I UNIT 1 HUMAN RESOURCE PLANNING

I Structure
1.0 Objectives
1.1 Introduction
Objectives of Human Resource Planning
concept of Human Resources Planning
Need for Human Resources Planning
Need for Human Resources Planning in Hospitality Industry
Qualitative Dimensions of Human Resources Planning
Micro and Macro Level Scenario of Human Resource Planning in Hospitality
Industry
Let Us Sum Up
Clues to Answers

1.0 OBJECTIVES
-* After reading this Unit, you should be able to understand the:
concept of human resources planning, .
need for public intervention in human resources planning,
theoretical basis and conceptual issues associated with alternative approaches to
human resources planning, and
conflict between the theoretical construct and political process of human resources
planning and the resultant practices in human resources planning.

1. INTRODUCTION
I

The word 'resource' refers to the productive power of natural goods. Human resource is,
therefore, the productive power in human beings. They are the ones who provide the
resources and also reap the benefits of the products or services. A proper planning is
required for developing and utilising the human resources. Human resource planning
broadly forms the action plan for developing the human resources by taking stock of the
infrastructure present and required in future. In this Unit, you will learn about the
various approaches and practices prevalent in human resources planning and also,.
understand the need for a proper planning of human resources.
Human Resource planning may be defined as a strategy for the acquisition,
utilisation, improvement and preservation of the human resources of.an enterprise.
It is the activity of the management which is aimed at co-ordinating the
requirements for and the availability of different types of employees. This involves
ensuring that the firm has enough of the right kind of people at the right time and also
adjusting the requirements to the available supply. The same can be applicable at a
macro. level say HRP for an industry like hospitality or a government planning at the
national level. The major activities of manpower planning include:

1
I
1 ) Forecasting future manpower requirements.

2) Inventorying present manpower resources and analysing the degree to which these
resources are employed optimally.

3) Anticipating manpower problems by projecting present resources into the future and
comparing them with the forecast of requirements. -
Block-1 Hum& 4) Planning the necessary programmes of recruitment, selection, training, etc. for
Resource Development future manpower requirements.
Here it must be noted that HRP is a prelude to Human Resource Development (HRD)
about which we will discuss later.

1.2 OBJECTIVES OF HUMAN RESOURCE PLANNING

The three main objectives of human resource planning are:
i) To ensure optimum use of human resources currently employed.
ii) To assess or forecast future skill requirements.
iii) To provide control measures to ensure that necessary resources are available as and
when required.
A number of specific reasons for attaching importance of manpower planning and
forecasting exercise are to:
link manpower planning with organisational planning,
determine recruitment levels,

. ,anticipate redundancies,
1 '

determine optimum training levels,

*. pravide a basis for management development programnes,
. -

cost the manpower in new projects,

assess future accommodation requirements,
study the cost of overheads and value of service functions,
have a competitive edge over other service providers, and
decide whether certain activities need to be subcontracted, etc.
These objectives are relevant for any hotel though as per its specific requirements the hotel
may add more to it, like, meeting the increasing demands of guests, providing right service
at the right moment or meet the demand of changing trends and fashions in hotel industry.

1.3 CONCEPT OF HUMAN RESOURCES PLANNING

Planning is a process of preparing a set of decisions for action in the future. Human
Resources planning may then be interpreted as a process of preparing a set of decisions
on human resources development for action by human resources in future. The actions
required on the part of human resources planning are primarily of two types:
i Availing the employment opportunities,.and
Evolving new technologies to enhance economic development.
There are three types of investments which have the potential to contribute to human
resources development. They are investments in:
health and nutrition,
 social and economic equity, and Human Resource Plann~ng

education and training.

The first two types of investment can only contribute to the accumulation of human
beings in terms of health, physical capacity to work and socio-economic status. It is the
-third, i.e., education and training, directed towards development of skills in human
beings that changes the future asset value, productivity and earning power of human
beings. This is the human capital approach to human resources planning. It attaches
prime importance to investment in education training and retraining as a means of human
resources development.

' 1.4 NEED FOR HUMAN RESOURCES PLANNING

Human resources planning essentially involve making conscious decision with regard to
education and training in order to facilitate future actions for participation of human
resources in economic development. The natural question that arises is that should policy
planners make such decisions? Can the market mechanism involving employers as users
of human resources and students and their parents as suppliers of human resources, not
. make such decisions? These are very relevant questions, which must be answered.
Any market mechanism essentially involves interactions between profit maximising
, producers and utility maximising consumers. In a perfectly competitive market economy,
each of the participants among the producers as well as consumers is endowed with
perfect knowledge about the market forces. The interactions between producers and
consumers result in a set of prices, which guarantee optimum allocation of resources,
provided certain conditions, are met. Allocative efficiency of resources is considered
optimum when it is not possible to improve welfare of anyone of the participants in the
market without impairing the welfare of at least one of the participants in the market.
Welfare of each participant is viewed here from the point of view of individual's
perceptions of choices and preferences according to his or her own standards. This is the
standard definition of optimality given by Pareto.
The conditions, which must be fulfilled to achieve Pareto's optimality in resource
allocation, are:
informed consumers,
absence of internal economies of scale in production,
absence of externalities either in production or in consumption, and
absence of public goods.
Failure to fulfil any one or more of the above conditions leads to market failure in
effecting optimum allocation of resources and justifies state intervention to effect
necessary corrections through policy decisions.
It should also be remembered that the parental influence is a decisive factor in the
educational achievements and choice of careers of children. Parental ignorance caused
by either lack of adequate knowledge about the market for educated or perceptions based
on their career experiences tather than based on the career challenges ahead of their
children or both are often viewed as the basis for state intelyention in education. State
sponsored vocational 'guidance programmes and the stress on generating employment
market information in developing nations bears evidence to state intervention. This
intervention is essential to make up for consumer ignorance or lack of adequate and
proper knowledge.
 -7r
Blosk- 1 Human 1.5 NEED FOR HUMAN RESOURCES PLANNING IN
Resource Development
HOSPITALITY INDSUTRY
Hospitality is an industry which is very much dependent upon the human resources.
Most of the services provided to a guest are, of course provided by it with the human
resources. For example, a tourist viewslperceives a destination by connecting the service
received, local behaviour and the destination attractions. So the positive or negative
feedback about a destination depends very much on the people interacting with the
tourist. One might argue that a tourist is motivated to visit a place by the presence of a
historical or present day architectural splendour, or may be by a natural or man-made
attraction. Here we should not forget that the tourists may visit a place for whatever
motivates them, but they will partake services at all the steps of their visit. The services
start at the time of deciding upon a destination till finally visiting and departing from
their destination of choice. The services would be that of a travel or tour operator,
probably staff of airlines, railways or roadways, services of the staff of a hotel or any
lodging place, help for sight seeing or eating or shopping etc. The attitude and behaviour
of the local people also forms part of a tourists' holiday experience.
We must remember that no tourist or guest can haie a succqRsfu1 trip without human
element, as for most of the tourists travelling is more about interacting with new people
and cultures and not just a monument or a site for fun. As stated earlier, hospitality '
industry requires human resources like no other industry as it provides services. The
services provided cannot be pre-checked or compared like mass produced goods but can
'
only be felt ince they have started or have been utilised. It is a sector where the
unpredictability of the human nature always affects both the service provider and the
service receiver. For example, a group of tourists visiting Kerala spends an evening
watching Kathakali performance. The dancer here is an entertainer providing services as
the show is especially for the tourists. The show would be viewed by each of the tourists
differently - some might find it interesting, others may not, some may be in awe of the
costume and make-up while others might like it so much that they go for another show.
While the dancer might not be 100 per cent fit one day and give less of a performance
than expected and thus let down a viewer of a previous performance. Many such
permutations and combinations are possible. It is true for any destination since some
tourist might like a destination due to the human element attached to it while others may
not find it so attractive.
The unpredictability of human nature and its need in every spectra of tourism industry
makes it necessary to plan well in advance for any expected or unexpected need in
future.
T ~ d a yevery
, country - developing or developed - has taken up tourism planning in a big
way. This is because the growth in the tourism sector has surpassed the growth in all
ec8nomies. As a result, Human Resource Planning in tourism naturally emerges as a vital
area of concern not only of the governments but also of the industry. In most of the cases
the gove$ments and industry have joined hands together but as far as the developing
countries are concerned not much investments have been made by the tourism industry in +

this area and still there is a large dependence from the government's efforts and
' initiatives as far as Hcman Resource Planning and Development are concerned.
However, the hotel industry is much more advanced in this regard when compared to
other sectors in tourism. Various hotel chains have adopted human resource planning;
have training institutes as well as HRD departments.
A crucial question to be asked here is why do we need improvements in HRD standards
and why is HRP necessary in hospitality and tourism. Well, a variety of reasons can be
given as an answer to these queries.
Job opportunities are integrated with economic development and practically all
countries have adopted a national strategy for employment generation - hospitality
and tourism being vital areas in this regard.
I Because of the emergence of the tourism as a tool for economic development and Human Resource Planning 1
I foreign exchange earner it also has become a highly competitive area. All countries
and.destinations have been trying hard for building the destination image in the
market and influencing the destination choice of tourists. This in any case is very
closely related to the facilities and the level of services available at any destination.
Hence, HRD and HRP.
i
I Hospitality itself has become a product in tourism and hence, a certain amount of
quality and standards are to be ensured in the hotels. This again is possible only
through HRP and HRD.

Emergence of special forms of tourism has led to the demand for specialised skills.
Adventure guides, Island and beach guides, special wild life guides, etc. are
examples in this regard. Similarly, the accommodation sector needs specialised
working force.

Tourists are becoming too demanding and want full value for the money spent.
Hence, over attention to HRP and HRD in all sectors of tourism.

In order to survive in a highly competitive market improvement in skills, training,

and retraining is necessary, for it is the quality in services vt-hich can act towards
having repeat visitors to your hotels1 destinations.
It is interesting to note that the need for HRP and HRD is not to be confined in relation
to the skills of the service providers alone but it is very important that the planners and
officials who carry out the plans should themselves be highly trained. Besides, while
planning for human resources in hospitality one will have to take into account whether
the approach is to be supply-driven or market-led? What are the employers' demands in
terms of training needs? Should they be routine or innovative? What are the employees'
needs in terms of training or retraining or how they perceive while on the job? Do
employers show interest in training or retraining of the employers or they are empathetic
to it,, etc. are some of the questions that have to be constantly addressed upon while
planning and developing human resources.
In developing countries it is necessary to consider skilled manpower as basic input to
production of goods and services with in the economy, assess the skill requirements to
achieve any predetermined economic growth target, and to gear the expansion of
educational system to provide the needed education and training. Tourism and
hospitality education, world-over falls in this category.
Accordingly, there are three approaches to educational planning:
Social Demand Approach,
Rate of Return Approach, and
Manpower RequFement Approach.

1) The social demand approach relies on an assessment of society's requirement for ,

education. In principle, it is an aggregate of demand for education in respect of all
individuals within the society. In practice, social demand approach relies on
projection of past trends in demographic aspects of population and the enrolment at
different levels of education.
Social demand approach is thus capable of revealing the number of students with
different types of professional preparation that may be expected by a given target
data, based on past experience. Projections of social demand for education are
contingent upon given levels of:
incomes of educated people,
tastes and preferences of households for education,
Block- 1 Human
Resource Development
demographic characteristics such as fertility and mortality,
direct costs of education,
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1
student grants, and 1
existing standards of admissions to various levels of education. 1
Critip of social demand approach argue that the decision to choose more or less of
education, beyond a legal school-learning age, is made by an individual who attaches
a positive value to the present and the hture benefits of education. This brings us to
the rate of return approach to education. Rate of return approach looks upon
education as a contributor to productivity and in this sense, it is expected to facilitate
investment decisions in education - whether or not the student should undergo more -
schooling, or whether or not the state should invest more and expand educational
facilities.
Estimation of rate of return involves the calculation of internal rate of return which
equates the present value of returns earned throughout the future active life with
costs incurred soon after the investment decision is made. There are thus three
parameters involved in the estimation of rate of return.
i
Costs of education,
Returns to education, and 1
Discount rate (used in discounting future returns to arrive at present value).
A variety of conceptual issues are involved in the estimation of these three
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parameters. These include:
a) Direct and indircct costs 1
b) Returns
A) Direct costs again have two components: private expenditure on education and
public expenditure on education. Private expenditure on education is the
expenditure incurred by the individuals pursuing education. Public expenditure
on education is what the government spends on creating, expanding and
maintaining educational facilities.
Indirect cost can be viewed from both private and social perspectives. I
From the angle it is the earning foregone by individual students
while attending school.
From social viewpoint of indirect costs involves estimation of opportunity
I
cost of public expenditure on education. ' .
B) Returns to Education can be categorised into direct monetary benefits, indirect
monetary benefits and non-monetary benefits.

i) Direct monetary benefits: These are the extra lifetime earnings received
that can be attributed to schooling or initial education.

ii) Indirect monetary benefits: Education definitely influences earnings from

the first job. Earnings from subsequent jobs are not all dependent on initial
education. Rather, they are dependent on the skills and experience acquired
through on-the-job-training and other in-service training. Additional
earnings attributable to such training are thus indirect to initial education.
Such training, however, is dependent on initial level of education, although
the nature of on-the-joblin-service training received need not necessarily be
the same for all individuals with identical initial education.
 iii) Non-monetary benefits: There are some non-monetary benefits, which Human Resource Planning
accrue to the individual pursuing education. Education may, for instance,
alter and modify tastes, preferences and outlook leading to cultural
upgradation. Likewise, education may facilitate individuals to take up more
satisfying job with higher prestige and greater independence, and less of
stress and strain.
pany other non-monetary benefits of education benefit the society. These
benefits are categorised as "externalities". The educated mind is trained to
inquire and question, and not to accept authority by default. This aspect of
education is expected to strengthen democratic principles, and reduce- the
chances of losing collective and individual freedom of the society. Likewise,
education causes better understanding and appreciation of the importance of
health and hygiene thus leading to improved health standards of the society at
large. Proponents of education even argue that schooling reduces crime and
improves social order.
Education causes quality improvement in labour. Given other factors of
production, including the physical capital endowments, growth of the economy
can come about only through improvements in the quality of labour. Education
thus contributes to economic growth.
3) The fundamental axiom of manpower requirements approach is that there is a
i s definite link between education and economic growth, and that lack of skilled
I
manpower in required numbers impedes growth. In this approach an attempt is made
! - to forecast future requirements of educated manpower to fulfil a future target of
Gross National Product (GNP) or specific targets of industrial production. Based on
i
I the forecasts of educated manpower requirements over a specified period, the
i planners would then indicate the directions of development of the educational sector
l
over the same specified period.

i The basic steps involved in this exercise are as under:

Anticipating the directions and magnitude of development of each sector of the
economy,
Evolving norms for employing manpower in each sector keeping in view the
technological options - present as well as future,
Translating the physical targets for the development of each sector into
manpower requirements,
Estimating the educational equivalents of the manpower requirements, and
Analysing the implications of estimates of educated manpower requirements for
I
educational development.
Given the endowment of capital and other material resources, human resources could
accelerate the production process and hence economic growth. At the same time,
utiprecedented growth in human resources, disproportionate to the pattern of
accumulation of capital and other material resources - could hinder development.
Rate of growth in human resources, in turn, is determined by the two dimensions of
human resources: Quantity and Quality. Quantity of human resources is determined by
variables such as:
, population policy,
population structure,
migration, and
labour force participation.
Block- 1 Human Quality of human resources, on the other hand, is influenced by the status of variables
Resource Development like:
education and training
health and nutrition, and
equality of opportunity.
In the case of international or domestic tourism it is not just the labour force that
participates in the production of goods and services but the entire host population of the
destination has a role to play. This is because besides the economic activity, attitudes of'
the host population matter a lot in creating an environment which is tourist and tourism
friendly. There are destinations where the population plays host to tourists numbering
four times more than its own numbers and each and every member of the population has -.
some role in this regard - a friendly smile too has a role. Many countries and
destinations have earned a brand image in hospitality. Hence, human resource planners
lay stress on creating tourism awareness including do's and don'ts vis-a-vis tourists for .
the entire host population. Moreover, there are destinations where, quantitatively
speaking, the whole population is involved in tourism both, directly as well as through
indirect employment. But beyond a point, it is the qualitative dimension that matters
and converting quantity into quality is the real challenge in HRD for the tourism and
hospitality industry.

1.6 QUALITATIVE DIMENSIONS OF HUMAN RESOURCES -

PLANNING
While the quantitative dimensions assist in the analysis of human resources in terms of
numbers, qualitative dimensions facilitate assessment and analysis of the productive
power in human resources. For example, four hundred drivers may be available to a
tourist transport operator but he may find only 20 out of these which meet the quality
. standards in relation to driving skills required for handling tourist coaches.
i) Education and Training
Education and training are the most dominant dimensions affecting quality of human
resources in terms of knowledge and skills. Education and training serve both individual
and social ends. To an individual, it has both vocational and cultural significance in
achieving economic emancipation and social upgradation. To the society, education and
training are means which make possible to take advantage of technological changes as
well as furthering technological progress.
Depending on the methods of imparting knowledge and skills, education and training
may be classified into two types: Formal and Informal. Formal education and training,
which is imparted through schools and colleges, emphasises transfer of knowledge.
Informal education and training such as on-the-job training and hereditary training lays
stress on transfer of skills, i.e., practical application of knowledge.
ii) Health and Nutrition
Health and nutrition status constitutes one of the most important indicators of quality of
human resource, as they contribute significantly to building and maintaining a productive
human resource as well as improving average expectation of life and quality of life.
There are three determinants of health status:
Purchasing power of people.
Public sanitation, climate and availability of medical facilities.
People's knowledge and understanding of health hygiene and nutrition.
Education, health and nutrition are inter-linked and they complement each other in the Human Resource Planning
process of human resources development.
Tourism has long been recognised as a tool for economic growth and development.
However, it can be beneficial to the host economies when it creates jobs for the locals.
Here qualitative dimensions of HRD become an important factor for education and
training of local population as per the requirements of responsible tourism development.

1.7 MICRO AND MACRO LEVEL SCENARIO OF HUMAN

RESOURCE PLANNING IN HOSPITALITY INDUSTRY
Micro level generally refers to the planning done on a smaller, i.e., micro scale as in the
case of an organisation. Macro level planning refers to the planning done keeping in
view a wider and larger scale as in the case of the planning done for a country.
Micro level planning revolves around the manpower needs and requirements of an
organisation. First the need and requirement is assessed and then the process of
procuring the human resources is set in motion. An ideal procedure will be to try to
assess the manpower need at each level of work, recruiting the manpower needed
according to the skills required and also providing training where updating of skills is
wanted. Planning should take in consideration the supervision and other matters
regarding staff discipline, monitoring and co-ordination. Human resource planning must
be followed by human resource development to achieve the pre-requisite set up by the
planning. For example, citing the case of tourism in the hospitality sector, E. Brogan in
his paper on Human Resource Development in Tourism: The Scottish Perspective
(1992) has made an observation which is relevant for all countries:
"There is a need to establish within individual tourism businesses a "training
culture" whereby an ongoing commitment to the development of the human
resources of the business is seen as a n essential and integral part of the business
as a whole. If such a commitment on the part of individual businesses to human
resource development and training is to be achieved, it is essential that these
objectives are seen as bringing benefits to the businesses in terms of enhanced
profitability. The operators of tourism businesses need to have a clear idea of
who their customers are, and of the overall developmental needs of the
businesses so that the skills of the managers and staff can be seen in their
proper place as central to the successful operation of the business. This is
essential if the training which is done by the businesses is to be' relevant and
properly targeted a t improving business performance."
Macro level planning is usually done on a large scale keeping in view the need of a
wider sector. An example is given to understand the Macro level planning better.
The example is based on Indian Governments plans to handle an increased inflow of
tourists, as plans were afloat to increase tourist arrivals by 1.5 percentage. The plan
broadly centred around two major points:

1) Human Resource available at time of the planning period; and

2) Human Resource requirements in future.

The first aspect was based on the people - both skilled and unskilled - working in the
tourism and its allied industry. An estimate was approximately decided upon to find a
number understandable.
The second aspect dealt with quest of the planning commission to increase the tourist
traffic by 1.5 percentage in seven years. This lead to an approximate projection of human
resource, i.e., manpower needed to handle the extra tourist traffic expected. This was
necessarily decided upon comparing present tourist traffic and personnel involved in
Block-1 Human handling them and the future needs. The projection of manpower requirements in all
Resource Development capacities were assessed and plans were put forward to develop the required manpower
for managerial and entrepreneurial, engineering, technical, kitchen and restaurant,
drivers, pilots, entertainers, guides and other job allied to tourism.
The planning dealt nQt only with projecting the needs and plans to develop human
resources but also put \forward the proposals of opening institutes and caurses to train
and develop the requi d manpower. An important aspect was that the planning and
T
implementation of plans for human resource development must be left with the
professionals.
In tourism and hospitality as its allied industry, human resource planning is the first step
towards the human resource development. As it is a service industry it becomes more ,

important to assess and plan for human resources as services can't be provided without
human resources. Providing excellent services is possible with proper lplanning and
anticipation of future needs.
 b
1.8 LET US SUM UP Human Resource Planning

Human Resource Planning as a process of human resources development involves

investment decisions by hospitality industry on three complimentary aspects, i.e.,
education, health, and social and economic equity. Of these, education has undoubtedly
been the dominant aspect. Human resources planning has therefore, been treated by our
planners as synonymous with educational planning.
Educational planning involves both private and public investments. Yet, in almost all the
countries public investment decisions have dominated educational planning exercises.
This is largely because of labour market imperfections and failure of the market
mechanisms to facilitate optimal investment decisions in education.
On the theoretical plane, there are three different approaches to human resources
planning: Social demand approach, rate of return approach and manpower requirements
approach. In practice, however, political process of planning - often at variance with the
rationale based on a well thought out dicta of planning - has been dominating. This has
resulted in the distortion of physical priorities within education sector in many cases.
In view of the predominance of qualitative aspects, there is a growing reahsation. that -
educational planning at micro level will be more meaningful than at the macro level
because preferences of visitors and guests have been changing frequently due to
&
increased global exposure. For example, we design a culinary curriculum for continental
menu and we do not train our manpower according to changing needs of guests then we
cannot survive in the indust* for long. Thus, we need to adopt human resource planning
at micro level and not at macro level.
The dimensions, attributes and distribution of population the product of whose labour
adds to national wealth constitute human resources. They are thus, the participants and
beneficiaries of economic development. The demographic profile, migration and
mobility and participation patterns in economic activity determine the quantitative
aspects of actual and potentiit1 human resources. Investments in education and training,
health and nutrition, and social welfare and quality promote quality of human resources
through enhanced labour productivity.
While quantitative and qualitative dimensions only regulate supply of human resources,
the other aspect of human resources planning namely the demand for human resources
crucially depends on the functioning and flexibility of labour markets. Labour market
analysis is a principal instrument of human resources planning, as it helps identify skill
shortages and also enables a diagnosis of market failure to match labour supply with
demand. To facilitate labour market analysis, there is a need for a comprehensive and
regularly updated labour market information system.

1.9 CLUES TO ANSWERS

1 Check Your Progress I

1) Refer Sec. 1.2.
2) Read Sec. 1.4.
3) Base your answer on Sec. 1.5.
4) Base your answer on Sec. 1.5.
Y
5) Read Secs. 1.5 and 1.6. I
- 6) Refer Sec. 1.7.
UNIT 2 DEMAND AND SUPPLY FORECASTING:
METHODS AND TECHNIQUES
Structure
Objectives
Introduction
Manpower Forecasts; Issues and Objectives
L2.1 Conceptual Issues
2.2.2 Objectives of Manpower Forecasts
Types of Manpower Forecasts; Micro and Macro Forecasting
Macro Forecasting
Micro Forecasting
Manpower Forecasting Techniques
Manpower Supply Forecasting
Supply Forecasting Techniques
Database for Manpower Forecasting
Let Us Sum Up
Clues to Answers

2.0 OBJECTIVES
After reading this Unit, you should be able to understand the:

need for forecasting manpower demand and supply in hospitality industry,

types of forecasts for manpower demand and supply,

methodologies of manpower demand and supply forecasting at the maoro and micro
levels, and

database required for manpower demand and supply forecasting at the macro and
micro levels.

2.1 INTRODUCTION
In spite of the universally accepted idea that a tourist not just buys the tourism product
but also in a way buys the service skills and qualities of a wide range of humans working
in hotels and other allied fields and in return who would contribute to the total holiday
experience of tourists, 111 many countries, we see that the growth and development of
tourism is adversely affected either due to lack of trained human resources or poor
quality in service arid so on. The reasons for this is rightly assessed by Tom Baum
(1993) who has pointed out that there is a "tendency to develop human resource
policies, initiatives and remedial programmes that are reactive to what is currently
happening rather than proactive to what is likely to occur." He further stresses that,
"as a general axiom, effective human resource strategies require considerable lead
time in order to support tourism development and, ideally, should be in place well
before the bulldozers and diggers move in".

