HUMAN RESOURCE MANAGEMENT (Core-VII)

Semester-V Course Code: U19MS507

UNIT-I INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

1.1.0 Introduction
1.1.1 Processes and functions of HR management
1.1.2 HR Department Organization
1.1.3 Role of HR Manager in the organization

UNIT-II HUMAN RESOURCE PLANNING

2.1.0 HR Planning
2.1.1 Concepts and Methods
2.1.2 Job Analysis
2.1.3 Job Description
2.1.4 Job Specification
2.1.5 Selection process
2.1.6 Employment tests and interviews

UNIT-III INDUCTION AND PERFORMANCE APPRAISAL

3.1.0 Induction and Performance Appraisal
3.1.1 Induction programme
3.1.2 Different training methods in company
3.1.3 Performance appraisal and review.

UNIT-IVWAGE AND SALARY ADMINISTRATION

4.1.0 Wage and Salary Administration
4.1.1 Job Evaluation methods
4.1.2 Wages
4.1.3 Different patterns of wage payments time rate, Piece rate
4.1.4 Wage incentives and Bonus

UNIT-V INTRODUCTION TO HR AUDIT

5.1.0 Concept of HR Audit
5.1.1 Separation and its types
5.1.2 Retirement benefits
5.1.3 Gratuity, Provident Fund and pension scheme.

TEXT BOOK:
1. S. P Gupta-Human Resource Management –15th Edition, S.Chand& sons, 2014
2. PraveenDurai-Human Resource Management -Pearson Publications

REFERENCE BOOKS:
1. Memoria – Personnel Management –Himalaya Publishing House, 2007.
2. Edwin Fillippo – Personnel Management –MGraw Hill, 3rdEdition 1971.
 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

Human Resource Management is a relatively new approach to managing human beings in any
organisation. Human beings are considered as the key resource in this approach. Since an organisation
is a body of people, their acquisition, development of skills, motivation for higher levels of attainments,
as well as ensuring maintenance of their level of commitment are all significant activities. All these
activities fall in the domain of Human Resource Management.
Human Resource Management is a process, which consists of four main activities, namely,
acquisition, development, motivation, and maintenance of human resources.
Scott, Clothier and Spriegel have defined Human Resource Management as that branch of
management which is responsible on a staff basis for concentrating on those aspects of operations which
are primarily concerned with the relationship of management to employees and employees to
employees and with the development of the individual and the group.
Human Resource Management is responsible for maintaining good human relations in the
organisation. It is also concerned with development of individuals and achieving integration of goals
of the organisation and those of the individuals.
Northcott considers human resource management as an extension of general management, that
of prompting and stimulating every employee to make his fullest contribution to the purpose of a
business. Human resource management is not something that could be separated from the basic
managerial function. It is a major component of the broader managerial function.
According to Edwin B. Flippo, ―Human resource management is the planning, organising,
directing and controlling of the procurement, development, resources to the end that individual and
societal objectives are accomplished. This definition reveals that human resource (HR) management is
that aspect of management, which deals with the planning, organising, directing and controlling the
personnel functions of the enterprise.
FEATURES OF HRM
The features of human resource management can be highlighted as follows:
1. It is an inherent part of management: Human resource management is inherent in the process of
management. This function is performed by all the managers throughout the organisation rather
that by the personnel department only. If a manager is to get the best of his people, he must
undertake the basic responsibility of selecting people who will work under him.
2. It is a pervasive function: Human Resource Management is a pervasive function of management.
It is performed by all managers at various levels in the organisation. It is not a responsibility that a
manager can leave completely to someone else. However, he may secure advice and help in
managing people from experts who have special competence in personnel management and
industrial relations.
3. It is basic to all functional areas: Human Resource Management permeates all the functional area
of management such as production management, financial management, and marketing
management. That is every manager from top to bottom, working in any department has to perform
the personnel functions.
4. It is people centered: Human Resource Management is people centered and is relevant in all types
of organisations. It is concerned with all categories of personnel from top to the bottom of the
organisation. The broad classification of personnel in an industrial enterprise may be as follows: (i)
Blue-collar workers (i.e. those working on machines and engaged in loading, unloading etc.) and
white-collar workers (i.e. clerical employees), (ii) Managerial and non- managerial personnel, (iii)
Professionals (such as Chartered Accountant, Company Secretary, Lawyer, etc.) and non-
professional personnel.
5. It involves Personnel Activities or Functions: Human Resource Management involves
several functions concerned with the management of people at work. It includes manpower
planning, employment, placement, training, appraisal and compensation of employees. For the
performance of these activities efficiently, a separate department known as Personnel Department
is created in most of the organisations.
6. It is a continuous process: Human Resource Management is not a “one shot” function. It must
be performed continuously if the organisational objectives are to be achieved smoothly.
7. It is based on Human Relations: Human Resource Management is concerned with the motivation
of human resources in the organisation. The human beings can‘t be dealt with like physical factors
of production. Every person has different needs, perceptions and expectations. The managers
should give due attention to these factors. They require human relations skills to deal with the
people at work. Human relations skills are also required in training performance appraisal, transfer
and promotion of subordinates
Objectives of HRM
The primary objective of HRM is to ensure the availability of competent and willing
workforce to an organization. The specific objectives include the following:
1) Human capital: assisting the organization in obtaining the right number and types of employees to
fulfil its strategic and operational goals.
2) Developing organizational climate: helping to create a climate in which employees are encouraged
to develop and utilize their skills to the fullest and to employ the skills and abilities of the workforce
efficiently
3) Helping to maintain performance standards and increase productivity through effective job design;
providing adequate orientation, training and development; providing performance-related feedback;
and ensuring effective two-way communication.
4) Helping to establish and maintain a harmonious employer/employee relationship
5) Helping to create and maintain a safe and healthy work environment
6) Developing programs to meet the economic, psychological, and social needs of the employees and
helping the organization to retain the productive employees
7) Ensuring that the organization is in compliance with provincial/territorial and federal laws affecting
the workplace (such as human rights, employment equity, occupational health and safety, employment
standards, and labour relations legislation) to help the organization to reach its goals.
8) To provide organization with well-trained and well-motivated employees
9) To increase the employees satisfaction and self-actualization
10) To develop and maintain the quality of work life
11) To communicate HR policies to all employees.
12) To help maintain ethical polices and behaviour.
The above stated HRM objectives can be summarized under four specific objectives:
1) Societal Objectives: seek to ensure that the organization becomes socially responsible to the needs
and challenges of the society while minimizing the negative impact of such demands upon the
organization. The failure of the organizations to use their resources for the society’s benefit in ethical
ways may lead to restriction.
2) Organizational Objectives: it recognizes the role of HRM in bringing about organizational
effectiveness. It makes sure that HRM is not a standalone department, but rather a means to assist the
organization with its primary objectives. The HR department exists to serve the rest of the organization.
3) Functional Objectives: is to maintain the department’s contribution at a level appropriate to the
organization’s needs. Human resources are to be adjusted to suit the organization’s demands. The
department’s value should not become too expensive at the cost of the organization it serves.
4) Personnel Objectives: it is to assist employees in achieving their personal goals, at least as far as
these goals enhance the individual’s contribution to the organization. Personal objectives of employees
must be met if they are to be maintained, retained and motivated. Otherwise employee performance
and satisfaction may decline giving rise to employee turnover.
Importance of HRM
Human Resource Management has a place of great importance. According to Peter F. Drucker,
―The proper or improper use of the different factors of production depends on the wishes of the
human resources. Hence, besides other resources human resources need more development. Human
resources can increase cooperation but it needs proper and efficient management to guide it.
Importance of personnel management is in reality the importance of labour functions of personnel
department which are indispensable to the management activity itself. Because of the following
reasons human resource management holds a place of importance.
1. It helps management in the preparation adoption and continuing evolution of personnel
programmes and policies.
 2. It supplies skilled workers through scientific selection process.

3. It ensures maximum benefit out of the expenditure on training and development and appreciates
the human assets.
4. It prepares workers according to the changing needs of industry and environment.

5. It motivates workers and upgrades them so as to enable them to accomplish the organisation
goals.
6. Through innovation and experimentation in the fields of personnel, it helps in reducing casts and
helps in increasing productivity.
7. It contributes a lot in restoring the industrial harmony and healthy employer-employee relations.

8. It establishes mechanism for the administration of personnel services that are delegated to the
personnel department.
Thus, the role of human resource management is very important in an organisation and it should not
be undermined especially in large scale enterprises. It is the key to the whole organisation and related
to all other activities of the management i.e., marketing, production, finance etc. Human Resource
Management is concerned with the managing people as organizational resources rather than as factors
of production. It involves a system to be followed in business firm to recruit, select, hire, train and
develop human assets. It is concerned with the people dimension of an organization. The attainment
of organizational objectives depends, to a great extent, on the way in which people are recruited,
developed and utilized by the management. Therefore, proper co-ordination of human efforts and
effective utilisation of human and others material resources is necessary.
Scope of HRM
The scope of HRM is indeed vast. All major activities in the working life of a worker (from
the time of his or her entry into an organization until he or she leaves the organizations) come under
the purview of HRM.
The major HRM activities include HR planning, job analysis, job design, employee hiring,
employee and executive remuneration, employee motivation, employee maintenance, industrial
relations and prospects of HRM.
The scope of Human Resources Management extends to:
1. All the decisions, strategies, factors, principles, operations, practices, functions, activities and
methods related to the management of people as employees in any type of organization.
2. All the dimensions related to people in their employment relationships, and all the dynamics that
flow from it.
3. The scope of HRM is really vast. All major activities in the working life of a worker (from the time
of his or her entry into an organization until he or she leaves it) come under the purview of HRM.
American Society for Training and Development (ASTD) conducted fairly an exhaustive study in this
field and identified nine broad areas of activities of HRM.
These are given below:
a) Human Resource Planning: The objective of HR Planning is to ensure that the organization has
the right types of persons at the right time at the right place. It prepares human resources inventory with
a view to assess present and future needs, availability and possible shortages in human resource.
Thereupon, HR Planning forecast demand and supplies and identify sources of selection. HR Planning
develops strategies both long-term and short-term, to meet the man-power requirement.
b) Design of Organization and Job: This is the task of laying down organization structure, authority,
relationship and responsibilities. This will also mean definition of work contents for each position in
the organization. This is done by “job description”. Another important step is “Job specification”. Job
specification identifies the attributes of persons who will be most suitable for each job which is defined
by job description.
c) Selection and Staffing: This is the process of recruitment and selection of staff. This involves
matching people and their expectations with which the job specifications and career path available
within the organization.
d) Training and Development: This involves an organized attempt to find out training needs of the
individuals to meet the knowledge and skill which is needed not only to perform current job but also
to fulfil the future needs of the organization.
e) Organizational Development: This is an important aspect whereby “Synergetic effect” is
generated in an organization i.e. healthy interpersonal and inter-group relationship within the
organization.
f) Compensation and Benefits: This is the area of wages and salaries administration where wages and
compensations are fixed scientifically to meet fairness and equity criteria. In addition labour welfare
measures are involved which include benefits and services.
g) Employee Assistance: Each employee is unique in character, personality, expectation and
temperament. By and large each one of them faces problems every day. Some are personal some are
official. In their case he or she remains worried. Such worries must be removed to make him or her
more productive and happy.
h) Union-Labour Relations: Healthy Industrial and Labour relations are very important for
enhancing peace and productivity in an organization. This is one of the areas of HRM.
i) Personnel Research and Information System: Knowledge on behavioral science and industrial
psychology throws better insight into the workers expectations, aspirations and behaviour.
Advancement of technology of product and production methods have created working environment
which are much different from the past. Globalization of economy has increased competition many
fold. Science of ergonomics gives better ideas of doing a work more conveniently by an employee.
Thus, continuous research in HR areas is an unavoidable requirement. It must also take special care
for improving exchange of information through effective communication systems on a continuous basis
especially on moral and motivation. HRM is a broad concept; personnel management (PM) and Human
resource development (HRD) are a part of HRM.
Evolution of HRM
The evolution of the concept of Human Resource Management can be analysed as follows:
Period before industrial revolution – The society was primarily an agriculture economy with limited
production. Number of specialized crafts was limited and was usually carried out within a village or
community with apprentices assisting the master craftsmen. Communication channel were limited.
Period of industrial revolution (1750 to 1850) – Industrial revolution marked the conversion of
economy from agriculture based upon industry. Modernization and increased means of communication
gave way to industrial setup. A department was set up to look into workers wages, welfare and other
related issues. This led to emergence of personnel management with the major task as
- Worker’s wages and salaries
- Worker’s record maintenance
- Worker’s housing facilities and health care
An important event in industrial revolution was growth of Labour Union (1790) the works working in
the industries or factories were subjected to long working hours and very less wages. With growing
unrest, workers across the world started protest and this led to the establishment of Labour unions. To
deal with labour issues at one end and management at the other Personnel Management department had
to be capable of politics and diplomacy, thus the industrial relation department emerged.
Post Industrial revolution – The term Human resource Management saw a major evolution after 1850.
Various studies were released and many experiments were conducted during this period which gave
HRM altogether a new meaning and importance.
A brief overview of major theories release during this period is presented below
• Frederick W. Taylor gave principles of scientific management (1857 to 1911) led to the
evolution of scientific human resource management approach which was involved in
- Worker’s training
- Maintaining wage uniformity
- Focus on attaining better productivity.
• Hawthorne studies, conducted by Elton Mayo & Fritz Roethlisberger (1927 to 1940). –
Observations and findings of Hawthorne experiment shifted the focus of Human resource from
increasing worker’s productivity to increasing worker’s efficiency through greater work
satisfaction.

Human Resource Management 10

• Douglas McGregor Theory X and Theory Y (1960) and Abraham Maslow’s Hierarchy of needs (
1954) – These studies and observations led to the transition from the administrative and passive
Personnel Management approach to a more dynamic Human Resource Management approach
which considered workers as a valuable resource.
As a result of these principles and studies, Human resource management became increasingly line
management function, linked to core business operations. Some of the major activities of HR
department are listed as-
1. Recruitment and selection of skilled workforce.
2. Motivation and employee benefits
3. Training and development of workforce
4. Performance related salaries and appraisals.

Functions of HRM
The main functions of human resource management are classified into two categories: (a) Managerial
Functions and (b) Operative Functions
(a) Managerial Functions: Following are the managerial functions of Human Resource Management
1. Planning: The planning function of human resource department pertains to the steps taken in
determining in advance personnel requirements, personnel programmes, policies etc. After determining
how many and what type of people are required, a personnel manager has to devise ways and means to
motivate them.
2. Organisation: Under organisation, the human resource manager has to organise the operative
functions by designing structure of relationship among jobs, personnel and physical factors in such a
way so as to have maximum contribution towards organisational objectives. In this way a personnel
manager performs following functions: (a) preparation of task force; (b) allocation of work to
individuals; (c) integration of the efforts of the task force; (d) coordination of work of individual with
that of the department.
3. Directing: Directing is concerned with initiation of organised action and stimulating the people
to work. The personnel manager directs the activities of people of the organisation to get its function
performed properly. A personnel manager guides and motivates the staff of the organisation to follow
the path laid down in advance.

