HRM Study Material

MANONMANIAM SUNDARANAR UNIVERSITY
DIRECTORATE OF DISTANCE & CONTINUING EDUCATION

TIRUNELVELI 627012, TAMIL NADU
M.B.A. - II YEAR
DKR21 - HUMAN RESOURCE MANAGEMENT

(From the academic year 2016-17)
Most Student friendly University - Strive to Study and Learn to Excel
For more information visit: http://www.msuniv.ac.in

MS UNIVERSITY HUMAN RESOURCE MANAGEMENT DD & CE
DKR21: HUMAN RESOURCE MANAGEMENT

Unit – I
Human Resource Management – Human Resource Philosophy – Changing Environment
of HRM – Strategic Human Resource Management using HRM to attain Competitive Advantage
– Trends in HRM – Organization of HR Departments – Line and Staff Functions – Role of HR
Managers.
Unit – II
Recruitment and Placement – Job Analysis: Methods Job Specification. HR and the
responsive Organization Recruitment and Selection Process, Employment Planning and
Forecasting – Building Employee Commitment – Promotion from within – Sources, Developing
and using Application Forms.
Employee Testing and Selection – Selection Process, Basic Testing Concepts – Types of
Test – Work Samples and Simulation – Selection Techniques Interview – Common Interviewing
Mistakes – Designing and Conducting Effective Interview – Small Business Applications.
Unit – III
Training and Development – Orientation and Training: Orientating the Employees – the
Training Process – Need Analysis – Training Techniques – Special Purpose Training.
Developing Managers: Management Development – The responsive Managers – On the
Job and Off the Job Development Techniques – Using HR to build a responsive Organization.
Performance Appraisal: Methods Problems and Solutions – MBO Approach – the
Appraisal Interviews – Performance Appraisal in Practice – Managing Careers – Career Planning
and Development – Managing Transfers and Promotions.
Unit – IV
Compensation and Managing Quality – Establishing Pay Plans: Basics of Compensation
– Factors determining Pay Rate – Current Trends in Compensation – Job Evaluation.
Pay for Performance and Financial Incentives: Money and Motivation – Incentives for
Operations – Employees and Executives – Organisation wide Incentive Plans – Practices in
Indian Organisations.
Benefits and Services: Statutory Benefits – Non-Statutory Benefits (Voluntary) –
Insurance benefits – Retirement Benefits and other welfare measures to build Employee
Commitment.
1 DKR21
Unit – V
Labour Relations and Employee Security: Industrial Relation and Collective Bargaining:
Trade Units – Collective Bargaining – Future of Trade Unionism – Discipline Administration –
Grievance Handling – Managing Dismissals and Separation.
Labour Welfare: Importance and Implications of Labour Registrations – Employee
Health – Auditing HR Functions – Future of HRM Function.
References:
1. Human Resource Management – Garry Dessler, Practice Hall
2. Human Resource Management – H. John Berhardian and Joycee R.A. Russel
3. Personnel and Human Resource Management – David A Decenzo and Stephen P.
Robbins
4. Human Resource Management – Text and Cases V.S.P. Rao Excel Books, New Delhi
5. Industrial Relations and Labour Welfare – Dr. R. Venkatapathy, Assissi Meriacheri,
Adithya Publications, CBE – 2001.
2 DKR21
DKR21: HUMAN RESOURCE MANAGEMENT
Lesson No. Particulars Page No.

INTRODUCTION TO HUMAN RESOURCE
1 5
MANAGEMENT
2 RECRUITMENT AND PLACEMENT 25
3 EMPLOYEE TESTING AND SELECTION 43
4 TRAINING AND DEVELOPMENT 60
5 PERFORMANCE APPRAISAL 83
6 MANAGING TRANSFERS AND PROMOTIONS 104
COMPENSATION AND FINANCIAL
7 112
INCENTIVES
8 JOB EVALUATION 135
9 BENEFITS AND SERVICES 145
INDUSTRIAL RELATION AND COLLECTIVE
10 156
BARGAINING
11 TRADE UNIONS AND GRIEVANCE HANDLING 170
12 LABOUR WELFARE 183
13 EMPLOYEE HEALTH AND SAFETY 194
3 DKR21
LESSON
INTRODUCTION TO HUMAN RESOURCE MANAGEMENT
CONTENTS
1.0 Human Resource Function & Philosophy

1.1 Changing environments of HRM
1.2 Strategic Human Resource Management using HRM to attain competitive advantage
1.2.1 Hierarchy of Strategy
1.2.2 Model of Strategic Management
1.3 Trends in Human Resource Management
1.4 Organization of HR Departments
1.5 Line and Staff Functions
1.6 Role of Human Resource Manager
1.6.1 Introduction
1.6.2 Functions of Human Resource Manager
1.7 Keywords
1.8 Questions for Discussions
4 DKR21
1.0 HUMAN RESOURCE FUNCTION & PHILOSOPHY
The main functions of human resource management are classified into two categories:
(a) Managerial Functions and (b) Operative Functions
(a) Managerial Functions Following are the managerial functions of Human Resources
Management
1. Planning: Planning is a predetermined course of actions. It is a process of determining

the organisational goals and formulation of policies and programmes for achieving them,
Thus, planning is future oriented concerned with clearly charting out the desired direction
of business activities in future. Forecasting is one of the important elements in the planning
process. Other functions of managers depend on planning function.
2. Organization: Under organisation, the human resource manager has to organise the
operative functions by designing structure of relationship among jobs, personnel and
physical factors in such a way so as to have maximum contribution towards organisational
objectives. In this way a personnel manager performs following functions:
(a) Preparation of task force.
(b) Allocation of work to individuals.
(c) Integration of the efforts of the task force.
(d) Coordination of work of individual with that of the department.
3. Directing: Directing is concerned with initiation of organised action and stimulating the
people to work. The personnel manager directs the activities of people of the organisation
to get its function performed properly. A personnel manager guides and motivates the staff
of the organisation to follow the path laid down in advance.
4. Controlling: It provides basic data for establishing standards, makes job analysis and
performance appraisal, etc. All these techniques assist in effective control of the qualities,
time and efforts of workers.
(b) Operative Functions: The following are the Operative Functions of Human Resource
Management
1. Procurement of Personnel: It is concerned with the obtaining of the proper kind and
number of personnel necessary to accomplish organisation goals. It deals specifically with
such subjects as the determination of manpower requirements, their recruitment, selecting,
placement and orientation, etc.
5 DKR21
2. Development of Personnel: Development has to do with the increase through training, skill
that is necessary for proper job performance. In this process various techniques of training are
used to develop the employees. Framing a sound promotion policy, determination of the basis
of promotion and making performance appraisal are the elements of personnel development
function.
3. Compensation to Personnel: Compensation means determination of adequate and

equitable remuneration of personnel for their contribution to organisation objectives. To
determine the monetary compensation for various jobs is one of the most difficult and
important function of the personnel management. A number of decisions are taken into the
function, viz., job-evaluation, remuneration, policy, inventive and premium plans, bonus
policy and co-partnership, etc. It also assists the organisation for adopting the suitable
wages and salaries, policy and payment of wages and salaries in right time.
4. Maintaining Good Industrial Relation: Human Resource Management covers a wide

field. It is intended to reduce strife, promote industrial peace, provide fair deal to workers
and establish industrial democracy. It the personnel manager is unable to make harmonious
relations between management and labour industrial unrest will take place and millions of
man-days will be lost. If labour management relations are not good the moral and physical
condition of the employee will suffer, and it will be a loss to an organisation vis-a-visa
nation. Hence, the personnel manager must create harmonious relations with the help of
sufficient communication system and co-partnership.
5. Record Keeping: In record-keeping the personnel manager collects and maintains

information concerned with the staff of the organisation. It is essential for every
organisation because it assists the management in decision making such as in promotions.
6. Personnel Planning and Evaluation: Under this system different type of activities are
evaluated such as evaluation of performance, personnel policy of an organisation and its
practices, personnel audit, morale, survey and performance appraisal, etc.
1.1 CHANGING ENVIRONMENTS OF HRM
Environments of HRM comprise political-legal, economic, technological, demographic

(external), and unions, organisational culture and conflict, professional bodies, organisational
objectives and policies (internal). Knowledge about the environment helps the HR manager and
his/her team to proactive and not remain reactive to the environment. Reactive strategy serves
the purpose when the environment is fairly stable and competition to less serve. Both of these
have become things of the past. Today's business environment is characterized by
6 DKR21
change and intense competition. Proactive steps are vital for any organization if it has to
survive in such an environment.
A) EXTERNAL FACTOR
As was started earlier, external forces include political-legal, economic, technological, and
demographic factors, the influence of which on HRM considerable. Each of these is
examined in detail here
a) Political-Legal
The Political environment covers the impact of political institutions on the HRM
department. In a democratic political setup (as opposed to a totalitarian system), there are
three institutions which together constitute the total political environment. They are - (i) the
legislature, (ii) the executive, (iii) the judiciary.
The legislature, also called parliament at the central level and Assembly at the state level, is
the law making body. The plethora of labour acts which are in force are enacted by the
legislature.
The executive, popularly known as the government, in the law implementing body. The
legislature decides and the executive acts.
Above these two is the judiciary which has the role of a watchdog. The main function of the
judiciary is to ensure that both the legislature and the executive work within the confines of
the Constitution and in public interest.
b) Economic
Economic environment refers to all those economic factors which have bearing on the HR
function. Economic growth, industrial production, agriculture, population, national and per
capita income, money and capital markets, suppliers, competitors, customers, and industrial
labour are the components of the economic environment.
Suppliers for the HR department, suppliers are who those provide human resource to an
organization. Employment exchanges, universities, colleges, training institutes, consulting
firms, casual-labour, contractors, competitors, and the like are the sources that supply
human resources. The type of employees the organization receives depends on the supplier.
7 DKR21
Competitors Competition plays a significant role in the some of the HR functions and
activities. As the number of organizations competing for human resources increases, so
does the importance of the staffing function and its appraisal and compensation activities. If
several companies make job offers to one individual, the organisation with more attractive
terms and conditions will win. When employees with particulars skills are hard to obtain,
the organization may need to groom its own employees through well-managed HR planning
programmes co-ordinated with training and development activities.
Customers have their own influence on a company's personnel functions. It needs no

mention that customers want high quality products at reasonable prices. So everybody in
the organisation must endeavour to offer products which give satisfaction for the money
customers pay. Sales are often affected by product quality which is directly related to the
skills and qualification of the organisation's employee.
Economic Growth Whether a country is economically developed or not affects the quality
of labour. Quality of labour in any country depends to a large extent on educational and
health available for its citizens. In advanced countries people and governments spend more
on education and health; with greater wealth and education better quality labour is assured,
which in turn ensures higher productivity. The inverse is likely to happen in low income
countries which spend less on education and health. Uneducated citizens with poor health
cannot contribute to productivity. Realising the relationship among health, education,
quality labour and productivity, development policies tend to focus on these variables
simultaneously.
c) Technological
Technology is a systematic application of organised knowledge to practical tasks.

Technological advances affect the HR functions in more than one way. First, technology
makes the job more intellectual or upgraded. Second, it renders works dislocated if they do
not equip themselves to the job. Third, job becomes challenging for the employees who
cope with the requirements of technology. Fourth, technology reduces human interaction at
the work place. Finally, job holders become highly professionalised and knowledgeable in
the job they perform.
8 DKR21
d) Demographic
Demographic variables include sex, age, literacy, mobility, etc. Modern work force is
characterized by literate, women and scheduled caste and scheduled tribes workers. Now,
workers are called 'knowledge workers' and the organisations wherein they work are called
'knowledge organisations'. As such, the traditional line of distinction between manual and
non-manual workers is getting blurred. Employees are demanding parity in remuneration
and responsibility among various categories and levels of employees.
B) Internal Environment
These are the forces internal to an organisation. Internal forces have profound influence on
HR functions. The internal environment of HRM consists of unions, organisational culture
and conflict, professional bodies, organisational objectives, polices, etc.
a) Unions: Trade unions are formed to safeguard the interest of its members/workers. HR
activities like recruitment, selection, training, compensation, industrial relations and
separations are carried out in consultation with trade union leaders.
b) Organisational Culture and Conflict: As individuals have personality, organisations

have cultures. Each organisation has its own culture that distinguishes one organisation
from another. Culture may be understood as sharing of some core values or beliefs by the
members of the organisation. "Value for time" is the culture of Reliance industries limited.
The culture of Tata conglomerate is "get the best people and set them free" HR practices
need to be implemented that best fit the organisations culture. There is often conflict
between organisational culture and employee's attitude, conflict usually surfaces because of
dualities such as personal goal vs. organisational goal, discipline vs. autonomy, rights vs.
duties, such conflicts have their bearings on HR activities in an organisation.
c) Professional Bodies:
Like other professional bodies, the NIPM as the HR professional body regulates the
functions of HR practitioners in India. For this, the NIPM in India has laid down a code of
ethics which the HR practitioners are expected to declare their allegiance to the code. Thus
professional bodies also influence HR functions of an organisation.
9 DKR21
1.2 STRATEGIC HUMAN RESOURCE MANAGEMENT USING HRM TO ATTAIN

COMPETITIVE ADVANTAGE
The term ‗strategy‘ is widely used in and presupposes importance. In other words of the
Oxford Concise Dictionary, strategy means 'general ship'. Thus, strategy is associated with
the long-term decisions taken at the top of the enterprise. The original literary meaning of
strategy is 'the art and science of directing military forces'. The term strategy is frequently
being used in the present-day corporate world. It envisages thinking ahead to survive and
grow in a highly competitive environment. Strength is concerned with determining which
open will provide maximum benefits. According to Jauch and Glueck.
1.2.1 Model of Strategic Management
In the descriptive and prescriptive management texts, strategic management appears as a

cycle in which several activities follow and feed upon one another. The strategic
management process is typically broken down into five steps:
1. Mission and Goals
The mission describes the organization‘s values and aspirations; it is the organization‘s
raison d‘être and indicates the direction in which senior management is going. Goals are the
desired ends sought through the actual operating procedures of the organization and
typically describe short-term measurable outcomes
2. Environmental Analysis
Environmental analysis looks at the internal organizational strengths and weaknesses and
the external environment for opportunities and threats. The factors that are most important
to the organization‘s future are referred to as strategic factors and can be summarized by the
acronym SWOT – Strengths, Weaknesses, Opportunities and Threats.
3. Strategic Formulation
Strategic formulation is concerned with making decisions with regard to defining the
organisation's vision and mission, establishing long- and short-term objectives to achieve
the organisation's vision and selecting the strategy to be used in achieving the organisation's
objectives.
10 DKR21
4. Strategy Implementation
Strategy implementation is concerned with aligning the organisation structure. systems and
processes with the chosen industry. It involves making decisions with regard to matching
strategy and organisational structure and providing organisational leadership pertinent to
the strategy and monitoring the effectiveness of the strategy in achieving the organisation's
objectives.
5. Strategy Evaluation
Strategy evaluation is an activity that determines to what extent the actual change and
performance match the desired change and performance.
1.2.2 Hierarchy of Strategy
Another aspect of strategic management in the multidivisional business organization

concerns the level to which strategic issues apply. Conventional wisdom identifies different
levels of strategy – a hierarchy of strategy.
1. Corporate
2. Business
3. Functional.
Corporate-Level Strategy
Corporate-level strategy describes a corporation‘s overall direction in terms of its general

philosophy towards the growth and the management of its various business units. Such
strategies determine the types of business a corporation wants to be involved in and what
business units should be acquired, modified or sold. This strategy addresses the question,
‗What business are we in?‘ Devising a strategy for a multidivisional company involves at
least four types of initiative:
 Establishing investment priorities and steering corporate resources into the most
attractive business units.

 Initiating actions to improve the combined performance of those business units with
which the corporation first became involved.
11 DKR21
 Finding ways to improve the synergy between related business units in order to
increase performance.

 Making decisions dealing with diversification
Business-Level Strategy
Business-level strategy deals with decisions and actions pertaining to each business unit,
the main objective of a business-level strategy being to make the unit more competitive in
its marketplace. This level of strategy addresses the question, ‗How do we compete?‘
Although business-level strategy is guided by ‗upstream‘, corporate-level strategy, business
unit management must craft a strategy that is appropriate for its own operating situation. In
the 1980s, Porter (1980, 1985) made a significant contribution to our understanding of
business strategy by formulating a framework that described three competitive strategies:
cost leadership, differentiation and focus.
The low-cost leadership strategy attempts to increase the organization‘s market share by
having the lowest unit cost and price compared with competitors. The simple alternative to
cost leadership is differentiation strategy. This assumes that managers distinguish their
services and products from those of their competitors in the same industry by providing
distinctive levels of service, product or high quality such that the customer is prepared to
pay a premium price. With the focus strategy, managers focus on a specific buyer group or
regional market. A market strategy can be narrow or broad, as in the notion of niche
markets being very narrow or focused. This allows the firm to choose from four generic
business-level strategies – low-cost leadership, differentiation, focused differentiation and
focused low-cost leadership in order to establish and exploit a competitive advantage within
a particular competitive scope.
Miles and Snow (1984) have identified four modes of strategic orientation: defenders,
prospectors, analysers and reactors. Defenders are companies with a limited product line
and a management focuses on improving the efficiency of their existing operations.
Commitment to this cost orientation makes senior managers unlikely to explore new areas.
Prospectors are companies with fairly broad product lines that focus on product innovation
and market opportunities. These sales orientation makes senior managers emphasize
‗creativity over efficiency‘. Analysers are companies that operate in at least two different
product market areas, one stable and one variable. In this situation, senior managers
emphasize efficiency in the stable areas and innovation in the variable areas. Reactors are
companies that lack a
12 DKR21
consistent strategy–structure–culture relationship. In this reactive orientation, senior

management‘s responses to environmental changes and pressures thus tend to be piecemeal
strategic adjustments. Competing companies within a single industry can choose any one of
these four types of strategy and adopt a corresponding combination of structure, culture and
processes consistent with that strategy in response to the environment. The different
competitive strategies influence the ‗downstream‘ functional strategies.
Functional-Level Strategy
Functional-level strategy pertains to the major functional operations within the business
unit, including research and development, marketing, manufacturing, finance and HR. This
strategy level is typically primarily concerned with maximizing resource productivity and
addresses the question, ‗How do we support the business-level competitive strategy?‘
Consistent with this, at the functional level, HRM policies and practices support the
business strategy goals.
1.3 CURRENT TRENDS IN HUMAN RESOURCE MANAGEMENT
The world of work is rapidly changing. As a part of organization, Human Resource

Management (HRM) must be prepared to deal with effects of changing world of work. For
the HR people it means understanding the implications of globalization, work force
diversity, changing skill requirements, corporate downsizing, continuous improvement
initiatives, reengineering, the contingent work force, decentralized work sites and employee
involvement. Let us consider each of them one by one.
1. Globalization and Its Implications
Business today doesn‘t have national boundaries – it reaches around the world. The rise of
multinational corporations places new requirements on human resource managers. The HR
department needs to ensure that the appropriate mix of employees in terms of knowledge
skills and cultural adaptability is available to handle global assignments. In order to meet
this goal, the organizations must train individuals to meet the challenges of organization.
The employees must have working knowledge of the language and culture (in terms of
values, morals, customs and laws) of the host country.
Human Resource Management (HRM) must also develop mechanisms that will help
multicultural individuals work together. As background, language, custom or age
differences
13 DKR21
become more prevalent, there are indications that employee conflict will increase. HRM
would be required to train management to be more flexible in its practices. Because
tomorrow‘s workers will come in different colors, nationalities and so on, managers will be
required to change their ways. This will necessitate managers being trained to recognize
differences in workers and to appreciate and even celebrate these differences.
2. Work-force Diversity
In the past HRM was considerably simpler because our work force was strikingly
homogeneous. Today‘s work force comprises of people of different gender, age, social
class sexual orientation, values, personality characteristics, ethnicity, religion, education,
language, physical appearance, marital status, lifestyle, beliefs, ideologies and background
characteristics such as geographic origin, tenure with the organization, and economic status
and the list could go on. Diversity is critically linked to the organization‘s strategic
direction. Where diversity flourishes, the potential benefits from better creativity and
decision making and greater innovation can be accrued to help increase organization‘s
competitiveness. One means of achieving that is through the organization‘s benefits
package. This includes HRM offerings that fall under the heading of the family friendly
organization. A family friendly organization is one that has flexible work schedules and
provides such employee benefits such as child care. In addition to the diversity brought by
gender and nationality, HRM must be aware of the age differences that exist in today‘s
work force. HRM must train people of different age groups to effectively manage and to
deal with each other and to respect the diversity of views that each offers. In situations like
these a participative approach seems to work better.
3. Changing Skill Requirements
Recruiting and developing skilled labor is important for any company concerned about
competitiveness, productivity, quality and managing a diverse work force effectively. Skill
deficiencies translate into significant losses for the organization in terms of poor-quality
work and lower productivity, increase in employee accidents and customer complaints.
Since a growing number of jobs will require more education and higher levels of language
than current ones, HRM practitioners and specialists will have to communicate this to
educators and community leaders etc. Strategic human resource planning will have to
carefully weigh the skill deficiencies and shortages. HRM department will have to devise
suitable training and short term programs to bridge the skill gaps and deficiencies.
14 DKR21
4. Corporate Downsizing
Whenever an organization attempts to delayer, it is attempting to create greater efficiency.

The premise of downsizing is to reduce the number of workers employed by the
organization. HRM department has a very important role to play in downsizing. HRM
people must ensure that proper communication must take place during this time. They must
minimize the negative effects of rumors and ensure that individuals are kept informed with
factual data. HRM must also deal with actual layoff. HRM department is key to the
downsizing discussions that have to take place.
5. Continuous Improvement Programs
Continuous improvement programs focus on the long term well-being of the organization.
It is a process whereby an organization focuses on quality and builds a better foundation to
serve its customers. This often involves a companywide initiative to improve quality and
productivity. The company changes its operations to focus on the customer and to involve
workers in matters affecting them. Companies strive to improve everything that they do,
from hiring quality people, to administrative paper processing, to meeting customer needs.
Unfortunately, such initiatives are not something that can be easily implemented, nor dictated
down through the many levels in an organization. Rather, they are like an organization wide
development process and the process must be accepted and supported by top management and
driven by collaborative efforts, throughout each segment in the organization. HRM plays an
important role in the implementation of continuous improvement programs. Whenever an
organization embarks on any improvement effort, it is introducing change into the organization.
At this point organization development initiatives dominate. Specifically, HRM must prepare
individuals for the change. This requires clear and extensive communications of why the change
will occur, what is to be expected and what effect it will have on employees.
6. Re-engineering Work Processes for improved Productivity
Although continuous improvement initiatives are positive starts in many organizations, they
typically focus on ongoing incremental change. Such action is intuitively appealing the constant
and permanent search to make things better. Yet many companies function in an environment
that is dynamic facing rapid and constant change. As a result continuous improvement programs
may not be in the best interest of the organization. The problem with them is that they may
provide a false sense of security. Ongoing incremental change avoids
15 DKR21
facing up to the possibility that what the organization may really need is radical or quantum
change. Such drastic change results in the re-engineering of the organization.
Re-engineering occurs when more than 70% of the work processes in an organization are
evaluated and altered. It requires organizational members to rethink what work should be
done, how it is to be done and how to best implement these decisions. Re-engineering
changes how organizations do their business and directly affects the employees. Re-
engineering may leave certain employees frustrated and angry and unsure of what to
expect. Accordingly HRM must have mechanisms in place for employees to get appropriate
direction of what to do and what to expect as well as assistance in dealing with the conflict
that may permeate the organization. For re-engineering to generate its benefits HRM needs
to offer skill training to its employees. Whether it‘s a new process, a technology
enhancement, working in teams, having more decision making authority, or the like,
employees would need new skills as a result of the re-engineering process.
7. Contingent Workforce
A very substantial part of the modern day workforce is the contingent workers. Contingent
workers are individuals who are typically hired for shorter periods of time. They perform
specific tasks that often require special job skills and are employed when an organization is
experiencing significant deviations in its workflow. When an organization makes its strategic
decision to employ a sizable portion of its workforce from the contingency ranks, several HRM
issues come to the forefront. These include being able to have these virtual employees available
when needed, providing scheduling options that meet their needs and making decisions about
whether or not benefits will be offered to the contingent work force.
No organization can make the transition to a contingent workforce without sufficient

planning. As such, when these strategic decisions are being made, HRM must be an active
partner in these discussions. After all its HRM department‘s responsibility to locate and
bring into the organization these temporary workers. As temporary workers are brought in,
HRM will also have the responsibility of quickly adapting them to the organization. HRM
will also have to give some thought to how it will attract quality temporaries.
8. Decentralized Work Sites
Work sites are getting more and more decentralized. Telecommuting capabilities that exist
today have made it possible for the employees to be located anywhere on the globe. With this
16 DKR21
potential, the employers no longer have to consider locating a business near its work force.
Telecommuting also offers an opportunity for a business tin a high cost area to have its
work done in an area where lower wages prevail.
Decentralized work sites also offer opportunities that may meet the needs of the diversified
workforce. Those who have family responsibilities like child care, or those who have
disabilities may prefer to work in their homes rather than travel to the organization‘s
facility. For HRM, decentralized work sites present a challenge. Much of that challenge
revolves around training managers in how to establish and ensure appropriate work quality
and on-time completion. Work at home may also require HRM to rethink its compensation
policy. Will it pay by the hour, on a salary basis, or by the job performed. Also, because
employees in decentralized work sites are full time employees of the organization as
opposed to contingent workers, it will be organization‘s responsibility to ensure health and
safety of the decentralized work force.
9. Employee Involvement
HRM has a significant role to play in employee involvement. There are a number of employee
involvement concepts that appear to be accepted. These are delegation, participative
management, work teams, goal setting, employee training and empowering of employees. What
is needed to demonstrate leadership as well as supportive management. Employees need to be
trained and that‘s where human resource management has a significant role to play. Employees
expected to delegate, to have decisions participative handled, to work in teams, or to set goals
cannot do so unless they know and understand what it is that they are to do. Empowering
employees requires extensive training in all aspects of the job. Workers may need to understand
how new job design processes. They may need training in interpersonal skills to make
participative and work teams function properly.
1.4 ORGANIZATION OF HR DEPARTMENTS
Two issues become relevant in a discussion on organisation of an HR department. They are

(i) Place of the HR department in the overall set-up, and
(ii) Composition of the HR department itself.
Status of the HR department in the total organisational structure depends on whether a unit is
small or large. In most of the small organisations, there is no separate department to co-ordinate
the activities relating to personnel. In fact, there may not be any personnel manager
17 DKR21
at all. Services of outsiders who specialize in maintaining accounts and records relating to
provident fund, pension and other statutory requirements are retained for a fee.
Alternatively, a low-placed employee may be entrusted with the task of attending to these
functions. Figure 1.1 shows structure of this type. In fact, it was this arrangement which
was followed in the past, irrespective of the size of the organisation. Earlier, Personnel
departments were called 'health and happiness' departments. The people assigned to deal
with personnel issues were often individuals who were past their prime. The personnel
department was se en as a place where the lesser productive employees could be placed
with minimal da mage to the organisation's ongoing operations. Individuals in the personnel
department were perceived as those responsible for planning company picnics, vacation
schedules and retirement parties. Personnel, as an activity, was seen as a necessary but
unimportant part of the organisation, Fortunately, things have changed for the better, and
the status of the personnel department has improved enormously over the years.
Owner/Manager
Production
Manager Sales Manager Office Manager Accountant
Personnel Assistant
Fig. 1.1 HRM in a Small-Scale Unit
A large-scale unit will have a Manager/Director heading the HR department. His or her status
will be equal to that of any executive. Figure 1.2 shows this structure. This arrangement holds
good when the company has a single unit. Where the company has multiple plants located in
different parts of the country, there may be a centralised HR/personnel department at the main
or registered office and each plant will have separate HR/personnel department. Routine
activities relating to each plant are handled by the HR/personnel department attached to the
work, whereas the broad policies, matters concerning executives, and the like are handled by
the central department. This is the conglomerates as BHEL, and L&T.
18 DKR21
Chairman and Managing Director
Director Director Director Director

Director
Production Personnel/HRM Marketing R&D
Finance
Fig. 1.2 HRM in Large Scale Unit
Coming to the composition of the HR department, it may be stated that it depends on the
scale of operations and attitude of the top management towards is personnel. However
atypical HR department (see Fig. 1.3) is headed by the director, under whom are Manager-
Personnel, Manager-Administration, Manager-HRD and Manager-Industrial Relations. The
department will grow in size and importance when new demands are placed on it by the top
management.
Director HRM
Manager Manager Manager HRD Manager HR

Personnel Administration
Appraisal Training & Development
PR Canteen Medical Welfare Transport Legal
Human Resource Planning

Canteen Grievance Handling Compensation
Fig. 1.3 Composition of a HR/Personnel Department
19 DKR21
1.5 LINE AND STAFF FUNCTIONS
The functions of an enterprise are very often classified into 'line' and 'staff' functions.
Production, finance, and distribution are called the line functions. All other functions such
as personnel, engineering, legal advice, etc., are called the staff functions. In fact line
functions are the organic functions of an enterprise which directly affect the product. They
are found universally in every organisation and are considered absolutely essential. But this
is not the case with the staff functions. They are auxiliary in nature and only indirectly
affect production, finance, or distribution of a product or service.
It is, however, better to distinguish 'line' and 'staff' by authority relationship rather than
by activities. Staff is usually advisory in nature and has only the power to recommend. In its
strictest sense, staff possesses no authority over the line. As a practical matter, however, it may
be accorded the authority to command because the top manager has indicated that whatever the
staff man says to do should be done when it pertains to his function or sphere of competence. A
personnel manager issuing orders to the head of the sales department hoe he should go about
hiring an employee function. This is known as functional authority and should be distinguished
from the mere staff authority to give advice.
When functional authority has been granted to the personnel department, the
question often arises as to whom its orders should be directed - whether only to the
executives of equal level or to persons at any level below or above the personnel
department at which implementation of the order is to be done. Koontz believes that in
order to preserve 'some semblance of unity of command ' functional authority of a staff
department should not extend beyond persons at its own level.
1.6 ROLE OF HUMAN RESOURCE MANAGER
1.6.1 Introduction
In most of the big enterprises, human resource department is set up under the leadership of
personnel manager who has specialised knowledge and skills. The human resource manager
performs managerial as well as operative functions. Since he is a manager, he performs the
basic functions of management like planning, organising, directing and controlling to
manage his department. He has also to perform certain operative functions of recruitment,
selection, training, placement, etc., which the problems to management, the human resource
managers attach highest priority to the settlement of industrial disputes than anything else.
The role of human resource management in industry is underlined by the complex and
dynamic nature of environment under which the modern large-scale industries function.
The impact of technology on organisation structure, politicisation of workers‗ unions, and
20 DKR21
the growing consciousness of industrial employees about their rights and privileges, have
made the role of personnel management increasingly more important in industrial
undertakings. The task has also been facilitated by the greater recognition of the value of
human resources in industry and application of human resource development (HRD)
techniques by the enlightened managers in modern organisations.
1.6.2 Functions of a Human Resource Manager
A human resource manager, charged with fulfilling the objectives of an organisation,

should be a leader with high intellectual powers, a visionary and a philosopher who
provides the initiative to shape the future in terms of leading the human beings in an
organisation towards more prosperous and progressive policies.
1. Human Resource Manager as an Intellectual: The basic skill in the human resource
field as compared to technologists or financial experts is the skill to communicate,
articulate, understand and above all, to be an expert when it comes to putting policies and
agreements in black and white. The personnel man‗s skill lies in his command over the
language. A personnel man has to deal with employees and he must possess the skills of
conducting fruitful and systematic discussions and of communicating effectively. He should
also be in a position to formulate principles and foresee the problems of the organisation.
This means that he would require the mental ability to deal with his people in an intelligent
manner as well as to understand what they are trying to say.
2. Human Resource Manager as an Educator: It is not enough that a human resource

manager has command-over the language, which, however, remains his primary tool. He
should be deeply interested in learning and also in achieving growth. Basically, human
beings like to grow and realise their full potential. In order to harmonise the growth of
individuals with that of the organisation, a personnel administrator must not only provide
opportunities for his employees to learn, get the required training and assimilate new ideas
but also he himself should be a teacher. A personnel man who simply pushes files and
attends labour courts for conciliation purposes and other rituals of legal procedure for the
settlement of industrial disputes is not a personnel administrator of the future.
21 DKR21
3. Human Resource Manager as a Discriminator: A human resource administrator must

have the capacity to discriminate between right and wrong, between that which is just and
unjust and merit and non-merit. In other words, he should be a good judge when he sits on a
selection board, a fair person when he advises on disciplinary matters and a good observer
of right conduct in an organisation.
4. Human Resource Manager as an Executive: The human resource manager must execute
the decisions of the management and its policies with speed, accuracy and objectivity. He has to
streamline the office, tone up the administration and set standards of performance. He has to
coordinate the control functions in relation to the various other divisions and, in doing so he
should be in a position to bring unity of purpose and direction in the activities of the personnel
department. He must ask relevant questions and not be merely involved in the office routine
whereby the status quo is maintained. He should have the inquisitiveness to find out causes of
delay, tardy work and wasteful practices, and should be keen to eliminate those activities from
the personnel functions which have either outlived their utility or are not consistent with the
objectives and purposes of the organisation.
5. Human Resource Manager as a Leader: Being basically concerned with people or

groups of people, and being placed in the group dynamics of various political and social
functions of an organisation, a Human resource manager must not shirk the role of
leadership in an organisation. He, by setting his own example and by working towards the
objectives of sound personnel management practices, must inspire his people and motivate
them towards better performance. He should resolve the conflicts of different groups and
build up teamwork in the organisation.
6. Human Resource Manager as a Humanist: Deep faith in human values and empathy
with human problems, especially in less developed countries, are the sine qua non for a
Human resource man. He has to deal with people who toil at various levels and partake of
their joys and sorrows. He must perform his functions with sensitivity and feeling.
7. Human Resource Manager as a Visionary: While every leading function of an

organisation must evolve its vision of the future, the primary responsibility for developing the
social organisation towards purposive and progressive action fall on the personnel man. He
should be a thinker who sets the pace for policy-making in an organisation in the area of human
relations and should gradually work out new patterns of human relations management
consistent with the needs of the organisation and the society. He must ponder on the social
obligations of the enterprise, especially if it is in the public sector, where one has to work
within the framework of social accountability. He should be in close touch
22 DKR21
1.7 KEYWORDS
Human Resource Management strategic management
HR department Line and Staff function
1.8 QUESTIONS FOR DISCUSSIONS
1. What are the functions of Human Resource Management?