This brings to fore the issue of manpower forecasting of both demand as well as supply.
In this Unit we will discuss the various issues related to demand and supply forecasting
at a conceptual level which you will find useful for application in the hospitality sector.
 Demand and Supply
2.2 MANPOWER FORECASTS: NEEDS AND OBJECTIVES Forecasting: Methods
- - --
ana I ecnnlques
In the context of manpower forecasting there are some conceptual issues which need
elaboration. The primary issue relates to manpower demand. The other issues concern
the manpower forecasts, need for manpower forecasts and types of forecasts.

2.2.1 Conceptual Issues

In manpower literature, one finds it's difficult to differentiate between the words
'demand', 'need', 'requirements', 'projections', 'estimates' and 'forecasts'. Some
use these terms as synonymous while others use them in distinct senses.
'Demand', from the economists' angle, is a schedule of relationships between quantities
of that particular category of manpower demanded and a series of possible wage rates,
i.e., manpower demanded varies with the wage rates - more at a lower wage rate than at
a higher one.
'Need' refers to the number of people required to provide an ideal level of service. What
is ideal is never achieved, because of structural, technological and other constraints.
'Requirements' are the functional composition of employment that will be necessary to
produce goods and services within a specified timeframe to achieve social, cultural;
economic and technological targets.
'Projections'lpredict the outcome of spontaneous forces, i.e., the outcome which is
expected in the normal course of events and in the absence of external stimulus. They are
mathematical extensions of 'data on. manpower into the future whereas 'estimates' are
educated guesses based on experience.
'Forecasts', on the other hand, refer to a prediction of the outcome when normal course
of events are influenced and altered by external forces. Forecasts usually take into
account both the projections and the estimates. For example, forecasts at the macro level
could result in a statement of what would happen if economic growth was deliberately ,
manipulated by government policy.

I 2.2.2 Objectives of.Manpower Forecasts

The basic rationale for making manpower forecasts is the long gestation lags in.the
production of skilled professional people. Manpower forecasts made well in advance,
facilitate planning of educationltraining is the effort to ensure that manpower required
are available at the time when they are needed. As we see the trend today, most of the
hotels have their training schools imparting training to personnel at work at different
levels.
The second major reason is the observed imperfections in the labour market. Markets for
manpower with long lead-time for production are characterised by cobweb cycles,
because of long lags in the supply side and short lags, on the demand side. In the event
suppljl is not planned to meet the requirement, cobweb cycles in the labour market may
ultimately lead to distortions in occupation-education correspondence, the fallout of
which could either result in huge educated unemployment or with people taking up
occupations for which they are not adequately prepared 'or both. Manpower forecasts, it
is expected, would facilitate correction of labour market distortions.
The third major reason is that in the short-run at least, elasticises of substitution among
various skills have b'een observed to be either zero or near zero. Production of goods and
services, therefore, requires various categories of skilled manpower in fixed proportion.
Shortage of any skilled category of manpower, in such a situation would adversely affect
the production of goods and services within the economy. Manpower forecasts would
C help avoid such a situation by facilitating anticipation of skill shortages and planning
ski11 supplies accordingly.
L
Block I Human The need for manpower forecasts in hospitality is essentially linked with the overall
Resource Development development and growth of this industry at both macro as well as micro levels. A variety
of issues are to be addressed in this regard keeping in view the characteristics of the
industry that need to be tackled in a coherent way. Both, the public and the private sector
have to act in a coordinated manner or else face a decline.

2.3 TYPES OF MANPOWER FORECASTS: MACRO AND

MICRO FORECASTING
Having understood the objectives of manpower forecasts one needs to know that
manpower forecasts could be categoriqed differently, depending on the purpose for
which forecasts are made. Some of the major types of forecasts are briefly described
here.
. 1 j Short-Term Forecasts
, Short-term forecasts are very useful at the micro-level or we can also say, company level,
e.g., a chain hotel makes financial statement for its expenditures keeping in view both
the on going projects and the projects in the pipeline. The financial provisions have to be
made for both the expected and unexpected expenditures. Short-term forecasts are
usually made for a period not exceeding two years aiming to facilitate estimation of
financial provision for wages/salaries in the programmes/projects initiated.
2) Medium-Term Forecasts
For most countries medium term is about two to five years - the horizon for planning.
Medium term forecasts are usehl in those offices which are concerned with advising
ministers or preparing contingency plans to meet the 'twists and turns of economic
circumstances or international events'.
3) Long-Term Forecasts
Forecasts for a period more than five years are considered as long-term forecasts. These
forecasts are useful in educational planning, particularly relating to the highly skilled
professional categories of manpower. They are also usehl in the preparation of
corporate plans incorporating productivity changes, technological changes and major
organisational developments. For example, The Macro Level Planning in Indian
hospitality sector discussed in Unit 1 gives you an idea abo& long-term forecasts.
4) Policy Conditional Forecasts
Policy conditional manpower forecasts are those which are determined by the policy
towards the factors which influence the demand for manpower. Such manpower
forecasts may be based on a rule of thumb, or on professional judgement, or on an
explicitly specified model or any combination of the three.
5) Optimising Forecasts
Optimising manpower forecasts are those which are obtained as solutions to an
optimising model in which numbers demanded of various categories of manpower are so
determined that either the end benefits are maximised, or cost of resources used in
achieving a pre-determined end objective is minimised.
6) Macro and Micro Forecasts
You have read about micro and macro level planning in Unit 1. Here we are talking
about micro and macro forecasts. For two reasons it is important to make a distinction
between them. First, the end purposes of the two types of forecasts are different. Second,
the methodologies employed and database used are different. It is, however, possible that
micro forecasts, if properly planned, might ultimately lead to macro forecasts but not
vice-versa.
 Demand and Supply
Macro forecasts are done usually at the national, industrylsector and regionlstate levels Forecasting: Methods
whereas Micro forecasts are made at the enterprise or department level. Macro and Techniaues
manpower forecasts are used for planning, education and training facilities as well as to
make decisions regarding choice and location of industries for development whereas
Micro manpower forecasts are needed primarily for planning recruitment, promotion,
training and counselling in accordance with the plan for the development of enterprise or
department concerned. Forecasts at this level are, therefore, required to be in greater
defails as well as precise. The micro forecasts are usually expressed in terms of numbers
required for each occupation, source and stage of recruitment, and scheduling of
training.

2.4 MACRO FORECASTING

Manpower demand forecasting techniques can be broadly summarised into five
categories:
Employers Opinion Method
Normative Method
Component Method
International Comparisons Method
Mediterranean Regional Project (MRP) Method

1) Employers Opinion Method

Under this method employers are asked to give their assessment of future manpower
needs in different categories in their respective establishments. Aggregating over all
employers and making allowance for death, retirement, migration and occupational
mobility, it is then possible to arrive at future manpower demand by skill category. This
method has been useful in the case of forecasting highly skilled professional category of
manpower as well as in making short-term manpower forecasts.
However, while making short-term manpower forecasts one may observe some
constraints. For instance, the technique assumes that employers are capable of making
such forecasts. It might be true in the case of large corporate sector establishments with
well-staffed personnel divisions. Likewise, the use. of technique implies that manpower
demand forecasts made by employers are linked to the production levels of their
respective establishments. In an opinion survey, this is rarely done. Finally, even if tbe
manpower forecasts are linked to production levels, employer's expectations of
production levels are never realised with the same degree of accuracy in an oligopolistic
situation, because of stiff competition and market imperfections. In other words, where
the market for goods and services are characterised by stiff competition, employer's
forecasts of manpower cannot be aggregated.

2) Normative Method
Normative method uses norms for employing manpower to produce goods and services.
The norms are usually expressed as ratios between manpower employed and the volume
(or value) of goods and services produced. These ratios are based on either the existing
situation or the desirable situation, e.g., hotel staff-guest ratio, tourist guide-tourist ratio
and so on.
As an illustration of the method, using employment-output norm, as a first step, the norm
is evolved for a base year. Next, output projection is obtained for the target year. Then,
the base year employment-output norm is applied to the target year's estimated output to
obtain employment forecasts in the target year.
 -

Block 1 Human This approach, however, has two basic limitations: One is that the method assumes that
Resource Development the norms are stable over a period of time. This can be overcome, if it is also possible to
predict changes in the norms as between the base year and target year. The other
limitation is that it uses a uniform norm for all components of a production process or for
all regions within country. This limitation can again be overcome by using different
norms for different components or regions; which is the component method.

3) Component Method
In the component method requirements of any category of manpower are further sub-
divided into various components and then a separate norm appropriate to each
component is used in arriving at a forecast of manpower requirements for each
component. Forecasts for all the components are then aggregated to arrive at an estimate
of future manpower requirements for the manpower category concerned.
For instance, in the case of hospitality, instead of using an overall norm such as the hotel
staff-guest ratio, the requirements of trained/skilled chefs are sub-divided into four
components:
Chefs required in 5-star deluxe and 5-star hotels,
Chefs required in Cstar category hotels,
I
Chefs required in 3,2 and 1-star hotels, and
Chefs required in supplementary accommodation units.

4) MRP Method

The MRP Method is very comprehensive as it is designed to forecast manpower

1
requirements by educational categories so that the forecasts are rendered directly
relevant to educational planning exercises. Primarily, there are five steps involved in
forecasting manpower requirements by education. The first step is to arrive at the largest
year projections of GDP - exogenously determined by an economic plan in the case of
planned economies.
The second step involves the estimation of sectoral contributions to GDP in the target
year by major sectors such as agriculture, manufacturing, transport and communication,
trade and commerce, and services.
At the third step, sector specific average employment-output ratios are applied to
sectoral composition of GDP in the target year to arrive at estimates of employment in
the target year by sector. .
Sectoral forecasts of employment thus obtained for the target year are then distributed
among a number of mutually exclusive occupational categories using either the base year
or any desirable sector-occupation distributions.
I
i

At the final step, occupational structure of manpower forecasts relating to the target year
are translated into educational structure by applying a standard measure of the level of
formal educationltraining required to successfully perform the tasks specified uader each
occupational title. This procedure gives the net manpower needs - net of replacement
needs. ~llowancesare then made for death, retirement,:migration and occupational
mobility to estimate the replacement needs by the target year. Net manpower needs and
the replacement manpower needs by education will together then yield the total
manpower needs by education. The forecasts thus obtained are conditional on the
achievement of GDP in the target year.
20
I
F
2.5 MICRO FORECASTING
As you know that micro forecasting is done at the enterprises or company level. Hence,
Demand and Supply
Forecasting: Methods
and Techniques

i it involves estimation of manpower needs for a specified or anticipated workload

structure. There are essentially three steps involved in the process:
Evolving manning n,orms based on an analysis of workload structure,
Forecasting Workloads,
Relating Workloads to manning norms. .

. 1) Evolving Manning Norms

It starts with taking a comprehensive view of the work of an organisation which is first
- divided into functions. The functions are then sub-divided into tasks and work groups
associated with each task are then identified. In respect of each workgroup, number of
positions, their job descriptions and required performance level for each position are
analysed. Based on this analysis as well as existing workload patterns, a set of desirable
manning norms for the organisation as a whole are worked out. However, in certain
cases as it may be true for hospitality industry.

2) Forecasting Workloads
In cases where 'work' consists of a single type of activity, then the total output is a
measure of the amount of work and where 'work' consists of a variety of tasks - the
relative magnitudes of which vary with time, then one way is to predict workload of each
task separately and aggregate the workloads of all tasks to arrive at a forecast of total
workload. In these cases these tasks may be interrelated but where the tasks are all not
correlated, one can use either of the two statistical techniques: Principal Component
Analysis and Factor Analysis.
Principal Component Analysis is a descriptive technique which finds linear
transformation of numerous tasks into a smaller number of indices (Principal
Components) such that:
the indices are all uncorrelated among themselves, and
all the indices together summarise the information contained among the numerous
tasks.
Principal Components are then projected to arrive at forecasts of workloads.
Factor Analysis, the aim of which is similar to that of Principal Component Analysis,
uses a sophisticated statistical model. Here, sQme small number of factors are identified
which have the potential to explain the behaviour of the numerous tasks. Then predicting
the behaviour of individual factors, it is possible to arrive at forecasts of workload under
each tasks and hence the forecast of total workload.

. 3) Relating Workload to Manning Norms

If workload 'W' can be forecast by the methods discussed in the previous section, and
productivity of workers 'P' - given as the ratio of workload to workers - can be
estimated based on historical data andfor appriori information on factors affecting
productivity, then manpower forecasts in terms of numbers required in future can be
obtained as
 Block 1 Human 2.6 MANPOWER FORECASTING TECHNIQUES
Resource Development
I
The process of estimating manpower demand for hospitality industry consists of four
steps:
an approach,
a basic factor,
a method, and
a technique.

i) Approach
There are eight possible approaches:
1) Subjective 2) Objective
3) Global 4) Component
5) Techno-economic 6) Non-economic
7) Deterministic 8) Probabilistic
The order i n which they are mentioned suggests.the formation of four groups, each of .
which comprises two mutually exclusive approaches, e.g., (i) Subjective or Objective,
(ii) Global or Component, etc. The groups, between themselves, are not quite mutually
exclusive.
A subjective approach to manpower demand estimation uses intuition, impression or
judgement. Opposed to this, the objective approach tries to justify the estimate of.
demand on the basis of certain factors or logical explanations.
A global approach would try to estimate manpower demand as an overall figure, directly
for the entire problem under consideration, whereas a component approach would first
estimate the demand for segments of the problem and then aggregate it. The techno-
economic approach combines the technological, economic and organisational
considerations mentioned earlier, whereas the non-economic approach utilises only
socio-political and other considerations.
ii) Basic Factor
,171.

A basic factor means a variable to which manpower demand can be related. The choice
depends upon the number of considerations which together constitute the multi-
dimensional framework of the particular problem facing us.
iii) Methods
According to Gareth Steiner, methods are useful in forecasting what will occur and
what should occur?
1
According to Steiner, what is more significant than the time element is the way in which
the change takes place. Thus, he has focussed on the need for different kinds of
i

I
feedback.
iv) Techniques
In this context, therefore, one can outline a few specifio techniques of manpower demand
forecasting. I
1
a) Subjective
The forecast here is made on the basis of estimates by experienced people whose
experience has taught them what types of changes are important and the rates of change 1

involved. Implicitly, however, subjective techniques involve subjective estimation of 1

workldd and manpower utilisation and their rate of change. The obvious advantage with I
 Demand and Supply
this technique is that no data collection is required and intangible factors like social Foreruling: MeUlods
opinion, fashion, etc, can be built in. However, forecasts based entirely on subjective and Techniques
assessment are unlikely to give very good results. But if mixed with objective techniques
these subjective estimates can prove to be useful.

b) Time Series Analysis

The time series extrapolation is a good method where it is sometimes not possible to take
an overall view of a group of staff, to base a forecast on estimates for workload and
manpower utiIisation.
There are four elements of the time series method:
Trend (TI)
Cyclical effect (C,)
- Seasonal effect (S,)
Random effect (R,)
These being multiplicative, we can get

VI = TI x Cl x Sl x RI
Projections or extrapolations can be done on the basis of moving averages or exponential
smoothing.

Accuracy of Techniq ues

No method of forecasting can be entirely without error. Some changes are unique (such
as new legislation or a decision to close down an establishment) and hence are more or
less unpredictable as to timing. Such errors are due to these unique changes which are
unavoidable. In hospitality industry also, it is not always possible to forecast human
resource demands accurately. The demand varies with the tourist traffic flow. The tourist
traffic flow increases or decreases depending upon both predictable and unpredictable
situations. For example, it is expected that tourists will arrive during a special sports
event such as Olympics or Commonwealth games but sudden riots or natural calamities
bring down tourist flow and it can't be taken into account when one is forecasting human
resource demand.
Taking the above facfors into consideration, a corporate approach to manpower planning
is to be developed. In doing so certain key considerations such as the followink emerge:

a) What positions and individuals are to be included in the planning effort? A simple
rule of thumb is to include all positions which are critical to corporate performance
and profits and/or pose recruitment problems.

b) What is the appropriate manpower-planning horizon? Experience shows that it can

extend upto 4 or 5 years. Beyond 5 years, technical manpower forecasts have
doubtful value due to pervasive imponderables and unpredictables in the
environment. Within the planning period, there should be a formal method of review
and assessment at least once every year.

c) With what business factors will manpower need be related? For a tour operating
company, it could be tour packages, for tourist transporter, it could be the number of
. cars and coaches. For a retailer, it could be the rupee value of sales. To be useful, the
predictor should meet at least two requirements:

i) it should be directly related to the essential nature of the business;

ii) changes in the selected factor be proportional to changes in the manpower

required. 23
B I O C ~I
Human 2.7 MANPOWER SUPPLY FORECASTING I1
Resource Development
In the previous section, we have discussed about demand forecasting for manpower.
Besides, one must also know the important issues related to the other side of the coin,
i.e., supply forecasting while referring to supply forecasting in hospitality we often treat
the terms like manpower and labour force as synonyms. But one can find a subtle
distinction, i.e., while labour force includes all the persons in the population who are
economically active, manpower is only the stilled component of labour force.
Manpower supply is, therefore, the totality of manpower employed and manpower
unemployed but seeking jobs. We need to understand it at both macro and micro level.
At the macro level there are two methods of estimation of manpower supply: one is
known as the 'direct method' and the other is termed as the indirect method.

1) Direct Method
-
Direct method relies on a census count of persons belonging to the category of
manpower for which supply is being estimated. Census count can be usually obtained
from the Population Census. The primary limitation of the direct method is that the
census counts are inftequent. For example, ih the Indian context Population Censuses are
decimal. For inter censual years there is no information. Also, because census are .
infrequent, they cannot be used in any meaningful trend forecasting exercise. This apart,
censuses are known to be subject to enumeration biases, such as, under count,
misreporting and classification biases. In view of these limitations, researchers in the
field of manpower have been resorting to indirect method.

2) Indirect Method
Under the indirect method institutional estimation of manpower involves the following
steps:
Estimating active life span,
Determining base period,
Forecasting annual institutional out-turn,
Obtaining cumulated out-turn adjusted for attrition, and
Estimating manpower supply.

a) Estimating active life span

Active life span is defined as the span of life over which an individual is active in any
given profession or occupation. Two parameters are used for estimating average active
life span of any occupation estimates of two parameters, namely:
6 average age at entry into the occupation, and
average age at retirement from the occupation.
Average age at entry into an occupation depends on the time taken by an average
individual to complete the relevant education programme/skill training. For example, if
one completes the higher secondary education at 17 years, average duration of
engineering collegiate education is 4 years and average duration of tourism education is
5 years, then, active age at entry into engineering occupation will be 21 years. Likewise,
average age at entry into profession will be 22 years. Assuming an average age 0665 at
retirement for engineers and hotel professionals, active life span of engineers will be
from 21 years of age to 65 years of age. Similarly, for hotel professionals it will be from
22 years of age to 65 years of age.
b) Determining base period Semanckand Supply
Forecasting: Methods
Manpower stock as of a target date comprises of manpower of all vintages starting from and Techniques
the persons who have just entered to those who are on the verge of retirement. Hence,
base period can be determined by subtracting the number of years in the active life span
from the target year. For example, assuming an active life span of 34 years for engineers
(from 21 to 65 years of age) and the target data as 2000 A.D., the base year will be 1966
(i.e., 2000-34).

c) Forecasting annual institutional out-turn

To start with, past trends in enrolments are extraported to cover the target date, using
suitable trend forecasting methods. The forecasts of enrolments thus obtained are then
converted into forecasts of out-turn, with the help of observed trends in annual rates of
completion of the educational level concerned.

d) Estimating attrition rate

Attrition in the manpower supply, relevant to any category of education, may be caused
by the following four factors:

Death

Retirement

Migration
Occupational mobility
The joint effect of these four factors is termed as the attrition rate. Among these four
factors, impact of occupational mobility is very difficult to estimate. In view of this,
attrition rate is usually taken to mean, i.e. the joint effect of death, retirement and
migration only.

e) Obtaining cumulated out-turn adjusted for attrition

Given the base year manpower supply (SO), manpower supply in the first Year after the
base year (S I) is determined as
(1- a) .
S1 =SO-+Yl
100

Where
I

a = attrition rate and

Y 1 = institutional out-turn in the first year after the base year.
Manpower supply in the second year ( S 2 ) after the base yest will be

S 2 = S 1 (1 -a)
-+Y2
100

where Y2 is the institutional out-turn in the second year after base year. using this
commutation process, manpower supply in the target year (which is say 't' years after
the base year) will be

St=St-1-- (1 - a ) + Yt
100

Where St - 1 is the manpower supply in the year prior to the target year.
25
Block 1 Human
Resource Development
Cumulated out-turn adjusted for attrition, obtained in the manner outlined above,
indicates the total number of persons in the population with the requisite
education/training. Manpower supply, on the other hand, is the labour-force component
of the cumulated and adjusted out-turn. Further, adjustments to cumulated and adjusted
out-turn is therefore, warranted to account for withdrawals from the labour. force in
respect of persons with the requisite educationltraining as outlined below:

Manpower Supply in the = Cumulated out-turn X

Labour force
target year adjusted for attrition participation rate

Micro level manpower supply, in hospitality industry comprises of external and internal
supplies.

External Supply Forecasting

External supply arises primarily through recruitment which is necessarily meant to
augment internal supply. Another minor source of external supply is through seconding
(or deputing) personnel from other organisations which takes place largely among
government departments. Hence, given the recruitment policy it is easy to predict the
external supply.

Internal Supply Forecasting

Internal supply within an organisation is governed by two factors:

Wastage - the out-movement from the organisation caused by voluntary resignation,

death or retirement.

Internal movement resulting from transfers and promotion.

Manpower flows generated by these two factors are of course inter-related. Forecasting
internal supply is, therefore, crucially dependent 6n analysis of wastage and internal
movements, with a view to obtain estimates of wastage and patterns of internal
movements.

2.8 SUPPLY FORECASTING TECHNIQUES

Analysis of Wastage
A crude method of estimating is termed as the British Institute of Management (BIM)
index which expresses wastage as a percentage of staff in position, i.e.:
Manpower 'leaning in a year I
Annual Manpower Wastage = x 100 I
Average manpower in position I
The BIM formula has many disadvantages, for example, it takes no cognisance of the
characteristics of manpower - crucial among them being the length of service and skill.
Further, it if difficult to assess the operational and financial implications of any given I
rate of wastage based on BIM formula. Also, it does not provide any mpaningful
indication for manpower planning.
I
Stability Index I

An alternative method which takes into account the length of service of the persons
leaving the organisation, termed as 'stability index', measures the complement of
wastage rate (i.e., rate of retention) as: .
 Demand and Supply
This method indicates only the percentage of manpower who stayed with the Forecasting: Methods
organisation for one year. It does not directly measure the extent af wastage. Also, it and Techniques
gives equal weightage to persons who left the organisation with less than one year's
service and with Inore than one year's service. This method is, therefore, not very useful
for manpower supply forecasting.
Modified Stability Index
Modified stability index, which is also referred to as Bowey's stability index includes
everybody employed in the organisation and gives due weightage to varying lengths of
service. In simple terms, Bowey's stability index may be expressed as:

Total length of service of manpower employed at the time of analysis

x 100
Total possible length of service had there been no manpower wastage

This method is useful in analysing the extent of wastage in terms of length of se&ice.
However, as in the case of stability index it is not very helpful in manpower supply
forecasting.
Cohort Analysis
Manpower cohort in an organisation is a group of staff who are more or less
homogenous and who joined the organisation at the same time. Graphical presentation of
leavers (those leaving the organisation at each point of time from the date of joining to
the date by which the entire cohort would have disappeared) resembles Figure I below:

Time
Figure I
In each cohort the peak of leaving occurs shortly after joining when.either the manpower
leaving realises that the job is not suitable to them or the employers find out that the
leavers are not suitable to the organisation. The peak is, however, determined by the
nature of job, work environment and career prospects within the organisation. The
objective of manpower planning is to see that the peak of leavers does not arise early in
the life of a cohort.
A slight transformation of Figure I by plotting cumulative percentage of leavers in the
cohort on the vertical axis and logarithm of time on the horizontal axis the curve in
Figure I becomes a straight line as in Figure 11.

I
Log time
Figure I1
 -
- - - -

lock 1 Human In statistical terminology, the transformation effected above is termed as the log-nornial
Resource Development transformation.