Human Resource Management 11

 4. Controlling: It provides basic data for establishing standards, makes job analysis and
performance appraisal, etc. All these techniques assist in effective control of the qualities, time and
efforts of workers.
(b) Operative Functions: The following are the Operative Functions of Human Resource
Management:
1. Procurement of Personnel: It is concerned with the obtaining of the proper kind and number of
personnel necessary to accomplish organisation goals. It deals specifically with such subjects as the
determination of manpower requirements, their recruitment, selecting, placement and orientation, etc.
2. Development of Personnel: Development has to do with the increase through training, skill that is
necessary for proper job performance. In this process various techniques of training are used to develop
the employees. Framing a sound promotion policy, determination of the basis of promotion and making
performance appraisal are the elements of personnel development function.
3. Compensation to Personnel: Compensation means determination of adequate and equitable
remuneration of personnel for their contribution to organisation objectives. To determine the monetary
compensation for various jobs is one of the most difficult and important function of the personnel
management. A number of decisions are taken into the function, viz., job-evaluation, remuneration,
policy, inventive and premium plans, bonus policy and co-partnership, etc. It also assists the
organisation for adopting the suitable wages and salaries, policy and payment of wages and salaries in
right time.
4. Maintaining Good Industrial Relation: Human Resource Management covers a wide field. It is
intended to reduce strifies, promote industrial peace, provide fair deal to workers and establish
industrial democracy. It the personnel manager is unable to make harmonious relations between
management and labour industrial unrest will take place and millions of man-days will be lost. If labour
management relations are not good the moral and physical condition of the employee will suffer, and
it will be a loss to an organisation vis-a-visa nation. Hence, the personnel manager must create
harmonious relations with the help of sufficient communication system and co-partnership.
5. Record Keeping: In record-keeping the personnel manager collects and maintains information
concerned with the staff of the organisation. It is essential for every organisation because it assists the
management in decision making such as in promotions.
6. Personnel Planning and Evaluation : Under this system different type of activities are evaluated
such as evaluation of performance, personnel policy of an organisation and its practices, personnel
audit, morale, survey and performance appraisal, etc.

H R Management Vs. Personnel Management

HRM Personnel Management

HRM is the latest development in the Personnel management precedes HRM
evaluation of management of man

Human Resource Management 12

 It gives more importance to the abilities of Performance is evaluated within the
employees rather than evaluating them as per framework of rules.
rules.
It works on the basis of integrated initiative It works on the basis of piecemeal initiative
Process of decision making is fast Process of decision making is slow
It supports performance related remuneration It supports fixed remuneration
It uses latest techniques of training and It uses outdated techniques of training and
development development
It practices division of work along with team It practices only division of work
work
It favours all round development of It favours contractual employment based on
employees written agreement

New Role of Human Resource Management

Human Resource Management in the “New Millenium” has undergone a great revolution by
questioning the accepted practices and re-inventing the organisations as well as structures. Many
traditional practices have been thrown out. As an example, it can be seen that hierarchies are vanishing
and there is greater emphasis on flat organisations. It means a great deal of specialisation and skills. It
also means upgrading the norms and standards of work as well as performance. The new role of human
resource management is much more strategic than before.
Some of the new directions of the role of HRM can be summed up as follows:
1. A Facilitator of Change: To carry people through upheaval requires the true management
of human resources.
2. An Integrated Approach to Management: Rather than being an isolated function, human
resource is regarded as a core activity, one which shapes a company‘s values. In particular, this can
have an impact on customer service.
3. A Mediator: Establishing and balancing the new and emerging aspirations and
requirements of the company and the individual.
Functions of a Human Resource Manager
A human resource manager, charged with fulfilling the objectives of an organisation, should
be a leader with high intellectual powers, a visionary and a philosopher who provides the initiative to
shape the future in terms of leading the human beings in an organisation towards more prosperous and
progressive policies.
1. As an Intellectual: The basic skill in the human resource field as compared to technologists
or financial experts is the skill to communicate, articulate, understand and above all, to be an expert
when it comes to putting policies and agreements in black and white. The personnel man’s skill lies in
his command over the language. A personnel man has to deal with employees and he must possess the
skills of conducting fruitful and systematic discussions and of communicating effectively. He should
also be in a position to formulate principles and foresee the problems of the organisation. This means
that he would require the mental ability to deal with his people in an intelligent manner as well as to
understand what they are trying to say.
Human Resource Management 13
 2. As an Educator: It is not enough that a human resource man has command-over the
language, which, however, remains his primary tool. He should be deeply interested in learning and
also in achieving growth. Basically, human beings like to grow and realise their full potential. In order
to harmonise the growth of individuals with that of the organisation, a personnel administrator must
not only provide opportunities for his employees to learn, get the required training and assimilate new
ideas but also he himself should be a teacher. A personnel man who simply pushes files and attends
labour courts for conciliation purposes and other rituals of legal procedure for the settlement of
industrial disputes is not a personnel administrator of the future.
3. As a Discriminator: A human resource administrator must have the capacity to discriminate
between right and wrong, between that which is just and unjust and merit and non-merit. In other words,
he should be a good judge when he sits on a selection board, a fair person when he advises on
disciplinary matters and a good observer of right conduct in an organisation.
4. As an Executive: The human resource man must execute the decisions of the management
and its policies with speed, accuracy and objectivity. He has to streamline the office, tone up the
administration and set standards of performance. He has to coordinate the control functions in relation
to the various other divisions and, in doing so he should be in a position to bring unity of purpose and
direction in the activities of the personnel department. He must ask relevant questions and not be merely
involved in the office routine whereby the status quo is maintained. He should have the inquisitiveness
to find out causes of delay, tardy work and wasteful practices, and should be keen to eliminate those
activities from the personnel functions which have either outlived their utility or are not consistent with
the objectives and purposes of the organisation.
5. As a Leader : Being basically concerned with people or groups of people, and being placed
in the group dynamics of various political and social functions of an organisation, a Human resource
man must not shirk the role of leadership in an organisation. He, by setting his own example and by
working towards the objectives of sound personnel management practices, must inspire his people and
motivate them towards better performance. He should resolve the conflicts of different groups and build
up teamwork in the organisation.
6. As a Humanist: Deep faith in human values and empathy with human problems, especially
in less developed countries, are the sine qua non for a Human resource man. He has to deal with people
who toil at various levels and partake of their joys and sorrows. He must perform his functions with
sensitivity and feeling.
7. As a Visionary: While every leading function of an organisation must evolve its vision of
the future, the primary responsibility for developing the social organisation towards purposive and
progressive action falls on the personnel man. He should be a thinker who sets the pace for policy-
making in an organisation in the area of human relations and should gradually work out new patterns
of human relations management consistent with the needs of the organisation and the society. He must
ponder on the social obligations of the enterprise, especially if it is in the public sector, where one has
to work within the framework of social accountability. He should be in close touch with socio-economic
changes in the country. He should be able to reasonably forecast future events and should constantly
strive to meet the coming challenges.

Human Resource Management 14

 HUMAN RESOURCE PLANNING

Introduction

Human Resource Planning is concerned with the planning the future manpower requirements are the
organisation. Human Resource manager ensures that the company has the right type of people in the
right number at the right time and place, who are trained and motivated to do the right kind of work at
the right time. Obviously, human resource planning primarily makes appropriate projections for future
manpower needs of the organisation envisages plan for developing the manpower to suit the changing
needs of the organisation from time to time, and foresees how to monitor and evaluate the future
performance. It also includes the replacement plans and managerial succession plans. Human Resource
planning is the process by which a management determines how an organisation should move from its
current manpower position to its desired manpower position. Through planning a management strives
to have the right number and the right kinds of people at the right places, at the right time, to do things
which result in both the organisation and the individual receiving the maximum long-range benefit.
Definitions of Human Resource Planning:
According to Wikstrom, Human Resource Planning consists of a series of activities, viz.,
(a) Forecasting future manpower requirements, either in terms of mathematical projections of trends
in the economic environment and developments in industry, or in terms of judgemental estimates based
upon the specific future plans of a company;
(b) Making an inventory of present manpower resources and assessing the extent to which these
resources are employed optimally;
(c) Anticipating manpower problems by projecting present resources into the future and comparing
them with the forecast of requirements to determine their adequacy, both quantitatively and
qualitatively; and
(d) Planning the necessary programmes of requirements, selection, training, development, utilisation,
transfer, promotion, motivation and compensation to ensure that future manpower requirements are
properly met.
Coleman has defined Human Resource Planning as “the process of determining manpower
requirements and the means for meeting those requirements in order to carry out the integrated plan of
the organisation”.
Human resource planning is a double-edged weapon. If used properly, it leads to the maximum
utilisation of human resources, reduces excessive labour turnover and high absenteeism; improves
productivity and aids in achieving the objectives of an organisation. Faultily used, it leads to disruption
in the flow of work, lower production, less job satisfaction, high cost of production and constant
headaches for the management personnel. Therefore, for the success of an enterprise, human resource
planning is a very important function, which can be neglected only at its own peril.

Human Resource Management 15

Objectives of HR Planning
The major objectives of Human Resource Planning in an organisation are to:
(i) ensure optimum use of human resources currently employed;
(ii) Avoid balances in the distribution and allocation of human resources;
(iii) assess or forecast future skill requirements of the organisation‘s overall objectives;
(iv) Provide control measure to ensure availability of necessary resources when required;
(v) Control the cost aspect of human resources;
(vi) Formulate transfer and promotion policies.
Steps in Human Resource Planning
Human resource planning refers to a process by which companies ensure that they have the right
number and kinds of people at the right place, at the right time; capable of performing diverse jobs
professionally. Planning the use of human resources is an important function in every organisation. A
rational estimate to various categories of personnel in the organisation is an important aspect of human
resource planning. HRP involves the following steps:
1. Analysis of Organisational Plans and Objectives: Human resource planning is a part of overall
plan of organisation. Plans concerning technology, production, marketing, finance, expansion and
diversification give an idea about the volume of future work activity. Each plan can further be
analysed into sub-plans and detailed programmes. It is also necessary to decide the time horizon for
which human resource plans are to be prepared. The future organisation structure and job design
should be made clear and changes in the organisation structure should be examined so as to
anticipate its manpower requirements.
2. Forecasting Demand for Human Resources: Human resource planning starts with the estimation
of the number and type of personnel required at different levels and in different departments. The
main steps involved in HRP process are (a) to determine and to identify present and prospective
needs of human resource, (b) to discover and recruit the required number of persons. (c) to select
the right number and type from the available people. (d) to hire and place in the positions for which
they are qualified, (e) to provide information to the selected people about the nature of work
assigned to them, (f) to Promote or to transfer as per the needs and the performance of employees,
(g) to denote if the employees are disinterested or their performance is not up to the mark, (h) to
terminate if they are not needed or their performance is below standard and shows no hopes of
improvement. It is the most crucial and critical area of HRD. This HRD manager must pay attention
to place right man to the right job through recruitment selection Training and Placement of
employees. This calls for the adoption of a systematic procedure to complete recruitment and
selection.
3. Forecasting Supply of Human Resources: One of the important areas of human resources
planning is to deal with allocation of persons to different departments depending upon the work-
load and requirements of the departments. While allocating manpower to different departments,

Human Resource Management 16

 care has to be taken to consider appointments based on promotions and transfers. Allocation of
human resource should be so planned that available manpower is put to full use to ensure smooth
functioning of all departments.
4. Estimating Manpower Gaps: Net human resource requirements or manpower gaps can be
identified by comparing demand and supply forecasts. Such comparison will reveal either deficit
or surplus of human resources in future. Deficits suggest the number of persons to be recruited from
outside whereas surplus implies redundant to be redeployed or terminated. Similarly, gaps may
occur in terms of knowledge, skills and aptitudes. Employees deficient in qualifications can be
trained whereas employees with higher skills may be given more enriched jobs.
5. Matching Demand and Supply : It is one of the objectives of human resource planning to assess
the demand for and supply of human resources and match both to know shortages and surpluses on
both the side in kind and in number. This will enable the human resource department to know
overstaffing or understaffing. Once the manpower gaps are identified, plans are prepared to bridge
these gaps. Plans to meet the surplus manpower may be redeployment in other departments and
retrenchment in consultation, with the trade unions. People may be persuaded to quit through
voluntarily retirement. Deficit can be met through recruitment, selection, transfer, promotion, and
training plans. Realistic plans for the procurement and development of manpower should be made
after considering the macro and micro environment which affect the manpower objectives of the
organisation.
Importance of Human Resource Planning
HRP is the subsystem in the total organizational planning. Organizational planning includes
managerial activities that set the company’s objective for the future and determines the appropriate
means for achieving those objectives. The importance of HRP is elaborated on the basis of the key roles
that it is playing in the organization.
1. Future Personnel Needs: Human resource planning is significant because it helps to determine the
future personnel needs of the organization. If an organization is facing the problem of either surplus or
deficiency in staff strength, then it is the result of the absence of effecting HR planning. All public
sector enterprises find themselves overstaffed now as they never had any planning for personnel
requirement and went of recruitment spree till late 1980’s. The problem of excess staff has become
such a prominent problem that many private sector units are resorting to VRS ‘voluntary retirement
scheme’. The excess of labour problem would have been there if the organization had good HRP
system. Effective HRP system will also enable the organization to have good succession planning.
2. Part of Strategic Planning: HRP has become an integral part of strategic planning of strategic
planning. HRP provides inputs in strategy formulation process in terms of deciding whether the
organization has got the right kind of human resources to carry out the given strategy. HRP is also
necessary during the implementation stage in the form of deciding to make resource allocation
decisions related to organization structure, process and human resources. In some organizations HRP
play as significant role as strategic planning and HR issues are perceived as inherent in business
management.

