CHAPTER ONE

OVERVIEW OF HUMAN RESOURCE MANAGEMENT

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After Going through this Chapter, you will be familiar with: -

 Definition of Human Resource Management
 Features of Human Resource Management
 The process of Human Resource Management
 Importance of Human Resource Management
 Objective of HRM
 The Nature and Challenges of HRM
 The Role of HRM
 Organization of the Human Resource Management Department
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Introduction

Human resource management (HRM) is concerned with the “people” dimensions in

management. HRM is the term increasingly used to refer to the philosophy, policies,
procedures and practices relating to the management of people within organizations. Since
every organization is made up of people, acquiring their services, developing their skills,
motivating them to higher levels of performance and ensuring that they continue to maintain
their commitment to the organization are essential to achieving organizational objectives.
Those organizations that are able to acquire develop, stimulate and keep outstanding workers
will be both effective and efficient. Those organizations that are ineffective or inefficient risk
the hazards of stagnating or going out of business. Human resource thus, creates
organizations and makes them survive and prosper. If human beings are neglected or
mismanaged, the organization is unlikely to do well.

Human Resource Management (HRM) is an approach to the management of people, based on

four fundamental principles:

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 1. Human resources are the most important assets an organization has and their effective
management is the key to its success.
2. This success is most likely to be achieved if the personnel policies and procedures of
the enterprise are closely linked with, and make a major contribution to, the
achievement of corporate objectives and strategic plans.
3. The corporate culture and the values, organizational climate and managerial behavior
that emanate from that culture will exert a major influence on the achievement of
excellence
4. HRM is concerned with integration-getting all the members of the organization
involved and working together with a sense of common purpose.
In its essence, HRM is the qualitative improvement of human beings who are considered the
most valuable assets of an organization- the sources, resources, and end-users of all products
and services. HRM is no doubt, an outgrowth of the older process and approach. But it is
much than its parent disciplines viz., personnel management and Behavioural Science. HRM
is also more comprehensive and deep-rooted than training and development. Its approach is
multi-disciplinary from the beginning to the end. It is a scientific process of continuously
enabling the employees to improve their competency and capability to play their present as
well as future expected roles so that the goals of the organization ate also met to an adequate
extent. Thus, the basic approach of HRM is to perceive the organization in its totality. Its
emphasis is not only on production and productivity but also on the quality of life. It seeks to
achieve the fullest possible socio-economic development.
Definitions:
Human Recourse Management (HRM) is that part of management concerned with
people at work and with their relationships within an enterprise. It is to bring together and
develop into an effective organization, the men and women who make up an enterprise
and, having regard for the well being of the individual and of working groups, to enable
them to make their best contribution to its success. (Graham et al 1992)
1. HRM refers to the concept or techniques needed to carry out the people or personnel
aspects of a management position including recruiting, screening, training, rewarding,
and appraising (Dessler, 1994).

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 2. HRM is the process of accomplishing organizational objectives by acquiring,
retaining, terminating, developing and property using the human resources in an
organization (Ivancevich et 1990).
3. HRM is the planning, organizing, directing and controlling of the procurement,
development, compensation, integration, maintenance, and separation of human
resources to the end that individual, organizational, and societal objectives are
accomplished (Flippo, 1984).
In the above definition, Flippo has tried to point out that a personnel/human resources
manager is a manager who exercises authority and leadership over other personnel and thus
must perform the basic function of management. This holds true to all functional managers
(such as marketing, Operations, Production, Human Resources, etc managers).
When the definition is broken down to its specific components, we find the basic
management functions when applied to managing human resources….
Planning: Establishing goals and standards, developing rules and procedure, developing
plans and forecasting- predicting or projecting some future occurrence.
 Determining, in advance, a personnel /HR program that will contribute to the goals
of an enterprise. This may include planning human resource requirement in the
organization and making the necessary preparation to fulfill those requirements
(procurement, recruitment, etc…)
 Besides planning human resource management functions, the HRM department is
responsible to participate in setting up organizational goals/objectives at the various
levels of the organization.
Organizing: Giving each subordinates a specific task; establishing departments; delegating
authority to subordinates; establishing channels of authority and communication;
coordinating the work of subordinates.
In addition, due to its specialization in the management of human resources and increasing
expertise, other parts of the organization may require their advice in the general structuring
and organizing of the enterprise.
Directing: Getting others to get the job done; maintaining morale; motivating subordinates.
Controlling: Setting standards of performance, checking to see how actual performance
compares with these standards; taking corrective action as needed.

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Procurement: Concerned with obtaining proper kind and number of human resources
necessary to accomplish organizational goals.
It specifically deals with determination of HR requirement, recruitment, selection, and
placement. This process is highly dependent on the job design (the kind of job performed),
internal and external factors, etc.
Development: It is the increase of skill, through training and development programs, needed
for proper job performance.
This function is essential as nature of jobs change through time due to technological
advancements, realignment of jobs, and other complexities that come along with expansion
of a business. E.g. Businesses that started small need training to equip their staff with the
necessary skill and knowledge required to deal with a wider and bigger organizational
activities.
Compensation: It is the adequate and equitable remuneration of personnel for their
contribution to organizational objectives.
It could be made in the form of money – salary, bonus, or fringe benefits such as medical
insurance, transportation or housing allowance, dependency allowance, stock options, etc.
Integration: It is concerned with the attempt to effect a reasonable reconciliation of
individual, societal and organizational interest.
With the employees procured, developed, and reasonably compensated, integration is the
most difficult and frustrating challenges to managers. It rests upon the foundation of a belief
that significant overlapping of interests do exist in our society. It is often the case that there is
a difference in what employees, management, and or society expects from each other.
Consequently, it becomes a very challenging task to deal with employees’ feelings and
attitudes in conjunction with principles and policies of an organization.
Thus, HRM is responsible in identifying areas of discontent from employees and try to
consider them when developing personnel policies and procedures, and develop a system
where employees could air their grievances, and also a system where by an organization can
take disciplinary action on those employees who do not go by the established policies.
Maintenance: It is concerned with the perpetuation of the state where by interest of
individuals, organizations and the society is reconciled. It is going to be a continuous effort

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that involves the active involvement of the HRM in ensuring that changes that may affect the
reasonably good working environment and make the necessary corrective measures.
Separation: It refers to the process involved in HRM when an employee is separated from an
organization. Depending on the reason why an employee separates from an organization,
HRM will take the necessary action to ensure that such employees pass through required
processes as specified by the policies and procedures of the organization. Some of these
reasons include retirement, layoffs, out-placement, discharged, etc.

Key Process and Systems

HRP
Job Analysis
Procurement Transfer

Staffing: Promotion
Recruitment
Selection
Placement Orientation

Training &
Development
Performance Appraisal

Maintenance Compensation & Reward

Protection (Safety& Health

Management)
Resignation

Separation Discharge

Retirement

Lay-off

Features of Human Resource Management

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On the analyses of the definitions of Human Resource Management, the following features of
HRM can be identified.
1. People Oriented: Human Resource Management is concerned with employees both
as individuals and as group in attaining goals. It is also concerned with behavior,
emotional and social aspects of personnel. It is the process of bringing people and
organizations together so that the goals of each are met.
2. Comprehensive Function: Human resource Management covers all levels and
categories of employees. It applies to workers, Supervisors, Officers, Managers and
other types of personnel. It covers both organized and unorganized employees. It
applies to the employees in all types of organizations in the world.
3. Individual-oriented: Under human resource management, every employee is
considered as an individual so as to provide services and programs to facilitate
employee satisfaction and growth. Other words, it is concerned with the development
of human resources ie., knowledge, capability skill, potentialities and attaining and
achieving employee goals.
4. Continuous Function: Human resource management is a continuous and never
ending process. According to George R Terry- “it cannot be turned on and off like
water from a faucet; it cannot be practiced only one hour each day or one day each
week. Personnel management requires a constant alertness and awareness of human
relations and their importance in everyday operations”.
5. A Staff Function: Human resource management is a responsibility of all line
managers and a function of staff managers in an organization. Human resource
managers do not manufacture or sell goods but they do contribute to the success and
growth of an organization by advising the operating departments on personnel
matters.
6. Pervasive Function: Human resource management is the central sub function of an
organization and it permeates all type of functional management viz., production
management, marketing management and financial management. Each and every
manger is involved with human resource function. It is a responsibility of all line
managers and a function of staff mangers in an organization.

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 7. Challenging Function: Managing of human resources is a challenging job due to the
dynamic nature of people. Human resource management aims at securing unreserved
co-operation from all employees in order to attain predetermined goals. Human
resource management aims at securing unreserved co-operation from all employees in
order to attain predetermined goals.
8. Development–oriented: Individual employee-goals consists of job satisfaction, job-
security, high salary, attractive fringe benefits, challenging work, pride, status,
recognition, opportunity for development etc. Human resource management is
concerned with developing potential of employees, so that maximum satisfaction
from their work and give their best efforts to the organization.
Process of HRM
HRM is a process consisting of four functions
1. Acquisition of human resources
2. Development of human resources.
3. Motivation of human resources and
4. Maintenance of human resources.
1. Acquisition Function: Acquisition process is concerned with securing an employing the
people possessing required kind and level of human resources necessary to achieve the
organizational objectives. The acquisition function begins with planning. It also covers
the functions such as job analysis, human resource planning, recruitment, selection,
placement, induction and internal mobility.
2. Development function: Development function is the process of improving moulding and
changing the skills, knowledge, creative ability, aptitude and values. The development
function can be viewed along three dimensions
(i) Employee training: –Training is the process of imparting the employees the
technical and operation skills and knowledge. It also includes changing of attitudes
among works.
(ii) Management development: - Management development is primarily concerned
with knowledge acquisition and the enhancement of an executive’s conceptual
abilities. It is the process of designing and conducting suitable executive

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 development programs so as to develop the managerial and human retains skill of
employees.
(iii) Career Development: - career development is the continual effort to match long-
term individual and organizational needs. When human resources have been
developed effectively, one can expect to have competent employees with up-to-date
skills and knowledge.
3. Motivation Function: The motivation function begins with the recognition that
individuals are unique and that motivation techniques must reflect the needs of each
individual. It is an area of management in integrating people into work situation in a way
that motivates them to work together productively, co-operatively and with economic,
psychological and social satisfaction.
4. Maintenance Function: The maintenance function is concerned with providing those
working conditions that employees believe are necessary in order to maintain their
commitment to the organization. The objective of the maintenance function is to retain
people who are performing at high levels. This requires that the organization provide safe
and healthy working conditions and satisfactory labor relations. If these activities are
performed effectively, we can expect to have competent employees who are committed to
the organization and satisfied with their jobs.
Why Human Resource Management?

Why is HRM so important? Organizations are designed to accomplish some purposes or

function and to continue doing so as long as possible. Because of this, organizations are not
necessarily intended to change. Only recently have companies begun looking to the HRM
function as a means of attaining their bottom line goals.
Competitive changes are affecting all types of organizations, from giants like IBM to which
the smallest business. No one can escape change, which is why managers must be skilled in
human resource management techniques.
To be more specific there are a number of reasons why HRM is becoming more important:
1. Changing employee needs. Employees are demanding that organizations become more
responsive to their personal needs by developing such programs as flexible work
schedule, parental leave, child care, sabbaticals, elderly- care assistance, and job sharing.
The human resource manager is responsible for developing and implementing policies

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 designed to reduce possible conflicts between organizational demands and family
responsibilities.
They must also be aware of the effect that “downsizing” and “restructuring” have on the
loyalty of employees.
2. Increased complexity. Management in the 21st century is becoming increasingly
complex for many reasons. These include emerging foreign competition, changing
technology, expanding scientific innovation, and an accelerating rate of change.
As a result, organizations need human resource managers to be involved in making
strategic decisions and in developing the distinctive competencies of the organization’s
human resources. Top executive depend up on the expertise of Human resource
management in recruitment, productivity, performance evaluation, quality, compensation,
and other Human Resource activities.
3. Increased legal complexity. The enactment of new state and federal laws is contributing
to the importance of human resource managers. The added reporting requirements of
these new laws are so extensive that compliance requires increasing human resource
expertise. The activities most influenced by governmental legislation include equal
employment, compensation, safety, and labor relations. If an organization fails to comply
with these laws, it runs the risk of costly legal actions and possibly severs financial
penalties.
4. Developing Human Resource Policies. Human resource policies are designed to create
consistency and equity within an organization. These polices are particularly important in
hiring, compensation, promotion, and termination. For example, compensation guidelines
need to be made within the human resource framework, sot that the salary structure is
completely fair and equitable.
Promotion procedures are also need to be developed and coordinated by human resource
managers to ensure equity throughout the organization.

In the 21st century, with organizations increasing in size and complexities and with new
laws prescribing even greater equality in the right of employees, the HR manager’s role
in developing and implementing changing polices will become increasingly important.

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5. Human Resource Information Systems. In the high tech world of the future, more
human resource activities will be requiring specialized expertise. As an example, many
organizations are developing computerized expert systems for making employee
selection decisions.
These systems integrate interview data, test scores, and application blank information.
Similarly, many organizations are developing compensation systems with elaborate
cafeteria- style benefit packages to replace simple hourly pay or piece rate incentive
system. Many organizations are also developing sophisticated databases to centralize are
human resource information to provide real time information for strategic manpower
planning and other reporting activities.
6. Human Resource Cost- effectiveness. Human Resource activities have become
increasingly important because of the high investment in human resources and the costs
associated with employee problems. The largest single cost in most organizations is
labor.
Labor costs are often too high as a result of problems involving absenteeism, tardiness,
turnover, slowdowns, sabotage, or drug dependencies. Having the right person in the
wrong job also means unnecessary costs. Good HRM is Good Management.
7. Other HRM trends. Other HRM trends include changing the corporate culture, helping
employees become more adaptive to change, increasing organizational competitiveness
and productivity, achieving TQM, and employee involvement.
Objectives of Human Resource Management
Objectives are pre-determined goals to which individual or group activity in an organization
is directed. Objectives of HRM are influenced by organizational objectives and individual
and social goals. Every organization has some objectives and every part of it should
contribute directly or indirectly to the attainment of desired objective. Objectives determine
the character of an organization and serve as the basis for voluntary co-operation and co-
ordination among employees. Objectives also provide benchmarks or standards of evaluating
performance. The primary aim of Human Resource Management is the promotion of
effectiveness of the people employed with the organization with performance of their allotted
duties by the substitution of co-operation in the common task in place of the suspicions and
hostility which have so long been characteristic of relations between employees and

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employers. According to Indian Institute of Personnel Management –“Personnel
management (Human Resource Management) aims to achieve both efficiency and justice,
neither of which can be pursued successfully without the other. It seeks to bring together and
develop an effective organization, enabling the men and women who make up an enterprise
to make their own best contribution to its success both as an individual and as a member of a
working group. It seeks to provide fair terms and conditions of employment and satisfying
work for all those employed”.
Objectives of human resource management are derived from the basic objectives of an
organization. In order to achieve organizational objectives integration of employer’s interest
and employee interests is necessary. In this light the objectives of human resource
management may be summarized as follows:
1. To improve the service rendered by the enterprise to society through building better
employee morale, which leads to more efficient individual and group performance.
Thus, HRM seeks to manage change to the mutual advantage of individuals, groups,
the organization and the society.
2. To establish in the mind of those associated with the enterprise - employees,
shareholders, creditors, customers and the public at large - the fact that the enterprise
is rendering the best service of which it its capable and distributing the benefits
derives from them fairly and contributing to the success to the enterprise.
3. To create and utilize an able and motivated workforce, to accomplish the basic
organization goals.
4. To recognize and satisfy individual and group needs by providing adequate and
equitable wages, incentives, employee benefits, social security, challenging work,
prestige, recognition, security, status etc. Thus an organization can identify and
satisfy individual and group goals by offering appropriate monetary and non-
monetary incentives.
5. To employ the skills and knowledge of employees efficiently and effectively i.e., to
utilize human resources effectively in the achievement organizational goals.
6. To strengthen and appreciate the human assets continuously by providing training and
developmental programmes. Training and development helps the organization attain
its goals by providing well-trained and well-motivated employees.

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 7. To maintain high employee morale and sound human relations by sustaining and
improving the various conditions and facilities.
8. To enhance job satisfaction and self-actualization of employees by encouraging and
assisting every employee to realize his full potential.
9. To provide facilities and conditions of work and creation of favourable atmosphere
for maintaining stability of employment.
10. To recognize and satisfy individual needs and group goals by offering appropriate
monetary and non-monetary incentives.
11. To develop and maintain a quality of work life (QWL), which makes employment in
organization a desirable personal and social situation.
Maximum individual development, developing desirable working relationship and effective
utilization of human resources are the primary goals of human resource management.
Management has to create conducive environment and provide necessary prerequisites for
the attainment of the objective of human resource management.
The Role of HRM
Human Resource Manager is an individual who normally acts in an advisory or “staff”
capacity, working with other managers to help them deal with human resource matters. Now
days, HRM has a great deal of contribution in strategic decision making involving the HR
perspective. They play a major role in strategic decision-making.
Employees do have direct relationship with their line managers and thus their day-to-day
activities, needs and aspirations are left to be deal with their immediate superiors. However,
the HRM should develop HR policies and programs to be implemented by the line manager
and function as a catalyst and energizer of the relationship between the employees and the
line managers.
For example, a line manager may seek an able person for a vacant position in his/her
department. This information (with all the requirements including qualifications, years of
experience, etc) will be communicated to the human resource manager who takes the
responsibility of placing an ad and start the recruitment process based on the specified
requirements and arrange an interview or any other selection mechanism. Once the selection
mechanism is done in the presence of the hiring department to ensure that potential
candidates are asked appropriate and job related questions during the interview. Once the

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selection is done, HRM will proceed with the placement process including orientation of the
new employee. Again, orientation is done by both HRM and the hiring manager. Usually, the
kind of orientation provided by the hiring department is job specific and will not cover other
parts of human resource related policies in the organization. This task of familiarizing new
employees with company policy and other aspects are covered by HRM. (Processing the
hiring process, documentation, providing company ID, orientation kit or package containing
company policy, etc.)
Everything that is done by the HRM is done with a support from the other line departments
and HRM does supports the line managers in effectively executing their tasks.
Basically, the HRM performs three major roles function:
 A Service Function: According to the needs of the other departments, the HRM is
required to render coordinating services such as
- Posting job advertisement
- Organizing Training Courses
- Keeping personnel records
- Operating Wage/salary systems
- Looking after the firms health and safety arrangements at work, etc
 Control Function:
- Analyzing key operational indices in personnel field like labor turnover, wage
costs, absenteeism, etc.
- Monitoring labor performance
- Recommending appropriate remedial action to line managers. Example:
identifying training needs, change of work methods, improved work
environments, etc.
 Advisory Function: Offers expert advice on personnel policies and procedures such ,
- Which employees are ready for promotion (as per the policy of the
organization, eg. Based on number of years of service, etc.)
- Who should attend certain training course?
- How a grievance procedure should be operated.

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 Organization of the Human Resource Management Department
Organization of human resource department is dependent on the nature of an organization
which might change its structure through time. Accordingly, the emphasis given to the
human resource department may also vary. One major factor affecting the organization of the
human resource department is the size of an organization.
1. HRM in a Small Business
In such organizations, the same functions of HR are needed but at smaller scale. For instance,
an owner-manager most of the time performs the necessary HR functions (outsourcing some
of these activities). In other situations, small business human resource departments are
staffed with one individual, and possibly a full-time secretary. Accordingly, such individuals
are forced, by design, to be HRM generalists who are required to properly perform the basic
functions of human resources and achieve the same goals that a larger department achieves.
The main difference is that they are doing the work themselves without benefit of a
specialized staff. In such situations, there is a tendency to use outside consultants to assist in
HRM activities. For instance, benefit administration may be beyond the capacity of small
businessperson. In that case, benefit administration may need to be contracted out.
2. HRM in Large Organization
As an organization grows in size and complexity the HRM department will be undertaking
specialized HR functions under separate department/units. These departments normally
involve distinct areas in human resources such as employment, training and development,
compensation/benefit administration, and employee relations. These departments are usually
staffed with HR specialists who have enough knowledge and expertise in the respective
areas. Managers of these departments have specific accountabilities and report, oftentimes, to
the vice president of human resources.
Another trend in HRM is in outsourcing some of the work HRM professionals once handled.
For example, private staffing agencies may perform the recruiting and selection activities,
several consulting firms providing training programs, and yet another financial organization
handling the majority of a company’s benefits administration. However, it is still essential for
managers and employees to understand the basic HRM issues and activities in their
organization.

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 CHAPTER TWO
ENVIRONMENTAL FACTORS AFFECTING HRM
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Objectives:

After you complete reading this Section, you will be able to:
 Figure out internal conditions affecting HRM activities;
 Determine external environment influencing HRM decisions;
 Describe the kind of impact the internal and external environment causes to HRM
activities ;

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Introduction

There is nothing constant in this world except change itself. Everything changes everyday.
There are factors affecting HRM. Because of the changes in these factors HRM itself faces
changes constantly. This chapter presents the environment affecting HRM and the challenges
thrown up by these changing environments on HRM. What you read in this chapter can
easily be associated with the reality in your environment.

