Before You Start

These notes are prepared from HRM by Gary Dessler,

and various online sources to which I am truly thankful.
The notes are made from examination point of view and
are restricted to the syllabus. However, for a greater
learning experience, it is better to study this subject
in-depth. Nevertheless, these notes might serve as a
starting point. I hereby do not take any responsibility
for any consequences that may result from this set of
information. (34 Pages of Material)
For any reviews or recommendations, contact me at
8826811598.
Hope these serve your academic needs in any manner
possible. If helpful do circulate to your juniors in
coming years.
Resources
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BMS SEM-1 Resources:​ ​bit.ly/BMS-SEM1
BMS SEM-2 Resources:​ ​bit.ly/BMS-SEM2
MARKETING Notes: ​bit.ly/Marketing-BMS
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 UNIT 1
HRM
Concept
It is the process of acquiring, training, appraising and compensating employees and attending
to their labour relations, health and safety and fairness concerns.

A HR Manager gets involved in recruiting, interviewing, selecting and training activities.

There are 2 types of authority:
Line Authority: It gives the managers the right to issue orders to other employees creating a
superior-subordinate relationship
Staff Authority: It gives the manager the right to advise other employees

HR managers usually have staff authority, they assist and advise the line managers in
recruiting, hiring and compensation.

Functions
The functions of HRM are as follows:
1. Line Function: The HR manager directs the activities of people in his or her own
department and in related areas.
2. Coordinative Function: The HR manager coordinates personnel activities, a duty
referred to as functional authority. He ensures that line managers are implementing
the firm’s human resource policies and practices.
3. Staff functions: Assisting and advising the line managers is important. He or she may
advise ​the CEO to develop the right HR strategy. HR ​assists ​in
hiring-training-evaluating, rewarding-counselling-promoting-firing employees.
It ​administers ​various benefit programs such as insurance, retirement, vacation etc.
It ​helps ​line managers comply with equal employment and occupational safety laws along
with handling grievances and labour relations.
It plays an ​innovator ​role by updating on the current trends and the new methods of
employee utilisation.
It also plays an ​employee ​advocacy role, by representing the interest of the employees.

Role of HR Manager
0. Placing right person on right job
1. Orientation of Employees
2. Training Employees for new jobs
3. Improving the Performance
4. Improving cooperation and work relationships
5. Interpreting company’s policies and procedures
6. Controlling labour costs
7. Skill & Ability Development
8. Boosting Employee Morale
9. Protecting Employees’ health and physical condition
Skills & Competencies
An HR Manager must possess following set of skills and competencies:

1. Human Resources Knowledge

The managers must have expertise in Human resources, knowing the subject in theory and
practice to effectively implement their duties as a manager. They must focus on how HR
practices will prove to be fruitful for their business in the long run.

2. Continuous Learning
Due to changing business environment, the manager must adapt and learn with the dynamics
of the business, in order to respond effectively to newly emerging HR problems.

3. Communication Skills
Primary function of an HR person is to facilitate discussion between employees and
employer. Thereby both oral and written skills are necessary for effective conflict resolution.

4. Critical Thinking Skills

In order to balance complex situations and think outside the box, critical thinking skills are
important, which may help to find solutions of unconventional problems.

5. Ethical Approach
Managing private information of an employee or protecting the reputation of the company are
challenges a manager may face. Keeping your ethics can help foster a culture of trust and
loyalty.

6. Emotional Skills
Empathy is important to understand the employees better and pursue a stronger leadership,
where you can handle other people. Since Human Resource management involves Human
understanding, therefore handling human emotions becomes essential.

HRD

Definition
Human Resource Development involves the training of an individual after he/she is first
hired, providing him opportunities to learn new skills.
HRD is important to employee onboarding and retention. Without proper training employees
cannot succeed, while learning is important for the development of personal and professional
skills of employee.

Thereby HRD uses training and career development efforts to improve the effectiveness of
the employee and the organisation.

While HRM is maintenance oriented, HRD is learning oriented.

HRM aims to improve efficiency of employees, HRD aims at their development.
HRM is restricted to the HR Department of an organisation, while HRD is given to managers
at various level of organisation.

HRM motivates employees with monetary incentives, HRD motivates by satisfying their
growth needs.

Goals
1. Make people more competent and develop their knowledge, skills and attitude.
2. Make people committed to their jobs and assess them with a performance appraisal
system.
3. Build an environment of trust and respect.
4. Build greater acceptability towards change, enhancing the problem-solving
capabilities of employees.
5. Engage a greater team spirit and improve all around growth of employees.
6. Build a greater efficiency culture, encouraging proper utilisation of resources.

Challenges

1. Culture or Attitude
HRD professionals have to face cultural changes in different countries, which is increasing
with globalisation.
2. Technology or Skills
As new technology emerges, the training required to excel in the same increases, thereby
upgradation of skills and knowledge is necessary to meet the requirement of new generation.
3. Values of Behaviour
Values like Credibility and timeliness are becoming the core values of many business’ which
the HRD personnel must adjust too and prove themselves in such areas.
4. Knowledge
Enhancement of Knowledge is necessary to understand the different philosophies at different
workplaces, and thereby adapt accordingly.
5. Life Style or Habits
Employee life style must be understood, in order to deliver the right training to the
employees.

Changing Environment of HRM

There are certain changing trends in the field of Human Resource Management, which are
described as below:

a. Globalization
Globalization is the tendency of the firms to extend their operations to new markets abroad.
Indian firms like Infosys, Wipro and TCS serve customers around the world.
Due to Globalisation, a competitive environment develops, which results in more pressure to
lower costs, to make employees more productive and to do things more efficiently.

Job off-shoring is a practice of making employees abroad do the jobs, thus shifting the job
markets to low wage countries.
b. Cultural Environment
The Cultural environment of an organisation does impact the HR policies that it follows.
The culture of the area of business may affect your hiring decisions. A technology rich area
like Silicon Valley may cause a company to adjust hiring policies either by lowering or
raising the standards. HR dept. Might have to make policy adjustments depending upon the
culture as well, for instance touching while talking might be rude in some areas while in
some areas it may not.
Moreover, Discrimination against minorities can lead to a lawsuit for the company thereby
the company must adjust its policies as per the culture it operates in.

c. Technological Advances (Changing Skill Requirement)

With the advent of improved technology, many jobs are becoming automated resulting in
fewer human jobs, thus making the job markets more competitive, creating a shift in the skill
and training requirement for companies.
JIT technology is helping in reducing the inventory levels, thus reducing waste and
manufacturing jobs as well.
Many Service jobs due have shifted to India and Philippines where labour is cheaper.
A greater automation results in more education and skills i.e. human capital requirement in
the employee, causing a shift of jobs from manual workers to knowledge workers.

d. Workforce Diversity
As globalisation increases, employees work across borders, enhancing the workforce
diversity of an organisations. HR Manager must ensure that workers belonging to different
ethnicity or age group have their needs catered and no form of discrimination takes place i.e.
to maintain fairness for all in the organisation.
.
e. Corporate Downsizing
Downsizing is the practice of reducing company size by laying off employees. Human
Resource managers should identify what problems are downsizing expected to solve and then
consider alternative means of solving the same. It should also consider the long-term effects
of downsizing, it might be possible that as the company position improves, it may not be able
to hire back key individuals fired during downsizing.

HRM Support for improvement programs

HR managers must aim at developing continuous improvement programs for employees, this
can be done by the manager himself who may pass on the necessary skills to his subordinates.
In the recent scenario, they must learn to deal with short shelf life of learning which may
become obsolete within months, which can be dealt by making learning a continuous and
ongoing process. Employees must be taught to own their career development, being a guide
to their own career paths and learning the activities that they desire more, by making learning
more flexible.

Work life Balance

Work and life balance play an important role for most employees. Job Sharing, Rotation,
Leave, Flexible Hours and alternative work schedules make it possible for workers to manage
their work and life better. When people get help managing their personal lives, they can focus
on their job better. Therefore, with a changing atmosphere of Human Resource Management,
focus must be laid down on helping women and men equally in the Work-life balance aspect.

Strategic HRM
It is the practice of attracting, developing, rewarding and retaining employees for the benefit
of both the employee and the organization. It involves interacting with other departments to
create strategies which fulfil common objectives of both departments and in turn the
organisation.
Therefore, it is a partner in organisational success as opposed to a necessity for legal
compliance or compensation.

