Employee Remuneration

Difference between wage and salary
Wage
It is the worth of a job
Wages are fixed
In popular terms it is an hourly payment
No long term guarantee of long- term employment
Refer to the payment to workers
There is a provision for overtime

Salary

It is the worth of an individual

Salary is negotiable

It is paid by month

Job can last for a long time

Refers to the payment to managerial and supervisory levels

There is no provision for overtime

Wage plans

The methods of remunerations are:
Time Rate System
Payment by results

Time Rate System:
The time rate or day rate is related to the hours of wage and is commonly used. The wage rate can be fixed on hourly, daily, weekly, fortnightly or monthly basis depending on the nature of his skills.

The method is applied in the following circumstances:
The quality of work is more important
The output of worker cannot be measured
Where the output of a worker is not in his control
Where the work can be closely supervised
Where increase in output is negligible compared to the incentive

Advantages:
The advantages of time rate system are:
i. it is simple and easy to understand
ii. it is recognized by trade unions as all workers are paid alike
iii. it involves less clerical expenditure
iv. a steady income is assured
v. as there is no hurry, tools and materials are handled carefully. Wastages are minimized.

Disadvantages:
i. it does not encourage initiative
ii. labour cost may rise thereby decreasing profit. This may be caused by decreased in productivity.
iii. Standards of labour are difficult to set.
iv. Production may decrease thus upsetting production schedules, create production bottlenecks and increase cost per unit.
v. Labour cost cannot be estimated for the purpose of quotations.
vi. It creates more idle time.
vii. This system encourages inefficiency.
viii. It requires close supervision to ensure that employees are working.

A few variations of this system are in use. They are:
a. High Wage Plan
b. Different Time Rates
c. Measured Day Work (Graduated)

High Wage Plan
Compared to the wage rate prevailing in the region, a higher time rate is fixed. This is done to enable the workers to achieve the standard, suitable working conditions are created.

Unsuitable or inefficient workers are taken off the system.

The employer benefits because overheads and wage costs per unit are reduced.

This scheme is suitable when high quality and productivity are required. But it should be possible to set up standards and measure the output.

The advantages are:
reduces supervision
simple and inexpensive ( because of lower labour cost per unit)
attracts skilled workers
increases productivity
decreases wages and overhead costs.

Different Time Rates
For different levels of efficiency, different rates are fixed. For efficiency upto the standard level, normal wages are paid and for efficiency beyond the standard level, the rate is gradually increased. This is similar to differential piece rate system.

Measured Day Work (Graduated)
The hourly rates are divided into two parts. One part is fixed which depends on the nature of the job and the other part is variable depending upon the merit rating and cost of living.

This system is very complicated. The calculations involved increase when the workers change jobs frequently. Merit rating mar be arbitary. There is multiplicity of rates. The workers do not easily understand the system. Because of all these factors this system is unpopular.

Payment by results
Payment by results is a method of paying wages which depend on the output or units produced by the worker. The worker can increase his income by producing more units.

The main classifications of payments by result are:
a. payment is directly proportional to the worker’s production; for example straight piece work system
b. payment proportionally increases as the production increases, like the differential piece-work system;
c. the rate of payment decreases as output increases e.g. premium bonus methods;
d. the payment varies at different levels of production like the accelerated premium method.

Piece Rate System
The wages are paid on the basis of the output of workers, i.e. ,on the basis of quantity o output. It is simple and common method of wage payment. The worker is paid on the basis of his work, not taking into account the time involved.

The wage is calculated as follows:

Wage = Number of units produced x Rate per unit

The piece rate can be applied in the following cases:
the work is of standard or repetitive nature
piece rate can be easily fixed
the is uninterrupted flow of work
it is necessary for the employer to get maximum production
quantity of output depends on effort and does not require skill

Merits:

i. A worker becomes an expert by continuously doing the work. Thus he can earn more.
ii. It increases efficiency.
iii. It reduces cost.
iv. Idle time is automatically controlled
v. The reward is related to effort. Efficiency is recognized
vi. Quotations can be easily made as cost per unit is known.
vii. Supervision can be reduced as workers are paid according to performance.
viii. Workers endeavour to increase production by discovering new techniques of producing goods.

Demerits:
Quality may be sacrificed to increase production.
Wastages may be high if not properly supervised.
It increases more supervision and inspection so that units attain the standard.
In order to maximize output, the worker may use machines and tools recklessly.
If work stops due to machine break down, power failure, etc., the worker may feel insecure.
The workers health may be affected due to over- strain
The inefficient and less efficient workers may feel insecure.
Lack of steady market may cause overproduction and surplus.
Determination of piece rate is difficult.

Piece Rate with Guaranteed Time Rate

A certain level of output is determined. Workers are paid on the basis of output. If the output is less than the standard, the worker is paid on time rate basis.

Thus, this system incorporates the merits of time rate and piece rate system and eliminates the demerits of them.

But, it is very complicated and misunderstandings may arise.


Incentive Schemes

Incentive system attempts to combine the merits of both the time rate and piece rate systems. The main objective of incentive plan is to induce a worker to produce more to earn a higher wage. Producing more in the same period of time should result in higher pay for the worker. Because if greater number of units is produced, it should also result in lower cost per unit for fixed factory cost and also for labour cost. A good incentive plan should have the following characteristics:

1. it should be simple and easy to understand;
2. operating cost of the system should be low;
3. it should permit less supervision;
4. the time lag between effort and reward should be minimum;
5. it should be fair to the employees and employer;
6. the standard set should be attainable
7. performance above standard should be well rewarded;
8. it should be flexible;
9. the premium should be large enough to induce workers;
10. all workers should be given equal opportunity to earn;
11. it should facilitate the budgetary control and standard cost systems;
12. inspection should be good;
13. good working conditions must be available;
14. the system should be introduced on a permanent basis and should not be ambiguous;
15. no rate cutting should be permitted and an individual’s earnings should not be curtailed;
16. there should be uniformity of reward for same amount of effort;
17. indirect workers should also be included.

Advantages of Incentive Schemes

less supervision is required;
the employee morale is high because they can earn more;
there is increased productivity;
increased production reduces cost ;
labour cost can be estimated;
it is possible to set standards for labour with accuracy;
there is maximum utilization of resources;
a task is done in the most economical manner which reduces labour cost.

Disadvantages of Incentive Schemes

if rates are not uniform for same type of jobs, it causes discontent;
quality may deteriorate and may be sacrificed in order to increase quantity;
it involves more calculations;
the worker may not adhere to the safety norms in order to increase productions. Here accidents may occur;
the worker’s health may be affected due to over-strain;
there may be apprehensions regarding rate cutting;
inefficient worker may envy the efficient ones which may cause unrest;
unskilled workers sometimes earn more than skilled workers if the latter have to work on time basis.

Classification of Incentive Schemes

Incentive schemes can be classified as follows:

Differential piece rate
Premium bonus schemes
Group bonus plans


Differential piece rate

Efficient and inefficient workers are distinguished
More than one piece rate is determined
Standards are set for each operations or job
Efficient workers that is those who attain or better the standard set are given a higher rate and inefficient are given a lower rate
Hence, there is encouragement to improve the performance
As the level of output increases the piece rate also increases.

The system is suitable where:
the method of working is standardized;
the workers do the same job over a long period;
the nature of work is repetitive;
output of each person can be measured;
the standard time for each job can be determined with precision.

Advantage:
Workers are encouraged to increase their efficiency and earn higher wage.

Disadvantage:
the system is complicated and difficult to understand.
A stage may be reached when the increased labour cost will equalize the benefit arising due to reduced overhead.



Premium Bonus Schemes

Under this system, the gains are shared by the employer and the employee in an agreed proportion. Apart from the minimum guaranteed wages, the efficient worker gets bonus which depends on the time saved. The standard is determined scientifically. The various incentive schemes should be chosen keeping in mind the nature of the work, with the consent of trade unions in order to make it successful.

These plans regulate the speed of work so that the pace of the work is not slow and at the same time it is not fast.


Group Bonus Plans

There are certain jobs which have to be performed collectively by a group of workers. The
ultimate production depends on the efficiency of the whole group. Under group bonus plans, payment may be made by results to all the workers in the group. Bonus may be shared equally or in a different proportion according to the skills required. These proportions may be based on time rates or previously agreed ratios.

These plans may increase production and reduce cost per unit. It creates team spirit. But efficient and inefficient workers may be rewarded alike. Efforts and rewards are not linked properly.

These plans can be used where:
a. it is required to reward both direct and indirect workers.
b. output depends on team work
c. it is desirous to create team spirit
d. It is not possible to measure the output of an individual person

Advantages of group bonus plan:
a. there is more cooperation and team work
b. inspection and supervision can be reduced
c. there is self-discipline
d. Production increases
e. Cost of production decreases and also the spoilt and defective goods
f. It simplifies payroll and cost accounting

Disadvantages of group bonus plan:
the amount of bonus given is too insignificant
no distinction is made between efficient and inefficient workers
time gap between effort and reward is very wide


Indirect Monetary Incentive Scheme

Profit Sharing
Co-partnership

Profit Sharing

‘Profit sharing is an agreement freely entered into, by which employee receives a share, fixed in advance, of the profits.’
-Henry R. Seagar
The workers get a share in the profit of the undertaking in a certain agreed percentage which is in addition to the normal wage of the workers. the profit percentage is predetermined and may be given in cash or in the form of shares. The percentage is often governed by the Payment of Bonus Act. If profit is given in the form of shares, it is called co-partnership.

