GGSIPU MBA Weekend HRM Class Notes
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Transcript of GGSIPU MBA Weekend HRM Class Notes
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Introduction to HRM, Concept of HRM
Human resources management consists of a group
of policies and procedures whose objective is to
mobilize and develop human resources in order to
increase an organizations efficiency and
effectiveness. The effective management of humanresources is essential for all organizations that
depend on personnel to produce goods and services.
HRM is closely linked to: the mission, the values,
the vision and the strategy of a business. It has
progressively transformed itself from an
administrative function to a catalyst for energy, a
creator of business culture and dynamism. HRM is
especially concerned with:
Identifying the best candidates for thepositions to be filled (Recruitment)
Ensure that new employees are adequatelyinformed about the policies of theorganization (Orientation)
The optional organization of the workload(Efficiency and Effectiveness)
Dev eloping knowledge and skills of mgmtand staff (Training, Skill Development an dCareer mgmt.)
Encouraging employee identification andinvolvement with the business
Assuring that management ov ersees theperformance of each employee and offersfeedback
Improving and/or maintaining a positivework environment (Conflict Resolution)
Adequately r ewarding employees for w orkaccomplished (Salary and Benefits) Managing risk with the health and safety of
employees in mind Assuring a balance between work and
personal time
Nature of HRM
It is pervasive in nature as it is present inall enterprises
Its focus is on results rather than on rules It tries to help employees develop their
potential fully
It encourages employees to give their bestto the organization
It is all about people at work, both asindividuals and groups
It tries to put people on assigned jobs inorder to produce good results
Helps an organization meet its goals byproviding for competent and well-
motivated em ployees
Tries to build and maintain cordialrelations between people at various levels
in the organization
It is a multidisciplinary activity, utilizingknowledge and inputs drawn from
psychology, economics, etc
Scope of HRM
The Indian Institute of Personnel Management hasspecified the scope of HRM thus:
Personnel aspect: This is concerned withmanpower planning, recruitment,selection, placement, transfer promotion,training and development lay off andretrenchment remuneration incentivesproductivity etc
Welfare aspect: It deals with workingconditions and amenities such as canteens,crches rest and lunch room housingtransport medical assistance education,health and safety recreation facilities etc
Industrial relations aspects: This coversunion management relations jointconsultation collective bargaininggrievances and disciplinary proceduressettlement of disputes etc.
Functions of HRM
Human resource or man power planning Recruitment, selection and placement of
personnel
Training and developm ent of employees Appraisal of performance of employees Taking corrective steps such as transfer
from one job to another Remuneration of employees Social security and welfare of employees Setting general and specific management
policy for organizational relationship
Collective bargaining, contract negotiationand grievance han dling
Staffing the organization Aiding in the self-development of
employees at all levels
Dev eloping and maintaining m otivationfor workers by providing incentives
Rev iewing an d auditing manpowermanagement in the organization Potential appraisal, feedback, counselling Role Analysis for job occupants Job Rotation Quality Circle, Organization development
and Quality of Working Life
Objectives of HRM
To help the organization reach its goals To ensure effective utilization and
maximum development of human
resources To en sure respect for human beings
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To identify and satisfy the needs ofindividuals
To ensure reconciliation of individual goalswith those of the organization
To achieve and maintain high moraleamong employees
To provide the organization with well-trained and well-motivated employ ees
To increase to the fullest the employee'sjob satisfaction and self-actualization
To develop and maintain a quality of worklife
To be ethically and socially responsive tothe needs of society
To develop overall personality of eachemployee in its multidimensional aspect
To enhance employee's capabilities toperform the present job
To equip the employ ees with precision andclarity in transaction of business
To inculcate the sense of team spirit, teamwork and inter-team collaboration
Processes of HRM
Human resource planning (Recruitment,Selecting, Hiring, Training, Induction,
Orientation, Evaluation, Promotion and
Layoffs)
Employee remuneration and BenefitsAdministration
Performance Management Employee Relations
Evolution of HRM
The early part of the century saw a concern for
improved efficiency through careful design of work.
During the middle part of the century emphasis
shifted to the employee's productivity. Recent
decades have focused on increased concern for the
quality of working life, total quality management
and worker's participation in management. These
three phases may be t ermed as w elfare,
development and empowerment. In the 21st centuryHRM will be influenced by following factors, which
will work as various issues affecting its strategy:
Size of the workforce Rising employ ees' expectations Drastic changes in the technology as well
as Life-style changes
Composition of workforce, new skillsrequired
Environmental challenges Lean and mean organizations Impact of new economic policy, politicalideology of the government
Downsizing and rightsizing of theorganizations
Culture prevailing in the organization etcRoles and Responsibilities of HR Manager
HR Team Effectiveness for HR efficiency:
Frame a clear and easily implementableHR Policies
Nurture and develop a motivated HRTeam to meet business requirement
Dev elop the collective knowledge of theHR team to handle complex and crisis
situation arising due to dynamic and
changing business environment
Create a complementing skills based teamsuch that various HR aspects can be
addressed and there are varied
competencies and skills the team has to behandle the entire gamut of HR
responsibilities ranging from HR design
t0o HR delivery e. g. recruitment
specialist, L&D experts, Business HR
Plan and implement an effective HR Planthat is aligned to Business Plan and overall
organisation people agenda
Deliver Business Expectations to attain HRcredibility
Execute manpower planning andbudgeting to have a road-map forrecruitment assignments
Manpower hiring as per the recruitmentplan agreed along with the Business
heads/department heads
Keep ears to the ground and reach out toall employees through communication
with employees at regular intervals to
gather insights @ workplace and feed them
back a ppropriately to the leadership team
of the organisation
Plan and execute suitable interventions tokeep the employees motivated
Act as a business partner and providedashboards/analytics to business
heads/department heads to help them
have a pulse of their team
Provide employee development andcounselling assistance to employees /team
members to enhance employee
performance an d productivity
Take adequate measures to retain goodemployees, ring fence high potential
employees
HR Delivery Agenda to executive effective HRpractices
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Ensure Statutory Compliant status at a lltimes
In case of a widespread organisation, HRvisit calendar to a ll l ocations is made and
followed
Executing Employee Engagementinitiatives to keep people together andmake the workplace exciting, rewarding
and engaging
Drive an effective Learning anddevelopment agenda that impacts the
employees and the businesses
Evaluate and improvise the current HRPractices to keep with time and external
benchmarks
Update HR policies in line with thebusiness and organisation requirement
Keeping and updated Employee Handbookwith all relevant details and information
Design, update and share SOPs of all HRprocesses
Conduct periodical employ ee surveys tocollate insights @ workplace and in turn
design employee interventions accordingly
to address concern areas
Support and counsel business managers toeffectively manage teams to ensure higher
employee productivity
Have an updated repository of Jobdescriptions for all roles in the
organisation along with measurable
performance indicators for each role
Maintain employee records and files inorder for ease of reference (both on-line
and physical copies of the records)
Communicate with employ ees andbusiness heads for better alignment
Be astute to handle dynamics at theworkplace and help employees to
ov ercome crisis situation
HRM in a Dynamic Environment
Well, jumping into the concept after quite a longperiod of time. The human resource development isa vast topic to deal with. Thus it is quite obviousthat the vast dimensions include a much of manyelements inside it. These elements are greatlyinfluenced by the dynamic behaviour of theenvironment- both internal as well as external. Inthe 21st century actually the organizations cannotexpect the success without the properunderstanding and response of these behavioursand the responses to these constants, if notcontinuous trends and changes in who theorganizations make to employ and what all theseemployees do require HR practices and systemsthat are well conceived and effectively implemented
to ensure high performances and continuoussuccess. The society is having a great influence onthe latest managerial trends. Now-a-days labour
force is very much diversified in terms of theethnicity, race, sexual orientation, disability andother cultural factors. The managerial challenge inthe 21st century is mainly concerned with how totake the advantage of the diversified environment
while fostering cooperation and cohesivenessamong the dissimilar groups of employees. If the
management is done effectively the diversified anddynamic environment can render successful outputsand offer the organization a powerful competitiveedge as it stimulates creativity, improves the skill ofproblem solving by offering broader perspectivesand also infuses flexibility to the firm. The mainpurpose of the study of HRM in a dynamicenvironment is to unravel the mystery surroundingthe external and the internal factors that complicatethe job of an HR manager in practice and reality.Factors may be many including the internal and theexternal environments. The advancements intechnology in a rapid rate also plays a major role inthe concern. Due to certain political influences andsocial factors in many cases the companies mayneed to deal with certain situations of recessionsand the local and foreign Gov ernment policies alsoplay a vital role in the influencing in this context.The HRM needs to make certain things clearenough and thereby overcome the obstacles com ingin the path by those factors. It also includes propermanagement of the skills of the employees inmaintaining a stand still structure in all theseadverse surroundings and turn them in favour ofthe organization as a wh ole.
