CHAPTER ONE – INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

1. In order to achieve its goals, the company should:

a. Possess required resources
b. Use them effectively and efficiently
2. Types of resources = human, financial, physical and informational
3. Effectiveness of employee contribution to the organization depends on the QUALITY OF THE HR
PROGRAM i.e. appropriate staffing, training, compensation + an environment that fosters the
effective use of Human resources

4. HRM can be defined as a process of procuring, developing and maintaining competent human
resources in the organization so that the goals of the organization are achieved in an effective and
efficient manner.
5. Simply, HRM is the efficient and effective utilization of Human Resources to achieve goals of an
organization.
6. Decenzo & Robbins: HRM is concerned with the people dimension in management.

To achieve organizational objectives, the following are essential.

 Acquiring their services

 Developing their skill
 Motivating them to higher levels of performance
 Ensuring that they maintain their commitment to the organization

Unique Characteristic of HRM:

 It has the ability to organize as unions

 Behaviour is complex and unpredictable
 Creativity and innovative power
 Human resource make decisions about all other resources

Generic Purpose of HRM

 To generate and retain an appropriate and contented workforce, which gives the maximum
individual contribution to the Organizational success.

Objectives of HRM

 Help the organization reach its goals

 Ensure effective utilization of HR
 Ensure Maximum development of HR
 Achieve and maintain high morale among employees
 Provide the organization with well-trained and well-motivated employees
 Develop and maintain a quality of work life
 Enhance employee’s capabilities to perform a job
The Soft Approach to HRM

 Human resources are defined as a valuable asset (rather than a variable cost)
 It is based on high level of managerial commitment to employees, high trust, learning and
enlightened leadership
 KEY FEATURES:
 Concern for the workers
 Focusing on winning the hearts and minds of workers
 Motivated, skilled, involved and contented workforce

The Hard Approach to HRM

 This is the calculative, quantitative and strategic management aspects of managing the workforce in a
rational way
 People management strategies are driven by strategic considerations to gain competitive advantage,
maximising control while achieving the lowest possible labour cost
 KEY FEATURES:
 Promote the HR strategy and align it with the business strategy
 Outsourcing, flexibility and performance management
 Downsizing
 HR is treated as another resource
 Operated against the interest of the worker

PERSONNEL MANAGEMENT VS. HUMAN RESOURCE MANAGEMENT

 PM is the planning, organizing, compensation, integration and maintenance of people for THE
PURPOSE OF contributing to organizational, individual and societal goals.
 PM is basically an administrative record-keeping function, at the operational level.
 PM attempts to maintain fair terms and conditions of employment, WHILE EFFICIENTLY MANAGING
PERSONNEL ACTIVITIES for individual DEPARTMENTS, ETC.
 HRM is described as having a much broader scope than PM, such as INVOLVING ONGOING
STRATEGIES TO MANAGE AND DEVELOP THE ORGANIZATION’S WORKFORCE.
 HRM mainly focuses on utilizing man power by understanding their strengths and weaknesses and
engaging them in different occupations in a way that increases and maximizes their productivity

 PM is a traditional approach of managing the people in the organization, HRM is a modern approach
of managing people and their strengths in the organization.
 PM is a routine function, HRM is a strategic function
 PM is concerned with the personnel manager, HRM is concerned with all levels of managers
 PM focuses on personnel administration, employee welfare, and labour relations.
 HRM focuses on acquisition, development, motivation and maintenance of HR in an organization
 PM considers people as an input for achieving required output, HRM considers people as a valuable
resource for achieving desired output
 HRM provides employees with more training and development opportunities unlike PM

Challenges of HRM
 Environmental Challenges  Organizational Challenges
o Rapid changes o Decentralization  Individual Challenges
o Work force diversity o Downsizing o Brain Drain
o Globalization o Organizational restructuring o Empowerment
o Legislation o Self-managed work teams o Job insecurity
o Evolving work & family roles o Technology o Ethical dilemmas and
o Shortage of required skills o Outsourcing social responsibility

o Competitive positioning: o Matching people and

cost, quality, distinctive organization

capabilities

Functions of HRM

 Job analysis
 HR planning
 Selection & Recruitment
 Training & Development
 Performance Appraisal
 Pay & Benefits
 Labour relations
 Career management
 Discipline Management
 Health & Safety MGT
 Retirement MGT
 CHAPTER TWO – APPROACHES TO HRM

Approach is defined as the way you handle something

 MANAGEMENT APPROACH
 This system focuses on managers of all levels being responsible and MANAGING their
subordinates. Its main motive is having effective management to attain a competitive
advantage and maximize the performance of employees.