HRM in India
The function of HRM in Indian organisations has evolved over time.
Philanthropic employers like Tata Group introduced measures for managing their employees.
While the traditional function focused on welfare and labour relations existed, it was after
independence in 1947 that the trade union activities intensified and labour laws were
introduced.
The trends soon shifted from welfare activities, labour compliances, industrial peace towards
confronting the aggressive unions.

Focus on HRD came after IIM Ahmedabad professors Udai Pareek & T.V. Rao popularized
the HRD concept in Indian Industry.
With the coming on globalizations, and a high demand for talented people, the HR function
took a strategic focus.

During the recession of 2008-09, different HRM approaches like Recruitment Freeze,
stopping training, cutting down on benefits, Downsizing and compensation reduction took
place.

The growth of HR function in India has led to the growth of specialized firms offering
support to organisations, for instance Infosys BPO and TCS BPO provide IT enabled HR
outsourcing support and cover wide spectrum of HR activities.

Manpower, Kelly are companies that provide temporary staffing services. Numerous firms
provide recruitment, payroll and training support to Indian organisations.
 UNIT 2

Human Resource Planning & Recruitment-Selection-Orientation

(Merged in flow)

Employment (or Human resource) Planning is the process of deciding what positions the firm
will have to fill, how to fill them. It embraces all future positions, from maintenance clerk to
CEO.

Process
Recruitment and Selection can be undertaken by the following process:
1. Deciding the positions to fill using human resource planning and forecasting.
2. Build a pool of candidates for these jobs, by recruiting internal or external candidates.
3. Have Candidates complete application forms and undergo initial screening interviews
4. Use Selection tools like tests, background investigations and physical exams to
identify viable candidate
5. Decide who to make an offer by interviewing the candidate.

Forecasting Demand & Supply

1. Personnel Needs
The basic process of deciding personnel needs is to forecast revenues first, then estimate the
size of the staff required to support this sales volume. Managers must consider other
decisions too, including projected turnover, decisions to upgrade. Certain tools for forecasting
personnel needs are:

I. Trend Analysis: It means studying the variations in your firm’s employment levels over the
last few years. The aim is to identify the trend which may continue in the future to estimate
the staffing needs.
II. Ratio Analysis: It makes forecasts based on a historical ratio between a causal factor
(Sales Volume) and the number of employees required.
E.g. If a Salesperson generates 500 worth of sales, and the ratio (sales revenue to sales
people) remains same, then it would require 6 salespersons to generate 3000 in sales.
(It assumes that productivity remains same)
III. Scatter Plot
It graphically shows how two variables such as Sales and Staffing Levels are related. If they
are related, then by forecasting your sales, you can forecast your staffing levels.
IV. Computerized Forecasts - They help the manager in incorporating more variables in their
personnel forecasting.

2. Supply of Inside Candidates

Determining what current employees might be qualified for the vacant positions. For this, we
must know the employee skill set and their qualifications. The managers can use Skill
Inventories.
Skill Inventories
A skill inventory summarizes the skills, education and experiences of current employees.
Some business uses commercial software others use database programs. Skill inventory
provides a collective business inventory of the skills, knowledge and real-world experience
that a firm’s workforce posesses.

With the help of this tool, a company can identify the gaps that exist between the skill,
knowledge and experience that the company has in its existing workforce versus what it
needs to meet its current and future needs.

This will help:

I. To hire staff as per the need of business
II. Assign right employees to right function
III. Channel the training and development efforts in the right direction
IV. Identify the key employees of the business.

Skill Inventories may also be Computerized

Manual Systems & Replacement Charts: Manual Systems like Personnel Inventory and
Development Record Form compiles qualifications information on each employee.
Personnel Replacement Charts are used for the top positions, showing the performance and
promotability for each position’s potential replacement.

3. Supply of External Candidates

First the manager must determine the ease through which he may find external candidates by
looking at the unemployment rates in his sector. He may further look at the employment
levels specific to the position vacant in his company via the data available with the
governmental organisations.

Internal & External Sources

Internal Sources: Filling open positions with inside candidates is beneficial as the manager
knows the abilities of the candidate, who may also be more committed to the company.
Moreover, promotions act as a morale boosting activity (as a reward for loyalty and
competence).
However, interviewing inside candidates might be a waste of time as the manager may know
ahead of time who she wants to hire.

Sources:
I. Rehiring: Rehiring employees who left the organisation. (Employee may return with a less
positive attitude)
II. Succession Planning (Described ahead)

External Sources: Firms can’t get all the new employees from the current staff, there exist
certain outside sources which the firm can delve into.
 Sources:
I. E-Recruitment: Internet based recruiting is popular for employers, whether their own website
or via job-boards like Monster.com. Sites such as LinkedIn provide a professional social
network. Virtual Job fairs offer jobs from a wide network of employers.
However, it is restricted to only those who have access to Web, and non-English speaking
areas may be left out, moreover employers may end up with a lot of resumes which may
increase workload.

II. Advertising: Media advertisement done via Newspaper or the Web can reach out to a large
audience, depending upon the type of employee desired, the target population of
advertisement should accordingly be set, for instance local newspaper is useful to recruit
local blue-collar help, clerical employees or low level administrative employees.

III. Employment Agencies: Various Public, Private and Non-Profit agencies exist which help
employers in finding the right kind of job-seekers for their company.

IV. Off-Shoring & Outsourcing Jobs - Outsourcing means that outside organisation supply
services on behalf of your company, while Of-Shoring is organisations abroad supplying
services on behalf of your company.

V. Executive Recruiters (Headhunters): Special Employment agencies retained by employers

to seek out top-management talent for their clients.

Selection Process

After reviewing all the resume, the next step is selecting the best candidate for the job. This
requires, screening the pool with various HR techniques. Selection is important because:
I. Performance - Employees with right skills will do a better job for organisation.
II. Cost - It’s costly to recruit and hire employees.
III. Legal Obligations - Mismanaging the selection process may lead to legal implications.

The selection process can be divided into the following parts:

a. Testing
A Test is basically a sample of a person’s behaviour. A test must be reliable or consistent, it
should also be Valid (measure what you intend to measure). A valid test ensures that those
who do well on test also do well on the job.

For validating a test, one must:

a. Analyse the Job: Choose the criteria of job for assessment.
b. Choose the Test: Selecting the most suitable test
c. Administer the Test
d. Relate the test scores and the criteria (how are they related)
e. Cross-Validate and Revalidate (Perform steps c & d on new employees)
Types of Test
1. Cognitive Ability Test
Tests of general reasoning ability and mental abilities like memory and reasoning.
-IQ Tests: They test the general intellectual ability including memory, vocabulary, verbal
fluency and numerical ability.
-Aptitude Test: Measure specific mental abilities like inductive and deductive reasoning,
memory, comprehension etc. (Measure aptitude for the job)

2. Test of Motor and Physical Ability

Certain test measures the speed and accuracy of simple judgement as well as the speed of
finger, hand and arm movements, along with that test may measure static or dynamic
strength.

3. Measuring Personality & Interest

They measure the basic aspect of an applicant’s personality such as introversion, stability,
motivation etc.
These tests maybe projective in nature i.e. the applicant is presented with an ambiguous
stimulus and he or she then reacts to it, thus projecting his or her attitudes into the picture.

Test may measure personality traits like emotional stability vs. moodiness, friendliness vs
criticalness or traits like hypochondria and paranoia.

The BIG Five test evaluates 5 personality dimensions such as Extraversion, Emotional
Stability, Agreeableness, Conscientiousness, and Openness to experience.

Personality traits do correlate with job performance, in one study extraversion(outgoing),

conscientiousness (desire to do a task well) and openness to experience were strong
predictors of leadership.

4. Achievement Test
They measure what someone has learned, like school test. They may test job knowledge or
applicant’s abilities.

5. Work Samples and Simulations: Presenting examinees with situations representative of the
job and evaluate their responses, thus measuring the job performance accurately.

E.g. Management Assessment Centres: A 2-3-day simulation in which 10-12 candidates

perform realistic management tasks under the observation of experts. (similar to Miniature
Job Training & Evaluation)

Situation Tests - Require examinee too response to situations representative of the job.

