing employment in order to create job

descriptions. It entails acquiring information on the incumbent's responsibilities.
Interviews, questionnaires, and observation are all methods of job analysis. The job
analysis process entails obtaining information about the incumbent's duties, the nature
and conditions of the employment, and some basic qualifications.
3. Job Evaluation: It is a systematic method for determining the worth and value of
each job within a company. Ranking, classification, factor comparison, and the point
method are the four main strategies. To obtain a sensible job, remuneration
organisations typically compare similar jobs to industry standards.
4. Pay Structures: The pay structure is designed in accordance with job evaluation.
Most pay structures include numerous grades, each with its own minimum and
maximum salary/wage and grade range. An organisation with a defined compensation
structure aids in the development of human resource branding. It can also be used to
standardise pay methods.
5. Salary Surveys: Conducting surveys to acquire market data is part of compensation
management. Salary budget averages, inflation indicators, cost of living indicators,
and typical salaries may all be included. Companies can either purchase the results of
salary surveys conducted by survey suppliers or conduct their own wage surveys for a
certain sector or geographic location.
6. Policies and Regulations: Government policies and regulations are another crucial
component of compensation management since they describe all of an organization's
rules and regulations, as well as its do's and don'ts. Furthermore, these decibels affect
the operation and limitations of an organisation.
5.4.5 Job Evaluation Methods:
A job evaluation is a systematic way of determining the value/worth of a job in relation to
other jobs in an organization. It tries to make a systematic comparison between jobs to assess
their relative worth for the purpose of establishing a rational pay structure.
For example, how would one measure how well your staff performs its duties? How would
you measure if an IT person is doing enough to justify his cost to the company? How would
you measure if a Production in charge is effectively utilizing the resources? It is done through
a process called job evaluation.

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Job evaluation and the methods you use are vital to determine employee output. Measuring
productivity is relatively easy when there is a tangible output of measurable material.
However, it can get quite tricky when that isn’t the case.
The methods of job evaluations used to set compensation levels are point factor, factor
comparison, job ranking and job classification.
1. Ranking Method: This approach of job rating rates jobs based on how valuable they
are thought to be in comparison to other jobs. The market worth of the jobs is not
considered. This approach is effective for smaller enterprises. Larger firms typically
have more positions and might call for grouping the jobs. This approach, for instance,
might be used if all level "A" personnel were put into one section, and the same for
level "B" staff, regardless of what tasks their professions required of them.
2. Grading/Classification Method: Jobs are categorised using this form of job
appraisal based on specific traits. One factor is the degree of expertise required to
perform the task. The second factor is the responsibility an individual has while
performing their work. The time required to complete this job evaluation approach is
not as great as it is for the other methods on the list. Lists of qualities for the job are
developed by the auditor. After that, he assigns ratings or classifications to the jobs.
3. Point-Factor Method: This type of job evaluation looks at particular aspects of the
job to assess how much value they provide to a job function. These elements are
broken down into other categories, such as abilities, obligations, and necessary work.
Then a numerical weight is ascribed to these factors. In order to determine the value of the
occupations, all of the contributing elements or points for a certain work are summed
together and compared to other jobs. This approach makes a job's internal value clear
without taking market value into account.
4. Factor Comparison Method: Each component is given a monetary value rather than
just a numerical weighting. Due of its complexity, this strategy isn't used by many
businesses. The job values that are given to employees might also be difficult to
convey because they are often arbitrary.
5. Competitive Market Analysis Method: A corporation uses a job evaluation
approach to assess where it stands in relation to the competition. This implies that
comparable employment on the market is taken into account, and the knowledge may
originate through job ads. It's crucial to decide what your firm offers in terms of

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compensation because different companies within an industry may give varying

salaries for the same function.
Organizations can better understand the demands of each role and what goes into maintaining
employee pay satisfaction by using job evaluation methodologies. Employees are sure to
appreciate it if a corporation makes the effort to assess the value each person offers and
gradually improves that employee's salary in accordance with their effort or competence.

CASE STUDY 1
Compensation Management
Leena is a new human resource supervisor at a huge and modern Mumbai hospital. The
hospital is a medium-sized institution with cutting-edge health-care services. It has a total
of 500 employees, including 15 executives, 10 consultants, 20 managers, and 50
supervisors. There are 25 technicians, 200 nurses, and 180 administrative and support staff.
The majority of these workers have bachelor's degrees in medical, paramedical, business, or
liberal arts fields.
Leena graduated with honours from a prestigious college five years ago with a bachelor's
degree in human resource management and began working at the hospital as an HR
assistant. After two years on the job, she was promoted to HR specialist in recruitment. She
is overjoyed with the advancement and intends to attend graduate school to get a Master of
Business Administration with a concentration in Hospital Administration. While working as
an HR assistant in the same company, she faced a variety of compensation administration
issues and complaints, including delayed salary adjustments, wage distortions, an
uncompetitive pay scale, and poorly constructed job analysis and job evaluation
programmes. She also saw a high turnover rate, particularly in the technical and
professional ranks, which she attributed to insufficient salary and benefits packages.
Because the HR manager was often preoccupied with labour relations issues, she felt
worthless and confused of what to do.
She also suspected that her country's low economic conditions, along with a subpar human
resource management system, were to blame for these issues. She believes that now that she
has the authority to make recommendations and influence management, she must devise a
strategy for establishing a compensation system.
Question:
1. What do you think of Leena's suggestion? What other suggestions do you have for
Leena to improve management?
2. What are the many considerations that organisations examine when creating a
compensation system?

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5.5 TYPES OF COMPENSATION

According to R. S. Schular “Compensation is such an activity through
which organization on the basis of its ability and within law reasonably assesses the
contribution of employees directly and indirectly for the distribution of financial and non-
financial remuneration.”
According to Wayne F Cascio “Compensation which includes direct cash payments,
indirect payments in the form of employee benefits and incentives to motivate employee to
strive for higher level of productivity is a critical component of the employment relationship.
Compensation is affected by forces as diverse as labour market factors, collective bargaining,
government legislation and top management's philosophy regarding pay benefits.”
Compensation is the entire amount of cash and non-monetary payments made to an
employee. It is usually one of the most expensive expenses for organisations with employees.
Compensation is more than just an employee's regular pay. It also includes a wide range of
other pay and benefits.
Employee compensation administration is known as compensation management or wage and
salary administration. It entails developing and implementing policies and programmes for
wages, salaries, and other kinds of employee remuneration. Wage and pay administration's
primary goal is to maintain a fair wage structure and labour cost structure. Compensation
management is primarily concerned with providing fair, beneficial, and rational
compensation to employees and employers. To comprehend how compensation works, it is
divided into two components, each with its own set of objectives and expectations. The
following are the numerous types of compensation in compensation management:
Direct monetary Compensation:
Financial compensation is a monetary payment offered to an employee in exchange for his
work. Basic salary, bonus pay, incentives, overtime pay, commission pay, and variable pay
are all included. Wages and wages are a significant component of the cost of conducting
business. Salary is a fixed, non-incentive payment based on hours worked. Wages could be
paid hourly, daily, weekly, or monthly. Incentives are a sort of compensation approach in
which remuneration is linked to output or profitability. It could be related to an individual's, a
team's, or an organization's overall performance. Bonuses, profit-sharing schemes, variable
pay, and stock options are all examples of incentives.

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Indirect monetary Compensation:

Pensions, insurance, paid holidays and other benefits are examples of indirect monetary
compensation. These are further subdivided into mandatory and voluntary benefits. A
provident fund, a gratuity scheme, a health plan, maternity leave, medical leave, and other
perks are examples of mandatory benefits that a business is compelled by law to provide to its
employees. Voluntary benefits are optional and provided by the employer freely. These
include unpaid time off, paid holidays, family-friendly benefits, retirement benefits, and so
on. Employees can now take sabbaticals, work from home possibilities, health/life/accident
insurance, company-sponsored education facilities, free transportation, subsidised meals, and
free concierge services.
Non-monetary compensation:
These are psychological benefits offered to employees who have the impression that their
abilities are valued. Employees at the senior and medium levels who prefer to work with
cutting-edge technology want to be empowered. Aside from recognition and service awards,
modern firms provide essential non-monetary incentives to their employees.

Total Compensation

Non- Monetary
Monetary Compensation
Compensation

Direct Compensation Indirect Compensation Rewards &

Recognition
Employee services
Pay for time not

Overtime policy

Insurance plans

Security plans
worked

Base pay Incentives

Stock Options

Gains sharing
Profit sharing
Commissions

Piece rate

Bonuses
Salaries
Wages

Figure 5: Components of Compensation

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5.5.1 Monetary Compensation:

1. Wages and Salary:
Wages and salaries are typically paid on a monthly basis, while wages are frequently paid on
an hourly or daily basis, whereas in the case of pay, the number of hours worked is not taken
into account. Wages and salaries are subject to annual raises. They vary each employment,
based on the nature of the profession. They also vary each employee, based on the nature of
the work, seniority, and merit. Employees in the same position, such as instructors, clerks,
and so on, receive the same income; nevertheless, salaries may fluctuate from employee to
employee when the number of hours worked varies.
2. Incentives:
Employees receive incentives, sometimes known as 'Performance based pay,' in addition to
wages and salaries. Incentives are based on worker productivity or efficiency, sales achieved,
profit made, or cost-cutting efforts. Individual reward schemes and group incentive schemes
are the two types of incentive schemes. Individual incentive schemes apply to specific
individual employee performance, whereas group incentive schemes apply to a group of
workers who are obliged to fulfil a specified task collectively in a given period. The incentive
money paid to the group is distributed equitably among the group members. Incentives are
monetary or non-monetary benefits given to employees in exchange for contributing more
efficiently. Piece rate wages are common in the industrial industry. The fairness of
compensation is entirely determined by productivity rather than any subjective element. They
are an excellent stimulator or motivator since they stimulate personnel to increase their
efficiency and achieve the goal. The types of incentives are:
• Profit sharing: A typical incentive for employees to work efficiently, the
organisation offers a share of the earnings to them. Profit sharing plans often require
firms to set a percentage of profits as a target, and if profits exceed that target, the
surplus profits are distributed to employees. It encourages employees to work
efficiently in order to increase the company's revenues and share in the profits.
• Co-operation / stock option: Employees do not acquire ownership rights by sharing
profits. Several organisations offer shares in management or participation in
management paired with a profit share as an incentive to encourage efficient work
from employees. The co-partnership is offered by the issuance of shares if a defined
target is exceeded.

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• Bonus: one-time extra reward given to an employee in exchange for sharing good
performance. Generally, when employees meet or surpass their targets, they are paid
an additional amount known as a bonus. Bonuses are also given in the form of free
international excursions, paid holidays, or gold, among other things. Some businesses
have a bonus programme during the holiday season.
• Commission: a popular incentive given to employees who work in the sales
department. In general, salespeople are paid a base pay in addition to their efforts.
More orders imply a higher commission.
• Suggestion system: Employees are compensated under the suggestion method if the
organisation benefits from the idea made by the employee. For example, if an
employee offers a cost-cutting measure, the person is compensated for making the
idea. it is a very good incentive to maintain employees' initiative levels high.
• Productivity linked wage incentives: These are wage rate plans in which higher
wages are offered in exchange for increased productivity. In a piece pay system,
efficient workers are compensated more than inefficient workers. Employees must
perform effectively in order to get higher pay.
• Retirement benefits: To motivate employees, several firms provide retirement
benefits such as pensions, provident funds, and gratuities. These incentives are
appropriate for employees that require protection and safety.
3. Allowances:
Allowances are amounts of something that are authorised, usually within the confines of a set
of rules and regulations or for a specific purpose. Other allowances are granted to employees
in addition to their base income to help them meet their basic needs. Among these benefits
are:
• Dearness Allowance (DA): a benefit given to employees to protect their real income
from price hikes. Dearness allowance is determined as a percentage of base wage.
• House Rent Allowance (HRA): Employers who do not provide employees with
living accommodations pay a house rent allowance. This allowance is calculated as a
percentage of the employee's salary.
• City Compensatory Allowance (CCA): This is mostly granted to employees who
work in metropolitan areas and other large cities where the cost of living is higher.

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For municipal employees, the city compensating allowance is often a predetermined

monthly sum, such as 30% of base pay.
• Transportation Allowance/Conveyance Allowance (TA): Some firms provide a
transportation allowance to cover the employee's commute from home to work.
4. Fringe Benefits/Perquisites
Employee benefits include medical treatment, hospitalisation, accident relief, health and
group insurance, canteen, uniform, recreation, and so on. In recent years, there has been a lot
of emphasis on developing compensation systems that go beyond monetary compensation.
We can assert that all aspects of pay management have a substantial impact on an employee's
life. Pay-for-performance has grown in popularity among management and professional
employees, particularly among executive and senior management. Money is the primary
motivator for the majority of employees.
Perquisites are allowances granted to executives and other higher-ranking officers. They
include amenities such as a corporate car, club membership, paid vacation, furnished
residential bungalows, stock option plans, overseas trip benefits, and so on.
5.5.2 Non- monetary compensation:
1. Awards – include cash, gift certificates, movie tickets, family party and food
coupons, travel discounts to popular destinations, and other items.
2. Recognition– includes Employee of the week, month and year awards presented at a
colourful event has the potential to push staff to perform better. Individuals that make
a positive contribution to society, go above and beyond the call of duty, or have an
impact on business are recognised.
3. Service awards – A loyalty award is given to employees who have worked for the
company for a certain number of years.
4. Appreciation – When an employee completes a task to the complete satisfaction of
superiors, the acknowledgment of higher authority in the presence of colleagues is a
quite certain reward.
5. Challenging task – The assignment of a difficult task to promising individuals has
the ability to unearth dormant brilliance in those employees.
6. Deputation for foreign assignment – The selection of the top performers for training
and significant overseas trips will definitely inspire them and raise their value and
standing among their colleagues.
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7. Seeking consultation – Consultation with key individuals on strategic issues and

eliciting candid input has a tremendous impact on morale and positive energy.
8. Participatory opportunity – Employee participation in decision-making would
undoubtedly heighten up their interest and motivate them to contribute positively to
the organization's goals, whether through a joint decision-making autonomous
workgroup, consultative committees, kaizen management, collective bargaining,
quality circles, suggestion committees, or other means.
9. Power delegation and decentralization – Employee empowerment through
decentralisation of power, emphasis on accountability, and delegation of authority has
the potential to awaken previously dormant potentials in employees.
10. Conducting of refresher training – Periodic training to renew employees'
knowledge, skills, and competencies has the potential to empower and rejuvenate
enterprises.
11. Provision of a pleasant working environment - The provision of a pleasant work
environment, such as separate cubicles, the latest electronic communication gadgets,
air-conditioned rooms, secretarial facilities, a comfortable desk and chair, pleasant
interior decoration, clean drinking water, relaxation facilities, and so on, can assist
employees in maintaining a pleasant mood and creating a mind-set for churning out
quality work.
12. Alternate work schedule – Alternative work schedules, such as past time work, job
sharing, flexi time, cancelled work hours, work from home, the possibility to work in
day shift, and so on, contribute significantly to employee loyalty.
13. Liberal holidays – One of the most significant motivators for employees is the
provision of various types of holidays and sabbaticals.
14. Services for career counselling and mentorship – The provision of career
counselling and guidance coaching has the potential to inspire modern employees to
realise their full potential.
15. Conducting events – Organizing numerous activities such as Independence Day,
festivals, New Year’s Day, sports events, literary events, Family Day, and so on
fosters a sense of unity among employees.
16. Status: relates to a job's rank, authority, responsibility, recognition, and reputation.
Managers can inspire employees with esteem and self-actualization needs by
promising increased position or rank in the organisation.
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17. Organizational climate: relates to the relationships between superiors and

subordinates. These are the characteristics that define a company. These attributes
have a direct influence on a member's behaviour. Employees are always motivated in
a healthy organisational environment. A positive approach adopted by managers
generates a better organisational climate, but a bad approach may spoil the climate.
18. Career advancement: Managers must give employees with possibilities for
advancement. When there are prospects for advancement, employees enhance their
skills and efficiency in the hopes of being promoted to a higher level. Promotion is a
powerful stimulant or motivator that encourages people to achieve at their peak.
19. Job enrichment: Employees become bored while completing monotonous tasks.
They want professions that provide variety and allow them to demonstrate their
abilities. Employees are satisfied and motivated when they are given demanding jobs,
job autonomy, and intriguing jobs. A profession that is interesting, enriching, and
difficult in and of it is a great motivator or stimulant.
20. Transparency – Transparent performance appraisal reward system, award system,
transfer system, career development practise promotion, and so on all contribute to a
positive attitude toward the company.
21. Job security: It entails a long-term relationship between personnel and the
organisation. A permanent or confirmation letter demonstrates work security.
Although work consistency gives safety and security, it can also have a negative
impact. Once hired, employees lose interest in their work.
22. Well-developed communication system – Conducting regular meetings, ensuring a
free flow of communication, setting deadlines, establishing clear-cut regulations,
well-defined policies, processes, and strategies, in-house news illuminating the
dynamics in the firm and in the sector, and assisting staff in remaining optimistic in
the facility
5.5.3 Compensation Process
With regard to present and future projections for monetary capacity, compensation
management describes an organization's efforts to maintain a competitive compensation
position within its local labour market. The environment, culture, business, and human
resources strategies of the organisation all influence how compensation is managed. It
includes several processes related to job appraisal, market rate analysis, and job analysis,
developing and maintaining pay structures, paying for performance, skills and competence,
and performance management, as well as the methods required to manage these activities.
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Organisation's Strategy

Compensation Policy

Job Analysis and Evaluation

Analysis of contingent Factors

Design and Implementation of Compensation Plan

Evaluation and Review

Figure 6: Compensation Process

Organisation's Strategy: Companies that operate in various market/product types with
differing levels of maturity implement various tactics, corresponding compensation schemes,
and a combination of various compensation techniques. As a result, it is clear that
organisations adopt various tactics depending on the state of the market and match their pay
plan and content to these strategies. An organisation can increase its business in a developing
market by taking over, merging with, or acquiring other businesses in the same industry, or
by combining both of these strategies. In a mature market, the organisation stabilises and
grows by making the current investment more effective rather than by making new
investments.
Compensation Policy: The basis for setting basic pay, bonuses, benefits, and various kinds
of perks for different levels of employees is the compensation policy. The organisational
philosophy about human resources and strategy should be connected to the policy. The
foundation for job evaluation, which establishes the relative value of the various jobs within
the organisation, is provided by job analysis.
Job Analysis and Evaluation: It is important to conduct a job analysis to ascertain the
specifics of each position's functions, responsibilities, and accountability. Following an
analysis of the jobs based on the statements in the job descriptions, the positions' worth is
determined from multiple angles. When designing the compensation structure for various
positions, an appropriate job evaluation technique is used to ensure internal equity.
Analysis of contingent Factors: The operation of the human resource management system is
affected by a number of elements, both internal and external, while formulating compensation
plans. The state of the labour market, cost of living, economic development, social
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considerations, pressure from trade unions, and numerous labour laws governing pay
management are examples of external influences.
Design and Implementation of Compensation Plan: A company may be able to create a
compensation plan that includes base pay with provisions for wage or salary increases over
time, various incentive plans, perks, and perquisites. These are occasionally chosen by
outside parties, such as pay commissions for government workers and public sector
businesses.
Evaluation and Review: Compensation management should have a provision for evaluating
and reviewing the compensation plan. A compensation plan is not a rigid and fixed one but is
dynamic since it is affected by a variety of factors. If it does not work as intended, there
should be review of the plan necessitating a fresh look.
5.5.4 Total Compensation equation
On the basis of the research conducted in the University of Michigan Business School on
MBA students’ expectations from their workplace, John E. Tropman devised a new concept
of pay based on the total compensation equation with 10 variables. To recruit the greatest
talent, this equation blends traditional salary with educational, emotional, and psychological
benefits. It combines the monetary and non-monetary benefits to create effective, employee
focused compensation package.
TC = (BP + AP + IP) + (WP + PP) + (OA + OG) + (EI + QL) + X
Wherein,
TC = Total compensation
BP = Base pay (salary)
AP = Augmented pay (one- time payment)
IP = Indirect pay (benefits)
WP = Works pay (employer subsidized equipment)
PP = Perks pay (special benefits)
OA = Opportunity for role advancement
OG = Opportunity for growth (training)
EI = Emotional income
QL = Quality of life
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X = Any unique element

5.5.5 Challenges in Compensation Design
1. Establishing Fair and Equitable Remuneration: Employee remuneration should be
fair both internally and externally. Comparable remuneration for comparable work is
referred to as internal equity. In other words, wage differences between positions
should be proportional to differences in work value. External equality implies that a
position's wage should be equal to the pay for a comparable job in another
organisation. Payment is determined by job needs, employee performance, and
industry levels, reducing favouritism and pay discrepancies.
2. To Improve the Company's Public Image: The wage and compensation programme
seeks to portray a progressive employer while conforming to legal wage and pay
regulations.
3. Cost Control: Labour and administrative expenditures can be handled in accordance
with the company's ability to pay by utilising effective wage and compensation
administration. It simplifies payroll administration and control. The company may
plan and regulate labour expenditures in a methodical manner (payroll budgeting).
4. Attracting Competent Personnel: Wage and salary administration that is well-
managed aids in the recruitment of qualified and diligent workers by assuring enough
pay for all occupations.
5. Clarity: To ensure uniform and consistent application, wage and salary plans should
be established explicitly in writing.
6. To enhance the Union-Management Relationship: Wages and compensation based
on systematic job analysis and current pay levels are more acceptable to trade unions.
As a result, good wage and salary management streamlines collective bargaining and
pay talks. It lessens complaints about wage disparities.
7. Wage Policy Development and Implementation: Management should ensure that
employees are aware of and understand the company's wage policy. Workers should
be involved in the development and implementation of wage policies.
8. Flexibility: Wage and salary plans should be adequately adaptable or sensitive to
changes in the organization's internal and external conditions.
9. Retain Current Employees: The corporation can retain its staff by giving a
competitive wage. It can reduce employee turnover and boost employee loyalty.

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10. In Both Interests: Wage policies should be created with the interests of employees,
employers, customers, and the community in mind.
11. Increase Production: Good wage and salary administration improves employee
motivation and morale, which leads to increased productivity.
12. Compensation Decision: All pay, and salary decisions should be reviewed against
the wage policy criteria.
13. Periodic Changes: Wage policies and programmes should be evaluated and altered
on a regular basis to reflect changing needs.
14. Consistent: Wage and wage plans should be aligned with the overall strategies of the
company. Financial planning should incorporate compensation planning.
15. Wage and salary plans should simplify and expedite the administrative process.
16. For compensation determination and administration, a suitable database and an
appropriate organisational structure should be constructed.

CASE STUDY 2
Paid time off: Too Little or Too Much?

You recently completed an analysis of data for the current salary and benefits scheme. You
discover that certain modifications should be done because the majority of your employees
(120 in total) are dissatisfied with the services provided. In truth, the plan had not been
amended in almost fifteen years, putting it out of date and in desperate need of updating.
One of the key sources of disagreement is the organization's PTO policy. Employees
believe that the current system of sick and vacation leave provides too few possibilities.
"I frequently come to work unwell, so I can still have my vacation time for my holiday,"
one employee explains. "I have given nine years to this organisation, yet I only get three
days more than someone who has just started," another employee complains. Here is the
most recent PTO offer: 7 days for 1 year or more, 10 days for 5 years or more, and 14 days
for 10 years or more
1. What cost concerns would you consider when modifying this component of your
compensation plan?
2. What other factors would you examine while designing a new PTO plan?

