HUMAN RESOURCE MANAGEMENT

Session 1
Introduction To Human Resources Management
Organization: A group consisting of people with formally assigned roles who work together to achieve the
organization’s goals.
Manager: Someone who is responsible for accomplishing the organization’s goals, and who does so by
managing the efforts of the organization’s people.
Managing: To perform five basic functions: planning, organising, staffing. leading and controlling. These
five basic functions represent the management process.
Human resource management: The process of acquiring, training, appraising & compensating employees
and of attending to their labour relations, health & safety, and fairness concerns.
Concepts and techniques you’ll need to perform the “people” or personnel aspects of management. These
include:

 Conducting job analysis (determining the nature of each employee’s job)

 Planning labour needs and recruiting job candidates
 Selecting job candidates
 Orienting and training new employees
 Managing wages and salaries (compensating employees)
 Providing incentives and benefits
 Appraising performances
 Communicating (interviewing, counselling, disciplining)
 Training employees and developing managers
 Building employee commitment
Authority: The right to make decisions, direct others and give orders.
Line manager: A manager who is authorised to direct the work of subordinates and is responsible for
accomplishing the organisation’s tasks.
Staff manager: A manager who assists and advises line managers.
Recruiters: Maintain contact within the community and perhaps travel extensively to search for qualified job
applicants.
Equal employment opportunity (EEO) representatives or affirmative action coordinators: Investigative
and resolve EEO grievances, examine organisational practises for potential violations, and compile and submit
EEO reports.
Job analysis: Collect and examine detailed information about job duties to prepare job description.
Compensation managers: Develop compensation plans and handle the employee benefits program.
Training specialists: Plan, organise, and direct training activities.
Labour relations specialists: Advise management on all aspects of union-management relations.
Strategic human resource management: Formulating and executing human resource policies and practises
that produce the employee competencies and behaviours the company needs to achieve its strategic aims.
Talent management: The end-to-end process of planning, recruiting, developing, managing, and
compensating employees throughout the organisation.
Ethics: The principles of conduct governing an individual or a group; specifically, the standards you use to
decide what your conduct should be.

PM & IR
Personnel management focussed on internal, “micro” oriented subject with an emphasis on description,
technique, concepts and methods from the behavioural and organisational sciences, and a heavily managerial
and individualist perspective on work and employment.
Industrial relations traditionally took a more strategic and external perspective on the employment
relationship.

EMPLOYMENT PROCESS

Job analysis and Job Workforce

evaluation Planning

Recruitment

Initial
screening

Selection

Training and
development

Performance Organisational
management exit

Session 2
Workforce Planning - Needs and Purposes

Definition:
Workforce planning is an organizational activity intended to ensure that investment in human capital results
in the timely capability to effectively carry out the organization’s strategic intent.
Workforce Planning - Need

Shifting views of Work

● From organizational-managed career to individual-managed career (people are less motivated to

pursue careers that are managed by and tightly coupled to a single lifelong employer)

● Increased focus on: training and learning, work/life balance, disdain for bureaucracy

Competition in the Labour Market

Recruiting and retaining talent: there is a ‘war for talent’

Technology Change
Current knowledge becoming more important than experience
Need to design and evaluate alternative career management strategies

Retirement-eligible Workforce
Provides an opportunity to purposefully align the workforce to achieve clearly articulated objectives

Workforce Planning - Purpose

● To obtain a clear representation of the workforce needed to accomplish the organization’s strategic

intent

● To develop an aligned set of human resource management policies and practices —in other words, a

comprehensive plan of action—that will ensure the appropriate workforce will be available when

needed

● To establish a convincing rationale—a business case—for acquiring new authority and marshalling

resources to implement the human resource management policies and programs needed to

accomplish the organization’s strategic intent.

Workforce Planning - Process
Step1 - Business Unit strategic Intent
Step 2 - Desired distribution of workforce characteristics
Step 3 - Gaps between projected future inventory and future desired distribution
Step 4 - Policies and practices

An Iterative Process
A Staffing model example

Vroom: Expectancy Theory

Motivational Force = Expectancy × Instrumentality × Valence

Role of HR:
Follow a structured interview
● Discuss business objectives/changes
● Discuss current staffing levels and capabilities
● Define how staffing should change (incrementally) to support business plans/objectives
 Session 3
Job Definition and Analysis
What is job analysis?
A Job Analysis is a systematic process for collecting and analysing information about a job. Alternatively,
the process of understanding what work people do in an organisation is called as Job analysis.
Definition of Job Analysis by Harvey, “The collection of data on the following factors is called Job
Analysis,
a) job-oriented behaviour
b) worker-oriented behaviour
c) behaviours involved in interactions with machines, materials, and tools
d) methods of evaluating performance
e) job context
f) personnel requirements
A job description is the documentation of the results of the job analysis.
Application of JOB analysis-
These include recruitment, candidate selection, employee training and development, performance
management, organizational management and planning, and litigation protection.
Components of Job Analysis-
1. A description of the work activity (WA) or tasks involved in doing the job
2. The knowledge, skills, and abilities (KSA) or competencies necessary to perform the job
3. Data on the range of job performance
4. The characteristics of the workplace.

