MODULE III HRP AND HIRING POLICY

Manpower Planning which is also called as Human Resource Planning consists of putting
right number of people, right kind of people at the right place, right time, doing the right
things for which they are suited for the achievement of goals of the organization. Human
Resource Planning has got an important place in the arena of industrialization. Human
Resource Planning has to be a systems approach and is carried out in a set procedure. The
procedure is as follows:
Analyzing the current manpower inventory
Making future manpower forecasts
Developing employment programs
Design training programs

According to Gorden MacBeath, manpower planning involves two stages. The first stage is
concerned with the detailed “planning of manpower requirements for all types and levels of
employees throughout the period of the plan,” and the second stage is concerned with
“planning of manpower supplies to provide the organisation with the right types of people
from all sources to meet the planned requirements.”

Importance of Manpower Planning

Key to managerial functions- The four managerial functions, i.e., planning, organizing,
directing and controlling are based upon the manpower. Human resources help in the
implementation of all these managerial activities. Therefore, staffing becomes a key to all
managerial functions.

Efficient utilization- Efficient management of personnel’s becomes an important function in

the industrialization world of today. Setting of large scale enterprises require management of
large scale manpower. It can be effectively done through staffing function.

Motivation- Staffing function not only includes putting right men on right job, but it also
comprises of motivational programmes, i.e., incentive plans to be framed for further
participation and employment of employees in a concern. Therefore, all types of incentive
plans become an integral part of staffing function.

Better human relations- A concern can stabilize itself if human relations develop and are
strong. Human relations become strong trough effective control, clear communication,
effective supervision and leadership in a concern. Staffing function also looks after training
and development of the work force which leads to co-operation and better human relations.

Higher productivity- Productivity level increases when resources are utilized in best possible
manner. Higher productivity is a result of minimum wastage of time, money, efforts and
energies. This is possible through the staffing and it's related activities (Performance
appraisal, training and development, remuneration)
Need of Manpower Planning
Manpower Planning is a two-phased process because manpower planning not only analyses
the current human resources but also makes manpower forecasts and thereby draw
employment programmes. Manpower Planning is advantageous to firm in following manner:
Shortages and surpluses can be identified so that quick action can be taken wherever
required.

All the recruitment and selection programmes are based on manpower planning.
It also helps to reduce the labor cost as excess staff can be identified and thereby overstaffing
can be avoided.

It also helps to identify the available talents in a concern and accordingly training
programmes can be chalked out to develop those talents.
It helps in growth and diversification of business. Through manpower planning, human
resources can be readily available and they can be utilized in best manner.
It helps the organization to realize the importance of manpower management which
ultimately helps in the stability of a concern.

Process of Manpower Planning:

The planning process is one of the most crucial, complex and continuing managerial
functions which, according to the Tata Electrical Locomotive Company, “embraces
organisation development, managerial development, career planning and succession
planning.” The process has gained importance in India with the increase in the size of
business enterprises, complex production technology, and the adoption of professional
management technique.

It may be rightly regarded as a multi-step process, including various issues, such as:
(A) Deciding goals or objectives
(B) Auditing of the internal resources
(C) Formulation of the recruitment plan
(D) Estimating future organisational structure and manpower requirements
(E) Developing a human resource plan

A. Deciding Goals or Objectives:

The business objectives have been determined; planning of manpower resources has to be
fully integrated into the financial planning. It becomes necessary to determine how the human
resources can be organised to achieve these objectives.

For this purpose, a detailed organisation chart is drawn and the management of the company
tries to determine “how many people, at what level, at what positions and with what kind of
experience and training would be required to meet the business objectives during the
planning period.” The management of this company considers a time 5 pan of five years as an
optimum period for this purpose.

It stresses the specific and standard occupational nomenclature must be used without which
“it would not be possible to build a firm-cum-industry-wise manpower resources planning.”
It suggests the adoption for this purpose of the international coding of occupations. For a
sound manpower planning it considers as a prerequisite the preparation of a manual of job
classification and job description with specific reference to individual jobs to be performed.
B. Audit of the Internal Resources:
The next step consists of an audit of the internal resources. A systematic review of the
internal resources would indicate persons within the organisations who possesses different or
higher levels of responsibilities. Thus, it becomes necessary to integrate into the manpower
planning process a sound system of performance appraisal as well as appraisal of potential of
existing employees.

C. Formulation of the Recruitment Plan:

A detailed survey of the internal manpower resources can ultimately lead to as assessment of
the deficit or surplus of personnel for the different levels during the planned period. Whilst
arriving at the final figures, it is necessary to take into account the “actual retirements and
estimated loss due to death, ill health and turnover, based on past experience and future
outlook in relation to company’s expansion and future growth patterns.”

D. Estimating Future Organisational Structure and Manpower Requirements:

The management must estimate the structure of the organisation at a given point of time. For
this estimate, the number and type of employees needed have to be determined. Many
environmental factors affect this determination. They include business forecast, expansion
and growth, design and structural changes, management philosophy, government policy,
product and human skills mix, and competition.

E. Developing of Human Resource Plan:

This step refers to the development and implementation of the human resource plan, which
consists in finding out the sources of labour supply with a view to making an effective use of
these sources. The first thing, therefore, is to decide on the policy— should the personnel be
hired from within through promotional channels or should it be obtained from an outside
source.
The best policy which is followed by most organisations is to fill up higher vacancies by
promotion and lower-level positions by recruitment from the labour market. The market is a
geographical area from which employers recruit their work force and labour seeks
employment.

Limitations of Human Resource Planning

The future is uncertain. There are several external factors viz. Technological, political,
cultural, etc. that affects the employment opportunities. Therefore, the management can
consider the human resource planning as a guiding factor and cannot rely completely on it.
With the surplus manpower, the companies try to remove this imbalance using termination,
layoff, removal of the existing employees. This could create a sense of insecurity among
them, and that would result in the loss of their faith in the company.

The human resource planning is time-consuming since it collects the complete information
regarding the personnel requirements of each department and then finds the suitable sources
to satisfy the needs.
The human resource planning is an expensive process. All the activities carried out from the
time the manpower need arises till the final placement of employees, consumes lot of time
and is very expensive.

Thus, the firm must carry out the human resource planning cautiously since it is accorded
with several limitations that can adversely affect the overall functioning of the firm.

Why do we need human resource planning?

• To determine future manpower requirements: It solves the problem of excess manpower or

understaffing
• To execute important functions: Human resource planning provides valuable and timely
information to design and execute functions such as recruitment, selection, transfers,
promotions, layoffs, training and development, and performance appraisals
• To reduce costs: Human resource planning helps the organization anticipate imbalances in
human resource and facilitates reduction in resource costs.
• To aid international strategies: Global operations are becoming very common. International
expansion strategies are not possible without human resource planning. It facilitates the
process of meeting staffing needs.

Recruitment: Meaning, Definition,

Meaning:
Recruitment is a positive process of searching for prospective employees and stimulating
them to apply for the jobs in the organisation. When more persons apply for jobs then there
will be a scope for recruiting better persons.

The job-seekers too, on the other hand, are in search of organizations offering them
employment. Recruitment is a linkage activity bringing together those with jobs and those
seeking jobs. In simple words, the term recruitment refers to discovering the source from
where potential employees may be selected. The scientific recruitment process leads to higher
productivity, better wages, high morale, reduction in labor turnover and enhanced reputation.
It stimulates people to apply for jobs; hence it is a positive process.

Recruitment is concerned with reaching out, attracting, and ensuring a supply of qualified
personnel and making out selection of requisite manpower both in their quantitative and
qualitative aspect. It is the development and maintenance of adequate man- power resources.
This is the first stage of the process of selection and is completed with placement.

Definition:
In the words of Dale Yoder, Recruitment is the process to “discover the sources of manpower
to meet the requirements of the staffing schedule and to employ effective measures for
attracting that manpower in adequate numbers to facilitate effective selection of an efficient
working force.”

Kempner writes, “Recruitment forms the first stage in the process which continues with
selection and ceases with the placement of the candidates.”
In personnel recruitment, management tries to do far more than merely fill job openings. As a
routine the formula for personnel recruitment would be simple i.e., just fill the job with any
applicant who comes along.
Process of Recruitment:
Recruitment Process Passes through the Following Stages:
(i) Searching out the sources from where required persons will be available for recruitment. If
young managers are to be recruited then institutions imparting instructions in business
administration will be the best source.
(ii) Developing the techniques to attract the suitable candidates. The goodwill and reputation
of an organisation in the market may be one method. The publicity about the company being
a professional employer may also assist in stimulating candidates to apply.
(iii) Using of good techniques to attract prospective candidates. There may be offers of
attractive salaries, proper facilities for development, etc.
(iv) The next stage in this process is to stimulate as many candidates as possible to apply for
jobs. In order to select a best person, there is a need to attract more candidates.

Sources of Recruitment:
The eligible and suitable candidates required for a particular job are available through various
sources. These sources can be divided into two categories-

Internal Sources of Recruitment:

1. Promotions:
The promotion policy is followed as a motivational technique for the employees who work
hard and show good performance. Promotion results in enhancements in pay, position,
responsibility and authority. The important requirement for implementation of the promotion
policy is that the terms, conditions, rules and regulations should be well-defined.

2. Retirements:
The retired employees may be given the extension in their service in case of non-availability
of suitable candidates for the post.

3. Former employees:
Former employees who had performed well during their tenure may be called back, and
higher wages and incentives can be paid to them.

4. Transfer:
Employees may be transferred from one department to another wherever the post becomes
vacant.

5. Internal advertisement:
The existing employees may be interested in taking up the vacant jobs. As they are working
in the company since long time, they know about the specification and description of the
vacant job. For their benefit, the advertisement within the company is circulated so that the
employees will be intimated.
External Sources of Recruitment:

1. Press advertisement:
A wide choice for selecting the appropriate candidate for the post is available through this
source. It gives publicity to the vacant posts and the details about the job in the form of job
description and job specification are made available to public in general.

2. Campus interviews:
It is the best possible method for companies to select students from various educational
institutions. It is easy and economical. The company officials personally visit various
institutes and select students eligible for a particular post through interviews. Students get a
good opportunity to prove themselves and get selected for a good job.

3. Placement agencies:
A databank of candidates is sent to organizations for their selection purpose and agencies get
commission in return.

4. Employment exchange:
People register themselves with government employment exchanges with their personal
details. According to the needs and request of the organization, the candidates are sent for
interviews.

5. Walk in interviews:
These interviews are declared by companies on the specific day and time and conducted for
selection.

6. E-recruitment:
Various sites such as jobs.com, naukri.com, and monster.com are the available electronic
sites on which candidates upload their resume and seek the jobs.

7. Competitors:
By offering better terms and conditions of service, the human resource managers try to get
the employees working in the competitor’s organization.

Selection
The selection process can be defined as the process of selection and short listing of the right
candidates with the necessary qualifications and skill set to fill the vacancies in an
organisation. The selection process varies from industry to industry, company to company
and even amongst departments of the same company.

Selection
Definition: The Selection is the process of choosing the most suitable candidate for the
vacant position in the organization. In other words, selection means weeding out unsuitable
applicants and selecting those individuals with prerequisite qualifications and capabilities to
fill the jobs in the organization.
Most often, the selection and recruitment are used interchangeably but however both have
different scope. The former is a negative process that rejects as many unqualified applicants
as possible so as to hire the right candidate while the latter is a positive process that attracts
more and more candidates and stimulates them to apply for the jobs.