 SYSTEMS APPROACH
 The authorities combine the cluster of interrelated elements for achieving a common
goal. There are many other components that have a strong relationship with each
other but are never used together. However, the presence of this approach will allow
these separate parts to work together to fulfil the company’s requirements.

 Examples for instances where the system approach is used can be: Training,
procurement, performance appraisal

 PROACTIVE APPROACH
 Proactive literally means acting before a problem occurs

 In this approach, HR related problems are anticipated and appropriate decisions and
corrective actions are taken before the problem exists

 It improves productivity by minimizing the resources (time & money) in the both short and
long run needed to produce the organization's goods or services

 It determines where the company want to go in the short- and long-term

 REACTIVE APPROACH
 Being reactive means acting after a problem occurred.
 If efforts are reactive only, problems may be compounded and opportunities may be
missed and the organization may suffer loss.

 STRATEGIC APPROACH
 Strategic HRM can be defined as the strategy to develop proper planning to hire &
manage employees for fulfilling the long-term goals of the company. It includes
developing employees to make sure their various prospects get combined for required
results.

 The strategic approach exists because the human resources of the organization are
considered as its most valuable, strategic resource

 The main motive of this strategy is targeting the long-term people issues and creating
resources for the tackling needs of the future.

 [4 FEATURES GIVEN IN TUTUE**]

 SOFT APPROACH
 Through this system, the employees are considered an important resource of the
business, if not the most important one. The employees’ needs are thoroughly met, and
there is often a strategy for reward, motivation, and recognition.

 Concern for the workers

 Focusing on winning the hearts and minds of the workers

 Motivated, skilled, involved and contented workforce

 Strategic focus on longer-term workforce planning

 Employees are empowered and encouraged to seek delegation and take responsibility

 Flatter organizational structures

 High business transparency with the employees with great communication involved;

 Higher-income and wages models, bonus packages, and other financial rewards
involved;

 Professional development and training opportunities for employees and an overall

appraisal system;

 A more modern and democratic leadership style

 HARD APPROACH
 Hard System is focused on a more traditional business outlook by treating the human resources of
the organization like an input. HR managers identify the workforce needs and act accordingly.
 Low business transparency;
 Lower income for employees;
 Systematic changes in employee numbers;
 No empowerment of employees;
 An old-fashioned style of management and leadership
 Promote human resource strategy and align it with the business strategy
 Generally covers outsourcing, flexibility and performance management
 Lead to downsizing
 Treated as another resource
 Operate against interest of the worker
 Taller organizational structures
 Suits autocratic leadership style
 Little empowerment or delegation
Line and Staff Aspects of HRM

 Authority: Authority is the right to make decisions, to direct the work of others, and to give orders.
 Staff authority (Advisory): The authority gives right to the manager to advise other managers or
employees.
 Line authority (Superior-Subordinate): The authority of managers to direct people in his or her own
department.
 Line manager (Line Authority): A manager who is authorized to direct the work of subordinates and is
responsible for accomplishing the organization’s tasks.
 Staff manager (Staff Authority): A manager who assists and advises line managers.

Line Managers

Line managers are bosses; they direct the work of subordinates in pursuit of accomplishing the organization's
basic goals.

Responsibilities of line managers are:

 Place the right person on the right job

 Orientate new employees
 Train employees for jobs new to them
 Improve the job performance of each person
 Gain creative cooperation and developing smooth working relationships
 Interpret the company’s policies and procedures
 Control costs
 Develop the abilities of each person
 Maintain morale
 Protect employees’ health & safety and physical condition

Staff Managers

Staff managers assist and advise line managers in accomplishing these basic goals. They do, however, need to
work in partnership with each other to be successful.

Responsibilities of staff managers include assistance in hiring, training, evaluating, rewarding, counseling,
promoting, and firing of employees, and administering various benefits programs.