How to conduct a Job Analysis

There are five different methods of collecting job analysis data
(1) self-reports
(2) direct observations
(3) interviews
(4) document reviews
(5) questionnaires and surveys

Self-Reports- Reports made by the employees’ current holding the position. This approach is only
appropriate for rather simple jobs that do not require a set of specific skills or much training.
Direct observation- By observing an incumbent actually performing the job. Direct observation, however, is
most useful with jobs that involve obvious physical activity, activities that are the core of the job. For jobs
that are primarily cognitive in nature, direct observation provides little useful data.
Interviews- Can be conducted as Individual or Group interviews. The interviewees include current
incumbents of the job, supervisors of the job, and others who are often referred to as subject-matter experts
(SMEs).
Document Reviews- organizations contain a variety of documents that are useful in conducting job analyses.
These include analyses of output, performance appraisals, reports by both internal auditors and external
consultants about workplace issues. Customer complaint records are useful source about employee job
behaviours that are of importance to customers. Internal memoranda about unusual events, difficulties
encountered by workers on a job, or problems in recruiting applicants for a particular job can provide
worthwhile insights into a job.
Questionnaires and Surveys- The job analyst typically asks the respondents individually to rate the
importance of a variety of tasks in the job under scrutiny. The next step is to pick out from a list the
requirements necessary to perform, and, finally, to identify the range of job performance using a rating scale.

Problems of using Job descriptions-

 Changes Over Time
 Low Accuracy
 Lack of Stability
 No consistency across the organization

Session 4
Interviewing and Recruitment

Developing your questioning skills

As the interviewer, it is up to you to ask the right questions to find out whether the candidate has the skills
and experience to fill the role. How your questions are constructed will determine the sorts of response you
are likely to receive. Candidates will follow your lead, so if you ask poorly phrased questions, they will give
you information that hinders rather than helps you to find out whether they could do the job.

Asking open and closed questions

As an interviewer, your aim is to get the candidate talking for the bulk of the interview. As a rule of thumb,
aim to get candidates talking for around 80 per cent of the time.

Closed questions
Closed questions are questions in which you could reasonably expect an answer of either a single word or a
short phrase.

Open questions
In order to hear about candidates’ experiences and get to evaluate whether they have the skills you need to
fill the vacancy; you need to ask open questions that make it difficult for candidates to answer in a
monosyllabic ‘yes’ or ‘no’ fashion.
Asking reflective questions
An interview is about asking probing questions to understand a candidate’s behaviour and motivations.

Asking challenging questions

Candidates sometimes talk in universal terms about themselves or the situations they have been in.

Learning to ask questions about competencies and behaviour

The key principle of structured, competency-based interviewing is to ask mainly questions that focus on past
experience, i.e., to ask questions about actual, specific situations that the candidate has experienced in the
past.

The Funnelling technique

Asking a good opening question should be only the start of your questioning about how a candidate handled
a particular situation. Candidates rarely share enough (or the right) information to allow you to judge their
level of skill in handling different situations; you will need to ask further questions to understand exactly
how candidates handled the situations they were in.

The STARS technique

An easier to remember way of looking at the funnelling technique is to use the STARS acronym, as
illustrated in Figure 3.2.

Taking each of the STAR’S steps in turn:

1)Situation. Begin by asking a broad, open question about a specific example of past behaviour. These
questions should typically begin with phrases such as ‘tell me about a time
when you…’ or ‘Give us an example of a situation in which you…’

2)Task. Ask a question about the candidate’s specific role in the situation. Quite often, the situation may
have involved many people, so ask questions such as: ‘What was your role
in this example?’ or ‘So what were you required to do in this situation?’

3)Actions. Possibly the most important part, try to understand the specific actions the candidate took to
address the situation. Consider questions such as: ‘What did you say or
do?’ ‘What steps did you take to tackle the opportunity/ rectify the problem?’

4)Result. Finish off by asking what result the candidate achieved in the end. If appropriate, you may also
wish to ask questions about what lessons the candidate learnt.

Focusing in on actions
It is pointless asking broad, open questions without following them up with probing questions about the
specific actions that the candidate took to deal with the situation.

Understanding the candidate’s thinking

It’s not always enough simply to know how a candidate behaved in different situations. A good interviewer
may need occasionally to understand why the candidate chose to behave
that way.
Seeking contrary evidence
Competency-based interviewing is not only about looking for evidence that candidates have in the past
demonstrated the behaviours you are looking for. You should also use it as an
opportunity to explore the areas in which candidates struggle.