Human Resource Management 20

3. Creating Highly Talented Personnel: Even though India has a great pool of educated unemployed,
it is the discretion of HR manager that will enable the company to recruit the right person with right
skills to the organization. Even the existing staff hope the job so frequently that organization face
frequent shortage of manpower. Manpower planning in the form of skill development is required to
help the organization in dealing with this problem of skilled manpower shortage
4. International Strategies: An international expansion strategy of an organization is facilitated to a
great extent by HR planning. The HR department’s ability to fill key jobs with foreign nationals and
reassignment of employees from within or across national borders is a major challenge that is being
faced by international business. With the growing trend towards global operation, the need for HRP
will as well will be the need to integrate HRP more closely with the organizations strategic plans.
Without effective HRP and subsequent attention to employee recruitment, selection, placement,
development, and career planning, the growing competition for foreign executives may lead to
expensive and strategically descriptive turnover among key decision makers.
5. Foundation for Personnel Functions: HRP provides essential information for designing and
implementing personnel functions, such as recruitment, selection, training and development, personnel
movement like transfers, promotions and layoffs.
6. Increasing Investments in Human Resources: Organizations are making increasing investments
in human resource development compelling the increased need for HRP. Organizations are realizing
that human assets can increase in value more than the physical assets. An employee who gradually
develops his/ her skills and abilities become a valuable asset for the organization. Organizations can
make investments in its personnel either through direct training or job assignment and the rupee value
of such a trained, flexible, motivated productive workforce is difficult to determine. Top officials have
started acknowledging that quality of work force is responsible for both short term and long term
performance of the organization.
7. Resistance to Change: Employees are always reluctant whenever they hear about change and even
about job rotation. Organizations cannot shift one employee from one department to another without
any specific planning. Even for carrying out job rotation (shifting one employee from one department
to another) there is a need to plan well ahead and match the skills required and existing skills of the
employees.
8. Succession Planning: Human Resource Planning prepares people for future challenges. The ‘stars’
are picked up, trained, assessed and assisted continuously so that when the time comes such trained
employees can quickly take the responsibilities and position of their boss or seniors as and when
situation arrives.
9. Other Benefits: (a) HRP helps in judging the effectiveness of manpower policies and programmes
of management. (b) It develops awareness on effective utilization of human resources for the overall
development of organization. (c) It facilitates selection and training of employees with adequate
knowledge, experience and aptitudes so as to carry on and achieve the organizational objectives (d)

Human Resource Management 21

 HRP encourages the company to review and modify its human resource policies and practices and to
examine the way of utilizing the human resources for better utilization.
Factors affecting HRP
HRP is influenced by several factors. The most important of the factors that affect human resource
planning are:
1. Type and Strategy of the Organization: Type of the organization determines the production
processes involve, number and type of staff needed and the supervisory and managerial personnel
required. If the organization has a plan for organic growth then organization need to hire additional
employees. On the other hand if the organization is going for mergers and acquisition, then organization
need to plan for layoffs.
2. Organizational Growth Cycles and Planning: All organizations pass through different stages of
growth from the day of its inception. The stage of growth in which an organization is determines the
nature and extends of HRP. Small organizations in the earlier stages of growth may not have well
defined personnel planning. But as the organization enters the growth stage they feel the need to plan
its human resource. At this stage organization gives emphasis upon employee development. But as the
organization reaches the mature stage it experience less flexibility and variability resulting in low
growth rate. HR planning becomes more formalized and less flexible and less innovative and problem
like retirement and possible retrenchment dominate planning. During the declining stage of the
organization HRP takes a different focus like planning to do the layoff, retrenchment and retirement.
3. Environmental Uncertainties: Political, social and economic changes affect all organizations and
the fluctuations that are happening in these environments affect organizations drastically. Personnel
planners deal with such environmental uncertainties by carefully formulating recruitment, selection,
training and development policies and programmes.
4. Time Horizons: HR plans can be short term or long term. Short term plans spans from six months
to one year, while long term plans spread over three to twenty years. The extent of time period depends
upon the degree of uncertainty that is prevailing in an organizations environment.
5. Type and Quality of information: The quality and accuracy of information depend upon the clarity
with which the organizational decision makers have defined their strategy, structure, budgets,
production schedule and so on.
6. Nature of Jobs Being Filled: Personnel planners need to be really careful with respect to the nature
of the jobs being filled in the organization. Employees belonging to lower level who need very limited
skills can be recruited hastily but, while hiring employees for higher posts, selection and recruitment
need to be carried out with high discretion
7. Outsourcing: Many of the organizations have surplus labour and hence instead of hiring more
people they go for outsourcing. Outsourcing determines HRP.
Barriers to Human Resource Planning
Human Resource Planners face significant barriers while formulating an HRP. The major
barriers are elaborated below:
Human Resource Management 22
 1) HR practitioners are perceived as experts in handling personnel matters, but are not experts
in managing business. The personnel plan conceived and formulated by the HR practitioners when
enmeshed with organizational plan, might make the overall strategic plan of the organization
ineffective.
2) HR information often is incompatible with other information used in strategy formulation.
Strategic planning efforts have long been oriented towards financial forecasting, often to the exclusion
of other types of information. Financial forecasting takes precedence over HRP.
3) Conflict may exist between short term and long term HR needs. For example, there can be a
conflict between the pressure to get the work done on time and long term needs, such as preparing
people for assuming greater responsibilities. Many managers are of the belief that HR needs can be met
immediately because skills are available on the market as long as wages and salaries are competitive.
Therefore, long times plans are not required, short planning are only needed.
4) There is conflict between quantitative and qualitative approaches to HRP. Some people view
HRP as a number game designed to track the flow of people across the department. Others take a
qualitative approach and focus on individual employee concerns such as promotion and career
development. Best result can be achieved if there is a balance between the quantitative and qualitative
approaches.
6) Non-involvement of operating managers renders HRP ineffective. HRP is not strictly an HR
department function. Successful planning needs a co-ordinated effort on the part of operating managers
and HR personnel.
Job analysis
Developing an organizational structure, results in jobs which have to be staffed. Job analysis is
the procedure through which you determine the duties and nature of the jobs and the kinds of people
(in terms of skills and experience) who should be hired for them. Some of the definitions of job analysis
are:
According to Michael L. Jucius, “Job analysis refers to the process of studying the operations,
duties and organizational aspects of jobs in order to derive specifications or as they called by some, job
descriptions.”
According to DeCenzo and P. Robbins, “A job analysis is a systematic exploration of the
activities within a job. It is a basic technical procedure, one that is used to define the duties,
responsibilities, and accountabilities of a job.”
Information provided by Job Analysis
Job analysis provides the following information:
1. Job Identification : Its title, including its code number;
2. Significant Characteristics of a Job: It location, physical setting, supervision, union jurisdiction,
hazards and discomforts;

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 3. What the Typical Worker Does : Specific operation and tasks that make up an assignment, their
relative timing and importance, their simplicity, routine or complexity, the responsibility or safety of
others for property, funds, confidence and trust;
4. Which Materials and Equipment a Worker Uses: Metals, plastics, grains, yarns, milling
machines, punch presses and micrometers;
5. How a Job is Performed: Nature of operation - lifting, handling, cleaning, washing, feeding,
removing, drilling, driving, setting-up and many others;
6. Required Personal Attributes: Experience, training, apprenticeship, physical strength, co-
ordination or dexterity, physical demands, mental capabilities, aptitudes, social skills;
7. Job Relationship: Experience required, opportunities for advancement, patterns of promotions,
essential co-operation, direction, or leadership from and for a job.
Sources of Information for Job Analysis
According to George R. Terry, “the make-up of a job, its relation to other jobs, and its
requirements for competent performance are essential information needed for a job analysis”.
Information on a job may be obtained from three principal sources:
(a) From the employees who actually perform a job;
(b) From other employees such as supervisors and foremen who watch the workers doing a job and
thereby acquire knowledge about it; and
(c) From outside observers specially appointed to watch employees performing a job. Such outside
persons are called the trade job analysts.
Methods of Job Analysis
Four methods or approaches are utilised in analysing jobs. They are:
1. Personal Observation: The materials and equipment used, the working conditions and probable
hazards, and an understanding of what the work involves are the facts which should be known by an
analyst.
2. Sending out of Questionnaires: Properly drafted questionnaires are sent out to job-holders for
completion and are returned to supervisors.
3. Maintenance of Long Records: The employee maintains a daily record of duties he performs,
marking the time at which each task is started and finished.
4. Critical Incidents: In this method, job holders are asked to describe incidents concerning the job on
the basis of their past experience. The incidents so collected are analyzed and classified according to
the job areas they describe
5. Personal Interviews: Personal interviews may be held by the analyst with the employees, and
answers to relevant questions may be recorded. But the method is time-consuming and costly.

Human Resource Management 24

6.Technical Conference Method: This method utilizes supervisors with extensive knowledge of the
job. Here, specific characteristics of a job are obtained from the “experts.”
7. Functional Job Analysis: Functional job analysis (FJA) is employee- oriented analytical approach
of job analysis. This approach attempts to describe the whole person on the job.
Purposes and Uses of Job Analysis
The information provided by job analysis is useful in almost every phase of employee relations. Its
purposes and uses can be understood from the following points:
1. Organisation and Manpower Planning: It is helpful in organisational planning for it
defines labour needs in concrete terms and coordinates the activities of the work force, and clearly
divides duties and responsibilities.
2. Recruitment and Selection: By indicating the specific requirements of each job (i.e., the
skills and knowledge), it provides a realistic basis for hiring, training, placement, transfer and
promotion of personnel.
3. Wage and Salary Administration: By indicating the qualifications required for doing
specified jobs and the risks and hazards involved in its performance, it helps in salary and wage
administration. Job analysis is used as a foundation for job evaluation.
4. Job Re-engineering: Job analysis provides information which enables us to change jobs in
order to permit their being manned by personnel with specific characteristics and qualifications.
5. Employee Training and Management Development: Job analysis provides the necessary
information to the management of training and development programmes.
6. Performance Appraisal: It helps in establishing clear-cut standards which may be
compared with the actual contribution of each individual.
7. Health and Safety: It provides an opportunity for indentifying hazardous conditions and
unhealthy environmental factors so that corrective measures may be taken to minimise and avoid the
possibility of accidents.
Process of Job Analysis
Following are the important steps in the process of job analysis:
1. Determine the Use of the Job Analysis Information: Start by identifying the use to which the
information will be put, since this will determine the type of data you collect and the technique you
use to collect them.
2. Collection of Background Information: According to Terry, “The make-up of a job, its relation
to other jobs, and its requirements for competent performance are essential information needed for a
job evaluation. This information can be had by reviewing available background information such as
organization charts and the existing job descriptions.

Human Resource Management 25

3. Selection of Jobs for Analysis: Job analysis is a costly and time consuming process. Hence, it is
necessary to select a representative sample of jobs for the purposes of analysis. Priorities of various
jobs can also be determined.
4. Collection of Job Analysis Data: Job data on features of the job, required employee qualification
and requirements, should be collected either from the employees who actually perform a job; or from
other employees who watch the workers, or from the outside persons.
5. Processing the Information: Once job analysis information has been collected, the next step is to
place it in a form that will make it useful to those charged with the various personnel functions. Several
issues arise with respect to this. First, how much detail is needed? Second, can the job analysis
information be expressed in quantitative terms? These must be considered properly.
6. Preparing Job Descriptions and Job Classifications: Job information which has been collected
must be processed to prepare the job description form. It is a statement showing full details of the
activities of the job. Separate job description forms may be used for various activities in the job and
may be compiled later on. The job analysis is made with the help of these description forms. These
forms may be used as reference for the future.
7. Developing Job Specifications: Job specifications are also prepared on the basis of information
collected. It is a statement of minimum acceptable qualities of the person to be placed on the job. It
specifies the standard by which the qualities of the person are measured.
Job Description
Job description is a written record of the duties, responsibilities and requirements of a particular
job. It is concerned with the job itself and not with the work. It is a statement describing the job in such
terms as its title, location, duties, working conditions and hazards. In other words, it tells us what is to
be done and how it is to be done and why. It is a standard of function, in that it defines the appropriate
and authorised contents of a job.
A job description contains the following:
1. Job identification, which includes the job title, alternative title, department, division, plant and
code number of the job. The job title identifies and designates the job properly.
2. Job Summary serves two important purposes. First it provides a short definition which is useful
as additional identification information when a job title is not adequate. Second, it serves as a
summary to orient the reader.
3. Job duties give us a comprehensive listing or the duties together with some indication of the
frequency of occurrence or percentage of time devoted to each major duty. It is regarded as the
heart of a job.
4. Relation to other jobs: This helps us to locate the job in the organisation by indicating the job
immediately below or above it in the job hierarchy. It also gives us an idea of the vertical
relationships of work flow and procedures.
5. Supervision: Under it is given the number of persons to be supervised along with their job titles,
and the extent of supervision involved – general, intermediate or close supervision.

Human Resource Management 26

6. Working conditions usually give us information about the environment in which a job holder
must work.
Job Specification
The job specification states the minimum acceptable qualifications that the incumbent must
possess to perform the job successfully. Based on the information acquired through job analysis, the
job specification identifies the knowledge, skills, and abilities needed to do the job effectively.
According to Dale Yoder, “The job specification, as such a summary properly described is thus
a specialized job description, emphasizing personnel requirement and designed especially to facilitate
selection and placement.”
A Job Specification should include:
(i) Physical characteristics, which include health, strength, endurance, age, height, weight, vision,
voice, eye, hand and foot co-ordination, motor co-ordination, and colour discrimination.
(ii) Psychological and social characteristics such as emotional stability, flexibility, decision making
ability, analytical view, mental ability, pleasing manners, initiative, conversational ability etc.
(iii) Mental Characteristics such as general intelligence, memory, judgement, ability to concentrate,
foresight etc.
(iv) Personal Characteristics such as sex, education, family background, job experience, hobbies,
extracurricular activities etc.
Job Design
Job design is of comparatively recent origin. The human resource managers have realized that
the poorly designed jobs often result in boredom to the employees, increased turnover, job
dissatisfaction, low productivity and an increase in overall costs of the organization. All these negative
consequences can be avoided with the help of proper job design. According to Jon Werner and
DeSimone, “Job design is the development and alteration of the components of a job (such as the tasks
one performs, and the scope of one’s responsibilities) to improve productivity and the quality of the
employees’ work life.”
Principles of Job Design
Principles are the bases of the approach used in job design. Robertson and Smith (1985) have
suggested the following five principles of job design:
• To influence skill variety, provide opportunities for people to do several tasks and combine
tasks.
• To influence task identity, combine tasks and from natural work units.
• To influence task significance, form natural work units and inform people of the importance of
their work.
• To influence autonomy, give people responsibility for determining their own working systems.