Technological Changes
There are three ways in which technology could
improve human resource management (HRM):
It can streamline operations. It can improve relations with other
departments through m ore t imely and
efficient service.
It can play a transformational role byremoving barriers to horizontal integration
within and outside the firm.
TQM in HR
Total quality human resources management
(TQHRM) is an approach to human resourcesmanagement that involves many of the concepts of
quality management. The primary goal of TQHRM
is employee empowerment. Several differences exist
between the tra ditional human resources approach
and TQHRM. The key points offered by Dr. Foster:
Process Characteristics
Consulting role Decentralization Release Dev elopmental
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Content Characteristics
Pluralistic Holistic System-oriented Satisfaction measures Person-based
Workplace Diversity
Workplace diversity refers to the variety of
differences between people in an organization. That
sounds simple, but diversity encompasses race,
gender, ethnic group, age, personality, cognitive
style, tenure, organizational function, education,
background an d m ore. Diversity not only involves
how people perceive themselves, but how they
perceive others. Those perceptions affect their
interactions. For a wide assortment of employees to
function effectively as an organization, humanresource professionals need to deal effectively with
issues such as communication, adaptability and
change. Diversity will increase significantly in the
coming years. Successful organizations recognize
the need for immediate action and are ready and
willing to spend resources on managing diversity in
the workplace n ow.
Benefits of Workplace Diversity
Increased adaptability Broader service range Variety of viewpoints More effective execution
Challenges of Diversity in the Workplace
Communication: Perceptual, cultural andlanguage barriers
Resistance to change Implementation of diversity in the workplace
policies
Successful Management of Diversity in theWorkplace
Recommended steps that have been proven
successful in w orld-class organizations are:
Assessment of diversity in the workplace: Dev elopment of diversity in the workplace
plan:
Implementation of diversity in theworkplace plan
Recommended diversity in the workplace solutions
include:
Ward off change resistance with inclusion
Foster an attitude of openness in yourorganization
Promote diversity in leadership positions Utilize diversity training Launch a customizable employee
satisfaction survey that provides
comprehensive reporting
Employee Empowerment
Empowerment of employees in the work place
provides them with opportunities to make their own
decisions with regards to their tasks. Nowadays
more and more bosses and managers are practicing
the concept of empowerment among their
subordinates to provide them with better
opportunities. According to Thomas A. Potterfield,
many organizational theorists and practitioners
regard employee empowerment as one of the most
important and popular management concepts ofour time. Companies ranging from small to large
and from low-technology manufacturing concerns
to high-tech software firms have been initiating
empowerment programs in attempts to enhance
employee motivation, increase efficiency, and gain
competitive advantages in the turbulent
contemporary business envir onment.
Learning Organization
A learning organization is the term given to a
company that facilitates the learning of its members
and continuously transforms itself. Learningorganizations develop as a result of the pressures
facing modern organizations and enables them to
remain competitive in the business environment. A
learning organization has five main features
Systems thinking: conceptual frameworkthat allows people to study businesses as
bounded objects
Personal mastery: commitment by anindividual t o the process of learning
Mental models: assumptions held byindividuals and organizations
Shared vision: creates a common identitythat provides focus and energy for learning
Team learning: accumulation of multipleindividual learning sets constitutes team
learning
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Methods and Techniques of Forecasting the
Demand and Supply of Manpower
Manpower forecasting is the first step or feature of
the entire manpower planning activity. The HR
manager foresees the demand and supply of
different types of manpower resources in the firm.In simple words the basic idea is to see where or in
which ar ea there is a shortage or surplus of human
requirement. Forecasting is the process of making
judgments about events whose actual outcomes
have not been seen. We could use a word like
prediction which is similar, but a more general
term. E.g. a retail showroom may need thirty more
sales employees during the one-month sale period.
Manpower Demand Forecasting:
Demand forecasting is a process of evaluating the
quality and quantity (number) of employ ees a firmor organization requires to meet its future needs. A
forecast could be a long-term or a short-term plan
depending on the activity levels for each function
and departments. There are several internal and
external factors to be considered in demand
forecasting.
Internal factors include budgetconstraints, production levels, new
products and services.
External factors include competition fromother firms; it could be from the domestic
or international firms, economic value,changes in techn ology etc.
Reasons to conduct demand forecasting:
Determine the jobs necessary for offeringservices.
Determine the staff required for futureneeds.
Determine the correct staffing levels indifferent parts of the firm or organization.
Determine the shortage of employees whenand where they are needed the m ost.
Manpower Supply Forecasting
Supply forecasting measures the number of
employees available within or outside the firm or
organization. It also has to keep absenteeism, shift
changes, number of working hours, promotions etc
in mind.
Reasons for making supply forecasting are:
It helps to decide the number of employeesand positions that are available for further
need.
It helps to evaluate the present staffinglevels in different parts of the firm or
organization.
It helps to prevent a shortage of employeeswhen and where they are needed the most.
It helps to match the future requirementwith the job specification.
Broadly speaking two key sources of supply of
manpower exist. They are:
Internal Supply:
Employees m oving up the ladder by way ofpromotions
Employees are transferred from otherdepartments or locations
External Supply:
Same industry Different related industries Unrelated industries The same city Peripheral cities Metros Across the country Rural parts with good coll eges Dying public sector units Companies which are getting shut down
Demand Forecasting Techniques
Expert Forecasts: Group forecasting method in
which experts present their independently
developed forecasts to the group. However, the
experts do not meet each other. The group keeps
refining their forecasts until a group consensus is
reached. This i s called as the Delphi technique.
Trend Analysis: This technique requires studying
the past data of an organization. Based on the past
forecast, utilization and requirement actually
experienced in the business, the future forecast is
made.
Work Study Technique: It is a technique that can be
used when it is possible to apply work
measurements to know how long operations should
take and the amount of labour required. It is
calculated in two ways.
Work-Load Analysis: Evaluating the w orkload in a department or job role. This then
enables deciding the no. of employees
required for doing the job. This depends
on the nature of the work load in a branch,
department, or a division in a firm ororganization.
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Work-Force Analysis: In workforceanalysis a sufficient margin for
absenteeism, labour turnover and idle time
on the basis of past experience is made.
