3

HUMAN RESOURCE MANAGEMENT- CONCEPTUAL

ISSUES WITH SPECIAL REFERENCE TO PUBLIC
ENTERPRISES IN KERALA
Contents

3.1 Human Resource Management - Conceptual Issues

3.2 Public Enterprises in India and Kerala
 Human Resource Management Conceptual Issues with Special Reference ...

The presentation of this chapter has been divided into two sections -
Section A relates to the Human Resource Management- Conceptual issues
and Section B about Public Enterprises in India and Kerala.

3.1 Human Resource Management- Conceptual Issues

It is an undisputed fact that out of all the resources contributing to
economic growth, manpower is the most vital resource. India, today is at a
crossroad; while we boast of one of the largest and youngest workforce, the
most daunting challenge is Human Resource Management. Human resource,
which is the most significant and active factor of production, is considered to
be the centre of all development process of the economy. But the changing
environment has led to a mismatch between the skills of the employees and
the functional roles expected from them. The policy makers of our country
having realized the intensity of this challenge are now increasing the focus on
this all important task. Efficient HR practices are highly dynamic and ever
changing with the changing requirements of the industry and the service
sector.

There is a profound truth in the HR philosophy that the best

organisations succeed not because of the people they have, but because of the
right people. An American software Billionaire in Silicon Valley quoted that
My employees are my most important assets. When they go home in the
evening, my net worth drops to zero.1 This statement shows the importance
of Human Resource Management in business scenario. So an effective
Human Resource Management process is an essential tool in the hands of a
successful business. Organizations, worldwide, have acknowledged that,
deploying the right resources to solve the right problem at the right time is
becoming increasingly critical. In the changing scenario optimizing human
and intellectual capital is the biggest challenge organizations face.

Human Resource Management consists of three parts. The first among

them is Human, a living and the best creature of God, who has feelings,

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happiness, sorrows and above all capable of thinking, expressing, desiring to

express and excel and achieving new goals.

The second constituent is Resource. Resources are available in the

shape of skill, knowledge, techniques, directions and supporting working
guidelines are the tools to put the things in shape and place a product before
the general public to maximize earnings in the shape of profits.

The third constituent is Management. The management has to play a

vital role of co-ordination, harmony, consolidation between the first two
constituents so that all three constituents, with their inter-coordinate role may
smooth the path of progress and to excel in the field of expertise, besides
maximizing utility gains.

3.1.1 Definition

Before define HRM, it seems pertinent to first define the term human
resources. In common par lane, human resources means the people. However,
different management experts have defined human resources differently. They
are:

a) Michael J. Jucius2 has defined human resources as a whole

consisting of inter-related, inter-dependent and interacting
physiological, psychological, and sociological and ethic components.

b) According to Leon. C. Megginson3, From the National

viewpoint, human resources are knowledge, skills, creative
abilities, talents and aptitudes obtained in the population; whereas
from the view point of the individual enterprise, they represent
the total of the inherent abilities acquired knowledge and skills as
exemplified in the talents and aptitude of its employees.

Now it is clear from above definitions that human resources refer to the
qualitative and quantitative aspects of employees working in an organization.

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3.1.2 Human Resource Management

According to K. Aswathappa4 - Human Resource Management refers

to a set of programmes, functions and activities designed and carried out in
order to maximize both employee as well as organizational effectiveness.

According to Flippo5, human resources management is the planning,

organizing, directing and controlling of the procurement, development,
compensation, integration, maintenance and reproduction of human resources to
the end that individual, organizational and societal objectives are accomplished.

According to National Institute of Personnel Management of India,

human resource management is that part of management concerned with
people at work and with their relationship within the organizations. It seeks
to bring together men and women who make up and enterprise, enabling each
to make his own best contribution to its success both as an individual and as
on member of a working group.6

3.1.3 Personnel Management and Human Resource management

Human Resource Management is different from Personnel Management in

orientation, approach and perspective, and not simply old wine in new bottles.
HRM views people as an important source or asset to be used for the benefit of
organizations, employees and the society. HRM is a broad concept. Personnel
management (PM) and human resource development (HRD) are a part of HRM.

Personnel Management views man only as an economic person and is

having a limited scope and an inverted orientation. It viewed labour as a tool
the behaviour of which could be manipulated for the benefit of the
organization and replaced when it was worn out. Personnel function was
treated as a routine activity meant to hire new employees and to maintain
personnel records. It was never considered a part of the strategic management
of business.

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3.1.4 Human Resource Development (HRD)

For many people, Human Resource Development and Human Resource

Management convey the same meaning. This may not be true. Essentially, HRD
is a function more concerned with training and development, career planning and
development, and organization development. HRD therefore, is a part of HRM.

3.1.5 Industrial Relations Management (IRM)

Industrial Relations Management is yet another term which adds to the

problem of semantics. Industrial relations, as the term implies, is merely
concerned with employee grievances and their settlement, unionization and
the like. IRM is also one wing of HRM.

3.1.6 Scope of Human Resource Management

The scope of HRM covers all the major activities in the working life of
a worker from the time of his or her entry into an organization until he or she
leaves the organization. Specifically, the activities included are-HR Planning,
Job analysis and design, Recruitment and Selection, Orientation and Placement,
Training and Development, Performance Appraisal & Job evaluation, Employee
and Executive remuneration, Motivation and Communication, Welfare, Safety
and Health & Industrial relations.

For the sake of convenience, we can categories all these functions into
seven sections as:

i). Introduction to HRM

ii). Employee hiring
iii). Employee and executive remuneration
iv). Employee motivation
v). Employee maintenance
vi). Industrial relations
vii). Prospects of HRM

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3.1.7 Objectives of Human Resource Management

Objectives of human resource management are derived from the basic

objectives of an organization. In order to achieve organizational objectives
integration of employers interest and employee interest is necessary. In this
light, the objectives of human resource management may be summarized as
follows7-
i) To help the organization attain its goals by providing well-trained
and well motivated employees.

ii) To employ the skills and knowledge of employees efficiently and

effectively.

iii) To enhance job satisfaction and self-actualization of employees

by encouraging and assisting every employee to realize his/her
full potential.

iv) To establish and maintain productive self-respecting and

internally satisfying working relationships among all the
members of the organization.

v) To bring about maximum individual development of members of

the organization by providing opportunities for training and
advancement.

vi) To secure the integration of all the individuals and groups with
the organization by reconciling individual / group goals with
those of an organization.

vii) To develop and maintain a quality life (QWL) which makes

employment in the organization a desirable personal and social
situation.

viii) To maintain high morale and good human relations within the
organization.

ix) To help maintain ethical policies and behaviour inside and

outside the organization.

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x) To manage change to the mutual advantage of individuals,

groups, the organization & the society.

xi) To recognize and satisfy individual needs and group goals by

offering appropriate monetary and non-monetary incentives.

Today it is accepted that people management enhances corporate

performance. The appropriate people strategy must vary according to the
organizational objectives, products or services, market positions, and
financial health.8 Thus, human resource management seeks to attain (a)
economically and effectively the organizational goals, (b) serve to the highest
possible degree the individual goals (c) functional objectives to maintain the
developments contribution at a level appropriate to organizations needs and
(d) preserve and promote the general welfare of the community. To sum up,
human resource management seeks to accomplish societal, organizational
functional and individual goals. (Fig. 3.1)

Source: Human Resource. Management by Aswathappa, K., Fifth Edition 2008. p. 8.

Fig. 3.1: Objectives of HRM

3.1.8 Role of HRM Department

The success of any organization depends upon its ability to develop its
human capital and utilize the same for corporate excellence. For that an

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efficient HR department is essential for the smooth and effective working of

any business organization, especially in the case of public sector units. It is
generally accepted by top management that human resource management
should be given a high priority in the organization. There must be a separate
HRM Dept. in the organization. A HR Department can act as torch-bearer
in assisting the operating functions in achieving targets in various areas. HR
Department can also act as a catalyst in generating fire in the belly of every
employee that nothing less than the best will be acceptable.9 The HRM
Manager should work as a human resource councilor of the Chief Executive.
He should be a designer, an initiator, an implementer and a monitor of
various HRM programmes and plans. To perform these responsibilities a
Human Resource Manager should have technical, managerial and personal
qualities.

Organization of a HR Department depends upon two issues like,

place of the HR department in the overall setup and composition of the
HR Department.10 Status of the HR department in the total organizational
structure depends on whether a unit is small or large. In most of the small
organizations, there is no separate personnel department. Services of
outside agencies are enjoined for a fee or a low-placed employee may be
entrusted with the task of attending to these functions. A large scale unit
will have a Manager/Director heading the HR department. Where the
Company has multiple plants located in different parts of the country,
there may be a centralized HR/personnel department at the main or
registered office and each plant will have separate HR department.
Composition of the HR department depends on the scale of operations and
attitude of the top management towards its personnel. However, a typical
HR dept. (Fig. 3.2) is headed by a Director, under whom are Manager
Personnel, Manager Administration, Manager HRD and Manager
Industrial Relations.

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Source: Aswathappa, K Human Resource Management 2008 p. 12.

Fig. 3.2: Composition of HR Department

3.1.9 Outsourcing HR Activities

Outsourcing is the process by which employers transfer routine or

peripheral work to another organization that specializes in the work and can
perform it more efficiently. The activities that are generally outsourced
include employee hiring, raining and development, payroll preparation,
statutory records maintenance and the like. Some executives assume that
outsourcing HR activities can reduce cost, improve flexibility and permit the
hiring of specialized expertise. Realizing the potential benefits, 72% of the
Indian companies are outsourcing their HR activities. If through outsourcing,
all activities are assigned to an outside firm, a Company can do without a HR
department.