Advantages:
Relations between labour and management improve because labour takes interest in management.
This method assumes that every worker contributes towards profit. It is applicable to all workers irrespective of their efficiency. There is better employer-employe relationship.
Labour morale is boosted. Hence, there is industrial peace.
The employees get a share of profit, capital and control of the management. This creates a sense of belonging to the company and the workers contribute to the welfare of the company. Materials and plant will be handled with care thus minimizing loss and wastages.
As bonus is given annually there will low labour turnover.
There is a direct relationship between profits and bonus. The workers try to increase bonus by increasing efficiency and production.
There is greater cooperation and Better team spirit.
Because of this scheme, quality workers are attracted to the industry.

Disadvantages:

The worker may not be satisfied as there is uncertainty of profits in spite of the efforts taken.
Labour unions also oppose the scheme as it may alienate workers from the union.
Profits depend on many factors. Many are beyond the control of the workers and are not directly related to their efforts.
Apportionment of profit on a suitable basis is difficult.
Once the workers are used to bonus, non payment of bonus in a year may give rise to discontent. Fluctuations in bonus also create bad industrial relations.
The workers may not trust the figures presented by the employer and may resort to strike.
The efficiency of worker may not increase as they have to wait for the year end to get reward for their efforts.
The efficiency may be adversely affected as both efficient and inefficient workers are treated alike.
The employers object to this scheme as the workers share the profits but not the losses.

Co-partnership

Sometimes labour is given a share of profit in the form of shares. This form of profit sharing is called labour co-partnership. It gives labour a permanent interest in the future of the organization. Hence, this scheme is also known as co-ownership.

Though the employees get a part of the capital and profits accruing thereon, these share may or may not carry voting rights. The employees may freely deal with these shares or a few restrictions may be placed on them. Sometimes, the employee may be given a loan to buy the company’s share.

Advantages:

Because the employees have a share in the capital, they have a greater sense of belonging and hence they evince more interest in the concern.
It reduces labour turnover.
As the employees contribution to the profit of the concern is recognized, their morale is high.

Disadvantages:

Efforts and rewards are not properly related.
The importance of incentive is reduced as date of payment is too far away.
It does not differentiate between inefficient and efficient workers.
Misunderstanding between employer and employee may arise because employees cannot verify the share allotted to them.


Wage Policy

The term ‘wage policy’ refers to the legislation or government action undertaken to regulate the level or structure of wages, or both, for the purpose of achieving specific objectives of social and economic policy.

The social objective of wage policy aim at:
eliminating exceptionally low wages
establishing fair standards
protecting wage earners from the impact of inflationary tendencies
increasing the economic welfare of the community as whole

Objective of Wage Policy

to abolish malpractices and abuses in wage payment;
to set minimum wages for workers having weak bargaining power because either they are unorganized or inefficiently organized, accompanied by separate measures to promote the growth of trade unions and collective bargaining;
to obtain for the workers a just share in the fruits of economic development, supplemented by appropriate measures to keep worker’s expenditure on consumption goods in step with the available supplies so as to minimize inflationary pressure; and
to bring about a more efficient allocation and utilization of manpower through wage differentials and where appropriate systems of payment by results costs
to provide minimum wage to workers employed in sweated industries
to fix wage ceilings
to improve existing wage-structure

Minimum Wage: A minimum wage must provide not merely for the bare sustenance of life but for the preservation of efficiency of worker. For this purpose, the minimum wage must also provide for the measure of education, medical requirements and other amenities.

Living wage: A living wage should enable the male-wage earner to provide for himself and his family not merely the bare essentials of food, clothing and shelter, but a measure of frugal comfort, including education for his children, protection against ill-health, requirements of essential social needs, and a measure of insurance against the more important misfortunes, including old-age.

Fair wage: While the lower limit of fair wage must obviously be the minimum wage, the upper limit is usually set by what may broadly be called the capacity of the industry to pay.


National Wage Policy
Though it is desirable to have a National Wage Policy it is difficult to conceive a concept of the same. The National Wage Policy has been discussed on many occasions in different fora. Because fixation of wages depends on a number of criteria like local conditions, cost of living and paying capacity also varies from State to State and from industry to industry, it would be difficult to maintain uniformity in wages. The Indian Labour Conference, held in November, 1985 expressed the following views-

Till such time a national wage is feasible, it would be desirable to have regional minimum wages in regard to which the Central Government may lay down the guidelines. The Minimum Wages should be revised at regular periodicity and should be linked with rise in the cost of living”

Accordingly, the Government issued guidelines in July, 87 for setting up of Regional Minimum Wages Advisory Committees. These Committees renamed subsequently as Regional Labour Ministers’ Conference, made a number of recommendations which include reduction in disparities in minimum wages in different states of a region, setting up of inter-state Coordination Council, consultation with neighbouring States while fixing/revising minimum wages etc.

Regional committees to reduce disparities in wages
There is disparity in rates of minimum wags in various regions of the country. This is due to differences in socio-economic and agro-climatic conditions, prices of essential commodities, paying capacity, productivity and local conditions influencing the wage rate. The regional disparity in minimum wages is also attributed to the fact that both the Central and State Governments are the appropriate Government to fix, revise and enforce minimum wages in scheduled employments in their respective jurisdictions under the Act

. To bring uniformity in the minimum wages of scheduled employments, the Union Government has requested the States to form regional Committees. At present there are five Regional Minimum Wages Advisory Committees in the country which are as
under:-

Region States/UTs covered

Eastern Region West Bengal, Orissa, Bihar, Jharkhand andAndaman & Nicobar Islands.
North Eastern Region Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Sikkim, Nagaland and Tripura.

Southern Region Andhra Pradesh, Karnataka, Kerala, TamilNadu, Pondicherry and Lakshadwadeep.

Northern Region Punjab, Rajasthan, Himachal Pradesh, Jammu & Kashmir, Haryana, Uttar Pradesh, Uttranchal, Delhi and Chandigarh.
Western Region Maharashtra, Gujarat, Goa, Madhya Pradesh,Chhattisgarh, Dadra & Nagar Haveli and Daman & Diu.
The meeting of the Regional Committee on Minimum Wages for these Regions are being held from time to time.

National Floor Level Minimum Wage
In order to have a uniform wage structure and to reduce the disparity in minimum wages across the country, concept of National Floor Level Minimum Wage was mooted on the basis of the recommendations of the National Commission on Rural Labour (NCRL) in 1991. Keeping in view the recommendation of NCRL and subsequent rises in price indices, the National Floor Level Minimum Wage was fixed at Rs.35/- per day in 1996.
The Central Government raised the national floor level minimum wage to Rs.40/- per day in 1998 and further to Rs.45/- w.e.f. 01.12.1999, and Rs.50/- per day w.e.f. 1.9.2002 keeping in view the rise in consumer price index.

Based on the norms suggested by the Working Group and its acceptance by the Central Advisory Board subsequently in its meeting held on 19.12.2003, national floor level minimum wage has last been revised upwards to Rs. 66/- per day with effect from 1.02.2004. The national floor level minimum wage, however, has no statutory backing. The State Governments are persuaded to fix minimum wages such that in none of the scheduled employments, the minimum wage is less than National floor level minimum wage. This method has helped in reducing disparity among different rates of minimum wages to some extent.

To sum up, effective implementation of the Minimum Wages Act, 1948, which primarily falls in the State sphere, is assiduously pursued by Ministry of Labour and Employment through discussion, writing letters, personal interaction and visits to States. The State
Governments are regularly asked to fix and revise minimum wages in scheduled employments to be at least at par with national floor level minimum wage of Rs. 66 per day.

Fixation/revision of minimum wages
Norms
The norms include those which were recommended by the Indian Labour Conference in its session held in 1957.
(i) 3 consumption units for one earner.
(ii) Minimum food requirements of 2700 calories per average Indian adult.
(iii) Clothing requirements of 72 yards per annum per family.
(iv) Rent corresponding to the minimum area provided for under Government's Industrial Housing Scheme.
(v) Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total Minimum Wages.
Other parameters
(i) "Children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage etc. should further constitute 25% of the total minimum wage." This judgment was delivered by the Supreme Court of India in 1991 in the case of Reptakos Brett and Co.Vs.its workmen.
(ii) Local conditions and other factors influencing the wage rate.





