2. Discuss HRM and its environments.
3. Explain the different models in Strategic Human Resource Management.
4. The role of HRM in formulating the hierarchy of strategies is crucial'. Elaborate.
5. Critically evaluate the current trends in HRM.
6. Describe the organization of HR departments.
7. What do you understand by line and staff functions?
8. Discuss the roles and functions of Human Resource Manager
23 DKR21
LESSON
RECRUITMENT AND PLACEMENT
CONTENTS
2.0 Definition of Recruitment
2.1 Recruitment process
2.2 Sources of Recruitment
2.3 Job analysis
2.3.1 Purposes and uses of Job analysis
2.3.2 Methods of Job analysis
2.4 Employment planning and forecasting
2.5 Building employee commitment
2.5.1 Concept of employee commitment
2.5.2 Building employee commitment
2.6 Developing and using application forms
2.7 Keywords
2.8 Questions for discussions
24 DKR21
Recruitment means search of the prospective employee to suit the job requirements as
represented by job specification–a technique of job analysis. It is the first stage in selection
which makes the vacancies known to a large number of people and the opportunities that
the organisation offers. In response to this knowledge, potential applicants would write to
the organisation. The process of attracting people to apply in called recruitment.
2.0 Definition of Recruitment:
Dale S. Beach has defined "Recruitment as the development and maintenance of adequate
manpower resources. It involves the creation of a pool of available labour upon whom the
organisation can depend when it needs additional employees."
According to Edwin B. Flippo: "Recruitment is the process of searching for prospective

employees and stimulating them to apply for jobs in the organisation."
2.1 Recruitment Process:
As was stated in the beginning of the chapter, recruitment is the process of locating,
identifying, and attracting capable applications for jobs available in an organisation.
Accordingly, the recruitment process comprises the following five steps.
1. Recruitment planning
2. Strategy development
3. Searching
4. Screening
5. Evaluation and Control
Recruitment Planning
The step involved in the recruitment process is planning. Here, planning involves to draft a
comprehensive job specification for the vacant position, outlining its major and minor
responsibilities; the skills, experience and qualifications needed; grade and level of pay;
starting date; whether temporary or permanent; and mention of special conditions, if any,
attached to the job to be filled.
Strategy Development
Once it is known how many with what qualifications of candidates are required, the next step
involved in this regard is to devise a suitable strategy for recruiting the candidates in the
organization. The strategic considerations to be consider may include issues like whether to
25 DKR21
prepare the required candidates themselves or hire it from outside, what type of recruitment
method to be used, what geographical area be considered for searching the candidates, which
source of recruitment to be practiced, and what sequence of activities to be followed in
recruiting candidates in the organization.
Searching
This step involves attracting job seekers to the organization. There are broadly two sources
used to attract candidates. These are:
1. Internal Sources, and

2. External Sources
Screening
Though some view screening as the starting point of selection, we have considered it as an
integral part of recruitment. The reason being the selection process starts only after the
applications have been screened and shortlisted. Let it be exemplified with an example.
In the universities, applications are invited for filling the post of Professors. Applications
received in response to invitation, i.e., advertisement are screened and shortlisted on the
basis of eligibility and suitability. Then only the screened applications are invited for
seminar presentation and personal interview. These selection process starts from here, i.e.,
seminar presentation or interview.
Job specification is invaluable in screening. Applications are screened against the

qualification, knowledge, skills, abilities, interest and experience mentioned in the job
specification. Those who do not qualify are straightway eliminated from the selection
process. The techniques used for screening candidates vary depending on the source of
supply and method used for recruiting. Preliminary applications, de-selection tests and
screening interviews are common techniques used for screening the candidates.
Evaluation and Control
Given the considerable cost involved in the recruitment process, its evaluation and control
is therefore, imperative. The costs generally incurred in a recruitment process include (i)
Salary of recruiters; (ii) cost of time spent for preparing job analysis, advertisement, etc.;
(iii) administrative expenses; (iv) cost of outsourcing or overtime while vacancies remain
unfilled; and (v) cost incurred in recruiting unsuitable candidates.
26 DKR21
In view of above, it is necessary for a prudent employer to try to answer certain questions
like: whether the recruitment methods are appropriate and valid? and whether the
recruitment process followed in the organisation is effective at all or not? In case the
answer to these questions are in negative, the appropriate control measures need to be
evolved and exercised to tide over the situation. However, such an exercise seems to be
only rarely carried out in practice by the organisation employers.
2.2 Sources of Recruitment:
The various sources of recruitment are classified into two broad categories, namely:
1. Internal Sources
2. External Sources.
This sources included under each category are depicted in the following Fig. 1.4
Sources of Recruitment
Internal Sources External Sources
a) Present Employees a) Employment Exchanges
b) Employee Referrals b) Advertisements
c) Former Employees c) Previous Applicants
d) Management Consultants d) Campus Recruitment
e) Raiding
f) Word-of-Mouth
g) Deputation
1. Internal Sources:
This refers to the recruitment from within the company. The various internal sources are
promotion, transfer, past employees and internal advertisements.
a) Present Employees: Promotions and transfers from among the present employees can be a
good source of recruitment. Promotion implies upgrading of an employee to a higher position
carrying higher status, pay and responsibilities. Promotion from among the present
employees is advantageous because the employees promoted are well acquainted with the
27 DKR21
organizational culture, they get motivated, and it is cheaper also. Promotion from among
present employees also reduces the requirement for job training. However, the disadvantage
lies in limiting the choice to a few people and denying hiring of outsiders who may be
better qualified and skilled. Furthermore, promotion from among present employees also
results in inbreeding which creates frustration among those not promoted.
b) Former Employees: Former employees are another source of applicants for vacancies
to be filled up in the organisation. Retired or retrenched employees may be interested to
come back to the company to work on a part-time basis. Similarly, some former employees
who left the organisation for any reason may again be interested to come back to work. This
source has the advantage of hiring people whose performance is already known to the
organisation.
c) Employee Referrals: This is yet another internal source of recruitment. The existing
employees refer their family members, friends and relatives to the company as potential
candidates for the vacancies to be filled up in the organisation. This source serves as one of
the most effective methods of recruiting people in the organisation because employees refer
to those potential candidates who meet the company requirements known to them from
their own experience. The referred individuals are expected to be similar in type in terms of
race and sex, for example, to those who are already working in the organisation.
d) Previous Applicants: This is considered as internal source in the sense that applications
from the potential candidates are already lying with the organisation. Sometimes the
organisations contact through mail & messenger these applicants to fill up the vacancies
particularly for unskilled or semiskilled jobs.
Evaluation of Internal Source
Let us try to evaluate the internal source of recruitment. Obviously, it can be done in terms
of its advantages and disadvantages. The same are spelled out as follows:
Advantages: The advantages of the internal source of recruitment include the following:
i) Familiarity with own Employees: The organisation has more knowledge and familiarity
with the strengths and weakness of its own employees than of strange and unknown
outsiders.
ii) Better Use of the Talent: The policy of internal recruitment also provides an opportunity
to the organisation to make a better use of the talents internally available and to develop
them further and further.
iii) Economic Recruitment: In case of internal recruitment, the organisation does not need
to spend much money, time and effort to locate and attract the potential candidates. Thus,
internal recruitment proves to be economical, or say, inexpensive.
28 DKR21
iv) Improves Morale: This method makes employees sure that they would be preferred
over the outsiders as and when vacancies will be filled up in their organisation.
v) A Motivator: The promotion through internal recruitment serves as a source of motivation

for employees to improve their career and income. The employees feel that organisation is a
place where they can build their life-long career, besides, internal recruitment also serves as a
means of attracting and retaining competent employees in the organisation.
Disadvantages
a) Limited Choice: Internal recruitment limits its choice to the talent available within the
organisation. Thus, it denies the tapping of talent available in the vast labour market outside
the organisation. Moreover, internal recruitment serves as a mean for "inbreeding", which is
never healthy for the future of the organisation.
b) Discourages Competition: In this system, the internal candidates are protected from
competition by not giving opportunity to otherwise competent candidates from outside the
organisation. This in turn, develops a tendency among the employees to take promotion
without showing extra performance.
c) Stagnation of Skills: With the feeling that internal candidates will surely get promoted,
their skill in the long run may become stagnant or obsolete. If so, the productivity and
efficiency of the organisation, in turn decreases.
d) Creates Conflicts: Conflicts and controversies surface among the internal candidates,
whether or not they deserve promotion.
(b) External Sources:
External sources refer to the practice of getting suitable persons from outside. The various
external sources are employment exchange, advertisement, past employees, private
placement agencies and consultants, walks-ins, campus recruitment, trade unions, etc.
a) Employment Exchanges
The National commission on labour (1969) observed in its report that in the pre-
Independence era, the main source of labour was rural areas surrounding the industries.
Immediately after Independence, National Employment Service was established to bring
employers and job seekers together. In response to it, the compulsory notification of
vacancies act of 1959 (commonly called employment exchange act) was instituted which
became operative in 1960. under the section 4 of the act, it is obligatory for all industrial
establishment having 25 workers are more, to notify the nearest employment exchange of
29 DKR21
vacancies (with certain expectations) in them, before they are filled. The main functions of
these employment exchanges with their branches in most cities are registration of job
seekers and their placement in the notified vacancies. it is obligatory for the employer to
inform the outcome of selection within 15days to the employment exchange.
Employment exchanges are particularly useful in recruiting blue - collar, white -

collar and technical workers. A study conducted by Gopalji on 31 organizations throughout
the country also revealed that recruitment through employment exchanges was most
preferred for clerical personnel i.e. white - collar jobs.
b) Advertisements
Advertisement in newspapers or trade and professional journals is generally used when

qualified and experienced personnel are not available from other sources. Most of the
senior positions in industry as well as commerce are filled by this method. The advantage
of advertising is that more information about the organization job descriptions and job
specifications can be given in advertisement to allow self-screening by the prospective
candidates. Advertisement gives the management a wider range of candidates from which
to choose. Its disadvantage is that it may bring in a flood of response, and many times, from
quite unsuitable candidates.
c) Management Consultants
Management consultancy firms help the organisations to recruit technical, professional and
managerial personnel They specialise middle level and top level executive placements.
They maintain data bank of persons with different qualifications and skills and even
advertise the jobs on behalf their clients to recruit right type of personnel.
d) Campus Recruitment
Jobs in commerce and industry have become increasing technical and complex to the point
where school and college degrees are widely required. Consequently big organisations
maintain a close liaison with the universities, vocational institutes and management
institutes for recruitment to various jobs.
Recruitment from educational institutional is a well - established practice of thousands of

business and other organisations. It is also known as campus recruitment. Reputed
industrial houses which require management trainees send their officials to campuses of
various management institutes for picking up talented candidates doing MBA
30 DKR21
e) Raiding
Raiding is a technical term used when employees working elsewhere are attracted to join
organisations. The organisations are always on the lookout for qualified professionals, and are
willing to offer them a better deal if they make the switch. There are always some employees
who are professionally very competent, but dissatisfied with something or the other in the
organisation. They form the easy‗ group to attract. The other group is formed of those who are
equally competent but are quite satisfied with their present position. To attract them, the
organisation has to offer a very lucrative package of perquisites. Whatever may be the means
used to attract, often it is seen as an unethical practice and not openly talked about.
f) Word-of-Mouth
Some organizations in India also practise the 'word of mouth' method of recruitment. In this
method, the word is passed around the possible vacancies or openings in the organization.
Another form of word- of- mouth method of recruitment is "employee-pinching" i.e. the
employees working in another organization are offered an attractive offer by the rival
organizations. This method is economic, both in terms of time and money.
Some organizations maintain a file of the applications and bio - data sent by job
seekers. These files serve us very handy as and when there is vacancy in the organization.
The advantage of this method no - cost involved in recruitment. However, the drawbacks of
this method of recruitment are non-availability of the candidate when needed and the choice
of candidates is restricted to a too small number.
g) Deputation
Another source of recruitment is deputation i.e. sending an employee to another

organisation for a short duration of two to three years. This method of recruitment is
practiced, in a pretty manner, in the government departments and public sector
organisations. Deputation is useful because it provides ready expertise and the organisation
does not have to incur the initial cost of induction and training. However, the disadvantage
associated with deputation is that the deputation period of two/three years is not long
enough for the deputed employee to prove his/her mettle, on the one hand, and develop
commitment with the organisation to become part of it, on the other.
Advantages
The advantages of external sources of recruitment are as under:
1. Qualified Personnel: By using external sources of recruitment the management can

make qualified and trained people to apply for vacant Jobs in the organisation.
31 DKR21
2. Wider choice: When vacancies are advertised widely a large number of applicants
from outside the organisation apply. The management has a wider choice while
selecting the people for employment.
3. Fresh Talent: The insiders may have limited talents. External sources facilitate
infusion of fresh blood with new ideas into the enterprise. This will improve the
overall working of the enterprise.
4. Competitive Spirit: If a company can tap external sources, the existing staff will
have to compete with the outsiders. They will work harder to show better
performance.
Disadvantages
The disadvantages of filling vacancies from external sources are as follows:
1. Dissatisfaction among Existing Staff: External recruitment may lead to

dissatisfaction and frustration among existing employees. They may feel that their
chances of promotion are reduced.
2. Lengthy Process: Recruitment from outside takes a long time. The business has to
notify the vacancies and wait for applications to initiate the selection process.
3. Costly Process: It is very costly to recruit staff from external sources. A lot of
money has to be spent on advertisement and processing of applications.
4. Uncertain Response: The candidates from outside may not be suitable for the
enterprise. There is no guarantee that the enterprise will be able to attract right kinds of
people from external sources.
Evaluation of alternative sources
A company cannot fill all its vacancies from one single source. It must carefully combine
some of these sources, weighing their cost and flexibility, the quality of men they supply,
and their effect on the present work force. Following are some of the measures which can
be used to assess how good or how poor various sources have proved to be:
1. Time lag between Requisition and Placement: The basic statistics needed to estimate
the time lag are the time-lapse data. To take an example, a company‗s past experience may
show that the average number of days from application to interview is 15 from interview to
offer is 5, from offer to acceptance is 7 and from acceptance to report for work is 21.
Therefore, if the company begins its recruitment and selection process today, the best
estimate is that it will be 48 days before the new employee is added to the pay-roll. With
32 DKR21
this information, the length‗of the pipe-line for alternative sources of recruitment can be
described and suitable recruiting sources chosen.
2. Yield Ratios: These ratios tell us about the number of leads/contacts needed to generate
a given number of hires in a given time. To take an example, suppose a company is
contemplating expansion and needs 10 additional engineers in the next 6 months. On
thebasis of its past experience the company predicts as under: We must extend offers to
2 candidates to gain one acceptance. If we need 10 engineers we will have to extend 20

offers. Further, if the interview -to-offer ratio has been 3 : 2 then 30 interviews must be
conducted and since the invitees to interview ratio is 4: 3 then as many as 40 candidates
must be invited. Finally, if contacts or leads required to find suitable candidates to invite are
in 6: 1 proportions then 240 contacts be made.
3. Employee Attitude Studies: These studies try to discover the reactions of present
employees to both external and internal sources of recruitment.
4. Correlation Studies: These studies tell us about the extent of correlation which, exists
between different sources of recruitment and factors of success on the job.
2.3 JOB ANALYSIS
Job analysis is the process by means of which a description is developed of the present
method and procedures of doing a job, physical conditions in which the job is done, relation
of the job to other jobs and other conditions of employment. Job analysis is intended to
reveal what is actually done as opposed to what should be done. Therefore if a man is
found doing some activity not required of that job, it should still form part of the job
analysis except where the immediate removal of that activity is possible. The purpose of job
analysis is not to describe an ideal but to show the management how at the moment a
particular job is being carried out.
 Job description: tasks, responsibilities, working conditions, etc.


 Job specification: employee characteristics (abilities, skills, knowledge, tools,
etc.) needed to perform the job.
2.3.1 PURPOSES AND USES OF JOB ANALYSIS
A comprehensive job analysis programme is an essential ingredient of sound personnel

management. It is fundamental to manpower management programmes because the results
of job analysis are widely used throughout the programmes. The information provided by
job analysis is useful, if not essential, in almost every phase of employee relations.
33 DKR21
(i) Organisation and Manpower Planning: It is helpful in organisational planning for it

defines labour needs in concrete terms and coordinates the activities of the work force,
and clearly divides duties and responsibilities.
(ii) Recruitment and Selection: By indicating the specific requirements of each job (i.e.,
the skills and knowledge), it provides a realistic basis for hiring, training, placement,
transfer and promotion of personnel.
(iii) Wage and Salary Administration: By indicating the qualifications required for doing
specified jobs and the risks and hazards involved in its performance, it helps in salary and
wage administration. Job analysis is used as a foundation for job evaluation. 31
(iv) Job Re-engineering: Job analysis provides information which enables us to change
jobs in order to permit their being manned by personnel with specific characteristics and
qualifications. This takes two forms :
(a) Industrial Engineering Activity, which is concerned with operational analysis, motion
study, work simplification methods and improvements in the place of work and its
measurement, and aims at improving efficiency, reducing unit labour costs, and
establishing the production standard which the employee is expected to meet; and
(b) Human Engineering Activity, which takes into consideration human capabilities, both
physical and psychological, and prepares the ground for complex operations of industrial
administration, increased efficiency and better productivity.
(v) Employee Training and Management Development: Job analysis provides the necessary
information to the management of training and development programmes. It helps it to
determine the content and subject-matter of in-training courses. It also helps in checking
application information, interviewing, weighing test results, and in checking references.
(vi) Performance Appraisal: It helps in establishing clear-cut standards which may be

compared with the actual contribution of each individual.
(vii) Health and Safety: It provides an opportunity for identifying hazardous conditions and
unhealthy environmental factors so that corrective measures may be taken to minimise and
avoid the possibility of accidents.
2.3.2 METHODS OF JOB ANALYSIS
Following methods may be used to collect information about job analysis:
(i) Observation. This was the first method of job analysis used by industrial-organizational
psychologists. The process involves simply watching incumbents perform their jobs and
taking notes. Sometimes they ask questions while watching, and commonly they even
34 DKR21
perform job tasks themselves. Besides slow and costly, this method also interferes with
normal work operations. However, it generally produces a good and complete job
description. This method is particularly desirable where manual operations are prominent
and where the work cycle is short. Working conditions and hazards can also be better
described when observed personally by the analyst.
(ii) Questionnaires and surveys. Expert incumbents or supervisors often respond to

questionnaires or surveys as a part of job analysis. These questionnaires include task
statements in the form of worker behaviours. Subject matter experts are asked to rate each
statement from their experience on a number of different dimensions like importance to
overall job success, frequency performance and whether the task must be performed on the
first day of work or can be learned gradually on the job. The questionnaire responses can be
statistically analyzed to provide a more objective record of the components of the job. To a
greater and greater extent, these questionnaires and surveys are being administered online
to incumbents. Sometimes persons leaving the job are also interviewed to give their views
about the job.
(iii) Interviews. It is essential to supplement observation by talking with incumbents. These

interviews are most effective when structured with a specific set of questions based on
observations, other analyses of the types of jobs in question, or prior discussions with
human resources representatives, trainers, or managers knowledgeable about jobs.
(iv) Checklists. This is also used as a job analysis method, specifically with areas like the Air
Force. In the checklist method, the incumbent checks the tasks he or she performs from a list of
task statements that describe the job. The checklist is preceded by some sort of job analysis and
is usually followed by the development of work activity compilations or job descriptions. The
scope of task statements listed depends upon the judgment of the checklist constructor.
(v) Critical incidents and work diaries. The critical incident technique asks subject matter
experts to identify critical aspects of behaviour or performance in a particular job that led to
success or failure. For example, the supervisor of an electric utility repairman might report
that in a very time-pressing project, the repairman failed to check a blueprint and as a result
cut a line, causing a massive power loss. The second method, a work diary, asks workers
and/or supervisors to keep a log of activities over a prescribed period of time. They may be
asked to simply write down what they were doing at fifteen minutes after the hour for each
hour of the work day. Or, they may list everything they have done up to a break.
(vi) The Position Analysis Questionnaire (PAQ). It is a well-known job analysis instrument.
Although it is labeled a questionnaire, the PAQ is actually designed to be completed by a
trained job analyst who interviews the SMEs (e.g., job incumbents and their supervisors). The
PAQ was designed to measure job component validity of attributes presented in aptitude tests.
35 DKR21
Job component validity is the relationship between test scores and skills required for good job
performance. The PAQ divided into six major sections: information input, mental process, work
output, relationships with others, job context, and other job characteristics.
2.4 EMPLOYMENT PLANNING AND FORECASTING
The basic purpose of having a human resource plan is to have an accurate estimate of the
number of employees required, with matching skill requirements to meet organisational
objectives. It provides information about the manner in which existing personnel are
employed, the kind of skills required for different categories of jobs and human resource
requirements over a period of time in relation to organisational objectives. It would also
give an indication of the lead time that is available to select and train the required number
of additional manpower.
More specifically, HR planning is required to meet the following objectives:
(i) Forecast personnel requirements: HR planning is essential to determine the future

manpower needs in an organisation. In the absence of such a plan, it would be difficult to
have the services of right kind of people at the right time.
(ii) Cope with changes: HR planning is required to cope with changes in market conditions,
technology, products and government regulations in an effective way. These changes may often
require the services of people with the requisite technical knowledge and training. In the
absence of an HR plan, we may not be in a position to enlist their services in time.
(iii) Use existing manpower productively: By keeping an inventory of existing personnel in

an enterprise by skill, level, training, educational qualifications, work experience, it will be
possible to utilise the existing resources more usefully in relation to the job requirements.
This also helps in decreasing wage and salary costs in the long run.
(iv) Promote employees in a systematic manner: HR planning provides useful information
on the basis of which management decides on the promotion of eligible personnel in the
organisation. In the absence of an HR plan, it may be difficult to ensure regular promotions
to competent people on a justifiable basis.
2.5 BUILDING EMPLOYEE COMMITMENT
Employees are the backbone of any organisation. They are the drivers of superior
organisational performance. Despite the fact that computer and IT have revolutionized the
work place, people are still needed to programme and operate the computers in order to get
the desirable result.
Low levels of commitment to both the organisation and work have been linked to
absenteeism, employee turnover and intention to quit. The success of any organisation in
36 DKR21
achieving its objectives is dependent on the level of commitment of its employees to both
the organisation and its various goals. This shows that building employees‘ commitment to
the workplace is one important goal of human resource policies and practices.
Organisations that want to remain competitive in a dynamic-complex business environment

of today must make building employee commitment at work a top priority.
2.5.1 THE CONCEPT OF EMPLOYEE COMMITMENT
There is no universal definition of commitment. Authors, researchers and scholars define

the concept to suit their interest and purpose. Some common definitions of employee
commitment are given below.
i.Commitment is a state of mind in which an individual becomes bound by his actions

to beliefs that sustain his activities and his own involvement (Salancik, 1977).
ii.Commitment is willingness on the part of individuals to contribute much more to the

organisation than their formal contractual obligation (Martin and Nicholas, 1987).
iii.Organizational commitment may also be defined as the psychological affiliation of

an employee to the organization (Chen et al., 2002).
2.5.2 BUILDING EMPLOYEE COMMITMENT
Building employee commitment to the workplace is one important goal of human resource
policies and practices. Research over the years revealed that commitment has a positive
effect on productivity, turnover and willingness to help co-workers.
Several ways of building employee commitment at work include the following.
(i) Fair treatment
Excellent grievance procedure that guarantees fair treatment of all employees in all
grievance and disciplinary matters must be in place.
(ii) People first-value
To build committed workforce organisations should emphasise ideas that portray employees as
the most valued assets. Employees must be trusted, treated with respect, involved in making on-
the-job decisions, and encouraged to grow and reach their full potential.
(iii) Employment security
Practice lifetime employment without guarantees. Make stable employment and continual
improvement of your team members or employees your strategy to obtain the smooth,
37 DKR21
steady growth of the company. This may be difficult in this era of global economic
meltdown induced staff retrenchment. Staff retrenchment must be undertaken with human
face. Retrenched employees entitlements must be fully paid. Unless this is done, those left
behind will never be committed. All efforts must be geared towards ensuring that
employees have confidence in their future with the organisation.
(iv) Excellent Reward package
In addition to offering employees competitive total reward packages, organisations should

build a pay plan that encourages employees to think of themselves as partners. This means
employees should have healthy share of the profits and downturn during good years and
bad years respectively. Stock ownership plan can also be encouraged to make employees
major stakeholders in the business.
(v) Value based hiring
Commitment should be embedded in companies‘ activities right from start. They must
demonstrate to potential employees at the point of entry that, they are organisation
committed to employees‘ welfare, career progression, learning and growth. Self-selection
can also be utilized, exhaustive screening process that requires some sacrifice on the part of
the employees should also be encouraged to create a commitment atmosphere.
(vi) Build excellent brand and solid reputation
There are some business organisations today that do receive thousands of unsolicited
applications due to their image, policies, programmes, ideologies and level of profitability.
These are organisations that several millions of people are willing to work in and grow.
Companies like GSK, Shell, IBM, Infosys, and Procter & Gamble consider their
‗employment brand‘ and ‗reputation‘ as key asset in attracting and retaining skilled,
competent, committed and motivated people.
The truth about commitment is that people are more interested in working in well-
established organisations with global brand and excellent reputation. Build your brand and
reputation to build committed workforce.
(vii) Strong commitment to training and development
To build commitment, there should be a great emphasis on, and investment in, training and
development. There should be a deliberate commitment of significant resources to the
training and development of employees at work.
38 DKR21
(viii) Groom-from-within philosophy/Promote-from-within policy
Organisations that practices groom-from-within philosophy are populated by committed

people. In such organisations talent development through training and retraining of staff is
accorded the greatest priority. If there is a job vacancy, first of all candidates will be sought
locally, but if no one is available; candidates will be sought across a region or across the
world.
Groom-from-within philosophy succeed best in an atmosphere where managers act as

coaches or mentors and also encourage people to move around within the organisation for
career development purposes rather than holding on to the best talents.
39 DKR21
2.6 DEVELOPING AND USING APPLICATION FORMS
Application blank or form is one of the most common methods used to collect information
on various aspects of the applicants‘ academic, social, demographic, work-related
background and references. It is a brief history sheet of an employee‘s background, usually
containing the following things:
i. Personal data (address, sex, identification marks)
ii. Marital data (single or married, children, dependents)
iii. Physical data (height, weight, health condition)
iv. Educational data (levels of formal education, marks, distinctions)
v. Employment data (past experience, promotions, nature of duties, reasons for leaving
previous jobs, salary drawn, etc.)
vi. Extra-curricular activities data (sports/games, NSS, NCC, prizes won, leisure-time
activities)
vii. References (names of two or more people who certify the suitability of an applicant to
the advertised position)
Even when applicants come armed with elaborate resumes, it is important to ask the
applicants to translate specific resume material into a standardized application form. Job
seekers tend to exaggerate, or overstate their qualifications on a resume.
So it's always better to ask the applicant to sign a statement that the information contained
on the resume or application blank is true and that he or she accepts the employer's right to
terminate the candidate's employment if any of the information is found to be false at a later
date.
2.7 KEYWORDS
Recruitment Job analysis
Employee commitment Planning and forecasting
Application forms
40 DKR21
1. Define recruitment.
2. Explain the recruitment process.
3. What are the various sources of recruitment? Discuss their relative
advantages and disadvantages.
4. What is meant by job analysis? Discuss the purposes and uses of job
analysis
5. Explain the various methods of Job analysis.
6. Critically evaluate the employment planning and forecasting.
7. what do you understand by concept of employee commitment?
8 How to build employee commitment? If you are HR Manager.
41 DKR21
LESSON
EMPLOYEE TESTING AND SELECTION
CONTENTS
3.0 Selection process

3.1 Selection test
3.1.1 What is selection test?
3.1.2 Purpose of test
3.1.3 Types of tests
3.2 Selection techniques interview
3.3 Common interviewing mistakes
3.4 Designing conducting an effective interview
3.5 Keywords
3.0 SELECTION PROCESS
Selection is a long process, commencing from the preliminary interview of applicants and
ending with the contract of employment. In practice, the process differs among
organizations and between two different jobs within the same company.
There is no single universally accepted selection process followed by all organisations. The
selection process is likely to vary from organisation to organisation depending upon the
nature of jobs and organisation.
Steps involved in standard selection process:
1. Preliminary interview
2. Application Blank
42 DKR21
3. Selection tests
4. Selection Interview
5. Reference checks
6. Physical Examination
7. Final Selection
1. Preliminary interview
Like screening, the purpose of preliminary interview is to eliminate unsuitable or

unqualified candidates from the selection process. In screening unqualified candidates are
eliminated on the basis of information given in the application forms, whereas preliminary
interview rejects misfits for reasons, which did not appear in the application forms. Due
care needs to be taken to ensure that the weeding out process does not lead the elimination
of desirable candidates. Obviously, preliminary interviews should be conducted by
someone who inspires confidence, who is genuinely interested in people and whose
judgment in adjusting of applicants is fairly reliable. Besides, the interviewer should be
courteous, kind and respective. He/ she should not appear brusque or impatient. That is
precisely the reason, preliminary interview is also called ‗courtesy interview‘.
2. Application Blanks
Application blank is the commonest device for getting information from a

prospective candidate. Almost all organizations require job seekers to ill up an application.
This serves as a personal record of the candidate bearing personal history profile, detailed
personal activities, skills and accomplishments. According, the following data is generally
called on from the applicant through applicant blank:
a) Biographical Information: It includes name, father‘s name, age, sex, nationality,

height, marital status, identification marks and number of dependents.
b) Educational information : These cover candidate‘s academic qualification, course,
year of passing, subject offered, percentage of marks, division, name of educational
institutions, training acquired, scholarship, etc.
c) Work experience: It includes positions held, name of employer, nature of job,
salary, duration of various assignments, reasons for leaving the present job,
membership of professional bodies, etc.
d) Salary: It refers to minimum salary acceptable and minimum joining period required.
43 DKR21
e) Extra-Curricular Information: It covers information like participation in games,

level of participation, prizes won, dramas, debates, NSS, NCC, hobbies, etc.
f) References: It includes the names of (two or three) referees who know the
character, work and abilities of candidate. However, empirical evidence reports a
very slight relationship between references and performance measures. Besides
inaccurate facts, this can also be attributed to the referee‘s inability to access and
describe the candidate, and his limited knowledge about him.
3.1 Selection Test
Individuals differ in many respects including job-related abilities and skills. In order
to select a right person for the job, individual differences in terms of abilities and skills
need to be adequately and accurately measured for comparison. This is done through a
device called ‗selection test‘. Selection test is a device that uncovers the information about
the candidates which are not known through application blank and interview.
3.1.1 What is selection test?
Test is defined differently by different writers and psychologists. Some definite test as ―an
objective and standardized measure of a sample behavior‖. It is considered standardized
because the procedure of administering the test, the environment in which the test is
conducted, and method of calculating individual score are uniformly applied. It is called
objective because of test measures the individual differences in terms of their abilities and
skills following an unbiased and scientific method avoiding interference of human factors.
1. Objective: It means the validity and reliability of measuring job related abilities and
skills. It is crazy of the whole testing movement. The psychological tests should
show that the test is predictive of the important aspects of role behavior related to
job for which the candidate is evaluation. Besides the objectivity also refers to
equality of opportunity for those being tested avoiding discrimination in terms of
caste, creed, sex, religion etc.
2. Standardized: Standardized refers to the uniformity of procedure administered and
the environment in which the test is taken. Uniformity refers to testing conditions
which include the time limit, instructions, testee‘s state of mind and health, room
temperature, test instruments, etc.
44 DKR21
3. Sample of behaviour: This refers to the fact that a total replication of reality of
human behaviour in any given testing situation is just not possible. Therefore, the
behaviour predicted through test is likely to be representative one, or say, a sample
of behaviour.
3.1.2 Purpose of test
Tests, i.e. psychological tests are conducted for various purposes. They include:
1. Guiding and counselling students seeking admissions in the educational institutes.

2. Career guidance to those thinking to make careers in specific vocations.
3. Research into human behaviour and its personalities.
4. Employment selection of the candidates for an organization. As regards selection
tests, these are conducted mainly to fulfill the following purpose.
i. For the selection and placement of new employees
ii. For appraising employees for promotional potentials.
iii. For counselling employees to enable them to perform better in their jobs.
3.1.3 Types of Tests
1. Intelligence Tests: These are tests to measure one‗s intellect or qualities of

understanding. They are also referred to as tests of mental ability. The traits of intelligence
measured include: reasoning, verbal and non-verbal fluency, comprehension, numerical,
memory and spatial relations ability. Binet-Simon; Stand ford-Binet and Weshier-Bellevue
Scale are some examples of standard intelligence tests.
2. Aptitude test: Aptitude tests measure ability and skills of the testee. These tests measure
and indicate how well a person would be able to perform after training and not what he/she
has done. Thus aptitude tests are used to predict the future ability / performance of a person.
There are two objectives of the aptitude tests. One to advise youth or jobseekers regarding
field of activities in which they are likely to succeed. This is called ‗vocational guidance‘.
Second, to select best persons for jobs where they may succeed. This test is called
‗vocational selection‘.
Specific aptitude tests have been designed to measure special abilities to perform a job.
Examples of such tests are Mechanical Aptitude Test, Clerical aptitude test, Artistic
aptitude test, Musical aptitude test, Management aptitude test, Differential aptitude test, etc.
45 DKR21
3. Achievement tests: Achievement tests are measure a person‘s potential in given area/
job. In other words, these tests measure what a person can do based on skill or knowledge
already acquired by him/her. Achievement tests are used for admission to specific courses
in the academic institutions. In these tests, grades in previous examinations are often used
as indicators of achievement and potential for learning. Indian industries have now started
conducting these tests to judge for themselves the level of proficiency attained rather than
believing their scores in academic examinations. Achievement tests are also known by the
names, proficiency tests, performance, occupational or trade tests.
Achievement tests resemble those of aptitude tests. However, the difference lies in the
usage of results. The line of difference between achievement and aptitude is very thin in the
sense of past achievement and performance. This difference between the two can be
exemplified with an example.
4. PIP Tests: PIP tests are those which seek to measure one‗s personality, interest and
preferences. These tests are designed to understand the relationship between any one of
these and certain types of jobs.
Interest tests are inventories of likes and dislikes of people towards occupations, hobbies,
etc. These tests help indicate which occupation (e.g. artistic, literary, technical, scientific,
etc.) are more in tune with a person‗s interests. Strong Vocational Interest Blank and Kuder
Preference Records are examples of interest tests. These tests do not; however, help. In
predicting on the job performance. Besides, they leave room for faking and the underlying
assumptions in the tests could be belied.
5. Projective Tests: These tests expect the candidates to interpret problems or situations.
Responses to stimuli will be based on the individual‗s values, beliefs and motives.
Thematic Apperception Test and Rorschach Ink Blot Test are examples of projective tests.
In Thematic Apperception Test a photograph is shown to, the candidate who is then asked
to interpret it. The test administrator will draw inferences about the candidate‗s values,
beliefs and motives from an analysis of such interpretation.
6. Graphology: The origin of graphology is traced back to the eleventh century when the
Chinese drew attention to the relationship between hand writing and personality. It has been
said that an individual‘s hand writing can suggest the degree of energy, inhabitations, and
spontaneity to be found in the writer, disclosing idiosyncrasies and elements of balance and
46 DKR21
control from which many personality characteristics can be inferred. For example, big letters
and emphasis on capital letters indicate a tendency towards domination competitiveness. A slant
to the right moderate pressure and good legibility show leadership potential.
4. Selection Interview
Interview is an oral examination of candidates for employment. No selection process is

complete without one or more interviews. Interview is the most common and core method
of both obtaining information from job-seekers, and decision-making on their suitability or
otherwise.
Organizations may seek to make their selection process as objective as possible. But
interview which is an essential element of the process, by and large still remains subjective.
Interviews usually take place at two crucial stages in the selection process, i.e., at the
beginning and in the end. Interviews can differ in terms of their focus and format. Usually
several individuals interview one applicant. This is called panel interview. Such panels
usually consist of representatives from-personnel and concerned operating units/line
functions. In this method, usually, applicants get screened from one stage to another, at
least in the initial stages. The interviews can be structured or unstructured general or in-
depth. Sometimes where the job requires the job holder to remain claim and composed
under pressure, the candidates are intentionally objected to stress and strains in the
interview by asking some annoying or embarrassing questions. This type of interview
called the stress interview.
Interviewing is both an art and a science. The effectiveness of the interview as a screening
device can be improved by taking care of certain aspects like the following:
1. The interview should be based on a checklist of what to look for in a candidate. Such a
checklist could be based on proper job analysis. Each critical attribute which the interview
seeks to evaluate may be assigned a specific weightage.
2. It is desirable to prepare a specific set of guidelines for the interview.
3. The interviewers need to train to evaluate performance in the interview objectively.

Also, all interviewers need to develop common understanding about the criteria measures,
their purposes and weightages.
47 DKR21
4. The interviewers may use past behaviour to predict future behaviours and obtain
additional information to attempt such linkages more meaningfully.
5. There should be proper coordination between the initial and succeeding interviews.
5. Reference Checks
The reference check as yet another step in the selection process used for the purpose of
verifying information and also obtaining additional feedback on an application. The
candidate is asked to supply two-three names of persons i.e., referees who know him/her
personally, Previous employers, University Professors, neighbours and friends can act as
references. However, references are treated as mere formality and are hardly used to
influence selection decisions. The obvious reasons are:
a) Reference are normally those who speak well about the candidate.
b) Referee may give favourable opinion about the candidate to get rid of them.
c) Sometimes referee either does not know much about the candidate or does not want to
divulge the truth about the candidate because it might adversely affect the selection or
promotion of the concerned candidate.
6. Physical Examination
The last tool used in the selection process is physical examination. The main purpose of
conducting physical or medical examination is to have proper matching of job requirement
with the physical ability of the candidate. Among various objectives of a physical test, the
major ones are to detect if the individual is carrying any infectious diseases, to identify
health defects of an individual for undertaking certain works detrimental to his/her health
and to protect companies from employees filing compensation claims for injuries and
accidents caused by pre-existing ailments.
However, with regard to physical examination, there are few matters of concern. The
pre-placement physical examination often fails to detect complicated diseases because of two
reasons. Firstly, test is cursory. Secondly, not enough is known about ailments. Added to this is
growing automation which requires less physical strengths for jobs. Moreover, a sound physical
condition is no guarantee against accidents. This, then, underlines concern for safety.
48 DKR21
7. Final Selection
The last step in the selection process is the final selection of the candidate for a job. The
candidates who have cleared all the above hurdles are finally selected and a letter of job
offer is issued to them. The job offer i.e., appointment letter contains the details like pay-
scale, allowances and other terms and conditions of the job. It also contains when and
whom he should report for joining the duty. When he/she reports for joining, he/she needs
to be placed in a particular section or division and introduced to the job and organisation.
3.2 SELECTION TECHNIQUES INTERVIEW
Interview Techniques
There are many possible approaches to conducting a selection interview. Whatever the
approach one point is certain - the interview will be extremely important to both the applicant
and the employer. For most selection situations, the interview provides the opportunity to
evaluate applicants and for applicants to gain an impression of the organisation at first hand.
Major features of the approach to selection interviewing recommended include:
 Focusing attention on the competencies most critical to success in the position, and
making the most effective use of the interviewing time available.

 Use of a structured interview format based on careful preparation of a written
checklist of questions.

 An emphasis on obtaining specific examples of relevant past behaviour, rather than
attempting psychological analysis of personality which uses hypothetical questions
or relying on subjective reactions to applicants.

 Use of several interviewers (panel) to share information, offset 'judgement bias' and
to reach consensus ratings of applicants.

 Separation of fact gathering from comparative evaluation of applicants.

 Objective, reliable and logical methodology. 