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IN-TEXT QUESTIONS
1. Components of wage & salary are __________
a. Basic wage b. Overtime wage c. Dearness allowances d. All of these
2. Job analysis is used in compensation to identify or determine ______
a. Skills level b. Responsibilities c. Required level of education d. All of
these
3. Job description identifies for a job ______
a. Tasks b. Duties c. Responsibilities d. All of these
4. Compensation management is the establishment and implementation of sound
policies and practices through ______
a. Job evaluation b. Surveys of salaries and wages c. Both d. None
5. Compensation should be ____ to efficiency and result.
6. Payment by result is an ______ scheme.
7. Compensation is the money and other benefits received by an employer for
providing _______
8. ______ is the method and practice of ordering the jobs with respect to their vale
and worth to the organization.
9. ______ states the duties, responsibilities, and mandatory conditions of a specific
job.

5.6 REWARD MANAGEMENT

In today’s cutthroat economic environment, organisations are focusing on cost-
effective quality improvements. A strong economy has also led to a competitive job market.
Therefore, businesses need more from their employee’s; those same employees want more in
return. Programs for rewarding and recognizing employees are one way to encourage staff to
alter their work habits and essential behaviour in the interest of any organisation. Thus,
Reward management is concerned with the policies, strategies, and procedures necessary to
make sure that people are valued and rewarded for their contributions to the accomplishment
of organisational goals. It contributes to the overall climate and culture of an organisation,
depending on how reward system is developed, administered and managed. Employees need
rewards and compensation because it will help them meet their basic financial needs while
also giving them a sense of job security and appreciation for their efforts. Reward system not
only attaching value to the employees but also adding value to the employees.
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When investing in human capital, which requires a reasonable return, it is appropriate to pay
people differently based on their contributions. The reward management philosophy
acknowledges that it must be strategic in the sense that it addresses more long-term issues
regarding how people should be valued for what they accomplish. Reward strategies must
flow from the business strategy, as must the procedures needed to implement them. Reward is
a composite of all organisational mechanisms used to finally acknowledge behaviour and
performance of employees. It includes all forms of compensation, non-monetary awards and
training opportunities, recognition, promotions, working conditions, assignments etc. It is a
part of enhancing motivation, loyalty and satisfaction emphasizing on career job security,
opportunities, learning opportunities, recognition, achievements etc. It is more potential in
focus to unleash the underlying potentials of employees, to secure command and control and
create persistent commitment.
5.6.1 Types of Rewards:
1. Extrinsic rewards
Extrinsic rewards are those that aren't directly related to the job, like salary or
working conditions. In their study, Gupta and Shaw (1998) came to the conclusion
that monetary incentives are indeed effective. They adopted the stance that not all jobs
are engaging and difficult by nature; in an ideal world, everyone would be
intrinsically motivated and rewarded, but this is frequently not the case in workplaces.
They came to the conclusion that because of the symbolic and practical value that
money carries, it matters to the majority of us and motivates us. Money's symbolic
value summarizes how we and others view it, whereas its instrumental value refers to
the benefits we can obtain from exchanging it.
2. Intrinsic rewards
Intrinsic rewards are the intangible, non-financial benefits that come with a job, such
as the tasks, interesting and challenging work, and training opportunities that are
available to employees. Acknowledgment and praise are the most effective intrinsic
rewards an employee wants to hear because they want to feel like they are
contributing at work, and they get motivated to work more enthusiastically.

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5.6.2 Objectives of reward management:

In India, the main goal of employee rewards is to support the achievement of organisational,
strategic, and immediate goals. This aids in guaranteeing the availability of qualified,
competent, devoted, and highly motivated individuals. The majority of organisations in India
believe that rewarding employees is the only effective way to encourage them to perform
better.
▪ Reward employees for the value they create.
▪ To give employees sense of job satisfaction.
▪ Reward the proper actions to send the proper message about the behaviour and results
that matter.
▪ Reward employees according to what the organization values and wants to pay for.
▪ Create a culture of performance in an organisation.
▪ To motivate employees and acquire their commitment towards organisation.
▪ Aid in attracting and keeping the top talent the organisation requires.
▪ Align reward practices with both organisation goals and employee’s values.
5.6.3 Principles for setting proper reward management system:
Most organisations employ a variety of rewards. Money, trophies, certificates of
achievement, public acclaim, official perquisites, special assignments, get-togethers, and
other meaningful considerations are a few examples of recognition and rewards. The most
prevalent ones are pay or salary, incentive programmes, perks and benefits, and awards. The
majority of employees consider their pay to be the most significant reward for their labour
and some employees might not actually be motivated by money. Surprisingly, there isn't any
solid proof that higher salaries inevitably result in better performance. Therefore, the benefit
of a well-designed reward management system will lead to increase in performance and
motivation.
▪ Operate fairly: biasedness should not be there. All employees should believe they
are treated fairly and are valued accordingly.
▪ Apply rightfully: People within the organisation are appropriately rewarded in
comparison to others; job relativeness is measured as objectively as possible and
equal pay is offered for work of equal value.

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▪ Preference of employees: The rewards that are offered must appeal to the employees.
Cash awards are preferred by many employees. Some employees enjoy having their
names appear in the company newsletter. Others enjoy the attention that award
ceremonies and public recognition.
▪ Consistent process: Pay decisions do not vary arbitrary or without explanation
among employees. It should be a consistent process.
▪ Transparent: employees should be aware of the reward process. The system must be
simple and easy to understand.
▪ Performance standard: Establish performance guidelines that the team can control.
▪ Employee’s involvement: Include employees in the reward process and give them
the authority to carry out the necessary tasks to ensure participation in the reward
system.
5.6.4 Designing Effective Reward System:
While designing reward system four main points arises that- Whom to reward, what to
reward, how to assess the rewards winner and how it should be given.
▪ Whom to reward?
1. Individual employees
2. Teams
3. The organisation
4. Outsiders like customers, suppliers, vendors etc.
▪ What to reward?
1. Performance at organisational level / Department level/ individual level
2. Speed and Efficiency
3. Loyalty
4. Innovation
5. Upholding values
6. Technical solutions
7. Learning
8. Good behaviour
9. Event management
10. Social concern etc…

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▪ How to reward?
Rewarding employees depends upon organisation to organisation. It can be given at
organisational level or department or individual level.
▪ How to assess?
Assessment can be done by the senior by assessing once performance project wise/
yearly basis, filling of survey forms or questionnaire can be filled by the team leaders
or peer group depending upon the type of organisation.
▪ What to reward?
1. Empowerment
2. Recognition
3. Career growth
4. Development
5. Celebration and fun
5.6.5 Total reward system:
It includes both monetary and non-monetary components, such as salary, variable pay, a
demanding work environment, employee benefits, growth opportunities, and so on. It
encompasses both indirect and direct benefits, as well as internal and extrinsic rewards. Each
facet of reward is connected together and addressed as an integrated and logical whole,
including basic pay, contingent pay, employee benefits, and non-financial incentives, which
include intrinsic rewards from the work itself. Total reward combines the influence of the two
major reward categories:
1) Transactional rewards: concrete rewards resulting from pay and benefit transactions
between the employer and employees.
2) Relational rewards: intangible rewards related to learning and growth and work
experience.
A whole reward approach is universal; confidence is not placed in one or two reward
mechanisms acting in isolation; instead, every method in which employees can be
rewarded and find job satisfaction via their work is considered. The goal is to
optimise the combined impact of a variety of reward efforts on job commitment,
motivation, and engagement.

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5.6.6 The significance of total reward:

The idea of total reward basically asserts that rewarding people involves more than just
giving them money. A total reward strategy, according to O'Neal (1998), is essential for
addressing the problems brought on by hiring and retaining employees as well as for
influencing behaviour: "It can help create a work experience that meets the needs of
employees and encourages them to contribute extra effort, by developing a deal that
addresses a broad range of issues and by spending reward dollars where they will be most
effective in addressing workers' shifting values."
The advantages of a comprehensive incentive system are as follows:
• Greater effect - the combined impact of the many sorts of awards will have a deeper
and longer-lasting influence on employee motivation and commitment.
• Improving the job connection - A total rewards approach to work makes the best use
of both relational and transactional rewards.
• Flexibility to accommodate employee’s needs –Milkovich and Bloom (1998) in
their study stated that ‘Relational rewards may bind individuals more strongly to the
organization because they can answer those special individual needs’.
• Talent management – Relational rewards aid in the creation of a favourable
psychological contract, which is much harder to replicate than individual pay practises
and can act as a differentiator in the recruitment market. The company can develop
into an "employer of choice" and "a great place to work," luring and keeping the
talented individuals it requires.

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IN-TEXT QUESTIONS
10. _____ is a comprehensive system to compensate and reward employees
fairly and consistently.
11. Which of the following is an example of a non-financial reward:
a. Bonuses b. Commissions c. health insurance d. employee recognition
programmes
12. A reward management strategy is essential for:
a. Job evaluation b. Human resource planning
c. motivating employees d. compliance with employment laws.
13. Performance-related pay systems:
a. tie rewards to firm profitability b. are easy to implement and measure
c. tie rewards to employee effort d. result in negligible increases in output
14. _____ result in negligible increases in output
15. Rewards may be of two kinds_______and ________rewards.

5.7 SUMMARY
Compensation is a reward that the organization provides to employees. As a result, the parties
must have a common understanding. Attractive remuneration allows a company to attract,
retain, and motivate skilled employees. Employees examine the fairness of the link between
their performance and the rewards associated with that performance. Remuneration is the
single most important HR activity, with an impact on all other tasks such as recruitment,
promotion, and job appraisal. Because employee compensation consumes a large portion of
the corporate budget, a compensation package is an important component of the overall
strategic HRM plan. Salary, bonuses, health-care plans, and other forms of compensation can
all be included in a compensation package. The purposes of pay are to attract people to work
for your organisation and to keep the ones who are currently there. Compensation is often
used to encourage individuals to perform at their best and boost morale. Employees that are
appropriately compensated are more likely to deliver excellent customer service, which can
lead to organisational growth and development.

5.8 ANSWERS TO IN-TEXT QUESTIONS

1. d 9. Job Analysis

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2. d 10. Reward Management

3. d 11. D
4. c 12. C
5. Proportional 13. C
6. Incentives 14. Wage rate
7. Services 15. Intrinsic, Extrinsic
8. Job evaluation

5.9 SELF-ASSESSMENT QUESTIONS

1. What are the fundamental concepts of compensation administration?
2. What kinds of compensation systems often inspire executives?
3. Explain briefly the essential components of India's industrial wage system.
4. Compare and contrast performance bonus systems at the individual, group, and
organisational levels. What similarities do they share? and/or Distinct?
5. “Compensation must fulfil the Intrinsic and Extrinsic needs of the employees”
Discuss.
6. Explain the factors affecting compensation decision.
7. “Compensation programme must be fair to both the employer and the employees”
Justify
8. Describe in detail the different steps in a compensation management process.
9. Assume your company is growing and wants to build a sales unit in another country.
What compensation elements would you be concerned about?

5.10 REFERENCES

1. Amos, T., Ristow, A., Ristow, L., & Pearse, N. (2008). Human Resource
Management, JUTA and company ltd.
2. Armstrong, M. (2007). A Handbook of Employee Reward Management and Practice,
Kogan Page

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3. Durai, P. (2010). Human Resource Management, Pearson

4. Pande, S., & Basak, S., (2015). Human Resource Management Text and Cases, Vikas
publishing house
5. Sanghi, S., (2014). Human Resource Management, Vikas Publishing house
6. Singh, B.D., (2012). Compensation and Reward Management, Excel books
7. Tamanna, S. Components of Employee Compensation (with Benefits). Retrieved
from: https://www.businessmanagementideas.com/human-resource-management-
2/employee-compensation/components-of-employee-compensation-with-
benefits/19228
8. Nakshita R. Employee Compensation Retrieved from:
https://www.businessmanagementideas.com/human-resource-management-
2/employee-compensation/employee-compensation/20570

5.11 SUGGESTED READINGS

1. Milkovich, G. T. (1987). A strategic perspective on compensation management.
2. Bhattacharyya, D. K. (2009). Compensation management. Oxford University Press.
3. Patnaik, B. C. M., & Padhi, P. C. (2012). Compensation management: A theoretical
preview. Trans Asian Journal of Marketing and Management Research, 1(1), 39-48.
4. Kanungo, R. N., & Mendonca, M. (1992). Compensation: Effective reward
management. Butterworths Publishers.

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LESSON 6

PERFORMANCE MANAGEMENT: SYSTEMS AND

STRATEGIES
Ms. Shalu Garg
Assistant Professor
Guru Gobind Singh Indraprastha University
shalugarg11901@gmail.com
STRUCTURE
6.1 Learning Objectives
6.2 Introduction
6.3 Concept of Performance Appraisal
6.3.1 Definition of Performance Appraisal
6.3.2 Nature of Performance Appraisal
6.3.3 Objectives of Performance Appraisal
6.3.4 Significance or Importance or Benefits of Performance Appraisal
6.3.5 Limitations of Performance Appraisal
6.3.6 Comparison between Performance Appraisal and Job Appraisal
6.3.7 Steps in Performance Appraisal System
6.3.8 Essentials of a Sound Performance Appraisal System
6.4 Methods of Performance Appraisal
6.4.1 Traditional Appraisal Methods
6.4.2 Modern Appraisal Methods
6.5 Performance Management and Potential Appraisal
6.5.1 Performance Management
6.5.2 Potential Appraisal
6.6 Summary
6.7 Glossary

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6.8 Answers to In-text Questions

6.9 Self-Assessment Questions
6.10 References
6.11 Suggested Readings

6.1 LEARNING OBJECTIVES

After reading this lesson, the students will be able to:
• Understand the definition, nature, objectives, significance, and limitations of
Performance Appraisal
• Interpret the Comparison between Performance Appraisal and Job Appraisal
• Learn steps in Performance Appraisal System
• Analyse the essentials of a Sound Performance Appraisal System
• Explain the Traditional Appraisal Methods and Modern Appraisal Methods
• Learn the terms like Performance Management and Potential Appraisal.

6.2 INTRODUCTION
In the last lesson we have learnt the meaning of job analysis, how to deal with the problem of
over staffing, how to hire the new employees, how to create a fit between the right people and
the right job. We have gained knowledge about how the job analyser analyses the job,
develops job descriptions, and prepares job specifications.
Performance appraisal has turned into an extremely critical action in most of the
undertakings. It gives information about past, present, and expected performance of the
employees which is supportive in taking choices on determination, preparation and
improvement, salary raise, promotion and transfer. These days a lot of cash is spent on
performance appraisal by most organizations.

6.3 CONCEPT OF PERFORMANCE APPRAISAL

Individuals differ in their capacities and aptitudes. These distinctions are normal and cannot
be dispensed with even by giving similar fundamental schooling and training to them. In this
way, it is important for the top management to know these distinctions so the workers having
better capacities might be compensated and some inefficient workers can be found and
compensated accordingly. The worker may likewise prefer to know the level of his
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performance in contrast with his colleagues so he might improve it. Along with this there is a
need to have reasonable performance appraisal framework to know the general value of every
worker.
6.3.1 Definition of Performance Appraisal:
Performance Appraisal can be known by different names like merit appraisal, merit rating,
progress rating and performance appraisal. In simple words, performance appraisal means
evaluating how the employee is performing during the job and what is the scope for his
development. The various authors gave the different definitions in their own words for
performance appraisal. The definitions are given underneath:
According to Beach, “Performance appraisal is the systematic appraisal of the individual
with regard to his or her performance on the job and his potential for development.”
According to Randall S. Schuler, "Performance appraisal is a formal, structured system of
measuring and evaluating an employee’s job, related behaviour and outcomes to discover
how and why the employee is presently performing on the job and how the employee can
perform more effectively in the future so that the employee, organisation, and society all
benefit."
According to Heyel, "It is the process of evaluating the performance and qualifications of the
employees in terms of the requirements of the job for which he is employed, for purposes of
administration including placement, selection for promotions, providing financial rewards
and other actions which require differential treatment among the members of a group as
distinguished from actions affecting all members equally."
According to Dale Yoder, ''Performance appraisal includes all formal procedures used to
evaluate personalities and contributions and potentials of group members in a working
organisation. It is a continuous process to secure information necessary for making correct
and objective decisions on employees. Performance appraisal from employee point of view -
"A performance appraisal is meant to help employees realise their strengths and shortcomings
and receive a compensation accordingly."

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ACTIVITY
At the point when you have gone through every one of the definitions by well-
known authors, give your perspectives on the meaning of the performance
appraisal.

6.3.2 Nature of Performance Appraisal:

The primary attributes of performance appraisal are:
a) Evaluating Performance- Performance appraisal is a course of assessing the
performance of workers.
b) Gaining Knowledge about Employees- It is the assessment of a worker’s strengths
and weaknesses.
c) Ongoing and Continuous Process- It is a progressing or consistent cycle wherein the
examinations are done intermittently as per a positive arrangement.
d) Making decisions- The fundamental reason for performance appraisal is to get data
important for going with genuine choices like transfer, promotion and increment.
e) Basis of Appraisals- Appraisals of workers depend on clear cut criteria, for example,
➢ Capacity to accomplish the work.
➢ Quality and amount of result.
➢ Relations with bosses, companions, and youngsters.
➢ Individual characteristics like reliability, versatility, drive, authority, and so
on.

ACTIVITY
Assuming you have been given the opportunity what else focuses would you
have included in the basis for performance appraisal?

6.3.3 Objectives of Performance Appraisal:

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The performance appraisal program might be executed to accomplish the accompanying

goals:
a) Determination of Wages and Incentives- To give a record of every worker's
performance to decide wages and motivation pay.
b) Suitability of Employees’ Jobs- To recognize the workers who have been put on
difficult tasks to move them to the positions for which they are more qualified.
c) Identification of Employees’ Strengths and Weaknesses- To know the nature of
performance of every worker and recognize their strengths and weaknesses.
d) Training Programmes- To plan training program to improve the nature and quality
of work of staff.
e) Knowing the Employees’ Performance Level- To work with the employee to make
him realize his performance level and how can he improve on that.
f) Finding Employees with Potential for Development- To find workers who have
sufficient potential for promotion and improvement.
g) Helping in Decisions- To act as the premise of work force choices like transfer and
promotion.
Examples of Performance Appraisal Objectives-
1. Business (Work) related Objectives-
a. To have an overview regarding work done by employees.
b. To help the managers in allocating workers as per their ability, interest, fitness
and capabilities
c. To further develop proficiency.
2. Communication Objectives-
a. To know what is generally anticipated of every employee regarding
performance ana the future tasks.
b. To give criticism to workers with the goal that they come to know where they
stand and can further develop their work performance.
c. To give training, guiding, and inspiration to employees.
d. To foster positive prevalent subordinate relations and accordingly lessen
complaints.
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3. Organizational (Hierarchical) Objectives-

a. To act as a reason for choices like transfer and promotion.
b. To act as a reason for compensation and pay organization and considering pay
increments and augmentations of workers.
c. To act as a reason for arranging reasonable preparation and improvement
programs.
4. Career (Profession) Development Objectives-
a. To evaluate serious areas of strength in the working of the employees and
proposing solutions for overcoming weaknesses.
b. To decide profession capability of every worker.
c. To design career related objectives and ways for improving every worker.

ACTIVITY
You are appointed as a chief in the ABC organization which is FMCG company,
and you have been given the task of making goals for the performance appraisal
which will occur in the approaching month. Thus, presently you should set up the
one goal from each category given under:
a) Business (Work) related Objectives
b) Communication Objectives
c) Organizational (Hierarchical) Objectives
d) Career (Profession) Development Objectives

6.3.4 Significance or Importance or Benefits of Performance Appraisal:

The advantages of performance appraisal are as per the following:
a) Periodic and Systematic Appraisal- It assists the manager with assessing the
performance of his employees. It likewise assists him with allotting that work to
people for which they are the most ideal.

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b) Guiding and Correcting Employees- Rating helps in directing and adjustment of

workers. The boss might utilize the consequences of rating with the end goal of
helpfully directing the employees in the productive presentation of work.
c) Recognizing Ability of Staff- The capacity of the staff is perceived and can be
satisfactorily compensated by giving them extra benefits in the form of promotion.
d) Basis of Sound Personnel Policy- Performance appraisal can be utilized as a premise
of sound personnel strategy in connection to transfer and promotion. If the
presentation of an employee is superior to other people, then he can be promoted, but
if he is not working up to the yardsticks then he can be transferred to some other job.
e) Effectiveness of Training Programmes- Ratings can likewise be utilized to assess
the adequacy of training programs. Weaknesses of workers are identified by
performance appraisal and the training projects can be altered appropriately.
f) Acts as Incentive- Performance examination gives a motivating force to the workers
to better their performance in a bid to work on their rating over others.
g) Preventing Grievances and Developing Confidence among Employees-
Systematic performance appraisal will reduce the number of complaints and foster a
certainty among the workers since they are persuaded of the unprejudiced premise of
assessment.

ACTIVITY
What all benefits could be achieved through performance appraisal in your
organization? Think and write down the advantages what you can imagine.

6.3.5 Limitations of Performance Appraisal:

The Performance appraisal may not yield the ideal outcomes in light of the accompanying
inadequacies:
a) Selection of Wrong Factors- If the elements chosen for the appraisal are unessential,
the consequence of performance appraisal will not be precise.
b) Weightage to Different Qualities- Different characteristics to be appraised may not
be given appropriate weightage in specific cases.

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c) Differences in Personality of Employees- Some of the elements are profoundly

distinctive like motivation, personality of the employees because of which the rating
of the performance may not be on the same logical lines.
d) Biasness in Appraisal- Supervisors frequently don't have the basic capacity in
evaluating the presence of their subordinates. Mostly, they are directed by their own
feelings and preferences. So, the appraisals are probably going to be partial and
biased.

ACTIVITY
Scrutinizing all the shortcomings during the process of performance appraisal,
what all weaknesses do you consider can be there? Mention them.

6.3.6 Comparison between Performance Appraisal and Job Appraisal:

S.No. Basis Performance Appraisal Job Appraisal
1. Meaning Performance appraisal means Job appraisal is assessing the
reviewing the work done by the value of a particular job in
employees and ranking them comparison to the various other
accordingly. jobs in the organization. It
considers the value of each job to
know the rational pay structure of
each job.
2. Basis It thinks about the capacities and It thinks about the necessities of
performance of people. different positions with regards
to sets of expectations.
3. Purpose The reason for merit rating is to The motivation behind job
assess the performance of people appraisal is restricted that is to
to take choices like salary raises, decide the value of the job based
transfers, promotions, and so on. on requests made by a specific
It likewise fills in as a rule for the work on the normal labourer.
administration to consider the This helps in fixing wages for
kind of training which should be various jobs.
provided to the employees.

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4. Person vs. Performance appraisal rates the Job appraisal examines the task
Job employee and not the occupation to decide their general work and
as it is worried about surveying fix a pay level that are fair and
the capacities of the people. It even-handed.
estimates the value of various
workers to the association.
5. Policy It helps in making decisions It helps in making the wage
Decision regarding transfer and promotion. policy of the organization.