Selection Process
Every organisation creates a selection process because they have their own requirements.
Although, the main steps remain the same. So, let’s understand in brief how the selection
process works.

1. Preliminary Interview

This is a very general and basic interview conducted so as to eliminate the candidates who are
completely unfit to work in the organization. This leaves the organization with a pool of
potentially fit employees to fill their vacancies.
2. Receiving Applications
Potential employees apply for a job by sending applications to the organization. The
application gives the interviewers information about the candidates like their resume, work
experience, hobbies and interests.
3. Screening Applications
Once the applications are received, they are screened by a special screening committee who
choose candidates from the applications to call for an interview. Applicants may be selected
on special criteria like qualifications, work experience etc.
 4. Employment Tests
Before an organization decides a suitable job for any individual, they have to gauge their
talents and skills. This is done through various employment tests like intelligence
tests, aptitude tests, proficiency tests, personality tests etc.

5. Employment Interview
The next step in the selection process is the employee interview. Employment interviews are
done to identify a candidate’s skill set and ability to work in an organization in detail.
Purpose of an employment interview is to find out the suitability of the candidate and to give
him an idea about the work profile and what is expected of the potential employee. An
employment interview is critical for the selection of the right people for the right jobs.

6. Checking References
The person who gives the reference of a potential employee is also a very important source of
information. The referee can provide info about the person’s capabilities, experience in the
previous companies and leadership and managerial skills. The information provided by the
referee is meant to kept confidential with the HR department.

7. Medical Examination
The medical exam is also a very important step in the selection process. Medical exams help
the employers know if any of the potential candidates are physically and mentally fit to
perform their duties in their jobs. A good system of medical checkups ensures that the
employee standards of health are higher and there are fewer cases of absenteeism, accidents
and employee turnover.
8. Final Selection and Appointment Letter
This is the final step in the selection process. After the candidate has successfully passed all
written tests, interviews and medical examination, the employee is sent or emailed an
appointment letter, confirming his selection to the job. The appointment letter contains all the
details of the job like working hours, salary, leave allowance etc. Often, employees are hired
on a conditional basis where they are hired permanently after the employees are satisfied with
their performance.

Difference between Recruitment and Selection

Basis Recruitment Selection
Meaning It is an activity of establishing contact It is a process of picking up more
between employers and applicants. competent and suitable employees.
Objective It encourages large number of It attempts at rejecting unsuitable
Candidates for a job. candidates.
Process It is a simple process. It is a complicated process.
Hurdles The candidates have not to cross over Many hurdles have to be crossed.
many hurdles.
Approach It is a positive approach. It is a negative approach.
Sequence It precedes selection. It follows recruitment.
Economy It is an economical method. It is an expensive method.
 Time Less time is required. More time is required.
Consuming

Selection Tests- Meaning and Definition

The selection tests aim at measuring such skills and abilities in a worker that are decided by
job analysis to be essential for successful job performance. A test is an instrument designed to
measure selected psychological factors.

The basic assumption underlies the use of tests in personnel selection is that the individuals
are different in their job-related abilities and skills and that these skills can be adequately and
accurately measured for comparison. A great number of human abilities are complex and
interrelated. Hence, these have to be understood in association with each other.
Selection tests are defined as under:

Cronbach defines it as, “A test is a systematic procedure for comparing the behaviour of two
or more persons.”
Milton M. Blum opines, “A test is a sample of an aspect of an individual’s behaviour,
performance and attitude.”

Selection Tests-5 Important Categories of Selection Test

Tests used in selection can be classified into five categories, namely:
1. Achievement,
2. Aptitude,
3. Interest,
4. Personality and
5. Intelligence tests.

1. Achievement Tests:
Achievement tests measure the job knowledge of the applicants in the areas such as
marketing, HR and economics. When an applicant claims to know something, an
achievement test is given to measure how well he/she knows it. It is for this reason that
achievement tests are also known as proficiency tests or performance tests.

Achievement tests are a refinement of the work sample technique and are used to measure
what the applicant actually can do and what tasks he/she can perform right now. Adaptability
tests, abstract reasoning tests, Stanford-Binet Scales, Miller Analogies Test and Purdue test
for machinists and machine operators are some of the examples of such tests.

Trade tests are the most common type of achievement tests given, for example, in a typing
test, matter to be typed is provided to the candidate and the time taken by the candidate in
typing that matter as also the errors made by him/her are noted down, and thus his/her
proficiency in typing is measured.
Similar tests are available in shorthand, calculating machines, operating calculators, simple
mechanical equipment, dictating and transcribing apparatus.
2. Aptitude Tests:
Aptitude tests are also known as potential ability tests and specific cognitive tests and are
used to measure the latent ability of a candidate to learn a given job if he/she is given the
required training. Aptitude tests have special significance where the new recruit has little or
very less experience along the lines of the job opening.

Specific aptitude tests have to be designed for jobs that require mechanical, clerical, musical,
academic, linguistic, motor capacities and abilities. Bennett Test of Mechanical
Comprehension and the Stenquist Mechanical Aptitude Test are some of the examples of
popular mechanical aptitude tests.

Aptitude tests for clerical jobs lay emphasis mainly on arithmetic, handwriting, spellings,
vocabulary, checking and so on. Aptitude tests help in detecting peculiarities or defects in the
applicant’s sensory or intellectual capacity.

3. Interest Tests:

Interest in a job or task contributes to success on the job. A person interested in his/her job is
likely to do better than one who is indifferent or uninterested. Interest tests have been
designed to discover a person’s field of interest and to identify the kind of work that will
satisfy him/her. They are in a sense inventory of the likes and dislikes of the people of some
occupations.

Although the interest tests have been mostly standardised, some organisations have
developed tests to suit their own requirements, especially when there is a continuing demand
for a large number of new personnel for a single job. Such developed tests are also known as
‘Tailor- made Tests’.

Most widely used interest scales are ‘Kuder Preference Record’, ‘Strong Vocational Interest
Blank’, mechanical reasoning tests and so on.

4. Personality Tests:
These tests aim at measuring the basic make-up or characteristics of an individual. They
assess his/her introversion motivation, emotional reactions, emotional maturity, stability,
mood, value system, ability to adjust, interpersonal relations, self-image, self- confidence,
ambition, tact, optimism, decisiveness, sociability, objectivity, patience, fear, distrust,
suspicion, judgement, dominance, impulsiveness, integrity, stability and so on. Industrial
psychologists usually emphasize the ‘big five’ personality dimensions as they apply to
personnel testing.

According to Jucius Michael, “An interview is a face to face, oral, observational and personal
appraisal method”. Usually, it is used as a means of getting the required information from the
candidate. It also involves giving information that will help the applicant make up his mind
about the company.
Interview in HRM-Main Objectives Used in Personnel Selection

When used in personnel selection, some of the objectives of interview are:

1. To get an opportunity to judge on applicant’s qualifications and characteristics as a basis
for sound selection and placement. On the basis of the information obtained about the family
background, training, educational and other qualifications, personality, characteristics,
aptitude, interests and skills of an applicant — the interviewer tries to arrive at as impartial a
decision as possible.

He may decide to hire him, to reject him or to pass him on to another step in the interview if
it is not the final one. This type of interview is referred to as selection or placement interview.

2. To give an applicant essential fact about the job and the company (nature and hours of
work, medical requirements, opportunities for advancement, special hazards, employee
benefits and services, company policies, etc.) in order to enable him to decide intelligently
whether he should or should not accept the employment. The interview is generally a non-
reciprocal relation between the individuals concerned.

3. To establish a rapport, or a feeling of mutual understanding and confidence, between the

personnel department and the applicant who is to be employed.

4. To promote goodwill towards the company whether the interview culminates in

employment or not. The goodwill is generated by unfailing courtesy to the interviewees, by
providing them with vocational literature, pamphlets, by offering constructive suggestions,
and by showing interest in them.

5. Interviewing is an invaluable tool of disciplinary action, grievance handling and relations

with unions.

6. To solve problems such as when counseling a student conferring with a career guidance
person or discussing a grievance with a superior. Such interviews are information-gathering
or fact findings meetings; but their main purpose is to solve a problem. Such interviews are
also termed as counseling interviews.

7. To get a real feel of the candidate, observe his appearance, mannerisms, confidence, and
typical ways of reacting to questions of various sorts.

8. To find out why an employee is leaving the company and seeking job elsewhere. Such
interviews are called exit or termination interviews.

9. Despite the fact the interviews are often regarded as costly, inefficient and non-valid
procedure for selection purposes, they are widely used because the psychological tests and
application blanks to not give correct information about the candidate as a real flesh and
blood human being.
Induction in HRM

When a new employee reports to duty, he will be new to the organization and to its policies,
rules and existing employees also. New employee will be a stranger to the work, place and to
the entire environment. Unless he is familiar to the organization, he cannot work with
confidence and pleasure. Therefore, there is a necessity of introduction of an employee to the
organization which is technically called Induction.

Induction means introduction of a new employee to the job and the organization. It 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. It is a
welcoming process to make him feel at home and generate in him a feeling of belongingness
to the organization. In the process of induction, the new comer is explained his duties and
responsibilities, company rules, policies and regulations so as to make him familiar to the
organization.

Objectives of HRM
The main object of induction is to make the new employee feel at home and develop a sense
of pride in the organization and commitment to the job.

The following are the some of the other important objectives:

(i) To help the new employee to develop a close and cordial relation with the existing
employees.
(ii) To give the new employee necessary information such as – location of the different
building, company rules, leave rules, rest periods etc.
(iii) To help the new employee overcome his natural shyness and nervousness in meeting the
new people in the organization.
(iv) To develop a sense of belongingness and loyalty among new employees.
(v) To help the employees know the different facilities and opportunities available in the
organization.
(vi) To help the new employees to minimize the “reality shock” that they may undergo after
reporting to duty.

Placement – Meaning and Definition

When the candidate is selected for a particular post and when he reports to duty, the
organization has to place him or her in the job for which he or she is selected which is being
done through placement. Placement is the act of offering the job to a finally selected
candidate. It is the act of finally assigning the rank and responsibility to an employee,
identifying him with a particular job.

In the words of Pigors and Myers, “Placement is the determination of the job to which an
accepted candidate is to be assigned and his assignment to that job. It is a matching of what
the supervisor has reason to think he can do with the job demands. It is a matching of what he
imposes in strain, working conditions and what he offers in the form of pay roll,
companionship with others, promotional possibilities etc.”
A well-placed employee will be an asset to the organization. Proper placement makes the
employee happy and reduces absenteeism and labour turnover. Proper placement increases
morale and efficiency of the employees and builds a good relation with the employer.

Increased production, improved quality of the product, regularity in work and attendance
indicate proper placement of an employee. It should be noted that, supervisor or an executive
should always keep a watch on newly recruited employee to ensure whether an employee is
properly placed or misplaced.

Placement –Importance

1. If the employees are properly placed, they will enjoy their work and organisation will not
have to suffer the problem of employee turnover.

2. If employees don’t like their work, they start making excuses from the job and remain
absent. Effective placement will keep the absenteeism rate low.

3. Morale of workers increases because they get the work of their choice, if correctly placed.

4. Workers will work attentively and safety of workers will be ensured and lesser accidents
will happen.

5. Workers will be satisfied with their jobs and there will be no reasons for disputes, so
human relations will improve.

6. Through proper placement, misfit between the job and person can be avoided.

7. Efficient and effective performance of individual tasks will ensure the achievement of
organizational goals.

8. Productivity i.e., ratio of output to input increases as wastage and abnormal losses
decrease.
Placement should be done keeping into view the job and social, psychological & emotional
needs of person.