2.1. Environment affecting HRM

Environment of particular interest to HRM can fall into two broad categories:
 External Environment
 Internal Environment (Organization conditions and employee characteristics)
2.1.1. External Environment
Conditions outside the organization influence and restrict what actions an organization can
take.
Economic Conditions
Organization decisions to hire additional people, to lay off current employees, or to grant a
cost-of-living wage increase are all influenced by economic conditions. Economic conditions
also influence employees. For example, high unemployment rates make many employees
reluctant to quiet their present jobs, because they are afraid they won’t find another one. This

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reduces turnover. Or workers squeezed by inflation may ask for extra hours of work to
increase their earnings. Therefore, you can say that the economy of the country is a major
environmental factor affecting human resource management.
As a generalization, when the economy is booming, recruiting qualified workers is more
difficult than in less prosperous times. Because all hiring companies compete for qualified
workers to produce quality products and win the market. Unemployment rate at this time will
be very low especially for skilled workers. So, you have to give higher benefits to these
workers to attract them to your company. On the other hand, when the economy is
experiencing downturn, more people are available to apply for a job.
The Population and the Labor force: The qualification, attitude, career interest and
motivations of people in the available workforce will influence human resource activities and
ultimately the effectiveness of the organization.
First, we need to clarify what we mean by available work force.
Population: Includes all the people
-Those eligible to work + those ineligible to work because of age or institutionalization.
(Below age of 14 and those in Prison or hospital)
Eligible to work = labor reserve + total labor force
Labor reserve: those who are working for economic gain even though they are eligible to
work. (Homemakers, college students, and retirees)
Total Labor Force = Armed Forces + Civilian Labor Force
Civilian Labor Force = Unemployed + Employed
Impact of the labor force on the human resource function of an organization may include
 Percent of minorities and women in the workforce influences equal employment
opportunity decisions.
 Qualifications and skills in the workforce influence need of training programs, design
of jobs, etc.
 Availability of various skills and demand for these skills by employers influence
salary and compensation decisions.
 The demand of the workforce for full-time or part-time jobs affects decision on work
schedule.

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Labor Market Conditions: The labor market condition involves the job opportunities and
compensation offered by employers and the skills and contributions offered by employees.
The scope of the labor market is influenced by three factors:

Occupation: The skills and qualifications required in an occupation. This refers to

required training, education, or even licensing requirement to perform a
given type of job. E.g. accountant, medical doctors, lawyer, etc. This may
limit mobility among occupations.
Geography: Distance employees are willing to relocate or commute. Supply of labor
force could be limited to a specific geographic area or region. Example,
supply of qualified human resources is very limited in some regions of
Ethiopia.
Industry: The industry in which the organization competes for labor and organization
face in the industry, the more it is expected to offer employees better
compensation for their contribution. This becomes even more important if the
supply of qualified employees is very limited.
Product/Service Market:
 Demand for products and services: The quality and quantity of people an
organization hires and its ability to pay its employees is affected by the changes that
occur in the product/service market. For instance, in times of market growth,
organizations increase employment levels while in times of market decline,
organizations economize their use of human resources.
 Inflation: It is the rate of changing in prices we pay for goods and services. A change
in inflation rate affects human resources management especially on cost-of-living
adjustments (COLA) to salaries and pension plans.
 Technology: Changes in technology will influence the nature of jobs to be performed
and consequently the qualifications and skills of people required to perform them.
Government Regulations
Government regulations have direct impact on human resource management decisions by
regulating terms and conditions of employment. Involvement and intervention of government
in employee and employer relations is increasing over time.

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Laws reflect a society’s response to social, political, or economic problems. A growing share
of business decisions-one estimate is as many as half-are shaped by the government laws,
regulations, and policies. In other words, the government laws and regulations will give
direction for almost half of the decisions of business organizations. Equal employment
opportunity legislation and employment-at-will decisions are especially significant examples.
It means, corporate organizations can not hire someone they like. The law says they have to
hire anyone who fits the job. These laws require examination of every single personnel
policy and program to ensure compliance. As more companies operate in many different
countries, simultaneously complying with regulations of many countries poses an additional
challenge.
Some areas of legislation and regulation include:
Equal employment opportunity: it affects recruiting, selection, evaluation, and promotion
directly and employment planning, orientation, career planning, training, and development
indirectly.
Compensation regulation: specifying the minimum pay for any job, for employees with a
certain educational level, etc.
Hours of work, national holidays, etc.
Benefit Regulations: Affect pension and retirement plans. In some countries government
requires employers to have basic medical insurance plans for its employees.
Worker’s safety laws: affects health and safety programs in organizations.
Privacy laws: protecting employees’ personal information.
Labor relations laws and regulations: affects the conduct of collective bargaining.
Union Expectations and Power (Labor Union)
Wage levels, benefits, and working conditions for millions of employees now reflect
decisions made jointly by unions and management. A union is a group of employees who
have joined together for the purpose of dealing with their employer. Unions are treated as an
environmental factor because; they become a third party when they bargain with the
company. In a unionized organization, the union rather than the individual employee
negotiate an agreement with management.

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In many cases, unions have forced employers to adopt sound human resources programs.
However, the presence of a union reduces employers’ flexibility in designing human resource
programs. Therefore, many organizations wish to maintain or achieve a union-free status.
How organizations respond to unions (if they are unionized) or the threat of unionization
becomes an extremely important factor in HR decision. The presence of a union means many
HR decisions must be negotiated with a third party (the union). But unions have an effect
beyond those employers whose workers are unionized. Many organizations make decisions
as part of strategy to remain non-unionized.
Labor unions exist to protect employees’ right in a more organized and effective way.
Union’s interest, expectation and power differ from one union to another. It depends on the
kind of industry they are in, the number and involvement of its members and the response of
the management to the demands and questions of the unions. However the case may be, the
presence of a union directly affects most aspects of human resource management-recruiting,
selection, performance evaluation, promotion, compensation, and benefits, among other
things.
2.1.2. Internal Environment
2.1.2.1 Organization conditions

Several factors affect nature of the organization: its strategies and objectives, financial
situation, technology, and culture are examples. All of these organizational characteristics are
important and worth considering for different decisions. Let us see an example here.
If you are given the chance to choose the organization you like working for among many
organizations, what would be your choice?
Obviously, you will primarily consider their HR programs: opportunity for advancement
(i.e., staffing and development), pay (i.e., compensation and benefits), challenging
assignments (i.e. work design and career development), and how the corporation treated its
employees (employee relations). There are a lot of other organizational characteristics related
to HR decisions you need to consider includes size, industry, geographic location, business
firm’s strategy, and many others. So, a number of organizational characteristics are related to
HRM. Among them, only five factors will be the focus. These factors are selected on the

19
ground that they exert a strong influence on the nature of work in organizations and on HRM
activities.
These are:
 Financial conditions
 Business strategy
 Technology
 Organization Culture/Philosophy
 Management /Leadership style
Financial Conditions

How do you think the financial status of an organization influence the decisions of HRM?
If an organization does not make enough money over time, it cannot pay employees, fund
training programs, or provide laid-off employees assistance in finding new jobs.
In most organizations, HR decisions, particularly those involving how many people to
employ, how much to pay them, and whether to retain them, account for a large share of
expenses. Many organizations are taking steps to tie these decisions more closely to the
organization’s financial conditions.
Financial status of an organization has a particularly critical influence on personnel activities.
If an organization is in a good financial condition, it is likely to increase the quantity of its
employees or even offer higher salary increments to its employees. However, if the
organization is not in a good financial condition, it is most likely to reduce is employees.
This is especially true for those labor-intensive organizations such as education, health care,
and government institutions where majority of the budget is assigned to cover salaries and
other benefits.
So HRM decisions must be made with their affordability in mind. In other words, every
HRM decision should be made only when it is financially feasible.
Strategy

An organization’s strategy focuses on such questions as which businesses should we compete

in? And how should we compete? Strategy sets long-term directions. It integrates decisions
and directs them toward specific goals. [Remember that you will get more detail
information on Strategy in other related courses.]

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Strategic questions occur at various levels in the organization-at corporate level, at unit level,
and operating level. The most fundamental question is at the corporate level: what businesses
should we be in? (What type of products or services shall we produce)? On which basic
market we need to focus? These are some of the issues the corporate level strategy must
explain. As you can see form the questions, the strategy at this level defines why the
organization exists and clearly identifies the direction it should move.
Functional (Operational) strategies involve particular components of the organization, such
as marketing, finance, and of course human resource management. At this level, managers
formulate a strategy that will help their function contribute to the achievement of corporate
and unit objectives.
For HRM, a strategic approach translates into three tasks:
1. Assure the HR issues are considered in formulating business strategies (“In what
business should we compete?”)
2. Establish HR goals and plans – a HR strategy – to support the business strategy
(“How will HR decisions help us compete?”)
3. Work with managers to ensure implementation of the HR plan (“How to translate
policies into day-to-day actions?”). Here, you know, HR manger is called as strategic
partner to other managers.
You can not win fierce competition without having well articulated strategy at all levels in
the organization. Why not? An organization may face intense competition in both its product
and labor markets. Many other firms will be producing similar products or services. An
organization must maintain a supply of competent employees if it is to succeed and grow. At
the same time, other organizations are striving for that same objective. A firm’s major task is
to ensure that it obtains and retains a sufficient number of employees in various career fields
to allow the organization compete effectively. This is what the strategy has to provide.
Technology

Technology can be defined as the processes and techniques used to generate goods and
services. Many of the dirty, dangerous, and boring aspects of work can be eliminated through
applications of new technology. But many employees view new technology as a threat to
their job security. Employee participation in decisions that affect how work is structured can
help relieve these fears and provide greater flexibility in adapting to continuing changes.

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New jobs will be created by technological changes. These jobs will require more skill than
today’s jobs. The future challenge for organizations is how to make their older workers
friendly with technological changes. In other words, one of the most challenging aspects of
human resource management in the future will be training and developing employees to keep
up with rapidly advancing technology.
Modern economy is shifting form manufacturing to service economy. The trend toward a
service economy also affects the type and amount of technology needed. More technology is
required in service economy. Highly skilled human resource is important to operate the
sophisticated technology in service economy. In the developed world the numbers of
manufacturing jobs and workers have been decreasing. The number of service industry jobs
has rapidly increased. So, developed economies require more skilled labor force in service
sector.
Culture
Corporate culture is the system of shared values, beliefs, and habits within an organization
that interacts with the formal structure to produce behavioral norms. Corporate culture
contains the values and standards that guide people’s behavior. It determines the
organization’s overall direction. It governs what the company stands for and how it allocates
resources; it determines the company’s structure, the system it uses, the people it hires, the fit
between jobs and people, and the results it recognizes and rewards; the culture decides what
the company defines as problems and opportunities and how it deals with them. HR mangers
will be the major players in shaping the cultures of organizations.
How does organization’s culture affect the behavior of its workers? Every worker will have
perceptions of the job and the organization after working for some time under the supervision
of a superior and different organizational policy. A firm’s culture has an impact on employee
job satisfaction as well as on the level and quality of employee performance. However, each
employee may assess the nature of an organization’s culture differently. One person may
perceive the culture negatively and another may view it positively. Employees who are quite
dissatisfied may even leave an organization.
If an organization has a well defined and practiced culture, its employees should be able to
feel comfortable to operate in that environment and adhere to the established culture
Example

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  Culture of Productivity through people-described as “Treat employees as the root
source of quality and productivity gain.” Or “Respect for the individual.”
 Culture of Autonomy and Entrepreneurship- “Foster many leaders and innovators
through the organization”
Management Styles
An organization’s culture is translated into practice largely as a result of actions taken by
manages. By their words and actions, managers call attention to what is important.
Thus, the quality and style of managerial leadership is crucial in shaping perceptions that will
support cultural values and, hence the organization’s strategy. Let us see the leadership style
and its impact on employee’s behavior by considering the three types of decision making
styles:
 Authoritarian: the leader makes decisions alone and tells subordinates what they are
to do.
 Democratic: the leader actively involves subordinates in the decision making process,
sharing problems, soliciting input, and sharing authority.
 Laissez-faire: the leader avoids making decisions whenever possible and leaves it up
to subordinates to make individual decisions with little guidance either form the
leader or form the rest of the group.
Research on the effectiveness of alternative leadership styles produced some interesting
results. For example, individuals under democratic leadership were more satisfied, had higher
morale, were more creative, and had better relationships with their superiors. However, the
quality of output produced by workers was highest under the authoritarian leadership style,
slightly lower under democratic leadership, and lowest under laissez faire leadership.
Employee Characteristics
Information about employees is critical for setting objectives and shaping human resource
decisions. Each employee has unique experiences, skills, abilities, needs, and motivations.
Individual differences relevant to human resource management include possession of highly
sought skills, career preferences, and performance. Information can be obtained on each
individual and on the entire work force. Relevant work force data include attitudes,
experience, wages, and performance levels. Management analyzes information in these
categories to set objectives for human resource management.

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Nature of the Task
The kind of employees found on a given organization is highly influenced by the kind of
tasks/ activities performed. Some of the issues relevant for employees in choosing to work
for a certain organization include degree of physical exertion required, degree of
environmental unpleasantness, physical location of work, time dimension of work, human
interaction on the job, and degree of autonomy in the task.

CHAPTER THREE

JOB ANALYSIS AND HUMAN RESOURCE PLANNING

___________________________________________________________________________

Objectives:

On successful completion of this chapter, you will be able to:

Analyze different definitions of job analysis;

Explain the importance of job analysis for an organization in general and HRM
function in particular;
 Reason out why job analysis is considered as the most basic HRM tool;
Summarize the process pursued to perform job analysis; and
Identify the main outputs of job analysis and their uses in the HRM decisions of
an organization
Recite documents and their contents produced from job analysis

___________________________________________________________________________
Introduction
Procurement is the first operative function of personnel management, which can be sub-
divided into various sub-functions like human resources planning, recruitment and selection.

24
Mangers should determine the kind of personnel required for a job and the number of persons
to be employed. The organization should also find out the right man for the right job in the
right time. The knowledge of the job is essential to perform these functions.

In addition, establishment of the scientific standard in advance is essential to compare the

applicants with the job and to select the suitable personnel. The standard stipulates the
minimum acceptance qualifications, skills and qualities required for adequate job
performance. Stipulating standard requires the knowledge regarding job design, study of the
job duties and responsibilities, requirements of the job, human abilities and qualities etc. job
analysis is needed to know all these functions and to perform various functions of HRM.
Job Terminology: Description of technical terminology is highly necessary in order to
facilitate the study of a job analysis. So, it is desirable to define the terms related to job
analysis like task, position, job occupation, job analysis, job description, job specification
and job classification.
 Task: A task is an action or related group of action designed to produce a definite
outcome of result.
 Position: A position is a group of similar tasks and responsibilities assigned to one
individual. The term is used in this narrow technical sense to facilitate more precise
discussion of the job analysis technique.
 Job: a job is “a group of positions that are similar as to the kind and level of work.”
In some instances only one position may be involved, simply because no other similar
position exists. For example, in the small firm, the position of personnel manger also
constitutes a job since there is only one personnel manger position in the
organization. Further, there may be six employees “all of whom are classified under
the same title, yet each may perform slightly different work.” For example, there may
be five or six cashiers in a large commercial bank branch who may do different work.
 Occupation: An occupation “is a group of jobs that are similar as to the kind of work
and are found throughout an industry of the entire country” and occupation is a
category of work found in many firms.

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  Job analysis: Job analysis is the determination of the tasks which comprise the job
and of the skills, knowledge, abilities and responsibilities required of the worker of a
successful performance and which differentiate one job from all others.”
The aspects of job analysis include:
Job Description: A job description is “an organized, factual statement of the duties
and responsibilities of a specific job.” In brief, it should tell what is to be done, how it
is done and why?
Job Specification: A job specification is “a statement of the minimum acceptable
human qualities necessary to perform a job properly.” In contrast to the job
description, it is a standard of personnel and designates the qualities required for
acceptable performance.
 Job Classification: A job classification is “a grouping of jobs on some specified
bases such as the kind of work or pay.” For example, police, a clerk, a teacher, and
engineer, a chemist etc.
3.1. Definition
You will find below different definitions given for job analysis. Read each of them carefully.
They may look different on your first reading. But they are not.
1. 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) and who should be
hired for them. It provides data on job requirements, which are then used for
developing job descriptions (what the job entails) and job specifications (what kind of
people to hire for the job).
2. Job analysis is the process of collecting, analyzing and setting out information about
the content of jobs in order to provide the basis for a job description and data for
recruitment, training, job evaluation and performance management.
3. Job analysis is a systematic way to gather and analyze information about the content
and human requirement of jobs, and the context in which jobs are performed.
4. Job analysis can be defined as “obtaining information about jobs”.
5. Job analysis is the procedure through which you determine the duties of positions or
jobs and the characteristics of people who should be hired for them.
The above definitions have the following points in common. Job analysis is all about:

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  Collecting or gathering information about a job,
 Analyzing such information,
 Producing job descriptions and job specification, and
 Carrying out the processes above in a systematic manner.

3.2. Type of Information Obtained from Job Analysis

Job analysis produces the following information about a job:-

 Overall purpose –Why the job exists and, in essence, what the job holder is expected
to contribute.
 Job content – The nature and scope of the job in term of the tasks and operating to be
performed and duties to be carried out- i.e. the process of converting inputs (i.e.
Knowledge, Skills, and Ability – KSA’s) into outputs (i.e. results-products and
services).
 Job context – Working conditions such as physical working conditions, work
schedule, and the organizational and social context for instance, in terms of people
with whom the employee would normally be expected to interact, health and safety
considerations, unsocial hours, mobility, and ergonomic factors relating to design and
use of equipment. Also included here might be information regarding financial and
non-financial incentives the job entails.
 Organizational factors – The reporting relationships of the job holder, i.e. to whom
he or she reports either directly (the line manager) or functionally (on matters
concerning specialist areas, such as finance or HR management).
 Worker/Human requirement – The qualifications, skills level, abilities, attitude,
personality and experience that the job holder would need to possess to perform the
job successfully. Information on human behaviors like sensing, communicating
decision making, and writing, personal job demands in terms of human energy
expenditure, a job’s walking long distances , a job’s working long hours, and so on.
 Performance criteria-The criteria, measures or indicators that enable an assessment
to be carried out to ascertain the degree to which the job is being performed
satisfactorily. Information collected includes the performance standards (in terms of

27
 quantity, quality, or time taken for each aspect of the job). For instance, standards by
which an employee in this job will be evaluated.

Here below is a brief summary of the type of information obtained from job analysis:

Job conditions
(Job context) Organizational
factors

Purpose of Job
Job Analysis
Job
Tasks/duties
(Job content)

SKA’s
Performance (Human
standards requirements)

Figure 3.1: Type of Information Obtained from Job Analysis

The foregoing information obtained from job analysis about a job could be summarized into
the following three broad categories:
Information about the Job content-The job content can be described as what workers
actually do on their jobs.
Information about the Job Context- The job context refers to the conditions under which a
person’s job is performed and the demands such conditions impose on the individual.
Information about Worker Requirement- worker or human requirement refers to the
Skills, Knowledge, Abilities (SKA’s) and experience etc that a worker needs to possess, to
perform a particular job successfully.

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The job analysis information indicated above is finally used to prepare two important
documents- Job descriptions and Job specifications. Full discussion of these documents will
be available later on.

 Job description is a document that provides information regarding the tasks, duties,
and responsibilities of a job.
 Job specification is a document that outlines the minimum acceptable qualifications
a person should possess to perform a particular job.
3.2. Why is Obtaining this Information Important?
Generally, the information obtained form job analysis is vital for the following purposes in
the organization:
Legal reasons

If for no other reason, there may be a legal need to do job analysis. Suppose that you have
selected one employed among a large number of applicants. One of the rejected applicants
has filed the case at the court. He claims that he was more appropriate for the job than the
one hired. How can you convince the court that he was not? When courts are required to
decide selection cases, the job analysis may be critical; employers wishing to demonstrate
that their selection processes are valid, will need to start with the job analysis.
Human resource management
However, besides any legal reasons for job analysis, there are also important management
reasons for doing the analysis. The job analysis yields an improved process for obtaining,
retaining, and managing an organization’s work and human resources. To say it in other
words, data compiled through job analysis contribute to virtually all Human Resource
Management functions; recruitment and selection, performance evaluation, train in
development, compensation management, job design, work force projections (HR planning),
and work force reduction or expansion decisions. Organizations are using job analysis as a
means of assessing what skills are needed to fulfill the requirements of the job (recruitment
and selection). The performance of employees in organizations is evaluated by how well they
accomplish the duties specified in their job descriptions (performance evaluation).
Organizational communication

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Job analyses can be utilized to enhance communication within the organization. Simply put,
the job description (which is the real job analysis data in a structured format) communicates
the organization’s expectations to its employees.
The job description is simple way of telling people what it is they are expected to do. To
facilitate this communication, the job analysis should use simple sentences or phrases to
define job tasks.
Essentially, the job analysis responders to a question asked by most employees. “What do
you want me to do”?
To be useful, the job analysis should record what the employee should do, to what or to
whom, and at what level of proficiency.
3.4. When is Job Analysis Needed?

Job analysis is performed on three occasions.