Human Resource Management 27

• To influence feedback; establish good relationship and open feedback channels.
Methods or Techniques of Job Design
The various techniques of job design and redesign are as follows:
1. Job Simplification: In job simplification, the complete job is broken down into small subparts;
this is done so that employee can do these jobs without much specialized training. For job
simplification, generally time and motion studies are used.
2. Job Rotation: Another technique designed to enhance employee motivation is job rotation, or
periodically assigning employees to alternating jobs or tasks.
3. Job Enlargement: Another means of increasing employee’s satisfaction with routine jobs is
increasing the number of tasks performed (i.e. increasing the scope of the job). This is called
job enlargement.
4. Job Enrichment: The concept of job enrichment has been derived from Herzberg’s two- factor
theory of motivation in which he has suggested that job content is one of the basic factors of
motivation. If the job is designed in such a manner that it becomes more interesting and
challenging to the job performer and provides him opportunities for achievement, recognition,
responsibility, advancement and growth, the job itself becomes a source of motivation to the
individual.
According to P. Robbins, “Job enrichment refers to the vertical expansion of the jobs. It
increases the degree to which the worker controls the planning, execution and evaluation of his
work.”
Job Enlargement Vs. Job Enrichment
Job enlargement and job enrichment are two techniques of job design in order to enhance productivity
and satisfaction of the employees. However, they differ from each other in the following respects:
1. Nature of Job: The major difference between job enrichment and enlargement lies in the nature of
additions to the job. Enlargement involves a horizontal loading or expansion, or addition of tasks of the
same nature. Enrichment involves vertical loading of tasks and responsibility of the job holder; it
improves the quality of the job in terms of its intrinsic worth.
2. Purpose: The purpose of job enlargement is to reduce the monotony in performing repetitive jobs
by lengthening the cycle of operation. On the other hand, the purpose of job enrichment is making the
job lively, challenging and satisfying. It satisfies the higher level needs such as ego satisfaction, self
expression, sense of achievement and advancement of Job holders.
3. Skill Requirement: Job enlargement may not necessarily require the use of additional skills which
the job holder was using in performing the job before the enlargement. This is due to similarity of
additional tasks. Enrichment calls foe development and utilization of higher skills, initiative, and
innovation on the part of the job holder in performing the job.

Human Resource Management 28

4. Direction and Control: Job enlargement requires direction and control from external sources, say
supervisor. In fact, the job holder may require more direction and control because of enlargement of
his responsibility. Enrichment does not require external direction and control as these come from the
job holder himself. He requires only feedback from his supervisor.
Job Evaluation
Job Evaluation is a system wherein a particular job of an enterprise is compared with its other
jobs. In the present industrial era, there are different types of jobs which are performed in every business
and industrial enterprise. Comparative study of these jobs is very essential because on the basis of such
study the structure of wages for different types of jobs is prepared. The comparison of jobs may be
made on the basis of different factors such as duties, responsibilities, working conditions, efforts, etc.
In nut shell, it may be said that job evaluation is a process in which a particular job of a business and
industrial enterprise is compared with other jobs of the enterprise.
Kimball and Kimball define job evaluation as “an effort to determine the relative value of every job
in a plant to determine what the fair basic wage for such a job should be.”
According to Wendell French, ―job evaluation is a process of determining the relative worth of the
various jobs within the organisation, so that differential wages may be paid to jobs of different worth.
The relative worth of a job means relative value produced.
We may define job evaluation as a process of analysing and describing positions, grouping them and
determining their relative value of comparing the duties of different position in terms of their different
responsibilities and other requirements.
Objectives of Job Evaluation
The following are the objectives of job evaluation:
(i) To secure and maintain complete, accurate and impersonal descriptions of each distinct job or
occupation in the entire plant;
(ii) To provide a standard procedure for determining the relative worth of each job in a plant;
(iii) To determine the rate of pay for each job which is fair and equitable with relation to other jobs in
the plant, community or industry?
(iv) To ensure that like wages are paid to all qualified employees for like work;
(v) To promote a fair and accurate consideration of all employees for advancement and transfer;
(vi) To provide a factual basis for the consideration of wage rates for similar jobs in a community and
industry.
Principles of Job Evaluation
There are certain broad principles, which should be kept in mind before putting the job evaluation
programme into practice. These principles are :

Human Resource Management 29

(i) Rate the job and not the man. Each element should be rated on the basis of what the job itself
requires.
(ii) The elements selected for, rating purposes should be easily explainable in terms and as few in
number as will cover the necessary requisites for every job without any overlapping.
(iii) The elements should be clearly defined and properly selected.
(iv) Any job rating plan must be sold to foremen and employees. The success in selling it will depend
on a clear-cut-cut explanation and illustration of the plan.
(v) Foremen should participate in the rating of jobs in their own departments.
(vi) Maximum co-operation can be obtained from employees when they themselves have an
opportunity to discuss job ratings.
(vii) In talking to foremen and employees, any discussion of money value should be avoided. Only
point values and degrees of each element should be discussed.
(viii) Too many occupational wages should not be established. It would be unwise to adopt an
occupational wage for each total of point values.
Methods of Job Evaluation:
The following are the methods of Job Evaluations:
1. Ranking Method: The ranking method requires a committee typically composed of both
management and employee representatives of job in a simple rank order, from highest to lowest. Rating
specialists review the job analysis information and thereafter appraise each job subjectively according
to its general importance in comparison with other jobs. In other words, an overall judgment is made
of the relative worth of each job, and the job is ranked accordingly.
2. Job Grading or Job Classification Method : This method works by assigning each job a grade,
level or class that corresponds to a pay grade for instance Grade I, Grade II, Grade III and so forth.
These grades or classifications are created by identifying gradations of some common denominations,
such as job responsibility, skill, knowledge, education required, and so on. Then, for each job grade so
created standard job descriptions are determined. Thereafter, such standard description is matched with
job descriptions in the organisation. The standard description that most nearly matches the job
description determines the job‘s grading.
3. Factor-comparison Method: This method is a combination of ranking and point systems. All jobs
are compared to each other for the purpose of determining their relative importance by selecting four
or five major job elements or factors which are more or less common to all jobs. These elements are
not predetermined. These are chosen on the basis of job analysis. The few factors which are customarily
used are : (i) mental requirements (ii) skill (iii) physical requirements (iv) responsibilities
(v) working conditions, etc. A few jobs are selected as key jobs which serve as standard against which
all other jobs are compared. key job is one whose contents have been stabilised over a period of time
and whose wage rate is considered to be presently correct by the management and the union.

Human Resource Management 30

Advantages of Job Evaluation
Job evaluation enjoys the following advantages:
(i) Job evaluation is a logical and to some Extent an objective method of ranking jobs relative to one
another. It may help in removing inequalities in existing wage structures and in maintaining sound and
consistent wag differentials a plant or industry.
(ii) In the case of new jobs, the method often facilitates fitting them into the existing wage structure.
(iii) The method helps in removing grievances arising out of relative wages; and it improves labour-
management relations.
(iv) The method replaces the many accidental factors, occurring in less systematic procedures, of wage
bargaining by more impersonal and objective standards, thus establishing a clear basis for negotiations.
(v) The method may lead to greater uniformity in wage rates, thus simplifying wage administration.
(vi) The information collected in the process of job description and analysis may also be used for the
improvement of selection, transfer and promotion procedures on the basis of comparative job
requirements.
(vii) Such information also reveals that workers are engaged on jobs requiring less skill and other
qualities than they possess, thereby pointing to the possibility of making more efficient me of the plants‘
labour force.

Recruitment
Recruitment means search of the prospective employee to suit the job requirements as represented by
job specification. It is the process of attracting people to apply for jobs in an organisation.
According to Edwin B. Flippo: “Recruitment is the process of searching for prospective employees
and stimulating them to apply for jobs in the organisation.”
Factors affecting Recruitment
The factors affecting recruitment can be classified as internal and external factors.
The internal factors are:
• Wage and salary policies;
• The age composition of existing working force;
• Promotion and retirement policies;
• Turnover rates;
• The nature of operations involved the kind of personnel required;
• The level and seasonality of operations in question;
• Future expansion and reduction programmes;
• Recruiting policy of the organisation;
• Human resource planning strategy of the company;
• Size of the organisation and the number of employees employed;
. Cost involved in recruiting employees, and finally;
• Growth and expansion plans of the organisation.
Human Resource Management 31
The external factors are:
• Supply and demand of specific skills in the labour market;
• Company’s image perception of the job seekers about the company.
• External cultural factors: Obviously, the culture may exert considerable check on
recruitment. For example, women may not be recruited in certain jobs in industry.
• Economic factors: such as a tight or loose labour market, the reputation of the
enterprise in the community as a good pay master or otherwise and such allied
issues which determine the quality and quantity of manpower submitting itself for
recruitment.
• Political and legal factors also exert restraints in respect of nature and hours of
work for women and children, and allied employment practices in the enterprise,
reservation of Job for SC, ST and so on.
Sources of Recruitment
The various sources of recruitment are generally classified as internal source and external
source.
(a) Internal Sources: This refers to the recruitment from within the company. The various internal
sources are promotion, transfer, past employees and internal advertisements.

Human Resource Management 32

(b) External Sources: External sources refers to the practice of getting suitable persons from outside.
The various external sources are advertisement, employment exchange, past employees, private
placement agencies and consultants, walks-ins, campus recruitment, trade unions, etc.
The following external sources of recruitment are commonly used by the big enterprises:
1. Direct Recruitment: An important source of recruitment is direct recruitment by placing a
notice on the notice board of the enterprise specifying the details of the jobs available. It is also
known as recruitment at factory gate.
2. Casual Callers or Unsolicited Applications: The organisations which are regarded as good
employers draw a steady stream of unsolicited applications in their offices. This serves as a
valuable source of manpower.
3. Media Advertisement: Advertisement in newspapers or trade and professional journals is
generally used when qualified and experienced personnel are not available from other sources.
4. Employment Agencies: Employment exchanges run by the Government are regarded as a good
source of recruitment for unskilled, semi-skilled and skilled operative jobs. In some cases,
compulsory notification of vacancies to the employment exchange is required by law.
5. Management Consultants: Management consultancy firms help the organisations to recruit
technical, professional and managerial personnel they specialise middle level and top level
executive placements.
6. Educational Institutions or Campus Recruitment: Big organisations maintain a close liaison
with the universities, vocational institutes and management institutes for recruitment to various
jobs. Recruitment from educational institutional is a well - established practice of thousand of
business and other organisations.
7. Recommendation: Applicants introduced by friends and relatives may prove to be a good
source of recruitment.
8. Labour Contractors: Workers are recruited through labour contractors who are themselves
employees of the organisation. Recruitment through labour contractors has been banned for the
public sector units.
9. Telecasting: The practice of telecasting of vacant posts over T.V. is gaining importance these
days. Special programmes like ‘Job Watch', ‘Youth Pulse’, ‘ Employment News’, etc. over the
T.V have become quite popular in recruitment for various types of jobs.
10. Raiding: Raiding is a technical term used when employees working elsewhere are attracted to
join organisations. The organisations are always on the lookout for qualified professionals, and
are willing to offer them a better deal if they make the switch.
Merits of External Source of Recruitment
The merits of external sources of recruitment are as under:
1. Qualified Personnel: By using external sources of recruitment the management can make
qualified and trained people to apply for vacant Jobs in the organisation.

Human Resource Management 33

 2. Wider choice: When vacancies are advertised widely a large number of applicants from outside
the organisation apply. The management has a wider choice while selecting the people for
employment.
3. Fresh Talent: The insiders may have limited talents. External sources facilitate infusion of
fresh blood with new ideas into the enterprise. This will improve the overall working of the
enterprise.
4. Competitive Spirit: If a company can tap external sources, the existing staff will have to
compete with the outsiders. They will work harder to show better performance.
Demerits of External Sources
The demerits of filling vacancies from external sources are as follows:
1. Dissatisfaction among Existing Staff: External recruitment may lead to dissatisfaction and
frustration among existing employees. They may feel that their chances of promotion are reduced.
2. Lengthy Process: Recruitment from outside takes a long time. The business has to notify the
vacancies and wait for applications to initiate the selection process.
3. Costly Process: It is very costly to recruit staff from external sources. A lot of money has to
be spent on advertisement and processing of applications.
4. Uncertain Response: The candidates from outside may not be suitable for the enterprise.
There is no guarantee that the enterprise will be able to attract right kinds of people from external
sources.
Selection
Human resource selection is the process of preferring qualified individuals who are available to fill
positions in an organization. Selection involves both picks up the fits and rejects the unfits. Therefore,
sometimes, it is called a negative process.
According to Thomas Stone, “Selection is the process of differentiating between applicants in order to
identify (and hire) those with a greater likelihood of success in a job”.
Difference between Recruitment and Selection
1. Difference in Objective: The basic objective of recruitment is to attract maximum number of
candidates so that more options are available. The basic objective of selection is to choose best out of
the available candidates.
2. Difference is Process: Recruitment adopts the process of creating application pool as large as
possible and therefore. It is known as positive process. Selection adopts the process through which
more and more candidates are rejected and fewer candidates are selected or sometimes even not a single
candidate is selected. Therefore, it is known as negative process or rejection process.

3. Technical Differences: Recruitment techniques are not very intensive, and not require high skills.
As against this, in selection process, highly specialised techniques are required. Therefore, in the

Human Resource Management 34

selection process, only personnel with specific skills like expertise in using selection tests, conducting
interviews, etc., are involved.

4. Difference in Outcomes: The outcome of recruitment is application pool which becomes input for
selection process. The outcome of selection process is in the form of finalising candidates who will be
offered jobs.

Selection Procedure

1. Application Pool: Application pool built-up through recruitment process is the base for
selection process. The basic objective at the recruitment level is to attract as much worthwhile
applications as possible so that there are more options available at the selection stage.
2. Preliminary Screening and Interview: It is highly noneconomic to administer and handle all
the applicants. It is advantageous to sort out unsuitable applicants before using the further
selection steps. For this purpose, usually, preliminary interviews, application blank lists and
short test can be used. All applications received are scrutinised by the personnel department in
order to eliminate those applicants who do not fulfil required qualifications or work experience
or technical skill, his application will not be entertained. Such candidate will be informed of his
rejection.

3. Application Blank or Application Form: An application blank is a traditional widely accepted

device for getting information from a prospective applicant which will enable the management
to make a proper selection. Information is generally taken on the following items:

(a) Biographical Data: Name, father’s name, data and place of birth, age, sex, nationality,
height, weight, identification marks, physical disability, if any, marital status, and number of
dependants.

(b) Educational Attainment: Education (subjects offered and grades secured), training
acquired in special fields and knowledge gained from professional/technical institutes or through
correspondence courses.

(c) Work Experience: Previous experience, the number of jobs held with the same or
other employers, including the nature of duties, and responsibilities and the duration of various
assignments, salary received, grades, and reasons for leaving the present employer.

(d) Salary and Benefits: Present and expected.

(e) Other Items: Names and addresses of previous employers, references etc. An application
blank is a brief history sheet of an employee’s background and can be used for future reference, in
case needed.

4. Selection Tests: Many organisations hold different kinds of selection tests to know more about
the candidates or to reject the candidates who cannot be called for interview etc. Selection tests

Human Resource Management 35

 normally supplement the information provided in the application forms. Such forms may contain
factual information about candidates.

A. Aptitude Tests: These measure whether an individual has the capacity or talent
ability to learn a given job if given adequate training. These are more useful for clerical and trade
positions.