Using this curve, then forecasts of percentage of total leavers of a particular cohort at
any future date can be made through extrapolation. Cohort analysis is thus very useful in
analysing and forecasting wastage of specific groups of manpower who have similar
characteristics and also joined at a particular time of the year such as management
trainees, trainee escorts and computer professionals, etc.
There are, however, some disadvantages. First, forecasting exercise requires information
on year-wise wastage from a cohort. If there are many cohorts it may not be a very easy
task. Second, for a meaningful analysis of wastage each leaver must be related to the
concerned cohort and the cohort size must be known. In the absence of computerised
personnel information system, this may not be all that easy. Third, if the manpower is
relatively stable as is the case in government jobs or public sector organisations which
assure job security - the length of time over which a cohort must be followed can be too
unwieldy to attempt any reliable forecasts.
Census Method
Some of the problems of cohort method can be overcome by using the census method.
Under the census method a snapshot of the total situation is taken at a particular point of
time or over a short period of time and data on leavers with completed length of service
is obtained. Based on such data, it is possible to estimate - with the help of standard
statistical techniques - the proportion of manpower joining at a given point of time that
will survive to a specified length of service. For example, based on the census method it
is possible to estimate proportion of manpower joining the service (say) in 1990 that will
complete 10 years of service.

Forecasting of Internal Movements

. A very useful method of analysing and forecasting internal movements is the Markov
Chain Model. It calls for the estimation of transition probabilities relevant to each
vertical and horizontal movement. A simple version of the model, without bringing in the
complications of the probability theory involved, is illustrated here in adequate detail for
any manpower planner or a personnel manager to judge the utility of the model in the
context of micro level manpower planning.
The illustration assumes a simple organisation with a three grade structure: A, B and C.
Also, the possible length of service is divided into three groups: 0-3 years, 3-10 years
and more than 1 0 years ( 10+ years).

Grades

B b b

0-3 3-10 1 O+
Length of service (in years)
Figure I11
 Demand and Supply
Figure I11 above is graphic representation of t%eMarkov Chain Model. In this, grade C Forecaning: Methods
is the entry level position, grade B are no further lateral entry levels in the organisation. and Techniaues
Thus, recruitment to higher levels .is entirely through promotion - like in a government
I department. Further, a person entering at grade C level has several options. He or she'
I
may get promoted to grade B or even grade A within the first 3 years depending on his or

i
1
her performance. Alternatively, he or she may get promoted to higher levels in'the next 3
to 10 years or only after 10 years. In the extreme case of bad worker, however he or she
may retire as a worker in grade C only. At each grade and length of service,.the worker
has also the option to leave the organisation.
1
If systematic personnel records are available, it will be easier to estimate the percentage
of manpower in each gradellength of service group who moved along the different
9
arrows in Figure 111. As an illustration again, the percentages - regarded as transition
probabilities - who moved along different arrows can be shown as in the Table-1 below:

Table-1: Markov Chain Probability Matrix

(Percentages
C B A
0-3 3-10 10+ 0-3 3-10 lo+ 0:3 3-10 10+
C 0-3 40
3-10 10 50
1O+ 5 10 70
B 0-3 4 55
3-10 7 10 10 60
1O+ 1 6 5 10 70
A 0-3 1 70
3-10 1 1 3 10 10 75
1O+ 2 3 6 5 5 5 70
Wastage 30 20 30 20 15 30 15 20 30
Total 100 100 100 100 100 100 100 100 100
,
The most difficult task in the use of ~ a r k o f l h a i n
Model is the estimation of transition
probabilities. Once the estimates of trirmsdon probabilities are made they can be applied
to any intake of fresh batch of recruits to forecast internal supplies as well as wastage (or
leavers) by grade and length of service. It is also not essential to keep transition
probabilities constant in forecasting future supplies. They can be varied through
deliberate intervention, if there is apriori information on the likely magnitudes of
transition probabilities reflecting future recruitment, promotion aqd transfer policies.

2.9 DATA BASE FOR MANPOWER FORECASTING

Data base has a crucial role to play in demand and supply forecasting of manpower in
hospitality industry, as it determines the methodologies that can be adopted and
methodological refinements that can be effected.
Keeping this in view, data requirements for manpower demand forecasting can be
discussed at macro and micro levels separately.

1) Data Base for Forecasting Demand at Macro Level

For macro forecasting it would be ideal to have comparable data on the following items
over a period of years in the past.
Population Statistics: Data on population of the country by age, sex, education,
economic activity status, migration, marital status, region, and rural-urban
distribution are needed.
Block I Human Data on Economiq Parameters: Economic parameters on which data are required
Resource Development on time-series basis are inputs, output, capital, investment, wages, productivity,
value added and depreciation by industry; consumption, savings and expenditure on
health by income strata of population in rural and urban areas of each region.
Information on Technologies: Details about existing technologies are needed by
industry specifying the implications of each technology for employment generation
and investment. Similar information is also needed on emerging technologies by
industry.
2) Database for Forecasting Demand at Micro Level
At this level, one may realise the importance of Manpower Information System (MIS)
with following modules:
Personal Data Module: Identification particulars, educational particulars,
educational qualifications, privileges, if any, such as, military training, handicapped,
scheduled castes/schedulestribes, etc.
Recruitment Module: Date of recruitment, grading in aptitude tests, grading in
leadership tests, overall grading, job preferences and choices, if any.
Job Experience Module: Placement history, grade promotions, tasks performed
gradewise, significant contributions, etc.
Performance Appraisal Module: Performance appraisal at each job held, job -
experience evaluated with the background of job description, communication rating,
rating of inter-personal relationships, rating of behaviours in a group, commitment of
corporate goals, etc.
Training and Development Module: Nature of training received at each level,
individual's evaluation of effectiveness of training, individual assessment of training
needs vis-bvis jobs currently being performed, etc.
Training and Development Module: Nature of training received at each level,
individual's evaluation of effectiveness of training, individual asseisment of training
needs vis-a-vis jobs currently being performed, etc.
Miscellaneous Module: Record of compensation and benefits received, health
status, information relating to personal problems which calls for the attention by the
authorities, security needs, etc.
MIS is developed on the basis of personnel history records of each individual employee
within the enterprise or company and is updated every year.
Data base requirements for supply forecasting can also be discussed at the macro and
micro level. '
For Macro Supply Forecasting data are received on the following aspects.
i) Age at Entry and Age at Exit
Data on age at entry and age at exit are required by category of manpower. In respect of
jobs in the civil services, defence services and most of the other salaried jobs age at entry
and exit are predetermined. In case of professional and manpower that do nbt pass
through any formal education, where it is difficult to obtain required information,
average observed age at entry and exit may be treated as prescribed.
ii) Annual Enrolment and Out-turn
Data on annual enrolment and out-turn relating to all courses in the formal and informal
educationltraining system are usually published. Where there are gaps, surveys may be
30 conducted to obtain complete data through records.
 I
- - -

. Demand and Supply

iii) Attrition Rates Forecasting: Methods
and Techniques
Attrition rates are not readily available for most of the categories of manpower. They
need to be compiled on the basis of pattern of retirement, migration and mortality.
iv) Retirement
In the case of government job the prescribed age at retirement is 58 years. Other salaried
jobs may permit continuing in employment upto 60 years of age. Only*in the case of
professional categories of manpower there is a possibility of remaining professionally
active even beyond 60 years of age. In all cases, however, age at exit from the relevant
occupation may be treated as retirement age.
v) Migration and Morality
There is no published source of information on migration by education. Specific studies
are needed covering Indian migrants settled in other countries to ascertain the magnitude
and other characteristics of migrants by education.
Decennial Population Censuses and the mortality information compiled by the actuarial
scientists in insurance companies are good sources of information for analysing mortality
patterns and for estimating the mortality components of attrition rate.
For Micro Supply Forecasting one can depend upon internal supply of data for
forecasting, as external supply is determined by factors extraneous to the company or
enterprise concerned. Internal supply forecasting calls for a detailed Manpower
Information System (MIS) at the level of company or enterprise. MIS is developed on
the basis of personal history records of each individual employee and is updated every
year. MIS may comprise of the following modules:
Personal Data Module: Identification particulars, educational particulars,
educational qualifications, privileges, if any, such as, military training, handicapped,
scheduled castes/schedulestribes, etc.
Recruitment Module: Date of recruitment, grading in aptitude tests, grading in
leadership tests, overall grading, job preferences and choices, if any.
Job Experience Module: Placement history, grade promotions, tasks performed
grade wise, significant contribution, etc.
Performance Appraisal Module: Performance appraisal at each job held, job
experience evaluated with the background of job description, communication rating
of inter-personal relationships, rating of behaviours; in a group, commitment
corporate goals, etc.
Training and Development Module: Nature of training received at each level,
individual's evaluation of effectiveness of training, currently being performed, etc. '
Miscellaneous Module: Record of compensation and benefits received, health
status, information relating to personal problem which, calls for the attention by the
authorities, security needs, etc.

1 Check Your Progress 1

1) Explain how "demand", 'heed" and "requirement" differ from each other.

2) Explain the database for Micro Forecasting.

 - --- - - --

Block 1 Human 3) What are different types of Manpower Forkcasts?

Resource Development

4) What are the dimensions of manpower supply?

.......................................................................................................
5 ) How would you determine Base Period?

6) Describe the Internal Supply Forecasting for Micro Forecasting?

2.10 LETUSSUMUP
On the theoretical plane, manpower demand implies functional or technological
requirements of manpower that will be necessary to perform a given task whereas
manpower supply forecast deals with skilled component of labour force. Manpower
demand fdrecast works with the rationale of long gestation lags in the production of
skilled professional people as well as to counter the influence of labour market
influences which is quite related to the hospitality industry.
-
The objectives and methodologies of both manpower demand and supply forecasting
can be dealt at macro and micro level. The macro demand forecasts are required to be
comprehensive indicating and facilitating appropriate action. Thus, methodologies used
here are complex and often expensive because qf the nature of techniques used and
develop and maintain data base required. However, we see micro level demand forecast
are exercised at a hoteVgroup level wherein forecasts are .required for planning
rectuitment, promotion and training. For this every largelmiddle size hotel need to
develop a well planned Manpower Information System (MIS) to record the personal
history of each employee.
While forecasting manpower supply a hotel can take into account four distinct
dimensions, i.e., stock and flow, quality and quantity, occupation and education and
macro and micro dimension methods and techniques adopted will vary for each
dimension. For instance, at the macro level, we have discussed two methods of making
manpower forecasting, i.e., ~ire'ctmethod relying on census count of all persons and
Indirect method estimating manpower supply by cumulating economically active
component of institutional turnover for the relevant period after making adjustments for
all factors carving manpower attrition.
Whether it is manpower demand forecasting or manpower supply forecasting a sound
database is required to be readily available to generate the needed data. In the later Units
you will also learn about the new Resource Information Systems.
 Demand and Supply
2.11 CLUES TO ANSWER Forecasting: Methods

1) 'Demand' for a particular category of manpower, from the economists angle, is a

schedule of relationships between quantities of that particular category of manpower
demanded and a series of possible wage rates.
'Need' refers to the number of people required to provide an ideal level of service.
What is ideal is never achieved, because of structural, technological and other
constraints.

v 'Requirements' are then the functional composition of employment that will be

necessary to produce goods and services within the framework of social, cultural,
t economic and technological targets (or constraints) specified.
L .
Read Sec. 2.2 to answer in detail.
L
2) For micro forecasting a well-defined Manpower Information System (MIS) is needed
at the enterprise or company level. MIS may have the following module:
L
1 i) Personal Data Module ii) Recruitment Module

iii) Job Experience Module iv) Performance Appraisal Mddule

v) Training and Development Module vi) Miscellaneous Module
Read carefully Sec. 2.5 and answer in detail.

3) The different types of Manpower Forecasts are:

i) Short-term forecasts
iii) Long-term forecasts
v) Onlookers forecasts
vii) Macro and micro forecasts.
Study Sec. 2.6 to explain the above.
ii) Medium-term forecasts
iv) Policy conditional forecasts
vi) Optimising forecasts

4) In the literature on manpower planning the following four dimensions of manpower

supply are clearly discernible:
...
i) Stock and flow, ii) Quantity and quality,
iii) Occupation and education, and iv) Macro and micro.

Read Sec.2.7 to answer in detail.

k
b
5) Manpower stock as of a target data comprises of manpower of all vintages, starting
from the persons who have just entered to those who are on the verge of retirement.
Hence, base period can be determined by subtracting the number of years in the
active life span from the target year.

6) Inter Supply Forecasting methods are:

k a) Analysis of wastage b) Stability index
k C) Modified stability index d) Cohort Analysis
t e) Census method f) Analysis of internal movements
g) Markov Chain Model.
 -
-
-- -
7
1
UNIT 3 HUMAN RESOURCE INFORMATION
SYSTEMS
Structure
3.0 Objectives
3.1 Introduction '
3.2 ~nformation:kome Basic Guide1ines
. 3.3 Human Resource Information at Macro Level
3.4 Human Resource Information at Micro Level
3.5 Effective Human Resource Information System: Some Approaches
3.6 Why Computerise Personnel Records and Information Systems?
3.7 Computer Applications in Human Resource Management: An Overview
3.8 Let Us Sum Up
3.9 Clues to Answers

3.0 OBJECTIVES
After reading this Unit, you should be able to:
understand the dynamics of information system and its use as a tool for
measurement,
examine the significance of information in human resource management, -

. appreciate the approaches to the information system at the macro and micro ~kvels,
consider the shortcomings of manual information system, and
discuss merits of computerisation and its applications in effective Human Resource
Information System.

3.1 INTRODUCTION
In the previous Unit, you have already learnt that Human Resource Planning is
concerned with the controlled utilisation of human resources to achieve pre-set
objectives, both short-term and long-term. To state briefly, planning process aims to
bring supply and demand into balance at the levels most consistent with the needs
of the projected requirements and with the assessments of the economic and social
environment - preyailing and expected. We have also discussed the importance of
Manpower Information System (MIS) in forecasting demand and supply at macro and
micro level. Infact, the basis of all manpower planning is information. You will need
the know-how to gather relevant data, analyse manpower demand and supply, and how
to apply this information to improve job efficiency and manpower utilisation. Whether
you are auditing the current situation or looking forward, you will need information and
reliable data, any way, in order to make best decisions or to move into new direction.
Gone are the times when decisions about future could be based on hunches. Now you
need to collect hard data in order to mak- the future events more manageable than
before. Increasingly, human resource profesiionals and specialist managers wanting to
introduce a new manpower planning system or improve an existing one, use information
as an invaluable aid in decisiokmaking. This tool is developed by systematising the
processes of collecting, maintaining, analysing and reporting information.
HRIS Defined
From the above, a general definition of Human Resource Information System (HRI$) is
developed. Thus, Human Resource 1nhrmation.System provides a method by which
an organisation collects, maintains, analyses and reports information on people and Human Resource
jobs. The information contained in the HRIS serves a hotel operator as a guide to Information Systems
recruiters, trainers, career planners and kher human resource specialists.'It applies to
information needs at macro level as well as to the micro level.
In this Unit whereas human resource information at the macro level is considered briefly,
rest of the discussion is devoted to the human resource information at the micro level,
i.e., the enterprise level. The Unit also discusses some approaches to build an effective
HRIS and the utility of computer applications in this regard.

3.2 INFORMATION: SOME BASIC GUIDELINES

As you know that without information, it is very difficult even to initiate the planning
process. For example in order to plan an accommodation unit at a destination one would
need infonnation about the number of expected tourist arrivals, number of beds
available, number of agents selling the destination, etc. Similarly, any organisation
dealing in providing tourism services needs infonnation to plan operations and thereby
look for the manpower to manage them. Hence, in order to make information useful and
effective, the following key points need to be taken note of
1) Adequacy of information: Lack of information hinders planning and will leave
unfilled gaps.
2) Specificity of information: If the information is for decision making, then which
decisions are to be made and what information is needed, therefore, must be made
specific.
3) Over-estimating information: It is desirable to follow a conservative approach. It
is better to understate the need than to waste resource on unused mass of
information.
4) Identifying need levels: There is a need for different levels of detail of information.
5) Mechanism for additionldeletion: The how and when of information to be
addedldeleted should be considered.
6) Management support: Information systems need constant management support for
maintenance.
7) Quality of information matters: Otherwise, the famous GIGO (garbage idgarbage
out) principle will be found at work.

3.3 HUMAN RESOURCE INFORMATION AT MACRO

LEVEL
The Data base required for purposes of making manpower forecast at the macro level is
indicated in Tablel:
Table 1
Forecasting at Macro Level
Data Base for Demand forecasting Data Base for Supply forecastieg
i) Population statistics i) Age at entry and Age at exit
ii) Economic parameters ii) Annual enrolment and outrun
iii) Existing technologies iii) Attrition rates .. c
iv) Emerging technologies iv) ~etkement
v) Migration ,
vi) Mortality
vii) Labour force participation rates
lock I Human We have discussed in previous Units, the limitations and complexities in generating
Resource Development appropriate data for demand forecasting and supply forecasting of manpower at both the
macro and micro level. However, the fact is that a totally reliable data base for macro
forecasting is not always available, and quite often specific studies have to be conducted
to generate the needed data.
+-
Institutional Arrangements at the Macro Level
~ h institutional
k arrangements for providing required data at the macro level can be done
through agencies and institutions like:
-. The Planning Commission
The Ministry of Labour
The National Sample Survey Organisation
The Institute of Applied Manpower Research
The National Labour Institute
Universities
Other institutions'at the state level.
1) At the apex of the institutional machinery for plan formulation regarding
employment and manpower sectors, is the Employment Manpower Planning
Division of the Planning Commission. This Division works closely with the -
Perspective Planning Division of the Planning Commission.
2) The Labour Ministry collects the data on employment through the Directorate
General of Employment and Training.
3) Employment data is also collected through the National Sample Survey and the
Annual Survey of Industries.
4) The Institute of Applied Manpower Research conducts studies on employment
strategies and estimates at the sectoral and project levels.
5) Tlqe National Labour Institute has conducted major studies at the sectoral and project
IeSels on institutional conditions on rural employment.
6) Researchers in the Universities and other research systems also participate.
7) The sate level employment market information scheme departments collect data on
local labour markets through employment market information schemes.
In case of hospitality, the Department of Tourism, Government of India and FHRAI are
major sources of information. They publish annually tourism statistics related to tourist
arrivals (country and region wise), numbers of hotels and beds available (star category
wise) etc. along with projections of future arrivals. Other professional associations like
the WTO, IAOTO and IATA, etc. also provide information to their members related to
Human Resources requirements, etc. In recent years, FHRAI has started publishing
results of various research studies undertaken by them and is useful for different areas of
operation, e.g., HR, IT and so on.
How to improve the effectiveness for Human ~ e s o u k ePlanning and policy at the
macro level?
An essential step in improving the effectiveness of manpower planning and policy at the
macro level lies in taking decisive measures to raise the quality and reliability of labour
market information. Existing sources of statistical information suffer from serious gaps
and inadequacies, redundancies, etc. So long as these deficiencies continue, meaningful.
manpower research required for National Employment Policy would be extremely
difficult to undertake.
 Thus, the quality and effectiveness of future manpower policies at the macro level would Human Resource
depend most significantly on the accuracy and adequacy of the information inputs in the Information Systems
formulation of the plans and policies. The need is not only to build computer-based data
banks, but no less importantly, to improve the quality of current bench-mark data
sources, viz., at the institutional levels such as the apex level institutions referred to
above. This has become extremely important for the tourism sector as new forms of
tourism are emerging and the HRD projections have to be correlated to their
requirements. For example, in the field of health tourism the HRD requirements would
be quite different and similar would be the situation in case of other forms of special
interest tourism.

3.4 HUMAN RESOURCE INFORMATION AT MICRO

LEVEL
.. With regard to data needs at the micro level, we have noted in various Units the need for
a well-defined and detailed manpower information system within the organisation. For
this purpose, the data modules and the particulars of information that each such module
should carry are noted below:

Data Module What it should contain

Personal Data module
any
Recruitment module
Identification particulars
Educational particulars
Technical qualification, if any
Special skills, if any
Earlier experience in tourism
Special privileges category, such as: ex-serviceman,
handicapped, scheduled castelscheduledtribe, etc. if
Date of recruitment
grading in aptitude tests
grading in leadership tests
overall grading
job preferences and choices, if any

Job Experience module Placement history

Grade promotions
Tasks performed gradewise
I
Significant contribution, etc.

Performatice Appraisal module Performance appraisal at each job held

~ o experience
b evaluated in the light ofjob description
Communication rating of inter-personal relationships
Ratings of behaviours in a group
Commitment to corporate goals, etc.

Training and Development Nature of training received at each level

module Individual's evaluation of effectiveness of training
Current training assignment, if any
Future training requirements, if any

Miscellaneous module Record of compensation and benefits received

Health status
Personal problems calling attention, if any
I Security needs, etc.
Block 1 Human HRM as a Total System
Resource Development
According to Murdick and Ross, Human Resource Management as a total system
interacts w i a other major systems of the organisation, viz., marketing, production,
finance, an&fhe external environment. In any service industry including Hospitality, the
main responsibilities of Human Resource Department can be enumerated as forecasting
and planning human resources, maintaining an adequate workforce, and controlling the
manpower policies and programmes of the enterprise, in other words, rendering service
functions to other major systems of the organisation.
Basically, a system consists of several inputs and outputs, and a number of related
subsystems, processes and activities, all operating through the medium of information.
Figure I depicts the Murdick and Ross model on human resource information systems
- followed by a brief description of the objectives that each subsystem is designed to
accomplish.

Information Input MANPOWER SYSTEMS

-
Outputs

Company --+ 1. RECRUITMENT, 4 TO OPERATING +

Objectives SELECTION AND MANAGERS (Improve
Operating Plans HIRING personnel performance)
Job Related Info. , 2. PLACEMENT -+ TO ORGANISATION +

-
Personnel Plans PERSONNEL
Personnel Policies -+ 3. TRAINING AND (Personnel satisfaction)
Other Planning DEVELOPMENT
Premises 4
ORGANISATION +
4. PAY AND GOALS (Related to

MANAGEMENT
(Reports, records, etc.,
6. MAINTENANCE
related to manpower)

FEEDBACK ON EFFECTIVENESS OF MANPOWER SYSTEM

Figure I: Human Resource Information Systems
(Source: Murdick, Robert G. & Joel E. Rosa, Information Systems for Modem Management,
Prentice Hall of India, New Delhi, 1979, Pp.21617)

Objectives of the Subsystems

Information Subsystem Objectives/Requirements

Recruitment skills required

inventory of skills available
0 job specifications
Placement matching available personnel against requirements
enabling use of tools and techniques to identify human capabilities for
placement against properly organised work requilements.
- - - - -

Training and developing talent requirements from within the organisation meeting
development demand for new skills
developing and maintaining a continuing skill inventory
Pay and compensation maintaining traditional pay and fmancial records
compliance with government, union and other requirements
- - -- - - - - -- -
Health safety ahd health of personnel, safety of job practices in during operations, plant
security security classified information
Maintenance ensuring success of personnel policies and procedures control over
work standards measuring performance against financial plans and
programmes.
Since now we know that Human Resource Information Systems serve multiple ' Human Resource
management needs, and that its objectives are manifold it becomes clear that the human ktformation Systems
resource staff has a major role to play in the collection, storage, retrieval and analysis of
personnel data. In fact, if we carefuliy design our information system it can provide us
better control over our human resource functions, and can help in creating a positive
climate where the value of human resources of the organisation is clearly understood and
recognised at various levels of management decision making. .We shall now consider the
several approaches and design aspects in establishing an effective human resource
information system.

3.5 EFFECTIVE HUMAN RESOURCE INFORMATION -.

SYSTEM: SOME APPROACHES
To have an effective information system, whatever be the size of the organisation, one
need to answer two basic questions:
I ) What is the information need?
2) How can it be met most effectively?
As far as small organisations are concerned, there is no or a little need to undertake
elaborate manpower planning because in such organisations the information needs are
likely to be few and simple which can be p e t by a manual human resource information
system. This manual system can consist of a set of forms or manual files, consisting of a
set of records. In such a system there is a folder for each employee with the employee's
employment history, appraisals, and salary record maintained in the personnel
department. Another set of records pertaining to compensation and benefits information
may be maintained in the pay roll section. Entries on forms and additionldeletion in the
existing records are carried out manually. (The manually operated information systems
suffer from several deficiencies which we will consider later).

In case of large Organisations, a comprehensive HRI system exists for developing,

1) The existing computer based payroll system. Since most firms now use a
. computer for payroll purposes, this system itself includes many basic employee data
elements which may be expanded to include other elements necessary for human
resource planning.

2) A supplemental system. Alternatively, a separate supplemental system could be

established and interfaced with the payroll system to provide the additional data
elements required. If planned intelligently, this could be a step towards a modular
approach to building a comprehensive HRIS.

3) A wholly separate information system. This is the third alternative which suggests
the establishment of a wholly separate information system for human resource.
planning purpose only. In large and modem organisations, the trend is clearly
toward; establishment of comprehensive systems. For example, ITC has a
comprehensive information system used by management to store, change and report
personnel information. It is a centralised information source in a company that is
diverse in its organisation, products and locations.

