CHAPTER 1

Concept of HRM and Objectives

Before we define HRM, it seems pertinent to first define the term ‘human resources’. In common
parlance, human resources means the people. However, different management experts have defined
human resources differently. For example, Michael J. Jucius has defined human resources as “a whole
consisting of inter-related, inter-dependent and interacting physiological, psychological, sociological and
ethical components”.

According to Leon C. Megginson “From the national point of view human resources are knowledge,
skills, creative abilities, talents, and attitudes obtained in the population; whereas from the view-point of
the individual enterprise, they represent the total of the inherent abilities, acquired knowledge and skills
as exemplified in the talents and aptitude of its employees”.

The National Institute of Personnel Management (NIPM) of India has defined human

resource/personnel management as “that part of management which is concerned with people at work and
with their relationship within an enterprise. Its aim is to bring together and develop into an effective
organisation of the men and women who make up an enterprise and having regard for the well-being of
the individuals and of working groups, to enable them to make their best contribution to its success”.

According to Decenzo and Robbins “HRM is concerned with the people dimension in management.
Since every organisation is made up of people, acquiring their services, developing their skills, motivating
them to higher levels of performance and ensuring that they continue to maintain their commitment to the
organisation are essential to achieving organisational objectives. This is true, regardless of the type of
organisation-government, business, education, health, recreation, or social action”.

Thus, HRM can be defined as a process of procuring, developing and maintaining competent human
resources in the organisation so that the goals of an organisation are achieved in an effective and efficient
manner. In short, HRM is an art of managing people at work in such a manner that they give their best to
the organisation for achieving its set goals.

Objectives:
The primary objective of HRM is to ensure the availability of right people for right jobs so as the
organisational goals are achieved effectively.

This primary objective can further be divided into the following sub-objectives:

1. To help the organisation to attain its goals effectively and efficiently by providing
competent and motivated employees.
2. To utilize the available human resources effectively.
3. To increase to the fullest the employee’s job satisfaction and self-actualisation.
4. To develop and maintain the quality of work life (QWL) which makes employment in
the organisation a desirable personal and social situation.
5. To help maintain ethical policies and behaviour inside and outside the organisation.
6. To establish and maintain cordial relations between employees and management.
Human Resource Management Process
Each organization works towards the realization of one vision. The same is achieved by formulation of
certain strategies and execution of the same, which is done by the HR department. At the base of this
strategy formulation lie various processes and the effectiveness of the former lies in the meticulous design
of these processes. But what exactly are and entails these processes? Let’s read further and explore.

The following are the various HR processes:

1. Human resource planning (Recruitment, Selecting, Hiring, Training, Induction,

Orientation, Evaluation, Promotion and Layoff).
2. Employee remuneration and Benefits Administration
3. Performance Management.
4. Employee Relations.

The efficient designing of these processes apart from other things depends upon the degree of
correspondence of each of these. This means that each process is subservient to other. You start from
Human resource Planning and there is a continual value addition at each step. To exemplify, the PMS
(performance Management System) of an organization like Infosys would different from an organization
like Walmart. Lets study each process separately.

Human Resource Planning: Generally, we consider Human Resource Planning as the process of people
forecasting. Right but incomplete! It also involves the processes of Evaluation, Promotion and Layoff.

 Recruitment: It aims at attracting applicants that match a certain Job criteria.

 Selection: The next level of filtration. Aims at short listing candidates who are the
nearest match in terms qualifications, expertise and potential for a certain job.
 Hiring: Deciding upon the final candidate who gets the job.
 Training and Development: Those processes that work on an employee onboard for his
skills and abilities upgradation.

Employee Remuneration and Benefits Administration: The process involves deciding upon salaries
and wages, Incentives, Fringe Benefits and Perquisites etc. Money is the prime motivator in any job and
therefore the importance of this process. Performing employees seek raises, better salaries and bonuses.

Performance Management: It is meant to help the organization train, motivate and reward workers. It is
also meant to ensure that the organizational goals are met with efficiency. The process not only includes
the employees but can also be for a department, product, service or customer process; all towards
enhancing or adding value to them.

Nowadays there is an automated performance management system (PMS) that carries all the information
to help managers evaluate the performance of the employees and assess them accordingly on their
training and development needs.
Employee Relations: Employee retention is a nuisance with organizations especially in industries that
are hugely competitive in nature. Though there are myriad factors that motivate an individual to stick to
or leave an organization, but certainly few are under our control.

Employee relations include Labor Law and Relations, Working Environment, Employee health and
safety, Employee- Employee conflict management, Employee- Employee Conflict Management, Quality
of Work Life, Workers Compensation, Employee Wellness and assistance programs, Counseling for
occupational stress. All these are critical to employee retention apart from the money which is only a
hygiene factor.

All processes are integral to the survival and success of HR strategies and no single process can work in
isolation; there has to be a high level of conformity and cohesiveness between the same.

HRM vs. Personnel Management

Personnel Management
Personnel Management is a part of management that deals with the recruitment, hiring, staffing,
development, and compensation of the workforce and their relation with the organization to achieve the
organizational objectives. The primary functions of the personnel management are divided  into two
categories:

 Operative Functions: The activities that are concerned with procurement,

development, compensation, job evaluation, employee welfare,
utilization, maintenance and collective bargaining.
 Managerial Function: Planning, Organizing, Directing, Motivation, Control, and
Coordination are the basic managerial activities performed by Personnel
Management.

From the last two decades, as the development of technology has taken place and the humans are replaced
by machines. Similarly, this branch of management has also been superseded by Human Resource
Management.

Human Resource Management

Human Resource Management is that specialized and organized branch of management which is
concerned with the acquisition, maintenance, development, utilization and coordination of people at
work, in such a manner that they will give their best to the enterprise. It refers to a systematic function of
planning for the human resource needs and demands, selection, training, compensation, and performance
appraisal, to meet those requirements.

Human Resource Management is a continuous process of ensuring the availability of eligible and willing
workforce i.e. putting the right man at the right job. In a nutshell, it is an art of utilizing the human
resources of an organization, in the most efficient and effective way. HRM covers a broad spectrum of
activities which includes:
  Recruitment and Selection
 Training and Development
 Employee Services
 Salary and Wages
 Industrial Relations
 Health and safety
 Education
 Working conditions
 Appraisal and Assessment

 The main difference between Personnel Management and Human Resource Management lies in their
scope and orientation. While the scope of personnel management is limited and has an inverted
approach, wherein workers are viewed as tool. Here the behavior of the worker can be manipulated as per
the core competencies of the organization and are replaced when they are worn-out.

On the other hand, human resource management has a wider scope and considers employees as the
asset to the organization. It promotes mutuality in terms of goals, responsibility, reward etc. that will help
in enhancing the economic performance and high level of human resource development.

In early centuries, when Human Resource Management (HRM) was not prevalent, then the staffing and
payroll of the employees were taken care of, by the Personnel Management (PM). It is popularly known
as Traditional Personnel Management. Human Resource Management have emerged as an extension over
the Traditional Personnel Management. So, in this article, we are going to throw light on the meaning and
differences between Personnel Management and Human Resource Management.

Difference
HUMAN
BASIS PERSONNEL
RESOURCE
MANAGEMENT
MANAGEMENT

The branch of
The aspect of management that
management that is focuses on the most
concerned with the effective use of the
work force and their manpower of an
Meaning
relationship with entity, to achieve the
the entity is known organizational goals
as Personnel is known as Human
Management. Resource
Management.

Approach Traditional Modern

 Treatment of
Machines or Tools Asset
manpower

Type of
Routine function Strategic function
function

Performance
Basis of Pay Job Evaluation
Evaluation

Management
Transactional Transformational
Role

Communication Indirect Direct

Collective
Labor
Bargaining Individual Contracts
Management
Contracts

Initiatives Piecemeal Integrated

Management
Procedure Business needs
Actions

Decision
Slow Fast
Making

Job Design Division of Labor Groups/Teams

Primarily on
mundane activities Treat manpower of
like employee the organization as
Focus hiring, valued assets, to be
remunerating, valued, used and
training, and preserved.
harmony.

HRM
Human Resource Management, shortly known as HRM refers to a systematic branch of management that
is concerned with managing people at work so that they can give best results to the organization. It is the
application of management principles to the people working in the organization. It aims at improving the
performance and productivity of the organization by finding out the effectiveness of its human capital.
Therefore, HRM is an art of placing the right person at the right job, to ensure the best possible use of
organization’s manpower.

The process involves an array of activities that begins with the recruitment, selection, orientation, &
induction, training & development, performance appraisal, incentives & compensation, motivation,
maintaining workplace safety, health & welfare policies, managing relationship with the organization,
managing change.

HRD
The term Human Resource Development or HRD  refers to the development of people working in an
organization. It is a part of HRM; that aims at improving skills, knowledge, competencies, attitude and
behaviour of employees of the organization. The purpose of the HRD is to empower and strengthen the
abilities of the employees so that their performance will get better than before.

Human Resource Development involves providing such opportunities to the employees that will prove
beneficial in their all around development. Such opportunities include training & development, career
development, performance management, talent management, coaching & mentoring, key employee
identification, succession planning and so on. Nowadays, there are many organizations work for the
human resource development of employees from the day they join the enterprise, and the process
continues, until the end of their employment term.

Key Differences between HRM and HRD

The significant differences between HRM and HRD are discussed in the following points

1. Human Resource Management refers to the application of principles of management

to manage the people working in the organization. Human Resource Development
means a continuous development function that intends to improve the performance of
people working in the organization.
2. HRM is a function of management. Conversely, HRD falls under the umbrella of
HRM.
 3. HRM is a reactive function as it attempts to fulfill the demands that arise while HRD
is a proactive function that meets the changing demands of the human resource in the
organization and anticipates it.
4. HRM is a routine process and a function of administration. On the other hand, HRD is
an ongoing process.
5. The basic objective of HRM is to improve the efficiency of employees. In contrast to
HRD, this aims at developing the skill, knowledge and competency of workers and
the entire organization.
6. HRD is an organizationally oriented process; that is a subsystem of a big system. As
opposed to HRM where there are separate roles to play, which makes it an
independent function.
7. Human Resource Management is concerned with people only. Unlike Human
Resource Development, that focus on the development of the entire organization.

Conclusion
HRM differs with HRD in a sense that HRM is associated with management of human resources while
HRD is related to the development of employees. Human Resource Management is a bigger concept than
Human Resource Development. The former encompasses a range of organisational activities like
planning, staffing, developing, monitoring, maintaining, managing relationship and evaluating whereas
the latter covers in itself the development part i.e. training, learning, career development, talent
management, performance appraisal, employee engagement and empowerment.

Objectives of HRD
HRD is associated with the following objectives:

 Work Opportunity: HRD provides an opportunity and a systematic framework for

the development resource in the organisation for full expression of their talents.
 Development of Traits: HRD is associated with the development of total personality
so that these can show and use their talent for the benefit of the organisation.
 Ability development: HRD makes capable employees. Thus they can develop their
capability by which they can do their present job easily.
 Creative Motivation: HRD manager motivates employees and improve their level of
performance.
 Good Relation: HRD manager stresses the need of coordination which is used for the
benefits of himself and for the benefits of those who come in his/their touch.
 Develop team spirit: HRD manager develops the spirit of teamwork; team work for
it is used for the effective cooperation and coordination of each employee which
ultimately checks industrial unrest.
 Organisational Growth: HRM manager is responsible for developing health, culture
and effective work plan which always result in more profitability.
 Human Resource Information: HRM manager in general keeps all records to
employees working in his organisation; these can be used at any time when these are
needed.
Structure of HRD System
The precise organizational plan for an HRD department depends on the type and of the organization in
which it is located. Here, we are giving hypothetical examples of organizational structure of three
different organizations to appreciate the functioning of HRD departments in different organizations.

Structure of HRD system in organizations was briefly discussed in the introductory part of this chapter,
duly illustrating an integrated HRD structure and HRD as a separate functional identity in an
organization. Here we will discuss the basic principles while structuring HRD Department of an
organization.

Needless to mention that the structure of HRD Department differs from organization to organization, for
the differences in size, nature of activity, philosophy and attitude. However, following principles are
usually followed in every organization, while it goes for structuring the HRD Department.

1. Developing an identity of HRD, which may or may not encompass other personnel
functions
 2. Establishing credibility for the HRD function, which is possible by entrusting the
responsibility for HRD at a higher level in an organizational hierarchy
3. Balancing integration and differentiation. Differentiation can be ensured by not
diluting the HRD functions with traditional personnel management and industrial
relations function, which is possible by entrusting the functional responsibilities to
different department heads as illustrated in Chart 3. Similarly, integration can be
achieved by diffusion of HRD functions with other major corporate functions like,
marketing, production (as explained earlier) and line functions, as inputs from these
areas can enrich the functioning of HRD department, structure of which has been
illustrated in Chart 2
4. Likewise, while structuring an HRD Department of an organization, it should be
ensured that it has linkages with external systems and internal systems, i.e., HRD
Department should represent various task groups, ad hoc committees, etc.
5. Finally, structure of HRD Department should be developed so that it can sustain a
monitoring mechanism

Basic principles governing the functioning of HRD system in an organization have been made clear by
the American Society for Training and Development (ASTD), while describing different roles of HRD
Managers. However, basic essence of functioning principles of HRD systems can be listed as follows:

(a) HRD systems should develop a strong feedback and reinforcing mechanism.

(b) The system should balance qualitative (subjective) and quantitative (objective) decisions.

(c) The system should balance the requirement of internal and external expertise.

(d) The system should be introduced in a phased manner.

Role of HRD Manpower

The objective of human resource manpower development is to provide a framework for employees to
develop their competencies necessary for individual and organizational efficiency and productivity as
well as career growth. The employer is responsible for devising programs geared toward an employee’s
career development and job skills acquisition after employment through training, performance
management and organization development. Manpower development is typically a part of the
organization’s human resource strategy and aims to maximize human capital potential so as to attain
strategic business objectives.

Training and Development of Manpower

Among manpower development’s functions is to oversee the development of human expertise in the
organization to improve productivity and efficiency. Through planning and monitoring of employee work
results, development programs are designed to ensure employees acquire pertinent skills and qualities
required for working at higher levels. This motivates the workers and enhances their career growth.
Systematic training programs also place the organization in a unique position to confront the growing and
changing needs of manpower, technology and diversification of business activities.
Performance Appraisal and Management
Performance evaluations and reviews are a crucial opportunity for employee improvement in your
organization. Manpower development should devise techniques for managers to use in conducting
meaningful and effective appraisals. Typically, these should help the manager rate goal achievement and
assess performance against some defined metrics such as job-specific competencies and core company
values. Effective performance appraisals will allow your management team to identify gaps in employee
productivity, which can serve as the foundation for programs geared toward employee development.

Manpower Planning and Strategy Development

Planning consists of getting the right number and right kind of people in the right place. This ensures
employees are assigned tasks for which they are well-suited to help the organization achieve its goals.
Human resource manpower development has to analyze the current manpower inventory, make future
manpower forecasts and determine whether recruitment from outside or promotions from within are
necessary to boost performance. By identifying the different skill sets and talent required by respective
areas of your business, a human resources strategy can be developed that considers how existing and
future employees fit into your company’s overall business.

Employee Welfare and Quality of Work Life

The ultimate objective of manpower development is to contribute to the professional well-being, pride
and motivation of the worker. Employee welfare refers to those efforts that improve the living standard of
employees and hence the quality of work life. The goal is to provide good leadership, interesting and
challenging jobs, safe working conditions and good wages. Several benefits can be extended to
employees as indirect compensation plans to motivate them to perform better. In addition, you can
implement an open-door policy or allow your employees to participate in the decisions that affect them
and their relationship with the company.

CHAPTER 2
HRM Human Resource Policies & Strategies:
Introduction
With human nature being what it is, employees will test limits and act “creatively” in workplace
situations, so you need a strategy for developing, communicating and enforcing a set of policies and
practices that reflect your standards of acceptable behavior.

But a successful policies and practices strategy does more than draw boundaries; it also recognizes and
addresses people’s needs.

There are many different types of people, and not surprisingly, they react differently to the need for
policies and practices based on those differences. For example, some people prefer there be a written
policy for everything, while others favor having no policies at all and would leave everything open to
interpretation as situations arise. Neither of these extremes contributes to a work environment that’s
conducive to high productivity levels. The answer is found in between, with the right number and types of
policies and practices that are focused on a primary goal–improving individual performance in the
workplace.

When you get to the heart of the matter, performance improvement is really about the process of setting
expectations and meeting them. The focus in business is not just about meeting specific goals, but also
about how you achieve them. And the “how” affects the liabilities you create in the process.

So how can you make sure your employees have clear expectations and are treated fairly as they work to
help build your company? The answer is found in the way you address four key elements related to the
development and deployment of your policies and practices: roles, rules, consequences and tools.

Roles
People like to have a clear understanding of their role in a company as well as the roles of others. Every
successful team has well-defined positions for its members: Everyone knows what he or she is to do, how
to do it and how their performance can impact those around them. In business, this means you need to
have clear reporting structures that spell out who’s in charge and how tasks are to be accomplished in the
organization.

This approach applies not only to intradepartmental structures, but also to company-wide or
interdepartmental projects. In addition, role definition is a foundational part of establishing clear
performance expectations for each employee.

Rules
Managers and employees need to share a clear understanding of what is and what is not acceptable
behavior within the company. Unfortunately, in today’s workplace, an employer can be held liable for the
bad behavior of an employee, especially when that bad behavior affects other employees, clients or
individuals. Having a clear set of behavioral expectations is critical to establishing that you’re not
contributing to that bad behavior as an employer.
Setting clear and specific behavioral standards in the form of rules establishes a framework for spotting
and addressing violations of those standards. If you rely on loosely defined general standards that aren’t
properly documented, then violations become subjective and open to interpretation. The result of such
ambiguousness is often litigation.

Consequences
It’s important that you clearly state consequences for violations of your behavioral standards so that
employees know what to expect and have fair warning of those expectations. In addition, clear
consequences help to ensure that you aren’t limited in your options for dealing with improper behaviors.

To establish these standards and violation consequences, sit down and think through the over-the-line
behaviors that won’t be permitted in your company. It’s essential that you know ahead of time what
employee actions require an immediate dismissal. Similarly, you want to know what performance issues
may qualify for a more progressive disciplinary approach, and then define the steps involved in that
approach.

By nature, people are complex beings who will confound you one minute and astound you the next. And
except for violations that warrant immediate firings, it’s usually a wise, compassionate and financially
prudent course to help people strengthen their character by overcoming their weaknesses. Also, this
approach provides you with a way to retain experienced employees and recover your investment in their
training.

I’ve found that managers are often disappointed in an employee’s performance even though the manager
never clearly communicated his or her expectations to that employee. If you don’t take steps to set clear
expectations, the consequences you administer for failure to meet those expectations can seem unfair.
This is extremely important because an employee who feels they’ve been treated unfairly can create a
great deal of liability. In many cases, the key issue is not whether they were actually treated unfairly but
whether the employee feels or perceives that they were treated unfairly.

And it doesn’t stop with the affected employee. If you or your managers haven’t clearly communicated
your expectations to one employee, chances are you haven’t done so with other employees as well and
they can be quick to empathize with any affected workers. It’s natural for employees to wonder, “What if
that happened to me?” To avoid the negative effect such a chain-reaction can have on your workplace, be
clear about your expectations with all employees at all times. Most employees will appreciate and respect
your forthright clarity.

Building a great company has a lot to do with how people work together. Policies and practices can
improve the way your employees interact, while minimizing the personnel obstacles that often arise in
today’s workplaces.