Catching liars out

As you can see, the competency-based interviewing style asks candidates to talk about what they did in a lot
of detail. As such, competency-based interviewing happens to be a good
way to catch out candidates who may be exaggerating, embellishing, or telling outright lies about their
skills.

Further,

 Delving into motivations and Aspirations

 Interpreting body language
 Being persistent

Rating candidates and making a decision

In order to rate candidates, you need to have a marking

frame – a document that has three parts:
■ a set of marking guidelines;
■ a list of the behaviours for each competency;
■ a rating scales.
 Session 5
Assessment and selection
ASSESSMENT CENTER IN HUMAN RESOURCE MANAGEMENT

Human resource management uses the assessment centre method to evaluate and develop personnel. The
central theme of this book is that each assessment centre must be customized to meet specific HRM goals.
Alternative ways of setting up each element of an HRM assessment centre are discussed.

Continuity and Change

The use of simulation exercises to observe specific behaviours of participants is an important feature of the
assessment centre method. Individuals and groups can learn new management skills when assessment centres
are used for development. Later in this chapter, we will discuss the effectiveness of assessment centres for
these various purposes.

The changing nature of work, organizations, and the global business environment
There are 168 million jobs anticipated to make up the United States economy over the next 6 years. The
workforce will be made up of ever-increasing percentages of minorities and women. Many of those entering
the labour market will be entering non-traditional occupations, many of them women and minorities. There
are changes taking place in the way businesses operate. Many modern businesses are reorganizing their
workforces to create high-performance work systems that optimize the alignment of social and technical
systems. Employers used to be responsible for their employees' professional development; however,
organizational cultures have shifted this responsibility to individuals.

The importance of carefully constructed human resource “Tools”

Changes in the organizational environment have altered the needs for various human resource management
tools and the attitudes of applicants and employees about such tools. Because of the increased diversity within
the workforce and the importance of complying with various employment laws.

The assessment centre method

The assessment centre method offers a comprehensive and flexible tool to assess and develop applicants and
employees in a modern work environment. Recent technological innovations have been incorporated into the
Assessment Centre method to allow the method to adapt to the globalization and computerization of the
business environment. It is not the best or only tool for carrying out human resource applications.

A typical assessment centres

There is no typical or universal way that assessment centres are set up or conducted. Over the course of the
day, participants take part in a series of simulation exercises. Assessors have been trained to conduct the
assessments, and the assesses have been briefed about the program. A spreadsheet is constructed to illustrate
the ratings each assessed received from each assessor on each dimension. The following week, each worker
receives an oral and written report on how well he or she did. It is important to note that this is just one example
of assessment centre operations. In particular, very different procedures are useful in integrating behavioural
observations. Another procedure gaining wider acceptance is the statistical integration of ratings.
Comparison with other assessment procedures
A spreadsheet is constructed to illustrate the ratings each assessed received from each assessor on each
dimension. The following week, each worker receives an oral and written report on how well he or she did.
An assessment centre can involve several different types of assessment techniques. Simulations provide the
opportunity to observe the complex behaviours of candidates as they interact with other people. An assessment
centre exercise for managers may be a work sample, but it does not have to be a complete replica of the job
element.

Assessment centres and various human resource functions

Assessment centres are fair to individuals from racial, gender, and age groups and thus are useful in advancing
the diversity goals of organizations dealing with a changing workforce. The following sections summarize
many of the HRM functions carried out in most organizations:
Recruitment: The source of new personnel may be located outside the organization, in the form of
applicants, or inside the organization, in the form of promotions and transfers. Chrysler and Mitsubishi used
the assessment centre method to show applicants what they would experience in the Japanese management
system.

Selection- Selection procedures, therefore, should help the organization identify individuals who are likely to
succeed on the job, and they should be non-discriminatory. Assessment centres have been used to screen and
select pilots, trainers for an automotive manufacturer’s training program
Placement- There are often several possible jobs that can be assigned to a new employee. In a program for
recruiting management trainees, Sears used an assessment centre to not only select among applicants but also
to place new recruits in positions where there was an optimal fit.
Training and development- Assessment centres have been used to diagnose employee deficiencies and to
provide skill training in selected areas. Throughout the book, we refer to centres used for these two purposes
as diagnostic assessment centres and developmental assessment centres, respectively.

Performance appraisal- Assessment centres have been used to certify the competence of individuals to
perform required technical skills. For years the American Board of Professional Psychology (1988) used an
assessment centre to evaluate the skill of clinical psychologists in disagreement with clients' psyches and
phobias.