Now before we move over to the design considerations and steps involved in
establishing a comprehensive human resource information system, let us also take note
of the significant features of computerised system. 39
Block 1 Human
Resource Development
3.6 WHY COMPUTERISE PERSONNEL RECORDS AND
INFORMATION SYSTEMS?
For a variety of purposes one can canyout a periodic and systematic analyses of the
personnel records.
provide d m essential to human resource planning,
aid the evaluation of current personnel policies and practices,
enable to produce an inventory of manpower, and
preparation of several reports and returns for submission to various governmentlnon-
government agencies, etc.
In manually .operated personnel record systems, entries on forms and insertion of
changes fiom time to time in the relevant records pertaining to a large number of
employees often fall behind so the records do not show the current position always. This
leads to a fiesh exercise toward collecting and compilation of original data elements,
evrry time the information is required. All that can be very time consuming. Hence, let
1.13 look at some of the shortcomings inberent in manual personnel records systems so
that the perspective of potential benefits of going in for a computerised personnel record
and information system becomes clearer.
a) Deficiencies and drawbacks of the manual system: These include the following:
i) Cost: Manual systems involve significant clerical and routine administrative
work load, the maintenance and updating of records being labour intensive and
costly. In addition, the documentation being relatively non-standardise, the same
have to be provided time and again; the same have to be produced separately.
ii) Accuracy: The manual transfer of data from one record to another increase the
chances of error. It is not uncommon to find the data collected form the same
source at different times or by different people giving almost a different picture.
As a result, the accuracy and reliability of the manual system is held to be very
much in doubt.
iii) Fragmentation: Manually stored information is frequently held in a fragmented
manner with different pieces of information being kept in separate files at
different places. Thus, many manual systems are unable to provide a single
comprehensive picture of an employee on one record.
iv) Duplication: As it happens, some of the information held in the personnel
records may be needed simultaneously by a number of other user departments,
such as, payroll departrnentlsalary group, training department may like to keep
duplicate records to meet their respective needs. Such practices are not only
prone to duplication but add to the costs.
v) Difficulty of analyses: The manual analyses of data is timeconsuming and
quite often not available on time for the purpose of decision making. As a result
the difficulty in extracting information promptly fiom manual systems may put
the personnel function in a backstage position where it may be overlooked or
bypassed for as a source of useful information for decision making. So much so,
the role and opportunities of the personnel function to influence manpower
planning decisions may get consequently reduced. In the ultimate, in that event,
it is likely to create scope for decisions being taken on ad hoc basis - so very
prejudicial to systematic planning and decision making leave aside any
meaningful control and measurement mechanism being available to the
management. The problems need to be considered in the context of one's own
organisation. Moreover, as organisations grow larger, the manual systems tend to
break down under the burden of manual processing.
b) Computerised personnel records/information system: Some potential benefits:
While it would be presumptuous to assume that in large and labour intensive sectors Information Systems
like hospitality, computerisation would automatically solve all the problems
'
associated with manual systems. In the fast changing technological and information
processing environment, it also offers does present several other potential benefits,
viz., maintaining their records.

i) Cost effectiveness: Taking into consideration the factors of time, speed and the
enormous amount of data which a computer can process, the computerisation
offers an option. When personnel function faces conflicting pressures to provide
more information while at the same time to reduce administrative overhead
costs, the computerised system can become increasingly cost effective because
in the long run the costs of computer hardware fall relatively to the cost of
employing ever-increasing clerical staff. But let it be understood clearly that it
would be a false analogy to draw a straight cost comparison between a manually
operated system and a computerised system because the cdmputer is capable of
performing a fundamentally different job. Thus, to put the concept of cost-
effectiveness in the right perspective, the improvement in the quality of human
resource decision making which is made possible through computerisation, need
also be taken into consideration.

ii) Effective human resource information: Perhaps more than the cost
effectiveness is the potential provided by computerisation for establishing an
effective human resource information system as is made clear in Table-2:
Table - 2
Manual system Computerised system
Retrieving information is slow and Retrieving information is fast and simple
cum bersome
Personnel function is bypassed as a Personnel is considered as a reliable s o y e
source of useful information of information useful for decision making
Identity of personnel function is lost With informatlon as a power tool, the
personnel function is in a position to
d
influence policies and decisions
Duplication of reports deals to dual As many copies of reports can be printed
work and lots of paper without much paper work.
Not able to respond to ad hoc Information can be readily ~anipulated,
enquiries for information and merged and disaggregated in response to
complex data needs special and complex demands and

- iii) Improved accuracy: In addition, a computerised human resource information

system can eliminate the shortcomings of manual system noted earlier.
Significantly, computerised systems do not depend upon constantly copying out
data form one record to another as in the manual system. T h k means the data is
entered only once with provision for updating at regular intervals. Therefore,
once the relevant data have been fed accurately, they will remain in pure form
and accurate until any item is changed.
iv) Validation of data-error detection: Further, availability of good software
systems should enable validating and editing data and detecting errors in a
number of ways such as:
criterion checks for particular fields, for example, an error warning if a post
is reserved for a certain category of person, if a salary is above or below a
certain minimum/maximum, or if age exceeds 58 years and, so on.
link checks, for example, that salary is incompatible with grade, date of
lock 1 Human Finally, a computerised system can greatly reduce fragmentation and duplication of data.
Resource Development All data can be stored in a single system to enable retrieval of a complete picture of each
employee or of each defined parameter in a desired number of permutation and
combinations. In advanced systems, other user departments outside the personnel
function can be provided with an on-line link into the data base from remote control
terminals programmed with passwords to restrict access and update only those parts of
the data base which are necessary for meeting out specific needs.

" 3.7 COMPUTER APPLICATIONS IN HUMAN RESOURCE

MANAGEMENT: AN OVERVIEW
In the previous section, we have learnt the potential uses of computers as against the
manual human resource information system. It has enabled us to develop a preamble to
the subject of applications of computers in human resource management. A computer
based human resource information system is:
a computerised personnel record system
a generator of personnel information
an aid to personnel administration, and
an aid to various specialist techniques in personnel management of hotels where
a strong and reliable data base the key to greater effectiveness.
This Section of the Unit lists out the potential applications of computers in personnel
function of a middle size or large hotel. This list intends to ptovide only an overview of
the applications, however, possibilities of new applications in specific need areas can be
explored:

a) Personal record keeping: The primary use of computers in personal department is

to keep employees' records. A good computer based personnel system, therefore,
should enable the personnel department to store all information about employees on
a computer which may be required at any point of time. In addition, it should be
possible for the user to keep historical files of past employees for purposes of
identifying trends and making projections when developing human resource plans. It
can also have personal records of those who can be temporarily or seasonally
employed as is the case in hospitality. wherein seasonality plays a crucial role.

b) Report generation: Report generation is the capability which enables the user to
manipulate any of the items stored on the data base as required by means of software
referred to as 'report generator'. That would mean facility for producing the more
common standard reports, ad hoc enquiry facilities, and a diary facility. The diary
facility can be called up to cover a certain period of time such as the forthcoming
month, and will produce a list of action required by the personnel department on the
basis of information held in the data base.

c) Word processing and integrated letter writing: With this facility it is possible to
store in the word processor a range of standard contracts of employment or a variety of
standard clauses which can be selected and merged together in order to reduce the'-
typing effort individually. Linking word processing to the computerised personnkl
system provides further opportunities to automate standard administrative proceti Ires.

d) Recruitment: When organisations are engaged in recruitment campaigns, these can

generate a considerable amount of administrative work. Under a computerised
procedure, the basic details of applicants can be put into the computer and their
progress through the recruitment procedure can be fed into the computer in the same
way. Such a system can provide management with progress reports on the filling of
I

e) Wage and salary planning: Planning of wage and salary increases which otherwise Human Resource -
is a time consuming process and fought with discrepancies in a manual system, can Information Systems
be easily handled by a good computer system.

f) Absence and sickness: The data on sickness and absence - duration, reasons, etc.,
can be storedsgainst the record of each employee. The attendance of the employees
can also be4aken care of by the computerised punching of card.on the time of arrival
and departure of the employee from the office. For purposes of reporting this
information can be summarised periodically according to the variables stored on the
data base.

g) Human resource planning: We have noted earlier that information is the strategic
backbone of human resource planning. Computers are capable of assisting the
process of human resource planning in several ways. Firstly, they greatly enhance
the scope of the personnel department to analyse the'structure and composition of
the current labour force and to provide useful information for human resource
planning purposes. Secondly, by using specially designed packages it would be
possible to make projections and raise issues which can simulate future patterns of
the organisation's human resource system. Further, the system will be readily able to
identify weak spots and strong points through the process of generating information
and its analysis. Additionally specialised modelling packages can be used for
such applications as (i) for predicting wastage patterns, (ii) for simulating
manpower flows into, within and outside the organisation, and (iii) for simulating
career structure against a range of assumptions about organisatidnal g r o m or

h) Personnel costing and control: It is now possible to provide through a

computerised information system line management with regular reports of staff
numbers and costs against budgets or targets, including information on turnover,
absenteeism, overtime levels and costs to serve as indicators of the organisations
extent of efficiency in the utilisation of its human resources.

i) Trairtfng and development: A computerised personnel records system provides

organisations with speedier and ready access to information about the skills,
education, qualification, appraisal ratings, career history, etc., of employees. This
will help talent search within the organisation as well s identification of training
and developmental needs of employees at different levels.

j) Other application packages: Include job z@alysis, job evaluation, staff scheduling,
rostering and shift modelling, etc.
Finally, as one of the most significant uses and applications of computers in personnel
work is the capability of computers to produce output in the form of graphs, bar charts,
histograms, pie charts, etc., through the use of appropriate software peripherals.

1) Why is it that information is called the very "stuff' of planning?

.......................................................................................................................................
.......................................................................................................................................

2) Explain the alternative recourses that smaller organisations can take in place of
HRIS.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
 Block 1 Human 3) Discuss the potential applications of computers in personnel functions.

I Resource Development
.......................................................................................................................................

3.8 LET US SUM UP

Human Resource Planning draws heavily on information. Appropriate and accurate
information is thus essential to planning of human resources as well as to different facets
of the human resource management function as such. There are certain basic
requirements up to which the information must conform.
At the macro level, although there do exist institutional arrangements for providing
manpower data, but the need for improving the effectiveness of human resource planning
a d policy has been articulated at several fora.
At the micro level the importance of having a well-defined and detailed manpower
information system within the organisation has been emphasised. The point has been
made that at the enterprise level, there is need for a comprehensive human resource
information system. In this context, the deficiencies and shortcomings of manual human .
resource information systems have been noted in order to develop a clearer perspective
for going in for a computerised personnel records system. Several advantages and
applications of using computerised information system have been brought in to focus.
Those of you who may be interested in the design process of a computerised human
resource information system would be well advised to read further the subject itself
being so specialised in nature.

3.9 CLUES TO ANSWERS

[check Your ~ r o ~ r e s s l

1) The basis of all manpower planning is information. Increasingly, human resource

professionals and specialist managers wanting to introduce a new manpower
planning system or improve an existing one, use information as an invaluable aid
in decision making. Read Secs. 3.1 and 3.2 to expand the answer.

2) The alternative is:

a) Expand the existing computer based payroll system.
, b) Establish a supplement system
c) Set up a wholly separate information system.
Read Sec. 3.5 to expand the above answer.
' .

3) The potential applications are:

l a) Personal Record Keeping '. b) Report generation

I c) Word processing and integrated letter writing d) Recruitment

e) Wage and salary planning f) Absence and sickness
g) Human Resource Planning h) Personnel costing and control
i) Training and development j2 Other application packages
Further consult Sec. 3.7.
 UNIT 4 HUMAN RESOURCE AUDIT (HRA)
Structure
Objectives
Introduction
Audit
The Need and Purpose of Formal HRA
Scope of and Approach to HRA
Essential Steps in Process of HRA
Let Us Sum Up
Clues to Answers

, 4.0 OBJECTIVES
After reading this Unit you should be able to:
.
understand the concept of human resource audit as distinct from financial and
statutory audits,
appreciate the need, purpose and scope of human resource audit, and
develop a perspective on the know-how of human resource audit.

4.1 INTRODUCTION
Human Resource Audit is an addition to the various tools and concepts used for effective
human resources management of any labour intensive industry, more particularly,
hospitality industry. In the service industry, human resources have a vital role to play as
they form a part and parcel of the product or service that is being consumed. Hence, in
this Unit, we aim to familiarise you with the basic concepts of human resource audit and
the issued related to it.

4.2 AUDIT
Conventionally, the independent accountant, after completing an audit, is in a position to
render a certificate covering his or her findings. Mention is made of the period covered
by the audit. An assertion is included in the certificate, that a review has been made of
the company's interhal control system and of the accounting procedures followed. A
brief statement of the scope of audit is made. Any qualifications that are applicable to
the execution of the assignment or to the company's accounts are prefaced. Finally, the
independent accountant renders his or her opinion regarding the company's financial
statements and the basis on which the accounts have been kept. Professional ethics are
observed by independent accountants. Material facts are neither missed nor misstated.
Again, conventionally, during manpower audit disbursements made on account of
payrolls are checked to underlying records. This may even require verification of
employee's signatures on payroll receipts to the extent considered necessary. Record of
the time of arrival and departure of employees is checked; so also the reports of the
number of pieces turned out by piece workers. Payroll records covering bonuses and
commission on sales to employees are subjected to scrutiny. Also, certain payroll
deductions and contributions in accordance with several social security and welfare laws
are checked to compliance and accuracy.
B I O C ~I Human Other areas selected for scrutiny are:
Resource Development *
authorisationssf additions to a company's personnel,
sanctions to the grant of special bonuses and profits sharing distributions and
payment of compensations,
compliance with wage regulations.
Careful consideration is given by the independent accountant to the company's system of
internal control and check, while determining the scope of the programme of audit.
Obviously, much of the .quantum and thrust of audit can be directly related to
effectiveness of the company's internal control system.
It is a general practice for independent accountants to analyse the changes which took
place in the company's personnel records during the period covered by the audit. The net
increase or decrease in the number of employees in any one function or function
occupation is discussed with one of the company's senior executives in order to obtain
the benefits of his or her comments regarding the situation.
While management can use a variety of means and measurement in control, in human
resource management, audit is one of the most important devices and a significant step in
the human resources planning process. Rather, it is considered as the first step in
planning of human resources.
I
4.3 THE NEED AND PURPOSE OF FORMAL HRA
Human ~ e s o u r c eAudit is a systematic assessment of the strengths, limitations, and
developmental needs of its existing human resources in the context of
organisational performance. (Flamholtz, 1987)
The premise on which the human resource audit is based is that opportunities are being
missed by staying with the current approaches. It considers the human resource process
as dynamic and that it must continually be redirected and revitalised to be responsive to
the ever-changing needs.
Human Resource Audits give an account of the skills, abilities and limitation of its
employees. The audit of non-managers are called skills inventory while the audit of
managers are called management inventories. Basically, the audit is an inventory that
catalogues each employees' skills and abilities which enables the planners to have a
understanding of the organisation's work force. (William B. Werther, Jr. and Keith

HRA is a sort of feedback on the duties and working of the managers and other
employees of the organisation. It is a sort of quality control of the human resource of an
organisation. HRA can be conducted for a department or the whole organisation. It gives
a more professional image and helps in bringing out the problem not necessarily linked
with the Human Resource division of an organisation. HRA helps clarify a department's
role in an organisation y d brings about more uniformity in action.
The commonly understood audits are the established and regular accounting audits
carried out in accordance with specific statutory regulations. However, in the case of
human resource audits, there is no legal obligation, but enlightened managements have
voluntarily accepted its usehlness depending upon the circumstances. The following
circumstances may be cited as examples:
felt concern by top management,
compulsions of the external forces necessitating a situational audit,
business changing significantly influenced by international business decisions
affecting human resource management, and
 an urge on the part of human resource management professionals towards HumanResixurceAudit
advancement of the practices and systems.
Human Resource Audit is the critical analysis of the existing human resource within the
organisation. To be able to do that, the audit will have to be served with the data that is
quantitative, qualitative, as well as comprehensive. In other words, the success of this
stage of human resource planning solely rests upon the manner in which personnel
records and other information are maintained. It is from the base of the current situation
that the human resource audit is to take-off in order that the future must be planned.
Hence, the information needs of such a critical exercise must be met.

4.4 SCOPE OF AND APPROACH TO HRA

Every time a human resource audit is to be taken up, the scope is decided. The audit
need no be exhaustive but may focus on a particular function of human resource
management such as training and development, compensation, performance appraisal,
etc. Nevertheless, the objective and approach of HRA, irrespective of its scope, remains
the same. .
Essentially, human resource audits are not routine. These are in fact, studies of unusual
nature. The manner of conduct can be self-directed surveys, or task force within the
organisation, or reserved for intervention by outside consultants. These audits can be a
one time affair or an occurrence after a regular interval or an ongoing audit function for
operating units within the organisation. For example, in a hotel, the focus of audit was on
analysing the extent to which managers and supervisors complied with established
personnel policies and practices.
Outside Consultants and HRA: Some Perceived Advantages
Since HRA is a sort of feedback on the performance of manager and employees, many
'firms prefer to have independent consultants conduct the audit in order to obtain greater
objectivity and impartiality in reporting. Consultants who have wider experience and
specialisation in the particular field, for instance, in our case hospitality, are asked for
conducting HRA. Most of them possess an uncanny eye on details and data that might
otherwise be looked as insignificant. They are supposed to act with impartiality and
make judgements on what they review and analyse without risk of prejudice.

4.5 ESSENTIAL STEPS IN PROCESS OF HRA

Though the process would vary from hotel to hotel, generally it involves the following
steps:
1 ) Briefing and orientation: This is a preparatory meeting of key staff members to:
i) discuss particular issues considered to be significant,
ii) chart out audit procedures, and
'
iii) develop plans and programme of audit.
2) Scanning material information: This involves scrutiny of all available information
pertaining to the personnel, personnel handbooks and manuals', guides, appraisal
forms, material on recruitment, computer capabilities and all such other information
required for HRA.
3) Surveying employees: Surveying employees involves interview with key managers,
functional executives, top functionaries in the organisation, and even employees'
representatives, if necessary. The purpose is to pinpoint issues of concern, present
strengths, anticipated needs and managerial philosophies on human resources.
Block I Human 4) Conducting interviews: What questions to ask? The direction which audit must
Resource Development follow is based on issues developed through the scanning of information gathered for
the purpose. However, the audit efforts will get impetus if clarity is obtained as to
the key factors of human resource management selected for audit and the related
questions that need to be examined.

The following model depicts various key factors required to be addressed during
human r e s o w e audit. It is developed from the interview guide used in an electronic5
company. It h u s t be remembered that the questions to be asked on factors given in
model are required to be framed very carefully. The diagram given below illustrates
the key factors and the subsequent table mentions related aspects related to each of
the factors to be covered by the interviewing audit team.
1

B
1
-.-e
0
,
d
0
%?. 0
40 cf?l -a &O
+
' *si % E
%%e:?e4f
Qf mnforma~on
Affirmative

HUMAN RESOURCE AUDIT: Key factors in human resource management

Topks for Interview Questionnaire and the aspects to be covered

Topic Related aspects to be covered
1) INFORMATION Coverage
Source
Adequacy
Gaps
2) FORECASTING

Testability
Budgeting
Time orientation
TEchnology perspective
3) TRAINING AND
DEVELOPMENT
Need assessment
Selection criteria -
Levels covered and frequency
Internal vs. external training
Quality consciousness
Changing needs
Climate for self-development
4) PERFORMANCE APPRAISAL Validity of appraisal process
Fitness
Benefits andlor drawbacks/probiems
know-how of appraising
Clear objectives
Uniformity in process
Underlying benchmarks
Consistency in ratings
Linkages with pay
Feedback to employees
Changing needs
 - -

5) MANAGEMENT SUCCESSION Policy formulation Human Resource Audit

PLANNING identifying key positions
Availability of successors
Matching future needs
Responsibility for grooming and de~loping
Handing nodpoor performers
6) COMPENSATION Approptiateness of policies
Company philosophy
Adequacy of rewards .
Nature of job descriptions
Flexibility in job evaluation systems
Control over costs
Rationale of reward system
Opportunities for improvement
7) AFFIRMATIVE ACTION Efficiency of action programmes
Lessons for hture
8) SPECIAL ASSIGNMENT Clarity
(other human resource functions) Comments
Activities' jurisdiction
9) NEED INTER-RELATIONSHIPS Uniqueness
Distinctiveness
Presence and awareness of about company's
human resource policy
Clarity of objectives of human resource audit
Future outlook on philosophy
Capabilities of implementation
10) THE STAFF FUNCTION Expectation from human resource staff
(the human resource staff) Degree of satisfaction
Adequacy
Attitude and approach
Capability and potential
Suggestion for change

The process of the interview and the sequence of questions is often as important as
their content. Another effective method is the 'focus interview'. A focus interview
involves meetingsrbetween a trained interviewer and selected members of the
organisation. Here the interviewer asks a variety of questions planned and prepared
in the same fashion as the interview questionnaire explained earlier.
5) Synthesising: The data thus gathered is synthesised to present the
current situation
priorities
staff pattern, and .
. issues identified.
Similarly, future needs are identified and appropriate criteria developed for.
spotlighting the human resource priorities and specific recommendations made.

6) Reporting: Just as the planning meetings of briefing and orientation, the results of
the audit are discussed within several rounds with the managers and staff specialists.
In the process, the issues that get crystallised are brought to the notice of the
management in a formal report. Follow-ups are necessary after an audit to see if the
- action plan used to solve problems found this the audit worked or not.
In conclusion, human resource audit is an important approach to human resource
planning. It is practical because if correctly conducted, .it should increase the
effectiveness of the design and implementation of human resource policies, planning
and programmes. A periohic and systematic audit helps human resource planners
develop and update employment and programme plans.
 Block 1 Human
Resource Development LCheck Your Progress J
1) Explain what you understand by HRA?'
...................................................................................................................................

1 2) What are the essential steps in HRA.

4.6 LET US SUM UP

Human Resource Audit is the critical analysis,of the existing human resources within the
organisation. It is a systematic review and assessment of human resource management
philosophies, policies, systems and practices. In terms of need, approach and procedures,
human resource audit is different from the commonly understood accounting audits
carried out in compliance of certain mandatory or statutory requirements. Similar to the
case of Human Resource Plgnning, the success of Human Resource Audit is dependent.
The reason for conducting a human resource audit is that it is from the base of the
current situation that the future must be planned. Thus, an enormous amount of
information needs to be available. But similar to the case of human resource planning,
the success of this audit is dependent upon the availability of the quantitative as well as .
qualitative information and its use by the auditor. The purpose of human resource audit
is to gather data about the organisation's human resource management and to use those
data to make judgements about how it's functioning, effectiveness, and requirements for
future planning and development. The decision to conduct a human resource audit and
its frequency would be guided by the top management's felt concern or, amongst other
considerations, a desire on the part of the human resource professionals to advance the
current practices and systems prevailing in the enterprise. The audit may be conducted
by the management either 'in house' or by engaging an outside consultant in order to
obtain greater objectivity i? reporting.

4.7 CLUES TO ANSWERS

I Check Your progress]
1) Human Resource Audit is a systematic assessment of the strengths, limitations and
developmental needs of its existing human in context of organisation performance. '
Study Sec.4.2 to expand the above answer.

2) The essential steps in HRA are:

i) Briefing and orientation
'

ii) Scanning material information

iii) Surveying Employees
iv) Conducting interviews
v) Synthesising
vi) Reporting
Study Sec.4.5 and expand the above answer.'
r
- -- - - ---

UNIT 5 HUMAN RESOURCE ACCOUNTING

Structure

5.0 Objectives
5.1 Introduction
5.2 The Concept of Human Resource Accounting (HRA)
5.3 Human Resource Accounting: Objectives in Relation to the Process of Human
Resource Management
5.4 Information as a Key Factor for HRA in Hospitality
5.5 Human Resource Costs: Concepts and Methods of Measuremen.
C
5.6 Human Resource Valuation: Concept and Determinants of Value
5.7 Human Resource Value: Monetary and Non-Monetary Measurements
5.8 Developing a Human Resource ACcounting System:
Some Design Considerations
5.9 Phases in the Design and Implementation of a Human Resource Accounting
System
5.10 LetUsSumUp
5.11 .Key Words
, 5.12 Clues to Answers

a 5.0 OBJECTIVES
After going through this Unit, you should be able to:
understand and define the concept of human resource accounting,
describe the main objective and the managerial role of human resource accounting,
appreciate the role of information as a key factor in human resource accounting
system,

./ follow the concept and various methods of monetary and non-monetary valuation of
human resources, and
understand the process and problems of designing and implementing a human
resource accounting system.