3.1.10 Role of HR Manager

In an organizational setup, getting things done by convincing others is

very important and the success of a manager, to a great extent, depends on
convincing others.11 Effective leaders in this era, will be those who are
continuous learners, who are on the cutting edge of excellence, who have

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strong convictions, and yet, having humility to recognize the need to

reinvent themselves and inspire their organization to adapt to the new
environment.12

To be successful in his job, a personnel manager must be a specialist in

organization theory and as such be an effective adviser to top management in
organizational matters as well as being able to organize his own department
in such a manner as to minimize frictions, promote goodwill, and release the
latent energies of his own people. He should have real expertise in personnel
administration and should have the ability of convincing matters to the
management. Unless the personnel manager has the active support of the top
management, he will be like a ship without a rudder. On the other hand, if he
does not win the confidence of the employees and their union, he will not be
respected by the management. Over the years, the position of human resource
manager has changed significantly. In the early days of industrialization, he
was considered a second class officer in his organization. But today human
resource manager is treated as a philosopher, specialized practitioner and a
strategic partner.

Organizations differ in structure, management styles, work processes,

work culture and the complexities of the operating business environment.
Similarly every individual is different, his problems, needs and emotions are
different. The world order is changing dramatically and is in the process of
complete transformation. The impossible things of yesterdays have become
possible today and the impossible things of today will become possible
tomorrow. That is why it is said that change is the only permanent aspect of
nature.

The above trends will have a tremendous impact on the tasks of HR

professionals who will have to act as change agents or change facilitators. The
roles of the HR Manager (Fig.3.3) include roles of conscience, of a counselor, a
mediator, a company spokesman, a problem solver and a change agent.

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(i) The conscience role: The conscience role is that of a humanitarian

who reminds the management of its morals and obligations to its
employees.

(ii) The counselor: Employees who are dissatisfied with the present
job, approach personnel manager for counseling. In addition
employees facing various problems like marital, health, mental,
physical and career also approach the personnel manager. The
PM counsels and consults the employees and offers suggestions
to solve the problems of the employees.

(iii) The mediator: As a mediator, the personnel manager plays the

role of a peace- maker. He settles the disputes between
employees and the management.

(iv) The spokesman: He is a frequent spokesman for or representative

of the company.

(v) The problem solver: He acts as a problem solver with respect to the
issues that involve HRM and overall long range organizational
planning.

(vi) The change agent: He acts as a change agent and introduces

changes in various existing programmes.

The ideal personnel manager is not a decision-maker but a

counselor not a collector of responsibilities but an advisor to help the
management make more reliable personnel decisions. If the personnel man
can meet the challenge of staff role he would make the most effective
contribution to industry.

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Source: Gupta, C.B. Human Resource Management Eleventh revised edition 2008, p. 2.9.
Fig.3.3: The Role of Human Resource Manager

3.1.11 Personnel (HRM) Policies, Procedures, Practices & Principles

A well designed personnel programme is as much economical and

should helps to achieve the objectives like motivation of employees,
increased productivity, better quality of work life and greater effectiveness of
the organization. Every HRM programme must have well-defined objectives
and it should be supported by sound policies, procedures and practices.

3.1.11.1 Personnel Programme

A programme is a complex of objectives, policies, procedures, task

assignments, steps to be taken, resources to be employed and other elements
necessary to carry out a given course of action. In HRM, there may be
separate programmes for employment, training, maintenance, welfare, etc.
Each programme is different from other programme.

A policy is an established guiding canon promised on objectives,

devised to govern the activities of the business enterprise and from which the
basic precepts of conduct are deprived.13

3.1.11.2 HRM Policies

In order to clearly understand the implications of personnel programmes, it

is necessary to distinguish between personnel policies, procedures and

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practices. A personnel policy provides a framework within which decisions

can be taken without further reference to higher authorities. A policy is a plan
of action and has a reference point for managers in their dealings with
employees. Personnel policies are developed by top management to assist the
managers at various levels to deal with the people at work.

3.1.11.3 Personnel Procedures

A procedure is a method for carrying out a policy or a systematic way

of handling regular events. It refers to the detailed step by step manner of
applying a policy to a particular administrative context. Policies are general
instructions whereas procedures are specific applications.

According to Terry, A procedure is a series of related tasks that make

up the chronological sequence and the established way of performing the
work to be accomplished.14

Procedures must be periodically reviewed and updated to keep pace

with the changing requirements of the volume of work.

3.1.11.4 Personnel Practices

It refers to the manner in which personnel programmes are

implemented in keeping with the procedures laid down for attaining the
objectives as stated in personnel policies. Personnel practices are highly
important as impact of policies on the employees is mostly felt at the level of
implementation. High sounding policies or elaborate procedures will not have
any meaning for the employees unless personnel practices are in line with
these policies and procedures.

3.1.11.5 HRM Principles

Principles are the fundamental truth established by research,
investigation and analysis. Many personnel principles have been
established through practice, experience and observation. Principles are
universal truths generally applicable to all organizations. Policies, on the

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other hand, vary from organization to organization. Principles guide

managers in formulating policies, programmes, procedures and practices.

3.1.12 Manpower Policy may Embrace:

Human resource planning

a) Recruitment and Selection
b) Placement, Induction & Socialization
c) Training & Development
d) Promotion and Performance Appraisal
e) Compensation Management
f) Communication and Motivation
g) Industrial Relations
h) Collective Bargaining etc.

In all these areas, new policy is developed when new problems arise
leading to change in form and content and properties among these areas.
Policy which is effective at present, may become obsoletes in future in view
of changed situations.

3.1.13 Human Resource Planning (HRP)

The success of an organization depends largely on the quantity and

quality of its human resources. No organization can be successful in the long
run without having the right number and the right kind of people doing the
right jobs at the right time. Before selecting the right man for the right job, it
becomes necessary to determine the quality and number of people required in
an organization. This is the function of human resource planning. Improper
planning may lead to either over staffing or under staffing, both of which
should be avoided.

According to Decenzo and Robbins, Human resource planning is the

process by which an organization ensures that it has the right number and
kind of people, at the right place, at the right time, capable of effectively and

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efficiently completing those tasks that will help the organization achieve its
overall objectives.15

In the words of Dale S. Beach, Human resource planning is the

process of determining and ensuring that the organization will have an
adequate number of qualified persons, available at the proper time,
performing jobs which meet the needs of the enterprise and which provide
satisfaction for the individuals involved.16

Formulation of HRP is a shared task between top management, line

managers and HR department.

3.1.14 Human Resource Planning Process

National Industrial Conference Board, USA, has viewed that manpower

planning could be seen as a series of activities consisting of the followings:

i). Forecasting future manpower requirements;

ii). Inventorying present manpower resources and analyzing the

degree to which these resources are employed optimally;

iii). Anticipating manpower problems by projecting present resources

into the future and comparing them with the forecast of the
requirements, to determine their adequacy, both quantitatively and
qualitatively;

iv). Planning the necessary programmes of recruitment, selection,

training, deployment, utilization, transfer, promotion, development,
motivation and compensation so that future manpower requirements
will be met.17

An effective and well designed HR plan will act as a useful tool in

framing the policies regarding recruitment and selection, training and
development, performance appraisal etc.

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3.1.15 Determining Manpower Requirements

The manpower manager is confronted with the problems like How

many and what kinds of individuals are required in the enterprise? Yoder
and other suggest job analysis as a technique to determine qualitative
manpower requirements.

3.1.15.1 Job Analysis

Job analysis refers to the process of collecting information about a job.

In other words, it refers to the anatomy of the job.

According to Jones and Decothis, job analysis is the process of getting

information about jobs: specially, what the worker does; how he gets it done;
why he does it; skill, education and training required; relationship to other
jobs, physical demands; environmental conditions.18

Edwin B. Flippo has defined job analysis as the process of studying and
collecting information relating to the operations and responsibilities of a
specific job. The immediate products of this analysis are job descriptions and
job specifications.19

There are two major aspects of job analysis. They are:-

i). Job Description: - Job description is a written statement of what a job

holder does, how it is done, and why it is done. It is also a description
of the activities and duties to be performed in a job, the relationship of
the job with other jobs, the equipment and tools involved, the nature of
supervision, working conditions and hazards of the job and so on. It
description differentiates one job from the other.

ii). Job Specification: - Job specification is a statement of the

minimum levels of qualifications, skills, physical and other
abilities, experience, judgment and attributes required for
performing job effectively. While job description focuses on the
job, job specification focuses on the person i.e., the job holder.

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3.1.15.2 Job Evaluation

Job evaluation is a comparative process of establishing the value of

different jobs in a hierarchical order. It allows one to compare jobs by using
common criteria to define the relationship of one job to another. This serves
as basis for grading different jobs and developing a suitable pay structure for
them. The techniques used for job evaluation include ranking, job
classification, points rating etc.

3.1.15.3 Job Design

Job design is the process of deciding the sequence of job contents/or

analysis. It involves specifying the contents of a job, the work methods used
in its performance and how the job relates to other jobs in the organization.

Methods / Techniques of Job Design

Jobs can be designed to range from very simple to highly complex

depending on the use of the workers skills. Some of the popular methods of
job design are:

a) Work Simplification

b) Job Rotation

c) Job Enrichment

d) Job Enlargement

a) Work Simplification: - Under this method, the job is simplified by

breaking it down into small-parts. Then each work is assigned to a worker
who does the same task over and over again. This increases workers
productivity, on the one hand, and, in turn, profits on the other. However, due
to repetitive job, workers feel boredom that also leads to mistake and
accidents.

b) Job Rotation: - Job rotation implies the moving of employees from job to
job without any change in the job. Here an employee performs different jobs,

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but of the same nature. The advantages are: it removes boredom, broadens
employees knowledge and skill and competent.

c) Job Enrichment: - Job enrichment is a motivational technique which

emphasizes the need for challenging and interesting work.20 Job enrichment is a
vertical expansion of a job by adding more responsibility and freedom to do it.

d) Job Enlargement: - It involves adding more tasks to a job. This is a

horizontal expansion in a job. By adding more tasks to job, job enlargement
expands job scope and gives variety of tasks to the job holder. Job
enlargement reduces boredom and monotony by providing the employee
more variety of tasks in the job.