Background Investigation
One of the easiest ways of avoiding hiring mistakes is to check the candidate’s background
thoroughly, which is cheap and useful. This helps in verifying the applicant’s information and
uncovering any damaging information. The background check maybe of Past Employment
records, Criminal Records, Driving Records and Credit Records.
There are certain legal dangers which maybe being sued for Defamation or for invasion of
Privacy.

Test such as Polygraph test the honesty of the candidate, while Graphology is the analysis of
handwriting to determine the personality traits. Pre-Employment Medical exams and
Substance Abuse screening also form a part of the selection process.

Interview
An interview is a procedure designed to obtain information from a personal through oral
responses to oral inquiries. A selection interview, is a selection procedure designed to predict
the future job performance on the basis of the interview.

Selection Interviews maybe Structured (following a set format with questions prepared &
guide for scoring the answers) or an Unstructured Interview (no set format & no guide for
scoring right or wrong answers - general conversation).

The interview may have Situational Questions (what the behaviour will be in a given
situation), Behavioural Questions (how they reacted to situations in the past), Job Related
Questions, Stress Interview (involves uncomfortable/sensitive or rude questions).

The interviews may be administered via a Panel Interview (A team of Interviewers/Board

Interview), Mass Interview (Several candidates simultaneously interviewed), Phone
Interview, Web-Assisted Interviews (Skype), Computerized Interviews (candidate responds
to the computer)

Orientation Process
Employee Orientation provides new employees with the information they need to function
and to help them start getting emotionally attached to the firms. It may be aimed at helping
the employee understand the organization in a broad sense and socialize him into the firm’s
culture.

The human resource specialist starts the orientation by explaining the basic matters like
working hours, benefits and vacations followed by introducing the supervisor who in turn
introduces the recruit to his colleagues, familiarizing him of the workplace, reducing his
anxiety or contentions of any kind. At a minimum, orientation includes information on
employee benefits, personnel policies, daily routine, company organization and operations,
safety measures and regulations and facilities tour.

The employees may receive the employee handbook, which states the employee
commitments, company policies and regulations.

Orientation may also be informal, such as get-togethers, competitions, movie screenings,

outdoor games, quiz etc. which may help the employee’s comfort level in organisation.
HRIS (Human Resource Information System)
HRIS: ​An intersection of Human Resources & Information Technology which allows HR
activities and processes to occur electronically.
Large employers rely on software to facilitate succession planning process. Software’s keep
certain data on their servers. In the software a manager may fill online resumes for oneself,
including career interests and feed their geographic restrictions. Once the Manager fills his
input, it reaches to his boss who assess’ his subordinates thus deciding his or her promotion.
This assessment foes to division head and division HR director, who use this information to
create career development plans for each manager. This is called a Human Resource
Information System.

Succession Planning
It is the process of hiring employees internally i.e. the process of identifying and developing
organisational leadership to enhance performance. It involves 3 steps.
a. Identifying Key Needs - The key positions that will be empty in the future and must
be filled.
b. Develop Inside Candidate - Identifying candidates and providing them the
developmental experience to be viable position holders in the future.
c. Assess & Choose - Assessing the employees and choosing the ones who fits the
position.

Job Analysis
Job Analysis is the procedure through which you determine the duties of the position and the
characteristics of people to hire for them. Job analysis produces information for writing the
Job Descriptions (what the job entails) and Job Specification (what kind of people to hire for
the job).

Uses
It has the following uses:
I. Recruitment & Selection
Job Analysis provides information about what the duties of the job and the characteristics
required to perform it, helping managers to decide what sort of people to recruit and hire.
Ii. Compensation: It depends upon the required skill and education level, safety hazard,
responsibility etc. Job Analysis thus helps in determining above factor, and thus the
compensation.
III. Training - Job Description lists the job duties, skills and the training that the job requires.
IV. Performance Appraisal - It involves comparing the actual performance with the expected
performance. Doing so would require the knowledge of Job Duties and standards.
V. Discovering Unassigned Duties: Job analysis can help discover certain duties which are
unassigned, thus allocating them to the right personnel.

Steps -
1. Decide how you will use the information which will help determine the data you
collect and how you collect it.
2. Review the organisation chart (organisation wide division of work) or the process
chart (detailed picture of the work flow), i.e. all the relevant background information
related to a job.
 3. Select the sample, it may be unnecessary to analyse 200 jobs when a sample of 10
works.
4. Actually, analyse the job by collecting data on job activities, human traits, working
conditions etc.
5. Verify the job analysis information by the worker himself or the immediate
supervisor.
6. Develop the Job Description and Job Specification.

Methods

1. The Interview
Managers may conduct unstructured or structured, individual or group interviews where
questions are asked to the employees in order to gather the necessary information related to
the Job.

2. Questionnaire
Employees are asked to fill detailed questionnaires to describe their job and the related duties.
It may be structured or unstructured. It is relatively cheaper in implementing, but developing
one is costly, and the answers may be distorted.

3. Observation
Direct Observation is appropriate when jobs are mainly observable physical activities such as
an assembly line worker. However, if the job is of mental nature or of emergency nature then
it is not desirable to use Observation. Reactivity can become a problem, i.e. when worker
changes the way he works upon observation.

4. Participant Diary
The worker maybe asked to keep a diary of the activities that they engage in. The detailed
and chronological nature of the log would be descriptive enough to ensure a decent job
analysis.

Job Description
It is a written statement of what the worker does, how he does and in what working
conditions does he do it in.

It covers:
I. Job Identification - Contains the Job Title, Date, Location etc.
II. Job Summary - Summary of job and its major functions or activities
III. Relationships - Job Holder’s relationship with others inside and outside the organisation
IV. Responsibilities & Duties - List the significant responsibilities and duties of the job in
few sentences
V, Standard of performance & Working Conditions - Standards expected from employee and
the environment/physical conditions of Workplace
Job Specifications
It is built in consideration of the Job Description and describes the human traits and
experience that are required to do this job effectively. It shows what kind of person to recruit
and what qualities should we test in that person.

Job Specification for trained employees is simple as you are placing already trained people on
job. But when Job Specification is written for untrained employees then you must specify
qualities such as physical traits, personality, interest etc. which he must be trained on for the
job.

HR Accounting​: HR accounting is the accounting for people as an organisational resource. It

involves measuring the costs incurred by organisations to recruit, select, hire, train and
develop human assets. It also involves measuring the economic value of people to the
organisation.

Importance
1. Under Conventional accounting, no information is made available about human
resources employed in an organisation, without whom financial resources hold no
value.
2. Expenses related to human organisation are charged to current revenue instead of
being treated as an investment, to be amortized over a period of time, reducing the
magnitude of net income significantly.
3. Value of human asset cannot be ignored, and valuation of firm must also be based
upon the same.
4. HR accounting lends a quantitative aspect to HR thus ensuring it’s monitoring in the
right manner.

HRD Competence Score​: Human Resource Development must have competence to

implement the systems and processes in ways that could ensure employee satisfaction,
Competence building and customer satisfaction. For HRD competence score, the
competencies of staff from different groups are measured and each group is measured in the
following dimensions:
1. Level of HRD skills they possess
2. Attitudes and support to learning and their own development
3. Extent to which they facilitate learning among others who work with the
4. Their attitudes and support to HRD function and system.

5.

HR Audits
It is described as an analysis by which an organisation measures where it currently stands and
determines what it has to accomplish to in its HR function.

Types;
Compliance - How Well are we complying
Best practices - How our practices compare to the best practices
Strategic audits - How our HRM practices help us achieve our strategic goals by fostering the
right employee behaviour
Function Specific audit - It focuses on specific areas such as compensation or training.

It may be scheduled every 2-3 years or as and when certain problem arises. Legal compliance
also requires auditing. Its Steps are as below: -
Decide on Scope of audit
Draft an Audit team
Compile the checklist and tools available
Know your budget
Consider legalities (what you discover is visible to the opposing counsel in the event of a
lawsuit)
Get top management support

UNIT 3
1. Training

Concept
Directly after the orientation, Training begins. Training means giving new or current
employees the skills they need to perform their job. Having high potential employees doesn’t
guarantee their success instead they must know what you want them to do and how.
Training program can also support the firm’s strategic goals.