6.3.7 Steps in Performance Appraisal System:

For fostering a powerful performance appraisal program, the accompanying steps ought to be
followed:
1. Assurance of Purpose- Before any performance appraisal program is started,
deciding its objectives is fundamental. The goal of the appraisal program might be
either to assess the real performance of people in their current positions or to decide
the capability of people to do higher positions or both. Now and again performance
appraisal programs are related to explicit targets like promotion, transfer and
promotion, salary raise, and so on.
2. Laying out the Criteria of Performance Measurement- Principles of appraisal
ought to be positioned to quantify the presence of different people in their
occupations. The guidelines of appraisal should be in clear-out terms and put in
writing. The subordinate ought to be made to comprehend the principles which will
measure the performance. The standards to be utilized for the estimation of
performance will shift from one occupation to another. Some of the models which are
usually utilized in modern enterprises are:
(i) optimum use of accessible assets,
(ii) productivity,
(iii) reduction in cost,
(iv) improvement in productivity,
(v) realization of big business targets, and
(vi) improvement in items and administrations.

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3. Assurance of Frequency of Appraisal- Performance appraisal is an ongoing process.

Yet, in most of the organizations, formal appraisal programs are executed once or
twice a year. The recurrence of appraisals will be not entirely settled by the goals of
appraisal and the degree of employees to be assessed.
4. Choice and Training of Appraiser- For the most part, the appraiser or the evaluator
is the superior of the individual to be assessed because he is generally acquainted with
the individual concerned and his work. Yet, there are sure restrictions of appraisal by
one individual on the grounds of the critical job of the appraiser. The appraiser might
be one-sided towards specific attributes about which he personally does not know. To
keep the biasness away, the proper training should be provided to the appraiser. In
fact, opinion of two appraisers can be taken to have objective results.
5. Planning of Appropriate Forms- Since the aftereffects of appraisal are to be utilized
for most significant choices like a transfer, promotion, and so on, it is fundamental to
track performance appraisal. For this reason, appropriate forms should be prepared for
appraising all types of employees, for example, supervisory, administrative, clerical,
and managerial and operative. The items in the forms are determined by the purpose
of appraisal.

ACTIVITY
Numerous new workers joined your organization, so in a similar setting you need
to keep an appraiser. So, what steps you really want to continue in picking the
ideal individual for the performance appraisal system. Mention them.

6.3.8 Essentials of a Sound Performance Appraisal System:

A sound arrangement of performance appraisal should satisfy the accompanying basics:
a) Simple and Easy to Understand- The presentation appraisal framework ought to be
easy to work with and straightforward. At the point when the appraisal framework is
concerned, employees may not comprehend it completely, furthermore, may check
out the arrangement with doubt. The arrangement ought not to be very tedious.
b) Fair and Uniform Appraisal System- The performance appraisal framework ought
to be performance-based, uniform and non-variable, fair, just, and even-handed. It

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ought to be guaranteed that the appraisers tell the truth, judicious and objective in
their methodology, judgment, and social direction.
c) Awareness to the Employees about the Goals and Objectives- The employees
ought to be made mindful of the presentation concerning objectives, targets,
furthermore, conduct expected of them. An individual condition between the appraiser
and worker must be created to accomplish common comprehension of the standards
of assessment.
d) Prepared in Consultation with Subordinates- The appraisal framework ought to be
conceived in a conference with the subordinates. This will expand their obligation to
the arrangement and their comprehension of anticipated performance.
e) Considering Prevailing Practices- The examination framework ought to consider
the appraisal works in different units in the business as well as the most recent
reasoning on performance appraisal. It ought to fit into the design and tasks of the
association.
f) Creating a Reliable Appraisal Environment- The top administration should
establish an environment of dependable examination all through the association.
Objective direction, open interchanges, common trust casual connections, and so forth
are the essential components of such an environment.
g) Designed to Achieve Specific Objectives- The appraisal framework ought to be
intended to accomplish explicit targets. The goals of the examination framework
might be to assess current performance at work and to decide the potential for higher
positions. Now and again, performance appraisal relates to explicit targets like a
salary increase, training, promotion, transfer, and so on. The number of elements to be
thought of and the information to be gathered ought to be tailormade to accomplish
the goal of the appraisal.
h) Appraisers should be Selected and Trained Properly- The appraisers ought to be
chosen and prepared appropriately so they have no private predisposition and have the
fundamental abilities for the true assessment of workers. In request to objectivity in
the examination, an individual might be evaluated by additional people autonomously.
i) Provision of Appeals against Appraisals- There ought to be an arrangement of
requests against appraisals to guarantee certainty of the workers and their affiliations
or organizations. The results of appraisal should be talked about with the rates so they

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might get a potential chance to communicate their sentiments on their progress

reports.

ACTIVITY
In your enterprise, you have fund that an unfair and biased measures of appraisal of
performance have been take. Ho will you help them in taking corrective measures?
Will you guide them to use essentials of a sound performance appraisal system?

IN-TEXT QUESTIONS
17. Performance Appraisal is an ongoing and _____ process.
18. The performance appraisal and job appraisal are same. True/False.
19. The Performance Appraisal should be fair and ________ in nature.
20. Proper training should be provided to the appraiser for appraisal of the
performance. True/False
21. Does performance appraisal help in bringing confidence and motivation
among the employees? Yes/Np

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CASE STUDY
Performance Appraisal at ABC Ltd.
Recently, three employees working at the Head Office have been denied annual
increments due to comparatively low score. They have gone to the Chief Executive of
the company expressing their dissatisfaction with the appraisal system and insisting that
community service is not apart of their job, and it should not influence their ratings. The
employees seem to organise a union and demand that annual increments should be
granted automatically.
ABC Ltd. is a reputed advertising agency having 5 branches in different parts of the
country. Its staff includes 180 operative employees and 35 executives. The company has
a performance rating plan under which the staff members are checked at the end of each
financial year by a committee of two executives by means of checklist method. The
qualities considered are responsibilities, initiative, dependability, leadership potential,
cooperative attitude and community service. After the performance is evaluated, the
check points are discussed with the concerned employees by their immediate boss and
are used to counsel them and arrange further training for them. The check points are
also used for granting or withholding of increments of staff with poor performance and
granting of additional increments to and promoting of deserving staff.
The Chief Executive feels that performance appraised is a dangerous source of friction
and so it should be discontinued altogether.
Questions:
1. If you were the Human Resource Manager of the advertising agency, how would
you solve the issue?
2. How far do you agree with the Chief Executive's view that performance
appraisal should not be continued?
3. On what lines would you recommend improvement or changes in the
performance appraisal system of the company?

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6.4 METHODS OF PERFORMANCE APPRAISAL

There are different strategies for merit rating which might be ordered into: (i) Traditional
Techniques, and (ii) Modern Methods. The techniques contrast for different clear reasons. To
start with, they contrast in the characteristics to be appraised. The characteristics may vary
because of contrast in work necessities, factual prerequisites, and assessment of the
management. For example, 'collaboration' may not be viewed as at all important by the
management. Then, at that point, it is troublesome additionally to rate such factors as
collaboration dependably. Second, they contrast the inclusion of who is being evaluated, e.g.,
chiefs, sales reps, and processing plant employees. Third, varieties might be caused because
of the level of accuracy in the assessment. Lastly, they might contrast techniques used to
acquire weightage for the different attributes.
To the extent that is practicable, merit rating ought to be founded on true factors; it ought to
be a nonstop cycle and made at standard stretches. Any great strategy for merit rating ought
to evaluate the accompanying individual characteristics of the employees:
(i) Knowledge of work.
(ii) Ability to accomplish the work.
(iii) Quality and amount of result.
(iv) Personal characteristics like constancy, versatility, drive, and so on.
(v) Special characteristics like certainty, administration, and so on.
6.4.1 Traditional Appraisal Methods:
Traditional methods are exceptionally old methods of performance appraisal. They are based
on the methods of appraisal which are followed since years. Appraisal of workers is done
based on principles of individual characteristics or characteristics like mentalities, judgment,
flexibility, drive, reliability, authority, faithfulness, dependability, and information on work.
and so on. There are six traditional methods which are talked about underneath:
1. Confidential Report- Under this, the appraiser is expected to record his impression
of the individual being assessed in an unstructured manner. In any case, in certain
organizations, remarks are expected to be gathered under unambiguous headings like
nature of occupation, performance, reasons for explicit work ways of behaving,
character attributes, and promotion needs. This framework is exceptionally abstract
and has its legitimacy in its effortlessness and is still being used particularly in general
society area and government offices.

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Majorly, there is no standard configuration for the confidential report. It relates to the
performance, capacity, and working of the employee during the earlier year.
Extremely easy-going feedback is found among evaluators while filling confidential
reports of the employees working under them. No criticism is given to the worker
being evaluated and accordingly, its validity is exceptionally low. The worker who is
evaluated never knows his shortcomings and the open doors accessible for defeating
them.
2. Ranking- Ranking is a team-oriented assessment strategy that includes the setting of
workers in a position as per their work performance. It grants examination of all
workers in any single rating group no matter what the kind of work is, all specialists
are decided on similar elements also, they are evaluated on the general premise
concerning their work performance rather than an individual appraisal of
characteristics. Along with it, the best is put first in the position and the poorest
possess the last position. The trouble with this framework is that the evaluator is
asked to think about an entire man.
Paired comparison is an improvement over simple ranking. Under this, each worker in
is contrasted with other worker to figure out which is better in his work. The evaluator
is furnished with booklets containing two names on each page. Clearly, the number of
rank requests would be n(n-1)/2, where n is the total number of people to be thought
about. Along with it, each employee is contrasted and each other worker in a similar
work family.

Fortune 500 Focus (Contd.)

In a forced distribution system, like the one used by GE, employees are ranked in
groups based on high performers, average performers, and nonperformers. The trouble
with this system is that it does not consider that all employees could be in the top two
categories, high or average performers, and requires that some employees be put in the
nonperforming category.
In a paired comparison system, the manager must compare every employee with every
other employee within the department or work group. Each employee is compared with
another, and out of the two, the higher performer is given a score of 1. Once all the pairs
are compared, the scores are added. This method takes a lot of time and, again, must
have specific criteria attached to it when comparing employees.

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3. Forced Distribution- A few evaluators experience the poor effects of a consistent

mistake, i.e., they either rate all employees as incredible, normal, or poor. The forced
distribution system is perceived to compel the evaluator to fit the workers being
evaluated into pre-decided scopes of scale. It enjoys an upper hand over the matched
examination framework in that at least two workers can be given equivalent
appraisals. This framework depends on the assumption that workers can be isolated
into five-point scale of outstanding, above average, average, below average and poor.
In this framework, the appraiser is approached to disperse the employees into these
classifications so that 10% of the men are in group ‘outstanding’, 20% ‘above
average’, 40% ‘average’, 20% ‘below average’ also, 10% 'poor'.
This strategy clearly gives the chance of judgment with respect to managers. Other
than this, the framework is straightforward and direct. The goal of this method is to
look out performance as an ordinary activity. Commonly, this strategy is not found in
groups especially when the group is small.
4. Graphic Rating Scale- Under this strategy, scales are laid out for various explicit
elements and characteristics. Five degrees are laid out for each variable and general
definitions show up at focuses along the scale. For the most part, the evaluator is
provided with a printed structure, one for every individual to be evaluated. The choice
of factors to be evaluated on rating scale is a significant point under this framework.
These are of two kinds:
(i) qualities, like drive and reliability.
(ii) commitments, like the amount and nature of work.
Since specific regions of occupation performance cannot be impartially estimated, all things
considered, a realistic scale will proceed to utilize a combination of the two qualities and
commitments.
Graphic rating scale forces a significant weight upon the superior. He should report and
assess the presentation of his subordinates on scales including upwards of five degrees on
maybe ten distinct variables. The primary downside of this framework is that the evaluator
might be one-sided. In any case, one method is to leave space on the structure after each
component and expect him to make sense of the justification behind his rating. Essentially, he
is approached to give an illustration of the rate's way of behaving that justifies the appointed
rating. Generally, appraisals will generally group on the high side under this framework. A
supervisor might generally rate his subordinates high to keep them away from analysis.

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The graphic rating technique is straightforward and simple to utilize. It allows the statistical
tabulation of scores in terms of measures of central tendency, skewness, and dispersion. It
allows a ready comparison of scores among workers. The scores apparently tell the merit or
worth of each person.

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5. Checklist Appraisal- Different statements are prepared in such a way that they
portray different sorts of conduct of a person in a specific occupation. Every statement
is joined to a scale value. During the hour of rating the workers, the supervisor simply
remembers and check all statements. After all the values are attached to the singular
qualities furthermore and appraisal up to this level is assembled on the rating sheet.
Then the average is calculated, and employee is evaluated. The weighted checklist
ought to be ready by the people completely familiar with the job and acquainted with
planning. When this process is finished, appraisals are put on separate cards for future
reference.
6. Critical Incident- A critical incident means when an employee exceeds or fails any
requirement of his job. It addresses an exceptional way of behaving of an employee at
work, concerning example:
(a) Resisted the implementation of change.
(b) Became upset about work.
(c) Refused to help colleague.
(d) Suggested an improvement in the work technique.
(e) Tried to get an individual specialist to acknowledge the administration's choice.
(f) Acknowledging new thoughts.
This strategy requires each manager to keep all such critical incidents in each employee's way
of behaving which demonstrate powerful or effective activity and those which show the
insufficient or unfortunate way of behaving. These are kept in an extraordinarily planned
notepad which contains classifications for qualities under which different ways of behaving
can be recorded. Instances of such sorts of occupation prerequisites for employees are
judgment, learning skills, efficiency, precision of work, obligation, and motive. Day-to-day
recording of these things is by all accounts fundamental because any other way, the boss
might fail to remember the incidents with his subordinates.
The primary issue with this strategy is that the extraordinary incident occur so rarely that
singular examination may not differ. It has been seen that often the workers have neither
positive nor negative occurrences. In cases, where the basic occasion does not occur, rating
an employee will be troublesome. Additionally, it might be hard for a manager to conclude
what is a basic or excellent incident. Here again, the human choice might show up in
recording the basic incident.

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The limitations of the critical incident method are as per the following:
(i) Outstanding occurrences may not occur consistently.
(ii) Negative occurrences are, for the most part, more observable than positive ones.
(iii) The manager may not record an incident right away and fail to remember it later.
(iv) It might likewise be extremely challenging for a manager to conclude whether an
incident is basic or on the other hand not.
(v) This strategy requires close oversight which may not be liked by the employees.
7. Essay Method- Under the essay method, the superior composes a report about the
worker which depends on his appraisal of the workers' performance. The superior
constantly observes the subordinate and composes his appraisal in the report. While
setting up a paper on the worker, the evaluator by and large thinks about the
accompanying variables:
(i) Job information and capability of the employee.
(ii) Employee's qualities and mentalities.
(iii) Employees interpretation about the organization's projects, arrangements,
goals, etc.
(iv) Employee relations with youngsters, colleagues, and managers.
(v) Development needs of the employee.
Essay appraisal is a non-quantitative method of examination. It gives a fair plan of
data about the employee being assessed.
Essay appraisal might experience the side effects of individual and human
predisposition in view of likings or on the other hand disliking of the manager. An
appraiser will most likely be unable to communicate his judgment in proper words
and it will restrict the utility of examination reports.
8. Group Appraisal- Under the group appraisal technique, the workers are evaluated by
an appraisal group, comprising their supervisor and three or four different people who
have some information on their presentation. The gathering then, at that point,
examines the guidelines of performance for that work, the real performance of the
worker, and the reasons for their specific degree of performance and gives ideas for
future enhancements, if any.

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This technique is without any trace of partiality since appraisal is done by multiple
judges. Besides, it is an extremely thorough and basic strategy. The main
disadvantage is that this technique is tedious.
9. Field Review Method- Under this strategy, the supervisors are consulted by a
specialist from the HR or staff division. The specialists question the manager to
acquire all the appropriate data on every worker and takes notes in his journal.
Consequently, there is no evaluating structure with variables where appraisals are
acquired. The specialists are generally grouped into three classifications remarkable,
agreeable, and unacceptable. The evaluator questions the supervisor about the
prerequisites of each work in his unit and about the performance of each man in his
work. He tests to know how the employees are working and how can his performance
be improved.
The supervisor is expected to offer his perspective about the promotion of his
subordinates, the level of the performance of each subordinate, his weaknesses, valid
statements, capacity, promotability, and the potential game plans in cases requiring
further thought. The questions are asked and responded to verbally.
The progress of the field survey strategy relies on the capability of the questioner. If
he knows his work, he can contribute essentially to precise examinations. The field
audit technique lets the supervisors free from the tedious work of filling in
examination structures. Superficial judgment can be eliminated.
Criticism of Traditional Methods:
The overall analysis of traditional performance appraisal systems is that they are as well
abstract in nature since every one of them depends on the private judgment of the evaluator.
Individual judgment is constantly exposed to partiality or bias from certain different regions.
The appraiser will most likely be unable to pass judgment on the skill of the employees
because of the absence of preparation.
As a result of the critical job of the supervisors under the traditional methods, performance
ratings are much of the time subject to various blunders and shortcomings which are talked
about underneath:
1. Halo Error- This sort of mistake happens when the evaluator permits one part of a
man's character or performance to impact his whole assessment. It is the inclination of
numerous evaluators to let the rating, they give importance to one characteristic
excessively which impact their appraisals. Numerous managers will generally give an

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employee around similar ratings on all elements. This mistake can be perceived
effectively on factor scales. The rating scale strategy is defective because the
supervisor tends to concentrate on one single factor more than the others before going
on the next. In this way, he can think about every one of the subordinates compared
with a norm or to one another on every characteristic.
2. Central Tendency Error- This blunder happens when the evaluator is uncertain
about the subordinates or has lacking data about them or is concentrating on the rating
process. Because of these reasons, by and large, the evaluators are hesitant to rate
individuals at the external closures of the scale. The evaluator realizes that he needs to
assess his subordinates at intermittent spans. If the evaluator is new to the system or
does not have adequate knowledge regarding the system in the organization, it would
be difficult for him to evaluate the subordinates.
3. Leniency or Strictness Error- Managers tend to be simple evaluators, what is more,
others tend to be strict in their appraisals. Tolerant or simple evaluators allot reliably
high qualities or scores to their subordinates and severe or strict evaluators give
reliably low appraisals. Both the patterns can emerge from changing guidelines of
performance among managers and structure various understandings of what they see
in worker performance. This mistake can be somewhat overwhelmed by teaching the
supervisors and arranging meetings between them with the goal that they might reach
settlement on exactly what they anticipate from their subordinates.
4. Recent Behaviour Bias- Often some evaluators assess people based on their
performance in the new couple of weeks, a normal consistent way of behaving is not
checked. Some workers monitoring this inclination show improved results when they
feel that they are being noticed and the report of their presentation is to be arranged
soon.
6.4.2 Modern Appraisal Methods:
There are some important methods of appraisal which the modern organizations use which
are Managing by Objectives (MBO), Behaviourally Anchored Rating Scale (BARS), 360-
degree appraisal. All these methods are explained underneath:
A. MANAGING BY OBJECTIVES (MBO):
Concept of Managing by Objectives (MBO):
The way of thinking of 'Management by Objectives' (MBO) was presented by Peter Drucker
in 1954 and later created by different journalists like John Humble, Dale McConkey, George
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Ordiorne, Edward Schleh, and Douglas McGregor. Noticing that even many is critical years
before 1954, goals were underscored by traditional administration authors like Fayol, Urwick,
and Barnard.
John Humble defined overseeing by targets as a powerful framework that coordinates the
organization's need to accomplish its objectives for benefit and development with the
administrator's need to contribute furthermore, foster himself. Ordiorne likewise focused on
that MBO isn't simply a group of rules, a progression of techniques, or even a set strategy for
making do, however, it is a perspective about administration.
Features of Managing by Objectives (MBO):
The wide attributes of MBO are as per the following:
(i) Operational Technique- The Management by objectives is a practical technique. The
objectives must be set in quantifiable or quantitative terms. As Drucker puts it,
"Objectives should be functional, and they should be equipped for being changed over
into explicit targets and explicit tasks. They should be fit for turning into the premise
as well as the inspiration for work and accomplishment".
(ii) Comprehensive Technique- MBO addresses an extensive instrument of
management. It is not just a tool of human resource management but an overall
management technique for realizing the various objectives of the organization.
(iii) Participative Management- MBO underlines a participative way to deal with the
management. The goals are set with the help of subordinates. MBO isn't just an
agreement, yet the creation of objectives and their performance working together.
(iv) Result Oriented- MBO is performance arranged. That is the reason, its other name is
Management by Results. This approach focuses on ends instead of means and is
demonstrative as opposed to correctional in character. The presentation of an
individual or unit is assessed as per the outcomes acquired.
(v) Concentration on Key Result Areas- The focus in MBO is on performance
improvement in the areas which are of basic significance to the association overall.
By distinguishing proof of key outcome regions, MBO guarantees that due
consideration is given to the need regions which are significant for good performance
and development of the association.
(vi) Systems Approach- MBO tries to coordinate the person with the organization and
also, the association with its current circumstance. It looks to guarantee the

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achievement of both individual and undertaking objectives by making objective

consistency.
Benefits of Managing by Objectives (MBO):
The important advantages of MBO are as per the following:
(i) Better Planning- Overseeing goals includes laying out objectives and targets through
the dynamic interest of the two bosses and subordinates. Such shared objective setting
further develops objective clearness and results in reasonable designs to which the
subordinates become committed. MBO makes goals coordinated towards these
targets.
(ii) Better Organization- When objectives are revised under MBO, then the whole
structure of the organization also changes and what all are expected from different
position holders also changes.
(iii) Means of Control- MBO fills in for control. There is a sense of control in the
organization which helps in fulfilling the goals of the organization.
(iv) Higher Productivity- There is an improvement in efficiency as everybody focuses on
significant activities instead of wasting energy on less significant issues.
(v) Better Appraisal of Performance- The most common way of characterizing the
outcomes anticipated lays out exact rules for the appraisal of performance. Clear
comprehension of obligations or measures of assessment strengthens responsibility.
MBO gives a tool for assessing the actual performance against pre-determined
performance. An appraisal is result-arranged and not quality situated. An individual
can likewise assess himself by the consequences of his own performance.
(vi) Executive Development- MBO encourages the long-term development of the
executives in the organization. It calls for tracking down new techniques to think
about arising circumstances. Thus, MBO is an instrument for the self-improvement of
leaders. That is, every leader gets the information and abilities at work as a result of
his meeting requirements of the performance.
Limitations of Managing by Objectives (MBO):
The MBO suffers from certain disadvantages which are discussed underneath:
(i) Difficulty in Setting Quantitative Targets- The executive by goals is fruitful if the
goals are set in quantifiable terms. It is challenging to pass judgment on the

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performance of people where the goals cannot be set in quantitative terms. In this
manner, it will not be possible to successfully carry out MBO.
(ii) Emphasis on Short-term Goals- Under MBO, objectives are set for a brief period,
say for six months or one year. The subordinates might focus on their nearby
objectives without really focusing on the long-range targets of the undertaking which
is certainly not a solid indication of hierarchical proficiency and adequacy. Since the
performance of the subordinates is to be evaluated after six months or one year, they
will generally focus on their nearby targets.
(iii) Resistance to Change- The arrangement of MBO seems, by all accounts, to be
straightforward, yet it requires changes in conventional reasoning and practices. By
and by, it is frequently opposed by both leaders and operative workers.
(iv) Lack of Training- There is an absence of training and information on the part of the
supervisors in executing the program. Many are inclined to sit down with the
subordinate, direct the objectives and focus with no info allowed from the
subordinate, and then, at that point, the request might be met in a predetermined time.
No thought is given to any external elements over which the subordinate has no
control or impact. In such circumstances, there can be no two-way correspondence
due to the external forced goals.
(v) Lack of Follow-up- The absence of follow-up by the predominant at the fitting time
is one more obstacle in the fruitful performance of MBO. The prevalent should get
with the subordinate at the proper time. The subordinate is ready to precisely tell the
chief what has been achieved and how. If the superior postpones the meeting, then the
subordinate also starts taking the program lightly.
(vi) Rigidity- The management by objectives often presents inflexibility in the
association. Since objectives are set after at regular intervals or one year, the superior
may not like to alter in the middle between on account of fear of opposition from the
subordinate. There may emerge a need to change the objectives at lower levels to
accomplish the long-range targets of the venture. The director should deal with such a
circumstance appropriately.
(vii) Limited Application- The management by objectives isn't fitting for all levels and
for everybody. It is reasonable just that the two chiefs and subordinates feel great
about taking part in it and are willing. The heavy demands made by it make MBO
valuable generally to managerial and professional employees.