Tools
Tools address the question of how you support the people in your company who manage other employees.
When faced with a specific personnel issue, what resources are available to them? Do they have an
employee handbook or a policy guide? What about regular training in company policies and practices,
coupled with simple, easy-to-use forms to guide them when dealing with particular issues? Are you
giving them a clear directive on working with your human resources personnel or legal representatives?
Are your resources available online?
Tools like these are vital not just to help avoid litigation, but also to minimize the time it takes for you to
deal with productivity-draining people issues instead of core business matters. Because many small-
business owners lack these resources and aren’t sure where to turn for help, they may use attorneys and
HR consultants on an a la carte basis to address such issues. Other businesses call on professional
employer organizations like Administaff to provide the support of a full-service human resources
department.

Role of HR in strategic management

Strategic management process involves four important stages: environmental scanning, strategy
formulation, strategy implementation and evaluation and control.

Environmental Scanning
HR professionals play key roles in scanning the environment. More specifically HR can provide the
following:

“From public information and legitimate recruiting and interview activities, you ought to be able to
construct organization charts, staffing levels, and group missions for the various organizational
components of each of your major competitors. Your knowledge of how brands are sorted among sales
subdivisions and who reports to whom can give important clues as to a competitor’s strategic priorities.
You may even know the track record and characteristic behavior of the executives”.

Strategy Formulation
Strategies are formulated at three levels:

1. Corporate level
2. Business unit level
3. Functional level

Corporate-level Strategy: This is formulated by the top management of an organization made up of

more than one line of business. The corporate-level strategy of the family-controlled Siyaram Pod dar
Companies is to continuously innovate in all its businesses with right technology, relentlessly cut costs
and focus on the overseas markets. The major questions that need to be answered at this stage are- What
kinds of business should the company be engaged in? What are the goats and expectations for each
business? How should resources be allocated to reach these goals?

In formulating corporate-level strategies, the company should decide where it wants to be-in 10 or 15
years hence in at least eight areas-market standing, innovation, productivity, physical and financial
resources, profitability, managerial performance and development, worker performance and attitudes, and
social responsibility.

Business-level Strategy: While the major question at the corporate-level is, “In what industries or
businesses should we be operating?,” the appropriate question at the business unit level is, “How should
we compete in the chosen industry or business?” A business unit is an organizational subsystem that has a
market, a set of competitors, and a goal distinct from those of the other subsystems in the group. The
concept of strategic business unit (SBO) was pioneered by General Electric (GE). At GE, there are over
200 strategic business units, each having its own strategies consistent with the organization’s corporate-
level strategy.

A single company that operates within one industry is also considered a business unit. For instance, an
independent company that builds and sells swimming pools is considered a business unit. In such an
organization, the corporate-level strategy and the business-unit strategy are the same.

Functional-level Strategy: Each business unit will consist of several departments, such as

manufacturing, sales, finance and HRD. Functional-level strategies identify the basic courses of action
that each of the departments must pursue in order to help business unit to attain its goals.

In formulating functional level strategies, managers must be aware that the different functions are
interrelated. A change in one department will invariably affect the way other departments operate. Hence,
the strategy of one functional area cannot be viewed in isolation. Rather, the extent to which all functional
strategies are integrated determines the effectiveness of the unit’s business strategy.

What is the role of HR executive in strategy formulation? He or she should evolve his or her own
strategies which must be aligned with corporate, unit and functional strategies. Motorola’s is a vivid case.
The America based MNC has been riding a roller coaster for two decades. Through the 1980s, the
company’s market share was commanding. Profitability was excellent. But in the early 1990s, the world
of consumer electronics changed dramatically, as people began spending more and more time out of the
office-working from homes, in planes and in hotel rooms. They demanded faster, smaller, more integrated
and energy-efficient electronics. At the same time, competition for their business grew more and more
intense. Major competitors sprang up in Europe and Asia, that produced more attractive and easy
affordable products. Competition resulted in price cuts and heavy pressure on the bottom line of
Motorola.

Working closely with line management, the HR professionals identified the culture that the increas ingly
competitive environment demanded. The HR team provided a powerful agenda for integrating staffing,
performance management, training and development, structure, and communications with common
business focus and direction. This allowed HR to maximize its impact on performance. At the core of
the HR strategy was understanding the organizational culture and integrating the former with business
strategy.

Certain key steps in HR strategy formulation are worth recollecting in this context.

 Be clear whether the HR strategy is meant for corporate, unit or functional level
strategies. The decision is simple in as much as the same HR strategy shall be relevant
for any level strategy.
 Next step is to identify the trends in the environment. Environmental scanning helps
delineate the major trends.
 The third step is to have a SWOT analysis of the firm. Scanning the internal
environment of the business helps list out its strengths and weaknesses and that of
external environment helps identify opportunities and threats.
 The fourth stage is the identification of key HR practices. Key HR practices fall into
four basic categories.
Flow of People: Hiring, promotions, transfers, out placement and training and development

Flow of performance management: Measurement, rewards and follow-up

Flow of information: Keeping the organization in touch with key external realities, managing internal
communications, and designing information technology infrastructure.

Flow of work: Organization structure, work process design and physical arrangements

Strategy Implementation
Strategies formulated need to be implemented. Implementation of strategies is often more difficult than
their formulation. Implementing strategies require such actions as altering sales territories, adding new
departments, closing facilities, hiring new employees, changing an organization’s pricing strategies,
developing financial budgets, formulating new employee benefits, establishing cost-control procedures,
changing advertising strategies, building new facilities, transferring managers among divisions and
building a better computer information system.

Additionally, HR function can contribute to strategic plans and actions of firm in the following ways:

(A) Encouragement of Pro-active Rather than Reactive Behavior: Being pro-active means that the
firm has a vision of where it wants to go 10 years hence, and has human resources who help it reach there.

(B) Explicit Communication of Goals: Generally, every firm shall have a goal and this must be
communicated to all the employees. Everyone should work towards reaching the goal.

(C) Stimulation of Critical Thinking: Managers often depend on their personal views and experiences
to solve problems and make decisions. The assumptions on which they make decisions can lead to
success if they are appropriate to the environment in which the firm operates. However, serious problems
can arise if the assumptions are no longer valid

(D) Productivity as an HR Based Strategy: The more productive an organization, the better is its com-
petitive advantage. Perhaps none of the resources used for productivity in organizations are as critical as
human resources. Many of the HR functions contribute to productivity. Pay, appraisal systems, training,
selection and job design are HR activities that directly contribute to productivity

(E) Quality and Service are HR-based Strategies: Besides productivity, other factors which contribute
to a firm’s competitive advantage are quality and customer service. Quality can come from people, and
realizing this firms are spending vast sum of money on quality training

(F) Proficient Strategic Management depends heavily on competent personnel, better-than-adequate

competent capabilities and effective internal organization. Building a capable organization is obviously
always a top priority in strategy execution.
Strategy Evaluation
The strategic management process results in decisions that can have significant and long-lasting
consequences. Erroneous strategic decision can inflict severe penalties can be exceedingly difficult, if not
impossible, to reverse. Strategy evaluation, therefore, assumes greater relevance. Strategy evaluation
helps determine the extent to which the company’s strategies are successful in attaining its objectives.
Basic activities involves in strategy evaluation are:

1. Establishing performance targets, standards and tolerance limits for the objectives,
strategies and implementation plans.
2. Measuring the performance in relation to the targets at a given time. If outcomes are
outside the limits, inform managers to take action.
3. Analyze deviations from acceptable tolerance limits.
4. Execute modifications where necessary and feasible.

HR policies & Procedures

Human resource policies are continuing guidelines on the approach of which an organization intends to
adopt in managing its people. They represent specific guidelines to HR managers on various matters
concerning employment and state the intent of the organization on different aspects of Human Resource
management such as recruitment, promotion, compensation, training, selections etc. They therefore serve
as a reference point when human resources management practices are being developed or when decisions
are being made about an organization’s workforce.

A good HR policy provides generalized guidance on the approach adopted by the organization, and
therefore its employees, concerning various aspects of employment. A procedure spells out precisely what
action should be taken in line with the policies.

Each organization has a different set of circumstances and so develops an individual set of human
resource policies. The location an organization operates in will also dictate the content of their policies.

In developing HR Policies, there should be clear and consistent statement of the organization’s policies
regarding all conditions of employment and procedures for their equal and fair implementation. In order
to fulfill this objective, policies and procedures should be:

 Clear and specific, but provide enough flexibility to meet changing conditions.
 Comply with all appropriate law and regulation.
 Consistent amongst one another and reflect an overall true and fair view approach to
all employees.

HR policies are developed by making decisions and taking actions on the day-to-day problems of the
organization. The process of developing HR policies involves the assessment of the following factors:

1. Identify the purpose and objectiveswhich the organization wishes to attain regarding

its Human Resources department.
 2. Analysis of all the factors under which the organization’s HR policy will be
operating.
3. Examining the possible alternatives in each area which the HR policy statement is
necessary.
4. Implementation of the policy through the development of a procedure to support the
policy.
5. Communication of the policy and procedures adapted to the entire organization.
6. Auditingthe policy so as to reveal the necessary areas requiring change.
7. Continuous revaluation and revision of policy to meet the current needs of the
organization.

On the basis of their source, human resource policies could be classified into

1. Originated Policies: These are the policies usually established by the senior managers
in order to guide their subordinates.
2. Implicit Policies: These are the policies which are not formally expressed; they are
inferred from the behavior of managers. They are also known as Implied Policies.
3. Imposed Policies: Policies are sometimes imposed on the business by external
agencies such as government, trade associationsand trade unions.
4. Appealed Policies: Appealed policies arise because the particular case is not covered
by the earlier policies. In order to know how to handle some situations, subordinates
may request or appeal for the formulation of specific policies.

On the basis of description

On the basis of description, policies may be general or specific.

1. General Policies: These policies do not relate to any specific issue in particular.

General policies are formulated by an organization’s leadership team. This kind of
policies is called ‘general’ because they do not relate to any specific issue in
particular.
2. Specific Policies: These policies are related to specific issues
like staffing, compensation, collective bargaining Specific policies must confirm to
the pattern laid down by the general policies.

Advantages
The following advantages are achieved by setting up HR policies:

1. They help managers at various levels of decision making to make decisions without
consulting their superiors. Subordinates are more willing to accept responsibility
because policies indicate what is expected of them and they can quote a written policy
to justify their actions.
2. They ensure long term welfare of employees and makes for a good employer-
employee relationship as favoritism and discrimination are reduced. Well-established
 policies ensure uniform and consistent treatment of all employees throughout the
organization.
3. They lay down the guidelines pursued in the organization and thereby minimizes
the personal biasof managers.
4. They ensure prompt action for taking decisions because the policies serve as
standards to be followed. They prevent the wastage of time and energy involved in
repeated analyses for solving problems of a similar nature.
5. They establish consistency in the application of the policies over a period of time so
that each one in the organization gets a fair and just treatment. Employees know what
action to expect in circumstances covered by the policies. Policies set patterns of
behavior and permit employees to work more confidently.

HR Programme
Once employees are selected, they must be prepared to do their jobs, which is when orientation and
training come in. Orientation means providing new employees with basic information about the
employer. Training programs are used to ensure that the new employee has the basic knowledge required
to perform the job satisfactorily.

Orientation and training programs are important components in the processes of developing a committed
and flexible high‐potential workforce and socializing new employees. In addition, these programs can
save employers money, providing big returns to an organization, because an organization that invests
money to train its employees results in both the employees and the organization enjoying the dividends.

Unfortunately, orientation and training programs are often overlooked. A recent U.S. study, for example,
found that 57 percent of employers reported that although employees’ skill requirements had increased
over a three‐year period, only 20 percent of employees were fully proficient in their jobs.

Orientation
Orientation programs not only improve the rate at which employees are able to perform their jobs but also
help employees satisfy their personal desires to feel they are part of the organization’s social fabric. The
HR department generally orients newcomers to broad organizational issues and fringe benefits.
Supervisors complete the orientation process by introducing new employees to coworkers and others
involved in the job. A buddy or mentor may be assigned to continue the process.

Training needs
Simply hiring and placing employees in jobs does not ensure their success. In fact, even tenured
employees may need training, because of changes in the business environment. Here are some changes
that may signal that current employees need training:

 Introduction of new equipment or processes

 A change in the employee’s job responsibilities

 A drop in an employee’s productivity or in the quality of output

  An increase in safety violations or accidents

 An increased number of questions

 Complaints by customers or coworkers

Once managers decide that their employees need training, these managers need to develop clear training
goals that outline anticipated results. These managers must also be able to clearly communicate these
goals to employees.

Keep in mind that training is only one response to a performance problem. If the problem is lack of
motivation, a poorly designed job, or an external condition (such as a family problem), training is not
likely to offer much help.

Types of training
After specific training goals have been established, training sessions should be scheduled to provide the
employee an opportunity to meet his or her goals. The following are typical training programs provided
by employers:

 Basic literacy training. Ninety million American adults have limited literacy skills,
and about 40 million can read little or not at all. Because most workplace demands
require a tenth‐ or eleventh‐grade reading level (and about 20 percent of Americans
between the ages of 21 and 25 can’t read at even an eighth ‐grade level), organizations
increasingly need to provide basic literacy training in the areas of reading and math
skills to their employees.
 Technical training. New technology and structural designs have increased the need
to upgrade and improve employees’ technical skills in both white ‐collar and blue ‐
collar jobs.
 Interpersonal skills training. Most employees belong to a work team, and their
work performance depends on their abilities to effectively interact with their
coworkers. Interpersonal skills training helps employees build communication skills.
 Problem‐solving training. Today’s employees often work as members of self‐
managed teams who are responsible for solving their own problems. Problem ‐solving
training has become a basic part of almost every organizational effort to introduce
self‐managed teams or implement Total Quality Management (TQM).
 Diversity training. As one of the fastest growing areas of training, diversity training
increases awareness and builds cultural sensitivity skills. Awareness training tries to
create an understanding of the need for, and meaning of, managing and valuing
diversity. Skill‐building training educates employees about specific cultural
differences in the workplace.

Training methods
Most training takes place on the job due to the simplicity and lower cost of on‐the‐job training methods.
Two popular types of on‐the‐job training include the following:
  Job rotation. By assigning people to different jobs or tasks to different people on a
temporary basis, employers can add variety and expose people to the dependence that
one job has on others. Job rotation can help stimulate people to higher levels of
contributions, renew people’s interest and enthusiasm, and encourage them to work
more as a team.

 Mentoring programs. A new employee frequently learns his or her job under the
guidance of a seasoned veteran. In the trades, this type of training is usually called an
apprenticeship. In white‐collar jobs, it is called a coaching or mentoring relationship.
In each, the new employee works under the observation of an experienced worker.

Sometimes, training goals cannot be met through on‐the‐job training; the employer needs to look to other
resources. Off‐the‐job training can rely on outside consultants, local college faculty, or in ‐house
personnel. The more popular off‐the‐job training methods are classroom lectures, videos, and simulation
exercises. Thanks to new technologies, employers can now facilitate some training, such as tutorials, on
the employees’ own computers, reducing the overall costs.

Regardless of the method selected, effective training should be individualized. Some people absorb
information better when they read about it, others learn best by observation, and still others learn better
when they hear the information. These different learning styles are not mutually exclusive. When training
is designed around the preferred learning style of an employee, the benefits of training are maximized
because employees are able to retain more of what they learn.

In addition to training, employers should offer development plans, which include a series of steps that
can help employees acquire skills to reach long ‐term goals, such as a job promotion. Training, on the
other hand, is immediate and specific to a current job

Developing HR policies and strategies

What follows are eight key steps in the quest towards delivering a successful HR strategy.

1. Aligning business and HR needs

The business’ goals – that is its strategic imperatives – sit at the heart of any HR strategy and in order to
align business and HR needs one key question must to be answered, “Can your organisation’s internal
capability deliver its business goals?”

This is where HR receives most criticism. The function is frequently accused of failing to fully
understand its business, goals and strategy for achieving these goals, and its business model and how it
delivers to its customers. For those who already understand the demands of their business, it is easy to
identify where the business has strong core competencies and where the business is weakest.

Sometimes these weaknesses are related to essential systems or processes, but more often – and
significantly for HR – these weaknesses relate to the quality of the workforce, its motivation and ability to
deliver organisation performance. Taking steps to understand your business and where it has competitive
advantage is an essential first step towards determining the key HR interventions that form the basis of an
HR strategy.
2. Developing your HR strategy
Deeper knowledge and understanding of your business goals and business model can identify potential
threats and opportunities in the quantity and quality of human resource required by your organisation.
This in turn identifies the key components of your HR strategy and the virtuous circle of providing
whatever your organisation needs for success.

It is also critical that the HR team has a high level of expertise in aligning major HR interventions and
their relevance to business performance. This calls for expert HR thinking and identifies the requisite
interventions and, equally important, how they fit together to leverage organisation performance.

If there is a strong need for the organisation to develop its management capability, for instance, should
you align your compensation strategy to reinforce this objective? If the organisational structure defines
the accountabilities clearly at every level of the organisation, is your HR team selecting and developing
against them? This is joined-up HR at work.

Another concern for HR is when it should make strategic interventions. Easy, it either follows your
business cycle, or is triggered by other key events such as a merger, an acquisition or a change in business
direction.

3. Organisational performance
Organisational performance is the process by which business goals and objectives are cascaded and
managed across and down an organisation. It provides a link and rationale for all other HR activity and, in
addition, the greatest opportunity to directly impact business success, enhancing HR’s reputation and
contribution.

HR needs to create and install a robust performance management process that sets out performance
objectives for all levels of staff within a business. This is an opportunity to develop line managers’ skills
in being able to disseminate and set stretch targets for their business.

A critical part of this process is a robust performance review process, which gives people feedback about
what has been achieved – what people have done well and not so well.

The third element is a personal development review process where individual strengths and weaknesses
are identified for the purposes of assessing and meeting organisational development needs.

4. Organisational design and structure

Organisational design is the shape, size and structure of the organisation required to meet customers’
needs. It reflects the management processes that drive the business model and determines organisational
agility and flexibility. These processes can be a source of competitive advantage or sources of frustration,
unnecessarily absorbing time, cost and resources.

Decisions affecting the shape, size and cost of the organisation will be aligned with the business strategy.
It should be relatively easy to see whether an organisation invests in marketing, sales or manufacturing,
for instance, and whether the organisation is maximising its work flow capability.
As people experts, the role of HR is to add value to the structure and operation of the business. Structural
weaknesses offer an opportunity to revamp any part of the organisation by identifying and making
appropriate changes, reductions in size or cost; or improvements to the quality of the operation.

Conversely, structural strengths are a signal to the HR team to reinforce organisational competence.

5. Strategic resourcing
Achieving clarity throughout the organisation’s structure is critical in order for resourcing strategies to
work well. If the organisation is transparent about its key roles and accountabilities, this will define the
skills and knowledge required to undertake the work and determine strategic resourcing requirements.

Deciding on your resourcing strategy means identifying a number of critical components. These range
from the processes needed to determine resourcing needs, the processes to attract the right people and the
processes for assessing and selecting the right people. HR has a strong traditional involvement in all of
the above. In addition, it is essential to ensure each stage of the resourcing activity is aligned and in direct
response to the strategic imperatives.

Another important component determining the effectiveness of any resourcing strategy is the need to
create a ‘recruitment brand’ – how the image (or brand) of the organisation appears to the recruitment
market can either support or undermine the success of a resourcing strategy.

6. Organisation development
If strategic resourcing is about providing a pipeline for importing external talent, then an organisation’s
development strategy is the way in which the HR team decides what changes and improvements need to
be made to the current workforce.