5.1 INTRODUCTION
Effectiveness is best measured by comparing inputs with the desired output. This gives a
.direct and positive measure of effectiveness as well as it provides comparative
information to show how effectiveness has changed over a period of time. It requires a
common base for measuring inputs and outputs. Measurement is the process of
representing the properties or qualities of objects in numerical terms. In our control
systems, measurement has a dual function: It provides information that can be used for
evaluating performance, and to make corrections in goal directed behaviour. This is the .
informational function of measurement. The accounting system, with its measures of
financial and managerial performance, is a part of overall measurement system that
contributes to the informational function. The informational function also draws on non-
financial measures of performance such as product quality and organisational climate. It
may be noted that the very act of measuring something has an effect on people's
behaviour because people tend to pay more atteation to the various aspects of jobs or
perfdrmance that are measured.
Block I Human In human resource planning, unlike other functions, there is still the problem of
Resource Development measuring itself; how can personnel inputs be measured using some common standards
inevitably financial? This presents serious difficulty for the personnel function itself if it
has to measure that output in financial terms. One attempt to apply financial
denominators to human resources is the human asset or human resource accounting
which endeavours to measure both the cost and the value of people to organisations.
The subject of approach to measurement of human resources through human resource
accounting has tempted personnel specialists and academics alike. The early
development of human resource accounting was carried out by a team of researchers
from the University of Michigan's Institute for Social Research under the guidance of
Rensis Likert. Likert felt that the failure to show the human resources of the firm as an
asset on the firm's books caused management to undervalue these resources in its
decision-making. Early development work by the research team at the R.G. Barry
Corporation at Columbus, Ohio emphasised the capitalising of expenditure on
employee recniitment and development, using the historicalcost approach. The money
spent on recruiting and training of employees was treated as a capital investment
to be amortized over several years, since the benefits were presumed to continue
over that period. R.G. Barry Corporation presented the human resource accounting
information as an addendum to its regular financial statements in its report to
stockholders. However, the primary use of information is for managerial control and
decision-making.
This Unit discusses the various aspects related to Human Resources Accounting.

5.2 THE CONCEPT OF HUMAN RESOURCE

ACCOUNTING (HRA)
The subject of offering measures of the values of people to the organisation through
human resource accounting is an essential component of HRP at all levels. According to
Flamholtz and Lace (1981):
"Human Resourie Accounting may be defined as the measurement and
reporting of the cost and value of people as organisational resources. It involves
accounting for investment in people and their replacement costs, as well as
accounting for the economic values of people to an organisation." ,

They further explain the value of an employee to the firm as "the present value of the
difference between wage and marginal revenue productn. An employee's value
drives from the ability of the firm to pay less than the marginal revenue product. Thus, it
involves measuring the costs incurred by business firms and other organisations to
recruit, select, hire, train and develop human resources. It also involves measuring
economic value of people to organisations. In short, they intend to make it clear that the
term 'human resource' recognises people who form organisational resources.
To quote Davidson, "Human resource accounting in the measurement of the cost
and value is a term used to describe a variety of proposals that seek to report and
emphasise the importance of human resources knowledgeable, trained and loyai
employees in a company's earning process and total 'assets".
In the words'of R;L. $Voddmff Jr., Vice President, RG. .Barry Corporation, the
company which undertook pioneering work (1960s) in developing human resource
accounting - "human resource accounting is an attempt to identify and report
investment made in resources of the organisation that are not presently accounted
. for under conventional accounting practice". Woodruff further considers it to be an
information system that tells management what changes over time are occurring to the
h v a n resources of the business.
 In the foregoing definitions one may not find unanimity on what human resource Human Resource
accounting is yet what is emphasised upon by all is the significance of information. Accounting
'Human Resource Accounting System requires and produces a great deal of
information for an organisation.

5.3 HUMAN RESOURCE ACCOUNTING:

OBJECTIVES IN RELATION TO THE PROCESS OF
HUMAN RESOURCE MANAGEMENT
You have been told in previous Section that Human Resource Accounting is a tool
designed to assist in the effective and efficient use of management of human resources.
Let us now consider the managerial role of human resource accounting in its totality
through Figure I which clearly shows that Human Resource Management is a system
designed to convert human resource inputs into outputs in terms of human services.

TRANSFORMATION
PROCESS
z
....................................................
........ INPUTS MANAGERIAL OUTPUTS ...........,
.......................................... SUBSYSTEMS ..........................................
4

PEOPLE for SERVICES

Acquiring,
(Individuals, Developing, provided
Groups Allocating, by
and the Conserving individuals
Total Utilising, and
Human Evaluating, groups . .
Organisation) and
Rewarding i
People

i............................................................................ Evaluationffeedback ...........................................................................

Figure I: "Raw" Wuman transformed into Valuable Wuman Output
The inputs are people: individuals, groups and the total human organisation. The
transformation process involves the managerial sub-systems in use for acquiring,
developing, allocating, conserving, utilising, evaluating and rewarding people working
for any organisation. The outputs in the process are the services provided by individuals
and groups. In other words, the model "transforms" "raw" human resources into
valuable human services. Now let us briefly examine each sub-system: what, it covers
Bnd it's enabling features.

SI. sub-system in the What it Includes Enabling Features

No. transformation
process
1) Acquisition of Human Recruiting Forecasting manpower
Resources Selecting requirements, Selection Procedure,
Hiring Cost estimation and Manpower
budgets.
Provides nonrmonetary surrogate
measures in order to test
management potential while
choosing the person possessing the
greatest future value to the
organisation. 53
.Block' 1 Human ,
Resource Dgwment S1. Sub-system in the What it includes Enabling Features
No. transformation
process
2) Development of Training to enhance Facilitates decisions involving the
Human Resources technical, intellectual allocation of resources by measuring '
and administrative the expected rate of return in
skills proposed investments in training.
(Human resource accounting information can greatly influence the acquisition and development
of policy for human resources in more thanone way, such as:
9 review of budget proposals,
9 employment decisions with regard to
level of entry
outside experience
extent of training
*: provide estimates of historical and current costs in order to help management
assess trade offs between the costs of remitment
from outside or development from within.)
3) Allocation of Human Assigning people to Helps management to allocate
Resources various organisational people to jobs in a way that will
tasks and roles optimize job productivity, human
resource development and
individual satisfaction.
4) Conservation of Maintaining Provides early warning signals to
Human Resources Mechanical capabilities suggest the need for special
of individuals and attention to conservation and
functional effectiveness prevent their depletion.
of management teams. ..
5) ~tifisationof Human Process of using Provides a unifying framework to
Resources human services to help managers utilise human
achieve organisational resource effectively and efficiently.
objectives It makes managers think of
strategies designed to influence the
value of people.
6) Evaluation and Reward Assessing the value of Helps human resource evaluation
of Human Resource people to an process by developing valid and
organisation with reliable methods of measuring the
respect to performance value of people to the organisation.
and their promotability Rewards include compensation,
promotion and symbolic 'rewards'.
The sub-system enables
administration of organisational
rewards in relation to a person's
value to the organisation.

To conclude, from a managerial perspective, human resource accounting can be seen as

a way of thinking for the management of an organisation's human resources. It is based
on the notion that people are valuable organisational resources. Another aim of human
resource accounting is ta inform the investors about an organisation's human assets. It
may be noted that current financial accounting practice treats all expenditures for
investment in human resource as 'expenses' rather than as 'assets'. This convention
results in a distorted measure of an organisation's return on investment. Therefore, it
does not offer a clear picture to the investor who attempts to value an organisation's
human resource on this basis alone. Nevertheless, the point is established that human "
resource accounting does have a potential role for management and investors. Figure I1
presents a model which contemplates the aims and objectives of human resource
 New Measures of Effective . Greater Accountability Human Resource
Manpower Utilisation for Human Resources Accounting

Better Decisions

Better Human Increased Managerial

Resource Planning Awareness of Human
Resource Value

Human Resource ~ k c o u n t i nObjectives

~:
Figure 11: Objectives of Human Resource Accounting

To conclude, we can say that human resource accounting aims at: (1) increased
managerial awareness of the values of human resources, (2) better decisions about.
people, based on improved information systems, (3) greater accountability on the part of
management for its human resources,. (4) developing new measures of effective
manpower utilisation, (5) enabling a longer time horizon for planning and budgeting,
and (6) better human resource planning.

5.4 INFORMATION AS A KEY FACTOR FOR HRA IN .

HOSPITALITY
Let us consider an example. One hotel chain is operating through its several regional
offices, numerous branches and employing a sizeable field work force. During the
review of its operations it is confronted with the following 'reported' problems
concerning the planning and effective utilisation of its manpower:

Nature of the problem Basis of report

1) High turnover among its field operatives General impression
(over the counter personnel) (no data available)
2) Rising administrative cat: the personnel Based on opinion
costs accounting for a very high component.
3) Lack of attention on the part of managers Viewed as apparent
towards developing their people. Only one or two branches monopolised in
offering promotable manpower causing
heartburning amongst the remaining
- branches.
A close look at these problems through an outside consultant brings out three basic
lacunae in the organisation system:
a) absence of a measure of planning of manpower beyond a short-term (one year),
b) obvious lack of information about the firm's manpower, and
c) absence of a position of senior executive in the corporate office for overseeing and
coordinating various human resource activities and effective utilisation of the
company's manpower.
8 The criticality of (b) can be easily understood because without reliable system of
information, effective planning and control is just not possible.
The primaiy purpose of human resource aecounting is to help management plan and
cmtrol the use of human resources effectively, and efficiently. For this, it must require a
great deal of information that can serve the management, the investors and other outside
agencies. Basically, the information it involves is f ~ r ~ m e a s u r i nthe
g costs incurred by
buimess firms and other organisations to recruit, select, hire, train and develop human
assets, besides measuringfhe economic value of people to the organisation.
Block 1 Human In the example given above, the hotel chain identified the following kinds of information
Resource Development and their use:
Information Needs in Human Resource Accounting
Kind of information Purpose of information
1) Information for Human To facilitat8 manpower planning
Resource Planning To gather data on actual costs of recruitment and selection,
training, etc.
Collection of figures over the past period provide
reasonable basis for projecting future expenses.
2) Information for control of To provide reasonable means of evaluating the performance
personnel costs of management in controlling costs,
The information helps develop a system of smdard costs
for personnel recruitment, selection and training. That
would help further in analysing costs.
3) Information for control of To increase management's awareness of the costs of
turnover costs turnover and to devise steps to control it.
4) Information for evaluation To increase the accountability of management in providing
of management measurements those were effective in developing and
effectiveness utilising people over a longer period of time.
5) Information for the Board To keep the top management abreast of changes in the
and Stockholders organisation's investment in people and human.resource
. value.
To help the top management,in deciding on information on
the firm's investment in humin resource to investors even
though the data remains unaidited.
The above illustration provides a synoptic view of the elements of information required to
consider various problems related to the effective and efficient utilisation of human
resources in the organisation. It also illuminates the point that the need for human resource
accounting information arises from the specific felt needs of a hotel or hotel chains.

5.5 HUMAN RESOURCE COSTS: CONCEPTS AND

METHODS OF MEASUREMENT
Before we consider cost measurements through human resource accounting, let us take a
look at some of the terms used in the accounting concept of 'cost'.
Some'' Definitions
I

1) Cost : A sacrifice incurred t o obtain some anticipated benefit or

service. Conceptually, all costs have "expense" and "asset"
components.
2) Original Cost : The sacrifice that was actually incurred to acquire or obtain
a resource. Original cost is also termed "historical costy'.
3) Replacement Cost : The sacrifice that must be incurred to replace a resource'
'

presently owned or employed.

4) Outlay Cost .
5) Direct Costs
6) Indirect,Costs
: The actual cash expenditure that must be incurred to acquire
or replace a resoCrce.
: Costs which can be directly traced to activity, product or
resource.
: Costs that cannot be traced directly to a specific activity,
product or activity process, but which are incurred for
7) Actual Costs : Costs actually incurred to attain some specified end. Human Resource
Accounting
8) Standard Costs : Costs that ought to be incurred to attain some
specified end under certain pre-defined conditions.
9) Opportunity Costs : The income or revenue foregone or sacrificed in order
to acquire or replace a resource.
The several accounting concepts related to costs defined above have significant
applications in human resource accounting. The concept of human resource cost has its
roots in the general concept of cost. Human resource costs are costs incurred to acquire
or replace people. Like other costs, they have expense and asset components. Similarly,
other descriptions of costs, viz., outlay and opportunity costs, direct and indirect costs,
actual and standard costs - all fit into the costs framework of human resource
accounting.
One can measure costs through human resource accounting in two ways: (1) the original
or historical cost of human resources, and (2) the replacement costs of human resources.

i) The concept of original cost

The original cost of human resources may be defined as the sacrifice that was actually
incurred to acquire and develop or replace people. It includes costs of:
recruitment,
selection,
hiring,
placement,
orientation, and
on-the-job training.
'
It has elements of direct costs as well as indirect costs. For example, a trainee's salary is
a direct cost, while the time spent by the supervisor or other employees during training
contributes to the indirect cost. For managerial
- uses of the cost data, it is desirable to
include the opportm~tycosts incurred in the original costs of human resources.
However, since the reliability of the opportunity costs can always be questioned, it
should not form part of reporting to investors and external users.
Measurement of Original Cost of Human Resources

Acquisition ORIGINAL HUMAN RESOURCE CQSTS Learning

costs costs
f t
Direct Costs Direct Costs

Trainer's Time

II Selection I Promotion
or hiring Lost Productivity
from within
I ' Hiring I the firm
during training

I Placement I
- - - Figure 111: Measurement for Original Human Resource Costs: A Model
(Fwure I11 and IV are adaotations from Eric G. Flamholtz. "Human Resoutce Account~na:~ e a s u r i nPositional
.
Block I Human The definition of original cost of human resources refers to the sacrifice that would have
Resource Development to be incurred to acquire and develop people. This means that any attempt for
measurement of original human resource costs essentially requires measurement of
acquisition costs and training costs. These costs will include both direct costs and
indirect costs of acquiring and developing human resources. Figure 111presents a model
for the measurement of original human resource costs.

ii) Replacement cost of human resources

The Replacement Cost of Human Resources may be defined as the sacrifice that would
have to be incurred today to replace human resources presently employed. It includes the
costs attributable to the turnover of a present employee as well as the cost of acquiring
and developing the replacement. From individuals, the scope can be extended to include
the groups of individuals and the human organisation as a whole. Replacement refers to
acquiring a substitute capable of rendering an equivalent set of services for a single
specified position, meaning thereby that the context is the positional replacement.
There is another notion of replacement cost: personal replacement cost. It refers to the
sacrifice that would have to be incurred today to replace a person presently employed
with a substitute capable of rendering an equivalent set of services in all the position the
former might occupy. Here the context is the person, and the replacement cost is the cost
of replacing a set of services provided by one person with an equivalent set of services
to be provided by another:
Measurement of replacement
The context of replacement cost measurement can be positional as well as personal.
There are three basic components of positional replacement cost:
(1) acquisition costs, (2) learning costs, and (3) separation costs. While the first
two components'have been reflected in the earlier model, the separation costs refer to
the costs incurred as a result of a position holder leaving an organisation. It may have
both direct and indirect components and may include such costs as (i) cost of a vacant
position while search for replacement is on, (ii) opportunity cost because of loss of
services, and (iii) cost of lost productivity prior to the separation of an individual from
the organisation if such tendencies were apparent.
.Figure IV presents a model for measurement of human resources replacement costs
(positional replacement cost).

I Acquisition I
w
POSITIONAL REPLACEMENT COSTS Learning

F tI costs

1 Direct Costs I -1 Direct Costs

Cost of A AL
promotion Cost of
or transfer Trainer's Time Formal
from withh Training and
I
-
I Lost Productivity I, I
I
I

I
Hiring

Direct Costs

Separation Pay
I

-
II
I
Placement
I
I during training

Separation Costs
On-theljob

Loss of efficiency prior to separation

I Cost of vacant position during search 1

Figure IV: Measurement for Promotional Replacement Costs: A Model
 iii) Personal replacement cost Human Resource
Accounting
The concept of personal replacement cost refers to the sacrifice that would have to be
incurred today to replace a person with a substitute capable of providing a set of services
equivalent to the individual being replaced. The notion refers to the cost of replacing a
person with a functionally equivalent substitute rather than the cost of replacing him
with the best available substitute. The notion of ~ersonalreulacement cost is auite

5.6 HUMAN RESO'LTRCE VALUATION: S'

One of the major objectives of human resource accounting is to develop reliable

measures of effective manpower utilisation. Both monetary and non-monetary measures
are needed for use in (1) decision making involving the acquisition, development and
allocation of human resources, and (2) monitoring and evaluating the degree to which
the management has effectively and efficiently utilised the human resources. For further
conceptual clarity, one may look at some of the terms used in the context of human
resource value with their simple definitions:
,b

Some Definitions:
1) Value: The present worth of the services of an employee is anticipated to render in I

the future.
I
2) Value of human organisation: The present worth of its expected future services to
an enterprise.
31 Individual's value to an organisation: The present worth of the set of future

4) Group'svalue to an organisation: The present value of its expected future

servioes.

membership during the period of his or her productive service life. I

7) Productivity: The set of services an individual is expected to provide while

occupying his or her present position.
8) Promotability:The set of services the individual is expected to provide if and when
he or she occupies higher-level positions in his or her present or different promotion
channels.
9) Individual skills: The currently developed potential of an individual to provide
services to the organisation; I
10) Rewards: The benefits derived by the system.
11) Instrumental individual rewards: Rewards which are administered in relation to
individual effort.
12) Instrumental system rewards: Rewards which accrue by virtue of membership in
the system. ..
13) Activation level: The neuropsychological counterpart of the notion of motivation.
 Block I Human 14) Human resource valuation: The process of assessing the value of people to an
Resource Development organisation. It involves measuring the productivity and promotability of people.
15) Casual variables: Independent variables that can be directly or purposely altered by
the organisation and its management.
16) Goal emphasis: Behaviour that stimulates an enthusiasm for meeting the group's
goal or achieving excellent performance.
17) Intervening variables: Variables that reflect the internal state, health and
performance capabilities of an organisation.
18) Managerial behaviour: The dimensions of supervisory behaviour effecting
influencing group effectiveness.
19) Organisation structure: The structural relationship among organisation roles.
20) Peer group behaviour: The support, interaction, facilitation, work facilitation, and
goal emphasis provided by the subordinate peer group.
21) Support: Behaviour that enhances someone else's feeling of personal worth and
importance.
22) Team Building: Behaviour that encourages members of the group to develop close,
mutually satisfying relationship.
23) Work facilitation: Behaviour that helps achieve goal attainment.

m 24) End-result variables: Dependent variables that reflect the results achieved by an
organisation.

What is human resource value?

The concept of human resource value is derived form the economic concept of value.
The economic concept of value has two dimensions:
1) Utility, i.e., value in use, and
2) Purchasing power, i.e., exchange value.
Value is the present worth of the services an object is anticipated to render in the
future. Thus, if an object has no future use, it has no value.
Similarly, human resource value is the present worth of people's expected future
services. The concept can be applied to individuals, groups, and the total human
organisation.
In the preceding definitions we have noted that an individual's value to an organisation
is the present worth of the set of future services he or she is expected to provide during
the period he or she is anticifiated to remain in the organisation.

I What determines the individual's value?

Unlike other resources, human beings cannot be 'purchased' or owned by organisations,
and hence are relatively free to either serve or turnover. From the organisation's
viewpoint, this suggests a dual aspect to an individual's value: one aspect is the amount
that organisation could potentially realise from his or her services if he or she stays with

. .

I derived, taking into account the person's ljkelihood of turnover.

Two models of the determinants of human resource value are relevant here: one by
Flamholtz that identifies the determinants of individual value and the ot&r by Likert
60 that explains the determinants of group value.
According to Flamholtz's model, the ultimate measure of a person's value is expected Human Resource
realisable value. This comprises of two variables: conditional value (potential value) Accounting
and the probability that the person will remain with the firm during his or her
expected sewice life, as is shown in Figure V.

Determinants of Elements of

4z
conditional value conditional value

Activation Individual's conditional value

-

. . .Symbols:
I
................................
Organisational
I l l : -4------) Hypothesised interaction :
I
----- I

'------------------------
I
Possible determinant I

Figure V: Flamholtz's Model of Determinants of an Individual's Value to Formal

Organisation
It is evident from this figure that the conditional value of a person depends upon both the
skills and the activation level that ultimately leads to his or her promotability,
transferability and productivity. The organisational determinants of a person's
conditional value include the degree to which the role assignment corresponds with the
employee's skills and personal goals, and the reward system used by the firm. Then, the
probability of a person staying in an organisation (maintaining organisational
membership) is directly related to the degree of job satisfaction that the employee feels.
The Likert and Bowers Model: Highlights causal, intervening and end-result variables
affecting the group's value to an organisation. Causal variables are those which are
controllable by the organisation, while intervening variables reflect organisational
capabilities. Both these variables determine the end-result variables of the organisation.
The end-result, dependent variables get their reflection in the achievements of the
organisation or the total productive efficiency in terms of sales, costs, earnings, market
performance, etc. Each of these models identifies variables that determine the value of
people to organisations. These variables must be taken into account in measuring the
value of people as organisational resources, as we move on further, to consider human
resource valuation methods.

5.7 HLMAN RESOURCE VALUE: MONETARY AND NON-

Monetary and non- monetary measurements of human resource value are needed in
order to translate manpower resources into a common denominator on which many
organisational decisions are based. These decisions pertain to individuals, groups, and
the total human organisation. For this purpose, different methods of valuation are
needed because each of these aggregations of human resources is a distinct unit of
organisational decision-making.
B I O C ~I Human 1) Monetary Measurements
Resource Development
The main aspects of a person's value to an organisation are:
i) Expected conditional value, and
ii) Expected realisable value.
W e have noted that the main aspects of a person's value to an organisation are the
expected conditional value and expected realisable value. In the direct approach, there is
an attempt to derive a direct or principal measure of a person's value. The indirect
approach involves application of various possible surrogates or proxy measures of
economic value in order to obtain measures of expected conditional and expected
realisable value.
Flamholtz's Stochastic Rewards Valuation Model based on the assumption that an
individual generates work value as he or she occupies and moves along'organisation
roles and renders service to the enterprise. The model presupposes that a person will
move from one state (role) of the system (organisation) to any other state during a
. specified time period. Exit also is considered a state in this model.
In order to follow the model, the following steps are necessary:

Step 1 Define the mutually exclusive set of "states" and individual may occupy in the system.
Step 2 Determine the value of each state to the organisation.
Step 3 Estimate a person's expected tenure in the organisation.
Step 4 Find the probability that the person will occupy each possible stare at specified future
times.
-
In principle, a person's expected conditional value and expected realisable value can be
equal, provided the person is certain to remain in +e organisation in the predefined set
of states throughout his or her expected service life. However, the basic problem in
applying'this model in actual organisation is the difficulty of obtaining valid and reliable
data inputs of 0)the value of a service state, (2) the individual's expected tenure, and
(3) the probabilities of occupying each defined state at specified times - although
Flamboltz continues to explore the various possibilities of measuring these dimensions.
There are a number of other valuation models which have been developed over the past
two decades and more. We will consider some of these here. The methods suggested
throw considerable light on the possible approaches to the problems of human resource
valuation.
A) Lev and Schwartz's Present Value of Future Earnings Model
Lev and Schwartz model- is based on the economic concept of recognising humans as
wealth-providing sources of income, and relies on measurement of such wealth as a
present value of future income streams. The exercise involves (1) classification of
employees into homogenous group profiles, (2) estimation of earnings for each such
group, and (3) calculation of the present value of earnings of each group, using an
appropriate discounting rate. Thus, the discounted future expected income stream
representsthe present value of services.
The model has some limitations: Firstly, it ignores the pbssibility of the individ&al
making exit from the organisation for reasons other than death, and secondly, it ignores
the likelihood of role changes beyond one's normal career channel. Further, by simply
aggregating individuals into groups on the basis of age, qualification, etc. is no
guarantee of aggregate measures in value because of synergism.
B) Hermanson's Adjusted Discounted Future Wages Model
In this method the approach is to adjust the discounted future salary wage payments to
62 - people by performance efficiency factor (which i s a ratio based on the return on
 investment derived by the specified firm relative to all other firms in the economy for a Human Resource
specified*period). Apparently, compensation measures, such as, salary are considered Accounting
potentially useful to develop a surrogate valuation model. However, in reality they may
not necessarily bear a significant relation either to an individual's value or to his or her
current productivity. There are several other limitations, such as, organisational
compensation policy, wage and salary structure, influence of unions which may not
accurately reflect the individual value.
C) Hekimian and Jones Competitive Bidding Model
In this model Hekimian and Jones propose a method wherebi the concept of
opportunity cost is applied by establishing an internal labour market within the
organisation through the process of competitive bidding. Under this approach, all
managers will be encouraged to bid for any scarce employee they want and the one who
i
is able to acquire his or her services put the bid price as his or her investment base in
respect of that employee. However, this method also has'problem of valuation, such as,
to the adoption of a procedure by a manager to decide the amount of bid.
In a review of the several methods discussed above, Flamholtz observes that it is not
sufficient to assert that the various methods bear an identity or close correspondence
between the true unknown economic value of individuals or surrogate measures.
Nevertheless, according to Flamholtz "at best these assertions should be'reviewed as
I
testable hypotheses" pointing to the need of validation through further research.
Monetary Measurements: Valuation of Groups
- Earlier, the point has been mentioned that the value of a group may not be equal to the
values of the individuals comprising the group. Mainly, the differential is attributed to
synergism. It is not valid merely to apply methods for individual valuation to group .
valuation, and vice versa. Hence, the need to develop methods for the valuation of
groups per se.
In organisations, there are several types of groups. For'exarnple, one classification is
departments, plants, divisions, levels, or just work groups. Another way of grouping is
based on the consideration whether the group comprises an expense centre or a profit
centre.
Human Organisational Dimensions Method
Based on the Likert-Bowers model of group's value to an organisation discussed
earlier, the method fotlows the assumptions on relationship among causal, intervening
and end-result variables. The assumptions are that the causal variables influence the
intervming variables, which in turn determine the organisation's end-result variables.
According to Likert, changes in the key dimensions in the human organisation are
considered to be dependable indicators for forecasting changes in the productivity and
financial performance of an organisational unit that the human organisation will be able
to sustain over substantial periods of time. Moreover, when changes in the human
organisational dimensions occur, predictions can be made of the magnitude of changes
that will occur subsequently in the output performance of that human organisation.
I
I Fl~mholtzproposes three methods for valuation of expense centre groups using
I
I surrogate measures for their valuation:
:. i) Capitalisation of Compensation,
r I'
ii) Replacement Cost Valuation, and
iii) Original Cost Valuation.