Job enrichment is different from that of job enlargement. Job

enlargement attempts to make a job more varied by removing the dullness
associated with performing repetitive operations. It involves a horizontal
loading or expansion, i.e., the addition of more tasks to the same nature. But
in job enrichment, the attempt is to build into the job a higher sense of
challenge and importance of achievement. Job enrichment involves vertical
loading of functions and responsibilities which require higher levels of skills
with competence. In order to enrich the job, management should take the
following measure:

a) give sufficient freedom to employees in deciding about work

methods, pace, sequence etc.

b) add new tasks;

c) increase responsibility;

d) encourage participation;

e) provide feedback to the employees; and

f) make the personnel understand how tasks contribute to a finished

product of the enterprise.

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3.1.16 Recruitment, Selection and Placement

Recruitment is a basic function in a HRM and it is an important part of

an organizations human resource planning which represents the competitive
strength of a company. It is a process where in a right person has to be
appointed at the right place at the right time in a right number. A productive
employee is deemed to be an asset for an organization, whereas any amount
spent on an unproductive employee adds to the loss.21

After the required number and kind of human resources are determined,
the next step in the procurement function is to locate the sources wherefrom
the required human resources can be available and to attract them towards the
organization. This is known as recruitment.

According to Flippo, Recruitment is the process of searching for

prospective employees and stimulating and encouraging them to apply for
jobs in an organization22. In this context, the observation made by IIPM in
India is worth citing. The most striking feature in the Indian Labour market
is the apparent abundance of labour yet the right type of labour is not too
easy to find23.

Recruitment needs are of three types planned, anticipated and

unexpected. Planned needs arise from changes in organizations retirement
policy. Resignations, deaths, accidents and illness give rise to unexpected
needs. Anticipated needs refer to those movements in human resource which
an organization can predict by studying trends in the internal and external
environments.

The recruitment process consists of the following steps24:

i). Recruitment process generally begins when the human resource

department receives requisitions for recruitment from any
department of the company. The requisitions contain details
about the position to be filled, number of persons to be recruited,
the duties to be performed, qualifications required, terms &

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conditions of employment and the time by which the person

should be available for appointment.

ii). Locating & developing the sources of required number and type
of employees.

iii). Identifying the prospective employees with required characteristics.

iv). Communicating the information about the organization, the job

and the terms and conditions of service.

v). Encouraging the identified candidates to apply for jobs in the

organization.

vi). Evaluating the effectiveness of recruitment process.

As Kempner point out, recruitment forms the first stage in the process
which continues with selection and ceases with the placement of the
candidate. Recruitment policy of an organization generally decides its future.
In modern management, there is absolutely no scope for recruiting relations,
friends and the like.

The recruitment process consists of two major steps, viz:-

a) Selection of the sources of supply
b) Generating applications

a) Sources of Recruitment
Suitable candidates must be attracted before making selection. Hence
the sources of supply of personnel have to be identified. There are two main
sources like:

a) Internal sources and

b) External Sources

The sources included under each category are depicted in the following
figure 3.4.

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Source: Khanka, S.S. HRM Text & Cases S. Chand & Co. Ltd. 2008. p. 55
Fig. 3.4: Recruitment Sources

1. Internal Sources:
a) Present Employees: - Promotions and transfers from among the
present employees can be a good source of recruitment. It is
advantageous because the employees promoted are well
acquainted with the organizational culture, they get motivated,
and it is cheaper also. It also reduces the requirement for job
training. However it may not ensure the selection of the best
persons for higher position. It blocks the possibility of getting
new persons with new ideas, initiative and originality. It causes
frustration and heart-burning among others who do not get
promotions.

b) Former Employees: - Retired or retrenched employees may be

interested to come back to the Company to work on a part-time
basis.

c) Employee Referrals: - Here the existing employees refer their

family members, friends and relatives to the company as potential
candidates for the organization.

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d) Previous applicants: This is also considered as internal source in

the sense that applications from the potential candidates are
already lying with the organization.

2. External Sources

These refer to recruitment from sources outside the organization. It

includes:

a) Direct hiring: - The operative level personnel like mechanics,

attenders etc. may be easily recruited by putting up a vacancy
board at the gate. On the spot recruitments through walk-in
interviews and job fairs are becoming popular for call centres,
BPO firms etc.

b) Employment Exchange: - Employment Exchange link job seekers

and employers. They register job seekers and furnish their details
to employers who notify vacancies. The Employment Exchange
Act 1959 makes it obligatory for both public sector and private
sector enterprises to fill certain types of vacancies through
employment exchanges.

c) Advertisement: - Advertisement is perhaps the most widely used

method for generating many applications. An advertisement copy
which should be prepared by using a four point guide called
AIDA. The letters denote that advertisement should attract
Attention, gain Interest, arouse a Desire and result in Action.

d) Employment Agencies/Outsourcing: In addition to the Govt.

agencies, there are a number of private employment agencies who
register candidates for employment and furnish a list of suitable
candidates from their data bank as and when sought by the
prospective employers. This method is found very cheap and the
management can save more time.

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e) Professional Associations: -Here recruitment of certain professional

and technical positions is made through professional associations
like Institute of Engineers, Indian Medical Association, All
Indian Management Association etc.

f) Campus Recruitment: - Nowadays campus recruitment is a

common source of recruitment in big organizations. These big
organizations maintain a close liaison with the universities,
vocational institutes and Management institutes for recruitment to
various jobs. This recruitment is suitable for only entry positions
like management trainees etc. For higher level positions, campus
recruitment is not suitable.

g) Deputation: - Another source of recruitment is deputation from

other organizations for a short duration of two to three years. This
method is more practiced in Govt. Departments and public sector
organizations. It is a useful method because it provides ready
expertise and the organization does not have to incur the initial
cost of induction and training.

h) Raiding or Poaching: - The term poaching is used by recruiters to

recruit employees of any other company. At present the latest
mantra being adapted by many organizations is buying talent
rather than developing it25. Normally the rival firms by offering
better terms and conditions try to attract qualified employees to
join them. e.g. -several executives of HMT left to join Titan
Watch Co. and several pilots of Indian Airlines left to join private
Air Taxi operators. It is considered to be an unethical practice.
Moreover poaching has become a challenge for the human
resource managers because it will weaken the competitive
strength of the firm.

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i) Website or e-recruitment: - The e-recruitment is a new trend that

has been followed by many organizations as a source of medium
towards recruitment. Job seekers advertise the job vacancies
through the worldwide web. The job seekers send their
applications or Curriculum Vitae (CV) through e-mail. It has
certain advantages like low cost of recruitment per candidate,
reduction in time for recruitment etc.

3.1.17 Govt. Policy on Personnel Policies of Public Enterprises

On 14th April 1961, the Govt. had formulated the following note regarding
personnel policies of Public Enterprises, which may be seen as a guide line26 :

i). Unskilled workers should be drawn from the locality where the
project is situated.

ii). All efforts to be made to recruit persons displaced from the area
acquired for the project, specially, the scheduled castes & tribes.

iii). Next preference to be for those who, even if they come from a
distance, have been retrenched by other public enterprises.

iv). Skilled workers, clerks and other non-technical staff, if basic

qualifications and experience are available, will be recruited with
the same preferences as for non-skilled staff.

v). Middle level technical non-technical posts having higher starting

salaries equivalent to class I junior scale of Govt. of India are to
be filled on all India basis, merit and qualification being the
principal criteria.

vi). Higher non-technical posts should be filled from the candidates

available in the Industrial Management Pool, failing which the
posts advertised on All-India basis.

vii). All higher technical posts are to be filled from persons recruited
either by advertisement on All India basis or by personal contact.

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viii). All applications received along with the list sent by the employment
exchange should be screened, and appointments made by selection
committees which will have representatives from the State Govt.

ix). For higher and medium level posts at least one representative of
the state Govt. preferably a State Govt. official who is on the
board of directors should be included in the selection committee.

x). Urgent and adhoc appointments, if made, should be brought to the

notice of the selection committees.

3.1.18 Selection

Scientific selection and placement will go a long way towards building

up a stable work force. It will keep the rates of absenteeism and labour
turnover low and will increase the morale of the employees. If the employees
are suitable according the requirements of the jobs, they will show higher
efficiency and productivity. Selection starts where recruitment ends.
Selection is the process of picking the suitable candidates from the pool of
job applications to fill various jobs in the organization.

According to Yoder, Selection is the process by which candidates for

employment are divided into class-those who will be offered employment
and those who will not.27

Selection Devices

The selection pattern varies from organization to organization,

depending on its needs and the level for which selection is made. The widely
used selection devices are:

a) Preliminary Interview: - It is the process of eliminating the

undesirable / unqualified candidates at the outset. Here the
authorities explain the nature of job and about the organization to
the candidates.

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b) Application Blank/Screening of Applications: - It is a traditional

device widely used for collecting information from candidates.
Small firms design no application form and ask the candidates to
write details about their age, marital status education, work
experience, etc. But big companies use different types of
application forms for different jobs. The application form should
provide all the information relevant to selection.

c) Selection Tests: - These are tests conducted to measure the job

related abilities and skills of applicants. It includes Intelligence Tests,
Aptitude Tests, Interest Tests, Personality Tests etc. The candidates
who have scored above the predetermined cut off points are likely to
be more successful than those scoring below the cut off point. Tests
are useful when the number of applicants is large.

d) Interview: - Interview is one of the most commonly used selection

devices. It gives an opportunity for the interviewer to learn about
the applicants behaviour, background, interest and values. The
information collected through application and test can be cross-
checked in the interview.

e) Reference Checking: - The applicant is asked to mention in his

application form, the names and addresses of two or more persons
who know him well. The prospective employer normally makes
an investigation on the reference supplied by the applicant and
undertakes more or less a through search into the candidates past
employment, education, personal reputation, policy record etc.

f) Physical Examination: - A comprehensive physical examination

of the selected candidates is conducted before their placement.
This is necessary in order to ensure that the selected candidates
are physically fit and are free from serious ailments.