Usually these responses work at three levels – the individual, team and organisation – and all are geared
to achieve high levels of organisational performance. It requires a close examination of the strategic
imperatives and clarity about the capabilities to execute it.

Development responses will aim to increase business skills, the application of business skills (sometimes
called competencies) and the behavioural elements – all of which contribute to an organisation’s effective
performance. It is important at an individual level, particularly for senior people, that they feel their
development needs are agreed and that they are provided with the skills to do their jobs.

At a team level, it defines individuals’ ability to work with others flexibly and align individual and team
skills and activity to business goals – all of which ensure that the organisation is equipped to deliver its
goals.

7. Compensation and benefits

Often called reward strategy, the purpose of compensation and benefits systems is to align the
performance of the organisation with the way it rewards its people, providing the necessary incentives
and motivation required for an organisation to deliver its goals.

Its components are a combination of base pay, bonuses, profit sharing, share options, and a range of
appropriate benefits, usually based on market or competitor norms and the organisation’s ability to pay.
Typically, the components of an organisation’s reward strategy will reflect the particular performance
culture of a business.

There is evidence that organisations see compensation as a strategic management lever and are
increasingly experimenting with new practices – team bonuses, for example, aimed at improving team
performance or skills/behaviour payments to upskill the workforce or reinforce culture or behaviour
change. A company’s reward policy in particular benefits from clarity about which other elements of the
HR strategy it aims to support.

8. Organisation culture
Culture is usually described as the “way we do things round here” – the way the organisation acts, reacts
and interacts. The trend in the last 10 to 15 years has been to align organisational behaviour more strongly
with customers’ needs, creating customer-facing units and customer-sensitive behaviours. This has been
as a direct result of the increased competition around product, quality, prices and packaging. In re-
aligning an organisation’s culture there can be real benefit and competitive advantage through improved
service.

HR teams which are closely involved with the organisation’s cultural ambitions can lead these initiatives
through their knowledge of organisation psychology such as describing new behaviours and work styles;
and through their skills in organisational development and being able to provide development solutions to
deliver the improvements.

Production of the HR strategy

The eight components described here form a generic model of the most commonly used elements of HR
strategies. It is important to select those that are most relevant to any particular organisation.

When the key elements are decided, there are a number of simple questions that the HR team should be
asking itself as each element of the strategy is considered in turn:

START: What are we not doing yet, that the business needs from us?

STOP: What should we stop doing because it does adds not value?

CONTINUE: What are we already doing that supports the business plan?

Strategic control
Managers exercise strategic control when they work with the part of the organisation they have
influence over to ensure that it achieves the strategic aims that have been set for it. To do this effectively,
the managers need some decision making freedom: either to decide what needs to be achieved or how
best to go about achieving the strategic aims. Such decision making freedom is one of the characteristics
that differentiate strategic control from other forms of control exercised by managers (e.g. Operational
control – the management of operational processes).
Strategic controls take into account the changing assumptions that determine a strategy, continually
evaluate the strategy as it is being implemented, and take the necessary steps to adjust the strategy to the
new requirements. In this manner, strategic controls are early warning systems and differ from post-action
controls which evaluate only after the implementation has been completed.

Important types of strategic controls used in organizations are:

1. Premise Control: Premise control is necessary to identify the key assumptions, and

keep track of any change in them so as to assess their impact on strategy and its
implementation. Premise control serves the purpose of continually testing the
assumptions to find out whether they are still valid or not. This enables the strategists
to take corrective action at the right time rather than continuing with a strategy which
is based on erroneous assumptions. The responsibility for premise control can be
assigned to the corporate planning staff who can identify key asumptions and keep a
regular check on their validity.
2. Implementation Control: Implementation control may be put into practice through
the identification and monitoring of strategic thrusts such as an assessment of the
marketing success of a new product after pre-testing, or checking the feasibility of a
diversification programme after making initial attempts at seeking technological
collaboration.
3. Strategic Surveillance: Strategic surveillance can be done through a broad-based,
general monitoring on the basis of selected information sources to uncover events that
are likely to affect the strategy of an organisation.
4. Special Alert Control: Special alert control is based on trigger mechanism for rapid
response and immediate reassessment of strategy in the light of sudden and
unexpected events called crises. Crises are critical situations that occur unexpectedly
and threaten the course of a strategy. Organisations that hope for the best and prepare
for the worst are in a vantage position to handle any crisis.

Process of Strategic Control

Strategic control processes ensure that the actions required to achieve strategic goals are carried out, and
checks to ensure that these actions are having the required impact on the organisation. An
effective strategic control process should by implication help an organisation ensure that is setting out
to achieve the right things, and that the methods being used to achieve these things are working.

Regardless of the type or levels of strategic control systems an organization needs, control may be
depicted as a six-step feedback model:

1. Determine What to Control: The first step in the strategic control process is

determining the major areas to control. Managers usually base their major controls on
the organizational mission, goals and objectives developed during the planning
process. Managers must make choices because it is expensive and virtually
impossible to control every aspect of the organization’s
2. Set Control Standards: The second step in the strategic control process is
establishing standards. A control standardis a target against which subsequent
 performance will be compared. Standards are the criteria that enable managers to
evaluate future, current, or past actions. They are measured in a variety of ways,
including physical, quantitative, and qualitative terms. Five aspects of the
performance can be managed and controlled: quantity, quality, time
cost, and behavior.

Standards reflect specific activities or behaviors that are necessary to achieve organizational goals. Goals
are translated into performance standards by making them measurable. An organizational goal to increase
market share, for example, may be translated into a top-management performance standard to increase
market share by 10 percent within a twelve-month period. Helpful measures of strategic performance
include: sales (total, and by division, product category, and region), sales growth, net profits, return on
sales, assets, equity, and investment cost of sales, cash flow, market share, product quality, valued added,
and employees productivity.

Quantification of the objective standard is sometimes difficult. For example, consider the goal of product
leadership. An organization compares its product with those of competitors and determines the extent to
which it pioneers in the introduction of basis product and product improvements. Such standards may
exist even though they are not formally and explicitly stated.

Setting the timing associated with the standards is also a problem for many organizations. It is not
unusual for short-term objectives to be met at the expense of long-term objectives. Management must
develop standards in all performance areas touched on by established organizational goals. The various
forms standards are depend on what is being measured and on the managerial level responsible for taking
corrective action.

3. Measure Performance: Once standards are determined, the next step is measuring

performance. The actual performance must be compared to the standards. Many types
of measurements taken for control purposes are based on some form of historical
standard. These standards can be based on data derived from the PIMS (profit
impact of market strategy)program, published information that is publicly available,
ratings of product / service quality, innovation rates, and relative market shares
standings.

Strategic control standards are based on the practice of competitive benchmarking – the process of
measuring a firm’s performance against that of the top performance in its industry. The proliferation of
computers tied into networks has made it possible for managers to obtain up-to-minute status reports on a
variety of quantitative performance measures. Managers should be careful to observe and measure in
accurately before taking corrective action.

4. Compare Performance to Standards: The comparing step determines the degree of

variation between actual performance and standard. If the first two phases have been
done well, the third phase of the controlling process – comparing performance with
standards – should be straightforward. However, sometimes it is difficult to make the
required comparisons (e.g., behavioral standards). Some deviations from the standard
may be justified because of changes in environmental conditions, or other reasons.
 5. Determine the Reasons for the Deviations: The fifth step of the strategic control
process involves finding out: “why performance has deviated from the standards?”
Causes of deviation can range from selected achieve organizational objectives.
Particularly, the organization needs to ask if the deviations are due to internal
shortcomings or external changes beyond the control of the organization. A general
checklist such as following can be helpful:

 Are the standards appropriate for the stated objective and strategies?
 Are the objectives and corresponding still appropriate in light of the current
environmental situation?
 Are the strategies for achieving the objectives still appropriate in light of the current
environmental situation?
 Are the firm’s organizational structure, systems (e.g., information), and resource
support adequate for successfully implementing the strategies and therefore achieving
the objectives?
 Are the activities being executed appropriate for achieving standard?

6. Take Corrective Action: The final step in the strategic control process is

determining the need for corrective action. Managers can choose among three courses
of action: (1) they can do nothing (2) they can correct the actual performance (3) they
can revise the standard.

When standards are not met, managers must carefully assess the reasons why and take corrective action.
Moreover, the need to check standards periodically to ensure that the standards and the associated
performance measures are still relevant for the future.

The final phase of controlling process occurs when managers must decide action to take to correct
performance when deviations occur. Corrective action depends on the discovery of deviations and the
ability to take necessary action. Often the real cause of deviation must be found before corrective action
can be taken. Causes of deviations can range from unrealistic objectives to the wrong strategy being
selected achieve organizational objectives. Each cause requires a different corrective action. Not all
deviations from external environmental threats or opportunities have progressed to the point a particular
outcome is likely, corrective action may be necessary.

To conclude, strategic control is an integral part of strategy. Without properly placed controls the strategy
of the company is bound to fail. Strategic control is a tool by which companies check their internal
business process and environment and ascertain their progress towards their goal.

Types of Strategic control

The type of business strategy you pursue is a key to whether or not your company will have long-term
growth and success. The challenge, however, is that it’s difficult to assess if the strategy you’ve chosen is
the right one or if you need to make adjustments. That process is made easier if you use the four common
types of strategic control to analyze the strategy you’ve put in place to determine its effectiveness, and to
find areas of strength and weakness. Without strategic control, your company will fail to adapt to any
external changes in your industry that require immediate and corrective action.

Testing the Validity of Assumptions

The business strategy you’ve chosen was likely based on some assumptions you made about what you
believed would happen several years in the future. Whether those assumptions are about your target
audience, your competitors, or product development, premise control lets you test those assumptions to
see if they’re still valid. For example, if you own a skateboard company, you may have assumed that your
ideal buyers were Millennials, but you may discover that premise was flawed after premise control
measures reveal that the fastest-growing skateboard consumers are actually an entire generation younger.

Strategic Surveillance Control

It’s impossible for you to anticipate every external threat that could impact the success of your business,
which is why strategic surveillance control lets you identify information sources that monitor these
external forces. Examples of these information sources are financial journals, trade magazines,
newspapers, economic forums, and industry conferences. These sources are often the first to identify the
potential challenges that businesses in your industry will face, and may even offer potential responses to
these challenges.

Special Alert Control

At some point in time, your company will go through a rough patch that’s triggered by some kind of
unexpected occurrence that impacts your business in a negative way. This could include a sudden crash in
the U.S. stock market, a domestic terrorist attack, or even a natural disaster that affects your customers’
buying habits. Special alert control helps your business respond to these events without having to change
your entire strategy to deal with this new event. For example, after the September 11, 2001, terrorist
attacks in the U.S., many commercial airlines were forced to adopt stricter safety protocols to account for
the intense fears that passengers had about flying on a plane.

Implementation Control Measures

As you begin to implement a business strategy, you must use implementation control measures to assess
whether or not your plan needs adjustment. Common types of implementation control include setting
performance standards, measuring actual performance, analyzing the reasons your staff failed to meet
specific performance standards, and developing a plan to correct performance deviations. Implementation
control also includes things such as budgets, schedules, and milestones that the company is trying to
achieve.

Operational Control System

Operational business controlling is used to regulate the internal processes necessary to monitor and
direct of the company in the short term. It allows making business decisions related to ongoing business
operations. The main tasks of operational controlling include:

 Controlling of the results

 Liquidity planning
  Monitoring of profitability
 Improving effectiveness of use of existing resources.

The process of operational controlling (also called business controlling) allows to convert strategic plans
in the operational plans. These plans must be tailored to specific units that make up the whole company.
The whole process takes often place in the so-called budgeting process.

Elements of operational controlling system

Basic elements of business controlling system are:

 Internal reporting system

 Budgetary control
 Operational planning (budgeting)

Business controlling normally takes the form of budgetary control, and is performed by comparing the
short-term performance of organizational units with those established in the budget. Then managers
analyses the deviations of actual values from the values set in goals for specific unit and the whole
company.

Role of operational planning and business controlling

It allows to identify intermediate objectives in relation to the objectives set in strategic planning.
Operational planning includes:

 Single event or action

 Small number of variables
 Execution of relatively simple tasks
 Balancing resources
 Aggregation of information
 Short time horizon

Design of operational controlling system

The detailed design process consists of the following steps:

 Determination of the time, scope and field of controlling.

 Preparation: setting goals and plans.
 Selection of parameters, measures and indicators.
 Providing proper information sources across organization.
 Determining the procedure for monitoring deviations.
 Establishing rules for decision-making process.
 A decision on the implementation of the system.
 Determination of the detailed time schedule and financial resources needed for
implementation
Operational controlling provides broad source of the information necessary to control main economic
processes. This information pertains primarily of present business, performance and resource utilization.
Operational controlling is closely linked and integrated with strategic controlling.

Functional strategies
‘Functional Strategy’ is the strategy or organisational plan adopted by each functional area, viz.
marketing, production, finance, human resources and so on, in line with the overall business or corporate
strategy, to achieve organisational level objectives. The functional strategy of a company is customized to
a specific industry or strategic business unit (SBU) and is used to back up other corporate and business
strategies.Each department develops certain objectives, which is to be enforced by employees, and aids in
the achievement of final organisational goals.

For example, marketing strategy involves decisions related to pricing, selling, advertising and distributing
a product. The aim could be to increase market share, venture into newer markets, penetrate existing
markets, launch new products or deal with distributors/ competitors.

According to Thompson and Strickland, “The term functional strategy refers to the managerial game plan
for a particular functional activity, business process, or key department within a business. A company’s
marketing strategy, for example, represents the managerial game plan for running the marketing part of
the business. A company’s new product development strategy represents the managerial game plan for
keeping the company’s product lineup fresh and in tune with what buyers are looking for.”

Pearce and Robinson define “a functional strategy is the short-term game plan for a key functional area
within a company. Such strategies clarify grand strategy by providing more specific details about how
key functional areas are to be managed in the near future.”

According to Thomas Wheelen and David Hunder, “Functional strategy is the approach a functional area
takes to achieve corporate and business unit objectives and strategies by maximizing resource
productivity. It is concerned with developing and nurturing a distinctive competence to provide a
company or business unit with a competitive advantage. Just as a multidivisional corporation has several
business units, each with its own business strategy, each business unit has its own set of departments,
each with its own functional strategy.”

Features of Functional Strategy

Some important features of functional strategy are as follows:

1. The time span of a functional strategy, as compared to a business-level strategy, is

short.
2. It focuses attention on what needs to be done now to make the grand strategy work.
3. It is more specific and action-oriented because it clearly outlines what should be done
in each functional area so as to achieve the corporate objectives.
4. Functional strategy pertains to the function, department, division of the enterprise.
5. It has to be in pursuance of the overall corporate strategy.
 6. It acts to achieve corporate and business unit objectives by maximizing resource
productivity.
7. It is the game plan to manage a principal subordinate activity within a business.
8. Functional strategy is concerned with developing and nurturing a distinctive
competence to provide a company or business unit with a competitive advantage.
9. The orientation of the functional strategy is dictated by its parent business unit’s
strategy.
10. Functional strategy is narrower in scope than business strategy. It contains relevant
details of the overall business game plan by setting out the actions, approaches and
practices which are to be employed in managing a particular function.
11. It may differ from region to region.
12. Functional strategies should be in sync rather than serving their own narrower
purposes. They should be in coordination and consistency with long-term objectives
and grand strategy.
13. These functional strategies have to be related to each other and to the overall
corporate strategy.
14. Implementation of these strategies involves a wide range of policy decisions to be
made relating to the functional areas.
15. The focus of these functional strategies is often towards external environment.
16. Functional strategies help in implementation of grand strategy. These translate grand
strategy into action.
17. There might be several sub-functional areas within functional strategies.
18. Functional strategies are made within the guidelines that have been set at higher
levels.
19. These are detailed statements of the “means” or activities that will be used to achieve
short-term objectives and establish competitive advantage.
20. A functional strategy supports business-level strategy, which in turn supports
corporate-level strategy.

Importance of Functional Strategy

Today, every firm faces challenges in optimizing resources such as finance, production facilities,
technology, and marketing opportunities in functional areas. Functional managers need strategies to make
the best of opportunities and to identify avenues for growth. They need strategic focus on their decisions
in their fields.

The importance of functional strategies is pointed out under the following headings:

1. Help in Operation of Business Functions

Functional strategies provide operational help in the conduct of various functional activities. For example,
a finance manager has to necessarily take decisions on funding opportunities, deploying projects,
reducing capital costs, or acquiring another firm. In addition, he has to decide on strategic options to
manage working capital, which may be used to decide the various aspects of receivables management,
factoring, payables management, inventory strategy, and treasury management.
Similarly, to manage human resource function, a number of strategic initiatives can be deployed by a
firm. Managers need strategic focus on various functions. The production and operations management
function also involves a number of strategic issues.

2. Managerial Road Map

Thompson and Strickland write, “A company needs a functional strategy for every major business activity
and organizational unit. Functional strategy, while narrower in scope than business strategy, adds relevant
detail to the overall business game plan. It aims at establishing or strengthening specific competencies
calculated to enhance the company’s market position. Like business strategy, functional strategy must
support the company’s overall business strategy and competitive approach. A related role is to create a
managerial road map for achieving the functional area’s objectives and mission.”

3. Help in Implementation of Grand Strategy

Pearce and Robinson state that “functional strategies must be developed in the key areas of marketing,
finance, production, R&D, and personnel. Functional strategies help in implementation of grand strategy
by organising and activating specific subunits of the company to pursue the business strategy in daily
activities.”

4. Decisional Guides to Action

Functional strategies guide and translate thought into action designed to accomplish specific annual
objectives. Thus, functional strategies may be regarded as decisional guides to action that make the
strategies work. They clarify many conflicting issues and problems, giving specific short-term guidance
to operating managers and employees.

5. Improves Effectiveness and Efficiency and Creates Super Profitability

It should be noted that functional strategies aim at improving the effectiveness of a company’s operations
and thus its ability to attain superior efficiency, quality, innovation, and customer responsiveness. It is
important to keep in mind the relationships of functional strategies, distinctive competencies,
differentiation, low cost, value creation, and profitability.

We can note that functional-level strategies can build resources and capabilities of a firm that enhance
superior efficiency, quality, innovation. These in turn, create low cost, value and superior profitability.

6. Builds Competitive Advantage

Functional strategies can improve the efficiency, reliability (quality), and consumer responsiveness of its
service. Thus, they can be used to build a sustainable competitive advantage. Functional strategies can
increase efficiency of activities and thereby lower their cost structure. In fact, functional strategy is
concerned with developing and nurturing a distinctive competence to provide a company or business unit
with a competitive advantage.
Grand Strategies
The Grand Strategies are the corporate level strategies designed to identify the firm’s choice with
respect to the direction it follows to accomplish its set objectives. Simply, it involves the decision of
choosing the long term plans from the set of available alternatives. The Grand Strategies are also called
as Master Strategies or Corporate Strategies.

There are four grand strategic alternatives that can be followed by the organization to realize its long-term
objectives:

1. Stability Strategy
2. Expansion Strategy
3. Retrenchment Strategy
4. Combination Strategy

The grand strategies are concerned with the decisions about the allocation and transfer of resources from
one business to the other and managing the business portfolio efficiently, such that the overall objective
of the organization is achieved. In doing so, a set of alternatives are available to the firm and to decide
which one to choose, the grand strategies help to find an answer to it.

Business can be defined along three dimensions: customer groups, customer functions and technology
alternatives. Customer group comprises of a particular category of people to whom goods and services are
offered, and the customer functions mean the particular service that is being offered. And the technology
alternatives covers any technological changes made in the operations of the business to improve its
efficiency.