This allows for completing the total job at
hand undertaken by an organization
despite the challenges of labour turnoveror absenteeism. The organization needs to
make reasonable prediction of labour
turnover or absenteeism.
Managerial Judgment Technique: This is a simple
technique. In this the managers of different
departments sit together, discuss and arrive at
conclusions as to the number employees required
for future operations based on their past
experiences. This technique involves a top-down
or bottom -up approach.
In top-down approach the managersprepare departmental forecasts. These are
viewed by department heads and a
decision is taken.
In bottom-up approach the managerssubmit their departmental proposals to top
managers who arrive at forecast.
Markov Analysis: This i s a mathematical technique.
It forecasts the availability of internal job
candidates. In this analysis, various job
classifications can be predicted based on past
movements (transfers, prom otions, a ttrition, n ew
joiners, resignations, and retirement).
Statistical Judgment Technique: This technique
concentrates on using the past to predict the future
by identifying trends, patterns and business drives
within the data to develop a forecast. This forecast
is referred to as a statistical forecast because it uses
mathematical formulas to identify the patterns and
trends while testing the results for mathematical
reasonableness and confidence.
Job Analysis
Meaning and Definition
A job analysis is a sy stematic exploration of the
activities within a job. It is a basic technical
procedure, one that is used to define the duties,
responsibilities and accountabilities of a job. This
analysis involves compiling a detailed description of
tasks, determining the relationship of the job to
technology and to other jobs and examining the
knowledge, qualifications or employment standards
accountabilities and other incumbent requirement.
Job terminology: Description of technical
terminology is highly necessary in order to facilitate
the study of a job analysis. They are
Task: A task is an action or related groupof action designed to produce a definite
outcome or result. Position: A position is a group of similar
tasks and responsibilities assigned to one
individual.
Job: A job is a group of positions that aresimilar as to kind and level of work.
Occupation: An occupation is a group ofjobs that are similar as to kind of work and
are found throughout an industry.
Job description: A job description is anorganised, factual statement of the duties
and responsibilities of a specific job.
Job specification: A job specification is astatement of the minimum acceptable
human qualities necessary to perform a job
properly.
Employee specification: Employeespecification is a statement of minimum
required employee qualifications. v iz.,
physical, educational, work etc. which
represent the possession of minimum
acceptable human qualities by the
prospective employee necessary to perform
a job.
Job classification: A job classification is agrouping of jobs on som e specified basissuch as kind of w ork or pay.
Process of Job Analy sis
Collection of Background Information:organisation charts, class specification s
and existing job descriptions
Selection of representative position to beanalysed
Collection of Job Analysis Data Dev eloping a J ob Description Dev eloping a Job Specification. Dev eloping Employee Specification
Job Analysis Methods
Observation Method: Using this method, a job
analyst watches employees directly or reviews films
of workers on the job. While the observation
method provides firsthand information, workers in
many cases do not function most efficiently when
they are being watched. Thus distortions in the job
analysis may occur. This method also requires that
the entire range of activities be observable; possible
with some jobs, but impossible for many e.g. m ost
managerial jobs.
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Individual Interview Method: Using this method,
job incumbents are selected and extensively
interviewed. The results of these interviews are
combined into a single job analysis. This method is
effective for assessing what a job entails, but is very
time consuming.
Group Interview Method: This method is similar to
the individual interview method except that a
number of job incumbents are interviewed
simultaneously. Accuracy is increased in assessing
jobs, but group dynamics may hinder its
effectiveness.
Structured Questionnaire Method: Using this
method, workers are sent structured questionnaire
on which they check or rate items they perform on
their job from a long list of possible task items. This
technique is excellent for gathering information
about jobs.
Technical Conference Method: This method utilizes
supervisors with extensive knowledge of the job.
Here, specific characteristics of a job are obtained
from th e experts.
Diary Method: This method requires job
incumbents to record their daily activities. That is,
workers are asked to maintain and keep daily
records or list of activities they are doing on that
day. This technique provides comprehensive job
information and it is much useful when it is
supplemented with subsequent interviews.
Purposes of Job Analysis
Job Descriptions: A job description is a written
statement of what the job holder does, how it is
done, and why it is done. A common format for a
job description includes the job title, the duties to
be performed, th e distinguishing characteristics of
the job, and the authority and responsibilities of the
job holder.
The content of J ob Description
Job title Organisational location of the job Supervision given and received Materials, tools, machinery and equipment
worked with
Designation of the immediate superior andsubordinates
Salary levels. Conditions of work Training and developmental facilities. Promotional chances and channels
Job Specifications: The job specification states the
minimum acceptable qualifications that the
incumbent must possess to perform the job
successfully. Based on the information acquired
through job analysis, the job specification identifies
the knowledge, skills and abilities needed to do the
job effectively. Individuals possessing the personal
characteristics identified in the job specification
should perform the job more effectively thanindividuals lacking these personal characteristics.
The job specification, therefore, is an im portant tool
in the selection process, for it keeps the selectors
attention on the list of qualifications necessary for
an incumbent to perform the job and assists in
determining wh ether candidates are qualified.
Job Evaluations: In addition to providing data for
job descriptions and specifications, job analysis is
also valuable in providing the information that
makes comparison of jobs possible. If an
organization is to have an equitable compensation
program, jobs that have similar demands in termsof skills, education and other personal
characteristics should be placed in common
compensation groups. Job evaluation contributes
toward that end by specifying the relative value of
each job in the organisation. Job evaluation,
therefore, is an important part of compensation
administration.
Job Design
Job design is defined as the process of deciding on
the content of a job in terms of its duties and
responsibilities; on the methods to be used incarrying out the job, in terms of techniques, systems
and procedures and on the relationships that should
exist between the job holder and his superiors,
subordinates and colleagues. Two important goals
of job design are (i) to meet the organisational
requirements such as higher productivity,
operational efficiency, quality of product or service
and (ii) to satisfy the needs of the individual
employees like interests, challenge, achievement or
accomplishment etc. Finally the goal of the job
design is to integrate the needs of the individual
with the organisational requirements.
Job Enlargement
Job enlargement involves expanding the number of
tasks or duties assigned to a given job. Job
enlargement is naturally opposite to work
simplification. Adding more tasks or duties to a job
does not mean that new skills and abilities are
needed to perform it.
There is only horizontal expansion. Frederick
Herzberg said that job enlargement is simply
adding zero to zero, meaning that; one set of
boring tasks (zero) is simply added to another set of
boring tasks (zero). Job enlargement is said to
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contribute to employee motivation, but the claims is
not v alidated in practice.
Job Enrichment
The most popularly adv ocated structural technique
for increasing an employees motivational potential
is job enrichment. To enrich a job, management
allows the worker to assume some of the tasks
executed by his or her supervisor. Enrichment
requires that workers do increased planning and
controlling of their work, usually with less
supervision and more self-evaluation. From the
view of increasing the internal motivation from
doing a job, it has been proposed that job
enrichment offers great potential. However, job
enrichment is successful only when it increases
responsibility, increases the employees freedom and
independence, organises tasks so as to allow
workers to do a complete activity and providesfeedback to allow individuals to correct their own
performance. Furthermore, job enrichment efforts
will only be successful if the individual s in the
enriched job find that their needs are met by the
enrichment. If these individuals did not want
increased responsibility, then increasing
responsibility will not have the desired effect.
Successful job enrichment, then, is contingent on
worker input.