1. Job analysis is done when the organization is founded, and a job analysis program is
initiated for the first time.
2. Job analysis is performed when new jobs are created in an organization.
3. Job analysis is used when jobs are changed significantly as a result of new
technologies, methods, procedures, or systems. Job analysis is most often performed
because of changed in the nature of jobs.

3.5. How Job Analysis Information Support HRM Functions

Job analysis data contributes to virtually all Human Resource Management functions;
recruitment and selection, performance evaluation, training and development, compensation
management, job design, work force projections, and work force reduction or expansion
decisions.
Information obtained about the job content (i.e. what is actually done on the job), the job
context (i.e. the conditions under which a person’s job is performed, and the demands such
conditions impose on the individual) and worker requirement (i.e. the qualifications required
to perform the job successfully) is used for laying the foundation for a number of human
resource practices. For instance, without such information, organizations cannot develop
effective human resources procedures for HR planning, recruitments, selection, training,

30
performance appraisal, compensation, or collective bargaining. Let us look at this in detail by
relating the job analysis to each HRM activity.

Job Analysis and Human Resource Planning

A major use of job analysis data is in the area of human resource planning. A job analysis
becomes a basis to do HR planning. Before you try to forecast the number of workers
required in your organization you need to conduct a job analysis. Because a job analysis
provides you the nature and scope of the job in terms of the tasks and operations to be
performed and duties to be carried out, i.e. the process of converting inputs into outputs.
Who should answer what type and number of jobs do you have in the organization?
This will be answered by the job description document prepared from the job analysis
information. After this you can start to think about the type of workers those can fit to your
jobs. What type and number of people do you need for your jobs? The qualifications, skills
level, abilities, attitude, personality and experience that the job holder would need to possess
to perform the job successfully are very important to forecast you work force. You can get
this from the job specification document produced form job analysis you conducted. You can
conclude that forecasting the labor demand of an organization is only possible after the type
of jobs and the type of workers it needs is clearly determined. This is what job analysis has to
do for HR planning.
Job Analysis and Recruitment and Selection
When recruiting new employees, the firm is interested in finding the best “fit” between the
organization and the new employees. Job analysis permits recruiters to find the best “fit”
between organization requirements and individual needs.
An effective recruitment and selection process should be based on objective criteria, and
those objective criteria are based on the job analysis.
An efficient recruitment process will limit applicants to those individuals who can actually
perform the jobs that require new employees. For example, a job advertisement based on the
specific performance criteria identified in the job analysis (and detailed in the job
description), should limit applicants to persons who meet those criteria. A job advertisement
that states the skills, qualification and experience (indicated in job specification) also limits
applicants to persons who can meet it. This is much more efficient than placing

31
advertisements which do not reflect the firm’s (the job’s) specific needs and consequently
result in a multitude of unqualified (both over- and under qualified) applicants.

The selection of an employee should also be based on objective criteria. In this case, the
applicant’s ability to do the critical tasks of the job as determined by the job analysis (and
reflected in the job description). The job description will “define” the ideal standard against
which all applicants will be compared. The “best fit” is then determined by a comparison of
the applicant’s KSA’s (knowledge, skills, and Attitudes) against the requirements of the job.
Job analysis and Training and Development
The job analysis is an essential element to the development of training programs; it serves as
the basis for the training needs assessment (the first step in the development training
programs).
In its simplest form, the training needs assessment is a matter of comparing the job
incumbent’s job performance with the actual requirements of that job (as specified in the job
description). If there is no discrepancy in this comparison, then we have no need for training.
On the other hand, if we identify a gap between the “actual” and the “ideal”, then we have
potentially identified a need for training.
Job Analysis and Performance Appraisal
Performance appraisal should also have a relationship to the critical tasks of the job as
determined by the job analysis (objective criteria). There should be quality standards or level
of proficiency statements for all of the critical tasks. Therefore, the primary question of
performance evaluations: “Did the employee do it at an acceptable quality level?” If the
information with respect to what is actually required to do the job is in the job analysis, then
these questions should be relatively easy to answer.
Job Analysis and Compensation
Relative skill level (the comparison of the sills required for various jobs) is important for
setting relative compensation within the firm. Of course, there are other factors used
indenturing levels of compensation; the external labor market and seniority. However, the job
analysis process should establish relative skill levels among the jobs in an organization in
order to ensure internal equity. The total job is the basis for estimating its worth.
Compensation is usually tied to a job’s required skill, competencies, working conditions,

32
safety, hazards, and so on. Therefore, job analysis is used to compare and properly
compensate jobs

Job Analysis and Labor Relations

Job analysis information is also important to employee and labor relations. When employees
are considered for promotion, transfer, or demotion, the job description provides a standard
for comparison of talent. Job analysis data are needed to defend, for example, decision
involving promotion, transfers, and demotions.
Thus far, we have looked into job analysis as it pertains to specific HRM functions. In
practice, however, these functions are interrelated. Job analysis provides the basis for tying
the functional areas together and the foundation for developing a sound human resource
program.
3.6. Job Analysis: The Process
Job analysis is analyzing the tasks you need to be done in order to complete a job. It doesn’t
have to be difficult or complicated. Job analysis is the process of looking at exactly what a
job entails in order to determine the necessary job qualifications.
Whatever methodology is used, the job analysis should be based on observable behaviors or
work products. By recording behavior and work products in the job analysis, the analysis
concentrates on those aspects of the job which are empirically verifiable.
3.6.1. Characteristics of Job Analysis Process
The process you have to go through to conduct a job analysis finally may come up with
results such as relative ranking of one job to another. This result could be used for various
HRM decisions in the organization. Job analysis process produces such kind of useful
information when it possesses the following characteristics.
Content Validity and Empirical Observations
A job analysis should focus on work behavior(s) and the task associated with them. If work
behavior(s) is/are not observable, the job analysis should identify and analyze those aspects
of the behavior(s) that can be observed and the observed work products.

33
In order to ensure content validity, the job analysis must be a record of observable behaviors
or work products. The job analysis should not record thought processes, attitudes, traits, or
other such constructs.

Employee Input
The work of jobs is done by people and people do not generally behave in random fashion. In
general, people are reasonable and systematic. Furthermore, when asked, people are able to
talk about their jobs in a very organized, systematic manner. Hence, it should be possible to
do a job analysis by talking to job incumbents. Employee’s participation in the job analysis is
very important to make the job analysis more effective and complete.
Accommodating Changing Jobs
The job analysis process must be able to accommodate and adjust to organizational change.
Many jobs undergo constant change, and job analysis systems must address this fact of
change. If the job analysis data are not valid and do not reflect job changes, employment
decisions based on that data may be irrelevant. To avoid being invalid, job analysis data
should be periodically reviewed by employers.
Summary of Job Analysis Process
The process of job analysis can be summarized as follow:
1. Planning the job Analysis
 Identify objectives of job analysis
 Obtain management support
2. Preparing and Communicating the Job Analysis
 Identify jobs and methodology
 Review existing job documentation
 Communicate process to managers and employees
3. Conduct the Job Analysis
 Gather job analysis data
 Review and compile data
4. Developing Job descriptions and Job Specifications
 Draft job descriptions and specifications

34
  Review drafts with managers and employees
 Identify recommendations
 Finalize job descriptions and specifications.
5. Maintaining an Updated Job Descriptions and Job Specifications
 Update job descriptions and specifications as organization changes
 Periodically review all jobs.
3.7. Job Analysis Methods: Basic Types

Job analysis information can be gathered in a variety of ways; by one or the combination of
the following methods. The most commonly used and important techniques are as follows:
 Observation
 Interviews
 Questionnaires
 Diary method
Each method has its own strengths and weaknesses. To overcome the weakness of one
method, it is possible to use it along with other methods.
Observation
Direct observation is especially useful in jobs that consist mainly of observable physical
activities .These kinds of jobs are usually standardized and are relatively simple to observe
and understand what the job entails. Examples of such jobs include janitors, assembly-line
worker, Accounting clerk, etc. Direct observation is often used in conjunction with
interviewing.
Disadvantage
 Direct observation method is limited to jobs with short and repetitive cycles. Jobs
having complex mental activity are difficult to observe .Example, observing the
activities of traveling sales person or a lawyer is difficult.
 If observation is done by untrained persons, there is a high possibility of missing
important information.
Interview –Asking questions
Interview is one of the most widely used method of determining the duties and
responsibilities of the job.
There are three types of interviews used to collect job analysis data

35
  Individual interview with each employee (job holder)
 Group interviews with group of employees havening the same job
 Supervisor interviews with one or more supervisors who are thoroughly
knowledgeable about the job being analyzed.
Advantages
 It allows the worker being interviewed to report activities and behaviors that might
not otherwise be available from organization chart.
 Provides an opportunity to explain the need for and functions of the job analysis.
 Allows interviewees to express their views and work related problems that may not
have been noticed by management
Disadvantages
 There is a possibility of distortion of information
 Employees may tend to exaggerate certain responsibility with expectation that
information gathered may have an impact on their pay.
 It is usually time consuming in terms of scheduling the interview and actually
conducting it. This is especially true if a group of people are involved in the interview
process.
Questionnaires – Standardized questions
Job analysis questionnaires allow employees to fill out forms in which they describe their
job related duties and responsibilities .The questionnaires usually contain combination of
structured and open ended questions. The structured questions ask specific questions
about the job, job requirements, equipment, while an open ended questions ask
respondents to describe their jobs with their own way. Questionnaires are usually filled
by job holder and reviewed by the immediate supervisor. Some typical questions of job
analysis questionnaire include:-
 What is the job being performed?
 What are the major duties and responsibilities of your positions?
 What physical locations do you work in?
 What are the education, experience, skill, and (where applicable) certification and
licensing requirements?
 What activities do you participate in?

36
  What are the job responsibilities and duties?
 What are the basic accountabilities or performance standards that typify you work?
 What are the job’s physical demands? The emotional and mental demands?
 Are you exposed to any hazards or unusual working conditions?
Advantage
 It is a quick and efficient way of obtaining information from large number of
employees.
 It is less costly than interviewing hundreds of employees.
Disadvantage
 Developing questionnaires and testing it (making sure that employees understand the
questions) can be time consuming and expensive.
 Respondents may misinterpret the question and provide the wrong information.
 Exceptions to a job may be overlooked
Diary methods
This method requires job holders to record their daily activities and the time spent on each
activity .This method can provide a complete picture of the job especially if it is combined
with subsequent interview with the worker and his /her supervisor.
Advantage
 Provides detailed information abut the job.
Disadvantage
 Job holder might exaggerate some aspect of their jobs to make their task look more
important than other activities.
In summery, these methods are by no means mutually exclusive. No one method is superior
to others. It is actually advisable to use combination of these methods in order to avoid one
sided view, taking in to account the cost and benefit associated with methods.
3.8. Who Does the Job Analysis?
Conducting a reliable and valid job Analysis is a job for a trained professional. However,
some firms use a job analyst; others use the supervisor, the job holder, or some combination
of these to collect job analyst information.
3.9. Steps in Job Analysis

37
The six steps in doing a job analysis are as follows.
Step 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 types of data you collect and
the technique you use to collect them. Some techniques-like interviewing the employee and
asking what the job entails and what his responsibilities are – are good for writing job
descriptions and selecting employees for the job. Your first step should therefore be to
determine the use of the job analysis information. Then you can decide how to collect the
information.
Step 2: Collect background information. Next, review available background information
such as organization charts, process charts and job descriptions.
Organization charts: show you how the job in question relates to other jobs and where it fits
in the overall organization. The organization chart should identify the title of and with whom
the job incumbent is expected to communicate.
A process chart: provides a more detailed understanding of the flow of work than you can
obtain from the job under study. Finally, the existing job description, if there is one, can
provide a good starting point from which to build your revised job description.
Step 3: Select representative positions to be analyzed. This is necessary when many
similar jobs are to be analyzed and it is too time-consuming to analyze, say jobs of all
assembly workers.
Step 4: Collect job analysis information. Your next step is to actually analyze the job
collecting data on job activities, required employee behaviors, working conditions, and
human requirements (like the traits and abilities needed to perform the job). For this, you
would use one or more of the job analysis techniques explained in the remainder of this
chapter.
Step 5: Review the information with the participants. The job analysis provides
information on the nature and functions of the job. This information should be verified with
the worker performing the job and the person’s immediate supervisor. Verifying the
information will help to determine if it is factually correct, complete, and easily understood
by all concerned. This “review” step can also gain the person’s acceptance of the job analysis
data you collected by giving the person a chance to modify your description of the activities
he or she perform

38
Step 6: Develop a job description, and job specification. In most cases, a job description
and a job specification are two concrete outcomes of the job analysis. The job description (to
repeat) is a written statement that describes the activities and responsibilities of the job, as
well as important feature of the job such as working conditions and safety hazards. The job
specification summarizes the personal qualities, traits, skills and background required for
getting the job done. It may be either a separate document or on the same document as the
job description.
3.9. Outputs of Job Analysis: Job Descriptions and Job Specifications
We have seen that job description and job specification are the two documents produced
form information gained in job analysis process. The point of discussion in this section is the
type of information included in job description and job specification.
3.9.1. Job Description
The information output from job analysis is used to develop Job descriptions and Job
specifications. Together, they summarize job analysis information in a readable format.
Information obtained through job analysis is crucial to the development of job descriptions.
Earlier, job description was defined as a document that states the tasks, duties, and
responsibilities of the job. Job descriptions must be both relevant and accurate. They should
provide concise statements of what employees are expected to do on the job and indicate
exactly what employees do, how they do it, and the conditions under which the duties are
performed. The following are among the items frequently included in job descriptions:
 Major duties performed
 Percentage of time devoted to each dust
 Performance standards to be achieved
 Working conditions and possible hazards
 Number of employees performing the job and to whom they report
 The machines and equipment used on the job
The contents of the job description (what a job entails) vary somewhat with the purpose for
which it will be used. If you’re creating a written job description, it is generally not necessary
to list any duty that does not take up more than 5 percent of the job holder’s time. These
seldom performed tasks shouldn’t be considered in writing the job description because they
simply aren’t a big enough part to warrant consideration. However, if there is some aspect of

39
a job’s requirements that occurs periodically or even just once a year, but has a large impact
on the business, it should be included.

Sample Job Description.

As presented above, job description is a written statement of what the jobholder does, how it
is done, and why it is done. It should accurately portray job content, environment, and
conditions of employment. A common format for a job description includes the job title, the
duties to be performed, the distinguishing characteristics to the job, and the authority and
responsibilities of the jobholder. An example of a job description for a record clerk is
provided below.
JOB Analysis (Example): COMMERCAL BANK OF ETHIOPIA (ARAT KILLO
BRANCH)
Job Descriptions
The supervisor works under the direction of personnel Manager: Plans goals; supervises the
work of organization resources.
Job Duties and Responsibilities
1. Plans goals and allocates resources to achieve them; monitors progress toward
objectives and adjusts plans as necessary to reach them, allocates and schedules
resources to assure their availability according to priority.
2. Supervises the work of ampleness; provides clear instructions and explanations to
employees when giving assignments, schedules and assigns work amalgam (mix)
plebes for maximum efficiently, monitors employees’ performance in order to
achieve assigned objectives.
3. Maintains accurate records and documents actions to details; documents important
aspects of decisions and actions.
4. Coordinates with others to achieve the optimal use of organization resources;
maintains good working relation ships with colleagues in other organization units;
represents others in unit during division or corporate wide meetings.
Job Requirements

40
1. Ability to apply basic principles and techniques of supervision
 Knowledge of principles and techniques of supervision
 Ability to plan and organize the activities of others
 Ability to get ideas accepted and to guide grouper individual to accomplish task.
 Ability to modify leader ship style and management approach to reach goals.
1. Ability to express ideas clearly both in writer and oral communications.
Minimum Qualifications
Twelve years of general Education equivalent; and one year supervisory experience
substitute 45 hours class room supervisory training for supervisory experience
3.9.2. Job Specification

What job specification Consists of?

Recall the definition of job specification as a document containing the minimum acceptable
qualifications a person should possess to perform a particular job. In other words, a job
specification is a list a job’s “human requirements”, that is, the requisite education, skills,
personality and so on that the job holder requires to perform the job satisfactorily. Items
typically included in the job specification are educational requirements, experience,
personality traits, and physical abilities. This type of information is extremely valuable in the
recruiting and selection process.
After job have been analyzed and the job specifications written, the result should be reviewed
with the supervisor and the worker to ensure that they are accurate, clear, and
understandable. This reviewing process results with employees also helps to gain their
acceptance.
Based on the information acquired through job analysis, the job specification identifies the
knowledge, skills, and abilities needed to do the job effectively. Individuals possessing the
personal characteristics identified in the job specifications should perform the job more
effectively than individuals lacking these personal characteristics. The job specification,
therefore, is an important tool in the selection process, for it keeps the selector’s attention on
the list of qualifications necessary for an incumbent to perform the job and assists in
determining whether candidates are qualified. An example of a job specification for a record
clerk positions is shown below.

41
Sample of a Job Specification

Job title: Record Clerk

Education: Minimum number of years of schooling: 12. Type of education: General with
emphasis on business. Special subjects required: some background and familiarity with
accounting, office procedures, office machines, and the telecommunications industry.
Physical and Health: Good health; emotional stability.
Appearance: Neat and clean.
Mental abilities: good with figures.
Special Abilities: Ability to work with others, manual dexterity.
Previous work experience: Minimum of one year, preferably in an industrial organization.
Special knowledge or skills: skilled in filing documents, checking records, compiling data,
and initiating reports.
Maturity: Must be capable of assuming increased responsibly within two years.
Other: except
ThethatComponents
incumbent would
of JobbeDescriptions
ready for promotion (normally to the position of
& Job Specifications
record supervisor or analyst) with in 24 months.

Job Analysis
Job Analysis

Determining
Determining Pertinent
pertinent information
Information Relating
relating to the to the
nature of nature
a job
of a job

Job Description
Job Specifications
A written description of a job
and its requirements A written statement of the
Job Titles & Location necessary qualification of
Duties to be performed the job holder
Characteristic of the job Education
Organizational Experience
Relationship Training
Relation to other jobs Mental Abilities
Machines, tools, and Physical Efforts &
materials Skills
Working Conditions Decision Making abilities,
etc.

42
3.10. Job Design
Job design is the process of determining the specific tasks to be performed, and methods used
in performing these tasks, and the way the job relates to other work in the organization. Job
enrichment and job enlargement are the two components worth considering while designing a
job. These concepts will be discussed next.
Job Enrichment
Job enrichment is the restructuring of the content and level of responsibility of a job to make
it more challenging, meaningful, and interesting to a worker.
Which type of job do you prefer? A job with repetitive and routine tasks in which you do not
make any decision or a job that givens you new experiences everyday in which you make
decision? Why?
Job Enlargement
There is a clear distinction between job enrichment and job enlargement. Job enlargement
involves changes in the scope of a job so as to provide greater variety to the worker. It
provides a horizontal expansion of duties. For example, instead of knowing how to operate
only one machine, a person learns to operate two or more even three but is given no higher
level of responsibility. On the other hand, job enrichment gives a person additional
responsibilities; it involves a vertical expansion of duties. For instance, the worker may be
given the additional responsibility of scheduling the three machines. Increased responsibility
means providing the worker with greater freedom to do the job; this includes making
decisions and exercising more self-control over work.
Summary

In conducting a job analysis, one needs to collect background information about the job to be
studied, select incumbent job experts, gather the data, analyze the data, and produce the end
results:
 Job descriptions- a written statement of what the jobholder does (duties and
responsibilities of the job).
 Job specifications – the personal characteristics needed to perform successfully on the
job.
Without a properly conducted job analysis, a human resource manger would find it difficult,
if not impossible, to perform satisfactorily the other human resource-related functions. Job

43
analysis data impacts virtually every aspect of human resource management – HR planning,
recruitment, selection, job specifications, job descriptions, performance appraisal,
compensation, safety and health, employee and labor relations, and legal employment
practices.
 The need for sound job analysis system is critical for:
o Satisfying various legal requirements related to employees matters.
o Facilitating the communication in the organization through articulated documents
– job description and Job specification.
o Smoothing the HRM activities in the organization.

HUMAN RESOURCE PLANNING

___________________________________________________________________________

After reading this Unit, you will be able to:

 Define HR Planning;
 Explain why HR planning is important for organizations;
 Apply the demand forecasting and supply forecasting processes and techniques;
 Draw relationship of activities of HR planning in a organization;
 Predict the outcomes of HR planning process;
 Elaborate internal and external factors influencing HR demand and supply forecasting
decisions of business organization; and
 Identify arrangements of organizations for attaining HR demand and supply
equilibrium.
___________________________________________________________________________
Introduction

In order to hire personnel on a scientific basis, one should establish in advance a standard of
personnel with which applicants can be compared. This standard should establish the
minimum acceptable qualities necessary for adequate performance of the job duties and
responsibilities to determine human abilities required for execution. Decisions concerning
human resources requirements are not confined to a personnel department. It will be found
that the line supervisor has much to contribute. Human Resources planning determine the

44
human resource needs of the whole enterprise and its every department for a give future
period for the various operations envisaged in connection with the accomplishment of the
organizational objectives and departmental goals. Human resource planning is the
predetermination of the future course of action chosen from a number of alternative courses
of action for procuring, developing, managing, motivating, compensating, career planning,
succession planning and separating the human element of enterprise. It determines a
conscious choice of patterns of the humanization of work environment in an organization.
1.1.Definitions of HR Planning
Different definitions of HR planning are given below. Read each of them thoroughly

 HR planning involves forecasting the need for labor and the supply of labor, then
planning the programs necessary to ensure that the organization will have the right
mix of employees and skills when and where they are needed.
 Human resource planning is a process that helps organization identifies their future
HRM needs and how those needs can be met.
 Human resource planning is the process of analyzing and identifying the need for
and availability of human resources, so that the organization can meet its objectives.
 Human resource planning is the process of analyzing and identifying the need for
and availability of human resources, so that the organization can meet its objectives.
 Human Resource Planning (HRP) is the process an organization uses to ensure that it
has the right number and the right kinds of people to deliver a particular level of
output or services in the future.
 Human Resource Planning is the systematic and continuing process of analyzing an
organization’s HR needs under changing conditions, and developing personnel
policies appropriate to the longer term effectiveness of the organization.

