CHAPTER 1 : The conceptual framework of HRM

1- DEFINITION OF HUMAN RESOURCE MANAGEMENT

A- Edwin B. Flippo “HRM is planning, organizing, directing, controlling of procurement, development,
integration, maintenance and separation of human resources to the end that individual,
organizational and social objectives are achieved.”

B- Bratton and Gold “HRM is a strategic approach to managing employment relations, which
emphasizes that leveraging people’s capabilities are critical to achieving competitive advantage, this
being achieved through a distinctive set of integrated employment policies, programmes and
practices.”

C- Storey “HRM is a distinctive approach to employment management, which seeks to achieve

competitive advantage through the strategic deployment of a highly committed and capable
workforce, using an array of cultural, structural and personnel techniques.”

D- George T. Milkovich and John W. Boudreau “Human resource Management is a series of

integrated decisions that form the employment relationship; their quality contributes to the ability of
the organizations and the employees to achieve their objectives.”

E- Institute of Personnel Management (IPM) “Human Resource Management is that part of

Management which is concerned with people at work and with their relationships within an
enterprise. Its aim 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.”

3- Difference between HRM, HCM and KM:

Human capital management : by Bontis “Human capital represents the human factor in the
organization; the combined intelligence, skills and expertise that give the organization its distinctive
character. The human elements of the organization are those that are capable of learning, changing,
innovating and providing the creative thrust which if properly motivated can ensure the long-term
survival of the organization.”
Knowledge management : Knowledge management is any process or practice of creating, acquiring,
capturing, sharing and using knowledge, wherever it resides, to enhance learning and performance in
organizations. HRM aims to support the development of firm-specific knowledge and skills that are
the result of organizational learning processes.
4- FEATURES OF HRM
A- Harmonious Relation : It tries to build and maintain cordial relations between people working at
various levels in the organization e.g., between superior and subordinate, among fellow-workers and
between management and employees

B- Human Resource Management is a Continuous Process: Human resource management is not a

short affair; rather it is an ongoing process of managing people and their competencies, It is
continued until the dissolution of an organization. All the processes involved in HRM should run
continuously.

C- Human Resource Management is a Dynamic Function: The principles and practices of HRM should
not be rigid. Rather they should be dynamic. It means HRM is a dynamic function whereby the
procedures and practices are influenced by the environmental factors. Employees should gain an
updated knowledge and ability to work in the changing environment.

D- Human Resource Management is a Universal Function : HRM is a universal function in the sense
that it is applicable in all types of organizations. The principles and practices are applied irrespective
of size, nature, scope and purpose of the organization.

E- Human Resource Management is a Strategic Approach: HRM is taken as strategic approach for
organizational development. It helps to mobilize human resource in the organization in order to
achieve the stated goals and objectives strategically.

- All the activities of management are arranged in such a way that they are interconnected with
efficient and effective utilization of human resources according to change in organizational strategy.
It helps an organization meet its goals in the future by providing for competent and well-motivated
employees. It tries to help employees develop their potential fully.

F- Integration of Goals

- Usually there is a difference between organizational goal and individual goal.

- An employee wants to satisfy his/her individual goal first.

- But managers want to accomplish organizational goals before something else. Hence, HRM
practices and principles help in integrating individual and organizational goal into a framework. As a
result of which, employees are motivated towards higher level work performance for achievement of
organizational goal.

G- Human Resource Management Is Future-oriented

HRM is future oriented behaviour in the sense that it helps in assessing human resource requirement
for future. It helps in determining future goals and objectives of the organization and it employees
the people to get the job done in future period of time.

H- Human Resource Management is Multidisciplinary

It is a multidisciplinary activity, utilizing knowledge and inputs drawn from multiple disciplines such
as psychology, economics, etc.

5- Objectives / importance of HRM

The primary objective of HRM is to ensure the availability of competent and willing workforce to an
organization. The specific objectives include the following:

A- Societal Objectives: seek to ensure that the organization becomes socially responsible to the
needs and challenges of the society while minimizing the negative impact of such demands upon the
organization. The failure of the organizations to use their resources for the society’s benefit in ethical
ways may lead to restriction.

B- Organizational Objectives: it recognizes the role of HRM in bringing about organizational

effectiveness. It makes sure that HRM is not a standalone department, but rather a means to assist
the organization with its primary objectives. The HR department exists to serve the rest of the
organization.

C- Functional Objectives: is to maintain the department’s contribution at a level appropriate to the

organization’s needs. Human resources are to be adjusted to suit the organization’s demands.
D- Personnel Objectives: it is to assist employees in achieving their personal goals, at least as far as
these goals enhance the individual’s contribution to the organization. Personal objectives of
employees must be met if they are to be maintained, retained and motivated. Otherwise employee
performance and satisfaction may decline giving rise to employee turnover.

6- CHALLENGES OF HUMAN RESOURCE MANAGEMENT

A- Globalization in HRM :

- The term Globalization has invaded the mind of every successful business man and the concept of
Global Village is common issue in modern business world. Globalization is a process that is drawing
people together from all nations of the world into a single community linked by the vast network of
communication technologies.

- This aspect of globalization has also affected in the business world of today.HR Manager today need
not rely in small limited market to find the right employees needed to meet global challenges, but
today they can recruit the employees from around the world.

B- Handling multicultural/Diverse Workforce:

- A multicultural workforce is one made up of men and women from a variety of different cultural
and racial backgrounds. Dealing with people from different ‘age’, ‘gender’, ‘race’, ‘educational
background’, ‘location, income’, ‘parental status’, ‘religious beliefs’, ‘marital status’ and ‘ancestry’
and ‘work experience’ can be a challenging task for HR managers.

- Cultural differences may often lead to difficulties with communications and a rise in the friction that
can develop as people with different expectations and habits interact. As a result, workforce diversity
is increasing. Managing these people with different religious, cultural, moral background is
challenging task for HR Manager. Thus it is important for a HR manager to create an environment in
which the positives of diversity are harnessed and the negatives are minimized as much as possible.

C- Compliance with Laws and Regulation :

- Keeping up with changing employment laws is a struggle for business owners. Many choose to
ignore employment laws, believing they don’t apply to their business. But doing so could mean
audits, lawsuits, and possible even the demise of a company.

D- Balance with work life

- Balancing work and life assumes relevance when both husband and wife are employed. In India,
working women now account for 15% of the total urban female population of 150 million. Any
organization that strives to be reckoned as ‘a great place to work’ needs to pay special attention to
minimize and facilitate resolution work life conflict of their employees.
- The challenge however is in knowing and doing things that facilitate and support work life balance
without intruding into the personal lives of employees.
- Programs aiming at work-life balance include:

- Child care at or near the workplace

- Job sharing

- Sick leave policies

- Flexible work timing

- Care for sick children and employees

E- Conflict Managing

- There is no organization without conflict situations. It is known that 80% of conflict situation occur
independently of human will. Its causes are people’s individual characteristics, as well as structure of
the organization, conditioned by the culture established in the organization.

- Work-Life-conflict is a clear and present danger to organizations and denial of this fact would be at
the peril of accepting suboptimal employee performance. HR managers should know how to handle
employee-employer and employee-employee conflicts without hurting their feelings.

7- Theoretical approaches to human resources management

A- Human Capital Theory: This is an economic approach which sees people as valuable assets. It
supports investment in the training and development of people in order to achieve improved
organizational performance and increased profitability.
B- Agency Theory: An agent is a person who acts on behalf of another person, the principal, in
dealing with other people. The theory of agency deals with the relationship between: a company’s
owners; and its managers (directors).
- Agency theory is based on the idea that when a company is first established, its owners are usually
also its managers. As a company grows, the owners appoint managers to run the company.