2) Non-Monetary Measurements
Although accounting has conventionally used money as its basic unit of measurement,
Am'erican Accounting Association's Committee has recently sugges'ted that there '
Block 1 Human no reason why money alone should be the unit of measurement used in accounting. (The
Resource Development committee stated that "there is also no reason why the only measure applied should be
'value' in terms of dollars.) It is entirely conceivable that accounting should deal with
various measures and do so in a systematic form, say, "a sector or number of measures".
The committee for the first time conceded that the future scope of accounting was likely
to include rion-monetary as well as monetary measures.
In human resource accounting, non-monetary measures of human resource value have
significant uses. Firstly, they may be used for decisions that do not require monetary
measurements - such as, layoff decisions. Secondly, non-monetary measures may also
be used as surrogates for monetary measures. For example, a ranking of people
according to their conditional value may be used as a surrogate for the monetary
measurement of conditional value. Thirdly, non-monetary measures may be used to
predict monetary measures. Hence, the importance to develop valid and reliable non-
monetary methods of measuring human resource value is gaining ground.
For non-monetary measurements, we may revert to Flamholtz's model to consider the
methods of measuring each determinant of an individual's value to human organisations.
We referred to the terms expected realisable value and conditional realisable value.
Expected realisable value and conditional value can be measured by ranking methods.
The probability of maintaining membership can be measured by acturial and subjective
probabilities. The elements of conditional value (productivity, transferability and
.
profitability) can be measured by personnel research and appraisal methods as well as by
certain objective measures. Productivity corresponds to measures of performance and it
can be measured by performance objective indices and by management appraisal.
Promotability and transferability- can be measured in terms of the measures of
potential, such as, psychometric tests and subjective assessments. Satisfaction can be
measured by attitude surveys. Skills can be measured by a capability inventory and
motivation can be measured by an attitude questionnaire. A person's role can be
measured by job analysis, while rewards can be measured through attitude surveys.
All of the variables contained in the Likert-Bowers model of the determinants of a
group's value can be measured by the "survey of organisations", an attitude
questionnaire. Taylor and Bowers have conducted tests of the predictive validity and
the internal consistency reliability of this measurement instrument. Their findings led to
reconceptualisation of an earlier version of the Likert-Bowers model and provide a
foundation for t ~ v e l o p m e nof
t non-monetary measurements of a group's value to an
,* "
organisation. .* t.

5.8 DEVELOPING A HUMAN RESOURCE ACCOUNTING

SYSTEM: SOME DESIGN CONSIDERATIONS
The design and implementation of human resource accounting system is a matter of
individual organisational capability and its perception of accounting and objectives of
developing a framework for the accounting of the human resources. While one firm may
draw satisfaction with the most rudimentary system, the other organisation may feel the
need for much more advanced capability. Similarly, the appropriateness.and validity of a
certain human resource accounting capability may render itself less appropriate and not
valid with the changed conditions, both inside and outside the organisation.
Flamholtz suggests five human resource accounting systems by type of capability
represented by systems I, 11,111, IV and V. Similarly, five functions of human resources
management, viz., human resource planning, human resource decision making,
conservation, evaluation and management efficiency: control are listed. These are
arranged in a matrix form (Figure VI) to indicate the human resource accounting
64 capabilities provided by each system level:
 4

System I systems11 System 111 System IV , System V . Human Resource

Human Prerequisite Basic HRA Intermediate Advanced Total HRA ' Accounting
Resource Personnel system HRA system HRA system system
Management system
Functions
I
Human Manpower Estimated Replacement Standard and Stochastic
Resource skills costs of wsts actual rewards
Planning inventory selection, personnel valuation
Replacement recruitment, costs model HR
tables training, etc. Stochastic value
manpower simulation
mobility
models
Simulations Manpower

Human
Resource
Decision
making:
A. Budgetary Personnel Personnel Budgetary Budget .Human Capital
costs included costs budgeted system for Standard and budgeting
in "General separately recruitment, actual costs Budget ROI
and training, etc. Original and on human
Administra- Budget replacement capital
tive" expenses replacement costs investment.
costs
- - - - - - -
B. Policy Traditional Value-oriented Recruitment Manpower Value-based
selection, selection vs. training assignment compensation
training and decisions trade off optimization
placement analysis models
methods

Human
Resource
conservation:
A. After- Turnover rates Turnover cost Replacement Opportunity HR Value
the-fact cost cost depletion
-- - -

B. Before- n.a. Attitudinal Expected Expected Expected

The-fact data Turnover cost Opportunity conditional
costs HR and realisable
accountability value
depletion
1v
Human Performance Perceived Performance Measurements Measurement
Resource and potential value rankings predictions of of ewnomic of economic
Evaluation ratings potential value value of value of
interval groups individuals
scaling of
value
v
Human n.a. Comparison of Comparison of Comparison of Inter-unit
Resource actual costs budgeted and actual costs comparison of
Management with historical actual costs against costs
Efficiency costs Variance standard
control analysis Variance
addysis
Figure VI: Capability provided by HRA system I to V

From the above matrix it would be seen that at the two extremes, there is System I which
consists of nominal but very elementary human resource accounting capability. At the
other end, there is System V which constitutes the total HRA system, representing the
maximal human resource accounting capability.
 Block 1 Human These five systems can be taken as five levels and five stages of developing human
Resource Development resource accounting capabilities. A firm may presently be in the first stage of human
resource accounting capability and desire to reach the fifth stage. Now depending upon
its own circumstances, it may be quite rational to 'move from stage to stage to
incrementally increase the firm's capability or alternately, to choose a higher system IV
I or V. However, this will depend on the following factors:

i) Type of organisation: There are three main criteria which influence the type of
organisation:
1) The degree of human capital intensiveness. For example, hospitals,
establishments are highly people intensive and, therefore, likely to lead to
account for human resources. I

2) The number of highly educated or skilled personnel required in hotels or related

services, individually as well as in groups.

3) The number of people occupying similar positions, i.e., each performing

virtually similar functions. For example, chefs in hotels. Large numbers provide
a basis for comparability and of performance and potential as well as data for
purposes of anaiysis.

ii) Size and structure of organisation: A small organisation may not need at all a
formalised human resource accounting system because the management's personal
knowledge of operations. However, the larger the organisation, the larger is its need :
for human resource accounting. Here, the human resource accounting system must
be designed as a subsystem to the overall management information system.
iii) Existing Human Resource Accounting capability: We have already noted from
the matrix (Figure VI) that an organisations PERSONNEL SYSTEMS and human
resource capability will also influence the choice of a human resource accounting
system. For example, an organisation with a computerised human resource
information system can be expected to develop System V capability with much ease
than an organisation with inadequate personnel system.
iv) Potential for Developing HR Accounting: Much of the potential for developing
human resource accounting capability will be judged from the fact of availability of
and accessibility to the required data. In some orgariisations, particularly in service
organisations, such as, hospitality or tourism, being labour intensive, most of the
data is available as a routine aspect of business operations, even though it might lack
the advanced capabilities. In other organisations, where some or all the required data
is not available, the potential for developing human resource accounting is to
intermediate (System 111) capability. Exceptionally, an organisadon may wish to
move directly from minimal to advanced human resource accounting capability.

5.9 PHASES IN THE DESIGN AND IMPLEMENTATION OF

A HUMAN RESOURCE ACCOUNTING SYSTEM
We have noted earlier that different organisations require different degrees of hum?
resource accounting capability. Flamboltz's Systems I to V are not all embracing or
standards to match a specific organisation's human resource accounting needs. Instead,
in each case, an appropriate system will have to be tailor made to a firm's particular
needs. There are five phases in the design and implementation of human resource
accounting system:

1) Identifying human resource accounting objectives,

2) Developing human resource accounting measurements,

3) Developing a data base for the system, ~Lrnan.
Resource
Accounting
4) Pilot testing the system for validity, and
5) Implementing the system.

1) HR Accounting Objectives: The objectives of the human resource accounting

system should basically stem from the management's requirements from human
resource information. These requirements must be defined explicitly. As a part of
the detailed study and analysis of the organisation's human resource management
process, each organisational unit should be responsible for human resource
management, should define its functions, indicate the kinds of decisions made,
their relative frequency and information needed to make those decisions. These
information needs must be analysed in relation to the present information flow and
the new information to be developed mast be made specific. Once this analysis is
done, the basis of the human resource accounting system in terms of its scope and
objectives can be defined. The objective may be a total HRA system, a problem
oriented system, a partial system, such as, a budgeting system for human resource
costs, or setting of standard costs.

2) Developing Human Resource Accounting Measurements: The first step is to

select the types of HRA measurements desired. The choice needs to be exercised
between: (a) single measurement or a set of measurements, (b) monetary or non-
monetary measurements, and (c) measurements of costs or value, or both. In the next
step, before these measurements selected can be translated into useable forms, their
validity and reliability must be tested.
3) .Developing Human Resource Accounting Database: The inputs required for
human resource accounting constitute the database. These include cost data, time
sheets, psychological measurements, etc. In typical cases, it will become necessary
to restructure the organisation's accounting classification with a uiew'to ensuring
that all personnel related costs are classified separately. Otherwise these cost
elements are 'buried' covered in one single cla\zit<cation "administration and
general expenses". The accounting classification should be organised in relation to
responsibility centres, such as, recruitm'ent, training, manag&ent development, etc.
In addition to restructuring the accounting classification, theldatabase must also
include non-financial information, such as, employee attitude survey feedback as a
standard ongoing basis. Similarly, the probabilistic estimates of employee mobility
compiled in the human resource planning process must be taken into account for
measuring human resource value.

4) Pilot Testing the System: After the objectives have & d e f i n e d , measurements
developed, and necessary database is made availahl~,the-next step i s to pilot test the
system. Care should be taken that the test is not ~nfluencedby extraneous problems
and that the management's support and cooperation is available throughout the -
processes of design and development of the \ J stem. In the light of the feedback from
pilot testing, the system should be reviened for its utility, efficiency, cost, etc.
aspects and suitability modified, if considered necessary.

5) Implementing the Human Resource Accounting System: The final phase is the
implementation process. It involves essentially, standardising the input output
documents, forms, etc., and familiarising the personnel with the new system. Staff
orientation as to the uses, purposes, uses and methods is a key activity in order to
operationalise the human resource accounting system without many hassles.
Any system, over a period of time, may become out of step either because of inherent
constraints or changes in the management needs. A continuing review would make the
system more responsive to the changing needs, and modifications required would be
easy to cany out either by simple adjustgents in the existing system or by following the
Resource Development

1) What is human resource accounting? Discuss with reference to a few definitions of

huinan resource accounting.

2) What is cost? Define the following concepts of cost:

a) Original cost b) Replacement cost
d) Opportunity cost

.......................................................................................................................................

......................................................................................................................................
......................................................................................................................................

4) What is value? Define the following terms used, in the context of human resource

i) Individual's value to an organisation.

ii) Groups value to an organisation.

iv) Peer Group Behaviour.

v) End Result Variables.
......................................................................................................................................

......................................................................................................................................
5) What are the methods for valuation of expense centre groups?

......................................................................................................................................

6) Describe the phases in the design and implementation of a Human Resource

Accounting System.
 5.10 LET US SUM UP Human Resource

Human Resource Accounting provides another type of information that holds promise
for the evaluation of human resource management and in turn assists in human resource '

planning policies and practices which invest in effective utilisation of these resources.
Human resource accounting places value on the human assets of the firm,which means
accounting for an organisation's employees among its other resources, measuring both
the cost and the value of the personnel. In other words, it involves accounting for
investment in people and their replacement costs, as well as accounting for the economic
values of people to an organisation. Several models and methods for developing
measures in monetary and non-monetary terms were discussed in the Unit.
However, there seems to be diversity in suggested ways of measuring the investments.
L HRA concept is well theorised, but still there are many questions remaining unanswered,
and the practical problems of gathering data and reliable measures of costs and values
have been overwhelming. Further, human assets are outside the concept of "ownership"
C
and so far there are no clear-cut methods to measuring the "changing characteristic" of
human resources, in a wholly convincing way. Nevertheless, much of the value of
human resource accounting lies in encouraging managers to consider investments in
manpower planning in a more positive way. As management the HRA concept itself,
represents a new way of thinking about people as assets. It has a great potentia/for
"
future research in the hospitality sources.

L
5.11 KEY WORDS
Investment Approach : denotes policy of treating certain human
resource costs as an investment to be
depreciated during an employee's expected:
employment.

Humanistic Values : refers to positive beliefs about the potential

I
and desire for growth among employees.

Incremental Values : indicates almost limitless values that are

created by a positive'organisational climate.

Organisational Climate : refers to human environment within which an

4
organisation's employees work. -

' Organisational Climate Approach : necessitates use of periodic surveys to

determine ways in which the organisational
climate has improved or deteriorated.

5.11 CLUES TO ANSWERS

[check Your Progress I

I ) Human Resource Accounting may be defined as the measurement and reportiig of
the cost and value of people as organisational resources. It involves accbunting for
investment in people and their replacement costs as well as accounting for the
economic values of people to an organisation. Read Sec. 5.2 and answer in detail.

2) Cost is a sacrifice incurred to obtain some anticipated benefit or service.

Conceptually, all costs have "e~pense"and "asset" component. See Sec. 5.5 to find
the definition of the various concepts of costs.
Block 1 Human 3 j The original aost of human resources refers to the sacrifice that would have to be
Resource Development incurred to acquire and develop people. This means that any attempt for
measurement of original .buman costs essentially requires measurement of
acquisition costs and training costs. These costs will include both direct costs and
indirect costs of acquiring and developing human resources. See Sec. 5.5 to check
out the figure of the model of Measurement for Original Human Resource Costs.

4) Value is the present worth of the services an employee is anticipated to render in the
hture. Read Sec. 5.6 to find the definition of the related terms.

5) Flamholtz proposes three methods for valuation of expense centre groups using
surrogate measures for their valuation:
. i) Capitalisation of Compensation,
ii) Replacement Cost Valuation, and
iii) Original Cost Valuation. 9

See Sec. 5.7 to learn about them in detail.

6) There are five phases in the design and implementation of human resource
accounting system. They are: a

i) identifying human resource accounting objectives,

ii) Developing human resource accounting measurements, l

iii) Developing a data b p e for the system,

iv) Pilot testing the system for validity, and
v) Implementing the system.
See Sec. 5.10 and expand the above answer.
UNIT 6 JOB EVALUATION:
CONCEPT, SCOPE AND LIMITATION

6.0 Objectives
6.1 Introduction
6.2 Need for a Rational and Equitable Pay Structure
6.3 Job Evaluation and Its Objectives
6.4 Anomalies in Salaries and Theory of Relative Values
6.5 Basic Assumptions in Job Evaluation
6.6 Trigger Points
6.7 Advantages of Job Evaluation
6.8 Areas of Application and Evaluatory Phases
6.9 Problems Associated with Job Evaluation
6.10 Let Us Sum Up
6.11 Clues to Answers

6.0 OBJECTIVES
After reading this Unit you will be able to:
develop an understanding of the concept of job evaluation, its scope and limitations,
appreciate the need for a rational and equitable pay structure, and
take note of the historical developments with regard to the application of the
technique of job evaluation.

6.1 INTRODUCTION
Productivity for any organisation or enterprise depends, to a great extent, on the morale
and motivation of the employees of that organisation1 enterprise. One of the principal
factors affecting the morale and motivation is the "pay policy" and "pay structure" of the
organisation. Assuming, we have two sections or categories of employees, say Category
A and Category B. The former has a salary structure higher than that of the latter. The
latter category has a feeling (real or imaginary) that the duties and responsibilities of the
former are not more onerous than theirs. This feeling could lead to frustration and
lowering of morale, productivity and poor service. An organisation needs a system which
will attempt to prevent such situations to develop and to resolve them to the satisfaction
of all concerned where such situations discern themselves. This sort of system is
specially needed in case of hospitality sector, where many pkople are employed
according to the need and specifications of a particular service. Disgruntled employeed
in contact with customers will end-up projecting a poor image not only of the
organisation but also of the destination as a whole. This Unit is intended to identify such
a system. It starts with highlighting the need for a rational pay structure and goes on to
deal with other issues like setting the objectives for job evaluation, relationship with
wages, advantages and areas of applications, etc. It also takes into account the problems
related with job evaluatian.

6.2 NEED FOR A RATIONAL AND EQUITABLE

PAY STRUCTURE
As wages are probably the most important single element in conditions of employment,
they have naturally always raised difficult issues in negotiations between employers and
 Human
B I O C ~I employees. These issues concern not just the general level of salary received by
Resource Development employees but also the differences in wages amongst them. These differences are of
many kinds. They exist as between countries and, within each country, as between
industries or groups of industries. Moreover, within any industry there are usually salary
differences as between individual, regions, firms or plants and within the latter as
between different departments. Many of these differences may reflect differences in
occupational content - quite apart from the fact that employees engaged in the same type
of work may receive quite different salary according to their length of service, working
conditions, personal performance or for a host of other reasons.
Among the many pay problems regularly confronting enterprises throughout the world,
those associated with internal pay differentials are amongst the most common. The
difficulties normally arise from the belief by certain employees that the position they
occupy in the existing jobs. But responding to such concern by means of upward pay
adjustments does not necessarily represent a solution as other employees with whom
comparisons are traditionally made, may not accept having their relative position
deteriorate in this way. Continuing ad hoc modifications to pay structures risk
undermining faith in their rationality and initiating a series of conflicting pay claims.
The way to resolve such difficulties lies in planning and developing to the extent
possible, a common understanding amongst all the employees and the management
concerned on what the pay structure shquld be. This is especially true in the case of
various segments of the hospitality industry, where, as you know, a large number of
people are employed on a seasonal or temporary basis. This employment can be only
during the peak season or for a special delegation or for a special event and so on. A pay
structure has to be followed so that no bad feeling is there between these temporarytpart
time employees and permanent -employees. A few professionals working as
specialists/consultantson a contract basis with one or more organisations would employ
them in case of a need for such professionals. A uniform pay structure is a morhl booster
for all involved.

6.3 JOB EVALUATION AND ITS OBJECTIVES

Job evaluation is thi process of establishing the value of jobs in a job hierarchy. Job
values may be determined by negotiation or fixed on the basis of broad assumptions
about market rates and internal relativities. Job evaluation is a comparative process
based on a whole series of tasks, responsibilities and obligations, including the skills,
knowledge and mental agility required, qualities of initiative, reliability of the employee
and so on. It aims at establishing pay structures that are fair and equitable in the sense of
ensuring equal pay for jobs demanding what are considered to be broadly similar
sacrifices and of rewarding appropriately the greater efforts and hardships involved is
some jobs as compared with others.
Through the process of job evaluation one will be able to compare jobs by using a
common criteria to define the relationship of one job to another. This gives us the basis
for grading jobs and developing a pay structure. In this way, it seeks to minimise the
dissatisfaction associated with pay differentials and thus to contribute to more
harmonious human relations at the work place.
In short, job evaluation concerns itself with pricing a job in relation to other jobs on
the basis of a consistent, fair, logical and equitable criteria and not on the basis of
arbitrary; variable judgements dictated by short-term expediency or arrived at
through rule of thumb methods. While one may get the impression that as a technique,
job evaluation is invariable and inviolate and it also possesses first-degree precision of
scientific variety, it is not so in practice; for, in the ultimate analysis, it is essentially a
way of applying judgement, and since no evaluatory process can eliminate the need for
exercising judgement, howsoever systematic it is or may be, it will always remain
captive to human traffics; additionally so because the technique is to be administered by
 people and for people in the live-organisation world of work. We must remember that ~ o Evaluation:
b Concept.
job evaluation is about relationships, and not absolutes. Therefore, job evaluation cannot Scope and Limitation
be the sole-determining factor for deciding pay structures. Jobs have intrinsic value -
such as, whether the tourist guide is worthy of his or her services being hired. Still, it is
not possible for us to determine what that value is in monetary terms unless we take into
account the pressure of supply and demand, internal differentials and feelings about
equity, in that order. Job evaluation is, therefore, an attempt to find a measure by which
the relative payments made to different jobs are internally consistent.
Therefore, the primary objective of job evaluation is also to find out the value of work.
But this is a value which varies from time to time and from place to place under the
influence of certain economic pressures, not least of which is the worth of money itself.
Nevertheless, the value of work at a specific time and place is absolute, governed by
supply and demand, and related to the value of all other work. The aim of job
evaluation is not to create a rate, but to discover what that rate is at that time and
in that place.

6.4 ANOMALIES IN SALARIES AND THEORY OF

RELATIVE VALUES
You have been told earlier that the most common anomaly is related to irregularity
between salary paid and work done by an employee. While this may be a source of
dissatisfaction and may appear to be anomalous, it is in fact only anomalous if
transference from one job to another is excluded from the criteria. For instance, the case
of the old employee who is retained at a salary i" excess of the value of the work he or
she does is not anomalous unless we expressly exclude 'length of service' from the
criteria. This goes to prove how important it is that the criteria should be properly
defined and understood lest every difference should be thought to be anomalous.
The concept of job evaluation is based on the theory of relative values, a theory which
broadly implies that the value of anything depends on and is influenced by the values
of other things. Thus, the value of work is relative to the value of other work, and so
can be determined only by comparisons between different kinds of work. The effect of
this is seen when, if the salary for a job is raised, then the value of the salary paid to
another job not so treated, is lowered. To restore the status quo ante it is necessary to
raise the wage of the second job proportionately. Another part of this theory is that
because of the internal and external economic pressures, the salaries that are to be used
as indicators for finding out what work is worth should not by themselves be anomalous,
otherwise, the evaluation will be affected by the anomalies themselves and so would
become unreliable.

6.5 BASIC ASSUMPTIONS IN JOB EVALUATION

. Job evaluation is based on certain basic postulates, i.e., claims/assumptions:
The work must have some intrinsic worth when judged against certain criteria,
but that whatever this worth may be it will not necessarily be the same as the dalary.
Implicit in this assumption is that these criteria can be identified, specified and
quantified. These criteria are in terms of the human characteristics or qualities that
are required to do the work satisfactorily. Further, these characteristics are supposed
to be in short supply in relation to the demand placed on them. The usual
characteristics or factors are skill, responsibility, physical effort, mental effort and
working conditions.

It is logical to pay the most for jobs which contribute most to attain the
organisational objective(s).
Block 1 Human a The enterprise goals are better served and furthered by installing and maintaining a
Resource Development job-cum-pay structure based on relative job worth.

worth of job. -
.There is a broad, if not critical, consistency between pay structures in an
organisation evolved on the basis of job evaluation and that in the outer community

The relative worth of jobs is not easy to gauge. By far, the most important element in
job price is the content factor. The content consists of duties and responsibilities of the
post, the difficulty level(s) encountered by the incumbents, demands that are made by the
post on job holder in terms of mental, intellectual, physical and environmental
. requirements for the due discharge of the duties attached to the post. These obviously are
central points related to the post and, hence, are basic to the determination of the base
rate for the job. Pay or salary structure may thus be seen to consist of the following:
The job rate which is relatable to the importance of the job, the responsibilities
involved in it, skill levels and pattern of experience needed for adequate job
performance, and the mental and physical demands made on the job incumbent.
Special or personal allowances connected with long service, skill scarcity,
recompense for personal or social inconvenience.