HRP is one of the most important elements in a successful HRM program, because it is a
process by which an organization ensures that it has the right umber and kinds of people, a
the right place, at the right tie, capable of effectively and efficiently completing those tasks
that will help the organization achieve its overall strategic objectives. Human resource
planning then ultimately translates the organization’s overall goals into the number and types
of workers needed to meet those goals. Without clear-cut planning, and direct linkage to the

45
organization’s strategic direction, estimation of an organization’s human resources needs are
reduced top mere guess work.
1.2.Essence of HR Planning

From the definitions given above, we can identify the following activities HR planning is
concerned with:
 Information Gathering (information obtained is used in the following stage to
determine HR needs and HR supply)
 Forecasting (information obtained form the above stage is used as a basis for
analyses, to actually forecast the organization’s HR needs and potential HR supply.
 Predictions or assumptions developed in the above stages are used as a basis for
developing HR plans to meet the organization’s present or future HR requirements.
 HR Plans, policies and programs used to adjust the gap between HR demand and
HR supply, to ensure alignment (integration) with the organization’s business and
corporate strategies.
 Evaluation of the accuracy of forecasts and Hr plans used to match HR surpluses
with HR demand.
1.3.Purpose of HR Planning

Planning is a time consuming and expensive process, and it seldom produces perfectly
accurate predications or perfectly correct choices.
Planning provides links between actions and consequences. Without planning you have no
way of knowing what assessments are useful, whether you’re moving in the right direction,
which of your action are achieving the greatest results, and how to integrate the different
activities so that they complement one another. Without planning, HR management can
become just a collection of activates each one independent of the others and focusing on its
own goals: staffing activities might focus only on filling vacancies quickly, compensation
activities might focus only on making sure payroll costs are as low as possible, training
actives might focus on delivering standard activities at low cost. When HR management is
just a collection of activities, long-run and integrated standards are seldom established, and
results of decisions are seldom compared to the standards that motivated them.

46
HRM is not simply a set of activities but an integrated strategy to manage human resources in
concert with other resources to achieve efficiency and equity. Activities must be directed
toward standards and be systematically evaluated on whether they achieve their goals. They
must also be integrated, for combinations of activities often can accomplish more than the
sum of the individual activities.
Not only HR planning link and integrate choices about human resource activities, it also links
the HR choices to the broader strategic choices of the organization. In a very real sense,
internal and external stakeholders judge HR management by its standards. Ideally,
stakeholders should be involved in shaping the standard. If HR managers focus on costs, the
function will be judged as a cost center. If HR managers focus on carrying out activities
planned, it will be judged as a group of activities. If HR managers link their decisions to
organizational goals, it will be judged as an integral contributor to the organization.
Hence, the aims of human resource planning are to ensure that an organization:
 Strategically aligns its HR plans, policies and practices with supporting corporate
objectives.
 Is able to anticipate its future HR needs and to estimate available HR supply, both
inside and outside of the organization, as a prerequisite for meeting those needs.
 Is able to anticipate the problems of potential HR surpluses or deficits, as a basis
for managing these imbalances.
 Is able to develop the necessary HR plan and practices required to obtain and retain
the quantity and quality of employees required to achieve the organization’s
corporate objectives.
 Can develop a well-trained and flexible workforce, thus contributing to the
organization’s ability to adapt to an uncertain and changing environment.
 Make the best use of human resources.
1.4.Steps in the HRP Process

With the expansion of business adoption of complex technology and professional

management techniques, the process of human resource planning has assumed great
significance. HRP consists of the following stages.
Step 1. Studying short and long range plans of the organization as well as determining the
impact of the organization’s objectives on specific organizational units.

47
Before undertaking the human resource planning of an organization the short-term and long-
term objective objectives should be analyzed. The process of human resource planning
should start with analyzing the organizational plan. Analysis of organizational plans and
programmes help in forecasting the demand for human resources as it provides the quantum
of work activity. According to Sikula, “the ultimate mission or purpose is to relate future
human resources to future enterprise needs so as to maximize the future returns on
investment on human resources”.
The business plan would be a blue print of desired objectives. This objective stated in
economic terms, would incorporate the growth rate of the company, diversification plans,
market opportunities and Government policies.
Therefore, human resource planning should meet two requirements.
1. It should be directly related to the essential nature of the organization.
2. The changes in the selected factor are proportional to changes in the human resources
required in the organization.
In a small organization, a human resource plan could be formulated to cover the whole
organization. However in a large organization size may necessitate human resource planning
by separate department.
Step 2. Forecasting the overall human resource requirements i.e. defining the skills,
expertise, and total number of employees required in the organization.
A second element of the planning process is forecasting human resourced needs based on
business strategies, production plans, and the various indicators of change in technology and
operating methods. Forecasting is usually accomplished by utilizing historical data and
reliable ratios (such as indirect/direct labor) and adjusting them for productivity trends. The
result of this forecast is a spreadsheet showing employees in terms of numbers, mix, cost,
new skills, job categories, and numbers and levels of managers needed to accomplish the
organization’s goals. Experience has shown that producing this forecast is the most
challenging part of the planning process because dealing with business and technical
uncertainties several. Years in the future requires creativity and a high of participation.
Demand forecasting involves predicting the numbers and types of people the organization
will need at some future point in time to achieve its strategic objectives. The information
used to make such predictions, would have been obtained form stage one, where the

48
organization’s objectives, plans and strategies were considered for their HR implications. For
example, demand forecasting would involve finding out what numbers and types of
employees will be required to successfully assist the organization in achieving its strategic
objectives. Another method available to planners to determine HR needs would be to
consider what would be the manpower required to handle an expected level of demand for an
organization’s products or services. Thus in this example, expected sales for an
organization’s products or services would be established first, and then the required
demand for staff to achieve such sales, would be estimated second. To assist with making
such predications about HR demand, two general approaches to demand forecasting are
commonly used:-
 Statistical / Mathematical Approaches
 Judgmental Approaches
Statistical Approaches: - some forecasting techniques are based on statistical methods.
Some of them are given below: -

1. Ratio-trend Analysis:- The ratio-tend analysis is carried out by studying past rations
and forecasting rations for the future. The components of internal environmental
change are considered while forecasting future rations. Activity level forecasts are
used to determine the direct human resource requirements. This method depends on
the availability of past records and the internal environmental changes likely to occur
in future.
2. Econometric Model:- Under the econometric model the previous data is analyzed and
the relationship between different variables in a mathematical formula is developed.
The different variables affecting the human resource requirements are identified. The
mathematical formula so developed is then applied to the forecasts of movements in
the identified variables to produce human resource requirements.
3. Work-study techniques:- work-study techniques are generally used to study work
measurement. Under the workload analysis the volume of workload in the coming
years is analyzed. These techniques are more suitable where the volume of work is
easily measurable. If the planners forecast expansion in the operations, additional
operational workers may be required. If the organization decides to reduce its

49
 operations in a particulate area, there may be decreased demand for the workers. If
there is likely to be no change, present demand for workers will continue. The work
study method also takes into account the productivity pattern for the present and
future, internal mobility of the workers like promotion, transfer, external mobility of
the workers like retirement, deaths, voluntary retirements etc.
Judgmental Approaches: - Judgmental Approaches are also known as the conventional
method. The forecasts are based on the judgment of those managers and executives who have
intensive and extensive knowledge of human resource requirement. Judgmental forecasts
could be of two types: -
1. Managerial estimate:- Under this method, the managers or supervisors who are well-
acquainted with the workload, efficiency and ability of employees, think about their
future workload, future capabilities of employees and decide on the number and type
of human resources to be required. An estimate of staffing needs is done by the lower
level mangers who make estimates and pass them up for further revision.
2. Delphi Method: - A survey approach can be adopted with the Delphi technique. The
Delphi process requires a large number of experts who take turns to present their
forecast statement and underlying assumptions to the others, who make revisions in
their forecasts. Face-to-face contact of the experts is avoided.

50
 Human Resource Planning

Environmental Information from Various

Factors Organization Units

Economic
activity Recruitment

Organizational Overall HR Inventory of Net HR

Competition Objective Requirement Present HR Requirement

Layoffs, terminations,
Government Early, retirements,
voluntary
Registration

Other

Promotions
Death Anticipated
Changes
Discharge Transfers

Resignation Retirements

51
Step 3. Information Gathering

After engaging in demand forecasting using both mathematical and judgmental tools to more
specifically determine the numbers and types of employees that will be required to support
the achievement of the organization’s corporate objectives, the third step in the HR planning
process is to collect information to be used for developing HR Supply forecasts, to predict
the availability of these employees. (Commonly referred to as determining future HR
supply). Two sources of information are available. One is the internal source and the other is
the external source.
i) Internal audit-determining the internal labor supply
The first major type of information to be gathered is obtained form inside the organization. It
is about maintaining accurate information concerning the composition, assignments, and
capabilities of the current work force. This information includes job classifications, age,
gender, ethnicity status, organization level, rate of pay, and functions. Employee information
may also include data, such as skills, education, training received, and career interests.
Obtaining such information is deferred to as carrying out an internal audit of the internal
labor market, used for determining the internal labor supply. Information is needed on the
current state of human resources in the organization, such as, how many individuals are
employed in each job and location, their skills levels, attitudes and how many are expected to
leave or retire during the forecast period.
Because, accurate knowledge about the current state of an organization’s human resources,
will give planners some indication of what are the numbers and types of human resources the
organization already has. This is important, as it will, amongst other things, prevent the
organization form unnecessarily engaging in obtaining employees form outside the
organization, when in fact such employees already exist within the organization. Equally, it
will also prevent planner’s form unnecessarily engaging in employee training for skills that
are also currently available within the firm.
Information a bout the current state of an organization’s human resources may be obtained
either from:
 computer records stored on a Human Resource Information System (HRIS)
 a Skills Inventory
 A Qualification Inventory

52
  Succession Planning

ii) External environmental scanning-determining the external labor supply

The second source of information is obtained form data received form the external
environment (which includes obtaining informational the current conditions or predicted
changes in the general economy, the economy of the specific industry, the relevant
technology, competition, government legislation, demographic and social trends and the
labor market’s present and future conditions. Obtaining such information from the eternal
business environment is referred to as eternal environmental scanning, used for determining
the external labor supply.
Because an organization does not already possess an adequate supply of employees to
support achieving its objectives, in terms of the right numbers and types, by scanning the
external environment, the organization will be able to identify another potential source of
employees from outside the organization, from which the organization’s HR requirements
may be satisfied.
Data about the external environment may be obtained from:
 Examining the Economy-general and specific industry
 Examining current and new Technology
 Examining the actions of competing employers
 Examining Labor Markets (e.g. unemployment rates)
 Examining Demographic and Social Trends (e.g. population, age composition,
gender)
 Examining Government Regulations (e.g retirement age laws)
 Evaluating the net migration into and out of the area
 Evaluating the implications of the numbers and the quality of individuals graduating
and leaving schools and tertiary institutions

Step 4- Taking an inventory of present human resources i.e. developing a profile of current
status of human resources.
Once the demand for labor is predicated, and relevant information is obtained about the
internal and external labor markets, it is now necessary to actually forecast the supply of

53
labor that the organization will require to meet such demand. Supply forecasting therefore
involves estimating the labor supply or the availability of workers, in terms of number or the
required skills sets, to meet the organization’s labor demand. An organization’s labor
supply is determined or estimated by assessing the:-
1. The numbers and skills sets and attitudes of the existing employees within the
organization. That is, forecasting internal supply. (NB). Remember, information
about the organization’s internal labor market would have already been obtained
from stage three-see above.)
2. Or carrying out a similar evaluation of potential employees form outside the
organization. That is, forecasting external supply. (NB. Information about the
organization’s external labor market would likewise already have been obtained
from stage three-see above.)
Based on the data gathered form inside and outside the organization, it means you are going
to make forecasting for both internal and external labor supply.
Step 5. The process of Matching (Forecast of total HR requirement – Internal supply of HR =
Net HR requirement.)
This stage involves matching the predications made for HR demand against the predictions
made for HR supply-to determine the outcomes. For instance, does HR demand exceed
available HR supply or does HR supply exceed HR demand? The aim is to attain a balance
between them. Mostly demand will not be equal to supply at a point in time.
 If HR demand is greater than HR supply, or
 If HR supply is greater than HR demand; the under-mentioned approaches may be
used to create equilibrium. That is, to ensure that HR supply matches HR demand the
various techniques can be used.
Step 6. Outcomes of the HR Planning Process
Having made demand and internal supply forecasts and considered the state of the external
labor market, the HR planner can anticipate future problems with the matching of HR
demand with employee supply. As such, if such problems do occur, appropriate HR or
personnel plans and programs will need to be put in place to off-set any imbalances between
HR demand and supply.

54
Managing a Human Resource Deficit and Surplus Supply
When the forecasted HR demand is greater than the forecasted HR supply, it creates HR
deficits supply. But when the reverse happens it creates HR surplus supply. Now the question
is how an organization can manage the deficit or surplus. You will also be introduced to the
alternative techniques organization can use to mitigate this problem. These methods or
techniques are called Human Resource programs to manage deficit or Surplus supply.
1. HR Programs Used to Manage Surplus Supply
HR surplus supply results when forecasted supply is greater than the forecasted demand. HR
department must design and apply techniques to overcome the excess of supply over demand.
Usually the following techniques are used.
Downsizing (out placement)
Downsizing is a reduction in the number of people employed by a firm (also known as
restructuring and rightsizing). Companies downsize their employees in difficult times and
rehire when time gets better. The negative impact of downsizing is that remaining employee
trust will reduce significantly. These workers believe that they might be let go the next time.
Early Retirement
Early retirement of some present employees is another way to reduce the number of workers.
Some employees will be delighted to retire, but others will be somewhat reluctant. Those
who are unhappy to retire early may be willing if the retirement benefits are made attractive.
Layoffs- (unpaid leaves of absence)
At times, a firm has no choice but to lay off a part of its workforce. Lay off is not the same
with firing but the effect is similar. In both cases the worker is no longer employed. Lay off
procedures are usually stated in the labor-management agreement. Usually, workers with the
least seniority are laid off first.
Job Sharing
Job sharing is an approach to work that is attractive to people who want to work fewer than
40 hours per week. In job sharing, two part-time people split the duties one job in some
agreed-on manner and are paid according to their contributions.

55
Pay reduction
Firms use pay reduction to reduce the number of full-time workers. A worker whose pay is
reduced usually tends to leave the company.
2. HR Programs Used to Manage Deficit Supply
Deficit supply of employees results when the forecasted employees demand is in excess of
the forecasted employee’s supply. This is a more serious problem which requires due
attention of management. Appropriate methods to mitigate the deficit are presented below.
Recruitment & Selection
When deficit is forecasted companies must plan to attract candidates (applicants) from the
labor market and select the required number who fits their requirement.
Improve Retention Rates
Here there are two things to be considered- the labor turnover and labor stability (retention
rates).
Labor turnover ratio

Labor retention rate:

Turnover is a general measure of the numbers moving through the organization, whereas by
calculating the stability index shown above it is possible to determine whether or not it is the
same jobs which are subject to a high turnover, and therefore, whether or not it is a
widespread problem, or located in a particular occupation or department.
Overtime
Perhaps the most commonly used method of meeting deficit of employees is having
permanent employees work overtime. Overtime may help both employer and employees. The
employer benefits by avoiding recruitment, selection, and training costs. The employees gain
from increasing income during the overtime period.
Yes, there are potential problems with overtime. Many manages believe that when they work
employees for unusually long periods of time, employees may became fatigued and lack the

56
energy to perform the work at normal rate. The other possible problem is related to the use of
prolonged overtime. Employees may slow down their pace so that overtime will be assured.
Training
Companies can also use training their existing employees as a means to overcome shortage of
some skills in the labor market. A company trains its employees in period of deficit supply of
employees to fill a growth gap, that is, to promote them to the next open position in the
organization.
Outsourcing
Outsourcing is the process of transferring responsibility for an area of service and its
objectives to an external provider. In other words, outsourcing is a subcontracting of various
functions to other firms. This decision is usually made when the subcontractor is viewed as
an organization that can perform a given function with perhaps even greater efficiency and
effectiveness.
Outsourcing may be made to avoid hiring additional employees or to implement the program
of downsizing. It has its own problems. The primary obstacles seem to be twofold: cost
issues and loss of control on the outsourced activities.
Talent Search is a service company engaged in recruiting and selecting workers for private
and NGOs. Let me say ABC Company requested Talent Search to hire a secretary on behalf
of them. ABC Company will communicate detail information about the duties and
responsibilities of the job, the qualification required, working place, salary etc to Talent
Search. Talent Search will publicize the vacancy, recruit candidates, and make final
selection. The selected secretary will be sent to ABC Company for hiring, Talent Search will
be paid for its services. This is what is called outsourcing of employment process.
1.5. Guidelines for making HR planning effective
Some of the steps that may be taken to improve the effectiveness of human resource planning
are given below: -
1. Objectives: - The HR plan must fit in with the overall objectives of the organization.
Important aspects such as working conditions, human relationships etc., must kept in
mind while developing the plan. The HR plan should be balanced with the corporate
plan of the enterprise. The methods and techniques used should fit the objectives,
strategies and environment of the particular organization.

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2. Top Management Support: - The plan must meet the changing needs of the
organization and should enjoy consistent support from top management. Before
starting the Human Resource Planning process the support and commitment of top
management should be ensured. Moreover, the exercise should be carrying out within
the limits of a budget. There is no use formulating plans, which cannot be
implemented due to financial constraints.
3. Appropriate Time Horizon: - The period of a human resource plan should be
appropriate to the needs and circumstances of the specific enterprise. The size and
structure of the enterprise as well as the changing aspirations of the people should be
taken into consideration.
4. Manpower Inventory: - The quantity and quality of human resources should be
stressed in a balanced manner. The emphasis should be on filling future vacancies
with right people rather than merely matching existing people with existing jobs. The
organization must have an up-to-date employee skills inventory showing pervious
jobs held, tenure on current job, educational and training qualifications, specific
knowledge and skills, prior work performance, past and current compensation,
mobility factors. Markov Analysis (an approach to forecast the internal supply pf
manpower tracking past patterns of personnel movements) may be pressed in to
service while preparing the manpower inventory. Upward mobility of existing staff
needs to be considered carefully.
5. Human Resource Information System: - An adequate database should be developed
for human resources to facilitate human resource planning. To manage employee
skills inventories, organizations should maintain computerized human resource
information systems containing data on: individuals, demographics, career
progression, appraisals, skills, interests, training, target positions, performance
ratings, geographic preferences, promotability ratings etc.
6. Adequate Organization and Co-ordination: - Human resource planning function should be
properly organized. A separate manpower planning division must be created, especially in
large organizations to coordinate manpower planning exercise at various levels. The various
plans for procurement, promotion and retention of human resources in an optimal manner by
filling future vacancies with right type of people.

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 CHAPTER FOUR
EMPLOYEE RECRUITMENT, SELECTION, PLACEMENTAND
INDUCTION/ORIENTATION OF HUMAN RESOURSES
___________________________________________________________________________
After you complete reading this Unit, you will be able to:
 Define recruitment of human resource using you own words.
 Explain the factors influencing recruitment practice of an organization.
 Draw the flow of recruitment process step by step.
 Figure out main sources of recruitment for an organization.
 List the advantages and disadvantages of each recruitment source
___________________________________________________________________________
Introduction
The quality and the number of persons to be recruited at a fails to procure the services of
persons with required qualifications, skill and calibre continuously, a time may come
ultimately when all the qualified persons retire and the organization is certainly bound to
suffer. Therefore, the importance of recruitment and selection of the right types of persons at
the right time is indispensable to the organization.

5.1. Recruitment Defined

 According to Kempner-“Recruitment forms the first stage in the process which

continues with selection and ceases with the placement of the candidate”.

 According to Flippo- Recruitment “is a process of searching for prospective

employees and stimulating and encouraging them to apply for jobs in an
organization”.

 In the words of Mamoria- “Recruiting is the discovering of potential applicants for

actual or anticipated organizational vacancies”.

Recruitment is the process whereby a firm attracts or finds capable individuals to apply for
employment. Of course, the objective is to find these applicants at the lowest possible cost.