PROMOTION

Promotion means the advancement of an employee to a higher job involving more work,
greater responsibility and higher status. It may or may not be associated with the increment in
salary.

Promotion is one of the best forms of incentives and it provides higher responsibilities, better
salary, high morale and job satisfaction to the employees. Practically, all the employees
aspire for career advancement and promotion is an advancement of the employee in the
organisational hierarchy.

Edwin B. Flippo, “A promotion involves a change from one job to another that is better in
terms of status and responsibilities.”
PROMOTION FEATURES-
a. Promotion is a reward for consistently good performance of the employee.
b. It enhances employee morale and job satisfaction.
c. It involves higher responsibilities, better job status and increase in salary.
d. Provides opportunities for career advancement.
e. Promotion is beneficial to both employees as well as organisation. It motivates, increases
the involvement and commitment of the employees, leading to increased productivity.

There are number of objectives for which organizations promote their employees:
(i) For the optimum utilization of the employees’ skill, knowledge at the appropriate level
in the organizational hierarchy resulting in organizational effectiveness and employee
satisfaction.

(ii) For the development of competitive spirit and inculcate the enthusiasm in the employees
to acquire the skill, knowledge etc. needed for the higher level jobs.

(iii) To develop competent internal source of employees ready to take up jobs at higher
levels in the changing environment.

(iv) For the promotion of a feeling of content with the existing conditions of the company
and a sense of belongingness to the company.

(v) To promote employee’s self-development and be ready for the promotion as and when
their turn of promotion occurs.

(vi) To promote interest in training, development programmes and in team development

areas.

(vii) To get rid of the problems created by the leaders of workers’ unions by promoting them
in the officers’ levels where they are less effective in creating problems

Demotion of Employees: Meaning, Types of Demotion

A demotion is a reduction in rank, often accompanied by lower pay and status.

There are many situations in which demotion might occur; any kind of rank systems like a
police department or military, for example, uses demotions as a disciplinary tool, while some
employees are at risk due to reorganization or substandard work.
Most people view a demotion as a punishment since it implies that the individual was
incapable of performing at a higher rank. It is opposite to promotion, an elevation in rank or
status
Demotion occurs when an employee moves from one job to another that is lower in pay,
responsibility, and status. Demotion seldom holds positive outcomes for the individual.

Usually, they are associated with discipline; the individual is demoted for poor job
performance or inappropriate behavior such as excessive absenteeism or incompetence.
Demotion may also be due to organizational factors such as reduction of the workforce,
market condition, change of technology and production method, and change of product mix.
What is Demotion?
Demotion is just the opposite of promotion. It refers to the lowering down of the status,
salary, and responsibilities of an employee. Demotion is generally used as a punitive measure
and is a preliminary step to discharge. The usefulness of demotion as a punitive measure is
questioned on many grounds.

Losing pay over a period of time is a long form of constant humiliation.

Moreover, a demoted employee will be always dissatisfied and his dissatisfaction may spread
to co-workers affecting adversely morale, productivity, and discipline of the work-force.

Advantages of demotion
Telling an employee that he is being demoted to a different job is rarely a positive experience
for a manager.
However, employee demotions are usually intended to benefit the company and may be even
the employee.
Good managers weigh the benefits of demoting employees against the possible psychological
effects on the worker and the organizational culture.

Frances Burks has pointed out the benefits of demotion, which are listed below:
Common benefit employers seek with demotions is getting an employee to quit as opposed to
firing him. Some managers use this tactic to avoid the conflict of telling someone he is fired.
Another financial benefit of demoting employees is a reduction in salary. Typically, a
demotion means the employee works in a lower-paying position. This can save the company
a substantial amount. In some cases, a demotion results because the company believes it is
overpaying a worker for the production he generates.

Employee demotion may involve fewer risks of lawsuits or other grievances than termination.
One of the more positive benefits of employee demotions is the opportunity to develop the
employee through more training and coaching. Sometimes, employees take a position, they
are not adequately prepared to handle. A demotion may prevent burnout or employment
separation. If the employee is demoted to a position he is most comfortable with, he can work
toward additional training to eventually grow into the position from which he was demoted.

A demotion could be the best option for keeping an employee who has potential but needs
more training and experience. Sometimes companies grow faster than anticipated, and
employees get pushed into roles that they don’t want or aren’t ready to handle. An employee
who has the potential to excel in the company may respond more favorably to a demotion if
he is provided with an opportunity for additional job training. After all, the employee may
realize he’s in over his head and unfit for his current position.

Sometimes a company’s structure change and demotions are necessary because departments
are phased out and fewer high-level positions are needed. Such changes can be an
opportunity for improvement for all involved as people assume new responsibilities to take
the company in a different direction. Some people won’t view the changes or demotions as an
opportunity and they’ll quit. Yet the people who remain may be a more motivated bunch who
is excited about the company’s new direction.
One problem with demotion is that the demoted employee may become de-motivated or
worse, openly antagonistic toward those responsible for the demotion decision.
Sometimes, demotions are intended to be kindly alternative to firing an employee who cannot
do his present job. Rather than sever the employment relationship, a decision is made to
retain the employee, but at a lower level of responsibility.
All rules and regulations are to be clearly laid down in writing which includes a clause that
violation of the same may result in demotion.

TRANSFER IN HRM-DEFINITION
Transfer is a process of placing employees in positions where they are likely to be more
effective or where they are to get more job satisfaction. In transfers, there is no change in the
responsibility, designation, status or salary.

It is a process of employee’s adjustment with the work, time and place. Transfer may also be
made as a disciplinary action.

In Government service, employees are transferred due to administrative reasons. Transfer is a

movement of the employee from one job to another job or some other place without change
in status, responsibilities and salary.

It is the movement of an employee from one job to another without involving substantial
change in his duties, responsibilities required skill, status and compensation.
In this definition the terms substantially equal means that the general nature of duties and
responsibilities remain the same through these may be a change in pay. It is a horizontal shift
of an employee from one place to another.

According to Edwin Flippo, a transfer, “is a change in job where the new job is substantially
equal to the old in terms of pay, status and responsibilities

Transfer may be made to achieve the following objectives:

1. To meet or fulfill organizational needs – To fulfill organisational needs arising out of
change in technology, volume of production, production schedule, quality of product etc., an
employee may have to be transferred.

2. To satisfy employee needs – Sometimes employees themselves demand transfer due to

their personal problems like ill health, family problem native attractiveness or non-co-
operation from boss or fellow workers. To satisfy their needs employees may have to be
transferred.

3. To adjust the workforce – Employees for excess or surplus in one department may have to
be transferred to other department or section where there is shortage of workforce.

4. To reduce monotony and to make the employees versatile – If the employees have stayed
on a job continuously for a longer duration, to reduce their monotony and to widen their
knowledge and skill, employees are transferred.

5. For effective use of employees – If the management feels that the service of the able
employee is to be used in different branches of the same organisation, then such employees
will have to be transferred.
6. To punish Employees – If employees are found indulged in undesirable activities like
fraud, bribery, duping etc., such employees are transferred to remote places as a disciplinary
action.

7. To give the relief to the employees – Employees who are overburdened and doing
complicated or risky work for long period are relieved from such work by transferring such
employees to a place of their choice.

8. To improve employees background by placing them in different jobs of various

departments and units.

Top 5 Forms of Employee Separation

Various forms of employee separation are discussed now briefly:

As studied in the previous section, the function of human resource management starts with
procuring employees from the society for their use in the organization. Hence, it stands
logical to return those employees to the same society when they are no more required in the
organisation.

In this section, we shall review the prominent processes of separation.

Separation is a situation when the service agreement of an employee with his/her organisation
comes to an end and employee leaves the organization. In other words, separation is a
decision that the individual and organisation part from each other.

In practice, employees may be separated, or say, may move out of organisation for a variety
of reasons like retirement, resignation, suspension, discharge, dismissal and layoff. Be
whatever the types/forms of separation, separation becomes important and sometimes
traumatic event for both the employee and organisation’.

1. Retirement:
Retirement is the major cause of separation of employees from the organisation. It can be
defined as the termination of service of an employee on reaching the age of superannuation.
For example, at present the superannuation age for the teachers working in the Central
Universities is 62 years and in case of some state government employees, it is 58 years. Some
people characterize retirement as ‘role less role’.
Retirement may be of two types:
(i) Compulsory Retirement:
This is the retirement when employees retire compulsorily from service on attaining the age
of superannuation. Some organisations like universities may have a policy to reappoint
professionals and others who possess rare skills and expertise for a limited time even after
attaining superannuation.

(ii) Voluntary Retirement:

When organisations give option to its employees to retire even before superannuation, it is
called ‘voluntary retirement’. This scheme is termed as, ‘voluntary retirement scheme
(VRS)’. Of late, in their efforts to downsize the employees, organisations by providing
certain incentives, are trying to encourage their employees to opt for voluntary retirement.
Employees in return of voluntary retirement are given lumpsum payment. This type of
retirement is also called ‘Golden Hand Shake’.
Retirement from service is a significant milestone in the life of an employee. Post-retirement
life requires a great deal of adjustment on the part of (retired) employee. Here, organisation
has a major role in facilitating smooth transition from job state to jobless stage.

Against this background, some organisations like Citi Bank and Bank of America organise
counseling sessions and also offer investment related services. Some organisations also
extend medical and insurance benefits to the retirees.

2. Resignation:
Resignation is termination of service by an employee by serving a notice, called ‘resignation’
on the employer. Resignation may be voluntary or involuntary. A voluntary resignation is
when an employee himself/herself decides to resign on the grounds of ill health, marriage,
better job prospects in other organisations, etc.

Resignation is considered involuntary or compulsory when the employer directs the

employee to resign on grounds of duty and indiscipline or face the disciplinary action.
However, in case of involuntary resignation, a domestic enquiry should be conducted before
asking the employee to resign. This is because otherwise the affected employee can go to the
union or court of law and complain that he was asked to resign under Stress.

While some resignations may be advisable and beneficial for the organisation to rectify the
mistakes committed in hiring the employees, excessive turnover may be alarming as well. In
such case, it is appropriate for the organisation to trace out the reasons behind resignations by
conducting ‘exit interviews’ with the employees who are leaving the organisation. Exit
interviews may enable the organisation to curb the employee turnover before it reaches to the
proportion of exodus.

Death comes without call. Some employees may die in service before attaining the age of
superannuation. When death occurs due to occupational hazards, the employee gets
compensation as per the provisions of Workmen’s Compensation Act, 1923.
Some organisations have provisions to give employment to the spouse/child or dependent of
an employee who dies in service. The normal separation of employees from an organisation
owing to resignation, retirement and death is known as ‘attrition’.

3. Layoff:
Layoff implies denial of employment to the employees for reasons beyond the control of
employer. Breakdown of machinery, seasonal fluctuations in demand, shortage of power, raw
materials, etc. are the examples of reasons leading to layoff.

According to Section 2 (KKK) of the Industrial Disputes Act, 1947, lay off is defined as “the
failure, refusal or inability of an employer, on account of shortage of coal, power or raw
materials or accumulation of stocks or breakdown of machinery or by any other reason, to
give employment to a workman whose name appears on the muster rolls of his industrial
establishment and who has not been retrenched”.