B. Personality Tests: At times, personality affects job performance. These determine

personality traits of the candidate such as cooperativeness, emotional balance etc. These seek to assess
an individual’s motivation, adjustment to the stresses of everyday life, capacity for interpersonal
relations and self-image.

C. Interest Tests: These determine the applicant’s interests. The applicant is asked
whether he likes, dislikes, or is indifferent to many examples of school subjects, occupations,
amusements, peculiarities of people, and particular activities.

D. Performance Tests: In this test the applicant is asked to demonstrate his ability
to do the job. For example, prospective typists are asked to type several pages with speed and accuracy.

E. Intelligence Tests: This aim at testing the mental capacity of a person with
respect to reasoning, word fluency, numbers, memory, comprehension, picture arrangement, etc. It
measures the ability to grasp, understand and to make judgement.

F. Knowledge Tests: These are devised to measure the depth of the knowledge and
proficiency in certain skills already achieved by the applicants such as engineering, accounting etc.

G. Achievement Tests: Whereas aptitude is a capacity to learn in the future, achievement is

concerned with what one has accomplished. When applicants claim to know something, an achievement
test is given to measure how well they know it.

H. Projective Tests: In these tests the applicant projects his personality into free responses
about pictures shown to him which are ambiguous.
5. Interview: An interview is a procedure designed to get information from a person and to assess his
potential for the job he is being considered on the basis of oral responses by the applicant to oral
inquiries by the interviewer. Interviewer does a formal in-depth conversation with the applicant, to
evaluate his suitability. It is one of the most important tools in the selection process. This tool is used
when interviewing skilled, technical, professional and even managerial employees. It involves two-
way exchange of information. The interviewer learns about the applicant and the candidate learns about
the employer.

Principles of Interviewing

To make it effective, an interview should be properly planned and conducted on ertain principles;
Edwin B. Flippo has described certain rules and principles of good interviewing to this end:

Human Resource Management 36

• Provide proper surroundings. The physical setting for the interview should be both private and
comfortable.

• The mental setting should be one of rapport. The interviewer must be aware of non-verbal
behaviour.
• Plan for the interview by thoroughly reviewing job specifications and job descriptions.

• Determine the specific objectives and the method of the interviewing.

• Inform yourself as much as possible concerning the known information about the interviewee.

• The interviewer should possess and demonstrate a basic liking and respect for people.

• Questions should be asked in a manner that encourages the interviewee to talk.

Put the applicant at ease.

• Make a decision only when all the data and information are available. Avoid decisions that are
based on first impressions.

• Conclude the interview tactfully, making sure that the candidate leaves feeling neither too elated
nor frustrated.

• Maintain some written record of the interview during or immediately after it.

• Listen attentively and, if possible, protectively.

• Questions must be stated clearly to avoid confusion and ambiguity. Maintain a balance between
open and overtly structured questions.

• ‘Body language’ must not be ignored.

• The interviewer should make some overt sign to indicate the end of the interview.

6. Background Investigation: The next step in the selection process is to undertake an investigation
of those applicants who appear to offer potential as employees. This may include contacting former
employers to confirm the candidate’s work record and to obtain their appraisal of his or her
performance/ contacting other job-related and personal references, and verifying the educational
accomplishments shown on the application.

7. Physical Examination: After the selection decision and before the job offer is made, the candidate
is required to undergo physical fitness test. Candidates are sent for physical examination either to the
company’s physician or to a medical officer approved for the purpose. Such physical examination
provides the following information:

• Whether the candidate’s physical measurements are in accordance with job requirements or
not?
• Whether the candidate suffers from bad health which should be corrected?

Human Resource Management 37

 • Whether the candidate has health problems or psychological attitudes likely to interfere
with work efficiency or future attendance?

• Whether the candidate is physically fit for the specific job or not?

8. Approval by Appropriate Authority: On the basis of the above steps, suitable candidates are
recommended for selection by the selection committee or personnel department. Though such a
committee or personnel department may have authority to select the candidates finally, often it has staff
authority to recommend the candidates for selection to the appropriate authority.

9. Final Employment Decision: After a candidate is finally selected, the human resource department
recommends his name for employment. The management or board of the company offers employment
in the form of an appointment letter mentioning the post, the rank, the salary grade, the date by which
the candidate should join and other terms and conditions of employment. Some firms make a contract
of service on judicial paper. Usually an appointment is made on probation in the beginning. The
probation period may range from three months to two years. When the work and conduct of the
employee is found satisfactory, he may be confirmed.

10. Evaluation: The selection process, if properly performed, will ensure availability of competent
and committed personnel. A period audit, conducted by people who work independently of the human
resource department, will evaluate the effectiveness of the selection process. The auditors will do a
thorough and the intensive analysis and evaluate the employment programme.

Orientation (Induction)

The introduction of the new employee to the job is known as induction. It is the process by which new
employees are introduced to the practices, policies and purposes of the organisation. Induction follows
placement and consists of the task of orienting or introducing the new employee to the company, its
policy and its position in the economy. Induction literally means helping the worker to get or with his
own environment. After an employee is assigned his job, it is necessary to introduce him to his job
situation, his associates in the job and the overall policies of the company.

In other words, it is a welcoming process-the idea is to welcome a newcomer, make him feel at home
and generate in him a feeling that his job, even though small, is meaningful and has significant
importance as part of the total organisation.

In the words of John M. Ivancevich, “Orientation orients, directs, and guides employees to understand
the work, firm, colleagues, and mission. It introduces new employees to the organisation, and to his
new tasks, managers, and work groups.”

Orientation is one component of the new employee socialization process. It is a process through which
a new employee is introduced to the organisation. The new employee is handed over a rulebook,
company booklets, policy manuals, progress reports and documents containing company information
which are informational in nature. It is responsibility of the human resource department to execute the
orientation programme.

Human Resource Management 38

Objectives of Induction

An induction process properly designed should serve the following objectives :

1) Introduce the new employee and the organisation to each other.

2) Create interest in his job and the company

3) Provide basic information about working arrangements

4) Make the new employee feel ‘at home’ in the new environment

5) Indicate the standards of performance and behaviour expected from him

6) Inform him about the training facilities

7) Reduce any misunderstanding about the job or the enterprise

8) Facilitate good employee relations

9) Assist the new employee to adjust to the company; and

10) Establish a favourable attitude about the company in the minds of the employee.

Induction Process

There is no specific model of induction process. Each industry develops its own procedure as per its
requirements. Generally, an induction procedure involves the following basic steps:

1. Reporting for duty before the concerned head of the department at a certain place.

2. The head of the department welcomes the new employee.

3. Introduction to the organizational head / branch head by the head of the department.

4. Organizational head/ Branch head introduces him to the important employees

5. Supervisor concerned introduces him to his co-workers in that section.

6. Providing information about the duties, responsibilities, rights, facilities, welfare measures, etc.

7. Supervisor clarifies the doubts of the new employee about the work.

Formal and Informal Induction Programme

1. Formal Induction Programme: Formal induction is a planned attempt to introduce new

employees to the organization, job and the working environment. This induction type may consume
more time of the superiors to learn and deliver the new employees needs at the beginning. But this
may create new employees less number of errors at the working period and good coordination among
all the parties. At this type of program, new employee may get know, who are the most

Human Resource Management 40

 experienced person to have the solution of the particular problem new employee might has. At the
very beginning new employees are having lots of questions as same as kids at small ages. That is full
normal thing and common thing, because the new employee needs to get know all the things, he may
actually needs or not. CEO, GM, Section/Department Heads, Senior Managers, and Line Managers
may involve in to the formal induction programme. This will deliver fundamental things that new
employees need to know. Advantage of the formal induction program is organization will have the
better chance to win the new employees’ loyalty at the very beginning. And also new employee will
have the chance to carry his/her works clearly, with less numbers of errors. Also, new employee will
fit to the organizational culture and the work group easily, and strongly.

2. Informal Induction Programme: Informal induction is not planned and is ad hock. New
employees learn through trial and error method. They get familiar with the work and work environment
by themselves. This induction type will make the stress on new employee at the very beginning, because
of his/her not knowing things at the operations. So in that case, new employee may leave the
organization at the beginning and then the organization may need to follow all the process of recruiting
and new employee to the organization. Also this method will create a large number of errors making
by new employee and then it may creates big losses to the organization. Those are the disadvantages
of informal induction program. The advantage of informal induction is, if the new employee survived,
then he/she may know the process by his/her experience, and the later on errors may minimize. But at
the beginning the vice verse thing of above advantage may creates loses, if the new employee unable
to survive at the organization. At the movements which employees couldn’t survive, there could be see
they are leaving organization at the beginning they have joined to it. So this will creates high labour
turn over too.

Placement

Placement is a process of assigning a specific job to each of the selected candidates. It involves
assigning a specific rank and responsibility to an individual. It implies matching the requirements of a
job with the qualifications of the candidate.

According to Pigors and Myers, “Placement consists in matching what the supervisor has reason
to think the new employee can do with what the job demands (job requirements), imposes (in strain,
working conditions, etc.), and offers (in the form of pay rate, interest, companionship with other,
promotional possibilities, etc.)” They further state that it is not easy to match all these factors for a new
worker who is still in many ways an unknown quantity. For this reason, the first placement usually
carries with it the status of probationer.

A few basic principles should be followed at the time of placement of an employee on the job.
These may be enumerated as below:

• The job should be offered to the man according to his qualifications. The placement should neither
be higher nor lower than the qualifications.

Human Resource Management 41

• While introducing the job to the new employee, an effort should be made to develop a sense of
loyalty and cooperation in him so that he may realise his responsibilities better towards the job and
the organisation.

• The employee should be made conversant with the working conditions prevailing in the industry
and all things relating to the job. He should also be made aware of the penalties if he commits a
wrong.
• Man should be placed on the job according to the requirements of the job. The job should not be
adjusted according to the qualifications or requirements of the man. Job first; man next, should be the
principle of placement.

• The placement should be ready before the joining date of the newly selected person.

• The placement in the initial period may be temporary as changes are likely after the completion of
training. The employee may be later transferred to the job where he can do better justice.

Significance of placement

The significances of placement are as follows: -

1. It improves employee morale.

2. It helps in reducing employee turnover.

3. It helps in reducing absenteeism.
4. It helps in reducing accident rates.
5. It avoids misfit between the candidate and the job.
6. It helps the candidate to work as per the predetermined objectives of the organization.

Human Resource Management 42

 PERFORMANCE APPRAISAL
Introduction
Performance appraisal or Performance evaluation is a method of evaluating the behaviour of
employees in a work place, normally including both the quantitative and qualitative aspect of job
performance. Performance here refers to the degree of accomplishment of the tasks that makeup an
individual’s job. It indicates how well an individual fulfilling the job demands. Performance is
measured in terms of results. Thus, Performance appraisal is the process of assessing the performance
or progress of an employee, or a group of employees on th given job, as well as his potential for future
development. Thus, performance appraisal comprises all formal procedures used in organisations to
evaluate contributions, personality, and potential of individual employees.
According to Edwin Flippo, “Performance appraisal is the systematic, periodic and an impartial
rating of an employee‘s excellence in matters pertaining to his present job and his potential for a better
job.”
According to Cummings, “The overall objective of performance appraisal is to improve the
efficiency of an enterprise by attempting to mobilise the best possible efforts from individuals
employed in it. Such appraisals achieve four objectives including the salary reviews the development
and training of individuals, planning job rotation and assistance promotions.”
Characteristics of Performance Appraisal
1. A Process: Performance appraisal is not a one-act play. It is rather a process that involves
several acts or steps.
2. Systematic Assessment: Performance appraisal is a systematic assessment of an
employee‘s strengths and weakness in the context of the given job.
3. Main Objective: The main objective of it is to know how well an employee is going for the
organisation and what needs to be improved in him.
4. Scientific Evaluation: It is an objective, unbiased and scientific evaluation through similar
measure and procedures for all employees in a formal manner.
5. Periodic Evaluation : Although informal appraisals tend to take place in an unscheduled
manner (on continuous) basis with the enterprises a supervisors evaluate their subordinates work and
as subordinates appraise each other rand supervisors on a daily basis.
6. Continuous Process: In addition to being periodic performance usually is an ongoing
process.
Purposes of Performance Appraisal
The following are the main purposes of performance appraisal:
1. Appraisal Procedure: It provides a common and unified measure of performance appraisal,
so that all employees are evaluated in the same manner. It gives an in discriminatory rating of all the
employees.
2. Decision Making: Performance appraisal of the employees is extremely useful in the
decision making process of the organization. In selection, training, promotion, pay increment and in
transfer, performance appraisal is very useful tool.

Human Resource Management 43

 3. Work Performance Records: Performance appraisal gives us a complete information in the
form of records regarding every employee. In the case of industrial disputes even arbitrator accepts
these records in the course of grievance handling procedure.
4. Employees Development: Performance appraisal guides the employees in removing their
defects and improving their working. The weaknesses of the employee recorded in the performance
appraisal provide the basis for an individual development programme. If properly recorded and used,
the performance appraisal gives the fair opportunities to employees to correct and rectify their mistakes.
5. Enables Supervisors to be More Alert and Competent : Performance appraisal enables
supervisor to be more alert and competent and to improve the quality of supervision by giving him a
complete record of employee's performance. He can guide an employee, where he is prone to commit
mistakes.
6. Merit Rating : Merit rating is another name of performance appraisal, it gives supervisors a
more effective tool for rating their personnel. It enables them to make more careful analysis of
employee's performance and make them more productive and useful.
7. Improves Employer Employee Relations : Performance appraisal is not only a useful guide
for the supervisors and employees but it improves the employer-employee relations by creating a more
conductive and amicable atmosphere in the organization. It also stimulates free exchange of thoughts
and ideas between the supervisor and his men. In this way performance appraisal bridges the emotional
gap between the employer and employee by bringing them more close and by reducing man-to-man
differences in the organization.
Uses of Performance Appraisal
Performance appraisal helps the employees in Self-improvement and Self-development. It helps
the management in taking decisions about Placement, Promotions, Transfer, Training and
Development, etc. It helps to achieve individual and organisational goals. It is useful to the employees
and the organisation. Therefore, Performance Appraisal should be conducted objectively from time to
time.
1. Help in Deciding Promotion: It is in the best interest of the management to promote the
employees to the positions where they can most effectively use their abilities. A well-organised,
development and administered performance appraisal programme may help the management in
determining whether an individual should be considered for promotion.
2. Help in Personnel Actions: Personnel actions such as lay-offs, demotions, transfers and
discharges etc. may be justified only if they are based on performance appraisal.
3. Help in Wage and Salary Administration: The wage increase given to some employees on
the basis of their performance may be justified by the performance appraisal results.
4. Help in Training and Development: An appropriate system of performance appraisal helps
the management in devising training and development programmes and in identifying the areas of skill
or knowledge in which several employees are not at par with the job requirements.
5. Aid to Personnel Research: Performance appraisal helps in conducting research in the field
of personnel management. Theories in personnel field are the outcome of efforts to find out the cause
and effect relationship between personnel and their performance. By studying the various