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g) Final Selection: - The candidates who clear all the steps involved in
selection process are finally selected and a letter of job offer is issued
to them. This appointment letter contains the details like pay-scale,
allowances and other terms and conditions of the job. It also contains
when and whom he should report for joining the duty.

h) Placement: - Placement involves assigning a specific job to each

one of the selected candidates. It has been customary in most of
the organizations to put employees initially on a probation period
with a view to adjudge their suitability for the job in the
organization. The probation period may vary from organization to
organization ranging from one to two years.

i) Induction/Orientation: - Induction is the process of receiving and

welcoming an employee when he first joins a company and giving
him the basic information he needs to settle down quickly and
happily and start work.28 The purpose of orientation is to make
the new entrant feel at home and develop a sense of pride in the
organization and commitment to the job.

j) Socialization: -Socialization is the process of adaptation to new

values, norms and attitude. At this stage the new employee
attempt to learn and inculcate the norms and values of the work
roles in the organization. Induction is a part of socialization.
Induction is confined to the new recruits only, whereas
socialization covers transfer and promotion. It comprises three
stages pre- arrival, encounter and metamorphosis.

3.1.19 Training and Development

In the present era of the privatization grow and internationalization, the

business can grow compete only when the employee performance is at the
par with the beat in the industry. In order to do so corporate houses conduct

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training programmes of their employees to update their skill and enhance

their efficiency and working performance.29

The drastic change in the business world requires accepting new values,
behaving differently, learning new skills and competencies and often taking
more risks. Such a transformation is possible only through effective training
and development programmes.30

The development of human resources is putting newer challenges in

todays business world. Therefore training and development are receiving a
great deal of emphasis.31The purpose of training is basically to bridge the gap
between job requirements and present competence for an employee. Training
is aimed at improving the behaviour and performance of a person. The need
for training and development is determined by the employees performance
deficiency, computed as follows:

Training and development need = Standard performances - Actual

performance.

Development

The term development has broader scope and aim to develop people
in all respect. Development enables individuals to become not only good
employees but better men and women also. Development is an ongoing
continuous process, while training is a one-shot deal. It also refers to
behavioural modification of people through continuous learning practices.
Training courses are typically designed for a shot-term, stated set purpose,
such as the operation of some piece(s) of machinery while development
involves a broader education for long-term purpose.

It is quite common that training activity of any organisation are largely

measured by number of training programmes conducted per year or number
of training programmes per employee per annum which does not reflect
quality of the training programme. In addition to training of new entrants,

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manpower at all levels requires refresher training from time to time, to avoid
personal obsolescence. The following two Chinese proverbs highlight the
importance of the employee training.

Give a man a fish, and you have given him meal. Teach man to fish,
and you have given him livelihood.

If you wish to plan for a year sow seeds, if you wish to plan for ten
years plant trees, if you wish to plan for life time develop men.32

Training is no doubt expensive but the benefits often exceed the costs.
But if the quality of training is poor it practically serves no purpose.

Training is required on account of the following advantages it offers to

both employees and employers.33

a) Better performance/higher productivity

b) Improved quality

c) Cost reduction

d) Less learning period

e) High morale

f) Low accident rate

g) Personal growth

h) Favorable organizational climate.

There are numerous training methods useful for specific categories of

trainees. Each organisation has to choose methods and techniques of training
which are relevant for its training needs. The various methods are:

i). On- the-Job Training

ii). Vestibule Training
iii). Off-the-job Training

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On- the-Job Training- the worker is given training at the work place. It is
based on the principle of learning by doing.

Vestibule Training- is a method of training in which a training centre called

vestibule is set up and an expert trainer is employed to provide training.

Off- the- Job Training- requires the worker to undergo training for a
specific period away from the work-place.

In addition to the above general methods of training, several training

aids and audiovisual devices are also utilized in training programmes. These
aids and devices include blackboards, projectors, charts, moving pictures,
graphs, video tape recording, computers etc.

3.1.20 Evaluation of Training Programme

Many organisations do not realise the need to evaluate the training

development programmes once the session ends. To get the best result from
training the content and the process of the training should be evaluated. The
process of examining a training program is called training evaluation.
Training evaluation checks weather training has had the desired effect. Many
researchers conducted so far on training and development and their
evaluation indicate that no objective and reliable yardsticks have been
evolved for measuring learning. during training.

Organisations regularly notice a gap between the skills employees learn

through training and their ability to demonstrate them. Learning is useless if
it does not result in the desired change. Training fails because people stop
learning the moment training ends.

3.1.21 Cross-Cultural Diversity and the Need for Expatriates Training

Culture differs from country to country and from market to market. The
multinational companies have presence in a number of countries due to
globalization and send their expatriates to take care of the companys affairs

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in other countries. These expatriates face adjustment problems because of the

presence of altogether different environment in the host country.

With the growing influence of foreign markets and increasing growth

prospects for multinational business models, it is of high importance that
companies prepare their employees to fit for global assignments. At the
organizational level, pre-and post-departure training, language training,
cross-cultural training is needed to be implemented and they should be
regularly monitored. At the individual level, expatriates should be supported
by the family and friends.34 When a company wants to select an expatriate, it
should choose a person of high emotional stability and cultural toughness and
then he should be allowed to go to other country.

3.1.22 Promotion and Performance Appraisal

Promotion is an essential feature of an individuals career. It is the most

common form of internal mobility of personnel in an organisation. Personnel
manager should aim at selecting, breeding, developing and retaining talent at
all levels in the enterprise. Promotion is a reassignment of the individual to a
job or higher position involving a change of duties to a more difficult type of
work and greater responsibility accompanied by change of title and usually
an increase in pay.

The seniority list of the employees at different levels should be

finalized and updated periodically and circulated among them so as to enable
them to have a clear idea about the prospects of their promotions in the
enterprise.

Public Enterprises in India have been free to a large extent in framing

their own promotion policies. There is no uniformity in the promotion policy
of these enterprises although the Government laid down general principles
and model rules in November, 1964. Following principles have been
accepted for promotion programmes in PEs.

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a) Promotion should be done solely on the basis of merit, efficiency

and good conduct, irrespective of the seniority of the persons
concerned in service.

b) Persons should be judged for promotion by the people who have

watched their work and conduct over a longer period.

c) Promotions should be made on the recommendations of a

committee consisting of not less than three officers, one of whom
at least is acquired with the work of the person concerned.

d) In judging the person on the basis of the confidential reports of

him, it should be seen that he was warned in time of the defects
noticed in his work and conduct and that if he did not show
improvement, he was warned again.

e) If no warning has been given to a person, it should not be presumed

that the reports on him are so good as to justify his promotion.

There are mainly three types of promotion. They are:

1. Horizontal Promotion Here promotion involves an increase in

responsibility and pay with the change in the designation. The job
classification remains the same.

2. Vertical Promotion Here, there is a change in the status,

responsibilities, job classification and pay

3. Dry Promotion It refers to increase in responsibilities and status

without any increase in pay or other benefits.

Demotion- Demotion refers to the lowering down of an employees status,

responsibilities, and pay in the organisation. It is affected when there is an
economic crisis in an organisation due to external factors etc.

Transfer- It refers to movement of an employee from one section to another

section of the same department, one department to another department, one

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unit to another unit, one place to another place, or one function to another
function in the form of job rotation without any change in the employees
status, responsibility, and pay.

3.1.23 Performance Appraisal

Performance appraisal is a systematic and objective way of judging the

relative worth or ability of an employee in performing his task. According to
Flippo35, performance appraisal is the systematic, periodic and an impartial
rating of an employees excellence in matters pertaining to his present job
and his potential for a better job.

Performance Appraisal is undertaken for variety of purposes like:-

a) To identify employees for salary increase, promotion, transfer and

lay-off or termination of services.

b) To determine training and development needs of the employees.

c) To motivate employees by providing feedback on their performance

levels.

d) To establish a basis for research and references for personnel

decisions in future.

In Indian PEs, little attention is, however, paid to fixing the targets for
individual employees. In some cases, only a general write-up on the
performance of the employee is recorded and finally, the overall performance
of the employee is categorized as average, above average, good, excellent or
outstanding.

3.1.24 Performance Appraisal in Public Enterprises

Most of the PEs use appraisal systems. The methods of appraisal used
by PEs are as follows:-

a) Immediate supervisor filling appraisal form countersigned by

superior and the head of the department.

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b) For superior grades, it may require concurrence of PSEB and DPE.

c) There are time bound efficiency bars in scales of pay.

d) They provide an opportunity to the employees to make

representation against adverse remarks.

e) Some of the organisations are zero effects programme. This is to

enable the subordinate to examine his weaknesses and provide
plus points for achievement.

f) There is more emphasis on traits like dependability, initiative,

enthusiasm, loyalty, leadership etc.

g) There is negligible emphasis on appraising the potential of the

executive for future growth.

h) There is no counselling provision in the appraisal plan of the PEs.

3.1.25 Compensation Management

Compensation in case of HRM is referred to as money and other
benefits received by an employee for providing services to his employer.
Compensation of human factor is more tedious and therefore, separate
techniques and tools are required for it. So it is known as compensation
management or remuneration management.

Compensation constitutes the single most important cost in most

organisations. Therefore, the effectiveness with which compensation is
designed and managed can provide a competitive edge. Compensation is
equally important to the employee as it determines his or her standard of
living and status in society. In other words, compensation affects a person
economically, socially and psychologically.

According to Cascio36 Compensation includes direct cash payments,

indirect payments in the form of employee benefits and incentives to
motivate employees to strive for higher levels of productivity.

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Based on the above description of compensation, we may identify its

various components as follows:

a) Wages and Salary

b) Incentives

c) Fringe Benefits/Welfare facilities

3.1.26 Wages and Salary

Wages and salary are the most important component of compensation and
these are essential irrespective of the type of organisation. Wage is referred to as
remuneration to workers particularly, hourly rated payment. Salary refers to as
remuneration paid to white collar employees including managerial personnel.

A sound wage and salary administration seeks to achieve the following

objectives.
a) To establish a fair and equitable remuneration

b) To attract competent personnel

c) To retain the present employees

d) To improve productivity

e) To control costs

f) To establish job sequences and lines of promotion wherever

applicable

g) To improve union management relations

h) To improve public image of the company

Basically there are two methods of paying labour remuneration. One is

time wage system and another is the piece wage system.

Time Wage System- Under this system, wages are paid on the basis of time
spent on the job irrespective of the amount of work done. The unit of time
may be a day, a week, a fortnight or a month.