It is important to note that the employee-employer relationship does not come to an end but is
suspended for some time Layoff may be temporary. In seasonal Industries like mines, sugar,
etc., lay off occurs routinely. Layoff also may occur for an indefinite time. When layoff
becomes a permanent one, it is called ‘retrenchment’.
According to the Section 25© of the Industrial Disputes Act, 1947, a laid off worker is
entitled to compensation equal to 50 per cent of the basic wages and dearness allowance that
would have been payable to him had he not been laid off.

However, the worker needs to satisfy the following conditions to be entitled to the
compensation:
(i) Should not be casual worker
(ii) His name should appear in the muster roll of the establishment.
(iii) Have completed not less than one year of continuous service.

4. Retrenchment:
Retrenchment means permanent termination of an employee’s services for economic reasons.
Retrenchment occurs on account of surplus staff, poor demand for products, general
economic slowdown, etc. It’s worth noticing that termination of services on account of
retirement, winding up of a business, illness or on disciplinary grounds does not constitute
retrenchment.

Retrenchment is mainly seen in plantations, agricultural services, forestry and logging, food
products, manufacture of machinery and cotton textile. The reasons pointed out behind
retrenchment were mainly financial stringency and lack of demand for their products.
The Industrial Disputes Act, 1947 makes it obligatory for organisations employing 100 or
more employees to give three months’ notice to the employee to be retrenched and also seek
prior approval of the Government.

In other organisations, employee must be served one month’s prior notice in writing
indicating the reasons for retrenchment. He/she should be paid compensation equal to 15
days’ wages for every completed year of service. As and when there is need for employing
people in future, the retrenched employee must be given preference.

5. Dismissal:
Dismissal is termination of service of an employee as a punitive measure. This may occur
either on account of unsatisfactory performance or misconduct. Persistent failure on the part
of employee to perform up to the expectations or specified standard is considered as
unsatisfactory performance. Wilful violation of rules and regulation by the employee is
treated as misconduct. Dismissal is a drastic step seriously impairing the earnings and image
of the employee.

Therefore, dismissal as a measure should be resorted to with great care and caution. It must
be justified and duly supported by the just and sufficient cause. Before an employee is
dismissed, he must be served advance notice to explain his position. The reasons for
dismissal must be clearly made known to the employee.
MODULE IV
Training: Meaning, Definition and Types of Training

Training constitutes a basic concept in human resource development. It is concerned with

developing a particular skill to a desired standard by instruction and practice. Training is a
highly useful tool that can bring an employee into a position where they can do their job
correctly, effectively, and conscientiously. Training is the act of increasing the knowledge
and skill of an employee for doing a particular job.

Definition of Training:
Dale S. Beach defines training as ‘the organized procedure by which people learn knowledge
and/or skill for a definite purpose’. Training refers to the teaching and learning activities
carried on for the primary purpose of helping members of an organization acquire and apply
the knowledge, skills, abilities, and attitudes needed by a particular job and organization.
According to Edwin Flippo, ‘training is the act of increasing the skills of an employee for
doing a particular job’.

Need for Training:

Every organization should provide training to all the employees irrespective of their
qualifications and skills.
Specifically, the need for training arises because of following reasons:

1. Environmental changes:
Mechanization, computerization, and automation have resulted in many changes that require
trained staff possessing enough skills. The organization should train the employees to enrich
them with the latest technology and knowledge.

2. Organizational complexity:
With modern inventions, technological upgradation, and diversification most of the
organizations have become very complex. This has aggravated the problems of coordination.
So, in order to cope up with the complexities, training has become mandatory.

3. Human relations:
Every management has to maintain very good human relations, and this has made training as
one of the basic conditions to deal with human problems.

4. To match employee specifications with the job requirements and organizational needs:
An employee’s specification may not exactly suit to the requirements of the job and the
organization, irrespective of past experience and skills. There is always a gap between an
employee’s present specifications and the organization’s requirements. For filling this gap
training is required.

5. Change in the job assignment:

Training is also necessary when the existing employee is promoted to the higher level or
transferred to another department. Training is also required to equip the old employees with
new techniques and technologies.
Importance of Training:

Training of employees and managers are absolutely essential in this changing environment. It
is an important activity of HRD which helps in improving the competency of employees.
Training gives a lot of benefits to the employees such as improvement in efficiency and
effectiveness, development of self-confidence and assists everyone in self-management.

The stability and progress of the organization always depends on the training imparted to the
employees. Training becomes mandatory under each and every step of expansion and
diversification. Only training can improve the quality and reduce the wastages to the
minimum. Training and development is also very essential to adapt according to changing
environment.
The importance of training can be discussed under the following heads

(i) Advantages of standardization:

The methods of production are standardised through training. All trained employees follow
same methods and techniques of production and hence there can be little variation in output
and standards produced by different employees. By using standardised methods, the quality
of output would be increased.

(ii) Increasing organisational stability and flexibility:

Training provides opportunities for the employees to learn an acquire skills to work in several
departments in an organisation. Training also results in low rate of labour turnover which
means high consistency in organisations in retaining people for long period of time.

(iii) Heightened morale:

Training results in increased morale of employees because of reduction in dissatisfaction at
work, reduced complaints, and reduced absenteeism, and increased interest in work during
the post-training period. Heightened morale results in increased loyalty to the organisation.

(iv) Reduced supervision and direction:

A trained employee knows what job he has to do and how to do that job and requires no
guidance and supervision. Supervisors can devote their time to solve more important
problems rather than concentrating on constant and regular supervision.

(v) Economical use of resources:

A well-trained employee makes better and economical use of available resources (materials,
machines, and equipment). Optimum utilization of resources results in reduced cost on
production and higher profits.

(vi) Increase in productivity:

Training brings about increase in quantity and quality of goods produced resulting in high
productivity.

(vii) Future manpower needs:

Through proper training employees become eligible for promotion handling more
responsibility. An expanding and growing organization wishes to train the existing employees
so as to place them in higher positions in future.
(viii) Better industrial relations:
Training provides a platform for maintaining smooth industrial relations. Employees develop
a feeling that organisation is taking care and interest in them through training programmes.

(ix) Reduced accidents at workplace:

Untrained people are bound to commit errors while handling machinery and equipment
resulting in incidents at workplace. Training eliminates (reduces) the possibility of incident
due to mishandling of equipment, machinery, and other resources of the organisation.

Proper training and development programmes ensure safety in handling the organisation’s
resources which results in reduction in the accident rates.

(x) Reduced learning time:

An untrained worker consumes a lot of time to learn the methods, technique of doing the
work. Skilled and trained employees reach the acceptable level of performance within no
time. Therefore, training results in reduced learning time.

Types of Training:
Various types of training can be given to the employees such as induction training, refresher
training, on the job training, vestibule training, and training for promotions.
Some of the commonly used training programs are listed below:

1. Induction training:
Also known as orientation training given for the new recruits in order to make them
familiarize with the internal environment of an organization. It helps the employees to
understand the procedures, code of conduct, policies existing in that organization.

2. Job instruction training:

This training provides an overview about the job and experienced trainers demonstrates the
entire job. Addition training is offered to employees after evaluating their performance if
necessary.

3. Vestibule training:
It is the training on actual work to be done by an employee but conducted away from the
work place.

4. Refresher training:
This type of training is offered in order to incorporate the latest development in a particular
field. This training is imparted to upgrade the skills of employees. This training can also be
used for promoting an employee.

5. Apprenticeship training:
Apprentice is a worker who spends a prescribed period of time under a supervisor.
Characteristics of Training

Whether you’re training new hires or building the skill sets of existing employees, the quality
of your training program will have a major impact on the outcome. An effective program can
lead to increased productivity, customer satisfaction, and more; an ineffective one, however,
can cost you time and money without providing any return on investment.

There are steps you can take to ensure that your employee training program falls into the
former category. Here are the qualities your program needs to thrive:

1 It Should Be Needs-Based
While learning for learning’s sake can be fun, it’s not the best use of company time or
money. You should always begin by identifying a need. For example, your company is
changing its time-tracking system, and all employees need to become familiar with the new
system before its launch. By identifying a need, you create a solid, tangible goal, and the
training program develops a specific focus.

2 It Should Align with Company Values

To both ensure managerial support and contextualize the lessons contained within, your
training program should be in sync with the company and what it values. How does it fit into
the company culture? Does it relate to both long- and short-term goals? Is there a
demonstrable positive impact to the company, its operational efficiency, and its bottom line?
These are the questions you need to answer at the outset.

3 It Needs Assessment Metrics

After assessing and identifying your company’s needs and building a program that aligns
with company values, the next step is to ensure that you can measure the program’s success.
Quantifiable performance metrics to evaluate the effectiveness of your program are an
absolute must, especially if the program is meant to be recurring. What is the benchmark for
success? Whether it’s increased sales, decreased waste, streamlined communication, or any of
a multitude of outcomes, you need to be able to illustrate that there has been a positive return
on the investment of not just money but also time and resources. When it comes to tracking
money well spent, resource planning is crucial.

4 It Should Be Adaptable
Having easily-quantifiable metrics can also help indicate if a change is needed. Consider the
phrase, “Nothing is written in stone.” While this old adage typically refers to the idea of the
future being within our control, you should take it to heart in a different way — that your
training methods should be flexible and open to change and growth. Sometimes, along the
way, you’ll find that the methods and tools you are using aren’t the most effective ones, and
you can dramatically improve your results by being open to change.

5 It Should Be Engaging
Little in life feels worse than putting your time and effort into something, only to discover
that people aren’t paying any attention to it. Employee training won’t be very effective at all
if your employees are tuned out and disengaged from the lessons at hand. Creating lessons
that are hands-on or involve trainee participation, as opposed to just reciting information and
hoping it sticks, are a good start.
6 It Should Be Immediately Relevant
Speaking of learning retention, did you know that most knew things learned will be forgotten
if not practiced in a relatively short time frame? By providing training and then putting that
training to use in real-world applications, you are helping to reinforce the lessons. If
opportunities to put the training to use do not arise organically, you can assign specialized
tasks designed to draw on the new knowledge in a real-world context to help make sure that
the lessons stick.

7 It Needs an Effective Leader

Last but certainly not least, an effective training program should always have a training
manager who brings great things to the table. This is a person who takes the time to
understand a business inside and out, who can expertly identify your needs and relate them
back to the bigger picture. They’re someone who can demonstrate results, who’s adaptable,
and most importantly, someone who’s passionate about learning. After all, to be a good
teacher is to always be learning yourself. Other qualities include effective communication
and social skills, the ability to set clear goals and create strategies for meeting them, and
being able to think outside the box. If you're wondering who may be a good leader, learn

OBJECTIVES OF TRAINING

The general objectives of training are as follows:

1. To Increase Productivity of Employees:

Training helps in developing the capacities and capabilities of the employees-both new and
old, by upgrading their skills and knowledge so that the organization could gainfully avail
their services for higher grade professional, technical, sales or production positions from
within the organization. In case of new employees, training aims to provide them with basic
knowledge and skill they need for an intelligent performance of their specific tasks.

2. To Remain Competitive in the Market:

To tackle the immensely growing competition in the target market, it is important for an
employer to increase the productivity of its workers while reducing the cost of production of
the products. Training, therefore, aims to bring about efficiency and effectiveness in an
organization to enable it to remain competitive in a highly competitive market situation and
for the achievement of organizational goals.

3. To Change Attitude of the Workers:

Training not only provides new knowledge and job skills to employees, but also brings about
a change in their attitude towards fellow workers, supervisor and the organization. It
increases job satisfaction among employees and keeps them motivated. It gives them security
at the workplace and as a result, labour turnover and absenteeism rates are reduced. It also
develops in them self-consciousness and a greater awareness to recognize their
responsibilities and contribute their very best to the organization.