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(viii) Costly Process- MBO is an expensive and time-consuming process. The setting and
valuation of targets are finished over such a brief period that it will most likely be
unable to accommodate sufficient connection among all superiors and subordinates in
the association. MBO requires an extraordinary arrangement of investigation for
which senior leaders don't have sufficient time.
Steps in Managing by Objectives (MBO):
The following steps needs to be followed for MBO which are explained underneath:
1. Setting of Goals- The objectives of each subordinate for a predefined period are set up by
the subordinate himself. Such objectives ought to be harmonious with the authoritative and
departmental goals. The subordinate will fix the objectives for himself for a predetermined
period which might be a half year or one year. He will likewise list the assets expected to
meet the objectives. The objectives set somewhere around the subordinate are the beginning
stage of overseeing by goals.
2. Approval of Goals- The superior will sit with the subordinate to talk about the objectives
set. The objectives might be revised, if required. When this process is finished, there will be
better opinions with his subordinate as to what is to be achieved by the subordinate. The
concluded adaptation of goals and responsibilities regarding the subordinate ought to be
diminished into writing to avoid any confusion. This record is named as the Key Result
Analysis.
It will consist of the following data:
(i) The general goals of the subordinate's work.
(ii) The key targets he should achieve.
(iii) The present moment and long haul need of his work.
(iv) The norms by which his presentation will be assessed.
3. Establishment of Check-Points- The executive's goals represents the delegation of
power to the subordinate to take care of his business. However, the superior should
lay out specific checkpoints to check that authority is exercised properly, and
necessary steps are taken to complete the job. This will help in monitoring the
subordinate's performance.
4. Periodic Review of Progress- The superior should make an occasional survey of the
progress in accomplishing the subordinate's objectives. For this, the superior should
look for progress reports from the subordinate occasionally, say fortnightly or month
to month. He ought to likewise contact the subordinate to distinguish the issues

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looked at by him and make suitable moves to solve the problem. Indeed, even the
objectives might be checked to overcome difficulties in the. Continuous contact
between the superior and the subordinate will guarantee that things do not go out of
control.
5. Appraisal of Performance and Counselling- Formal appraisal toward the finish of
the target period is done by the superior through appraisal of the subordinate's
performance. Under this, accomplishments are examined and the goals of the
subordinate.
Making MBO Effective:
The following guidelines can be followed for making MBO objective:
1. Top Management Support
2. Education about MBO
3. Active Participation in Goal Setting
4. Decentralisation of Authority
5. Orientation of Executives
6. Integration of MBO Programs.

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CASE STUDY

Management by Objectives

The Branch Manager of a FMCG company attended a seminar on Management by Objectives.

His enthusiasm was very high and was so excited about it. He then decided to introduce this
concept in his next meeting with staff. The branch manager highlighted the key benefits of this
technique and discussed the advantages which the branch can get with the application of this
technique. He told his subordinates to think upon it so as to adopt this technique in the branch.
However, introducing a whole new concept was not easy and it led to many objections and
queries like- are the goals of the branch for the next year assigned by the chairman? So, there
was no list of the expectations from the branch manager regarding this concept yet but he
himself made his list of goals and objectives which the branch will thrive to achieve in the
future.

When these goals were achieved, the executives were so impressed with the branch manager
that he made such clear objectives and also achieved them with assurance. They were so
impressed with his hard work and sincerity towards his branch. Now, he wanted every
department to make his own goals and objectives which are verifiable and clear.

Questions:

1. Can the Branch Manager develop verifiable objectives when they have not been
assigned to him by the Chairman? How?
2. Do you justify the Branch Manager's approach is setting goals? Give reasons for your
answer.

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B. BEHAVIOURALLY ANCHORED RATING SCALE (BARS):

BARS is intended to evaluate the performance of employee on the pre-determined
statements. Performance is assessed by asking the evaluator to record explicit observable
work of behaving of an employee and afterward to contrast these perceptions and a
“behaviourally anchored rating scale". Subsequently, the supervisor is in a situation to look at
the employee's real way of behaving with the way of behaving that has not been set to be
successful.
The Behaviourally Anchored Rating Scale (BARS) moves toward consolidating components
of the traditional rating scales and critical incident method. Utilizing BARS, work ways of
behaving from basic incidents successful and inadequate ways of behaving are depicted more
equitably. This strategy utilizes people who know all about a specific task to recognize its
major parts. They are approached to rank and approve explicit ways of behaving for each of
the parts. BARS approach quits estimating abstract individual characteristics and on second
thought measures perceptible, basic ways of behaving that are connected with explicit work
aspects.
Development of a BARS requires the following steps:
(i) Generate Critical Incidents- Specialists who realize the occupation being assessed
(work holders as well as managers) are approached to portray explicit delineations
(basic occurrences) of compelling furthermore, inadequate performance.
(ii) Develop Performance Dimensions- These individuals then, at that point, group the
incidents into a more modest arrangement of performance aspects (express 5 to 10).
Each group (aspect, for example, good faith is in this manner characterized.
(iii) Reallocate Incidents- One more gathering of specialists who likewise know the work
then, at that point, redistributes the first basic occurrences. They are given the group
definitions and the basic occurrences and are approached to reassign every incident to
the group they think it fits best. Regularly, a basic occurrence is held if some rate
(normally half to 80%) of the second group assigns it to the same cluster as did the
first group in step (ii).
(iv) Scale the Incidents- The subsequent group is by and largely requested to rate the way
of behaving portrayed in the incident regarding how really or insufficiently it
addresses performance on the fitting aspect (seven or nine-point scales are
commonplace).

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(v) Develop Final Instrument- A subset of the incidents (typically six or seven for every
cluster) is utilized as conduct secures for each aspect.

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The benefits of BARS are as per the following:

(i) Engagement of Experts- Experts are engaged in developing the BARS. The outcome
ought to in this way be a decent and precise measure of performance at work.
(ii) Clarifying Performance- The basic occurrences along the scale help to explain what
is implied by incredibly great performance, normal performance, etc.
(iii) Providing Feedback- Critical incidents might be more helpful in giving criticism to
employees than essentially educating them regarding their performance rating and not
giving specific behavioural examples.
(iv) Making Dimensions Independent- Systematically clustering basic incidents into
five or six performance aspects helps in making the aspects more autonomous of each
other.
(v) Consistent and Reliable- BARS assessments appear to be somewhat steady and solid
in that unique evaluators' appraisals of a similar individual will generally be
comparable. This method isn't one-sided by the experience and assessment of the
evaluator.
C. 360-DEGREE APPRAISAL:
The 360-degree appraisal includes the rating of an employee or administrator by everyone
above, alongside, and below him. Corporates like General Electric India (GE), Reliance
Industries Ltd. (RIL), Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax, and
Thomas Cook are utilizing this instrument to figure out bits of insight about their supervisors.
Even though conveyed generally as a reality finding procedure, 360° appraisal is likewise
used to plan promotion and reward framework in the association.
As per Milliman and others, "360-degree appraisal is the course of methodically gathering
information on an individual's abilities, capacities and ways of behaving from an assortment
of sources-the manager, peers, subordinates and even customers and clients".
Accordingly, the appraisal of a worker is finished by his superior, his peers, his subordinates,
and clients or untouchables with whom he connects over his work performance. In 360-
degree appraisal, other than evaluating the performance of the assessee, his different
properties, for example, initiative, interpersonal skills, decision-making, customer orientation,
values, and specialized capacities are likewise evaluated.
Components of 360 Degree Appraisal:
The components of 360-degree appraisal are portrayed as under:
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1. Self Appraisal- Self-examination is a vital piece of the 360-degree appraisal

framework since it gives the worker an outright opportunity to take use his strengths
and a valuable chance to evaluate his performance. In a deep-rooted framework,
employees utilize the device of self-appraisal really and organizations likewise find
that employees frequently are their own most grounded critics and show an
exceptionally serious level of objectivity. Self-examination additionally gives an open
door to the worker to communicate his vocation moves for what's in store.
Nonetheless, this is just for social event data, and under the given hierarchical
imperatives, it might not be imaginable to give the profession movement wanted by
the worker. By the by, it is to the association's advantage to at least know on a direct
premise the desires of its employees.
2. Superior Appraisal- This is, obviously, the main part of the 360-degree appraisal
framework. In any case, here the centre is to give helpful criticism on the employee's
performance and his improvement needs. It is the obligation of the better than
guarantee that the employee puts forth objectives in the space of business
performance as well as in the areas that are indispensable to the association. These are
called corporate thrust areas and may incorporate relationship management, well-
being, and quality development. If the superior finds the way of working of the
subordinate inappropriate, then he might set standard which will act as yardsticks for
him.
3. Peer Group Appraisal- Peers assume a significant part in the existence of an
employee in the association. They can give the feedback of the employee attitude and
the working. For better results, choosing the right peer group is essential for giving
the true feedback. They should incorporate companions both from inside the division
as well as from different divisions which are straightforwardly associated with the
working of worker's specialty. The idea of interior clients comes conveniently here.
Three to five interior clients ought to regularly be picked for peer appraisal. Peer
examination should try to get feedback on:
(a) employee's functioning style
(b) awareness towards others
(c) spirit of co-activity and joint effort
(d) capacity to function as a colleague.

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4. Subordinates' Appraisal- The most particular component of the 360-degree

appraisal is the job of subordinates in appraisal. It implies two things. It, first and
foremost, is a clear expression from the association that it empowers transparency,
and that input is a two-way process. Furthermore, it is a foundational
acknowledgment of the way that a worker's subordinates truly do play a crucial job in
his appraisal. In this manner, the reason for subordinate's appraisal is to get a direct
appraisal of how the subordinates see their superior to be as far as:
(a) designation of power
(b) directing and preparing subordinate
(c) inspiration of subordinates
(d) group building, etc.
Advantages of 360 Degree Appraisal:
There are various advantages of 360 Degree Appraisal which are given underneath:
(i) Reveals Employee's Strengths and Weaknesses- It uncovers the qualities and
shortcomings of the employees.
(ii) Gap can be Reduced- The gap between self-appraisal and the perspectives of one's
colleagues is decreased.
(iii) Teamwork- When peer group appraisal is considered for performance examination,
cooperation flourishes.
(iv) Initiation of Self-Change- Inflexible administrators are compelled to start self-
change.
(v) Improving overall Quality of Staff- It works on the by and large nature of the staff
on the grounds that every part is helping the others to move along.
Drawbacks of 360 Degree Appraisal:
There are various limitations of 360 Degree Appraisal which are given underneath:
(i) Biased Response- Response from peers (colleagues) and subordinates might be one-
sided.
(ii) Ignored Goals- Performance as far as achieving objectives is overlooked.
(iii) Frustration among Employees- Feedback might cause disappointment and
resentment among the employees.

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(iv) Time-Consuming Process- 360° examination is a complex and tedious appraisal

procedure.
Example of Performance Appraisal Types:
Summarised form of Performance Appraisal Methods:

Type of Performance
Advantages Disadvantages
Appraisal Method

Inexpensive to develop Subjectivity

Graphic Rating Scale
Easily understood by employees Can be difficult to use in making
and managers compensation and promotion decisions

Subjectivity

Writing ability of reviewer impacts

Can easily provide feedback on the
Essay validity
positive abilities of the employee

Time consuming (if not combined with

other methods)

Does not allow for detailed answers or

Measurable traits can point out
Checklist scale explanations (unless combined with
specific behavioural expectations
another method)

Provides specific examples

Critical Incidents Tendency to report negative incidents
Time consuming for manager

Work Standards Ability to measure specific

Does not allow for deviations
Approach components of the job

Can create a high-performance

work culture
Ranking Possible bias
Validity depends on the amount of
interaction between employees and

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Type of Performance
Advantages Disadvantages
Appraisal Method

manager

Can negatively affect teamwork

Open communication
Many only works for some types of
MBOs
Employee may have more “buy- job titles
in”

Focus is on desired behaviors

Scale is for each specific job

BARS Time consuming to set up

Desired behaviors are clearly

outlined

Difference Source: 11.2 Appraisal Methods – Human Resource Management. (2016, March
22). Pressbooks. Retrieved October 21, 2022, from
https://open.lib.umn.edu/humanresourcemanagement/chapter/11-2-appraisal-methods/

IN-TEXT QUESTIONS

16. The other name of Management by Objectives is _______.

17. Name any two traditional methods of Appraisal.
18. The full form of BARS is __________.
19. The 360-degree method is a traditional appraisal method. True/False
20. The Confidential Report is a traditional method of appraisal. True/False

6.5 PERFORMANCE MANAGEMENT AND POTENTIAL

APPRAISAL
6.5.1 Performance Management:

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Performance management is a tool that incorporates recognizing and focusing on objectives,

characterizing what is progress towards objectives, setting norms for estimating results,
following promotion toward objectives, trading criticism among organizational parts,
routinely evaluating progress, supporting viable objective arranged exercises, and intervening
to make upgrades when required.
Performance management has other implications than performance appraisal which gives
input about employees' job performance. Other than getting input, performance management
also incorporates performance interviews, archiving of performance data, and use of appraisal
data. These components have been talked about underneath:
1. Getting Feedback- It includes an orderly assortment of worker's performance
information concerning the amount of result, nature of the result, the practicality of
result, helpfulness, and so on. Such information should be gathered formally. It tends
to be incorporated from performance reports documented by the employee and his
boss, and furthermore reports of value auditors.
2. Performance Appraisal Interview- A sound appraisal framework ought to
incorporate the post-appraisal interview. In this meeting, criticism on performance is
given to the employee. The evaluator makes sense of his appraisals of the worker and
the characteristics he has taken into thought for appraisal. The meeting likewise gives
an open door to the employee to make sense of his perspectives about performance
guidelines, rating scales, appraisals, the variables hindering his performance, and so
on. The evaluator can give direction, training, and ideas to the worker for working on
his performance.
The post-appraisal interview is intended to accomplish the accompanying goals:
(a) to tell the employee where he stands.
(b) to assist the worker with going about his business by explaining what is generally
anticipated of him.
(c) to give an open door to the worker to remark upon his appraisal.
(d) to strengthen prevalent subordinate connections.
(e) to trade significant data for vocation promotion; and
(f) to advise the worker for additional turn of events.
Appraisal interview can be of the following types:
(i) Tell and Sell Interview- The motivations behind this interview are:

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(a) to let the employee, realize how well he is doing,

(b) to acquire the worker's acknowledgment of the assessment, and (c) to draw up
an arrangement of progress for him.
It depends on the understanding that workers have few deficiencies, yet they
should be persuaded about these inadequacies, the evaluator's appraisal, and
ideas for development. The questioner requires tolerance, understanding
furthermore, and the capacity to persuade the employee about his assessment
and ensuing medicinal measures without utilizing his positional power. This
sort of interview is fitting for youthful and new workers who are unpractised,
unreliable, and need the counsel of the unrivalled. The predominant can
deserve admiration because of his more prominent information and
experience.
(ii) Tell and Listen Interview- The target of this interview is to impart the appraisal to
the worker and afterward listen thoughtfully to his responses. Such a meeting is
separated into two sections: The initial segment covers serious areas of strength for
the worker's work performance, and the subsequent part is utilized to investigate
completely the employee's sentiments about the appraisal. With the help of
precautions, taking full advantage of pauses, and answering sentiments to show
understanding are the abilities expected in this kind of interview. One benefit of this
technique is that it makes a great connection between the superior and the
subordinate. The subordinate fosters a positive mentality towards the superior.
Another benefit is that it will generate support and correspondence.
(iii) Problem-tackling Interview- In this meeting, the point isn't appraisal but
improvement of an employee. Hence, the questioner removes himself from his
standard job as an appointed authority and places himself in the job of a partner. He
doesn't convey (tell) the examination to the employee. He doesn't call attention to the
areas of progress. Maybe he tries to copy the employee into contemplating working
on his own presentation. He doesn't supply cures or arrangements in spite thinks about
all thoughts on work improvement proposed by the employee. This process is done by
capable inquiries.
3. Archiving Performance Data- The records of performance appraisal and
performance interviews should be put away for use in the future. The HR supervisor
ought to be capable to recover this data for taking faculty choice in the future. Such
choices may include pay hikes, promotions, training, etc. For instance, assuming a

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worker is given or denied promotion, such choice should be supported by

performance data.
4. Use Appraisal Data- Performance management includes the utilization of appraisal
information for taking sound staff choices. The areas of HRM where such information
can be utilized incorporate the accompanying:
(i) Validation of selection strategy.
(ii) Training and improvement programs.
(iii) Transfer and lay off choices.
(iv) Promotional choices.
(v) Compensation organization, e.g., the choice about stoppage or yearly
increment, or giving development increases.
(vi) Taking care of grievances.
6.5.2 Potential Appraisal:
For the most part, individuals acquire promotions based on their past performance. The
previous performance is viewed as a decent mark of future work achievement. It would be
ideal for this to be valid if the jobs are comparable. In any case, in real practice, the jobs that
a task holder has done in the past may not be something similar that he expects an alternate
work after his transfer or on the other hand promotion to another position. Past performance,
in this way, may not be a decent sign of the reasonableness of a marker for a higher job. To
overcome this deficiency, organizations should start the course of potential appraisal.
The potential appraisal is a means of surveying the secret characteristics of a worker for the
motivation behind setting him up for releasing higher obligations in the future. The essential
reason behind potential appraisal is that each individual has specific secret characteristics to
changing extents. These characteristics might be an innovative creative mind, capacity to
work in different climates, enthusiasm for high accomplishment, critical thinking,
independent direction abilities, etc. This large number of characteristics comprise the
capability of a person. It is through potential appraisal that this large number of
characteristics are distinguished. These characteristics of an employee might be considered to
foresee whether the worker is capable for taking higher responsibilities.
Objectives of Potential Appraisal:

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The primary motivation behind a potential appraisal is to recognize the capability of

employees to reach the top management positions in the organization and who can take the
responsibilities of the higher positions in the hierarchy.
The potential appraisal can serve the accompanying goals:
(i) To provide advice to the workers about their future possibilities.
(ii) To provide advice to the employees about how they should further develop their
career possibilities.
(iii) To assist the organization in making the plan.
(iv) To refresh training programs occasionally.
Mechanism of Potential Appraisal:
Potential appraisal assumes the presence of obvious work or job depictions and work or job,
i.e., characteristics expected to perform the job. The components that could be utilized for
potential appraisal are talked about underneath:
(i) Rating by Superior- The capability of a competitor could be evaluated by the
supervisor who is familiar with the competitor's work and furthermore his specialized
capacities.
(ii) Psychological Tests- Administrative and conduct aspects can be estimated through
various mental tests.
(iii) Games- Simulation games and activities (appraisal focus, business games, in-basked,
role play, and so on) could be utilized to reveal the capability of the applicant.
(iv) Performance Records- Performance records and appraisals of the applicant on his
past positions could be inspected cautiously on different aspects like drive,
imagination, risk-taking capacity, and so on, which could assume a key part in
releasing his obligations in a new position.
Benefits of Potential Appraisal:
Potential appraisal is being utilized by enormous business firms as it offers the accompanying
advantages:
(i) Identification and Grooming of Candidates- The firm can distinguish and prepare
possibilities for promotion to higher situations in the future.

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(ii) Career Planning and Development- It gives significant contributions to vocation

arranging and improvement.
(iii) Better use of Human Assets- It empowers the association to utilize its human
resources.
(iv) Satisfaction of Needs and Aspirations- It assists with fulfilling the necessities and
desires of the workers with incredible potential.
(v) Helps in Succession Planning- It works with progression arranging by distinguishing
talented staff who could involve in higher posts when the current occupants move out
of the association.

IN-TEXT QUESTIONS
25. These are the types of Performance Management Interviews- Tell & ____ and
tell & ____.
26. Potential Appraisal and Performance Management constitutes one and the
same thing. True/False.
27. The Performance Management helps in getting inputs in the form of _____
28. Does Potential Appraisal help in succession planning? Yes/No.
29. Potential Appraisal help in career development. True/False.

6.6 SUMMARY
In the lesson we have learnt how important is the timely survey of the performance of the
employees to provide them with just, equitable, uniform and fair wages and incentives. The
regular survey of the employees’ jobs also contributed widely to the growth of the
organization. It helps in understanding the needs of the employees and also helps in taking
various important decisions related to the job of the employees like increase in pay, transfer,
promotion, etc.

6.7 GLOSSARY

Yardstick: It implies the guidelines set on an earlier premise.

Unprejudiced: It implies making a decision about anything fairly, with next to no earlier
mentality.

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6.8 ANSWERS TO IN-TEXT QUESTIONS

1. Continuous 9. False
2. False 10. True
3. Uniform 11. Sell and Listen
4. True 12. False
5. Yes 13. Feedback
6. Management by Results 14. Yes
7. Ranking and Essay Method 15. True
8. Behaviourally Anchored Rating Scale

6.9 SELF-ASSESSMENT QUESTIONS

20. Consider yourself as a Human Resource Manager and answer the following questions
based on your knowledge of Performance Management:
(a) What is the objective of your performance review?
(b) Who should participate in your performance review?
(c) What should you measure in your performance review?
(d) What type of questions will you ask your team during your performance
review?
21. Review each of the appraisal methods and discuss which one you might use for the
following types of jobs and discuss your choices.
a. Administrative Assistant
b. Chief Executive Officer
c. Human Resource Manager
d. Retail Store Assistant Manager
22. Consider yourself as an employee of the company and answer the following
questions:

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(a) Do you have everything you need to perform your job? Or what resources or
support do you need from the department to reach your goals?
(b) What are your long-term career goals, and how can the organization help you
in achieving them?
(c) Which of the organizational goals do you think are more aligned with your
personal goals?
(d) What is your biggest strength and weakness?
(e) In what ways do you think you can contribute to the company?
23. Why is performance appraisal necessary in modern organisations? Discuss any two-
techniques of performance appraisal.
24. What do you mean by Performance Appraisal? Discuss its benefits to an industrial
organization.