C- General Systems Theory:

- The basic notion of GST is derived from the concept of tissue that is made up of cells working
together to perform a specific function. Any disorder in cells will have negative effects on the tissue
and consequently on the body.
- This theory describes organizations as complex systems having human resources management as a
sub-system. The theory emphasizes that the success or failure of the human resources management
component determines the existence and direction of the organization.
D- Competitive Advantage Theory:

- Competitive advantage refers to factors that allow a company to produce goods or services better
or more cheaply than its rivals. These factors allow the productive entity to generate more sales or
superior margins compared to its market rivals.
- Competitive advantage in HR refers to the quality of the employees who can not be copied, unlike
company's systems and processes. It comes down to the fact that companies with better employees
have the competitive advantage.

CHAPTER 2 :Management theories

Management theories can be classified into:

• Classical management theory: emerged from the Industrial Revolution and revolves around
maximizing efficiency and production.

• Humanistic or behavioral management theory: started in the early 20th century and
addresses the organization’s human and social elements.

• Modern management theory: followed on the heels of World War II and combines
mathematical principles with sociology to develop holistic approaches to management.

1- Classical management theory or (classical school):

A- Scientific Management Theory

Classical theory is also known as traditional theory of management which developed by Frederick W.
Taylor in1911. The first among this school of thought is “scientific management perspective” where
Taylor is known to be a “father of scientific management” for proposing 'one best way to do things'
or scientific management/Taylorism.

In the late nineteenth century and early twentieth century, Taylor worked on increasing efficiency
using scientific methods, eliminating additional movements and transfers at workplace. He wanted to
train workers for better jobs, divide the tasks between management and workers and implement
scientific management style with respect to different practices and workers in action.

Time and motion were a scientific analysis of task for examining the physical movements and
requirements for the completion of task.

Taylor also commenced another study “science of shovelling” for determining the optimal weight to
be lifted by the workers, thus, the optimal shovels were introduced to increase productivity while
reward as increase in the pay was motivator. The major notion of the motivation for employees
under scientific management were seen as money.

B- Administrative management theory

Administrative management theory is another well-known classical management theory developed

by Henry Fayol in 1916, he has developed this theory based on personal experience.

He introduced six functions and fourteen management principles in his theory. Management
functions developed by Fayol are used in all organizations.

All business activities could be split into six functions namely; administrative, security, accounting,
financial, commercial and technical while focused on the “managerial activities of manager including,
predicting, planning, organizing, commanding, coordinating, monitoring” The six functions are
reduced to four, which are still running. These are planning, organizing, leading and controlling.

Key principles include “division of work, authority and responsibility, discipline, unity of command,
unity of direction, subordination of individual interest to general interest, remuneration,
centralization, scalar chain, order, equity stability of tenure of personnel, initiative and esprit de
corps”.

C- Management bureaucratic theory (Bureaucratic Organisation):

The German sociologist Karl Emil Maximilian known as Max Weber proposes this theory. This is also
called Weber's theory of bureaucracy. He proposed this theory in1947.

He called his work a social and economic organization theory. This theory mainly focuses on
organizational structure.

With the expansion of organisations, the operations become further complex giving “authoritarian-
paternalistic pattern” way that enhances functional specialization within the distinctive layers of
management to have smooth operations.

2- Humanistic or behavioural management theory (Human Relation School):

A- Hawthorne Experiment by Elton Mayo
Elton Mayo is the main champion along with the Frank Roethlisberger and William Dickson of human
relations movement that later transformed into organisational behaviour. They argued that inter-
relationships within the group members are vital aspect at the organisational settings. Their study
known as “Hawthorne experiment” proved as paradigm shifter in the management studies
- “Hawthorne Effect” is a term explaining the phenomenon of individuals work and demonstrate
better performance when they are observed. Since the experiment took place at Western Electric's
Hawthorne company therefore the phenomenon is termed after the location. The experiment was
conducted to assess whether there is a correlation between productivity and work environments.
- It was evident that employee’s productivity tends to enhance due to change during the experiment
however, it declines when experiments ends. The experiment proved vital in establishing the key
notion that increased attention from the head/supervisor is reason for improved performance.
The two important conclusions drawn from this experiment were :
- existence of strong informal groups and
- behaviour of employees at work is significantly affected by non-economic factors.
Hence, this work contradicts the earlier work of classical theory that argued employees are economic
and rational beings whereas human relations school revealed employees' social person view.
 - There are number of scholars such as, Abraham Maslow, Douglas McGregor, Frederick Herzberg,
Kurt Lewin, Mary Parker Follet and so on who had contributed to behavioural school.
B- Maslow's Hierarchy of Needs:
Maslow's Hierarchy of Needs

Needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher
up. From the bottom of the hierarchy upwards, the needs are: physiological, safety, love and
belonging, esteem and self-actualization.

The original hierarchy of needs five-stage model includes:

1- Physiological needs - these are biological requirements for Human survival, e.g. air, food, drink,
shelter, clothing, warmth, sleep. If these needs are not satisfied the human body cannot function
optimally. Maslow considered physiological needs the most important as all the other needs become
secondary until these needs are met.

2- Safety needs : protection from elements, security, order, law, stability, freedom from fear.

3- Love and belongingness needs : after physiological and safety needs have been fulfilled, the third
level of human needs is social and involves feelings of belongingness. The need for interpersonal
relationships motivates behavior

Examples include friendship, intimacy, trust, and acceptance, receiving and giving affection and love.
Affiliating, being part of a group (family, friends, work).

4- Esteem needs : which Maslow classified into two categories: (1) esteem for oneself (dignity,
achievement, mastery, independence) and (2) the desire for reputation or respect from others .

Maslow indicated that the need for respect or reputation is most important for children and
adolescents and precedes real self-esteem or dignity.

5- Self-actualization needs : realizing personal potential, self-fulfillment, seeking personal growth

and peak experiences. A desire “to become everything one is capable of becoming”

C- Douglas McGregor(Theory X and Theory Y)

Douglas McGregor in his book, “human side of enterprises” published in 1960 argued that there are
two types of individual in the organisation, respectively X and Y type.
D- Herzberg’s Two Factor Theory :

Also known as Herzberg's motivation-hygiene theory, the two-factor theory or the dual-factor theory
proposed by Frederick Herzberg in 1959. The Herzberg theory states that certain elements within a
workplace lead to job satisfaction, while others lead to dissatisfaction. Herzberg developed the
theory to understand an employee's attitude better and drive toward the job. He theorized that an
individual's job satisfaction depends on two types of factors: motivators and hygiene factors.

1- Motivating factors

- Achievement: Individuals who have a strong drive to set and accomplish goals, enjoy working
alone, are willing to take calculated risks. This motivates them to succeed in the workplace.
- Recognition: Offering recognition not only makes employees feel accomplished and
appreciated, but it also reinforces good performance and encourages employees to continue
repeating the actions that led to the high performance.
- The work itself: Employees who believe that their work is important and that their tasks are
meaningful are more likely to be motivated to do well.
- Job advancement opportunities: Ensuring employees understand a clear plan of progression
within their position in the workplace can instill motivation to work toward a promotion,
which can ultimately increase employee productivity.
- Growth opportunities: Employees often feel more motivated at work when there are ample
opportunities for growth and professional development. Giving employees opportunities to
increase their skills and become more efficient in their positions instills a sense of
accomplishment and pride that acts as a strong motivator for employees.
2- Hygiene factors
- Relationship with peers: Encouraging camaraderie among team members can contribute to
greater job satisfaction.
- Company policies: This can cover initiatives to promote a healthy workplace, such as mask
wearing and social distancing.
- Physical workspace: Some aspects of a physical working environment include its size and
facilities, such as an on-site gym and updated furniture.
- Working conditions: This element includes the formal terms that the company hires its staff
members, such as the rate of pay, contract of employment and length of the workday.
- Salary: Companies can offer competitive salaries and benefits to maintain high employee
satisfaction.
- Status: As an employee, performing meaningful work can provide a sense of status.
 - Job security: Employees may also feel more satisfied with their jobs when they feel secure in
their positions.
- Supervision: Autonomy enables employees to perform their tasks as they deem fit.
3- Modern management theory
A- Organisational system

- If the structure of an organisation is its skeleton, the jobs, perhaps, its muscles, the people its blood
and guts and its physical perspectives its flesh, then there still remains the nervous system, the
respiratory system, the circulation system, the digestive system, etc.