Stability Strategy
Definition: The Stability Strategy is adopted when the organization attempts to maintain its current
position and focuses only on the incremental improvement by merely changing one or more of its
business operations in the perspective of customer groups, customer functions and technology
alternatives, either individually or collectively.

Generally, the stability strategy is adopted by the firms that are risk averse, usually the small scale
businesses or if the market conditions are not favorable, and the firm is satisfied with its performance,
then it will not make any significant changes in its business operations. Also, the firms, which are slow
and reluctant to change finds the stability strategy safe and do not look for any other options.

Stability Strategies could be of three types:

1. No-Change Strategy
2. Profit Strategy
3. Pause/Proceed with Caution Strategy

To have a better understanding of Stability Strategy go through the following examples in the context of
customer groups, customer functions and technology alternatives.

1. The publication house offers special services to the educational institutions apart from
its consumer sale through the market intermediaries, with the intention to facilitate a
bulk buying.
2. The electronics company provides better after-sales services to its customers to make
the customer happy and improve its product image.
3. The biscuit manufacturing company improves its existing technology to have the
efficient productivity.

In all the above examples, the companies are not making any significant changes in their operations, they
are serving the same customers with the same products using the same technology.

Expansion Strategy 
is adopted by an organization when it attempts to achieve a high growth as compared to its past
achievements. In other words, when a firm aims to grow considerably by broadening the scope of one of
its business operations in the perspective of customer groups, customer functions and technology
alternatives, either individually or jointly, then it follows the Expansion Strategy.
The reasons for the expansion could be survival, higher profits, increased prestige, economies of scale,
larger market share, social benefits, etc. The expansion strategy is adopted by those firms who have
managers with a high degree of achievement and recognition. Their aim is to grow, irrespective of the risk
and the hurdles coming in the way.

The firm can follow either of the five expansion strategies to accomplish its objectives:

1. Expansion through Concentration

2. Expansion through Diversification
3. Expansion through Integration
4. Expansion through Cooperation
5. Expansion through Internationalization

Go through the examples below to further comprehend the understanding of the expansion strategy. These
are in the context of customer groups, customer functions and technology alternatives.

1. The baby diaper company expands its customer groups by offering the diaper to old
aged persons along with the babies.
2. The stockbroking company offers the personalized services to the small investors
apart from its normal dealings in shares and debentures with a view to having more
business and a diversified risk.
3. The banks upgraded their data management system by recording the information on
computers and reduced huge paperwork. This was done to improve the efficiency of
the banks.
In all the examples above, companies have made significant changes to their customer groups, products,
and the technology, so as to have a high growth.

Retrenchment Strategy 
is adopted when an organization aims at reducing its one or more business operations with the view to cut
expenses and reach to a more stable financial position.

In other words, the strategy followed, when a firm decides to eliminate its activities through a
considerable reduction in its business operations, in the perspective of customer groups, customer
functions and technology alternatives, either individually or collectively is called as Retrenchment
Strategy.

The firm can either restructure its business operations or discontinue it, so as to revitalize its financial
position. There are three types of Retrenchment Strategies:

1. Turnaround
2. Divestment
3. Liquidation

To further comprehend the meaning of Retrenchment Strategy, go through the following examples in
terms of customer groups, customer functions and technology alternatives.
 1. The book publication house may pull out of the customer sales through market
intermediaries and may focus on the direct institutional sales. This may be done to
slash the sales force and increase the marketing efficiency.
2. The hotel may focus on the room facilities which is more profitable and may shut
down the less profitable services given in the banquet halls during occasions.
3. The institute may offer a distance learning programme for a particular subject, despite
teaching the students in the classrooms. This may be done to cut the expenses or to
use the facility more efficiently, for some other purpose.

In all the above examples, the firms have made the significant changes either in their customer groups,
functions and technology/process, with the intention to cut the expenses and maintain their financial
stability.

Combination Strategy 
means making the use of other grand strategies (stability, expansion or retrenchment) simultaneously.
Simply, the combination of any grand strategy used by an organization in different businesses at the same
time or in the same business at different times with an aim to improve its efficiency is called as a
combination strategy.

Such strategy is followed when an organization is large and complex and consists of several businesses
that lie in different industries, serving different purposes. Go through the following example to have a
better understanding of the combination strategy:

* A baby diaper manufacturing company augments its offering of diapers for the babies to have a wide
range of its products (Stability)and at the same time, it also manufactures the diapers for old age people,
thereby covering the other market segment (Expansion). In order to focus more on the diapers division,
the company plans to shut down its baby wipes division and allocate its resources to the most profitable
division (Retrenchment).

In the above example, the company is following all the three grand strategies with the objective of
improving its performance. The strategist has to be very careful while selecting the combination strategy
because it includes the scrutiny of the environment and the challenges each business operation faces. The
Combination strategy can be followed either simultaneously or in the sequence.

Strategy factors
Strategic Factors are those things that your organization or business unit needs to get right in order to
succeed with your key stakeholders, that is, your customers, suppliers, employees, owners and any other
organization, business unit or individual that you depend on for success. The stakeholders use these
criteria to evaluate you.

Examples of Strategic Factors. Chapter 3 onwards offers numerous examples of these Strategic Factors.
For customers, the Strategic Factors are customer service, product quality and the like. With employees,
they are items such as rewards, company reputation and job security. For owners in a public company, the
Strategic Factors include dividends and capital growth.
Strategic Factors as Common Currency. Strategic Factors provide not only a pathway to success but also
a common currency that links the way in which strategic planning and performance measurement are
undertaken. The key word is link, and Strategic Factors form that link.

Strategic Factors across Sectors. Strategic Factors also provide the tools to be able to address the needs
not just of private sector profit-seeking organizations, but also of non- profit organizations from both the
public and private sectors. Here again Strategic Factors act as integrators because all organizations have
them at their core.

Strategic Factors for Business Units. Strategic Factors also provide the way to move across the terrain
from corporate to department, from organization to business unit. Because they apply just as well to a
unit’s relationship to key stakeholders, they make it easy to link the unit’s strategic plan to the
organization’s.

Strategic Factor System. Finally, Strategic Factors supply us with a system for streamlining strategy
development and its measurement, a system for tying all the diverse strategy concepts and activities
together. We call it the Strategic Factor System.

CHAPTER 3

Productivity & improvement of Human

Resource
1. Adjust lighting

Ample lighting not only makes it easier to see what you’re doing, but it’s also much healthier than a
dimly lit office. Having to strain your eyes to read text, and sitting in front of a computer screen for hours
on end, will not only result in lower productivity but can also cause headaches and drowsiness.

It’s vital to have the right type of lighting, too. Natural light is most desirable; a 2014 study by
Northwestern Medicine and the University of Illinois at Urbana-Champaign found that workers that were
exposed to higher levels of natural light slept for longer (an average of 46 minutes per night), slept better,
and were more physically active than those workers who were not exposed to natural light in their
workplace. Many migraine sufferers also identify artificial light as a trigger for their attacks.

2. Ensure employees are sitting comfortably

Standing desks have, in recent years, been touted as a cure-all for everything from back pain to obesity.

Discomfort at our desks – whether they are standing or conventional sitting ones – is important for
maintaining productivity and concentration levels. Constantly fidgeting, getting up and moving around to
escape an uncomfortable seat, and having to frequently adjust a chair, will all eat into valuable time.
Investing in good chairs is a start, but HR should also make sure that employees know how to set up their
desk environment for maximum productivity and safety, as back pain and headaches can often be
attributed to poor desk ergonomics. Investing in online desk assessments and elearning courses is a good
way to ensure that your staff are aware of the health considerations when working with computer
equipment and have set up their desks appropriately.

Comfort can also be affected by the amount of unnecessary clutter you have on your desk. A study by
furniture retailer OKA found that untidy desks are linked to a 77% decline in productivity and a 53% fall
in motivation among British workers. Encouraging employees to keep their desks tidy could make a
significant difference to their productivity levels.

3. Set the perfect temperature

Getting the temperature right in an office isn’t easy – there will almost always be someone who is too hot
or too cold. But this seemingly innocuous trial of office life can make a serious dent in your
organisation’s productivity; a 2014 survey found that nearly a third (29%) of workers estimate they spend
between 10-30 minutes each day not working because of an uncomfortable temperature.

Meanwhile, a 2004 study by Cornell University linked warmer office temperatures to fewer errors and
higher productivity levels. When office temperatures were increased from 68 degrees Fahrenheit to 77
degrees Fahrenheit (20C to 25C), typing errors dropped by 44% and output increased by 150%.

4. Reduce noise levels

A steady hum of background chatter is part and parcel of working in most offices. But office noise levels
– which usually range from between 60 to 65 decibels – can make it hard to concentrate. The German
Association of Engineers specifies 70 decibels as an acceptable volume for carrying out simple,
transactional office-based work, while just 55 decibels is the limit for what they term “mainly intellectual
work” that is complex and demands creative thinking and problem solving.

A 2011 study by Cornell University found that office workers who were exposed to higher levels of office
noise had higher levels of epinephrine – a stress hormone more commonly known as adrenaline –
compared to those working in a quieter environment.

5. Support flexible working

Knowing that an employer is open to flexible working is great for employee morale and engagement, and
is a sign that your organisation understands that employees have lives outside of work, and that you trust
them to manage their time and workloads appropriately.

As well as potentially cutting down on time spent commuting, and financial and environmental costs, the
ability to work from home (or other locations) also gives employees the opportunity to do the deeper
work that they might struggle to complete in a busy office environment.

6. Encourage healthy eating choices

Making the wrong choice at lunchtime can have a profound effect on an employee’s productivity level
later that afternoon. Tuck into foods such as pasta, bread and fizzy drinks – all of which release glucose
quickly – and you could be heading for a sugar crash come 3pm.

It’s far better to encourage employees to choose healthy, filling foods that are a source of energy, fibre
and nutrients and release glucose comparatively slowly, such as baked potatoes and pulses (such as beans
and lentils). Don’t forget about snacks, too; consider making fresh fruit available on the house so staff
aren’t tempted to graze on chocolate, sweets and energy drinks.

7. Invest in employee happiness

In a recent study by researchers at the University of Warwick, a boost in employee happiness led to a
12% increase in productivity, while unhappy employees were found to be 10% less productive.
Commenting on the findings, the research team said: “We find that human happiness has large and
positive causal effects on productivity. Positive emotions appear to invigorate human beings.”

Creating a culture of mindfulness, communication and collaboration will improve morale and motivation
among a workforce. Ensuring that employees are recognised for their efforts, whether by way of a reward
or a simple ‘thank you’, will help to create a happy working environment.

8. Provide the right technology

Technology – whether that’s communications tools such as Slack or specialist applications such as an HR
system – has great potential to improve the speed and efficiency with which we work, so long as you
choose the right products and they are implemented well. Email, for instance, can be a great drainer on
productivity; consider reducing your reliance on this medium, or, at least, getting your email volumes
under control. Introducing single sign-on for your business applications can really help, too: not only will
users spend less time entering login information, but your IT help desk won’t receive so many password
reset requests.

Job Analysis and Job Design

Job Analysis is a systematic exploration, study and recording the responsibilities, duties, skills,
accountabilities, work environment and ability requirements of a specific job. It also involves
determining the relative importance of the duties, responsibilities and physical and emotional skills for a
given job. All these factors identify what a job demands and what an employee must possess to perform a
job productively.

The process of job analysis involves in-depth investigation in order to control the output, i.e., get the job
performed successfully. The process helps in finding out what a particular department requires and what a
prospective worker needs to deliver. It also helps in determining particulars about a job including job title,
job location, job summary, duties involved, working conditions, possible hazards and machines, tools,
equipments and materials to be used by the existing or potential employee.
However, the process is not limited to determination of these factors only. It also extends to finding out
the necessary human qualifications to perform the job. These include establishing the levels of education,
experience, judgment, training, initiative, leadership skills, physical skills, communication skills,
responsibility, accountability, emotional characteristics and unusual sensory demands. These factors
change according to the type, seniority level, industry and risk involved in a particular job.

Importance of Job Analysis

The details collected by conducting job analysis play an important role in controlling the output of
the particular job. Determining the success of job depends on the unbiased, proper and thorough job
analysis. It also helps in recruiting the right people for a particular job. The main purpose of conducting
this whole process is to create and establish a perfect fit between the job and the employee.

Job analysis also helps HR managers in deciding the compensation package and additional perks and
incentives for a particular job position. It effectively contributes in assessing the training needs and
performance of the existing employees. The process forms the basis to design and establish the strategies
and policies to fulfill organizational goals and objectives.

However, analysis of a particular job does not guarantee that the managers or organization would get the
desired output. Actually collecting and recording information for a specific job involves several
complications. If the job information is not accurate and checked from time to time, an employee will not
be able to perform his duty well. Until and unless he is not aware of what he is supposed to do or what is
expected of him, chances are that the time and energy spent on a particular job analysis is a sheer wastage
of human resources. Therefore, proper care should be taken while conducting job analysis.

A thorough and unbiased investigation or study of a specific job is good for both the managers and the
employees. The managers get to know whom to hire and why. They can fill a place with the right person.
On the other hand, existing or potential employee gets to know what and how he is supposed to perform
the job and what is the desired output. Job analysis creates a right fit between the job and the employee.

The main purposes of conducting a job analysis process is to use this particular information to create a
right fit between job and employee, to assess the performance of an employee, to determine the worth of a
particular task and to analyze training and development needs of an employee delivering that specific job.

Let’s understand the concept with the help of an example. If the job of an executive sales manager is to be
analyzed, the first and foremost thing would be to determine the worth of this job. The next step is to
analyze whether the person is able to deliver what is expected of him. It also helps in knowing if he or she
is perfect for this job. The process doesn’t finish here. It also involves collection of other important facts
and figures such as job location, department or division, compensation grade, job duties, routine tasks,
computer, educational, communicational and physical skills, MIS activities, reporting structure, ability to
adapt in a given environment, leadership skills, licenses and certifications, ability to grow and close sales,
ability to handle clients, superiors and subordinates and of course, the presentation of an individual.

Purpose of Job Analysis

Job Analysis plays an important role in recruitment and selection, job evaluation, job designing, deciding
compensation and benefits packages, performance appraisal, analyzing training and development needs,
assessing the worth of a job and increasing personnel as well as organizational productivity.
  Recruitment and Selection: Job Analysis helps in determining what kind of person is required
to perform a particular job. It points out the educational qualifications, level of experience and
technical, physical, emotional and personal skills required to carry out a job in desired fashion.
The objective is to fit a right person at a right place.
 Performance Analysis: Job analysis is done to check if goals and objectives of a particular job
are met or not. It helps in deciding the performance standards, evaluation criteria and individual’s
output. On this basis, the overall performance of an employee is measured and he or she is
appraised accordingly.
 Training and Development: Job Analysis can be used to assess the training and development
needs of employees. The difference between the expected and actual output determines the level
of training that need to be imparted to employees. It also helps in deciding the training content,
tools and equipments to be used to conduct training and methods of training.
 Compensation Management: Of course, job analysis plays a vital role in deciding the pay
packages and extra perks and benefits and fixed and variable incentives of employees. After all,
the pay package depends on the position, job title and duties and responsibilities involved in a
job. The process guides HR managers in deciding the worth of an employee for a particular job
opening.
 Job Designing and Redesigning: The main purpose of job analysis is to streamline the human
efforts and get the best possible output. It helps in designing, redesigning, enriching, evaluating
and also cutting back and adding the extra responsibilities in a particular job. This is done to
enhance the employee satisfaction while increasing the human output.

JOB DESIGN
Job design follows job analysis i.e. it is the next step after job analysis. It aims at outlining and organising
tasks, duties and responsibilities into a single unit of work for the achievement of certain objectives. It
also outlines the methods and relationships that are essential for the success of a certain job. In simpler
terms it refers to the what, how much, how many and the order of the tasks for a job/s.
Job design essentially involves integrating job responsibilities or content and certain qualifications that
are required to perform the same. It outlines the job responsibilities very clearly and also helps in
attracting the right candidates to the right job. Further it also makes the job look interesting and
specialised.

There are various steps involved in job design that follow a logical sequence, those that were
mentioned earlier on. The sequence is as follows:

1. What tasks are required to e done or what tasks is part of the job?
2. How are the tasks performed?
3. What amount are tasks are required to be done?
4. What is the sequence of performing these tasks?

All these questions are aimed at arriving upon a clear definition of a specific job and thereby make it less
risky for the one performing the same. A well defined job encourages feeling of achievement among the
employees and a sense of high self esteem.

The whole process of job design is aimed to address various problems within the organisational setup,
those that pertain to ones description of a job and the associated relationships. More specifically the
following areas are fine tuned:

 Checking the work overload.

 Checking upon the work under load.
 Ensuring tasks are not repetitive in nature.
 Ensuring that employees don not remain isolated.
 Defining working hours clearly.
 Defining the work processes clearly.

The above mentioned are factors that if not taken care of result into building stress within the employees.

Benefits of Job Design

1. Employee Input: A good job design enables a good job feedback. Employees have the option to
vary tasks as per their personal and social needs, habits and circumstances in the workplace.
2. Employee Training: Training is an integral part of job design. Contrary to the philosophy of
“leave them alone’ job design lays due emphasis on training people so that are well aware of what
their job demands and how it is to be done.
3. Work/Rest Schedules: Job design offers good work and rest schedule by clearly defining the
number of hours an individual has to spend in his/her job.
4. Adjustments: A good job designs allows for adjustments for physically demanding jobs by
minimising the energy spent doing the job and by aligning the manpower requirements for the
same.

Job design is a continuous and ever evolving process that is aimed at helping employees make
adjustments with the changes in the workplace. The end goal is reducing dissatisfaction, enhancing
motivation and employee engagement at the workplace.
Job design is the next step after job analysis that aims at outlining, and organizing tasks and
responsibilities associated with a certain job. It integrates job responsibilities and qualifications or skills
that are required to perform the same. There are various methods or approaches to do this. The important
ones are discussed below

Human Approach
The human approach of job design laid emphasis on designing a job around the people or employees and
not around the organizational processes. In other words it recognizes the need of designing jobs that are
rewarding (financially and otherwise) and interesting at the same time.

According to this approach jobs should gratify an individual’s need for recognition, respect, growth and
responsibility. Job enrichment as popularized by Herzberg’s research is one the ways in human approach
of job design. Herzberg classified these factors into two categories – the hygiene factors and the
motivators.

Motivators include factors like achievement, work nature, responsibility, learning and growth etc that can
motivate an individual to perform better at the work place.

Hygiene factor on the other hand include things like working conditions, organizational policies, salary
etc that may not motivate directly but the absence of which can lead to dissatisfaction at the work place.

Engineering Approach
The engineering approach was devised by FW Taylors et al. They introduced the idea of the task that
gained prominence in due course of time. According to this approach the work or task of each employee
is planned by the management a day in advance. The instructions for the same are sent to each employee
describing the tasks to e undertaken in detail. The details include things like what, how and when of the
task along with the time deadlines.

The approach is based on the application of scientific principles to job design. Work, according to this
approach should be scientifically analyzed and fragmented into logical tasks. Due emphasis is then laid
on organizing the tasks so that a certain logical sequence is followed for efficient execution of the same.
The approach also lays due emphasis on compensating employees appropriately and training them
continuously for work efficiency.

The Job Characteristics Approach

The job characteristics approach was popularized by Hackman and Oldham. According to this approach
there is a direct relationship between job satisfaction and rewards. They said that employees will be their
productive best and committed when they are rewarded appropriately for their work. They laid down five
core dimensions that can be used to describe any job – skill variety, task identity, task significance,
autonomy and feedback.