Roles for Human Resource Departments

If an organization has a formal HR group there are typically three different roles that group might play in the
organization.

• Administrative—focusing on clerical administration and recordkeeping, including essential legal paperwork,

policy implementation, counselling, advising and providing welfare.

• Operational and employee advocate—managing most HR activities in keeping with the strategies and
operations that have been identified by management and serving as employee “champion” for employee
issues and concerns.

• Strategic—helping to define the strategy relative to human capital and its contribution to organizational
results.
 CHAPTER THREE – EQUAL EMPLOYMENT OPPORTUNITY

 EEO is the right of people to employment and advancement without regard to race, sex, age, religion,
colour, national origin or physical and mental ability.

 The first legislation was established in the United States by Title VII of the Civil Rights Act of 1964. It was
amended as Equal Employment Opportunity Act of 1972. In U.S. the Equal Employment Opportunity
Commission (EEOC) enforces the Equal Employment Opportunity Act. This Act generally applies to all
public and private organizations employing 15 or more people.

 In Sri Lanka, the Constitution of 1978 prohibits discrimination. In the Constitution, The Fundamental
Rights of chapter III - Section 12(2), states that discrimination based on race, religion, language, caste,
sex, or place of birth is unlawful.

 The aim of EEO legislation is to ensure that discrimination in employment is not made on an unfair or
unlawful manner.

DISCRIMINATION

“Favouring one individual in preference to another”

1. SEX DISCRIMINATION
 ‘housekeepers’ were a common job for women
 Women would be paid a lower rate than their male colleague
 Nowadays this type of discrimination is unlawful
 SEXUAL HARASSMENT
o unwelcome sexual advances, requests for sexual favours and other verbal or physical
conduct of a sexual nature

2. AGE DISCRIMINATION

 Making the following assumptions about aged/older employees:

o Performance of older employees is low.
o Physical and mental ability is low for older employees.
o Older employees are less receptive to training (it is difficult to train older)
o Older employees are inflexible, resistant to change.
 Studies have disproved this and also shown that older employees additionally offer maturity
derived from experience and are less prone to accidents than their younger counterparts.
Absenteeism and turnover rates of older employees is also comparatively lower.

3. RACE DISCRIMINATION

 Rejecting applications of ethnic minority groups or giving priority for applicants of ethnic
majority.
 Asking different questions for the people of different ethnic groups. E.g.:- asking about arrest
records or loan history.
 Adopting different criteria for different ethnic groups in providing opportunities for promotion
and training programs.
  Racially motivated attacks, victimization.
4. RELIGIOUS DISCRIMINATION
 Employers should allow flexibility in working to the employees for their religious needs as long as
it doesn’t cause any inconvenience to the operations of the organization; flexibility should be
allowed to all religious groups equally. Particularly,
o Allowing the employees to take leave
o Allowing flexibility in working time
o Allowing flexible work breaks.

5. EMPLOYMENT OF THE DISABLED

BONA FIDE OCCUPATIONAL QUALIFICATION [BFOQ]

 BFOQ allows employers to discriminate in certain instances and is a statutory exception to EEO laws.
 Its primary use is as a defence against intentional discrimination based on age/sex/religion/race
 BFOQ refers to the requirement that an employee be of a certain religion, sex, or national origin
where that is reasonably necessary to that organization’s normal operation.
o Religion may be a BFOQ in religious organizations
o Sex may be a BFOQ for positions requiring specific physical characteristics necessarily
possessed by a sex. E.g. flight attendant, actor
 CHAPTER FOUR – HUMAN RESOURCE PLANNING

 HR Planning ensures the right number of people with the right skills, knowledge, and ability are in the
right place at the right time to deliver short and long term organizational objectives

o Forecasting future needs of various types of employees

o Comparing the needs with the present work force

o Determining the numbers and types of employees to be recruited or removed from the
workforce
 The main objective of HR Planning is to prepare the organization to acquire the appropriate
employees for the appropriate jobs at the appropriate times

 CIPD: HRP is the systematic and continuing process of analysing an organization’s human needs under
changing conditions and developing personnel policies appropriate to long term effectiveness of the
organization