6.10 REFERENCES

Chhabra, T.N. (2019). Principles and Practices of Management, Dhanpar Rai & Co., Delhi, p.
271
Amos, T., Ristow, A., Ristow, L., & Pearse, N. (2008). Human Resource Management, JUTA
and company ltd.
Chhabra, T.N. & Chhabra, Monica S. (1988). Essentials of Human Resource Management,
Sun India Publications, New Delhi.

6.11 SUGGESTED READINGS

Pande, S., & Basak, S., (2015). Human Resource Management Text and Cases, Vikas
publishing house
Chhabra, T. N., & Chhabra, M. S. (2016). Essentials of Human Resource Management (2nd
ed.). Sunindia lashers.

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LESSON 7
INDUSTRIAL RELATIONS
Dr. Malavika Srivastava
Associate Professor
Institute of Information Technology & Management
GGSIPU
Malavika.iitm@gmail.com

STRUCTURE

7.1 Learning Objectives

7.2 Industrial Relations
7.2.1 Nature of Industrial Relations
7.2.2 Aspects of Industrial Relations
7.2.3 Objectives of Industrial Relations
7.2.4 Systems Approach to Industrial Relations
7.2.5 Environmental factors to Industrial Relations
7.2.6 Evolution of Industrial Relations
7.2.7 Answers to In-Text Questions
7.3 Dynamics of Employee, Employer and the State
7.3.1 Parties to Industrial Relations
7.3.2 The Workers’ Association: Trade Union

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7.3.3 Employer’s Organization

7.3.4 State/Union Government
7.3.5 Answers to In-Text Questions
7.4 Trade Unions
7.4.1 Trade Union: Past
7.4.1.1 Emergence of Labour Leader
7.4.1.2 Formation of First Labour Organization
7.4.1.3 Post-Independence Scenario
7.4.2 Trade Unions: Present
7.4.3 Trade Unions: Future
7.4.4 Answers to In-Text Questions
7.5 Industrial Harmony & Worker’s Participation
7.5.1 Industrial Harmony
7.5.2 Worker’s Participation in Management
7.5.3 Importance & Objectives of Worker’s Participation in Management
7.5.4 Modes of Participation
7.5.5 Worker’s participation in Management in India
7.5.6 Worker’s Participation in Management in India
7.5.7 Success of Worker’s Participation in Management
7.5.8 Industrial Harmony & Worker’s Participation in Management
7.6 Collective Bargaining
7.6.1 Significance of Collective Bargaining
7.6.2 Functions of Collective Bargaining
7.6.3 Process of Collective Bargaining
7.6.4 Collective Bargaining in India
7.6.5 Obstacles in Collective Bargaining in India

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7.6.6 Answers to In-Text Questions

7.7 Summary
7.8 Glossary
7.9 Self-Assessment Questions
7.10 References
7.11 Suggested Readings

7.1 LEARNING OBJECTIVES

After studying this lesson, you will be able to:

1) Explain the concept of Industrial Relations and its emergence.
2) Elaborate the nature & objectives of Industrial Relations
3) Enumerate the stages of Evolution of Industrial Relations
4) Identify the three important parties and their roles in Industrial Relations
5) Explain the effects of environmental determinants on Industrial relations
6) Define Trade Unions and their emergence, its present condition and its future.
7) Understand the concept of Industrial Harmony and Worker’s Participation in
Management.
8) Understand the concept, significance & functions of Collective Bargaining

7.2 INTRODUCTION TO INDUSTRIAL RELATIONS

Starting from the medieval period, when the relations between the master and servant were
not complex, moreover it was direct and personal hence it was easy to secure cooperation
from the workers. Relations between them was easy as the masters were approachable, and
they were enough to take workers out of their difficulties. Then the situation underwent a
change with the emergence of factory system after England’s Industrial Relations in the 18th
Century. In this system the old philosophy didn’t work as the workers faced many economic,
social and psychological problems and what was majorly needed was their Welfare and
Wellbeing. This gave birth to the concept of Industrial Relations to tackle with the workers
insecurities and unrest at the industries as there was high need for cooperation between labour
and employers.

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The term Industrial Relations consists of two words “Industry” and “Relations”.
Relations co-exist with humans and Industry is a place where number of humans, initially
unknown to each other, meet, work, compete & cooperate, which makes it even more
important to tie them in a harmonious relationship to maintain Industrial Peace. Therefore,
after Industrial Revolution, which mark the emergence of factories and labour- management
relations, industrial relations evolved to regulate and harmonise their relations and to
safeguard the labour from all sorts of exploitation at the industries and also to ensure their
complete welfare and wellbeing.
We shall now understand the concept of Industrial Relations more comprehensively with the
help of some definitions:
H. Henry Richardson asserts “Industrial Relations is an art, the art of living together for the
purpose of production”. To work together it becomes a necessity for them to learn this art by
acquiring the skill of adjustment.
On the other hand, H.A. Clegg emphasised the regulation and institutionalization of industrial
relations when he asserted that “The field of Industrial Relations includes the study of
workers and their trade unions, management, employers’ association, and the state
institutions concerned with the regulation of employment”
National Commission on Labour (NCL) also emphasised that “Industrial relations affect not
merely the interests of the two participants-labour and management, but also the economic
and social goals to which the State addresses itself. To regulate these relations in socially
desirable channels is a function, which the State is in the best position to perform”.
The above definitions clarify that Industrial Relations emerges out of employee employer
relations in industries which are regulated by the Government/State in various aspects.
7.2.1 Nature of industrial Relations:
1. Industrial Relation is interdisciplinary in nature: As the study of conditions like
level of wages and security of employment is related to economics, if we study their
origin and evolution, it comes under history, resultant social conflicts due to these
issues comes under sociology, study of attitude of various parties to Industrial
Relations comes under the purview of psychology, state policies bearing on the issues
under political science, the legal aspect of the issue under law, the technological
aspect under the study of technology and the quantitative assessment of losses
incurred by the parties and the country's economy under mathematics.

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2. Industrial Relation is multidimensional in nature: Having three major dimensions

as determinants, namely:
a. Institutional factors such as government policies, labour laws unions of
workers and employers, power, structure, community etc.
b. Economic factors such as type of economic ownership like capitalist, socialist,
company ownership etc.
c. Technological factors such as techniques of production, capital structure,
rationalization etc.
3. Industrial Relations as “Web of Rules”: Formed by the interaction of the
government, the industry and the labour are influenced by the existing and emerging
institutional, economic and technological factors.

ACTIVITY
Industrial Relations is a multifarious topic. Like the above points, think of some
more points in nature, features, characteristics of Industrial Relations that you
have observed or experienced through your exposure to any industry or
organization.

7.2.2 ASPECTS OF INDUSTRIAL RELATIONS:

“Cooperation is as common in human nature as Conflict”. Therefore, Douglas McGregor
considers both to be the two most important aspects of Industrial Relations.
Cooperation: Cooperation between union & management, the two actors in the industrial
relations drama, differing in economic power, wealth and education, depends primarily on
their ability and willingness to make contacts at points of mutual concern. In a nutshell
“Union-Management cooperation will be a function of two forces- the behavioural pattern of
union and management, and the balancing of union rights with management rights. This will
require a tough exercise in the demarcation of joint and exclusive areas of the two parties”
Conflict: In Labour-Management relationship, conflict is inevitable. To some extent it also
forms the base for their survival and is not always destructive. But the same conflict when
becomes recurring in nature can be hazardous. Hence, a timely realization and redressal is
necessary to maintain industrial harmony.

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7.2.3 OBJECTIVES OF INDUSTRIAL RELATIONS:

According to the Labour management Committee of the Asian Regional Conference of the
International Labour Organization (ILO) along with the primary objective of improving the
economic conditions of the workers, increasing productivity and achieving industrial
democracy in industrial enterprise, have also identified following as the fundamental
objectives of Industrial relations:
i) To enable employers and trade unions to deal with their mutual problems freely,
independently and responsibly.
ii) Facilitating the maximum use of collective bargaining for mutual accommodation.
iii) Enabling workers’ and employers’ organization to associate with government
agencies in consideration of general, public, social and economic measures affecting
employers’ and workers’ relations.
iv) Timely redressal of Industrial conflicts and policing the occurrence of strikes and
lockouts.
v) To provide higher job satisfaction to the workers to minimise labour turnover and
absenteeism.
vi) To promote workers participation in management.
vii) To encourage government control in regulating production and industrial relations.

IN-TEXT QUESTIONS
1. Industrial Relations is an _______________ of living together.
2. Industrial Relations came into being in 20th Century. True / False
3. Following is not one of the Aspects of Industrial Relations:
a) Cooperation b) Confidence
c) Conflict d) None of the above
4. Facilitating maximum use of ____________________ is the objective of IR.
5. Concern towards Employees ____________________ are major objectives of
IR.
7.2.4 SYSTEMS APPROACH TO INDUSTRIAL RELATIONS:
John Dunlop proposed System’s Approach to Industrial Relations. This approach focuses on
participants in the process, environmental forces and the output. It also studies inter-relations
among different facets of Industrial Relations system.
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Environmental Forces Participants in the System Outputs

Market of Economic Union

Restraints
Technology Management Rules of the Workplace
Distribution of Power
Government
in Society

Fig 1.1 Systems Approach to Industrial Relations

The basic elements of the system:
1. Participants in the System: Workers & their organization, management and their
representatives, and government. These sub-systems interact with each other within
the economic, social and politico-legal framework of the country.
2. Environment: Dunlop referred to these components as: “technological subsystem”,
“economic subsystem” and “political subsystem”.
a) Technological characteristics: Industrial relations would be very different in
a labour-intensive industry than a capital-intensive one. Changes in technology
enhances the employers’ expectations about the skills of workers. The work
processes and methods with modern techniques reduce the manual work and
workers acquire greater control over their work, thus, higher production can be
achieved.
b) Market or economic constraints: These factors influence industrial relations
because the need for labour is closely related to the demand of products. As
the competition rises up the market share of an enterprise becomes uncertain
which influences the industrial relations both in long and short terms.
c) The locus and balance of power: The locus and balance of power in a society
also influences the relationship between labour and management. The
regulatory role of Government is an important factor in shaping the pattern of
Industrial Relations.
3. Output: The output is the result of interaction of the parties/actors of the system
which is manifested in the network of rules, policies and agreements etc. This
facilitates the workers.
7.2.5 ENVIRONMENTAL FRAMEWORK OF INDUSTRIAL RELATIONS:
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Relations at the workplace are influenced by various environmental factors. These factors
shape these relationships, they even reinforce them in the course of developing Industrial
Relations:
1. Economic Forces: There are numerous economic factors as difference in wages,
unemployment, relative status, which has a direct relationship with the industrial
relations. If the demands for higher wages and improvement in standard of living will
not be met, conflict is inevitable.
2. Social Factors: In the initial stage of industrialization various social factors such as
social groups, social values and norms, social status influence industrial relations,
which gives rise to the existence of class in industries. But with the progress in
industrialization, such factors lose their importance.
3. Psychological Forces: Lack of motivation, lower morale, loss of personal identity,
lack of interest and dissatisfaction due to dissatisfaction at work give vent to the
worker’s protest and to fight the same, employers form their organizations. Thus, an
environment of ‘power relationship’ is created which might culminate in collective
bargaining.
4. Politico-Legal Forces: The system of Government, political institutions, judiciary
etc. influence the industrial relations in the country to a great extent. For ex. The
philosophy of the political party in power influences the state of industrial relations by
enacting and enforcing various statutes for the protection of the interest of the
workers.

IN-TEXT QUESTIONS

6. Society is the participant in system. True / False

7. Systems Approach to Industrial Relations was proposed by
_______________.
8. Which is not one of the factors in the Environmental framework of IR:
a) Economic b) Biological
c) Social d) Legal
9. Motivation, Morale, Personal Identity are ____________________.
10. ____________________ are considered to be outputs in Systems Approach.
7.2.6 EVOLUTION OF INDUSTRIAL RELATIONS:

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History of India marks the evolution of Industrial Relations in three distinct phases. First
phase begun from the middle of the 19th Century and ended by the end of the First World
War. Thereafter commenced the Second Phase and lasted by the attainment of Independence
in 1947 and the post-independence era represents the Third phase.
First Phase: It commenced with the British Government attempt to minimise the competitive
advantage of indigenous employers against the British employers by regulating the condition
of work in their ways, a series of legislative measures were adopted, which worked as the
beginning of industrial relations in India. The establishment of International Labour
Organization (ILO) in 1919 had a great effect on industrial relations in India. With budding
trade unions in India, foundation of All India Trade Union Congress (AITUC) in 1920 also
was an important event in the history of Industrial Relations in our country.
Second Phase: As an extension to the First Phase, after the First World War, a number of
laws were enacted. For Ex. Trade Dispute Act, 1929, provided a conciliation machinery for
settlement of disputes. Also, a survey was conducted by The Royal Commission on Labour
(1929-31) to assess labour problems in India related to their working conditions with respect
to health, safety and welfare of the workers and made recommendations to make further
modifications in policies, acts and laws.
Third Phase: The Industrial Truce Resolution adopted in 1947 was the major development
in this phase. This encouraged “the labour and management to assist the Government to
secure, promote & guarantee such agreements between the parties as will usher in a period of
contended and orderly advancement towards a cooperative commonwealth”. Under this phase
more importance is given to the need for respecting the mutuality of interests between labour
and capital in industrial development and recommended to the parties the method of mutual
discussion of all problems, common to both and the determination to settle all disputes
without recourse to interruption in or slowing down of production”.
In the end it can be stated that as far as evolution of Industrial relations in India has been
gradual. It went through phases from traditional to modern times of its existence. The
evolution took place also to bring about change for the betterment of working conditions of
the workers in terms of their health, safety and welfare at the workplace. Finally, it took a
turn towards importance to mutuality of interest and role of Government in practicing law for
dealing with industry related issues.

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IN-TEXT QUESTIONS
11. There are ____________________ phases in the Evolution of Industrial
Relations.
12. A major development in Third phase is ____________________.
13. ILO conducted a survey to access labour problems in India. True / False
14. Trade Dispute Act, 1929 was enacted in the _______________ Phase of IR
Evolution.
15. When was All India Trade Union Congress formed:
a) 1920 b) 1820
c) 1944 d) 1947

7.2.7 ANSWERS TO IN-TEXT QUESTIONS

1. Art 9. Psychological factors
2. False 10. Rules of the workplace
3. Confidence 11. Three
4. Collective Bargaining 12. Industrial Truce Resolution
5. Participation 13. False
6. False 14. Second
7. Dunlop 15. 1920
8. Biological

7.3 DYNAMICS OF EMPLOYEES, EMPLOYER & THE STATE

Industrial Relations is made of two terms, out of which more important is relations. When it
comes to relationship, their existence is possible only when there are two or more parties to it.
In Industrial Relations this relation is “employment relationships” in industry i.e., between
employers and labour which is secured under the great influence of government of the nation
or state.
Therefore, there are three major parties to industrial relations: Workers and their
organization, Employers & their organization and Government/State.

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They have their own unique role to play in regulating industrial relations in the interest of
industry and largely of the nation.

Employee Employers'
Association Organization

Parties
to IR

State

Fig 1.1: Parties to Industrial Relations

7.3.1 PARTIES TO INDUSTRIAL RELATIONS:
The three major variables in Industrial Relations are:
a. Workers & their organizations: The diverse workforce with various differences in
their characteristics, culture, attainment, qualifications, skills and attitude, forms a
very important element of this industrial relations network. Workers organization, to
be more specific, the Trade Unions are political institutions and are formed for
safeguarding the political and social interest of the workers. They are the worker’s
representatives and moreover works as mediator between workers and the employers.
Its major objective is to strengthen the workers position to support the fulfilment of
their organizational objectives, and to secure management cooperation for the same.
b. Employers & their organizations: The other important thread in the network of
Industrial Relations is the Employer. In fact, the industries exist because of
employers, as they are the creators. They create industries and employment for the
workers. They are the one who regulates the employment related factors such as
worker behaviour, attitude, satisfaction/dissatisfaction for securing higher
productivity from them. Similar to workers organizations, employers also sometimes
have their association in order to increase their bargaining power to be utilised in the
times of disputes with the workers. Employers’ association can create pressure on
workers as well as Government as and when required to regulate industrial relations.

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c. Government/State: An Influential partner in the industrial relation system which

bears powers over and above workers association and employers’ organization, is the
Government/State, whose role is to intervene in the working relationships and
regulating working conditions through various laws relating to labour in the interest of
employers, workers as well as the nation.

ACTIVITY
Above we have talked about the Three major parties to Industrial Relations. You
are supposed to draw three columns and enumerate the 5-5 functions each of
Employee Association, Employer’s Organization & the State/Government.

IN-TEXT QUESTIONS
16. There are _______________ parties to IR.
17. Trade Unions are formed to safeguard the recreational interest of the workers.
True / False
18. Which is NOT a party to IR:
a) Trade Unions b) Courts/Tribunals
c)Employer’s Organization d) ILO
19. ____________________ bears power over & above Employees Association
& Employer’s Organization.
20. ____________________ regulates employment related factors.

7.3.2 THE WORKERS ASSOCIATION: TRADE UNION

Unlike traditional, less complicated, less technological relation between workers and
employers, the modern industrial organizations, using modern technology and large number
of workers led to the development and growth of Trade Unions not only in advanced
economies but also in developing economies like India.
‘The emergence of trade unionism is spontaneous and inherent in the growth of capitalism.
The origin of trade unionism lies in the Industrial Revolution which disrupted the older way
of life and created a new society forged by the shop, the mine and the industry’.

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According to Flippo “A Labour Union or Trade Union is an organization of workers formed

to promote, protect and improve, through collective action, the social, economic and political
interests of its members”.
Following are some important features of Trade Unions:
a. It is an organization formed by employees or workers.
b. It is formed on a continuous basis. It is a permanent body and not a casual or
temporary one.
c. It is formed to promote and protect all kinds of interest, most importantly economic.
d. It achieves its objectives through collective action and group efforts.

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OBJECTIVES OF TRADE UNIONS:

1. Steady Employment: Steady i.e., stable, stability in employment can be achieved
only with the equity between word and pay (economic benefit). An important
objective of Trade Unions is to achieve this equity between the two, which should
also be competitive in market and beneficial and satisfactory for workers.
2. Regulating personnel policy: The organization runs with various policies related to
selection of employees for lay off, retirement, transfer & promotion, assigning
employees to job and disciplining them. These decisions shouldn’t be subjective
rather it should be transparent and fair to all. Driving management towards
maintaining this transparency in the whole organizational process is also one of the
objectives of Trade Unions.
3. Making their voice heard in decision making: Managing an organization is all
about crucial decisions taken at the right point of time in the most appropriate manner.
Hence, in this vital process, workers voice will be heard, their inputs will be taken
only when they will have strength and strong views. Trade Unions are for the purpose
of providing that required strength to workers so that they can also put forward their
suggestions in important decision which will affect them in industries.
4. Recognition & Participation: When alone recognition is difficult, but as an
association recognition and participation can be sought easily. Same lies with Trade
Unions, workers join trade unions so as to gain position of equal partners with
management in the task of production.
5. Securing Legal sanctions: In order to secure a permanent position in the contract
between employers and workers, the worker’s demands need to avail a legal sanction.
For the same to happen unions may take recourse of political backing or forming their
own political party.
Also, modern trade unions engage in achieving many more objectives like providing
educational, medical recreational and other facilities for the welfare and wellbeing of families
of members of trade unions, is the have sufficient funds.
FUNCTIONS OF TRADE UNIONS:
There are broadly THREE categories of functions performed by Trade Unions, viz., (i)
Militant Functions, Fraternal Functions, and Political Functions.
a) Militant Functions: Although Collective Bargaining and Negotiations are the major
weapons in the hands of Trade Unions, in certain situation when they, along with their
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other rights, also try to secure share in productivity gains, greater contribution in
management decision making or even control of industry, they can adopt certain
agitational methods like, strike, lockouts, gherao etc. increasing unrest in the industry,
for fulfilment of their demands.
b) Fraternal Function: Fraternal responsibility is about standing in support in
unfavourable times. This is what this function of union addresses. In the period of
work stoppages due to strikes gheraos, or in times of illness, employment injury or
when they are temporarily unemployed, unions are always willing to provide financial
assistance and support.
c) Political Functions: Unions also sometimes attempts to improve the political status
of its leader, members and union itself through associating them with political parties
and sometimes contesting as political parties themselves in order to have influence
over government and the labour policies.
7.3.3 EMPLOYERS’ ORGANIZATION:
Employer’s Organizations in India have a three-tier structure viz. local associations, regional
industrial associations and All India Federation. Of the three, the local associations which
operate mainly through the chambers of commerce covers all industries in an area. Their
activities in the labour field are comparatively less extensive. The industrial associations are
the general patterns of organization of employers in India. They are formed at the area or
regional level as also at the all-India level and are generally affiliated to the central industrial
organizations. At the national level, there are federations namely All India Organization of
Employers (AIOE) formed in 1932, Employers’ Federation of India (EFI) formed in 1933
and All India manufacturers’ Organization (AIMO) formed in 1941, which have been given
representation on different tripartite labour consultative bodies.
ROLES OF EMPLOYERS’ ORGANIZATION:
Employers’ Federation of India (EFI): The main objectives of the establishment of EFI are:
a) To protect and promote the legitimate interests of employers engaged in industry,
trade and commerce.
b) To maintain harmonious relations between management and labour and to initiate and
support schemes that would increase productivity and give labour a fair share of the
increased return.
c) To collect and disseminate information affecting employers and to advice members
on their labour/employer relations and other related problems.
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All India Organization of Employers (AIOE): The main objectives are:

a) To take all steps which may be necessary for promoting, supporting or opposing
legislative and other measures affecting or likely to affect directly or indirectly,
industries in general or particular
b) To nominate delegates and advisers etc. to represent the employers of India at
International platform
c) To promote and support all schemes for the general uplift of labour and to take all
possible steps to establish harmonious relations between capital and labour.
All India Manufacturers’ Organization (AIMO): Addresses the following objectives which is
not much different from that of EFI and AIOE:
a) To help bring about the rapid industrialization of the country through sound and
progressive economic policies
b) To help increasing the aggregate wealth of India
c) To utilise to the fullest possible extent all the available national resources and talent in
the country to uplift the standard of living of the people.
FUNCTIONS OF EMPLOYERS’ ORGANIZATION:
A major function of an employers’ organization is to protect & promote the interest of its
members. Economic, commercial and fiscal matters and policies are crucial for them. They
seek for legislative support for the realization of their objectives. Other than the above there
are some more functions of employers’ organization towards labour are as follows:
a) Communication: Communication regarding developed or developing labour
legislations, regarding changes in labour policy, significant court decisions on labour
matters as well as proceedings of important tripartite deliberations etc. has to be
clearly and completely made by employers’ organization to its members.
b) Advisory Functions: Employers’ organizations build up an expert advisory service
on labour matters to advise their affiliates.
c) Educational Efforts: Employers’ Federation of India conducts various seminars,
conferences, and training programmes to discuss important issues in the labour
management relations.
d) Social Responsiveness: Participating in National Plans for Economic Development,
eliciting responsive cooperation from the unions, improving levels of production and
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productivity, pursuing policies, adopting neighbourhood villages etc. are various

social responsibilities shouldered by Employer’s organizations.
e) Representational Roles: They also represent employers on various significant
platforms as wage boards and various committees formed by the Government to place
their point of views before them.
7.3.4 STATE/UNION GOVERNMENT:
Among the THREE parties to Industrial Relations, the apex governing body is the STATE,
which has the responsibility of correcting correct any kind of imbalance or disrupted social
and economic order so that the complex socio-economic system of industries. In various
instances of disputes and indiscipline which goes out of the hands of the management, and
they fail to resolve it through mutual agreement, bargaining and negotiation.
THE ROLES OF STATE IN INDUSTRIAL RELATIONS:
a) The major role played by the State is to lay down the Labour Policy, as guiding
principles for the labour related issues such as wage payments, regulation of health
and safety, welfare and social security, union management relations etc.
b) Labour policy is directed towards the achievement of various goals like industrial
peace and harmony, reducing inequalities, increasing standard of living of workers,
increasing productivity, providing social security, providing a fair wage, etc.
c) To achieve the above State also has the responsibility of keeping in place the
industrial relation policy, welfare policy, social security policy etc.
d) Concern for planned development and rapid economic growth.
e) Fulfil requirements of a welfare stare as included in Directive Principles of State
Policy
f) Addressing to the socio-economic imbalances in the society, depressed conditions in
the working class as observed by the Royal Commission on Labour and the Labour
Investigation Committee
g) Addressing to the imbalances in between unions and employers and the weaknesses of
both the social partners, leading to preference for adjudication despite known
appreciation of the merits of free and fair collective bargaining.
h) To achieve the commanding heights of the economy as per the Industrial policy
resolution, 1956.