Organizational development- Many organizations use large-scale, com phenomenal organizational

simulations as a means of promoting organizational development. Borrow and Leonards reported on an
assessment centre for a large metropolitan service provider that was used to select the best-fitting candidates
for positions that did not exist.
Human resource planning- Kodak's Colorado Division found a deficiency among its first- and second-level
managers in the skill of management control. Kodak used this information to design a new training program
to improve its employees' management control skills.
Promotion and transfer- AT&T and many of the Bell Companies have used assessment centres for more
than 40 years to identify individuals' potential for success in managerial positions. Of course, candidates’
performance on the current job is also considered very carefully as well as their aptitude for a new role.
Layoffs- An organization must make difficult decisions about who to release and who to keep. The security
division of Hoffman Company used an assessment centre to simulate the job requirements of a restructured
department. Each employee was given a chance to demonstrate his or her capabilities for the new assignment.

Case studies of Assessment centre in operation

Palmore Fire Department
The Palmore Fire Department (PFD) used an assessment centre to help de-bury who to promote from the rank
of Lieutenant to that of Captain. Surveys of hundreds of assessment centres in the United States and Germany
showed that 45% to 50% of organizations use them for promotional purposes.

The Organization
The PFD is considered a highly sophisticated department, consisting of more than 400 employees, working in
more than 20 stations. The PFD provides services in firefighting, emergency medical services, hazardous
materials, rescue, fire prevention code enforcement, education, and disaster preparedness.

Target Job
The Pennsylvania Fire Department (PFD) has set up an assessment centre to identify lieutenants who make
the best captains. Captain is a middle-level management position that involves managing an entire fire station.
The captain supervises all aspects of personnel management, including day-to-day operations and
administration.
Dimensions
job analysis was conducted on the role of captain. Past job descriptions, training materials, and information
from O*NET were collected and reviewed. Preliminary lists of tasks and knowledge, skills, and abilities were
generated, and judgments of the importance of these factors were collected from subject matter experts.
Exercises

The job analysis identified several types of situations that captains must deal with on a regular basis. The data
was used to build several assessment exercises that simulated important elements of the PFD captain job.
Participants sat at a desk and carried out tasks similar to those required of a captain in any given day. PFD
gave a set of cognitive ability and personality tests to assess whether candidates for promotion had the basic
skills and personality traits necessary for effective performance as a captain. Tests covered verbal reasoning,
reading skills, and a measure of general intelligence. Psychological testing was under the supervision of an
industrial/organizational psychologist.

Participants
Candidates could self-nominate or be nominated by current captains. All nominations had to be approved by
the department’s human resource director, who verified that all minimum qualifications had been met. The
six individuals who scored the highest on these assessments were scheduled to participate in the full-day
assessment centre the following week.
Assessors

Assessors were trained and coordinated by an industrial/organizational psychologist, who had developed other
assessment and validation projects. The assessors observed the candidates in exercises and evaluated the
dimension-relevant behaviours observed. They led the integration discussion, presented the mental ability and
personality test results, wrote reports, and gave oral and written feedback.

Program
Assessors made ratings on the performance dimensions, which were then compiled by the administrator.
Where discrepancies occurred, the assessors discussed differences and came to an agreement within 1point on
a 5-point rating scale. Once this level of agreement was reached, an overall assessment rating of promotability
was used to rank the candidates.

Feedback
After completing the assessment, each participant was given a brief written and verbal review of the findings
and the recommendation regarding probably Motability. The feedback given was not detailed but laid out the
decision-making process, the decision criteria, and how the candidates scored on relevant criteria.
Other elements of the program
The organization’s policy called for the chief to seek out and use other information, such as past performance
appraisals and safety violations, and accident records. Using all this information, the fire chief made the final
decision of whom to promote to captain.
Results

Five years after the assessment centre was set up, PFD evaluated the effectiveness of the program. Responses
to a survey questionnaire revealed that the captains, assistant chiefs, and the chief believed the assessment
centre had been providing valuable information about lieutenants’ skills to be captains that had not been
available previously. Some problems with the assessment program were revealed by the evaluation study. In
some situations, the fire chief was not giving a great deal of weight to the overall assessment centre rating.

Technosoft, Inc.
Techno soft used an assessment centre to diagnose the training needs of individual staff members. 51.2% of
organizations surveyed used assessment centres for development planning. Only 8% of the German
assessment centres used the results for ascertaining training needs.
The Organization

Techno soft, Inc. Techno soft sells its products directly to individuals, as well as to schools, universities, and
organizations. Techno soft strives to maintain its strong system of corporate values, including excellence in
product development, internal relations, and customer service.
Target Job
A challenge Techno soft has encountered is keeping its techs up to date with the latest technology. There
seems to be an increased need for techs to be more flexible, adaptable, and team-oriented. The program also
needed to incorporate an assessment of these more 'nontechnical' skills.
Dimensions

With the latest technology, just when it all the techs have mastery of a particular technique or application,
there are new programming languages and protocols that must be learned. seems, to meet these needs, Techno
soft outsourced the project to a consulting firm to develop a diagnostic assessment centre that assessed techs
on both tech and non-technical levels. The consultants also worked with Techno soft’s training department to
identify training opportunities that could allow them to develop in each of these areas.