B- Contingency theory

Contingency theory suggests that “organisational variables are in a complex inter-relationship with
one another and with conditions in the environment”, and that environmental contingencies act as
constraints and opportunities and influence the organisation’s internal structures and processes.’

CHAPTER 3 :
1- Human Resource Planning
1- Definition of Human Resource Planning
Human resource planning is a process by which an organization ensures that it has the right number
and kind of people at the right time, capable of effectively and efficiently completing those tasks that
will help the organization to achieve its overall strategic objectives.

2- Aims of HRP
1. Attracting and retaining the number of people required with the appropriate skills, expertise and
competencies.
2. Anticipating the problems of potential surpluses or deficits of people.
3. Developing a well trained and flexible work force for contributing to the organizations ability to
adapt to an uncertain and changing environment.
4. Reducing dependence on external recruitment when key skills are in short supply by evolving
retention as well as employee development strategies.
5. Improving the utilization of people by introducing more flexible systems of work..
3- Types of HRP:
A- Hard HR Management
Treats employees: simply as a resource of the business Strong link with corporate business planning
– what resources do we need, how do we get them and how much will they cost.
Focus of HRM: identify workforce needs of the business and recruit & manage accordingly
Traite les employés : simplement comme une ressource de l'entreprise (comme les machines et les
bâtiments). Lien fort avec la planification commerciale de l'entreprise : de quelles ressources avons-
nous besoin, comment les obtenons-nous et combien coûteront-elles.
Objectif de la GRH : identifier les besoins en main-d'œuvre de l'entreprise, recruter et gérer en
conséquence (embauche, déplacement et licenciement)
Key features
- Short-term changes in employee numbers (recruitment, redundancy)
- Minimal communication, from the top down
- Pay – enough to recruit and retain enough staff (e.g. minimum wage)
- Little empowerment or delegation
- Appraisal systems focused on making judgements (good and bad) about staff

- Taller organisational structures

- Suits autocratic leadership style

B- Soft HR Management
1- Treats employees as the most important resource in the business and a source of competitive
advantage. Employees are treated as individuals and their needs are planned accordingly
2- Focus of HRM: concentrate on the needs of employees – their roles, rewards, motivation ….etc.
Key features
- Strategic focus on longer-term workforce planning
- Strong and regular two-way communication
- Competitive pay structure, with suitable performance-related rewards (e.g. profit share,
share options)
- Employees are empowered and encouraged to seek delegation and take responsibility
- Appraisal systems focused on identifying and addressing training and other employee
development needs
- Flatter organisational structures
- Suits democratic leadership style

4- HR planning process (HRF)

A- Definition :
Reilly (2003): A process in which an organization attempts to estimate the demand for labour and
evaluate the size, nature and sources of supply which will be required to meet the demand. Planning
needs the following FORECAST ̇one for HR needs, ̇ one for the supply of inside candidates; and ̇ one
for the supply of outside candidates.
ADale S. Beach “ is a process of determining and assuring that the organization will have an
adequate number of qualified persons available at the proper times, performing jobs which meet the
needs of the enterprise and which provide satisfaction for the individuals involved .” (Meena)
Coleman Bruce “Human Resource Forecasting is the process of determining human resource
requirements and the means for meeting these requirements in order to carry out the integrated plans
of the organization .” (Meena)
B- Objectives of Human Resource Forecasting :
1. Ensure adequate supply of HR as and when required.
2. Ensure proper use of existing HR in the organization.
3. Forecast future requirements of human resources with different levels of skills.

4. Assess surplus or shortage, if any, of human resources available over a specified period.

5. Anticipate the impact of technology on jobs and requirements for human resources.

6. Control the human resources already deployed in the organization.

7. Provide lead-time available to select and train the required additional human resource over a
specified time.
8. Making assessment human resource requirements for future and making plans for recruitment .
9. Determining training and development needs of the enterprise.

10. Minimize the imbalances caused due to non-availability of human resources of right kind, right
number in right time and at the right place.

5- Stages of HRP:
1. Forecasting future people needs (Demand Forecasting)
2. Forecasting the future availability of people (Supply Forecasting)
3. Evolving plans to suit supply and demand.
A- HR Demand Forecast
Demand forecasting is the process of estimating the future quantity and quality of people required.
The basis of the forecast must be the annual budget and long-run plan, translates into activity levels
for each function and department.
Managers should consider several factors when forecasting HR Needs:
• The demand for product or service
• Projected turnover (resignations or terminations)
• Decision to upgrade the quality of products or services
• Enter into new market
• Technological changes
• Organizational growth
B- HR Supply Forecast
The next step for the management is to determine whether it will be able to procure the required
number of personnel and the sources for such procurement. Supply forecasting measures the
number of people likely to be available from within and outside an organization’s.
The supply analysis covers:
a. Existing human resources,
b. Internal sources of supply, and
c. External sources of supply

2- Job Analysis and Job Design

1- Job analysis:
A- Job analysis definition:
Job analysis is sometimes called Job Study, suggesting the care with which, tasks, processes,
responsibilities and personnel requirements are inquired into . It is essential to understand the nature
and all requirements, content related and behavioral, of a job, for writing job descriptions and
preparing job design.
Job analysis is a process of determining which characteristics are necessary for satisfactory job
performance and analyzing the environmental conditions in which the job is performed. The process
of job analysis leads to development of two documents viz. job description and job specification.

Any job vacancy can not be filled until and unless HR manager has these two sets of data. It is
necessary to define them accurately in order to fit the right person at the right place and at the right
time. This helps both employer and employee understand what exactly needs to be delivered and how.

A-1 Job description indicates the tasks and responsibilities, job title, duties, machines, tools and
equipment, working conditions and occupational hazards that form part of the job whereas job
specification comprises of the capabilities required to perform job, education, experience, training,
judgmental skills, communication skills and personal skills required to perform the job effectively.
Purpose of Job Description
The main purpose of job description is to collect job-related data in order to advertise for a particular
job
• It helps in attracting, targeting, recruiting and selecting the right candidate for the right job.
• It clarifies what employees are supposed to do if selected for that particular job opening.
• It gives recruiting staff a clear view what kind of candidate is required by a particular
department or division to perform a specific task or job.