Human Resource Management 44

problems which are faced by the performance appraiser, new areas of research may be developed in
personnel field.
6. Help in Self Evaluation: Performance appraisal helps the employee in another way also.
Every employee is anxious to know his performance on the job and his potentials for higher jobs so as
to bring himself to the level of that position.
Essentials of an Effective Performance Appraisal System
1. Mutual Trust: The existence of an atmosphere of confidence and trust so that both supervisor and
employee may discuss matters frankly and offer suggestions which may be beneficial for the
organisation and for an improvement of the employee. An atmosphere of mutual trust and confidence
should be created in the organisation before introducing the appraisal system.
2. Clear Objectives: The objectives and uses of performance appraisal should be made clear and
specific. The objectives should be relevant, timely and open.
3. Standardisation: Well-defined performance factors and criteria should be developed. These factors
as well as appraisal form, procedures and techniques should be standardised. It will help to ensure
uniformity and comparison of ratings.
4. Training : Evaluators should be given training in philosophy and techniques of appraisal. They
should be provided with knowledge and skills in documenting appraisals, conducting post appraisal
interviews, rating errors, etc.
5. Job Relatedness: The evaluators should focus attention on job-related behaviour and performance
of employees. The results of performance rather than personality traits should be given due weight.
6. Strength and Weaknesses: The raters should be required to justify their ratings. The supervisor
should try to analyse the strength and weaknesses of an employee and advise him on correcting die
weakness.
7. Individual Differences: While designing the appraisal system, individual differences in
organisations should be recognised. Organisations differ in terms of size, nature, needs and
environment. Therefore, the appraisal system should be tailor-made for the particular organisation.
8. Feedback and Participation : Arrangements should be made to communicate the ratings to both
the employees and the raters. The employees should actively participate in managing performance and
in the ongoing process of evaluation. The superior should play the role of coach and counseller.
9. Post Appraisal Interview: A post-appraisal interview should be arranged so that employees may
be supplied with feedback and the organisation may know the difficulties under which employees work,
so that their training needs may be discovered.
10. Review and Appeal : A mechanism for review of ratings should be provided. Which particular
technique is to be adopted for appraisal should be governed by such factors as the size, financial
resources, philosophy‘and objectives of an organisation.
Process of Performance Appraisal
Various steps in appraising performance of employees are as follows:
1. Establishing Performance Standard: The process of evaluation begins with the establishment of
Performance Standards. While designing a job and formulating a job description, performance
standards are usually developed for the position. This standard should be very clear and objective
enough to be understood and measured.

Human Resource Management 45

2. Communicating Performance Expectations to Employees: The next important step is to
communicate the aforesaid standards to the concerned employees. Their jobs and jobs-related
behaviour should be clearly explained to them.
3. Measuring Actual Performance: The third step is the measurement of actual performance. To
determine what actual performance is, it is necessary to acquire information about it we should be
concerned with how we measure and what we measure. Four sources of information are frequently
used to measure actual performance: personal observation, statistical reports, oral reports and written
reports.
4. Comparing Actual Performance with Standards: The next step is comparison of actual
performance with the standards. By doing so the potentiality for growth and advancement of an
employee can be appraised and judged. Efforts are made to find out deviations between standard
performance and actual performance.
5. Discussing the Appraisal with the Employee: After comparing actual performance with
standards, the next step is to discuss periodically the appraisal with the employee. Under this discussion
good points, weak points, and difficulties are indicated and discussed so that performance is improved.
6. Initiating Corrective Action: The final step is the initiation of corrective action whenever
necessary. Immediate corrective action can be of two types. One is immediate and deals predominantly
with symptoms. The other is basic and delves into causes.
Methods or Techniques of Performance Appraisal
Several methods and techniques are used for evaluating employee performance. They may be classified
into two broad categories. They are Traditional Methods and Modern Methods.
Traditional Methods:
1. Ranking Method: Ranking method is the oldest and simplest method of rating. Here, each
employee is compared with all others performing the same job and then he is given a particular
rank i.e. First Rank, Second Rank etc. This method ranks all employees but it does not tell us
the degree or extent of superiority. In this method, the performance of individual employee is
not compared with the standard performance. Here, the best is given first rank and poorest gets
the last rank.
2. Paired Comparison: In method is comparatively simpler as compared to ranking method. In
this method, the evaluator ranks employees by comparing one employee with all other
employees in the group. The rater is given slips where, each slip has a pair of names, the rater
puts a tick mark next those employee whom he considers to be the better of the two. This
employee is compared number of times so as to determine the final ranking.
3. Grading Method: Under this method of performance appraisal, different grades are developed
for evaluating the ability of different employees and then the employees are placed in these
grades. These grades may be as follows: (i) Excellent; (ii) very good; (iii) Good; (iv) Average;
(v) Bad; (vi) Worst.
4. Man-to-Man Comparison Method: This method was first used in USA army during the 1st
World War. Under this method, few factors are selected for analysis purposes. These factors
are: leadership, dependability and initiative. After that a scale is designed by the rate for each
factor. A scale of person is also developed for each selected factor. Each person to be rated is

Human Resource Management 50

 compared with the person in the scale, and certain scores for each factor are awarded to him/her.
In other words, instead of comparing a whole man to a whole man personnel are compared to
the key man in respect of one factor at a time. We can use this method in job evaluation. This
method is also known as the Factor Comparison Method.
5. Graphic Rating Scale Method: This is the very popular, traditional method of performance
appraisal. Under this method, scales are established for a number of fairly specific factors. A
printed form is supplied to the rater. The form contains a number of factors to be rated.
Employee characteristics and contributions include qualities like quality of work, dependability,
creative ability and so on. These traits are then evaluated on a continuous scale, where the rater
places a mark somewhere along the scale. The scores are tabulated and a comparison of scores
among the different individuals is made. These scores indicate the work of every individual.
6. Check-list Method: The main reason for using this method is to reduce the burden of evaluator.
In this method of evaluation the evaluator is provided with the appraisal report which consist of
series of questions which is related to the appraise. Such questions are prepared in a manner
that reflects the behavior of the concerned appraise.
7. Critical Incidents Method: This method is very useful for finding out those employees who
have the highest potential to work in a critical situation. Such an incidence is very important for
organization as they get a sense, how a supervisor has handled a situation in the case of sudden
trouble in an organization, which gives an idea about his leadership qualities and handling of
situation. It is also said to be a continuous appraisal method where employees are appraised
continuously by keeping in mind the critical situation. In this method, only the case of sudden
trouble and behaviour associated with these incidents or trouble are taken for evaluation.
8. Essay Method: In this method, the rater writes a detailed description on an employee’s
characteristics and behavior, Knowledge about organizational policies, procedures and rules,
Knowledge about the job Training and development needs of the employee, strengths,
weakness, past performance, potential and suggestions for improvement. It is said to be the
encouraging and simple method to use. It does not need difficult formats and specific training
to complete it.
Modern Methods:
1. Management by Objective (MBO)
It was Peter F. Drucker who first gave the concept of MBO to the world in 1954 when his book The
Practice of Management was first published. Management by objective can be described as, a process
whereby the superior and subordinate managers of an organisation jointly identify its common goals,
define each individual‘s major areas of responsibility in terms of results expected of him and use
these measures as guides for operating the unit and assessing the contribution of each of its members.
Essential Characteristics of MBO:
1. A Philosophy: Management by objective is a philosophy or a system, and not merely a technique.
2. Participative Goal Setting: It emphasises participative goal setting.
3. Clearly Define Individual Responsibilities: Management by objective (MBO) clearly defines
each individual‘s responsibilities in terms of results.

Human Resource Management 51

 4. Accomplishment of Goal: It focuses a tension on what goal must be accomplished rather than on
how it is to be accomplished (method).
5. Objective Need into Personal Goal: MBO converts objective need into personal goals at every
level in the organisation.
The Process of MBO:
1. Establishment of Goal: The first step is to establish the goals of each subordinate. In some
organisations, superiors and subordinates work together to establish goals. While in other organisation,
superiors establish goals for subordinates. The goals typically refer to the desired outcome to be
achieved. Thereafter these goals can be used to evaluate employee performance.
2. Setting the Performance Standard: The second step involves setting the performance standard for
the subordinates in a previously arranged time period. As subordinates perform, they know fairly well
what there is to do, what has been done, and what remains to be done.
3. Comparison of Actual Goals with the Standard Goals : In the third step the actual level goal
attainment is compared with the standard goals. The evaluator explores reasons of the goals that were
not met and for the goals that were exceeded. This step helps to determine possible training needs.
4. Establishing New Goals, New Strategies: The final step involves establishing new goals and,
possibly, new strategies for goals not previously attained. At this point, subordinate and superior
involvement in goal-setting may change. Subordinates who successfully reach the established goals
may be allowed to participate more in the goal-setting process next time.
Advantages of MBO:
1. Balanced Focus on Objectives: MBO forces the management to set objectives with balanced stress
on key result area. Thus, crisis conditions are avoided to take place in the organisation.
2. Better Managing Things: MBO forces managers to think about planning for results, rather than
merely planning activates or work. Managers are required to ensure that the targets are realistic and
needed resources are made available to subordinates to achieve the targets.
3. Better Organising : The positions in the enterprise can be built around the key result areas.
Managers are required to clarify organisational roles and structures hence better organising.
4. MBO Reduces Role Conflict and Ambiguity : Role conflict exists when a person is faced with
conflicting demands from two or more supervisors; and role ambiguity exits when a person is uncertain
as to how he will be evaluated, or what he has to achieve. Since MBO aims at providing clear targets
and their order or priority, it reduces both these situations.
5. It Provide more Objective Appraisal Criteria : The targets emerge from the MBO process
provide a sound set of criteria for evaluating the manager‘s performance.
6. More Motivation : MBO helps and increases employee motivation because it relates overall goals
to the individual‘s goals : and help to increase an employee’s understanding or where the organisation
is and where it is heading.
7. Managers Complete with Themselves : Managers are more likely to complete with themselves
than with other managers. The kind of evaluation can reduce internal conflicts that often arise when
managers compete with each other to obtain scarce resources.
8. Develop Personal Leadership : MBO helps the individual manager to develop personal leadership,
especially the skills of listening, planning, controlling, motivating, counselling and

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evaluating. This approach to managing instills a personal commitment to respond positively to the
organisation‘s major concerns as well as to the development of human resources.
9. MBO Identifies Problem Early : It identifies problems better and early. Frequent performance
review sessions makes this possible.
10. Identifies Performance Deficiency : MBO identifies performance deficiencies and enables the
management and the employee to set individualised self improvement goals and thus proves effective
in training and development of people.
Disadvantages of MBO:
1. Unfavourable Attitude of Managers : Some executives have an attitude that the regular attention
required of them by Management by objectives system, drawn heavily on their busy time-schedule and
is not consistent with their roles. They feel that it is not so effective a way as some other approaches.
2. Difficult to Apply MBO Concepts : Those executives who have been involved very often find it
difficult to apply MBO concepts to their own work habits. They find it hard to think about the results
of work rather than the work itself.
3. Heavy Paper Work : MBO involves a huge amount of news letter, instruction booklets, training
manuals, questionnaires, performance data review and appraisals report to be prepared by the superior
and subordinates. Thus MBO is said to have created one more paper mill in organisation added to the
already existing large amount of paper work.
4. Tug of War : There is sometimes tug of war in which the subordinates try to set the lowest targets
possible and the supervisors the highest.
5. Time Consuming : MBO is time consuming especially in the early phases of its introduction when
employees are unfamiliar with its process.
2. Assessment Centres:
It is a method which was first implemented in German Army in 1930. With the passage of time
industrial houses and business started using this method. This is a system of assessment where
individual employee is assessed by many experts by using different technique of performance appraisal.
The techniques which may be used are role playing, case studies, simulation exercises, transactional
analysis etc.
In this method employees from different departments are brought together for an assignment which
they are supposed to perform in a group, as if they are working for a higher post or promoted. Each
employee is ranked by the observer on the basis of merit .The basic purpose behind assessment is to
recognize whether a particular employee can be promoted, or is there any need for training or
development. This
method has certain advantages such as it helps the observer in making correct decision in terms of
which employee has the capability of getting promoted, but it has certain disadvantages also it is costly
and time consuming, discourages the poor performers etc.
3. 360 Degree Performance Appraisals:
This method is also known as ‘multi-rater feedback’, it is the appraisal in a wider perspective where
the comment about the employees’ performance comes from all the possible sources that are directly
or indirectly related with the employee on his job. In 360 degree performance appraisal an employee

Human Resource Management 53

can be appraised by his peers, managers (i.e. superior), subordinates, team members, customers,
suppliers/ vendors - anyone who comes into direct or indirect contact with the employee and can
provide necessary information or feedback regarding performance of the employee the “on-the-job”.
The four major component of 360 degree performance appraisal are:
1. Employees Self Appraisal
2. Appraisal by Superior
3. Appraisal by Subordinate
4. Peer Appraisal.
Employee self appraisal gives an option to the employee to know his own strengths and
weaknesses, his achievements, and judge his own performance. Appraisal by superior forms the
traditional part of the 360 degree performance appraisal where the employees’ responsibilities and
actual performance is judged by
the superior. Appraisal by subordinate gives a chance to evaluate the employee on the basis of
communication and motivating abilities, superior’s ability to delegate the work, leadership qualities
etc. It is also known as internal customers; the correct opinion given by peers can aid to find employees’
who are co-operative, employees who ready to work in a team and understanding towards others.
4. Cost Accounting Method:
In this method performance of an employee is evaluated on the basis of monetary returns the employee
gives to his or her organization. A relationship is recognized between the cost included in keeping the
employee in an organization and the benefit the organization gets from him or her. The evaluation is
based on the established relationship between the cost and the benefit. The following factors are
considered while evaluating an employee’s performance:
1. Interpersonal relationship with others.
2. Quality of product produced or service given to the organization.
3. Wastage, damage, accidents caused by the employee.
4. Average value of production or service by an employee.
5. Overhead cost incurred.
5. Behaviorally Anchored Rating Scales (BARS):
This method is a combination of traditional rating scales and critical incidents methods. It consists of
preset critical areas of job performance or sets of behavioural statements which describes the important
job performance qualities as good or bad (for e.g. the qualities like inter personal relationships,
flexibility and consistency, job knowledge etc). These statements are developed from critical incidents.
These behavioral examples are then again translated into appropriate performance dimensions. Those
that are selected into the dimension are retained. The final groups of behavior incidents are then scaled
numerically to a level of performance that is perceived to represent. A rater must indicate which
behavior on each scale best describes an employee’s performance. The results of the above processes
are behavioural descriptions, such as anticipate, plan, executes, solves immediate problems, carries out
orders, and handles urgent situation situations. This method has following advantages: a) It reduces
rating errors) Behavior is assessed over traits. c) It gives an idea about the behavior to the employee
and the rater about which behaviors bring good Performance and which bring bad performance.