 Note taking during the interview, and documentation of the reasons for selection
decisions.
49 DKR21
Plan for the interview
More effective use of interview time is gained by reviewing job requirements in order to
prepare a list of interview questions which will provide job relevant information. Sample
interview questions and sample interview plans have been prepared to assist you in your
preparation.
Careful planning of specific questions will draw out information about past behaviour
relevant to the particular skills, knowledge, experience and abilities critical to job success.
This ensures the focus of the interview is on the most important aspects of the applicant's
capacity to perform the job.
Separate data collection and judgement
Interviewers often make lasting decisions about applicants in the first few minutes. The
usefulness of the interview as an information gathering process is then lost as the interviewer
simply looks for information to support this initial judgement. Using a structured interviewing
process to seek information on job relevant behaviour minimises this problem.
The approach recommended here means the interview is used to collect information on the
applicant's past behaviour and the behaviour displayed during interview and the
demonstrated capacity to perform in the role. When experiencing a strong view of an
applicant it is appropriate to make an effort to seek contrary evidence. This affords the
applicant with an opportunity to present a more balanced view.
Pooling of the information obtained by each interviewer, and joint evaluation of the
applicants takes place only after the interview process is completed and not between
candidates as this may 'lead' the decision process of some panel members.
Behaviour predicts behaviour
If you want to know how somebody is likely to behave in a certain situation, the best thing
to find out is how they behaved in the past when placed in a similar situation. If a candidate
has been able to meet deadlines and to work well with other people in the past, then the
chances are they will be able to do so in the future. As with any prediction method, you will
sometimes be wrong using past behaviour to predict future behaviour so care must be taken
to find supportive evidence (i.e., through referee reports). Your rate of success will be high,
50 DKR21
however, if you can gather sufficient valid data about past behaviour, and if you have an
accurate idea of the behaviour to be required in the future. Although people do change and
develop, major behavioural characteristics tend to remain basically the same in adults.
People who have been honest in the past tend to be so in the future. A person, who has
shown good judgement, or decisiveness, or tenacity, or ability to learn in the past, is likely
to repeat this behaviour in the future.
Develop questioning, listening and note taking skills
Knowing what to look for and having planned questions which will draw out information
about the relevant past behaviour of applicants is a good start. Interviewers still need to
conduct the interview skillfully, however. The key skills of questioning, listening and note
taking are central to the success of the interview. The criteria focused interviewing process
provides clear guidelines for applying these skills to meet the needs of both the interviewer
and the applicant.
Integrating the interview with other selection techniques
The clear criteria and rating methods utilised allow for integration of interview findings
with other selection techniques such as the application, referee reports, samples of job
behaviour and ability tests. Psychological tests are not currently used by USQ. This means
the accuracy of the interview and other selection tools can be cross-checked. Alternatively,
different selection tools can be used to measure different competencies relevant to the
position. This specialisation allows for more in-depth coverage of competencies. A simple
example might be when selecting a computer operator. A test of ability might be used
instead of using the interview or referees' report to get information about past performance
or skill levels. Similarly, having a lecturer make a presentation may allow for an assessment
of prepared oral presentation skills. The interview and referees' reports can then concentrate
on other critical aspects. However, they should be focused clearly on objective and
independent feedback of the applicant against the selection criteria. When the results of the
application and interview are added to results of tests and referees' reports, a comprehensive
profile is available for selection decision making.
51 DKR21
Selection decision making by panel discussion
When the interviewing, reference checking and other information gathering stages are
complete, a final decision can be made. In the process recommended, a number of people will
have been involved in gathering information. It is important for each person to share the
information so that all relevant data is considered. This requires an effective process of group
decision making. Bringing applicant data together and discussing it, criterion by criterion,
allows for ratings to be supported by behavioural or factual evidence - not just surface
impressions. These findings need to be documented on the interview summary form.
By ensuring a focus on evidence of past behaviour to support predictions of future

behaviour, we make use of the most valid and reliable selection information available.
Remember, consensus decision making is not averaging but is a process whereby the reason
for a score may be proposed and assessed until such time as the panel, in general, feels the
final score and relative judgements are representative of the panel's view.
3.3 COMMON INTERVIEWING MISTAKES
Incorrect attire:
Dress appropriately for the type of job interview. Always dress in more conservatively than
you would normally. Make sure that you are not wearing outlandish colours, showing too
much skin, or wearing too much jewellery (man or woman).
Unprepared answers:
You know the typical job questions, so have them prepared. Know ahead of time your
answers to questions such as, "What are you strengths and weaknesses? Where do you see
yourself in ten years? What can you bring to the company that nobody else can? What
brought you to this part of your career?" These generalized questions will more than likely
be asked of you on the big day.
Unprepared questions:
Just as much as must prepare the answers to give to your interviewer, you must also come
prepared with questions to ask of the interviewer about the position and the company.
Employers want to see people who think on their toes and are interested in the position as
52 DKR21
much as possible. Scribble down a few quick questions that you can ask at the appropriate
time of the interview so that you are not trying to think on the spot of what to ask.
Forgetting to do your research:
If you are going on a job interview and know nothing about the company, than you are
mistaken. You must learn as much as possible about the position and company prior to your
interview. Therefore, you will be able to hold an intelligent and well-informed discussion
about the company. You will also be able to ask questions more comprehensively.
Slips of the tongue:
Although this mistake is difficult to control, people often make them. People accidentally
say the wrong thing, infer the wrong idea, or blurt out an insult or profanity. Any of these
slips of the tongue can throw you out of the interview race. Concentrate on what you say, so
that it comes out intelligibly and not incoherently.
Ringing of cell phones:
Make sure your phone is off prior to the interview. Nothing is ruder or more disrespectful to
an interviewer than listening to another ring.
Checking the time:
Be careful not to glance at your watch or the wall clock in the middle of your interview.
Perhaps you should take off your watch prior to the interview so that you have no chance of
accidentally looking at your wrist.
Asking about salary too early:
While it probably one of the determining factors in your decision to work at a company, do
not jump the gun in the interview to ask about salary. The interviewer will inevitably tell
you what salary and benefits come with the job. There are so many people looking for jobs,
so if the company sees you as someone who just wants the money and does not necessarily
care about the job, it will work against you in the long run.
Tardiness:
Do not be late to your job interview. Rather, arrive around 10-15 minutes early so you can
settle in, fill out paperwork, and allow your interviewer to get ready.
53 DKR21
Fidgeting:
While you will probably be nervous prior to and during your job interview, try not to fidget.
It is distracting and reads nervousness and anxiety. No employer wants a fidgety co-worker
in the building.
Lying:
While it is common to exaggerate on resumes, it is downright wrong to lie on them and in

your job interview. Honesty is the most venerable quality in a worker and an employer and
interviewer will respect your truth and honesty. Do not claim to have worked somewhere if
you have not, and so on and so forth.
3.4 DESIGNING CONDUCTING AN EFFECTIVE INTERVIEW
There are two basic ways to avoid these interview problems. One is obvious: keep them in
mind and avoid them (don't make snap judgments, for instance). The second is not quite so
obvious: Be careful how you design and structure the interview. Structured interviews can
minimize many of the problems.
Structured interviews are effective interviews.
In a structured interview, you approach the interview using a ―structured‖ process, pre-
planned questions and a written rating process. Structured interviews:
• provide the ability to compare and rank all applicants who have answered the same pre-
planned questions.
• increase the likelihood that all persons interviewing the applicant reach the same
conclusion.
• maximize the chance that information obtained from the interview is a reliable predictor
of job performance.
• Ensure all applicants are asked the same questions and pre-planned questions are more
likely to focus on job related factors
Prepare:
• Schedule sufficient time for the interview.
54 DKR21
• Reserve a private room that is free from interruptions.
• Review the applicant‘s resume and/or application.
• Review the job description and make sure it is current.
Develop Pre-Planned Questions:
• Develop behavior-based questions to gain the most reliable information on an applicant‘s

ability to perform the job. This type of question asks the applicant to describe past actions to
specific job-related situations. The manner in which an applicant has responded in the past is a
good indicator of how he or she will respond to similar circumstances in the future.
For example you might ask:
- Tell me about a situation where you were required to meet a tight deadline. What was the
situation and how did you handle it?
Try not to ask theoretical questions. Theoretical questions result in responses that the
applicant thinks are right or what you want to hear. They do not provide reliable
information for the hiring decision.
The following question is theoretical and encourages an applicant to tell what they would
do in a given situation:
- What would you do to meet a tight deadline?
• Be sure and base your questions on the most important job tasks and those that have the
greatest risk should an employee make an error.
• Create a written rating process that allows you to rate the applicant‘s past performance
using a scale from good to poor.
The following are examples of permissible inquiries during interviews:
• Any questions that relate directly to the performance of the job as advertised.
• Questions related to education, previous experience, and related professional activities.
• Questions regarding ability to perform specific essential job functions—[Do not mention
a person‘s disability when asking such a question.]
55 DKR21
• What is the candidate looking for in a position that he or she doesn‘t now have?
• Why does the candidate want to work at Organization?
• What does the candidate like best/least about his or her current or last position?
• When can the candidate start work?
• Can the candidate confirm dates of employment as stated on the resume?
• What is the salary required?
• What is the candidate‘s current salary?
• What does the candidate know about the organization?
• How did the candidate learn about this position?
• Has the candidate ever been convicted of a crime? If so, when, where, and
what was the disposition of the case?
• Names of persons who will be willing to provide professional and/or
character references for the applicant.
• What job-related organizations, clubs, professional societies, or other
associations do you belong to—you may omit those which indicate race,
religious creed, color, national origin, ancestry, sex, or age.
• What is your leadership style?
• what do you see as your biggest challenge? What would you propose to do about it?
• Describe a situation that frustrated you at work.
• Describe an on-going problem that you were able to resolve or overcome.
• Describe an environment that is ineffective for you.
• Describe a time when you found it necessary to make an unpopular decision.
• Describe a leader you admire.
56 DKR21
Build Rapport:
• Provide a friendly and enthusiastic greeting.
• Sit beside the applicant to create an open, relaxed atmosphere. Try not to sit behind a
desk. This creates a physical barrier and can make the applicant uneasy.
• Briefly make small talk to put the applicant at ease.
• Tell the applicant what your job position is and how it relates to the desired position.
Question Applicant:
• Use a consistent interviewing format with all applicants.
• Ask your pre-planned questions. Make sure that you use open-ended questions to
encourage the applicant to speak freely and supply needed information.
• If an applicant has difficulty answering a question, help the applicant relax by moving on
to the next question.
• Use follow-up probes to gain more detailed information on how the applicant handled
prior job-related situations. (Find out the details of the situation, what the applicant did in
the situation and how it turned out.)
• Use effective listening skills to obtain as much information as possible. (A general

guideline is to give the applicant 80 % of the air time and limit yourself to 20 %.)
• Observe the applicant‘s body language. It can provide additional insight into his or her
behavior.
• Take good notes. Use your notes to document the basis for your decision.
• Using the scale you developed, rate the applicant‘s responses.
Provide Information:
• Use the job description and other job-related documents to describe the job and career
potential. Make sure your representation is based on facts so that the applicant is not misled.
57 DKR21
NOTE: Always provide information regarding the job and institution after the applicant
has answered questions regarding their skills. This will prevent the applicant from
tailoring their responses to fit the job requirements.
Answer Questions:
• Allow the applicant the chance to ask you additional questions about the job or institutions.
Conclude Interview:
• Ask the applicant if there is anything else that would be important for you to know.
• Determine the applicant‘s interest in the job.
• Inform the applicant of the next steps and when he or she can expect them to occur.
• End on a positive note and thank the applicant.
3.5 KEYWORDS
Application Blank Test
Selection Interview
1. Explain the selection process.

2. What is selection test?
3. Bring out the types and purposes of tests?
4. Describe the Selection techniques interview.
5. What are the Common interviewing mistakes?
6. If you were the interviewer of your company, How to Designing and
conducting an effective interview?
58 DKR21
LESSON
TRAINING AND DEVELOPMENT
CONTENTS
4.0 Introduction
4.1 Distinction between Training and Development
4.2 Induction Training
4.2.1 Need for Induction of New Employees
4.3 Training requirement for different Types of Employees
4.4 Orientation is generally provided on the following
4.5 Management Development
4.5.1 Management Development Program (MDP)
4.5.2 Consideration on administering a Management Development
Programme
4.5.3 Essentials of success of Management Development Programme
4.6 Process of designing a Training Programme
4.7 Methods of Training
4.8 Techniques of Evaluation of Training
4.9 Keywords
4.10 Questions for Discussions
59 DKR21
4.0 Introduction
Though training and education differ in nature and orientation, they are complementary. An
employee, for example, who undergoes training, is presumed to have had some formal
education. Furthermore, no training programme is complete without an element of
education. In fact, the distinction between training and education is getting increasingly
blurred now-a-days. As more and more employees are called upon to exercise judgment
and to choose alternative solutions to the job problem training programmes seek to broaden
and develop the individual through education. For instance, employees in well-paid jobs
and or employees in the service industry may be required to make independent decisions
regarding their work and their relationships with clients. Hence, organisations must
consider elements of both education and training while planning their training programmes.
Training is the systematic modification of behaviour through learning which occurs as a

result of education, instruction development and planned experience. Training is the
increasing knowledge and skill of an employee for doing a particular job; Training is a
short term process utilizing a systematic and organised procedure by which trainees learn
technical knowledge and skill for a definite purpose. Training is a process of learning a
sequence of programmed behaviour. It implies application is a process of learning a
sequence of programmed behaviour. It implies application of rules and procedures to guide
their behaviour thereby improve their performance.
Training is a systematic programme to increase the knowledge, skills, abilities and aptitudes of
employees to perform specific jobs. Training is concerned with increasing the knowledge and
understanding of the total environment. Development is concerned with the growth of an
employee in all respects. Development programmes seek to develop skills and competence for
future jobs while training programmes are directed toward maintaining and improving job
performance. Thus training is a process by which the aptitudes, on the one hand skills, abilities
of employees to perform specific jobs are increased. On the other hand, education is the process
of increasing the general knowledge and understanding of employees.
60 DKR21
4.1 Distinction between Training and Development
Training Development
Training means learning skills and Development means the growth of an
knowledge for doing a particular job. It employee in all respects. It shapes attitudes.
increases job skills.
The term ‗training‘ is generally used to The term ‗development‘ is associated with the
denote imparting specific skills among overall growth of the executives.
operative workers and employees.
Training is concerned with maintaining and Executive development seeks to develop
improving current job performance. Thus, it competence and skills for future performance.
has a short-term perspective. Thus, it has a long-term perspective.
Training is job-centred in nature. Development is career-centred in nature.
The role of trainer or supervisor is very All development is ‗self development‘. The
important in training. executive has to be internally motivated for
self-development
Development refers to those learning opportunities designed to help employee grow.

Development is not primarily skills-oriented. Instead, it provides general knowledge and
attitudes which will be helpful to employees in higher positions. Efforts towards
development often depend on personal drive and ambition. Development activities, such as
those supplied by management development programmes are generally voluntary.
4.2 Induction Training:
The introduction of the new employee to the job is known as induction. It is the process by
which new employees are introduced to the practices, policies and purposes of the organisation.
Induction follows placement and consists of the task of orienting or introducing the new
employee to the company, its policy and its position in the economy. Induction literally means
helping the worker to get or with his own environment. After an employee is assigned his job, it
is necessary to introduce him to his job situation, his associates in the job and the overall
policies of the company. The induction stage demands great care because the first impression
made on the mind of the employee is very critical in the employment life and
61 DKR21
the treatment he receives during the early days on the new job helps him to form an opinion
about his employer and the company.
An induction process properly designed should serve the following purposes:
(a) to help the newcomer to overcome his natural shyness, any nervousness he may
experience in meeting new people in the new environment;
(b) to integrate the new employee into the organisation and develop a sense of belonging
which is a strong motivational force;
(c) to supply information about the nature for workforce, conditions of service and welfare
facilities.
4.2.1 Need for Induction of New Employees
The new employee may have some difficulty in settling down to his new job and in
developing a sense of belonging. He can easily adjust himself to his new job if he is given a
clear explanation of the work of the department to which he is attached. This introduction
of the employee to the job is known as induction.
Purpose and Need for Induction
The purpose of induction and orientation is to help the new employee and the organization
to accommodate each other. Included in this process may be financial assistances for
expenses of travel filling out of pay roll and other forms, introduction to colleagues and
explanation of the policies and practices of the organization, many other factors which
serve to integrate the new employee into the enterprise.
The need for security, belonging, esteem and knowledge is met through proper induction
and orientation. Haphazard procedures, casual greetings, and lack of information can
precipitate anxiety, discouragement, disillusionment or defensive behaviour, including
quitting. A successful induction is that which reduces the anxiety of the new employee.
Therefore, such methods which bring this about are explained to company workers.
Any neglect in the area of induction and orientation may lead to labour turnover, confusion
and wasted time and expenditure.
62 DKR21
4.3 Training requirement for different types of employees
Employees at different levels require training. Unskilled workers squire training in

improved methods of handling machines and materials to reduce the cost of production and
waste and to do the job in the most economical way. Such employees are given training on
the job itself and the training is imparted by their immediate superior officers, sardars or
foremen. The training period ranges from 3 weeks to 6 weeks. Semi-skilled workers require
to cope with the requirements of an industry arising out of the adoption of mechanization,
rationalization and technical processes. These employees are given training either in their
own sections or departments, or in segregated training shops where machines and other
facilities are easily available. The trainings is usually imparted by the more proficient,
workers, bosses or inspectors, and lasts for few hours or a week, depending upon the
number of operations, and the speed and accuracy required on a job. Training methods
include instruction in several semi-skilled operations because training in one operation only
creates difficulties in adjustments to new conditions, lends the colour of specialisation to a
job and makes work somewhat monotonous for an individual.
Skilled workers are given training through the system of, apprenticeship, which varies in
duration from a year to three or five years. Craft training is imparted in training centres and
the industry itself.
Other employees: Besides the above types of employees, others - typists, stenographers,
accounts clerks and those who handle computers - need training in their particular fields;
but such training is usually provided outside an industry.
Salesmen are given training so that they may know the nature and quality of the products
and the routine involved in putting through deal; they are trained in the-art of salesmanship,
audio handling customers and meeting their challenges.
The supervisory staff needs training most for they form a very important link in the Chain
of administration. The training programmes, for supervisors must be tailor-made to fit the
needs of an undertaking. Their training enables supervisor to cope with the increasing
demands, of the enterprise in which they are employed and to develop team spirit.
Supervisory training aims at:
(i) Helping the present supervisors to improve their performance.
63 DKR21
(ii) Helping them to prepare for greater responsibilities of the higher levels of management.
(iii) Building, up the security and status of supervisors; and
(iv) Ensuring their technical competence with a view to enabling them to know and
understand all about the processes and operations in which their workers participate.
4.4 Orientation is generally provided on the following:
(i) The significance of the job with all necessary information about it including job training
and job hazards.
(ii) The company, its history and products, process of production and major operations
involves in his job.
(iii) Structure of the organization - the geography of the plant and functions of the various
departments.
(iv) Employees‗ own department and job and how they fit into the organization.
(v) Many programmes include follow-up interviews at the end of 3 or 6 months with a view
to finding out how the new employee is getting along.
(vi) Relations between foremen and personnel department.
(vii) Company policies, practices, objectives and regulations.
(viii) Personnel policy and sources of information.
(ix) Terms and conditions of service, amenities and welfare facilities.
(x) Rules and regulations governing hours of work and overtime, safety and accidents
prevention, holidays and vacations, method of reporting, tardiness and absenteeism.
(xi) Grievance procedure and discipline handling.
(xii) Social benefits (insurance, incentive plans, pensions, gratuities, etc.) and recreation
services, athletic, social and culture activities) and
(xiii) Opportunities, promotions, transfers, suggestion schemes and job stabilisation.
64 DKR21
Verbal explanations at interview are supplemented by a wide variety of printed material,

employee handbooks, house journal, picture stories, comics and cartoons, pamphlets, etc.,
along with short study tours around the plant on the above matters. Techniques of Induction
Programme
An Induction programme consists primarily of three steps:
(a) General orientation by the staff – the personnel department.
(b) Specific orientation by the job supervisor, or his representative.
(c) Follow-up orientation by either the personnel department or supervisor.
The first phase of the programme is ordinarily conducted by the personnel department. This
type of induction is general for it gives the necessary information about the history and
operations of the firm, the purpose which is to help an employee to build up some pride and
interest in the organization. Information is also given on specific employee services, such as
pension, health and welfare plans, safety programmes, etc.
At the second stage, induction is conducted by the job supervisor. Induction is specific and
requires skill on the part of the men. The employee is shown the department and his place of
work, introduced to other employee, informed of the location of the bathrooms, lavatories,
canteens, and time clock; and told about the organization‗s specific practices and customs (such
as whether the personnel bring their lunch or whether lunch is supplied to them at concessional
rates, the timings and length of rest periods, the work dress etc.). The purpose of specific
induction is to enable an employee to adjust himself with his work and environment.
Follow-up induction takes place sometime within one week to six months from the time of the
initial hiring and orientation. It conducted either by a foreman or a specialist. The employee
may be asked whether his hours of work and pay are as represented to him before employment;
how he feels about his fellow-workers; how he feels about his boss; and whether he has any
suggestion to make for changes in the induction procedure or in other company practices. The
interviewer records the answers as well as his own comments on the employee‘s progress. At
the same time, the line supervisor completes an evaluation of the employee, indicating his
strong and weak points, indicating also whether he is doing well.
65 DKR21
4.5 Management Development
The stages involved in a management development programme are:
(i) Organizational Planning, to determine, the company‗s present and future needs.
(ii) Managerial appraisal, to evaluate periodically the abilities and performance of

individuals with a view to identifying managers showing a promise of further development
and meeting their training needs.
(iii) Programme targeting, to focus the company‗s effects on the most pertinent areas.
(iv) Ascertaining key positions requirements to stress the basic requirements of particular
managerial positions.
(v) Replacement of skills inventories, to indicate persons qualified for managerial

replacements.
(vi) Planning individual development programmes, to provide specified development

programmes for promising managers, and
(vii) Appraising existing programmes, to‗ascertain areas of improvement to be incorporated

in future programmes.
Since the object of management development is to influence and modify the behaviour of
the managers in operation, it is necessary that in framing a management development
programme for specified managerial group, the following points should be involved.
(1) The programme must take care to throw impulses into-the system in a manner that
generates the urge to behaviour changes from within the trainee manager by the process of
evolving rather than an imposition from outside.
(2) Identify the pattern of behaviour of which the programme is aimed at which it seeks to
influence and modify.
(3) Identify the nature of the exposure the impulses that must be introduced into the system
through the development programme, which will touch the springs of motives and
responses modifying the behaviour in the desired direction.
66 DKR21
4.5.1 Management Development Program (MDP)
Management development programmes, aim systematically to identify talent, improve skills,

widen experience and help people to grow in their ability to accept greater responsibility. The
subject matter of a course for Management Development Programme (MDP) may comprise:
1. Company or Organisation : The Management Development Programme (MDP)

relating company or organisation may contain the following sub-areas :
(i) Objective and philosophy of company.
(ii) Policies, procedures and practices of an organisation.
(iii) Products and services.
(iv) Organisational structure and organisation dynamics.
(v) Plant facilities.
(vi) Financial aspects such as investment planning, financial planning and control capital
budgeting.
(vii) Labour management relations etc.
2. Management Techniques and Principles : Under this main area the following sub-
areas may be included:
(i) Organisation principles.
(ii) Financing, planning and management.
(iii) Cost analysis and control.
(iv) Operations research and data processing.
(v) Marketing management, Marketing research.
(vi) Production planning and control.
(vii) management and administration.
(viii) Decision-making.
67 DKR21
3. Human Relations : In this constituent the below mentioned sub-areas may be included :
(i) Motivation.
(ii) Understanding human behaviour.
(iii) Group dynamics; (iv) Discipline.
(v) Complaints and grievances.
(vi) Collective bargaining.
(vii) Counselling and suggestion scheme.
(viii) Selection methods and procedures.
(ix) Attitudes, training and development.
(x) Job evaluation and performance appraisal.
(xi) Labour economics.
(xii) Supervisory responsibilities.
4. Technical Knowledge and Skills : Under this main area the following sub-areas may be
included:
(i) Computer technology.
(ii) PERT/CPM.
(iii) Linear programming.
(iv) Materials handling.
(v) Inventory control.
(vi) Adequate understanding of technology, products, processes.
5. Personnel Skills : It contains the following sub-areas :
(i) Speaking.
(ii) Report writing.
68 DKR21
(iii) Conference leadership
(iv) Learning through listening.
(v) Reading improvement.
6. Economic, Social, and Political Environment : It contains the following sub-areas :
(i) Business.
(ii) Economic system.
(iii) Relations with the state.
(iv) Community relations.
(v) Political systems.
(vi) Legal framework of business.
(vii) Social responsibilities of the corporation and business.
4.5.2 Consideration on Administering a Management Development Programme:

While administering the programme, we should have to give the following considerations:
1. Systematic Career Planning: A Management Development Programme should support

a systematic career planning for managerial personnel otherwise the frustrated trainees
might seek opportunities elsewhere and the whole investment made in training programmes
would go waste.
2. Structured Course: Management Development must follow a series of structured

courses. There should also be an active interaction between the trainees and management.
3. Indiscriminate Approach: The training programme should cover as far as possible,

every manager, capable of showing potential for growth. It should be free from
discrimination. Peter Drucker pointed out that - the right men out of every ten who were not
included in the programme will understandably feel slighted. They may end of by
welcoming less effective, less productive, less willing to do new thing.
4. Properly Planned: The entire programme should be properly planned. The trainee should
take part in it. An individual may stay out, but it should be made clear that he does so at some
69 DKR21
risk to his future promotion. The company should not normally allow any manager to opt
out of a training programme.
4.5.3 Essentials of Success of Management Development Programme (MDP): The

following are the essentials for the success of Management Development Programme (MDP)
:
1. Circulate the Materials to Participants : The following materials should be distributed

among the participants to make the programme more successful :
(a) Newsletter conveying information about corporate affairs.
(b) Copies of talks given by management personnel.
(c) Excerpts from well-written and informative articles.
(d) Copies of minutes of meeting distributed among those who were not present.
When these materials are discussed by a group, new plans and improved procedures will be
formulated.
2. Programme should be prepared well in advance: The programme should be prepared

well in advance and should contain decisions about instructional methods and development
approaches to be used and have a provision of expertise and the necessary support system.
It should be based on the policy of promoting a proper utilisation of trained executives,
their knowledge and techniques in the improvement of the operations of an organisation.
3. Training division should have smart and successful executives : The training division
should not be a dumping ground for people found to be unsuitable for other jobs; it should be
mannered by a group of smart and successful executives drawn from various functional areas
and disciplines. A multi-disciplinary approach should be emphasised in training programmes
rather than the purely personal flavour that is often found in them.
4. Programme should be for all not the weak ones: A management programme should
not only be looked upon as something meant for the "limping horses" in the organisation; it
should be for the "high fliers" as well. In view of knowledge explosion and the consequent
threat of management obsolescence, such programmes should be meant for everyone in an
organisation and not just for the weak ones.
70 DKR21
5. Management Development Programme (MDP) should be based on a definite strategy

: The MDP should be based on a definite strategy, which should spell out the type,
coverage and objectives of the programme. The multitier supervisory and management
development programme should start from the first line supervisor and go all the way up to
the top management.
6. Top Management should Accept Responsibility: The top management should accept
responsibility for getting the policy of development executed. To do so, a senior officer
may be placed in-charge to initiate and implement the MDP.
7. Management Development is a “Line Job”: It is essentially a "line job". It takes place

on the job and involves both the man and his boss.
8. Selection of the Right Materials: Management development starts with the selection of
the right materials for managerial ranks. It is essential to ensure that really good material is
led into the programme at the entry level.
9. Realistic Time Table is Required: There should be realistic time table in accordance
with the needs of a company. This time table should take into account the needs for
managerial personnel over a sufficiently long period and the resources which are available
and which will be required.
10. It should Fulfill the needs of the Company: Management development must be
geared to the needs of the company and the individual.
11. Developing Managers is the Responsibility of All Managers: Every manager must
accept direct responsibility for developing managers under his control on the job, and a
high priority should be given to his task. Thus, for the development of management, it is
essential for the top management to promote a culture for:
(i) learning and gaining knowledge.
(ii) the quest of excellence.
(iii) tolerance of mistakes.
(iv) striving to maintain a balance and an equity.
(v) the discovery of self and others. and
71 DKR21
(vi) enabling a subordinate to become aware of his superiors‗ interest in his development
and mental growth.
4.6 PROCESS OF DESIGNING A TRAINING PROGRAMME:
Training programmes are costly propositions. They are time and energy consuming too. Hence, the
training programmes should be framed with great care and caution. The following steps should be
taken while developing a training programme. These steps usually involve a considerable amount of
dialogue between personnel department professionals and other supervisors and managers.
Ordinarily, the flows or sequences of these steps are approximately as follows but the various steps
are independent and in some cases may be done simultaneously.
1. Determining the need and Priorities for Training: The very first step in designing a
training programme is to determine the organisation‗s need for such programme. It is from
need assessment that the entire training process will flow. If the organisation does not
accurately determine its need, the training process will be in appropriately undertaken. Mc-
Guhee and Thayer have recommended the following three-steps approach in order to
determine training need :
(a) Organisational Analysis: This analysis basically determines where training emphasis
should be placed in the organisation.
(b) Man Analysis: It is used to determine who needs to be training and what skills and
knowledge or attitudes should be augmented or improved.
(c) Operational Analysis: It assists to decide what the training should consist of; requiring a
study of what a person should be taught if he is to perform his task with maximum
effectiveness. Some of the popular methods to assess the training needs of employees in a
company include observation and analysis of job performance. In each company, the
management should analyse organisation needs, job specifications and the present skill levels of
the employees. The analysis of organisational needs should focus on the number of employees
with various combinations of skills needed at each level and in every part of the firm for
specific periods. Regarding job specifications, many organisations have written job
specifications that define the skills needed for each job in the firm. By carefully examining
these specifications, the human resources staff can obtain a clear idea of the nature of skills
needed for each job. Then, an analysis of worker skills and qualifications from his personal
72 DKR21
file can assist in determining training needs. Similarly training needs can be assessed for a
group of employees.
2. Translating needs into Objectives and Establishing Training Goals: Once the training
needs have determined the next important step is to translate the skills needed into specific
training objectives or desired outcomes of training objectives. These training objectives or goals
are then used to determine the specific courses that will be offered. Training objectives should
include such matters as specific skills to be taught, the number of people to be trained and from
which units and the period within which such training should take place. Objectives for training
programme that do not relate directly to specific job skills should also be considered for
example, employee health and safety guidelines, promotion opportunities and self-study
opportunities. Training objectives include the general content of the training to be given. The
most frequently adopted objectives or training subjects by the companies are: new employee
orientation, performance appraisal, leadership, selection process, interpersonal skills, word
processing, new equipment operation, team building, delegation skills, and listening skills.
Sometimes, orientation regarding company policy and practices can be particularly important,
especially for new employers.
3. Selecting Trainees: Selecting individuals or groups for training is a very complex decision
for the firm and the individuals chosen. From the firm‗s perspective, providing the right training
to the right people can help to create and maintain a well-trained and stable work force. To
impart training for individuals with limited performance partial or lack of interest is simply a
waste of time, effort, and money. Overlooking individuals with ambition and potential
represents a lost opportunity and can contribute to higher employee turnover. It should be
assumed that ambition and potential are widespread in the firm and exist at all age levels. There
are at least four important considerations important in selecting trainee: (i) legal requirements
and formalities (ii) employee needs and motivation (iii) skills obsolescence and retraining, and
(iv) multi-skilling. Employee needs and motivation can be determined with the help of previous
performance evaluations as well as interviews performance evaluations as well as interviews
with individual employees and owner supervisors. The rapidly change in technology is
requiring that all segments of the society give higher priority to worker retraining. This also
means that individual workers themselves must seek out training opportunities to avoid having
their skills become obsolete. Similarly, numerous companies have moved in the direction of
training their employees to have
73 DKR21
multiple skills, called multi-skilling. In particular, multi-skilling is relevant where self-

managed teams are utilised. Everyone is encouraged to learn all of the jobs of the team and
employees are usually paid according to the number of skills that they have developed.
4. Making the Curriculum and Choosing Training Methods After -deeming training
objectives and translating into specific course areas, the trainees are identified and evaluated,
management will be in a position to decide the overall curriculum, i.e., the arrangement of
courses to be offered. The curriculum is a sort of grand plan of what training is to be presented
and with what frequency. However, a part which must be added to this grand plan is the matter
of training methods. Will the training be on the job, off the job, prior to employment, or prior to
a formal assignment? Will it be done by lecture computer assisted, or carried out by some other
method? Will it be long-term or short-term?
5. Preparation of training budget Preparing a training budget will be an interactive

process with the other steps in formulating a training program. Budget constraints may limit
the human resource manager's alternatives and must, therefore, considered during all phases
of the development process. Costs that must be included in the training budget are: staff
planning time, trainees' wages, trainers' salary, and expenses such as cost of training
materials, travels, accommodations, and meals. If the desired training programme does not
fit within budget constraints, the human resource manager must consider modification such
as fewer trainees, different trainees, different training techniques, and a different training
location.
6. Selecting trainers and providing training to trainers. An effective training

programme can be developed only when effective trainers are available. Firms have the
option of using staff trainers or of seeking contract trainers outside, or of having both, types
of trainers. Staff trainers' may be full-time specialists on the organisation or may be part-
time trainers. After their selection, they must be provided with the information regarding
the persons who are to be strained. The trainers should be engaged after careful evaluation
of their suitability and effectiveness so as to ensure quality training.
7. Using selected training technique. To conduct the training is a significant aspect of

training process. Under this step, the trainers speak, demonstrate, and illustrate in order to
put over the new knowledge, skills, and operations. Besides, he suggests the trainee to be at
ease, without any stress and strain, and explains to him the necessity of the training
74 DKR21
programme and creation of trainee's personal interest in training. The trainer tells the sequence
of the entire job, the need for each step in the job, the relationship of the job to the total work-
flow, the nature of interpersonal behaviour required at the job, and so on. All key points should
be covered and emphasised. Audio-visual aids should be used to demonstrate and illustrate. To
ensure follow-up by the trainee, he should be asked to repeat the operations, and encouraged to
ask questions for further classifications and understanding.
8. Performance or learning tryout. As the training continues, it is important that the

progress of trainees should be monitored. This may be accomplished by periodic skill or
knowledge tests or periodic assessments by the personnel department. The trainee may be
asked to do the job several times. His mistakes, if any, are corrected and complicated steps
should be explained again. As soon as the trainee demonstrates that he can do the job
rightly, he is put at his own job and the training is said to be over.
9. Evaluation system of training programme. In order to generate adequate feedback,

some key purposes of conducting this evaluation are :
(i) Determining whether a programme meets its objectives or goals.
(ii) Identify strengths and weaknesses in the training process.
(iii) Calculate the cost-benefit ratio of a programme.
(iv) Determine who benefited the most from a programme and why
(v) Establish a data base for further decision about the programme.
Training programmes can be evaluated with a variety of methods. The most popular
method involves analysis questionnaires filled out by the trainees either at the end of the
training session or within a few weeks. Although in some situations employees can
accurately evaluate the quality of the training programme, in other situations their
subsequent performance or degree of improvement is a more valid measure. After specific
performance measurement, the results are compared with the objectives for the training
programme. If the training objectives have been met, the training is said to be successful.
75 DKR21
4.7 METHODS OF TRAINING
The following methods are generally used to provide training:
On-the-Job Training Methods: This type of training is imparted on the job and at the
work place where the employee is expected to perform his duties. It enables the worker to
get training under the same working conditions and environment and with the same
materials, machines and equipment‘s that he will be using ultimately after completing the
training. This follows the most effective methods of training the operative personnel and
generally used in most of the individual undertaking.
1. On Specific Job: On the job training methods is used to provide training for a specific
job such an electrician, motor mechanic, and pluming etc.
(a) Experience: This is the oldest method of on-the-job training. Learning by experience
cannot and should not be eliminated as a method of development, though as a sole
approach; it is a wasteful, time consuming and inefficient. In some cases, this method bas
proved to be very efficient though it should be followed by other training methods to make
it more meaningful.
(b) Coaching: On-the-Job coaching by the superior is an important and potentially

effective approach is superior. The technique involves direct personnel instruction and
guidance, usually with extensive demonstration.
2. Job Rotation: The major objective of job rotation training is the broadening of the
background of trainee in the organisation. If trainee is rotated periodically from one job to
another job, he acquires a general background. The main advantages are: it provides a
general background to the trainee, training takes place in actual situation, competition can
be stimulated among the rotating trainees, and it stimulates a more co-operative attitude by
exposing a man to other fellow problem and view-points.
3. Special Projects: This is a very flexible training device. The trainee may be asked to
perform special assignment; thereby he learns the work procedure. Sometime a task-force is
created consisting of a number of trainees representing different functions in the organisation.
4. Apprenticeship: Under this method, the trainee is placed under a qualified supervisor or
instructor for a long period of time depending upon the job and skill required. Wages paid to
76 DKR21
the trainee are much less than those paid to qualified workers. This type of training is
suitable in profession, trades, crafts and technical areas like fitter, turner, electrician,
welders, carpenters etc.
5. Vestibule Training: Under this method, actual work conditions are created in a class
room or a workshop. The machines, materials and tools under this method are same as
those used in actual performance in the factory. This method gives more importance to
learning process rather than production.
6. Multiple Management: Multiple management emphasizes the use of committees to

increase the flow of ideas from less experience managers and to train them for positions of
greater responsibility. The McCormick & Company of Baltimore, U.S.A. developed the
programme. The company claims that the plan has increased employee efficiency, reduced
labour turnover and absenteeism, and enabled the company to pay higher wages than those
prevailing in the area and industry. In this method; a junior board authorized to discuss any
problem that the senior board may discuss, and its members are encouraged to put their
mind to work on the business a whole, rather than too concentrate to their specialized areas.
Off-the-job Training Methods