 Skill Variety: The employees must be able to utilize all their skills and develop new skills while
dealing with a job.
 Task Identity: The extent to which an identifiable task or piece or work is required to be done
for completion of the job.
  Task Significance: How important is the job to the other people, what impact does it create on
their lives?
 Autonomy: Does the job offer freedom and independence to the individual performing the same.
 Feedback: Is feedback necessary for improving performance.

These are different approaches but all of them point to more or less the same factors that need to be taken
into consideration like interest, efficiency, productivity, motivation etc. All these are crucial to effective
job design

Work Measurement
Work measurement is concerned with the determination of the amount of time required to perform a
unit of work. Work measurement is very important for promoting productivity of an organization. It
enables management to compare alternate methods and also to do initial staffing. Work measurement
provides basis for proper planning.

Since it is concerned with the measurement of time it is also called ‘Time Study’. The exact examination
of time is very essential for correct pricing. To find the correct manufacturing time for a product, time
study is performed. To give competitive quotations, estimation of accurate labour cost is very essential. It
becomes a basis for wage and salary administration and devising incentive schemes.

Work measurement has been defined by British Standard Institution as, “The application of techniques
designed to establish the time for a qualified worker to carry out a specified job at a defined level of
performance”. This time is called standard or allowed time. Time study may also be defined as “the art
of observing and recording the time required to do each detailed element of an industrial
operation”.

Objectives of Work Measurement:

1. To compare the times of performance by alternative methods.

2. To enable realistic schedule of work to be prepared.
3. To arrive at a realistic and fair incentive scheme.
4. To analyse the activities for doing a job with the view to reduce or eliminate
unnecessary jobs.
5. To minimise the human effort.
6. To assist in the organisation of labour by daily comparing the actual time with that of
target time.

Uses of Work Measurement:

1. Wok measurement is used in planning work and in drawing out schedules.

2. Wok measurement is used to determine standard costs.
3. Wok measurement is used as an aid in preparing budgets.
4. It is used in balancing production lines for new products.
5. Wok measurement is used in determining machine effectiveness.
 6. To determine time standards to be used as a basis for labour cost control.
7. To establish supervisory objectives and to provide a basis for measuring supervisory
efficiency.
8. To determine time standards to be used for providing a basis for wage incentive plans.

Techniques of Work Measurement:

Work measurement is investigating and eliminating ineffective time. It not only reveals the existence of
ineffective time. But it can be used to set standard times for carrying out the work so that ineffective time
does not evolve later. It will be immediately found out by the increased standard time. For the purpose of
work measurement, work may be regarded as repetitive work and non-repetitive work.

The principal techniques of work measurement are classified under the following heads:

1. Time Study
2. Work Sampling
3. Pre-determined Motion Time System
4. Analytical Estimating

Ergonomics
Ergonomics is about designing for people.

Defined as the science of fitting a workplace to the user’s needs, ergonomics aims to increase efficiency
and productivity and reduce discomfort.

Think about the angle of your computer monitor, or the height of your desk. Think about whether your
eyes are strained by the end of the day or if your wrists hurt from typing. A sound understanding of
ergonomics can prevent most workplace injuries by adjusting tools to the user, putting an emphasis on
proper posture to reduce the impact of repetitive movements.

The use of computers and rapidly changing technology in the modern workplace has greatly increased the
need for ergonomics. Desks, chairs, monitors, keyboards and lighting all need to be assessed when
creating a workspace, whether it is at the office or at home.

Ergonomics also takes into account the need for movement throughout the day. Office furniture has
traditionally encouraged stiff, fixed postures and little movement. However, a balance between sitting and
standing, which can be aided with a height-adjustable desk, is a proven way to combat the effects of
sedentary workplace behavior.

Ergonomics is the process of designing or arranging workplaces, products and systems so that they fit the
people who use them.
Most people have heard of ergonomics and think it is something to do with seating or with the design of
car controls and instruments – and it is… but it is so much more. Ergonomics applies to the design of
anything that involves people – workspaces, sports and leisure, health and safety.

Ergonomics (or ‘human factors’ as it is referred to in North America) is a branch of science that aims to
learn about human abilities and limitations, and then apply this learning to improve people’s interaction
with products, systems and environments.

Ergonomics aims to improve workspaces and environments to minimise risk of injury or harm. So as
technologies change, so too does the need to ensure that the tools we access for work, rest and play are
designed for our body’s requirements.

In the workplace: According to Safe Work Australia, the total economic cost of work-related injuries
and illnesses is estimated to be $60 billion dollars. Recent research has shown that lower back pain is the
world’s most common work-related disability – affecting employees from offices, building sites and in
the highest risk category, agriculture.

Ergonomics aims to create safe, comfortable and productive workspaces by bringing human abilities and
limitations into the design of a workspace, including the individual’s body size, strength, skill, speed,
sensory abilities (vision, hearing), and even attitudes.

In the greater population: The number of people in Australia aged 75 and over is forecast to double
over the next 50 years. With this, equipment, services and systems will need to be designed to
accommodate the increasing needs of the ageing population, applying to public transport, building
facilities, and living spaces.

How does ergonomics work?

Ergonomics is a relatively new branch of science which celebrated its 50th anniversary in 1999, but relies
on research carried out in many other older, established scientific areas, such as engineering, physiology
and psychology.

To achieve best practice design, Ergonomists use the data and techniques of several disciplines:

 Anthropometry: body sizes, shapes; populations and variations

 Biomechanics: muscles, levers, forces, strength
 Environmental physics: noise, light, heat, cold, radiation, vibration body systems: hearing,
vision, sensations
 Applied psychology: skill, learning, errors, differences
 Social psychology: groups, communication, learning, behaviours.
Human Resource planning Objectives and
Activities
Human resource is the most important asset of an organization. Human resources planning are the
important managerial function. It ensures the right type of people, in the right number, at the right time
and place, who are trained and motivated to do the right kind of work at the right time, there is generally a
shortage of suitable persons.

According to E.W. Vetter, human resource planning is “the process by which a management determines
how an organization should make from its current manpower position to its desired manpower position.

Through planning a management strives to have the right number and the right kind of people at the right
places, at the right time to do things which result in both the organization and the individual receiving the
maximum long range benefit.”

Dale S. Beach has defined it as “a process of determining and assuring that the organization will have an
adequate number of qualified persons available at the proper times, performing jobs which meet the needs
of the enterprise and which provide satisfaction for the individuals involved.”

In the words of Leon C. Megginson, human resource planning is “an integration approach to performing
the planning aspects of the personnel function in order to have a sufficient supply of adequately
developed and motivated people to perform the duties and tasks required to meet organisational
objectives and satisfy the individual’s needs and goals of organisational members.”

Objectives of Human Resource Planning

1. Well Defined Objectives

Enterprise’s objectives and goals in its strategic planning and operating planning may form the objectives
of human resource planning. Human resource needs are planned on the basis of company’s goals.
Besides, human resource planning has its own objectives like developing human resources, updating
technical expertise, career planning of individual executives and people, ensuring better commitment of
people and so on.

2. Determining Human Resource Reeds

Human resource plan must incorporate the human resource needs of the enterprise. The thinking will have
to be done in advance so that the persons are available at a time when they are required. For this purpose,
an enterprise will have to undertake recruiting, selecting and training process also.

3. Keeping Manpower Inventory

It includes the inventory of present manpower in the organization. The executive should know the persons
who will be available to him for undertaking higher responsibilities in the near future.
4. Adjusting Demand and Supply
Manpower needs have to be planned well in advance as suitable persons are available in future. If
sufficient persons will not be available in future then efforts should be .made to start recruitment process
well in advance. The demand and supply of personnel should be planned in advance.

5. Creating Proper Work Environment

Besides estimating and employing personnel, human resource planning also ensures that working
conditions are created. Employees should like to work in the organization and they should get proper job
satisfaction.

An HR Planning process simply involves the following four broad steps:

 Current HR Supply: Assessment of the current human resource availability in the organization

is the foremost step in HR Planning. It includes a comprehensive study of the human resource
strength of the organization in terms of numbers, skills, talents, competencies, qualifications,
experience, age, tenures, performance ratings, designations, grades, compensations, benefits, etc.
At this stage, the consultants may conduct extensive interviews with the managers to understand
the critical HR issues they face and workforce capabilities they consider basic or crucial for
various business processes.
 Future HR Demand: Analysis of the future workforce requirements of the business is the
second step in HR Planning. All the known HR variables like attrition, lay-offs, foreseeable
vacancies, retirements, promotions, pre-set transfers, etc. are taken into consideration while
determining future HR demand. Further, certain unknown workforce variables like competitive
factors, resignations, abrupt transfers or dismissals are also included in the scope of analysis.
 Demand Forecast: Next step is to match the current supply with the future demand of HR, and
create a demand forecast. Here, it is also essential to understand the business strategy and
objectives in the long run so that the workforce demand forecast is such that it is aligned to the
organizational goals.
 HR Sourcing Strategy and Implementation: After reviewing the gaps in the HR supply and
demand, the HR Consulting Firm develops plans to meet these gaps as per the demand forecast
created by them. This may include conducting communication programs with employees,
relocation, talent acquisition, recruitment and outsourcing, talent management, training and
coaching, and revision of policies. The plans are, then, implemented taking into confidence the
mangers so as to make the process of execution smooth and efficient. Here, it is important to note
that all the regulatory and legal compliances are being followed by the consultants to prevent any
untoward situation coming from the employees.

Manpower Requirement Process

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

According to Vetter, the process by which management determines how the organisation should move
from its current manpower position to its desired manpower position. Through planning, management
strives to have the right number and the right kinds of people, at the right places, at the right time, doing
things which result in both the organisation and the individual receiving maximum long-run benefit.

Coleman has defined human resource or manpower planning as “the process of determining manpower
requirements and the means for meeting those requirements in order to carry out the integrated plan of the
organisation.”

Stainer defines manpower planning as “Strategy for the acquisition, utilisation, improvement, and
preservation of an enterprise’s human resources. It relates to establishing job specifications or the
quantitative requirements of jobs determining the number of personnel required and developing sources
of manpower.”

According to Wickstrom, human resource planning consists of a series of activities, viz:

(a) Forecasting future manpower requirements, either in terms of mathematical projections of trends in
the economic environment and development in industry, or in terms of judgmental estimates based upon
the specific future plans of a company;

(b) Making an inventory of present manpower resources and assessing the extent to which these resources
are employed optimally;

(c) Anticipating manpower problems by projecting present resources into the future and comparing them
with the forecast of requirements to determine their adequacy, both quantitatively and qualitatively; and

(d) Planning the necessary programmes of requirement, selection, training, development, utilization,
transfer, promotion, motivation and compensation to ensure that future manpower requirements are
properly met.

According to Geisler, manpower planning is the process—including forecasting, developing and

controlling—by which a firm ensures that it has the right number of people and the right kind of people at
the right places at the right time doing work for which they are economically most useful.

Process of Manpower Planning:

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

It may be rightly regarded as a multi-step process, including various issues, such as:

(A) Deciding goals or objectives

(B) Auditing of the internal resources

(C) Formulation of the recruitment plan

(D) Estimating future organisational structure and manpower requirements

(E) Developing a human resource plan

A.  Deciding Goals or Objectives:

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

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

It stresses the specific and standard occupational nomenclature must be used without which “it would not
be possible to build a firm-cum-industry-wise manpower resources planning.” It suggests the adoption for
this purpose of the international coding of occupations. For a sound manpower planning it considers as a
prerequisite the preparation of a manual of job classification and job description with specific reference to
individual jobs to be performed.

B.  Audit of the Internal Resources:

The next step consists of an audit of the internal resources. A systematic review of the internal resources
would indicate persons within the organisations who possesses different or higher levels of
responsibilities. Thus it becomes necessary to integrate into the manpower planning process a sound
system of performance appraisal as well as appraisal of potential of existing employees.

C.  Formulation of the Recruitment Plan:

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

D.  Estimating Future Organisational Structure and Manpower Requirements:

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

E.  Developing of Human Resource Plan:

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

Factors Affecting Manpower Planning:

Manpower planning exercise is not an easy tube because it is imposed by various factors such as:

1. It suffers from inaccuracy because it is very difficult to forecast long-range

requirements of personnel.
2. Manpower planning depends basically on organisation planning. Overall planning is
itself is a difficult task because of changes in economic conditions, which make long
term manpower planning difficult.
3. It is difficult to forecast about the personnel with the organisation at a future date.
While vacancies caused by retirements can be predicted accurately other factors like
resignation, deaths are difficult to forecast.
4. Lack of top management support also frustrates those in charge of manpower
planning because in the absence of top management support, the system does not
work properly.
5. The problem of forecast becomes more occur in the context of key personnel because
their replacement cannot be arranged in short period of time.

Recruitment & Selection Process: Introduction

Recruitment and Selection is an important operation in HRM, designed to maximize employee strength
in order to meet the employer’s strategic goals and objectives. In short, Recruitment and Selection is the
process of sourcing, screening, shortlisting and selecting the right candidates for the filling the required
vacant positions.

The Scope of Recruitment and Selection

The scope of Recruitment and Selection is very wide and it consists of a variety of operations. Resources
are considered as most important asset to any organization. Hence, hiring right resources is the most
important aspect of Recruitment. Every company has its own pattern of recruitment as per their
recruitment policies and procedures.

The scope of Recruitment and Selection includes the following operations:

 Dealing with the excess or shortage of resources

 Preparing the Recruitment policy for different categories of employees
 Analyzing the recruitment policies, processes, and procedures of the organization
 Identifying the areas, where there could be a scope of improvement
 Streamlining the hiring process with suitable recommendations
 Choosing the best suitable process of recruitment for effective hiring of resources
Any organization wants it future to be in good and safe hands. Hence, hiring the right resource is a very
important task for any organization.

Career planning and development

1. A career may be defined as ‘a sequence of jobs that constitute what a person does for
a living’.
2. According to Schermerborn, Hunt, and Osborn, ‘Career planning is a process of
systematically matching career goals and individual capabilities with
opportunities for their fulfillment’.
3. Career planning is the process of enhancing an employee’s future value.
4. A career plan is an individual’s choice of occupation, organization and career path.

Career planning encourages individuals to explore and gather information, which enables them to syn-
thesize, gain competencies, make decisions, set goals and take action. It is a crucial phase of human
resource development that helps the employees in making strategy for work-life balance.

Features of Career Planning and Career Development:

1. It is an ongoing process.
2. It helps individuals develop skills required to fulfill different career roles.
3. It strengthens work-related activities in the organization.
4. It defines life, career, abilities, and interests of the employees.
5. It can also give professional directions, as they relate to career goals.

Objectives of Career Planning:

1. To identify positive characteristics of the employees.

2. To develop awareness about each employee’s uniqueness.
3. To respect feelings of other employees.
4. To attract talented employees to the organization.
5. To train employees towards team-building skills.
6. To create healthy ways of dealing with conflicts, emotions, and stress.

Benefits of Career Planning:

1. Career planning ensures a constant supply of promotable employees.

2. It helps in improving the loyalty of employees.
3. Career planning encourages an employee’s growth and development.
4. It discourages the negative attitude of superiors who are interested in suppressing the
growth of the subordinates.
5. It ensures that senior management knows about the calibre and capacity of the
employees who can move upwards.
6. It can always create a team of employees prepared enough to meet any contingency.
 7. Career planning reduces labour turnover.
8. Every organization prepares succession planning towards which career planning is the
first step.

Career Development
Career development is the series of activities or the on-going/lifelong process of developing one’s career.
Career development usually refers to managing one’s career in an intra-organizational or inter-
organizational scenario. It involves training on new skills, moving to higher job responsibilities, making a
career change within the same organization, moving to a different organization or starting one’s own
business.

Career development is directly linked to the goals and objectives set by an individual. It starts with self-
actualization and self-assessment of one’s interests and capabilities. The interests are then matched with
the available options.

The individual needs to train himself to acquire the skills needed for the option or career path chosen by
him. Finally, after acquiring the desired competency, he has to perform to achieve the goals and targets
set by him.

Career development is directly linked to an individual’s growth and satisfaction and hence should be
managed by the individual and not left to the employer. Career development helps an individual grow not
only professionally but also personally. Learning new skills like leadership, time management, good
governance, communication management, team management etc also help an employee develop and
shape their career.
Importance of Career Development

Every employee working in an organization is looking for a career development which moves in the right
direction. Career path taken by an employee determines the growth. Career should be planned in a way
that it moves forward.

Career development provides the framework with skills, goals, awareness, assessment and performance
which helps an individual to move in the right direction and achieve the goals one has in one’s career.
Careful career planning is always useful for individuals to succeed professionally and also helps to boost
employee motivation in the organization.

Career Development Strategies

The development of an individual’s career is driven by several factors. Strategies to improve someone’s
career can be driven either by the company through organization development or by the individual
himself or herself. Some strategies of career development are as following.

1. By Companies

Training and development by companies can help in employees learn new skills. Companies help in
providing leadership development, management development etc. This is all done through employee
training sessions or developmental counselling. Employee development in the long run helps in career
development.

2. By Employees

Individuals can themselves boost their own career. This is done through constant evaluation of their skills
using techniques like continuing professional development.

Training Methods
A large variety of methods of training are used in business. Even within one organization different
methods are used for training different people. All the methods are divided into two classifications for:

Training Methods: On Job Training and off the Job Training Methods

1. On-the-job training Methods

Under these methods new or inexperienced employees learn through observing peers or managers
performing the job and trying to imitate their behavior. These methods do not cost much and are less
disruptive as employees are always on the job, training is given on the same machines and experience
would be on already approved standards, and above all the trainee is learning while earning. Some of the
commonly used methods are:-

(a) Coaching: Coaching is a one-to-one training. It helps in quickly identifying the weak areas and tries
to focus on them. It also offers the benefit of transferring theory learning to practice. The biggest problem
is that it perpetrates the existing practices and styles. In India most of the scooter mechanics are trained
only through this method.

(b) Mentoring: The focus in this training is on the development of attitude. It is used for managerial
employees. Mentoring is always done by a senior inside person. It is also one-to- one interaction, like
coaching.

(c) Job Rotation: It is the process of training employees by rotating them through a series of related jobs.
Rotation not only makes a person well acquainted with different jobs, but it also alleviates boredom and
allows to develop rapport with a number of people. Rotation must be logical.

(d) Job Instructional Technique (JIT): It is a Step by step (structured) on the job training method in
which a suitable trainer (i) prepares a trainee with an overview of the job, its purpose, and the results
desired, (ii) demonstrates the task or the skill to the trainee, (iii) allows the trainee to show the
demonstration on his or her own, and (iv) follows up to provide feedback and help. The trainees are
presented the learning material in written or by learning machines through a series called ‘frames’. This
method is a valuable tool for all educators (teachers and trainers). It helps us:

 To deliver step-by-step instruction

 To know when the learner has learned
 To be due diligent (in many work-place environments)

(e) Apprenticeship: Apprenticeship is a system of training a new generation of practitioners of a skill.

This method of training is in vogue in those trades, crafts and technical fields in which a long period is
required for gaining proficiency. The trainees serve as apprentices to experts for long periods. They have
to work in direct association with and also under the direct supervision of their masters.

The object of such training is to make the trainees all-round craftsmen. It is an expensive method of
training. Also, there is no guarantee that the trained worker will continue to work in the same organization
after securing training. The apprentices are paid remuneration according the apprenticeship agreements.

(f) Understudy: In this method, a superior gives training to a subordinate as his understudy like an
assistant to a manager or director (in a film). The subordinate learns through experience and observation
by participating in handling day to day problems. Basic purpose is to prepare subordinate for assuming
the full responsibilities and duties.