Fringe benefits like holidays with pay, pensions, life insurance, car, etc.
Payments associated with reward according to performance (payment by result
scheme, merit rating or profit sharing schemes, such as, sharing of commission in the
hospitality sector, share of production plan, etc.)
The economic pressures affect the salaries and they have to be altered accordingly.
The basic evaluations of the work are not affected by such pressures. Once the
differential has been determined between job and job, it remains unchanged as long
as the system itself endures. The evaluation depends upon the criteria and so long as
the criteria do not change, the evaluation should remain as it were.
Like everything job evaluation decays. It might begin to decay even before-pit is
completed and implemented, and can be kept in good order only by carefit1 maintenance.
But once a system has begun to collapse the best maintenance possible will not restore it
and it will need to be replaced by another system.

6.6 TRIGGER POINTS

The trigger points for initiating job evaluation exercises in an organisation are basically

disillusion with the existing remuneration patterns, and

a realisation that prevalent salary structure will soon lose validity or situational

conditions of growth or shrinkage.

Besides these two the:

a technology-change brings about variation in job nature, and difficulty levels, and .
 organisations face difficulty in attracting potential recruits or retaining the existing Job Evaluation: Concept,
ones because of a feeling that the remuneration system is too complex, inadequate or '
Scope and Limitation
unfair leading often to management-employee bickering about pay. In short, the need
for job evaluation arises because of technology change and organisational growth.
The job evaluation~processthus initiated has to take care of the factors affecting the jdb
value in the organisation concerned. The main factors affecting job values or pay
structures are market rates, negotiated pay scales and internal relativities and feelings

In general terms job evaluation is used to create two dimensions of relationships. The
first is the vertical relationship within a sector of an organisation where the basic skill is
similar. Here the order of seniority may be obvious, but the spacing of the rungs on the
seniority ladder needs to be established. How much more, for example, should the Senior
Tour Executive be paid than Tour Executive? The second dimension is the lateral
relationship between jobs of a different nature. For example, how should one relate the
values of similar jobs between the tours and travel departments? and so on.

6.7 ADVANTAGES OF JOB EVALUATION

The management-employee relationships are improved and strengthened by increasing
the appreciation of each side's aspirations and viewpoints. When there is a pervasive
goodwill in the organisation based on mutual understanding of management-and-
employee over the principle irritant, that is, the pattern of payment and overall
compensation structure, the organisational goals are more effectively realised, personnel
growth and development stimulated, and mutually profitable partnership programmes are

Job evaluation deals with actual facts, and not what is thought of (by management or
employees) as facts regarding jobs; it centres around commonality of previously
determined criteria so as to enhance objectivity and consistency in factor analysis and
value assessment. Further, it seeks to avoid all ad hocism, arbitrariness and expediency
in dealing with pay matters, not only to provide a disciplined framework for all
organisational pay decisions, but to also promote positive acceptance of such decisions.
The advantages flowing from it benefit all in the organisation - management, employees,

1) Management has the advantage of greater order in its pay arrangements h d more
stable pay structure, and benefits from looking at its pay problems in a more ,

disciplined way;

2) Employees benefit because job evaluation provides an agreed framework for settling
questions affecting jobs and so helps to prevent arbitrary, i.e., random decisions. It
also helps to ensure that differences in skills and responsibilities are properly
recognised and that when people increase their skills or take on more
responsibilities, they are rewarded suitably;
3) Everyone benefits from a system which enables the pay for new and revised jobs to
be settled in the same way as pay for existing jobs, because it helps to prevent

An additional rationale for reforming the payment systems through this technique stems
from the important fact that it, thus, leads to reduction of lost time, reduction in salary
anomalies and a number of salary disputes, and improves morale. Several other by-
product benefits also accrue from the data gathered (for job evaluation) through job
 -- --
Block 1 Human AREAS OF APPLICATION AND EVALUATORY
Resource Development
6.8
PHASES
It is now an established fact that job evaluation can be used to developgay structures for
hourly or weekly paid clerical employees as much as for managers, executives,
technicians and professionals. Areas of application can be summarised as:
Phase I : Preparatory
a) Preparatory work concerned with policy, programme, planning and communications,
b) Selection of the job evaluation method most appropriate to the circumstances of an
organisation and tailoring it to fit the requirements of that organisation,
c) Establishment of the necessary procedures and training of those applying the
scheme.
Phase I1 : Analysis and Assessment
a) Indication to the employees concerned what the objectives of the job evaluation
exercise are and how the exercise will be carried out,
b) Description analysis, and evaluation of jobs to define job relationships.
Phase I11 : Building and Pricing the Structure
a) Positioning ofjobs into a number of grades,
b) Financial evaluation of grades.
Phase IV : Negotiation, Implementation and Control
a) Where applicable, negotiation of the new pay structure;
b) Implementation of the new pay structure, perhaps on phased basis;
c) Establishment of procedures to evaluate new and revised jobs and for maintenance
of the system.

6.9 PROBLEMS ASSOCIATED WITH JOB EVALUATION

At the inception of a job evaluation application, many problems will arise - human,
technical and economic. Experience shows that most of the human problems are based
on or stem from the economic and technical ones. If people are ignorant as to what job
evaluation holds for them it must be because the technique of communication has failed.
If as a result of the application people are worse off than they expected to be, or not so
well off as they hoped to be, something could not have been made clear in the first place.
Nevertheless, there are bound to be some human problems which are not entirely
technical in their origin. A lot of the problems will depend on the history of employee-
management relationships in the establishment, so that difficulties encountered in one
organisation will not necessarily be found in another.
Sometimes job evaluation forms part of a productivity deal, though it is hard to see just
what the two things have in common. There are many instances where employees have
literally been bribed to accept job evaluation in return for an increase in wages. This is
typical of the confusion that exists between salary and job values.
Another important problem confronts the employees who cannot resolve whether to
cooperate in an application ornot. Quite understandably they feel that once they accept
the idea they will find themselves constrained by the system, unable to'argue objectively
against 'the book'. What is essential here is that everyone should regard the evaluation
simply as a basis for negotiation rather than the actual salary?
 The technical problems will mainly concern the management, although nf course if ~ o Evaluation:
b Concept,
employees' representatives are to be included they too will need to understand the Scope and Limitation
technique that is to be used. Such questions as: which is the best system?; who is going
..to install it?; who is going to operate it?; do we have employee participation and if so
how do we go about it?; when shall we start and how long will it take?; what problem
are we likely to find in running and maintaining the scheme?; will all require to be
resolved. The sooner they are answered the better and certainly before the concern
become too much involved. Not least of the technical problems will be to design the
system's0 that it fits the complex shape of the organisation in which it is to be used.
Seldom is it possible to find a readymade system which does not require some moulding
and reshaping if it is to work satisfactorily. Tailoring a particular system to suit
individual circumstances is often the most difficult part of the introduction.
The economic problems will be of concern to all, though for different reasons.
Management will be anxious about the cost of the application (for obviously the amount
of work involved is quite considerable) and about the proceeds, tangible and intangible,
that are likely to accrue. Apart from the cost of introducing and running the scheme there
may be wage adjustments, based on the evaluation, which can be quite expensive.
So far as the employees are concerned they will want to know what happens to the jobs
that are underpaid compared to their evaluation. If their rates are raised then the others
will by comparison be automatically lowered. Will job evaluations cause redundancy? It
, is difficult to see why it should, yet it would be extremely foolish to guarantee that it will
not (or indeed that the use of any management technique will not).

Check Your Progress

1 ) What do you understand by Job Evaluation? What is its objective?

......................................................................................................................................
......................................................................................................................................
......................................................................................................................................
......................................................................................................................................
2) What is the "Theory of Relative Values"?
......................................................................................................................................
......................................................................................................................................
......................................................................................................................................
......................................................................................................................................
3) When do most organisations take a fresh look at their wage structure?

s ...................
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UNIT 7 JOB ANALYSIS AND JOB DESCRIPTION
Structure
Objectives
Introduction
Job Analysis and Related Terms: Definition and Uses
Job Description, Job Specifications and Job Analysis: Linkages
Job Requirements versus Personal Qualities of Job Holder
Information Collection Methods
Design of Job Description
Uses of a Job Description
Let Us Sum Up
Clues to Answers

7.0 OBJECTIVES
After going through this Unit, you should be able to:
define the concepts ofjob analysis and job description,
identify the process ofjob analysis, and
identify the structure and uses of job description.

One of the aims of this course is to acquire or enhance your knowledge about the modern
Human Resource Management concepts and techniques. This should, undoubtedly
improve your skills.as a manager, especially as a manager of people working at different
levels in hospitality industry. You will also appreciate that an effective manager is one
who is able to handle his or her people efficiently. In order to be a good manager of
people, it will also be imperative for you to have an adequate understanding of the jobs
assigned to them as also the relative job differentials in terms of their level of difficulty,
responsibility, knowledge and skills. In this Unit, we shall be dealing with the concepts
and techniques ofjob analysis and job description.

7.2 JOB ANALYSIS AND RELATED TERMS: DEFINITION

AND USES
Job analysis refers to the process of examining a job to identify its component parts
and circumstances in which it is to be performed.
There exists a wide range ofjob evaluation methods. The choice of an evaluation method
is dependent on the number and kind of jobs to be evaluated, the cost of the operation,
available resources, the degree of precision required and the organisations' environments
- both internal and external. However, whatever be the chosen method, systematic
gathering and analysis of information about jobs is a prerequisite. The central concern for
a job analyst should be to treat jobs as units of organisation. Job analysis viewed thus will
act as a tool which provides the informational base for a wide range of organisational and
managerial functions. Job analysis, in this sense, should be purposeful and performed
professionally as an ongoing organisational activity. The purpose is to gather, analyse
and utilise information about jobs. This -information is extremely valuable to make
decisions relating to organisational plarming and design, recruitment and selection of
personnel, their training, appraisal and development and other managerial functions.
Thus, Job analysis is the foundation for both job description and job evaluation.
lock 1 Human The job analysis process involves gathering of such information as:
Resource Development
a) What the employee does?
b) How the employee does it?
c) Why the employee does it?
d) The materials, tools and procedures used in the conduct of the work,
e) The physical activities involved in the performance of the work,
f) The conditions under which the work is performed,
g) Typical work incidents and work patterns, etc.
Each of these pieces of information is essential in determining the level of work and
responsibility and the knowledge, skill and abilities needed to perform them to an
acceptable level of proficiency. This is also relevant for customer care which is crucial in
any service-based industry like hospitality.
The process of assembling and recording information on such essential
characteristics of jobs is known as job analysis. In other words, jobs are subjected to
analysis to find out precisely what the duties, responsibilities, working environment and
other requirements of a job are and to present these in a clear, concise and systematic
way. Job analysis should be undertaken by trained job analysts working in close
collaboration with managers and jobholders.
As explained earlier, job analysis involves a systematic examination of jobs in order to
uncover the nature of the Easks performed, the working conditions under which they are
carried out, the responsibilities entailed and the skill required. Formerly, job analysis was
the only way to analyse a job and help in human resource planning. Nowadays, task
analysis also helps in the human resource development. (You will read about task
analysis in a subsequent Unit).
Apart fiom job evaluation, the information gathered through job analysis may be used for
a wide range of personnel and general management decisions, such as, the recruitment,
selection, promotion and transfer of staff, performance review and appraisal, manpower
planning, the design of training programmes and organisational analysis. It is indeed an
essential part of any modern personnel management system. The kind of information
gathered through job analysis varies considerably, depending on the specific uses to be
made of it. Accordingly, job analysis programmes are usually tailor-made for the
purposes in view. In practice, however, their main use is most often job evaluation.

7.3 JOB DESCRIPTION, JOB SPECIFICATIO.NSAND JOB

ANALYSIS: LINKAGES
Job description is a broad statement of the purpose, duties and responsibilities of a
j ~ bor position. A job description is based on a detailed job analysis and usually
summarises the essential information gathered through job analysis. It describes the main
tasks and responsibilities of the job clearly and concisely in order to facilitate the
systematic comparison of jobs for evaluation purposes. The kind of information and
amount of details contained in the job descriptions depend on the job evaluation plan to
be used. However, in all cases they must be standardised and uniform phraseology should
be used. If job characteristics are set out differently from one job to another, systematic
comparisons are likely to be hampered and one of the main advantages of job evaluation
will be lost right fiom the beginning.
Before we examine in detail the two cornerstones of job evaluation, viz., job analysis and
job descriptions, we should mention a complementary means of describing jobs, namely
by job specifications. These usually involve a listing of the personal qualifications
regarded as necessary for satisfactory performance. Job specifications are mainly used in
 selecting and recruiting staff and are accordingly not essential to job evaluations. But Job Analysis and Job
certain personal attributes, such as experience, education and aptitude, may occur in both, Description
the job description as well as the job specification. Many job evaluation plans
accordingly use job specifications to complement job description.

7.4 JOB REQUIREMENTS VERSUS PERSONAL

QUALITIES OF JOB HOLDER
It needs to be kept constantly in mind that job analysis seeks to determine job
requirements as opposed to the personal skills of the incumbent. Of course, job content
and jobholder's aptitudes often tend to influence each other. Generally speaking,
independent work encourages personal influence on job content whereas team work or
work entailing the use of elaborate equipment reduces it. It is, however, very rare for job
content to be so rigidly fixed that it leaves no room for any personal influence by the
jobholder. Conversely, a job is rarely so extensively affected (this may not be true in
certain jobs in hospitality and tourism) by the holder that it is impossible to arrive at any
idea of its content without considering his or her personal attributes. The job of a
marketing manager, for example, has certain basic requirements, which are definable
quite irrespective of the qualities of the incumbent. It is these basic requirements that are
the focus ofjob analysis.
A jobholder can be thought of as bringing to his or her work-knowledge, physical and
mental abilities, and other personal attributes, such as tact, initiative and assiduity, which
one is called upon to use as the work may demand. But irrespective of individual
differences related to innate ability, motivation, level of education, age and character, the
. nature of the job makes certain demands on him or her. Since job analysis focuses on the
job and its requirements, those personal qualities and characteristics of the incumbent not
directly required by the job have to be disregarded. This procedure of "distilling" from
the activities involved in the iob those qualifications deemed necessary and sufficient for
the job, and a simultaneous- systematic abstraction of the incumbent from the job, is
essential to job analysis.

7.5 INFORMATION COLLECTION METHODS

A variety of methods are available for gathering job information. The method that was
historically linked to the concept of job analysis was observation which was
supplemented by the interview. In recent years, questionnaires, diaries, self-reports by
employees and checklists have been experimented with different degrees of success.
There are three main methods to gather and verify information needed for each job,
namely (i) questionnaire to be filled-in by the employee and his or her immediate
supervisor, (ii) an interview with the employee and his or her supervisors, and (iii) direct
observations at the work place. There are also other sources of information which help
the analysts to get a complete and clear picture of the job in question. The job analyst
could use one of these methods or a combination of more than one of these methods
depending on the work situation.
The relative advantages and disadvantages of these three methods are discussed below:

i) The Questionnaire
The use of a questionnaire has a number of advantages. First of all, it is the most cost-
effective method, since it can elicit information from a wide number of employees and
their immediate superiors in a relatively short period of time. The main task of the analyst
becomes one of planning the questionnaire well and checking the responses provided.
Secondly, employees take an active part in completing the questionnaire, providing
intimate detailed knowledge of their jobs which is not available elsewhere. Thirdly, the
questionnaire has to be structured in advance, and this facilitates the processing of the
1
B I O C ~1 Human results. In some cases, once the responses to the questionnaire have been verified, they
Resource Development can conveniently be used with little further processing to prepare a job description.
The questionnaire method does, however, have disadvantages - some of them serious. To
start with, the people required to complete it must have a certain level of education, and
even then questions may be interpreted in different ways so that the answers may be
beside the point. Furthermore, not everyone is able to describe fully and exactly the tasks
that constitute their job. One may, for example, over-emphasise some features of it and
completely ignore others even when they are important. There is less risk of this with a
detailed questionnaire that includes a checklist of points, but questionnaire suited to all
jobs is not easily drawn up and may be unduly long. In practice, while a well-structured
questionnaire can get essential information quickly, it is virtually impossible to get
complete comparable information solely by questionnaire, and this method is generally
used in combination with interviews and direct observation.
While designing a questionnaire, nature of jobs to be evaluated and the job evaluation
plans/methods are to be considered. At the manual or unskilled employees' level such as
cleaner, housekeeping attendants, etc., the job analysis consists of a simple description of
actions taken in order to complete the job. In this case, a plain narrative statement would
serve the purpose of job analysis. But, as one moves up in the hierarchy of the
organisation, the complexity of the job increases, and it ceases to be self-explanatory.
The role of the night clerk, for example, his or her place in the organisation and the
implications of the work and its effects on others, both alongside, above and below him
or her are not self-evident. All this requires to be clearly put down. At a higher or
managerial level, the issues become more complex and hence the need for job analysis is
definitely greater. A similar situation exists in the case of service sector where the
employees are in direct touch with the consumers.

ii) Interview .
In practice, an interview is almost always necessary in order to obtain precise, complete
and comparable information. The interview conducted by the analyst is an effective way
of checking on the information already available on job. The analyst asks the jobholders
on the duties and main tasks on their job, generally working from a previously prepared
list of questions as with a questionnaire. To know the full extent of a job through the
interview, the analyst aims to obtain all the relevant facts about the job, such as:
the title of the job holder,
the title of the job holder's superior,
the job titles and numbers of staff reporting to the job holder (This information can
best be recorded by means of an organisation chart) and
a brief description of the overall role or purpose of a job.
After the interview, the analyst draws up a report which is shown to the jobholder and his
or her immediate superior for approval. The analyst, this way deals straightway with the
question of why the job exists at all. It is a fundamental question and is not always
clearly understood by the jobholder. The analyst usually drafts the report in the form of a
job description, which effectively speeds up the preparatory work of job evaluation. It is
not always easy to separate purpose Erom a description of activities, but it is important for
an analyst-to do so. For example, one might describe that the job of the manager is to
supervise the range of activities taking place in lobby of a hotel. It would be wrong on the
analysts' part to describe this as the purpose of the job. The purpose should show the
necessity for the above is to act as an intermediate and coordinating link in the ,

management chain, so that the general manager of hotel operations can adequately
control the whole operation through a team of a manageable size.
Interviews are not only time consuming but also a difficult task of finding high quality
analysts who can win the jobholder's confidence. As has been noted, "too many imagine
interviewing to be relatively simple whereas nothing could be farther from the truth."
 Obtaining information from a jobholder about his or her job is not an easy task. Many Job Analysis and Job
workers show a natural distrust of the analyst who comes tol examine their work, whilst Description
others will give a lot of information, much of it useless. It is accordingly essential to have
a well trained and experienced team of analysts if the interview is to be the only method
used.

iii) Observation
Repetitive work is most suitable for direct observation of what the jobholder actually
does. Direct observation by the analyst can clear up points left unclear by the interview or
1 questionnaire and give him or her an idea of the personal qualifications required, but the
I sight of an analyst in the work may well cause some stress and workers may dislike being
I observed. Observation is almost useless where the job calls for considerable personal
judgement or intellectual ability, as in managerial or administrative jobs, it cannot
possibly comprehend all the tasks in a work cycle that covers a week or month or that
entails changes of tasks only at long intervals. Other than this a skilled and experienced
person might make a difficult task look easy whereas, untrained and inexperienced
person can make an easy task look difficult.

7.6 DESIGN OF JOB DESCRIPTION --- -

A primary output or result of job analysis is a job description. Information obtained by

' job analysis is shifted and recorded concisely, clearly and fully in the job description. The
job description must assemble all the important elements of a job, such as essential tasks,
responsibilities, qualifications required and the functional relation of the job to other jobs.
There is no universally accepted standard format for job description for the reason that
the form and structure of the job descriptions must depend on the kind of work being
analysed and the job evaluation plan being used. For example, if the job evaluation plan
comprises factors such as physical and intellectual effort, knowledge, skills,
responsibilities and working conditions, it follows that job description should be
structured to reflect these factors so as to facilitate factor by factor comparison and
evaluation of jobs. With non-analytical methods, job descriptions may be more flexible
and simpler but must specifj. the title of the job and its position in the organisation,
summarise the tasks performed and list the skills and abilities required. A complete job
description should, therefore, rightly contain three categories of information:
job mission and location,
the work performed, and
the context in which the action takes place.
With non-analytical methods, job descriptions may be more flexible and simpler but must
specify the title of the job and its position in the organisation, summarise the tasks .
performed and list the skills and abilities required. While writing a job ,description one
should be brief, factual and precise as far as possible. It will be helpful to follow the
following guidelines while writing a job description:

1) Always be accurate about what is expressed.

2) Omit expressions which are attributes - such as uninteresting, distasteful, etc.

3) -
Personal pronouns should be avoided if it is necessary to refer to the employee,
the work 'operator' or 'so and so executive' may be used.

4) Do not describe only one phase of the job and give the impression that all phases are

5) Generalised or ambiguous expressions, such as 'prepare', 'assist', 'handle', etc.,

should be omitted unless supported by data that will clarifj. them.
Block 1 Human
Resource Development
6)

7)
All statements should be clearly and simply set down - promiscuous use of
adjectives only reflects one's own opinion.
Describe the job as is being done, by the majority of workers holding the
I
designation.
8) Write in simple language - explain unusual technical terms.
9) Description of a job which is part of teamwork, should establish the team 1
10) The length of description is immaterial, it is not expected even with printed forms
that all job descriptions should be of equal length but write concisely.
1 1) When the job analyst finds that the data he or she has to work with is insufficient, he
or she should stop until sufficient data is available.
12) Put the date of completion of each description and revise it as often as changes in
jobs and occupation require.
13) Job description should have the concurrence of the concerned supervisor.
14) Description should contain the initials of the persons who compile them.

I
7.7 USES OF A JOB DESCRIPTION
I
I
Apart from being a basis for job evaluation, the job descriptions can be put to many uses.
These are as under:
a) Supervisor - Employee Communication
The information contained in the Job Description outlines the work which the incumbent
is expected to perform. Hence, it is an extremely useful document for both the supervisor
and the subordinate for purposes of communication. Furthermore, it helps employees to
understand just what work their associates are expected to perform, thus, facilitating
integration of efforts at the work-site by the employees themselves.
b) Recruitment, Selection, Promotion, Transfer
Information pertaining to the knowledge, skills and abilities required to perform the work
to an acceptable standard, can be used as a sound basis on which to base standards are
procedures for recruitment, selection, promotion and transfer.
c) Work Performance Appraisal.
To be sound and objective, a performance appraisal system must be rooted in the work
performed by the employees, such work is indicated by the duties in the job description.
In such an approach, using each duty as the basis for discussion, the employee and the
supervisor agree on work performance goals for the peridd to be covered by the
subsequent evaluation report, they also agree on the criteria to be used to determine the
extent to which the goals have been attained. The reports resultink from this methodology
minimize subjectLvity by focussing attention on the job, as distinct from the personality
traits, habits or practices of the employee. As a csnsequence, the results are more factual,
valid and defensible than is the case in other types of systems.

These three processes are closely interrelated. The job description showing, in specific
terms, the knowledge, skill and ability requirements for effective performance of the
duties, is a sound and rational basis for each of these processes. Analysis of various types
of jobs at progressively more senior levels will indicate logical sources of supply for
more senior posts, as part of manpower planning, it will also indicate the gap to be
bridged in terms of knowledge, skill and ability, thus providing a sound basis for
preparing job-related training and development programmes.
 e) Industrial Relations Job Analysis and Job
I Description
Frequently issues arise in the industrial relations field wllich have their origin in the work
to be undertaken. In these instances the job description may be used to form a factual
basis for discussion and problem resolution.
f) Organisation and Procedure Analysis
The duties and responsibilities outlined in the job description may be used to great
advantage by management in analysing organisation and procedures, because they reveal
how the work is organised, how the procedures operate and how authority and
responsibility are apportioned.

Check Your Progress

1) Define Job Analysis.

......................................................................................................
......................................................................................................
......................................................................................................
......................................................................................................
2) What are the uses of Job 'Analysis?
......................................................................................................
.......................................................................................................

......................................................................................................
3) How would you gather job information?
......................................................................................................
......................................................................................................
......................................................................................................

4) Mention some guidelines for writing a job description.