Following are the off the job training techniques:
1. Special Courses and Lectures: Lecturing is the most traditional form of formal training
method Special courses and lectures can be established by business organizations in numerous
ways as a part of their development programmes. First, there are courses, which the
organizations themselves establish to be taught by members of the organizations. Some
organizations have regular instructors assigned to their training and development such as Tata
and Hindustan Lever in private sector; Life Insurance Corporation. State Bank of India and
other nationalized commercial banks, Reserve Bank, Hindustan Steel, Fertilizer Corporation
and many others in public sector. A second approach to special courses and lectures is for
organizations to work with universities or institutes in establishing a course or series of course
to be taught by instructors by these institutes. A third approach is for the organizations to send
personnel to programmes established by the universities, institutes and other bodies. Such
courses are organized for a short period ranging from 2-3 days to a few weeks.
2. Conferences: This is also an old method, but still a favourite training method. In order to
escape the limitations of straight lecturing many organizations have adopted guided,
77 DKR21
discussion type of conferences in their training programmes. In this method, the participants
pools, their ideas and experience in attempting to arrive at improved methods of dealing with
the problems, which are common subject of discussion; Conferences may include buzz sessions
that divide conferences into small groups of four or five intensive discussion. These small
groups then report back to the whole conference with their conclusions or questions.
Conference method allows the trainees to look at the problem from a prouder angle.
3. Case Studies: This technique, which has been developed, popularized by the Harvard
Business School, U.S.A is one of the most common forms of training. A case is a written
account of a trained reporter of analyst seeking to describe an actual situation. Some causes
are merely illustrative; others are detailed and comprehensive demanding extensive and
intensive analytical ability. Cases are widely used in variety of programmes. This method
increases the trainee‗s power of observation, helping him to ask better questions and to look
for broader range of problems.
4. Brainstorming : This is the method of stimulating trainees to creative thinking This approach
developed by Alex Osborn seeks to reduce inhibiting forces by providing for a maximum of group
participation and a minimum of criticism. A problem is posed and ideas are invited. Quantity rather
quality is the primary objective. Ideas are encouraged and criticism of any idea is discouraged.
Chain reactions from idea to idea often develop. Later these ideas are critically examined. There is
no trainer in brainstorming and it has been found that the introduction of known efforts into it will
reduce the originality and practicability of the group contribution, Brainstorming frankly favours
divergence, and his fact may be explain why brainstorming is so little used as yet in developing
countries where no solutions ought to carry the highest premium.
5. Laboratory Training: Laboratory training adds to conventional training by providing

situations in which the trains themselves experience through their own interaction some of the
conditions they are talking about. In this way, they more or less experiment on themselves.
Laboratory training is more concerned about changing individual behaviour and attitude. There
are two methods of laboratory training: simulation and sensitivity training.
(a) Simulation: An increasing popular technique of management development is simulation of

performance. In this method, instead of taking participants into the field, the field can be
simulated in the training session itself Simulation is the presentation of real situation of
organisation in the training session. It covers situations of varying complexities and roles for the
participants. It creates a whole field organisation, relates participants, through key roles in
78 DKR21
it, and has them deal with specific situations of a kind they encounter in real life. There are
two common simulation methods of training: role-playing is one and business game is the
other.
(i) Role-playing: Role-playing is a laboratory method, which can be used rather easily as a
supplement of conventional training methods. Its purpose is to increase the trainee‗s skill in
dealing with other people. One of its greatest use, in connection with human relations training,
but it is also used in sales training as well. It is spontaneous acting of a realistic situation
involving two or more persons, under classroom situations. Dialogue spontaneously grows out
of the situation, as the trainees assigned to it develop it. Other trainees in the group serve as
observers or critics. Since people take rules even day, they are somewhat experienced in the art,
and with, a certain amount of imagination they can protect themselves into roles other than their
own. Since a manager is regularly acting roles in his relationship with other it is essential for
him to have role awareness and to do role thinking so that they can size up each size up each
relationship and develop the most effective interaction position.
(ii) Gaming: Gaming has been devised to simulate the problems of running a company or
even a particular department. It has been used for a variety of training objectives from
investment strategy, collective bargaining techniques to the morale of clerical personnel. It
has been used at all the levels, from the executives for the production supervisors. Gaming
is a laboratory method in which role-playing exists but its difference is that it focuses
attention on administrative problems, while role-playing tend to emphasis mostly feeling
and tone between people in interaction. Gaming involves several terms, each of which
given a firm to operate for a number of periods. Usually the periods are short one year or
so. In each period, each-team makes decisions on various matters such as fixation of price,
level of production inventory level, and so forth.
Since each team is competing with others, each firm‗s decisions win affect the results of all
others. All the firm‗s decisions are fed into a computer, which is programmed to behave
somewhat like a real market.
(b) Sensitivity Training: Sensitivity training is the most controversial laboratory training
method. Many of its advocates have an almost religious zeal in their enhancement with the
training group experience. Some of its critics match this favour in their attacks on the
technique. As a result of criticism and experience, a somewhat revised approach, often
79 DKR21
described as 'team development‗ training. has appeared. National Training Laboratories at

Bethel U.S.A. The training groups themselves called ‗T GROUP‘ first used it. Since then
its use has been extended to other organizations, universities and institutes. Training is
essential for the smooth, economic, timely and efficient production, work or service in any
organisation. To get work accomplished well from a worker or employee, it is a must that
he is given proper training in methods of work. Training is the organized producer by
which people learn knowledge and skill for a definite purpose management can‗t make a
choice as between 'training‗ or 'no training‗. On the other hand, it is a must. The only choice
lies in the method of training.
4.8 TECHNIQUES OF EVALUATION OF TRAINING
Several techniques of evaluation are being used in organisations. One approach towards
evaluation is to use experimental and control groups. Each group is randomly selected, one
to receive training (experimental) and the other not to receive training (control).
The random selection helps to assure the formation of groups quite similar to each other.
Measures are taken of the relevant indicators of success (e.g. words typed per minute,
quality pieces produced per hour, wires attached per minute) before and after training for
both groups. If the gains demonstrated by the experimental group are better than those by
the control group, the training programme is labelled as successful.
Another method of training evaluation involves longitudinal or time-series analysis.

Measurements are taken before the programme begins and are continued during and after
the programme is completed. These results are plotted on a graph to determine whether
changes have occurred and remain as a result of the training effort. To further validate that
change has occurred as a result of training and not due to some other variable, a control
group may be included.
One simple method of evaluation is to send a questionnaire to the trainees after the
completion of the programme to obtain their opinions about the programme‗s worth. Their
opinions could also be obtained through interviews. A variation of this method is to
measure the knowledge and/or skills that employees possess at the commencement and
completion of training. If the measurement reveals that the results after training are
satisfactory, then the training may be taken as successful.
80 DKR21
In order to conduct a thorough evaluation of a training programme, it is important to assess

the costs and benefits associated with the programme. This is it difficult task, but· is useful
in convincing the management about the usefulness of training.
4.9 KEYWORDS
Training Development
Induction Case Study
Management Development Program Role play
Sensitivity training Brainstorming
1. What do you meant by training? Distinction between training and

development.
2. What is induction Training? Describe the need and purpose of induction
Training.
3. What can be the subject matter of Management Development Program
(MDP)?
4. What consideration should be given to administer a MDP?
5. What are the requisites for the success of MDP?
6. Elaborate on the different methods that are used for the training
of employees.
7. Explain the training requirement for different types of employees in
an organization.
8. Describe the Techniques of evaluation of training.
9. Explain the Process of designing a training program.
81 DKR21
LESSON
PERFORMANCE APPRAISAL
CONTENTS
5.0 Introduction
5.1 Definitions of performance appraisal
5.2 Characteristics of performance appraisal
5.3 Purpose of performance appraisal
5.4 Uses of performance appraisal
5.5 Essentials of an effective performance appraisal system
5.6 Steps in appraising performance
5.7 Methods or techniques of performance appraisal
5.7.1 Traditional methods of performance appraisal
5.7.2 Modern method of appraisal and career development
5.7.2.1 Management by Objective (MBO)
5.7.2.2 Essential Characteristics of MBO
5.7.2.3 Objectives of MBO
5.7.2.3 The Process of MBO
5.7.2.4 Benefits or Advantages of MBO
5.7.2.5 Disadvantages of MBO
5.8 Limitations of Performance Appraisal
5.9 Keywords
82 DKR21
5.0 Introduction
Performance appraisal or Performance evaluation is a method of evaluating the behaviour

of employees in a work place, normally including both the quantitative and qualitative
aspect of job performance. Performance here refers to the degree of accomplishment of the
tasks that makeup an individual‗ job. It indicates how well an individual fulfilling the job
demands. Performance is measured in terms of results. Thus, Performance appraisal is the
process of assessing the performance or progress of an employee, or a group of employees
on the given job, as well as his potential for future development. Thus, performance
appraisal comprises all formal procedures used in organisations to evaluate contributions,
personality, and potential of individual employees. In other words, performance appraisal
includes the comparison of performance scales of different individuals holding similar areas
of work responsibilities and relate to determination of worth of the scales for the
achievement of organisation objective.
5.1 Definitions of Performance Appraisal:
Performance Appraisal has been defined as follows:
(i) According to Edwin Flippo, "Performance appraisal is the systematic, periodic and an
impartial rating of an employee‗s excellence in matters pertaining to his present job and his
potential for a better job."
(ii) According to Wendell French, Performance appraisal and review in the formal,
systematic assessment of how well employees are performing their jobs in relations to
establish standards and the communication of that assessment to employees.
5.2 Characteristics of Performance Appraisal:
The following are the characteristics of Performance Appraisal
1. A Process: Performance appraisal is not a one-act play. It is rather a process that

involves several acts or steps.
2. Systematic Assessment: Performance appraisal is a systematic assessment of an

employee‗s strengths and weakness in the context of the given job.
3. Main Objective: The main objective of it is to know how well an employee is going for
the organisation and what needs to be improved in him.
83 DKR21
4. Scientific Evaluation: It is an objective, unbiased and scientific evaluation through

similar measure and procedures for all employees in a formal manner.
5. Periodic Evaluation: Although informal appraisals tend to take place in an unscheduled

manner (on continuous) basis with the enterprises a supervisors evaluate their subordinates
work and as subordinates appraise each other rand supervisors on a daily basis, yet the
systematic (i.e., formal) appraisal of an individual employee is likely to occur at certain
intervals throughout that person‗s history of employment (say quarterly, six monthly,
annually, etc.)
6. Continuous Process: In addition to being periodic performance usually is an ongoing

process. It means that appraisals are regularly scheduled and are not dumped on the
employee on whimsical dates without relevance. The process has not been broken in
person‗s history of employment however, the periodicity of appraisal may be changed as
per needs of the situation.
7. Employee Feedback: Performance appraisal system provides information to employees

on how well they are doing their jobs, and this feedback is provided to them when it is
relevant. Performance appraisal is also called Employee Rating and Service Rating.
Performance appraisal and merit rating are used synonymously. But strictly speaking
performance appraisal is a wider term than merit-rating. In merit rating the focus is on
judging the calibre and worth of an employee so as to place him on right job. On the other
hand, performance appraisal focuses on the performance and future potential of the
employee. Its aim is not simply to decide placement or promotion but to measures the value
of worker in different job situations.
5.3 PURPOSE OF PERFORMANCE APPRAISAL
The following are the main purposes of performance appraisal.
1. Appraisal Procedure: It provides a common and unified measure of performance

appraisal, so that all employees are evaluated in the same manner. It gives an in
discriminatory rating of all the employees.
2. Decision Making: Performance appraisal of the employees is extremely useful in the

decision making process of the organization. In selection, training, promotion, pay
increment and in transfer, performance appraisal is very useful tool.
84 DKR21
3. Work Performance Records: Performance appraisal gives us complete information in

the form of records regarding every employee. In the case of industrial disputes even
arbitrator accepts these records in the course of grievance handling procedure.
4. Employees Development: Performance appraisal guides the employees in removing

their defects and improving their working. The weaknesses of the employee recorded in the
performance appraisal provide the basis for an individual development programme. If
properly recorded and used, the performance appraisal gives the fair opportunities to
employees to correct and rectify their mistakes.
5. Enables Supervisors to be More Alert and Competent: Performance appraisal enables

supervisor to be more alert and competent and to improve the quality of supervision by
giving him a complete record of employee's performance. He can guide an employee,
where he is prone to commit mistakes.
6. Merit Rating: Merit rating is another name of performance appraisal; it gives

supervisors a more effective tool for rating their personnel. It enables them to make more
careful analysis of employee's performance and make them more productive and useful.
7. Improves Employer Employee Relations: Performance appraisal is not only a useful

guide for the supervisors and employees but it improves the employer-employee relations
by creating a more conductive and amicable atmosphere in the organization. It also
stimulates free exchange of thoughts and ideas between the supervisor and his men. In this
way performance appraisal bridges the emotional gap between the employer and employee
by bringing them more close and by reducing man-to-man differences in the organization.
5.4 USES OF PERFORMANCE APPRAISAL
Performance appraisal helps the employees in Self-improvement and Self-development. It

helps the management in taking decisions about Placement, Promotions, Transfer, Training
and Development, etc. It helps to achieve individual and organisational goals. It is useful to
the employees and the organisation. Therefore, Performance Appraisal should be conducted
objectively from time to time. The employees should not oppose it. However, they should
see that the performance appraisals are systematic, fair and impartial. It should not be for
punishing the employees. It should be for improving the employees and their performances.
85 DKR21
1. Help in Deciding Promotion: It is in the best interest of the management to promote the
employees to the positions where they can most effectively use their abilities. A well-
organised, development and administered performance appraisal programme may help the
management in determining whether an individual should be considered for promotion
because the system not only appraises the worth of the employee on the present job but also
evaluates his potentialities for higher job.
2. Help in Personnel Actions: Personnel actions such as lay-offs, demotions, transfers and
discharges etc. may be justified only if they are based on performance appraisal. While in
some cases, actions are taken because of unsatisfactory performance of the employee, in
some other cases it may be called for due to some economic conditions beyond control such
as changes in production process. In former case, the action can only be justified on the
basis of the result of performance appraisal.
3. Help in Wage and Salary Administration: The wage increase given to some
employees on the basis of their performance may be justified by the performance appraisal
results. In some cases appraisal, i.e., merit and seniority are combined for higher salaries on
better positions.
4. Help in Training and Development: An appropriate system of performance appraisal

helps the management in devising training and development programmes and in identifying
the areas of skill or knowledge in which several employees are not at par with the job
requirements. Thus the appraisal system points out the general training deficiencies which
may be corrected by additional training, interviews, discussions or counselling. It helps in
spotting the potential to train and develop them to create an inventory of executives.
5. Aid to Personnel Research: Performance appraisal helps in conducting research in the

field of personnel management. Theories in personnel field are the outcome of efforts to
find out the cause and effect relationship between personnel and their performance. By
studying the various problems which are faced by the performance appraiser, new areas of
research may be developed in personnel field.
6. Help in Self Evaluation: Performance appraisal helps the employee in another way also.
Every employee is anxious to know his performance on the job and his potentials for higher
jobs so as to bring himself to the level of that position.
86 DKR21
7. Help in Creating Healthy Competition: Performance appraisal brings out the

deficiencies and shortcomings of the employees. Discussions between ratter and rates may
be conducted in a spirit of co-operation and mutual understanding. This gives an
opportunity to the employer to have an insight on their performance and to take corrective
measures to improve upon their performance.
5.5 Essentials of an Effective Performance Appraisal System:
The following are the essentials of an effective Performance Appraisal System:
1. Mutual Trust: The existence of an atmosphere of confidence and trust so that both
supervisor and employee may discuss matters frankly and offer suggestions which may be
beneficial for the organisation and for an improvement of the employee. An atmosphere of
mutual trust and confidence should be created in the organisation before introducing the
appraisal system. Such an atmosphere is necessary for frank discussion of appraisal. It also
helps to obtain the faith of employees in the appraisal system.
2. Clear Objectives: The objectives and uses of performance appraisal should be made
clear and specific. The objectives should be relevant, timely and open. The supervisor must
very thoroughly evaluate the employee‗s performance so that he is capable of meeting
challenges about his ratings of his subordinate.
3. Standardisation: Well-defined performance factors and criteria should be developed.

These factors as well as appraisal form, procedures and techniques should be standardised.
It will help to ensure uniformity and comparison of ratings. The appraisal techniques should
measure what they are supposed to measure. These should also be easy to administer and
economical to use. The appraisal system should be performance based and uniform.
Employees should be made fully aware of performance standards and should be involved in
setting the standards.
4. Training: Evaluators should be given training in philosophy and techniques of appraisal.

They should be provided with knowledge and skills in documenting appraisals, conducting
post appraisal interviews, rating errors, etc.
5. Job Relatedness: The evaluators should focus attention on job-related behaviour and
performance of employees. The results of performance rather than personality traits should
be given due weight. Suggestions for improvement should be directed towards the objective
87 DKR21
facts of the job (such as work schedules, output, reports completed, sales made, losses incurred,
profits earned, accomplishments, etc.). Joint plans for the future must be developed after
consultation with subordinates. The individual as a person should never be criticised.
6. Strength and Weaknesses: The raters should be required to justify their ratings. The
supervisor should try to analyse the strength and weaknesses of an employee and advise
him on correcting die weakness.
7. Feedback and Participation: Arrangements should be made to communicate the ratings

to both the employees and the raters. The employees should actively participate in
managing performance and in the ongoing process of evaluation. The superior should play
the role of coach and counsellor. The overall purpose of appraisals should be
developmental rather than judgmental.
8. Individual Differences: While designing the appraisal system, individual differences in

organisations should be recognised. Organisations differ in terms of size, nature, needs and
environment. Therefore, the appraisal system should be tailor-made for the particular
organisation. The needs of rates in terms of feedback, mobility, confidence and openness
should also be considered.
9. Post Appraisal Interview: A post-appraisal interview should be arranged so that

employees may be supplied with feedback and the organisation may know the difficulties
under which employees work, so that their training needs may be discovered.
10. Review and Appeal: A mechanism for review of ratings should be provided. Which
particular technique is to be adopted for appraisal should be governed by such factors as the
size, financial resources, philosophy‗ and objectives of an organisation. The results of the
appraisal, particularly when they are negative, should be immediately communicated to the
employees, so that they may try to improve their performance.
5.6 Steps in Appraising Performance:
Various steps in appraising performance of employees are as follows:
1. Establishing Performance Standard: The process of evaluation begins with the

establishment of Performance Standards. While designing a job and formulating a job
description, performance standards are usually developed for the position. These standard
should be very clear and not vague, and objective enough to be understood and measured.
88 DKR21
These standard should be discussed with the supervisors to find out which different factors
are to be incorporated. Weights and points to be given to each factor and these then should
be indicated on the Appraisal Form, and later on used for appraising the performance of the
employees.
2. Communicating Performance Expectations to Employees: The next important step is

to communicate the aforesaid standards to the concerned employees. Their jobs and jobs
related behaviour should be clearly explained to them. It should be noted that job related
behaviours are those critical behaviour that constitute job success. The employee should not
be presumed to guess what is expected of him. It should be noted that here communication
means that the standards have been transmitted to the employee and he has received and
understood them a two-way communication, i.e., transference of information from the
manager to the subordinate regarding expectations, and feedback from the subordinate to
the manager that this information has been received and understood in same context and
contents.
3. Measuring Actual Performance: The third step is the measurement of actual

performance. To determine what actual performance is, it is necessary to acquire
information about it we should be concerned with how we measure and what we measure.
Four sources of information are frequently used to measure actual performance: personal
observation, statistical reports, oral reports and written reports.
4. Comparing Actual Performance with Standards: The next step is comparison of

actual performance with the standards. By doing so the potentiality for growth and
advancement of an employee can be appraised and judged. Efforts are made to find out
deviations between standard performance and actual performance.
5. Discussing the Appraisal with the Employee: After comparing actual performance
with standards, the next step is to discuss periodically the appraisal with the employee.
Under these discussion good points, weak points, and difficulties are indicated and
discussed so that performance is improved. The information that the subordinate receives
about his performance assessment has a great impact of his self-esteem and on his
subsequent performance. Conveying good news is considerably less difficult for both the
manager and the subordinate than when performance has been below expectations.
89 DKR21
6. Initiating Corrective Action: The final step is the initiation of corrective action whenever
necessary. Immediate corrective action can be of two types. One is immediate and deals
predominantly with symptoms. The other is basic and delves into causes. Immediate corrective
action is often described as putting out fires whereas basic corrective action gets to the source of
deviation and seeks to adjust the difference permanently. Coaching and counselling may be
done or special assignments and projects may be set. Persons may be deputed for formal
training courses, and decision making responsibilities and authority may be delegated to the
subordinates. Attempts may also be made to recommend for salary increases or promotions, if
these decisions become plausible in the light of appraisals. It should be noted that the above
details may vary from organisation to organisation, but these steps usually form the principal
steps/features of a sound evaluation programme.
5.7 METHODS OR TECHNIQUES OF PERFORMANCE APPRAISAL
Several methods and techniques are used for evaluating employee performance. They may be
classified into two broad categories, viz., traditional methods and modern methods while
traditional methods lay emphasis on the rating of the individual's personality traits, such as
initiative, dependability, drive creativity, integrity, intelligence, leadership potential, etc.; the
modern methods, on the other hand, place more emphasis on the evaluation of work results.
Performance Appraisal
Traditional Methods Modern Methods
1. Ranking Method 1. Management by Objective (MBO)
2. Grading Method 2. Assessment Centre Method
3. Man-to-Man Comparison Method 3. Human Asset Accounting Method
4. Graphic Rating Scale Method 4. Behaviourally Anchored Rating Scales

5. Essay Method 5. 360- degree appraisal
6. Forced Choice Method
7. Paired comparison
8. Checklist method
90 DKR21
5.7.1 Traditional Methods of Performance Appraisal:
There are different techniques/methods which are used for performance appraisal of
employees. Some of the methods of performance appraisal are:
1. Ranking Method: Ranking method is the oldest and simplest method of rating. Here,
each employee is compared with all others performing the same job and then he is given a
particular rank i.e. First Rank, Second Rank etc. It states that A is superior to B. B is
superior to C and so on. This method ranks all employees but it does not tell us the degree
or extent of superiority i.e. by how much one employee is superior to another. Secondly,
this ranking is based on only mental assessment so it is not possible to give any objective
proof about why the rater has ranked one employee as superior to another. In this method,
the performance of individual employee is not compared with the standard performance.
Here, the best is given first rank and poorest gets the last rank. The ranking method is
highly subjective. Similarly, here the employees are compared as a whole. Comparison of
the various parts of an employee's performance is not done.
2. Grading Method: Under this method of performance appraisal, different grades are
developed for evaluating the ability of different employees and then the employees are
placed in these grades. These grades may be as follows: (i) Excellent; (ii) very good; (iii)
Good; (iv) Average; (v) Bad; (vi) Worst.
3. Man-to-Man Comparison Method: This method was first used in USA army during
the 1st World War. Under this method, few factors are selected for analysis purposes. These
factors are: leadership, dependability and initiative. After that a scale is designed by the rate
for each factor. A scale of person is also developed for each selected factor. Each person to
be rated is compared with the person in the scale, and certain scores for each factor are
awarded to him/her. In other words, instead of comparing a whole man to a whole man
personnel are compared to the key man in respect of one factor at a time. We can use this
method in job evaluation. This method is also known as the Factor Comparison Method. In
performance appraisal, it is not of much use because the designing of scale is a very
difficult task.
4. Graphic Rating Scale Method of Performance Appraisal: This is the very popular,
traditional method of performance appraisal. Under this method, scales are established for a
number of fairly specific factors. A printed form is supplied to the rater. The form contains a
91 DKR21
number of factors to be rated. Employee characteristics and contributions include qualities

like quality of work, dependability, creative ability and so on. These traits are then
evaluated on a continuous scale, where the rater places a mark somewhere along the scale.
The scores are tabulated and a comparison of scores among the different individuals is
made. These scores indicate the work of every individual. The following table presents
simple graphic scale:
Quality Quantity Creative Dependability
Excellent
Good
Average
Poor
This method is popular because it is simple and does not require any writing ability. The
method is easy to understand and use. Comparison among pairs is possible. This is
necessary for decision on salary increases, promotion, etc.
5. Essay Method: The essay method involves an evaluator's written report appraising an
employee's performance, usually in terms of job behaviours and/or results. The subject of
an essay appraisal is often justification of pay, promotion, or termination decisions, but
essays can be used for developmental purposes as well.
Since essay appraisals are to a large extent unstructured and open-ended, lack of
standardization is a major problem. The open-ended, unstructured nature of the essay
appraisal makes it highly susceptible to evaluator bias, which may in some cases be
discriminatory. By not having to report on all job-related behaviours or results, an evaluator
may simply comment on those that reflect favourably or unfavourably on an employee.
This does not usually represent a true picture of the employee or the job, and content
validity of the method suffers.
92 DKR21
6. Forced Choice Method: The series of statements arranged in the blocks of two or more
are given and the rater indicates which statement is true or false. The rater is forced to make
a choice. HR department does actual assessment. Advantages - Absence of personal biases
because of forced choice. Disadvantages – Statements may be wrongly framed.
7. Paired comparison: A performance appraisal that measures the relative performance of

employees in a group. This is a method of performance evaluation that results in a rank
ordering of employees to come up with a best employee. This type of approach measures
the relative performance of employees in a group.
8. Checklist Appraisal: The main purpose of this method is to reduce the evaluator's
burden of rating the employee. In this method a dichotomous questionnaire (A question
with two answer choices namely `Yes' or `No') is used. A rater is required to put a tick
mark against the respective column. This questionnaire is prepared and scored by the HR
department. The main disadvantage of this method is the rater is not given the flexibility to
add or delete the statements.
5.7.2 MODERN METHOD OF APPRAISAL AND CAREER DEVELOPMENT
Most of the traditional methods emphasise either on the task or the worker‗s personality,
while making an appraisal. For bringing about a balance between these two, modern
methods have been developed. The details of these methods are as follows:
5.7.2.1 Management by Objective (MBO): It was Peter F. Drucker who first gave the
concept of MBO to the world in 1954 when his book The Practice of Management was first
published. Management by objective can be described as, a process whereby the superior
and subordinate managers of an organisation jointly identify its common goals, define each
individual‗s major areas of responsibility in terms of results expected of him and use these
measures as guides for operating the unit and assessing the contribution of each of its
members.
5.7.2.1.1 Essential Characteristics of MBO:
The important features of MBO are as follows:
1. A Philosophy: Management by objective is a philosophy or a system, and not merely a

technique.
93 DKR21
2. Participative Goal Setting: It emphasises participative goal setting.
3. Clearly Define Individual Responsibilities: Management by objective (MBO) clearly

defines each individual‗s responsibilities in terms of results.
4. Accomplishment of Goal: It focuses a tension on what goal must be accomplished

rather than on how it is to be accomplished (method).
5. Objective Need into Personal Goal: MBO converts objective need into personal goals
at every level in the organisation.
6. It Establishes Goals Yardsticks: It establishes standards or goals yardsticks as

operating guides and also as basis of performance evaluation.
7. Efforts to Blend and Balance Goals: It is a system intentionally directed toward

effective and efficient attainment of organisational and personal goals.
5.7.2.1.2 Objectives of MBO: The objective of MBO is to change behaviour and attitudes
towards getting the job done. In other words, it is results-oriented. It is performance that
counts. It is a management system and philosophy that stress goals rather than methods. It
provides responsibility and accountability and recognises that workers or employees have
needs for achievement and self-fulfillment. It meets these needs by providing opportunities
for participation in goal setting process. Subordinates become involved in planning their
own careers.
5.7.2.1.3 The Process of MBO:
It is as follows:
1. Establishment of Goal: The first step is to establish the goals of each subordinate. In
some organisations, superiors and subordinates work together to establish goals. While in
other organisation, superiors establish goals for subordinates. The goals typically refer to
the desired outcome to be achieved. Thereafter these goals can be used to evaluate
employee performance.
2. Setting the Performance Standard: The second step involves setting the performance
standard for the subordinates in a previously arranged time period. As subordinates perform,
they know fairly well what there is to do, what has been done, and what remains to be done.
3. Comparison of Actual Goals with the Standard Goals : In the third step the actual level
94 DKR21
goal attainment is compared with the standard goals. The evaluator explores reasons of the
goals that were not met and for the goals that were exceeded. This step helps to determine
possible training needs. It also alerts the superior to conditions in the organisation that may
affect a subordinate but over which the subordinate has no control.
4. Establishing New Goals, New Strategies: The final step involves establishing new
goals and, possibly, new strategies for goals not previously attained. At this point,
subordinate and superior involvement in goal-setting may change. Subordinates who
successfully reach the established goals may be allowed to participate more in the goal-
setting process next time. The process is repeated.
5.7.2.1.4 Benefits or Advantages of MBO:
The benefits of MBO are as follows:
1. Balanced Focus on Objectives: MBO forces the management to set objectives with
balanced stress on key result area. Thus, crisis conditions are avoided to take place in the
organisation.
2. Better Managing Things: MBO forces managers to think about planning for results,
rather than merely planning activates or works. Managers are required to ensure that the
targets are realistic and needed resources are made available to subordinates to achieve the
targets. Clearly set objectives for the subordinates serve as evaluation standards and
motivators for them. Thus, MBO results in improvement in managing.
3. Better Organising: The positions in the enterprise can be built around the key result
areas. Managers are required to clarify organisational roles and structures hence better
organising.
4. MBO Reduces Role Conflict and Ambiguity: Role conflict exists when a person is faced
with conflicting demands from two or more supervisors; and role ambiguity exits when a
person is uncertain as to how he will be evaluated, or what he has to achieve. Since MBO aims
at providing clear targets and their order or priority, it reduces both these situations.
5. It Provide more Objective Appraisal Criteria: The targets emerge from the MBO
process provide a sound set of criteria for evaluating the manager‗s performance.
95 DKR21
6. More Motivation: MBO helps and increases employee motivation because it relates
overall goals to the individual‗s goals: and help to increase an employee‗s understanding or
where the organisations and where it is heading.
7. Managers Complete with Themselves: Managers are more likely to complete with
themselves than with other managers. The kind of evaluation can reduce internal conflicts
that often arise when managers compete with each other to obtain scarce resources.
8. Develop Personal Leadership: MBO helps the individual manager to develop personal
leadership, especially the skills of listening, planning, controlling, motivating, counselling
and evaluating. This approach to managing instills a personal commitment to respond
positively to the organisation‗s major concerns as well as to the development of human
resources.
9. MBO Identifies Problem Early: It identifies problems better and early. Frequent
performance review sessions make this possible.
10. Identifies Performance Deficiency: MBO identifies performance deficiencies and

enables the management and the employee to set individualised self-improvement goals and
thus proves effective in training and development of people. Mc Gregor points out that
MBO, in most of the cases, does some good without costing much. He further point out,
under proper conditions, participation and consultative management provide
encouragement to people to direct their creative energies towards organisation objectives,
give them some voice in decisions which affect them, and provide sufficient opportunities
for satisfaction of social, egoistic and self-fulfillment needs.
5.7.2.1.5 Disadvantages of MBO
1. Unfavourable Attitude of Managers: Some executives have an attitude that the regular
attention required of them by Management by objectives system, drawn heavily on their
busy time-schedule and is not consistent with their roles. They feel that it is not so effective
a way as some other approaches. Some view their roles as primarily involving policy-
making, budget formulation etc.
2. Difficult to Apply MBO Concepts: Those executives who have been involved very often
find it difficult to apply MBO concepts to their own work habits. They find it hard to think
about the results of work rather than the work itself. They tend to over emphasize goals that
96 DKR21
the easy to quantify, sometimes forgetting that workers often behave almost like children at
play-when the game no longer challenges, interest is soon last.
3. Heavy Paper Work: MBO involves a huge amount of newsletter, instruction booklets,
training manuals, questionnaires, performance data review and appraisals report to be
prepared by the superior and subordinates. Thus MBO is said to have created one more
paper mill in organisation added to the already existing large amount of paper work.
4. Tug of War: There is sometimes tug of war in which the subordinates try to set the
lowest targets possible and the supervisors the highest.
5. Time Consuming: MBO is time consuming especially in the early phases of its
introduction when employees are unfamiliar with its process. A number of pitfalls have
been indicated, by the researchers, in the way of effective working of MBO programmes.
The reasons for failure in the MBO process are: hasty implementation, unknowledgeable
users, lack of management follow through, and support, over emphasis on structure,
treatment of another gimmick, failure to carefully monitor and encourage the MBO process
during hard initial year of implementation. MBO can be effective technique for
performance evaluation and for motivating subordinates, by developing communication
between executives at all levels. Those at the bottoms must be willing to listen to the voice
of experience, and those at the bottoms must be willing to listen to the voice of experience,
and those at the top willing to accept fresh idea from lower echelon employees. Similarly,
executives must keep abreast of new programmes, especially the modern ideas that have
been developed in the academic circles.
2. Assessment Centre Method This concept was first applied to military situations by
Simoniet in the Geran Army in the 1930s and the War office Selection Board of the British
Army in the year 1960. The main objective of this method was and is to test candidates in a
social situation, using a number of assessors and variety of procedures. The most important
characteristic of the assessment centre is job-related simulations. These simulations involve
characteristics that managers feel are important to the job success. The evaluators observe and
evaluate participants as they perform activities commonly found in these higher level jobs. In
this method many evaluators join together to assess the performance of employee in several
situations with the use of variety of criteria. It is used mostly to help select employees for the
first level (the lowest) supervisory positions. The assessments are made to find employee
potential for the purpose of promotions. The assessment is generally done with the
97 DKR21
help of a couple of employees and involves a paper-and pencil test, interviews, and
situational exercises. The main features of the techniques are given below:
(i) Leaderless Discussion: The use of situational excises such as an in basket exercise,
business game, a role-playing incident and leaderless group discussion.
(ii) Highly Experienced Evaluator: Evaluators are drawn from experienced managers with
proven ability at different level of management.
(iii) Employee’s Individual and Collective Evaluation: The evaluators evaluate all
employees, both individually and collectively, and each candidate is given one of the three
categories more than acceptable, less than acceptable and unacceptable.
(iv) Preparation of Summary Report: A summary Report is made by the members, and a
feedback on a face-to-face basis is administered to all the candidates who ask for it.
3. Human Asset Accounting Method:
This technique refers to money estimates to the value of a firm‗s internal human
organisation and its external customer goodwill. If well trained employees leave a firm, the
human organisation is worthless; if they join it, its human assets are increased. if distrust
and conflict prevail, the human enterprise is devalued. If team work and high morale
prevail, the human organisation is a very valuable asset. The current value of a firm‗s
human organisation can be evaluated by developed procedures by undertaking periodic
measurements of key casual and intervening enterprise variables. The key casual variables
include the structure of an organisation‗s management policies, decisions, business
leadership, skills, strategies, and behaviour. The intervening variables indicate the internal
state and health of an organisation. They include loyalties, attitudes, motivations, and
collective capacity for effective interaction, communication and decision-making. These
two types of variable measurements must be made over several years to provide the needed
date for the computation of the human asset accounting.
4. Behaviourally Anchored Rating Scales (BARS): This method is also called behavioural
expectation scales. These are the rating scales whose scale points are determined by statements
of effective and ineffective behaviour. They are said to be behaviourally anchored in that the
scales represent a range of descriptive statements of behaviour varying from the least to the
most effective. A rater must indicate which behaviour on each scale best
98 DKR21
described an employee‗s performance. Behaviourally anchored rating scales (BARS) are

having 5 steps:
1. Generate Critical Incidents: Persons with knowledge of the job to be appraised (job
holders/supervisors) are asked to describe specific illustrations (critical incidents) of
effective performance behaviour.
2. Develop Performance Dimensions: These people then cluster the incidents into a smaller
set (or say 5 or 10) of performance dimensions. Each cluster (dimension) is then defined.
3. Reallocate Incidents: Any group of people who also know the job then reallocate the
original critical incidents. They are given the cluster‗s definitions, and critical incidents,
and asked to redesign each incident to the dimension it best described. Typically a critical
incident is retained if some percentage usually (50 to 80%) of this group assigns it to the
same cluster as the previous group did.
4. Scale of Incidents: This second group is generally asked to rate (7 or 9 point scales are
typical) the behaviour described in the incident as to how effectively or ineffectively it
represents performance on the appropriate dimension.
5. Develop Final Instrument: A subset of incident (usually 6 or 7 per) cluster is used as

behaviour anchors for the performance dimensions. BARS were developed to provide
results which subordinates could use to improve performance superiors would feel
comfortable to give feedback to the ratee. Further, BARS help to overcome rating errors.
Unfortunately, the method too suffers from distortions inherent in most rating techniques.
5. 360o Appraisal: In 360-degree performance appraisal technique a manager is rated by

everyone above, alongside and below him. 360 degree approach is essentially a fact-
finding, self-correcting technique, used to design promotions. The personality of each top
manager – their talents, behavioural traits, values, ethical standards, tempers, loyalties – is
to be scanned, by their colleagues as they are best placed to diagnose their suitability for the
job requirements. In this method a question is structured to collect required data about a
manager from his bosses, peers, subordinates. 360-degree approach of assessment provides
equal opportunity to evaluate the efforts of the top manager or managers in running a
company effectively. It focuses on the intrinsic qualities of the manager as well as his
capacity to lead. It also gives feedback to all assesses on their styles.
99 DKR21
Merits of 360-Degree Approach: The merits of the technique are 1. The organisation
gains from the self-awareness of the top managers. It reveals strengths and weaknesses in
their managing styles. 2. The gap between self-assessment and the views of one‗s
colleagues is reduced. 3. Teamwork thrives once peer group assessment is included in the
methodology. 4. Empowerment is facilitated. 5. Facts about the organisational culture are
brought to light. 6. Inflexible managers are forced to initiate change in their style:
Demerit of 360-Degree Approach: The main drawbacks of this approach are as follows:
1. 360-degree approach can be utilised to humiliate people. 2. Response from colleagues
tends to be biased. 3. Linking rewards to findings can prove to be unfair. 4. The results
could be uneven. This technique identifies most suitable and acceptable person for the
consideration of promotion. 360-degree approach supports the company‗s progress and
rewarding the excellent performance of an individual.
5.8 Limitations of Performance Appraisal
The main limitations of Performance Appraisal are explained below:
1. Time Consuming: Performance appraisal is a time taking affair. It is a very lengthy

process under which different forms are to be filled in and various observations are required
to be noted in a careful manner.
2. Lack of Reliability: Reliability implies stability and consistency in the measurement.