Compensation Package and terminal benefits

Syllabus and Reading List

Syllabus and Reading List

Human Resource Development: Concept, significance, scope and status; Strategies for formulation of human resource development programmes; Career planning and career development; Human resource accounting.
Human Resource Management: Introduction, concept, functions, scope and significance of Human Resource Management; Organization of Human Resource Management; Qualities of Human Resource Manager and his role in industry; Professionalization of Human Resource Management in India.
Manpower Planning: Meaning, objectives and significance; Steps in manpower planning; Quantitative and qualitative aspects of manpower planning; Recruitment, interviewing, selection, induction and placement.
Manpower Training and Development: Concept, purpose, and methods of training; Executive development programmes and their evaluation; Performance Appraisal; Counseling and employees communication system; Promotion, demotion and transfer; Employee morale, motivation and productivity; Executive stress.
Employee Remuneration: Wage plans and policies, profit sharing and incentive plans, Compensation Package and terminal benefits.
Industrial Relations: Concept, scope, significance and determinants; Industrial Unrest, Industrial disputes and their prevention; industrial discipline; trade unions, collective bargaining; Worker’s participation in management; Employee welfare, personnel policies.
An overview of laws relating to recruitment and related aspects: The Employment Exchanges (Compulsory Notification of Vacancies) Act 1959; The Apprentices Act 1961; The Industrial Employment (Standing Orders) Act 1946.
An overview of laws relating to payment of wages, bonus etc.: The Payment of Wages Act 1936; The Minimum Wages Act 1948; The Payment of Bonus Act 1965; The Employees’ Provident Funds and Miscellaneous Provisions Act 1952; The Employees’ State Insurance Act1948; The Payment of Gratuity Act 1972.

Reading List
Human Resource Management by Mirza S Saiyadain
Human Resource Management: A Contemporary Perspective by Ian Beardwell & Len Holden
Human Resource Management: Perspective for New Era by Debi S Saini & Sami A Khan
Personnel/Human Resource Management by David A DeCenzo & Stephen P Robbins
Readings in Human Resource Development by T V Rao
Industrial Relations by Arun Monappa

Human Resource Development

Human Resource Development

Concept, significance, scope and status; Strategies for formulation of human resource development programmes; Career planning and career development; Human resource accounting.

Concept of HRD
Human Resource Development in the organizational context is a process by which the employees of an organization are helped, in a continuous and planned way, to:
Acquire or sharpen capabilities required to perform various functions associated with their present or expected future roles;
Develop their general capabilities as individuals and discover and exploit own inner potentials for their own and /or organizational developmental purposes;
Develop an organizational culture in which supervisor-subordinate relationships, teamwork, and collaboration among sub-units are strong and contribute to the professional well being, motivation and pride of employees.

In 1970 Len Nadler published his now-classic book Developing Human Resources, in which he coined the term "human resource development" (HRD).

HRD integrates training, education, and development of employees.

HRD provided purpose and direction for the continued growth and organized learning to provide the possibility of performance change.

In 1987 Patricia McLagan proposed the following narrative definition of HRD:

HRD is the integrated use of training and development, career development, and organization development to improve individual effectiveness

Labour was considered as a cost but now they are considered as an investment from which returns can be expected.

HRD is based on a new concept of man; a new concept of power; and new concept of organization.

New concept of man- Based on his shifting and complex needs

Initially strict supervision was there. Labours were treated as liability. Labours were not well educated and not technically sound. Productivity came down after doing the same work repeatedly.
Tech. and spread of education catalysed the promotion of HRD.
(Binny textiles- initially 80,000 workers were there before 1991; but now there are only 5000 workers of which only 250 are involved in production.)

New concept of power- based on collaborative co-determination
Earlier there was a continuous conflict between the workers and the employers because of the clash of interest. The workers wanted maximization of wage gains and job security whereas the employers wanted max. of profits and minimization of labour costs. The employer also wanted a free hand in hiring and firing of workers. Under the HRD system the employers accepted employees as collaborators (who works together). Realized the symbiotic relation between the two.

New concept of organization- based on democratic principles and social justice
Equality between the management and the workers.
There is not discrimination between the employees.

Human Resource Development aims at developing a variety of competencies of employees and developing a culture in the organization to utilize these competencies and contribute to organizational growth

HRD Belief-system
Human resources are the most important assets of any organization
Unlike other resources, human resources can be developed and increased to an unlimited extent
A healthy climate, characterized by the values of openness, enthusiasm, trust, mutuality, and collaboration is essential for developing human resources
HRD can be planned and monitored in ways that are beneficial both to the individual and to the organization
Employees feel committed to their work and organization if the management perpetuates a sense of belonging
Employees are likely to have this feeling if the organization provides for their basic needs and for their higher needs through appropriate management style and systems
Employee commitment is increased with the opportunity to discover and use one’s capabilities and potential in one’s work
It is every manager’s responsibility to ensure the development and utilization of the capabilities of subordinates, to create a healthy and motivating work climate, and to set examples for subordinates to follow.

Significance of HRD
HRD is needed by any organization that wants to be dynamic and growth-oriented or to succeed in a fast-changing environment. Organizations can become dynamic and grow only through the efforts and competencies of their human resources. Personnel polices can keep the morale and motivation of the employees high, but these efforts are not enough to make the organization dynamic and take it to new directions. Employee capabilities must continuously be acquired, sharpened and used. For this purpose, an enabling organizational culture is essential. When employees use their initiative, take risks, experiment, innovate, and make things happen, the organization may be said to have an enabling culture.
Even an organization that has reached its limit in terms of growth needs to adapt to the changing environment. No organization is immune to the need for processes that help to acquire and augment its capabilities for stability and renewal.

HRD as a System
The components or elements of HRD are:
Individual Growth
Organizational Development
Work Output

Individual Growth
- Human resources development system in any organization focuses on the individual and his growth.
- Its aim is to develop human resources to their highest potential so that the organisational goals are achieved.
- Human growth occurs through learning newer and newer responses to deal with problems that are encountered in one’s own environment
- Learning is retained when one becomes aware of results achieved.
- If individual growth is aimed then people need two things- new challenges and knowledge of their achievement

Orgaisational Development
- Organizational growth & development takes place through learning ways to cope with its environment
- Organisation has many inputs- man, machinery material, and money.
- All the inputs properly managed leads to the orgaisational growth.
- Organisation cannot develop in isolation
- It can develop only when there is a congruence between organizational needs and individual needs

Work and Work Output
- Work refers to the setting up of work goals, activities geared towards attainment of these goals, feedback on performance, appraisal of work performance, involvement in decision making process, work and quality of work life
- Work output refers to enlarged responsibilities, productivity improvement, rewards for productivity improvement and goal attainment

HRD : a Function

The basic aim of HRD is behavioral and attitudinal change of the employees that facilitates attainment of organizational change. This involves three things
1. formulation of appropriate programmes
2. implementation of the programmes
3. evaluation
HRD Mechanisms
The goal of HRD system is to develop:
the capabilities of each employee as an individual;
the capabilities of each individual in relation to his or her present role;
the capabilities of each employee in relation to his or her expected future role;
the dyadic relationship between each employee and his or her supervisor;
the team spirit and functioning in every organizational unit;
collaboration among different units of the organization;
the organization’s overall health and self-renewing capabilities which, in turn, augment the enabling capabilities of individuals, dyads, teams, and the entire organization.
Objectives of HRD are accomplished through the following process mechanisms:
Performance Appraisal
Potential Appraisal and Development
Feedback and Performance Coaching
Career Planning
Training
Organization Development or Research and Systems Development
Rewards
Employee Welfare and Quality of Work Life
Human Resource Information