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This process begins when new recruits are sought, and end when applicants have submitted
application forms or resumes. The result is a pool of job-seekers form which the firm can
then select the most qualified.
Smart companies recruit employees they can retain, and retention depends on getting the
right people in the right job in the first place. So, while getting large pool applications is
important, getting the right type of applicant is even more important.

In effect, it involves:
 Identifying the sources where the required number and kind of employees are/will be
available
 Developing suitable techniques to attract the desirable candidates
 Stimulating as many candidates as possible and be able to attract large number of
candidates. The higher the number of applicants the better chance of being selective
in the hiring process.

5.2. Constraints on Recruitment

Logically, firms would seek to recruit in a manner that guarantees the greatest number of
qualified applicants. However, there are often constraints on the recruitment process which
prohibit some methods, some of these constraints re

 Organization Policies
 Affirmative-action Programs
 Recruiter Habits
 Environmental Conditions
 Job Requirements
Organizational Polices
An example of an organizational policy might be a “promote-from-within” policy.
Frequently, such policies are encountered in unionized firms where the collective agreement
stipulates that job openings must be posted internally prior to seeking applicants form outside
the organization.

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Further, in many unionized environments, policies may restrict the number of part-time
employees working for the firm. This is clearly a recruitment constraint insofar as it places
limitations on the firm. However, it may will also limit the number of applicants because
some very highly qualified an applicants may simply prefer part-time employment. Because
some very highly qualified applicants may simply prefer part-time employment. Another
organizational policy which could potentially, constrain recruitment efforts us a firm’s
compensation policy. For example, big companies in Ethiopia which competes with private
sector firms for employees might feel constrained because of public sector, government-
imposed, wage controls. In such a case, the wage controls serve to limit the number of
applicants, who could earn higher wages in the private sector.

Affirmative-action Plans
Occasionally, firms may adopt affirmative-action policies in an effort to attain a workforce
that is more representative of the general populace. In effort to increase workforce diversity,
firms may choose to voluntarily hire persons with specific characteristics. More often, such
affirmative action policies are mandated by law.

There is ample evidence in all sectors of society that equal access to employment has been
denied to members of certain groups because of their sex, ethnic characteristics, or disability.
This situation not only violates basic human rights but also hinders economic growth by
preventing the full participation of skilled individuals from designated groups. Women,
visible minorities and persons with disabilities face significant but different disadvantages in
employment. Some of these include high unemployment, occupational segregation, pay
inequities and limited opportunities for career progress.

However, all employers are legally obligated by federal or regional human rights statutes and
employment standards legislation to ensure that no qualified individual is treated unfairly
because of assumptions associated with sex, ancestry, disability status, or other non-bona fide
occupational requirements.

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Recruiter Habits
Recruiter habits may also constitute a recruitment constraint. For example, past successes
may lead to habits or preferred tendencies in recruitment. One recruiter, who had played
football, had had considerable success recruiting other football enthusiasts. Whereas he had
luckily had this initial success, he went so far as to overtly seek out football players in his
recruitment (justifying his choices by statements such as: “Football players play and work by
the spirit of the rules, not the letter of the rules.”) Obviously, football skills are not
necessarily indicators of job-related success. Such recruiter habits do not constitute good
recruitment practices. In the end, such habits may actually perpetuate past mistakes
Environmental Conditions
Few organization function in a vacuum, or a closed system. Organizations are generally
subject to changes in their environment. This includes changes in the labor market. The rate
of unemployment in an area can have a profound influence on recruitment. High
unemployment, or a surplus of labor supply, may result in a larger number of skilled
applicants for a particular job than would be the case in times of full employment. Firms can,
for example, take advantage of layoffs in related industries, as skilled workers become
available. On the other hand, the recruiting activities of competitors can limit the supply of
qualified applicants.

Spot shortages in certain skills also influence recruitment insofar as such shortages may
require the firm to look for less-skilled individuals, and then to compensate for deficiencies
through training programs.
Changes in legislation governing the employment of certain classes of employees can also
constrain recruitment activities. If, for example, the degree of qualification necessary to do a
particular job is changed by way of legislation, then the firm’s recruitment activities may also
need to change.
Job Requirements
Generally, skilled workers are more difficult to find than unskilled workers. A limited pool of
potential applicants causes firms to use different recruiting techniques. Whereas an

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advertisement placed in a newspaper’s classified section may serve to attract unskilled
workers, recruitment of skilled workers may require more sophisticated techniques.
5.3. Recruitment Process

The figure below indicates the recruitment process. Study the figure thoroughly.

Human Resource Planning

Recruitment

Internal Sources External Sources

Internal Methods External Methods

Recruited
Individuals

The above figure shows that when human resource planning indicates a need for employees,
then the recruitment process starts. Frequently, recruitment begins when a manger intimates
an employee requisition. The employee acquisition is a document that specifies job title,
department, and the date employee is needed for work, and other details. With this
information, mangers can refer to the appropriate job description to determine the
qualifications the recruited person needs.

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The next step in the recruitment process is to determine whether qualified employees are
available within the firm (the internal source) or must be recruited form external sources,
such as colleges, universities, and other organizations. Because of the high cost of
recruitment, organizations need to use the most productive recruitment sources and methods
available.

Recruitment sources are the locations where qualified individuals can be found. Recruitment
methods are the specific means by which potential employees can be attracted to the firm.
When the sources of potential employees have been identified, appropriate methods for either
internal or external recruitment are used to accomplish recruitment objectives.
5.4. Sources of Recruitment
There are two sources of recruitment- Internal and External Sources
1. Internal Sources:
Vacant positions in organizations could be filled by those existing employees through
transfers, promotions and recall from layoff. Most large organizations attempt to develop
their own employees for positions beyond the lowest level. The internal source is more
effective if the organization has been effective in recruiting and selecting employees in the
past and has a strong employee development program. This source of recruitment has its own
advantages and disadvantages.

A. Advantages:
a. The company has better knowledge of the strength and weakness of job candidates:
If accurate information is gathered about an employee under consideration through
qualification inventory, performance evaluation, interview with prior and present
supervisors of the employee, there is a high chance of recruiting the best employee from
with in the organization.
b. Inside job candidates have better knowledge of the organization and job operations.
Thus, they require less orientation and training than outsiders. Moreover the likelihood of
inside candidates having inaccurate expectations and /or becoming dissatisfied with the
organization is very low.

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c. Employees see that competence is rewarded and moral and performance may thus
be enhanced. Recruiting from within an organization creates promotion opportunities to
employees. Thus, organizations providing first job opportunity to their employees are
likely to win the loyalty and good performance of the employees.
d. The return on investment that an organization has on its present work force is
increased. Most organizations speed sizable amount of investment on their employees in
a form of short-term trainings, frienge benefits, etc. Being able to use the workforce to its
maximum capability is considered as a return on investment to the organization.

B. Disadvantage:
a. People can be promoted to the point where they cannot successfully perform the job.
An organization can suffer of it uses inferior internal sources just for the reason of
boosting the morale of its employees.
b. Infighting for promotions can negatively affect morale. Competition among
employees for promotions may be very intense to the extent of damaging the morale of
employees.
c. Inbreeding of ideas can stifle new ideas and innovations. When an entire management
team has been brought up through the ranks, there may be a tendency to make decisions
“by the book” and to maintain the status quo. It is, therefore, necessary to take into
consideration external sources in order to bring “new blood” from the external sources.
2. External Sources
External sources provide a larger pool of candidates. It is often needed by organizations that
are growing rapidly or have a large demand for technical and skilled managerial employees.
Advantages:
a. The pool of talent is much larger. Internal source may not lead to large number of
possible candidates for a given open position. Thus, using external sources provides the
advantage of choosing from among large pool of candidates.
b. New insights and perspectives can be brought to the organization. Expertise,
excellence and experience in other organization can be easily brought into the
organization.
Disadvantages:

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a. Attracting, contracting, and evaluating a potential employee is more difficult: This is
especially more difficult for higher-level jobs.
b. Adjustment or orientation time is longer for external candidates. As a result, it might
take sometime before they can perform with their full potential.
c. Morale problem can develop among internal employees who feel qualified to do the
job. Current employees might feel neglected and their level of performance may be
affected.
5.5. Methods of Recruitment
a. Job Posting: It means posting notices of job openings on organization bulletin boards for
recruiting possible internal candidates. Accordingly, interested employees could apply for
the job. Job posting usually not used when promotion to a supervisory position is
involved, since management often prefers to select personnel itself for promotion to
management levels.
Some organizations develop implementation policies for job posting to be successful.
This may include

1. Posting for a specific period of time before going to external sources

2. Set eligibility rules and communicate it to the employees
3. Specify standards that may be required for the job.
b. Skill inventory: It is an internal recruitment method to identify employees with the
attributes needed for a particular job. It is the systematic record, either manual or
computerized, listing employee’s education, career and development interests, languages,
special skills, etc.
c. Job Advertisement: It is a widely used recruitment method in order to reach relatively
large numbers of potential applicants. Advertisements are commonly placed in daily
newspapers, trade and professional newspapers, and occasionally on radio, TV, and
billboards. However, the choice of appropriate media for a specific advertisement should
depend on the type of job and the required degree of coverage.
In addition to the media used, the construction of the ad is also important. There are four
basic guidelines job advertisements should follow:
 Attract attention: Using wider boarders or a lot of empty space around it might help
the ad to stand out by itself.

66
  Develop/Create interest in the job: Mentioning some key aspects of the job that
might spark interest of potential applicants. (Location and exciting and challenging
assignments, etc.)
 Create desire: amplifying on the interest factors and other benefits that may part of
the job (job satisfaction, career development, travel, etc.)
0Generally, if advertising is to be used as a primary method of recruitment, planning and
evaluation of the advertising program should be a primary concern of the human resource
department.
Advantages and Disadvantages of some Major Types of Media

Type of Disadvantages When to Use

Medium Advantages
News Papers Short deadlines Ad size Easy for prospects to ignore. When you want to limit
flexibility Circulation Considerable competitive recruiting to a specific area.
concentrated in specific clutter. When sufficient numbers of
geographic areas Circulation not specialized- you prospects are clustered in a
Classified sections well must pay for great amount of specific area.
organized for easy unwanted readers. When enough prospects are
access by active job Poor printing quality. reading help wanted ads to
seekers fill hiring needs.
Magazines Specialized magazines Wide geographic circulation When job is specialized.
reach pinpointed usually cannot be used to limit When time and geographic
occupation categories. recruiting to specific area. limitations are not of utmost
Ad size flexibility. Long lead time for ad importance. When involved
High quality printing. placement. in ongoing recruiting
Long life-prospects programs.
keep magazines and
reread them.
Radio and TV Can reach prospects Only brief, uncomplicated In competitive situations
that are not actively messages are possible. Lack of when not enough prospects
looking for a job better permanence; prospect cannot are reading your printed ads.
than newspapers and refer back to it. (Repeated When there are multiple job
magazines. Can be airings necessary to make opening and there are enough
limited to a specific impression). Creation and prospects in specific
geographic area. production of commercials geographic area. When a
Creatively flexible. Can particularly TV- can be time large impact is needed
dramatize employment consuming and costly. Lack of quickly. Useful to call
story more effectively special interest selectivity; attention to printed ads.
than printed ads. Little paying for waste circulation.
competitive recruitment
clutter.
“Point-of- Calls attention to Limited usefulness; prospects Posters, banners, brochures,
purchase” employment story at must visit a recruiting location audiovisual presentations at
(promotional time when prospects before it can be effective. special events such as job
materials at can take some type of fairs, conventions, as part of

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recruiting immediate action. an employee referral
location) Creative flexibility program, at placement
offices, or whenever
prospects visit an
organization facilities.

d. College Recruiting: It involves recruitment from educational institutions that offer

opportunities to recruit recent graduates. Educational institutions are particularly
excellent source of potential employees for entry-level postings in organizations. It could
also be an important source of professional and technical employees.
e. Employment Agencies: There could be public or private employment agencies. These
agencies have information on job seekers in terms of qualifications, skills interests, etc.
and can be a good source of employment by organizations. Public agencies are a major
source of both blue-collar and white-collar works whiles private agencies are important
sources of clerical, white-collar, and managerial personnel.
Some specific situations in which employment agencies become handy:

 The organization does not have its own human resource department
 A particular opening must be filled quickly.
 If there is a need to attract a greater number of minority and female applicants

These agencies usually pre-screen applicants for the organization. Although it is

advantageous to have part of the recruitment process done by specialists, it could sometimes
result in allowing poor applicants bypass the preliminary stages or blocking qualified
applicants from entering the final recruitment stage. To avoid such problems, organizations
are advised to do the following.

 Give the agency an accurate and complete job description.

 Specify the devices or tools that the employment agency should use in screening
potential applicants.
 Where possible, periodically review data on accepted or rejected candidates.
 If feasible, develop a long-term relationship with one or two agencies.

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f. Employee Referrals: Some organizations encourage their employees to refer potential
applicants to an open position. Announcements of openings and requests for referrals are
made in the organization’s bulletin and posted on bulletin boards. Prizes could be offered
for those referrals that the result in hiring. This method of recruiting potential employees
can cut recruiting costs by eliminating advertising and agency fees.
It can also result in higher quality candidates since most employees would not
recommend someone unless he/she believes that the individual can perform effectively.
However, there are some possible problems among those recommenders that confuse
friendship with job performance and competence. As a result, employee referral method may
result in nepotism and sometimes violet equal employment opportunity laws (one group
favoring each other).

g. Executive Recruiters (“head hunters”): There are people who are exclusively known
for seeking out top management talent for their clients. Exclusively recruiters could be a
very expensive method of recruitment but their services might result in obtaining highly
qualified personnel for crucial executive and technical positions. These groups have
many contacts are especially skilled in contacting qualified candidates who are employed
and not actively looking to change jobs.

h. Walk-ins/Write-ins or Unsolicited Applicants: Unsolicited applications whether they

reach the employer by letter, telephone, or in person, can be a source of prospective
applicants. Such applications are kept in file if there are no particular openings at that
time. Qualification of unsolicited applicants is dependant on economic conditions, the
organization’s images, and the job seeker’s perception of the types of jobs available.
5.6. Who Does the Recruiting?
In most large organizations the human resource department is responsible to for recruiting.
There organizations normally have an employment office within the human resources
department. However, the recruiters and interviewers in these departments are required to
closely work with the hiring department. This helps in accurately defining what is needed to
look for either in the external or internal sources.

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The roles of Operating and Human Resource managers in
Recruitment

Recruiting Function Operating manager (OM) Human Resource Manager

(HRM)
Set recruiting goals Set by OM with advice of Advises OM on state of labor
HRM market

Decide on sources of recruits Policy decision, outside Advices on status of possible

and recruiting policies versus inside, set by OM inside recruits.
with advice of HRM
Decide on methods of
recruiting OM advises HRM on HRM decides on recruiting
methods or recruiting methods with advice of OM
College recruiting
OM occasionally recruits Normally recruits at colleges
at colleges.
Cost/benefit studies of
recruiting OM evaluates results of HRM performs cost/benefit
cost/benefit studies and studies.
decides accuracy

5.7. Alternative Methods to Recruitment

The commonly used alternative to recruitment include outsourcing, using of contingent

workers, and overtime. Let us discuss each of them in detail below.

Outsourcing
Outsourcing is the process of transferring responsibility for an area of service and its
objectives to an external provider. In other words, outsourcing is a subcontracting of various
functions to other firms. This decision is usually made when the subcontractor is viewed as
an organization that can perform a given function with perhaps even greater efficiency and
effectiveness.

70
Outsourcing may be made to avoid hiring additional employees or to implement the program
of downsizing. It has its won problems. The primary obstacles seem to be twofold: cost
issues and loss of control on the outsourced activities.
Contingent Workers
Contingent workers are known as part-timers, temporaries, and independent contractors.
Some even call them disposable workers.

The reasons are seen from employer side. These are the reasons:

 To achieve flexibility – due to rapid growth of technology and global competition,

organizations are not in apposition to forecast their HR demand months in advance.
To avoid hiring people today and resorting to layoffs tomorrow, organizations look to
a contingent workers as a buffer.
 To control cost- total costs of permanent employee includes basic salary and other
huge amount of benefits. The contingent worker needs only the basic salary.

Overtime
Perhaps the most commonly used method used as alternative to recruitment is having
permanent employees work overtime. Overtime may help both employer and employees the
employer benefits by avoiding recruitment selection, and training costs. The employees gain
from increasing income during the overtime period.

There are potential problems with overtime. Many managers believe that when they work
employees for unusually long periods of time, employees may become fatigued and lack the
energy to perform the work at normal rate. The other possible problem is related to the use of
prolonged overtime. Employees may slow down their pace so that overtime will be assured.

71
 SELECTION OF HUMAN RESOURSES
________________________________________________________________
After you complete reading this Unit, you will be able to:
 Explain the importance of selection to organizations;
 Determine the impact of selection environment on selection;
 Describe the steps in selection process;
 Evaluate the importance of each selection procedure in the process; and
 Extract the weaknesses of various selection methods in selection process.
________________________________________________________________
Introduction

Selection either internal or external is a deliberate effort of the organization to select a fixed
number of personnel from a large number of applicants. The primary aim of employees’
selection is to choose those persons who are most likely to perform their jobs with maximum
effectiveness and to remain with the company. Thus, in selection, an attempt is made to find
a suitable candidate for the job. In doing so naturally many applicants are rejected. This
makes selection a negative function. In contract, recruitment is a positive function because in
it attempt is made to increase the number of applicants applying for the job.
6.1. Definition

Recruitment involves searching for and attracting candidates to fill job vacancies. Selection
is a later stage of the recruitment process which involves choosing competent and qualified

applicants suited for the job.

This selection of competent employees is one of the most important activities a firm can do.
Spending a few extra Birrs, to select a competent employee who might potentially save the
firm’s thousands of Birrs, is money will-spent.
There are also legal considerations involved in the selection of new employees. The fear of
wrongful termination lawsuits has caused many companies to become far more concerned

72
about whom they hire. If a company is careful, thorough, and selective in its hiring practices,
it can reduce the instances when it will be necessary to terminate employees.

During recruitment, it is important to have a large pool of qualified recruits. However, after
having recruited this large number of job applicants, organizations must weed out the
unqualified ones and then select the very best remaining candidate(s) for the job
A well designed selection process will yield information about a candidate’s skills and
weaknesses. The Human Resource specialist must determine which selection tools are most
appropriate for purposes of selecting the best candidate. Put simply, the main tools will be
the kinds of questions that are asked of the applicants.

For example, applicant skills can be evaluated through application forms, interviews, tests,
and reference checks, letters of recommendation or reference, and physical examinations.
Clearly, some selection tools are more effective than others, but a combination of tools is
usually best.

6.2. The Significance of Employee Selection

Effective Selection is highly important for an organization’s future success because:

 Selection is more powerful way of improving productivity. Selecting qualified and
competent employees improves the benefits an organization reaps.
 Selection decision is a long lasting decision. Once the decision is made reversing it is
very difficult. If an organization hires poor performers, it cannot be successful long,
even if it has a perfect plans and good control systems. In today’s business what
makes the real difference is the kind of Human resource you have, not technology of
financial resource.
 Selection affects other HR functions. If less qualified people are selected, then it will
be necessary to budget funds for training them.

6.3. Environmental Factors Affecting the Selection Process

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Compare your answer with the following descriptions of environmental factors that impact
the selection process.

Legal considerations
HRM is influenced by legislation, executive orders, and court decisions. Managers who hire
employees must have extensive knowledge of the legal aspects of selection. They must the
relationship between useful and legally defensible selection tools.
Organizational hierarchy
Different methods of selection are taken for filling positions at varying levels in the
organization. For example, extensive background checks and interviewing would be
conducted to verify the experience and capabilities of the applicant for the sale’s manager
position. On the other hand, an applicant for a clerical position (secretary) would most likely
take only a word processing test and perhaps a short employment interview.
Applicant Pool) labor market)
The number of qualified applicants for a particular job can also affect the selection process.
Te process can be truly selective only if there are several qualified applicants for a particular
position. When the applicants are very few, the selection process becomes a matter of
choosing whoever is at hand.
Probationary Period
Many firms use a probationary period that permits them to evaluate an employee’s ability
based on established performance.
Probationary period is required for either of the following two reasons.
1. a substitute for certain phases of the selection process (if an individual can
successfully perform the job during the probationary period, other selection tools may
not be needed) or
2. a check on the validity of the selection process (to determine whether the hiring
decision was a good one)
6.4. Selection Process

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A series of steps are normally followed in processing an applicant for a job. Each step in the
process seeks to expand the organization’s knowledge about the applicant’s background,
abilities, and motivation and it increases the information from which decision makers will
make their predictions and final choice. The selection process used by organizations may
vary depending on the size of the organization, the type of jobs to be filled and also the
number of people to be hired. The basic selection process involves the following steps:
a. Application Form
It provides basic employment information to be used at a later stage of the selection process
and also to screen out unqualified applicants. It involves basic questions ranging from simple
name and address kind of question to extended personal history profile. Questions that do not
relate to the job at hand or open for discrimination should be avoided. Such questions like
race, religion, etc are irrelevant unless they have direct impact on the job or are going to be
used strictly for statistical purposes.
b. Preliminary Interview
It is used to get necessary information from the prospective applicants and to assess the
applicant’s suitability to the job. The information obtained may be related to the job or
personal specifications regarding education, experience, salary expected, aptitude towards the
job, age, physical appearance and other physical requirements. This may help to fine out, at
an early stage, inappropriate applicants as a result of inadequate experience or education.