4. To Enable Workers to Adapt Quickly to Changes:

Technology is changing at a fast pace. Technological changes like automation and
development of highly mechanized and computer-oriented systems, threaten the survival of
dynamic companies by creating new problems, new methods, new procedures, new
equipment’s, new jobs, new skills and knowledge, new product and services etc.
In such a situation, the employees may find themselves helpless to adapt to the changes and
may feel frustrated and compelled to leave their jobs. Thus, training acts as a continuous
process to update the employees in the new methods and procedures and make them efficient
in handling advanced technology.

5. To Mitigate the Risk of Accidents:

Trained workers can handle the machines safely. They also know the use of various safety
devices in the factory. Thus, they are less prone to industrial accidents.

6. To Reduce Wastage of Time and Resources:

Training aims at making employees efficient in handling materials, machines and equipment
and thus to avoid wastage of time and resources. It also helps in imparting new skills among
the workers systematically so that they may learn quickly. If the workers learn through trial
and error, they will take a longer time and even then, may not be able to learn right methods
of doing work.

7. To Provide Growth Opportunities to Existing Employees:

Sometimes, it may not be possible for the management to fill in higher work positions from
outside. Under such conditions, the apprenticeship programmes aiming at improving the
skills of the present employees come to the aid of the company by make available their
requirements of the personnel from within the organization. This reduces the need for
recruiting people from outside and also improves the morale of the existing employees.

8. To Make the Management Effective:

One of the primary objectives of training and development process is to give rise to a new
and improved management which is capable of handling the planning and control without
any serious problem. Knowledge and experience gathered through training enables them to
handle the tough situations and confusing realities, thus opening the way for bigger and better
opportunities for business. It can also be used for strengthening values, building teams,
improving inter- group’s relations and quality of work life.

LIMITATIONS OF TRAINING TRAINI

Effect On Concentration: When the employees work consistently on their tasks, they do not
lose concentration of the work. But sometimes they work and do training together. Which
lose their productivity and concentration as well.

Increases Stress On Employees: In order to keep the staffs up to date with the latest
technology and trends, training employees attend hours and hours training programs which
makes them stressed.

Long Run Process: In order to make employees updated companies give months of training.
When the employees became trained the technology that they learned might be old.
Too Much Of Theory: Training of some departments is full of theories than practical’s. These
kinds of lecture make employees learn tough. Because they are unrealistic and hard to use.
Trainees Lose Their Interest: At times of training sessions which lead for long hours,
employees are bored and aren’t interested in their session.
Training Needs Assessment
A training needs assessment identifies individuals' current level of competency, skill or
knowledge in one or more areas and compares that competency level to the required
competency standard established for their positions or other positions within the organization.
The difference between the current and required competencies can help determine training
needs.

Rather than assume that all employees need training or even the same training, management
can make informed decisions about the best ways to address competency gaps among
individual employees, specific job categories or groups/teams.
Assessments can be conducted at any time but are often done after hiring, during
performance reviews, when performance improvement is needed, for career development
plans, for succession planning, or when changes in an organization also involve making
necessary changes to employees' jobs.

It is beneficial to perform these assessments periodically to determine the training needs of

an organization, employees' knowledge and skills, and also training program effectiveness.

Step 1: Identify the Business Need

A training assessment is the first step to any successful training program and is also a critical
aspect of succession planning. Conducting this analysis allows an organization to focus its
efforts on areas of training that are necessary for employees to successfully carry out the
organization's goals, make optimum use of the company's training dollars and motivate
employees by contributing to their career development.

The person conducting the training needs assessment must clearly understand the overall
organization and department goals and priorities, so he or she can properly assess the training
options and identify which training opportunities will contribute most to the overall success
of employees, the business units and the organization as a whole.

Essentially, why is the organization conducting a training needs assessment? What is the end
result that the employee, manager or executive team is trying to accomplish? Will training
contribute to this accomplishment? Sometimes training is not the answer. There may be other
organizational issues that would be best addressed through another means—for example,
through job analysis, goal clarification, reorganizing or realigning a department, or employee
engagement.

Step 2: Perform a Gap Analysis

Performing a gap analysis involves assessing the current state of a department's or employee's
performance or skills and comparing this to the desired level. The difference between the
existing state and the desired state is the gap. There are many different methods for
conducting a gap analysis. The method for identifying the gap will depend on the
organization and the situation. Depending on the situation, it may be helpful to use one or
more gap analysis methods. Some gap analysis assessment tools are the following:
HR records.

HR records can include accident and safety reports, job descriptions, job competencies, exit
interviews, performance evaluations and other company records such as production, sales and
cost records. For example, if a department has a dramatic increase in workplace accidents,
then it would be important to review accident reports as part of the gap analysis prior to
conducting safety training.

Individual interviews. Individual interviews may be conducted with employees, supervisors,

senior managers and even sometimes clients/customers or outside vendors. If an organization
is providing safety training, talking with the employees who not only had the accidents but
also witnessed the accidents would be advisable.

In addition, talking to employees who have never had accidents could be useful in creating a
training program that includes a standard of safe practices. If the accidents involved
equipment, it may be beneficial to talk to the vendor that manufactured or serviced the
equipment. The information gathered can identify the gaps that an organization needs to
address. A company and its employees can benefit from new training opportunities as a result
of the training needs assessment.

Focus groups. Unlike individual interviews, using focus groups involves simultaneously
questioning a number of individuals about training needs. Best results occur with a
department or group of employees who have similar training needs. The participants
brainstorm about all the training needs they can think of and write them on a flip chart.

Then each person is provided perhaps five dots or sticky notes (employers should provide the
number of dots or sticky notes that will work best for the organization). Each individual
places his or her dots or sticky notes on the training ideas he or she believes are the most
important. An individual could choose to place one dot on five different items, or all five on
one training item.

Surveys, questionnaires and self-assessments. Surveys generally use a standardized format

and can be done in writing, electronically or by phone. Depending on the situation, it may be
helpful to conduct surveys with employees as well as with customers. When conducting a
customer service training needs assessment, employers should ask employees what would
help them provide better customer service. Employers should also obtain opinions from
customers about their experiences with employees.

Step 3: Assess Training Options

The gap analysis generates a list of training options and needs. Now the list can be assessed
based on the goals and priorities of the organization, both currently and in the future.
A scale of 1 to 3 could be used with number 1 being critical, 2 being important and 3 being
not important at all. Here are factors to consider when determining if training is a viable
option.

Solution to a problem. For example, an employee has a performance problem that has clearly
been identified as a training issue. The employee is provided with additional on-the-job
training in which he or she successfully acquires the needed skills. As a result, the company
would have a fully competent employee who is also meeting the required performance
standards.

Cost. Cost of training is a significant factor that needs to be weighed in terms of importance.
Depending on the situation, the organization may be willing to invest a significant amount in
one training but not in the others listed due to organizational priorities and finances. Here is
the formula to calculate the total cost of training:
Number of Employees Trained x Cost of Training = Total Cost of Training
Return on investment. Return on investment (ROI) is a calculation showing the value of
expenditures related to training and development. It can also be used to show how long it will
take for these activities to pay for themselves and to provide a return on investment to the
organization.

Legal compliance. If any of the training needs from the gap analysis are required legally (i.e.,
by federal, state or industry laws) or to maintain employees' licenses or certifications, then
these trainings would be a high priority.

Time. Sometimes the amount of time involved to build the capacity within the organization
will affect its operational needs as it can interfere with the employees' ability to complete
other job duties. In this case, it may be more beneficial to hire the talent from outside the
organization or outsource the task to fill in the skills gaps. In other cases, like succession
planning, the organization can afford a long-term commitment to building the capacity from
within.

Remaining competitive. Perhaps there exists minimal knowledge/competencies in a new

product or service that is negatively affecting company revenue. The employer can provide
the needed training to its employees so that the new product or service generates or exceeds
the desired revenue. In this situation, the company benefits from the increase in revenue,
therefore outweighing the cost of training.

After all the training needs/options have been assessed, the HR professional will have a list of
training priorities for individual employees, departments or the organization as a whole.

Step 4: Report Training Needs and Recommend Training Plans

The next step is to report the findings from the training needs assessment, and make
recommendations for short- and long-term training plans and budgets, starting with the most
critical priorities from the training option list. If there is a timeline for any of the trainings,
such as a deadline to satisfy training obligations for legal compliance purposes, then they
should be budgeted and scheduled accordingly.

The report should include a summary of why and how the assessment was completed, the
methods used and people involved, and the training recommendations with a general
timeline.

Considerations for the report and recommended training plans include:

What training is already being offered, and should it continue to be offered?
Will the training be conducted in-house or externally?
Does it make sense to bring in a trainer to train several employees on the same subject matter,
rather than send everyone to an off-site training?
Does the company have the subject matter expertise within HR, the training department or
another department to conduct the training?
Can and should the training be conducted online?
What is the learning style of the participants?
Are all participants at one location or multiple locations, or are they decentralized?
Training Need Identification

Training need identification is a tool utilized to identify what educational courses or activities
should be provided to employees to improve their work productivity. Here the focus should
be placed on needs as opposed to desires of the employees for a constructive outcome.
In order to emphasize the importance of training need identification we can focus on the
following areas: -

To pinpoint if training will make a difference in productivity and the bottom line.
To decide what specific training each employee needs and what will improve his or her
job performance.
To differentiate between the need for training and organizational issues and bring about a
match between individual aspirations and organizational goals.

Identification of training needs (ITN), if done properly, provides the basis on which all other
training activities can be considered. Also requiring careful thought and analysis, it is a
process that needs to be carried out with sensitivity as people's learning is important to them,
and the reputation of the organization is also at stake.

Identification of training needs is important from both the organisational point of view as
well as from an individual's point of view. From an organisation's point of view it is
important because an organisation has objectives that it wants to achieve for the benefit of all
stakeholders or members, including owners, employees, customers, suppliers, and
neighbours. These objectives can be achieved only through harnessing the abilities of its
people, releasing potential and maximising opportunities for development.

Therefore, people must know what they need to learn in order to achieve organisational goals.
Similarly, if seen from an individual's point of view, people have aspirations, they want to
develop and in order to learn and use new abilities, people need appropriate opportunities,
resources, and conditions. Therefore, to meet people's aspirations, the organization must
provide effective and attractive learning resources and conditions. And it is also important to
see that there is a suitable match between achieving organizational goals and providing
attractive learning opportunities.

Different Levels at which it is to be Conducted

Identification of training needs can be done at three levels to ascertain three kinds of needs: -

• Organizational Needs
These concern the performance of the organisation as a whole. Here identification of training
needs is done to find out whether the organisation is meeting its current performance
standards and objectives and if not, exploring ways in which training or learning might help it
to do so. Sometimes organizational training needs are also identified when the organisation
decides that it has to adopt a major new strategy, create a new product or service, undergo a
large-scale change programme, or develop significant new relationships, such as joining with
others to form new partnerships.

• Group Needs
Since working in groups and teams have become very much prevalent in today's corporate
world that is why nowadays there is increased emphasis given on team effectiveness and
team performance. So training needs are nowadays even identified at the group level.
Training needs here are concerned basically with the performance of a particular group,
which may be a team, department, function, sub-unit, or so on. Information about this group's
performance may identify areas of need - which, again, may be for training or other
interventions. It is used to find out how efficiently a particular team or group goes about its
business and meets its current objectives.