Training program consist of 4 steps:

1. Need analysis involves identifying the specific knowledge and skills that the job
requires and compare them with the prospective trainee’s knowledgeable and skills.
2. Instructional Design Setup involves formulating specific & measurable training
objectives, reviewing the content and estimating the budget for the training program.
3. Third step is to implement the program by actually training the targeted employee
group using various methods.
4. Evaluation step involves assessing the program’s success or failure.

Prior to training involve the trainee and supervisor in designing the program.
During training, provide trainees with training experience and conditions that resemble actual
work environment.
After training, reinforce what has been learned, by appraising and rewarding the employees
for using new skills and making sure they have the necessary tools to use their skills.

Motivating the Trainees

Learning requires both ability and motivation. Ability means that the trainee must have the
basic skills to learn the training, while motivation is the reason behind why the trainee is
pursuing the training. Therefore, the HR manager has the duty of making the learning
meaningful which can be done by:
1. Providing a concrete view of material that is going to be taught.
2. Use familiar examples and avoid jargons
 3. Use Visual Aids
4. Create a perceived need of training in trainee’s mind.

Needs
A manager must not rely upon intuition to decide the training needs of his employees and
must undertake a proper analysis to determine what the training needs are.

For a new employee this would involve a Job Analysis, and then deciding what must be
taught.
For a current employee, training is complex as it may or may not be fruitful in enhancing the
performance of the employee. (Motivation or other factors might exist for poor performance)

Need analysis can be done by:

1. Task Analysis: It is a detailed study of the job to determine what specific skills the job
requires. Job Description and Job Specification are important here, which list the job duties
and skills serving as the basic reference point for determining the training required.
Reviewing Performance standards, performing the job or questioning the job holder can also
work.

2. Person Analysis: Details of the person who is taking up/having the position are taken into
considerations to ensure that he has the necessary skills and personality to perform his job
well, and to see if he or she requires any sorts of training.

3. Organisational Analysis: We focus on what is the strategy of the organisation and how
training is important in order to achieve that strategy and in turn the goals of the organisation.
E.g. Company might be technologically expanding, thus requiring additional training for
employees.

4. Competency Model: It consolidates in one diagram, a precise overview of the

competencies needed to perform the job well. This includes the Roles, Area of Expertise and
Foundational (starting level) Competencies.

5. Training Needs of Current Employee

Performance Analysis is the process of verifying whether if there is any performance
deficiency and determining if the employee should correct such deficiencies through training
or some other means.
First step is to compare the actual performance with the expected performance, in-turn
determining any deficiencies. Apart from that Job Performance Data, Observations,
Interviews with employee, Attitude Surveys can help determine the performance gap.

Once this is done, now it’s important to determine whether training will help improving
performance or it would prove futile as lack of skills might not be the only reason for
downfall of performance.
Designing Training Program
Once the results of the need analysis are available, the manager can design the training
program.
This entails setting the training objectives, working out a training program budget and
deciding what the content and training methods will be.
● Budget of program would include development costs (HR specialist), Direct Cost and
Indirect (overhead) cost of trainers’ time, participant compensation, and cost of
evaluating the program.
● Budget will help determine the actual design of the program. Design means deciding
on the content (courses and instruction) as well as on how to deliver the training,
on-the-job or via the Web.
● Employers can create their own content or select offline and online content, which is
already made, which might also be free.

Methods of Training
1. On-The-Job Training
Have a person learn a job by actually doing it. In Coaching or Understudy method, the
supervisor trains the employee who learns by observing. Job Rotation method involves
employee moving from job to job at planned intervals.

2. Apprenticeship Training
People become skilled workers through a combination of formal learning and long term on
the job training. It traditionally involves the apprentice studying under the
tutelage(instruction)of a master craftsperson.
3. Informal Learning
Learning by informal means can be done by performing the job daily in collaboration with
colleagues. Managers don’t manage informal learning but can ensure that it takes place.

4. Job-Instruction training
It consists of a logical sequence of steps to deliver the training. The steps show trainees what
to do and the key points show how it is to be done.

5. Lectures
Lecture is the means of presenting knowledge to a large group of trainees. Ex. When a sales
force needs to know about a new product feature.

6. Programmed Learning
It is a step-by-step self-learning method which involves presenting questions to the learner,
allowing person to respond and then providing feedback on the accuracy of answers.
This helps the person learn at his own pace and get immediate feedback.

7. AV based learning
It involves techniques like DVD, Firms, PPT’s for learning. This is helpful for delivering
complex demonstrations in a simple manner.
8. Vestibule Training
Trainees learn on the actual or simulated equipment that they will use on the job but are
trained off the job. This is useful when training on the job is costly or dangerous. E.g.
Assembly Line workers.

9. Tele training & Video-conferencing

Trainer at central location teaches employees at remote location via televised hook-ups. E.g.
Using Satellite Television. While Video-conferencing facilitates training via live cameras.

10. EPSS
Electronic Performance Support System are computerized tools that automate training,
documentation and phone support. Ex. Dell service rep when faced with a customer with
computer problem are aided with EPSS. It takes a person step by step through an analytical
sequence.

11. Computer Based

Trainers use interactive Computer based systems to increase knowledge or skills. Interactive
multimedia training using text, video, graphics, animation can help produce innovative
training environments.

12. Simulated
This encompasses Virtual Reality Games, Animated Guides, Online Role play and various
such techniques for training.

13. Internet Based Training

Online Courses are made available to employees on the Internet, Learning Portal may be
developed by organisation, to deliver the right selective training courses.
Virtual Classroom uses special software to enable multiple remote learners to participate in
live audio & visual discussions.

14. Lifelong & Literacy Training

Lifelong training means providing employees with continuing learning experience over their
tenure, to consistently expand their horizons.
Literacy Training ensures delivery training to those with learning disabilities, imparting them
skills to read, write and do arithmetic necessary for a job.

15. Voice & Accent Training

Call centres train employees to fit their voice as per the job position, whereas Accent training
focuses on modifying the speech pattern as necessary to make calls abroad.

Evaluating Training
Controlled Experimentation involves having a training group and a no-training group. Data is
obtained both before and after the group is exposed to training and before and after a
corresponding work period in the no-training group. This helps in evaluating the changes that
have resulted in the performance of the training group.
4 Basic outcomes can be measured to Evaluate Training:
Reaction (Did employee’s like the program)
Learning (skills that they were supposed to learn)
Behaviour (changes in behaviour due to training)
Result (in terms of objectives set)

Management Development
It is an attempt to improve managerial performance by imparting knowledge, changing
attitudes or increasing skills. It consists of
I. Assessing the company’s strategic needs
Ii. Appraising Manager’s current performance
Iii. Developing Managers
Development is usually a part of the succession planning, and both stem from the employer’s
strategy, vision and HR plans. Its purpose can also be to fill top positions

Methods of Management Development are:

1. Managerial On-the-Job Training: This includes:
a. Job Rotation: Moving managers from department to department to broaden their
understanding of business and test their abilities.
b. Coaching/Understudy Approach: The trainee works directly with a senior manager (or
the one who he will replace), and the manager is responsible for this training.
c. Action Learning: It gives managers time to analyse and solve problems in department
other than their own. The problems would be real-world business problems that extend
beyond their usual areas of expertise.

2. Off-the-Job Management Training & Development

a. Case-Study Method: A written Description of an organisational problem is presented
to a trainee, who then analyses the case, diagnoses the problem and presents his or her
findings and solution.
Integrated Case Scenarios expand the case analysis by creating long-term comprehensive case
situations.
B. Management Games: Trainees are divided into 5-6-person groups each of whom compete
in a simulated marketplace. They must take several decisions like: How much to spend on
advertising, how much to Produce, how much inventory to maintain etc.
Here People learn by being involved and help develop their problem solving and team skills.
C. Outside Seminars: Web-Based and traditional classroom management development
seminars and conferences are also a method for delivering learning and fostering skill
development as desired.
D. University Related Program: Universities provide executive education and continuing
education program to students who are experienced managers.
E.g. Harvard offers Advanced Management Program while IIM, XLRI etc. are colleges
which associate with Indian firms for customized programs.
3. Performance Management System

Concept of Performance Appraisal (Performance Management described later)

Performance Appraisal means evaluating an employee’s current or past performance relative
to his or her performance standards. Essentially it involves setting work standards, assessing
the employee’s performance relative to those standards and providing feedback to employee
for motivating him to eliminate performance deficiencies or to continue to perform above par.