2. Off-the-job Training Methods

Off-the-job training methods are conducted in separate from the job environment, study material is
supplied, there is full concentration on learning rather than performing, and there is freedom of
expression. Important methods include:

(a) Lectures and Conferences: Lectures and conferences are the traditional and direct method of
instruction. Every training programme starts with lecture and conference. It’s a verbal presentation for a
large audience. However, the lectures have to be motivating and creating interest among trainees. The
speaker must have considerable depth in the subject. In the colleges and universities, lectures and
seminars are the most common methods used for training.

(b) Vestibule Training: Vestibule Training is a term for near-the-job training, as it offers access to
something new (learning). In vestibule training, the workers are trained in a prototype environment on
specific jobs in a special part of the plant.

An attempt is made to create working condition similar to the actual workshop conditions. After training
workers in such condition, the trained workers may be put on similar jobs in the actual workshop.

(c) Simulation Exercises: Simulation is any artificial environment exactly similar to the actual situation.
There are four basic simulation techniques used for imparting training: management games, case study,
role playing, and in-basket training.

(d) Sensitivity Training: Sensitivity training is also known as laboratory or T-group training. This
training is about making people understand about themselves and others reasonably, which is done by
developing in them social sensitivity and behavioral flexibility. It is ability of an individual to sense what
others feel and think from their own point of view.

It reveals information about his or her own personal qualities, concerns, emotional issues, and things that
he or she has in common with other members of the group. It is the ability to behave suitably in light of
understanding.

(e) Transactional Analysis: It provides trainees with a realistic and useful method for analyzing and
understanding the behavior of others. In every social interaction, there is a motivation provided by one
person and a reaction to that motivation given by another person.

Techniques of Performance Appraisal

Performance Appraisal Methods: Traditional and Modern Methods

Each method of performance appraisal has its strengths and weaknesses may be suitable for one
organization and non-suitable for another one. As such, there is no single appraisal method accepted and
used by all organizations to measure their employees’ performance.
 1. Traditional Methods

(i) Ranking Method

It is the oldest and simplest formal systematic method of performance appraisal in which employee is
compared with all others for the purpose of placing order of worth. The employees are ranked from the
highest to the lowest or from the best to the worst.

In doing this the employee who is the highest on the characteristic being measured and also the one who
is L lowest, are indicated. Then, the next highest and the next lowest between next highest and lowest
until all the employees to be rated have been ranked. Thus, if there are ten employees to be appraised,
there will be ten ranks from 1 to 10.

(ii) Paired Comparison

In this method, each employee is compared with other employees on one- on one basis, usually based on
one trait only. The rater is provided with a bunch of slips each coining pair of names, the rater puts a tick
mark against the employee whom he insiders the better of the two. The number of times this employee is
compared as better with others determines his or her final ranking.

N (N-1)/2

Where N = the total number of employees to be evaluated.

(iii) Grading Method

In this method, certain categories of worth are established in advance and carefully defined. There can be
three categories established for employees: outstanding, satisfactory and unsatisfactory. There can be
more than three grades. Employee performance is compared with grade definitions. The employee is,
then, allocated to the grade that best describes his or her performance.
Such type of grading is done is Semester pattern of examinations and in the selection of a candidate in the
public service sector. One of the major drawbacks of this method is that the rater may rate most of the
employees on the higher side of their performance.

(iv) Forced Distribution Method

This method was evolved by Tiffen to eliminate the central tendency of rating most of the employees at a
higher end of the scale. The method assumes that employees’ performance level confirms to a normal
statistical distribution i.e., 10,20,40,20 and 10 per cent. This is useful for rating a large number of
employees’ job performance and promo ability. It tends to eliminate or reduce bias.

It is also highly simple to understand and easy to apply in appraising the performance of employees in
organizations. It suffer from the drawback that improve similarly, no single grade would rise in a ratings.

(v) Forced-Choice Method

The forced-choice method is developed by J. P. Guilford. It contains a series of groups of statements, and
rater rates how effectively a statement describes each individual being evaluated. Common method of
forced-choice method contains two statements, both positive and negative.

(vi) Check-List Method

The basic purpose of utilizing check-list method is to ease the evaluation burden upon the rater. In this
method, a series of statements, i.e., questions with their answers in ‘yes’ or ‘no’ are prepared by the HR
department. The check-list is, then, presented to the rater to tick appropriate answers relevant to the
appraisee. Each question carries a weight-age in relationship to their importance.

(vii) Critical Incidents Method

In this method, the rater focuses his or her attention on those key or critical behaviours that make the
difference between performing a job in a noteworthy manner (effectively or ineffectively). There are three
steps involved in appraising employees using this method.

First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is prepared. Second, a
group of experts then assigns weightage or score to these incidents, depending upon their degree of
desirability to perform a job. Third, finally a check-list indicating incidents that describe workers as
“good” or “bad” is constructed. Then, the check-list is given to the rater for evaluating the workers.

(viii) Graphic Rating Scale Method

The graphic rating scale is one of the most popular and simplest techniques for appraising performance. It
is also known as linear rating scale. In this method, the printed appraisal form is used to appraise each
employee.
The form lists traits (such as quality and reliability) and a range of job performance characteristics (from
unsatisfactory to outstanding) for each trait. The rating is done on the basis of points on the continuum.
The common practice is to follow five points scale.

(ix) Essay Method

Essay method is the simplest one among various appraisal methods available. In this method, the rater
writes a narrative description on an employee’s strengths, weaknesses, past performance, potential and
suggestions for improvement. Its positive point is that it is simple in use. It does not require complex
formats and extensive/specific training to complete it.

(x) Field Review Method

When there is a reason to suspect rater’s biasedness or his or her rating appears to be quite higher than
others, these are neutralised with the help of a review process. The review process is usually conducted by
the personnel officer in the HR department.

(xi) Confidential Report

It is the traditional way of appraising employees mainly in the Government Departments. Evaluation is
made by the immediate boss or supervisor for giving effect to promotion and transfer. Usually a
structured format is devised to collect information on employee’s strength weakness, intelligence,
attitude, character, attendance, discipline, etc. report.

2. Modern Methods

(i) Management by Objectives (MBO)

Most of the traditional methods of performance appraisal are subject to the antagonistic judgments of the
raters. It was to overcome this problem; Peter F. Drucker propounded a new concept, namely,
management by objectives (MBO) way back in 1954 in his book.

The Practice of management. The concept of MBO as was conceived by Drucker, can be described as a
“process whereby the superior and subordinate managers of an organization jointly identify its common
goals, define each individual’s major areas of responsibility in terms of results expected of him and use
these measures as guides for operating the unit and assessing the contribution of each its members”.

An MBO programme consists of four main steps: goal setting, performance standard, comparison, and
periodic review. In goal-setting, goals are set which each individual, s to attain. The superior and
subordinate jointly establish these goals. The goals refer to the desired outcome to be achieved by each
individual employee.

In performance standards, the standards are set for the employees as per the previously arranged time
period. When the employees start performing their jobs, they come to know what is to be done, what has
been done, and what remains to be done.
In the third step the actual level of goals attained are compared with the goals agreed upon. This enables
the evaluator to find out the reasons variation between the actual and standard performance of the
employees. Such a comparison helps devise training needs for increasing employees’ performance it can
also explore the conditions having their bearings on employees’ performance but over which the
employees have no control.

Finally, in the periodic review step, corrective measure is initiated when actual performance deviates
from the slandered established in the first step-goal-setting stage. Consistent with the MBO philosophy
periodic progress reviews are conducted in a constructive rather than punitive manner.

(ii)  Behaviourally Anchored Rating Scales (BARS)

The problem of judgmental performance evaluation inherent in the traditional methods of performance
evaluation led to some organizations to go for objective evaluation by developing a technique known as
“Behaviourally Anchored Rating Scales (BARS)” around 1960s. BARS are descriptions of various
degrees of behaviour with regard to a specific performance dimension.

It combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified
scale with specific behavioural examples of good or poor performance. The proponents of BARS claim
that it offers better and more equitable appraisals than do the other techniques of performance appraisal
we discussed so far.

(iii) Assessment Centres

The introduction of the concept of assessment centres as a method of performance method is traced back
in 1930s in the Germany used to appraise its army officers. The concept gradually spread to the US and
the UK in 1940s and to the Britain in 1960s.

The concept, then, traversed from the army to business arena during 1960s. The concept of assessment
centre is, of course, of a recent origin in India. In India, Crompton Greaves, Eicher, Hindustan Lever and
Modi Xerox have adopted this technique of performance evaluation.

In business field, assessment centres are mainly used for evaluating executive or supervisory potential. By
definition, an assessment centre is a central location where managers come together to participate in well-
designed simulated exercises. They are assessed by senior managers supplemented by the psychologists
and the HR specialists for 2-3 days.

Assessee is asked to participate in in-basket exercises, work groups, simulations, and role playing which
are essential for successful performance of actual job. Having recorded the assessee’s behaviour the raters
meet to discuss their pooled information and observations and, based on it, they give their assessment
about the assesee. At the end of the process, feedback in terms of strengths and weaknesses is also
provided to the assesees.

(iv) 360 – Degree Appraisal

Yet another method used to appraise the employee’s performance is 360 – degree appraisal. This method
was first developed and formally used by General Electric Company of USA in 1992. Then, it travelled to
other countries including India. In India, companies like Reliance Industries, Wipro Corporation, Infosys
Technologies, Thermax, Thomas Cook etc., have been using this method for appraising the performance
of their employees. This feedback based method is generally used for ascertaining training and
development requirements, rather than for pay increases.

Under 360 – degree appraisal, performance information such as employee’s skills, abilities and
behaviours, is collected “all around” an employee, i.e., from his/her supervisors, subordinates, peers and
even customers and clients.

In other worlds, in 360-degree feedback appraisal system, an employee is appraised by his supervisor,
subordinates, peers, and customers with whom he interacts in the course of his job performance. All these
appraisers provide information or feedback on an employee by completing survey questionnaires
designed for this purpose.

(v) Cost Accounting Method

This method evaluates an employee’s performance from the monetary benefits the employee yields to
his/her organization. This is ascertained by establishing a relationship between the costs involved in
retaining the employee, and the benefits an organization derives from Him/he

Promotion and Transfer

Human Resource Management is a process of connecting people and organizations to accomplish
targeted goals. It is a part of management process which is associated with the management of human
resource in an organization. Among major functions of Human Resource Management, Promotion and
transfer is vital for growth of companies.

It is important that company must develop good strategies in regard to transfers and promotions. The
policy must have a clear, fair and transparent process that applies to all employees within the
organisation. A transfer requires employees to change the work group, workplace or unit. The transfer
may be to displace the worker to a different geographic region. Basically, In Job transfer in any
organisation, employees are displaced from one post to another or from one department to other or from
one branch of company to other. It is more common in banks, government department and manufacturing
companies. Transfer is neither a promotion nor demotion but horizontal or lateral movement of an
employee. The main aim of Transfer is to fulfil the different types of work in different department, to
provide training to employee, to rectify any poor placement of employee, to satisfy personal needs of
worker, to meet organisational needs arises due to expansion, fluctuation in work requirement or changes
in organisational structure, to have a solution to poor performance of employee in a particular department,
to avoid fatigue and monotony, to remove poor personal relations, to punish employees as a punitive
action. The transfer of an employee to another job must evaluate that it is equal to or better than the
earlier job. A promotion is a change of job to a higher level within the organisation.

Many scholars stated that Promotion is a human resource function in which an advancement involving a
change of classification for an individual, within or between budgetary units, and may or may not involve
a salary increase. A promotion for the individual may result from a reclassification of a position.
Promotions can benefit an organisation as it shows the organisation values its employees by giving them
opportunity to improve their career opportunities through promotion. Therefore, increasing employee
loyalty, retention and reducing employee turnover for the organisation. Edwin Flippo stated that
“Promotion involves a change from one job to another that is better in terms of status and
responsibilities”.

Promotion helps employees in several ways. It provides higher status, salary, and satisfaction to existing
employees, motivate employees to higher productivity and loyalty to the organisation, to retain the
services of qualified and competent employees, to recognise, appreciate and reward the loyalty and
efficiency of employees, to support the policy of filling higher vacancies from within the organisation, to
raise employees morale and sense of belongings.

There are many types of transfers such as replacement, versatility, shift and remedial transfer. In
organisations, promotions are done as horizontal, vertical and dry level.

Principles of good Promotion Policy: Rules of promotions such as qualifications, experience and other
terms should be perfect and specific. Wide publicity should be given to promotion policy. Company must
not follow partiality, favouritism or injustice. It should be based on scientific performance appraisal of
employees and opportunity should be provided to every worker. Promotion policy should be prepared for
long period and should not be forced to accept by an employee. Promotion should be given from within
the same department. Grievance relating to promotions should be settled properly. Promotion policy
should be finalised after discussion with staffs.

To summarize, a promotion is the selection employee to another position, within the same department or
elsewhere in the organization that involves duties and responsibilities of a more complex or demanding
nature and are recognized by a higher pay grade and salary. A transfer is appointing workers to another
position within the same department or to another place in the organization, involving duties and
responsibilities of a similar nature and having a similar pay grade and salary.

CHAPTER 4

Wage policy, Wage determination, Wage boards

A national wage policy, thus aims at establishing wages at the highest possible level, which the economic
conditions of the country permit and ensuring that the wage earner gets a fair share of the increased
prosperity of the country as a whole resulting from the economic development.

The term “wage policy” here refers to legislation or government action calculated to affect the level or
structure of wages or both, for the purpose of attaining specific objectives of social and economic policy.

1. To eliminate malpractices in the payment of wages.

2. To set minimum wages for workers, whose bargaining position is weak due to the fact
that they are either un-organised or inefficiently organised. In other words, to reduce
wage differential between the organised and unorganised sectors.
3. To rationalise inter-occupational, inter-industrial and inter-regional wage differentials
in such a way that disparities are reduced in a phased manner.
 4. To ensure reduction of disparities of wages and salaries between the private sector
and public sector in a phased manner.
5. To compensate workers for the raise in the cost of living in such a manner that in the
process, the ratio of disparity between the highest paid and the lowest paid worker is
reduced.
6. To provide for the promotion and growth of trade unions and collective bargaining.
7. To obtain for the workers a just share in the fruits of economic development.
8. To avoid following a policy of high wages to such an extent that it results in
substitution of capital for labour thereby reducing employment.
9. To prevent high profitability units with better capacity to pay a level of wages far in
excess of the prevailing level of wages in other sectors.

10.To permit bilateral collective bargaining within national framework so that high wage islands are not
created.

11.To encourage the development of incentive systems of payment with a view to raising productivity
and the real wages of workers.

12.To bring about a more efficient allocation and utilisation of man-power through wage differentials and
appropriate systems of payments. In order to achieve the above objectives under the national wage policy,
the following regulations have been adopted by the state:

1. Prescribing minimum rates of wages.

2. Compulsory conciliation and arbitration.
3. Wage boards.

1. Minimum Wages:

In order to prescribe the minimum rate of wages, the Minimum Wages Act, 1948 was passed. The Act
empowers the government to fix minimum rates of wages in respect of certain sweated and unorganised
employments. It also provides for the review of these wages at intervals not exceeding 5 years.

2. Compulsory Conciliation and Arbitration:

With the object of providing for conciliation and arbitration, the Industrial Disputes Act 1947 was passed.
It provides for the appointment of Industrial Tribunals and National Industrial Tribunals for settlement of
industrial disputes including those relating to wages.

3. Wage Boards:

A wage board is a tripartite body with representatives of management and workers, presided over by a
government nominated chairman who can act as an umpire in the event of disagreement among the
parties.
Technically, a wage board can make only recommendations, since there is no legal sanction for it, but for
all practical purposes, they are awards which if made unanimously, are considered binding upon
employers.

Factors affecting wages & Salary, Systems of

payments
Following factors influence the determination of wage rate:

1. Ability to Pay:

The ability of an industry to pay will influence wage rate to be paid, if the concern is running into losses,
then it may not be able to pay higher wage rates. A profitable enterprise may pay more to attract good
workers. During the period of prosperity, workers are paid higher wages because management wants to
share the profits with labour.

2. Demand and Supply:

The labour market conditions or demand and supply forces to operate at the national and local levels and
determine the wage rates. When the demand for a particular type of skilled labour is more and supply is
less than the wages will be more. One the other hand, if supply is more demand on the other hand, is less
then persons will be available at lower wage rates also.

According to Mescon,” the supply and demand compensation criterion is very closely related to the
prevailing pay comparable wage and on-going wage concepts since, in essence to all these remuneration
standards are determined by immediate market forces and factors.

3. Prevailing Market Rates:

No enterprise can ignore prevailing wage rates. The wage rates paid in the industry or other concerns at
the same place will form a base for fixing wage rates. If a unit or concern pays low rates then workers
leave their jobs whenever they get a job somewhere else. It will not be possible to retain good workers for
long periods.

4. Cost of Living:
In many industries wages are linked to enterprise cost of living which ensures a fair wages to workers.
The wage rates are directly influenced by cost of living of a place. The workers will accept a wage which
may ensure them a minimum standard of living.

Wages will also be adjusted according to price index number. The increase in price index will erode the
purchasing power of workers and they will demand higher wages. When the prices are stable, then
frequent wage increases may not be required
5. Bargaining of Trade Unions:
The wage rates are also influenced by the bargaining power of trade unions. Stronger the trade union,
higher will be the wage rates. The strength of a trade union is judged by its membership, financial
position and type of leadership.

6. Productivity:
Productivity is the contribution of the workers in order to increase output. It also measures the
contribution of other factors of production like machines, materials, and management .Wage increase is
sometimes associated with increase in productivity. Workers may also be offered additional bonus, etc., if
productivity increases beyond a certain level. It is common practice to issue productivity bonus in
industrial units.

7. Government Regulations:
To improve the working conditions of workers, government may pass a legislation for fixing minimum
wages of workers. This may ensure them, a minimum level of living. In under developed countries
bargaining power of labour is weak and employers try to exploit workers by paying them low wages. In
India, Minimum Wages Act, 1948 was passed empower government to fix minimum wages of workers.
Similarly, many other important legislation passed by government help to improve the wage structure.

8. Cost of Training:
In determining, the wages of the workers, in different occupations, allowances must be made for all the
exercises incurred on training and time devoted for it.

Systems of payments
Paycheck

You might consider paying your employees by either writing or printing payroll checks. With paychecks,
employees do not need to have bank accounts. Employees can use a check cashing service (for a fee) to
receive their wages.

Some employees prefer to receive their wages via paychecks because they like having an actual check
delivered to them. However, paychecks could get lost or stolen.

Time and cost of this payment option

With a written paycheck, you need to handwrite a paycheck for each employee. Writing out the checks
each pay period takes time. For handwritten checks, you will need to purchase blank checks.

If you decide to print your employees’ paychecks, you can save considerable time from writing them all
out. However, you will pay more in supplies to print the paychecks. For printing paychecks, you need
check stock, ink, and a printer. You might even need a special MICR printer with magnetic ink to read,
process, and print bank account and routing numbers on the checks.

Direct deposit
Direct deposit is the most common payment method used. Eighty-two percent of U.S. workers receive
their wages via direct deposit. One of the biggest benefits of direct deposit is the convenience it offers for
both you and your employees.

With direct deposit, you receive your employees’ banking information when you hire them and deposit
their wages each pay period. Your employees do not need to be physically present at your business to
receive payment each period. For example, if an employee is on vacation, they will still receive their
wages on time.

Time and cost of this payment option

With direct deposit, you do not need to worry about filling out and distributing checks each period. If you
have online payroll software, direct deposit might be incorporated at no added cost. Simply review your
payroll before submitting it to be deposited in your employees’ bank accounts.