Performance Appraisal
Under the HRD system, Performance Appraisal is aimed at:
understanding the difficulties of the employees and finding ways to reduce them;
understanding the strengths and weaknesses of employees and helping them to overcome their shortcomings and build on their capabilities;
helping the employees to be aware of their positive contributions;
encouraging the employees to accept more responsibilities and challenges;
helping the employees acquire new skills and capabilities;
planning for effective utilization of the talents of the employees.
During the appraisal meetings, the supervisor and subordinates share their observations and concerns. Such discussions help to develop mutual understanding and the data thus generated are reported to higher management and are used in making decisions about individual employee development as well as developmental needs of the work-group of the entire organization.
Potential Appraisal and Development
In the organization that subscribes to HRD, the potential (career enhancement possibilities) of every employee is assessed periodically. Such assessment is used for development planning as well as future placement within the organization. Under this system, it is assumed that the organization is growing continuously. It may be expanding in scale, diversifying its operations, introducing technological changes, or entering new markets. A dynamic and growing organization needs to continually review its its structure and systems, creating new roles and assigning new responsibilities. Capabilities to perform new roles and responsibilities must continually be developed among the employees. The identification of employee potential to ensure the availability of people to do different jobs helps to motivate employees in addition to serving organizational needs.
Feedback and Performance Coaching
Knowledge of one’s strength helps one to become more effective, to choose situations in which one’s strengths are required, and to avoid situations in which one’s weaknesses can create problems. This also increases the satisfaction level of an individual. Often, people do not recognize their strengths. Supervisors in an HRD system have the responsibility for ongoing observation and feedback to subordinates about their strengths and their weaknesses, as well as for guidance in improving performance capabilities.
Career Planning
People perform much better when they feel trusted and see meaning in what they are doing. In the HRD system, corporate plans are not kept secret. Long range plans are made known to the employees. They are helped to prepare for change whenever situation so warrants. In fact, the employees facilitate change. Major changes are discussed at all levels to increase employees’ understanding and commitment.
Most people want to know the possibilities of their own growth and career opportunities. Because managers and supervisors have information about the growth plans of the company, it is their responsibility to transmit information to their subordinates and to assist them in planning their careers within the organization. Of course, the plans may not become a reality, but all are aware of the possibilities and are thus prepared for them.
Training
Training is linked with performance appraisal and career development. Employees generally are trained on the job through special in-house training programmes. For some employees (including managers), outside training may be utilized to enhance, update or develop specific skills. This is especially valuable if the outside training can provide expertise, equipment, or sharing of experiences that are not available within the organization.
In-house training programmes are developed by in-house trainers or consultant hired for the purpose and periodic assessments are made of the training needs within the organization. The effects of all the training programmes are monitored and added to the data concerning training needs. Managers and employees who attend in-house or outside training events also are expected to submit proposals concerning any changes they would like to suggest on the basis of their new knowledge.
Organization Development or Research and Systems Development
This function includes research to ascertain the psychological health of the organization. This generally is accomplished by means of periodic employee surveys. Efforts are made to improve the organizational health through various means in order to maintain a psychological climate that is conducive to productivity. The OD or systems experts also help any department or unit in the company that is having problems such as absenteeism, low production, interpersonal conflicts, or resistance to change. These experts also refine and develop various systems within the organization to improve their functioning.
Rewards
Rewarding employee performance and behaviour is an important part of HRD. Appropriate rewards not only recognize and motivate employees they also communicate the organization’s values to them. In HRD systems, innovations and use of capabilities are rewarded in order to encourage the acquisition and application of positive attitudes and skills. Typical rewards include certificates of appreciation, newsletter announcements, increase in salary, bonus, special privileges and desired training. Promotions generally are not considered as rewards because these are based on appraisals of potential whereas rewards are based on performance. Rewards may be given to teams, departments, and other units within the organization as well as to individuals.
Employee Welfare and Quality of Work Life
Employees at lower levels in the organization usually perform relatively monotonous tasks and have fewer opportunities for promotion or change. This particularly is true in developing countries. In order to maintain their work commitment and motivation, the organization must provide some welfare benefits such as medical insurance, disability insurance, holidays, etc.
Quality of Work Life programmes generally focus on the environment within the organization and include basic physical concerns such as heating and air conditioning, lighting, safety, precautions, additional physical amenities such as food and beverages, recreation, and psychological and motivational factors such as flexible working hours, freedom to suggest changes or improvements, challenging work and varying degree of autonomy.
HRD systems focus on employee welfare and quality of work life by continually examining employee needs and meeting them to the extent feasible. Job enrichment programmes, educational subsidies, recreational activities, health and medical benefits, etc. generate a sense of belonging.
Human Resource Information
All appropriate information about employees should be stored in a central human resource database. This includes all basic information about each employee, training programmes attended, performance records, potential appraisals, and accomplishments. These data are utilized whenever there is a need to identify employees for consideration special projects, additional training or higher level jobs.

What is Career?
Career is a sequence of positions occupied by a person during his life time.
Career does not apply any advancement nor success or failure.
Therefore any work, whether paid or unpaid, pursued over an extended period of time, can constitute a career.

Individual Career Development versus Organisational Career development

Organisational Career development involves tracking career paths. Management seeks information so it can direct and monitor the progress of minorities and women and to ensure capable managerial and technical talent will be available to meet the organization’s needs. It looks at individuals filling the needs of the organization.

Individual Career Development focuses on assisting individuals to identify their major career goals and to determine what they need to do to achieve these goals. Thus the focus is entirely on the individual and includes his o her career outside the organization as well as inside.
Assuming that an organization already provides extensive employee and management development programs, why should it need to consider a career development program as well?
A long-term career focus should increase the organization’s effectiveness in managing its human resources. Following are the positive results that can accrue from a well designed career development program.
1. Ensures Needed talent will be available
Working with individual employees to help them better align their needs and aspirations with those of the organization will increase the probability that the right people will be available to meet the organization’s changing staffing requirements.

2. Improve the Organization’s ability to attract and retain high-talent personnel

3. Reduced Employee Frustration

External versus Internal Dimensions to a Career
Every individual’s career has two dimensions or components:
External dimension (is realistic and objective)
Internal Dimension ( represents the individual’s subjective perceptions)

External dimension in a career represents the objective progression of steps through a given occupation. Each of the steps in the career is objective and explicit.

The internal dimension in a career is a subjective concept of progression. This concept may be vague, as when one has the general ambition to “get ahead.”

Importance of these two dimensions of career

The major influence on the individual’s attitudes and behavior will not be objective reality, but rather their subjective perception of their career relative to their expectations.
So, regardless of what an organization may be objectively doing to develop the careers of its employees, successful career development demands that attention also be given to how employees perceive their career relative to their expectations.

Career Stages
1. Exploration
The exploration period ends for most of the people in their mid twenties as they make the transition from school to work.
From an organizational point of view this stage has the least relevance since it occurs prior to employment.

2. Establishment
The establishment period begins with the search for work and includes getting the first job, being accepted by peers, learning the job, and gaining the first tangible evidence of success or failure in the real world.

3. Mid- Career
This is the time where individuals may continue their prior improvements in performance, level-off, or begin to deteriorate.
Mistakes carry greater penalties as the individual is no longer seen as a learner.

4. Late Career
5. Decline

Methods to make Organizational Career Development More Effective
1. Challenging Initial Jobs
There is an increasing body of evidence indicating that employees who receive especially challenging job assignments in their career do better on later jobs.
Thus initial challenges, particularly if they are successfully met, stimulate a person to perform better.

2. Understanding of Career Options
This involves the dissemination of the information about the various promotional avenues and the qualifications and experience required to occupy those positions.

3. Assessment Centers
Assessment Centers is used as a selection device, a management development device as well as a career development device.
By putting people through assessment centers we obtain observable evidence of their ability to do certain job
Additionally, in his role as an assessor, an individual learns how to observe behavior carefully, to make inferences from observations, and to give feedback to the assessee.

4. Career Counseling
A career counseling dialogue must contain the following four elements:

a. The employee’s goals, aspirations, and expectations with regard to is or her own career for the next five years or longer.

b. The manager’s view of the opportunities available and the degree to which the employee’s aspirations are realistic and match up with the opportunities available.

c. Identification of what the employees would have to do in the way of further self development to qualify for new opportunities.

d. Identification of the actual next steps in the form of plans for new development activities or new job assignments that would prepare the employee for further career growth.

5. Career Development workshops
Career development workshop is a training program designed to assist workers in managing their careers.

6. Continuing Education and Training
7. Periodic Job Changes
8. Sabbaticals

Methods to make Individual’s Career Development More Effective
Individual’s career development requires people to become knowledgeable of their own needs, values, and personal goals. This can be achieved through a three-step, self-assessment process:
Identify and organize your skills, interests, work-related needs and values
Convert these inventories into general career fields and specific job goals
Test these possibilities against the realities of the organization or job market.


Strategies for formulation of human resource development programmes
Focus on enabling capabilities: problem solving skills, diagnostic abilities.
Balancing adaptation and change in the organizational culture: HRD managers must be sensitive towards resistance to change by the employees.
Attention to contextual factors: organizational culture, size of the organization, technology, existing skills, employee potentials, availability of external support system.
Building linkages with other functions: long range corporate plans, budgeting and finance, marketing, production, etc.
Balancing specialization and diffusion of functions: line managers should be involved in HRD planning and implementation. Management should leave the job of human resource development to experts alone.
Establishing the identity of HRD: HRD function should be recognized as such with a designated officer and distinct responsibility; multiple responsibilities produce several kinds of conflicts.
Ensuring respectability for the function: both credibility and usefulness depends on this.
Developing monitoring mechanisms: systematic monitoring is required to review progress and level of effectiveness.
Building feedback and reinforcement mechanism: systematic feedback loops should be evolved so that appropriate HRD interventions can be made and consolidated.
Balancing external and internal expertise: consultants may be called for expertise that may be required occasionally while internal capabilities should be developed if the expertise is required on long term basis. However, there is a great risk in case overuse of either external or internal expertise. If the company depends on consultants too much, employees will reflect withdrawal of efforts and be less interested in coming up with ideas. On the other hand, if consultants are discouraged, they may remain in dark about innovative and best practices that are important for competitive advantage.


Human Resource Accounting

Human resource accounting was initiated by Rensis Likert in the sixties. He stressed the importance of long-term planning of human resource’s qualitative variables that result in greater benefits in the long run.

“Human Resource Accounting is a term used to describe a variety of proposals that seek to report and emphasise the importance of human resources knowledgeable, trained and loyal employees in the company’s earning process and total assets.”
-Davidson

“Human Resource Accounting is the measurement of the cost and value of people for organization.”