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Piece Wage System- Under this system remuneration is based on the amount
of work done or output of a worker. One unit of output is considered as one
piece and a specific rate of wage is paid per piece. It is also called payment
by result.

Both of these systems are having certain advantages and disadvantages.

So there arises another method i.e. Balance or Debt method. This method is a
combination of time and piece wage system. The worker is guaranteed a time
rate with an alternative piece rate. If the wages calculated at piece rate exceed
the time rate, the worker gets credit. On the other hand, if time wages exceed
piece wages, the worker is paid time wage.

3.1.27 Incentives

The very concern of a human resource manager is to extract the best

and maximum result from the employees and also to retain them. However,
compensation alone does not serve this purpose. Instead, in order to enthuse
employees to contribute their best something in addition to compensation is
needed.

Incentive is anything that attracts a worker and stimulates him to work.

Incentive can be financial and non financial. According to Venkata Ratnam and
Srivastva37, A wage incentive scheme is a method of payment for work of an
accepted quantity produced over and above a specified quantity or standard.

Incentives are mainly classified into two as financial and non financial.
Financial incentives may further be classified as individual incentives and
group incentives.

Benefits: These are the extra benefits provided by the employer to the
employees in addition to the normal wage or salary. The commonly offered
benefits are retirement benefits, pension and gratuity, provident fund, safety
and health facilities etc. In simple terms benefits are non-wage benefits

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offered by the employer to the employees. They represent cost expense to the
employer and cost savings to the employee.

Expenditure on welfare (benefits) is a profitable investment in the long-

run as it motivates the workers for higher productivity. Labour welfares are
not a form of employers goodwill or charity to the workers, but are
facilitative services to build and maintain the morale of the workers to
achieve the objectives of the organisation. The employees feel satisfied if
they are provided with such services and they also feel committed to the
organisation. Following are the basic objectives of labour welfare.

i). To provide better life and health to the worker.

ii). To make the workers happy, satisfied and efficient.

iii). To relieve workers from industrial fatigue and to improve

intellectual, cultural and material conditions of living of the
workers.

In India, the main agencies engaged in labour welfare include:

a) Central Government
b) State Government
c) Employers
d) Workers Organizations/Trade Unions
e) Other voluntary agencies

Central Govt. has passed a number of Acts for the welfare of workers
under Factories Act, Indian Mines Act, Employment of Children Act,
Maternity Benefits Act, Plantation Labour Act etc. These Acts provide for
canteen, crches, shelter, rest rooms, lunch rooms, washing and bathing
facilities, medical aid, proper lighting, ventilation, drinking water etc.
Appointment of welfare officers is also made compulsory. State Govt. run
health centres, educational centres etc. for the welfare of the workers. Many

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employers provide voluntary welfare facilities along with the statutory

welfare facilities like medical and transport facilities, reading rooms,
scholarships to children of workers, patronize teams of employees for
hockey, football etc. The welfare facilities offered by the employers on their
own are called voluntary welfare facilities.

3.1.28 Communication

A harmonious work atmosphere is the dream of every organisation.

Management, especially the HR heads should always try to maintain good
relation with its employees. For maintaining good human relations, an
efficient system of communication is necessary. Communication is the
mortar that holds an organization together, whatever its business or its
size. Without communication an organization cannot function at all. So
the employers of every organisation have emphasized the importance of
communication skills and the current trends in the business environment.
Communication skills constitute skills in reading, writing, listening,
understanding, and speaking. The Management Principle that- all the leaders
are managers; but all the managers are not leaders38 is worth noting.

a) Elements of Communication

In order to analyze the activity of communication, we must know the

process and the elements involved in the process of communication. There
are seven elements or factors which make the process of communication.39

i). Source/Sender is the one who initiates the action of communication.

ii). Audience/Receiver is the person(s) for whom the communication

is intended.

iii). Goal/purpose is the senders reason for communicating, the

desired result of the communication.

iv). Context/Environment is the background in which the communication

takes place.

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v). Message/Content is the information conveyed.

vi). Medium/Channel is the means or method used for conveying the

message.

vii). Feedback is the receivers response to the communication as

observed by the sender.

b) Methods of Communication

Most of our communication is with words. Language is common

system of symbols which we use for sharing our experience with other. We
do communicate a number of things by our facial expressions, movements,
clothing and so on, whether we speak or not. We can also use other symbols
like pictures, colors and sounds to communicate. Communication with word
is called verbal communication. Verbal communication may be oral or
written.
Oral communication occurs in situations like conversations, telephone
talk, interviews, conferences, presentations, group discussions and meetings.
It requires that both parties should be present and attentive at the same time.
The common channels of oral communication are:

a) Face-to-face conversation
b) Telephone conversation
c) Presentation
d) Public speech
e) Interview
f) Group discussion
g) Negotiation
h) Meeting

Channels of written communication are:

a) Letter
b) Memo

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c) Notice
d) Circular
e) Report
f) Minutes etc.

c) Process of Communication

The process of communication involves decisions and activities by the two

persons (sender and receiver) involved in communication. The sender begins the
process of communication. The sender has to be clear about the purpose of the
communication and about the target audience of the communication.

The functions of the sender are:

a) Being clear about the purpose of the communication.

b) Findings out about the understanding and needs of the target audience.

c) Encoding the required information and ideas with symbols to

create the message to suit the receiver.

d) Selecting the medium to send the message.

e) Making efforts to get feedback.

The receiver attends to the message and interprets it. The process of
translating the symbols into ideas and interpreting the message is called
decoding. Interpreting is a complex activity; it involves using knowledge of
the symbols and drawing upon previous knowledge of the subject matter. The
receivers ability to understand, level of intelligence, values and attitudes,
and relation with the sender, all influence his creation of meaning. If the
sender and the receiver have a common field of experience, the receivers
understanding of the message will be closer to what the sender intended.40

3.1.29 Motivation

Motivation is an effective instrument in the hands of the management in

inspiring the work-force. It is the major task of every manager to motivate his

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subordinates or to create the will to work among the subordinates. It should

also be remembered that a worker may be immensely capable of doing some
work; nothing can be achieved if he is not willing to work. So a manager has to
make appropriate use of motivation to enthuse the employees to follow them.

In order to motivate workers to work for the organizational goals, the

manager must determine the motives or needs of the workers and provide an
environment in which appropriate incentives are available for their satisfaction.
If the management is successful in doing so, it will also be successful in
increasing the willingness of the workers to work. This will increase efficiency
and effectiveness of the organisation. Higher motivation leads to job satisfaction
of the workers which can reduce absenteeism, turnover and labour unrest.

Motivation is perceived to be a force to persuade people to perform. The

formula for performance is P= OAM. Where O stands for Opportunity, A for
Ability and M for Motivation.41 If any of the components is missing or weak the
performance will, either not be there or it will not be up to the mark.

The word motivation has been derived from motive which means
any idea, need or emotion that prompts a man into action. Whatever may be
the behaviour of a man, there is some stimulus behind it. Stimulus is
dependent upon the motive of the person concerned. Motive can be known by
studying his needs and desires. There is no universal theory that can explain
the factors influencing motives which control mans behaviour at any
particular point of time.

According to Dalton E.McFarland, Motivation refers to the way in

which urges, desires, aspirations, strivings or needs direct, control or explain
the behaviour of human beings.42 Motivation has close relationship with the
behaviour of human beings. It explains how and why the human behaviour is
caused.

There are two types of motivation-intrinsic and extrinsic. Intrinsic

motivation comes from within-the employee wants to do a good job. He is

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willing to put forth a sustained effort to accomplish something. He is driven

by what is called a fire in the belly.

Extrinsic motivation consists of things outside you- bonuses, awards,

threat of punishment, etc. The rewards, which aim at satisfying economic and
social needs, are not really motivators for employee, but they are satisfiers,
and are extrinsic in nature.

Theories of Motivation
In many industries, top managements are under increasing pressure to
understand how contemporary HR policies and practices add value to
organizational effectiveness. Motivation is an important aspect that determines
the efficiency of an organization. Realizing the importance of motivation, many
researchers have attempted to study about the factors influencing motivation that
resulted the emergence of many theories on motivation.

Following are some of the theories of motivation.

1) Maslows Need Hierarchy Theory

2) Mc.Clellands Needs Theory

3) Herzbergs Motivation (Hygiene) Theory

4) Vrooms Valence Expectancy Theory

5) Porter and Lawler Model of Motivation etc.

Out of the above theories, the first two theories are prominent and
commonly used in industries.

1) Maslows Need Hierarchy Theory

This theory is based on human needs. These needs can be classified into a
sequential priority from the lower needs to the higher needs. He concluded that
when one set of needs is satisfied, it ceases to be a motivator. Thereafter the next
set of needs in the hierarchy takes its place. The basic human needs as identified
by Maslow in the ascending order of importance are as follows:

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a) Physiological needs- These are the basic needs for sustaining

human life like food, shelter, water air etc. These needs exert
tremendous influence on mans behaviour.

b) Safety needs- When the physiological needs are satisfied, the needs
for safety and security arises. Employees need a danger free and
secured work atmosphere. Employers should try to meet these needs
by implementing effective safety and welfare measures in their units.

c) Social needs- Man always wants to be recognized and accepted by

others. For meeting these needs people have to be given chances
for good relations with each other in and outside the organization?

d) Esteem needs- Esteem needs refer to the need for self esteem and
self respect. Needs which indicate self confidence, achievement,
competence, knowledge and independence are included in them.
This kind of need produces satisfaction as power, prestige, status
and self-confidence.

e) Self-actualization needs- This is regarded as the highest level need

in this hierarchy. The term self-actualization means to get
actualized in what a person is potentially good at.

2) Mc.Clellands Needs Theory

David Mc.Clelland states that three types of needs arise as a result of

experience in the life of persons. They are; Need for Power, Need for
Affiliation, and Need for Achievement.

i). Need for Affiliation- This refers to the need to establish and
maintain cordial relations with others.

ii). Need for Power- This need is egoistic and it refers to the desire of
a person to dominate and influence others by using physical
objects and actions.