 AIMS OF HRP:

o Obtain quality and quantity of people needed

o Make best use of human resources
o Anticipate problems related to surplus and deficit of human resources
o Develop a well-trained and flexible workforce
o Reduce dependence on external recruitment when key skills are in short supply

 IMPORTANCE OF HRP

o To determine future employee demand

o To utilize human resources more efficiently and effectively
o To control employee cost
o Provide equal opportunities
o To formulate and implement strategic plans
o To develop highly competent managerial and professional employees

 WHY DO SOME ORG. NOT ENGAGE IN HRP??

o Lack of understanding about the purpose of HRP

o Non-availability of HRM experts within the org./unable to procure such experts
o Belief that HRP is unnecessary
o Habit of staffing bases on a day-to-day requirement
o Habit of engaging in HRP informally for short periods of time

HUMAN RESOURCE PLANNING PROCESS

STEP 1: FORECASTING DEMAND FOR HR
Estimating demand for human resources and the type and amount needed for future requirements; includes
skills and competencies of the human resources

Factors affecting future demand:

 Demand for the product  Leaves of absence

 Production method  Terminations
 Retirements  Economic, social, political factors
 Resignations  Strategic plans of the organization
 Deaths

Techniques of Forecasting

 Informal forecasting – done quickly and randomly without a systematic base, uses intuition
 Advantages – easy & quick, good for small organizations, less time consumed
 Disadvantages – low accuracy, not suitable for large organizations, intuition may be wrong

 Formal expert survey – better method for planners, high accuracy, high time consumption

 Delphi technique
 Unit forecasting
 Extrapolation/trend analysis
 Ratio analysis
 Scatter plot

STEP 2: FORECASTING SUPPLY FOR HR

Assessing the number of people likely to be available from both within and outside the org.

Internal supply: current employees who can be promoted or transferred to meet forecast needs
External supply: people who are working for another org and job seekers.

Factors affecting INTERNAL supply

 Organizational features
 Rates of Productivity
 Rates of promotion, demotion, transfers, turnover
 Training & development programs

Factors affecting EXTERNAL supply

 Supply and demand of jobs & skills

 Rate of population
 Education attainment levels within a region
 Immigration & emigration patterns
 Forecasts of economic growth and decline
 Technological development
 Expected growth rate of industry
 Compensation system bases on education, experience, skills, age

STEP 3: COMPARE FORECASTED DEMAND & SUPPLY

  Calculate net employee requirements for the relevant period of planning
o Positive number = surplus of employees (org. employees > forecasted employees)
o Negative number = shortage of employees (org. employees < forecasted employees

STEP 4: STRATEGIES FOR SHORTAGE AND SURPLUS OF EMPLOYEES

When employees are in surplus: When employees are in shortage

 Hiring freeze  Work overtime

 Reduction of reward expenditure  Hire temporary/permanent full time
 Attrition (downsizing) employees
 Early retirements on voluntary basis  Hire part time employees
 Lay off  Hire casual employees
 Termination  Subcontract work to other orgs. (outsource)
 Encourage of leaves of absence  Provide opportunities for learners for a period
of time

STEP 5: ASSESS HRP EFFORT

 This is necessary to determine its impact on organizational goals and objectives

 It is difficult to evaluate in terms of cost and benefit as costs are clear but benefits are more tangible
and immeasurable
 Success or failure of HRP can be assessed on whether or not the organization has the right people it
needs, at the right time and right place
 If the org. is in position of starting a new plant or product due to lack of personnel  HRP not
successful
 CHAPTER FIVE – SELECTION

“The process through which organizations make decisions about who will or will not be allowed to join the
organization.”

“The process of choosing from among available applicants the individuals who are most likely to successfully
perform a job.”

“Selection is the process of making the choice of the most appropriate person from the pool of applicants
recruited to fill the relevant job vacancy.”