Lack of consistency over time and among different raters may reduce the reliability of
performance appraisal.
3. Incompetence: Raters may fail to evaluate performance accurately due to lack of

knowledge and experience. Post appraisal interview is often handled ineffectively.
4. No Uniform Standards: The standards used for appraisal purpose are not uniform
within the same organisation. This makes the rating unscientific. Similarly, the rating is
done on the basis of an overall impression, which is not proper.
5. Absence of Effective Participation of Employees: In performance appraisal effective

participation of concerned employee is essential. In many methods of appraisal he is given
a passive role. He is evaluated but his participation or self-evaluation is rather absent.
100 DKR21
6. Resistance of Employees to Appraisal: Employees oppose the system as they feel that
the system is only for showing their defects and for punishing them. The managers resist
the system as they are not willing to criticise their subordinates or have no capacity to guide
them for self-improvement or self-development.
7. Paperwork: Some supervisors feel that performance appraisal is paperwork. They make
such complaints because many a times, performance appraisal reports are found only in the
files rather than rendering any practical use.
8. Fear of Spoiling Relations: Performance appraisals may also affect superior-

subordinate relations. As appraisal makes the superior more of a judge rather than a coach,
the subordinate may look upon the superior with a feeling of a suspicion and mistrust.
9. Stereotyping: This implies forming a mental picture of a person on the basis of his age,
sex, caste or religion. It results in an over-simplified view and blurs the assessment of job
performance.
10. Negative Approach: Performance appraisal loses most of its value when the focus of
management is on punishment rather than on development of employees.
11. Multiple Objectives: Raters may get confused due to too many objectives or unclear
objective of performance appraisal.
12. Resistance: Trade unions may resist performance appraisal on the ground that it
involves discrimination among its members. Negative ratings may affect interpersonal
relations and industrial relations particularly when employees/unions do not have faith in
the system of performance appraisal.
13. Halo Effect: Generally, there is the presence of ‗a halo‗ effect which leads to a
tendency to rate the same individual first, which once have stood first.
14. Individual Differences: Some people are more distinct while some are very liberal in
assigning the factors, points or number to the employees. They are unable to maintain a fair
distinction between two individuals. It also nullifies the utility of this system.
15. Unconfirmed: Sometimes the results of performance appraisals are not confirmed by other
techniques of motivation, incentive wages plans and so on. Factors are introduced in the
101 DKR21
managerial appraisal because of a fact or bias in the person concerned conducting the
appraisal.
5.9 KEYWORDS
performance appraisal Assessment Centres
Management by Objective (MBO) Halo Effect
Performance Review
1. Define performance appraisal
2. What are the Characteristics of performance appraisal?
3. Discuss the Purpose Of Performance Appraisal
4. What is the uses of performance appraisal
5. How is performance appraisal in an effective?
6. Describe the various Steps involved in appraising performance.
7. Explain the methods of performance appraisal.
8. What is Management By Objective (MBO)? What are the main

objectives MBO?
9. Explain the Process of MBO
10. Discuss advantages and disadvantages of MBO
11. Bring out the Limitations of Performance Appraisal
102 DKR21
LESSON
MANAGING TRANSFERS AND PROMOTIONS
CONTENTS
6.1 Transfers
6.1.1 Purposes of transfer
6.1.2 Types of transfers
6.1.3 Benefits and problems of transfers
6.1.4 Transfer policy
6.2 Promotion
6.2.1 Advantages of promotion
6.2.2 Bases of promotion
6.2.3 Promotion policy
6.3 Keywords
103 DKR21
6.1 TRANSFERS
A transfer is a change in job assignment. It may involve a promotion or demotion or no

change at all in status and responsibility. A transfer has to be viewed as a change in
assignment in which an employee moves from one job to another in the same level of
hierarchy, requiring similar skills, involving approximately same level of responsibility,
same status and same level of pay. A transfer does not imply any ascending (promotion) or
descending (demotion) change in status or responsibility.
6.1.1 Purposes of Transfers
Organizations resort to transfers with a view to serve the following purposes:
i. To meet the organizational requirements: Organizations may have to transfer

employees due to changes in technology, changes in volume of production,
production schedule, product line, quality of products, changes in the job pattern
caused by change in organizational structure, fluctuations in the market conditions
like demands fluctuations, introduction of new lines and/or dropping of existing
lines. All these changes demand the shift in job assignments with a view to place the
right man on the right job.
ii. To satisfy the employee needs: Employees may need transfers in order to satisfy
their desire to work under a friendly superior, in a department where opportunities for
advancement are bright, in or near their native place or place of interest, doing a job
where the work itself is challenging, etc.
iii. To utilise employees better: An employee may be transferred because management
feels that his skills, experience and job knowledge could be put to better use elsewhere.
iv. To make the employee more versatile: Employees may be rolled over different jobs
to expand their capabilities. Job rotation may prepare the employee for more
challenging assignments in future.
v. To adjust the workforce: Workforce may be transferred from a plant where there is
less work to a plant where there is more work.
vi. To provide relief: Transfers may be made to give relief to employees who are
overburdened or doing hazardous work for long periods.
vii. To adjust the workforce: Workforce may be transferred from a plant where there is
less work to a plant where there is more work.
viii. To reduce conflicts: Where employees find it difficult to get along with colleagues
in a particular section, department or location – they could be shifted to another place
to reduce conflicts.
104 DKR21
ix. To punish employees: Transfers may be affected as disciplinary measures – to shift

employees indulging in undesirable activities to remote, far-flung areas.
6.1.2 Types of Transfers
Transfers can be classified thus
i) Production Transfers: Transfer caused due to changes in production.
ii) Replacement Transfers: Transfer caused due to replacement of an employee working on

the same job for a long time
iii) Rotation transfers: Transfers initiated to increase the versatility of employees.
iv) Shift transfers: Transfers of an employee from one shift to another.
v) Remedial transfers: Transfers initiated to correct the wrong placements.
vi) Penal transfers: Transfers initiated as a punishment for in disciplinary action of

employees.
6.1.3 Benefits and Problems of transfers
A summary of benefits and problems associated with transfers is given below:
Benefits Problems
Improve employee skills otherwise reduce Inconvenient to employees who do not want
monotony, boredom. to move.
Remedy faulty placement decisions. Employees may or may not fit in the new
location/department.
Prepare the employee for challenging Shifting of experienced hands may affect
assignments in future. productivity.
Stabilize changing work requirements in Discriminatory transfers may affect
different departments/locations. employee morale.
Improve employee satisfaction and morale
Improve employer-employee relations
105 DKR21
6.1.4 Transfer Policy
Organizations should clearly specify their policy regarding transfers. Otherwise, superiors
may transfer their subordinates arbitrarily if they do not like them. It causes frustration
among employees. Similarly, subordinates may also request for transfers even for the petty
issues. Most of the people may ask for transfer to riskless and easy jobs and places. As
such, organization may find it difficult to manage such transfers. Hence, an organization
should formulate a systematic transfer policy. A systematic transfer policy should contain
the following items:
 Specification of circumstances under which an employee will be transferred in the

case of any company initiated transfer.

 Name of the superior who is authorized and responsible to initiate a transfer.

 Jobs from and to which transfers will be made, based on the job specification,
description and classification, etc.

 The region or unit of the organization within which transfers will be administered.

 Reasons which will be considered for personal transfers, their order of priority, etc.

 Reasons for mutual transfer of employees.

 Norms to decide priority when two or more employees request for transfers like
priority of reason, seniority.

 Specification of basis for transfer, like job analysis, merit, length of service.

 Specification of pay, allowances, benefits, etc., that is to be allowed to the employee
in the new job.

 Other facilities to be extended to the transferee like special level during the period of
transfer, special allowance for packaging luggage, transportation, etc.
Generally, line managers administer the transfers and HR managers assist the line managers
in this respect.
6.2 PROMOTION
Promotion is defined as giving higher position to the employee, which carries high status
more responsibilities and higher status. Promotion means advancement of employee in
terms of pay and status also improvement in working conditions.
106 DKR21
Promotions are used to fill the positions which are more important to fill rather than
the present position of employee. It can be filled by external recruitment but employees
having eligibility and experience must be appointed for their motivation. Also it will
decrease labor turn over as external recruitment costs more. Also increase in salary and
status will increase job satisfaction.
When scale of pay is increased without changing job it is called up-gradation and
promotion involves changes in job as well as high salary.
When higher position is given without change in salary it is known as Dry Promotion.
All these, Promotion Up-Gradation and Dry Promotion are used by management to increase
morale of employee and as giving reward also.
6.2.1 Advantages of promotion:
• Present employees if promoted can handle the process products and problems easily as
they are already connected to organization but new incumbent may take some to adjust him
or may not adjust himself at all.
• The cost of training the insiders for the higher position is nearly nil hence no extra
training cost.
• Employees will give their best as they know that reward of giving good performance is sure.
• High morale of the employees is achieved.
6.2.2 Bases of Promotion
Organisations adopt different bases of promotion depending upon their nature, size,
management, etc. Generally, they may combine two or more bases of promotion. The well-
established bases of promotion are seniority and merit.
Merit-based promotions:
Merit based promotions occur when an employee is promoted because of superior

performance in the current job. Merit here denotes an individual's knowledge, skills,
abilities and efficiency as measured from his educational qualifications, experience, and
training and past employment record.
107 DKR21
The advantages of this system are fairly obvious:
 It motivates employees to work hard, improve their knowledge, acquire new skills
and contribute to organisational efficiency.

 It helps the employer to focus attention on talented people, recognise and reward
their meritorious contributions in an appropriate way.

 It also inspires other employees to improve their standards of performance through
active participation in all developmental initiatives undertaken by the employer
(training, executive development, etc.)
However, the system may fail to deliver the results, because:
 It is not easy to measure merit. Personal prejudices, biases and union pressures may
come in the way of promoting the best performer.

 When young employees get ahead of other senior employees in an organisation
(based on superior performance), frustration and discontentment may spread among
the ranks. They may feel insecure and may even quit the organisation.

 Also, past performance may not guarantee future success of an employee. Good
performance in one job (as a Foreman, for example) is no guarantee of good
performance in another (as a supervisor).
Seniority-based promotions:
Seniority refers to the relative length of service in the same organisation. Promoting an
employee who has the longest length of service is widely welcomed by unions because it is
fairly objective. It is easy to measure the length of service and judge the seniority. There is no scope
for favouritism, discrimination and subjective judgement. Everyone is sure of getting the same, one day.
In spite of these merits, this system also suffers from certain limitations. They are:
 The assumption that the employees learn more with length of service is not valid
as employees may learn up to a certain stage, and learning capabilities may
diminish beyond a certain age.

 It de-motivates the young and more competent employees and results in greater
employee turnover.

 It kills the zeal and interest to develop, as everybody will be promoted without
108 DKR21
showing any all-round growth or promise.
 Judging the seniority, though it seems to be easy in a theoretical sense, is highly

difficult in practice as the problems like job seniority, company seniority,
regional seniority, service in different organisations, experience as apprentice
trainee, trainee, researcher, length of service not only by days but by hours and
minutes will crop up.
6.2.3 Promotion Policy
Seniority and merit, thus, suffer from certain limitations. To be fair, therefore, a firm-
should institute a promotion policy that gives due weightage to both seniority and merit. To
strike a proper balance between the two, a firm could observe the following points:
 Establish a fair and equitable basis for promotion i.e., merit or seniority or both.

 A promotion policy established thus, should provide equal opportunities for
promotion in all categories of jobs, departments and regions of an organisation.

 It should ensure an open policy in the sense that every eligible employee is
considered for promotion rather than a closed system which considers only a
particular class of employees. It must tell the employees the various avenues for
achieving vertical growth through career maps, charts etc.

 The norms for judging merit, length of service, potentiality, etc., must be
established beforehand. The relative weightage to be given to merit or seniority
or both should also be spelt out clearly.

 The mode of acquiring new skills, knowledge, etc., should be specified to all
employees so that they can prepare themselves for career advancement.

 Appropriate authority should be entrusted with the responsibility of taking a final
decision on promotion.

 Detailed records of service, performance, etc., should be maintained for all
employees, to avoid charges of favouritism, nepotism etc.

 It should be consistent in the sense that it is applied uniformly to all employees,
inspective of their background.

 Promotion policy should contain alternatives to promotion when deserving
candidates are not promoted due to lack of vacancies at higher level. These
alternatives include up gradation, re-designation, sanctioning of higher pay or
increments or allowances assigning new and varied responsibilities to the
employee by enriching the job or enlarging the job.
109 DKR21
 A provision for appeal against (alleged) arbitrary actions of management and

review should be there.

 Promotions initially may be for a trial period so as to minimise the mistakes of
promotion.

 Promotion policy, once it is formulated, should be communicated to all
employees, particularly to the trade union leaders. It should be reviewed
periodically, based on the experiences and findings of the attitude and morale
surveys.
6.4 KEYWORDS
Self-Assessment tools Promotions
Transfers Individual Counselling
Skill Invention
1. Bring out the purpose of transfers.
2. What is Transfer? Explain the types of transfers.
3. Critically evaluate the benefits and problems of transfers.
4. Explain the Transfer policy.
5. What are the Advantages of promotion?
6. Elaborate the Bases of promotion.
7. Describe the Promotion policy.
110 DKR21
LESSON
COMPENSATION AND FINANCIAL INCENTIVES
CONTENTS
7.0 Introduction
7.1 Incentive Compensation:
7.1.1 Advantages of Incentive Pay Programs
7.1.2 Effects of Incentive Compensation
7.2 Incentive Plans
7.3 Incentives for Hourly Employees
7.4 Incentives for Management Employees
7.5 Incentives for Sales Employees
7.5.1 Types of Sales Incentive Plans
7.6 Incentives for Professional Employees
7.7 Incentives for Executive Employees
7.8 Organisation-Wide Incentive Plans
7.8.1 Gainsharing Plans
7.8.2 Profit-Sharing Plans
7.8.3 Employee stock ownership plans (ESOP)
7.9 Bonus Plans
7.9.1 The Scanlon Plan
7.9.2 The Rucker Plan
7.9.3 Improshare
7.10 Keywords
111 DKR21
7.0 Introduction
Good compensation plans, well administrated, have a salutary effect on the entire enterprise.
Employees are happier in their work, co-operation and loyalty are higher, and productive output
is up and quality is better. In the absence of such plans compensations are determined
subjectively on the basis of haphazard and arbitrary decisions. This creates several iniquities
which are among the most dangerous sources of friction and low morale in an enterprise.
Although there can be both monetary and non-monetary forms of compensation prevalent
in an enterprise, yet it is the former which is the most basic element by which individuals
are attracted to an organization, persuaded to remain, and induced to engage in behaviour
beneficial to the organization. I
Primary Compensation
The primary monetary compensation is basic pay in the form of wages or salaries. In
popular usage a distinction is drawn between these two words. The word 'wage' is used to
denote payments to hourly-rated production workers and the word 'salary' is used to denote
payments to clerical, supervisory and managerial employees. For our purpose, however,
this distinction is meaningless because roughly the same problems are involved in the
administration of both wage and salary policies.
Time as a Basis for Pay
The old and most common system of paying employees in on the basis of time, i,e., rate per
hour, per day, per week, per month or per year. Under this system no consideration is given
to the quality or the amount of output. The employer buys the time of the worker, i.e., the
worker is guaranteed a definite payment for a specified period of working. Use of time rates
for salaried employees is almost universal. Time basis is more satisfactory when units of
output are not distinguishable and measurable and employees have little control over the
quality of output or when there is no clear-cut relation between effort and output as on
some machine-paced jobs; work delays are frequent and beyond the employee's control;
quality of work is especially important; supervision is good and the supervisors know what
constitutes " a fair day's work", and competitive conditions and cost control do not require
precise advance knowledge of labour costs per units of output.
112 DKR21
Nominal and Real Wages
Wages can be expressed in two ways. When they are expressed in terms of money paid to
the worker they are called nominal wages. But when they are expressed in terms of their
purchasing power with reference to some base year they are called real wages. These wages
are arrived at by making adjustment in the nominal wages for the rise or fall in the cost of
living. Thus, if the nominal wage of a worker in 1998 was Rs. 400 p.m. and in 2001 it is Rs.
900 p.m. but if the living in 2001 has become thrice as costly as in 1998 the real wage of
the worker in 2001 is Rs. 300 only.
How do we measure changes in the cost of living, or changes in the prices that consumers pay?
The measuring rod is the consumer price index number. This index number is intended to show
over a period of time the average percentage change in the prices paid by the consumers
belonging to the population group proposed to be covered by the index for a fixed list of goods
and services consumed by them. The average percentage change, measured by the index, is
calculated month after month with reference to a fixed period. This fixed period known as the
'base period' of the index; and since the object of the index is to measure the effect of price
changes have to be determined with reference to a fixed list of goods and services of
consumption which is known as a fixed basket of goods and services.
Important steps in the construction of this index number are as follows:
1. Selection of representative commodities consumed by the group.

2. Making arrangements for obtaining their price quotations regularly.
3. Selecting a base year and converting current price into price relatives based on the
prices of the base year.
4. Obtaining a weighted average of the price relatives taking the quantities consumed
in the base year as weights.
7.1 Incentive Compensation:
Incentive Compensation is essentially a managerial device for increasing workers‘

productivity. The belief underlying incentive compensation is that an offer of money in
addition to character than in place of-primary compensations will result in an increased rate
of output. But in many cases this is not also largely because in today‘s machine-paced
113 DKR21
production system individual worker or group can do little to speed the production line or
the pace of the automatic machine.
7.1.1 Advantages of Incentive Pay Programs
 Incentives focus employee efforts on specific performance targets. They provide real
motivation that produces important employee and organizational gains.

 Incentive payouts are variable costs linked to the achievement of results. Base salaries
are fixed costs largely unrelated to output

 Incentive compensation is directly related to operating performance. If performance
objectives (quantity and/or quality) are met, incentives are paid. If objectives are not
achieved, incentives are withheld.

 Incentives foster teamwork and unit cohesiveness when payments to individuals are
based on team results.

 Incentives are a way to distribute success among those responsible for producing that
success.
7.1.2 Effects of Incentive Compensation:
 This is tendency among the workers to sacrifice quality for the sake of quantity. This
calls for a very strict system of checking and inspection.

 Unless there are appropriate guarantees, workers may tend to oppose the introduction of
new machinery or methods other changes in conditions of production which would
necessitate a restudy of the job because of a fear that their earnings may be reduced.

 Unless greater vigilance is exercised there is a danger of workers disregarding safety
regulations.

 Unless a maximum ceiling on incentive earning is fixed, some workers tend to
overwork and undermine their health.

 Jealousies may arise among workers because some are able to earn more others. In
the case of group systems, the fast workers may be dissatisfied with the efforts of the
slower members of the group.
114 DKR21
7.2 Incentive Plans:
A wide verity of incentive plans has been devised by industries under which the
worker earnings are related directly to some measurement of work done either by himself
or by his group. Such plans are generally classified into the following four categories.
 Individual incentive plan


 Group incentive plan

 Factory-wide or plant-wide incentive plans

 Payment by result to indirect workers.

1. Individual incentive plan:
The simplest of all individual incentives popular since the scientific movement over a
hundred years ago is the straight piece-rate system under which the employee is guaranteed
a minimal hourly rate for meeting some re-established standard output.
2. Group incentive plan:
One particular advantage of group incentive plans is that they encourage team spirit-a sense
of mutual co-operation amongst individuals. Co-operation reduces wastage of idle time and
encourages effective communication with one another.
3. Factory-wide or plant-wide incentive plans:
Profit-sharing is a very common example of a plant-wide incentive plan. Under this plan
certain percentage of profit is distributed among employees usually annually or bi-annually
as an incentive over and above their wages and salaries. Employees individual shares may
be determined either on the basis of their length of services or on the number of hours each
has worked during the year or on the basis of their wages and salaries.
4. Payment by result to indirect workers:
Various systems of incentive payment also sometime designed for indirect workers such as
maintenance workers, cleaners, inspections and packers to reward them for their increased
efforts. It is argued that a part of increased production which the direct workers may
achieve is attributable to the effort of indirect workers.
115 DKR21
7.3 Incentives for Hourly Employees
Incentive payments for hourly employees may be determined by the number of units
produced, by the achievement of specific performance goals, or by productivity
improvements in the organization as a whole. In the majority of incentive plans, incentive
payments serve to supplement the employee's basic wage.
Piecework
One of the oldest incentive plans is based on piecework. Under straight piecework,
employees receive a certain rate for each unit produced. Their compensation is determined
by the number of units they produce during a pay period.
Under a differential piece rate, employees whose production exceeds the standard output
receive a higher rate for all of their work than the rate paid to those who do not exceed the
standard.
Employers will include piecework in their compensation strategy for several reasons. The
wage payment for each employee is simple to compute, and the plan permits an
organization to predict its labor costs with considerable accuracy, since these costs are the
same for each unit of output. The piecework system is more likely to succeed when units of
output can be measured readily, when the quality of the product is less critical, when the
job is fairly standardized, and when a constant flow of work can be maintained.
Under the piecework system, employees normally are not paid for the time they are
idle unless the idleness is due to conditions for which the organization is responsible, such
as delays in work flow, defective materials, inoperative equipment, or power failures. When
the delay is not the fault of employees, they are paid for the time they are idle.
Computing the piece rate. Although time standards establish the time required to perform
a given amount of work, they do not by themselves determine what the incentive rate
should be. The incentive rates must be based on hourly wage rates that would otherwise be
paid for the type of work being performed. Say, for example, the standard time for
producing one unit of work in a job paying Rs. 6.50 per hour was set at twelve minutes. The
piece rate would be Rs. 1.30 per unit, computed as follows.
116 DKR21
60 (minutes per hour)

12 (standard time per unit) = 5 units per hour
Rs. 6.50 (hourly rate)

5 (units per hour) = Rs. 1.30 per unit
Limited use of piecework. In spite of its incentive value, the use of piecework is limited.
One reason is that production standards on which piecework must be based can be difficult
to develop for many types of jobs. In some instances the cost of determining and
maintaining this standard may exceed the benefits gained from the system. Jobs in which
individual contributions are difficult to distinguish or measure, or in which the work is
mechanized to the point that the employee exercises very little control over output, also
may be unsuited to piecework. The same is true of jobs in which employees are learning the
work or in which high standards of quality are paramount.
One of the most significant weaknesses of piecework, as well as of other incentive
plans based on individual effort, is that it may not always be an effective motivator. If
employees believe that an increase in their output will provoke disapproval from fellow
workers, they may avoid exerting maximum effort because their desire for peer approval
outweighs their desire for more money.' Over a period of time, the standards on which piece
rates are based tend to loosen, either because of peer pressure to relax the standards or
because employees discover ways to do the work in less than standard time. In either case,
employees are not required to exert as much effort to receive the same amount of incentive
pay, so the incentive value is reduced.
Negative reaction to piecework. Despite the opportunity to earn additional pay, employees,
especially those belonging to unions, have negative attitudes toward piecework plans. Some
union leaders have feared that management will use piecework or similar systems to try to
speed up production, getting more work from employees for the same amount of money.
Another fear is that the system may induce employees to compete against one another,
thereby taking jobs away from workers who are shown to be less productive. There is also
the belief that the system will cause some employees to lose their jobs as productivity
increases or will cause craft standards of workmanship to suffer.
117 DKR21
Standard Hour Plan
Another common incentive technique is the standard hour plan, which sets incentive rates
based on a predetermined ―standard time‖ for completing a job. If employees finish the
work in less than the expected time, their pay is still based on the standard time for the job
multiplied by their hourly rate. For example, if the standard time to install an engine in a
half-ton truck is five hours and the mechanic completes the job in four and a half hours, the
payment would be the mechanic‘s hourly rate times five hours. Standard hour plans are
particularly suited to long-cycle operations or those jobs or tasks that are non-repetitive and
require a variety of skills.
The Wood Products Southern Division of Potlatch Corporation has successfully used a
standard hour plan for the production of numerous wood products. The incentive payment is
based on the standard hours calculated to produce and package 1,000 feet of wood paneling. If
employees can produce the paneling in less time than the standard, incentives are paid on the
basis of the percentage improvement. Thus, with a 1,000-hour standard and completion of the
wood paneling in 900 hours, a 10 percent incentive is paid. Each employee‘s base hourly wage
is increased by 10 percent and then multiplied by the hours worked.
While standard hour plans can motivate employees to produce more, employers must
ensure that equipment maintenance and product quality does not suffer as employees strive
to do their work faster to earn additional income.
7.4 Incentives for Management Employees
Merit raises constitute one of the financial incentive systems used most commonly for
managerial employees. Most recent studies of pay practices indicate that as many as 90
percent of large public and private sector organizations have merit pay programs for one or
more of their employee groups. Incentive pay may also be provided through different types
of bonuses. Like those for hourly employees, these bonuses may be based on a variety of
criteria involving either individual or group performance. As stated earlier, managerial
employees are also usually included in the different types of gain sharing plans. Although
they may not technically manage employees, sales employees and professional employees
will also be discussed in this section.
118 DKR21
Merit Raises
Merit raises can serve to motivate managerial, sales, and professional employees if they
perceive the raises to be related to the performance required to earn them. Furthermore, theories
of motivation, in addition to behavioral science research, provide justification for merit pay
plans as well as other pay-for-performance programs. For employees to see the link between
pay and performance, however, their performance must be evaluated in light of objective
criteria. If this evaluation also includes the use of subjective judgment by their superiors,
employees must have confidence in the validity of this judgment. Most important, any increases
granted on the basis of merit should be distinguishable from employees‘ regular pay and from
any cost-of-living or other general increases. Where merit increases are based on pay-for-
performance, merit pay should be withheld when performance is seen to decline.
Problems with Merit Raises
Merit raises may not always achieve their intended purpose. Unlike a bonus, a merit raise
may be perpetuated year after year even when performance declines. When this happens,
employees come to expect the increase and see it as being unrelated to their performance.
Furthermore, employees in some organizations are opposed to merit raises because, among
other reasons, they do not really trust management. What are referred to as merit raises
often turn out to be increases based on seniority or favoritism, or raises to accommodate
increases in cost of living or in area wage rates. Even when merit raises are determined by
per-formance, the employee's gains may be offset by inflation and higher income taxes.
Compensation specialists also recognize the following problems with merit pay plans:
1. Money available for merit increases may be inadequate to satisfactorily raise employees‘
base pay.
2. Managers may have no guidance in how to define and measure performance; there may
be vagueness regarding merit award criteria.
3. Employees may not believe that their compensation is tied to effort and performance;
they may be unable to differentiate between merit pay and other types of pay increases.
4. Employees may believe that organizational politics plays a significant factor in merit pay
decisions, despite the presence of a formal merit pay system.
119 DKR21
5. There may be a lack of honesty and cooperation between management and employees.
6. It has been shown that ―overall‖ merit pay plans do not motivate higher levels of
employee performance.
Lump-Sum Merit Pay
To make merit increases more flexible and visible, organizations such as Boeing, Timex,
and Westinghouse have implemented a lump-sum merit program. Under this type of plan,
employees receive a single lump-sum increase at the time of their review, an increase that is
not added to their base salary. Unless management takes further steps to compensate
employees, their base salary is essentially frozen until they receive a promotion.
Organizations using a lump-sum merit program will want to adjust base salaries upward after a
certain period of time. This can be done yearly or after several years. These adjustments should
keep pace with the rising cost of living and increases in the general market wage.
7.5 Incentives for Sales Employees
The enthusiasm and drive required in most types of sales work demand that sales
employees be highly motivated. This fact, as well as the competitive nature of selling,
explains why financial incentives for salespeople are widely used. These incentive plans
must provide a source of motivation that will elicit cooperation and trust. Motivation is
particularly important for employees away from the office who cannot be supervised
closely and who, as a result, must exercise a high degree of self-discipline.
Unique Needs of Sales Incentive Plans
Incentive systems for salespeople are complicated by the wide differences in the types of
sales jobs. These range from department store clerks who ring up customer purchases to
industrial salespersons from McGraw-Edison who provide consultation and other highly
technical services. Salespersons‘ performance may be measured by the dollar volume of
their sales and by their ability to establish new accounts. Other measures are the ability to
promote new products or services and to provide various forms of customer service and
assistance that do not produce immediate sales revenues.
Performance standards for sales employees are difficult to develop, however, because
their performance is often affected by external factors beyond their control. Economic and
120 DKR21
seasonal fluctuations, sales competition, changes in demand, and the nature of the sales
territory can all affect an individual‘s sales record. Sales volume alone therefore may not be
an accurate indicator of the effort salespeople have expended.
In developing incentive plans for salespeople, managers are also confronted with the
problem of how to reward extra sales effort and at the same time compensate for activities
that do not contribute directly or immediately to sales. Furthermore, sales employees must
be able to enjoy some degree of income stability.
7.5.1 Types of Sales Incentive Plans
Compensation plans for sales employees may consist of a straight salary plan, a straight
commission plan, or a combination salary and commission plan.
Straight salary plan
A straight salary plan permits salespeople to be paid for performing various duties not
reflected immediately in their sales volume. It enables them to devote more time to
providing services and building up the goodwill of customers without jeopardizing their
income. The principal limitation of the straight salary plan is that it may not motivate
salespeople to exert sufficient effort in maximizing their sales volume.
Straight commission plan
The straight commission plan, based on a percentage of sales, provides maximum incentive
and is easy to compute and understand. For example, organizations that pay a straight
commission based on total volume may use the following simple formulas:
Total cash compensation = 2% x total volume

or
Total cash compensation = 2% × total volume up to quota + 4% × volume over quota
However, the straight commission plan is limited by the following disadvantages:
1. Emphasis is on sales volume rather than on profits (except in those rare cases where
the commission rate is a percentage of the profit on the sale).
2. Territories tend to be milked rather than worked.
121 DKR21
3. Customer service after the sale is likely to be neglected.
4. Earnings tend to fluctuate widely between good and poor periods of business,
and turnover of trained sales employees tends to increase in poor periods.
5. Salespeople are tempted to grant price concessions.
6. Salespeople are tempted to overload their wholesale customers with inventory.
When a combined salary and commission plan is used, the percentage of cash
compensation paid out in commissions (i.e., incentives) is called leverage. Leverage is
usually expressed as a ratio of base salary to commission. For example, a salesperson
working under a 70/30 combination plan would receive total cash compensation paid out as
70 percent base salary and 30 percent commission. The amount of leverage will be
determined after considering the constraining factors affecting performance discussed
earlier and the sales objectives of the organization. The following advantages indicate why
the combination salary and commission plan is so widely used:
1. The right kind of incentive compensation, if linked to salary in the right proportion, has
most of the advantages of both the straight salary and the straight commission forms of
compensation.
2. A salary-plus-incentive compensation plan offers greater design flexibility and can

therefore be more readily set up to help maximize company profits.
3. The plan can develop the most favourable ratio of selling expense to sales.
4. The field sales force can be motivated to achieve specific company marketing objectives
in addition to sales volume.
7.6 Incentives for Professional Employees
Like other salaried workers, professional employees, engineers, scientists, and attorneys, for
example, may be motivated through bonuses and merit increases. In some organizations,
unfortunately, professional employees cannot advance beyond a certain point in the salary
structure unless they are willing to take an administrative assignment. When they are promoted,
their professional talents are no longer utilized fully. In the process, the organization may lose a
good professional employee and gain a poor administrator. To avoid
122 DKR21
this situation, some organizations have extended the salary range for professional positions
to equal or nearly equal that for administrative positions. The extension of this range
provides a double-track wage system, whereby professionals who do not aspire to become
administrators still have an opportunity to earn comparable salaries.
Professional employees can receive compensation beyond base pay. For example, scientists
and engineers employed by high-tech firms are included in performance base incentive
programs such as profit sharing or stock ownership. These plans encourage greater levels of
individual performance. Cash bonuses can be awarded to those who complete projects on or
before deadline dates. Payments may also be given to individuals elected to professional
societies, granted patents, or meeting professional licensing standards.
7.7 Incentives for Executive Employees
A major function of incentive plans for executives is to motivate them to develop and use
their abilities and contribute their energies to the fullest possible extent. Incentive plans
should also facilitate the recruitment and retention of competent executive employees. This
can be accomplished with plans that will enable them to accumulate a financial estate and
to shelter a portion of their compensation from current income taxes.
Components of Executive Compensation
Organizations commonly have more than one compensation strategy for executives in order to
meet various organizational goals and executive needs. For example, chief executive officers
(CEOs) may have their compensation packages heavily weighted toward long-term incentives,
because CEOs should be more concerned about the long-term impact of their decisions than the
short-term implications. Group vice presidents, on the other hand, may receive more short-term
incentives since their decisions affect operations on a six to twelve month basis. Regardless of
the mix, executive compensation plans consist of four basic components. (1) base salary, (2)
short-term incentives or bonuses, (3) long-term incentives or stock plans, and (4) perquisites.
Another important element in compensation strategy is the compensation mix to be paid to
managers and executives accepting overseas assignments.
123 DKR21
Bases for Executive Salaries
The levels of competitive salaries in the job market exert perhaps the greatest influence on
executive base salaries. An organization‘s compensation committee normally members of
the board of directors will order a salary survey to find out what executives earn in
comparable enterprises. Comparisons may be based on organization size, sales volume, or
industry grouping. By analyzing the survey data, the committee can determine the equity of
the compensation package outside the organization.
Job evaluation will allow the organization to establish internal equity between top managers
and executives. For executives, the Hay profile method is probably the most widely used
method of job evaluation. Finally, base pay will be influenced by the performance of the
executive. Most organizations evaluate their executives according to a set of predetermined
goals or objectives.
Bases for Executive Short-Term Incentives
Incentive bonuses for executives should be based on the contribution the individual makes to
the organization. A variety of formulas have been developed for this purpose. Incentive bonuses
may be based on a percentage of a company‘s total profits or a percentage of profits in excess of
a specific return on stockholders‘ investments. In other instances the payments may be tied to
an annual profit plan whereby the amount is determined by the extent to which an agreed-upon
profit level is exceeded. Payments may also be based on performance ratings or the
achievement of specific objectives established with the agreement of executives and the board
of directors. Objectives influencing the creation of shareholder value include sales, operating
margin, cost of capital, and service and quality measures.
Top corporate executives have the opportunity to earn large sums of money. Frequently, a
significant part of their total compensation comes from incentive bonuses. When long-term
compensation is added to annual base salary increases and bonuses, the total compensation
of some executives may well reach into the millions of dollars.
Bases for Executive Long-Term Incentives
Short-term incentive bonuses are criticized for causing top executives to focus on quarterly
profit goals to the detriment of long-term survival and growth objectives. Emhart Corporation
faced this problem when deciding whether to update and expand a profitable facility that
124 DKR21
manufactured industrial hardware. At one time, Emhart would have opted not to expand,
since the executives making this decision received their incentive bonuses primarily on the
basis of profit growth. Expansion of the hardware plant would not increase short-term profit
growth and thus would cut into their bonuses. But Emhart revamped its plan, deciding to
link executive bonuses with the long-term price of stock Consequently, according to
Emhart chairman T. Mitchell Ford, the company okayed the expansion. ―The plan lets us
manage with a long-term view of the business,‖ said Sherman B. Carpenter, vice president
for administration.
Sears, Combustion Engineering, and Borden, like Emhart, have adopted compensation
strategies that tie executive pay to long-term performance measures. Each of these
organizations recognizes that, while incentive payments for executives may be based on the
achievement of specific goals relating to their positions, the plans must also take into
account the performance of the organization as a whole. Important to stockholders are such
performance results as growth in earnings per share, return on stockholders‘ equity, and,
ultimately, stock price appreciation. A variety of incentive plans, therefore, has been
developed to tie rewards to these performance results, particularly over the long term.
Stock options are the primary long-term incentive offered to executives. The basic
principle behind stock options is that executives should have a stake in the business so that
they have the same perspective as the owners i.e., stockholders. The major long-term
incentives fall into three broad categories:
1. Stock price appreciation grants
2. Restricted stock and restricted cash grants
3. Performance-based grants
Each of these broad categories includes various stock grants or cash incentives for the
payment of executive performance, Often, as one observer notes, organizations combine
stock options with tandem stock appreciation rights plus performance-based grants to
balance market performance and internal, strategic performance. The granting of stock
options contributes substantially to executives‘ million-dollar compensation packages.
Executive Perquisites
In addition to incentive programs, executive employees are often given special benefits and
perquisites. Perquisites, or ―perks,‖ are a means of demonstrating the executives‘ importance
125 DKR21
to the organization while giving them an incentive to improve their performance.

