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.