Uses of Performance Appraisal

1. Most employers base pay and promotional decisions on the employee’s appraisal.
2. Appraisal lets the boss and subordinate develop a plan for correcting any deficiencies
and reinforcing the things that subordinate does right.
3. Appraisals serve a useful career planning purpose. They provide an opportunity to
review the employee’s career plans in light of his strengths and weakness’.
4. Appraisals play an integral role in employer’s performance management process
Performance Management: It is the continuous process of identifying, measuring and
developing the performance of individuals and teams and aligning their performance with the
organization’s goals.
5. In Indian firm’s where HRIS (HR information systems) are not developed, PMS
(Performance Management System) reports serve as the source of most of current employee
information.

Steps
I. Define the employee’s job and performance criteria. Make sure you understand the duties
and the standards of the job being appraised.
II. Appraising the performance forms the next step, where actual performance is compared
with the standard performance.
III. Feedback Session must follow, where you discuss the progress and performance of your
subordinate and make plans for any development that is required.

Performance Management Methods

1. Graphic Rating Scale Method: It lists the traits such as teamwork and a range of
performance values (very bad to very good) for each trait. The supervisor then rates
the subordinate on each trait by selecting the value best suited to the employee. The
values are then totalled. (The traits maybe actual job duties as well as competencies)
2. Alternation Ranking Method
It involves ranking employees from best to worst on a particular trait, since it’s easier to
distinguish between the worst and the best employee. This results in forming an ordered list
of employees from best to worst in term of a particular trait.

3. Paired Comparison Method

For every trait you pair and compare every subordinate with every other subordinate. If you
have to select between A & B, then mark A with +ve and B with -ve (given A is better). At
the end total up the no. of + & - for each employee.
4. Forced Distribution Method (Rank & Yank)
This involves setting certain percentage brackets each representing a certain level of
performance. E.g. All the employees may be put in the top 5%, middle 90% and bottom 5%
brackets depending upon their performance. It is possible that bottom % category may be put
on probation for some time and fired if no signs of improvement are seen.
Many employees see it as damaging morale yet many employers see it as convenient or
effective.
Employers must prevent this system from managerial abuse and protect it against unfairness
and bias claims.

5. Critical Incident Method

The supervisor keeps a log of negative and positive examples of a subordinate’s work-related
behaviour. Every 6 months or so, supervisor and subordinate meet to discuss the latter’s
performance using the incidents as examples. The list provides examples of what specifically
the subordinate can do to eliminate deficiencies.

6. BARS (Behaviourally Anchored Rating Scales)

BARS is an appraisal tool that anchors a numerical rating scale with specific examples of
good or poor performance distributed from good to bad on a rating scale.

7. MBO (Management by Objective)

MBO involves setting objectives for a subordinate and then appraising them on the basis of
how these objectives are met.

Factors that Distort Appraisal

1. Unclear Standards: If the traits and degrees of merit are ambiguous then appraisal
becomes distorted. Therefore, it is important to include descriptive phrases that define
or illustrate each trait.
2. Halo Effect: A supervisor’s general impression of the employee may impact the way
he rates his overall traits. An unfriendly employee may get rated lower on all trait
rather than just the behavioural ones. (BARS maybe used as a counter)
3. Central Tendency: Supervisors may stick to the middle when filing in rating scales,
while avoiding the highs and the lows, thus rating all the employees average.
(Ranking can be used)
4. Leniency or Strictness: Supervisors may rate all the employees consistently high or
low. This problem is severe in case of graphic rating scale. Ranking can be used to
distinguish clearly between high and low performers. (A Forced Distribution model
can also be used)
5. Recency Effect: Recent activities of the employees blind you to performance over a
longer period of time.
6. Bias: Purpose of Appraisal, Personality Trait of Supervisor, Inter-Personal
Relationships, Personal Characteristics of Subordinate, are factors which can induce
bias in an appraisal. Bias is inclination or prejudice against someone. (Multiple Raters
can be used)
 Who Should Do the Appraisal?
I.Immediate Supervisor: Best position to evaluate subordinate’s performance.
II.Peer Appraisals: Team members or fellow colleagues working with an employee
III.Rating Committees: 2-3 Supervisors
IV.Self-Ratings: Rating yourself (may result in overly positive ratings)
V.Appraisal by Subordinates (Upward Feedback): Helps top management diagnose
management styles and take corrective action with managers as required.
VI.360-degree Feedback: Ratings are collected from supervisors, subordinates, peers, internal or
external customers of a particular employee. (Prone to competitive tendencies resulting in
negative review from colleagues, and it may also be complex and lengthy)

Appraisal Interview
The appraisal takes place during an appraisal interview where the supervisor and subordinate
review the appraisal and make plans to remedy deficiencies and reinforce the strengths.

4 Types:
I. Satisfactory-Promotable: Objective is to discuss the person’s career plans and develop a
plan of action for educational/professional development.
II. Satisfactory-Not Promotable: Objective is to maintain satisfactory performance by finding
the right incentives such as extra time off, bonus, positive reinforcement etc.
III. Unsatisfactory but Correctable: Objective is to lay out an action plan for correcting the
performance.
IV. Unsatisfactory-Uncorrectable: 2 options exist, either to tolerate the person’s poor
performance or to dismiss him right away.

How to Conduct an Interview?

Review the person’s Job Description, compare performance to standard, review previous
appraisal and give him a week’s notice to review his or her work. Conduct interview in a
private place without interruptions.

1. Talk in terms of objective work data. (quality records, absences)

2. Don’t get personal. (Don’t compare to other people, or tell that you are too slow,
instead compare with the standards)
3. Encourage the person to talk
4. Get Agreement (on how things will be improved, and clarity in what he is doing right
or wrong)
The subordinates should not feel threatened during the interviews, they should have an
opportunity to present their ideas to steer the course of interview and have a helpful and
constructive supervisor conduct the interview.

How to Handle a Defensive Subordinate​: When you tell a person that his performance is
poor, he might react with denial which a defence mechanism is, through which he avoids
having to question his competence. Some might react with anger and aggression delaying the
confrontation (dealing) of the current problem.
The manager must recognize that the defensive behaviour is normal and attacking should be
avoided in such phase of emotions. If situation does not improve postponing works as a
solution, by giving sufficient time a more reactional reaction takes over. Moreover, the
Supervisor should avoid being a psychologist.

Even if the manager criticises a subordinate ensure that this dignity remains intact. Provide
examples of critical incidents and specific suggestions of what to do and why. Avoid planned
criticism which the employee may expect periodically. Criticism should be objective and free
of personal bias.

A formal written warning can be presented in the face of weak performance, which serves as
a wake-up call for the employee and can help in case of legal matters (if employee decides to
sue).

Performance Management​: It is a continuous process of identifying, measuring, and

developing the performance of individuals and teams and aligning their performance with the
organisation’s goals.
Ex. Toyota (Kentucky) plant does not use the appraisal technique. Here, the teams of
employees monitor their own results and continuously align those results with the team’s
standards of work and with the plant’s overall quality and productivity needs.

(Different from Appraisal - Continuous vs. One-time, PMS is goal directed while appraisal
might be a formality in cases, PMS involves modifying how employee and team get work
done which may involve additional training, work procedures, while Appraisal might not be
that broad)

(Why use it: Total Quality Management (TQM): While appraisals focus on what’s wrong,
PMS aims at feedback and corrections, Appraisals might be tense and counterproductive,
Strategic Planning helps in achieving strategic goals of the organisation as a whole)

(Basic Blocks of PMS: 1. Direction Sharing: communicating the company’s higher-level

goals and breaking them into team/individual goals, 2. Goal Alignment: Establishing a link
b/w a Manager’s goal and his company’s goal, 3. Ongoing Feedback: Face to Face and
computer-based feedback on the progress towards the goal, 4. Coaching and Development
support, 5. Rewards, Recognition & Compensation ensuring to keep employee on track.)