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IN-TEXT QUESTIONS

21. Trade Unions are formed on continuous basis and are permanent in nature.
True / False
22. Among the three parties to IR, the Apex body is _______________.
23. Which is not one of the functions of Trade Unions:
a) Fraternal b) Maternal
c) Militant d) Political
24. Full form of AIOE is ____________________.
25. Labour Policy is directed to achieve ____________________.

7.3.5 ANSWERS TO IN-TEXT QUESTIONS

16. Three 24. All India Organization of Employers
17. False 25. Industrial Peace & Harmony
18. ILO
19. State
20. Employer’s Organization
21. True
22. State
23. Fraternal

7.4 TRADE UNIONS

With the emergence of Industries after Industrial Revolution between 1750 and 1825 AD,
that resulted into modern factory system. It was characterised by large scale production and
employment and separation of management from ownership, because of which personal
touch has been lost and the relations between workers and management became very formal
and complex.
The desire for higher profits by employers and weak bargaining power in the hands of
workers led to the exploitation of working class. After a long time, they realised that if the
workers will not strengthen their position before employers, they will be in great danger of
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serious exploitation by the employers. Hence Trade Unions came into existence. After
emergence, with the passage of time and changes in situation, the face and form of Trade
Unions also changed leaps and bounds.
“Trade Unions owe their origin to class struggle between the capitalist employers and their
workers. To get more and more profits employers exploit the workers, who because of their
common interest to get more wages unite in trade unions and then resist the employers”.
To be more specific, “the origin and growth of trade unionism is the result of the increased
complexities of economic structure. Industrial Revolution made it all the more essential to
organise workers to protect their economic rights and secure better working environment”.
Thus, trade unionism is the child of industrialization born out of the stresses and strains of
Industrial Revolution.
7.4.1 TRADE UNIONS: PAST
Initially, it was some social workers, philanthropist and other religious leaders who started
their efforts towards retaining worker welfare in industries. Social reformers under the
leadership of Sorabjee Shapurjee Bangali started an agitation to draw the attention of the
Government towards deteriorating conditions of workers in industries specially those of
women and children and to appeal to the authorities to introduce legislation for bettering their
conditions in industries.
Such pressure from social reformers and the traders compelled the Government to move
ahead on this path and on the basis of the reports of Factories Commission, the first Indian
Factories Act was enacted in 1881. The Act was a cause of great disappointment due to its
inappropriateness in terms of its insufficient provisions for women and child labour raised
demands for its amendment which led to an atmosphere of agitation.

ACTIVITY
Talking about trade unions here, write your own definition to Trade Unions and
list down the names of Trade Unions you have ever heard of.

7.4.1.1 Emergence of a labour leader:

Shri Narayan Meghaji Lokhandey who was influenced by Mahatma Phooley of Maharashtra
emerged as a first labour leader in India. He devoted his whole life to the cause of labour
movement. Shri Lokhandey organized a conference of workers in Bombay and drew up a
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memorandum sighed by about 5300 workers which was presented to the Factory
Commission. It contained the following demands:
a) Complete day of rest after a week.
b) Work should begin at 6:30am and end at sunset.
c) ½ hour rest at noon.
d) Payment of wages not later than 15th day after the due date.
e) Payment of wages for the period of employment injury.
7.4.1.2 Formation of First Labour Organization:
The first workers’ organization in India was the Bombay Mill Hands Association organized
in the year 8190 by Shri N.M. Lokhandey, a factory worker himself. He was its first president
also. However, The Bombay Mill Hands Association had no roll of membership, no funds
and no rules. Hence, it is more correctly called as a philanthropic promoter of workers
welfare rather than a labour organization. Shri Lokhandey, President of Bombay Mill-Hands
Association present the petition again for resuming with the previous demands, which was
followed by a bigger petition signed by 17000 workers and based on this recommendation to
Factory Commission the Indian Factory Act of 1981 was passed.
The important provision of the Act was:
a) Regulation of hours of work for women labour to 11 hours a day with rest intervals
for one and a half hours.
b) Raising of minimum and maximum ages of children to 9 and 14 respectively.
After the inception of Factory Act, 1891 a large number of labour associations were started.
Some more important of them were:
1. The Amalgamated Society of Railway Servants of India, 1897
2. The Printers Union, Calcutta, 1905
3. The Bombay Postal Union, 1907
4. The Kamgar Hitvardhak Sabha, Bombay, 1910.
7.4.1.3 Post-independence scenario:
Trade Union movements in Punjab & Bengal was adversely affected by the partition of
country. The THREE Central Trade Union Organization of that time were AITUC, IFL &
INTUC. Among the three IFL was adversely affected. The IFL lost one of its big constituent
unions in Calcutta, the Bengal Chamber of Labour with membership of over one lakh, as
most of the workers were Muslims who migrated to Pakistan.

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When the socialist started Hind Mazdoor Sabha in December 1948, the Indian Federation of
Labour existed then, and they both merged together. Still there were disagreements towards
principles and objectives of Hind Mazdoor Sabha. Therefore, United Trade Union Committee
was formed. The Committee called a conference of various leaders at Calcutta on 30 th April
1949 where the United Trade Union Congress was formed.
By 1949, four Central Trade Union Organizations were functioning in the country:
1. The All-India Trade Union Congress
2. The Indian National Trade Union Congress
3. The Hind Mazdoor Sabha
4. The United Trade Union Congress
With increasing Industrialization, a number of industries emerged, and organized sector
started growing rapidly. With the increasing number of workers, number of trade unions also
increased. The industries were in a better capacity to pay, and unions could negotiate and
extract better wages and facilities through collective bargaining. That era witnessed a
continuous increase in the number of registered trade unions.
Another important reason responsible for this increase in the Political Influence. Various
parties with the intention of being in good books of workers tried to bring workers within the
folds of unions, which also increased the extent of unionization and made workers aware of
the usefulness of this instrument.

IN-TEXT QUESTIONS
26. Trade Unions owe their origins to _______________.
27. Mahatma Gandhi was first labour leader in India. True / False
28. First Worker’s Organization in India was:
a) Calcutta Mill b) Andhra Mill
c) Bombay Mill d) All of the above
29. Pre-Independence three Central Trade Union Organizations are
____________________.
30. ____________________ was an important reason for the increase in number
of unions post-Independence.

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7.4.2 TRADE UNION: PRESENT

About the present state of the Trade Unions, we can only say that it is in its twilight state. The
emergence and dominance of private sector governed by mostly information technology and
artificial intelligence bring us to the “decreasing bites” of trade unions in the industrial
system.
Unionization of employees are now considered to be traditional methods of regulating
employee’s working condition. With the increase in modern industries the employees have
developed a distastefulness towards unionization. Issues like wage fixations for today’s
generation are not done through agitational methods, as it’s an old school method. Now
fixing salary is much related to the market conditions, the competition in the market, and
goodwill of the company and so on.
If we talk about providing adequate facilities and working conditions. Today belief that
“employees are the first consumers” has worked wonders as everyone believe in keeping
customers happy. So, they try to provide the best facilities, the most conducive environment
to work in order to maintain their edge over the other competitors and to retain the best talent
with them in the competitive market. So, for all these they really don’t need to depend on
trade unions for bargaining and negotiating on their behalf leading to fewer grievances on the
employee front.
On the positive side, businesses became more proficient in dealing with employees. In large
Indian corporates supervisors have become far more understanding and respectful of their
teams. In any case, for the bulk of the workforce, instead of supervisors and IR officers are
finding ways to motivate employees rather than ways to exploit them.
Still in various industries in the country we may witness work stoppages and industrial
unrests, but those are symbolic. The back breaking stoppages that used to happen
traditionally is out of scene now.
7.4.3 TRADE UNION: FUTURE
Uncertain! Is the future of Trade Unions just as the future of work. The sea change brought
into the labour markets due to globalization, demographic factors, environmental and
technology are going to continue changing, and the COVID-19 crisis has increased the
challenge to the next level by shutting down number of factories and making labours sit at
home jobless. This also witnessed a dip in trade union membership leading to a downfall in
trade unions.

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In future also the organizations are believed to become even more human centric, widening
the bridge between industries and need for unionization for the employees. The scenario in
future will also showcase that how industries make efforts to keep employees highly
motivated. The future only talks about, Talent acquisition, talent management, Intellectual
capital management, human resource as business partners and the like, leaving no room for
employees to bind themselves as unions, or feel the need to unite for better bargaining and
negotiation with the management, and the agitational methods like work stoppages, strikes,
gherao and so on has only found a place in books and have become only symbolic.

IN-TEXT QUESTIONS
31. At present Trade Unions are in ____________________ stage.
32. Due to modernization of industries employees have developed
____________________ towards unions.
33. In Future organization will try to keep employees more motivated. True /
False
34. Employees are the first _______________.
35. In future organizations are believed to become:
a) production centric b) human centric
c) Both d) None

7.4.4 ANSWERS TO IN-TEXT QUESTIONS

26. Class Struggle 34. Consumers
27. False 35. Human Centric
28. Bombay Mill
29. AITUC, IFL, INTUC
30. Political Influence
31. Twilighting
32. Distastefulness
33. True

7.5 INDUSTRIAL HARMONY: WORKER’S PARTICIPATION

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Harmony is where equality is. In the industry where all citizens are treated as equal and are
allowed to participate freely in industrial affairs, they are treated as responsible partners of
the enterprise and are allowed to participate in the decision making process, where they are
also given the rights of self-expression and an opportunity to communicate their view on
framing the policies of the company and in return what is needed is the service that they are
expected to render in industry, in such kind of a setup Industrial Harmony can prevail for
long. Worker’s participation in management in a nutshell is prerequisite to industrial
harmony. There are various objectives, modes and levels of workers participation in
management.
7.5.1 INDUSTRIAL HARMONY
Industrial harmony synonymously used for the term Industrial Peace. There is certain
requisite to Peace & Harmony in industries. When there is non-existence of situations of
unrest in organizations, no-existence of strike by labour unions in organization resulting into
competent and productive, harmony persists. The dimensions that contribute towards
Industrial Harmony also involve nonexistence of industrial dissatisfaction, presence of
consensus, trust and respect between work teams and unions, good connection between
unions delegate and administration of the organization, employee positive attitude towards
his or her impact to the organization, commitment and retention.
Today’s modern philosophy of management, that strives to maintain harmony in industry, is
based on considering workers not merely a wage earner, but also as equal partners in the
productive process. They should be given the opportunity to participate in the management of
the enterprise. Their views and suggestions should be given due consideration while taking
decisions by the management. It is rightly suggested that management of industrial unit will
be smooth and efficient if workers are associated with the management.
Merits of Industrial Harmony:
a) It brings effective communication between workers and management.
b) It leads to cordial labour-management relationships.
c) It gives higher status to workers and drive then towards higher participation
d) It develops spirit of cooperation among workers and management both.
e) Workers feel committed to the decisions taken by them jointly with the management.
For the above harmony to be maintained in industries there are various contributing factors,
and an important one is “Worker’s Participation in Management”. Further in this chapter we
will majorly focus on this aspect.
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ACTIVITY
In modern organizations various efforts are made to increase Worker’s
Participation in Management. Enlist any such FIVE trending activities along with
the name of organizations practicing it.

IN-TEXT QUESTIONS
36. Harmony is where _______________ is.
37. Industrial Harmony is unrelated to Worker’s Participation in Management.
True / False
38. Which is NOT one of the merits of Industrial Harmony:
a) develops better communication b) develops cordial relationship
c) drives them towards recreation d) develops commitment
39. Harmony persists with non-existence of ____________________.
40. Worker’s Participation in Management is a ____________________ to
Industrial Harmony.

7.5.2 WORKER” S PARTICIPATION IN MANAGEMENT

Worker is someone who work in a particular job or in a particular way. Worker participation
in any organization is important because 80% of the organization’s success depends on the
worker’s performance. According to the claims made in literature that modern management
should and is ‘empowering’ the ordinary employees in new potential ways. Also, employee
involvement and their techniques may enhance management communication and increase
their motivation. According to Malcolm Leary, involvement of worker improves quality of
thinking which is beneficial for decision making.
Keith Davis has defined the term “participation” as the mental and emotional involvement of
a person in a group situation which encourages him to contribute to group goals and share
responsibilities in them. This definition shows three important elements of participation.
Firstly, it means mental and emotional involvement rather than only physical activity,
secondly, participation must motivate a person to contribute to a specific situation to invest
his own resources such as initiative, knowledge, creativity, ingenuity in the objectives of the

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organization and thirdly, it encourages people to share responsibility for a decision or

activity.
7.5.3 IMPORTANCE OF WORKER” S PARTICIPATION IN MANAGEMENT
From the above discussion we can conclude that for a smooth functioning of any
organization. Industrial Harmony & Peace are the basic requirements, and it can be achieved
through Worker’s Participation in Management. Now let us discuss that what is its
importance in the organization:
Reduced Industrial Unrest: By cutting at the very root of industrial conflict, workers
participation minimizes the conflicting interest between the parties, and substitute it with
cooperation, homogenous objectives, and common interest by making the decision arrived at
become “Ours” instead of “theirs”,
Reduced Misunderstanding: A common reason for misunderstanding among workers and
managers is their outlook towards each other. They both believe that the other is working
only with the intention of maximising their own profits. This can be resolved through
worker’s participation in management, so that they are aware of the decisions and also have
the feeling of belongingness.
Increased Organizational Balance: In an environment where employees are free to share
their problems and work towards common solution to those problems. There will be high
degree of balance because of decreased misunderstandings and conflicts.
Improved Communication: With decreased misunderstanding there will be a free flow of
communication. Many a time because of certain barriers important information gets restricted
from flowing freely. Participation tends to break this barrier and make the available to
managers for better decision making.
Higher Productivity: Co-operation between Labour and Management is the key to higher
productivity. This was empirically tested that poor “labour management relationship” never
encourage the workers to perform any more than the minimum requirement to retain their
job. Therefore, participation becomes important to increase productivity.
Increased Commitment: Higher commitment comes from higher involvement, and
opportunity to express oneself, contributing to the decisions, putting forward constructive
opinions, getting acknowledged, accepted and appreciated for the same contributes to
increased commitment and higher participation.
Industrial Democracy: Democracy is about reducing class conflict between capital and
labour. Democracy is about encouraging people to have their own individuality and
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confidence in themselves to take a stand, putting point of views forward and participate in
decision making process.
Developments of individuals: Opportunity to express enhances creativity and ability to face
job related challenges. When they enjoy freedom to give suggestions rather just following
instructions their self-confidence improves and there is higher room for further growth and
development.
Less resistance to change: When the changes are just introduced without explanation, they
moreover become compulsion leading to high amount of resistance. On the contrary if the
changes are discussed and planned collectively there will be lower resistance and higher
acceptance and cooperation for its execution.
7.5.4 MODES OF WORKER” S PARTICIPATION IN MANAGEMENT
There are various methods through which workers participate in management of industrial
enterprise:
1. Works Committee: Matters associated with wage payments, bonus, training,
discipline etc. are discussed in works committee. It consists of equal number of
representatives of both employers and workers, who meets frequently for discussion
on commonly identified problems of workers and management, joint decisions are
taken on such issues and are binding on both the parties. Works Committees are very
popular in France and England but are not proved to be effective in India.
2. Joint Management Council: It involves setting up of joint committees represented
by the workers and the management to discuss and give suggestions for improvement
on matters of mutual interest. The decisions taken by such committee are not binding
on either party but are implemented if they reach consensus in decision. Matters
relating to wages, bonus and incentives are generally kept out of the reach of joint
management council. Issues relating employee welfare, safety measures, grievance
redressal, training, working hours etc. are dealt under joint management council.
3. Collective Bargaining: It is a process where employees through their elected leaders
participate intermittently with management with the purpose of negotiating on labour
agreements for redressing the grievances of the workers.
4. Co-partnership: By purchasing shares of the company the employees become co-
owners so that they can participate in the management of the company through their
elected representatives on the Board of Directors. They can also attend general
meetings of shareholders and exercise their voting rights.

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5. Suggestion Schemes: Here the workers are encouraged to give their suggestions to
the management on various administrative matters, which are accepted if found
suitable. Those providing constructive suggestions are also rewarded. This method is
executed with the help of suggestion boxes. These suggestions are collected every
month and suitable decisions are taken jointly by the committee comprising
representatives of workers and management.
6. Grievance Procedure: In Indian context, Sec 9C of Industrial Dispute Act provides
that in every establishment in which 100 or more workers are employed or have been
employed on any one day in the preceding twelve months, the employer shall setup a
time bound grievance redressal procedure.
7. Quality Circle: First originated in Japan during 1962 and then spread to many other
countries including India. They are autonomous units of about 10 workers led by a
supervisor. The workers who have a shared area of responsibility, meet weekly to
discuss, analyse and propose solution to an ongoing problem, such as, reducing
defects, scrap, rework and downtime leading to higher productivity.

IN-TEXT QUESTIONS

41. Only 20% of Organization success depends on Worker’s performance. True /

False
42. _______________ defines Participation as Mental and Emotional
Involvement.
43. Which is NOT one of the Modes of Worker’s Participation:
a) brainstorming b) works committee
c) suggestion schemes d) collective bargaining
44. Worker’s Participation decreases resistance to change. True/False
45. Becoming co-owners of the company is termed as ____________________.

7.5.5 WORKER” S PARTICIPATION IN MANAGEMENT IN INDIA

Around 1910 it was introduced in Textile Industry. Soon after the First World War, Tata Iron
& Steel Company at Jamshedpur set up a Works Committee with workers cooperation, but it
wound up after few years as it was not effective.
The Royal Commission on Labour in India recommended Works Committee at the plant and
industry levels for consultation and resolution of disputes, but they also could not make much
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difference. After 1940, with the emergence of Indian Labour Conference, trade unions and
political leaders made demands for labour association with management. It took a legislative
form only when the Government of India enacted Industrial Disputes Act in 1947, which
made it obligatory for all units employing more than one hundred workers to constitute works
committees.
The idea of associating labour with management is even found in the Directive Principles of
the State Policy in the Indian Constitution. The Industrial Policy Resolution of April 1956
made it clear that “in a socialist democracy, labour is a partner in the common task of
development and should participate in it with enthusiasm……”
7.5.6 SUCCESS FOR WORKER’S PARTICIPATION IN MANAGEMENT:
Following requirements should be fulfilled in order to make Worker’s Participation in
Management Successful:
i) Enterprise should have a progressive management which is conscious of obligation
and responsibilities towards its stakeholders and the country as a whole.
ii) Presence of strong trade union, which is a true representative of the workers.
iii) Unanimity regarding organizational objectives between management and labour as
well as mutual recognition of their rights and responsibilities.
iv) Atmosphere of trust should be there both on management and worker’s side.
v) Both management and workers should be aware of the benefits of participation.
Merely as an action participation cannot be effective, till the time workers,
management and the Government will not feel committed and determined,
participation will remain fruitless.
vi) Single union should work as representative of workers in the participation process so
as to prevent inter-union rivalry, which can adversely affect the industrial growth.
7.5.7 INDUSTRIAL HARMONY & WORKER’S PARTICIPATION IN
MANAGEMENT:
In simple terms it can be explained by saying that Worker’s Participation in Management
crystalizes the concept of Industrial Harmony. On the other this is also a fact that
managers/employers are really fascinated with this concept, but in most of the cases they are
clueless about what should be done to achieve harmony through worker’s participation and
how worker’s participation can be achieved.

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We can say that worker’s participation is the basic requirement for Industrial Harmony &
Peace. In order to achieve the same an effective system of communication and consultation
between the employees and workers is required. Industrial Harmony that can be achieved
through Industrial Democracy is an Attitude, which can be given a clear and concrete shape
only through Worker’s Participation in Management.
There is absolutely no conflict between the two concepts. In fact, they both complement each
other and are supplementary in character.

IN-TEXT QUESTIONS
46. Worker’s Participation in Management was introduced in India in
____________________.
47. Unanimity regarding ____________________ success of Worker’s
Participation in Management.
48. Worker’s Participation in India started in India in a Coal Mine. True / False
49. _______________ made it obligatory to constitute Works Committee for all
units employing more than 100 employees.
50. Industrial Harmony is an:
a) bias b) myth
c) perception d) attitude

1.5.8 ANSWERS TO IN-TEXT QUESTIONS

36. Equality 44. False
37. False 45. Co-partnership
38. Direct them towards recreation 46. 1910
39. strike 47. Organizational Objectives
40. prerequisite 48. False
41. False 49. Industrial Dispute Act, 1947
42. Keith Davis 50. Attitude
43. Brainstorming

7.6 COLLECTIVE BARGAINING: INTRODUCTION

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In the early stage of Industrialization, when workers and management attempt to negotiate
with each other on frequent basis in order to increase their own gains, individual negotiation
became difficult in such large-sized labour market. Employers found it much convenient to
negotiate with a group of employees at a time rather than dealing with them individually.
This gave birth to the phenomenon of ‘collective bargaining’. It began from local bargaining
at the plant level to the regional level and finally to the national level. There are various
aspects related to this process which will be discussed further in this chapter.
Famous historians of British Labour Movement, Sidney and Beatrice Webb originated
the term “Collective Bargaining” in the end of nineteenth century. The term denoted a
procedure under which two parties, namely, workers and management, reach an agreement
about wage rates and basic conditions of employment.
In the words of Flippo, “Collective Bargaining is a process in which the representatives of a
labour organization and the representatives of business organization meet and attempt to
negotiate a contract or agreement, which specifies the nature of employee-employer union
relationship”.
Another important definition of Collective Bargaining according to a manual issued by the
International Labour Office in 1960 defines the term as “negotiations about working
conditions and terms of employment between and employer, a group of employers or one or
more employers’ organization, on the one hand, and one or more representative workers’
organization, with a view to reach an agreement”.
John T. Dunlop is of the view that “the term collective bargaining connotes multiple
meanings. “Collective Bargaining is (i) a system which establishes, revises and administers
many of the rules which govern the workers’ place of work; (ii) a procedure which
determines the quantum of compensation which employees should receive and which
influences the distribution of economic benefits; (iii) a method of settling disputes during the
pendency of agreement and of determining, after its expiry, whether a dispute should be
reopened or whether a strike or a lock-out should be resorted to or not”.
From the above definitions, some essential features of Collective Bargaining can be
extracted:
(i) It is a collective process.
(ii) It is a continuous process.
(iii) It is a flexible and a dynamic process.
(iv) It is a method of partnership of workers in management.