At this step, the organization could also provide information to applicants regarding the job,
the work environment, salary range, etc. to help them make decisions if they still want the
job or not.
c. Employment Tests
The next step is to conduct various employment tests to gather further information about
applicants and thus be able to asses their suitability to the job. Some of the employment tests
used by organizations include the following:
i. Aptitude tests
Measure a person’s capacity or potential to learn and perform a job. Some of the tests that
measure a person’s aptitude include:
 Verbal ability – ability to use words in communicating, planning, etc.

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  Numerical test- ability to add, subtract, etc.
 Perception speed test – ability to recognize similarity and difference
 Spatial tests – ability to visualize objects in space and determine their relationships
 Reasoning tests – ability to analyze oral or written facts and make correct judgment
concerning these facts on the basis of logical implications.
ii. Job Knowledge and Proficiency Test
Job knowledge tests are used to measure the job related knowledge possessed by the
applicant (either written or oral). It may include questions that differentiate experienced
worker from inexperience ones.
Proficiency test on the other hand measures how well the applicant can do a sample of the
work that is to be performed. The typical example is typing test for a secretarial position.
Another example could be a case study to a managerial position.
iii. Interest Test
These are designed to determine how a person’s interests compare with the interest of
successful people who do the same type of job. For example, tests that measure a person’s
interest in situations that require him/her to work with people or deal with people could
measure a person’s interest in a salesperson’s position. The basic assumption underlying this
test is people perform better if placed in positions that interest them.
iv. Personality Tests
It measures the basic aspect of an applicant’s personality such as introversion, stability, and
motivation. They’re expresses as self-confidence, tact, emotional, optimism, decisiveness,
conformity, objectivity, patience, fear, distrust, initiative, judgment, dominance,
impulsiveness, sympathy, integrity and stability.
d. Comprehensive Interview
It is used to supplement information gained in other steps in the selection process. It is
designed to probe into areas that cannot be addressed by the application forms or tests.
Questions to be asked in this interview should be job related. The interview is usually done
by a panel of interviewers consisting of human resource personnel, potential supervisor, and
other executives that may be of relevance in assessing the applicant’s qualifications.

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The interview could be structured or unstructured. The structured interviews are preferred in
situations where it is important to cover certain basic questions related with the job to all
applicants. It also increases the accuracy and reliability of questions.

Problems in Conducting Interviews

 Interviewers may be favorably or unfavorably impressed with the job applicant for
the wrong reasons.
 Interviewers may have personal biases. Example: way of dress, hairstyle, etc.
 Interviewers may allow a simple characteristic to dominate judgment of all traits.
For example, an applicant with a peasant personality may affect the fair judgment
of the interviewer. In this case, other work related traits may be overlooked.
In order to avoid these problems, interviewers should be acquainted with the basics of
conducting effective interviews. The following guidelines could help in ensuring effective
interviews.
 Interviewers should be carefully selected and trained
 Interviews should be planned by outlining the information that is to be obtained and
questions to be asked.
 The interviewers should put the interviewee at ease unless it is part of the interview
process.
 The fact obtained by the interview should be recorded immediately
 Effectiveness of the interview process should be evaluated
e. Reference Checking/Background Investigation
It involves contacting individuals who are listed as references the applicant. It may include
contacting former employers to confirm the candidate’s work record and performance level,
contacting other job-related, personal, and educational references to verify accomplishments
shown in the application. In some cases, this step may extend to the level of doing a
background investigation on the applicant.

f. Physical Examinations

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It is given to determine whether an applicant is physically capable of performing the job and
also to determine the applicant’s eligibility for group life, health and disability insurance.
Physical examination requests should be directly related to the job in order to avoid any
possible discrimination against disable or handicapped applicants. Since medical examination
is very expensive, this step is usually the last step before final decision.
In some cases, however, this step is done after the final employment decision is completed.
This is a situation where the physical/medical examination is used to determine the eligibility
of the person for various insurance benefits extended by the organization.
g. Final Employment Decision
If the above steps are successfully accomplished, the best qualified individual can be
identified. This decision is made by the hiring department as per the qualifications set up for
the job to be filled.
1. The Comprehensive Approach
The general selection process (discussed above) has multiple hurdles-beginning with a
screening interview and culminating with a final selection decision. This discrete selection
process is designed so that tripping over any hurdle puts one out of the race. This approach,
however, may not be the most effective selection procedure for every job. If, for example,
but the job specification requires five, the candidate is rejected without going any further in
the process. Yet, in many jobs, negative factors can be counterbalanced by positive factors.
Poor performance on a written test, for example, may be offset by several years of relevant
job experience. This suggests that sometimes it may be advantageous to do comprehensive
rather than discrete selection.
In comprehensive selection, all applicants are put through every step of the selection process,
and the final decision is based on a comprehensive evaluation of the result from all stages.
The comprehensive approach overcomes, the major disadvantage of discrete method
(eliminating potentially good employees simply because they receive an acceptable, but low
evaluation at one selection step). The comprehensive method is more realistic. It recognizes
that most applicants have weaknesses as well as strengths. But it is also more costly, since all
applicants must go through all the screening hurdles. Additionally, the method consumes
more of management’s time and can demoralize many applicants by building up hope. Yet in
those instances where many qualities are needed for success in the job and where finding

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candidates who are strong on all qualities is unlikely, the comprehensive approach is
probably preferable to the typical discrete method.

No matter which approach is used or which steps are involved, one aspect must be present:
the devices used must measure job-related fact; that is, these devices must be able to indicate
how one would perform on the job. That’s critical for business success; and it’s necessary to
defend and respond to an allegation that the hiring practices are discriminatory.
6.5. Basic Testing Concepts
a. Reliability

For any predictor to be useful, the scores it generates must posses and acceptable level of
reliability or consistency of measurement. This means that the applicant’s performance on
any given selection device should produce consistent scores each time the device is used.”
For example, if your height were measured every day with a wooden yardstick, you would
get highly reliable results, but if you were measured daily by an elastic tape measure, there
would probably be considerable disparity between your height measurements from one day
to the next. Your height does not change from day to day-the variability is due to the
unreliability of the measuring device.

Similarly, if an organization uses tests to provide input to the selection decision, the tests
must give consistent results. If the test is reliable, any single individual’s scores should
remain fairly stable over time, assuming that characteristics it is measuring is also stable. An
individual’s intelligence, for example, is generally a stable characteristic, and if we give
applicants an IQ test, we should expect that someone who scores 110 in March would score
close to 110 if tested again in July. If, in July, the same applicant scored 85, the reliability of
the test would be highly questionable. On the other hand, if we were measuring something
like an attitude or a mood, we would expect different scores on the measure, because
attitudes and moods change.
b. Validity
High reliability may mean little if the selection device has low validity, that is, if the
measures obtained are not related to some relevant criterion, such as job performance.

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Validity refers to how well a criterion predictor (test) actually predicts the criterion of job
success. A test’s validity answers the question. “What does this test measure?” With respect
to testing for example, just because a test score is consistent is no indication that it is
measuring important characteristics related to job behavior. It must also differentiate between
satisfactory ad unsatisfactory performances on the job. We should be aware of three specific
types of validity: content, construct and criterion-related.
Content Validity: It is the degree to which the content of the test or question about job
tasks, as sample, represents the situations on the job. It shows that the test constitutes a fair
sample of the content of the job. It requires identification of the most critical aspect of a job
in terms of performance and including a sample of those tasks and behaviors in the test. All
candidates for that job are given the same test or questions so applicants can be properly
compared. A simple example of a content-valid test is a typing test for a word-processing
position. Such a test can approximate the work to be done on the job; the applicant can be
given a typical sample of typing and his or her performance can be evaluated based on that
sample. Assuming that the tasks on the test, or the questions about tasks, constitute an
accurate sample of the tasks on the job (ordinarily a dubious assumption at best,) the test is
content valid.
Construct Validity: It is the degree to which a test measures a particular trait related to
successful performance of the job. These traits are usually abstract in nature, such as the
measure of intelligence, and are called constructs. Construct validity is complex and difficult.
In act, it is the most difficult type of validity to prove because you are dealing with
constructs, or abstract measures.
Criterion Related Validity: Criterion-related validity is the degree to which a particular
selection device accurately predicts the level of performance or important elements of work
behavior. This validation strategy shows the relationship between some predictor (test score,
for example) and a criterion, job performance, (e.g. production output or managerial
effectiveness). It involves demonstrating who does well on the test do well on the job, and
those who do poorly on the test do poorly on the job. For example, a space visualization test
given to an architect or someone who is expected to read blue prints is valid as it is highly
related to the job. To establish criterion-related validity, either of two approaches can be
used: predictive validity or concurrent validity.

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Predictive Validity: to validate a test productively, an organization would give the test (with
an unknown validity to all prospective applicants. The test scores would not be used at this
time; rather, applicants would be hired as a result of successfully completing the entire
selection process. At some prescribed date, usually at least a year after being hired, the
applicants’ job performance would be evaluated by their supervisors. The ratings of the
evaluations would then be compared with the initial test scores, which have been stored in a
file over the period. At that time, an analysis would be conducted to see if there was any
relationship between test scores (the predictors) and performance evaluation (the measure of
success on the job, or the criterion). If no clear relationship exists, the test may have to be
revised. However, if the organization can statistically show that the employees who scored
below some predetermined score, called a cut score (determined in the analysis), were
unsuccessful performers, then management could appropriately state that any future
applicants scoring below the cut score would be ineligible for employment. What happens to
unsuccessful performers? They are handled like any other employment. What happens to
unsuccessful performers? They are handled like any other employee who has experienced
poor evaluations: training, transfer, discipline, or discharge.
Concurrent validity method validates tests using current employees as the subjects. These
employees are asked to take a proposed selection test experimentally. Their scores are
immediately analyzed, revealing a relationship between their test scores and existing
performance appraisal data. Again, if there is a relationship between test scores and
performance, then a valid test has been found.
Predictive validity is the preferred choice. Its advantage over concurrent validity is that it is
demonstrated by using actual job applicant, whereas, concurrent validity focuses on current
employees. Both validation strategies are similar, with the exception of the people who are
tested and the time that elapses between gathering of predictor and criterion information.
While the costs associated with each method are drastically different, predictive validation
strategies should be used if possible. Concurrent validity, although better than no validity at
all, leaves many questions to be answered. Its usefulness has been challenged on the premise
that current employees know the jobs already and that a learning process takes place. Thus,
there may be little similarity between the current employee and the applicant.

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PLACEMENT/ORIENTATION OF EMPLOYEES
________________________________________________________________
After reading this Section, you will be able to:
 Understand the definition of orientation
 List all purposes of orientation presented in this section.
 Identify basic levels of orientation
 Know who is responsible for the orientation
___________________________________________________________________________
7.1. What is Orientation?
 It is the introduction of new employees to the organization, work unit, and job. This
can be done by oral or written communications like manuals, guidelines, etc.
Orientation is the guided adjustment of new employees to the company, the job, and the work
group. It is a common type of formal training in organizations. For example, they use
computer-based training for orienting new employees in a two-hour program that offers
detailed information on the corporate culture, benefit, policies, and procedures.
In a typical orientation program, company policies and rules are spelled out along with the
mechanics of promotion, demotion, transfer, resignation, discharge, layoff, and retirement.
These data are also likely to be included in handbooks given to each new employee. A
summary of employee benefits is often provided.

To perform effectively, new employees need information that not only permits them to do
their jobs but also provides information that will help them understand their co-workers’
behavioral patterns. Although orientation is often the joint responsibility of the training staff
and the line supervisors, peers have been found to serve as excellent information agents.
There are several reasons for peers’ success in performing this function. For one thing they
are accessible to newcomers-often more so than the boss. Peers also tend to have a high

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degree of empathy for new people. In addition, they have the organizational experience and
technical expertise to which new employees need access.

7.2. Purposes of Orientation

Orientation formats are unique to each firm. However, almost all emphasize these areas: the
employment situation (job, department, and company), company policies and rules,
compensation and benefit, corporate culture, team membership, employee development, and
dealing with change and socialization. Let me describe this point in detail one by one.
The Employment Situation
The basic purpose, from the firm’s viewpoint is to have the new employee become
productive as quickly as possible. Therefore, specific information about performing the job
may be provided at an early point in time. Knowledge of how the job fits into the
departmental goal and goal of the company tend to illustrate its importance and provide
meaning to the work.
Company Policies and Rules
Every job within an organization must be performed within the guidelines and constraints
provided policies and rules. Employees must understand these to have a smooth transition to
the workplace. This information may be quite detailed, so common practice is to include it in
the form of an employee handbook.
Compensation and Benefits
Employees will have a special interest in obtaining information about the reward system.
This information is usually provided during the recruitment and selection, but a review of the
data is appropriate during orientation.
Corporate Culture
The firm’s reflects, in effect, “How we do things around here.” This relates to everything
form the way employees dress to the way they talk. Companies have a number of ways to
communicate their culture, and knowledge of it is critical to a new employee’s orientation.
Team Membership

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A new employee’s ability and willingness to work in teams is most likely determination
before he or she is hired. In orientation, the importance of becoming a valued member of the
company team may be emphasized. Even though the individual is now and will always be
important to organizations, many processes can be more effectively accomplished through
teams. It is imperative that team spirit be instilled in each employee and the sooner the better.
Employment Development
Employee development has become essentially a do-it-yourself process. However, some
firms provide assistance in this area. Employees should know exactly what is expected of
them and what is required by the firm for advancement in the job or for promotion. An
individual’s employment security is increasingly becoming dependent upon his or her ability
to acquire needed knowledge and skills that are constantly changing. Thus, employees should
be kept aware of company-sponsored developmental programs and those available
externally, and they should receive encouragement to take advantage of any appropriate
opportunities.
Dealing with change
Employees at all levels must learn to deal effectively with change to survive in their jobs.
The best way individuals can be prepared for change is to develop and expand their skills
continually. It is mutually advantageous for both employee and employer for this to occur as
it provides security for the employee and a more valuable performer for the firm.
Socialization
To reduce the anxiety that new employees may experience, attempts should be made to
integrate the person into the informal organization.

7.3. When should it be given?

 Before or during the selection process followed by a formal orientation period once
an individual is hired.
 Immediately after a job applicant is hired.
Who does the orientation?

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Major responsibility of orientation falls on the human resource department, especially as it
relates to the general information concerning the organization. HRD is also responsible for
initiating and coordinating both the general and job/department specific orientations.
The new employee’s immediate supervisor takes the responsibility of job/department
orientation as he/she is likely to give accurate and relevant information.
In some organizations, orientation may be conducted by fellow workmen. However, the
person selected to give the orientation should be properly trained.
7.5. Basic Levels of Orientation

There are two basic levels of orientation.

A. General Company Orientation:

It covers topics of relevance and interest to all employees. Some issues likely to be covered
include:
 Overview of the Organization: founding, growth, goals, priorities, problems, etc
 Traditions and customers, Organization’s structure and relationship of various parts of the
organization, community relations, expectations & activities
 Key Policies and Producers
 Compensation: pay rates, how pay is received, advances on payment, loans from
credit unions, etc.
 Fringe Benefits: insurance, holidays and vacations, sick leave, maternity, etc.,
retirement plans and options, training opportunities, recreation and social activity etc.
 Safety and Accident Prevention: health and first aid clinic, safety precaution, fire
prevention and control, etc.
 Physical facilities, food service and cafeteria, parking, etc.

B. Department and Job Orientation

It refers to orientation that covers topics that are specific to the new employees department
and job. It is usually given by the new employee’s supervisor or assigned coworker qualified
to give the orientation. The content depends on the specific requirement of the department
and the skills and experience of the employee. Some of the topics covered include:

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  Department Functions: goals and current priorities, department structure,
department’s relationship with other parts of the organization, etc.
 Job Duties and Responsibilities: detailed explanation of the job description,
common problems and ways to overcome them, explanation on where and how to get
materials, have equipment maintained and repaired, overtime needs and requirements,
etc.
 Policies, Procedures, Rules and Regulations: rules unique to the job/department,
safety precaution, tour of the department and other facilities, etc.
For an orientation to be effective, it should be supported by a written document (orientation
Kit) incorporating basic policies and procedures all new employees need to know. Such
document is usually prepared by Human Resource Department and has relevance to all
employees. Some of the information included:
 Organization Chart
 Copy of policies and procedures handbook
 List of Holidays and other benefits
 Copies of performance evaluation forms, dates, and procedures, telephone numbers,
etc.

In General, any orientation program should be carefully planned, be conducted by a well-

trained individual and also be evaluated at least annually to ascertain ways to make
improvements. Feedback can be gathered from employees on the effect of the orientation
program on their performance and general attitude towards the organization.

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 CHAPTER FIVE
TRAINING & DEVELOPMENT OF HUMAN RESOURSES
________________________________________________________________
After you complete reading this Unit, you will be able to:
 Define training and development;
 Analyze the reasons and benefits of employees training;
 Relate training process to management function;
 Reason out why training employees is very important to organizations
________________________________________________________________
Introduction
For any organization to perpetuate itself, through growth, there is a basic need for developing
its manpower resources. It is one thing toe possess knowledge but yet another thing to put it
to effective use. It is essential to help develop skills and also update the knowledge.
Especially, in an rapidly changing society, employee training and development is not only an
activity that is desirable but also an activity that an organization must commit resources to if
it is to maintain a viable and knowledgeable work force.
8.1. Meaning and purpose of Training

Training is a process of learning a sequence of programmed behavior. It is application of

knowledge. It gives people an awareness of the rules and procedures to guide their behavior.
It attempts to improve their performance on the current job or prepare them for an intended

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job. According to Edwin D Flippo “The purpose of training is to achieve a change in the
behavior this objective, any training programme should try bringing positive changes in:
● Knowledge- it helps a trainee to know facts, policies, procedures and rules pertaining
to his job.
● Skills- It helps him to increase his technical and manual efficiency necessary to do the
job and
● Attitude-It moulds his behavior towards his co-workers and supervisors and creates a
sense of responsibility in the trainee.

8.2. Importance of Training

The importance of training are-

1. Training enables the managements to face the pressure of changing environments.
2. Training usually results in the increase of quantity and quality of output.
3. Training leads to job satisfaction and higher morale of the employees.
4. Trained workers need lesser supervision.
5. Trained workers enable the enterprise to face competition from rival organization.
6. Training enables employees to develop and rise within the organization and increase
their earning capacity.
7. It moulds the employee’s attitudes and helps them to achieve better cooperation with
the organization.
8. Trained employees make better economic use of materials and equipment resulting in
reduction of wastage and spoilage.
9. Training instructs the workers toward better job adjustment and reduces the rate of
labour turnover and absenteeism.
8.3. Benefit to Organization

A programme of training becomes essential for the purpose of meeting the specific problems
of a particular organization arising out of the introduction of new lines of production,
changes in design, the demands of competition etc. The major benefits of training to an
organization are: -

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● Higher productivity: - Training can help employees to increase their lever of
performance on their present assignment. Training increases the skill of an employee
in the performance of a particular job. Increased performance and productivity,
because of training, are most evident on the part of new employees who not fully
aware of the most efficient and effective ways of performing their job. An increase in
skill usually helps to increase both quantity and quality of output.
● Better organizational climate: - An endless chain of positive reactions result form
well planned training programme. Increased morale, less supervisory pressures
improved product quality, increased financial incentives, and internal promotions etc.,
results in better organizational climate.
● Less Supervision: - Training does no eliminate the need for supervision, but it
reduces the need for constant supervision.
● Prevents Manpower Obsolescence: - Training prevents Manpower obsolescence as
it fosters the initiative and creativity of employees. An employee is able to adapt
himself to technological changes.
● Economical Operations: - Trained personnel will make economical use of materials
and equipment. This will reduce wastage in materials and damage to machinery and
equipments.
● Prevents industrial Accidents: - Proper training can help to prevent industrial
accidents.
● Improves Quality: - Trained employees are less likely to make operational mistakes
thereby increasing the quality of the company’s products.
● Greater Loyalty: - A common objective of training programme will mould
employee’s attitudes to achieve support for organizational activities and to obtain
better cooperation and greater loyalty. Thus, training helps in building an efficient
and loyal work force.
● To fulfill Organizations future Personnel Needs: - When the need arises,
organizational vacancies can be staffed from internal sources. If an organization
initiates and maintains an adequate training programme.