Furthermore, perks serve as a status symbol both inside and outside the organization.
Perquisites can also provide a tax saving to executives, since some are not taxed as income.
Some of the more common perquisites include assigned chauffeurs, country club
memberships, special vacation policies, executive physical exams, use of an executive
dining room, car, phones, liability insurance, and financial counselling.
7.8 Organisation-Wide Incentive Plans
Organisation-wide incentive plans are plans in which all or most employees can participate,
and which generally tie the reward to some measure of companywide performance. Also
called variable pay plans, they include gainsharing plans, Profit-sharing, and employee
stock ownership (ESOP).
7.8.1 Gainsharing Plans
The emphasis on total-quality management has led many organizations to implement a

variety of gainsharing plans. Gainsharing plans enable employees to share in the benefits of
improved efficiency realized by the organization or major units within it. Many of these
plans cover managers and executives as well as hourly workers. The plans encourage
teamwork among all employees and reward them for their total contribution to the
organization. Such features are particularly desirable when working conditions make
individual performance difficult if not impossible to measure.
The basic principle of gainsharing, according to some authorities on productivity and

incentives, is to establish effective structures and processes of employee involvement and a
fair means of rewarding system-wide performance improvement. At its root, gainsharing is
an organizational program designed to increase productivity or decrease labor costs and
share monetary gains with employees.
Inherent in gainsharing is the idea that involved employees will improve productivity
through more effective use of labour, capital, and raw materials and share the financial
gains according to a formula that reflects improved productivity and profitability. The more
common gainsharing plans include profit-sharing plans, the Scanlon and Rucker plans,
Improve share, and employee stock ownership plans (ESOPs).
126 DKR21
7.8.2 Profit-Sharing Plans
Probably no incentive plan has been the subject of more widespread interest, attention, and
misunderstanding than profit sharing. Profit sharing is any procedure by which an employer
pays, or makes available to all regular employees, special current or deferred sums based on
the organization‘s profits. As defined here, profit sharing represents cash payments made to
eligible employees at designated time periods, as distinct from profit sharing in the form of
contributions to employee pension funds.
Profit-sharing plans are intended to give employees the opportunity to increase their
earnings by contributing to the growth of their organization‘s profit. These contributions
may be directed toward improving product quality, reducing operating costs, improving
work methods, and building goodwill rather than just increasing rates of production. Profit
sharing can help to stimulate employees to think and feel more like partners in the
enterprise and thus to concern themselves with the welfare of the organization as a whole.
Its purpose therefore is to motivate a total commitment from employees rather than simply
to have them contribute in specific areas.
A popular example of a highly successful profit-sharing plan is the one in use at Lincoln
Electric Company, a manufacturer of arc welding equipment and supplies. This plan was started
in 1934 by J. F. Lincoln, president of the company. Each year the company distributes a large
percentage of its profits to employees in accordance with their salary level and merit ratings. In
recent years the annual bonus has ranged from a low of 55 percent to a high of 115 percent of
annual wages. In addition, Lincoln's program includes a piecework plan with a guarantee, cash
awards for employee suggestions, a guarantee of employment for thirty hours of the forty-hour
workweek, and an employee stock purchase plan.
The success of Lincoln Electric‘s incentive system depends on a high level of

contribution by each employee. The performance evaluations employees receive twice a
year are based on four factors dependability, quality, output, ideas and cooperation. There is
a high degree of respect among employee and management for Lincoln‘s organizational
goals and for the profit-sharing program.
7.8.2.1 Variations in Profit-sharing Plans
Profit-sharing plans differ in the proportion of profits shared with employees and in the
distribution and form of payment. The amount shared with employees may range from 5 to
127 DKR21
50 percent of the net profit. In most plans, however, about 20 to 25 percent of the net profit
is shared. Profit distributions may be made to all employees on an equal basis, or they may
be based on regular salaries or some formula that takes into account seniority and/or merit.
The payments may be disbursed in cash, deferred, or made on the basis of combining the
two forms of payment.
7.8.2.2 Requirements for Successful Profit-Sharing Plans
Most authorities in the field agree that to have a successful profit-sharing program, an
organization must first have a sound HR program, good labor relations, and the trust and
confidence of its employees. Profit sharing thus is a refinement of a good HR program and
a supplement to an adequate wage scale rather than a substitute for either one. As with all
incentive plans, it is the underlying philosophy of management, rather than the mechanics
of the plan, that may determine its success. Particularly important to the success of a profit-
sharing plan are the provisions that enable employees to participate in decisions affecting
their jobs and their performance.
7.8.2.3 Weaknesses of Profit-Sharing Plans
In spite of their potential advantages, profit-sharing plans are also prone to certain
weaknesses. The profits shared with employees may be the result of inventory speculation,
climatic factors, economic conditions, national emergencies, or other factors over which
employees have no control. Conversely, losses may occur during years when employee
contributions have been at a maximum. The fact that profit-sharing payments are made only
once a year or deferred until retirement may reduce their motivational value. If a plan fails
to pay off for several years in a row, this can have an adverse effect on productivity and
employee morale.
7.8.3 Employee stock ownership plans (ESOP)
Employee stock ownership plans are companywide plans in which a corporation contributes
shares of its own stock or cash to be used to purchase such stock to a trust established to
purchase shares of the firm's stock for employees. The firm generally makes these contributions
annually in proportion to total employee compensation, with a limit of 15% of compensation.
The trust holds the stock in individual employee accounts, and distributes it to
128 DKR21
employees upon retirement (or other separation from service), assuming the person has
worked long enough to earn ownership of the stock.
ESOPs have several advantages. The company gets a tax deduction equal to the fair market
value of the shares that are transferred to the trustee, and can also claim an income tax
deduction for dividends paid on ESOP-owned stock. Employees as noted aren't taxed until
they receive a distribution from the trust, Usually at retirement when their tax rate is lower.
The Employee Retirement Income Security Act (ERISA) allows a firm to borrow against
employee stock held in trust and then repay the loan in pre-tax rather than after-tax dollars,
another tax incentive for using such plans.
ESOPs can also help shareholders of closely held corporations (in which, for instance, a
family owns virtually all the shares) to diversify their assets, by placing some of their own
shares of the company's stock into the ESOP trust and purchasing other marketable
securities for themselves in their place.
Research suggests that ESOPs do encourage employees to develop a sense of ownership in

and commitment to the firm, They do so in part because the ESOPs provide increased
financial incentives, create a sense of ownership, and held build teamwork. Those
responsible for the funds usually, the firm's top executives must be fastidious in executing
their fiduciary responsibilities for the fund.
7.9 Three Unique Bonus Plans
To provide employees with bonuses that encourage maximum effort and cooperation but
are not tied to profit fluctuation, three unique plans have been developed. Two plans, which
bear the names of their originators, Joe Scanlon and Alan W. Rucker, are similar in their
philosophy. Both plans emphasize participative management. Both encourage cost
reduction by sharing with employees any savings resulting from these reductions. The
formulas, on which the bonuses are based, however, are somewhat different. The third plan,
Improshare, is a sharing program based on the number of finished goods that employee
teams complete in an established period.
129 DKR21
7.9.1 The Scanlon Plan
The philosophy behind the Scanlon plan is that employees should offer ideas and
suggestions to improve productivity and, in turn, be rewarded for their constructive efforts.
The plan requires good management, leadership, trust and respect between employees and
managers, and a workforce dedicated to responsible decision making. When correctly
implemented, the Scanlon Plan can result in improved efficiency and profitability for the
organization and steady employment and high compensation for employees.
According to Scanlon‘s proponents, effective employee participation, which includes

the use of committees on which employees are represented, is the most significant feature
of the Scanlon Plan. This gives employees the opportunity to communicate their ideas and
opinions and to exercise some degree of influence over decisions affecting their work and
their welfare within the organization. Employees have an opportunity to become managers
of their time and energy, equipment usage, the quality and quantity of their production, and
other factors relating to their work. They accept changes in production methods more
readily and volunteer new ideas. The Scanlon Plan encourages greater teamwork and
sharing of knowledge at the lower levels. It demands more efficient management and better
planning as workers try to reduce overtime and to work smarter rather than harder or faster.
The primary mechanisms for employee participation in the Scanlon Plan are the shop
committees established in each department. These committees consider production
problems and make suggestions for improvement within their respective departments to an
organization-wide screening committee. The function of the screening committee is to
oversee the operation of the plan, to act on suggestions received from the shop committees,
and to review the data on which monthly bonuses are to be based. The screening committee
is also responsible for consulting with and advising top management, which retains
decision-making authority. Both the shop committees and the screening committee are
composed of equal numbers of employees and managers.
Financial incentives under the Scanlon Plan are ordinarily offered to all employees (a
significant feature of the plan) on the basis of an established formula. This formula is based on
increases in employee productivity as determined by a norm that has been established for labour
costs. The norm, which is subject to review, reflects the relationship between labour
130 DKR21
costs and the Sales Value Of Production (SVOP). The SVOP includes sales revenue and the
value of goods in inventory.
The plan also provides for the establishment of a reserve fund into which 25 percent of any
earned bonus is paid to cover deficits during the months when labour costs exceed the norm.
After the reserve portion has been deducted, the remainder of the bonus is distributed, with 25
percent going to the organization and 75 percent to the employees. At the end of the year, any
surplus that has been accumulated in the reserve fund is distributed to employees.
7.9.2 The Rucker Plan
The Share Of Production plan (SOP), or Rucker Plan, normally covers just production workers
but may be expanded to cover all employees. As with the Scanlon Plan, committees are formed
to elicit and evaluate employee suggestions. The Rucker Plan, however, uses a far less elaborate
participatory structure. As one authority noted, ―It commonly represents a type of program that
is used as an alternative to the Scanlon Plan in firms attempting to move from a traditional style
of management toward a higher level of employee involvement.‖
The financial incentive of the Rucker Plan is based on the historic relationship between the
total earnings of hourly employees and the production value that employees create. The
bonus is based on any improvement in this relationship that employees are able to realize.
Thus, for every 1 percent increase in production value that is achieved, workers receive a
bonus of 1 percent of their total payroll costs.
Lessons from the Scanlon and Rucker Plans
Perhaps the most important lesson to be learned from the Scanlon and Rucker plans is that
any management expecting to gain the cooperation of its employees in improving
efficiency must permit them to become involved psychologically as well as financially in
the organization. If employees are to contribute maximum effort, they must have a feeling
of involvement and identification with their organization, which does not come out of the
traditional manager and subordinate relationship. Consequently, it is important for
organizations to realize that while employee cooperation is essential to the successful
administration of the Scanlon and Rucker plans, the plans themselves do not necessarily
stimulate this cooperation.
The attitude of management is of paramount importance to the success to either plan. For
example, where managers show little confidence and trust in their employees, the plans
tend to fail. Managers further note that Scanlon and Rucker plans are successful only when
the following are true:
131 DKR21
 Bonus formulas are clearly understood and can be reviewed by employees.


 Management is highly committed to making the plan succeed.

 Adequate training is given to both employees and supervisors.

 Adequate potential exists for employee rewards.
Like any other incentive plan, the Scanlon and Rucker plans are no better than the
organizational environment in which they are used.
7.9.3 Improshare
Improshare improved productivity through sharing is a gainsharing program developed by

Mitchell Fain, an industrial engineer with experience in traditional individual incentive
systems. Whereas individual production bonuses are typically based on how much an
employee produces above some standard amount, Improshare bonuses are based on the
overall productivity of the work team. Improshare output is measured by the number of
finished products that a work team produces in a given period. Both production (direct)
employees and nonproduction (indirect) employees are included in the determination of the
bonus. Since a cooperative environment benefits all, Improshare promotes increased
interaction and support between employees and management.
The bonus is based not on dollar savings, as in the Scanlon and Rucker plans, but on
productivity gains that result from reducing the time it takes to produce a finished product.
Bonuses are determined monthly by calculating the difference between standard hours
(Improshare hours) and actual hours, and dividing the result by actual hours. The
employees and the company each receive payment for 50 percent of the improvement.
Companies such as Hinder liter Energy Equipment Corporation pay the bonus as a separate
check to emphasize that it is extra income.
7.10 KEYWORDS
Compensation Financial Incentives
Gainsharing Plan Profit-Sharing Plan
Employee stock ownership plans (ESOP) Rucker Plan
Scanlon Plan Piecework
Organisation-Wide Incentive Plans Standard hour plan
132 DKR21
1. What do you understand by compensation?

2. What are the advantages of incentive pay programs?
3. Write the effects of incentive compensation
4. Discuss the various types of incentive plans.
5. Describe the nature of some important management incentives.
6. Explain the Incentives for Hourly Employees.
7. Discuss the Profit-Sharing Plans. Elaborately.
8. Write short notes on:
a) The Scanlon Plan
b) The Rucker Plan
c) Improshare
133 DKR21
LESSON
JOB EVALUATION
CONTENTS
8.0 Introductions
8.1 Definitions
8.2 Objectives of job evaluation
8.3 Principles of Job Evaluation
8.4 Advantages of Job Evaluation
8.5 Methods of Job Evaluation:
8.5.1 Merit rating
8.5.1.1 Objects Of Merit Rating
8.5.1.2 Methods of Merit Rating
8.6 Limitation of Job Evaluation
8.7 Keywords
134 DKR21
8.0 Introduction
Job Evaluation is a system wherein a particular job of an enterprise is compared with its other
jobs. In the present industrial era, there are different types of jobs which are performed in every
business and industrial enterprise. Comparative study of these jobs is very essential because on
the basis of such study the structure of wages for different types of jobs is prepared. The
comparison of jobs may be made on the basis of different factors such as duties,
responsibilities, working conditions, efforts, etc. In nut shell, it may be said that job evaluation
is a process in which a particular job of a business and industrial enterprise is compared with
other jobs of the enterprise. Some scholars name it the determination of job rate.
8.1 Definitions:
Below are given some important definitions of the job evaluation
1. According to the International Labour Office (ILO), "Job evaluation is an attempt to

determine and compare the demands which the normal performance of a particular job makes
on normal workers, without taking into account the individual abilities or performance of the
workers concerned".
2. In the words of Kimball and Kimball "job evaluation as an effort to determine the relative
value of every job in a plant to determine what the fair basic wage for such a job should be".
3. Wendell French defines job evaluation as "a process of determining the relative worth of
the various jobs within the organization, so that differential wages may be paid to jobs of
different worth. The relative worth of a job means relative value produced. The variables
which are assumed to be related to value produced are such factors as responsibility, skill,
effort and working conditions".
Job evaluation is a process of comparing jobs with other jobs in terms of the demand a job
makes on the worker. It does not set the price of a job; it merely fixes its relative worth. It
presents an effort to determine the relative value of every job in a plant, and to determine
what the fair basic wage for such a job should be. It is not evaluating the ,merit of the
worker who is doing the work. It rates the job and not the qualities of the individual worker
on the job, which is the task of employee rating. We may define job evaluation as a process
of analyzing and describing positions, grouping them and determining their relative value
of comparing the duties of different position in terms of their different responsibilities and
other requirements.
135 DKR21
8.2 Objectives of job evaluation
The following are the objectives of job evaluation:
(i) To secure and maintain complete, accurate and impersonal descriptions of each distinct
job or occupation in the entire plant.
(ii) To provide a standard procedure for determining the relative worth of each job in a plant.
(iii) To determine the rate of pay for each job which is fair and equitable with relation to
other jobs in the plant, community or industry.
(iv) To ensure that like wages are paid to all qualified employees for like work.
(v) To promote a fair and accurate consideration of all employees for advancement and
transfer.
(vi) To provide a factual basis for the consideration of wage rates for similar jobs in a
community and industry. and
(vii) To provide information for work organization, employees‗ selection, placement,

training and numerous other similar problems.
8.3 Principles of Job Evaluation
There are certain broad principles, which should be kept in mind before putting the job
evaluation programme into practice. These principles are:
(i) Rate the job and not the man. Each element should be rated on the basis of what the job
itself requires.
(ii) The elements selected for, rating purposes should be easily explainable in terms and as
few in number as will cover the necessary requisites for every job without any overlapping.
(iii) The elements should be clearly defined and properly selected.
(iv) Any job rating plan must be sold to foremen and employees. The success in selling it
will depend on a clear-cut explanation and illustration of the plan.
(v) Foremen should participate in the rating of jobs in their own departments.
(vi) Maximum co-operation can be obtained from employees when they themselves have an
opportunity to discuss job ratings.
136 DKR21
(vii) In talking to foremen and employees, any discussion of money value should be
avoided. Only point values and degrees of each element should be discussed.
(viii) Too many occupational wages should not be established. It would be unwise to adopt
an occupational wage for each total of point values.
8.4 Advantages of Job Evaluation
Job evaluation enjoys the following advantages:
(i) Job evaluation is a logical and to some extent an objective method of ranking jobs
relative to one another. It may help in removing inequalities in existing wage structures and
in maintaining sound and consistent wag differentials a plant or industry.
(ii) In the case of new jobs, the method often facilitates fitting them into the existing wage
structure.
(iii) The method helps in removing grievances arising out of relative wages; and it
improves labour and management relations.
(iv) The method replaces the many accidental factors, occurring in less systematic
procedures, of wage bargaining by more impersonal and objective standards, thus
establishing a clear basis for negotiations.
(v) The method may lead to greater uniformity in wage rates, thus simplifying wage
administration.
(vi) The information collected in the process of job description and analysis may a1so be
used for the improvement of selection, transfer and promotion procedures on the basis of
comparative job requirements.
(vii) Such information also reveals that workers are engaged on jobs requiring less skill and
other qualities than they possess, thereby pointing to the possibility of making more
efficient me of the plants‗ labour force.
8.5 Methods of Job Evaluation:
The following are the methods of Job Evaluations
1. Ranking Method: The ranking method requires a committee typically composed of both
management and employee representatives of job in a simple rank order, from highest to lowest.
Rating specialists review the job analysis information and thereafter appraise each job
137 DKR21
subjectively according to its general importance in comparison with other jobs. In other
words, an overall judgment is made of the relative worth of each job, and the job is ranked
accordingly. These are overall rankings, although raters may consider individually the
responsibility, skill, effort, and working conditions and each job. No attempt is made to
determine the critical factors in each job. Therefore, it is quite possible that important
elements of some jobs may be overlooked while unimportant items are weighed too
heavily. It may be noted that because of the difficulties in ranking a large number of jobs at
the time, the paired comparison technique of ranking is sometimes used. With this
technique, decisions are made about the relative worth of only two jobs at a time. However,
since each job is compared with every other jobs, the number of comparisons to be made
increases rapidly with the addition of each job to the list.
2. Job Grading or Job Classification Method: This method works by assigning each job
a grade, level or class that corresponds to a pay grade for instance Grade I, Grade II, Grade
III and so forth. These grades or classifications are created by identifying gradations of
some common denominations, such as job responsibility, skill, knowledge, education
required, and so on. Then, for each job grade so created standard job descriptions are
determined. Thereafter, such standard description is matched with job descriptions in the
organization. The standard description that most nearly matches the job description
determines the job‗s grading. This method requires a decision at the initial stage on the
number of pay grades to be included in the wage and salary plan. Of course, the actual
amount to be assigned to pay grades made after the job evaluation is completed.
3. Factor-comparison Method: This method is a combination of ranking and point

systems. All jobs are compared to each other for the purpose of determining their relative
importance by selecting four or five major job elements or factors which are more or less
common to all jobs. These elements are not predetermined. These are chosen on the basis of
job analysis. The few factors which are customarily used are: (i) mental requirements (ii)
skill (iii) physical requirements (iv) responsibilities (v) working conditions, etc. A few jobs
are selected as key jobs which serve as standard against which all other jobs are compared.
key job is one whose contents have been stabilized over a period of time and whose wage
rate is considered to be presently correct by the management and the union.
138 DKR21
Evaluation of Various Methods: None of the systems is free from defects. None is the
best in all conditions and for all types of organizations. However, the point system is the
best in the present circumstances. It is widely used in almost all the enterprises as a
technique of job evaluation since it presents an analytical approach to the measurement of
job worth. It is better not to insist on a particular system of job evaluation. A mix of all the
methods should be adopted.
8.5.1 Merit Rating
Merit rating in a technique to evaluate the merits of duals according to job request merit.
The personal abilities that an individual brings to his job, measured by the extent to which
his output or quality of his work exceeds the minimum that can reasonably to expect for his
basic rate of pay.
The definitions of merit rating are given as follows:
1. According to Edward Flippo, "Merit rating is a systematic, periodic and, so far as

humanly possible, an impartial rating of an employee‗s excellence in matters pertaining to
his present job to his potentialities for a job".
2. According to Scot, Clothier and Spriegal, "Merit rating of an employee is the process of
evaluating the employee‗s performance on the job in terms of the requirements of the job".
3. Alford and Beatty observe, "Employees or personnel rating is the evaluation or appraisal
of the relative worth to the company of a man‗s services of his better job".
8.5.1.1 Objects Of Merit Rating
The objects of Merit Rating are as follows:
1. To make a comparative study of the abilities of different employees.
2. To provide higher reward to the more efficient employees.
3. To prove the justification of different rat of wages to different employees according to

their abilities.
4. To establish harmonious relation between employees and employers.
5. To motivate the employees to do better and more work.
6. To determine a policy for promotions and transfer.
139 DKR21
7. To evaluate the success of training programmes.
8. To forecast the need of training to the employees and to determine the nature of training.
8.5.1.2 Methods of Merit Rating
Following are the various methods of Merit Rating:
1. Rating Procedure: In this method, the abilities of an employee are compared with that
of other employees. Under this method, the employees are divided into efficient and
inefficient employee. This method adopts the technique of paired comparison. Therefore,
the pairs of two employees each are made according to the formula of N (N-1) Z and the
more efficient employee in every pair is underlined. The employee having maximum
underline is treated as the most efficient employee having maximum underline is treated as
the most efficient employee whereas the employee having no underline to his credit is
treated least efficient employee.
2. Grading Method: Here different grades are divided for evaluating the ability of
different employees and then the employees are placed in these grades. The grades are,
Excellent, Very Good, Good, Average, Bad, And Worst. Every grade may again be sub-
divided into three grades: (i) Highly Satisfactory (ii) Satisfactory (iii) Non-satisfactory.
Employees can be placed in any of these groups according to their abilities.
3. Man to Man Comparison Method: This is the method where, a master scale is used to
evaluate the qualities of different employees. The five scales of performance are determined
for every job in the master scale. For example, to measure the efficiency of employees, first
of all the most efficient employee is selected and after that the most inefficient employees
are selected who are respectively more efficient than average efficiency and less efficient
than average efficiency. These five employees become the base for measuring the
efficiency of the total employees. Every employee of the enterprise is compared with these
five employees to evaluate their ability and efficiency.
140 DKR21
4. Graphic Rating Method: In this method, the abilities of employees are evaluated
through graph. The abilities of all the employees are represented on a graph paper with the
help of scale. Following qualities are included to evaluate the ability of employees such as
quantity of Job, quality of job, regularity, ability to learn, ability to initiate, dependence
upon other employees and officers, safety aspects, ability to direct, ability to supervise,
behaviour with other employees and officers.
Under this method of Merit Rating, a report is prepared regarding Merit Rating of every
employees and it is represented on a graph paper. It makes evaluation of employees very
easy and simple.
5. Checking List Method: A list of necessary qualities for the performance of a job is prepared
under this method. The qualities of the employees are measured on the basis of the abilities of
such lists. If an employee possesses that quality, the sign ‗+‗ is marked in the list. If that quality
is not possessed by an employee the sign ‗-‗ is marked in the list. If there is a doubt regarding
it, the sign of (?) is marked in the list. On the basis these sign, the abilities of an employee are
evaluated. The specimen of checking list of Merit Rating is as follows :
Checking List of Merit Rating
S.No. Question Yes (+) No (-)
1. Does the employee possess technical knowledge of his job?
2. Does the employee possess interest in his job?
3. Is the attendance of employee satisfactory?
4. Is the health of employee satisfactory?
5. Does the employee follow the orders and instructions?
6. Does the employee behave well?
7. Does the employee perform his duties properly?
8. Does the employee violet his responsibilities?
6. Descript Evaluation Method: In this method supervisor prepares a detailed report of the
abilities, efficiency and potentialities of the employees under his supervision. All the
employees are evaluated on the basis of these reports.
141 DKR21
7. Forced Choice Descriptive Method: In this method some details are collected regarding the
performance of an employee on the given job. After this, some standards are fixed with the
consent of evaluations. The performance of an employee is evaluated on the basis of these
standards and the ability and efficiency of all the employees are evaluated on this basis.
8.6 Limitation of Job Evaluations: These are:
(i) Though many ways of applying the job evaluation technique are available, rapid changes
in technology and in the supply and demand of particular skills have given rise to problems
of adjustment.
(ii) Substantial differences exist between job factors and the factors emphasized in the
market. These differences are wider in cases in which the average pay offered by a
company is lower than that prevalent in other companies in the same industry or in the
same geographical area.
(iii) A job evaluation frequently favours groups different from those which are favoured by
the market. This is evident from the observations whole of Kerr and Fisher. According to
them, "the jobs which tend to rate high as compared with the market are those of janitor,
nurse and typist, while craft rates are relatively low. Weaker groups are better served by an
evaluation plan than by the market; the former places the emphasis not on force but on
enquiry".
(iv) Job factors fluctuate‗ because of changes in production technology, information

system, and division of labour and such other factors. Therefore, the evaluation of a job
today is made on the basis of job factors, and does not reflect the time job value in future.
In other words, continuing attention and frequent evaluation of a job are essential.
(v) Higher rates of pay for some jobs at the earlier stages than other jobs or the evaluation
of a job higher in the organizational hierarchy at a lower rate than another job relatively
lower in the organizational hierarchy often give rise to human relations problems and lead
to grievances among those holding these jobs.
8.7 KEYWORDS
Job Evaluation Job

Job Grade Check list
Merit Rating Wages
142 DKR21
1. What is meant by Job Evaluation? What are the objectives of

Job Evaluation?
2. Discuss the advantages of Job Evaluation. Does job evaluation have
any limitations? what are these?
3. Explain the various methods of job evaluation.
4. What is Merit rating? Discuss the different methods of merit rating.
5. Write notes on the following:
a) Ranking method
b) Grading method
c) Checking list method
143 DKR21
LESSON
BENEFITS AND SERVICES:
CONTENTS
9.0 Introduction
9.1 Types of benefits
8.1.1 Statutory benefits
8.1.2 Non statutory benefits (Voluntary)
9.2 Insurance benefits
9.2.1 The Worker‘s Compensation Act, 1923
9.2.2 Employee‘s State Insurance Act. 1948
9.3 Retirement benefits
9.4 Keywords
144 DKR21
9.0 Introduction
According to the two-factor theory propounded by Herzberg the factors which motivate
workers to produce more are increased responsibility, advancement, growth, recognition,
achievement and the work itself. Labour welfare and security benefits do not fall under any
these factors. There is evidence to show that after some time these benefits, not being
dependent or performance, are taken for granted by the workers.
They also benefit the employer in several ways many of which are not subject to
quantification. Among these benefits are:
 More effectiveness recruitment


 Improved morale and loyalty

 Lower turnover and relations
 Good industrial relations


 Reduced influence of unions

 Enhanced public image and good will
9.1 Types of benefits
Various benefits provided to the employee may be classified on different bases. One
classification may be in terms of statutory and voluntary benefits provided to employees
under these two categories are discussed hereunder.
9.1.1 Statutory benefits. These benefits are mandatory provided under the provisions of
various Acts as discussed below.
(i) The Factories Act, 1948: This act covers area including health, welfare, safety, working
hours, leave with wages, etc. The various benefits provided under the act include: (i) No
worker (adult) shall be required to work in a factory for more than 48 hours in any week
(Section 51) ; (ii) The working hours shall be kept restricted to 9 hours on any day (Section
54); An adult worker shall have weekly holidays, is eligible for compensatory holidays of
the same number in the same month; (v) Provision for double salary to the workers working
during holidays ; and (vi) Provision for canteen employing more than 250 workers and
crèches where more than 30 women employees are working.
(ii) The mines Act, 1952: Apart from provision for canteen and creches, the Mines Act,
1952 specifies that there should be provision for first-aid boxes and first-aid rooms in mines
employing more than 150 workers and appointment of a welfare officer in mines employing
more than 500 workers.
145 DKR21
(iii) The plantation Labour Act, 1951: The Act makes provision for canteen in plantations
employing 150 or more workers, educational arrangements in the estate for the children of
workers, where there are 25 workers' children between the age of 6 and 12, and provision
for umbrellas, blankets, raincoats, or other such amenities for the protection of workers
from rain or cold as may be prescribed. appointment of a Welfare Officer in plantations
employing 300 or more workers is also specified in the Act. Besides, workers who worked
for 240 days during a calendar year are eligible for paid vacation at the rate of one day for
every 20 days worked in case of adult works and at the rate of one day for every 15 days
worked in case of child workers.
(iv) The Motors Transport Workers Act, 1961:
Under this Act also, provisions for canteen, rest rooms, uniform, raincoats, medical
facilities, etc., are made. First-aid facilities equipped with the prescribed contents are to be
provided in every transport vehicle.
(v) Employees' State Insurance Act, 1948: This Act deals comprehensively about the
health to be provided to the employees working in factories. establishments running with
power and employing 20 or more workers. The main benefits provided under this Act
include sickness benefit for 56 days in a year, maternity benefit, disablement benefit,
dependent‘s benefit, medical benefit, etc...
(vi) Workmen's Compensation Act, 1923: In addition to safety and health measures,
provision for the payment of compensation has also been made under this Act. The Act
covers the employees whose wages are less than Rs. 500 per month. Amount of
compensation depends on nature of injury and the monthly wages of employee. In case of
death of the employee, his dependents are eligible for compensation.
9.1.2 Non statutory benefits (Voluntary): Voluntary benefits are determined and provided
by the individual organizations at their own. These benefits may include educational
facilities, transportation facilities, housing facilities, recreational facilities, consumer
cooperative societies, subsidized lunch/refreshment, child care, etc. Since providing these
facilities is obligatory on the part of employers. hence the level and degree of facilities
provided vary across the organizations.
U.S Chamber of Commerce has classified employee benefits into five categories as follows:
1. Legally - required payments:
(i) Old age pension
(ii) Disability pension
146 DKR21
(iii) Unemployment insurance
(iv) Worker's compensation
2. Contingent and deferred benefits
(i) pensions plan
(ii) Group life insurance
(iii) Maternity leave
3. Payment for time not worked:
(i) Vacation
(ii) Holidays
(iii) Voting Pay Allowances
4. Paid rest periods
(i) Waste-up time
(ii) Lunch periods.
5. Christmas Bonus
9.2 Insurance Benefits
Most employers also provide a number of required or voluntary insurance benefits such as
worker‘s compensation and health insurance.
Worker’s Compensation
Worker‘s compensation laws aim to provide sure, prompt income and medical benefit to
work related accident victims or their dependents, regardless of fault. Every state has its
own worker‘s compensation law and commission, and some run their own insurance
programs. However, most require employers to carry worker‘s compensation insurance
with private, state approved insurance companies. Neither the state not the federal
government contributed any funds for worker‘s compensation.
How Benefits are Determined
Worker‘s compensation benefits can be monitory or medical. In the event of a worker‘s

death or disablement, the person‘s dependents receive a cash benefit based on prior
earnings – usually one – half to two – third the worker‘s average weekly wage, per week of
147 DKR21
employment. If the injury causes a specific loss (such as an arm), the employee may receive
additional benefit based on a statutory list of losses, even though he or she may return to
work. In addition to these cash benefits, employers must furnish medical, surgical, and
hospital services as required for the employee
Controlling Worker’s Compensation Cost
It is important to control worker‘s compensation claims. While it‘s usually the employer‘s
insurance company that pays the claim, the cost of the employer‘s premiums reflect the
amount of claims. In practice, there are several ways to reduce worker‘s compensation
claims. Screen out accident - prone workers. Reduce accident – causing conditions in your
facilities. And reduce the accidents and health problems that trigger claims – for instance,
by instituting effective safety and health programs and complying with government safety
standards.
It‘s also important to get injured employees back on the job as fast as possible, since
workers compensation costs accumulate as long as the person is out of work. Many firms
have rehabilitation programs. This include physical therapy; career counselling to guide
injured employees into new, less strenuous jobs; and nursing assistance to help reintegrate
recipients back into workforce.
9.2.1 The Worker’s Compensation Act, 1923
This Act is the first planned step in the field of social security in India. The main objective
of the Act is to ensure compensation to workers for accidents occurred during the course of
employment. The main features of the Act are as follows:
Coverage: This act covers workers employed in factories, mines, plantations, mechanically
propelled vehicles, construction works, railways, ships, circus and other hazardous
occupations specified in schedule II of the Act. It does not apply to the Armed forces,
casual workers and workers covered by the Employee‘s State Insurance Act. 1948.
Administration: The Act is administered by the State Government by appointing

commissioners for this purpose under section 20 of the Act
Benefits: Under this Act, compensation is payable by the employer to the workman for all
personal injuries caused by industrial accidents which disable him/her for more than three days.
In case of death of workman, the compensation is paid to his/her dependents. The Act also
specifies that in case a workman contracts any occupational disease, which is specified in its
third schedule, such disease shall ordinarily be treated as an employment injury arising
148 DKR21
out of and in the course of employment. The employer is under obligation to make the
payment of compensation within one month from the date on which it is due. In case of
default in paying the compensation due under the Act, the commissioner may direct for
recovery of the amounts of arrears with interest.
9.2.2 Employee’s State Insurance Act. 1948
The main objective of this Act is to provide social insurance for workers. It is a
contributory and compulsory health insurance scheme that provides medical facilities and
unemployment insurance to industrial workers for the period of their illness. Following are
the main features of this Act;
Coverage: The Act covers all workers (weather manual, supervisory or salaried employees)
whose income do not exceed Rs. 6500/- per month and are employed in factories, other
than seasonal factories which run with power and employee 20 or more workers. The state
government can extent the coverage of the act with the approval of the central government.
Administration: The Act is administrated by the Employees State Insurance (ESI)

Corporation, an autonomous body of 40person consisting of representatives of the Central
and State Government, employers, employees, medical profession and the parliament.
Benefits: Under this Act, an insured is entitled to receive the following types of benefits:
1. Medical Benefits: An insured or a member of his or her family requiring medical help is
entitled to receive medical facility free of charge in a hospital either run by the ESI
corporation or by any other agency.
2. Sickness Benefit: An insured worker in case of certified sickness is entitled to receive

cash payment for a maximum period of 91days in any continuous period of 1 year. The
daily rate of sickness benefit is calculated as half of average daily wages. The insured
worker should be under medical treatment at a dispensary or any other medical institutions
maintained by the corporation.
3. Maternity Benefit: An insured woman is entitled to receive cash payment calculated at a

full average wage for a period of 12 weeks of which not more than 6 weeks shall precede
the expected date of her confinement.
149 DKR21
4. Disablement Benefit: This benefit is entitled to insured worker in case of individual

accidents and injury. In case of temporary disablement, the worker is paid 70% of wages
during the period of disablement. In the case of permanent partial disablement, the insured
individual is entitled to a cash benefit for life to be paid as a percentage of the full rate. In
the case of permanent total disablement, 70% of the wages is paid as monthly pension to
the worker for life.
5. Dependents’ Benefit: This benefit is available to the dependents of a deceased worker

due to industrial accident or injury. The rate of benefit differs depending upon the
relationship between the deceased and the dependents.
9.3 Retirement benefits
A retirement plan or a pension is an arrangement by an employer to provide their

employees with an income when they are no longer earning a regular income from working.
Retirement plans may be set up by in a variety of ways but typically will have a form of a
guaranteed payment. Often retirement plans require both the employer and employee to
contribute money into a fund while employed so that they will receive benefits upon
retirement. Pension plans are considered a form of delayed income.
The first contingent of baby boomers turns in the year 2011, and many reportedly won't wait till
65 to retire. This presents two challenges for employers. First, many employees, facing the
inevitable aging process, are seeking (or demanding) enhanced retirement benefits. Second,
we'll see that employers, facing a looming employee shortage, are taking steps to entire older
workers to keep working in capacity. The major retirement benefits are the
Social Security
Most people assume that social security provides income only when they are over 62, but it
actually provides three types of benefits. The familiar retirement benefits provide an income if
you are retire at age 62 or thereafter and are insured under the Social Security Act. Second are
survivor's or death benefits. These provide monthly payments to your dependents regardless of
your age at death, again assuming you are insured under the Social Security Act. Finally there
are disability payments. These provide monthly payments to employees who become totally
disabled (and to their dependents) if they work and meet certain
150 DKR21
requirements. The Social Security System also administers the Medicare program, which
provides a wide range of health services to people 65 or over. "Full retirement age"
traditionally was 65 the usual age for retirement. However, full retirement age to collect
Social Security rose gradually till 1960. It is now 67 for those born in 1960 or later.
Pension Plans
pension plans are financial programs that provide income to individuals in their retirement.
About half of full-time workers participate in some type of pension plan at work. However,
the actual rate of participation depends on several things. For example, older workers tend
to have a higher participation rate, and employees of larger firms have participation rates as
much as three times as high as those in small firms.
we can classify pension plans in three basic ways: contributory versus non-contributory;
qualified versus nonqualified plans; and defined contribution versus defined benefit plans.
The employee contributes to the contributory pension plan, while the employer makes all
contributions to the non-contributory pension plan. Employers drive tax benefits from
contributing to qualified pension plans, such as tax deductions for pension plan contribution
(they are "qualified‖ for improved tax treatment); nonqualified pension plans get less
favourable tax treatment for employees and employers.
Defined Benefits plans with defined benefits plans, employees know ahead of time the
pension benefits they will receive (the benefit is "defined" or specified by amount or
formula). The defined pension benefit itself is usually set by formula that it ties the
pension's retirement pension to an amount equal to a percentage of the person's
preretirement pay (for instance, to a fraction of an average of his or her last five years of
employment), multiplied by the number of years he or she worked for the company.
Defined Contribution plans in defined contribution plans specify what contribution the
employee and /or employer will make to the employee's retirement or savings fund. Here,
in other words, the contribution is defined, not the pension. with a defined benefit plan the
employee knows what his or her retirement benefits will be upon retirement. With a defined
contribution plan, The person's pension will depend on the amounts contributed to the fund
and on the retirement fund's investment earnings. Defined contribution plans prevail among
employers today, because of their relative ease of administration, favorable tax treatment,
and other factors. Portability - making it easier for employees who leave the firm prior to
151 DKR21
retirement to take their accumulated pension funds with them - is enhanced by switching
from defined benefit to defined contribution plans. The former are therefore more
appropriate for employees who plan to stay with the firm until retirement.
401(k) plans The most popular defined contribution plans are based on section 401 (k)
of the Internal Revenue Code, and called 401(k) plans. The employee authorizes the
employer to deduct a sum of money from his or her pay check before taxes, and to
invest it in bundle of investments in his or her 401(k). The deduction is pre-tax, so the
employee pays no tax on those set-aside dollars until after he or she retires (or removes
the money from the 401(k) plan). The person can decide to deduct any amount up to
legal maximum (the IRS sets as an annual dollar limit - now about $15,000). The
employer arranges, usually with an investment company such as Fidelity Investments,
to actually manage the 401(k) plan to make various investment options available to the
company's 401(k) plan. The options typically include mutual stock funds and both
funds.
Registered Retirement Savings Plans
A Registered Retirement Savings Plan or RRSP is an account that provides tax benefits
for saving for retirement yet is not necessarily based on the employer/employee
relationship. RRSPs can provide ways to save money for retirement and defer and
reduce taxes because:
 Contributions to RRSPs, up to established limits, may be deducted from income in

pre-taxed dollars.