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(v) It is based on give and take approach and not in take or leave approach.
(vi) It is an attempt in achieving and maintaining discipline in industry.
(vii) It is an effective step in promoting industrial jurisprudence.

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7.6.1 Significance of Collective Bargaining:

Collective bargaining has its importance and benefits to Employees, to Employers and
Society at large. The description of the same is as follows:
Importance to Employees:
(i) Collective bargaining develops a sense of self-respect and responsibility among the
employees.
(ii) Collective bargaining increases the strength of the workers. Their bargaining capacity
as a group increases.
(iii) Collective bargaining increases the morale and productivity of employees.
(iv) It restricts management freedom for arbitrary action against the employees,
(v) Effective Collective Bargaining machinery strengthen the trade union management.
Importance to Employers:
(i) The workers feel motivated as they can talk to the employers on various matters and
bargain for higher benefits, leading to higher productivity.
(ii) It is easier for the management to resolve issues at the bargaining table rather than
taking up complaints of employees individually.
(iii) Collective bargaining promotes a sense of job security among the employees and
thereby tends to reduce cost of labour turnover to management, employees as well as
the society at large.
(iv) Collective Bargaining opens up the channel of communication between the top and
the bottom levels of the organization which may be difficult otherwise.
Importance to Society:
(i) Collective Bargaining can facilitate industrial peace in the country.
(ii) Collective Bargaining results in the establishment of a harmonious industrial climate
which supports nation’s economic and social development.
(iii) It is the most significant aspect of labour-management relations and extends the
democratic principle from the political to the industrial field.
(iv) The exploitation of workers by the management can be checked.

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(v) Collective Bargaining is a measure to distribute equitably the benefits derived from
industry among all the participants including the employees, the union, the management, the
customer, the suppliers and the public.
7.6.2 Functions of Collective Bargaining:
Arthur D. Butler identifies three important functions of Collective bargaining, which carries
over the process of decision-making and balancing the power between the employers and the
employees. The functions are as follows:
(i) Technique of long-run social change: As a process of social change collective
bargaining in more than the direct clash between employers and unions. It refers to
the rise in the political and social power achieved by workers and the organization.
With gradual rise in social and political power, workers gain greater recognition and
ability to assert against employers.
(ii) Peace Treaty or Temporary Truce: In various cases Collective Bargaining can be
viewed as a struggle between the workers and the management which is smoothened
by the compromises. This compromise can happen in two major ways, i.e.,
Compromise with combative aspects and Compromise without combative aspects.
(iii) Industrial Jurisprudence: It means introducing civil rights in industry i.e.,
management be conducted by rules rather than arbitrary decisions. It establishes rules
which define and restrict the traditional authority exercised by management.
7.6.3 PROCESS OF COLLECTIVE BARGAINING:
Collective Bargaining is a process in which through negotiating workers & management
attempts to arrive at an agreement on wages and other economic benefits and other terms and
conditions of service. In this context The Indian Institute of Personnel Management has
suggested the following steps that constitute the process of Collective Bargaining.

Composition of Maintain Develop a

Make a good Encourage Bring in other Contract
Negotiatig Continuity of Problem-Solving
begenning Leadrship Managers Administration
Team Talks Attitude

1. Composition of the Negotiating Team: The team should consist of the representatives
of both the workers and the employers, with adequate qualities, job knowledge and
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skill for negotiation, they should have full knowledge of the issue and must have full
authority to speak for them and take complete decision.
2. Make a good beginning: Well, begun is half done and is true for Collective
Bargaining too. It will be better to have a perfect clarity of the issue and both the
parties begin with a correct mindset so that mutual co-operation can be secured.
3. Maintain continuity of talks: It is very important for a collective bargaining process to
have continuity in discussions. What needs to be taken care of is that the discussion
should not end mid-way because of any roadblock or confusion or should side-track.
As long as the talk continue, a solution will be possible ultimately.
4. Develop a problem-solving attitude: To solve a problem it is important to have correct
attitude and will to solve it. Both the parties in Collective Bargaining must proceed
with the expectation of solving the problem, only then agreement will be easy to
reach.
5. Encourage Leadership: More practical and easier is to deal with a few representatives
of a strong and organized body than with a heterogenous mass of disunited
individuals. To participate in collective bargaining not only management but union
also must have a strong leadership.
6. Bring in other managers: Issues being discussed in collective bargaining may require
diverse knowledge and expertise. Not necessarily every manager is a master in all
fields. Therefore, managers of different field can be consulted to reach at the best
possible solution of problem under discussion.
7. Contract administration: The final phase in the process of Collective Bargaining is to
administer the contract which has been agreed upon between management and union.
There should be unanimity of agreement and harmonious relations between the two
parties for an effective administration of the contract.

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IN-TEXT QUESTIONS
51. The term “Collective Bargaining” has been originated by _______________.
52. Collective Bargaining is a Tripartite system. True / False
53. What does not stand true for features of Collective Bargaining:
a) Collective process b) Not Flexible
c) Continuous process d) Based on give and take
54. ____________________ is the first step in the process of CB.
55. CB is an ineffective step in promoting industrial jurisprudence. True / False

7.6.4 COLLECTIVE BARGAINING IN INDIA:

Collective Bargaining is not that popular in private sector, but it takes place in public sector
as bipartite agreement in India.
Some frequently occurring trends of Collective Bargaining that are found in India are as
follows:
(i) Trend of counter-demands. When trade unions submit their charter of demands for
negotiation, management also push forward their charter of demands as counter –
demands.
(ii) Use of coercive tactics by unions, especially when it is militant union. Even in
management, some officials were found following coercive approach to collective
bargaining.
(iii) Industry wise bipartite committees are there for agreement on issues like wages and
other terms of employment.
(iv) The scope of Collective Bargaining has expanded to cover in itself issues such as
dearness allowance, retirement benefits, retrenchment benefits, bonus, annual leave,
production norms, performance evaluation, workers’ participation in management etc.
(v) Collective bargaining agreements in India have been concluded to settle a variety of
issues at various levels-plant level, industry level and national level. On the whole it
has been appreciated and was successful in some industries in India.
7.6.5 OBSTACLES TO COLLECTIVE BARGAINING IN INDIA:
Collective Bargaining process is not much encouraged in industries of India and where it also
faces certain obstacles. They are as follows:
Multiple Unions: No union enjoys the support of the majority of workers in the plant. Inter
Union rivalry does not allow a conducive atmosphere for Collective Bargaining.

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Non-Recognition: In case of multiple unions there is problem in recognizing union to serve

as a bargaining agent on behalf of the workers.
Political Orientation: Leaning towards political parties is found to be easier by unions,
hence they are not much in favour of collective bargaining.
Defective Laws: When the provides an easy access to adjudication, the parties lose faith and
patience to enter into the process of bargaining.
Mediation of Political Leaders: In most of the industrial disputes the settlement is driven
through political leaders inhibiting the growth of collective bargaining.
7.6.6 SUGGESTIONS FOR EFFECTIVE COLLECTIVE BARGAINING:
(i) Presence of strong and stable representative union in every plant.
(ii) Recognition of representative union should be provided by law.
(iv) Political leadership should be replaced by internal worker leadership.
(v) Political leaders should not interfere in industrial relations.
(vi) Both trade unions and management must have faith in peaceful methods of issues
between them like Negotiation & Collective Bargaining.
(vii) Adjudication should be resorted to only when all other remedies have failed.

IN-TEXT QUESTIONS

56. Collective Bargaining is commonly used in Private sector in India. True /

False
57. A common trend of collective bargaining in India is _______________.
58. What is not one of the obstacles to collective bargaining in India:
a) Multiple Union b) Complex adjudication procedure
c) Political Orientation d) Non-recognition of Unions
59. ____________________ should not interfere in Collective Bargaining
Process.
60. Inter Union rivalry is an obstacle to Collective Bargaining. True/False
7.6 ANSWERS TO IN-TEXT QUESTIONS

1. Sidney & Beatrice Webb 6. False

2. False 7. Counter Demands
3. Not Flexible 8. Complex adjudication procedure

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4. Composing a Negotiating Team 9. Political Parties

5. False 10. True

7.7 SUMMARY

Industrial Relations can better be termed as a “complex system” formed with the three major
parties i.e., Employer, Employee and the Government. These parties interact with each other
in the functioning of an industry with their specific and unique roles. In the absence of even
one of them the survival of industry will come under question. Therefore, it becomes even
more important to maintain harmonious relations among them so as to secure industrial
peace, satisfaction and higher productivity. Hence, the presence of machineries to manage
industrial relation is inevitable.
The vital part of Industrial Relations is the one who constitutes Industrial Relations
i.e., the parties to Industrial Relations and their association with each other. They have their
own representative groups, having their specific and unique roles to play. The analysis of the
above content also shows that these parties co-exist and one without the other will have no
significant role to play. The Employer’s Organization is the representative group for
employers and similarly Trade Unions are for employees.
Trade Unions can be considered as child of Industrial Revolution. It was when the
employers started exploiting the workers, it orders to secure their rights and dignity and to get
them the share due to them in industries, the social reformers came forward with the concept
of uniting the workers to strengthen their position before the management and get their due
share in in terms of monetary benefits as well as respect in return of their service. Along with
that an objective of Industrial Relations is to maintain Industrial Harmony and Peace through
Workers’ Participation in Management. We can say that it is Worker’s Participation because
of which we achieve Industrial Harmony & Peace. Management also plays a very significant
role in securing worker’s participation in management, by providing them liberty to put
forward their ideas and suggestion, rewarding the constructive ones, considering them to be
equal partners and not mere workers, accepting their contribution in decision making and so
on. Worker’s Participation in the form of works committee, joint management council,
suggestion schemes, co-partnership etc. always contributes to Industrial Democracy leading
to harmony.
In an industry peace and harmony can also be maintained when problems can be
resolved collectively and peacefully among the conflicting parties. Therefore, the concept of

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Collective Bargaining was originated. It has been given different definition and meaning by
different theorist. Collective bargaining has its own benefits for Employees, Employers and
Society. It is a process with well-defined steps, which needs to be followed to increase the
effectiveness of the process. In India Collective bargaining is less popular as compared to
some other countries because of the presence of certain obstacles, which can also be
prevented easily with the help of some corrective measures.

7.8 GLOSSARY
System: A set of idea or rules for organizing something.
Locus: A particular position or place where something is situated.
Politico-Legal: Pertaining to policy or the administration of the government.
Truce: An agreement to stop fighting for a period of time.
Legal Sanctions: Legal approval
Human Centric: Higher concern towards humans in organizations.
Amalgamated: Process in which separate organizations unite.
Harmony: Peaceful existence together.
Collective Bargaining: Procedure under which two parties reaches an agreement.
Industrial Jurisprudence: Introducing Civil rights in Industries.
Combative: Ready to fight or argue.

7.9 SELF-ASSESSMENT QUESTIONS

25. What do you mean by Industrial Relations? Explain its nature & objectives.
26. Discuss the systems approach to industrial relations and state the actors in Industrial
relation system.
27. Explain the phases of Evolution of Industrial Relations.
28. Explain the various parties to Industrial Relations along with their specific roles.
29. Write an Essay on Trade Unionism in India.
30. “State is an important participant in Industrial Relations in the country”. Comment &
discuss the role of State in Industrial Relations.
31. What is an Employers’ Organization? State the origin and growth of employers’
organizations in India.

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32. Explain the concept of Collective bargaining and discuss its salient features.
33. Explain the Process of Collective Bargaining.
34. Comment on “Collective Bargaining in Indian context”.
35. What is Trade Union? Comment on the beginning of Trade Union Movement in India.
36. What is meant by Industrial Harmony? What are the prerequisites for its success?
37. What do you understand by Worker’s Participation in Management? Is it necessary to
improve the relationship between workers and employers? Explain.
38. Write a comprehensive note on the role of Worker’s participation in Management in
maintaining Industrial Harmony & Peace.

7.10 REFERENCES

Dunlop John T., (1958). Industrial Relations System, Henry Holt and Company, New York,
p.98.
Report of Royal Commission on Labour, 1931, p. 26.
Webb Sidney and Webb Beatrice, (1932), Methods of Social Study, Longmans, Green & Co.,
New York.
Clegg, H.A., Industrial Democracy and Nationalization, Blackwell: Oxford, 1951.
Richardson, J.H., An Introduction to the Study of Industrial Relations, George Allen,
London, 1961, p. 26.
Flippo, Edwin B., Personnel Management, Mc-Graw Hill, Tokyo, 1984, p. 443
Butler, Arthur D., Labour Economics and Institutions, American Publishing Co., New York,
1961.
Indian Institute of Personnel Management, op. cit., pp. 194-96
Tannenbaum, Frank, (1951). A Philosophy of Labour.
Flippo, Edwin B. (1984). Personnel Management, McGraw-Hill, New York, p. 378.
Yoder, Dale and Staudohar, Paul D., Personnel Management and Industrial Relation,
Prentice-Hall, New Delhi. Pp. 418-19.
Dunlop, J.T., 1948. “The Development of Labour Organization: A Theoretical Framework”
in Lester, R.A. and Shister, J. (Ed.), Insights into Labour Issues, pp. 164-65.
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Planning Commission, Five Year Plans, (1951-92)

Alexander, K.C., (1973). Worker’s Participation in Management, in Thakur, C.P. and Sethi,
K.C. (Ed.) Industrial Democracy, Some issues and experiences, p. 159.
Chhabra, T.N. and Suri, R.K. (2009). Industrial Relations-Concepts & Issues, Educational &
Technical Publisher.
Mhetras, V.G. (1966). Labour Participation in Management, Indian Journal of Social Work,
Vol. XXI, No. 4.
Kesari, J.P., The System of Worker’s Participation in Management, Indian Journal of Social
Work, Vol XXI, No. 4.
Flippo, Edwin B., Personnel Management, Mc-Graw Hill, Tokyo, 1984, p. 443

7.11 SUGGESTED READINGS

Chhabra, T.N. and Suri, R.K. (2009). Industrial Relations-Concepts & Issues, Educational &
Technical Publisher.
Dunlop, John T., (1958). ‘Industrial Relations System’, Henry Holt & Co. New York.
Butler, Arthur D., (1961). Labour Economics and Institutions, American Publishing Co., New
York.
Report on National Commission on Labour, 1969.
Clegg, H.A. (1951). Industrial Democracy & Nationalization.
Blumbery, Paul, (1968). Industrial Democracy, Constable, London.
Alexander, K.C., (1973). Worker’s Participation in Management, in Thakur, C.P. and Sethi,
K.C. (Ed.) Industrial Democracy, Some issues and experiences.
Flippo, Edwin B., (1984). Personnel Management, McGraw Hill, Tokyo.

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LESSON 8
GRIEVANCE, CONFLICT MANAGEMENT &
INTERNATIONAL DIMENSIONS OF HRM
Dr. Jyotika Bahl
Assistant Professor
Gargi College
University of Delhi
submittojyotika@gmail.com

STRUCTURE

8.1 Learning Objectives

8.2 Introduction
8.3 Grievance
8.3.1 Understanding of Grievance and its features
8.3.2 Causes of Grievance
8.3.3 Consequences of Grievance
8.3.4 Importance of Handling Grievance
8.4 Discipline
8.4.1 Understanding of Discipline
8.4.2 Principles of Discipline
8.5 Conflict Management and Dispute Resolution
8.5.1 Understanding and Nature of Conflict
8.5.2 Adverse impact of Conflict
8.5.3 Modes of Handling Conflict
8.6 Employee Engagement
8.6.1 Introduction and Understanding of Employee Engagement
8.6.2 Factors affecting Employee Engagement
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8.7 International Dimensions of HRM

8.7.1 Understanding the International HRM
8.8 Summary
8.9 Glossary
8.10 Answers to In-text Questions
8.11 Self-Assessment Questions
8.12 References
8.13 Suggested Readings

8.1 LEARNING OBJECTIVES

The objective of this lesson is to understand

• The concept of grievance, causes and importance of handling grievance
• The importance of Discipline to maintain good work relations and attain
organisational goals
• The term conflict and the measures to resolve disputes
• Employee engagement, its importance and factors affecting employee engagement
• International dimensions of HRM, difference between traditional HRM and
International HRM

8.2 INTRODUCTION

This lesson is designed to provide an understanding of the terms- grievance, discipline,

conflict, employee engagement and international HRM which assume importance due to new
challenges thrown by globalisation, work force diversity and economic uncertainty.

➢ With human relations approach to management, organisations need to constantly

address the issues of grievance, identify grievance and devise methods of handling
grievance. Unaddressed issues of grievance can create frustration, stress and loss of
interest in work. Understanding the need to address grievance can go a long way in
building employee-employer relation.

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➢ The need for discipline cannot be undermined in the achievement of organisational

goals and maintaining good work environment.
➢ Each organisation experiences some level of conflict, whether inter-individual or
intra- individual. Newer methods of handling conflicts need to be adopted keeping in
mind the dysfunctional impacts of conflict.
➢ The organisations need to engage the employees in the managerial processes like
planning and decision making in order to keep them satisfied and involved in the job.
➢ Going global has also increased the necessity of understanding the aspects of
International HRM. The new challenges and opportunities created by International
HRM need an understanding so as to ensure greater and better mobility of work force.

8.3 GRIEVANCE

8.3.1 Understanding Grievance and its features- Grievance is the feeling of injustice or
discrimination in treatment or an experience of unfair treatment or exposure to unfavourable
situation or any dissatisfaction from the job or any aspect of the job. An employee can
experience grievance in job related matters like performance evaluation, promotion, leave,
transfers, training or even compensation.
According to Michael J. Jucius, Grievance is “any Discontent or dissatisfaction,
whether expressed or not and whether valid or not, arising out of anything connected
with the company that an employee thinks, believes or even feels, is unfair, unjust or
inequitable.”
Keith Davis defines grievance as “any real or imaginary feeling of personal injustice
which an employee has concerning his employment relationship.”

The following are the features of Grievance:

1. Discontentment with some aspect of the organisation- The dissatisfaction or the
feeling of injustice must be related to the organisation in which a person is engaged.
For example, it can relate to unclear authority responsibility relationships, reporting to
multiple bosses, violation of rules or procedures of the organisation, treatment by the
supervisor, etc.
2. Discontentment arises out of employment- Grievance is something that is related to
the job and personal difficulties, or issues are not part of the term industrial grievance.
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Thus, discontentment due family or marriage or personal financial issues does not
qualify to be grievance. It can include dissatisfaction from wages or salaries, denial
of leave, lack of recognition for work, biased performance evaluation by supervisor.
3. Dissatisfaction may be expressed or implied- Grievance may be expressed in words
either in gossip or arguments or by communicating with supervisor. It may be
implied/ conveyed by the conduct of an employee through his behaviour, which can
include absenteeism, tardiness, daydreaming. Organisation should promptly identify
and handle the grievance as it can have unfavourable consequences for the
organisation.
4. Dissatisfaction may be real, imaginary, justified or unjustified, valid or invalid-
Grievances that are genuine, real or justified, should be removed by the management.
Employees may also be faced with grievance which are emotional in nature or based
on distorted perception, imaginary or lack of proper thinking. These grievances may
be difficult to handle.
5. Feeling of injustice – In instances of grievance workers feels that there has been
unjust or unfair treatment. For example, employee might feel that the supervisory
style is biased, or a self- motivated employee might not perceive autocratic leadership
favourable.
6. Grievance, if not handled in time, may lead to low morale and productivity-
Grievances when identified in the employees should be handled appropriately. If not
handled on time, grievance may hamper progress of work or motivation to work or
morale or even efficiency to complete the task. Thus, grievance if not removed in time
can negatively impact the organisational goals.
8.3.2. Causes of Grievance – Grievance can occur from two broad factors (1) Management
policies or (2) Working conditions. The possible causes of grievance are discussed below.
Management Policies Working Conditions
Discriminatory Wage rate or scale of pay Non- availability of machines, tools or other
equipment required for doing the job
Overtime
Lack of proper facilities for work like rest
Denial of Leaves
rooms, drinking water, ventilation
Unreasonable transfers or improper
Tight production standards
matching of employee with job
Subjectivity in Seniority, promotion and
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discharge
Lack of career planning and employee
development plan
Lack of role clarity
Hostility with trade unions
Autocratic style of leadership

8.3.3. Consequences of Grievance – Grievance, if not addressed on time may have adverse
effect on the employees and the organisation. The consequences of unaddressed grievance are
discussed below.
(1) The employee experiencing grievance may witness a sense of frustration, disloyalty
and non-cooperation.
(2) They may lose interest in work and show signs of disengagement.
(3) There may be indiscipline in the form of absenteeism, work-to-rule, demonstration,
strike or even mass casual leave.
(4) The quality and quantity of output may suffer in the organisation.
8.3.4. Importance of Handling Grievance – It is pertinent to handle and redress grievance on
time so as to ensure that grievance does not have unfavourable impact on the organisation.
The importance of handling grievance is discussed below.
1. Effective handling of grievance can assist in building good employer-employee
relations. Organisations can collect genuine feedback on company policy, practice and
procedure in order to reduce the chances of grievance associated with them. This can
instil a feeling of engagement among employees.
2. Organisation can benefit from keeping grievance within tolerable limits so timely
detection and redressal of grievance is essential.
3. Constant monitoring of cases of grievance assists management to understand the
behaviour of superiors towards subordinates.
4. If grievance handling mechanism is in place, then employees know that their issues
would be resolved to their satisfaction, and this would boast their morale.
5. Timely handling of grievance can help create a favourable work culture.
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6. The reputation of the organisation improves when management gives due attention to
human aspect and respects the dignity of employees. The organisation would be
sought for employment when prospective candidates know that management treats
employees with dignity and respect.

IN-TEXT QUESTIONS
1. Grievance can be (1) real or imaginary (2) justified or unjustified (3) valid or
invalid (4) all of the above
2. Which of the following is not the cause of industrial grievance (1) denial of
leave (2) discriminatory compensation (3) family issues (4) lack of proper
working conditions
3. Grievance can be ____ from the conduct of an employee through his
behaviour
4. Every employee expresses his grievance (True or False)
.

8.4. DISCIPLINE

8.4.1. Understanding of Discipline- Any organisation needs to cultivate the environment

where there is orderly behaviour of employees for the achievement of goals of the
organisation. In the absence of discipline there will be chaos, irregularity, disorder or even
confusion in the organisation. Existence of discipline encourages the employees to follow the
rules, procedure and practice and behave responsibly. Indiscipline was associated with
punishment for long. But today organisations have realised that discipline should be followed
voluntarily and not because of threat of punitive action. Thus, concept of self-discipline by
education and training should be encouraged. If an individual is in conflict with the
disciplinary process, then it might be difficult to maintain good human relations. Thus,
discipline needs to be developed from within.
According to Ordway Tead, “Discipline is the orderly conduct of affairs by the members of
an organisation who adhere harmoniously in forwarding towards the end which the group has
in view, and willingly recognise that.”