A-2 job specification: Basic contents of a job specification are as follows:

1. Personal characteristics such as education, job experience, age, sex, and extra co curricular
activities.
2. Physical characteristics such as height, weight, chest, vision, hearing, health, voice poise, and hand
and foot coordination.
3. Mental characteristics such as general intelligence, memory, judgment, foresight, ability to
concentrate.
4. Social and psychological characteristics such as emotional ability, flexibility, manners, drive,
conversational ability, interpersonal ability, attitude, values, creativity etc.
B- Methods of job analysis
B-1 Observation Method: Observation of work activities and worker behaviors is a method of job
analysis which can be used independently or in combination with other methods of job analysis.
B-2 Interview: In this method, the interviewer asks job related questions, and record answers to
relevant questions. The limitation of this method is that it does not provide accurate information
because the employee may not provide accurate information to protect his own interest.
B-3 Questionnaire:
In this method properly drafted questionnaires are sent to jobholders. Structured questionnaires on
different aspects of a job are developed. Each task is described in terms of characteristics such as
frequency, significance, difficulty and relationship to overall performance. This method provides
comprehensive information about a job. The limitation of this method is that it is time consuming and
costly.
1- Job Design:
A- Job Design definition:
According to Michael Armstrong “Job Design is the process of deciding on the contents of a job in
terms of its duties and responsibilities, on the methods to be used in carrying out the job, in terms of
techniques, systems and procedures, and on the relationships that should exist between the job holder
and his superior subordinates and colleagues.”
B- Methods of Job Design :
B- 1 Job Simplification: the job is simplified or specialized. A given job is divided into small sub-
parts and each part is assigned to one individual employee. Job simplification is introduced when job
designers feel that the jobs are not specialized enough.
B- 2 Job Rotation:
Job rotation implies systematic movement of employees from one job to the other. Job remains
unchanged but employees performing them shift from one job to the other. With job rotation, an
employee is given an opportunity to perform different jobs.
B- 3 Job Enlargement:
Many tasks and duties are aggregated and assigned to a single job. It is opposite to job simplification.
Job enlargement is an extension of Job rotation,. Job enlargement is to expand in several tasks than
just to do one single task. It is also the horizontal expansion of a job. It involves the addition of tasks
at the same level of skill and responsibility.
It is done to keep workers from getting bored. This would also be considered multi tasking by which
one person would do several persons jobs, saving the company money and man hours that normally
would be paid to additional workers.
B- 4 Job Enrichment:
Job enrichment means making the job rich in its contents so that an employee will get more
satisfaction while performing that job. It upgrades the responsibility, scope and challenge. A vast
majority of the jobs are repetitive & monotonous in nature. The central focus of job enrichment is
giving people more control over their work Where possible, allow them to take on tasks that are
typically done by supervisors.

3- Recruitment and Selection

1- Recruitment :
A- Definition of recruitment:
Recruitment is a process of attracting individuals on a timely basis, in sufficient numbers and with
appropriate qualifications, to apply for jobs with an organization.
Recruitment is the process of choosing the right person for the right position and at the right time.
Recruitment also refers to the process of attracting, selecting, and appointing potential candidates to
meet the organization’s resource requirements.
B- Recruitment sources:
B- 1 Internal Sources
Internal sources of recruitment refer to hiring employees within the organization internally. In other
words, applicants seeking for the different positions are those who are currently employed with the
same organization.
At the time recruitment of employees, the initial consideration should be given to those employees
who are currently working within the organization.
- Internal sources of recruitment are the best and the easiest way of selecting resources as performance
of their work is already known to the organization.
Promotion : It is the process of shifting an employee from a lower position to a higher position with
more responsibilities, remuneration, facilities, and status. Many organizations fill the higher vacant
positions with the process of promotions, internally.
Transfer refers to the process of interchanging from one job to another without any change in the
rank and responsibilities. It can also be the shifting of employees from one department to another
department or one location to another location, depending upon the requirement of the position
Employee referrals :An employee referral is a recommendation of a candidate for a job opening by
an existing employee or someone in the candidate's network. In this process, the present employees
can refer their friends and relatives for filling up the vacant positions.

Pros and Cons of Internal Sources of Recruitment

The advantages are as follows:
∙ It is simple, easy, quick, and cost effective.

∙ No need of induction and training, as the candidates already know their job and responsibilities.

∙ It motivates the employees to work hard, and increases the work relationship within the
organization.

∙ It helps in developing employee loyalty towards the organization.

The drawbacks as follows:

∙ It prevents new hiring of potential resources. Sometimes, new resources bring innovative ideas and
new thinking onto the table.

∙ It has limited scope because all the vacant positions cannot be filled.

∙ There could be issues in between the employees, who are promoted and who are not.

∙ If an internal resource is promoted or transferred, then that position will remain vacant.

∙ Employees, who are not promoted, may end up being unhappy and demotivated
B- 2 External Sources
External sources of recruitment refer to hiring employees outside the organization externally. In other
words, the applicants seeking job opportunities in this case are those who are external to the
organization.
Direct recruitment refers to the external source of recruitment where the recruitment of qualified
candidates are done by placing a notice of vacancy on the notice board in the organization.
Employment agencies are a good external source of recruitment. Employment agencies are run by
various sectors like private, public, or government. It provides unskilled, semi-skilled and skilled
resources as per the requirements of the organization. These agencies hold a database of qualified
candidates and organizations can use their services at a cost.
Advertisements are the most popular and very much preferred source of external source of
recruitment. The job vacancy is announced through various print and electronic media with a specific
job description and specifications of the requirements.
Professional associations can help an organization in hiring professional, technical, and managerial
personnel, however they specialize in sourcing mid-level and top-level resources. There are many
professional associations that act as a bridge between the organizations and the job-seekers.
Campus recruitment is an external source of recruitment, where the educational institutions such as
colleges and universities offers opportunities for hiring students. In this process, the organizations
visit technical, management, and professional institutions for recruiting students directly for the new
positions.
Word of Mouth Advertising: Word of mouth is an intangible way of sourcing the candidates for
filling up the vacant positions. There are many reputed organizations with good image in the market.
Such organizations only need a word-of-mouth advertising regarding a job vacancy to attract a large
number of candidates..

Pros and Cons of External Sources of Recruitment

The benefits are as follows :
∙ It encourages new opportunities for job seekers.

∙ Organization branding increases through external sources.

∙ There will be no biasing or partiality between the employees.

∙ The scope for selecting the right candidate is more, because of the large number candidates
appearing.

- The disadvantages as follows :

- This process consumes more time, as the selection process is very lengthy.
- The cost incurred is very high when compared to recruiting through internal sources.
- External candidates demand more remuneration and benefits.
2- SELECTION :
1- Selection definition:
According to O.Donnell, “Selection is the process of choosing from among the candidates, from
within the organization or from the outside, the most suitable person for the current position or for the
future position.”
2- Difference between Recruitment and Selection
The major differences between Recruitment and Selection are as follows:
- Recruitment is defined as the process of identifying and making the potential candidates to apply for
the jobs while selection is defined as the process of choosing the right candidates for the vacant
positions.
- Recruitment is called as a positive process with its approach of attracting as many candidates as
possible for the vacant jobs while selection is called as a negative process with its elimination or
rejection of as many candidates as possible for identifying the right candidate for the position.
- Both recruitment and selection work hand in hand and both play a vital role in the overall growth of
an organization..
3- Importance of Selection
The purpose of selection is to choose the most suitable candidate, who can meet the requirements of
the jobs in an organization, who will be a successful applicant. For meeting the goals of the
organization, it is important to evaluate various attributes of each candidate such as their
qualifications, skills, experiences, overall attitude, etc. In this process, the most suitable candidate is
picked after the elimination of the candidates, who are not suitable for the vacant job.
4- Advantages of Selection:
- It is cost-effective and reduces a lot of time and effort.
- It helps avoid any biasing while recruiting the right candidate.
- It helps eliminate the candidates who are lacking in knowledge, ability, and proficiency
- It provides a guideline to evaluate the candidates further through strict verification and reference-
checking.

- It helps in comparing the different candidates in terms of their capabilities, knowledge, skills,
experience, work attitude, etc.

- A good selection process helps in selecting the best candidate for the requirement of a vacant
position in an organization.

4- Induction and orientation

A- Induction is the process of introducing new employees to a company or organization, including

providing information about the company's policies, procedures, and culture.