4. ​Career Planning
Career: It may be defined as a sequence of jobs that constitute what a person does for a
living.
Career Planning: It is a process of systematically matching career goals and individual
capabilities with opportunities for their fulfilment.
Career Plan: An individual’s choice of occupation, organisational and career path.

It encourages individuals to explore and gather information which enables them to build
competencies (ability to do something successfully), make decisions, set goals and take
action. It is an important part of HRD. (developing key competencies to enable individuals to
perform their jobs better)

Steps:
1. Prepare Inventory (Skill inventory & Interest Inventory)
2. Identify individual career needs:
a. You are willing and suitable to take up higher responsibility and can be promoted
b. You have willingness and potential to take higher responsibility but require more
training/experience
c. You have potential to take higher responsibility but lack interest
3. Analysing career opportunities and developing a career path
4. Matching individual career needs with career opportunities.
5. Accordingly implementation programme must be prepared.
6. Review career plans and make future projections, analyse job descriptions, analyse training
and development programs.

Career Anchors
It includes the talents, motives, values and attitudes which give stability and direction to a
person’s career.
(It is one element in your self-concept that you will not give up, even in the face of difficult
choices.)
Self-Concept: The idea of self-constructed from the beliefs one holds about oneself and the
responses of others.

Career Anchor concept was developed by Edgar Schein, to help people recognize their
preference for certain areas in their job.

The anchors are as follows:

1. Technical/Functional Competence: This kind of person likes being good at something
and will work to become an expert. They like to be challenged in order to use their
skills to meet that challenge.
2. Managerial Competence: They like problem solving and dealing with other people.
They thrive on responsibility.
3. Autonomy/Independence: These people have a primary need to work under their own
rules and avoid standards, while preferring to work alone.
4. Security/Stability: These people seek stability and continuity as a primary factor of
their lives and avoid risk. They may spend their life in a particular career.
5. Entrepreneurial Creativity: They like to invent things, be creative and run their own
business. They differ from those who seek autonomy and will share their workload.
They find ownership very important. They get bored easily and wealth is a sign of
success for them.
6. Service/Dedication to a cause: Driven by how they can help other people using their
talent. They may work in public services on in human resources.
7. Pure Challenge: Driven by challenge, they seek constant stimulation and difficult
problems that they can tackle. Will change jobs when current one gets boring.
8. Lifestyle: They focus on their lifestyle, balance work and life, and may take long
periods of time off work to indulge in passions like travelling.
Career Life Stages
Each person’s career goes through stages and the stage you are in will influence your
knowledge and preference for various occupations.
1. Growth Stage: Birth to Age 14, person develops self-concept by interacting with those
around him. At the beginning of this stage, children experiment different ways of
acting, forming impressions of how people react to different behaviours developing
their identity. At the end, the adolescent begins to think realistically about alternative
occupations.
2. Exploration Stage: 15-24, the person seriously explores various occupational
alternatives. He tries to match these alternatives with what he or she has learned about
them and his own interest and abilities from school, leisure activities and work. Broad
choices are made during the beginning of this period, and seemingly appropriate
choices are made as person tries for a beginning job.
3. Establishment Stages: 24 to 44, forms the heart of work life for many. A suitable
occupation is found and the person engages in activities that help him or her earn a
permanent place in it. Person continually test his or her capabilities and ambitions
against those of the initial occupation choice.
(Trial Substage - determines whether chosen field is suitable or not
Stabilization Substage - occupation goals are set and individual does explicit career planning
Mid-Career Crisis Substage - Make reassessment of progress relative to original ambitions
and goals, they may find that they are not going to realize their dreams, while deciding the
importance of work in their lives)
4. Maintenance Stage (45-65): Created a place in the world of work and efforts are directed
towards maintaining that place.
5. Decline Stage: Retirement approaches, people have to accept reduced levels of power and
responsibility and learn to accept their new roles and mentor for younger individuals. Then
the person may find alternative use of his time.

5. Compensation

Employee Compensation: It refers to all forms of pay going to employees and arising from
their employment. It has 2 main components: Direct Financial Payments (wages, salaries,
incentives, commissions and bonuses) & Indirect Financial Payments (paid insurance, leave
travel concessions)

Steps of Determining Compensation

1. Conduct a Salary Survey

Here employers use survey data to price Benchmark Jobs i.e. the jobs which remain
consistent across Industry in terms of salary, responsibilities etc. which in turn help in pricing
related jobs based on their importance to the firm.
Second, employers typically price 20% or more of their positions directly in the marketplace
based on formal or informal survey of what comparable firms are paying for comparable
jobs.
Third, surveys also collect data on benefits like insurance, sick leave and vacations to make
decisions on employee benefits.
(Surveys can be formal - collect info from other employers & informal - internet surveys)

2. Job evaluation
Job Evaluation aims to determine a job’s relative worth. It is a formal and systematic
comparison of jobs to determine the worth of one relative to the other. This helps in
determining the salary structure. Jobs that require greater qualifications, more responsibilities
and more complex job duties should receive more pay than jobs with lesser requirements.

There are certain basic factors which jobs have in common, called Compensable Factors,
which help in comparing jobs and determining their pay.

Job evaluation is useful when there is dissatisfaction reflected in high turnover (quitting jobs),
work stoppages, or arguments which may result in from paying employees un-equally.

1. Ranking Method: Involves ranking jobs on the basis of Job Analysis, followed by
comparing them on a number of factors.
2. Job Classification: Classifying jobs into groups, each group representing roughly the
same value in-terms of their pay.
3. Point Method: We identify compensable factors, and the degree to which they are
present in a particular job, and then identify the degree to which each compensable
factor is present in the job. (quantitative technique)
4. Factor Comparison: You rank each job several times once for every compensable
factor.

3. Group Similar Jobs into Pay Grades

A pay grade is comprised of jobs of approximately equal difficulty or importance as
established by job evaluation. Similar kinds of jobs are grouped together into these grades.

4. Price Each Pay Grade - Wage Curves

Assign pay rates to pay grades. Wage Curve shows the pay rates currently paid for jobs in
each pay grade relative to the points or rankings assigned by job evaluation.
The purpose of Wage curve is to show relation between the value of job as determined by job
evaluation and the current average pay rates for your grades.
5. Fine-Tune Pay Rates
I. Developing Pay Ranges: This shows the minimum, maximum and midpoint pay rates for a
pay grade. (Since pay rate is not fixed but varies over a range for a pay grade)

II. Correcting Out-of-Line Rates: Wage Rate for a job may fall of the wage line (as shown
above). This means that the average pay for that job is too high or too low relative to other
jobs in the firm.
For underpaid jobs, raise the wages to the minimum range for their pay grade.

For overpaid jobs, freeze the rate paid until a general salary increase brings other jobs in line,
or we can transfer or promote the employees to jobs for which they can be legitimately paid
at current pay rate.

Components of Pay Structure

The employee benefit package contains several things apart from the pay benefits.
The pay structure in India is as below:
1. Basic Pay: The floor of the basic pay is the minimum wage. The basic pay is the most
stable and fixed as compared to the dearness allowance and annual bonus which
change due to external factors.
2. Dearness Allowance: Changing pattern of prices and consumption result in real wages
to fluctuate, therefore the goods and services that can be bought can decrease or
increase with the same pay. Therefore, dearness allowance is a feature that allows for
adjustment of wages for the inflation rates.
3. Overtime Payment: Employees are entitled to overtime payment amounting to twice
the ordinary rate of their wages for the work done in excess of 9 hours on a day for
more than 48 hours in any week.
4. Annual Bonus: This act is applicable as per the enactment of the Payment of Bonus
Act, 1965.
5. Incentive Schemes: Inducements offered to employees to put forth their best in order
to maximise production results. Types of incentives are discussed below.
6. Fringe Benefits: Supplementary benefits available to the employees are called Fringe
Benefits. (Discussed at end of Unit 3)

Factors influencing Compensation levels

Compensation is the monetary and non-monetary rewards given to the employees in return
for their work done for the organization. There are internal and external factors affecting
employee compensation.

Internal Factors (within the organisation)

1. Ability to Pay: Big companies can pay higher compensation, while smaller companies
may manage to pay only the market rates
2. Business Strategy: If strategy calls for skilled workers then a higher compensation
must be paid.
3. Job Evaluation: It helps in deciding the pay grades and pay rates. Whereas
Performance Appraisal can help an employee earn extra based on performance.
4. Employee: Employee himself can influence compensation based on his performance,
his experience and his potential.