 Income earned within the account is not taxed until money is withdrawn from the
plan. RRSP accounts can be setup with as either:

 Individual RRSP
An Individual RRSP is associated with only a single individual; only they

contribute money to their RRSP.
 Spousal RRSP
152 DKR21
The spouse of the contributor is actually the account holder. A spousal RRSP is a
means of splitting income in retirement.
 Group RRSP
An employer can arrange for employees to make contributions through a schedule of

regular payroll deductions. In many organizations RRSP contributions can be based on
a ―matching‖ program. This means that the employer will put in a certain percentage
or dollar amount based on the contributions the employee makes.
The employee gets to receive the tax savings immediately at the time of deduction
instead of having to wait until the end of the tax year.
Phased Retirement
Today‘s work place is challenged with having up to four different generations working side
by side. For most employers, designing a compensation and benefit structure that address
the unique needs of each demographic group, is a complex task. Added to that is the shift in
pension structures over the past few years. Some non-profit organizations provide their
employees with a pension fund; however most tend to offer only contributions to an RRSP.
This leads to an increasing number of employees not feeling able to retire.
It is important that organizations understand the details of their pension plan, whether it is a
defined benefit or contribution or simply an RRSP program before considering design
changes. For those not hindered by a design change, one option that is gaining in
popularity, especially in this sector, is providing a phased retirement program for older
skilled employees.
For employees:
Components of the phased program are allowing employees who might be considering
retiring to delay their departure date, continue to earn a partial income that reduces the
burden on their pension income, they continue to receive benefit coverage and are able to
acclimate gradually by continuing to reduce their hours until they are prepared to leave.
For employers:
Employers are able to develop a timely and effective succession plan without losing critical
skills or intellectual capital. Organizations benefit by being able to tap into the most
experienced staff at a reduced salary, while transitioning to a new team or organizational
design.
153 DKR21
Hurdles:
Employees need to understand the impact continuing to work may have on pension or
benefit programs; also to be considered is the timing of starting your phased approach. If an
employee starts too soon, they might not have accumulated enough to compensate for the
reduced salary.
Employers need to be sure that the phased retirement program is structured in a way that
will not diminish the work of the organization or the financial position of the employee.
9.4 KEYWORDS
Benefit Service
Insurance Retirement
Social Security
1. Explain the different types of benefits.

2. Describe the Insurance benefits.
3. Explain the Retirement benefits
4. Briefly explain the Employee‘s State Insurance Act. 1948.
154 DKR21
LESSON
10
INDUSTRIAL RELATION AND COLLECTIVE BARGAINING
CONTENTS
10.0 Industrial Relation

10.0.1 Meaning of Industrial Relations
10.0.2 Definition of Industrial Relations
10.0.3 Nature of IR
10.0.4 Two dominant aspects of Industrial Relations
10.0.5 Significance or Importance of IR
10.0.6 Objectives of Industrial Relations
10.0.7 Conditions for good IRs
10.0.8 Cause of Poor IR
10.0.9 Suggestions to Improve Industrial Relations
10.1 Collective bargaining
10.1.1 Objectives of Collective bargaining
10.1.2 Importance of Collective bargaining
10.1.3 Bargaining process
10.2 Keywords
155 DKR21
10.0 Industrial Relation:
―Industrial Relation‖ pose one of the most delicate and complex problems to modern industrial
society. With growing prosperity and rising wages, workers have achieved a higher standard of
living; they have acquired education, sophistication and greater mobility. Career
patterns have changed for larger section of the people have been constraint to leave their
farms to become wage – earners and salary – earners in urban areas under trying conditions
of work. Ignorant and drenched in poverty, vast masses of men, women and children have
migrated to urban areas. The organizations in which they are employees have ceased to be
individually owned and have become corporate enterprises. At the same time, however, a
progressive, status – dominated, secondary group – oriented, universalistic, aspirant and
sophisticated class of workers has come into being, who have their own trade unions and
who have, thus, gained a bargaining power which enables them to give a tough fight to their
employers to establish their rights in growing industrial society. As a result, the government
has stepped in and played an important role in establishing harmonious industrial relations,
partly because it has itself become an employer of millions of industrial workers, but
mainly because it has enacted a vast body of legislation to ensure that the rights of
industrial workers in private enterprises are suitably safe guarded. Besides, rapid changes
have taken place in the techniques and methods of production. Long established jobs have
disappeared and new employment opportunities have been created, which call for different
patterns of experience and technical education. Labour employer relationships have,
therefore, become more complex than they were in the past and have been given a sharp
edge because of the widespread labour unrest. In the circumstances, a clear understanding
of the factors which make for this unrest and which are likely to eliminate it would be a
rewarding experience for anyone who is interested in industrial harmony.
10.0.1 Meaning of Industrial Relations
Broadly, the term ‗Industrial Relations‘ is used to donate the collective relationship
between management, employees and government in any industrial or non-industrial
organization. Individual relationships of workers with their management are thus excluded
from the scope of industrial relations and form part of personnel management.
10.0.2 Definition of Industrial Relations
―Industrial relations‖ refer to a dynamic and developing concept which is not limited to
―the complex of relationship between trade unions and managements‖ but also refers to the
―general web of relationships normally obtaining between employers and employees, a
web, much more complex than the simple labour – capital conflict‖.
156 DKR21
The labour dictionary defines ―industrial relations‖ as ―the relationship between employers
and employees in industry‖. According to Dale Yoder, ―industrial relationship‖ describes
―relationship between managements and employees or among employees and their
organizations that characterize or grow out of employment.
10.0.3 Nature of IR
Industrial Relations are always a mixture of cooperation and conflict. However,

much cooperation may be sort as an organizational objective, some conflict will always
remain. There are at least 3 reasons for this:
1. Both the groups (labour and management) develop different orientations and perceptions
of their interests. They also develop generally negative image about each other.
2. There are no mutually accepted yardsticks or norms to tell to the groups how far they
should go in the pursuit of their objectives. In the absence of norms both groups claim
complete rationality for their demands.
3. There is no neutral field for the groups to meet on. This means that whenever the two
groups meet each other for negotiations they bring with them some carry over from the past
beside their inherent distress and suspicion for each other.
10.0.4 Two Dominant Aspects of Industrial Relations
There are 2 important aspects of the industrial relations scene in a modern‘s industrial society:
(1) cooperation and (2) conflict
1. Cooperation: Modern Industrial production is based upon cooperation between

labour and capital. Here labour stands for the workers who man the factories, mines and
other industrial establishments or services. Capital stands for the owners or business
enterprises that supply the capital and own the final products. The cooperation between the
two is one of the basic requirements for the functioning of modern industries and the
growth of industrialization. This needs no further elaboration as it is clear that large
factories and other business establishments cannot run successfully unless, there is close
cooperation between labour and capital. The very fact that the present industrial
organization and the economics structure have been able to turn out a quality of goods and
services unprecedented in the history of mankind are an index of extends of cooperation
between the two. Cooperation is the normal feature of industrial relations.
157 DKR21
2. Conflict: The second aspect of the system of industrial relations (IR) today is the
existence of conflict. Conflict, like cooperation, is inherent in the IR setup of today. It
becomes apparent when industrial disputes resulting in strikes and lockouts become
frequent. The prevailing industrial unrest, the frequency of work-stoppages resulting either
from strikes or lockouts and the slowing down of production are the occasional expression
of the ever present and latent conflict between workers and the management.
10.0.5 Significance or Importance of IR
The significance of good IR in any country cannot be overemphasized. Good industrial

relations are necessary for the following reasons:
1. To help in the economic progress of a country. The problem of an increase in

productivity is essentially the problem of maintaining good IRs. That is why they form an
important plank of the economic development plan of every civilized nation.
2. To help establishing and maintaining true industrial democracy which is a prerequisite

for the establishment of a socialist society.
3. To help management both in the formulation of informed labour relations policies and in
their translation into action.
4. To encourage collective bargaining as a means of self-regulation. They consider the

negotiation process as an educational opportunity, a chance both to learn and to teach.
5. To help government in making loss forbidding unfair practices of unions and employers.
6. To boost the discipline and morale of workers. Maintenance of discipline ensures

orderliness, effectiveness and economy in the use of resources. On the other hand, lack of
discipline means waste, accidents, loss and confusion. It also means insubordination and
non-co-operation.
Content of Industrial Relations
IR do not constitute a simple relationship but are a set of functional inter-dependent

complexities involving historical, economic, social, psychological, demographic, technological,
occupational, political, legal and other variables and call for inter-disciplinary approach to their
study. IR does not function in a vacuum but are multi-dimensional in nature
158 DKR21
and they are conditioned by two sets of determinants – the institutional factors and
economical factors
Institutional Factors, include such matters as state policy, labour legislation, labourers and
employers‘ organizations and social institution (community, caste, joint family, religions),
attitude towards work, system of power and status and motivation and influence, the system
of industrial relations, etc. Under Economical Factors are included economic organization
(socialist, capitalist, individual ownership, company ownership, government ownership),
capital structure – including technology, the nature and composition of the labour force and
the sources of supply and demand in the labour market. The development of IR has not
been the result of any single factor or cause, but has been determined by the condition
existing on the eve of the Industrial Revolution in Western Europe and the social, economic
and political situations in different countries.
10.0.6 Objectives of Industrial Relations
In addition to their primary objective of bringing about good and healthy relations between
employers and employees, industrial relations are designed:
i) To safeguard the interests of labour and of management by securing the highest level of
mutual understanding and goodwill among all those sections in the industry which
participate in the process of production
ii) To avoid industrial conflict or strife and develop harmonious relations which are
essential factors in the productivity of workers and the industrial progress of a country
iii) To raise productivity to a higher level in an era of full employment by lessening the
tendency to high turnover and frequent absenteeism.
iv) To eliminate, as far as possible and practicable, strikes, lockouts and gheraos by
providing a reasonable wages, improved living and working conditions and fringe benefits.
v) To establish government control of such plans and units as are running at a loss or in
which production has to be regulated in the public interest.
159 DKR21
10.0.7 Conditions for good IRs
Good IRs depends on a great variety of factors. Some of the more obvious ones are listed
below.
1. History of IRs: No enterprise can escape its good and bad history of IRs. A good history
is marked by harmonious relationship between management and workers. A bad history by
contrast is characterised by militant strikes and lockouts. Both types of history have a
tendency to perpetuate themselves. Once militancy is established as a mode of operations,
there is a tendency for militancy to continue. Or, once harmonious relationship is
established, there is a tendency for harmony to continue
2. Economic satisfaction of workers: Psychologists recognize that human needs have a

certain priority. Need number 1 is the basic survival need. Much of the man‘s conduct is
dominated by this need. Man works because he wants to survive. This is all the more for
underdeveloped countries where workers are still living under subsistence conditions.
Hence, economic satisfaction of workers is another important prerequisite for good IRs.
3. Social and psychological satisfaction of workers: Identifying the social and

psychological urges of workers is an important step in the direction of building good
industrial relations. As has been revealed by the Hawthorne experiments a man does not
live by bread only. He has several other needs beside his physical needs which could also
be given to attention by the employer
4. Off-the-job conditions of workers: All though some employers may occasionally wish
that they could employ only a person‘s skill or his brain but all that can be employed is a
whole person, rather than certain separate characteristics. A person‘s different traits may be
separately studied, but in the final analysis they are all part of the one system making up a
whole man. His home life is not totally separable from his work life, and his emotional
condition is not separate from his physical condition. Each affects the other. Hence for
good IRs, it is not enough that the worker‘s factory life alone should be taken care of. His
off-the-job conditions should also be improved.
5. Enlightened and responsible labour unions: The most important single condition
necessary for good IR is a strong and enlightened labour movement, which may help to
promote the status of labour without jeopardising the interests of management.
160 DKR21
6. Negotiating skills and attitudes of management and workers: Both management and
worker‘s representatives in the area of IR came from a great variety of backgrounds in
terms of training, education, experience and attitudes. This varying background plays a
major role in shaping the character of IRs.
7. Public policy and legislation: When government regulates employee relations, it

becomes a third major force determining IRs- the first 2 being the employer and the union.
The government intervention helps in three different ways (i) it helps in catching and
solving problems before they become serious. Almost everyone agrees that it is better to
prevent fires than to try stopping them after they start; (ii) it provides a formalized means to
the workers and the employers to give emotional release to their dissatisfaction; and (iii) it
acts as a check and balance upon arbitrary and capricious management action.
8. Education of workers: With rising skills and education worker‘s expectation in respect
of rewards increase. It is a common knowledge that the industrial workers in India are
generally illiterate and is mislead by outside trade union leaders who have their own acts to
grind. Better worker‘s education can be a solution to this problem. This alone can provide
workers with a proper sense of responsibility which they owe to the organization in
particular and to the community in general.
9. Nature of the industry and business cycles: In those industries where the direct and
indirect labour costs constitute a major proportion of the total cost, lowering down the
labour costs becomes important particularly when the product is not a necessity and
therefore there is little probability to pass additional cost on to the customer. Such
industries cannot grant liberal increases in wages or fringe benefit to their and have IRs
different from other types of industries. Business cycle also affects IRs. In general, IRs is
good when there is a boom and prosperity all around. During such periods level of
employment and wages rise which make workers happy. But during recession, there is a
decline in employment levels and wages. This makes workers unhappy and mars good IRs
10.0.8 Cause of Poor IR
Poor IRs is the result of a number of socio-economic, political and psychological factors
which are briefly discussed below.
1. Uninteresting nature of work: People want to make a life out of work rather than just a
living. Work is such a dominating part of our lives that no matter how much satisfaction we
161 DKR21
have outside it; we are not living a satisfied life unless we live with satisfaction at work also.
The problem of poor IR is essentially a product of large scale production which has made man
subordinate to the machine. This has made him lose his sense of pleasure, pride and satisfaction
from work which he used to get earlier by producing the product. This dissatisfaction of worker
on the shop floor generally culminates into big strikes and lock outs.
2. Political Nature of Unions: Another major irritant to good IR is politicisation of labour

unions by outside political leaders. This leads to multiple unions on the one hand and inter -
union rivalry on the other.
3. Poor Wages: Too much tight or complicated wage and incentives and payment systems
are also a cause of poor IRs. Wage and salary differentials between occupations also create
a feeling of inequity and mar good in IRs.
4. Occupational Instability: Another important factor which sometimes affects good IRs
is the spectra of change in occupation. Occupational stability makes workers feel secure on
their jobs. It produces an enervating effect on them. Workers who have held a job for
several years generally win confidence on that job.
5. Poor Behavioural Climate: The behavioural climate of an enterprise which is made up

of its culture, traditions and methods of action maybe either favourable to the worker or
unfavourable. Favourable climate is one which helps in meet his economic, social and
psychological wants. It produces a good image of the enterprise in his mind. On the other
hand, unfavourable climate is one which prevents him from meeting his various types of
needs and produces in his mind a poor image of the enterprise. This eventually drives him
to seek membership of a militant labour organization where he can give vent to his negative
feelings and fight against his employer. This becomes a cause of poor IRs.
10.0.9 Suggestions to Improve Industrial Relations
1. Both management and union should develop constructive attitude towards each other.
2. All basic policies and procedures relating to IRs should be clear to everybody in the
organization and to the union leaders.
3. The personnel manager should remove any distress by convincing the union of the
company‘s integrity and his own sincerity and honesty.
4. The personnel manager should not vie with the union to gain worker‘s loyalty. He should
not try to wean away from the union.
5. Management should encourage right kind of union leadership.
162 DKR21
6. After the settlement is reached the agreement should be properly administrated.
10.1 COLLECTIVE BARGAINING
Collective bargaining is the process of negotiating between management and workers

represented by their representatives for determining mutually agreed terms and conditions
of work which protect the interest of both workers and the management.
According to Dale Yoder, "Collective bargaining is essentially a process in which employees

act as a group in seeking to shape conditions and relationships in their employment".
Michael J. Jucious has defined collective bargaining as "a process by which employers, on
the one hand, and representatives of employees, on the other, attempt to arrive at
agreements covering the conditions under which employees will contribute and be
compensated for their services".
Thus, collective bargaining can simply be defined as an agreement collectively arrived at

by the representatives of the employees and the employers.
10.1.1 Objectives of collective bargaining
The basic objective of collective bargaining is to arrive at an agreement between

management and the employees determining mutually beneficial terms and conditions of
employment. This major objective of collective bargaining can be divided into the
following sub-objectives.:
 To foster and maintain cordial and harmonious relation between the

employer/management and the employees.

 To protect the interests of both the employer and the employees.

 To keep the outside, i.e., the government intervention at bay.

 To promote industrial democracy.
163 DKR21
10.1.2 Importance of collective bargaining
The need for and importance of collective bargaining is felt due to the advantages it offers
to an organization. The chief ones are as follows:
1. collective bargaining develops better understanding between the employer and the
employees:
It provides a platform to the management and the employees to be at par on negotiation

table. As such, while the management gains a better and deep insight into the problems and
the aspirations of the employees, on the one hand, the employees do also become better
informed about the organizational problems and limitations, on the other. This, in turn,
develops better understanding between the two parties.
2. It promotes industrial democracy:
Both the employer and the employees who best know their problems, participate in the
negotiation process. Such participation breeds the democratic process in the organization.
3. It benefits the both-employer and employees:
The negotiation arrived at is acceptable to both parties- the employer and the employees.
4. It is adjustable to the changing conditions:
A dynamic environment leads to change in employment conditions. This requires changes in

organizational processes to match with the changed conditions. Among other alternatives
available, collective bargaining is found as a better approach to bring changes more amicably.
5. It facilitates the speedy implementation of decisions arrived at collective negotiation:
The direct participation of both parties - the employer and the employees - in collective
decision making process provides an in-built mechanism for speedy implementation of
decisions arrived at collective bargaining.
10.1.3 Bargaining Process
The actual bargaining goes through a process consisting of certain stages. However, the
number of stages and sequencing of these may vary from organization to organization
depending on the nature of parties involved in bargaining process. According to Mondy and
164 DKR21
Noe, the following four types of structures decide the nature of parties involved in
bargaining process:
1. One company dealing with a single union.
2. Several companies dealing with a single union.
3. Several unions dealing with a single company.
4. Several companies dealing with a several unions.
Generally, a bargaining process consists of the following stages:
Pre-negotiation
This is the first stage involved in a bargaining process is also known as 'preparation for
negotiation' In other words, it refers to homework for negotiation. That the pre-negotiation
stage of the bargaining process is vital is duly confirmed by the fact that "up to 83 percent
of the outcomes of the negotiations are greatly influenced by pre-negotiation stage.
Preparation
Preparation includes researching and formulating proposals. A collective bargaining

research must take into consideration the economic factors on which union demands are
based: minimum budget requirements, cost of living, productivity, company‘s ability to
pay, industry practices etc. The result of the data analysis of these economic factors
determines the content of a collective bargaining proposal.
A union engaged in collective bargaining prepares two sets of research studies. The first
contains the demands of the union based on its research findings. These demands are
presented to the general membership for adoption or approval, after which they become
proposals that are then submitted to the management for collective bargaining purposes.
The second research study is a definition of the arguments supporting the proposals of the
union. This research study is submitted to the Department of Labor and Employment
(DOLE) to be used as a reference material should the negotiation reach a deadlock as to
require mediation or conciliation and arbitration.
165 DKR21
Negotiation
Negotiation is the actual deliberation of proposals by the union and the management. It is
composed of five stages:
1. The union submits a notice to negotiate together with its proposals to the company.
2. The company answers the notice to negotiate within ten (10) days after receipt of said
notice.
3. The union‘s bargaining representatives and the management hold meetings and
conferences to discuss the proposal.
4. If both parties agree on the proposal, a collective bargaining agreement is signed. If not,
then a deadlock or a disagreement regarding certain proposals ensues between labor and
management.
During a deadlock, the union may file a notice of strike while the company may file a notice of
lockout to the DOLE. Both parties, however, may opt for conciliation and mediation in which
government representatives through which conciliators or mediators help labour and
management in settling their disagreement. If the deadlock is not resolved within thirty days,
the union can go on strike while the company can lockout provided they have submitted a
winning strike-vote or lockout-vote seven days prior to intended date of strike or lockout. The
DOLE, on the other hand, may elevate the case to compulsory arbitration. A decision arrived at
in compulsory arbitration is appeal able up to the Supreme Court.
5. The CBA is presented to the general membership for ratification. A CBA, to be

considered ratified, requires a vote of not less than one-half of the total membership of the
union. This procedure, however, is not applicable to agreements whose contents are results
of compulsory arbitration.
Implementation
The merit of a collective bargaining agreement lies to a great extent of the implementation of its
provision. Most CBA‘s have a term of three years. The date of effectively of a provision (e.g.,
wage increase) is usually specified in the agreement. How this provision is put into practice is
subject to the interpretation of labor and management, a process that sometimes
166 DKR21
leads to a dispute. To accommodate the conflict, CBAs include machinery for settling
grievances or disputes.
How can members help the union during the collective bargaining process?
Preparation
1. Study the significant labour laws and related legislations.
2. Assist in gathering data by administering questionnaires and interview schedules and by

researching on cost of living, industry practices, etc.
3. Help collate data.
4. Be realistic in costing your demands. Consider not only your benefit but also the current
position of your company.
5. Understand your union‘s collective bargaining proposals.
6. Help in disseminating information and in explaining your union‘s collective bargaining

proposals to other members.
7. Participate in all collective bargaining-related meetings or activities, particularly in the

approval of proposals.
Negotiation
1. Be supportive of your bargaining representatives.
2. Keep yourselves apprised on the progress of the negotiation.
3. Be present in consultation meetings called by your union during the negotiation
4. In case of a deadlock and the consequent arbitration that follows, be cooperative with the
conciliators or arbitrators.
5. Let facts and realities, not emotions, dictate your actions during a strike. Consider what
you will gain and what you will eventually lose in the process.
6. Be flexible. Your demands may be modified without necessarily defeating the objectives
of your union.
167 DKR21
7. Make sure that you participate in the ratification of your CBA.
8. Do not blame your bargaining representatives if the CBA does not contain all the proposals
that you presented. A CBA, after all, a product of collective effort. You are equally
responsible for the agreement as much as your representatives.
Implementation
1. Study your CBA. Make sure that your union and the management agrees on a common
understanding of the agreement.
2. Monitor the implementation of the CBA.
3. Abide by the provisions of the CBA.
4. Should a CBA violation occur, exhaust the grievance machinery to settle the conflict
within the company.
10.2 KEYWORDS
Industrial Relations Collective bargaining
Labour Union Industrial Democracy
1. Define industrial relations. List out its objectives and also bring out
its importance.
2. What are the causes of poor IR? Suggest measures for
improving industrial relations.
3. What is meant by collective bargaining? What are its objectives?
4. Describe the need for and importance of collective bargaining.
5. Explain the bargaining process.
168 DKR21
LESSON
11
TRADE UNIONS AND GRIEVANCE HANDLING
CONTENTS
11.0 Trade Union

11.0.1 Principles of trade unionism
11.0.2 Workers Join a Trade Union
11.0.3 Functions of trade unions
11.0.4 Future role of trade union
11.1 Procedure for disciplinary action
11.2 Grievance handling
11.2.1 Causes of grievances
11.2.2 Effects of grievances:
11.2.3 Discovering of grievances
11.2.4 Steps in grievances handling
11.3 Managing dismissals and separation
11.4 Keywords
169 DKR21
11.0 Trade Unions:
The institution of Trade union, though comparatively recent in origin has become a
powerful force by way of its direct influence in the social and economic life of industrial
workers. Sydney and Beatrice Webb considered Trade Unionism to be "the extension of the
principle of democracy in the sphere of industry".' Unfortunately this broad idea is
weakened by causes not too far to seek; multiplicity of unions, placing political ideology
before economic interests and to some extent insufficient leadership.
Since the conflict or co-operation between workers and management is greatly influenced
by the nature of the workers organization and the processes that induce their structure,
study of Trade Union becomes a critical topic in the industrial relations area. The
organization of workers and employers on an occupational basis is one of the most
significant features of modern industrial society.
A continuous association of wage earners for the purpose of maintaining or improving the
condition of their working lives.
The Indian Trade Union Act of 1926 defines a trade union as ―any combination whether
temporary or permanent formed primarily for the purpose of regulation the relation between
workmen and workmen, between employers and employers or for imposing restrictive
conditions on the conduct of any trade or business and include any federation to two or
more trade unions.
11.0.1 Principles Of Trade Unionism
Trade unions function on the basis of three cardinal principles. If any one of them is
threatened or is in jeopardy, they would fight back. These principles are:
Unity is Strength:
This fact has been very effectively brought out by Longfellow in the Song of Hiawatha:
―All your strength is in your union.
All your danger is in your discord.
Therefore, be at peace henceforward, And, as brothers, live together‖.
Equal pay for equal work or for the same job:
This principle is based on one of the nine principle included in the ILO‘S Charter of
Freedom of Labour, which says: ‗Men and Women should receive equal remuneration for
work of equal value‖.
170 DKR21
Security of Services;
This principle enjoins upon trade unions that they ensure social and economic security for
their members.
11.0.2 Why do Workers Join a Trade Union:
 To get economic security: that is, they want steady employment with an adequate.

 To retrain the management from taking any action which is irrational, illogical,
discriminatory or prejudicial to the interests of labour. Workers desire that the
assignment of jobs, transfers, promotions, the maintenance of disciple, layoffs,
retirement, rewards and punishment should be on the basis of a predetermined
policy and on the basis of what is fair and just.

 To communicate their views, aims, ideas, feelings and frustrations to the
management: that is , they want to have effective voice in discussions which
affect their welfare;

 To secure protection from economic hazards beyond their control; for example,
illness, accident, death, disability, unemployment and old age:

 To get along with their fellow workers in better way and to gain respect in the
eyes of their peers;

 To get a job through the good offices of a trade union.
11.0.3 Functions Of Trade Unions:
Communication
Welfare
Activities Education
Functions
Communication:
Many large unions publish a newsletter or a magazine. Their main aim is to clarify the unions
policy or stand on certain principal issues and also to pass on information about the union and
its activates. Much could be done to improve the contents and quality of such publications.
There is a need to professionalize such publications by hiring specialized persons to handle
171 DKR21
the activity. If necessary, these publications could also be sold to generate additional
revenue to augment union finances.
Welfare activities:
Many Unions provide a number of welfare activities to improve the quality of the workers
lives. Included in this sphere are the provisions of housing, cooperative societies and in the
case of TLA it has ventured into the area of organizing working or self-employed women
and has even started banking activities for this purpose.
Education:
Education helps create awareness on the part of the workers in the environment around
them. Many workers cannot afford formal education or given the Government too, has
worker education schemers, the trade unions in some cases have cooperated and added their
own contributions to tailor it to the specific requirement of the workers.
Central unions:
1. I.N.T.U.C (Ruling Congress)

2. N.L.O. (Old Congress)
3. A.I.T.U.C.(at Lenin Sarini)
4. H.M.S.
5. C.I.T.U.
6. U.T.U.C.(at Central Avenue Calcutta)
7. H.M.P. (Samyukta Socialist Party)
11.0.4 Future role of trade union:
Few events in recent times have affected the course Indian trade unionism
Communication:
Unions can pass on greater and more varied information to the workers about themselves
and the organization. At present they only communicate on service conditions and related
issues under the belief that workers are not interested in receiving information on any other
issues. This is wrong.
172 DKR21
Counselling:
There is growing trend of disrespect for law as a result of the sharp decline in our standard
of discipline. Unions can play a very positive role in providing counseling services to
employees. Cases of excessive drinking, smoking, drug addition, indebtedness, etc.
Education and Training:
A large number of workers have lost their jobs as results of VRS, retirement or closures
both in the organized and the unorganized sector. These workers need skills for doing new
jobs.
Welfare:
Unions can help management in developing innovative welfare schemes for employees
such as workers co-operatives, workers bankers, nursery schools, etc. they can emulate the
example set by several other organizations such as the Self Employed Women‘s
Association (SEWA) of Ahmadabad,.
Family and Vocational Guidance:
Unions can help workers families in several ways. For example, they can provide guidance
in respect of the education and career of workers children. They can provide conciliation
services in settling family quarrels. They can help in creating jobs for the wives of workers,
and so on.
Research:
Unions can play a very helpful role in generating data on various dimensions of worker‘s
needs, aspirations, standard of living, etc. For this purpose they can lunch research projects
either independently or in collaboration with academic institutions.
Team Building:
Unions can play very helpful role in building effective semi-autonomous of teams and
shaping the work organization in a direction consistent with a democratic vision of the
work place.
173 DKR21
Employee Ownership:
With the employee stock ownership plans becoming increasingly popular, employees, like
other stake holders, may also want to organize themselves to demand more voice of the
owners. Unions can come forward to give voice to the interests of employee owners.
New Work Force:
In future, a sizable proportion of new entrants to our work force are likely to be women,
Scheduled Castes and Scheduled Tribes and other minority groups. They traditionally have
had trouble in getting jobs and justice.
11.1 Procedure for disciplinary action:
1. Issue of the Charge-sheet:
The principles enunciated above require that a workman is to be issued a charge-sheet

calling him to submit his explanation within a specified period of time. This charge-sheet
should be drafted in a clear and unambiguous language so that the workman does not have
any difficulty in understanding the charges that he has to answer. Wherever possible, the
relevant clause of the company‘s standing orders should be mentioned in the charge-sheet.
2. Suspension pending enquiry:
In a case where the charges levelled against a workman are of serious nature and it is
considered by the manager that his physical; presence might endanger the safety of other
workmen, or if it is apprehended that he might intimidate others or tamper with the
evidence, he may be suspended. During the period of suspension pending enquiry, the
workman will get subsistence allowance as per law.
3. Consideration of the explanation:
After a charge-sheet has been served on a workman within the time specified for the reply
he may submit his explanation:
 Admitting the charges and requesting for mercy, or


 Denying the charge and requesting for an enquiry, or

 Not submitting any explanation at all, or

 Requesting for more time to submit explanation.
174 DKR21
4. Notice for holding the Enquiry:
After consideration of the explanation of the charge-sheeted workman or when no reply is

received within the specified time limit, the manager should issue an office order appointing an
enquiry officer or an enquiry committee to hold the enquiry of the charge-sheet. The enquiry
officer can be an official of the company, or even an outsider, but care should be taken to
appoint only such a person as enquiry officer who is neither a witness nor is personally
interested in any way in the mater for which the charge-sheet has been issued.
5. Holding of the enquiry:
The object of holding an enquiry is to find out whether the workman is guilty of the charges
levelled against him in the charge-sheet, or not. In doing so, the enquiry officer given the
workman a reasonable opportunity to defend himself by cross examining the witnesses/
documentary evidence/ exhibits produced against him and by examining the witnesses/
documentary evidence in his defence.
6. The Enquiry:
On the appointed date and time, fixed for the enquiry the following persons should be
present apart from the enquiry officers.
 The Management Representative


 The Charge-Sheeted Workman

 Representative of the Charge-sheeted Workman

 The Procedure
11.2 GRIEVANCE HANDLING:
According to Michael J. Jucius, the term grievance means ―any discontent or dissatisfaction,
whether expressed or not and whether valid or not, arising of anything connected with the
company that an employee thinks, believes or even feels, is unfair, unjust or inequitable"
A grievance can be defined as any discontent or dissatisfaction, with any aspect of the
organization. I t can be real or imaginary, legitimate or ridiculous, stated or invoiced,
written or oral. It must, however, find expression in some form or the other.
175 DKR21
11.2.1 Causes of grievances:
Economic:
Wage fixation, wage computation, overtime, bonus, etc. Employees feel they are getting
less than what they ought to get.
Work Environment:
Poor physical conditions of workplace, tight production norms, defective tools and
equipment, poor quality of materials, unfair rules, lack of recognition, etc.
Supervision:
Relates to the attitudes of the supervisor towards the employee such as perceived notions of
bias, favouritism, nepotism, caste affiliations, regional feelings, etc.
Work Group:
Employee is unable to adjust with his colleagues; suffers from feelings of neglect,
victimisation and becomes an object of ridicule and humiliation, etc.
Work Organization:
Rigid and unfair rules, too much or too less work responsibility, lack of recognition, etc.
11.2.2 Effects of grievances:
Grievances can have several effects which are essentially adverse and counterproductive to
organizational purposes. The advance effects include:
Loss of interest in work

Poor quality of production
Low productivity
Increase in wastage and cost
Increase in employee turnover
Increase in absenteeism
Increase in the incidence of accidents.
176 DKR21
11.2.3 The discovering of grievances:
Direct Observation:
A good manager must know how his subordinates behave in ordinary circumstances. When
significant changes in that behavior occur, it is sure to affect performance. Absenteeism,
lateness, indifference, etc., are some of the forms in which discontent and dissatisfaction
find expressing. A careful analysis of grievances rate, accident rate, requests for transfer,
indiscipline, etc., may reveal general patterns that are not easily discernible in the instance.
Grievances Procedure:
The most important channel through which discontent and dissatisfaction can be
communicated is through grievances procedure. A grievances procedure provides an
avenue and an opportunity to give vent to employee‘s grievances. The dilemma most
managers face is whether and how far they should encourage or discourage grievances. If
management does not induce employees to express their grievances, unions will do so.
Discouraging employees from expressing grievances means ignoring grievances.
Gripe Boxes:
The gripe box is a facility to file anonymous complaints about the various causes of
discontent and dissatisfaction in the organization. It is different from the suggestion scheme
system that may be in vogue in a company. In this case anonymity is assured and there is no
reward or punishment. The limited purpose is to let the management know what the
employees feel, without fear of victimization.
Open-door Policy:
Most organizations preach open-door policy, but do not practice it. The policy is good and
democratic, but usually ineffective and at times counter-productive. Organization would do
well to have a grievances procedure. If a grievances procedure exists, open-door policy
becomes redundant.
Exit Interview:
Employees usually quit organizations due to dissatisfaction or better prospects elsewhere. It

requires certain skills to get to know the real reasons for leaving the job. Exit interviews, if
177 DKR21
conducted effectively can provide vital information to improve personal policies and
identify the weaknesses and strengths of the organizations.
11.2.4 STEPS IN GRIEVANCES HANDLING:
Acknowledge Define the Get the Analyse and

Follow up
Dissatisfaction Problem Facts Decide
Acknowledge Dissatisfaction:
Managerial/Supervisory attitude to grievances is important. They should focus attention on

grievances, not turn away from them. Ignorance is not bliss; it is the bane of industrial
conflict. Condescending attitude on the part of supervisor and manager would aggravate the
problem.
Define the Problem:
Instead of trying to deal with a vague feeling of discontent, the problem should be defined
properly. Sometimes the wrong complaints are given. By effective listening, one can make
sure that a true complaint is voiced.
Get the Facts:
Facts should be separated from fiction. Though grievances results in hurt feelings, the
efforts should be to get the facts behind the feelings. There is need for a proper record to
each grievance.
Analyses and Decide:
Decisions on each of the grievances will have a precedent effect. While no time should be
lost in dealing with them, it is no excuse to be slipshod about it. Grievances settlements
provide opportunities for managements to correct themselves. Union pressures may
temporarily bring union leadership closer to the management, but it will surely alienate the
workforce away from the management.
178 DKR21
Follow Up:
Decision taken must be followed up earnestly. They should be promptly communicated to

the employee concerned. If a decision is favourable to the employee, his immediate boss
should have the privilege of communicating the same.
11.3 Managing dismissals and separation
The end result of both the terms – discharge and dismissal – is same, that is, the employee‘s
services stand terminated. In practical usage, both terms are therefore used interchangeably.
Some minor differences, however, are worth mentioning here. While dismissal is a sort of
punishment against alleged misconduct, discharge is not always a punishment. When the
employer examines all background factors leading to the termination of services of an
employee, he may simply discharge the employee instead of dismissing him. Dismissal has a
negative connotation and carries a punitive label alongside. A person who is dismissed from
service may find it difficult to find alternative employment, when compared to a person who is
discharged from service. In case of discharge, the errant employee may be served a reasonable,
advance notice. This is not so in the case of dismissal where the services are terminated
immediately. In case of dismissal, the employer can withhold the dues payable to the employee
whereas in case of discharge, usually all these are settled simultaneously. Finally, before
dismissing an employee, the employer has to hold disciplinary proceedings (domestic enquiry)
in a proper way. In case of discharge, he may or may not go for it.
The grounds for dismissing an employee are clearly stated in Industrial Disputes Act, 1947
(as amended in 1982) and the Industrial Employment (Standing Orders) Act, 1946 – such as
willful insubordination, theft, fraud, dishonesty, habitual late coming, habitual neglect of
work, willful damage to property, disorderly violent behaviour, striking work in violation of
rules, taking bribes, etc.
Separation
Employee separations occur when employees cease to be members of an organisation.