Exercises
Tests focused on motivation and the ability to adapt to new technologies and environments. Techs were also
asked to consult with an employee who was having problems with a number of technical matters. The tech
consulted with the employee, gathered enough information to understand the issues, decided on the best course
of action, and communicated with the employee in nontechnical language what was wrong and what needed
to be done.
Participants

Top management decided that all current techs would go through the diagnostic assessment centre. This served
multiple purposes. In addition, the consultants suggested putting the senior techs through the program first to
build support and excitement about this new initiative among the less senior techs.
Assessors

Because the dimensions assessed in this program ranged from highly technical knowledge to highly
psychological competencies, a varied panel of assessors was used. The consulting team played an active role
in conducting assessor training, assessing, administering the centre, conducting the integration discussions,
and providing feedback, but over a period of 2.

Program
Many aspects of the assessment centre were computerized, which led to reduced costs and increased
efficiency. No overall assessment rating was derived. The high level of complexity ensured that the centre
was perceived to be 'face valid' to participants. Participants logged on to this system to register themselves
into the program and schedule various activities.

Feedback
During integration, the administrator entered final dimension scores for each tech. The system then generated
a training needs profile for each participant, and the participant was automatically sent an email indicating
that his or her assessment results and training profile were available to be viewed. In the following week, each
participant met with his or her supervisor to discuss the training plan generated and to set goals for completing
all necessary training.
Other elements of the program

Participants continued to use the web-based application to track their training progress. The system also
included scores on training exams and other success measures. This tool was also used to notify the techs
about new training courses. participants who assessed low on this dimension were automatically sent an email
notifying them of opportunities that were especially relevant to meeting developmental needs.
Results

Because of the extensive amount of data stored in the web-based system, the consulting firm was able to come
back in the years following the launch of the program to determine if it was meeting its goal of diagnosing
needs and prescribing the needed training to keep the Techno soft’s techs current and effective. One noticeable
improvement was that since the assessment centre and training planning tools were implemented, the techs
had been far more active in training than they had been.

Auto-manufac Worldwide
Staffed with an internal team of industrial and organizational psychologists, AMW built a comprehensive
leadership development program with the developmental assessment centre at its core. The purpose of the
assessment centre was not to assess overall potential or to diagnose, but to use the assessment centre as an
actual training experience in and of itself. This application involved several modifications to the traditional
assessment centre design. This may be an underestimate, though, because many organizations use complex
behavioural simulations for training purposes, but do not call them assessment centres.
The Organization
AMW produces products used by manufacturing companies to automate their production process. These
products include assembly line systems, warehouse and inventory systems, as well as technologies to
automate shipping and receiving. U.S. dollars. The organization is led by the President/CEO and a number of
vice presidents. These individuals directly supervise department heads and shift managers.

Target Job
AMW was committed to doing everything it could to prepare its site department heads and shift managers for
positions as site managers. However, through experience, AMW learned that department heads and shift
managers do not necessarily gain experiences in their current jobs that allow them to develop the skills they
need to be leaders. Because the purpose of the program was to develop skills needed in the next level of
management, it was the site manager position that was the target job.
Dimensions

A job analysis was conducted to find a common set of performance dimensions necessary for effectiveness as
a site manager worldwide. It is important to note that only dimensions that lend themselves to development
are appropriate for a leadership development program or developmental assessment centre. This is because
the purpose of the program is to improve proficiency on the dimensions, as opposed to screening and selecting
managers. Therefore, although some ability and personality dimensions were identified in the job
analysis, only modifiable knowledge and skills were incorporated into the program.

Exercises
In each block the participant took the role of a site manager and engaged in a role-play exercise, a fact-finding
exercise, and a presentation exercise. In this simulation, some shift supervisors were transferred to a site
culturally distinctive from the participant's site. The participant was given a file of memos, emails, and
personnel action documentation in addition to detailed information about the cultures of the two sites. This
required the participant to seek information, solve problems, manage conflict, and communicate effectively.
Participants

The purpose of the assessment centre was not to identify high-potential persons, but rather to take those already
believed to have great potential and equip them with the additional skills needed for higher level leadership
positions. Therefore, those individuals identified as high potential through the performance appraisal process
were invited to participate in the leadership development program.