According to the American Accounting Association (1970), HR accounting is the human resource identification and measuring process and also its communication to the interested parties.
HR accounting refers to the evaluation of the overall HR management in economic terms.

Human resource Accounting is the systematic recording of the transactions relating to the value of human resource i.e. the cost of the acquisition of the knowledge of the human beings in the organization, development of their skills and talent utilization of their energy for the production of goods or for rendering of services in the most profitable manner and thereby achieving the organization’s objective. The people in the organization are accounted for, as resource.

According to this, HR value is defined as the “the value of the current wages payable to employees currently on the payroll for the remaining years of their tenure with the company.”

Any resource will have two sides i.e. its assets value and the cost of procurement. But in the case of HR, only the procurement or maintenance cost is accounted in the balance sheet and not the asset value.

The cost of HR encompasses the following:

Cost of Recruiting: This starts from the time of searching for human resources. It includes the publicity, mailing, rejected applicants and contracted applicants.

Cost of Selection: It corresponds to the selected personnel. The components are derived from the candidate's interview (traveling, lodging /boarding, organization of exams and selective tests).

Cost of Contracting: This begins from the selection of personnel. It includes the cost of formulating the contract, travel and other incidental expenses.

Cost of placing: It is a variety of administrative costs, necessitated by situating the new employees in their job.

Cost of training: A greater part of this cost is the salary of the trainee who is unproductive. It hold good for the supervisor's or the trainers lost time while coaching the employee to do the job correctly. Costs also originate from a decrease in the productivity of the rest of the workers whose jobs are adversely affected.

Cost of Orientation: This cost generally includes adapting the new person to the organization as a whole and to a specific job. The cost of familiarizing the new employee with the personnel policy, products and services of the organization and the organizations in general is hardly estimable.

Cost of Promotion: It originates every time an employee changes his job in the same category or another due to promotion.

Cost of Improvement: This cost is for maintaining and improving the real potential of every employee.

Cost of Substitution: This includes the exit costs of the leaving employee and recruiting and training of the replacement.

Opportunity Cost: It is the estimate of an asset value that is the target of an alternative use.

Exit Cost: This cost covers the lost efficiency prior to separation, job vacancy cost during the new search and termination pay.

In addition to the above, the cost of HR includes the following also:

Rewards: Cash-like and non-Cash-like

Facilities: Tools, Fixtures/Fittings and accessories at work essential for the welfare of the employees.

Health and Safety: Specific policies (Statutory and Voluntary) implementation systems.

Consultation and communication overheads

Pensions and contributions to social security payments

Severance Costs: Retirement, Redundancy and Dismissal.

Advantages of Human Resource Accounting
By the adoption of a good system of human resource accounting, the value of human resource in the organization is disclosed properly and it will facilitate proper interpretation of returns on capital employed. Such interpretation of return on capital employed will be more reliable than the interpretation based on pure monetary capital employed.
Since a detailed record relating to human resources is maintained under a systematic human resource accounting, all managerial decision making is easily facilitated in situations like direct recruitment, retrenchment or retention: and thus the quality of management is improved.
In a good system of human resource accounting the human resource which are a valuable asset, are recognized in the organization. This improves the morale of the employees.
A good system of human resource accounting will create a sense of belongingness to the firm by winning their loyalty, devotion and initiative which will increase the productivity of the organization.
Since human resource are recognized and identified in human resource accounting, it will prevent the misuse and underuse of human resource i.e. reckless transfers, demotions, maltreatment by superiors and supervisors etc. are involved.
In human resource accounting, a monetary value is attached to the human resources and the human talents, devotion, and skills are considered ; and these valuable assets are allotted a place in the financial statements. This will generate some enthusiasm in the minds of employees bringing general progress to the undertaking.
Human resource accounting acts as a good control tool as it helps to measure the production performance of the organization.
Since the standard costs of recruiting, selecting and training people are known by human resource accounting, the organization can select the best person i.e. the person with highest expected realizable value.


Valuation of Human Resources- Methods
Original Cost Method/ Historical Cost Method
Original cost of human resource refers to the expenditure incurred by the concern in acquiring and developing the human resource.
There are two types of original cost
Direct Cost
Indirect Cost

Direct Cost of Human Resources
i. Recruitment costs
Expenses incurred to make the recruitment of employees, e.g. cost of advertisement, interview, etc.;
ii. Familiarisation Costs
Expenses incurred to make the employees familiarized with the nature and procedure of the work in the concern.
iii. Development Costs
It covers the cost of internal as well as external training and refresher courses
iv. Job Costs
Normal salaries and allowances paid to the employees are also a part of direct costs of human resources.

Indirect Cost of Human Resources
This cost includes all obligatory and incidental payments e.g. rewards for efficiency, facilities and benefits, gifts, loss of efficiency due to ailments or accidents etc.

The total of all these costs for all employees of the concern represents the total value of human resources in the concern. It can be shown in the balance sheet as an investment on human resources by the concern.

Replacement Cost Method
An employee replacement value is estimated cost that an organization would incur, if it were to replace the present employee with equal ability. Such costs are known as Replacement Cost.
The cost required to replace human resources would serve as the basis of valuation of human resources. It is indeed very difficult to find an identical replacement of existing human resources.

Opportunity Cost Method
The opportunity cost of an asset or human resource is based on the principle that they have value only if there is an alternative use of them. Therefore, this method holds that only the scarce human resource would have value at any particular time or place i.e. when they have alternative offers, while on the time or place a human resource may not have any other value.

Present Value Method
Present value of human resource refers to the share of earnings, which they attribute to the total earnings of the concern, after making due adjustments for the cost of capital.



Pv (r) = RC+FC+DC + JC- P (Le + Og)
Esp
Where
Pv (r) = Present value of Human Resource
RC = Recruitment Cost
FC = Familiarization Cost
DC = Development Cost
JC = Job Cost (salaries and allowances aid during the
Year)
Esp = expected service period
P (Le + Og) = Probability for loss of efficiency of human
Resource and for out going employees)

Disadvantages of this method
This method of valuation of valuation of human resource is very complicated, as it is not possible to ascertain their exact contribution to the total earnings of the concern.
The depreciation on human assets is also a controversial issue. Some accounting personnel hold that human resource should be appreciated rather than depreciated because the efficiency an experience of human beings go on increasing year after year, while others hold that the human asset should be depreciated just like other physical assets, as their efficiency falls with every increase in their age.

Difficulties in Valuation of Human Resource
Monetary valuation of human resource should not be made, as human beings cannot be owned like other physical assets.
Because of a vast range of categories and skill of human resources, the cost valuation of every individual employee would be very difficult and most uneconomic task.
The capital includes the investment to give the enterprise a better and meaningful return, but in case of human resources it cannot be properly assured.
Valuation of their qualifications, experience, skill and expertise in exact form is not possible.
Element of risk, which is higher in case of human resource because o their turnover habit, is another obstacle in this regard
Lack of the possibility for exact replacement is also another difficulty in the valuation of human resources.

Human Resource Management

Human Resource Management

Introduction, concept, functions, scope and significance of Human Resource Management; Organization of Human Resource Management; Qualities of Human Resource Manager and his role in industry; Professionalization of Human Resource Management in India

Introduction to HRM

“HRM is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic development of a highly committed and a capable workforce, using an integrated array of cultural, structural and personnel techniques.”
-J Storey

Human Resource Management is the strategic approach to acquiring, developing, managing, motivating and gaining the commitment of the organization’s key resource- the people who work in it and for it.”
–Michael Armstrong

HRM was a response to the Japanese competition. The Japanese put primacy on shared vision rather than on any centrally imposed rationality such as the Americans have been best known for. The Americans had neglected the pursuit of collective commitment through transformational leadership, which the Japanese paternalism revered. The Japanization inspired emphasis on cultural management through HRM to secure the commitment of employees.

There are two approaches to HRM:
1. Hard HRM
2. Soft HRM
These were based on the Michigan and Harvard models of HRM respectively. The hard model views employees as human resources to promote efficiency. It emphasizes their strategic use in minimizing cost and enhancing quality. This eventually promotes unitary perspectives of employers about employee relations. I does emphasize the need to create a work situation that is free from conflict and promotes commonality of goals of employers and employees. However, commonality is of goals is more a façade than a reality. The resource model views employees just as another resource. This is quite in consonance with the classical economic view that people are no different from just other factors of production and their management should aim at maximization o utility. It stresses the necessity of a “tight fit” between HR strategy an business strategy. The critical task of management is to align the formal structure and the HR systems, i.e., selection, appraisal, rewards and development, so that they can reinforce the realization o organizational objectives.