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Limitations of Performance Appraisal
The main limitations of Performance Appraisal are explained below :
1. Time Consuming : Performance appraisal is a time taking affair. It is a very lengthy process under
which different forms are to be filled in and various observations are required to be noted in a careful
manner.
2. Lack of Reliability : Reliability implies stability and consistency in the measurement. Lack of
consistency over time and among different raters may reduce the reliability of performance appraisal.
3. Incompetence : Raters may fail to evaluate performance accurately due to lack of knowledge and
experience. Post appraisal interview is often handled ineffectively.
4. No Uniform Standards : The standards used for appraisal purpose are not uniform within the same
organisation. This makes the rating unscientific. Similarly, the rating is done on the basis of an overall
impression, which is not proper.
5. Absence of Effective Participation of Employees : In performance appraisal effective
participation of concerned employee is essential. In many methods of appraisal he is given a passive
role. He is evaluated but his participation or self evaluation is rather absent.
6. Resistance of Employees to Appraisal : Employees oppose the system as they feel that the system
is only for showing their defects and for punishing them. The managers resist the system as they are
not willing to criticise their subordinates or have no capacity to guide them for self improvement or self
development.
7. Paperwork : Some supervisors feel that performance appraisal is paperwork. They make such
complaints because many a times, performance appraisal reports are found only in the files rather than
rendering any practical use.
8. Fear of Spoiling Relations : Performance appraisals may also affect superior-subordinate relations.
As appraisal makes the superior more of a judge rather than a coach, the subordinate may look upon
the superior with a feeling of a suspicion and mistrust.
9. Stereotyping : This implies forming a mental picture of a person on the basis of his age, sex, caste
or religion. It results in an over-simplified view and blurs the assessment of job performance.
10. Negative Approach : Performance appraisal loses most of its value when the focus of
management is on punishment rather than on development of employees. 11. Multiple Objectives :
Raters may get confused due to two many objectives or unclear objective of performance appraisal.
12. Resistance : Trade unions may resist performance appraisal on the ground that it involves
discrimination among its members. Negative ratings may affect interpersonal relations and industrial
relations particularly when employees/unions do not have faith in the system of performance appraisal.
13. Halo Effect: Generally, there is the presence of a ‘halo‘effect which leads to a tendency to rate
the same individual first, which once have stood first.
14. Individual Differences: Some people are more distinct while some are very liberal in assigning
the factors, points or number to the employees. They are unable to maintain a fair distinction between
two individuals. It also nullifies the utility of this system.

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15. Unconfirmed: Sometimes the results of performance appraisals are not confirmed by other
techniques of motivation, incentive wages plans and so on. Factors are introduced in the managerial
appraisal because of a fact or bias in the person concerned conducting the appraisal.

Human Resource Management 56

 COMPENSATION MANAGEMENT

Employees’ compensation is one of the major determinants of employee satisfaction in an

organization. The compensation policy and the reward system of an organization are viewed by the
employee as a indicators of the management’s attitude and concern for them. Hence, it very important
for the management to design and implement its compensation system with utmost care and tact. A
good wage and salary administration should be able to attract and retain employees, give them fair deal,
keep the organization competitive and motivate employees to perform their best.
Meaning of Compensation
In layman’s language the word ‘compensation’ means something, such as money, given or
received as payment for service. The word compensation may be defined as money received in the
performance of work, plus the many kinds of benefits and services that organization provides their
employee. It refers to wide range of financial and non-financial rewards to employee for their service
rendered to the organization. It is paid in the form of wages, salaries , special allowance and employee
benefits such as paid vacation, insurance, maternity leaves, free travel facility , retirement benefits etc.
According to Wendell French,” Compensation is a comprehensive term which includes
wages, salaries and all other allowance and benefits.”
Wages are the remuneration paid for skilled, semi-skilled and unskilled operative workforce.
Salary is the remuneration of those employees who provides mental labour to the employer such as
supervisor, office staff, executive etc wages are paid on daily or hourly basis where as salary is paid on
monthly basis.
Objectives of Compensation Planning
The basic purpose or objective of establishing sound compensation is to establish and maintain
an equitable rewards system. The other aim is the establishment and maintenance of an equitable
compensation structure i.e an optimal balancing of conflicting personnel interest so that the satisfaction
of employees and employers is maximised and conflicts minimized, the compensation management is
concerned with the financial aspect of employees need, motivation and rewards.
A sound compensation structure tries to achieve these objectives:
• To attract manpower in a competitive market.
• To control wages and salaries and labour costs by determining rate change and
frequency of increment.
• To maintain satisfaction of employees by exhibiting that remuneration is fair
adequate and equitable.
• To induce and improved performance, money is an effective motivator.

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a) To Employees:
i. Employees are paid according to requirement of their jobs i.e highly skilled jobs are paid more
compensation than low skilled jobs. This eliminates inequalities.
ii. The chances of favouritism are minimised.
iii. Jobs sequence and lines of promotion are established wherever they are applicable.
iv. Employee’s moral and motivation are increased because of the sound compensation structure.
b) To Employers:
i. They can systematically plan for and control the turnover in the organization.
ii. A sound compensation structure reduces the likelihood of friction and grievance over
remunerations.
iii. It enhance an employee morale and motivation because adequate and fairly administrative
incentives are basis to his wants and need.
iv. It attracts qualified employees by ensuring and adequate payment for all the jobs.
v. In dealing with a trade union, they can explain the basis of their wages programme because it is
based upon a systematic analysis of jobs and wages facts.
Principles of Wages and Salary Administration
Since the issue of wage and salary determination has always enjoying the major consideration
for any organization, it should be develop and maintain based on sound principles , some of them are
narrated below, attempt should be made to incorporate them as far as possible while designing the
compensation system.
1) There should be a definite plan and system to ensure that differences in pay for jobs are based upon
variations in job requirements, means maintaining equity in the distribution of wages and salaries in
the organization.
2) Maintaining competitiveness in the wage market means the general level of wage and salary
should be reasonably in line with that prevailing in the market.
3) Matching employees’ expectations and it should avoid unjustified discrimination by providing
equal pay for equal work.
4) Reinforcing positive employee behavior and contribution to the organization, differences in the
compensation package should be based on contribution, productivity, job performance, achievement
etc.
5) Devising a system that is the most efficient for the organization, as far as possible it must eliminate
any discrepancies or exploitation of the employees.
6) The compensation system should formulate and define rules and regulations for determining,
changing, adjusting wages in the organization.

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7) The compensation package must ensure fairness, should maintain harmonious relationship between
the employee and employer.
8) Compensation system should be flexible enough so that future changes can be incorporated.
9) The wage and salary administration should take care of and comply all the rules and regulations laid
down by the legislator for protecting the employees’ interest.
10) Optimization of management and employee interests.
Essentials of Sound Wage and Salary Administration
Sound Wage and salary administration demands some essentials to satisfy, so that one who is
shoulder with the responsibility of designing administrative aspects with this regards, may come out
with efficient system for managing the issues related with it. Some of the pre requisites for the sound
compensation system are:
I. Rational Job Analysis: It is an important exercise with regards to each category of jobs. It reveals
detailed aspects of the job, like duties, responsibilities associated with the performance, performance
standards as a fair parameter for evaluation of the performance. It gives fair idea about job specification
i.e. qualification, experience, skill and other essential requirements that job performer must satisfy.
Thus rational job analysis always put policy decider in a better condition to lay down appropriate
content in policy design.
II. Proper Job Evaluation: Job evaluation is a systematic process of analyzing and evaluating jobs to
determine the relative worth of job in an organization. It forms the basis for designing the sound
compensation system in an organization. Since wage and salary administration and the perceived
fairness of approach adopted under it have a immense influence on employee morale, motivation and
satisfaction, proper job evaluation exercise demands sensible consideration.
III. In Depth Knowledge About an Organization and Market Factors: Apart from job evaluation,
the various other factors that determine the administrative aspects for wage and salary administration
are the size and structure of the organization and the industry in which it operates, the strength of
employees union, position of a person and his importance to the organization, demand and supply for
particular skill sets in the industry, organizational ability and capacity to pay and its economic condition
like profitability, and legislative aspects related with wage determination. Sound system for
compensation management demands detail knowledge about all these factors in order to its sound
framework and operation in the organization.
IV. Clarity of Objectives or Purposes of Wage and Salary Administration : Last but not the least
in terms of its significance, in order to have effective and efficient administration of compensation as
an area in the organization, one must have accurate clarity about the purposes that it may tries to satisfy
through policy decisions .objectives may be attracting talented resources; retaining and motivating
employees; financial management of an organization; satisfying legal requirement; and many more.
Sometimes these objectives are conflicting in nature also. So it is very essential that one, who is going
to carry out this responsibility of designing the compensation system in the organization, should have
reasonable clarity for objectives to be satisfied with the design.
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Factors affecting Wage and Salary Administration
The term employee’s remuneration includes both wages and salaries. Wages are commonly
considered as the price of labour paid to the workers for the services rendered to the organization
employing them. Where quantum of services rendered is difficult to measure the payment is called
salary. Normally, payment made to workers is referred to as wages, and remuneration paid periodically
to persons whose output cannot be measured such as clerical, supervisory and managerial staff, is called
salary. Wage and salary administration is affected by so many factors and most of them are
uncontrollable in nature.
Major factors affecting wage and salary administration are discussed as under:
1) Demand and Supply: Demand for and supply of labor and its availability will have great influence
on the determination of wage rates. If there is a shortage of labor, the wages demanded will be high. If,
on the other hand labor is plentiful, workers will be too willing to work at low rates of wages. However,
wages cannot be regarded today merely a price for services rendered. In recent years therefore, both
management and labor has been becoming less and less dependent on this factor as a basic factor. An
employee will not hesitate to accept lower wages if he has opportunities
for growth in the organization. Today, the money which is paid as compensation should enable a worker
to buy goods and services which will enable him and his family to live a better and fuller life and satisfy
his hierarchical needs.
2) Organization’s Ability to Pay: This is a major affecting factor in determining wage and salary
structure of an organization. Financial position and soundness of an organization can put it in a position
to offer attractive compensation package. Some of the reputed economically sound organizations are
offering good compensation package and thereby successful in obtaining and maintaining talented
workforce. Good compensation package helps in attracting and retaining quality talent in an
organization. Generally wages in most of the organization decide through collective bargaining and ,
organization’s ability and capacity to pay attractive wages depends upon over all financial soundness
and economic condition of an organization.
3) Prevailing Market Rate or “Going Wage Rate”: This is practically the major factor that induces
any organization to take it as a base while determining wage and salary structure for it. Prevailing
market rate is also known as ‘most comparable rate of wage’, and most popular method for wage rate
determination, especially for lower cadre positions. There are many reasons for an organization to pay
wages at a market rate like competition and a practice of ‘Brain Drain’ prevails in the market. Further
more certain laws framed laid down principal of’ minimum wages’, ‘equal wage for equal work’. In
addition to this trade unions are also prefer to bargain upon and in accordance with market rate of
wages.
4) Productivity: Productivity is measured in terms of output per man hour. It a result of several factors
such as technology, labour efforts, method of doing work, management contribution and support and
so on. However, productivity has always remained as base for wage differences since it a base which
is apparently justifiable and acceptable to all in the organization. Many a time this as base

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is not acceptable to many trade unions as it is very difficult to have accurate measurement and is has
always remain at a discretion of management policies.
5) Cost of Living: It is always expected that there has to be adjustment in pay rates in accordance with
prevailing cost of living. The changes in the cost of leaving affect purchasing power of the person.
Trade union also considers this as a base for collective bargaining on wage issues.
6) Trade Union’s Bargaining Power: Generally the mechanism for fixing of wages for majority of
workers is collective bargaining or negotiation, and collective bargaining and negotiations depends
upon the trade union’s strength. If there is a strong union operates in the organization, it may dictate its
terms on wage fixation and revision over a period of time and vice versa. The strength and power of
the trade union depends upon its membership, financial strength and leadership it may have, for its
functioning.
7) Job Requirements: From the organizational perspective appropriate job analysis and job
evaluation exercise is a base for the wage determination and revision. It is quite obvious also that wages
to be paid to the workers should be in accordance with the duties, responsibilities and the efforts likely
to be put for job performance. Wage or compensation package very in accordance with job description
and job specification.
8) Management Attitude: Attitude of employer or management towers the working community of the
organization does influence in wage determination and revision at an appropriate time. Some reputed
and professional organization does prefer to pay wage in accordance with their reputation or prestige
of an organization in the market. They may give participation to workers in sharing profits. On the
other hand conservative organizations do not prefer to go for such profit sharing.
9) Psychological and Social Factors: Psychologically person perceive wages and compensation
package as sole parameter for success or failure in the life. Compensation package plays significant
role in the employees pride, moral, motivation and psychological engagement and involvement in the
work. Therefore such variable should not be overlooked by the organization while determining
wage and salary structure. Socially and ethically also people feels that “equal work should carry equal
pay “ i.e. wage should be in accordance with efforts and workers should not be felt like being cheated.
Compensation policy should not make any discrimination on the basis of caste, color, Sex or region,
and must try to satisfy condition for fairness equity and justice.
10) Legislative Considerations: Legislative provisions do provide protection to the working
community by fixing bottom line for wage payments. Many a time it was found that the bargaining
power of the workers was not strong enough to ensure fair wages. Consequently, the state legislative
frame work stepped in to regulate wages and provide for certain benefits to the workers. Legislation
like Minimum Wages Act, 1936, provides for statutory minimum wages to be prevails in the industrial
organization so that workers can satisfy their bare requirements and maintain their minimum living
standard. These aspects are also considered while deciding compensation policy for an organization.