Assessors
The assessor panel included individuals from the corporate office, training and development office, as well as
vice presidents representing the different geographic regions within AMW. The assessor panel contained
individuals from the corporate HR office, the training and development office, as well as vice presidents
representing the different geographic regions within which AMW conducts business.

Feedback
This is one of three cases in which an assessment centre at the Massachusetts Institute of Mental Health
(AMW) provided feedback that was more in-depth and involved specific short- and long-term goal setting and
occurred on multiple occasions throughout the leadership development program.
Other elements of the program

The input was gathered from the participants themselves, as well as their supervisors, peers, and subordinates.
Results from the multi-sources were fed back to the participants as part of their monthly coaching session to
provide additional developmental feedback.

Results
There are strong beliefs within the organization that the leadership development program is the "royal road"
to middle management. Despite this, the program has seen great success among those who have participated.
Longitudinal multisource ratings show significance increasing proficiency after participating in the
developmental assessment centre.

Session 6
Training and Development
The overall goal of training and development is learning.
Explicit knowledge
 knowledge that is well documented, easily articulated, and easily transferred from person to
person (Processes, checklists, flowcharts, formulas, and definitions)
 formal training is central to the development of Explicit knowledge.
Tacit knowledge
 refers to personal knowledge based on individual experiences that is difficult to codify.
 informal learning is central to the development of tacit knowledge
Knowledge Management
refers to the process of enhancing company performance by designing and implementing tools, processes,
systems, structures, and cultures to im-prove the creation, sharing, and use of knowledge. Knowledge
management contributes to informal learning.
Training design process/ ADDIE model - is based on principles of Instructional System Design.

it includes analysis, design, development, implementation, and evaluation.

Analysis – conducting needs assessment, and ensuring employees’ readiness for training.
Design - learning environment, ensuring transfer of training, and developing an evaluation plan
Implementation - selecting and using a training method.
Evaluation - monitoring and evaluating the program.

Forces Influencing Working and Learning

 Economic cycles
 Globalization
 Increased value placed on intangible assets and human capital
- Intellectual capital - the codified knowledge that exists in a company.
- Social capital - relationships in the company.
- Customer capital - the value of relationships with persons or other organizations outside the
company for accomplishing the goals of the company
 Focus on link to business strategy
 Changing demographics and diversity of the workforce
 Talent management
- STEM - skills refer to skills in science, technology, engineering, and math.
 Customer service and quality emphasis
Total Quality Management (TQM) is a companywide effort to continuously improve the ways
people, machines, and systems accomplish work.
 Six Sigma process - process of measuring, analysing, improving, and then controlling processes
once they have been brought within the narrow Six Sigma quality tolerances or standards. The
objective is to create a total business focus on serving the customer.
Lean thinking is a way to do more with less effort, equipment, space, and time, but still provide
customers with what they want.
 New technology
 High-performance work systems
- Cross training - training employees in range of skills so they can fill any of the roles needed to
be performed on the team.
The ATD competency model
model describes what it takes for an individual to be successful in the training and development field.

Session 7
Performance & Reward Basics
Performance:
Two important facets of performance:
1) it is a subjective, constructed phenomenon;
2) it is open-ended and multidimensional.

In short, what is important about performance is not just how ‘high’ or ‘low’ it is but also how it is
defined and measured, by whom and for what purpose.
Open System Model
We can conceptualise work and work performance as a system comprising three main elements arranged in a
linear sequence:
1) ‘inputs’, including employee knowledge, skills and competencies (i.e., abilities and attitudes), as well
as other tangible and intangible ‘resources’
2) human resource ‘throughputs’ (i.e., activities that transform inputs into outcomes, including, most
importantly, work effort and other behaviour);
3) ‘outputs’, including outcomes from work behaviour; i.e., results.

Individual knowledge and skill feeds into work group know-how, which in turn flows into organisational
productive capabilities.
Similarly, individual results flow into group results, which in turn contribute to organisation-wide results.

Performance management purpose

Without performance direction and recognition, employees will be at loss as to the nature and level of work
effort required.
A well-designed and well-accepted performance management system can be said to have a four-fold purpose:
(1) strategic communication
(2) relationship-building
(3) employee development
(4) employee evaluation

Basic requirements for effective performance management

The four key requirements are:
(1) Validity
In relation to performance measurement, validity can be disaggregated into three dimensions:
1) construct validity (= role relevance of performance standards)
2) content validity (= role representativeness of performance standards)
3) criterion-related validity (= the accuracy of performance measures or indicators used in reflecting
and/or predicting the desired performance standards).
(2) Reliability
Reliability has to do with the consistency and accuracy of the measurement task itself as opposed to
the performance criteria and measures used.
(3) Cost effectiveness
The time and expense involved in the pursuit of ever more reliable performance measurement
instruments may well be cost-prohibitive (if not counterproductive) in terms of return on investment.
Hence, cost-effectiveness is also an important consideration in designing and managing any
performance management system.
 (4) Felt-fairness
To be effective, a performance management system should meet the test of felt-fairness, both in terms
of the decision-making processes involved, or procedural fairness, and the outcomes delivered, or
distributive fairness
Reward
Anything tangible or intangible that an organisation provides to its employees either intentionally or
unintentionally in exchange for the employee’s potential or actual work contribution, and to which employees
as individuals attach a positive value as a satisfier of certain self-defined needs.