• Individual Needs
These concern the performance of one or more individuals (as individuals, rather than as
members of a group). Here identification of training needs is about finding out to what extent
individuals need to learn or be trained in order to bring their current performance up to the
required level as a result of changes in methods and processes that call for new competencies
and skills.

The Most Effective Training Methods

Research on training methods is essential to avoid the unnecessary costs that come with
training. According to Forbes, the training market is worth approximately $109 billion in the
United States. Therefore, the tasks of researchers are to search and define the best methods to
present the information to the targeted trainees, as well as to find the right approach
to investing in project management training.

One excellent study that explores such training methods is “Training Methods: A Review and
Analysis.” The authors of this article performed an integrative review of some of the most
popular training methods. In addition to defining the core methods for training, the study does
the following:

Defines the key characteristics of the chosen types of training methods

Researches the conditions in which the training methods are most suitable
Based on the authors’ research questions, the study came up with the following information
that’s crucial for successful training. All this information is based on an exhaustive list of 13
core methods.
1. Case Study
The case study is a proven method for training and is known to effectively boost learner
motivation. However, when learners lack access to the resources necessary to completing a
case study or if the project become a challenge, their motivation and learning will be
hindered.

This method is suitable for situations when the trainees have the core knowledge but can still
benefit from training. Because this method comes with lower costs, it’s also one of the more
popular methods in different disciplines like law, counseling, and medicine.

2. Games-Based Training
Games have been used for many educational purposes, including training. Using games for
education is affordable, competitive, and motivational, especially in the digital era, in which
many applicants and employees are highly involved with technology.
One of the disadvantages of this method is the inability to determine the components in a
game that will contribute to the training itself. Trainers can’t really make sure that every
learning concept will be accepted by the trainees through game playing.
Still, game-based training teaches students to compete in environments like business, sports,
or law.
3. Internship
Internships are great for both sides. Employers can benefit from the help of employees, while
employees can benefit from the guidance of and training by employers. Still, in some cases,
this can be high-pressured or inconsistent.
However, in situations and environments where the learners have some base knowledge and
the employers are supportive and understanding, this is an excellent training method.

4. Job Rotation
Job rotation can do a lot in terms of employee motivation and commitment. This method
gives people chances to further develop and work toward a promotion and engenders
satisfaction and cooperation. Still, for introverts, this is often a big challenge because of the
fear that they might fail in front of others. Also, it’s a method that requires a lot of time and
room for error.
But with the right background knowledge, both of these problems can be eliminated or at
least reduced.

5. Job Shadowing
Job shadowing serves to generate employees’ engagement and interest. Trainees get a chance
to see their work from another perspective, which is perfect for those who are being
considered for a promotion or a role change.

6. Lecture
Lectures are often dreaded and ridiculed, but they are the most commonly used training
techniques. Yes, there is often a lack of interaction, but with the right speaker and simple
lectures, this can lead to optimal learning.

7. Mentoring and Apprenticeship

When companies plan to groom people for promotion and growth, this is the best training
method to use. Trainees can truly benefit from such a personalized learning structure, boost
the mentor-trainee relationship, and facilitate their future career.

8. Programmed Instruction
Programmed instruction doesn’t work without self-discipline, so it is most effective in cases
when some straying from the program isn’t detrimental to the company’s success. Even so,
this is an effective and flexible practice.

9. Role-Modeling
This is the counterpart of the lecture training method—one that promotes practice on lifelike
models. It’s often used in cases when employees need some practice after they see a lecture
or a demonstration.

10. Role-Play
With role-playing, trainees can practice what they’ve learned in a personalized and simulated
situation. They can still fail, but with good content and safe role-playing, there won’t be any
serious consequences.

11. Simulation
Simulation becomes more affordable every day. As such, it’s commonly used for training that
is considered costly or dangerous if performed in a real environment. This is a safe way to
practice what would otherwise be risky.
12. Stimulus-Based Training
Stimulus-based training is a bit unconventional, but it’s becoming more popular as time
passes. It’s a widely applied method that might make trainees a bit uncomfortable but can
also enable them to acquire thorough knowledge faster than the other methods of training
described here.

13. Team Training

Team training has a big and important goal: to connect a team. As such, it doesn’t focus on
trainees as individuals like the previously discussed methods; rather, this method is used to
connect team members and make them more engaged in their training and work.

On-the-Job Training
Definition: The On-the-Job Training is a technique wherein the workers, i.e., operative staff,
is given the direct instructions to perform their jobs on the actual work floor.
The workers can learn the skills that are required to be performed in the actual work
conditions and also gets accustomed to the working environment. Also, the organizations
need not to bear any additional cost of setting up a classroom or a simulated setup for
imparting training to the workers, away from the actual work floor, as in the case of Off-the -
Job training.

On-the-Job Training Methods

Coaching: Under this method, the superior or an experienced staff gives instructions to the
workers to perform a job. It is one-to-one training designed for the workers where they can
find answers to their queries through the instructions and demonstrations given by the
superior.

1. Mentoring: This training is given to the managerial level people, wherein the senior or
the manager gives instructions to the immediate subordinate to carry out the day to
day functioning.
It is again a one-to-one training method, where the manager is considered as a mentor to the
subordinate and guides him in the situations of difficulty.

2. Job Rotation: Under the job rotation, an employee is often shifted to the other related
jobs, with the intention to make him well versed with other job backgrounds.
This helps him to escape the boredom caused by performing the same kind of work again and
again and also helps in developing a rapport with other people in the organization.
3. Job Instructional Training: Under this training, a trainer designs a step by step training
program, wherein the worker is given the instructions to perform the job as required.
Firstly, the overview of the job along with the desired results is explained to the
trainee, and then the skills required for the job is demonstrated by the trainer.
Then a worker is allowed to perform the job as per his acquired skills or expertise, and then
finally the workers are asked to give their feedback and ask for any query arising out of the
training program.
4. Understudy: Here, the superior gives training to the subordinate as an understudy or
an assistant who is likely to perform a superior’s job in case of the vacancy arising out
of superior’s retirement, transfer, promotion or death.
5. Apprenticeship: This type of training is generally given to the people in crafts, trade
and technical fields that require a long-term learning before they actually gain the
proficiency in their respective disciplines.
This training is a blend of classroom and on-the-job training and is conducted under the close
supervision. This can be extended up to 3 to 4 years as apprentices need to go through the
learning process till they become an expert in their fields.
E.g. The craftsmen job, mechanic, electrician, plumber, tool maker, etc. have to undergo this
type of training.

Off-the-Job Training

Definition: The Off-the-Job Training is the training method wherein the workers/employees
learn their job roles away from the actual work floor.
Simply, off-the-job training comprises of a place specifically allotted for the training purpose
that may be near to the actual workplace, where the workers are required to learn the skills
and get well equipped with the tools and techniques that are to be used at the actual work
floor.

Off-the-Job Training Methods

1.Special lectures: This is also called as classroom training wherein the employees are given
lectures about the job requirements and the necessary skills required for implementing the
job.
There is generally a classroom or a workshop wherein the complete job knowledge is given
to the workers by the experts or specialists from the professional institutes.The main purpose
of this training is to make the employees well informed about their job roles and discussing
their queries arising out of the lectures.

2. Simulation: Under this training, the trainee is required to learn the operations of machines
and equipment, that are reasonably designed to look similar to those installed at the actual
work floor.
This is one of the most common method of training wherein the worker learns to operate
tools and machinery that look alike to those, they would be using in the actual work
environment.

3. Vestibule Training: This type of training is specifically given to the technical staff, office
staff and the employees who learn the operations of tools and equipment assembled at a place
away from the actual work floor.
This type of training is conducted to give the real feel to the trainees, that they would be
experiencing at the actual plant.

3. Case Studies: Under this method, the trainees are given the situation or a problem in the
form of a case study, and are required to solve it as per their learning from the training
program.

4. Role playing: This type of training is essential in case of customer services. Under this, the
trainees assume roles and enact as per the given situations. It is also called as socio-drama or
psycho-drama, wherein the employees act as if, they are facing the situation and have to solve
it spontaneously without any guidance.
 6. Management Games: Under this method, the trainees are divided into groups and then
they are presented with the simulated marketplace or the situations, wherein they are
required to apply their learning and solve the problems accordingly.

Under off-the-job training, the worker concentrates only on the learning of a job and is not
accountable for the production

On the job and off the job training methods

The major differences between these two training methodologies have been listed here:

On the job training involves imparting training in the real work environment i.e. it believes in
learning by doing; while off the job training involves imparting training outside the real work
environment i.e. the principle of learning by acquiring knowledge is adopted.

Under on the job training the training and performance goes simultaneously so production is
not hindered at the time of training; while under off the job training methods first training is
imparted and then the real performance follows and therefore does not add anything to actual
production during training.

‘On the job training aims at developing the best practices for a specific job and getting the job
done; while off the job training methods aim at learning basic facts and skills and is more
general in nature.

On the job training is usually imparted by experienced workers and first line supervisors at
the workplace; while‘off the job training is imparted usually by the academicians and
professionals at any place other than the real workplace.

‘On the job’ training methods are suitable when the trainees are limited in numbers and the
job is not hazardous in nature; while off the job training methods can be utilized to train any
numbers of employees and for jobs that involve risks.

‘On the job’ training methods are simple and less-expensive because they utilize the actual
workplace and firm’s supervisors for imparting training; while off the job training methods
are quite expensive as they need a complete different set-up. Training here is imparted in an
artificial set-up and outside experts are hired for the purpose.

Most popular on the job training methods include job rotation and apprenticeship training;
while the popular off the job training methods include classroom lectures and simulation
exercises.
On the job training is generally imparted in case of manufacturing firms for production-
related jobs; while off-the-job training is mostly imparted for managerial and non-production
related jobs.
MANAGEMENT DEVELOPMENT-MEANING

“Executive or management development is a planned process of learning and growth

designed to bring behavioral change among the executives.”

It is continuous process of learning. It implies that there will be a change in knowledge and
behavior of the individuals undergoing development programme. The employee will be able
to perform his present job better and will increase his potential for future work.

Managers develop themselves by participating in formal training courses organized by the

organisation. They also make use of actual job experience in learning new behavior and the
organisation must provide opportunities for development of its managers. But an equal, but
more important, counterpart to the efforts of the organisation is those of the individuals. Self-
development is an important concept in the whole programme of executive development.

Management development is a process in which managers working at different levels learn

and improve their ability, capability, knowledge and skills for improving the performance of
individual as well as organisation. The effectiveness of managers at work contributes a lot to
the success of every organisation.

The new approach of human resource management is that money used in development of
employees and managers is considered as an investment and not as a cost. Along with their
jobs the managerial staff is provided opportunities to learn and improve their competencies.
This whole process is known as management development.

The managerial staff is prepared to improve their performance on present jobs and preparing
them for further assignments also. Management development is a systematic process of
training and growth by which managerial personnel gain and supply skills, knowledge,
attitudes and insights to manage the work in their organisations effectively and efficiently.

Management development program includes the activities — short courses, leadership

courses, management education and training programs, coaching, guiding and mentoring.
These programs can be conducted in-house or outside by consultants or experts.

Management Development – Characteristics and Purpose

The characteristics of management development are as follows:

1. It is an organised process of learning rather than a haphazard or trial and error approach.

2. It is a long-term process as managerial skills cannot be developed overnight.

3. It is an ongoing exercise rather than a “one-shot” affair. It continues throughout an

executive’s entire professional career because there is no end to learning.

4. Management development aims at preparing managers for better performance and helping
them to realise their full potential.