External Factors (Outside the organisation)

1. Labour Market: Demand & Supply factor influence the wage.
2. Going Rate: Compensation is also decided on the amount that prevails in the industry.
3. Productivity of Firm: Increase in production requires greater productivity and more
working hours thus increasing the compensation.
4. Cost of Living: Compensation for same position is different in California & Delhi,
due to difference in the cost of living.

Wage Differentials​: Wages paid to workers vary greatly. These wage differentials are mostly
the result of differences in worker ability and the worker’s effort in performing the job but
may also result if job is unionized.
● Occupation Wage Differentials exist because certain professions require more
education and training.
● Compensating Differentials exist because some jobs pay more as they are less
desirable. E.g. Construction over retail sales.
● Performance Pay: Many occupations pay a wage rate corresponding to the
performance, such as sales or managerial positions, due to higher qualifications and
productivity of workers.

Incentives
Incentives can be defined as rewards for greater efficiency of employees.
Incentives are of 2 types:
A. Monetary or Financial Incentives
i. Pay and Allowances: Increment in salary or Granting Allowance (money
paid to meet expenses)
ii. Profit Sharing, Stock Option, Gain Sharing: (​Described Below)
iii. Bonus & Commission: Bonus is a one-time extra reward for high
performance, Commission is a percentage of Sales, paid to the salesperson.
iv. Productivity based Wage incentive: Higher wages for higher productivity
v. Retirement Benefits, Health Benefits, Fringe Benefits (Described at the
end)

B. Non-Monetary (Aimed at fulfilling esteem and self-actualization needs)

1. Status: Rank, Authority or Responsibility attached to a job with respect and prestige.
 2. Career Advancement: Promotion Opportunities to improve the skill and efficiency of
employees.
3. Job Enrichment: Engaging employees in variety of jobs, which challenge them and
offer greater autonomy.
4. Recognition & Job Security: Giving special respect to subordinates, and Job Security
is having safety and security over the job.

Profit Sharing Plans​: Plans in which all or most employees receive a share of the firm’s
annual profits. Current Profit sharing plans (Cash Plans) have the employees share a portion
of the employer’s profits quarterly or annually. A deferred profit sharing plan involves the
employer putting cash awards into trust accounts for the employee’s retirement based on a
percentage of the employee’s salary or his contribution to company profits.

Scanlon Plans
It is a type of Gain Sharing Plan, which engages many or all employees in a common effort to
achieve a company’s productivity objectives, with any resulting cost-savings gain shared
among the employees and the company.

First, Scanlon’s ​philosophy of cooperation​ assumes that managers and workers must rid
themselves of us and them attitude to foster ownership of the company.
Second feature is ​Identity,​ i.e. the company must articulate its mission and employees must
understand it deeply.
Third, ​Competence, ​high level of competence is expected from employees.
Fourth, ​involvement system, ​employees present improvement suggestions to the apt
department level committees.
Fifth, ​sharing of benefits formula, ​if a suggestion is implemented and successful, then all
employees share in 75% of savings.

Employee Stock Option Plan (ESOP) & Employee Stock Purchase Scheme (ESPS)
ESOP: These are companywide plans in which the employer contributes shares of its own
stock to a trust established to purchase shares of the firm’s stock for employees.
The limit set is 15% of the compensation. The trust holds the stock in individual employee
accounts and distributes it to employees upon retirement, assuming the person has worked
long enough to assume ownership of the stock.

ESPS: It is a company run program in which participating employees can purchase the
company shares at discounted price. Employees contribute to the plan through payroll (sum
total of compensation) which build up between the offering data and the purchase date. At the
purchase date, the company uses the accumulated funds to purchase shares in the company on
behalf of the participating employee.

(ESOS & ESPS are regulated by SEBI guidelines.)

Social Security​: It provides 3 types of benefits; family retirement benefits provides an income
if you retire at age 62 or thereafter and are insured under the Social Security Act (US).
Second is the survivor’s or death benefits which provides monthly payments to your
dependents regardless of your age at death. Third is the scheme providing payments to
employees who become disabled to meet their requirements.

Health​:
I. Coverage - Employer health plans provide at minimum basic hospitalization, surgical and
medical insurance. They also can cover health related expenses like doctor visits, eye care,
dental services etc.
II. HMO’s: Employers offer membership in Health Management Organisations as a
hospital/medical insurance option.
III. PPO’s: Preferred Provider Organisation is a cross between HMO’s and tradition
doctor-patient arrangement, where group of health care providers contract with employers
and insurance companies to provide services at reduced fees.
Iv. Mental Health benefits are also covered by many employers.

Retirement​: Benefits provided once the person retires.

Pension Plans: Financial programs providing income to individuals in their retirements. There
are defined benefits plan where employees know ahead of time the pension benefits that they
will receive. Defined Contribution plans specify what contribution the employee will make to
the employee’s savings fund.

Other Benefits​:
I. Work-Life Benefits Subsidized Child Care, Sick Child Benefits, Elder Care, Time off are
some of the benefits offered,
II. Job Related Benefits: Subsidized Transportation, Food Services, Educational Subsidies.
III. Flexible Benefits Program: Flexible Work Schedules, Compressed Workweeks (fewer
days), Workplace Flexibility (receiving technology for convenience).
 UNIT 4
1. ​Industrial Relations

Introduction
The term Industrial Relations explains the relationship between employees and management
which stems directly or indirectly from the union-employer relationship.

It also includes the processes through which these relationships are expressed (collective
bargaining, grievance and Dispute settlement) and the management of conflict between
employers, workers and trade unions when it arises.

Trade Unions
Trade unions are association of workers formed to represent their interests and improve their
pay and working conditions.

Types
1. Craft Unions: Represent Workers with particular skills like Plumbers or Weavers.
2. General Unions: Include workers with a range of skills and from a range of industries.
3. Industrial Unions: Seek to represent all the workers in a particular industry.
4. White Collar Unions: Represent particular professions of White Collar workers i.e.
those who work in office or in professional environment.
Unions belong to National Union Organisation, in India it is All India Trade Union Congress
(AIUTC)

Role
1. Perform Collective Bargaining (described below)
2. Employee Welfare: They represent workers’ interests and aim at securing benefits
such as wages, work-life balance, job security etc. for the unionized workers.
3. Unfair Practices: Keep a check on the unfair labour practices of the employers. It is
unlawful for employers to dominate a union, discriminate against workers engaged in
union or victimize those who file charges against them. Unions ensure that the
employers comply with the law and can file case if they don’t.
4. Legislation: They play a key role in developing labour laws and regulations for
effective worker protection. They push for regulation in areas that concern the
employees in the workplace in terms of safety and security of employees.
Functions
1. Increasing cooperation and well-being amongst workers: Unifying the bond between
workers as a counter to extreme division of labour. Promoting unity and friendliness
and discussion problems of workers.
2. Securing Facilities for Workers: Trade unions fight on behalf of workers to ensure the
right facilities are given by management.
3. Establishing contact between Worker and Employers: Due to large sized industries,
workers may lose out effective means to express grievance. Trade unions help in
bridging the gap by bring to notice the grievances and difficulties of employees in
front of the employer.
4. Safeguard Interests of Workers: Ensure that exploitation of workers does not take
place, and they receive their benefits such as increase in wages, sick leaves, accident
compensation. Trade unions thus protect their interest and provide them security.

Problems faced by trade unions

1. Small Size: Smaller size means lesser bargaining power.
2. Poor Finance: Small size of trade unions has an impact on its financial health,
whereas the per member expenditure is also low, as a result the unions cannot
undertake welfare activities.
3. Politicisation: The trade union movement in India has a defect, where the leadership
has been provided by outsiders especially the professional politicians. Thereby, the
unions are more engrossed in catering to their political leader’s party rather than
protecting their workers’ interests. (The political leaders may possess little knowledge
of the labour problems, industry scenario and little general education.)
4. Multiplicity of Unions: Unions are multiple based on craft, creed and religion. E.g.
DTC has 50 unions, while SAIL has 240 unions. This may lead to inter-union rivalry
within the organisation, thus fragmenting the workers.
5. Lack of Enlightened Labour Force: Lack of Education, Division by
race-religion-language-caste, lack of self-consciousness and non-permanent class of
workers has resulted in a labour force which is not fully aware of their rights and how
to avoid exploitation.