Job Rotation
Job rotation refers to the movement of an employeefrom one job to another. Jobs themselves are not
actually changed, only the employees are rotated
among various jobs. An employee who works on a
routine/respective job moves to and works on
another job for some hours/day s/months and backs
up to the first job. This measure relieves the
employee from boredom and monotony, improves
employees skills regarding various jobs and
prepares the competent employees to meet the
contingencies.
Human Resource Planning
Human resource or manpower planning is the
process by which a management determines how an
organization should move from its current
manpower position to its desired manpower
position. Through planning, a management strives
to have the right number and the right kind of
people at the right places, at the right time, to do
things which result in both the organization and the
individual receiving the maximum long-range
benefit". The scope of HRP is futuristic in nature
and usually runs parallel to the annual business
planning exercise. It comm ences prior to the start ofthe companys new financial year.
Steps in Human Resource Planning
Forecasting manpower requirements Creating an inventory of present
manpower resources and assessing the
extent to which these resources are
employed/ optimally Identifying manpower problems by
projecting present resources into the
future t o determine their adequacy
Planning the necessary programmes ofrequirement selection, training,
development, utilization, transfer,
promotion, motivation and compensation
Need for Human Resource Planning
Organization needs competent staff withthe necessary qualifications, skills,
knowledge, work experience and aptitude Employees exit and organization both
naturally (superannuation) and
unnaturally (resignations), there is an on-
going need for hiring replacement staff
Meet the need for more employees due toorganizational growth and expansion
Organizations might need to replace thenature of the present workforce as a result
of it s changing n eeds
Identify an organizations need to reduceits workforce
Process of Human Resource Planning
1. Deciding goals or objectives;2. Estimating future organisational structure
and manpower requirements;
3. Auditing Human resources both internallyand externally
4. Planning job requirements and jobdescriptions/person specifications; and
5. Building a plan
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Recruitment
It is the process of generating a pool of capable
people to a pply for employment to an organization.
Types of Recruitment
Recruitment is of 2 types:
Internal Recruitment - is a recruitment which takes
place within the concern or organization. Internal
sources of recruitment are readily available to an
organization. Internal sources are primarily three -
Transfers, promotions and Re-employment of ex-
employees. Re-employment of ex-employees is one
of the internal sources of recruitment in which
employees can be invited and appointed to fill
vacancies in the concern. There are situations when
ex-employees provide unsolicited applications also.
Internal recruitment may lead to increase in
employees productivity as their motivation level
increases. It also saves time, money and efforts. But
a drawback of internal recruitment is that it refrains
the organization from new blood. Also, not all the
manpower requirements can be met through
internal recruitment. Hiring from outside has to be
done.
Internal sources are primarily 3 Transfers Promotions (through Internal Job
Postings) and Re-employment of ex-employees - Re-
employment of ex-employees is one of the
internal sources of recruitment in which
employees can be invited and appointed to
fill vacancies in the concern. There are
situations when ex-employees provide
unsolicited applications also.
External Recruitment - External sources of
recruitment have to be solicited from outside the
organization. External sources are external to a
concern. But it involves lot of time and money. The
external sources of recruitment include -Employment at factory gate, advertisements,
employment exchanges, employment agencies,
educational institutes, labour contractors,
recomm endations etc.
Selection
Employee Selection is the process of putting right
men on right job. It is a procedure of matching
organizational requirements with the skills and
qualifications of people. Effective selection can be
done only when there is effective matching. By
selecting best candidate for the required job, theorganization will get quality performance of
employees. Moreover, organization will face less of
absenteeism and employ ee turnover problem s. By
selecting right candidate for the required job,
organization will also save time and money. Proper
screening of candidates takes place during selection
procedure. All the potential candidates who apply
for the g iven job are tested.
But selection must be differentiated from
recruitment, though these are two phases of
employment process. Recruitment is considered to
be a positive process as it motivates more of
candidates to apply for the job. It creates a pool of
applicants. It is just sourcing of data. While
selection is a negative process as the inappropriate
candidates are rejected here. Recruitment precedes
selection in staffing process. Selection inv olves
choosing the best candidate with best abilities, skills
and knowledge for the required job.
The Employee Selection Process takes place in
following order-
1. Preliminary Interviews: It is used toeliminate those candidates who do not
meet the minimum eligibility criteria laid
down by the organization. The skills,
academic and family background,
competencies and interests of the
candidate are examined during
preliminary interview.
2. Application blanks: The candidates whoclear the preliminary interview arerequired to fill application blank. It
contains data record of the candidates such
as details about age, qualifications, reason
for leaving previous job, experience, etc.
3. Written Tests: Various written testsconducted during selection procedure are
aptitude test, intelligence test, reasoning
test, personality test, etc. These tests are
used to objectively assess the potential
candidate. They should not be biased.
4. Employment Interviews: It is a one to oneinteraction between the interviewer and
the potential candidate. It is used to find
whether the candidate is best suited for the
required job or not.
5. Medical examination: Medical tests areconducted to ensure physical fitness of the
potential employee.
6. Appointment Letter- A reference check ismade about the candidate selected and
then finally he is appointed by giving a
formal appointment letter.
Induction (Orientation) & Placement
Once the candidates are selected for the required
job, they have to be fitted as per the qualifications.
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Placement is said to be the process of fitting the
selected person at the right job or place, i.e. fitting
square pegs in square holes and round pegs in
round holes. Once he is fitted into the job, he is
given the activities he has to per form and also told
about his duties. The freshly appointed candidates
are then given orientation in order to familiarizeand introduce the company to him. Generally the
information given during the orientation
programme includes:
Employees layout Type of organizational structure Departmental goals Organizational layout General rules and regulations Standing Orders Grievance system or procedure
In short, during Orientation employees are made
aware about the mission and vision of the
organization, the nature of operation of the
organization, policies and programmes of the
organization.
The main aim of conducting Orientation is to build
up confidence, morale and trust of the employ ee in
the new organization, so that he becomes a
productive and an efficient employee of the
organization and contributes to the organizational
success.
The nature of Orientation program varies with the
organizational size, i.e., smaller the organization the
more informal is the Orientation and larger the
organization more formalized is the Orientation
programme.
Proper Placement of employees will lower the
chances of employ ees absenteeism. The employees
will be more satisfied and contended with their
work.
Internal Mobility
Internal mobilitythe movement of employees
from one position to another within a corporation
is an efficient and cost-effective method of talent
deployment. A successful internal m obility program
begins with a company clarifying its purpose and
the business goals it seeks to accomplish with an
internal mobility initiative. Next, the corporation
translates the business goals driving internal
mobility into specific business policies. These
business policies will in turn determine the
organization of the staffing department delivering
the service, how and when the initiative will a pply,
and the rules and procedures followed. Newchallenges and learning opportunities are the best
way of guaranteeing employability throughout a
career. The career development approaches used to
achieve these goals are job broadening or increasing
job responsibilities, project work, network
participation, and job r otation within one functional
family or between businesses, functions or un its.
Internal mobility within the organization is basedon the following principles:
Talent has to be managed at the service ofto the entire corporation, not to one
specific unit or function
Every individual has a responsibility totake his/her career development in his/her
own hands
The company offers guidance,opportunities and resources to maintain
employability throughout a managers'
career
Organisations look for a balance betweendeveloping competencies internally and
attracting competencies from outside
Training & Development
Training of employ ees takes place after orientation
takes place. Training is the process of enhancing the
skills, capabilities and knowledge of employees for
doing a particular job. Training process moulds the
thinking of employees and leads to quality
performance of employees. It is continuous and
never ending in nature.