If you do not have payroll software, you will be responsible for paying direct deposit fees. You might
need to pay set-up fees, monthly fees, and a small fee per pay period for each direct deposit. Set-up fees
could range from $50-$150, and transaction fees might be $1.50 per transaction.

Job Evaluation Meaning and Methods of Job

Evaluation
JOB EVALUATION
A job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs in an
organization. It tries to make a systematic comparison between jobs to assess their relative worth for the
purpose of establishing a rational pay structure. Job evaluation needs to be differentiated from job
analysis. Job analysis is a systematic way of gathering information about a job. Every job evaluation
method requires at least some basic job analysis in order to provide factual information about the jobs
concerned. Thus, job evaluation begins with job analysis and ends at that point where the worth of a job is
ascertained for achieving pay equity between jobs and different roles.

There are four basic methods of job evaluation currently in use which are grouped into two categories:

1. Qualitative Methods

(a) Ranking or Job Comparison

(b) Grading or Job Classification

2. Quantitative Methods
(a) Point Rating

(b) Factor Comparison

Methods of Job Evaluation

1. Ranking Method
The ranking method is the simplest form of job evaluation. In this method, each job as a whole is
compared with other and this comparison of jobs goes on until all the jobs have been evaluated and
ranked. All jobs are ranked in the order of their importance from the simplest to the hardest or from the
highest to the lowest.

Ranking method is appropriate for small-size organizations where jobs are simple and few. It is also
suitable for evaluating managerial jobs wherein job contents cannot be measured in quantitative terms.
Ranking method being simple one can be used in the initial stages of job evaluation in an organization.

Merits of Ranking Method       

(i) It is the simplest method.

(ii) It is quite economical to put it into effect.

(iii) It is less time consuming and involves little paper work.

Demerits of Ranking Method  

(i) The main demerit of the ranking method is that there are no definite standards of judgment and also
there is no way of measuring the differences between jobs.

(ii) It suffers from its sheer unmanageability when there are a large number of jobs.

2. Grading Method

Grading method is also known as ‘classification method’. This method of job evaluation was made
popular by the U.S. Civil Service Commission. Under this method, job grades or classes are established
by an authorised body or committee appointed for this purpose. A job grade is defined as a group of
different jobs of similar difficulty or requiring similar skills to perform them. Job grades are determined
on the basis of information derived from job analysis.

The grades or classes are created by identifying some common denominator such as skills, knowledge
and responsibilities. The example of job grades may include, depending on the type of jobs the
organisation offers, skilled, unskilled, account clerk, clerk-cum-typist, steno typist, office superintendent,
laboratory assistant and so on.

Merits of Grading Method

(i) This method is easy to understand and simple to operate.

(ii) It is economical and, therefore, suitable for small organizations.

(iii) The grouping of jobs into classifications makes pay determination problems easy to administer.

(iv) This method is useful for Government jobs.

Demerits of Grading Method

(i) The method suffers from personal bias of the committee members.

(ii) It cannot deal with complex jobs which will not fit neatly into one grade.

(iii) This method is rarely used in an industry.

3. Points Rating

This is the most widely used method of job evaluation. Under this method, jobs are broke down based on
various identifiable factors such as skill, effort, training, knowledge, hazards, responsibility, etc.
Thereafter, points are allocated to each of these factors.

Weights are given to factors depending on their importance to perform the job. Points so allocated to
various factors of a job are then summed. Then, the jobs with similar total of points are placed in similar
pay grades. The sum of points gives an index of the relative significance of the jobs that are rated.

Merits of Points Rating

(i) It is the most comprehensive and accurate method of job evaluation.

(ii) Prejudice and human judgment are minimized, i.e. the system cannot be easily manipulated.

(iii) Being the systematic method, workers of the organization favour this method.

(iv) The scales developed in this method can be used for long time.

(v) Jobs can be easily placed in distinct categories.

Demerits of Points Rating

(i) It is both time-consuming and expensive method.

(ii) It is difficult to understand for an average worker.

(iii) A lot of clerical work is involved in recording rating scales.

(iv) It is not suitable for managerial jobs wherein the work content is not measurable in quantitative
terms.

4. Factor Comparison Method

This method is a combination of both ranking and point methods in the sense that it rates jobs by
comparing them and makes analysis by breaking jobs into compensable factors. This system is usually
used to evaluate white collar, professional and managerial positions.

Merits of Factor Comparison Method

(i) It is more objective method of job evaluation.

(ii) The method is flexible as there is no upper limit on the rating of a factor.

(iii) It is fairly easy method to explain to employees.

(iv) The use of limited number of factors (usually five) ensures less chances of overlapping and over-
weighting of factors.

(v) It facilitates determining the relative worth of different jobs.

Demerits of Factor Comparison Method

(i) It is expensive and time-consuming method.

(ii) Using the same five factors for evaluating jobs may not always be appropriate because jobs differ
across and within organizations.

(iii) It is difficult to understand and operate.

Components of wage/salary: DA, incentives,

Bonus, Fringe benefits etc.
Basic Pay
The concept of basic Pay is contained in the report of the Fair Wages Committee. According to this
Committee, the floor of the basic pay is the “minimum wage” which provides “not merely for the bare
sustenance of life but for the preservation of the efficiency of the workers by providing some measure of
education, medical requirements and amenities.” The basic Pay has been the most stable and fixed as
compared to dearness allowance and annual bonus which usually change with movements in the cost of
living indices and the performance of the industry.

Dearness Allowance
Dearness allowance is a cost of living adjustment allowance paid to the government employees and
pensioners. It is one of the components of salary, and is counted as a fixed percentage of the person’s
basic salary. It is adjusted according to the inflationary trends to lessen the impact of inflation on
government employees.

The fixation of wage structure also includes within its compass a fixation of rates of dearness allowance.
In the context of a changing pattern of prices and consumption, real wages of the workmen are likely
to fluctuate greatly. Ultimately, it is the goods and services that a worker buys with the help of wages that
are an important consideration for him. The real wages of the workmen thus require to be
protected when there is a rise in prices and a consequent increase in the cost of living by suitable
adjustments in these wages. In foreign countries, these adjustments in wages are effected automatically
with the rise or fall in the cost of living.

In India, the system of dearness allowance is a special feature of the wage system for adjustment of
the wages when there are frequent fluctuations in the cost of living. In our country, at present, there
are several systems of paying dearness allowance to the employees to meet the changes in the cost of
living. In practice, they differ from place to place and industry to industry. One of the methods of paying
dearness allowance is by a flat rate, under which a fixed amount is paid to all categories of workers,
irrespective of their wage scales. The second method is its linkage with consumer price index numbers
published periodically by the government. It indicates the changes in the prices of a fixed basket of goods
and services customarily bought by the families of workers. In other words, the index shows the rise or
fall in the cost of living due a rise or fall in consumer prices.
The Consumer Price Index (CPI) is a monthly index published by the Bureau of Labor Statistics. The
CPI is compiled by price data collected throughout the country for a fixed set of goods, such as food,
clothing, shelter, fuels, prescriptions, transportation fares, and medical fees. The CPI is important as a
predictor of wage increases and of employees’ need for greater income.

D.A. as a Separate Component

The Second World War, too, repeated the same economic inflation and again the demand for increased
D.A. was made by the industrial workers. It is to be noted here that the main reason for keeping the D.A.
as a separate component and not merging it in the wages, was due to the fact that the employers always
considered the D.A. increase as a temporary feature and expected such allowance to be adjusted
downward, if the cost of living restored. But their hope was never fulfilled and the D.A. continued to
remain as a separate component which could be raised with the rise in the price index number. This
element of D.A. is also found in some of the early reports like the Report of Rau Court of Inquiry which
was constituted in the year 1940 under the provisions of the Trade Disputes Act, 1929 to investigate the
dearness allowance of railway employees. Subsequently, Justice Rajadhyaksha Award given in 1946 in
the trade dispute between the Post Telegraph Department and its non-gazetted employees, the Central Pay
Commission 1947, the Committee on Fair Wages, 1948, the Bank Award Commission, 1955, the Second
Pay Commission, 1959, the Dass Commission, 1965 and the Gajendragatkar Commission, 1967, all
approved and recommended payment of D.A. as a separate component of the earning of the workers. The
Wage-Boards also generally sought to keep the D.A. as a separate component although some of them
recommended the merger of D.A. with the basic wage.
Relevant Factors and Practices

The very concept of D.A. is linked with the need of mitigating the hardship of the lowest paid employees
living on subsistence level and cushioning the impact on the higher paid employees. In the actual
determination of the quantum of D.A. various relevant factors need to be taken into consideration like the
following:

(a)    D.A. as a separate component and linking it with the cost of living Index,
(b)    the selection of the All India or State level index with which D.A. should be linked;
(c)    extent of neutralisation;
(d)    The capacity of the employer to pay D.A.

Revision of D.A.

As far as revision of D.A. is concerned several State Govts., Employers’ Organisations etc. have
suggested revision of D.A. after 10 point rise in the index, or once in 6 months, whichever is later. Some
State Governments and Employers’ Organisations suggested for revision of D.A. after a 5 point rise in the
index or once in a quarter. The National Commission on Labour2, recommended increase of D.A. linked
with 5 point slab on the basis of all India price index number.

“The Union Cabinet, chaired by the Prime Minister Narendra Modi has approved to release an additional
instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to
pensioners w.e.f. 01.07.2018 representing an increase of 2% over the existing rate of 7% of the Basic
Pay/Pension, to compensate for price rise,”

How to Calculate Dearness Allowance?

DA is calculated as a percentage of (basic pay + grade pay). After 1/1/2006 the calculation of DA for
government employees is as follows:

Dearness Allowance Percentage = {[Average of AICIP (Base year 2001 = 100) for the past 12 months –
115.76]/115.76} x 100

Formula for calculating DA for Central public-sector employees after 1/1/2007 is:

Dearness allowance Percentage = {[Average of AICIP (Base year 2001 = 100) for the past 3 months –
126.33]/126.33} x 100

AICIP stands for All India Consumer Price Index

Beginning 1st of January 1996, the dearness allowance is granted to compensate for price increases to
which the revised pay scales relate. This will be reviewed twice a year, on 1st January and 1st July.
Foreign Countries Experience
It is interesting to note that the practice of paying D.A. as a separate component appears to he confined
only to India and some Asian countries and similar concept is not found elsewhere in other industrial
countries. However in other countries to meet the demand of the increase cost of living, the real wages
themselves are revised to provide for the desired level of standard of living. Some wage agreements
contain ‘escalator clause’ to provide for the review of wages in the event of increase in price index. Such

practice is common in USA, Italy and Scandinavian countries. In Japan cost of living allowance and rent
allowance is comprised in the wages. In some countries the wage agreements provided for the increase in
wage as a separate component linked with the increase in the price index. In India such increase is
referred as ‘Dearness Allowance’ keeping it as 3 component distinct from the wages. There are different
pros and cons of retaining D.A. as a separate component in India as it would give flexibility in the
determination of the quantum of D.A. corresponding to the increase in the Price Index number and to
achieve desirable level of neutralisation.

Overtime Payment
Working overtime in industry is possibly as old as the industrial revolution. The necessity of the
managements’ seeking overtime working from employees becomes inevitable mainly to overcome
inappropriate allocation of manpower and improper scheduling, absenteeism, unforeseen situations
created due to genuine difficulties like breakdown of machines. In many companies, overtime is
necessary to meet urgent delivery dates, sudden upswings in production schedules, or to give
management a degree of flexibility in matching labour capacity to production demands. The payment of
overtime allowance to the factory and workshop employees is guaranteed by law. All employees who are
deemed to be workers under the Factories Act or under the Minimum Wages Act are entitled to it at twice
the ordinary rate of their wages for the work done in excess of 9 hours on any day or for more than 48
hours in any week. The major benefit of overtime working to workers is that it offers an increase in
income from work.

Annual Bonus
The bonus component of the industrial compensation system, though a quite old one, had assumed a
statutory status only with the enactment of the Payment of Bonus Act, 1965. The Act is applicable to
factories and other establishments employing 20 or more employees.

Eligibility: Every employee not drawing salary/wages beyond Rs. 10,000 per month who has worked for
not less than 30 days in an accounting year, shall be eligible for bonus for minimum of 8.33% of the
salary/wages even if there is loss in the establishment whereas a maximum of 20% of the employee’s
salary/wages is payable as bonus in an accounting year. However, in case of the employees whose
salary/wages range between Rs. 3500 to Rs. 10,000 per month for the purpose of payment of bonus, their
salaries/wages would be deemed to be Rs. 3500. 

Incentive System
The term “incentive” has been used both in the restricted sense of participation and in the widest sense of
financial motivation. It is used to signify inducements offered to employees to put forth their best in order
to maximise production results. Incentives are classified as financial and non-financial. Important
financial incentives are attractive wages, bonus, dearness allowance, traveling allowance, housing
allowance, gratuity, pension, and provident fund contributions. Some of the non-financial incentives are
designation, nature of the job, working conditions, status, privileges, job security, opportunity for
advancement and participation in decision making. However, a vast diversity exists in regard to policy
and practice of incentive payments. Incentive systems also have been classified into three groups:
individual wage incentive plan, group incentive scheme, and organisation-wide incentive system.

The individual wage incentive plan is the extra compensation paid to an individual over a specified
amount for his production effort. Individual incentive systems are based upon certain norms established
by work measurement techniques such as past performance, bargaining between union and the
management, time study, standard data, predetermined elemental times and work sampling. There are
four types of individual incentive systems such as measured day-work, piece-work standard, group plans
and gains-sharing plans. Under the measured day-work incentive wage system, an individual receives his
regular hourly rate of pay, irrespective of his performance. Piece-work system form the most simple and
frequently used incentive wage. In this, individual’s earnings are direct and proportionate to their output.
Group plans embody a guaranteed base rate to the workers in which the performance over standard is
rewarded by a proportionate premium over base pay. Gains-sharing system involves a disproportionate
increase in monetary rewards for increasing output beyond a predetermined standard. As the gains are
shared with the entrepreneurs, the worker gets less than one per cent increment in wage for every one
percent increase in output.

The group or area incentive scheme provides for the payment of a bonus either equally or
proportionately to individuals within a group or area. The bonus is related to the output achieved over an
agreed standard or to the time saved on the job – the difference between allowed time and actual time.
Such schemes may be most appropriate where:

(a) people have to work together and teamwork has to be encouraged; and
(b) high levels of production depend a great deal on the cooperation existing among a team of workers as
compared with the individual efforts of team members.

The organisation-wide incentive system involves cooperation among employees and the management and
purports to accomplish broader organisational objectives such as:

(i) to reduce labour, material and supply costs;

(ii) to strengthen loyalty to the company;
(iii) to promote harmonious labour-management relations; and
(iv) to decrease turnover and absenteeism.

One of the aspects of organisation-wide incentive system is profit sharing under which an employee
receives a share of the profit fixed in advance under an agreement freely entered into. The major objective
of the profit sharing system is to strengthen the unity of interest and the spirit of cooperation. Some of the
advantages of such a scheme are:

(i) it inculcates in employees’ a sense of economic discipline as regards wage costs and productivity;
(ii) it engenders improved communication and increased sense of participation;
(iii) it is relatively simple and its cost of administration is low; and
(iv) it is non-inflationary, if properly devised.

One of the essentials of a sound profit sharing system is that it should not be treated as a substitute for
adequate wages but provide something extra to the participants. Full support and cooperation of the union
is to be obtained in implementing such a scheme.
Fringe Benefits
The remuneration that the employees receive for their contribution cannot be measured by the mere
estimation of wages and salaries paid to them. Certain supplementary benefits and services known as
“fringe benefits” are also available to them. The characteristics of fringe benefits are:

1. These benefits are distinctly additional to the regular wages paid to the workers. As
such, they are not provided as a substitute for wages or salaries of the employees.
2. These benefits are meant primarily to be of advantage to the employees.
3. The advantages accrued to the employees through the provision of fringe benefits are
as such they cannot be secured through their own individual efforts.
4. Only those benefits fall within the purview of fringe benefits which are or can be
expressed in cash terms.
5. The scope of fringe benefits is different from that of welfare services. Fringe benefits
are provided by the employers alone whereas welfare services may be provided by
other agencies as well. Benefits that have no relation to employment should not be
regarded as fringe benefits.

Fringe benefits have been classified in several ways. In terms of their objectives, Meggison classifies
them into two groups: those providing for employees’ security and those purporting to increase
employees’ job satisfaction causing reduction in labour turnover and improvement in productivity. The
former group includes retirement programmes, workmen’s compensation, unemployment compensation,
social insurance, and other provisions. The later group incorporates vacations, holidays, sick leave,
discounts on company goods and services, and allied tangible and intangible benefits.

Fringe benefits are also categorised as statutory, contractual, and voluntary. Statutory benefits include
social security and medical care, unemployment compensation, workmen’s compensation, provident
fund, and gratuity. The benefits provided by the employers in pursuance of agreements with workers may
include dearness allowance, house rent allowance, city compensatory allowance, medical allowance,
night-shift allowance, heat allowance, transport, housing and educational allowances. Voluntary fringe
benefits which are provided unilaterally by the company include group insurance, death benevolent fund,
washing allowance, leave encashment, leave travel concession, conveyance allowance, incentive for
family planning, service awards, and suggestion awards.

Currently fringe benefits are a significant part of employee compensation system and the employees tend
to take them for granted and do not link these items with wages or income as they do not have any direct
bearing on payments. They are no more on the fringe of compensation but form an integral component of
individual’s earnings involving spiraling costs for the company. However, the fringe benefit system can
become effective if attempts are made to gear them to the needs of human resource in organisational
settings.

Conveyance allowance
Conveyance allowance is one of the compulsory employee benefits provided for meeting an expenditure
incurred by an employee ( especially government employee) for commuting from home to office and
office to home. In order to claim conveyance allowance by an employee, he or she should reside and
work in towns only.
City compensatory allowance
City compensatory allowance is one of the employee benefits provided for meeting additional cost of
living for working in cities.

The Minimum Wages Act 1948

In a labour surplus economy like India wages couldn’t be left to be determined entirely by forces of
demand and supply as it would lead to the fixation of wages at a very low level resulting in exploitation
of less privileged class. Keeping this in view, the Government of India enacted the Minimum Wages Act,
1948. The purpose of the Act is to provide that no employer shall pay to workers in certain categories of
employments wages at a rate less than the minimum wage prescribed by notification under the Act. In
fact the sole purpose of this act is to prevent exploitation of sweeted and unorganised labour, working in
compititive market.

The Act provides for fixation / periodic revision of minimum wages in employments where the labour is
vulnerable to exploitation. Under the Act, the appropriate Government, both Central and State can fix /
revise the minimum wages in such scheduled employments falling in their respective jurisdiction.

The term ‘Minimum Wage Fixation’ implies the fixation of the rate or rates of minimum wages by a
process or by invoking the authority of the State. Minimum wage consists of a basic wage and an
allowance linked to the cost of living index and is to be paid in cash, though payment of wages fully in
kind or partly in kind may be allowed in certain cases. The statutory minimum wages has the force of law
and it becomes obligatory on the part of the employers not to pay below the prescribed minimum wage to
its employees. The obligation of the employer to pay the said wage is absolute. The process helps the
employees in getting fair and reasonable wages more particularly in the unorganized sector and eliminates
exploitation of labour to a large extent. This ensures rapid growth and equitable distribution of the
national income thereby ensuring sound development of the national economy.

It has been the constant Endeavour of the Government to ensure minimum rates of wages to the workers
in the sweated industries and which has been sought to be achieved through the fixation of minimum
wages, which is to be the only solution to this problem.