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iii). Need for Achievement- This need arises when a person desires to
accomplish something with his own efforts. This implies ones
will to excel in his/her efforts.

According to McClelland, all these three needs may act simultaneously

on an individual.

3) Herzbergs Motivation (Hygiene) Theory

Herzberg started his theory with a distinction between motivational and

maintenance factors in job situation. According to him, there are ten
maintenance or hygiene factors and six motivational factors that influence the
behaviour of persons. Hygienic factors include wages, fringe benefits,
physical conditions, and overall company policies, administration, etc. The
presence of these factors at a satisfactory level prevents job dissatisfaction,
but does not provide motivation to the employees. Motivational factors like
achievement, recognition, advancement, work itself, possibility of growth
and responsibility are essential for increasing the productivity of the
employees. In order to increase the motivation of employees, it is necessary
to pay attention to motivational factors.

4) Vrooms Valence Expectancy Theory

According to VictorVroom, motivation of any individual depends on

the desired goal and the strength of his expectation of achieving the goal.
Motivation is the product of valence, expectancy and instrumentality. His
theory is expressed in the formula-

Motivation (force) = ValenceExpectancyInstrumentality

Here valance is the strength of an individuals preference for a

particular outcome. It can be taken as equivalent of value, incentive, attitude
and expected utility. Valence is positive when the individual prefers to attending
the outcome for not attending it. A valence of zero occurs, when the individual is
indifferent towards the outcome and is negative when he prefers not attaining

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outcome to attaining it. Expectancy is the probability that a particular action will
lead to a desired reward and instrumentality denotes an individuals estimate that
performance will result in achieving the reward.

The combination that produces the strongest motivation is high positive

valence, high expectancy and high instrumentality. If all the three are low, the
resulting motivation will be weak. He suggest that the management must
recognize and determine the situation as it exists and take steps to improve
upon these factors for behavioural modification so that these three elements
achieve the highest value individually.

5) Porter and Lawler Model of Motivation

This model is an improvement over Vrooms Expectancy model and is

mainly applied to study the behaviour of managers. He concluded that there
exists a complex relationship between job attitudes and job performance. The
different elements of this model are; effort, performance, rewards, and
satisfaction. He stressed that managers should carefully assess their reward
structure and that through careful planning and careful definition of role
requirements, the effort-performance-reward-satisfaction systems should be
integrated into the overall system of managing.

3.1.30 Industrial Relations

Industrial Relations refers to all types of relationships between all the

parties concerned with industry. It is a vast complex of relationships
obtaining between management and employees, union and management,
union and employees and between employees themselves. Both parties to
industrial relations have a common interest in industry, but many a time, they
are found to be pulling in different a direction which leads to industrial
unrest. The creation and maintenance of good relations between the workers
and the management is the very basis on which the development of industrial
democracy depends.

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The primary objective of industrial relations is to maintain good and

healthy relations between the workers and the management in the enterprise.
Some of the important objectives are listed below.43

a) To promote healthy labour management relations.

b) To protect the interest of employees as well as management by

securing the highest level of mutual understanding and goodwill
among them.

c) To raise productivity to a higher level is the need of the day and to

contribute to the economic development of the country.

d) To check industrial conflicts and minimize the occurrence of

strikes, lockouts and gheraos.

e) To minimize labour turnover and absenteeism by providing job

satisfaction to the workers.

f) To facilitate and develop industrial democracy based on workers

partnership in management of industry.

g) To establish Government control over industries to regulate

production and industrial relations.

Industrial Unrest- Industrial peace in a country is an important pre-

condition for its industrial development. Industrial peace implies the
existence of harmonious relationship between the management and the
workers. Industrial unrest refers to discontent and conflict between employers
and employees. It takes the shape of strikes, lock-outs, demonstrations etc.

Industrial Dispute- is the most acute problem in industrial organizations

because it endangers peace in the industry. Some of the symptoms of industrial
unrest are high labour turnover, disciplinary problems, absenteeism, low
morale, restriction of output etc.

According to Sec. 2 of the Industrial Dispute Act, 1947, Industrial

dispute means any dispute or difference between employers and employers or

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between employers and workmen or between workmen and workmen, which

is connected with the employment or non-employment or the terms of
employment or with the conditions of labour of any person.

The important causes of industrial disputes are either (a) economic or

(b) non-economic causes.

a) Economic Causes
i). Wages, bonus and allowances
ii). Conditions of work and employment
iii). Working hours
iv). Leave and holidays with pay
v). Unjust retrenchment

b) Non-Economic Causes
i). Recognition of trade unions
ii). Victimization of workers
iii). Ill-treatment by supervisory staff
iv). Political causes, etc.

During 2008-09, 3143 industrial disputes were registered in Kerala. At

the end of the year, there were 5962 cases along with the pending disputes of
previous year which is less than 6.6% of current year. A total of 3192
disputes were settled during the year under review. Due to strike and lockout
74,264 workers were affected which led to loss of 12, 46,572 man days.

Poor industrial relations are harmful to the employer, employee and to

the society. It reduces productivity of labour and lead to rise in cost of
production. Many of the workers loose jobs and promotions. They get
frustrated and demoralized. Employers face resistance to changes in
technology and organizational structure. Therefore, industrial strike has
multiplier effect on the economy and society. So it is the duty of the
management to find measures for maintaining good industrial relations.
Following are some of the measures to maintain sound industrial relations:

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i). Collective Bargaining

ii). Participative Management

iii). Grievance Procedure etc.

3.1.31 Collective Bargaining

The role of collective bargaining for solving the problems arising at the
plant or industry level has been widely recognized. It is considered as the corner
stone of good industrial relations. It is the process in which the terms and
conditions of employment are determined jointly by the employer and employee.

Collective Bargaining can be the most central activity of trade unions

wherein they represent the voice of their members. The ILO Convention No.154,
adopted in 1981, defines collective bargaining in Article 2 as follows:

The term collective bargaining extends to all negotiations which take

place between an employer, a group of employers or one or more employers
organizations, on the one hand, and one or more workers organizations on
the other, for (a) determining working conditions and terms of employment;
and/or (b) regulating relations between employers and workers; and/ or (c)
regulating relations between employers or their organisations and a workers
organisation or workers organisations.44

Collective bargaining helps to promote cooperation and mutual

understanding between the workers and the management. It provides a
framework for deciding the terms and conditions of employment without
resort to strikes and lockouts and without the intervention of outsiders. But
the progress of collective bargaining in India is not very encouraging. The
major emphasis of both unions and employers is to settle the disputes through
adjudication.

3.1.32 Workers Participation in Management (WPM)

The modern thinking on management is based on considering workers

not merely as wage-earners, but also as equal partners in the productive

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process. They should be given the opportunity to participate in the

management of the enterprise. Their views and suggestions should be given
due consideration while taking decisions by the management. It is rightly
suggested that management of industrial units will be smooth and efficient if
workers are associated with the management.

Involvement of employees in the decision- making process has been

termed variously as industrial democracy, employee participation,
participative management and workers participation in management.
Whatever term is used, the objective is to involve subordinates in decision
making at various levels. No scheme of WPM would be successful, unless
management is sincerely willing to share power. The principal forms through
which workers participate are, information sharing, joint consultation and
suggestion schemes.

3.1.33 Grievance Procedure

Every employee has certain expectations which he thinks must be fulfilled

by the organisation he is working for. When the organisation fails to do this, he
develops a feeling of discontent or dissatisfaction. When an employee feels that
something is unfair in the organisation, he is said to have a grievance.

According to Walter Bear, The grievance procedure is problem-

solving, dispute-settling machinery which has been set up following an
agreement to that effect between labour and management. It is the means by
which a trade union or an employee makes and processes his claim that there
has been a violation of the labour agreement by the company.45Grievances
may occur for a number of reasons:

i). Economic: Wage fixation, overtime, bonus, wage revision, etc.

ii). Work environment: Poor physical conditions of workplace, tight

production norms, defective tools and equipment, unfair rules,
lack of recognition etc.

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iii). Supervision: Relates to the attitude of the supervisor towards the

employee such as perceived notions of bias, favoritism, nepotism,
caste affiliation, regional feelings.

iv). Work group: Employee is unable to adjust with his colleagues.

v). Miscellaneous: Violations in respect of promotions, safety

methods, transfer, disciplinary rules, fines, granting leave, medical
facilities, etc.

The following guidelines may help a supervisor while dealing with

grievances: 46
a) Treat each case as important and get the grievance in writing.

b) Talk to the employee directly; encourage him to speak the truth.

Give him a patient hearing.

c) Discuss in a private place. Ensure confidentiality, if necessary.

d) Handle each case within a time frame.

e) Control your emotions, your remarks and behaviour.

f) Maintain proper records and follow up the action taken in each

case etc.

An HR Manager should be a person having well acquainted with the

above theoretical aspects of HRM and recognize that the employees are come
to the workplace not only with technical skills, soft skills and knowledge but
also with their personal feelings, perceptions, desires, attitudes and values.
So, if you want to retain the best people in your organisation, focus on
finding out what these people want. To recruit and retain the best people the
mantra is -solicit feedback from your people to find out more about the work
experience that optimize their job satisfaction and continuously strive to
improvise and provide nothing but the best work climate.

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3.2 Public Enterprises in India and Kerala

3.2.1 Public Enterprises in India

Almost all countries of the world has recognized the importance of

State interference for sound and balanced economic development. Increasing
intervention by State in the economic field has been a characteristic feature of
the recent past. The public sector has played a pivotal role in the planned
economic and industrial development of any country. Public Enterprises was
created to prevent the concentration of economic power, to reduce the
disparities of income and wealth among the people and to provide
commercial surpluses for financing further economic development. In actual
PEs attained the Commanding heights of the economy.

Public Enterprises are called by a variety of names like, Public Sector

Undertakings, Nationalized Industries, Socialized Industries, State-Owned
Industries, State Enterprises, Government Concerns etc. In foreign countries,
the term has been used in conformity with their political and administrative
structures. They are known as Public Corporation (Great Britain), Crown
Corporation (Canada), Statutory Corporation (Australia), Government
Sponsored Corporation (Pakistan), Government Corporation (USA) etc.