The soft ‘Harvard’ model an in a way be described as neo-pluralist. It emphasizes industrial pluralism half-heartedly, but nevertheless shows commitment to individual employee interests and goals along with organizational goals. It recognizes the legitimate interests of various stakeholders in the corporation, including the shareholders, groups of employees, government and the community. Although this model also views employees as resources, it differs from the hard model in that it views them as resourceful humans. This model argues for proactive interventions and emphasizes the alignment o HRM with strategic planning and culture change. It views people as social capital that can be developed. It supports the idea that commonality o interest among stakeholders can be developed, and seeks equalization of power for trust and collaboration. It argues for open channels for communication to build trust and commitment, goal orientation, and participation and informed choice.
While the hard model reflects ‘utilitarian instrumentalization’ (most beneficial use of human resource for the organization, the soft model concerns itself with the promotion of individual dignity, involvement and empowerment, i.e., a kind of ‘development humanism’.
The hard HRM underscores the calculative, strategic aspect o ‘managing the head counts’ in a most responsive way. It emphasizes that the top management should exercise control and minimize cost. The soft model focuses on the treatment of employees as proactive trustworthy resource whose competencies can be developed. It presumes that I we can ensure their commitment through motivation and appropriate leadership we can
Achieve not only better economic performance but also a tentative model for workplace justice.

Management academics find the soft model more acceptable than the hard model

Some of the features of soft HRM are
· Empowerment
· Trust
· Learning organization
· Leadership
· Excellence
· Quality circles
· Delayering

Some of the features of hard HRM are
· Downsizing
· Lean production
· Business process re-engineering (BPR)
· Total quality management (TQM)
· Performance related pay (PRP)

Functions of HRM

HRM is a process that consists of four functions:
a. acquisition,
b. development
c. motivation,&
d. maintenance
of human resources

Acquisition Function:
The acquisition function begins with planning. This includes the estimation of demands and supplies of labour. Acquisition also includes the recruitment, selection, and socialization of employees.

Development Function
The development function has three dimensions:
Employee training which emphasizes skills development and changing of attitudes among workers.
Management development, which concerns itself primarily with knowledge acquisition and the enhancement of an executive’s conceptual abilities.
Career Development, which is the continual effort to match long-term individual and organizational needs.

Motivation Function
The motivation function begins with the recognition that individuals are unique and that motivation techniques must reflect the needs of each individual. Within the motivation function,
· Alienation
· Job Satisfaction
· Performance Appraisal
· Behavioral and structural techniques for stimulating worker performance
· The importance of linking rewards to performance
· Compensation and benefits administration,&
· Methods to handle problem
are reviewed.

Maintenance Function
The maintenance function is concerned with providing those working conditions that employees believe are necessary in order to maintain their commitment to the organization.

Qualities of Human Resource Manager and his role in industry

David Ulrich suggests four key HRM competencies:

1. Knowledge of the Business. Human resources professionals must understand how their business or agency operates. This includes the organization’s strategy, how the organization makes money or achieves its primary purpose, its technological processes and organizational capabilities, etc. Therefore, HR professionals should develop their knowledge of such areas as finance, marketing, operations, and general management. Expertise in these areas helps human resources professionals create value by enabling
them to link their actions more effectively to the organization’s strategy.
2. Knowledge of “Best Practices” in HR (HR Delivery). Human resources professionals must continue to develop expertise in their field, knowing the best practices and “state of the art” in staffing, development, reward systems, performance management, and related HR functions. This is the area in which human resources has excelled traditionally and must continue to deliver excellence.
3. Change Management Skills. The rapidly changing environment requires organizations to be adaptable and transform themselves internally to meet new challenges and needs. Since change involves winning the hearts and minds of people, HR professionals must have the skills to help line managers achieve this transformation. Change management requires skills in problem solving, innovation, process improvement, influence, consultation, communication, and leadership. This is a relatively new requirement for human resources and one which demands increased attention.
4. Personal Credibility. Finally, HR professionals need to demonstrate behaviors that convey competence, integrity, accountability, confidentiality, and related ethical qualities to earn the trust and respect of line managers and employees. A record of quality and performance helps earn credibility, but so do the more personal attributes of character cited above.

In addition to the above mentioned qualities, HR manager must possess the following three competencies:
1. Knowledge:
•Personnel and Human Resources – Knowledge of principles and procedures for personnel recruitment, selection, training, compensation and benefits, labor relations
and negotiation, and personnel information systems.
•Administration and Management – Knowledge of business and management principles involved in strategic planning, resource allocation, human resources
modeling, leadership technique, production methods, and coordination of people and resources.
•Mathematics – Knowledge of arithmetic, algebra, geometry, calculus, statistics, and their applications.

2. Skill:
•Management of Personnel Resources – Motivating, developing, and directing people as they work, identifying the best people for the job.
•Writing – Communicating effectively in writing as appropriate for the needs of the audience.
•Speaking – Talking to others to convey information effectively.


3. Ability:
•Written Comprehension – The ability to read and understand information and ideas presented in writing.
•Oral Comprehension – The ability to listen to and understand information and ideas presented through spoken words and sentences.
•Oral Expression – The ability to communicate information and ideas in speaking so others will understand.

Human resource management (HRM) is the management function that is concerned with getting, training, motivating, and keeping competent employees. While some large organizations have Human Resources Departments, not only small-business managers but also many managers who work for large companies must make human resource decisions: recruiting candidates, reviewing application forms, interviewing applicants, inducting new employees, appraising employee performance, and providing training.
To hire competent, high-performing employees who can sustain their performance over the long-term, an organization should follow an eight-step human resource management process (see the above slide). The first three steps represent employment planning, adding staff through recruitment and reducing staff by downsizing, and selecting competent employees. These new employees must be adapted to the organization (orientation) and their job skills must be kept current (training and development). The last steps in the HRM process are performance appraisals, compensation and benefits, and safety and health. These elements are used to identify employment goals, correct performance problems, and promote sustained high-level performance.
Human Resource Planning follows three steps: (1) assessing current human resources, (2) assessing future human resource needs, (3) developing a program to meet future human resource needs.
Management should begin by generating a human resource inventory to assess what talents and skills are currently available in the organization. The next step is a job analysis to define the jobs within the organization and on-the-job behaviors that will promote success. Information gathered during job analysis allows management to compose the following: a written job description that states what a jobholder must do, plus how and why it is done; a job specification that states the minimum knowledge, skills, and abilities that a worker must possess to perform the job successfully. These documents can assist managers to recruit and select appropriate new hires.
Depending on the organization’s objectives and strategies, demand for human resources is contingent upon demand for the organization’s products or services and on the levels of productivity. After estimating total revenue, management can estimate the number and kinds of human resources needed to obtain those revenues.
After it has assessed current capabilities and future needs, management can estimate future human resources shortages and over-staffing. Then, it can develop a program to match these estimates with forecasts of future labor supply.
Recruitment is the process of locating, identifying, and attracting capable employees. Many companies are finding new employees on the World Wide Web. The source that is used should reflect the local labor market, the type or level of position, and the size of the organization.
Are certain recruiting sources better than others? Employee referrals can produce the best applicants for two reasons. First, current employees screen applicants before referring them. Second, current employees believe that their reputations with the firm will be reflected in the candidates that they recommend; so, they reflect only those who they believe will not make them look bad. Employee referrals, however, may not generate the diversity of applicants required by EEOC laws.
In the past decade, most large U.S. businesses, as well as many government agencies and small businesses, have been forced to shrink the size of their workforce or restructure their skill composition. Downsizing has become a relevant means of meeting the demands of a dynamic environment. The figure above presents the following major downsizing options:
Firing is permanent involuntary termination.
Layoffs are temporary involuntary termination.
Attrition is not filling openings creating by voluntary resignations or retirement.
Transfers involve moving employees either laterally or downward.
Reduced workweeks require employees to work fewer hours per week, share jobs, or work part time.
Early retirements provide incentives to more senior employees for retiring before their normal retirement date.
Job sharing means that employees share one full-time position.
Once the recruiting effort has developed a pool of candidates, the next step in the employment process is to identify who is “best” qualified for the job. Given performance criteria chosen by management, selection seeks to predict which applicants will be successful if hired. In essence, then, the selection process is a prediction exercise.
Any selection decision can result in four possible outcomes: two correct decisions and two errors. Problems occur when managers either reject candidates who would have performed successfully on-the-job (reject errors) or accept those who perform poorly (accept errors). Therefore, effective selection activity reduces the probability of making accept or reject errors and increases the probability of making correct decisions.
When a selection device measures the same thing consistently, it exhibits reliability. To be effective predictors, selection devices must possess and acceptable level of consistency.
If a selection device contains a proven relationship between the selection device and some relevant criterion it demonstrates validity. The burden is on management to verify that any selection device it uses to differentiate applicants is related to job performance.

Human Resource Planning

Human Resource Planning

Meaning, objectives and significance; Steps in manpower planning; Quantitative and qualitative aspects of manpower planning; Recruitment, interviewing, selection, induction and placement.