 Selection is the process of choosing individuals with the correct qualifications to fill jobs in an
organization

IMPORTANCE OF EFFECTIVE STAFFING:

 Hire hard, manage easy – invest time and effort in selecting the right people, will make managing
them as employees less difficult
 Good training will not make up for bad selection

OBJECTIVES OF SELECTION

 To get the right person for the right job

 To establish or maintain an image as a good employer
 To perform the selection process as cost-effective as possible

STEPS IN THE SELECTION PROCESS

i. Application/CV; shortlisting
ii. First interview
iii. Tests
iv. References
v. Follow-up interviews
vi. Final Decision

Application forms – contact info, work experience, educational background, technical experience,
memberships in professional or trade groups

Shortlisting – categorizing applicants as probable, possible, or unsuitable

Tests – ability tests, aptitude tests, intelligence (cognitive ability) tests, personality tests

Interview – a two-way exchange, where questions are asked to elicit information, qualities, attitudes, etc.

 Structured interviews
 Unstructured Interviews
 Stress Interviews
 Situational Interviews
 Behavioural description Interviews
 Panel interviews
Other:

Pre-employment checking, using references

Communication the decision – the organization should make an offer to the selected candidate, the offer
should include: job responsibilities, work schedule, rate of pay, starting date, and other relevant details.

CRITERIA FOR MEASURING THE EFFECTIVENESS OF SELECTION TOOLS AND METHODS

 The method provides RELIABLE information

 The method provides VALID information
 The information can be GENERALIZED to apply to the candidates
 The method offers HIGH UTILITY
 The selection criteria are LEGAL
 CHAPTER SIX – RECRUITMENT

Recruitment is the process of attracting individuals on a timely basis, in sufficient numbers, and with
appropriate qualifications, and encouraging them to apply for jobs with an organization.

Recruitment is the process of locating and encouraging potential applicants to apply for existing or
anticipated job openings.

Recruitment is a process of searching for prospective employees and stimulating and encouraging them to
apply for jobs in an organization.”

“Recruitment is the discovering of potential candidates for actual or anticipated organizational vacancies. It is
the linking activity… bringing together those with the jobs to fill & those seeking jobs”

GUIDELINES OF RECRUITMENT

 Determine present and future manpower requirements

 Attract and encourage more candidates to apply for vacancies
 Create a pool of candidates for the organization to choose an appropriate candidate from
 Increase the pool of candidates at minimum cost
 Infuse fresh blood at all levels of the organization
 Meet the organization’s legal and social obligations regarding the composition of its workforce

INTERNAL SOURCES OF RECRUITMENT EXTERNAL SOURCES OF RECRUITMENT

 Job posting  Advertisements

 Intranet  Employment agencies
 Succession plans  Word of mouth
 Identifying through performance appraisals  Job portals
 HRIS  Acquisitions & mergers
 Skills inventories and replacement charts  Voluntary application
 Headhunting
ADVANTAGES
 Outsourcing
 Familiarity of candidate  College recruiting
 Employee retention  Internet recruiting
 Enhances employee morale
ADVANTAGES
 Less expensive
 Available info and observation  New ideas
 Valuable information – competitors strategies
DISADVANTAGES
 Diverse skills
 Lack of new ideas  Vast experience
 Expensive training programs
DISADVANTAGES
 Ripple effect (?)
 Political and personal bias  Lack of reliability
 Some unhappy employees  Committing mistakes
 High cost
 Time consuming – orientation
 Demotivates internal employees
APPROACHES TO RECRUITMENT
• Walk-in: A walk-in interview is a job screening that happens without calling applications. They are common
at career fairs and they conduct various tests and interviews.

• Consult-in: The busy and dynamic companies request the potential job seekers to approach them
personally and consult them regarding the jobs.

• Head-Hunting: a process of recruitment of a prospective employee, who is working elsewhere and who has
a relevant work experience for a particular job profile.

• Body shopping: Professional Organisations and hi-tech training institutes develop a pool of human
resources for the possible employment. The prospective employers contact these organizations to recruit the
candidates.

• Business alliances: like acquisitions, mergers, and take-overs help in getting resources.

• E-recruitment: Organisations advertise the job vacancies through the World Wide Web (www) internet.

• Advertising: A classic employment recruitment technique is the "help wanted" advertisement in local
newspaper.

• Career Fairs: For entry-level jobs, career fairs can help to recruit recent graduates and individuals who want
to change careers.

• Database: Maintain a database or filing system for potential employees based on resumes collected at
career fairs, from your website or from manual submissions.