5. Executive development is guided self-development. An executive can provide

opportunities for development of its present and potential managers. Bill the image for
learning has to come from the executive itself. Executive development is possible only when
the individual has the desire to learn and practice what he learns.

The organisation can provide the environment for development or advancement but the
initiative for development has to be taken by the individual himself. Unless the person has the
required potential and urge, he cannot be considered fit for development.

He can also be given the necessary guidance to help him face the present job’s problems or to
prepare him for the higher jobs. Training is also necessary to prevent obsolescence of
knowledge and skills of individuals.

Executive development programmes seek to develop the overall personality of the executives
and not only the skills necessary to do the job efficiently. The job of executive is a very
challenging one. So, the executive development programmes should be more concerned with
conceptual and human skills of the executives. A comprehensive development programme
uses various learning aids to increase the knowledge, decision making ability, skill in dealing
with people and maturity of the managers.

Purpose of Management Development:

The purpose or objective of management development programmes are discussed below:
1. To sustain better performance of managers throughout their careers.
2. To improve the existing performance of managers at all levels.
3. To encourage existing managers to increase their capacity to assume and handle greater
responsibility.
4. To enable the organisation to have the availability of required number of managers with
the required skills to meet the present and anticipated (future) needs of the organisation.
5. To replace elderly executives who have risen from the ranks by highly competent and
academically qualified professionals.
6. To provide opportunities to the executives to fulfil their career aspirations.
7. To ensure that the managerial resources of the organisation are utilized optimally.

Difference between Training and Development

1 Aims and Objectives of Training and Development

The primary difference between training and development is that training aims to ensure that
employees of the organization are equipped with skills and knowledge so, that they can be
able to handle specific jobs in the company.

In development, individuals are equipped with skills and knowledge so, that they can develop
a conceptual framework and general understanding of operations of the company.
Besides, training helps to ensure that employees improve their work performance while
development prepares workers for future challenges in the same organization.

2 Number of People Involved in Training and Development

The second difference is that the number of people involved in training is significantly
different from the number of individuals involved in a development program.
Training involves a large number of people who are usually assembled in a workshop or
seminar so that they can be taught a specific skill that will enhance their job performance. It
is a group-based practice.
However, development does not involve a group and mostly includes a single person who is
equipped with skills, competence, and general knowledge to handle various tasks within the
organization.

3 Orientation in Training and Development

An individual is required to undergo training so that he or she can be able to perform a
specific job in the organization. New employees in the business are subjected to training
programs to expose them to their new roles.
On the other hand, development is career oriented and works to help the individual master in
a particular field. For example, an individual will be developed to master accounting
concepts, so that he or she can undertake accounting duties at management level.

4 Focus on Training and Development

The focus of training is to help individuals in the organization be able to handle specific tasks
within the organization.
This means that training is geared towards ensuring that individuals can handle immediate
tasks in the company.

On the other hand, development is geared towards ensuring that the people under the program
are in a position of handling future tasks when they arise.
This means that training helps one to immediately execute the knowledge gained while the
knowledge and skills acquired under development are implemented in the future.

5 Terms in Training and Development

The period for training and development is different. Training takes a shorter period because
fewer skills are gained. People in training are only taught to handle a specific duty and are
required to execute the skills acquired immediately.
Training only takes a considerable period, but mostly depends on the complexity of the skill
being impacted.

Development is a gradual process, which is done in long-term. This is because development

involves understanding the operations. A person under the development program is always
learning on how to improve specific aspects of the organization to enhance its activities.

6 Motivation involved in Training and Development

Under the training program, the trainer is tasked with the role of offering motivation to the
trainee, so that they can work hard to ensure they acquire the skills and knowledge to execute
the tasks required.
Under the development program, an individual is required to have self-motivation because
external parties are not involved in ensuring that a person develops to be a future manager in
the organization.
Therefore, a person must motivate himself or herself, so that he or she can be declared
suitable and qualified to handle management positions in the company.
MODULE V

Performance Appraisal:

A merit rating, performance appraisal, employee appraisal, performance review, or (career)

development discussion is a method by which the job performance of an employee is
evaluated (generally in terms of quality, quantity, cost, and time) by the superior manager or
supervisor.

A performance appraisal is a systematic and objective method of judging the quality of an

employee in performing his job and a part of guiding and managing career development. It is
the process to obtain, analyze, and record the information about the relative worth of an
employee to the organization.

Performance appraisal is an analysis of an employee’s recent successes and failures, personal

strengths and weaknesses, and his/her suitability for promotion or further training.
It is also the judgment of an employee’s performance in a job based on considerations other
than productivity alone.

Performance appraisal is done periodically, but on a continuous basis. It is a part of a larger

performance management system and includes both managerial and non-managerial
employees in its scope.

Objectives of Performance Appraisal:

Generally, the aims of a performance appraisal are to::

a. To provide employees feedback on their performance.
b. Identify employee training needs.
c. Document criteria used to allocate organisational rewards.
d. A basis for decisions relating to salary increases, promotions, disciplinary actions, bonuses,
etc.
e. Provide the opportunity for organisational diagnosis and development.
f. Facilitate communication between employee and employer.
g. Validate selection techniques and human resource policies to meet regulatory
requirements.
h. To improve performance through counseling, coaching and development.
i. To motivate employees through recognition and support.
Methods:

There are numerous methods in use to appraise employee performance depending upon the
size and nature of the organizations. A common approach to assess performance is to use a
numerical or scalar rating system whereby managers are asked to score an individual against
a number of objectives/attributes.

In some companies, employees receive assessments from their manager, peers, subordinates,
and customers, while also performing a self assessment. The most popular methods used in
the performance appraisal process can be divided in two categories:

These methods include Ranking methods, Graphic Rating Scale method, Critical Incidents
Method, Checklist Methods, Essay Method and Field Review Method.
Modern Appraisal methods include Management by Objectives, 360 – Degree Feedback
Appraisal, Behaviourally Anchored Rating Scales, Assessment Genre, Human Resource
Accounting, and Balanced Scorecard.

Traditional Trait Appraisal Methods:

1. Ranking Methods:
Ranking can be based on the followings:

(а) Straight Ranking Method:

This is one of the oldest and simplest techniques of performance appraisal. In this method,
the appraiser or evaluator ranks the employees from the best to the poorest on the basis of
their overall performance. It is very useful for a comparative evaluation.

(b) Paired Comparison Method:

It is a better way of comparison than the straight ranking method. In this method each
employee is compared with all others on a one- to-one basis, and then ranked.

(c) Forced Distribution Method:

It is a method of appraising employees on the basis of a predetermined distribution scale. The
evaluator is asked to rank 10% employees in the best category, 20% in the next category,
40% in the middle category, 20% in before the low, and 10% in the lowest brackets.

2. Graphic Rating Scale Method:

In this method, an employee’s quality and quantity of work is assessed in a graphic scale
indicating different degrees of a particular trait, i.e., behavior or characteristics as they relate
to work performance.

For example a trait like Job knowledge may be judged on the range of average, above
average, outstanding or unsatisfactory or on the basis of numbers (1,2,3,4, 5, and so on). The
list of factors to be appraised is dependent upon the company requirements.

3. Critical Incidents Methods:

In this method, the evaluator rates the employee on the basis of critical events and how the
employee behaved during those incidents. It includes both negative and positive points. The
negative point incident might be damage to machinery because of not following safety
measures.
Positive point incident may be staying beyond working hours to repair a machine. The
drawback of this method is that the supervisor has to note down the critical incidents and the
employee behavior as and when they occur.

4. Checklist Methods:
The appraiser is given a checklist of several behaviours, traits, or job characteristics of the
employees on job. The checklist contains a list of statements on the basis of which the
evaluator describes the on the job performance of the employees. If the rater believes that
employee does have a particular listed trait it is marked as positive check, otherwise the item
is left blank.

The company has a choice to choose either Weighted Checklist Method or Forced Checklist
Method.

5. Essay Appraisal Method:

It is also known as “Free Form Method”. It involves a description of the performance in a
number of broad performance criteria of an individual employee by his superior based on the
facts and often supported by examples and evidences. A major drawback of the method is
how to keep the bias of the evaluator away.

6. Field Review Method:

In this method, a representative of the HR department or a training officer discusses and
interviews the supervisors to evaluate and rate their respective subordinates. This method is
very time consuming method. However, this method helps to reduce the superiors’ personal
bias.

At this stage it would not be out of context to mention some of the limitations associated with
trait-based methods of performance evaluation. First, the trait-based methods are based upon
traits (like integrity and consciousness) which may not be directly related to successful job
performance. An employee can change behaviour, but not personality.

An employee who is dishonest, may stop stealing, but is likely to involve the moment he feels
the threat of being caught is gone. Second, trait-based methods are easily influenced by
‘office politics’ and is thus, less reliable.

Modern Appraisal Methods:

These methods are described as under:

1. Management by Objectives:
The concept of ‘Management by Objectives’ (MBO) was given by Peter F. Drucker in 1954.
It can be expressed as a process whereby the employees and the superiors come together to
identify common goals – the organizational goals as well as individual goals, the standards to
be taken as the criteria for measurement of their performance and contribution and deciding
the course of action to be followed.

Thus, the essence of MBO is participative goal setting, choosing course of actions and
decision making. Ideally, when employees themselves have been involved with the goal
setting and the choosing the course of action to achieve them, they are more committed.
2. 360 -Degree Feedback Appraisal Method:
360-degree feedback, also known as ‘multi-rater feedback’, is the most comprehensive
appraisal where the feedback about the employees’ performance comes from all the sources
that come in contact with the employee on his job.
These sources include superiors, subordinates, peers, team members, customers, and
suppliers apart from the employee himself (see Figure 18.10), who can provide feedback on
the employee’s job performance.

Self-appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his
achievements, and judge his own performance (in University of Delhi’s Master’s in
International Business, faculty member is not only evaluated by the head of department but
also by students).

Subordinates (part of internal customers) evaluation gives an opportunity to rate the

employee on the parameters like communication and motivating abilities, superior’s ability to
delegate the work, leadership qualities etc.

Evaluation by peers can help to find employees’ abilities to work in a team, cooperation and
sensitivity towards others. Thus, an evaluation by one and all is a 360-degree review and the
feedback is considered to be one of the most credible. Some of the organizations using this
method include Wipro, Infosys, and Reliance Industries etc.

3. Behaviorally Anchored Rating Scales:

Behaviorally Anchored Rating Scales (BARS) is a modern technique which is a combination
of the graphic rating scale and critical incidents method. It comprises predetermined critical
areas of job performance or sets of behavioral statements describing important job
performance qualities as good or bad (like the qualities such as inter-personal relationships,
adaptability and reliability, job knowledge etc.).

The typical BARS includes seven or eight performance behaviours each one measured by a
seven-or-nine point scale. These statements are developed from critical incidents.
In this method, an employee’s actual job behaviour is judged against the desired behaviour
through recording and comparing the behavior with BARS. Developing and practicing BARS
needs expert knowledge.

4. Assessment Centres:
Assessment centres are a contribution of German psychologists. The main feature of
assessment centres is that they process. Assessment Centres consist of many multiples.

a. Multiple competencies to be evaluated for in a candidate.

b. Multiple observers to eliminate the subjectivity and increase objectivity involved in the
process.
c. Multiple participants: 18 – 21 in case of TMTC (Tata Management Training Centre).
d. Multiple exercises: Exercises like role plays, case analysis, presentations, group
discussions etc.
e. Multiple simulations: These could be creative, crisis or exploitative type of simulations.
f. Multiple observations: Each observation is observed at least twice. There are five main
ways in which evaluation is made. A group of participants takes part in a variety of exercises
observed by a team of trained assessors who evaluate each participant against a number of
predetermined, job-related behaviors. Decisions are then made by pooling.