Importance of Training
Training is crucial for organizational developm ent
and success. It is fruitful to both employ ers and
employees of an organization. An employee will
become more efficient and productive if he is
trained well.
Training is given on four basic grounds:
New candidates who join an organizationare given training. This training
familiarizes them with the organizationalmission, vision, rules and regulations and
the w orking conditions.
The existing employees are trained torefresh and enhance their knowledge.
If any updates and amendments take placein t echnology, training is given to cope up
with those changes. For instance,
purchasing new equipment, changes in
technique of production, computerisation.
The employ ees are trained about use of
new equipments and work methods.
When promotion and career growthbecomes important. Training is given so
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that employees are prepared to share the
responsibilities of the higher level job.
The benefits of training can be summed up as:
Improves morale of employees: Traininghelps the employee to get job security andjob satisfaction. The more satisfied the
employee is and the greater is his m orale,
the more he will contribute to
organizational success and the lesser will
be employee absenteeism and turnover.
Less supervision: A well trained employeewill be well acquainted with the job and
will need less of supervision. Thus, there
will be less wastage of time and efforts.
Fewer accidents: Errors are likely to occurif the employees lack knowledge and skills
required for doing a particular job. The
more trained an employ ee is, the less arethe chances of committing accidents in job
and the more proficient the employee
becomes.
Chances of promotion: Employees acquireskills and efficiency during training. They
become m ore eligible for promotion. They
become an asset for the organization.
Increased productivity: Training im provesefficiency and productivity of employees.
Well trained employees show both
quantity and quality performance. There is
less wastage of time, money and resourcesif employees are properly trained.
Ways/Methods of Training
Training is generally imparted in two ways:
On the job training: On the job trainingmethods are those which are given to the
employees within the everyday working of
a concern. It is a simple and cost-effective
training method. The improficient as well
as semi- proficient employees can be well
trained by using such training method. Theemployees are trained in actual working
scenario. The motto of such training is
learning by doing. Instances of such on -
job training methods are job-rotation,
coaching, temporary promotions, etc.
Off the job training: Off the job trainingmethods are those in which training is
provided away from the actual working
condition. It is generally used in case of
new employees. Instances of off the job
training methods are workshops,
seminars, conferences, etc. Such method is
costly and is effective if and only if largenumber of employees have to be trained
within a short time period. Off the job
training is also called as vestibule training
,i.e., the employees are trained in a
separate area( may be a hall, entrance,
reception area, etc. known as a vestibule)
where the actual working conditions are
duplicated
Career and Succession Planning
Career planning is the process of setting
individual career objectives and devising
developmental activities necessary to achieve
them. It is, in the broadest sense, the personal
process of planning ones future work. In this
process, an individual analyses his or her
interest, values, goals, and capabilities. From
the management view point, career planning
and development should remain an individual
responsibility.
The principal objectives of career planning are:
To secure the right man at the right joband at the right time;
To maintain a contended team ofemployees;
To provide adequate career avenues toemployees to higher levels of
responsibilities; and
To strengthen the retention programme ofthe organisation.
There are four distinct elements of a career
planning programme. They include:
1. Individual assessments of abilities,interests, career needs, and goals;
2. Organisational assessments of employeeabilities and potential;
3. Communication of information concerningcareer options and opportunities with the
organisation; and
4. Career counselling to set realistic goals andplan for their attainment.
Comprehensive definition of Succession
Planning is that it is the process of ensuring a
suitable supply of successors for current and future
senior or key jobs arising from business strategy, so
that the careers of individuals can be planned and
managed to optimise the organisations needs and
the individuals aspirations.
Succession planning includes these activities:
Analysis of th e demand for managers an dprofessionals by company level, function
and skill.
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Audit for existing executives andprojection of likely future supply from
internal and external sources.
Planning of individual career paths basedon objective estimates of future needs and
drawing on reliable performance
appraisals and assessments of potential. Career counselling undertaken in the
context of a realistic understanding of the
future n eeds of the firm, as well as those of
the individuals.
Accelerated promotions, targeted againstthe future needs of the business.
Performance-related training anddevelopment to prepare individuals for
future roles as well as current
responsibilities.
Planned strategic recruitment not only tofill short-term n eeds but also future needs.
The actual activities by which openings arefilled.
Job evaluation
Job evaluation is a process of determining the
relative worth of a job. It is a process which is
helpful even for framing compensation plans by the
personnel manager. Job evaluation as a process is
advantageous to a company in many ways:
Reduction in inequalities in salarystructure
Specialization (define a job and thereby fixsalaries for it)
Helps in selection of employees Harmonious relationship between
employees and manager
Standardization (determining the salarydifferentials for different jobs become
standardized)
Relevance of new jobs (understand therelative value of new jobs)
Principles of Job Evaluation
Definition: Jobs must be clearly definedsuch that they are identifiable and easily
distinguishable. These jobs must then be
part of the job description.
Evaluation: A job evaluation scheme mustbe arrived upon and used as a standard
and all jobs in the organisation must be
evaluated as per that scheme only.
Job Understanding: Job evaluators need tohave deep insights into the job design
process. They must have a methodical
understanding of various tasks inv olved. Concern: Job evaluation must be
concerned with the job and not with the
person. i.e. it is the job that has to be
evaluated and not the person
Assessment: The assessment has to becarried out in an acceptable manner and
by com petent people. Further, it is based
on judgement and is not scientific but can
however be used to make objectivejudgements if used correctly.
Competency based Training and Assessment
With the ever evolving and diversifying business
challenges, the approach to the management of
human resources has also undergone a paradigm
shift. The competitive advantage achieved through
technology, new products and information is short
lived and vastly evaporating. The only
distinguishing feature from the competition which
remains, are the skills and contribution from the
employees. The organizational leadership thereforeplays an important part a s they directly influence
the performance and the people of the organization.
A well-defined and uniform competency framework
is the first step towards an organized approach to
the human resource management of the
organization.
There is a constant need to increase efficiency and
create and deliver value in each transaction.
Therefore it is imperative that a more scientific
approach like competencies be used to define and
understand the knowledge, skills and attitude
required to perform a job effectively. Evaluating anemployees performance based on pre -defined
competencies and their behavioural indicators, in
turn is called competency based assessment.
The preliminary condition for a competency based
assessment is a well-defined competency framework
of the organization. Ideally, the com petency
framework needs to be in alignment with the long
term organizational goals and its vision and
mission. These competencies then need to be
interpreted in the context of the tasks performed by
employees at different levels, so a competency like
fosters teamwork will be defined differently for a
senior leader like COO and would further have to be
contextualized for a junior manager.
The competencies are like the Pole Star for the
organization especially the senior leaders and act as
a constant check for the employees to direct and
redirect their efforts to yield specific results. Since,
competencies can be assessed and analy zed; it gives
a fairly objective evaluation of an employees
performance. The best part about the competencies
is that they can be learnt unlike personality traits
which are characteristic to an individual. If theorganization identifies criteria critical to its success
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in the form of core competencies, they can be
cascaded down to the whole organization.
Having a competency framework and assessments
based on it provides a comprehensive picture of the
skill map of the organization, the development
needs, and potential leaders and thus define theapproach to effective talent management. From the
perspective of the employ ees, they g et a better
understanding of the potential progression of their
careers which further augments their engagement
with the organization.
Within the competency based assessment approach
the organizations can find a structured model to
integrate their management practices as well. A
sy stematic approach like this can help define
organizational priorities clearly and align the
human resource strategies to create and build on
key behaviours which are desired and would berewarded. It also creates individual employees
accountable and responsible for their performance
and learning and development while creating a
culture of transparency. And most importantly
competency based assessments go a step further to
understand the individual and organizational fit to
make correct hiring decisions, the starting point of
the employees life-cycle in the organization.