• Employment Agencies: If an organization is searching for employees with specific skills, it may approach a
recruiting agency that screens and potentially tests applicants based on the skills you require.

• Employee Referrals: The existing employees can be a great source of providing recruitment referrals
 CHAPTER SEVEN – TRAINING & DEVELOPMENT

T & D are done to improve current and future performance, by helping employees acquire skills, knowledge
and attitudes.

Training consists of an organisation’s planned efforts to help employees acquire job-related knowledge, skills,
abilities, and behaviours, with the goal of applying these on the job.

Training focuses on providing employees with specific skills or helping them to correct deficiencies in their
performance. Development is an effort to provide employees with the abilities that the organisation will need
in the future.

The goal of training is to eliminate current skill deficit, whereas development prepares for future work
demands.

Effective Measures of Training: Effective Measures of Development:

 Performance appraisals  Qualified people available when needed

 Cost/benefit analysis  Internal Promotion possible
 Passing tests  HR based competitive advantage
 Certifications
Costs of Training:

 Payment for trainers & Trainees

 Materials for training
 Living expenses for trainers and trainees
 Costs of facilities; equipment, transportation
 Opportunity cost
Benefits of training

 Increase in production
 Reduction in errors
 Reduction in turnover
 Less supervision required
 New capabilities
 Attitude changes/ Improvements

WHEN DOES THE NEED FOR TRAINING ARISE?

 The installation of new equipment or techniques

 A change in working methods
 Introducing new products
 Increase in the number of accidents/mistakes
 Need to reduce scrap and increase quality
 Inadequate performance or productivity
 For promotion or transfer of individual employees
SYSTEM APPROACH TO TRAINEES

1. PHASE 1: Needs Assessment

2. PHASE 2: Design
3. PHASE 3: Implementation
4. PHASE 4: Evaluation

I. Identifying Training Needs (Where the individual lacks skill, knowledge, ability to effectively perform)

a. Organizational analysis – quantity, quality, willingness to learn of the employees

b. Task analysis – analysis of job components, skills required to perform the job
c. Individual analysis – meeting deadlines, quality of performance, absenteeism, work behaviour

II. Identifying the objectives of training (improve the company’s performance through people performing
better)

a. Induction – organizational culture & structure, rules, policies, freedom, limits

b. Updating – prevent obsolescence by updating knowledge and skills
c. Preparing for future assignments
d. Improvements in performance
e. Growth of employees – increases ability to handle higher levels of responsibility
f. Organizational effectiveness - strengthening values, building teams improving inter-group
relations and quality of work life

TRAINING TECHNIQUES

 On-The-Job Training – training a person to learn a job while working on it

 Coaching – employee is trained on the job by an experienced worker or the trainee’s supervisor
 Job rotation – employee moves from job to job at planned interval
 Apprenticeship training – instructions, practical training

ADVANTAGES

o Relatively inexpensive
o Trainees learn while working, contributing to production
o No need of expenses exclusive for training
o Trainees get immediate feedback about their performance

 Off-The-Job Training
1. Job Instruction training – for jobs that involve a sequence, step by step instructions are given
2. Lectures – convenient for training a large group
3. Audio – visual techniques – surgeries, repairing
4. Tele-training
5. Video conferencing
6. Programmed learning – a systematic method for teaching job skills involving presenting questions
or facts to the learner, allowing the person to respond, and giving immediate feedback to the
learner about accuracy about his answers.
7. Vestibule or stimulated training – pilot training, expensive and dangerous to train on the job
 8. Computer based training

ADVANTAGES
o Learning is self- paced
o Training is interactive
o New employees don’t have to wait for a scheduled training session
o Training can focus on specific needs
o It is easier to revise a computer program
o Record keeping is facilitated
o Computer program can be linked to video presentations
o It is cost effective if used for a large number of employees

TRAINING FOR SPECIAL PURPOSES

1. Literacy training programmes – to improve basic skills including reading, writing and mathematics
2. AIDS education
3. Values training – educating employees about the firm’s most cherished values
4. Diversity training – aim to create more harmonious working relationships among employees
5. Customer service training – to treat the company’s customers in a courteous and hospitable manner
6. Training for teamwork and empowerment – employees are given the authority to do their jobs
7. Training for international business – Avoiding loss of business due to cultural insensitivity, Improving
job satisfaction and retention of overseas staff, enabling a newly assigned employee to communicate
with his colleagues abroad.