Essential Ingredient

 Wage should be by way of remuneration

 It should be capable of being expressed in terms of
 It should be payable to a person employed in respect of his employment or of work
done in such employment.
 It should be payable to a
 It should be payable if the terms of employment, express or implied, are fulfilled.
 It includes house rent allowance.
 It does not include house accommodation, supply of light, water, medical attendance,
traveling allowance, contribution of employer towards provident fund, gratuity , any
scheme of social insurance etc.
Classification of Wages
The Supreme Court has classified “Wages” into three categories. They are:

 The Living Wage ( highest standard of wage)

 The Fair Wage (between living and minimum wage)
 The Minimum Wage.( it is the lowest standard of wage)

Procedure for fixing and revising minimum wages (section 5)

The appropriate Government is required to appoint an Advisory Board for advising it, generally in the
matter of fixing and revising minimum rates of wages.

The Central Government appoints a Central Advisory Board for the purpose of advising the Central and
State Governments in the matters of the fixation and revision of minimum rates of wages as well as for
co-ordinating the work of Advisory Boards.

The Central Advisory Board consists of persons to be nominated by the Central Government representing
employers and employees in the scheduled employments, in equal number and independent persons not
exceeding one third of its total number of members. One of such independent persons is to be appointed
the Chairman of the Board by the Central Government.

The Workmen Compensation Act 1923

Amendment Act 1972
The Workmen’s Compensation Act, 1923 provides for payment of compensation to workmen and their
dependants in case of injury and accident (including certain occupational disease) arising out of and in the
course of employment and resulting in disablement or death. The Act applies to railway servants and
persons employed in any such capacity as is specified in Schedule II of the Act. The schedule II includes
persons employed in factories, mines, plantations, mechanically propelled vehicles, construction works
and certain other hazardous occupations.

The amount of compensation to be paid depends on the nature of the injury and the average monthly
wages and age of workmen.The minimum and maximum rates of compensation payable for death (in
such cases it is paid to the dependents of workmen) and for disability have been fixed and is subject to
revision from time to time.

A Social Security Division has been set up under the Ministry of Labour and Employment , which deals
with framing of social security policy for the workers and implementation of the various social security
schemes. It is also responsible for enforcing this Act. The Act is administered by the State Governments
through Commissioners for Workmen’s Compensation.

The main provisions of the Act are

 An employer is liable to pay compensation:- (i) if personal injury is caused to a

workman by accident arising out of and in the course of his employment; (ii) if a
 workman employed in any employment contracts any disease, specified in the Act as
an occupational disease peculiar to that employment.
 However, the employer is not liable to pay compensation in the following cases:-
 If the injury does not result in the total or partial disablement of the workman for a
period exceeding three days.
 If the injury, not resulting in death or permanent total disablement, is caused by an
accident which is directly attributable to:- (i) the workman having been at the time of
the accident under the influence of drink or drugs; or (ii) the willful disobedience of
the workman to an order expressly given, or to a rule expressly framed, for the
purpose of securing the safety of workmen; or (iii) the willful removal or disregard by
the workman of any safety guard or other device which has been provided for the
purpose of securing safety of workmen.
 The State Government may, by notification in the Official Gazette, appoint any
person to be a Commissioner for Workmen’s Compensation for such area as may be
specified in the notification. Any Commissioner may, for the purpose of deciding any
matter referred to him for decision under this Act, choose one or more persons
possessing special knowledge of any matter relevant to the matter under inquiry to
assist him in holding the inquiry.
 Compensation shall be paid as soon as it falls due. In cases where the employer does
not accept the liability for compensation to the extent claimed, he shall be bound to
make provisional payment based on the extent of liability which he accepts, and, such
payment shall be deposited with the Commissioner or made to the workman, as the
case may be.
 If any question arises in any proceedings under this Act as to the liability of any
person to pay compensation (including any question as to whether a person injured is
or is not a workman) or as to the amount or duration of compensation (including any
question as to the nature or extent of disablement), the question shall, in default of
agreement, be settled by a Commissioner. No Civil Court shall have jurisdiction to
settle, decide or deal with any question which is by or under this Act required to be
settled, decided or dealt with by a Commissioner or to enforce any liability incurred
under this Act.
 The State Government may, by notification in the Official Gazette, direct that every
person employing workmen, or that any specified class of such persons, shall send at
such time and in such form and to such authority, as may be specified in the
notification, a correct return specifying the number of injuries in respect of which
compensation has been paid by the employer during the previous year and the amount
of such compensation together with such other particulars as to the compensation as
the State Government may direct.
 Whoever, fails to maintain a notice-book which he is required to maintain; or fails to
send to the Commissioner a statement which he is required to send; or fails to send a
report which he is required to send; or fails to make a return which he is required to
make, shall be punishable with fine.
The Payment of Bonus Act 1965 & Amendment
The Payment of Bonus Act, 1965 provides for the payment of bonus to persons employed in
certain establishments, employing 20 or more persons, on the basis of profits or on the basis of
production or productivity and matters connected there with.

The minimum bonus of 8.33% is payable by every industry and establishment under section 10
of the Act. The maximum bonus including productivity linked bonus that can be paid in any
accounting year shall not exceed 20% of the salary/wage of an employee under the section 31
A of the Act.

Applicability

 Payment of Bonus Act, 1965 extends to whole of India.

 Payment of Bonus Act, 1965 applies to every factory and to every other
establishment in which 20 or more persons are employed on any day during
an accounting year;
 The Government may also apply the act on any factory or establishment in
which has less than 20 but not less than 10 persons are employed;
 Payment of Bonus Act, 1965 is applicable on every employee whether doing
any skilled, unskilled, manual, supervisory, managerial, administrative,
technical or clerical work for hire or reward and whether the terms of
employment are express or implied.

Eligibility

 Payment of Bonus Act, 1965 is applicable on employees drawing wages /

salary up-to 10,000/- per month.
 Only those employees are entitled for bonus, who have worked for at least 30
working days in an accounting year.

Rate of Bonus

 33% of the salary or wages earned by an employee in a year or Rs. 100/-,

whichever is higher.
 In case allocable surplus exceeds the amount of provision of minimum bonus,
the employer shall be bound to pay maximum bonus not exceeding 20% of
the salary or wages earned by employees.
 In case allocable surplus exceeds the maximum bonus (20% of the salary or
wages earned by employees), the excess surplus shall be carried forward for
being set on in the succeeding accounting years up to and inclusive of the 4th
accounting year.
Amendment of payment of Bonus Act, 1965
The Payment of Bonus Act, 1965 (Bonus Act) has been recently amended to bring about certain
key changes (the Amendments).

(a) Revision of wage threshold for eligibility: The wage threshold for determining eligibility of

employees has been revised from INR 10,000 to INR 21,000 per month, covering a larger pool
of employees.

(b) Change in the wage ceiling used for calculation of bonus: Previously the maximum
bonus payable was 20% of INR 3500 per month. The minimum bonus payment was also
capped at 8.33% of INR 3500 per month or INR 100, whichever is higher. The calculation ceiling
of INR 3500 has now been doubled to INR 7000 per month “or the minimum wage for the
scheduled employment, as fixed by the appropriate Government” (whichever is higher).
Therefore, the cost associated with bonus payments could double (or be greater still, depending
on applicable minimum wages), based on the organization’s performance.

(c) Retrospective Effect: The amendment has been brought into effect from 1 April 2014.

The Bonus Act applies to every factory and every establishment that employs 20 or more
persons, and unlike other performance linked incentives offered by companies, the bonus
payable under this law is not linked to the performance of the employee. All employees earning
up to the wage threshold (increased to INR 21,000 by the Amendments), and who have worked
in the establishment for not less than 30 working days in the year are eligible to receive this
statutory bonus. Therefore, the Amendments could have a significant financial bearing for
establishments, especially those in the medium and small scale sectors. We have analyzed the
Amendments in some more detail below.

Impact of the Amendments and Potential Challenges

(a) INR 10,000 to INR 21,000: As with many other labour statutes, the Bonus Act also contains
a separate definition of ‘wages’. Broadly, ‘salary or wage’ under the Bonus Act includes all
guaranteed components of an employee’s salary (not just the basic salary) and specifically
excludes certain allowances and concessions. Salary structures adopted by organizations these
days can be fairly complex, with multiple allowances and incentives built into the compensation
structure. With the increase in the wage threshold, employers would have to undertake a more
detailed assessment to determine which components of their existing salary structure would fall
with the definition of ‘wages’ under the Bonus Act, and accordingly determine which employees
are eligible to receive the statutory bonus.

(b) Reference to minimum wages under the Minimum Wages Act (MW Act): The insertion
of a reference to the minimum wage under the MW Act to calculate bonus payments has
created an additional challenge for companies. The appropriate Governments (i.e. State
Governments) fix different minimum wages for various scheduled employments. Further, even
within a particular scheduled employment, different minimum wages are notified for different
categories of employees. Thus, employers would have to carry out an assessment of the
applicable wage rates for different categories of employees in order to calculate the statutory
bonus payable. This issue would be even more significant for employers having offices in
multiple States since the minimum wages for the same scheduled employment also vary from
one State to another, and the variation can sometimes be quite significant. For instance, the
monthly minimum wage for a skilled employee in a shop or commercial establishment in Delhi is
INR 11,154 while the monthly minimum wage for a skilled employee in a shop or commercial
establishment in Maharashtra is INR 8,440.

Another consequence of including this reference to minimum wages is that it creates an

additional level of unpredictability in the calculation of the bonus amount. A lot of companies
(especially MNCs) currently follow a practice of calculating the maximum statutory bonus (i.e.
20% of INR 3,500) and paying this to employees on a monthly basis through the year. However,
since there is now a reference to the minimum wages under the MW Act and since the minimum
wages are updated on a periodic basis (i.e. once or twice a year), there would be an increased
variability in the bonus amount, and it would therefore be difficult for employers to predict the
maximum bonus payable under the Bonus Act.

(c) Complexities in paying the bonus retrospectively: Under the Bonus Act, an employer is
required to pay bonus within 8 months from the close of the accounting year. Employers in India
usually follow a financial year from 1 April to 31 March and close their books of accounts
accordingly. Therefore, most companies would have already determined the allocable surplus
for the financial year 2014 – 15 (i.e. 1 April 2014 to 31 March 2015) and distributed bonus to
eligible employees. Since the Amendments are retrospective, it would impact the distribution of
bonus in relation to the financial year 2014 – 15 as well. The allocable surplus would need to be
re-assessed to account for the increased pool of covered employees and the bonus eligibility re-
determined based on the revised calculation ceilings and available surplus. This would then
have to be redistributed among this larger pool of employees, which may result in various
outcomes – (i) companies could now be required to pay an additional bonus to employees who
have already been paid, if the bonus amount that was paid earlier is lower than the bonus
payable after the Amendments; or (ii) if the bonus already paid was higher than the bonus
payable after the Amendments, there may even be a reduction of bonus entitlement for some
individuals (either in terms of the amount payable or in the context of percentage of bonus
received), to accommodate bonus payments to the newly covered staff using the allocable
surplus.

Therefore, there would be an increase in the financial burden and greater accounting
complexities for employers, and in some cases, there may also be issues around recovery of
amounts from employees.

It is therefore critical that the government issues clarifications, further amendments or

exemptions to ease the operational complexities with the retrospective amendments. The
requirement to consider the minimum wages under the MW Act while calculating bonus will
create uncertainty and disparity around bonus payments, which was best avoided at this stage.
We have been working with various industry associations to approach the government to offer
solutions in relation to the financial and operational hardships that companies will face due to
the Amendments. However, at present, the obligation to pay statutory bonus in accordance with
the amended eligibility threshold and wage ceiling in relation to financial year 2014 – 15
continues to exist.

CHAPTER 5
Discipline & Grievance handling
Grievance may be any genuine or imaginary feeling of dissatisfaction or injustice which an employee
experiences about his job and it’s nature, about the management policies and procedures. It must be
expressed by the employee and brought to the notice of the management and the organization.

Grievances take the form of collective disputes when they are not resolved. Also they will then lower the
morale and efficiency of the employees. Unattended grievances result in frustration, dissatisfaction, low
productivity, lack of interest in work, absenteeism, etc. In short, grievance arises when employees’
expectations are not fulfilled from the organization as a result of which a feeling of discontentment and
dissatisfaction arises. This dissatisfaction must crop up from employment issues and not from personal
issues.

Grievance may result from the following factors:

1. Improper working conditions such as strict production standards, unsafe workplace,

bad relation with managers, etc.
2. Irrational management policies such as overtime, transfers, demotions, inappropriate
salary structure, etc.
3. Violation of organizational rules and practices

The manager should immediately identify all grievances and must take appropriate steps to eliminate the
causes of such grievances so that the employees remain loyal and committed to their work. Effective
grievance management is an essential part of personnel management. The managers should adopt the
following approach to manage grievance effectively:

1. Quick action: As soon as the grievance arises, it should be identified and resolved.
Training must be given to the managers to effectively and timely manage a grievance.
This will lower the detrimental effects of grievance on the employees and their
performance.
2. Acknowledging grievance: The manager must acknowledge the grievance put
forward by the employee as manifestation of true and real feelings of the employees.
Acknowledgement by the manager implies that the manager is eager to look into the
complaint impartially and without any bias. This will create a conducive work
environment with instances of grievance reduced.
3. Gathering facts: The managers should gather appropriate and sufficient facts
explaining the grievance’s nature. A record of such facts must be maintained so that
these can be used in later stage of grievance redressal.
4. Examining the causes of grievance: The actual cause of grievance should be
identified. Accordingly remedial actions should be taken to prevent repetition of the
grievance.
5. Decisioning: After identifying the causes of grievance, alternative course of actions
should be thought of to manage the grievance. The effect of each course of action on
the existing and future management policies and procedure should be analyzed and
accordingly decision should be taken by the manager.
 6. Execution and review: The manager should execute the decision quickly, ignoring
the fact, that it may or may not hurt the employees concerned. After implementing the
decision, a follow-up must be there to ensure that the grievance has been resolved
completely and adequately.

An effective grievance procedure ensures an amiable work environment because it redresses the
grievance to mutual satisfaction of both the employees and the managers. It also helps the management to
frame policies and procedures acceptable to the employees. It becomes an effective medium for the
employees to express t feelings, discontent and dissatisfaction openly and formally.

Types of Trade unions

There are four main types of trade unions.

These are:

I. Craft unions:

These represent workers with particular skills e.g. plumbers and weavers. These workers may be
employed in a number of industries.

II. General unions:

These unions include workers with a range of skills and from a range of industries.

III. Industrial unions:

These seek to represent all the workers in a particular industry, for instance, those in the rail industry.

IV. White collar unions:

These unions represent particular professions, including pilots and teachers. Unions in a country, often
belong to a national union organisation. For example, in India, a number of unions belong to the All India
Trade Union Congress (AITUC).

This is the oldest and one of the largest trade union federations in the country. A number of them also
belong to international trade union organisations such as the International Confederation of Free Trade
Unions, which has more than 230 affiliated organisations in 150 countries.
Role of Unions:
Unions carry out a number of functions. They negotiate on behalf of their members on pay scales,
working hours and working conditions. These areas can include basic pay, overtime payments, holidays,
health safety, promotion prospects, maternity and paternity rights and job security.

Depending on the circumstances, unions may try to protect or improve workers’ rights. They also provide
information on a range of issues for their members, for instance on pensions. They help with education
and training schemes and may also participate in measures designed to increase demand for the product
produced and hence for labour.

Some also provide a range of benefits to their members including strike pay, sickness pay and
unemployment pay. In addition many get involved in pressurizing their governments to adopt a
legislation, which will benefit their members or workers in general, such as fixing a national minimum
wage.

Collective Bargaining:
An individual worker may not have the skill, time or willingness to negotiate with her or his employer. A
worker is also likely to have limited bargaining power. If she or he presses for a wage rise or an
improvement in working conditions, the employer may be able to dismiss her or him and take on
someone as a replacement. Unions enable workers to press their claims through collective bargaining.
This process involves negotiations between union officials, representing a group of workers, and
representatives of employers.

Problems of Trade unions

The shortcomings or the weakness of the trade union movement in India are as follows:

1. Lack of Balanced Growth: Trade unions are often associated with big industrial houses.
A vast majority of the working population is without any union backing. The entire
agricultural sector is highly unorganized in India. The agricultural workers are subject to
all kinds of exploitation. The same is true with respect to those working in small scale
and cottage industries. Lack of balanced growth of trade unions in all sectors is one of the
major weakness of the trade union movement in India.
2. Low Membership: Trade unions, with the exception of few have low membership. This
is because many employees are not willing to join unions although they are ready to
enjoy the benefits arising out of the union actions. The reasons for the hesitation of
employees to join unions include, among others, the need to take pat in strikes and such
other programmes, fear of pay cut and fear of punishment.
3. Poor financial Position: Low membership is one of the reasons for the poor financial
position of the unions. Moreover, the subscription payable by every member is kept low.
Some members may not even make a prompt payment of the small amount of
subscription. These are also not very many sources from which unions can get funds.
 They may probably depend on contributions from philanthropists. The poor financial
position can only weaken the trade union movement.
4. Political Control: Most popular trade unions in India are affiliated to certain political
parties. These political parties are only keen on making every grievance of the working
class a political issue to attain political gains. As a result the problem only gets wide
publicity and remains unsolved.
5. Multiplicity of Unions: Often there exists more than one union within the same industry
each backed by a political party. These various unions have conflicting ideology. If one
union comes out with a strike proposal another union may work against it. As a result,
none of the unions is actually able to solve the problems of the workers.
6. Inter-Union Rivalry: The existence of many unions within a particular industry paves
way for what is called inter-union rivalry. These unions do not work together for the
cause of the workers. Each union may adopt a different approach to the problem. The
inter-union rivalry may become a more serious problem of the workers. As a result, the
employees are unable to derive the benefits of collective bargaining.
7. Lack of able Leaders: Another barrier to the growth of trade unions is the lack of able
leaders. Some union leaders give a strike call even for petty problems that can easily be
resolved through talks. On the other hand, there are leaders who have secret pact with the
management. They get bribes from the government and work against the interests of the
employees. Some leaders don’t convene a meeting of the general body at all even when a
crisis develops. They take unilateral decisions that are thrust on the employees.
8. Lack of Recognition: Most management is not prepared to recognize trade unions. This
happens because of any of the following reason.
 The existence of low membership that reduces the bargaining power of the union.
 The existence of more unions within the same industry.
 Inter-union rivalry.
 The indifferent attitude of the employees themselves towards trade unions.
9. Opposition from Employers: Apart from the fact that most employers are not prepared
to recognize trade unions, they also do not let their employees from a union. This the
employers are able to achieve by adopting certain punitive measures like intimidating
employees victimizing union leaders, initiating disciplinary action against employees
indulging in union activities and so on. Some employers also start rival unions with the
support of certain employees. Sometimes, they may go to the extent of bribing union
leaders to avert a strike or such similar show of protest by employees. The employers fail
to understand that the union enables the employees to express their grievances in a
democratic manner and can also be used as a means of promoting better labor
management relationships.

 Indifferent Attitude of the Members: Union leaders alone cannot be blamed for the
weakness of the trade union movement. The indifferent attitude of the members of certain
unions is also a barrier. Some members do not even make a prompt payment of the
subscription amount. The treasurer of the union has to go behind them, remind and
persuade them to pay the subscription that is often a very small amount. There are on the
other hand, members who do not attend the general body meetings nor do they bother to
know what is discussed in such meetings. There are still others who do not take part at all
in any of the programmes of the union organized to press the demands of the employees
like slogan shouting procession, demonstration, hunger strike etc. Members generally
expect the office-bearers to do all that is necessary to achieve the demands.