Performance management and potential
appraisal
Performance Management is a long term processthat focuses on continuous performance
improvement. Its goal is to create a climate of
shared understanding about what is to be achieved,
and then developing people to increase the chance
that it will indeed be achieved.
Aims of Performance Management
To assist in the achievement of enhancedstandards of work performance of an
employee or class of em ployees.
To assist employees to identify theknowledge and skills to perform their jobsefficiently.
To ensure that the employees work towardsthe defined goals.
To ensure that the employees receive regularfeedback on performance.
To assist the employees to achieve personalgrowth through acquiring relevant
knowledge and skills and attitudes.
To evaluate the company and its ability to setand r each goals.
To identify and remedy situations that arehindering company performance.
Purpose of Performance Management
Driving results: The purpose of performance
management is to drive improvement in business
results through individual, group and enterprise
goal alignment, measurement, performance
coaching and performance information sharing.
Building capabilities: Performance management
drives organisational and individual capability
development by clarifying role-specific goals and
competencies, creating an environment of
constructive feedback, and using formal
developmental coaching or mentoring.
Growing talent: Another important purpose of
performance management is to motivate and retain
high performers by providing career development
programs that include motivation and reward
strategies, challenging work assignments and otheron-the-job learning initiatives that will lead to
career a dvancement an d job satisfaction.
Basic Principles of Performance Management
Effective organisations need effective performance
management. Organisational effectiveness is not
possible without performance management.
Performance management helps to achieve the
following:
To facilitate the integration of individualand organisational objectives and valuesand develop a performance-orientated
culture.
To identify and meet individualdevelopment needs and to identify those
employees with a g ood growth potential.
To identify poor performers. To pr ovide a basis for v aluing people. To improve the quality of management.
Managers ability to deliver has an impact on
performance management. Effective Performance
management n eeds managers who not only hav e an
open and honest management style, but who also
provide support and direction through:
Having a thorough understanding of theirinstitutional strategy and the big picture
and being vary of any assumptions they
may hold about their employees interest
in such matters before engaging with them
on such issues.
Recognising that appraisal is not aboutsupervision, but is more concerned with
helping individuals set strategic goals for
themselves that are consistent with thoseof the organisation.
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Performance management is not a fixed event; it is
a cyclic process centred on learning and
development. Performance management does not
just happen, as is often assumed, at an annual event
set up for the purpose. Formal appraisal is but a
single aspect of the process. Performance
management is about learning and development,which is a continuous and ongoing activity. It is
more effective if it is planned in advance,
experienced, reviewed and evaluated on a regular
basis. Feedback on progress and achievement is an
important aspect of the learning cycle, and in this
respect, employees are no different to students. We
all need high-quality regular feedback if we are to
develop. Indeed, conventional wisdom tells us that
any feedback, even if negative, is better than none at
all. Managers, then, need to be n ot only particularly
skilled in this regard, but they must also seek every
opportunity to provide feedback to the team
members.
Performance management is not a system. It is a
natural process of managing people. Performance
management is the way an organisation views its
employees. This may not necessarily entail
following best practices, but rather doing what is
best for the organisation. Either way, the focus will,
or should, invariably be on changing behaviour, not
paperwork, and should focus on the process, rather
than the system. Performance management works
best and succeeds most when it is aligned w ith the
culture, climate, aspirations and values of the
organisation. It is perceived to be an artificial
implant grafted on to the existing sy stem.
Role of Appraisal in Performance Management
Performance Appraisal is the assessment, at regular
intervals, of an employ ees performance at work.
Appraisals are a part of performance management.
Performance management is a continuous process
while appraisals are periodic activities. Appraisal is
a static process, whereas performance management
is a dynamic process.
If the management inv olves improvements, the
moment an organisation is assessed to determine
where it stands, there is an appraisal taking place.
Managing an organisation becomes difficult without
some form of appraisal. Appraisals are not reducing
the performance of individuals and dyads or teams
to a five-point scale or a number. It is the reduction
of annual performance into a number and equating
one number with another. Since appraisal scales are
not calibrated and equated, the numbers generated
from the appraisal process are not comparable
across functions, levels, departments and
organisations. Some organisations use liberalscales, some use conservative scales and some use
no scales but m erely feelings.
Performance appraisal should lead to increased
performance. However, in most organisations,
performance appraisals have lead to decreased
performance. This is because of de-motivation.
When appraisals are linked to rewards and when
fewer people are rewarded than those expecting
them, those who are n ot rewarded get de-motivated.If those who expect to be rewarded exceed the
number of those who actually get rewards, the net
outcome of performance a ppraisal may be negative.
If people continue to perform in spite of appraisals,
and they do not have a positive attitude to
appraisals, then the organisation is spending more
psychological energy.
Using appraisal sy stems should make the
performance management process more effective
and productive. Appraisal systems help managers
manage their performance. Managers should view it
as aids for performance management. Managersshould not be overwhelmed with appraisals and
appraisal outcomes and should not ignore the most
important aspects of performance management
performance improvements and competency
building. This happens when the concerns get
focused on appraisals rather than improvements or
on ratings and rewards rather than performance
enhancement and development. Managers need to
learn to enjoy the performance management
process itself, as it occurs round the year and is not
blocked by appraisals as they occur once in a while.
Performance management systems with an
appraisal component built into them should lead to
improved performance and more motivated and
competent people.
Compensation Administration
Elements of compensation
Base pay: Base pay is the fixed rate of compensation
that an employee receives for performing the
standard duties and assignment of a job.
Employers need to ensure that base-pay programsare designed to reveal market practices within their
identified competitor group. To achieve this,
organisations must first identify their competitive
market. This can be achieved by considering
different factors, including the nature of the
industry, geographic location, total employment
and annual revenue. Next, they need to conduct an
assessment of market pay practices for similar jobs
within the recognised competitor group. This
assessment should involve the duties, skills, and
impact levels of each job evaluated that is, each
job of similar size and scope.
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Then a pay structure for managing the competitive
base-pay levels for the jobs throughout the
organisation should be developed. Pay structures
typically consist of a series of pay ranges or bands
that reveal competitive rates of pay for specific jobs,
as well as allowing room for salary growth. Jobs of
similar value from both the market point of viewand an internal point of view are grouped together.
Then a competitive pay range is developed around
the market rates for the particular jobs.
Variable pay: Performance-based variable pay
continues to achieve momentum as a more
successful way to identify and reward employee
performance. Also known a s pay -per-performance,
variable pay is popular in todays corporate w orld.
By including a percentage of variable pay in the
compensation plan, organisations ensure that two
people with different efficiency levels do not get the
same benefits. By doing this, the company rewardsproductivity and hard work and motivates the
under-performers to work hard. Once limited to
senior management levels, these incentive or bonus
plans are being redesigned to reward the
achievement of specific company or employee
performance objectives. In a variable pay plan, the
size of the award varies among employees and from
one performance period to another, based on levels
of achievement measured, as well as against pre
established company and employee performance
targets. Amounts are usually calculated as a
percentage of base pay depending on job category
and position. Rewards are normally paid in cash on
an annual, semiannual or quarterly basis depending
on the plan design. Plan designs range from sales-
comm ission types to individual incentive or bonus
plans to team awards. The main idea of these
programs is to reward innovation and hard work
and to discourage mediocrity in performance.
Skill and competency-based pay: Skill-based pay
offers employ ees extra compensation when they
have new skills specially recognised by the company
as essential to achieve a competitive advantage.