2- Orientation is the process of familiarizing new employees with the physical layout of the company
and the location of various departments and facilities. In brief, induction is about familiarizing
employees with the company's culture, policies, procedures and orientation is about familiarizing
employees with the physical layout of the company and the location of various departments and
facilities.

3- Key differences between Induction and Orientation

a. Purpose: Induction is the process of introducing new employees to the company, its culture,
policies, and procedures. Orientation is the process of providing new employees with information
about the company, its products, services, and the job they will be performing.
b. Timing: Induction typically happens at the beginning of an employee's tenure with a company,
while orientation may happen at any point during an employee's tenure.
c. Length: Induction is generally a longer process than orientation, as it covers more topics and may
involve multiple meetings or sessions.
d. Audience: Induction is typically intended for new employees, while orientation may be intended
for new employees, as well as existing employees who are transitioning to a new role or department.
e. Delivery: Induction is often delivered through a combination of in-person and online training,
while orientation may be delivered through a variety of methods such as in person training, online
training, and self-paced training.
f. Content: Induction covers a wide range of topics, such as company culture, policies, and
procedures, while orientation typically focuses on job-specific information such as job duties,
company products and services, and company expectations.
g. Formality: Induction is generally a formal process, with structured training sessions and
evaluations, while orientation may be more informal, with employees receiving information in a less
structured way.
h. Goals: The goal of induction is to ensure that new employees feel welcome, informed, and
prepared to contribute to the company's success. The goal of orientation is to provide new employees
with the information they need to be successful in their new role.
i. Evaluation: Induction may involve formal evaluations of the employee's understanding and
retention of the information presented during the induction process, while orientation may not include
formal evaluations.
4- Similarities between Induction and Orientation
a. Both induction and orientation are initial steps in the process of introducing new employees to a
company or organization.
b. Both aim to help new employees feel comfortable and confident in their new roles.

c. Both may include training on specific skills or systems related to the employee's job.
d. Both typically involve meetings with various members of the company, such as HR representatives,
managers, and current employees.
e. Both are considered important for ensuring a smooth transition for new employees and for the
overall success of the company.

CHAPTER 4 : Training and Development

1- TRAINING AND DEVELOPMENT DEFINITION:

A- Training is an educational activity carried out in order to gain new qualifications according to the
requirements of the job and to enable the individual to reach the required level of knowledge and
skill

B- Development can be defined as a set of systematic and planned activities designed by an

organization to provide its members with the opportunities to learn necessary skills to meet current
and future job demands. Focused most broadly, HRD seeks to develop people’s “knowledge,
expertise, productivity, and satisfaction.

2- DIFFERENCE BETWEEN TRAINING AND DEVELOPMENT:

1- According to the two researchers R. Wayne Mondy, Robert M. Noe “Training is the activities that
provide learners with skills and knowledge that are needed for their present job».

2- Training is the process of teaching employees the basic skills they need to perform their jobs.
Development refers to teaching managers and professionals to increase knowledge, skills, attitude,
needed for future jobs.

3- Participant Training programs are arranged for employees. Development programs are arranged
for executives.

4- Training level is the lower level learning program. development level is a higher level learning
program.

5- Training is imbibed for enhancing much more skills and knowledge to the employees.
Development is imbibed for enhancing specific skills and knowledge to the executives.

6- Aimed Training is aimed at improving job-related efficiency and performance. The development
aims at overall personal effectiveness including job efficiencies.

7- Instruction: Training refers only to instruction in technical and mechanical operations.

Development refers to the philosophical, theoretical and educational concept.

8- Period: Training courses are typically designed for a short-term period. Development involves a
broader education for long term purposes.

3- IMPORTANCE OF TRAINING:

∙ Training helps in the recruitment of staffs and ensure a better quality of applicant.

∙ It eliminates risk, since trained employees can make better and economic use of materials, and
equipment thereby reducing and avoiding waste.

∙ Training serves as a monitoring factor for employees in an organization.

∙ It leads to greater efficiency and productivity.

∙ It increases the loyalty and adaptability of staffs.

∙ It improves staff’s moral.

4- ADVANTAGES AND DISADVANTAGES OF TRAINING AND DEVELOPMENT:

A- DISADVANTAGES:
High training cost: Employee training costs can be prohibitively expensive for small and medium-
sized businesses. Travel, training and equipment costs can add up. Various of these can be reduced
by using online learning

It generally requires time away from work employee’s training time is time spent away from their
work. Likely, trainer won’t be able to accommodate a significant number of nonwork hours for your
employee.

Too much theory: Specific departments’ training programs are more theoretical than practical.
Employees have a hard time learning the material in these types of seminars. When a training
program is conducted over a long period, academic lectures become tedious.

Waste of time and money : The company must invest money, time and employ other people for
training, resulting in a waste of valuable resources. They would also pay salaries to both the teacher
and the staff.

Command of training: If you assign new employee training to another teacher or employee, you
must consider what the workers are learning. Since the teacher may not be as professional and
talented as you, the workers may pick up bad habits and receive inadequate training. It will
jeopardize the entire training activity.

Employee loss interest: Employees become tired and uninterested in their training sessions when
they last for several hours. As a result, data and details are not saved for workers who do not pay
attention. Employees lose interest when training programs are repeated over and over again with the
same data or theory.

B- ADVANTAGES:

Sustaining with the organizational changes and latest technology: Human Resource training is
needed to keep pace with all sectors and avoid being left behind in our ever-changing business
world. All industries are abiding by specific standards and ensuring that workers are up to date with
the latest skills thanks to staff training. Since the market is constantly changing, workers need to keep
up with the latest developments.

Staying one step ahead of the competition It is necessary to preserve track of the employees’
progress to remain ahead of the competition. Employee monitoring and assessment also play an
indispensable role in the performance of businesses. The company and its employees would
undoubtedly be ahead of their rivals if they underwent staff training.

Promotion opportunities : which provides them with a consistent path and increased opportunity for
advancement. As a result, they become a valuable asset to the business. One of the advantages of
having a teaching team is this.

Increase productivity Staff training is vital because it helps to develop the skillset and efficiency of
employees. Employee training improves performance, which in turn boosts productivity. Employees
achieve both quantity and quality performance because they are well trained.

Excellent customer service Qualified employees are those who are familiar with the methods for
dealing with customers appropriately. In this way, the company is run more efficiently.

Standardized methods As a result of training and development, the best approaches for the
particular job are standardized and followed by all employees.
Better material and equipment utilization Trained personnel will know how to make the most
efficient use of materials and equipment.

Boosting employee morale: Employees have more self-confidence because they have access to
employee training. Employees achieve work satisfaction and security as a result of preparation.
When employees are delighted, their productivity improves. As a result, the employee contributes
more to the organization’s growth, and absenteeism and turnover are reduced.

5- TYPES OF TRAINING:

A- Induction or orientation training: Induction is concerned with introducing or orienting a new

employees to the organization and its procedures, rules and regulations. When a new employee
reports to work, he must be helped to get acquainted with the work environment and fellow
employees.

B- Job training : Job training relates to specific job which the worker has to handle .It gives
information about machines, process of production, instructions to be followed, methods to be used
and so on. It develops skills and confidence among the workers and enables them to perform the job
efficiently.

C- Refresher training or retraining : The refresher training is meant for the old employees of the
enterprises. The basic purpose of refresher training is to acquaint the existing workforce with the
latest methods of performing their jobs and improve their efficiency further. Retraining programmes
are designed to avoid personnel obsolescence..

D- Internship training : Under this method, the educational or vocational institute enters into
arrangement with an industrial enterprise for providing practical knowledge ,to its students.
Internship training is usually meant for such vocations where advanced theoretical knowledge is to
be backed up by practical experience on the job.