2. ​Industrial Dispute
Concept
According to Industrial Disputes Act, 1947, industrial dispute means any dispute or
difference between 2 employers or 2 workmen or employer-workmen, which is connected
with the employment or non-employment or the terms of employment and conditions of
employment of any person.

However, in practice, industrial disputes mainly relate to the difference between the workmen
and the employers. Disputes differ from discipline and grievance which focus on individuals,
while dispute focuses on collectivism of individuals. (interest of majority workmen is
involved)
Types

Interest Disputes arise out of terms and conditions of employment. E.g. Layoffs, wages and
bonuses etc.
Grievance or Right Dispute: Arises out of the grievances of employees such as on issues
related to Payment of Wages, Fringe Benefits, Over time etc. (also called Individual
Disputes)

Manifestation of Disputes
● Strikes: A spontaneous and coordinated withdrawal of labour from production.
Primary strikes are aimed against employers.
Secondary strikes (sympathy strikes) pressure is applied not against the employer but against
the third person who has good relations with the employer.
● Lock-Outs: Counter to strikes, here the employer shuts down the place of work till the
workers agree to resume work on their conditions.
● Gherao: It means to surround. A physical blockage of managers by encirclement
preventing any movement. The person confined can be humiliated, without
food-water and toilet facility for long periods of time. It is illegal.
● Picketing and Boycott: Workers through display signs, banners and placards draw
attention of the public that a dispute exists. Workers prevent their colleagues from
entering the workplace, persuading them to join the strike.
Boycott aims at disruption the normal functioning of the organisation and is a form of
non-cooperation.

Causes
I. Economic Causes
Wages, Bonus, Dearness Allowance, Working Conditions & Hours, Leaves etc.
II. Non-Economic Causes
Recognition of trade unions, Victimisation of workers, Ill-treatment by supervisory staff,
Political Causes.

Dispute Settlement
1. Conciliation
It is a form of mediation. Mediation is the act of making active effort to bring the two
conflicting parties to compromise. Conciliator plays a passive and indirect role, and his
functions are provided under the law.
Therefore, Conciliation is the practice by which service of a neutral party are used as a means
of helping the disputing parties to reduce the extent of their differences and to arrive at an
amicable solution.

2. Court of Inquiry
Government can appoint a court of inquiry to enquire into any matter connected with or
relevant to the industrial dispute. The court is then expected to submit its report within six
months.
3. Voluntary Arbitration
The dispute is settled through an independent person chosen by the parties involved mutually
and voluntarily. Arbitrators derive power to settle the dispute from the agreement that the
parties have made between themselves.

4. Adjudication
It consists of settling the dispute via an intervention of third party appointed by the
government. This can be done only if both the employer and the recognised union agree to do
so. (in case there is no consent of the parties, it is called as Compulsory Adjudication)

Grievances
Any dissatisfaction or feeling of injustice related to one’s employment situation brought to
the attention of the management.

Dissatisfaction is anything that disturbs an employee whether or not expressed in words.

Complaint is a spoken or written dissatisfaction brought to the attention of the supervisor.
Grievance is a complaint formally presented to a management representative or a union
official.

Causes of Grievance
1. Economic: Demanding individual wage adjustments, where employees feel they are
being paid less compared to others.
2. Work Environment: Undesirable work conditions.
3. Supervision: Attitudes of supervisor towards employee such as bias, favouritism,
nepotism, caste or regional discrimination.
4. Organizational Change: Change in organisational policies can result in grievances.
5. Employee Relations: Employees may be unable to adjust with their colleagues,
feeling neglected and victimized.
6. Misc.: Violation in respect of promotions, safety standards, transfer, disciplinary rules
etc.

Grievance Procedure
Grievance procedures differ from firm to firm. Some contain simple 2 step procedures, where
the grievant and company representative meet to discuss the grievance. If they don’t find a
solution, grievance foes before a third-party arbitrator, who then makes the decision.

While Grievance procedure can also contain 6 or more steps. This involves the informal
meeting of grievant and supervisor, which when fails is followed by a formal grievance
resulting in a meeting of grievant and supervisor’s boss. Next the grievant, union
representative meet with highest level managers. The grievance if not solved goes towards
arbitration.

Industrial Disputes Act, 1947 calls for a GRM (Grievance Redressal Machinery) within
organisation.
 Aspect of Discipline & Disciplinary Procedure
Purpose of Discipline is to encourage employees to behave sensibly (adhering to rules and
regulations) at work. Discipline is necessary when employee violates a rule.

Basics of Fair & Just Disciplinary Process

I. Rules & Regulations: They address issues such as theft, destruction of company property,
drinking on the job and insubordination (defiance of authority).
They inform the employees ahead of time of what is acceptable and unacceptable behaviour

II. Progressive Penalties: It is a second pillar of effective discipline. It ranges from oral
warnings to written warnings to suspension from the job to discharge. The severity of the
penalty is a function of the type of offense and the no. of times it has occurred.

III. Discipline without Punishment: Assuming that No one likes to be punished, and
punishment may have a short-term compliance, Non-punitive discipline serves as a solution.
An oral reminder maybe issued, if another incident arises within 6 weeks then issue a formal
written reminder, if another incident occurs within next 6 weeks then tell the employee to
take a 1 day paid leave, if behaviour re-occurs then dismiss.

Criminal behaviour or fighting may result in immediate dismissal.

3. ​Collective Bargaining

Concept
It is a process where the employer and employee representative meet and negotiate with each
other over the wages, hours and terms & conditions of employment, executing a written
contract with agreement between the 2 parties.

Types
1. Conjunctive or Distributive Bargaining: Both the parties try to maximize their
respective gains. It is based on principle “my gain is your loss and your gain is my
loss”, thus one party wins over the other. Here, the employee wishes to increase
wages or bonus, employer wishes to increase workload or reduce wages.
2. Co-operative or Integrative Bargaining: Both parties try to resolve the problems and
reach an amicable solution. E.g. Workers agree to low wages, company adopts
modernized methods to increase production.
3. Productivity Bargaining: Workers are given the incentives or the bonus for increased
productivity. Both employer and employee benefit by increased production and
increase pay respectively.
4. Composite Bargaining: Workers express concern over working conditions,
recruitment and training policies, environmental issues etc. with the intention to
safeguard their interests.

Process
 1. Preparation: Both parties prepare the negotiations to be carried out from their sides.
Each member should be well versed with the issues to be raised and have adequate
knowledge of labour laws.
2. Discuss: Both parties decide the ground rules that will guide the negotiations as well
as the negotiators from both the sides. The issues of the meeting are identified.
3. Propose: The chief negotiator begins the conversation with an opening statement
followed by both parties putting forth their initial demands.
4. Bargain: The negotiation begins, each party tries to win over another. It can go on for
days, or the solution may be found soon. Else a third part can also intervene.
5. Settlement: Both parties agree on a common solution. A mutual agreement is formed
and signed by each party.

Problems
1. Surface Bargaining: Going through the bargaining without the intention of completing
an agreement.
2. Inadequate Concessions: Unwillingness to compromise, even though no one has to
make a compromise
3. Dilatory Tactics: Refusal to meet with the union does not satisfy the duties of an
employer.
4. Imposing Conditions: Attempting to impose conditions that are unreasonable is bad
faith.
5. Committing unfair labour practices during negotiations: Reflect poorly upon the good
faith of the guilty party.

Essentials of effective collective bargaining

Good-Faith bargaining is the cornerstone of effective labour-management relations. It means
that both parties communicate and negotiate, they match proposals with counter proposals
and take a reasonable effort to arrive at an agreement.

1. Be sure to set clear objectives for every bargaining item and make sure to understand
the reason for each.
2. Be alert of the real intentions of the other party.
3. Do not hurry and be a good listener in order to understand other parties’ perspective.
4. Build a reputation for being fair and firm and assertive not aggressive.
5. Remember that collective bargaining is not a zero-sum game (only 1 winner) and
involves compromise as well.

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