Skill-based pay can be particularly useful foremployees who like their current jobs but are
looking for new challenges. Competency -based pay
is more widespread than skill-based pay because the
criteria cover not only measurable skills but also
knowledge, performance behaviours and personal
attributes. It helps out employees to grow in the
company and helps them to close the knowledge
gaps needed for creative m oves.
Long-term incentive compensation: Long-term
incentive compensation vehicles, such as stock-
option plans and other deferred-compensation
plans, which are not usually used to rewardperformance, are achieving desirability among
employees. These long term incentive compensation
plans appreciate employees based on company
performance ov er a long term that is typically three
to five years. Stock-option plan s are a common form
of long -term com pensation at public organisations.
In most private companies, incentives that reflect
stock plans are u sed for key employ ees.
Long-term compensation plans can be valuable
preservation tools for the success of an
organisation. They help to focus on driving and
improving the key employees to achieve the
financial performance of the company over a longer
term.
Elements of benefits
Company benefits can include a wide range of
offerings from standard medical insurance to more
modern benefits like prepaid legal services, andapplicants who are comparing job offers often
narrow their choices down to those that offer the
most generous benefits package. Applicants and
new employees checking their choices of benefit
plans often feel confused and ov erwhelmed as the
terminology used can be difficult to recognise and
understand. While the different plans are typically
designed to deal with the health and welfare of the
employee population, understanding them can be a
difficult task. Further complicating matters, some
companies share the costs of these benefits with the
employees, in an effort to help make up for the
significant expenses connected with broad benefitplans. Some of the benefits are discussed below:
Training: For most of the employees, training
means more than money. For example, according to
one survey of HR executives conducted by the
American Management Association, technical and
employability training w ere rated considerably
higher than pay-for-performance or bonuses.
Companies typically answer to this interest by
sending workers to outside conferences and
seminars, repaying employ ees for tuition, offering
managerial training and supporting employees in
degree programs.
Health care: The benefits that get the most attention
from employers today are health care benefits
because of the high costs involved in getting good
healthcare facilities and the increasing concern
about staying healthy. In the past, health insurance
plans included only medical, surgical and hospital
expenses. However, today employers include
prescribed drugs and dental, optical and mental
healthcare benefits in the package they offer their
workers.
Typically, an employer offers employees some form
of group health insurance or set am ount to spen d on
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healthcare or personal insurance plans each year.
Employees may be offered insurance after working
for a specified period of time, and the level of
cov erage is usually linked to employment status,
with part time employees receiving fewer benefits.
Depending on the companys plan, employees may
have to select the healthcare plan, paying a small feewhile the com pany pays the r emaining amount of
the premium or the employ er may cover all
insurance-related costs.
In group benefits, employees can have access to
different types of healthcare plans, including
insurance plans, under which people pay for
services at the time of availing them, and submit a
bill to the insurance company for reimbursement.
Managed healthcare plans like providing services
from health maintenance organisations (HMOs)
and preferred provider organisations (PPOs), which
offer care through a network of providers are alsogetting immensely popular.
Pensions: Employees have ranked retirement or
pension plans as second to medical coverage.
However, many employers offer no pension
cov erage to their employees. Approximately half of
the private-sector workforce is not covered for
pension by the employer. There are two main types
of pension plans: defined benefit and defined
contribution.
In defined benefit plans, the benefits are calculated
as a percent of the last few or the highest years ofearnings multiplied by years of service. They are
then paid in the form of life pensions. These plans
are adjusted towards those who are expected to
work for the same company throughout their career.
Defined contribution plans generally apply to
younger workers. This type of pension plan permits
workers t o save directly from some selected assets
of their own choice.
Stock options: Stock options give employees a
chance to buy stock in their company at a
predetermined price during a limited time period.In todays strong economy, employers have found it
increasingly essential to provide stock options to
attract the most v alued w orkers. For example, m ore
than 70 percent of technical workers now have stock
options and 7 to 12 percent of U.S. companies offer
stock option plans to all employees, u sually a llowing
from one hundred to two hundred option shares
annually, or an amount based on a percentage of
salary.
Generally there are two types of stock options:
Discounted stock options: This type of plan
permits an employee to buy the companys stock at
a price below the market value.
Index options: Some companies issue stock
options with employed prices joined to the Standard
and Poors 500 Index or other peer group stockindex. With this method, if the stock price
outperforms the index then the exercise price will
be less than the fair market value. If the index
outperforms the market, the exercise price will be
more than the fair market value.
Objectives of compensation plans
The Objectives of compensation can be classified
under four broad categories equity, efficiency,
macro-economic stability and optimum allocation
of labour.
Equity: Equity is the first category, which may take
sev eral forms. This concept involves income
distribution through narrowing of inequalities,
increasing the salary of the less paid employees,
protecting real wages and the concept of equal pay
for work of equal worth. Compensation
management struggles for internal and external
equity.
Efficiency: Efficiency is often closely related to
equity, because the two concepts are not opposing.
The objectives of efficiency are revealed in attempts
to link part of wages to productivity or profit, groupor individual performance, purchase and
application of skills and so on. Arrangements to get
efficiency may also be seen as being fair.
Macro-economic stability: Macr o-economic stability
can be achieved through high employment levels
and low inflation. For example, an unwarranted
high minimum wage would have a bad impact on
levels of employment, though at what level this
result would occur is a matter of debate.
Efficient allocation of labour: The well-organised
allocation of labour in the labour market means thatemployees will move to wherever they receive a net
gain. Such movement can be from one location to
another or from one job to another. The condition
or availability of financial incentives causes such
movement.
For example, w orkers may m ove from a low-wage
area to a high wage area. Employees may gain new
skills to benefit from the higher wages paid for
skills. When an employer offers wages lesser than
the market rates, the employee turnover increases
and when they offer the wages above market rates,
the employ er attracts job applicants. Whenemployees move from small to large industries, an
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efficient allocation of labour due to structural
changes takes place.
Objectives of benefit plans
Employers and employees value benefits
differently[3]. They will hardly ever agree on the
level of benefits that plans should provide.
Employers try to find the employees needs and the
cost to the organisation. Employees wish to increase
the value of benefits received and minimise other
expenses.
Employer objectives
The employ er objectives for benefit plans are
influenced by:
Meeting the organisation andcompensation objectives.
Actual salary and percentage of payr oll. Administration complexity and cost. Tax and accounting issues. The part benefits play in the total rewards
objectives of th e organisation.
Employee objectives
Employee objectives for benefit plans inv olve
income protection for:
Cash flow: This refers to the cash outflow with
respect to the personal expenses of employees. This
normally occurs when there is an unexpected
increase in expenses for example a sudden
occurrence of m edical expenses.
Income replacement: Providing replacing income if
employee turns out to be disabled.
Income for surviving dependants: Providing income
for existing dependents in the event of death.
Adequate retirement income: Providing sufficient
income upon r etirement.
To design a benefits program, an organisationshould define its program objectives. Furthermore,
program objectives need to be adjusted with the
organisations and HRs philosophy and strategy.
Since company philosophies and strategies vary, no
two com panies will share the sam e objectives for
employee benefit plans.
Characteristics of Compensation Programs
Internal equity: It is a measure of how an
organisation values each of its jobs in relation to
one another. Internal equity exists when an
employer pays wages corresponding with therelative internal value of each job. This is
established according to the employers view of the
importance of the work performed. Before an
organisation can calculate approximately the
importance of each job, it must first find out the
job-related factors that will be used for setting
compensation levels -in short, compensable factors.