5. Human Resource Accounting Method:

Human resources are valuable assets for every organization. Human resource accounting
method values the relative worth of these assets in the terms of money. In this method the
valuation of the employees is calculated in terms of cost and contribution to the employers.
The cost of employees includes all the expenses incurred on them , viz., their compensation,
recruitment and selection costs, induction and training costs etc., whereas their contribution
includes the total value added (in monetary terms).

The difference between the cost and the contribution will be the performance of the
employees. Ideally, the contribution of the employees should be greater than the cost incurred
on them.

6. Balanced Score Card:

It was developed by Robert Kaplan and David Norton in 1990s. The purpose of balanced
scorecard is to evaluate the organizational and employee performance in performance
appraisal management processes. The conventional approach measures the performance only
on a few parameters like the action processes, results achieved or the financial measures etc.
The Balanced scorecard provides a framework of different measures to ensure the complete
and balanced view of the performance of the employees. Balanced scorecard focuses on the
measures that drive performance.

The balanced scorecard has two basic characteristics – a balanced set of measures based on
four measures (financial – profits, market share, ROI; customer – perspective about
organization loyalty to firm, acquisition of new customers; internal business measures –
infrastructure, organisational processes and systems, human resources; and the innovation
and learning perspective – ability to learn, innovate and improve) and linking these measures
to employee performance. Senior managers are allocated rewards based on their success at
meeting or exceeding the performance measures.

Performance Appraisal-PROCESS

Performance appraisal is planned, developed and implemented in the following manner:

1. Establish Performance Standards:

The performance standards for each and every job should be developed and discussed with
the superiors after thorough analysis of the job. These standards should be clear and not
vague. They must be measurable after certain period.

2. Communicate the Standards:

After setting the performance standards of job, the next activity is to communicate these
standards to all concerned; at least two parties – (a) appraiser (b) appraisee. It is necessary,
these standards must be modified. The appraiser must ensure that the information
communicated by him has been received by appraisee and understood clearly.
3. Measure Actual Performance:
Now the next activity is to measure actual performance of appraisee on the job after certain
period. Generally four common sources are used by appraiser to measure actual performance,
personal observation, statistical reports, oral reports and written reports.

4. Compare Actual Performance with Standards:

The fourth activity is the comparison of actual performance with standards. Sometimes actual
performance may be better than standards and sometimes it may go off the track. Any
deviations between actual performance and standard performance may be noted carefully for
next activity.

5. Feedback to the Employee:

In this activity the results of stage forth are discussed with employee. The information which
is received by appraisee about his assessment has a great impact on his performance.
Communicating poor performance is difficult task of appraiser.

6. Taking Corrective Action, if Necessary:

This is the final or last activity of the performance appraisal process. In this stage two types
of corrective action may be recommended by the appraiser. One is positive means salary
increase or promotion if actual performance of appraisee is up to the mark and second is
negative means coaching and counselling may be done if the performance is poor. If
necessary appraisee may be deputed for formal training courses.

Advantages of Performance Appraisal:

(i) It helps the supervisors to plan out the promotion programs for efficient employees.

(ii) It helps in planning compensation packages for employees. Compensation packages

which include bonus, high salary rates, extra benefits, allowances and pre-requisites are
dependent on performance appraisal.

(iii) The systematic procedure of PA helps the supervisors to

frame training policies and programs.

(iv) It helps the supervisors to understand the validity and

importance of the selection procedure.

(v) Systematic appraisal helps to identify the ability of the employees.

(vi) It serves as a motivation tool. Through evaluating performance of employees, a person’s

efficiency can be determined if the targets are achieved. This very well motivates a person for
better job and helps him to improve his performance in the future.
Disadvantages of Performance Appraisal:
(i) If not done right, they can create a negative experience.

(ii) Performance appraisals are very time consuming and can be overwhelming to managers
with many employees.

(iii) They are based on human assessment and are subject to errors and biases.

(iv) Can be a waste of time if not done appropriately.

(v) They can create a very stressful environment for everyone involved.

COMPENSATION MANAGEMENT,

Also known as wage and salary administration, remuneration management, or reward

management, is concerned with designing and implementing total compensation package.
Compensation is the human resource management function that deals with every type of
reward individuals receive in exchange for performing an organizational task.
The consideration for which labor is exchanged is called compensation.

Compensation is what employees receive in exchange for their work. It is a particular kind of
price, that is, the price of labor. Like any other price, remuneration is set at the point where
the demand curve for labor crosses the supply curve of labor.

What is Compensation and Compensation Management?

Compensation is referred to as money and other benefits received by an employee for
providing services to his employer.

Compensation refers to all forms of financial returns: tangible services and benefits
employees receive as part an employment relationship, which may be associated with
employee’s service to the employer like provident fund, gratuity, insurance scheme and any
other payment which the employee receives or benefits he enjoys in lieu of such payment.
According to Dale Yoder, “Compensation is paying people for work.”

“Compensation is what employees receive in exchange for their contribution to the

organization.” – Keith Davis
In the words of Edwin B. Flippo, “The function compensation is defining as adequate and
equitable remuneration of personnel for their contributions to the organizational objectives.”

Cascio has defined compensation as follows;

“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.”
Beach has defined wage and salary administration as follows;
“Wage and salary’ administration refers to the establishment and implementation of sound
policies and practices of employee compensation.
It includes such areas as job valuation, surveys of wages and salaries, analysis of relevant
organizational problems, development, and maintenance of wage structure, establishing rules
for administering wages, wage payments, incentives, profit sharing, wage changes and
adjustments, supplementary payments, control of compensation costs and other related
items.”

Compensation can be in the form of cash or kind. Compensation may be defined as money
received in the performance of works, plus the many kinds of benefits and services that
organizations provide their employees.

Objectives of Compensation Management

The basic objective of compensation management can be briefly termed as meeting the needs
of both employees and the organization.
Employers want to pay as little as possible to keep their costs low. Employees want to get as
high as possible.

Objectives of compensation management are;

1.Acquire qualified personnel

Compensation needs to be high enough to attract applicants. Pay levels

must respond to the supply and demand of workers in the labor market
since employees compare for workers.

Premium wages are sometimes needed to attract applicants working for

others.

2.Retain current employees

Employees may quit when compensation levels are not competitive,

resulting in higher turnover.

Employees serve organizations in exchange for a reward. If pay levels are

not competitive, some employees quit the firm. To retain these employees,
pay levels must be competitive with that of other employers.

3.Ensure equity

To retain and motivate employees, employee compensation must be fair.

Fairness requires wage and salary administration to be directed to
achieving equity. Compensation management strives for internal and
external equity.
Internal equity requires that pay be related to the relative worth of a job so
that similar jobs get similar pay.

External equity means paying workers what other firms in the labor market
pay comparable workers.

4.Reward desired behavior

Pay should reinforce desired behaviors and act as an incentive for those
behaviors to occur in the future. Effective compensation plans reward
performance, loyalty, experience, responsibility, and other behaviors.

Good performance, experience, loyalty, new responsibilities, and other

behaviors can be rewarded through an effective compensation plan.

5.Control costs

A rational compensation system helps the organization obtain and retain

workers’ reasonable costs. Without effective compensation management,
workers could be overpaid or underpaid.

6.Comply with legal regulations

A sound wage and salary system considers the legal challenges imposed by
the government and ensures employers comply.

7.Facilitate understanding

The compensation management system should be easily understood by

human resource specialists, operating managers, and employees.

8.Further administrative efficiency

Wage and salary programs should be managed efficiently, making optimal

use of the HRIS, although this objective should be a secondary
consideration with other objectives.
9.Motivating Personnel

Compensation management aims at motivating personnel for higher

productivity.

Monetary compensation has its own limitations in motivating people for

superior performance. Besides money, people also want praise, promotion,
recognition, acceptance, status, etc., for motivation.

10.Consistency in Compensation

Compensation management tries to achieve consistency-both internal and

external in compensating employees. Internal consistency involves a
payment based on the criticality of jobs and employees’ performance on
jobs.

Thus, higher compensation is attached to higher-level jobs. Similarly, higher

compensation is attached to higher performers in the same job.

11.To be adequate

Compensation must be sufficient so that the needs of the employee are

fulfilled substantially.

Importance of Compensation Management in HRM

Effective compensation management plays a pivotal role in the management of human
resources. Also, compensation administration is one of the most important areas of human
resources management as it helps in making compensation policies, programs and their
effective execution. Following points highlight the role of compensation management in
human resource management:

1.Strategizing objectives
Compensation management helps in evaluating and developing strategies for deciding wages
and other monetary and non-monetary benefits for the employees. It also helps in evaluating
wages as per prevailing competitive market rates. Human resource department assesses the
decisions regarding union power impact on pay scale structure with the help of compensation
management.

2.Complying with Government regulations

HR managers are responsible to consider various rules and regulations of government while
deciding the compensation of employees at the workplace. Also, effective compensation
management system helps in complying with various regulations such as minimum wages,
overtime pay, equal pay, child labor and other federal regulations.
3.Cost and profit assessment
Compensation management supports human resource managers by defining the pay scale and
other benefits such as employee retirement benefits etc. for employees . With the help of
compensation management, the human resource department assesses the cost of employing a
person and evaluates its performance on the basis of profitability attained by the use of
human capital.

4.Employee retention
When employees are satisfied by the structure of their pay they automatically feel motivated
to work according to the needs of the organization. Thus, compensation management helps in
retention of employees at the workplace which is one of the major objectives of the human
resource department.

Compensation Management Process

Let's now look at the process. Once a company is organized and ready to begin hiring
employees, they need to develop a process to reward those employees. The following is a list
of steps management may take to complete this process:

1. Understand the Budget

First, management must understand the budget. Before a company can pay workers for their
services, they need to know how much money they have available to spend. For Bill, he
would need to determine how much money he suspects he will have available to pay his new
employees. So, if he projects $1000 in sales and has $200 in expenses, he would have $800
left over to use for compensating his employees.

2. Put Someone in Charge

Second, management needs to put someone in charge. Many big companies have a
department responsible for paying employees with a management team overseeing the entire
process. For a start-up business, like Bill's, often times it's the owner that will be in charge of
payroll.This means that he will have to be in charge of the budget and will have to make sure
each employee gets paid instead of relying of someone from HR.

3. Analyze the Jobs

Third, management needs to analyze the jobs. Before you can pay employees, you need to
know what their job duties and/or position is worth. This can be determined through surveys
and data collected from companies within the industry. The tasks the employee will be
required to complete also play a role in deciding how much to compensate for each position.
For Bill, he might do some research on other furniture businesses and determine how much
their employees are getting paid. Using a comparison, he can determine how much he should
pay his employees.

4. Decide Levels
Deciding levels is the next step. More specifically, in large companies, there are often
different levels of employees. You might have new hires, executives, management, etc. A
company with different levels may have a pay range. For example, a new hire might only get
paid between $25,000 and $30,000 a year, whereas a higher up executive might be paid more
like $120,000 and $140,000.
5. Develop a Compensation Package
Once you have decided how much you want to pay, you need to create a compensation
package. Will there be benefits? How often will the employee get paid? When Bill gets to
this step, he might decide to pay each employee $15.00/hr with the option of health insurance
as a benefit.