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 ● Standardization of Procedures: - Trained employees will work intelligently and
make fewer mistakes when they possess the required know- how and have an
understanding of their jobs.
8.4. Benefits to Employees

● Personal Growth: - Employees on a personal basis gain individually from

training. They secure wider awareness, enlarged skill and enhanced personal
growth.
● Development of new skills: - Training improves the performance of the employees
and makes him more useful and productive. The skill developed through training
serves as a valuable personal asset to the employee. It remains permanently with
the employee.
● Higher Earning Capacity: - By imparting skills, training facilities higher
remuneration and other monetary benefits to the employee. Thus, training helps
each employee utilize and develop his full potential.
● Helps adjust with changing Technology: - Old employees need refresher training
to enable them keep abreast of the changing methods, techniques and use of
sophisticated tools and equipment.
● Increased Safety: - Proper training can help prevent industrial accidents. Trained
workers handle the machines safely. Thus, they are less prone to industrial
accidents. A safe work environment also leads to a more stable mental attitude on
the part of the employees.
● Confidence: - Training creates a feeling of confidence in the minds of employees.
It gives safety and security to them in the organization.
8.5. Training Process
a. Training need identification: Determining the need for training is the first step in the
training process. It can be done through identifying the strength and weakness of the
organization, the departments or the individuals. Some of the areas that may indicate
need for training include accidents, excessive scrap, high labor turn-over, quality and
quantity of outputs, special problems of a department, etc.
For effective training need identification, analysis should be one in four areas

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  Organizational analysis: assessing the internal and external factors affecting the
organization.
 Task analysis: identification of the tasks required to do a job and the related
human resource requirement to do the tasks. This is usually appropriate to identify
training needs of employees who are new to their jobs.
 Performance Analysis: evaluation of the individuals on the job and their skills
and abilities. It involves identifying a deficiency and then correcting it with new
equipment, a new employee, a training program, or some other adjustment.
 Customer survey: analysis of customer satisfaction with the service they’re
being provided by employees.

Other techniques used to identify training needs include supervisor’s reports, personnel
records, management requests, observations, tests of job knowledge, and questionnaire
surveys to employees and customers. Training need questionnaire lists skills needed to do a
job and ask employees to identify the skill they lack and thus need to be trained for.
b. Selecting trainees: Selecting the right individuals for training is the second step. Since
training is very expensive there should be a clear and definite relationship between the
training and its contribution. To ensure this, it is essential to give the training to the right
people by considering factors such as the relevance of the training to the improvement of
performance interest and motivation level of the trainee, etc.
c. Selecting Training Methods: There are several training methods but the appropriateness
of the training technique depends on cost effectiveness, desired program content,
availability of training facility, trainees’ capabilities, etc. (Methods of training discussed
on next section) .
d. Conducting Training: Delivering the training by people from the organization itself or
by using outside trainers. A careful analysis of the trainer’s qualification has to be done to
endure the desired level of qualify of training. Furthermore, it is essential to determine
the content of the training, appropriate time schedule and training facilities.
e. Evaluation of training: Feedback on the training program should be obtained in order
to asses the value of the training in light of the objectives it is expected to achieve. The

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 evaluation should be done in every aspect of the training program starting from its
objectives to the effectiveness of the training method, training content, trainer’s ability,
etc.
8.6. Methods of Training
a. On-the-job training: The employee is shown how to do the job and allowed to do it
under the trainer’s supervision. It is much more important for jobs that are either difficult
to simulate or learn quickly by watching. It has several advantages. It is relatively
inexpensive, trainees learn while producing, and there is not need for expensive off-job
facilities like classrooms.
Some examples of on the job training include apprenticeship programs and coaching or
understudy programs. Apprenticeship is a system in which an employee is given
instruction and experience on the job and off-the job to cover all practical and theoretical
aspects of a work required in a skilled occupation. Such occupations include plumbers,
electricians, crafts, mechanics, barbers, carpenters, etc. In coaching or understudy
program, employees are trained on the job by experienced worker or the trainee’s
supervisor.
b. Job Instruction Training: It is the listing of each of a job’s basic tasks, along with a
“key point” for each, in order to provide step-by-step- training for employees. This is
more effective to jobs that consist of a logical sequence of steps.
c. Lectures: It is a technique used to convey specific information like rules, procedures, or
methods. It is a quick and simple way of providing knowledge to large groups of trainees.
One example could be a sales force being taught the special features of some new
product. Audiovisuals and demonstrations may be used to add more meaning to the
lecture. Group discussions could also be added to ensure the effective participation of the
trainees.
d. Audiovisual Techniques: The include films, audiotapes, or videotapes, etc. They are
more expensive than conventional lectures but have some advantages in situations where
there is a need to illustrate how a certain sequence should be followed over time, to
expose trainees to events not easily demonstrable in live lectures (tour of a factory, or
open heart surgery) and when the training is going to be used organization wide and its is
too costly to move the trainees from place to place.

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e. Vestibule or Simulated training: It is a training activity that explicitly places the trainee
in an artificial environment that closely mirrors actual working condition. It is a necessity
in situations where it is too costly or dangerous to train employees on the job. Using
simulated environment to train a new assembly worker will minimize possible slow down
of production if they were directly placed or trained on the actual job. Safety issues and
high cost are also issues considered in pilot training. Thus, vestibule or simulated training
is the only practical alternative.
8.7. Executives or Management Development

Executive or management development is a long-term educational process utilizing a

systematic and organized procedure by which managerial personnel learn conceptual and
theoretical knowledge. Development is a related process. It covers not only these activities,
which improve job performance, but also those which bring about growth of the personality;
help individuals in the progress towards maturity and actualization of their potential
capacities so that they become not only good employees but also better human beings. In
organizational terms, it is intended to equip persons to earn promotion and held greater
responsibility. Training a person for a bigger and higher job is development.
According to Harold Koontz and Cyril O’Donnell- “Developing a manager is a
progressive process in the same sense that educating a person is. Neither development nor
education should be through of as something that can ever be completed, for there are no
known limits to the degree one may be developed or educated. Manager development
concerns the means by which a erosion cultivates those skills application will improve the
efficiency and effectiveness with which the anticipated results of a particular organizational
segment are achieved”
According to G.R. Terry- “Management development should produce change in behaviour
which is more in keeping with the organization goals than the previous behaviour. The
change frequently consists of a number of small steps resulting from training but the
cumulative effect is considerable. It is also basic that a terminal behaviour is identified
before the development efforts starts”.
Thus, Executive or Management Development implies that there will be a change in
knowledge and behaviour of the individuals undergoing development programme. The
individual will not only be able to perform his job better but also increase his potential for

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future assignments through the acquisition, understanding and use of new knowledge,
insights and skills. Self-development is an important concept in the whole programme of
management development.
8.8. Need and Importance of Executive Development

Executive talent is the most important asset of an organization. According to Peter Drucker-
“An institution that cannot produce its own mangers will die. From an overall point of view
the ability of an institution to produce manager is more important than its ability to produce
good efficiently and cheaply”. The need for executive development is felt because:
1. There is a shortage of trained managers. The organization has to develop the talented
employees and maintain an inventory of executive skills to meet the future demand.
2. The performance of a company depends upon the quality of its managers. Executive
development, therefore, is of paramount importance to have effective and desired
managerial talents to meet the organization’s demand.
3. Obsolescence of managerial skills is another factor, which calls for continuous
executive development. A manager must continuously update himself to successfully
meet new challenges as they occur.
8.9. Objective of Executive Development:

1. To ensure a steady source of competent people at all levels to meet organizational

needs at all times.
2. The performance of a company depends upon the quality of its mangers. Executive
development, therefore, is of paramount importance to have effective and desired
managerial talents to meet he organization’s demand.
3. Obsolescence of managerial skills is another, which calls for continuous executive
development. A manger must continuously update himself to successfully meet new
challenges as they occur.

8.10. Methods of Executive/Management Development

Methods of executive/management development be classified into tow broad categories-

1. On-the-job methods and

2. Off-the job methods.

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On-the-job methods

1. Job/Position rotation: involves rotating key personnel in different positions or

departments. This will help employees gain experience in variety of jobs in the
organization. This method is expected to equip employees with better experience that
will enhance their understanding of the organization and the relationship among its
different parts. Besides development of managers, this method could also help in
avoiding problems during vacations, absences, resignations, etc.
2. Coaching: This method is mainly used to develop managers by placing the trainee
under a close guidance and supervision of the trainer to perform an increasing range
of management tasks and share the trainer’s experience.
3. Special projects: Under this method, a trainee is assigned a project that is closely
related to the objective of his department. The trainee will study the problem and
make recommendations upon it.
4. Committee Assignments: Under this method, an ad hoc committee is constituted and
is assigned a subject to discuss and make recommendations. The committee will
make a study of the problem and present its suggestions to the departmental head.
Off-the job methods

1. Role Playing: Role-Playing techniques is used for human relations and leadership
training. Under this method, a conflict situation is artificially constructed and two or
more trainees are assigned different parts to play. Its purpose is to given trainees an
opportunity to learn human relations skills through practice and to develop insight
into one’s own behaviour and its effect upon others.
2. Case study: Under this method, the trainees may be given a problem to discuss
which is more or less related to the principles already taught. This method gives the
trainee an opportunity to apply his knowledge to the solution of realistic problems.
3. Conference Training: The trainee as a member can learn from others. The
conference is ideally suited to learning problems and issues and examining them from
different angles.

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 4. Management Games: a management game is a classroom exercise in which teams of
students compete against each other to achieve common objectives. The game is
designed to be a close representation of real-life conditions.
5. Sensitivity Training or T group Training: It is an experience in interpersonal
relationships, which results in change in feeling and attitudes towards oneself and
others.
6. Special courses: The executives may be required to attend special courses, which are
formally organized by the enterprise with the help of experts form educational
institutions.

CHAPTER SIX
PERFORMANCE APPRAISAL
________________________________________________________________
After going through this chapter, you will be conversant with
 Define Performance appraisal
 Objectives of Performance appraisal
 Uses of Performance appraisal
 Purpose of Performance appraisal
 What is to be appraised?
 Process of performance appraisal
 Essentials of a good appraisal system
 Methods or techniques of Performance Appraisal
___________________________________________________________________________
Introduction
After an employee has been selected for a job, has been trained to do it and has worked on it
for a period of time, his performance should be evaluated. Performance appraisal or merit
rating is the mechanism to assess the contribution of all human resources working at each
level of the organization during a specific period of time. Performance appraisal enables the
employees to know as to how they are performing in comparison with the set standards. They
can then try to improve their performance.

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Performance appraisal could, thus, be seen as an objective method of judging relative worth
or ability of an individual employee in performing his tasks objectively. Performance
appraisal can help identify a better worker from a poor one. It also lets the employee know
how well he is performing and help him to improve his performance.
The immediate supervisor or specially trained person meant for the job does performance
appraisal. Performance appraisal has direct linkage with such personnel systems as selection,
training, mobility, etc. Appraisal and selection has a lit to do with the criteria or job
expectation. Well-developed job descriptions can be extremely useful is not only selecting
people but also evaluating them on the same criteria.
9.1. Definitions of Performance Appraisal
 According to Wendell French, Performance appraisal is, “the formal, systematic
assessment of how well employees are performing their jobs in relation to established
standards, and the communication of that assessment to employees”
 According to Flippo - “Performance appraisal is the systematic, periodic and an
impartial rating of an employee’s excellence in matters pertaining to his present job
and his potential for a better job”
 According to Dale Yoder, “Performance appraisal includes all formal procedures
used to evaluate personalities and contributions and potentials of group members in a
working organization. It is a continuous process to secure information necessary for
making correct and objective decisions on employees”.
 According to Cummings and Schwab- “the objectives of performance appraisal
schemes can be categorized as either evaluative or developmental. The evaluative
purpose have a historical dimension and are concerned primarily with looking back
at how employees have actually performed over given time period, compared with
required standards of performance. The developmental, a future-oriented
performance appraisal is concerned, for example, with the identification of
employee’s training and development needs and the setting of new targets.”

 According to C.D. Fisher, L.F. Schoenfeldt and J.B. Shaw, - “Performance

appraisal is the process by which an employee’s contribution to the organization
during a specified period of time is assessed”.

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From the above definitions we can conclude that performance appraisal is method of
evaluating the behavior of employees in the work spot, normally including both the
quantitative and qualitative aspects of job performance. It is a systematic and objective way
of evaluating both work-related behavior and potential of employees. It is a process that
involves determining and communicating to an employee how he is performing the job and
ideally establishing a plan of improvement. Performance appraisal emphasizes individual
development. Now it is used for evaluating the performance of all the human resources
working at all levels of organization and of all types. It evaluates the performance of
technical, professional, and managerial staff.

9.2. Objectives of Performance Appraisal

Performance appraisal plans are designed to meet the needs of the organization and the
individual. It is increasingly viewed as central to good human resource management.
Performance appraisal could be taken either for evaluating the performance of employees or
for developing them. The evaluative purpose have a historical dimension and are concerned
primarily with liking back at how employees have actually performed over given time period,
compared with required standards of performance. The developmental purpose is concerned
with the identification of employee’s training and development needs.
Appraisal of employees’ serves several useful purposes
1. Feedback: - It serves as a feedback to the employee. It tells him what he can do to
improve his present performance and go up the “organizational ladder”. The appraisal
thus facilitates self-development. It also makes the employee aware of his key
performance areas.
2. Compensation Decisions: - It provides inputs to system of rewards. The approach to
compensation is at the heart of the idea that raises should be given for merit rather
than for seniority.
3. Data Base: - It provides a valid database for personal decisions concerning
placements, pay, promotion, transfer etc. Appraisal also makes the employee aware of
his key performance areas. Permanent performance appraisal records of employee
help management to do planning without relying upon personal knowledge of
supervisors who may be shifted.

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 4. Personal Development: - Performance appraisal can help reveal the causes of good
and poor employee performance. Though discussions with individual employees, a
line manager can find out why they perform as they do and what steps can be initiated
to improve their performance.
5. Training and Development Programme: - By identifying the strengths and
weaknesses of an employee it serves as a guide for formulating a suitable training and
development programme to improve his quality of performance in his present work. It
can also inform employees about their progress and tell them what skills they need to
develop to become eligible for pay rises and/or promotions.
6. Promotion Decisions: - It can serve as a useful basis for job change or promotion. By
establishing whether the worker can contribute still more in a different or a higher job
it helps in his suitable promotion and placement. If relevant work aspects are
measured properly, it helps in minimizing feelings of frustration of those who are not
promoted.
7. Personal Development: - Performance appraisal can help reveal the causes of good
and poor employee performance. It thus helps the employee to overcome his
weaknesses and improve his strength so as to enable him to achieve the desired
performance.
8. Improves Supervision: - The existence of a regular appraisal system tends to make
the supervisors more observant of their subordinates because they know that they will
be expected periodically to fill out rating forms and would be called upon to justify
their estimates. This improves supervision.
Performance appraisal helps to have comparative worth of employees. Appraising employee
performance is, thus, useful for compensation, placement and training and development
purposes. In the words of M.W. Cummings, “the overall objectives of performance
appraisal is to improve the efficiency of enterprise by attempting to mobilize the best possible
efforts from individual employed in it. Such appraisals achieve four objectives including the
salary reviews, the development and training of individuals, planning job rotation and
assistance promotions.” The information can also be used for grievance handling and
keeping the record. It helps in improving the quality of supervision and better the employee
employer relationship.

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9.3. Uses of Performance Appraisal
 To create and maintain a satisfactory level of performance
 To identify employees’ needs for training and thus contribute to their growth and
development
 To facilitate fair and equitable compensations based on performance
 To facilitate selection test validation, i.e. employees rating on performance evaluation
may be used as the variables against which test score are measured.
 It provides essential data for assessing employees’ potential for promotion and also
for making administrative decision relating to salary increment, terminations,
demotions, etc.
 It helps in encouraging performance among employees. Result of performance
appraisal is communicated to indicate how they’re doing and suggesting needed
changes in behavior, attitude, skills or knowledge. It gives clear indication what is
expected of employees.
9.4. Process of Performance Appraisal
Performance appraisal is planned, developed and implemented through a series of steps

JOB ANALYSIS
JOB DESCRIPTION AND JOB SPECIFICATION

ESTABLISHING STANDARDS OF PERFORMANCE

COMMUNICATING PERFORMANCE STANDARDS

TO EMPLOYEES

MEASURING ACTUAL PERFORMANCE

COMPARING ACTUAL PERFORMANCE WITH

STANDARDS AND DISCUSS WITH EMPLOYEES

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 INITIATING CORRECTIVE ACTION, IF NECESSARY

Fig: -9.1 Performance appraisal process

1. Job analysis, job description and job specification: - Performance appraisal is a

process not to be undertaken in isolation of various human resources functions. It begins
with job analysis, job description and job specification. These help in establishing the
standard performance.
2. Establishing standards of performance: - Appraisal systems require performance
standards, which serve as benchmarks against which performance is measured. The
standards set for performance must be clearly defined and unambiguous. It should be
attainable by normal employee. To be useful, standards should relate to the desired result
of each job. Performance standards or goals must be developed with the supervisors to
ensure that all the relevant factors have been included. Where the output can be
measured, the personal characteristics, which contribute to employee performance, must
be determined. Goals must be written down. They must be measurable within certain
time and cost considerations.
3. Communicating performance standards to employees: - Performance appraisal
involves at least two parties; the appraiser who does the appraisal and the appraise whose
performance is being evaluated. The performance standards specified in the second step
above are to be communicated and explained to the employees (both appraiser and
appraise) so that they come to know what is expected of them. Feedback should also be
taken to relieve of from any confusion or misunderstanding. Feedback enables the
manager that the information has reached the employees. If necessary the standards may
be revised or modified in the light of feedback obtained from the employees and
evaluators. As pointed out by DeCenzo and Robbins, “too many jobs have vague
performance standards and the problem is compounded when these standards are set in
isolation and do not involve the employee.”

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4. Measuring actual performance: - After the performance standards are set and
accepted, the next step is to measure actual performance. This requires choosing the right
technique of measurement, identifying the internal and external factors influencing
performance and collecting information on results achieved. It can be affected through
personal observation, written and oral reports from supervisors. The performance of
different employees should be so measured that it is comparable. Performance measures,
to be helpful must be easy to use, be reliable and report on the critical behaviours that
determine performance.
Performance measures may be objective or subjective.
i. Objective performance measures – objective performance measures are indications
of job performance that can be verified by others and are usually quantitative.
Objective criteria include-
 Quality of production.
 Degree of training needed.
 Accidents in a given period
 Absenteeism
 Length of service etc.
ii. Subjective performance measures – Subjective performance measures are ratings
that are based on the personal standards of opinions of those doing the evaluation and
are not verifiable be others. Subjective criteria include –
 Ratings by supervisors.
 Knowledge about overall goals.
 Contribution to socio-cultural values of the environment.
5. Comparing actual performance with standards and discuss the appraisal with
employees: - Actual performance is compared with the predetermined performance
standards. Actual performance may be better than expected “and sometimes it may go off
track”. Deviations if any from the set standards are noted. Along with the deviations, the
reasons behind them are also analyzed and discussed. Such discussions will enable an
employee to know his weakness and strengths. Weakness is discussed so that employee
takes interest in improving the performance. He will be motivated to improve himself.

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 The assessment of another person’s contribution and ability is not an easy task. It has
serious emotional overtones as it affects the self-esteem of the appraise. Any appraisal
based on subjective criteria is likely to be questioned by the appraise and leave him quite
dejected and unhappy when the appraisal turns out to be negative.
6. Initiating corrective action, if any: - The last step in the process is to initiate corrective
action essential to improve the performance of employee. Corrective action is of two
types-
i. The one, which puts out the fires immediately – Employees, can be scolded or
warned so that he himself can make necessary attempts to improve the performance.
But this is not enough and proper. And
ii. The other one, which strikes at the root of the problem permanently – though
mutual discussions with employees, the steps required to improve performance, are
identified and initiated. The reasons for low performance are identified and initiated.
The reasons for low performance should be probed, take the employee into
confidence and motivate him for better performance. Training, coaching, counseling
etc. are examples of corrective actions that help to improve performance. Counseling
and coaching can do the magic.
9.5. Performance Appraisal Methods
a. Goal Setting or management by objective (MBO): It involves measuring and
evaluating an employees’ performance based on the work objectives set by both the
employee and the supervisor. MBO focuses attention on anticipatively set goals that are
tangible, verifiable, and measurable. The emphasis is on what must be accomplished
rather than how it is to be accomplished.
The basic process involved:
 Setting objectives of performance
 Developing action plans
 Allowing employees to implement the plans
 Measuring objective achievements
 Taking corrective action, if necessary
 Establishing new objectives for the future
For this process to work effectively, the following requirements need to be met.

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  Objectives should be quantifiable
 Active participation of employees
 Conduct appraisal interview with the employee
 Supervisors should keep communication channel open throughout the appraisal
period, i.e., to discuss progress and to modify objectives when necessary.

b. The Essay Method: In this method, the appraiser is expected to describe an employee’s
performance in written narrative form. It focuses on issues such as strengths and
weakness, job knowledge, communication skills, quantity and quality of work, potentials
of the employee for promotion, training, etc. Although this method is simple since it does
not require complex form, the fact that it is not structured may have an impact on the
length and content of the essay. Consequently, it makes it difficult to make comparison of
results with other employees’ performance.
c. Critical Incident Appraisal Method: It requires the rater to write down critical or key
behaviors of an employee that make a difference between satisfactory and unsatisfactory
job performance. For example, recording exceptional good or poor performances. This
method focuses more on the behavior of employees on their jobs (performances) than
traits (personality). Thus, it is more job-related than other methods. However, this method
has drawbacks since it requires continuous and close supervision from the rather to
record critical events on the employee’s performance. Also, the concept of critical
incident may be interpreted differently by different people making it difficult to compare
evaluation results of two or more people.
d. Checklist appraisal method: The rater uses a list of behavioral descriptions required to
do a job and put a check mark against those behaviors that apply to the employee. In a
simple checklist method, the rater is asked to provide yes and no answer to the list of
behaviors.
Example: Does the employee volunteer to help other employees?
Does the employee approach customers promptly?
Does the employee complete assignments on time?
Does the employee accept constructive suggestion? Etc.