E- Apprenticeship training : discussed in off the job methods .

6- METHODS OF TRAINING:

A- ON THE JOB TRAINING

is considered to be most effective method of training the operative personnel. Under this method,
the worker is given training at the workplace by his immediate supervisor. In other words, the
workers learns in the actual work environment .It is based on the principle of ‘learning by doing’.

Notable on the job methods are explained below.

A- 1 Coaching : Under this method, the supervisor imparts job knowledge and skills to his
subordinate. The emphasis in coaching or instructing the subordinate is on feeling by doing. This
method is very effective if the superior has sufficient time to provide coaching to his subordinates.

A- 2 Understudy : The superior gives training to a subordinate as his understudy or assistant. The
subordinate learns through experience and observation .It prepares the subordinate to assume the
responsibilities of the superior’s job in case the superior leaves the organization. The purpose of
understudy is to prepare someone to fill the vacancy caused by death, retirement, promotion, or
transfer of the superior.

A- 3 Position/job rotation: The purpose of position rotation is to broaden the background of the
trainee in various positions .the trainee is periodically rotated from job to job instead of sticking to
one job so that he/she acquires a general background of different jobs. However rotation of an
employee from one job to another should not be done frequently .

A- 4 Apprenticeship training : Apprenticeship training is a process by which people become skilled

workers, usually through a combination of formal learning and long term on the job training, often
under the tutelage of a master craftsmen. The apprentice learns the by observing the manner of
doing the job by the master craftsman or else he may be allowed to work on the job under his
supervision. The process continues till the new employee is able to do the job independently. This
type of training has traditionally been more appropriate for developing skills of craftsmanship such as
that of weaver, carpenter, plumber, machinist and fitter.

A- 5 Informal learning : Surveys from the American society for training and development estimate
that as much as 80% of what employees learn on the job they learn through informal means,
including performing their jobs while interacting every day with their colleagues .employers can
facilitate informal learning.

A- 6 Job instructions training : Many jobs consists of a sequence of steps that can best learned step
by step. Such step by step training is called job instructions training (JIT) .

B OFF THE JOB TRAINING :

requires the workers, to undergo training for a specific period away from the work place off the job
methods are concerned with both knowledge and skills in doing certain jobs. The workers are free of
tension of work when they are learning.

There are several off the job methods of training and development as described below:

B- 1 Special lecture cum discussion :

Training through special lectures is also known as ‘class –room training’ .It is more associated with
imparting knowledge than with skills. The special lectures may be delivered by some executives of
the organization or specialist from vocational and professional institutes.

B- 2 Behavior modeling:

A training technique in which trainees are first shown good management techniques in a film , are
asked to play roles in a simulated situation and are then given feedback and praise by their
supervisor Behavior modeling involves (1) showing the trainees the right way of doing something (2)
letting trainees practice that way and then (3) giving feedback on the trainee’s performance .

B- 3 vestibule training:

With vestibule training, trainees learn on the actual or simulated equipment but are trained off the
job .vestibule training is necessary when it is too costly or dangerous to train employees on the job
and/or where the job is difficult and complex. for instance and when safety is concern – as with pilots
–simulated training for instance may be only practical alternative.

B- 4 Conference training:

A conference is a group meeting conducted accordingly to an organized plan in which the members
seek to develop knowledge and understanding by oral participation. These days , video conferencing
is also gaining popularity under which people can participate in the conference via satellite.

B-5 Workshops : A training workshop is a type of interactive training where participants carry out a
number of training activities rather than passively listen to a lecture or presentation.
7- TRAINING PLAN STAGES
A- Training Need Analysis (TNA)
- The first situation, relates to performance at which the staff faces quality degradation or gap between
performance and the established work standard.
- Second situation, relates to computer use, new procedure and technology which are adopted to
reform efficiency in firm operation.
- Third situation, relates to the training that is carried out and grounded on specific requirements, for
example legal liability.
Below are functions of Training Need Analysis (TNA):
1. collects information on skill, knowledge and feeling of the employee;
2. collects information on job content and job context;
3. defines standard performance and actual performance in operation;
4. involves stakeholders and gathers their support;
5. provides data for planning needs.
The output of Training Need Analysis (TNA) is identification of performance gap. Performance gap
can be identified as difference between expected performance and actual performance of individual.
B- training design : is a blueprint for a training event or experience. It is detailed plan for trainers that
what they will do. Why it is to be done, and the best way to reach training’s objectives. Training helps
to find solutions by identifying the problems and guiding in the right direction. It functions as a
process from identification of the needs to evaluation and feedback.
Basic Factors in Designing a Training and Development Programme:
1- Level of participants: The level of participants assessed through some pretests. An area of
consideration affecting the choice of a training programme is trainee characteristics, specifying the
number of employees who need training, their ability levels, and individual differences in training
needs. If an organization’s objective is to implement major changes, everyone in it should be involved.
2- Training period : The duration of training varies with the skill to be acquired, the complexity of
the subject, a trainee’s aptitude and ability to understand, and the training media used. Generally, a
training period should not be unduly long; if it is, trainees may feel bored, uninterested.
3- Content of the programme : There are four basic areas of the training programme content. Each
represents a type of behaviour of material to be learned. The four content areas are, information,
acquisition of skills, attitudinal change, decision-making and problem solving skills. In practice,
training programmes often incorporate more than one type of training content.
4- Effective training methodology : The appropriate training methodology is decided on various
factors like the nature of the topic, time, receptivity level of participants and availability of faculty
resources.
5- Responsibility for training : Training is the responsibility of four main groups:
a) The top management, which frames the training policy;
b) The personnel department, which plans, establishes and evaluates instructional programmes.
c) Supervisors, who implement and apply developmental procedure;
d) Trained employees, who provide feedback, revision and suggestion for corporate educational
endeavours.
6- Principles of training: There are a set basic principles that must be observed, the most important:
Training is most effective when the learning experience occurs under conditions identical with those
the trainee will encounter on the job.
7- Evaluation system: Designing an evaluation system well in advance perhaps helps trainers to
consolidate their efforts in the right direction for its effectiveness.
8- Budget provisions: Budget provisions play a very important role in designing training
programmes. The programmes, resources, methodology etc. are all decided according to funds
available in the budget.

Further, not less important than previous stages is training material making which will beneeded and
developed as follows:
1. overall training schedule (time estimation)
2. plan for every single session
3. learning materials, for example notebook, textbook, handout, etc.
4. instructional aid
5. evaluation form.
C- Training Program Implementation
Once the training programme has been designed, it needs to be implemented. Implementation is beset
with certain problems.
Firstly, most managers are action-oriented and frequently say no to training efforts.
Secondly, there is problem of locating suitable trainers within an organization.
Any training programme implementation involves action on the following lines:
1. Deciding the location and organizing training and other facilities.
2. Scheduling the training programme.
3. Conducting the programme
4. Monitoring the progress of trainees.
E- Training Evaluation
To ascertain the success of training, evaluation is a necessary. The end stage is critical point in every
activity as it is frequently ignored even if it is a vital part to ascertain if the training is success in
achieving the goals or otherwise.
Kirkpatrick articulated the most influential framework for training evaluation. Kirkpatrick argues
training effort can be evaluated according to four criteria: reaction, learning, job behavior and
result:

Reaction (level 1): Did the trainees like the program and feel it was valuable?

Positive reactions to a training program may make it easier to encourage employees to attend future
programs. But if trainees did not like the program or think they did not learn anything, they may
discourage others from attending and may be reluctant to use the skills and knowledge obtained in
the program.