EVALUATING THE EFFECTIVENESS OF TRAINING

i) Controlled experimentation

To determine the effectiveness of the training programme, two groups need to be used. One
group receives the training whereas the other is the control group. Data should be obtained
before and after training from both groups to determine the extent to which the change
occurred in performance to the training group.

ii) Measuring training outcomes

a. Reaction to the program – like, dislike, worthwhile
b. Learning – gained knowledge and understanding
c. Behaviour – application of new knowledge on the job
d. Result – determine whether the final results were achieved
e. Ultimate value - how the organization as a whole has benefited from the training in terms of
profitability, survival or growth.

[REVIEW QUESTIONS AVAILABLE IN TUTE]

CHAPTER EIGHT – PERFORMANCE APPRAISAL
 CHAPTER NINE – COMPENSATION MANAGEMENT
Compensation: a wide range of financial and non-financial rewards to employees for their services rendered
to the organization. It is THE most important cost of a firm

Compensation can be given in the form of wages, salaries and employee benefits such as paid vacation,
insurance, maternity leave, free travel facility, retirement benefits, and etc.

Monetary payments are a direct form of compensating the employee and have a great impact in motivating
employees.

Goal of compensation management: to design the lowest-cost pay structure that will attract motivate and
retain competent employees and that will be perceived as fair by these employees.

Objectives of a Compensation System:

 Attract new employees
 Retention of employees
 Cost efficiency
 Legal compliance
 Equitable salaries for all employees
 Motivating employee performance

Types of compensation:

Base Compensation Supplementary Compensation

 Payments: Wages & Salaries
 Fringe benefits to workers above their usual
 To compensate employees for their service  Benefits such as housing, medical facilities,
canteen, etc.
 Paid in cash
 Non-wage payment
 Determined by: job evaluation, demand and  To increase employee efficiency, long-term
supply of labour, organization’s capacity to employee retention
pay, trade union’s bargaining power,  Determined by: the history of the
productivity, government regulations, etc. organization, philosophy of management,
organization’s capacity to spend on
employee benefits, need to retain talented
employees, desire to enhance public image,
etc.

Perquisites A.K.A “Perks” (initiated by industrial giants for executives)

- Company apartment, corporate aircraft, Home security, Paternity leave, Entertainment, Club membership

Factors determining Pay Rates

1. Legal considerations
a. Laws regarding min. wages, OT rates, EEO
2. Union Influences
3. Compensation policies of the organization
 4. Equity of pay rates

Compensation Policies
An important guideline for determining wages & salaries of an org. A written policy that recognizes:
the value of all jobs, the wage rates paid by competitors, and ensures stable earnings.

Establishing Pay Rates

1. Conducting the Salary/market survey
2. Determining the worth of each job (job ranking)
a. Conduct job analysis
b. Rate worth/importance of all jobs
c. Create a job hierarchy
d. Classify jobs by grade levels/pay grades
3. Price Each Grade/assign Pay rates for each grade

Compensation Tools
1. Job-based Compensation / Job-based pay – JBP
2. Skill – based Compensation / Skill-based pay – SBP

Job-Based-Pay

 Paid according to the job they hold

 Objective: to allocate pay so that the most important jobs are paid the most
 Value of jobs is identified based on the job evaluation, and then compensation is determined
 This system is tied to experience/seniority
 PROS
 Rational, objective, systematic
 Minimizes employee complain
 Easy to set up & administer
 CONS
 Arbitrary establishment
 Inflexible plans
 Difficult to evaluate the value/importance of jobs

Skill-Based-Pay

 Paid according to how flexible, capable at performing tasks, the employee is.
 The greater the variety of job related skills workers possess, the more they would be paid
 Encourages the learning of new skills/ multiple skills

Pricing Managerial & Professional Jobs (Market-pricing approach)

 Salary
 Benefits (Health care, employee service, etc.)
 Short-term incentives
 Long-term incentives
 Perquisites (company car, executive dining rooms, etc.)
[KEY TERMS AND REVIEW QUESTIONS]