The service agreement between the employee and the employer comes to an end and the
employee decides to leave the organisation. Separations can take several forms such as:
179 DKR21
Resignation
An employee may decide to quit an organisation voluntarily on personal or professional

grounds such as getting a better job, changing careers, wanting to spend more time with
family, or leisure activities. The decision could, alternatively, be traced to the
employee's displeasure with the current job, pay, working conditions or colleagues.
Sometimes an employee may be forced to quit the organisation compulsorily on
grounds of negligence of duty, insubordination, misuse of funds, etc. The resignation in
this case, unlike voluntary separation, is initiated by the employer. If the employee
refuses to quit, he may have to face disciplinary action.
When employees resign or quit an organisation, there will be a certain amount of

disruption to the normal flow of work. Replacing an experienced and talented person
may not be easy in a short span of time. Training new recruits would take time and may
even prove to be a prohibitive exercise in terms of costs. The HR Department,
therefore, should examine the factors behind resignations carefully. Whenever possible,
exit interviews must be conducted to find out why a person has decided to call it a day.
To get at the truth behind the curtain, deportees must be encouraged to speak openly
and frankly. The interviewer must ensure confidentiality of the information leaked out
by the employee. The purpose of the interview must be explained clearly and the
interviewer must listen to the deportee‘s views, opinions, critical remarks patiently and
sympathetically. Every attempt must be made to make the parting of ways more
pleasant (e.g., conducting interview in a place where the employee is comfortable,
giving a patient and sympathetic hearing to the employee, wishing him success after
settling all the dues, etc.) There should, however, be no attempt to (a) defend the
company against criticism or attacks (b) justify actions which may have annoyed the
employee (c) attack the departee's views or choice of new company or job (d) convince
the employee to change his mind about leaving etc.
11.4 KEYWORDS
Trade Union Grievance Handling
Job Security Work Environment
Gripe Boxes Counselling
180 DKR21
1. Explain the Principles of trade unions. Why do employees join unions?

2. What are the functions of trade unions?
3. Discuss the future role of trade union.
4. Define grievance. Identify analyse the various causes of grievances.
5. How will you discover the grievances?
6. Describe the various steps involved in grievances handling.
7. Discuss the dismissals and separation.
181 DKR21
LESSON
12
LABOUR WELFARE
CONTENTS
12.0 Introduction
12.1 Importance & Implications of Labour Legislations
12.2 Objectives of the Labour Legislations
12.3 The classification of Labour Legislations
12.3.1 The regulative labour legislation
12.3.2 The protective labour legislations
12.3.3 Wage-related labour legislations
12.3.4 Social security labour legislations
12.3.5 Welfare labour legislations
12.4 Miscellaneous labour legislations
12.5 State labour laws
12.6 Keywords
182 DKR21
12.0 Introduction
The legal provisions regarding safety cover areas such as fencing of machinery, not
employing young person's near dangerous machines, using safe devices to cut off power,
using good hoists and lifts, giving enough room for workers to move around safely, quality
flooring, providing ventilators for pumping out fumes, gases; and precautions to be taken to
prevent five accidents etc. Health promotion covers areas such as healthy living, physical
fitness, smoking cessation, stress to all troubled employees.
12.1 Importance & Implications of Labour Legislations
Conventions and Recommendations have covered wide range of subjects concerning labour, for
example, working conditions including hours of work, weekly rest, and holidays, wages, labour
administration, employment of children and young person's including minimum age of
employment, medical examination, night work, employment of women including maternity
protection, night work and employment in unhealthy processes and equal pay, health, safety and
welfare, social security, industrial relations including right to organize collective bargaining and
conciliation, and employment and unemployment. By July 2002, India had ratified 39 out of
184 Conventions adopted by ILO Provisions of which most of the ratified Conventions have
been incorporated in the labour laws of the country. Provisions of quite a number of
Recommendations have, also, been embodied in labour law.
12.2 Objectives of the Labour Legislations
Labour legislation in India has sought to achieve the following objectives:
 Establishment of justice - Social, Political and Economic.


 Provision of opportunities to all workers; irrespective of caste, creed, religion,
beliefs; for the development of their personality.

 Protection of weaker sections in the community.

 Maintenance of Industrial Peace.

 Creation of conditions for economic growth.

 Protection and improvement of labour standards.

 Protect workers from exploitation.

 Guarantee right of workmen to combine and form association or unions.

 Ensure right of workmen to bargain collectively for the betterment of their service
conditions.

 Make state interfere as protector of social well-being than to remain an onlooker.

 Ensure human rights and human dignity.
183 DKR21
12.3 The classification of Labour Legislations
On the basis of specific objectives, which it has sought to achieve, the labour legislations
can be classified into following categories:
a) Regulative
b) Protective
c) Wage-Related
d) Social Security
e) Welfare both inside and outside the workplace
12.3.1 The regulative labour legislation
The main objective of the regulative legislation is to regulate the relations between
employees and employers and to provide for methods and manners of settling industrial
disputes. Such laws also regulate the relationship between the workers and their trade
unions, the rights and obligations of the organizations of employers and workers as well as
their mutual relationships.
The Trade Unions Act, 1926
Trade unions are primarily formed to regulate the relations between workmen and
employers. The Act provides for registration of trade unions, which also includes
association of employers. Upon registration, trade unions enjoy certain protection and
privileges under the law. In addition, the Act also provides for imposing restrictions on the
conduct of any trade or business. Registration of a trade union is not compulsory but a
registered union enjoys certain rights and privileges under the Act, it is always desirable to
get a trade union registered. The Act requires that at least 50 per cent of the office bearers
of a union should be actually engaged or employed in the industry. A registered trade union
is a body corporate with perpetual entity under a common seal. It can acquire, hold, sell or
transfer any movable or immovable property and can be party to contracts. It can sue or can
be sued in his own name. From the HR manager's point of view, it is essential to invite
registered trade unions of the unit only for collective bargaining and also form participative
forums like works committee, etc., from their nominated representative.
The Industrial Disputes Act, 1947
The Industrial Disputes Act, 1947 primarily regulates industrial relations in India. The Act
provides a machinery and procedure for settlement of industrial disputes by negotiation, without
resorting to strikes and lockouts. The scope of the Act extends to the whole of India for every
industrial establishment carrying on any business, trade, irrespective of the number of people
184 DKR21
employed. However, the Act is not applicable for people employed in managerial or
administrative capacity and for those who are employed in Army, Air Force and Navy,
Police Services and Prison Services. The Act defines industrial dispute as any dispute or
difference between employers and employees or between workmen and workmen, which is
connected with the employment or non-employment or the terms and conditions of
employment. A tentative list of disputes, covered under this Act is reproduced below:
 The propriety or legality of standing orders.


 Discharge or dismissal

 Matters pertaining to reinstatement or grant of relief for wrongful dismissal.

 Matters pertaining to withdrawal of any concession or privilege.

 Matters pertaining to strike or lockout

 Payment of wages, including periodicity and mode of payment.

 Leave and hours of work

 Holidays

 Bonus

 Retirement benefits

 Discipline

 Non-implementation of award, etc.
Industrial Employment (Standing Orders) Act, 1946
This Act requires employers to clarify conditions of employment so as to enable the

workmen (employed by them) to understand the rules of conduct pertaining to working
hours, holidays, attendance, leave, termination of employment, suspension or dismissal,
misconduct, etc. The Act is applicable to industrial establishments, employing 100 or more
workmen. Under this Act, employers are required to submit a draft of standing orders to the
certifying officer for certification. Upon certification it receives the force of law and
employers are required to display the text in the language of the workmen and in English
prominently. Once certified, employers cannot modify the standing orders without the
approval of the certifying officer. Model standing orders cover following areas:
i. Basis of classification of workman – permanent, probationers, temporary, casual,

apprentices, etc.,
ii. Information on working time
iii. Information on holidays and paydays
iv. Wage rates
v. Shift work
vi. Attendance and late coming
185 DKR21
vii. Leave
viii. Payment of wages
ix. Stoppage of work
x. Termination of employment
xi. Act of misconduct, which is liable for disciplinary action, etc.
Standing orders are guidelines for HR decisions; hence HR managers must know legal
interpretation of standing orders.
12.3.2 The protective labour legislations
Under this category come those legislations whose primary purpose is to protect labour
standards and to improve the working conditions. Laws laying down the minimum labour
standards in the areas of hours of work, supply, employment of children and women, etc. in
the factories, mines, plantations, transport, shops and other establishments are included in
this category. Some of these are the following:
Factories Act, 1948
This Act is divided into twelve chapters covering 141 sections, which again are
supplemented by three schedules. The first Act was enacted in 1881 to regulate working
conditions in factories primarily for women and children and to provide them health and
safety measures. In 1911 the new Factories Act was enacted, replacing the old one,
covering also the hours of work for adults. The Act was further improvised in 1934,
incorporating recommendations of the Royal Commission of Labour. The new Act of 1948
replaced the earlier one and through a series of amendments made from time to time, the
Act is now more comprehensive covering all areas of working conditions of labour.
The Shops and Establishments Acts
The Act in essence a state legislation. It seeks to regulate the working conditions of workers
in the unorganized sector, including shops and establishments which do not come under the
Factories Act Regulations for working hours, rest intervals, overtime, holidays, termination
of service, maintenance of shops and establishments and other rights and obligations of the
employer and employees are laid down.
12.3.3 Wage-related labour legislations
Legislations laying down the methods and manner of wage payment as well as the
minimum wages come under this category:
186 DKR21
The Payment of Wages Act, 1936
The Act is intended to regulate payment of wages in a particular form at regular intervals
without any unauthorized deductions. It is applicable to the employees receiving wages below
Rs.1,600 per month. As per the Act, employers are responsible for payment of wages to the
employees duly fixing the wage periods (which in no case should exceed one month), deciding
about time of payment as per the norms (which requires payment within seven days of the
expiry of the wage period for establishment where less than 1,000 people are employed and in
other cases within ten days of the expiry of wage period), mode of payment (in cash or by
cheque or by crediting to employee's bank account with prior consent) and ensuring no
unauthorized deductions. All these aspects must be known to the HR manager.
The Minimum Wages Act, 1948
The Act provides for minimum statutory wages for scheduled employment. The Act also
stipulates maximum daily working hours, weekly rest and overtime. It prevails over the rates
fixed under any award agreement. The Act empowers the State Government to fix minimum
wages, failing which they cease the right to engage labour and run the industry. Wages, as per
the Act, include all remuneration capable of being expressed in terms of money including house
rent allowance. However, it excludes the value of housing accommodation, supply of light,
water, medical attendance, employer's contribution to provident fund and pension fund,
travelling allowances or the value of travelling concession, gratuity payable on discharge or any
other payments made to defray special expenses. For HR managers it is important to consider
all these aspects while designing compensation package.
The Payment of Bonus Act, 1965
The Payment of Bonus Act, 1965 imposes statutory liability on employers (covered under the
Act) to pay bonus to employees according to the prescribed formula, linking the bonus with
profits or productivity. Bonus is payable to every employee receiving salary or wages up to
Rs. 3,500 per month, provided the employee has worked at least for 30 days in that year, save
and except those employees who have been dismissed from service for fraud, riotous or violent
behaviour, or theft, misappropriation or sabotage of any property of the establishment. Such
employees ceases the right to get bonus even for previous unpaid years, irrespective of the fact
that they have committed such acts in the present year. Employers can deduct from the bonus
any customary payment made to the employees (festival or interim bonus) earlier. Employers
can also recover any financial loss caused for the misconduct of the employees.
187 DKR21
12.3.4 Social security labour legislations
They cover those legislations, which intend to provide to the workmen, social security
benefits under certain contingencies of life and work.
The Workmen’s Compensation Act, 1923
Factories and establishments which are not covered under the Employees State Insurance
Act, are covered under this Act to provide relief to workmen and/or their dependents in
case of accidents arising out of and in the course of employment causing either death or
disablement of workmen. The workmen's compensation (Amendment) Act, 2000 w.e.f. 8-
12-2000 has brought all the workmen within the limit of this Act, irrespective of their
nature of employment. Under the Act, the employers are under obligation to pay
compensation for any accident suffered by an employee in the course of employment,
failing which the Act provides for penalties. There must be some causal connection with
employment to become eligible for compensation, which may not necessarily be inside the
workplace. Causal relationship is established by the circumstantial evidence, which may be
even in cases where workmen sustain injury while coming to work or while going to his
house after completion of work.
The Employees’ State Insurance Act, 1948
The principal objective of this Act is to provide to the workers medical relief, cash benefits
for sickness, compensation for employment injuries (which also covers occupational
diseases), pension to the dependents of deceased workers and maternity benefits to women
workers. All these benefits are given from a contributory fund. Once workmen are covered
under ESI Scheme, compensation under Workmen's Compensation Act for employment
injuries is not payable. The Act is applicable to all factories (excluding seasonal factories)
employing ten or more (when manufacturing process is carried out using power).
188 DKR21
For factories carrying out the manufacturing process without the aid of power, the staid number
is 20 or more persons. The scope of the Act covers every employee, including those engaged as
casual or by a contractor, provided they do not receive wages not exceeding Rs.6,500 per
month. Apprentices engaged under the Apprentices Act are not eligible for ESI benefits. The
Act requires registration of eligible factories and establishments within a prescribed time limit.
Similarly entitled employees are also required to be insured in a prescribed manner under the
Act. Since the nature of insurance is contributory, employers are required to pay @ 4.75 per
cent and employees are required to contribute @ 1.75 per cent of the wages. However such
employees who are drawing less than Rs.40 as daily wages are exempted from the requirement
of contribution. The Act provides benefits at prescribed rate and imposes penalty for violation
up to 5 years imprisonment and fine up to Rs. 25,000.
The Employees PF and Miscellaneous Provisions Act, 1952
The Act provides for compulsory contributory fund for social security of the employees and
their dependents (in case of death). It extends to every factory, establishment employing 20 or
more persons. The Central Government, however, by notification, brings any establishment
under the purview of the Act even in cases where such establishments employ less than 20
persons. However, cooperative societies employing less than 50 persons and working without
the aid of power, newly set up establishments (for initial 3 years), and State/Central
Government establishments (where they have their own schemes) are immune from the
provisions of this Act. The Central Government has framed three schemes under the Act, i.e.
Employees' Provident Fund Scheme, 1952 (for provident funds), Employees' Family Pension
Scheme, 1971 for providing family pension and life assurance benefit, which been merged with,
Employees' Pension Schemes, 1995 and the employees' Deposit Linked Insurance Scheme,
1976. The Act requires employers to contribute amount @ 12 per cent of the Wages, D.A. etc.
(10% in case of BIFR referred establishments or establishments employing less than 20 persons
or any establishments in the jute, beedi, brick, coir or gaur gum industry) and ensure similar
deduction from employees and deposit the same together with administrative charges and
required returns/attachments to the regional provident fund office or to their own private
provident fund scheme (approved by the Provident Fund Commissioner).
The Maternity Benefit Act, 1961
This provides maternity benefits to women employees. It sets out that a woman may avail 3
months leave with full salary before or after the birth of her child.
189 DKR21
Payment of Gratuity Act, 1972
This Act is also a social security measure to provide retirement benefit to the workmen,
who have rendered long and unblemished service to the employer. Employees are entitled
to receive gratuity under the Act, provided they have rendered continuous 5 years‘ service
or more at the rate of 15 days wages for each completed year, subject to a maximum of
Rs.3,50,000. The gratuity may be wholly or partly forfeited by the employer if termination
of services of an employee is due to his riotous or disorderly conduct or any other act of
violence or any offence, including moral turpitude committed in the course of his
employment.
12.3.5 Welfare labour legislations
Legislations coming under this category aim at promoting the general welfare of the
workers and improving their living conditions. Though, in a sense, all labour-laws can be
said to be promoting the welfare of the workers and improving their living conditions and
though many of the protective labour laws also contain chapters on labour welfare; the laws
coming under this category have the specific aim of providing for improvements in the
living conditions of workers. They also carry the term ―Welfare‖ in their titles.
 Limestone and Dolomite Mines Labour Welfare Fund Act, 1972.


 The Mica Mines Welfare Fund Act, 1946.

 The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare
Fund Act, 1976.

 The Cine Workers Welfare Fund Act, 198.

 In addition, some state governments have also enacted legislations for welfare funds.

 Beedi Workers Welfare Fund Act, 1976.
12.4 Miscellaneous labour legislations
Besides the above, there are other kinds of labour laws, which are very important. Some of
these are:
 The Contract Labour (Regulation and Abolition) Act, 1970


 Child Labour (Prohibition and Regulation) Act, 1986

 Building and other construction workers (Regulation of Employment and Conditions
of Service) Act, 1996
190 DKR21
 Apprentices Act, 1961


 Emigration Act, 1983

 Employment Exchange (Compulsory Notification of Vacancies) Act, 1959

 Inter State Migrant Workmen (Regulation of Employment and Condition of Service)
Act, 1979

 Sales Promotion Employees (Condition of Service) Act, 1976

 Working Journalists and other Newspapers Employees (Condition of Service and
Miscellaneous Provision) Act, 1955.
12.5 State labour laws
General
An important feature of almost all labour laws is the existence of employer-employee

nexus. Besides, each labour law has its provisions in terms of coverage, based mainly on
the number of employees, salary levels and so on. The definition of expressions used in
different labour laws is not necessarily uniform. All these have resulted in considerable
amount of litigation, leading to a vast amount of industrial jurisprudence.
Another important point to note is that while all the labour laws, excepting Shops and
Establishment Acts, are enacted by Parliament, quite a few of them are implemented, both
by the Central Government and the State Governments (including Union Territories); the
jurisdiction being determined by the definition of the term ‗appropriate government‘ in the
relevant statute. It is also relevant to point out that some of the Parliamentary laws are
implemented exclusively by the State Governments, for example Trade Unions Act, 1926;
Workmen‘s Compensation Act, 1923; Plantation Labour Act, 1951; Working Journalists
Act 1955; Factories Act 1948 and so on.
12.6 KEYWORDS
Labour welfare Labour Legislations
Social security labour laws
191 DKR21
1. Explain the Importance and Implications of Labour Legislations.
2. Give the main objectives of Labour Legislation?
3. Classify Labour Legislation in detail.
4. Give a brief description about regulative labour legislation.
5. Write short notes on
a) Miscellaneous labour legislations
b) State labour laws
192 DKR21
LESSON
13
EMPLOYEE HEALTH AND SAFETY
CONTENTS
13.0 Introduction
13.1 Meaning and definition of health
13.2 Physical health and mental health
13.3 Safety measures
13.4 Statutory Provisions for safety in India
13.5 Stress management
13.5.1 Meaning and definition of stress
13.5.2 Sources of stress
13.5.3 Coping with stress
13.6 Employee welfare
13.7 HRD Audit
13.8 Keywords
193 DKR21
13.0 Introduction
Since large number of employees spend great deal of their time in work place, their work
environment is not always good for their healthy life. Stress, Strains, Mental and Psychological
Conditions, Poor working conditions, Long hours of work, Poor ventilation, Insanitation,
Malnutrition etc spoil their health. Efficiency in work place is possible only when an employee
is healthy on the other hand industry exposes workers to certain hazards which affect his health.
The symptoms of bad health are high rate of absenteeism and turnover, industrial discontent and
indiscipline, poor performance and low productivity. Modern industry is characterized by
complicated mechanisms, intricate job requirements, and fast moving production lines. One of
the important consequences of all this is increased dangers to human life, through accidents.
To avoid this safety programmes like industrial health programmes are introduced, both for
employers and employees benefit.
13.1 Meaning and definition of health
The W.H.O has defined health as "a state of complete physical, mental and social well-
being and not merely the absence of disease or infirmity."
Industrial health refers to a system of public health and preventive medicine which is
applicable to industrial concerns.
According to the joint I.L.O/W.H.O Committee on Organizational Health, industrial health is:
i) The prevention and maintenance of physical, mental and social well-being of workers in
all occupations
ii) prevention among workers of ill-health caused by the working conditions
iii) Protection of workers in their employment from risks resulting from factors adverse to
health,
iv) Placing and maintenance of the worker in an occupational environment adapted to his
physical and psychological equipment.
13.2 Physical health and mental health
Physical health implies prevention of disease or health conservation and prevention of

occupational disease. Health is the outcome of the interaction between the individual and
his environment. Health not only depends on the employee but also on the environment.
Efficiency in work is possible when the worker is healthy physically and mentally.
194 DKR21
Industries exposes employees to certain hazards which he would not meet elsewhere and which
may affect his health. Physical and mental healths both are essential for the satisfaction and
improved morale, discipline, performance and productivity of the employees.
In India, the Royal Commission on Labour (1931), the Labour Investigation Committee
(1946), the Health Survey and Development committee (1943), the Labour Welfare
Committee (1969) all emphasized upon the "creation and maintenance of a healthy
environment as possible, in the homes of the people as well as in all places where they
congregate for work, amusement or recreation are essential".
13.3 Safety measures
Safety measures deals with prevention of accidents and with minimizing the resulting loss
and damage to persons and property. Five basic principles must govern the safety
programme of an organization. They are:
1. Factors resulting to accidents have to be traced out, analyzed and eliminated.
2. Identify potential hazards; provide effective safety facilities and equipment take prompt
remedial action.
3. The top management must continuously monitor the safety performance.
4. Management and supervision must be fully accountable for safety performance in the
work place.
5. All employees should be given thorough training in safe methods of work and should
receive continuing education and guidance on eliminating safety hazards and on prevention
of accidents.
There are three E’s of safety to prevent accidents, namely, engineering, education and
enforcement of safety rules.
13.4 Statutory Provisions for safety in India The Factories Act contain specific provision
for the safety of workers.
1. When any part of the machinery is in motion, it is obligatory to fence the machinery.
2. Any examination, adjustment of any part of the machinery shall be carried out by trained
male worker wearing tight fitting clothing.
3. No adolescent shall be allowed to work on any machinery which poses danger.
4. Suitable devices for cutting off power in an emergency shall be provided

195 DKR21
5. Prohibition of employing women and children near cotton-openers.
6. Precautions against dangerous fumes, use of portable electric lights. Explosive or

inflammable gas or dust, fire etc.
13.5 Stress Management
Stress is a state of mind that shows certain biochemical reactions in the human body and is
projected by a sense of anxiety, tension, depression, frustration and irritation. Such reactions are
caused when the demands of the environmental forces or internal forces are not met by the
resources available to the person. Situations produce stress in the form of bio-chemical,
functional and structural changes in the human organism. These situations could be fear, pain,
fatigue, emotional arousal, humiliation, frustration, lack of concentration, blood pressure, drugs,
loss of loved one, non-occurrence of an expected event and even unexpected successes that
require a change in the operational style. High level stress damages the physical and
psychological well-being of a person and extremely low levels of stress are equally undesirable
for they cause boredom, and result in lack of stimulation, innovation and challenges. Thus
moderate level of stress is necessary for higher level of performance.
13.5.1 Meaning and Definition of Stress
The term "Stress" refers to the body‗s physical, mental, and chemical reactions to
circumstances that confuse, endanger, frighten or irritate the individual.
i. According to Hans Selye Stress is defined "as the nonspecific response of the body to any
demand" .
ii. Stress is a discrepancy between an employee‗s perceived state and desired state, when
such a discrepancy is considered important by the employee. Stress influences two
behaviors - (1) the employee‗s psychological and physical well-being and (2) the
employee‗s efforts to cope with the stress by preventing or reducing it.
iii. S.P. Robbins, "Stress" is a dynamic condition in which an individual is confronted with
an opportunity, constraint or demand related to what he or she desires and for which the
outcome is perceived to be both uncertain and important.
196 DKR21
13.5.2 Sources of Stress
There are two sources of stress namely organizational sources and personal sources.
A) Organizational Sources
The extent and ratio of stress that people experience in job place are influenced by the
following factors:
i. Nature of job
The nature of job itself can determine the type and degree of stress that can be induced.
Some jobs lead to more stress-related responses than others. For example job of a police
officer, or air traffic controller are often considered to be low- stress jobs. In general high
stress occupations are those in which the employees have little control over their
operations, work under time constraints and have major responsibilities for human or
financial resources. Persons working under adverse working conditions such as temperature
extremes, pollution, uncomfortable lighting and ventilation and loud noise are also
vulnerable to high stress. According to a study, some of the high stress jobs are foreman,
manager, inspector, waitress or waiter and clinical laboratory technician. On the contrary
low stress jobs are college professor, personnel worker, craft worker, farm labourer etc.
ii. Role Ambiguity
Role is the set of activities associated with certain position in the organization. When there
is lot of uncertainty regarding job definitions or job expectations, then people experience
role ambiguity. Role ambiguity is high in managerial jobs where responsibilities are more
and role definitions and task specifications are not clear.
Role ambiguity produce psychological strain and dissatisfaction, lead to under-utilization of

human resources and leads to feeling of futility on how to cope with the organizational
environment.
iii. Role Conflict
Role conflict occurs when two or more persons have different and sometimes opposing
expectations of a given individual. Role conflicts occur when contradictory demands are at
the same time placed before an employee. For example, a building contractor may ask a
197 DKR21
carpenter to something which is different to what the city building code is, thus causing a
role conflict. Similarly a father may know that his son has committed a crime but does not
inform the police.
iv. Responsibilities assigned to employees
Any type of responsibility can be a burden on an employee. Holding a person responsible

for anything going wrong can create stress and it can be more if the manager has a limited
degree of control over his subordinates.
v. Lack of Participation
When the employees are allowed to participate in the decision making process of the
organization, the employee‗s develop high morale, work more efficiently and feel that they
have control over the work environment thereby reducing the extent of role conflict and
role ambiguity which are the causes of stress.
vi. Interpersonal Relations
The efficiency, performance and effectiveness of an organization are mapped by the degree of
relations that the people enjoy in the work place. Harmonious, cordial and congenial relations
result in peace. When the interpersonal relations are poor there is stress, tension and anxiety.
Under such crisis full situation the superior and subordinate relations keep deteriorating.
B. Personal sources
i. Job concern
Job variables can become stressors when they become sources of concern, anxiety and
frustration to an individual. Lack of job security, prospect of losing a job with family
depending on the individual, job recession, low status of job, lack of career progress are all
factors resulting into stress.
ii. Relocation
Transfers or promotions resulting into change of place geographically, disturbs the routine daily
life of individual causing stress. Fear of working in a new place, unpredictability of the new
work environment, anxiety due to fear of how to create new relations, getting away from
198 DKR21
spouse, children, relatives or looking for new dwelling, school for children in new place can
be the result of uncertainty and a cause of stress.
iii. Change of life structure
Structure of life and process of living has many facets like socio-cultural factors like religion,
race, education, family. As a person grow older responsibilities also grow up, and therefore
stress develops. The extent of stress is also determined by the ability to cope with stress.
13.5.3 Coping with Stress
A. Organizational Strategies
1. Preventive Management: Preventive management can be conducted by surveys and

employee/group interviews. Managers can identify potential problems of serious stressors
and take steps to reduce them
2. Maintaining a productive Culture: Maintenance of positive organizational

environment and satisfied employees sets the right direction.
3. Management by Objectives: A management by objectives or similar performance

appraisal technique that identify employee goals, roles and responsibilities and strengthen
communication can reduce stress by eliminating uncertainty in critical aspects of
employee‗s jobs
4. Controlling the Physical Environment: Reducing stress in the physical environment
requires that management undertake one or two different strategies. First by reducing noise,
better control of temperature, second by protecting employees by improved safety equipment.
B. Personal Strategies
1. Meditation: Transcendental meditation gives mental and physical relaxation. Meditation

reduces anxiety and improves work performance and gives job satisfaction.
2. Exercise: One of the least expensive and effective stress reduction strategy is exercise
like jogging, sports, fitness classes, cycling, swimming etc. This improves mental and
physical health.
3. Entertainment: Watching a favourite movie or listening to music can release stress
199 DKR21
4. Removing the cause of Stress: sometimes one can easily check the cause of stress, for
example, a confrontational supervisor, difficult support staff, no possibility for
advancement etc. Thus the key is to reduce or lessen the cause.
5. Seeking Counselling: Stress is a common psychological problem. Counsellors can offer

helpful insights and stress-reduction techniques that may remove the problem.
13.6 Employee Welfare
Employee welfare depends on overcoming personal crisis, family problems and work place
problems. Removal of these problems leads to healthy and more productive years of service
to the employees.
Organizations try number of approaches to address rising problems of the employees. One
such approach is the establishment of wellness programs. Wellness is defined as a freely
chosen lifestyle aimed at achieving and maintaining an individual‗s good health.
Employee welfare programs can bring behavioural changes in employees. More broader
and comprehensive approaches are adopted by organizations to solve problems of
employees. Job security, Voluntary participation, Accessibility, Insurance coverage can
boost the morale and efficiency of the employees.
13.7 HRD AUDIT:

 HRD audit refers to the measurement of the effectiveness of the human resource
management‘s mission, objectives, strategies, policies, procedures, programmes and
activities.
 HRD audit also refers to the determination of what should or should not be done in
the future as a result of such measurement.
13.7.1 OBJECTIVES OF HRD AUDIT:

 To review the whole system of management programmes in which a management develops,
allocates and supervises human resources in an organization with a view of determining the
effectiveness of these programmes.
 To seek explanations and information, that is, to get answers to such questions as,
 To evaluate the extent to which functional managers have implemented the policies which
have already been initiated?
 To evaluate the personnel staff and employees.
200 DKR21
13.7.2 NEED FOR HRD AUDIT:

 The number of employees
 Organizational structure
 Communication and Feedback
 Location and Dispension
 Status of an industrial Relations Manager
 Administrative Style.
13.7.3 AREAS OF HRD AUDIT:

 Mission statement relating to HRM
 Objectives, goals and Strategies of HRM
 Accomplishments of HRM
 Programmes of HRM including the detailed practices and procedures.
13.8 KEYWORDS
Employee health Safety measures
Stress Employee welfare
1. Define: Health
2. Give the importance of industrial health. Explain how safety measures

can help in reducing industrial accidents.
3. What do you understand by stress?
4. Write short notes on employee welfare.
201 DKR21
REFERENCES
Books
 Aswathappa, K (2008). Human Resource Management. New Delhi: Tata McGraw-

Hill Publishing Company Limited.

 Biswajeet Pattanayak. (2009). Human Resource Management. New Delhi: PHI
Learning Private Limited

 Gary Dessler and Biju Varkkey. (2009). Human Resource Management. New Delhi:
Dorling Kindersley (India) Pvt. Ltd.

 John P Wilson. (2005). Human Resource Development. New Delhi: Kogan Page India

 Khanka, S.S (2010). Human Resource Management. New Delhi: S. Chand &
Company Ltd.

 Monal Arora. (2000). Industrial Relations. New Delhi: Excel Books.

 Tripathi, P.C (2003). Personnel Management & Industrial Relations. New Delhi:
Sultan Chand & Sons.

 Tripathi, P.C (2009). Personnel Management and Industrial Relations. New Delhi:
Sultan Chand & Sons.

 Ratna Sen. (2011). Industrial Relations. New Delhi: Macmillan Publishers India Ltd
202 DKR21
Websites
 http://sujai-human.blogspot.in/2010/11/employment-planning-and-
forecasting.html (viewed on 22/08/2013)

 http://www.usq.edu.au/hr/facdept/rshandbook/techniques (viewed on 23/08/2013)

 http://www.bookrags.com/articles/47.html viewed on 23/08/2013
 http://www.mu.ac.in/myweb_test/M.Com.%20Study%20Material/Human%20Res.%2
0Management%20-%20M.%20Com%20-%20I.pdf (viewed on 23/08/2013)

 http://sujai-human.blogspot.in/2010/11/developing-and-using-application-
forms.html (viewed on 23/08/2013)

 http://vmouonline.in/oldweb/studymaterial/4%20BBA%2001.pdf (viewed on
23/08/2013)

 http://www.palgrave.com/business/brattonandgold/docs/bgcha02.pdf
(Viewed on 23/08/2013)

 http://www.ou.edu/faculty/M/Jorge.L.Mendoza-1/job-analysis-criteria-
reliability-validity.pdf (Viewed on 24/08/2013)

 http://www.ffw.org.ph/bin/TRAINING%20RESOURCES/CBA_Handout.pdf
(Viewed on 13/09/2013)

 http://legacy.montevallo.edu/HR/HiringManagerDocuments/CONDUCTING%20AN%20EFFE
CTIVE%20INTERVIEW.pdf (Viewed on 19/09/2013)

 https://www.google.co.in/search?q=trade+unionismpdf&oq=trade+unionismpdf&aqs
=chrome..69i57j0l4.15459j0j8&sourceid=chrome&espv=210&es_sm=122&ie=UTF8
#es_sm=122&espv=210&q=incentive+compensation+doc (Viewed on 19/09/2013)
https://www.google.co.in/#q=managing+promotions+and+transfers (Viewed on
3/10/2013)

 https://www.google.co.in/search?q=trade+unionismpdf&oq=trade+unionismpdf&aqs
=chrome..69i57j04.15459j0j8&sourceid=chrome&espv=210&es_sm=122&ie=UTF8
#es_sm=122&espv=210&q=collective+bargaining+process+doc (Viewed on
12/10/2013)

 http://shodhganga.inflibnet.ac.in/bitstream/10603/610/11/11_chapter3.pdf
(Viewed on 15/10/2013)

 http://hrcouncil.ca/hr-toolkit/compensation-employee.cfm (Viewed on 15/10/13)


 https://www.google.co.in/?gws_rd=cr&ei=3A9mUqmiB8XsiAfzpYCQBg#q=importa
nce+and+implications+of+labour+legislations (Viewed on 15/10/13)
203 DKR21

HRM Study Material

Uploaded by

Copyright:

Available Formats

HRM Study Material

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

HRM Study Material

Uploaded by

Copyright:

Available Formats

MANONMANIAM SUNDARANAR UNIVERSITY

DIRECTORATE OF DISTANCE & CONTINUING EDUCATION

DKR21 - HUMAN RESOURCE MANAGEMENT

Most Student friendly University - Strive to Study and Learn to Excel

For more information visit: http://www.msuniv.ac.in

DKR21: HUMAN RESOURCE MANAGEMENT

DKR21: HUMAN RESOURCE MANAGEMENT

Lesson No. Particulars Page No.

INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

1.0 Human Resource Function & Philosophy

1.0 HUMAN RESOURCE FUNCTION & PHILOSOPHY

(a) Managerial Functions and (b) Operative Functions

1. Planning: Planning is a predetermined course of actions. It is a process of determining

(a) Preparation of task force.

(b) Allocation of work to individuals.

(c) Integration of the efforts of the task force.

(d) Coordination of work of individual with that of the department.

3. Compensation to Personnel: Compensation means determination of adequate and

4. Maintaining Good Industrial Relation: Human Resource Management covers a wide

5. Record Keeping: In record-keeping the personnel manager collects and maintains

1.1 CHANGING ENVIRONMENTS OF HRM

Environments of HRM comprise political-legal, economic, technological, demographic

Customers have their own influence on a company's personnel functions. It needs no

Technology is a systematic application of organised knowledge to practical tasks.

b) Organisational Culture and Conflict: As individuals have personality, organisations

1.2 STRATEGIC HUMAN RESOURCE MANAGEMENT USING HRM TO ATTAIN

1.2.1 Model of Strategic Management

In the descriptive and prescriptive management texts, strategic management appears as a

1. Mission and Goals

1.2.2 Hierarchy of Strategy

Another aspect of strategic management in the multidivisional business organization

Corporate-level strategy describes a corporation‘s overall direction in terms of its general

consistent strategy–structure–culture relationship. In this reactive orientation, senior

1.3 CURRENT TRENDS IN HUMAN RESOURCE MANAGEMENT

The world of work is rapidly changing. As a part of organization, Human Resource

1. Globalization and Its Implications

3. Changing Skill Requirements

Whenever an organization attempts to delayer, it is attempting to create greater efficiency.

5. Continuous Improvement Programs

6. Re-engineering Work Processes for improved Productivity

No organization can make the transition to a contingent workforce without sufficient

8. Decentralized Work Sites

1.4 ORGANIZATION OF HR DEPARTMENTS

Two issues become relevant in a discussion on organisation of an HR department. They are

Fig. 1.1 HRM in a Small-Scale Unit

Chairman and Managing Director

Director Director Director Director

Fig. 1.2 HRM in Large Scale Unit

Manager Manager Manager HRD Manager HR

Appraisal Training & Development

PR Canteen Medical Welfare Transport Legal

Human Resource Planning

Fig. 1.3 Composition of a HR/Personnel Department

1.5 LINE AND STAFF FUNCTIONS

1.6 ROLE OF HUMAN RESOURCE MANAGER

1.6.2 Functions of a Human Resource Manager

A human resource manager, charged with fulfilling the objectives of an organisation,

2. Human Resource Manager as an Educator: It is not enough that a human resource

3. Human Resource Manager as a Discriminator: A human resource administrator must

5. Human Resource Manager as a Leader: Being basically concerned with people or