Learning (level 2): Did the trainees learn what they should learn through HRD objectives?
This is an important criterion that an effective HRD program should satisfy. Measuring whether
someone has learned something in training may involve a quiz or test-clearly a different method
from assessing the participant’s reaction to the program

Job Behavior (level 3): Does the trainee use what was learned in training back on the job?

This is also critical measure of training success. If learning does not transfer to the job, the training
effort cannot have an impact on employee or organizational effectiveness. Measuring whether
training has transferred to the job requires observations of the trainees on the job behavior or
viewing organizational records

Results (level 4): Has the training or HRD effort improved the organizations effectiveness?

Is the organization more efficient, more profitable or better able to serve its customer as a result of
the training program? Meeting this criterion is considered the bottom line as far as most managers
are concerned.

CHAPTER 5 : Compensations and wages

1- Compensation definitions :
Dale Yoder “Compensation is paying people for work”.

Keith Davis “Compensation is what employees receive in exchange for their contribution to the
organization”.

Edwin B. Flippo“The function compensation is defining as adequate and equitable remuneration of

personnel for their contributions to the organizational objectives”.

Cascio (1995) “Compensation includes direct cash payments and indirect payments in form of
employees benefits and incentives to motivate employees to strive for higher levels of productivity”.

Gary Dessler “Employee compensation refers to all forms of pay going to employees and arising from
their employment.”

Milkovitch and Newman (2005) “Compensation is all forms of financial returns, tangible services and
benefits employees receive as part of an employment relationship.” The phrase “financial returns”

2- Different Types of Compensation:

A- Non-monetary Compensation:

It includes any benefit that an employee receives from an employer or a job that does not involve
tangible value. Examples are career development and advancement opportunities, opportunities for
recognition, as well as work environment and conditions.

B- Direct Compensation

Direct Compensation comprises of the salary that is paid to the employees along with the other
health benefits. It consisting of pay received in the form of wages, salaries, bonuses, and
commissions provided at regular and consistent intervals.
These include the basic salary, house rent allowances, medical benefits, city allowances, conveyance,
provident funds, etc. It also includes bonuses, payments for holidays, etc.

C- Indirect Compensation

Indirect compensation can be thought of as the non monetary benefits an employee gets from the
organization. It includes everything from legally required public protection programs such as Social
Security to health insurance, retirement programs.

3- Objectives of compensation management

- Acquire qualified personnel: Compensation needs to be high enough to attract applicants. Premium
wages are sometimes needed to attract applicants working for others.

- Retain current employees: Employees may quit when compensation levels are not competitive,
resulting in higher turnover.

- Ensure equity To retain and motivate employees, employee compensation must be fair.
Compensation management strives for internal and external equity.

- Reward desired behavior: Pay should reinforce desired behaviors and act as an incentive for those
behaviors to occur in the future. Good performance, experience, loyalty, new responsibilities, and
other behaviors can be rewarded through an effective compensation plan.

- Control costs : A rational compensation system helps the organization obtain and retain workers
reasonable cost. Without effective compensation management, workers could be overpaid or
underpaid.

- Motivating Personnel : Compensation management aims at motivating personnel for higher

productivity.

4- Determinants of Compensation :

- there are several other internal and external factors affecting the compensation:

A. External Determinants of Compensation

1. Labour Market Conditions : The forces of demand and supply of human resources, no doubt, play
a role in compensation decision. Employees with rare skill sets and expertise gained through
experience command higher wage and salary than the ones with ordinary skills abundantly available
in the job market. But the higher supply of human resources for certain jobs may not lead to
reduction of wages beyond a floor level due to Government’s prescription of minimum wage levels
and employee union’s bargaining strength. Similarly, this factor by itself does not result in lower pay
if the vast majority of available resources are unemployable due to poor skill and low talent. Thus, it
is clear that law of demand and supply applies to labour market only to a limited extent.

2.Economic Conditions : Organizations having state-of-the-art technology in place, excellent

productivity records, higher operational efficiency, a pool of skilled manpower, etc., can be better
pay masters. Thus, compensation is the consequence of the level of competitiveness .prevailing in a
given industry.

3. Prevailing Wage Level: Most of the organizations fix their pay in keeping with the level for similar
jobs in the industry. If a particular firm keeps its pay level higher than those of others in the industry,
its employee cost becomes heavier which may escalate the end cost of the products. This will affect
the competitiveness of the firm. On the other hand, if a firm keeps its pay level lower than the
prevailing rates, it may not recruit the skilled and competent manpower.

4.Government Control: Government through various legislative enactments such as Minimum

Wages Act, 1948, Payment of Wage Act, 1936, Equal Remuneration Act, 1976, Payment of Bonus Act,
1965, dealing with Provident Funds, Gratuity, Companies Act, etc., have a bearing on compensation
decisions. Therefore, firms have to decide on salaries and wages in the light of the relevant Acts.

5. Cost of Living: Increase in the cost of living, raise the cost of goods and services. It varies from area
to area within a country and from country to country. The changes in compensation are based on
consumer price index which measures the average change in the price of basic necessities like food,
clothing, fuel, medical service, etc., over a period of time.

6. Union’s Influence: The collective bargaining strength of the trade unions also influence the wage
levels. Trade unions enjoy an upper hand in certain industries like banking, insurance, transport and
other public utilities.

7. Globalization: The entry of multinational corporations and big corporates have triggered a massive
change in the compensation structure of companies across sectors. There is a salary boom in sectors
like information technology, hospitality, biotechnology, electronics, financial services and so on.

8. Cross Sector Mobility: Contemporary companies find it difficult to benchmark the salaries of their
staff with others in the industry thanks to mobility of talent across the sectors. For example,
hospitality sector employees are hired by airlines, BPOs, healthcare companies and telecom
companies.

B. Internal Determinants of Compensation

1. Compensation Policy of the Organization: Firm’s policy regarding pay i.e., attitude to be an
industry leader in pay or desire to pay the market rate determines its pay structure.

2. Employer’s Affordability: Those organizations which earn high profit and have a larger market
share, a large business conglomerate and multinational companies can afford to pay higher pay than
others.

3. Worth of a Job: Organizations base their pay level on the worth of a job. The wages and salaries
tend to be higher for jobs involving exercise of brain power, responsibility laden jobs, creativity-
oriented jobs, technical jobs.

4. Employee’s Worth: many private sector organizations follow performance-linked pay system. They
conduct performance appraisal more often than not which provides input for determining pay levels.
It distinguishes the high-performer from the low-performer and the non-performer.

5- wages:
The wage frequently expressed as an hourly rate, forms a payment for an individual’s services while
the salary relates to such payment frequently expressed as monthly rate. A wage or salary level
relates to the average of the rates paid for the jobs in a given population that is industry, enterprise,
region nation, etc, whereas a wage structure means a hierarchy of jobs where wage rates are
embodied.

Wage and salary administration is essentially the application of a systematic approach to the
problem of ensuring that employees are paid in a logical, equitable and fair manner.
A- Wage Structure :

Wage : wage and salary are used interchangeably, but ILO “International Labour Organization”
defined the term wage as “the remuneration paid by the employer for the services of hourly, daily,
weekly and fortnightly employees.” It also means that remuneration paid to production and
maintenance or blue collar employees.

Salary basic pay : the term salary is defined as the remuneration paid to the clerical and managerial
personnel employed on monthly or annual basis. The term salaries / wages can be defined as the
direct remuneration paid to an employee compensating his services to an organization.

Nominal Wage: it is the wage paid or received in monetary terms. It is also known as money wage.

Real Wage: Real wage is the amount of wage arrived after discounting nominal wage by the living
cost. It represents the purchasing power of money wage.

Take Home Salary: It is the amount of salary left to the employee after making authorized deductions
like contribution to the provident fund, life insurance premium, income tax, and other charges.