The Public Sector Undertakings evolved in India after the attainment of

independence in 1947. India adopted the mixed economy approach for
economic development allowing for the role of both Public Sector and Private
Sectors. Guided by economic Planning (Five Year Plans), the Central
Government and State Governments went for investments in the public sector
especially in areas, where the private sector was not forthcoming. Between the
Central Government and the State Governments, moreover, investments by the
former have been made primarily in sectors which fall either in the Central List
or the Concurrent List of the Constitution of India. Public sector investments
by the State Governments /UTs, on the other hand, have been made in areas
that fall in the State List of the Constitution. PEs in India is operating at three
levels, namely, Central, State and Municipal. Khera47, rightly pointed out that,

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There is hardly any country today in which the Government is not engaged
actively and directly in the setting up and management of economic and
industrial enterprises. The importance of Public Sector is stressed by Hanson
by saying that, Public enterprise without a plan can achieve something: a plan
without public enterprise is likely to remain on paper.48

Definition: - S.S. Khera49 contends that By public enterprise is meant the

industrial, commercial and economic activities carried on by the Central
Government or by a State Government or jointly by the Central Govt. and a
State Govt. and in each case either solely or in association with private
enterprise, so long as it is managed by a self contained management.

3.2.2 Objectives of Public Sector Undertakings in India

The growth of State Enterprises is due to a variety of motives, pressures

and purposes which differ from country to country. In a country like India
which has adopted mixed economy, Public Enterprises have been set up and
nurtured with a view to attaining the commanding heights of the economy.
Following are some of the basic objectives of PSUs in India:

a) To promote rapid economic development.

b) To achieve balanced regional development.

c) To reduce disparities of income.

d) To enhance the employment opportunities.

e) To promote exports and to earn foreign exchange.

f) To provide basic infrastructural facilities for the growth of the economy.

g) To assist the development of small and ancillary industrial units.

h) To produce items like military tanks, jet aircrafts, products needed

for the defence of the country etc.

i) To ensure in the rapid economic development and industrialization

of the country and create the necessary infrastructure for economic
development.

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3.2.3 Growth of Public Sector in India

Since 1956, there has been an impressive growth of the public sector
enterprises. The amount of investment in public sector enterprises has been
rapidly increasing. The growth of PEs started by the Central Government can
be observed from Table 3.1. The table reveals that whereas there were 5
industrial public sector units of Central Government with a capital investment
of `29 crores in 1951, the number went up to 249 in 2010 with a total capital

investment of `5, 79,920 crores.

Table 3.1: Growth of Central Government Public Enterprises

As at the End of Total Investments
No. of Units
March (` in Crores)
1951 5 29
1961 47 950
1980 179 18150
1990 244 99330
2000 240 252745
2001 242 274114
2005 237 357849
2007 244 421089
2008 247 513532
2010 249 579920
Source: Public Enterprises Survey 2008-09, Dept of Public Enterprises, Govt. of India
3.2.4 Performance of Public Enterprises in India

The performances of Public Enterprises like any other enterprises are

generally judged on the profitability criterion. PEs are generally criticized on
the ground that their performance has been very poor in terms of rate of
return on profit made on capital investment (Table 3.2) The table reveals that
in the year 1991-92 when the process of privatization or disinvestment was
started, profitability of Central Public Enterprises was relatively low.
Profitability measured in terms of per cent of gross profits to capital
employed was 11.6 in 1991-92 and 11.4 in 1992-93. Profitability measured in

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terms of net after-tax profit to capital employed was 2.3 per cent in both
1991-92 and 1992-93.

However, from 1994-95, profitability of these units has greatly

improved. The ratio of gross profits to capital employed which was 11.6
percent in 19991-92, rose to around 14 per cent in 1994-95 and to 16 per cent
in 1995-96. Thereafter, rate of gross profits to capital employed has risen to
16.2 per cent in 2001-02, 17.7 per cent in 2002-03 and 21.5 per cent in 2004-
05. Corresponding ratio of net profit after tax to capital employed has risen to
6.7%, 7.8% and 13.0% in 2001-02, 2002-03 and 2004-05 respectively.

Table 3.2: Profitability of Working of Central Public Sector Undertakings

Return:Gross
Gross Profits
No. of Units

Capital (%)
after tax to
Net Profits

Net Profits
Year (End

Employed

before tax
( `Crore)

Profits to
after tax
March)

Capital

Capital
1991-92 237 1,17,991 13,675 2,355 Rate of
11.6 2.0
Eighth Plan 1992-93 239 1,40,110 15,957 3,271 11.4 2.3
1993-94 240 1,59,836 18,555 4,544 11.6 2.8
1994-95 241 1,62,451 22,630 7,187 13.9 4.4
1995-96 239 1,73,948 27,587 9,574 15.9 5
1996-97 236 2,31,178 30,915 10,188 13.4 4.4
Ninth Plan 1997-98 236 2,49,855 37,206 13,582 14.9 5.4
1998-99 235 2,65,093 39,727 13,203 15.0 5.0
1999-2000 232 3,02,947 42,270 14,331 13.9 4.7
2000-2001 234 331,372 48,767 15,653 14.7 4.7
2001-2002 231 390,162 63,190 25,978 16.2 6.7
Tenth Plan 2002-03 227 4,17,931 73,374 32,399 17.7 7.8
2003-04 227 4,52,910 95,120 53,084 21.0 11.7
2004-05 227 5,04,826 1,08,491 65,429 21.5 13.0
2005-06 244 4,03,706 NA 69,536 NA NA
2006-07 244 4,21,089 NA 81,550 NA NA
Source: Public Enterprises Survey, 2008

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3.2.5 Highlights of the Performance of CPSEs, during 2009-10

The Public Enterprises Survey (2009-10), report on the performance of

CPSEs was summarized as mentioned below:

There were 249 CPSEs under the administrative control of various

Ministries/Departments as on 31.3.2010. Out of these 249 CPSEs, 217 have
been in operation and 32 CPSEs have yet to commence business. Out of the
217 operating CPSEs 158 showed profits during 2009-10 and 59 incurred
losses during the year. The cumulative investment, which was ` 29 crores in 5

enterprises as on 31.3.1951, has gone up to `579920 crores in 249 CPSEs as

on 31.3.2010. While investment in all the CPSEs went up by 12.93% in
2009-10 over 2008-09, the increase in capital employed went up by 14.73%
during the same period (Table 3.3) The net profit; of profit making CPSEs
was `108435 crores in 2009-10. The net loss of loss making enterprises (59)

stood at `15842 crores during the year.

Table 3.3: Performance of CPSEs during 2009-10

(`in crores)

% change
over
Sl.No. Particulars 2009-10 2008-09
previous
year
1. Investment (long term loan+equity) 579920 513532 12.93
2. Capital Employed 910120 793240 14.73
3. Total Turnover 1235060 1271529 -2.87
4. Profit of Profit Making CPSEs 108435 98488 10.10
5. Loss of Loss Making CPSEs 15842 14621 8.35
6. Dividend Declared 33223 25501 30.28
7. Corporate tax 40007 33828 18.27
8. Interest paid 35720 39300 -9.11
9. Contribution to Central Exchequer 139828 151543 -7.73
10. Foreign Exchange Earnings 77745 74206 4.77
11. Foreign Exchange Outgo 420477 433332 2.97
12. Number of Employees 1490699 1535531 -2.79

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13. Net worth 653801 583144 1.12

Source: Public Enterprises Survey Report 2010-11, Government of India
The Department of Public Enterprises (DPE) presents to Parliament
every year a comprehensive report known as the Public Enterprises Survey
on the financial and physical performance of Central Public Sector
Enterprises (CPSEs) in the country. As per the DPE report a lions share of
the investment in these enterprises has gone into infrastructure projects also
called public utilities. Although these enterprises are often monopolies, they
operate at a price disadvantage as they have to work under an administered
price regime. Despite rise in inputs costs, prices of goods and services of
these enterprises have not been correspondingly raised for years. This has
been one of the reasons for their losses.

The Indian economy has been on a high growth trajectory, in recent

years. It is important to ensure that there are no supply constraints to maintain
the growth momentum. In this perspective, the public sector enterprises,
especially those in the infrastructure sector have a very important role to play.

3.2.6 Public Enterprises in Kerala

Kerala, the southern most state of the Indian Union was formulated on
the basis of the Malayalam language on November 1, 1956 as per the Re-
organization Act of 1956. The State has cent percent literacy and excellent
and intelligent workforce. The only way to sustain the high level of human
development already achieved and to take it forward is to industrialize the
State. With the tertiary sector expanded to its limit, the key to progress and
development lies in industrialization be it in the public or private sector. The
road ahead for Kerala is the road to industrialization. Eventhough the State
had many large Private Sector Undertakings, the private sector as a whole,
did not have the financial resources for massive investment, particularly in
the core sectors.

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It is noteworthy that the qualities of our highly intelligent and competent

manpower do not reflect in the performance of the Public Sector Undertakings.
During 2009-10 out of the 84 active enterprises 30 units have reported losses
amounting to ` 336.13 crore. The Ministry of Finance has extended a very
supporting hand for the rejuvenation of the PSUs. During the last four years
there was a budgetary support of ` 210.81 crores for the rejuvenation and
modernization of PSUs. Utilization of this amount is given in Table 3.4.

Table 3.4: Utilization of Budgetary Support from 2006-07 to 2009-10

(`in crores)

Sl.No. Particulars 2006-07 2007-08 2008-09 2009-10 Total

1. OTS with banks/F/s 11.18 28.39 20.88 17.71 78.16
2. Settlement of balance VRS 14.30 9.59 5.91 1.58 31.38
3. Modernization/revival 12.73 5.93 24.53 19.56 62.75
4. Working Capital 14.80 4.62 8.12 10.98 38.52
Total 53.01 48.53 59.44 49.83 210.81
Source: Synergizing PSUs-Annual Review meet April, 2009, Dept. of Industries & Commerce,
Govt. of Kerala.