Meaning of Human Resource Planning

HRP is the process of analyzing an organisation’s need for employees and evaluating how this can be met from the internal and external labour markets. It should be an on going process of monitoring that helps identify the need to attract, allocate, develop, and retain human resources to meet the wider business objective of the organization. It encourages managers in organizations to plan ahead. Good quality HRP will involve analyzing data of existing employees (demographics, competencies, training, etc.) in order to assess the overall balance of the existing resources and to predict possible future issues such as skill shortages, promotion opportunities, and retirement patterns

Human Resource Planning is the process including forecasting, developing, and controlling by which a firm ensures that it has the right number of people and the right kind of people, at the right places at the right time, doing work for which they are economically most useful.
-Geister (1967)

HRP can be described as a series of activities, consisting of the following:
1. Forecasting future work force requirements, either in terms of mathematical projections of economic trends and industrial development or through judgmental estimates based upon specific future plans of the company
2. Making an inventory o the existing manpower resources, and analyzing the degree to which these resources are employed.
3. Anticipating work force problems, by projecting present resources into the future and comparing them with the forecast requirements, to determine their adequacy, both quantitatively and qualitatively
4. Planning the necessary programmes of recruitment, selection, training, deployment, utilization, transfer, promotion, development, motivation, and compensation so that future work force requirements will be met.


Objectives and Significance of Human Resource Planning

Based on a survey of 28 companies in the manufacturing sector, Krishnaswamy (1985) identified the following four objectives of HRP
1. Searching for and recruiting highly skilled and specially qualified employees
2. Getting the best employees and assigning him/her to the right work, so that efficiency and production can be maximized.
3. Anticipating the changed requirements of personnel, and be prepared for it organizationally.
4. A forward looking activity plan that will help the in management identifying organizational needs, in developing people, and in providing them growth opportunities.

One of the fundamental objectives of a human resource plan, for a manager, is its utility as a planning and control technique. A human resource plan, because it is systematically done, enables a manager to predict his human resource requirements and control the number of people deployed; as a result of which, with more precise matching of work force needs to a firm’s business plans, wages and salary costs can be controlled.

Qualitative Aspect of Manpower Planning
Qualitative aspect of MPP includes the following
Business Plan
Workload analysis
Job Analysis
Job Description
Job Specification

Business Plan
A business plan refers to the objectives of the organization. This objective, stated in economic terms, would incorporate the growth rate of the company, diversification plans, and market opportunities.
In making a projection of work force requirements, selecting the right predictor is important. According to Wikstrom (1971), to be useful, the predictor should meet two requirements:
It should be directly related to the essential nature of the business so that the business planning is done terms of terms of this factor.
the changes in the selected factor should be proportional to changes in the work force required in the business.

Workload analysis
Workload analysis helps a human resource planner to get an estimate of the number of employees needed, and the nature and extent of work to be done by them.
Workload analysis is done separately for the blue-collared workers and the white-collared employees.


For blue collared workers:
Since the blue-collared workers use machine paced jobs, it is possible to arrive at precise figures for the time taken in producing a given number of units. The general method is adopted to begin with, by establishing standard conditions under which the job will be performed. Then the job is broken down into its several elements, and the time taken to perform each element is noted. The total time taken for the completion of all the elements in a cycle is computed, so that an overall timing for each cycle of operation is arrived at. These are known as standard times. Another variation is to study the actual situational aspect, by observing the workers perform their jobs, and the timing them with stop watch.

For white- collared employees:
Formulating workload norms for white-collar employees, where the jobs are not machine-paced or not so precise and repetitive, poses some problems. Various techniques like workload measurement, time budgeting studies, and work sampling have been used. All these require either detailed or random studies at fixed time intervals to understand the activities in which an employee spends his time, or in other words, what are the various tasks done by him. Either by direct observations or written records maintained by an employee, it is possible to find out what he is doing. Analysing this data can indicate where efficiency could be brought about for better utilization, and a personnel requirements estimates can be made.

Job Analysis
Job analysis is a process by which data, with regard to each job, is systematically observed and noted. It provides information about the nature of the job and the characteristics or qualifications that are desirable in the job holder. The data from job analysis could be used for a variety of purposes. The job analysis study attempts to provide information in seven basic areas;
Job identification or its title, including the code number if any.
Distinctive or significant characteristics of the job, its location, setting, supervision, union jurisdiction, and hazards and discomforts if any.
What the typical worker does. Specific operations and tasks that make up the assignment, and their relative timing and importance; the simplicity, routine, or complexity of tasks, responsibility for others, for property, or for funds.
What materials and equipment the worker uses. Metals, plastics, grain, yarns, lathes, milling machines, electronic ignition testers, corn huskers, punch presses, and micrometers are illustrative.
How the job is performed. The emphasis here is on the nature of the operations, and may specify such operations as handling, feeding, removing, drilling, driving, setting up, and many more.
Required personnel attributes. Experience, training apprenticeship, physical strength, coordination, physical demands, mental capabilities, aptitude, and social skills are some attributes.

Job Description
Job description refers to the job contents and the expectations tha an organization has from its employees.
It is a document that outlines the purpose of the job, the task involved, the duties and responsibilities, the performance objectives, and the reporting relationships. It provides details of the terms and conditions, including the remuneration package and hours of work.
It is used in the recruitment process and provides the basis for developing a job specification.

Job Specification
Job specification helps in understanding the minimum qualification needed to perform a particular job. These may include
a. academic qualification
b. professional qualification
c. age
d. years of experience
e. relevance and nature of previous experience
f. and other skills and attitudes

Quantitative aspects of manpower planning :
Managerial Judgment
Ratio-trend analysis
Work-study techniques
Delphi technique

Managerial Judgment
In this, managers sit together, discuss and arrive at a figure which would be the future demand for labour. The technique may involve “bottom-up” approach or “top-down” approach.
“Bottom-up” approach
This method of forecasting starts at the lowest level and progresses upwards, through various levels in the organization, till an aggregate projection for the organization as a whole is ready. The basic idea is that the best person to determine the human resource requirements is the manager of the unit or department. Department managers periodically project their work force requirements, while comparing their present and future needs, keeping in mind productivity levels, market demand, sales forecast, and mobility of staff in the department. Since this exercise is done periodically, it gives sufficient lead time to human resource managers to identify available human resources, both internally and externally.
“Top-down” approach
In this method, top managers prepare company and departmental forecasts. These forecasts are reviewed and agreed with departmental heads.

Neither of these is accurate- a combination of the two could yield positive results. In the ‘bottom-up’ and ‘top-down’ approach, departmental heads are provided with broad guidelines. Armed with such guidelines, and in consultation with HRP section in the HRM department, departmental managers can prepare forecasts o their respective departments. Simultaneously, top HR managers prepare company forecasts. A committee comprising departmental managers and HR managers will review the two sets of forecasts, arriving at a balance which is then presented to the top managers for their approval.
This technique is used in smaller organizations or in those companies where sufficient data base is not available.

Ratio –trend Analysis
This method involves comparing the number of employees to workload index.
e.g. if it takes 3 people to do a job, when the work is doubled 6 people would be required to do it.
The level of activity may vary from department to department in the same organization.
This is a highly simplified, and to some extent, a crude way of projecting workforce requirement. It does not take into account
a. the technological development
b. local conditions
c. any other variables
that may be deterimental to productivity.

Work Study Techniques
Work study techniques can be used when it is possible to apply work measurement to calculate how long operations should take and the amount of labour required. The starting point in a manufacturing company is the production budget prepared I terms of volume of saleable products for the company as a whole, or volumes of output for individual departments. The budgets of productive hours are then compiled using standard hours for direct labour. The standard hours per unit of output are then multiplied by the planned volume of units to be produced to give the total planned hours for the period. This is divided by the number o actual working hours for an individual operator to show the number of operators required. Allowances will be have to be made for absenteeism and idle time.
e.g.
i. Planned output for next year 20000 units
ii. Standard hours per unit 5
iii. Planned hours for the year 1,00,000
iv. Productive hours per man/year
(allowing normal overtime, absenteeism
And idle time) 2000
v. Number of direct workers required (iv/v) 50

Work study techniques for direct workers can be combined with ratio-trend analysis to forecast for indirect workers, establishing ratio between the two categories. The same logic can be extended to any other category of employees.

Delphi Technique
The Delphi technique was developed during the late 1940’s at the Rand Corporation’s. Its objective was to predict future developments in a particular area, by integrating the judgments and opinions provided independently by many experts. It is structured approach for reaching a consensus judgment, among the experts, regarding the number of employees, who will be required in the future. These experts are well versed with plans o the organizations, and the internal and external factors that may influence these planned activities, and hence, the demand for work force. These experts can come both from within or outside the organization. The basic procedure consists of experts presenting their forecasts to other experts, without physically meeting them. Once the first forecast is collected and shared, another round of forecasting takes place. This process of sharing and revising goes on till a consensus is emerged.
Delphi technique has been to be good for short duration (1 year) forecasts. However, one of its major problems is in the integration of varied opinions of experts. As a result, it may drag on for a long time because of many reiterations. One of the reasons for this may be the physical absence of experts at one place to provide timely feedback, or make timely adjustments in their forecast.

Recruitment
Recruitment is the process of identifying the prospective employees, stimulating and encouraging them to apply for a particular job or jobs in an organization.
It is a positive action as it involves inviting people to apply.
The purpose is to have an inventory of eligible persons from among whom proper selection of the most suitable person can be made.