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If some of the listed behaviors are more relevant to the job than others, it is possible to use a
weighted checklist method that attaches a weight to each item and thus permitting the
development of a more accurate rating score. Although this method minimizes bias, it is time
consuming and costly to assemble the questions for each job category.
e. Graphic Rating Scale method: It is a system that lists a number of traits and a range of
performance for each of these traits. The employee is then rated by identifying the score
that best describes his or her level of performance for each trait. The list might include
such factors as quantity and quality of work, job knowledge, cooperation, attendance,
accuracy of work, etc. It is one of the simplest and popular methods of appraising
performance since it is less time consuming to develop and administer. It permits
quantitative analysis and comparison. The major drawback to these scales is their
subjectivity and low reliability. Moreover, the descriptive words often used in such scales
may have different meaning to different raters.
Example: Quality of work: accuracy, skill and completeness of work

Consistently Occasionally Consistently Sometimes Consistently

Unsatisfactory unsatisfactory Satisfactory Superior Superior

f. Forced- Choice Rating: It requires the rater to rank a set of statements describing how
an employee carries out the duties and responsibilities of a job. The rater ranks the
statement that describes most the employee as the first choice and works his/her way to
the least descriptive statement. In this method, raters usually are not aware of the weights
attached to each of these descriptions thus leaves little room for bias. However, raters
find this method to be very difficult to choose from the list of statements especially if
they feel that two or more of the traits describe the employee equally.
Example: Patient with slow learners
Lectures with confidence
Keeps interest and attention of class
Describes the objective of each class

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There may be an instruction to the rate the above description from 1-4 starting from the item
that nest describes the person to the item that least describes the person. Raters may not have
knowledge of the weights attached to each of the description. Therefore, there is little room
for bias.

9.6. Who should do the Appraisal?

The appraiser may be any person who has thorough knowledge about the job content,
contents to be appraised, standards of contents, and who observes the employee while
performing a job. The most typical appraisers are one or combination of the following:

 the immediate manager or supervisors

 the employee’s peers
 the employee himself i.e. Self appraisal
 the employees subordinates
 other managers familiar with employees’ work
 a higher- level manager
 personnel department specialists
9.7. Most common problems observed in performance appraisal:

 Lack of Objectivity: Some traits used for evaluating performance are difficult to
measure and thus lack objectivity. These factors may include loyalty, attitude,
personality, etc.
 Halo Error: raters may perceive one factor as having significant importance and give
a good or bad overall rating to an employee based on this one factor.
 Leniency: rating consistently higher than the expected norm or average.
 Strictness: being unduly critical of employees performance and thus result in
consistently lower rating than the expected norm.
 Central tendency: Consistently rating employees near the average. In such cases, it
would be very difficult to differentiate good performers from poor performers.

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  Recent Behavior bias: raters basing their evaluation on the employees’ recent
behavior. This may not be a representative of the overall performance of the
employee throughout the evaluation period.
 Personal bias: raters having biases related employees’ personal characteristics race
religion, gender, or age.

9.8. Characteristics of an Effective Appraisal System

Although an appraisal system may not reach perfection, there are some factors, which may
contribute to its effectiveness. Thus, for an appraisal system to be effective, it should possess
the following essential characteristics.
a. Reliability and Validity: An appraisal system should provide consistent, reliable and
valid information and data, i.e., if two appraisers equally qualified and competent to
evaluate an employee using the same appraisal technique, their rating should agree with
each other. Appraisal technique should also be valid by measuring what it is suppose to
measure, i.e., the factors used to measure performance need to be related to the job.
b. Job Relatedness: the criteria used for appraising employee performance should be job
related. Information for the criteria should be determined thought job analysis.
c. Performance Expectations: Managers should clearly explain performance expectations
to their subordinates in advance of the appraisal period. This will ensure that employees
direct their efforts towards the expected performance level.
d. Standardization: Employees in the same job category should be appraised by using the
same appraisal technique. Appraisal forms, procedures, administration of techniques,
ratings, etc., should be standardized as appraisal decisions affect all employees of the
group.
e. Qualified Appraisers: Responsibility for evaluating employee performance should be
assigned to the individuals) who directly observe at least a representative sample of job
performance. In order to ensure consistency, appraisers should be well trained to provide
insights and ideas on rating, documenting appraisals, and conducting appraisal
interviews.
f. Employee Access to Results: An effective appraisal system should provide feedback to
employees on how well or bad they’ve performed.

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g. Due Process: A formal procedure should be developed to permit employees to appeal
appraisal results that they consider inaccurate or unfair.

CHAPTER SEVEN
COMPENSATION MANAGEMENT
________________________________________________________________
After going through this chapter, you will be conversant with:
 Definition of compensation
 Essentials of a sound wage plan
 Advantages of Sound Wage plan
 Characteristics of a Sound incentive Wage Plan
 Types of Incentive Plans
 Factors influencing wage structure
________________________________________________________________
Introduction
Services rendered by individuals to organizations have to be equitably paid for. This
compensation generally comprises cash payments, which include wages, Bonus and shared
profits. Good compensation plans have a salutary effect on the employees. They are happier
in their work, co-operative with management and productivity is up. Although, there can be
both monetary and non- monetary forms of compensation, it is the monetary and non-
monetary forms of compensation which is the most basic element by which individuals are
attracted to an organization and are persuaded to remain in the organization.

Wages in the widest sense mean any economic compensation paid by the employer under
some contract to his workers for the services rendered by them. Remuneration is composed
of two parts. They are basic salary and allowances. The basic wage is the remuneration,
which is paid or payable to an employee in terms of his contract of employment for the work

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done by him. Allowances are paid in addition to the basic wage to maintain the value of basic
wages over a period of time. Allowances include dearness allowance, bonus, overtime pay
etc.

Definition
It refers to all forms of pay of rewards going to employees and arising from their
employment. Employee compensation has two components. It includes direct financial
payments in the form of ages, salaries, incentives, commissions, and bonuses; and indirect
payments (fringe benefits) in the form of financial benefits like employer-paid insurance
and vacations
Employees need to be rewarded for the service they provide an organization. The
organization, on the other hand, has the obligation to reward employees fairly according to
the contribution they provide to the organization. Organizational reward includes, both
intrinsic and extrinsic, that are received as a result of employment by the organization.
Intrinsic rewards: rewards that are internal to the individual and are normally derived from
involvement in certain activities or tasks. Example: job satisfaction, feelings of
accomplishment, etc.
Extrinsic rewards: these are directly controlled and distributed by the organization and are
more tangible. Example salaries and fringe benefits. Provision of extrinsic rewards usually
leads to intrinsic reward.
Compensation should be equitable to the employer and the employee alike. It should be
adequate in order to meet the needs of the employees, the employers and also meet the
minimum requirements of the government, union and management. Just like other human
resource functions, compensation policies and procedures are also affected by internal and
external factors in the environment including government regulations, economic conditions
union’s influence and demand, the labor market, wage rates offered by competitors,
organization’s financial condition, its size and complexity, managerial philosophy and
strategy, etc.

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10.2. Importance of Compensation
To employees:

 It is the primary (and often the only) source of income for employees and their
family.
 It is a fair reward for the work employees perform and the benefit they provide for the
employer.
 It determines employees’ social status. Income level is often used as a measure of a
person’s worth.
To employers:
 To attract capable employees to the organization
 To motivate them towards superior performance level
 To retain their services for an extended period of time

10.3. Factors affecting compensation

a. Government: government rules, regulations, executive orders, and laws have their
influence on an organization’s compensation policy. Every government provides laws for
compensation in areas like, minimum wage rate, equal pay provisions-to avoid pay
differentials based on sex in jobs requiring substantially equal skill, effort, responsibility,
and working conditions. Etc
b. Cost of Living: Cost of living as measured in terms of consumer price index may affect
the organization’s compensation policy as it tries to adjust its employees’ earning to the
rate of inflation. This process is called cost of living adjustment (COLA). As per the
policy of the organization, compensation could be adjusted at the same rate as the
inflation or at different rates.
c. Comparable wage rates: The wage pattern in the industry and community could have an
impact on the compensation policies and practices of organizations. Comparing wage and
salary rates in given areas may help in ensuring that the organization is offering a salary
that is not substantially higher or lower than those paid by others in the same area.

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 Comparison could also be done based on occupation to provide a comparable pay to
similar occupations around the country.
In order to ensure that a comparable level of payment is offered to employees,
organizations conduct salary and wage survey on other companies to avoid costly
mistakes. This could also be done to offer comparable benefit packages to employees.
d. Market Conditions: Regardless of other factors involved, the supply and demand
relationship in the labor market will determine the wage and salary level in organizations.
e. Ability to Pay: Regardless of other factors, wage and salary rates are ultimately
dependent on the employer’s ability to pay. Ability to pay, in term, is dependent on how
well the organization is functioning and its ability to continue to earn revenues.
10.4. Establishing Equitable Payment Structure
The primary objective of any base wage and salary system is to establish a structured and
system for the equitable payment of employees, depending on their job and their level of
performance in their job.
There are several policy issues that need to be addressed for establishing a fair and equitable
compensation system. Most based wage and salary systems establish pay ranges for certain
jobs based on the relative worth of a job to the organization and wage and salary survey.
Determining the relative worth of a job to the organization maintains fair and equitable pay
structure internally by comparing jobs within the organization while wage and salary survey
ensures that the payment range is comparable to the payment systems in other similar
establishments or occupations. An individual’s performance on the job should then determine
where that individual’s pay fall within the job’s range.

Equitable Payment Structure

Job Evaluation –Internal Wage and Salary Survey –

Equity External Equity
(Relative worth of the (Pricing the different jobs
different jobs in by comparing them with
organization) other similar
establishments)
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1. Job Evaluation:
It is a systematic determination of the value of each job in relation to other jobs in the
organization. If done properly the relative value of the jobs is reflected in the relative wage
rate for the jobs.
It involves
 To enumerate the requirements of a job
 The job’s contribution to the organization
 Classifying it according to importance

Steps in Job Evaluation

i. Gather information of the jobs being evaluated. The information is obtained from
job analysis.
ii. Determining factors that are to be used in determining the worth of different jobs to
the organization like education, skill, initiative, responsibility, working
conditions, physical and mental effort, experienced, etc. for example, a job of
design engineer involves complex requirement and has greater condition to goal
achievement when compared to the job of an assembler of the product designed.
iii. Determine the method of evaluation that will use the chosen factors for evaluating
the relative worth of the different jobs. The most common kinds of job evaluation
methods include point method, factor comparison, job classification and job
ranking. The first two methods use quantitative measurement in their evaluation.
They break the job down into its component parts such as education, skill, initiative,
responsibility, job conditions, physical and mental efforts, and experience. Then,
each of these factors are appraised and a numeric value is assigned to it added
together to find a total score to the job. The scores of each job is then ranked
according to its importance and grouped together into job ranges or classifications.
Job classification and ranking methods use a qualitative in nature. They involve
determining the importance of jobs and ranking them in descending order and
assigning appropriate numeric values to each job.

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 iv. Grading the jobs according to their importance.
Problems in Job Evaluation

 The worth of all occupations cannot be precisely measured with the same yardstick
(standard). In some cases, a job that requires great effort to execute may not be that
important. Therefore, the job may be rated high in one factor while it is rated low in
another factor.
 It is difficult to measure the worth of scientific, technical, professional, and
managerial jobs.
 It is difficult to separate the individual’s contribution from the job being evaluated.
Even though a job’s contribution is low, it may seem to have a great deal of
contribution if being handled by a skilled individual.
2. Wage and Salary Survey
It is used to collect comparative information on the policies, practices, and methods of wage
payment from selected organizations in a given geographic location or a particular type of
industry.
Conducting wage and salary survey is useful to ensure external equity by providing
information about the labor market. It also helps in correcting employees’ misconception
about certain jobs as being too important or paying. Employees will also be motivated when
they know that they’re getting a comparable payment with employees of other organizations.
In order for the survey to be effective, it is essential to identify the jobs to be surveyed and
also the organizations and their geographic location. Then the appropriate wage survey will
be designed. Some of the issues usually included in the survey include
Length of workday Overtime Pay
Starting wage rates Vacation and holiday practices
Base wage rates Pay ranges, Incentive plans, etc.
10.5. Employee Benefits (Fringe Benefit)
It refers to benefits given to employees in addition to salary or wages. They constitute
significant portion of the employees pay. Unlike wages and salaries, benefits are not usually
related to employee performance. Broadly classified, there are two types of fringe benefits.

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a. Time –off pay: these are payments for the time not worked and include paid vacations,
paid holidays, paid sick leaves, pension programs, rest periods, etc.
Examples:
Paid Vacations – Organizations provide employees a certain number of paid vacation
days in a year. The number of days may vary according to how long an employee has
worked for an organization. Usually, paid vacation times increase with seniority.
Sick Leaves: Providing employees with pay for days not worked because of illness.
Pension Programs: It represents a fixed payment other than wages, made regularly to former
employees or their surviving dependents.
b. Non-pay benefits: these are benefits not paid in cash but include expenditures on items
such as medical services, transportation accommodation, insurance, cafeteria services,
education programs, child care services, and others.
Examples:
Health Insurance: medical insurance program designed to cover a portion or total medical
expense incurred by an employee. It may include coverage for hospitalization, outpatient
doctor bills, prescription drugs, dental, eye, medical health care, etc.
Accident and Disability Insurance: It is designed to protect the employees who experience
a long-term or permanent disability.
10.6. Methods of Payment
There are three basic methods of payment:
1. Time-based payment: It is a payment computed in terms of some time unit-hours, days,
weeks, months, years, etc. Remuneration does not vary according to quantity and quality
or performance. One good example is salary.
Advantage:
 It is easy to administer since it is fixed amount.
 It improves employees’ integration to the organization by enhancing employees’ security.
(Knowledge what they earn at the end of a certain period of time).
Disadvantage:
 It is not a good motivator as it is not associated with performance.

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  In times of need to reduce costs due to financial problems, organizations are forced to
lay-off salaried employees as opposed to reducing working hours and keeping
employees with the organization.

CHAPTER EIGHT
EMPLOYEE RELATIONS
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11.1.Definition
It is a continuous relationship between a defined group of employees (represented by a union
or association) and an employer. The relationship includes the initial recognition of the rights
and responsibilities of union and management, the negotiations of a written contract
concerning wages, hours, and other conditions of employment, and the interpretation and
administration of this contract over its period coverage. (Ivancevich and Glueck, 1998).
The employee-employer relations are expressed in an employment contract which may
include element such as amount and method of payment, hours of work, holidays pay,
provisions for sickness, injury, and entitlement to pay, terms and conditions of pension
rights, disciplinary rules and procedures, institutional rights of unions and management,
terms and conditions of termination of the contract, enforcement and administration.
There are three parties in employee relations-the employees, the employer, and the
government. Employees are represented by labor union. A labor union is a group of
employees who have joined together to achieve present and future goals that deal with
employment condition. The role of the government in labor relations is developing the
framework if the employer relationship through laws (Eg. The Ethiopian Labor Law).

11.2. Why do employees join labor unions?

Although there are various reasons why employees join unions, the general interest lies in
satisfying their needs that are important to them. Some of these reasons include

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Job Security: employees have fear of loss of job for various reasons (personal clash with
manager, economic recession, etc.). Labor unions could make negotiations with management
to protect employees from sudden loss of jobs or even prevent lay-offs.
Socialization: As a member of a labor union, employees have a chance to socialize with
other employees of similar interest through meetings, social events, educational programs,
etc, and create a strong friendship and team spirit.

Safety and Health: Unions are instrumental in ensuring a safe and healthy working
environment in organizations. Improved working condition is one important factor that
employees are likely to be interested in.
Communication Link: Most employees consider labor unions as a bridge that links them to
management. Through this link, they can express their dissatisfaction and disagreement.
Through this link, they can express their dissatisfaction and disagreement about the job,
management, and other issues.
Fair and equitable compensation: Fair compensation is usually at the top of the list of
unions. They’re committed to ensure that employees get a fair and comparable payment
fringe benefit. This is likely to attract employees to join unions.
11.3. Collective Bargaining
It is the process through which representatives of management and the union meet to
negotiate a labor agreement. Under law, both management and the union are required to
negotiate wages, hours, and terms and conditions of employment “in food faith”. Good faith
bargaining means that both parties are making a reasonable effort during communication
and negotiation to arrive at an agreement.
The process of collective bargaining includes three phases-preparation, negotiation, and
administration of the contract.
Preparation: At this stage, both parties make all the necessary preparation for the
negotiation in terms of developing offensive or defensive strategies regarding contract
changes and assess internal and external environment that may affect the outcome of the
negotiation (legal, economic, political, and social, etc.) They study the intentions and
capacities of the other party.

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Negotiation: the actual negotiation process requires a great deal of skill and experience. The
most typical bargaining/negotiating stages involve
1. Each side presents its demands (usually the demands are very far apart in some
issues)
2. Reduction of demands: each side trades off some of its demands to gain others.
3. Subcommittee studies: the parties form joint subcommittees to develop reasonable
alternatives.
4. If they agree, informal settlement is reached and each group goes back to its sponsor-
union representatives to their supervisors and members; management to the top
management.
5. If everything is in order, formal agreement is reached and signed.
If an agreement is not reached by the parties, a situation called impasse occurs. It is a
situation in which parties cannot reach settlement. In order to resolve such disagreement, a
“third party” may be involved. An intervention by a third party is used to overcome an
impasse, such as mediation, fact-finding, and arbitration.
Mediation: a neutral third party to help the parties reach an agreement. The mediator holds
meeting with each party and try to determine a common ground for further negotiation and
make suggestions on settlement packages. The mediator does not have the authority to make
a final decision.
Fact-finding: a neutral party that studies the situation and makes a public recommendation
on what the solution should be.
Arbitration: a neutral party that has the power to determine and dictate the settlement terms.
If the arbitration is binding arbitration, both parties are committed to accept the decisions of
the arbitrator.
Administration of the contract: it involves the activities necessary to put the agreed upon
contract in practice including adequate communication of the agreement to the concerned
parties.

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11.4. Grievance Handling
Several problems may arise during the implementation of agreed up on contracts. In such a
situation, there should be a formally established system whereby employer and
union/employees determine whether or not the contract has been violated.
The concept of grievance has been defined by various authors differently.
 Dessler defines is as any factor involving wages, hours, or conditions of employment
that is used as a complaint against the employer.
 Beach defines a grievance as “any dissatisfaction or feeling of injustice in connection
with one’s employment situation that is brought to the notice of the management.”
Grievances may arise from various sources and their seriousness also varies accordingly.
Some grievances arise from discipline cases, seniority problems (including promotion,
transfers, layoffs, etc.) Job evaluation results, work assignments, benefits, etc. As grievance
is often a symptom of an underlying problem, it requires careful analysis of the situation to
prevent repeated problems from occurring.
Grievance Procedure: It is an orderly system whereby disputes between management and
union/employees are resolved in a series of steps. Grievance procedure differs from
organization to organization. Some organizations have very simple procedures involving
only two steps while others may have very long steps before resolving the problem.
Disciplinary Action
Discipline is a procedure that corrects or punishes a subordinate because a rule or procedure
has been violated. Most contracts agreed by management and unionized organization provide
management with the right to discipline workers following set disciplinary procedures.
Incompetence, misconduct, and violation of contracts are some of the areas likely to initiate a

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disciplinary action. The most common types of disciplinary actions include oral reprimand,
loss of privileges, fines layoff, demotion, suspension, and dismissal.
A fair discipline process is based on three prerequisites – rules and regulations, a system of
progressive penalties, and an appeals process.
Rules and regulations: A clear definition of rules and regulations should be set to help
employees know before hand what is expected of them while working in that organization.
Some areas where rules and regulations apply included theft, destruction of company
property, drinking on the job, insubordination, etc.
A system of progressive penalties: Penalties may range from oral warning to written
warning to suspension from the job to discharge. The higher and more frequent the offence
is, the more severe the penalty becomes.
Appeals Process: In order to ensure the disciplinary action is fair and equitable, there has to
be an appeal process.
The disciplinary process may involve the following steps:
1. Establishing work and behavior rules.
2. Communicating these rules to employees
3. Establishing effective assessment mechanisms (performance appraisal or observation)
4. Collecting full information on the case and deciding on the type of penalty. (Usually
based on set policies and procedures)
5. Administering punishment or motivating change.
6. Following-up the case.

Disciplinary Action Guidelines

1. Discipline action should be applied consistently i.e. similar incidents should get
similar treatment.
2. The employee should be adequately warned of the consequences of his/her alleged
misconduct.
3. Disciplinary action should be taken in private.
4. Penalty should always carry with it constructive element. The employee should be
told clearly the reasons for the action to be taken.

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5. Disciplinary action should be taken promptly in order to for the employee to
understand clearly the relationship between the penalty and the offensive act.
6. As much as possible, disciplinary action should be applied by the immediate
supervisor.
7. After taking the disciplinary action, an attempt should be made to assume a normal
attitude toward the employee.

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