The State Level Public Enterprises (SLPEs) have played a very

important role in the economic development and providing infrastructure
services including, power supply, road transportation and irrigation in the
different parts of the State. Some SLPEs are promotional in nature providing
cheap credit to target groups and extending marketing support to small and
village enterprises. Since these enterprises have been set up as corporation
or as companies, they are by design autonomous bodies.

Definition of SLPEs-The Standing Committee of Secretaries of

Department/Bureau of Public Enterprises in States/UTs, in its meeting held in
New Delhi on 27th-28thApril, 2011 decided to adopt the following definition
of State Level Public Enterprises (SLPEs):

i). Companies under the State Government as defined under Section

617 of the Companies Act, 1956, whereby the State Government

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owns equity more that 50% in the total shareholding of the

company.

ii). Statutory corporations established under the Act of State Legislature.

iii). Subsidiary companies of these government companies (i, &ii

above).

iv). Any other enterprise so categorized by the State Government (e.g.

Companies/Boards/Authority/Co-operative)

As per the Annual Review of State Level Public Enterprises (SLPEs)

published by the Bureau of Public Enterprises, Government of Kerala 2009-
10 there are 114 PSUs. Out of these 114 PSUs twenty units are merged,
transferred, liquidated or closed. Another 10 have been closed down in the
past. So there are only 84 active working SLPEs. Based on the field and type
of activity, the 84 active SLPEs are grouped in to 14 sectors depending on
their field and type of activity. The 14 sectors and the number of enterprises
in each sector are indicated below (Table 3.5)

Table 3.5: Sector wise classification of SLPEs in Kerala

Sector No. Sector No. of SLPEs

1 Development & Infrastructural Agencies 18
2 Ceramics and Refractories 2
3 Chemical Industries 8
4 Electrical Equipment 4
5 Electronics 3
6 Engineering 8
7 Plantation & Agro Based Units 12
8 Textiles 3
9 Wood Based Industries 1
10 Traditional Industries 7
11 Trading Units 2
12 Welfare Agencies 9
13 Public Utilities 6

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14 Others 1
Total 84
Source: A Review of Public Enterprises in Kerala 2009-2010, Bureau of Public Enterprises

3.2.7 Ownership
Of the 84 enterprises which are active, eight are statutory bodies, while
52 are fully owned by the Government of Kerala. Eight enterprises are jointly
owned by the State and Central Governments. Details of the status of
ownership of the enterprises are indicated in Table 3.6. Among the 84
enterprises information is not available from three units. So working PEs
which have provided and published sufficient information to the Government
of Kerala is eighty one numbers.

Table 3.6: Status of Ownership of State Level Public Enterprises

Sl.No Status of Ownership No. of SLPEs

1. Statutory Bodies 8
2. Wholly owned by the Government of Kerala 52
3. Joint ownership of State & Central Government 8
4. Joint ownership of Government of Kerala & Public 8
5. Joint ownership of Govt. of Kerala , Financial 5
Institutions & Public
6. Joint ownership of Govt. of Kerala, Financial 2
Institutions, Public & Foreign firms
7. Joint ownership of Govt. of Kerala and Urban Local 1
Bodies
Total 84
Source: A Review of Public Enterprises in Kerala, 2009-2010, Bureau of PEs

The administrative control of the SLPEs vest with different government

departments. Thirty nine enterprises are under the industries department
followed by 12 under the agriculture department. The number of SLPEs
under the different departments is summarized in Table 3.7.

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Table 3.7: Administrative Departments of the SLPEs

Sl.No. Administrative Department No. of SLPEs

1 Agriculture 12
2 Coastal Shipping & Inland Navigation 1
3 Cultural Affairs 1
4 Finance 1
5 Fisheries & Ports 2
6 Food, Civil Supplies& Consumer Affairs 1
7 Forest & Wild Life 1
8 Tourism 3
9 General Education 1
10 Health & Family Welfare 1
11 Home 1
12 Housing 1
13 Industries 39
14 Labour & Rehabilitation 2
15 Local Self Government 1
16 Power 2
17 Public Works 2
18 General Administration (Sainik Welfare) 1
19 Sc/SC Development 3
20 Social Welfare 2
21 Taxes 3
22 Transport 2
23 Water Resources 1
Total 84
Source: A Review of Public Enterprises in Kerala, 2009-2010, Bureau of PEs

In Kerala, out of the eighty-four working PEs (Feb. 2010 Review),

thirty units are making heavy losses. In the Industrial sector, fourteen out of
thirty nine units are running on heavy accumulated losses. So these units are
considered to be sick industrial units.

Sec 3(1) (o) of the Sick Industrial Companies (Special Provisions) Act
1985, defines a sick company as, Industrial company (being a company
registered for not less than five years) which has at the end of any financial

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 Human Resource Management Conceptual Issues with Special Reference ...

year accumulated loss equal to or exceeding its entire net worth and which
has also suffered cash losses in such a financial year, and the financial year
immediately preceding such financial year.

By The Companies (Second Amendment) Act, 2002 defines a sick

company as one:

a) Which has accumulated losses in any financial year equal to 50

percent or more of its average net worth during four years
immediately preceding the financial year in question, or

b) Which has failed to repay its debts within any three consecutive
quarters on demand for repayment by its creditors.

Here the term net worth is equal to paid up capital plus reserves &
surpluses minus [preliminary expenses, accumulated loss, miscellaneous
expenditure not written off and intangible assets (as given in Balance
Sheet)].

Sickness in the industrial sector is a burning problem in the country,

especially in Kerala. The Causes of this industrial sickness are not only many
but also different from region to region and industry to industry and
therefore, there is need to study the causes and find out remedies so as to
rehabilitate the ones which are viable in order to avoid unnecessary waste of
resources. This rapid growth of sick units in recent years has caused concern
among the planners, policy makers, financiers and academics. It is no doubt
that a lot of measures have been undertaken at the Government (both Central
and State) level to contain this growing malady. One of the measures taken
over by the Kerala Government is the appointment of a body named Public
Sector Restructuring and Internal Audit Board (RIAB).

3.2.8 Public Sector Restructuring and Internal Audit Board (RIAB)

RIAB, constituted in 1994, executes State Owned Enterprise Reform

Initiative and is functioning under the Industries Department. It has worked

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in association with National and International Agencies such as Common

Wealth Secretariat, Commonwealth Association for Corporate
Governance, Global Corporate Governance Forum, UNDP and the
Academy of Corporate Governance. RIAB also carries out macro level
fund management and monitoring and performance management of State
Owned Enterprises (SOEs). The following activities are being carried out
by RIAB:

a) Monitoring performance and status of audit completion in SLPEs

under the Industries Department.

b) Appraisal of proposal submitted by the SLPEs.

c) Management of fund flow to PSUs and monitoring.

d) Performance audit in SLPEs.

e) Conducting studies for PSU restructuring, preparation of

packages, modernization of technology.

f) Institution of systems for good Corporate Governance, HRD and

capacity building in public services provider. Linking with
national and international institutions (Commonwealth Secretariat,
UNDP, University Centre, Asian Productivity Organization etc.).

g) Implementation of good governance systems.

h) Conducting Training /Capacity Building Programme.

i) Conducting evens related to Public Sector Governance (Annual

Review Meet, Award for Best PSU, Best CEO, Best Industrial
Journalist and Trade Union Meet etc.).

3.2.9 An Overview of the Performance of SLPEs in Kerala for the

Last Ten Years (From 2001-02 to 2009-10)
In the year 2000-01, 98 Government Companies and 9 statutory bodies
were operating in the State. A total of 1,28,022 employees were working in

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these units .The total paid up capital of these units was `4792.4788 crores

and the total capital invested was `15536.07 crores. Out of the 107 units,
only 35 units generated profits and the remaining 64 suffered from
losses.

In the year 2001-02, the total number of SLPEs in the State was 107
with a total of 1, 22,824 personnel. There was an increase in the paid up
capital and the total capital invested. Thirty eight units generated profits and
fifty units incurred a loss of ` 511.60 crores. The overall working of these

units showed a negative result of `218.07 crores.

During 2002-03, 1, 10,882 employees were working in 104 Public

Sector Units in the State. Even when the total capital invested increased to
17760.43 crores, the number of profit making units declined to 33 units
which resulted a further increase in the net loss.

In 2003-04, the total employment was 1, 12,346. The total capital

invested was ` 19454.81 crores. Out of the 104 units, 40 units generated

profit of `288.19 crores. The net loss during this year was `227.16 crores.

With a capital investment of ` 19052.81 crores the year 2004-05

saw 39 units making profits out of the total 104 units. Unlike the previous
years the overall working result of this year shows a decrease in the net
loss.

During 2005-06, the total employment of the PEs in the State was
1, 11,904. The total capital invested and the total profit earning units declined
to `.18779.53 crores and 32 respectively. The net loss during this period was
198.15 crores.

In the year 2006-07, the total number of PEs operating in the State was
105 with a total capital investment of ` 16892.65 crores. The total

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employment of the year was 1, 09,699. Of these 105 units, 49 units generated
profit of ` 542.44 cores and 37 units incurred losses amounting to ` 402.47
crores. Unlike the previous years the overall result of the year showed a profit
of `139.97 crores.

In the year 2007-08 there was a big change in the total number of
SLPEs from 105 to 84.The total number of employment during the period
was 1,07,728. The total paidup capital and the capital invested were
` 7,203.02 crores and ` 17,744.01 crores respectively. Out of the total units

fifty two units generated profits worth `796.04 crores .The overall result of

these units shows a profit of `155.87 crores.

During 2008-09, the total capital investment was ` 18245.57 crores

and the total employment was 1, 23,290 numbers. Out of the total 84 units
fifty three units generated profits. The net profit for the year was ` 490.36
crores.

In the year 2009-10 sixty units out of the total 84 units generated profit
of `978.77 crores. The total capital invested and the total employments were

`20, 200.01 crores and 1, 29,463 numbers respectively. The net profit of the

year was `666.38 crores. (Table 3.8)

103
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Human Resource Management Conceptual Issues with Special Reference ...

105

Source: A Review of Public Enterprises in Kerala 2009-2010, Bureau of Public Enterprises

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..YZ..

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