Remuneration
Direct remuneration typically comprises three main categories of financial reward:
(1) Base pay: the relatively fixed component of total remuneration
(2) Direct benefits: such as employer contributions to superannuation or pensions, health care,
childcare
(3) Performance pays: which by definition varies with measured performance

Purpose of reward management

A reward system maintained by a work organisation is likely to have three primary objectives:
1) to attract the right people at the right time for the right jobs, tasks or roles
2) to retain the best people by recognising and rewarding their contribution
3) to motivate employees to contribute to the best of their capability
A well-formulated and administered reward system is likely to have a number of important secondary
objectives. In particular, it should seek to be:
1) Need-fulfilling: the rewards should be of value to employees in satisfying relevant human needs
2) Felt-fair, particularly in terms of offering rewards commensurate with contribution
3) Legal: it should comply with relevant legal requirements regarding employee rights and entitlements,
including, of course, all mandatory benefits and minimum standards
4) Affordable: the rewards allocated, and any associated on-costs, should be within the organisation’s
financial means
5) Cost-effective: there should be an appropriate ‘return on investment’ from total reward outlays
6) Strategically aligned: as with performance management, reward management should support the
organisation’s corporate and business objectives

System Review, Change and Development

Human resource practices should be tailored specifically to the particular context, strategy, structure and
culture of each organisation.
Selecting practices such that, in terms of desired results, behaviour and competencies, are synergistic (i.e.,
complementary and/or supplementary) rather than pulling in different directions.
A framework for system development
This is a general framework for reviewing and transforming current performance and reward strategy, policy
and practices in line with the tenets of the best fit model.
1) The framework involves five main steps:
2) establishing the basic strategic requirements
3) reviewing current practice against these strategic requirements to identify specific areas for
improvement
4) recommending an altered or new configuration of performance and reward practices
5) rehearsing the proposed changes and planning their implementation 5 rolling-out the changes
 The model proposes that taking a strategic approach to performance and reward management
requires careful analysis of and alignment between four key sets of factors:
(1) competitive strategy,
(2) organisational structure,
(3) management culture and
(4) performance and reward principles and practices.

To optimise their effectiveness, performance and reward policies and practices should be compatible with,
and aligned with, strategy, structure and culture – or, more precisely, with intended strategy, desired
structure and espoused culture.

1)competitive strategy:
o cost defender
o quality defender
o analyser
o prospector
 2)organisational structures:
o mechanistic
o organic
3)management culture:
o traditional
o high involvement.

Employees’ attitudes and behaviour are the critical bridge between human resource practices, each of
the above organisational factors and an organisation’s effectiveness

Below are the behavioural dimensions over which performance and reward practices have influence

1) behavioural dimensions:
o membership behaviour
o task behaviour
o organisational citizenship behaviour

2) attitudinal dimensions:
o job and reward satisfaction
o task motivation
o organisational commitment.

Practice Review
o Assess the strengths and weaknesses of performance and reward strategies
o The overall aim is to establish the nature and extent of any ‘gap’ between actual and desired practice
outcomes so as to determine the extent, nature and degree of urgency of required change
The three areas of practice are
(1) performance management method(s),
(2) reward mix and
(3) remuneration level.

Determining a performance management method

Three main approaches to performance management are the
1) results-based,
2) behaviourally based and
3) competency-based approaches

Determining Reward Mix

 Rewards are of two main types: extrinsic and intrinsic.
 Extrinsic rewards are rewarding that flow from the work context.
They take three main forms:
1) financial rewards or remuneration (i.e., pay and benefits),
2) social rewards and
3) developmental rewards.

 Intrinsic rewards are those psychological rewards that arise from the content of the work itself, such
as
1) task achievement,
2) self-esteem,
3) a sense of responsibility,
4) job autonomy
5) involvement in decision-making

 The first design challenge here is to determine an appropriate balance between these four generic
reward types
 Within each organisation, reward and remuneration mix will need to be configured to the needs and
desired behavioural outcomes of each distinct employee group.
 There are two widely followed ‘rules’ here:
1) The higher up the organisational hierarchy, the greater the proportion of total pay that can be
performance-variable.
2) The higher up the hierarchy, the greater the proportion of total pay that can be linked to
organisational performance.
Determining remuneration level
 The option of paying at the market median is often chosen as a way of minimising risk
 Changing the pay level settings will have an impact on three key factors:
(1) the total cost of remunerating the current workforce,
(2) total labour turnover costs and
(3) overall workforce quality and performance.