8.4.2. Principles of Discipline - Discipline is the essence of our life. The prerequisites of any
disciplinary policy in an organisation are discussed below.

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1. The objective of industrial discipline should be clearly understood by workmen. They

must clearly specify the standards expected from the workmen.
2. Clear and unambiguous rules and regulation must be set in consultation with
workmen which serve as a code of conduct. Participation of workmen in designing
rules and regulations would ensure their prompt acceptance.
3. The code of conduct must be made know to all those who need to follow them and all
those who need to monitor the observance of this code in the same sense. The newly
recruited employees should also be given orientation regarding the same.
4. These rules should also contain the provision for investigation and settlement of
grievance and conflict arising during the course of work.
5. The policy should emphasise on observance of the code and prevention of breach of
disciplinary rules rather than penalties for indiscipline.
6. Code of conduct should specify the authorities to be approached for grievance related
to discipline and also appellant authorities. The code should also state the quantum of
punishment for violation of disciplinary conduct.
7. Disciplinary committee may be established for looking into the causes of indiscipline
and devising measures for removal of indiscipline.
8. Implementation of disciplinary code of conduct should be objective and consistent.

IN-TEXT QUESTIONS

5. Discipline can be voluntarily followed or may be observed due to

punishment. (True or False)
6. Observance of discipline can avoid
(a) chaos or disorder (b) regularity (c) clarity of goals
7. Every organisation should devise a code of conduct so as to ensure
uniformity and consistency in observance of disciplinary rules. (True/ False)
8. Disciplinary code of conduct is devised to ensure
(a) prevention of indiscipline (b) victimises the employees (c) unfair
treatment to employees.

8.5 CONFLICT MANAGEMENT AND DISPUTE RESOLUTION

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8.5.1 Understanding and Nature of Conflict - Conflicts are indispensable in our everyday life.
It is present in our personal life and professional life. Especially in case of organisations the
manager needs to understand the consequences of conflict and learn to deal with it. Conflict
can have adverse impact on the organisation like inefficiency, loss of interest in work,
absenteeism, low productivity, stress, tension, depression and demotions. The conflict at
work may have a spill over effect in personal life of the employees.
Conflict is a situation of imbalance or difference. It can be inter-individual (among
individual) or intra individual (within individuals). In case of intra individual conflict the
individual is in state of conflict in his mind as he is not in a situation to make decision in a
particular situation. He is in dilemma over a particular issue. For example, an employee may
not be able to decide whether to opt for lump-sum pension or NPS. Taking another example,
there might be conflict of interest in the mind of employee as organisational and individual
interests are different.
But an individual is in inter-individual conflict when there is a conflict with some other
individual or group of individuals either because of difference of opinion or breakdown of
decision making. For instance, in teamwork the delegation of responsibility may be difficult
due to differences in opinion of team members on fixation of task responsibility.

In the light of above discussion Pondy (1967) defines conflict as ‘a breakdown in the
standard mechanism of decision making.’
Follett defines conflict as “the appearance of difference, difference of opinion, of interest”.

Conflict is indispensable as individuals are unique in their way of thinking, perceiving and
interpreting situations. It is present at all levels with varying degrees between different
persons. The nature of conflict is discussed below.
1. Conflict exists when there are alternative courses of action available and there is
difficulty in selection of the best alternative in a given circumstance.
2. Conflict among individuals implies that there is conflicting perception, beliefs or
goals.
3. Conflict is a dynamic process as it involves various stages or events. A conflicting
situation does not occur overnight, its presence is due to a series of events occurring
over a period of time.

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4. It should be perceived by the parties standing in conflicting situation against each

other. If there is no such perception, then there can be no conflict between the parties.
8.5.2 Adverse impact of conflict
Conflict may be bad as it has the possibility of affecting the efficiency, productivity and
willingness to work. Every employee or member of group is required to deal with the conflict
with strength and courage. It may demand a change in perception and even attitude. The
dysfunctional aspects of conflict are discussed below.
1. Resignation of personnel- an individual may be encouraged to leave the job to avoid
the situation of conflict. An individual may witness inter-individual conflict because
of difference in philosophy between the management and himself or difficulty in
getting along with group members due to difference of orientation or interest or
because of biased attitude of the supervisor. Whatever may be the reason for inter-
individual conflict, the individual employee may resign if he feels dissatisfied or
strongly feels that he might not be able to continue with the organisation. This might
lead to loss of key personnel of the organisation.
2. Tensions- conflict may lead to a situation of stress and even tension. In extreme cases
the management may find it difficult to deal it. Timely action should be taken to avoid
anxiety, frustration, depression and sense of insecurity.
3. Discontentment- conflict presents circumstances of dissatisfaction/ discontentment
among the two opposing parties. This difference can accelerate if the management
fails to take corrective measures. In this win-lose situation the parties at dispute may
seek opportunity to settle scores which can adversely affect the productivity of the
organisation and attainment of goals.
4. Creation of distrust- the opposing parties might lose trust upon each other which has
tendency to cause work delays. Also, in such a situation there may be loss of
cooperation and coordination among the members of the team. It gives rise to
negative feelings and the parties may avoid interaction with each other.
5. Goal displacement- conflicting parties may concentrate on winning the conflict,
thereby causing wastage of time and effort in looking for tactics. This may distract the
members from focusing on organisational goals and rather encourage the conflicting
parties to concentrate on personal goals.
6. Weakening of organisation- the organisation may become weak because of the
conflicting situation. The management trying to supress the conflict may have to deal
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with gigantic proportions later on and non-interference with the conflict may also
increase unnecessary trouble for the organisation. Frequent conflicts may cause
tensions and distrust among the members of the organisation which can cause
resignation of key / skilled personnel.
8.5.3 Modes of handling conflict
In order to avoid dysfunctional aspect of conflict, every organisation should devise strategies
to effectively deal with it. The following are some suggestions to deal with conflicts.
1. Avoidance and repression- avoidance means ignoring the conflict and repression calls
for putting down of this conflict by the manager. This strategy includes
a. Avoidance or ignoring the conflict- it requires a manager to avoid the conflict
and pretend as if there was no existence of a conflict. This method is advisable
for insignificant matters and matters relating to anything other than work like
religion, caste, politics, etc. this method is useful when differences are not
related to organisation’s task.
b. Reorganisation of groups- management can also look at reorganisation of the
groups so as to place people together on some common ground. Grouping
people with some similarity can help build their relations and assist in building
cooperative work relations.
c. Reduction of inter-dependence between groups- the existence of
interdepartmental dependency among various groups in any organisation can
be a cause of conflict. This interdependency can be because of resource
limitations or sharing resources. The reduction of dependence may reduce
inter groups differences.
d. Dominance or repression of difference- it means the conflicting parties gets a
chance to redress the conflict by solution given by higher level. This method
of resolving conflict is appropriate when delay in handling conflict can be
costly, for instance, in cases when alternative project proposals are discussed
and selected by top management and delay would result in resources
remaining idle. This method may be viewed as an autocratic response to
conflicting situation.
e. Regulation of inter-personal contacts through transfers- transfers of employees
participating in conflicting situations to different departments or branches or
locations can help keep the conflict at bay.

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2. Containment of conflict- the managers surface the conflict, regulate the issues to be
discussed in a conflicting situation and manner of resolution. The strategies include
a. Compromise or bargaining- it is a form of set off in which two conflicting
parties exchange concessions until compromise is arrived. In this arrangement
both parties stay consistent with their stand but slowly reach an agreement
when both parties are willing to alter their stand and compromise to terminate
the situation of conflict. Bargaining continues until mutually satisfactory
arrangement is reached.
b. Restructuring interactions between the groups- encouraging formal
communication of those groups which are dependent on each other for
resources can reduce conflicting situations. Involvement of third parties can
also be utilised for resolving the conflict as open discussion of conflict could
further increases the conflict.
3. Confrontation- in this method manager permits both parties to face each other and sort
out the differences. This method involves dangers of spreading ill will against each
other and should be used with caution. In this method the parties get a chance to
understand their differences, the procedure to resolve the conflict and their roles in
resolving conflict. For example, the removal of Cyrus Mistry from the post of
chairman of Tata group lead to a confrontation between Tata and Cyrus in the media.
It helped understand their perception of conflict and deliberate on the friction. This
helps identify the real reason for the conflict.
4. Problem solving- in this method the focus is on transforming the negative feelings of
discontent and frustration by diverting energy towards creativity. The manager plays
the role of communicator who recognises the conflict among the parties, their
relationship and feelings. The management may engage an insider consultant to assist
the two conflicting parties to identify the conflict and mutually decide a solution to
remedy the situation.
5. Conflict stimulation- this strategy is based on the assumption that moderate level of
conflict is essential for existence of creativity and innovation. The tactics involved in
this strategy are
a. Communication- manager can send threatening messages to the groups
involved in conflict with each other to stimulate the conflict. Messages may
include threats to downsize. However, planting such messages in the
communication network should be done diligently to stimulate conflict.
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b. Encouraging competition- Conflict can be utilised to encourage healthy

competition among the groups and individuals in the organisation.
Additionally incentive schemes, bonus or awards can act as motivators for
outstanding performance in this competition.
c. Bringing in new employees- addition of new employees to the existing groups
at workplace having different attitude, beliefs, background and values can
enhance disequilibrium or conflict. This disturbance because of disequilibrium
will cause members to struggle for new equilibrium.
d. Restructuring the organisation- the management can restructure the
organisation- its rules or practices to increase the inter-dependence among the
groups. This will help in stimulating conflict, disturb the status quo and
demand adjustments.

IN-TEXT QUESTIONS
9. Which of the following is not the adverse impact of conflict
(a) stress and tension (b) enhance creativity (c) resignation (d) weakness for
organisation
10. Avoidance of conflict is suitable for
(a) insignificant matters (b) significant and important matters
11. An individual experiencing conflict due to discriminatory treatment given by his
colleagues, experiences (a) inter-individual conflict (b) intra-individual
conflict
12. Conflict is a (a) dynamic process (b) static process

8.6 EMPLOYEE ENGAGEMENT

8.6.1 Introduction and understanding of employee engagement

With growing competition, globalisation, uncertain economic conditions, demand for talented
workforce, the need for employee engagement is gaining significance. Engaged employees
are committed, passionate and attached to their jobs. They help increase productivity, attain

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organisational goals and provide competitive advantage to the organisation. It is an important

aspect of employer-employee relationship where leadership plays an important role.
Employees, in general experience three levels of engagement- engaged, not engaged or
disengaged. Engaged employees are those who work with passion towards organisational
goals, not engaged employees are those who participate in work but without passion and
energy while disengaged employees are those who are unhappy with work and display
incomplete role performance. Clearly maintaining engaged employees is essential to avoid
situations of job hopping, absenteeism, labour turnover or even low productivity.
Engagement helps increase morale, loyalty, motivation of workforce, greater retention, high
level of creativity and better customer service.
Different views were presented by different authors to give an understanding to employee
engagement. According to one school a need satisfying approach in the understanding of
employee engagement is essential. The employees are disengaged when three needs are not
satisfied namely- meaningfulness (feeling of achievement), safety (work conditions related to
the job) and availability (presence in the job). While the other school suggests a satisfaction-
engagement approach. When employee feels exhausted or fatigued or burn out at his job, he
may have a negative influence on the team members and may experience individual conflict.
Burnout is associated with exhaustion while employee engagement is associated with
satisfaction, emotional involvement, participation, enthusiasm and vigour. This approach
links the employee engagement with business outcomes (such as productivity, profit and
turnover).
According to Durand Crosby, “Employee engagement is described as the degree to which an
individual is attentive and absorbed in the performance of his/ her job which in turn leads to
fulfilling, positive experience and state of mind. These positive work-related experiences are
likely to result in desired work outcome, such as increased commitment to the organisation.”
Robinson defined employee engagement as “a positive attitude held by the employee towards
the organisation and its value.”
Gallup “The term employee engagement refers to an individual’s involvement and
satisfaction with as well as enthusiasm for work.”

8.6.2 Factors affecting employee engagement

Several factors have been identified by researchers which affect the engagement of
employees at work. Some such factors are discussed below:

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1. Career development – Employee engagement is high in organisations providing

opportunities for career advancement. Thus, organisation providing opportunities to
learn more skills enhance ability or even knowledge assist the employee to reach their
potential. Such organisations are sought by employees seeking career advancement
and employers can retain them through training and development.
2. Leadership – Engaged workers seek leaders who recognise their effort and work and
encourage them to reach their potential. A leader should be a visionary, influencer,
good communicator and future oriented. He should involve the employees in the
process of decision making, articulation of vision and maintain good leader member
exchange to ensure engagement. Effective leader should positively consider feedback
from employees to ensure participation and engagement.
3. Effective management of talent – There is diversity in talent of the employees
engaged in the organisation due to job requirement, task demand or individual factors.
Engaged organisation recognise the diversity in talent and skill and encourage each
individual employee to reach a higher vision of themselves. They provide training or
skill development workshops to ensure continuous development of talent required to
fulfil task in turbulent situations. For example, with initiation of AI, banks are training
staff to understand the use and advantages associated with AI enabled banking
solutions.
4. Clarity of company values, policies and practices – In order to engage employees,
there needs to be clarity of values, policies and practice to ensure the trust of
employees in the system. If values or policies are ambiguous, employees may feel a
biased treatment towards them. Thus, clarity of values and practices is essential to
gain trust of the employee and engage him.
5. Equal opportunity and fair treatment- There is high employee engagement when they
are treated equally, fairly and justly. Thus, employer must ensure equal opportunity
for career advancement, training, promotion and fairness in pay, performance
evaluation and entitlement to leave. In cases on inequity or discriminatory treatment,
employees would show withdrawal symptoms and hence disengagement.
6. Communication- Effective upward and downward communication ensures good
relations between employer and employee as instructions pass easily and feedback is
accepted well. Open door policy in context of communication plays a significant role
in employee engagement. When the employee understands the policies, instructions

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and rules, he performs better in comparison to a situation when he is lacks the

understanding.
7. Quality of work relationships with peers, supervisors and subordinates – The relation
shared with colleagues whether supervisors, subordinates or peers determines
engagement level in the organisation. An employee sharing friendly, transparent,
cooperative relation with peers, supervisor or subordinate will encounter higher level
of engagement. On the other hand, employees experiencing exhaustion or strained
relations may experience low level of engagement. Thus, it becomes essential for
management to maintain good quality of human relations with personnel.
8. Performance appraisal- A just, objective and unbiased evaluation of performance of
employees can retain high level of engagement in the employees. A clearly defined
and transparent performance evaluation mechanism can increase commitment and
participation of employees. While a biased system of performance appraisal may give
rise to dissatisfaction and grievance leading to withdrawal from participation and
involvement.
9. Pay and benefits- An appropriate mix of monetary and non-monetary benefit would
ensure engagement of employees in the life of the organisation. Employer should
strike a balance between work done and compensation rewarded. When pay is directly
related to work, the worker would stay motivated to work. Any ambiguity or inequity
in pay and benefits may be a cause of disengagement among the employees.
10. Health and Safety – Ensuring health and safety of employees at work can increase the
levels of engagement. Thus, working conditions, compensation for accidents during
the course of work, reasonable work hours, installation of precautionary measures,
insurance policy ensure engagement of employees. Employees exhibiting low level of
engagement might be exposed to higher level of risk of health and safety.
11. Job satisfaction- Satisfied employees are more inclined to express high level of
engagement and involvement. Dissatisfied employees slowly disengage from the
organisation life. Thus, organisations must ensure proper work-life balance and
integration of individual goals with the organisation goals.

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IN-TEXT QUESTIONS
13. Which of the following is not a need in the understanding of employee
engagement (a) meaningfulness (2) burnout (3) availability (4) safety
14. Employee engagement can be linked to __________
15. A disengaged worker is one who is (a) attached to the job (b) unhappy with
the work (c) not passionate about his work.
16. Not Engaged worker lacks (a) energy and passion for work (b) will work (c)
skills for work.

8.7 INTERNATIONAL DIMENSIONS OF HRM

8.7.1 Understanding the International HRM- with the mobility of human resources and
globalisation, business expands beyond their domestic boundaries to provide goods and
services to people spread in different geographic locations belonging to different culture with
demand. Organisations going global manage human resource not only in their domestic
boundary (parent country) but also in host country and other countries (who may be the
suppliers of human resources). HRM involves the functions of recruitment, selection,
training, development, compensation, when organisations are operating only in parent
country. These functions in case of international HRM would be performed in three
countries- parent, host and other countries. Thus, international HRM is the interplay among
the three dimensions namely, human resource activities, types of employees and countries of
operation.
International HRM involves broader functions than domestic HRM. International HRM can
be distinguished from domestic HRM on the following points:
1. Broader HR activities – International HRM involves an understanding of international
taxation, international relocation, orientation, relations with host government, dealing
with expatriates.
2. Different tax laws – Expatriates working in a country other than home country is
faced with different tax structures. The HR department is required to design the
compensation such that there is no tax incentive or disincentive. The tax liability

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usually arises when the task/ project is complete. Thus, designing suitable
compensation plan is essential.
3. International relocation and orientation – challenges such as pre-travel training,
immigration, housing, medical, travel details, relocation allowance, international
allowance, etc. need to be worked out.
4. Host-Government relations – Its essential to maintain relations with host country as
parent country would need work permits, clearance to set up business, etc. The
compliance with legal framework of host country is essential for operation of business
in countries other than parent country.
5. Extensive involvement of HR personnel in personal life of employee – The HR
personnel may need family details to arrange family visa for relocation or may be
required to constantly explain the housing/ medical facilities extended by employer or
may need to arrange schooling if employee is posted in remote areas. Thus, the scope
of functions of HR department may expand.
6. Risk – There is a risk that the employee may not be able to settle in the foreign
country and may want to return back to its parent country. In such cases the cost of
relocation may be huge, and the employer may have to bear the loss of such failed
experiment. Additionally, the risk due to terrorism, virus or economic uncertainty can
also be immense. It is the responsibility of HR department to place the right candidate
on a foreign project/ assignment.
7. Cultural Environment – when people are posted in a foreign country, they might
experience a cultural shock. It happens when an individual stays away from his
culture and slowly appreciates a different culture where he witnesses different beliefs,
attitude and value system.

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IN-TEXT QUESTIONS
17. International HRM involves operation in (a) parent country (b) host country (c)
other countries supplying human resources (d) all of the above
18. International HRM involves interplay of ____
19. Which of the following is an argument for International HRM being distinct from
domestic HRM (a) relations with host country’s government (b) selection (c)
planning the quantity of HRM required

8.8 SUMMARY

This chapter is an eye opener for both employees and employers as generally employers
focus on organisational goals and ignore employee centric issues of grievance, conflict and
engagement. Any employee can be suitably motivated if his employer can satisfactorily
redress his grievance, maintain the discipline, resolve conflict and engage employee at
different stages of management process. This understanding can create harmonious relations
between employer and employee and benefit the organisation by enhancing the quality of
work. The understanding of different aspects of International HRM can help the reader to
appreciate the importance of this arena.

8.9 GLOSSARY

Grievance: any real or imaginary feeling of personal injustice which an employee has
concerning his employment relationship.
Discipline: orderly behaviour of employees for the achievement of goals of the organisation.
Conflict: the appearance of difference.
Employee engagement: an individual’s involvement and satisfaction from work.
International HRM: the interplay among the three dimensions namely, human resource
activities, types of employees and countries of operation

8.10 ANSWERS TO IN-TEXT QUESTIONS

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1. All of the above 11. Inter- individual conflict

2. Family issues 12. Dynamic process
3. Implied 13. Burnout
4. False 14. Business Outcome
5. True 15. Unhappy with the work
6. Chaos or disorder 16. Energy and passion for work
7. True 17. All of the above
8. Prevention of indiscipline 18. Human resource activities, types of
employees and countries of operation
9. Enhance creativity
19. Relations with host country’s
10. Insignificant matters
government

8.11 SELF-ASSESSMENT QUESTIONS

1. Harsha, manager of ABC perceives that only inter individual conflict can occur in an
organisation. Comment on the above statement and discuss the modes of handling
conflict.
2. Engagement of employees is receiving attention today. Explain the concept of
employee engagement and the factors affecting employee engagement.
3. Discuss the causes of Grievance and the importance of handling grievance.
4. Explain the concept of International HRM, its need and the difference between
domestic HRM and International HRM.
5. Molie, is a HR manager proposed to be transferred to a newly opened company
branch located in Singapore. Molie feels that her Indian experience of handling HR is
sufficient to meet the new challenges in Singapore. Explain on your understanding of
International HRM, the preparation that might be required in comparison to traditional
HRM.
6. Samie an engineer and Anshu a sales representative is working on a launch of new
product. But they seem to have differences in ideas on promotion, highlighting
product USP, launch event, etc. Because of this difference there is a delay in
submission of draft launch proposal to the CEO. The project head is faced with the
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issue of resolution of conflict between the two. Suggest ways in which conflict can be
resolved.
7. Manu is an HR executive who is appointed to revise and review the disciplinary
policy in Timmy Ltd. This is his first just assignment, and he seeks your advice on the
principles for drafting a disciplinary policy.
8. Priya and Shashi are colleagues and are discussing their dissatisfaction associated
with workplace which includes non-recognition, discriminatory leave policy, no
maternity benefits, etc. They perceive that there is no platform to voice their feelings
and have started to look for better jobs. Explain to both of them, the concept of
grievance, causes and importance.

8.12 REFERENCES

Aswathappa, K. (2017), Human Resource Management: Text and Cases, Mc Graw Hill
Bernard Walker (2011), Employee- Employer Grievance: A Review, International Journal of
Management Reviews, 13, 40-58.
Chandani and Mehta (2016), Employee Engagement: A Review Paper on Factors affecting
Employee Engagement, Indian Journal of Science and Technology, 9(15).
Chhabra, T.N., Text and Cases in Human Resource Management, Dhanpat Rai &Co.
Crosby (2014), Improving Employee Retention in Public Sector by Employee Engagement,
proceeding of the fourth International Conference on Engaged Management Scholarship,
Tulsa
Kalokar and Sahu (2022), Employee Engagement: A Review Paper, IJCRT, 10(2), 372-378
Mansoor and Hassan (2016), Factors influencing Employee Engagement: A study of
Telecommunication Network provider in Maldives, International Journal of Accounting and
Management, 4(1), 50-64.
Robbins, S.P, Organisation Behaviour, Pearson Education.
Sarangi and Nayak (2016), Employee Engagement and its impact on organisational Success-
A study in Manufacturing Company, India, Journal of Business and Management, 18(4), 52-
57.
Singh and Chhabra, Organisation Theory and Behaviour, Dhanpat Rai &Co.
Rao, Subra, P. International Human Resource Management, Himalaya Publishing House.
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Rao, VRS. Fundamentals of Human Resource Management, Scholar Tech Press.

8.13 SUGGESTED READINGS

Aswathappa, K. (2017), Human Resource Management: Text and Cases, Mc Graw Hill
Chhabra, T.N., Text and Cases in Human Resource Management, Dhanpat Rai & Co.
Robbins, S.P, Organisation Behaviour, Pearson Education

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