There are two categories of sources of manpower:
1. Internal Sources
2. External Sources

Internal Sources: These include personnel already on the pay-roll of the organization as also those who were once on the pay-roll of the company but who plan to return, or whom the company would like to hire. These include those who quit voluntarily or those on production lay-offs.

External Sources: These sources lie outside the organization, like the new entrants to the labour force without experience. These include college students, the unemployed with a wider range of skills and abilities, the retired experienced persons, and others not in the labour force, like married women.

Advantages of preferring people from within the organization:
- improves morale
- Promotes loyalty
- require no induction
-employers are in a better position to evaluate those already in the organization


Disadvantages of preferring people from within the organization:
- leads to inbreeding
- discourages new blood from entering the organization
- Capable hands may be left out if promotion is based on seniority.

Advantages of preferring people from outside the organization:
- provide a wide market
- helps bring new ideas into the organization
- source never ‘dries up’

Disadvantages of preferring people from outside the organization:
- selected person may not be loyal towards the organization
- organization has to make larger investments in their training and induction.

Methods of Recruitment
Direct Methods
Indirect Methods
Third- Party Methods

Direct Methods
This include sending recruits to educational and professional institutions, employee contacts with public, manned exhibits and waiting lists

Indirect Methods
This cover advertising in newspapers, on the radio, in trade and professional journals, technical journals and brochures.

Third- Party Methods
Various agencies are used for recruitment under these methods. This include commercial and private employment agencies, state agencies, placement offices of schools, colleges and professional associations, recruiting firms, management consultation firms, indoctrination seminars for college professors, friends and relatives.

Selection
Selection is the process of examining the applicants with regard to their suitability for the given job or jobs, and choosing the best from the suitable candidate and rejecting the others.
Thus process is negative in nature in the sense that rejection of candidates is involved.
Successive Hurdles in the Selection Process
Preliminary Interview
Application Form
Employment
Interview with Supervisor
Recommendation
Physical Examination
References
Work History
Testing
Second Interview
Initial Screening or Preliminary Interview
- This is a sorting process in which prospective applicants are given the necessary information about the nature of the job and also, necessary information is elicited from the candidates about their education, experience, skill, salary expected ,ect.
- If the candidate is found to be suitable, he is selected for further process and, if not, he is eliminated
- This can be done across the counter of the organisation’s office
- This is done by a junior executive in the personnel department.
- When the candidate is found suitable, an application form is given to him to fill in and submit.

Application Form
- In an application form the applicant is asked to give details about age, marital status, educational qualification, work experience and references.
- The application can be used in two ways:
a. to find out the basis of information contained therein as to the chances of success of the candidate in the job for which he is applying, and
b. to provide a starting point for the interview

- It is often possible to reject candidates on the basis o scrutiny of the application as they are found to be lacking in educational standards, experience or some other relevant eligibility and traits.

Selection Tests
Purpose of test
The basic assumption underlying the use of tests in personnel selection is that individuals are different in their job-related abilities and skills and these skills can be adequately and accurately measured.
Tests seek to eliminate the possibility of prejudice on the part of the interviewer or supervisor. Potential ability will only govern selection decisions.
The other major advantage is that the test may uncover qualifications and talents that would not be detected by interviewers or by listing of education and job.

Types of tests:
Achievement or Intelligence Tests
Aptitude or Potential Ability Tests
Personality Tests, and
Interest Tests.

Achievement or Intelligence Tests
- These are also called ‘proficiency tests.’
- These measure the skill or knowledge which is acquired as a result of training programme and on the job experience
- These measure what the applicant can do.
- These are of two types: (i) Test for measuring job knowledge (ii) Work Sample Tests

(i) Test for measuring job knowledge
These are administered to determine knowledge of typing, shorthand and in operating calculators, adding machines, etc. These are primarily oral test consisting of a series of questions which are believed to be satisfactorily answered by only those who know and thoroughly understand trade or occupation
(ii) Work Sample Tests
These measure the proficiency with which equipment can be handled by the candidate. This is done by giving him a piece of work to judge how efficiently he does it.


Aptitude or Potential Ability Tests
- These tests measure the latent ability of a candidate to learn a new job or skill.
- These are of three types
a. Mental Test: These measure the overall intellectual ability of the intelligence quotient of a person and enables to know whether he has the mental capacity to deal with new problems.
b. Mechanical Aptitude Tests: These measure the capacity of a person to learn a particular type o mechanical work. These are useful when apprentices, machinists, mechanics, maintenance workers, and mechanical technicians are to be selected.
c. Psychomotor or Skill Test: These measure a person’s ability to do a specific job. These are administered to determine motor ability and similar attributes involving muscular movements, control, and coordination. These are primarily used in the selection o workers who have to perform semi-skilled and repetitive jobs.

Personality Tests
These help to know an individual’s
Value system
Emotional reactions
Maturity
Characteristic mood
Motivation
Ability to adjust himself to stresses of everyday life
Capacity to inter-personal relation

Interest Tests
These are designed to discover a person’s area of interest and to identify the kind of work that will satisfy him. The interest tests are used for vocational guidance, and are assessed in the form of answers to a well-prepared questionnaire.

Interview
An interview is a conversation with a purpose between one person on one side and another person or persons on the other.
Purpose:
- Obtaining information
- Giving information
- Motivation

Types of interviews:
Informal interview: This may take place anywhere. The employer or manager in the personnel department may ask the candidate a few general questions like name, place of birth, previous experience, etc. It is not planned and is used widely when the labour market is tight and you need the workers badly.
Formal interview: This is held in a more formal atmosphere in the employment office by the employment officer with the help of well-structured questions. The time and place are stipulated by the employment office of the organization.
Planned interview: This is a formal interview carefully planned. The interviewer has a plan of action worked out in relation to time to be devoted to each candidate, type of information to be sought, information to be given and the modality of the interview. However, the interviewer may use some amount of flexibility.
Patterned interview: This type of interview is conducted with higher degree of planning, accuracy, precision and exactitude. A list of questions and areas are carefully prepared.
Non-directive interview: This is designed to let the interviewee speak his mind freely. The interviewer is a patient listener. The idea is to give the candidate complete freedom to sell himself without any encumbrances.
Depth interview: This is designed to intensively examine the candidate’s background and thinking and to go into considerable detail on a particular subject of special interest to the candidate.
Stress interview: This is designed to test the candidate and his conduct and behavior by putting him under conditions of stress and strain. This is very useful to test the behaviour of individual under disagreeable and trying conditions.
Group interview: this is designed to see how the candidates react to and against each other. All the candidates may be brought together in the office and they may be interviewed. The candidates may, alternately, be given a topic for discussion and be observed as to who will lead the discussion, how they will participate, how each of them will make his/her presentation and how they will react to each other’s views and presentation.
Panel interview: This is done by members of the interview board or a selection committee. This is done of usually for supervisory and managerial positions. It pools the collective judgment and wisdom of members of the panel. The candidate may be asked to meet the panel individually for a fairly lengthy interview.

Placement
Placement is the determination of the job for which a selected candidate is best suited and assigning that job to him. The ideal situation is ‘the right man for the right job’. A proper placement of worker reduces employee turnover, absenteeism, accident rates, etc. and improves morale, motivation and work etc.

Induction
Induction is introducing an employee to the job and to the organization. The primary purpose of induction is to ‘sell’ the company to the new employee so that he may feel proud of his association with the company. This is called orientation or indoctrination.

Purpose and need of Induction
- Facilitate better integration of the new employee with the old ones.
- Inculcate a respect for organizational culture among the new employee.
- Sensitize the new employee about vision and mission of the organization.
- Develop clear understanding of the tasks assigned to new employees.

Three steps in Induction
General orientation by the staff: It provides necessary general information about the history and activities of the firm. The purpose is to help an employee to build some pride and interest in the organization.
Specific orientation by the job supervisor: The employee is shown the department and his place of work, location of facilities and is told about the specific practices and customs of the organization. The purpose is to enable the employee to adjust with his work and environment.
Follow-up orientation by either the personnel department or the supervisor: This is conducted within one week to six months of the initial induction by a foreman or specialist. The purpose is to find out whether the employee is reasonably well satisfied at the workplace. Through personal talks, guidance and counseling, efforts are made to remove any difficulty faced by the newcomer.

Components of Induction Programme
The company history and products, processes and assigned tasks.
The significance of the job with all necessary information about it including job training and job hazards.
Structure of the organization and the function of various departments.
Employee’s own department and job, and how he fits into the organization.
Personnel policy and sources of information.
Company policies, practices, objectives, and regulations.
Terms and conditions of service, amenities, and welfare facilities.
Rules and regulations governing hours of work, over-time, safety and accident prevention, holidays and vacations, methods of reporting.
Grievance procedure and discipline handling.
Social benefits and recreation services.
Opportunities, promotions, transfer, suggestion scheme and job satisfaction.

Steps in manpower planning
Environment
Organisational Objectives and policies
HR needs forecast
HR supply forecast
HR Programming
HRP Implementation
Control and evaluation of programme
Surplus
Restrict hiring
Reduce working hours, VRS, Lay off, etc.
Shortage
Recruitment and selection