Session 8
Compensation and Incentives
VARIABLE PAY
Variable pay is compensation linked to individual, group/team, and/or organizational performance.
Variable pay plans attempt to provide tangible rewards, traditionally known as incentives, to employees for
performance beyond normal expectations.

Effective Variable pay plans:

Metric options available for variable pay plans:

A common metric for incentive plans is return on investment (ROI).
Some factors that contribute to the success of incentive plans are as follows:
• Develop clear, understandable plans that are continually communicated.
• Use realistic performance measures.

• Keep the plans current and linked to organizational objectives.

• Clearly link performance results to pay-outs that truly recognize performance differences.

• Identify variable pay incentives separately from base pay.

Three Categories of Variable Pay

 Individual incentives are given to reward the effort and performance of individuals. Some common
means of providing individual variable pay are piece rate systems, sales commissions, and individual
bonuses.
 Group/team incentives are gainsharing or goal sharing plans, in which the employees on a team that
meets certain goals, as measured against performance targets, share in the gains.
 Organizational incentives reward people according to the performance results of the entire
organization. This approach assumes that all employees working together can generate improved
organizational results that lead to better financial performance.

INDIVIDUAL INCENTIVES
Individual incentive systems tie personal effort to additional rewards.

Conditions necessary:

 Individual performance must be identified.

 Individual competitiveness must be desired.
 Individualism must be stressed in the organizational culture.

Piece-Rate Systems

 Straight piece-rate system: Wages are determined by multiplying the number of units produced
(such as garments sewn, or service calls handled) by the piece rate for one unit. Because the cost is
the same for each unit, the wage for each employee is easy to figure, and labour costs can be
accurately predicted.
  Differential piece-rate system: Employees are paid at one piece-rate wage for units produced up to a
standard output and a higher piece-rate wage for units produced over the standard.

Bonus

 One-time payment that does not become part of the employee’s base pay.
 Most popular short-term incentive plan
 When performance results are good, bonuses go up and when not met, bonuses go down.
“Spot” Bonuses: A unique type of bonus that can be awarded at any time. Spot bonuses are given for extra
time worked, extra efforts, or an especially demanding project.

Special Incentive Programs

Performance Awards: Cash, merchandise, gift certificates, and travel are the most frequently used
incentive rewards for significant performance.
Recognition Awards: Recognizes individual employees for their performance. For instance, many
organizations in industries such as hotels, restaurants, and retailers have established “employee of the
month” and “employee of the year” awards.
Service Awards: Although service awards often are portrayed as rewarding performance over several years,
the programs in most firms recognize length of service (e.g., 1, 3, 5, or 10 years) more than employees’
actual performance. Many of these awards increase in value as the length of service increases.
Purposes of Special Incentives

GROUP/TEAM INCENTIVES
Distribution of Group/Team Incentives:
1. Same-size reward for each member
2. Different-size reward for each member

Gainsharing: System of sharing with employees greater-than-expected gains in profits and/or productivity.
 Teams and Variable Pay Plan Results

Conditions for Successful Group/Team Incentives

Profit sharing
System to distribute a portion of the profits of an organization to employees.
The primary objectives of profit-sharing plans can include the following:
• Increase productivity and organizational performance
• Attract or retain employees
• Improve product/service quality
• Enhance employee morale
 Framework Choices for a Profit-Sharing Plan

 Stock option plan: Plan that gives employees the right to purchase a fixed number of shares of
company stock at a specified price for a limited period of time.
 Employee stock ownership plan (ESOP): Plan designed to give employees significant stock
ownership in their employers.

TYPES OF SALES COMPENSATION

 The salary-only approach is useful when an organization emphasizes serving and retaining existing
accounts over generating new sales and accounts.
 In the straight commission system, a sales representative receives a percentage of the value of the
sales the person has made.
 Salary-plus-commission combines the stability of a salary with the performance aspect of a
commission.

Commission: Compensation computed as a percentage of sales in units or dollars.

Draw: Amount advanced against, and repaid from, future commissions earned by the employee.

Elements of Executive Compensation

 Executive Salaries
 Executive Benefits (Regular and supplementary benefits)
 Executive Perquisites (or) Perks (Special benefits—usually noncash items)
 Annual Executive Incentives and Bonuses
 Long-Term Executive Performance Incentives (Stock options and restricted stock options)

Compensation committee Subgroup of the board of directors that is composed of directors who
are not officers of the firm that has authority over executive compensation plans.

Common Executive Compensation Criticisms