Finding out the relative internal value of jobs in alarge organisation can be a difficult process. Job-
evaluation methods are usually used to develop job
hierarchy that reveals the relative value of jobs on
the basis of skill, effort, responsibility, and working
conditions. A number of job-evaluation approaches
have been developed. Such approaches include:
Whole job ranking. Classification. Point factors. Factor comparison. Slotting. Scored questionnaires.
External competitiveness: It is a measure of an
organisations pay structure compared to that of its
opponents. External equity exists when an employer
pays a wage rate equal to the wages persisting in
external labour markets. Evaluating external equity
requires measuring these labour markets. There is,
however, no single labour market for a specific job.
Supply and demand differ considerably among
markets, resulting in significant variation in wages
across labour markets. The following factors add to
these wage differences among markets:
Geographic location. Industry sector. Union statu s. Size of the organisation. Product competition. Company prestige. Education and experience level of available
work force.
Licensing or certification requirements calledfor by the job
Some combination of these factors v erifies the
labour market for a specific job. Employ ers should
carefully define the appropriate market to ensure
accurate external wage comparisons. Determining
the market too narrowly can result in wages that are
higher than necessary. If, for example, a company
doing business in two locations defines its pay
practice strictly in terms of a metropolitan labour
market, it could set wages that are unnecessarily
high for its rural areas. On the other hand, defining
the market too broadly may cause an organisation
to set wages too low to attract and maintain
competent employees.
Affordability: It is a measure of h ow high priced a
compensation program is to a company. If pay
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structures are not formulated responsibly, an
organisation could end up paying labour costs that
exceed what it can a fford t o pay.
Legal defensibility: Compensation programs should
stick to specific laws designed to provide fairness in
how employees are paid. Role description is acritical step in the development of a legally
justifiable testing mechanism. Perform ing a role
description study and using the resulting data to
develop exam specifications assures that candidates
are tested on critical incidents or the knowledge,
skill, and abilities that are appropriate to the role
for which they are being certified or licensed.
Understandable or saleable: Compensation
programs should be well communicated between
the employees and employers.
Efficient to administer: With increased pressure toimprove productivity and reduce costs, it is
essential that an organisations compensation
program be as simple and as easy as possible to
maintain and manage. A balance needs to be struck
between what appears to be the best program and
what is well-organised, effective and easiest to
manage.
Safeguard organisational resources: The
compensation program should reward performance
fairly without differing with the interests of
company stakeholders. Awards should reflect both
individual employ ee and company performance.
Flexible: Pay programs are necessary tools to fight
for labour in th e marketplace. They should be
flexible and capable of changing as needed.
Meet the organisations unique needs: To some
degree, each company is single within its own
industry or geographical area. The aim
characteristics of the company need to be identified
and addressed when designing compensation
programs.
Incentives and Employee Benefits
An Employee Reward system consists of an
organisations integrated policies, processes, and
practices for rewarding its employees. This is done
in accordance with their contribution, skill,
competence, and their market worth. It is developed
within the framework of the organisations reward
philosophy, strategies, and policies. It contains
arrangements in the form of processes, practices,
structures, and procedures. These arrangements
will provide and maintain appropriate types and
levels of pay benefits and other forms of reward.
The overall objective is to reward employees fairly,
equitably, and consistently, in accordance with their
value to the organisation. This further helps in the
achievement of the organisations strategic goal s.
It is not just about pay and employee benefits. A
reward system consists of financial rewards likefixed, variable pay, and employee benefits which
together comprise total remuneration. The system
also incorporates non-financial rewards like
recognition, praise, achievement, responsibility, and
personal growth. The combination of financial
rewards, employ ee benefits, and non-financial
compensation comprises the total Employee reward
sy stem.
Needs for Employee Rewards
In a world where organisations like to boast about
running "lean and mean," it may seem nearlyimpossible to compensate employees, for doing
good work without breaking the budget. According
to a survey by staffing firm Accountemps found that
frequent recognition of accomplishments was the
top non-monetary compensation named by full and
part-time office workers, with regular
communication. This can make your employees
more productive without shaving one millimetre off
your bottom line. Therefore, there is a need for
employee rewards and its results are mentioned
below:
Retention: A good employee r eward program is apositive impact on employee retention. When the
employee is content with the reward program then,
it will be easy for the organisation to r etain the
employee.
Health and Safety: Solid employee reward
programs also have measurable positive effects both
on safety and workplace health. This reduces overall
health-care costs for both employ ee and employer.
Motivation: A crucial outcome of a good employee
reward program is enhanced motivation among
personnel. This also includes helping the employeesto make connections between professional goals
and personal g oal s.
Engagement: A solid employee reward program
also increases employ ee engagement in the
workplace, a factor that converts into improved
performance and better customer experience.
Return on Investment: Employee reward
programs provide a concrete Return on Investment
(ROI). Studies have shown that employee
recognition and rewards of a non monetary basis
show a greater return on investment than do cashawards.
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Bottom Line: Ultimately, from th e employers
viewpoint, employ ee reward programs have a
positive effect on the bottom line for reasons such
as, the positive effect on health care costs,
performance, and w orkplace engagement.
According to many management consultants,human resource professionals, career coaches, book
authors and bosses, from a range of industries;
there are 15 best ways to reward employees without
spending much of company funds. They are:
1. Have flexible working hours: If there is one
complimentary r eward that rises above the r est, it i s
flexible work schedules. It is commonly suggested
that flex time is a plus side that offers, the m ost gain
with the least pain. For example, give a little
latitude in determining work schedules and to take
time for family or personal issu es such as doctors
appointment and banking errands. As long as theemployee deserves, and does not abuse the
privilege, this can go a long way to building trusting
and mature relationships with key workers.
2. Send a handwritten note: Supervisors must ask
top management people to write a personal note to
employees, who deserve recognition.
3. Make work fun: Create some events to provide
fun to employee.
4. Help them connect: Introducing employees and
staffs to key suppliers, custom ers or someone insenior management can, help make an employees
career.
5. Bring in the casualness: For example,
implementing a non formal day. It can make
employees feel r ight at h ome with each other, which
translates into increased productivity. It is great to
work in an office where, employees are m ore
concerned about doing quality w ork than, what they
are wearing.
6. Celebrate employees family special days: Every
birth and wedding deserves a celebration. Eachemployee must be made to leave office early on
special days, and the food is on the house. No need
to make up the time. Give memorable gifts for
employees spouse or family and apologies, for
taking them away from their families on a Sunday.
7. Reward effort as well as success: Even if
employees ideas sometimes fail, y ou must
encourage the employees to keep producing new
ideas. This stimulates innovation and positive
behaviour, not winning.
8. Give them free days: Give a certain number offree days off to employees to use, as they see fit.
Employees can u se these days as they like. They do
not have to pretend to be sick. They can go to the
beach, read a book, and play with their kids and so
on.
9. Serve refreshments: During the hectic times of
the year, serving drinks and refreshments tocolleagues helps to build a comfortable
environment. Small gestures will build great
companies. As y ou serve, y ou can encourage
colleagues and hear about real consumer issues.
10. Celebrate employees birthday: Host a monthly,
hour-long birthday lunch for any employee, with a
birthday that month. Employ ees are invited to a sk
him anything. They feel recognised, and he gains
loyal employees who share their ideas.
11. A pplaud their efforts literally: If an employee
has done something really worthwhile, have yourentire staffs to give them a standing ovation at the
next meeting.
12. Have a Wall of Fame: Set a public space within
your firm for