Minimum wage: It is defined as the amount or remuneration “which may be sufficient to enable a
worker to live in reasonable comfort, having regard to all obligations to which an average worker
would ordinarily be subjected to.”

B- Methods of wage payment :

• Minimum wage: Minimum wage providing for sustenance of life plus for preservation of the
efficiency of worker.

• Fair wage: Equal to the rate prevailing in the same trade and in the neighbourhood, or equal to the
predominant rate for similar work throughout the country.

• Living wage: Higher than fair wage. Provided for bare essentials plus frugal comforts.

C- Types of Wages :

Time wages : Wages paid according to the time are called Time wages. Time wages referred to the
daily wages, weekly wages etc.

Price wages : Price wages are the modes of payment which are paid on the basis of the quantity of
work.

Task wages : If the worker does the work from the start to its end, the payment is made for whole
the work and its called Task wages.

Cash wages : When the wages are paid in money or cash, they are called Cash wages.

Kind wages : The wages paid to the workers for their services in the form of commodities is called
Kind wages.

Service wages : Sometimes workers are neither paid in cash or kind. They are paid through a service.
This is called Service wage.

CHAPTER 6 : Appraisal performance in HRM

1- Definition of Appraisal performance definitions:
Performance appraisal (PA) is the process of evaluating how well employees perform their jobs when
compared to a set of standards, and then communicating that information to those employees. Such
appraisal also has been called employee rating, employee evaluation, performance review,
performance evaluation, and results appraisal.

2- Performance Management Vs. Performance Appraisal

Performance management is a systematic analysis and measurement of worker performance that
use to improve performance over time, while Performance appraisal is the ongoing process of
evaluating employee performance. Performance appraisals are reviews of employee performance
over time , so appraisal is just one piece of performance management.

3- The reasons companies conduct appraisals:

In a studies conducted by Alan and Kenneth the top five major uses of performance appraisal are: A-
compensations: The uses of performance appraisal for compensation help organisations to achieve
fair, decent and consistent reward outcomes for remuneration justice in organisation. In the use of
appraisal, compensation is always used as a tool to “control” the performance of an individual to
achieve the organisational goals and objectives.performance improvement

B- improve performance: in recent years, instead of using appraisal as a control and maintenance
tool to improve performance, the shift is towards using it for motivation and development purposes.
This helps the organisation identify the employee’s performance gap in training and development
purposes.
C- Feedback: Performance improvement can also be used at the same time for “feedback” to identify
the things that an employee is already doing well and the things that he/she needs to do better . The
aim of using appraisal is therefore to provide that “feedback” to help the employees and not to
punish or demoralise them.
D- Documentation: Although the success of appraisal lies not in the paperwork, documentation in
appraisal provides a record of objective evidences for reward such as wage increment, bonus,
promotion, etc. On the other extreme, proper documentation can also act as a defence tool against
individual who legally challenge the validity of management decision to reward and punish.
4- Problems with existing performance appraisal tools
A-The use of incorrect procedures: sometimes appraisal may be used only as a form of disciplinary
action and not as an opportunity to gain the benefits from this appraisal exercise.

B-The lack of performance appraisal exercise reviews: When there are important operating systems
employee’s decisions that are made without information can be gained from appraisal and that is
bound to result in problem.

C-The lack of Abilities : In performance rating, Oberge (1972) found that the standards and rating of
employee tends to vary widely and often unfairly due to managers’ or appraisers’ high tendency to
give middle range scores resulting in both high and low performers not being recognised and
managed ccordingly.

D-The use of complicated performance appraisal systems: when procedures and/or forms are too
complicated, difficulties arise. Some evaluators may not know how to complete the appraisal forms.
E-Irregular and/or infrequent appraisal exercise: when appraisals are held irregularly and/or
infrequently, benefits to be gained from a continuous appraisal process are lost.

F-Fear of offending employees: some appraisers may be afraid of offending employees by telling the
truth during the performance appraisal sessions. This is unfortunate because managers have a
responsibility to be honest and to provide employees with the help they need to become better
employees.

G-Comparison of employees: some appraisers have a tendency to compare one employee’s

performance with that of another. While this approach can sometimes be helpful, the most effective
comparison is between what the employee is expected to do and how the employee performed on
the job.

H-Failure to follow-up on performance appraisal exercise reviews: to be effective, information

gathered from the performance appraisal must be put to use. Appraisal exercise should not be
conducted and shelved away until the next review.

I-Over-emphasis on errors: some appraisers become so concerned that an error may occur in the
appraisal process that they fail to implement a performance appraisal programme, or they develop
so many safeguard procedures that the process becomes unmanageable.

5- Responsibility for Appraisal

A- Immediate Supervisor: The supervisor is usually in an excellent position to observe the
employee’s job performance and the supervisor has the responsibility for managing a particular unit.
When someone else has the task of evaluating subordinates, the supervisor’s authority may be
undermined.

B- Subordinates : Some firms conclude that evaluation of managers by subordinates is both feasible
and needed. They reason that subordinates are in an excellent position to view their superiors’
managerial effectiveness. In the higher education environment, it is a common practice for
instructors to be evaluated by students.

C- Peers and Team members :

- A major strength of using peers to appraise performance is that they work closely with the
evaluated . The rationale for evaluations conducted by team members includes the following:

- Team members know each others’ performance better than anyone and can, therefore, evaluate
performance more accurately. Peer pressure is a powerful motivator for team members.

- Members who recognize that peers within the team will be evaluating their work show increased
commitment and productivity.

- Peer review involves numerous opinions and is not dependent on one individual.

D- Self-Appraisal : If employees understand their objectives and the criteria used for evaluation, they
are in a good position to appraise their own performance. Many people know what they do well on
the job and what they need to improve. If they have the opportunity, they will criticize their own
performance objectively and take action to improve it.

E- Customer Appraisal: Customer behavior determines a firm’s degree of success. Therefore, some
organizations believe it is important to obtain performance input from this critical source.
Organizations use this approach because it demonstrates a commitment to the customer, holds
employees accountable, and fosters change.

5- Performance Appraisal Methods:

A- 360-Degree Feedback Evaluation Method :

The 360-degree feedback evaluation method is a popular performance appraisal method that
involves evaluation input from multiple levels within the firm as well as external sources. The 360-
degree method is unlike traditional performance reviews, which provide employees with feedback
only from supervisors. In this method, people all around the rated employee may provide ratings,
including senior managers, the employee himself or herself, supervisors, subordinates, peers, team
members, and internal or external customers.

B- Rating Scales Method : The rating scales method is a performance appraisal method that rates
employees according to defined factors. Using this approach, evaluators record their judgments
about performance on a scale. The scale includes several categories, normally 5–7 in number,
defined by adjectives such as:

5= Outstanding, consistently exceeds expectations.

4 = Above Expectations.

3 = Meets Expectations.

2 = Below Expectations.

1 = Needs Improvement.

C -Essay Method: The essay method is a performance appraisal method in which the rater writes a
brief narrative describing the employee’s performance. This method tends to focus on extreme
behavior in the employee’s work rather than on routine day-to-day performance.

D - Work Standards Method : The work standards method is a performance appraisal method that
compares each employee’s performance to a predetermined standard or expected level of output.

E- Ranking Method: The ranking method is a performance appraisal method in which the rater ranks
all employees from a group in order of overall performance.

F- Results-Based System: The manager and subordinate jointly agree on objectives for the next
appraisal period in a results-based system, in the past a form of management by objectives. In such a
system, one objective might be, for example, to cut waste by 10 percent. At the end of the appraisal
period, an evaluation focuses on how well the employee achieved this objective.