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Methods of Wage Payments
Basically there are two methods for wage payments, viz. (1) Time rate wage system; and (2)
Piece rate wage system. The wage paid to labor has to perform important functions in the economic
system. It should be such as to make the worker capable and willing to be efficient and involved in the
job. There should be link, wherever feasible between emoluments and productivity; and fair parity
between wage differentials and skill differential. The plan should act as an incentive to improve the
efficiency, and it should attract the worker wherever demanded or needed. Whatever may be the method
of wage payment but the wage plan should contain following ingredients:
• It should be simple and understandable
• It should be capable of easy computation
• It should be capable of motivating the employees
• It should be attractive enough for new talent in the organization.
• It should be fair, just and stable to all the employees.
The fundamental plans of wage payment are:
I. Time Rate Wage System: It is the oldest and the simplest form of wage fixing. Under this system,
workers are paid according to the work done during a certain period of time at a rate of per hour, per
day, per week, per fortnight, or per month or any other fixed period of time. According to the section4
of the Payments of Wages Act,1936, not more than one month must elapse between two wage period.
Time wage system adopts time as the basis of worker remuneration without taking in to account the
units produced. The worker is guaranteed a specified sum of money for a fixed period of his time taking
no account of the quality or quantity of the work done.
Merits:
• It is simple and understandable and easy for calculation of wages, since wages under this system is
equal towage per hour* numbers of hours worked by an employee.
• There is no time limit for completion of job, workman are not in hurry to finish it and this may mean
that they may pay p enough attention to the quality of work, effective handling of machinery and
utilization of resources in an optimum manner.
• All workers are given same treatment in terms of equal wage payment, so grievances, ill will;
jealousy can be avoided among them.
• Time rate system provides regular and stable income to workers, so they can adjust and manage
their budget accordingly.
• It requires less administrative attention as this system provide good faith and mutual understanding
and trust between employer and employee.

Demerits:
• It does not take in to account the ability and capacity of the workers so the skilful and more
capable workers who have higher production efficiency will demoralize.

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• Time rate system is unrelated to the productivity and does not provide extra motivation for extra
efforts by the workers.
• The labor charges for a particular job do not remain constant. This put the management in a difficult
position in the matter of quoting rates for a particular piece of work.
• There is a possibility of systematic evasion of work by the workers, since there is no specific target
or demand for specific quantity of work by the management.
• Time rate system does not ask for maintaining individual workers record, it becomes difficult for
the employer to determine his relative efficiency for the purpose of performance evaluation for future
promotion or rewards. Thus it does injustice to the outstanding employees.
Suitability:
Time rate system is suitable when the output contributed by the worker is difficult to measure and
cannot be recorded in an individual basis. It is also suitable when by cultivating mutual trust and
confidence and by giving fair and equal treatment to all the employees, management can get the work
done in an appropriate manner.
II. Piece Rate Wage System:
Under this system, workers are paid according to the amount of work done or numbers of units
produced or completed, the rate of each unit being settled in advance, irrespective of the time taken to
do the work. This does not mean that the workers can take any time to complete a job because of his
performance far exceeds the time which his employer expects he would take, the overhead charges for
each unit of article will increase. There is an indirect implication that a worker should not take more
than average time.
Merits:
• The main advantage of this system is recognition of merit, as efficient is rewarded, It is therefore
more equitable then time rate system.
• It pays workers as per their efficiencies, ability, capacity or performance, so it gives direct stimulus
and motivation to the employees for extra efforts, which may result into more productivity.
• It requires less managerial supervision as total remuneration depends upon units produced, and not
on time spent in an organization.
• Being interested in continuity of his work, a workman is likely to take greater care to prevent
breakdown in the machinery or in the work shop. It is a gain to the management since it reduces
maintenance expenditure in an organization.
• As the direct labor cost per unit of production remains fixed and constant, calculation of cost while
filling tenders and estimates becomes easier.
• It results in to not only increase in the output and wages ,but the methods of production too are also
improved, as workers demand material and tools free from defects and machinery in perfect operating
condition.

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Demerits:
• If rates of wages are not scientifically fixed and acceptable to the workers, would result into workers
exploitation and may prove counterproductive.
• As workers are interested in completion of the job with a greatest speed, may damage the machinery,
quality of output or may increase rate of hazards in an organization.
• Trade unions generally do not like this system of wage payment; they may not have full support and
acceptance. It may be the major issue for industrial dispute.
Suitability:
It can be introduced generally in jobs of a repetitive nature, when task can be easily measured,
inspected and counted. It is practically suitable for standardized processes, and it appeals to skilled and
efficient workers who can increase their earnings by working to their best capacity.
III. Balance and Debt System:
This system combines time rate and piece rate. Under it a minimum weekly wage is guaranteed for a
full weeks’ work, with an alternative piece-rate determined by the rate fixed on the assumption that the
worker would put enough effort to earn his minimum wage. If the wages calculated on piece bases are
in excess of the time rate, the worker earns the excess. If the piece rate wages are less than the time-
rate earnings, he would still get weekly wage, but on the condition that he shall have to make good the
excess paid to him out of the subsequent wage he would earn. Suppose a worker is expected to complete
at least 10 pieces during the week in order to earn the minimum wage of rs.60, the piece rate has been
fixed at a rate of Rs.6 per unit. If the worker produces 12 units within the week, his earning will be
Rs.72. If on the other hand he produces only 9 units , he will still be paid Rs. 60 his minimum weekly
wage but as on the basis of piece rate his earning should amount to only Rs. 54, the sum of Rs. 6 paid
in excess will be debited to him to be deducted out of his subsequent earnings. Thus under this system
workers’ wages are determined, by both the number of hours he works and the pieces he produces. So
it a hybrid system producing the same benefits and limitations of both the time rate and piece rare
system.
Various Modes of Compensation
Various modes of compensation are as follows:
a) Wages and Salary- Wages represent hourly rates of pay and salary refers to monthly rate of pay
irrespective of the number of hours worked. They are subject to annual increments. They differ from
employee to employee and depend upon the nature of jobs, seniority and merit.
b) Incentives- These are also known as payment by results. These are paid in addition to wages and
salaries. Incentive depends upon productivity, sales, profit or cost reduction efforts. Incentive scheme
are of two types:
I ndividual incentive schemes.
Group incentive schemes.

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c) Fringe Benefits- These are given to employees in the form of benefits such as provident fund,
gratuity, medical care, hospitalization, accident relief, health insurance, canteen, uniform etc.
d) Non- Monetary Benefits- They include challenging job responsibilities, recognition of merit,
growth prospects, competent supervision, comfortable working condition, job sharing and flexi time.
Incentives
Incentives are monetary benefits paid to workmen in lieu of their outstanding performance.
Incentives vary from individual to individual and from period to period for the same individual. They
are universal and are paid in every sector. It works as motivational force to work for their performance
as incentive forms the part total remuneration. Incentives when added to salary increase the earning
thus increase the standard of living. The advantage of incentive payment are reduced supervision, better
utilisation of equipment, reduced scrap, reduced lost time, reduced absenteeism and turnover &
increased output.
According to Burack & Smith, “An incentive scheme is a plan or programmes to motivate
individual or group on performance. An incentive programme is most frequently built on monitory
rewards (incentive pay or monetary bonus), but may also include a variety of non monetary rewards or
prizes.”
Kinds of Incentives
Incentives can be classified under the following categories:
1. Individual and Organizational Incentives
2. Financial and Non-Financial Incentives
3. Positive and Negative Incentives
1) Individual and Organizational Incentives- According to L.G. Magginson, “Individual incentives
are the extra compensation paid to an individual for all production over a specified magnitude which
stems from his exercise of more than normal skill, effort or concentration when accomplished in a
predetermined way involving standard tools, facilities and materials.”
individual performance is measured to calculate incentive where as organizational or group
incentive involve cooperation among employees, management and union and purport to accomplish
broader objectives such as an organization-wide reduction in labour, material and supply costs,
strengthening of employee loyalty to company, harmonious management and decreased turnover and
absenteeism.
I) Individual Incentive System is of two types:
a) Time based System- It includes Halsey Plan, Rowan Plan, Emerson Plan and Bedeaux Plan
b) Production based System- it includes Taylor’s Differential Piece Rate System, Gantt’s Task and
Bonus Plan

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II) Group Incentive System is of following types
a) Scalon Plan
b) Priestman’s Plan
c) Co-Partnership Plan
d) Profit Sharing
Some important these plans of incentive wage payments are as follows:
Halsey Plan: Under this plan a standard time is fixed in advance for completing a work. Bonus is
rewarded to the worker who performs his work in less than the standard time and paid wages according
to the time wage system for the saved time.
The total earnings of the worker = wages for the actual time + bonus
Rowan Plan: Under this method minimum wages are guaranteed given to worker at the ordinary rate
for the time taken to complete the work. Bonus is that proportion of the wages of the time taken which
the time saved bears to the standard time allowed.
Incentive = Wages for actual time for completing the work + Bonus
Emerson Plan: Under this system, wages on the time basis are guaranteed even to those workers whose
output is below the standard. The workers who prove efficient are paid a bonus. For the purpose of
determining efficiency, either the standard output per unit of time is fixed, or the standard time for a
job is determined, and efficiency is determined on the basis of a comparison of actual performance
against the standard.
Bedeaux Plan: It provide comparable standards for all workers. The value of time saved is divided
both to the worker and his supervisor in the ratio of ¾ and ¼ respectively. A supervisor also helps a
worker in saving his time so he is also given some benefit in this method. The standard time for each
job is determined in terms of minutes which are called Bedeaux points or B’s. Each B represents one
minute through time and motion study. A worker is paid time wages up to standard B’s or 100%
performance. Bonus is paid when actual performance exceeds standard performance in terms of B’s.
Taylor’s Differential Piece Rate System : F.W. Taylor, founder of the scientific management evolved
this system of wage payment. Under this system, there is no guarantee of minimum wages. Standard
time and standard work is determined on the basis of time study. The main characteristics of this system
are that two rates of wage one lower and one higher are fixed. Those who fail in attaining the standard,
are paid at a lower rate and those exceeding the standard or just attaining the standard get higher rate.
Under this system, a serve penalty is imposed on the inefficient workers because they get the wages at
lower rates. The basic idea underlying in this scheme is to induce the worker at least to attain the
standard but at the same time if a worker is relatively less efficient, he will lose much. For example,
the standard is fixed at 40 units per day and the piece rate are 40 P. and 50 P. per unit. If a worker
produces 40 units or more in a day, he will get the wages at the rate of 50 P per unit and if he produces
39 units will get the wages at 40 paise per unit for the total output.

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Gantt’s Task and Bonus Plan - In this, a minimum wage is guaranteed. Minimum wage is given to
anybody, who completes the job in standard time. If the job is completed in less time, then there is a
hike in wage-rate. This hike varies between 25% to 50% of the standard rate.
Profit Sharing – It is a method of remuneration under which an employer pay his employees a share
in form of percentage from the net profits of an enterprise, in addition to regular ages at fixed intervals
of time.
2) Financial and Non-financial Incentives- Individual or group performance can be measured in
financial terms. It means that their performance is rewarded in money or cash as it has a great impact
on motivation as a symbol of accomplishment. These incentives form visible and tangible rewards
provided in recognition of accomplishment. Financial incentives include salary, premium, reward,
dividend, income on investment etc. On the other hand, non-financial incentives are that social and
psychological attraction which encourages people to do the work efficiently and effectively. Non-
financial incentive can be delegation of responsibility, lack of fear, worker’s participation, title or
promotion, constructive attitude, security of service, good leadership etc..
3) Positive and Negative Incentives- Positive incentives are those agreeable factors related to work
situation which prompt an individual to attain or excel the standards or objectives set for him, where
as negative incentives are those disagreeable factors in a work situation which an individual wants to
avoid and strives to accomplish the standards required on his or her part. Positive incentive may include
expected promotion, worker’s preference, competition with fellow workers and own‘s record etc.
Negative incentives include fear of lay off, discharge, reduction of salary, disapproval by employer etc.
Fringe Benefits
Employees are paid several benefits in addition to wages, salary, allowances and bonus. These
benefits and services are called ‘fringe benefits’ because these are offered by the employer as a fringe.
Employees of the organization are provided several benefits and services by the employer to maintain
and promote employee’s favorable attitude towards the work and work environment. It not only
increases their morale but also motivate them. These provided benefits and services forms the part of
salary and are generally refereed as fringe benefits. According to D. Belcher, “ Fringe benefits are any
wage cost not directly connected with the employees productive effort, performance, service or
sacrifice”.
Kinds of Fringe Benefits
The various organizations in India offer fringe benefits that may be categorized as follows:
1) Old Age and Retirement Benefits - these include provident fund schemes, pension schemes,
gratuity and medical benefits which are provided to employee after their retirement and during old age
as a sense of security about their old age.
2) Workman’s Compensation - these benefits are provided to employee if they are got ignored or die
under the working conditions and the sole responsibility is of the employer.

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3) Employee Security- Regular wage and salary is given to employee that gives a feeling of security.
Other than this compensation is also given if there is lay-off or retrenchment in an organization.
4) Payment for Time Not Worked – Under this category of benefits, a worker is provided payment
for the work that has been performed by him during holidays and also for the work done during odd
shifts. Compensatory holidays for the same number in the same month are given if the worker has not
availed weekly holidays.
5) Safety and Health – Under this benefit workers are provided conditions and requirements regarding
working condition with a view to provide safe working environment. Safety and Health measures are
also taken care of in order to protect the employees against unhealthy working conditions and accidents.
6) Health Benefits – Employees are also provided medical services like hospital facility, clinical
facility by the organization.
Process of Wage Determination
Practically how wages are determined and maintained or administered in an organization is very
organization to organization. Ideally speaking it depends upon sole discretion that what procedure an
organization follows for wage and salary administration. More or less an attempt is made by every
organization to follow the principles suggested for sound compensation management. Organization
tries to inculcate systematic procedure for wage determination and their revision at an appropriate time.
Process of wage determination includes job analysis and job evaluation, survey of wages in the
environment, determining wage structure, and deciding rules for wage administration.
Following are the important steps:
1. Job Analysis and Job Evaluation: This may be the primary exercise that an organization needs to
carefully carry out with an intention to create base for wage determination. Job analysis reveals
information about tasks, duties, responsibilities and standards with proposed job is to be performed by
the employees. It also guides in terms of job specification i.e. skills, ability. Qualification and
experiences needed to perform the job with requisite performance standards. Job analysis gives enough
information about the job and the profile of the performer in order to perform that job.
Another important exercise that an organization needs to carry out is ‘Job Evaluation’. It is nothing but
finding out relative worth of a job, in terms its contribution and significance to the overall
organizational objectives.
2. Determining Performance Standard and Wage Surveys: Having understood the job in
considerable detail an attempt is made to determine expected performance standard to be carried out
by the performer. Then, an organization must survey wage rates prevails in the market for the same job
or its similar type, so that attractive compensation package can be designed to induce good quality of
candidature to apply for the job in an organization. Here care should be taken that wage structure should
be in accordance with the complexity and efforts needed in the performance.

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 3.Deciding Wage Structure and Rules for Its Administration: Based on collection of
relevant information and taking in to account some of the influencing factors, an organization
should design wage structure which includes slab for basic or minimum wages, incentives,
and/or increment over a period of time to gather with other financial and nonfinancial
perquisites to be offered to an employee. Attempt should be made to follow principles of
fairness, equity and justice to gather with transparency while designing wage structure and
deciding rules for its administration. The rules should not provoke un justified discriminations
and exploitation of workers otherwise it may prove counterproductive and may give rise to
grievance, and industrial disputes.

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