. 7.8 LET US SUM LTP

Jobs are subjected to analysis to find out precisely what the duties, responsibilities,
working environment and other requirements of a job are and to present these in a clear,
concise and systematic way. The information gathered through job analysis can be used
for a wide range of personnel and general management decisions. Job analysis is also a
prerequisite to preparing job descriptions. In fact, job descriptions summarise the
essential information gathered through job analysis. The various concepts and methods
discussed in this Unit are useful in tourism industry as they are in any other.
Block 1 Human
Resource Development
7,9 CLUES TO ANSWERS
Check Your Progress

1) Job analysis refers to the process of examining a job to identify its component parts
and circumstances in which it is to be performed. Read Sec. 7.2.
2) The main use of job analysis is job evaluation. Apart from job evaluation, the
information gathered through job analysis may be used for a wide range of personnel
and general management decisions. Read Sec. 7.3 and answer.

3) There are three main methods to gather and verify information needed for each job,
namely:
a) questionnaire to be filled in by the employee and his or her immediate
supervisor,
b) an interyiew with the employee and his or her supervisors, and
c) direct observation at the work place.
Read Sec. 7.7 and expand the above answer.

4) A few guidelines while writing a job description are:

i) always be accurate about what is expressed.
ii) quit expressions which are attributes, such as, uninteresting, distasteful, etc.
iii) do not describe only one phase of the job and give the impression that all phases
are covered.
Read Sec. 7.9 and list a few more guidelines.

Activity C

.- .
1). Make job analysis questionnaire for following jobs:
a) Lobby Manager
b) Coach Driver

2) Give job description of following:

. a) Tourist Guide (Wildlife)
b) Travel Agency Sales Manager
c) Public Relations Officer (Hotel)
, UNIT 8 JOB EVALUATIONMETHODS
I

Structure
Objectives
Introduction
Job Evaluation Methods and Job Ranking
Job Classification or Grade Description
Point Rating
8.4.1 Preparing an Evaluation Plan .
8.4.2 Advantages and Disadvantages
The Factor of Comparison Method
Recent Developments in Job Evaluation
Let Us Sum Up
Clues to Answers

8.0 OBJECTIVES
After reading this Unit, you should be able to :
identify and develop an understanding of the methods of job evaluation,
know about the steps involved in the application of various methods.
appreciate the relative advantages and disadvantages of various job evaluation
methods, and
have a knowledge of the recent developments in job evaluation.

8.1 INTRODUCTION
Inequidble salary relationships affect adversely employee motivation and morale with
severe loss to the organisation's economy and effectiveness of operations. The general
principle of job evaluation, as you have been told in previous Units, should be "equal pay
for substantially equal work" and its corollary of variation in rates of base pay in
proportion to subitantial differences in the difficulty, responsibility and qualifications
r~quirementsof the work performed. It should also be entirely compatible with prevailing
economic and political philosophy.
This Unit attempts to identify and discuss various methods that have been in use in
identifying job similarities and job differentials. Grouping of positions in an organisation
into relatively few groups of similar positions or classes simplify the job of managing
people in many respects and helps to develop a rational wage structure for different
categories of employees in an organisation.

8.2 JOB EVALUATION METHODS AND JOB RANKING

4

After job analysis and preparation of job descriptions comes the essential stage of job
evaluation, namely, the systematic comparison of jobs in order to establish a job
hierarchy. The techniques which have been commonly used tend to fall into one of the
two main categories:
Non analytical, and
Analytical 87
 t

Block 1 Human Non-analytical methods are:

Resource Development
a) Job ranking;
b) Job classification.
Analytical methods are:
a) Point rating or assessment;
b) Factor comparison.
The simplest and least formal of all job evaluation systems is known as the Ranking
Method. Under this method no effort is made to break a job down into its elements or
factors, but the aim is rather to judge the job as a whole and determine the relative values
by ranking one whole job against$another whole job. This is usually done by using a
*
narrative position description, but 'in many cases even this is omitted. With or without
information concerning the job at hand, an individual or group of individuals rank the
jobs in the order of their difficulties or value to the Company. In order to achieve proper
utilisation of the ranking system, one must also consider other facets of the job, such as :
Decisions - difficulty, judgement required.
Complexity - range of tasks to be carried out or skills to be used.
Knowledge and skills - what the jobholder is required to know and be able to do.
Physical effort required to carry out the job.
This procedure is followed for jobs in each department and an attempt is then made to
equate or compare jobs at various levels among the several departments. When this is
completed, grade levels are defined and salary groups formed. In future, new jobs can be
graded or existing jobs regraded with reference to the established gradings on a job-to-
job basis..
It is advisable to use the statistical technique of paired comparisons. The assumption is
that it is always easier to compare one job with another than to consider a number of jobs
and attempt to build up a rank order by multiple comparisons. While using the technique
of paired comparison one must compare each job separately with every other job. If a job
is considered to be more important than the one with which it is being compared, it
receives two points; if it is thought to be equally important, it receives one point; and if it
is regarded as less important, it receives no point. A matrix can be built showing the
scores for each job against all other jobs being ranked. Finally, one can then total the
scores as shown below:

Job A B C D E Total
Score
A - 0 0 1 2 3
B 2 - 0 2 2 6
C 2 2 - 2 .2 8
D 1 0 0 - 1 2
E 0 0 0 1 - 1

In this example, Job A is compared with Jobs B to E. It is considered to be less important

than Job B and C and received no points in both the cases; equally important to Job D
and received one point; and more important than Job E and received two points. The total
score is three. The same procedure is adopted for Jobs B to E. The higher the score, the
higher is the rank.

1 ) Advantages
a) Easily understood and easy to administer.
 b). Sets a better rate than the arbitrary rate based pprely on judgement and Evaluation Meth
experience.

2) Disadvantages

a) The classification is in general terms and only an overall assessment is possible.

There are no definite standards of judgement.
b) In a complex indu!trial organisation, it is not possible to be familiar with all the
jobs and thus general descriptions must not enable correct assessment of the
relative importance of all the jobs.
c) The grading is very much influenced by the existing salary rates.
d) It does not indicate the degree of difference between jobs, but only indicates that
one job is more or less important than another one.

8.3 JOB CLASSIFICATION OR GRADE DESCRIPTION

This method is similar to ranking as in both the methods neither points nor money values
are used to classify jobs. No complicated procedures are involved; once the structure and
definition of grades are fixed, the evaluation process is comparatively quick and simple.
However, classification differs from ranking as here the order of operations is reversed.
First of all, the grades are determ'ined and then the jobs are graded by reference to their
content. Figuratively, the method may be described as a series of carefully labelled
shelves in a bookcase. The primary task is to describe each of the classes so that no
difficulty is experienced in fitting each job into its proper "niche". Jobs are then
classified by comparing each job to the descriptions provided.
In this method the most difficult and important operation is defining the grades; it should
be done so as to bring out perceptible differences between levels of skill, responsibility,
etc. Before defining the requirements of the various grades it is usual to select those
factors which constitute essential aspects of the jobs. Skills, knowledge, experience and
responsibility required are generally used as basic factors, but the choice and number of
factors depend on the nature of the organisation's activities. It should be noted, however,
that whilst the classification method may rely on selected general factors, the evaluation
itself is carried out on the basis of whole jobs - they are not broken down into their
component elements. The factors are used to provide general guidance for the decisions
but are not weighed and not scored.
The classification method has historically been the one most widely used for salaried
jobs, particularly in government and service occupations, although there is also some
evidence of its use in the industry.

1 ) Advantages
a) Comparatively simple and easily administered.
b) Since written job descriptions are used evaluation of jobs tend to be more
accurate than under ranking system.

2) Disadvantages
a) Classification is in general terms and only an overall assessment is possible.
b) It is very difficult to make comprehensive class specifications for a complex
organisation. 'The specifications tend to overlap specially in the case of senior
'
jobs, and it is difficult to decide which class a particular job belongs.
c) Placing of jobs in classes is very much influenced by the existing salary rates.
Block 1 Human
Resource Development 8.4 POINT RATING
Point rating is probably now the most common mt?thod used for job evaluation in many
countries. It employs clearly defined factors and allots numerical points.
The points rating scheme is based on an analysis of separately defined characteristics or
factors which are assumed to be common to all the jobs. One has to assume that
differences in the extent to which the characteristics are found in the jobs will measure
differences between the levels of the job. Therefore, when the factors in the points
scheme are selected one should ensure that they are considered as most important in
determining the relative degrees of difficulty or responsibility for the work of others
working conditions, resources controlled (managerial and supervisory jobs), contacts
(managerial and clerical jobs), and physical effort (manual jobs).
Each one of the above factors has a range of points allocated to it so that a maximum
number of points are available. The relative importance of "weighting" of a factor can be
determined by the maximum number of points given to it. Different point rating plans
may select different factors ind weigh each factor differently. For each factor, one must
divide the total range of points into degrees according to the level at which the factor is
present in the job. One can evaluate the jobs by comparing job descriptions containing
analyses of the extent to which the factor is present in the job with the factor degree
definitions. One must grade the jobs for each factor and give a factor score in accordance
with the points value attached to each factor degree. Then add up the scores for each
factor to produce a total score and allocate them into job grades according to the points
range determined for each grade.
The points rating procedure has to be clearly defined from the very start. By and large, its
steps fall into two distinct stages, namely preparing an evaluation plan and schedule (by
defining and weighting factors) and grading jobs by reference to this schedule.

8.4.1 Preparing an Evaluation Plan

The preparation of the evaluation plan involves the following steps :
i) Selecting aqd defining factors;
ii) Dividing the factors into degrees;
iii) Weighting the factors;
iv) Allocating points to each degree; and
v) Validating the factor plan.
.
i) Selecting and defining factors
While selecting factors, representative sample of benchmark jobs covering all the major
occupations and levels of responsibility are covered under this scheme.

ii) Dividing the factors into degrees

Once thefactors are selected they must be diLided into degrees to make them operational.
Prepare a preliminary definition of each factor and divide it into degrees of levels each of .
which is also defined. It is evident that the degree must be clearly defined and graduated, '
as far as the number of degrees is concerned, which is largely a matter of common sense.
However, one must remember that too many degrees will somplicate the evaluation
process unnecessarily, and even whilst a scheme having only two or three degrees will
not sufficiently differentiate jobs from each other. It i s useful to restrict .the number of
levels to five or six. It is not always necessary for each factor 'to have the same number of
degrees, but it is important that the degrees should enable all jobs from the highest to the
90 lowest to be placed in an order of importance that everybody will recognise.
 iii) Weighting the factors Job Evaluation Methods

It is unlikely that each factor will be of equal significance. If, for example, four generic
factors such as skill, effort, responsibility and working conditions are chosen, the relative
importance of each of them will vary a great deal depending on the wurk done and
occupations concerned. Generally speaking, skills are more important than effort in
technical occupations, and responsibility is the most important factor in managerial jobs.
Therefore, the relative importance of each of the factors selected has to be determined -
in other words, the factors must be weighted. One way of arriving at a preliminary
weighting is to rank factors in order of importance and allot each of them a percentage
arrivkd at by discussion in the evaluating committee or between the analyst and the
persons involved.

iv) Allocating points to each degree

Once the relative importance of the factors has been determined in a preliminary way and
the factors suitably divided into degrees, each degree must be assigned a numerical value.
These are the values that will be used in determining the total point values ofjobs.
The point values ascribed to the degrees may follow and arithmetical, geometrical or
variable progression. Table 1 illustrates the difference between these three forms by an
example of the "skills" factor.

Table 1 : Methods of points progressions for the "skills" factor

Progression Sub-factors Degrees (points)

1 e2 3 4 5

Arithmetical progression Education 15 30 45 60 75

Experience 20 40 60 80 100

Geometrical progression Education 15 30 60 120 240

Experience 25 50 100 200 400

Variable progression Education 15 20 30 45 75

Experience 20 30 45 65 100

The choice of a method of points progression is also a matter of preference. The

advantage of arithmetical progression issthat it can be simply and easily explained to the
employees. Geometrical progression is sometimes preferred because it gives a wider
points range at higher levels. Variable progression can be used where there is sufficient
difference when moving between degrees. Experience shows, however, that employees
are not easily convinced that geometrical or variable progression is fair.

v) Validating the factor plan

. The factor plan plays a decisive role in all point rating schemes. As a general rule, once it
is officially adopted, no major amendment may be made to it. Therefore, it is essential
that proposed plans should be carefully tested on a number ofjob descriptions. These test
samples must comprise a sufficient number of jobs in order to verify whether the plan
results.in the desired spread of points and an acceptable hierarchy. If necessary, the
weighting or definitions of degrees must be amended and the test repeated several times
until it gives a completely satisfactory result. At this stage, all the factors and sub-factors
must be precisely defined and the meaning of all terms clarified. The tested factor pian is
then submitted to the evaluating committee or other decision-making organ for adoption.
Once the factor plan is adopted, it is usual to prepare an evaluation handbook explaining
the procedure to be followed and summarising all the elements required for evaluation, in
particular the definition of the selected factors and the points allotted. This handbook, or
a summary of it, is usually distributed to all staff covered by the job evaluation sclieme.
B I O C ~I Human 8.4.2 Advantages and Disadvantages
Resource Development
The point rating method also has its advantages and disadvantages:

a) The graphic and descriptive types of rating scales used have been accepted as
most reliable and valid. Agreement among rates is usually quite close.

b) Compensable factors are not limited to any particular number. These factors
which the parties decide as important can be used.

c) Job classes, which is the aim of all job evaluation systems are easily set up. Job
classes are simply determined in terms of arbitrary point ranges or on agreed
point ranges.

2) Disadvantages

a) It is difficult to develop a point-rating scheme. Defining factors and their degrees

in such a fashion that all rates will have the same meaning needs considerable
amount of skill.

b) Assigning proper weightages to each factor and then assigning point values to
each degree without being unfair to either the easy or the difficult jobs, requires
careful and detailed study.

c) The point system is difficult to explain. The concept of factors, degrees relative
weights and points 'and relating points to money value caflnot be easily
interpreted to employees. If the workers do not understand the system clearly it
may have adverse effect.

d) Point rating scheme is certainly a time consuming process. Collecting job

descriptions, defining degrees and factors, allocating degrees to each factor of
each job, co-relating them with points and then ultimately with money value
unanimously by evaluation committee is a long process. Considerable clerical
work is also involved in preparing the job descriptions, final table of jobs
evaluated, degrees assigned and points scored.

8.5 THE FACTOR OF COMPARISON METHOD

The method was originally developed in 1926 as an offshoot of point rating. This method
therefore incorporates some of the principles of point rating but differs substantially from
it in its use of benchmark jobs and its method of comparing jobs and fixing wage rates.
Thus, the factor comparison method involves four steps:
1) Selecting bench-mark jobs;
2) Ranking bench-mark jobs by factors;
3) Allocating money values to factors; and
4) Ranking the otherjobs, and wage fixing.

1) Selecting bench-mark jobs

The jobs selected as a benchmark jobs must satisfy a number of conditions. Firstly
they should be capable of clear descriptions and analysis in terms of the factors used;
secondly they must be representative of hierarchy, thirdly when the rates for the
bench-mark jobs are to be used as the standard for fixing the wages, these rates
should be regarded as appropriate by all concerned.
92
2 ) Ranking bench-mark jobs by factors
Once a number of benchmark jobs are chosen they are ranked successively by
reference to each of the factors chosen. When the ranking is done by a committee
1
Job Evaluation Methods

each member must make his or her own ranking and the results then being averaged.
A typical example of ranking of jobs in a hotel by factors under the comparison
method is given in Table 2.

Table 2: Ranking Jobs by Factors Under the Factor Comparison Method

in a Transport Department of a Travel Agency
Job Skill Mental Physical Responsibility Working
requirements requirements requirements condition

Cleaner 1
Desk Clerk 2
Accountant 3
Lobby Manager 4
Chef 5

3) Allocating money values to factors

The factor comparison method may also be used for fixing up salary in money units by
ranking the jobs according to a procedure different from the one shown above. The salary
rate far each bench-mark job is broken down and distributed among the factors in the
proportions in which these are considered to contribute to the total price paid for each
bench-mark job in the form of its wage rate. For example, if cleaner is a bench-mark job
and its wage rate is 20 money units, it may be decided to assign nine of these to skill, five
to mental requirements, two to physical requirements, three to responsibility and one to
working*conditions.Similarly, if the wage rate for another bench-mark job, for example
that of a clerk, amounts to 18 money units, eight of these may be allotted to skill, three to
working conditions, and so on. When the rates for all benchmark jobs have been divided
in this way the jobs have implicitly been ranked again with respect to each of the factors.
In the example given, the helper ranks above the mechanic as regards skill requirements,
but below the mechanic if the jobs are ranked on the basis of working conditions.
After the results have been averaged by a committee in the manner described above, the
allocation of wage rates and the ranking by factors of the jobs covered for Table 2 might
work out as indicated in Table 3.

Table 3: Allocation of Money Values to the Different Factors and

Ranking ofJobs Under the Factor Comparison Methods
Block 1 Human The two rankings of the benchmark jobs are undertaken independently of each other and
Resource Development need not coincide. Their respective results as illustrated by Tables 2 and 3 are compared
in Table 4.
It will be noted that there are differences in ranking received in Table 4. These
differences have to be removed either by increasing or decreasing the money value of the
different factors for the jobs concerned of by examining the job contents again. If it is not
possible to reconcile the ranking of a particular job, it is eliminated from the list of
benchmark jobs.

Table 4: Comparison of Rankings by Factors and

Money Values under the Factor Comparison Method
Mental
Skill Responsibility Working
requirements requirements condition

h
Job
w

Cleaner 1 1 1 1 2 3 1 1 4 5
Clerk 2 2 2 2 - 3 5 2 2 3 3

Accountant 3 3 3 3 4 2 3 3 5 4

Lobby Manager 4 4 4 4 5 4 5 4 2 I
Chef 5 5 5 5 1 1 4 5 1 2

4) Ranking other jobs

On the basis of job descriptions, each job is analysed and compared with the,benchmark
jobs in terms of each of the factors separately. . I

Advantages and Disadvantages

The advantages and disadvantages under the Factor Comparison Method are as follows:

a) Factor comparison method-permits a more systematic comparison of jobs than

the non-analytical methods,
b) Evaluation is easier than. by the point method, as a set of si*ilar jobs are
compared and ranked against each other,
c) Analysis of benchmark jobs is very comprehensive,
d) In a scheme that incorporates money values, determination of wage rates is
automatic, and
e) Reliance of the method on benchmark jobs guarantees that the scheme is tailor-
made and that the ranking necessarily reflects the actual structure while
eliminating anomalies.

2) Disadvantages
a) This method is comparatively complicated to apply and it is difficult to explain
to workers,
b) The wage rates for the bench-mark jobs are presumed to be correct and definitive
and all other rates are determined by reference to them, and

- c) It goes against the common belief that the procedures of evaluating jobs and
fixing their wages should be kept separate.
 Job Ev'aluation Method,
8.6 RECENT DEVELOPMENTS IN JOB EVALUATION
The question of choosing and weighing of factors is one of the most difficult issues
encountered in the basic qualitative methods. Some job evaluation schemes are rejected
because of the factors chosen, and others categorised as vague and confused because of
too many factors and sub-factors. As a result, some researchers and practitioners of job
evaluation have proposed and experimented with single-factor schemes which are briefly
outlined below.

1) The time span of discretion method

This method was developed by E. Jaques in the 1950s and early 1960s and was tried.out
in a London Engineering firm. Its special feature is that it uses only one factor viz. The
"time span'' at the disposal of each worker.
The time span of discretion is defined as the longest period of time for which a jobholder
can exercise his or her own discretion without supervision from senior regarding the
quality of work. This time span of discretion is claimed to show the worker's ability and
the nature and difficulty of the job and is believed to conform to the norms of equality on
which each worker bases his or her own idea of what should be the job hierarchy. This
method, has, in practice, been applied only to a very limited extent and is really still in
the experimental stage. It has often been rejected by employees as well as management
because no formal proof is offered of any connection between the time span of discretion
and the norms of equity accepted by the employees. Moreover, whether time spans can
be'measured accurately is also controversial.
In Jaques' original method, jobs are grouped into five major grades, from grade 1, in
which the time span of discretion is less than one month, to grade 5, in which it is more
than five years. Each grade, of course, comprises several degrees, each with its own time-
spa? of discretion. Jaques' approach differs substantially from that of conventional
methods by focussing on the individual rather than on the job requirements.

This method has been developed by T.T. Paterson and his colleague T. Husband. This
method assumes that the only factor common to all jobs whatever the work involved is
"decision-making". Decisions are placed according to their level and nature in six groups
known as "decision bands", as indicated below:
Band E
Policy decisions made by top management in general terms that direct and guide the
enterprise.
Band D
Programming decision, taken within the limits fixed by the policy decisions in Band E.
Band C
Interpretative decisions, deciding how to do the work within the limits set at Band D; for
example, the kind of machine and number of staff required to work in kitchen.
Band B
Routine decisions, concerned with carrying out Band C decisions that is how the work is
to be done.
Band A
Automatic decisions, on the way the worker carries out instructions.
Band 0
Defined decision, usually made by unskilled workers. The margin of discretion is very
narrow at this level of decision-making.
Block I Human In recognition that within each decision band there may be a deed to coordinate work,
Resource Development each band, except Band 0, is divided into two levels. The upper-level jobholder in any
decision band coordinates the work of the persons in the lower level in that band and has
structural authority over them. - .
In theory, the decision-banding method offers the disadvantages of simplicity and
university but in practice it is sparingly used because employees do not readily accept
any scheme that does not take into account such factors as skills, experience etc.

3) The Hay and MSL guide-chart profile method

This method was developed by a firm of consultants in the United States in 1950s.
Basically, it Comb'ines the features of the point rating and factor comparison methods. It
is used mainly for managerial, pmfessional and technical jobs in about 30 countries and it
is particularly widespread in the United States and the United Kingdom.
This method evaluates jobs by reference to three basic factors viz., Know-how or skill,
problem solving and accountability. A fourth basic factor, working conditions, is also
sometimes used for jobs having hazards, an unpleasant working environment and high
physical demands.
The basic factors are clarified by reference to a list of 8 elements or sub-factors. Each
basic factor is depicted in a guide-chart which breaks down the relevant sub-factor into
different degree levels.

4) The Direct Consensus Method

This method, developed by the firm of Inbucon AIC, relies on the parried comparison
technique. An important feature of this method is that members of the valuation panel
record their individual assessments of while job rankings and these assessments are fed
into a computer. In cases where the assessors do not agree on the job rankings, the
computer programme establishes the best possible correlation between their assessments
without the need for prolonged discussion in committee to reach a consensus.

ICheck Your Progress I

I) What do you understand by job evaluation? Explain job-ranking method of job
evaluation.

2) List the advantages and disadvantages of job classification or grade description.

......................................................................................................
.......................................................................................................

3) Explain the steps involved in preparing an evaluation plan for Point Ranking.
......................................................................................................
...................................................................................................... .
......................................................................................................
4) What do you understand by description method ?
8.7 LET US SUM UP
Job Evaluation Method>
I
Job evaluation proceeds job analysis and job description. Quite a few methods are now
available for systematic comparison of jobs in order to establish a job hierarchy in an
organisation. Depending on its needs and ethos, an organisation could pick up any of the
available methods. It is also open to an organisation to develop a method that may
combine the features of two or more than two methods. What is important is that, the -
chosen method should secure theasatisfaction of all concerned, namely the management,
the einployees and the unions, and also ensure the supply of right skills to the
organisation for carrying out its operations efficiently and effectively.

8.8 CLUES TO ANSWERS

/check Your Progress 1
1) The systematic comparison of jobs in order to establish a job hierarchy is known as
job evaluation. The simplest and least formal of all job evaluation systems is known
as Ranking Methods. Under this.method no effort is made to break a job drawn into
its elements or factors but the aim is rather to judge the job as a whole and determine
the relative values by ranking one whole job against another whole job. This usually
is done by using a narrative position description but in many cases even this is
omitted. With or without information concerning the job at hand, an individual or
group of individuals rank the job in the order of their difficulties or value to the
company. Read Sec. 8.2 and answer in detail.

2) Advantages and disadvantages ofjob classification method are:

Advantages
a) Comparatively simple and easily administered.
b) Since written job descriptions are used evaluation of jobs tend to be more
accurate than under ranking system.
Disadvantages
a) Classification is in general term and only an overall assessment is possible.
b) It is very difficult to make comprehensive class specifications for a complex
organisation. The specialisations tend to overlap specially in the case of senior
jobs and it is difficult to decide which class a particular job belongs.
c) Placing ofjobs in classes is very much influenced by the existing salary rates.
Read Sec. 8.3.

3) Preparing an evaluation plan for Point Ranking involved the following steps :
i) selecting and defining factors;
ii) dividing the factors into degrees;
iii) weighting the factors;
iv) allocating points to each degree;
V) validating the factor plan.
Read Sub-sec. 8.4.1 and explain the above points.

4) The discretion method was developed by E. Jaques in the 1950s and early 1960s. Its
special feature is that it uses only one factor, i.e. the "time span" at the disposal of
each worker. See Sec. 8.6.
 9.6 Competency Analysis
9.7 Performance Analysis
9.8 Discrepancy Analysis
9.9 Task Analysis as a Supervisory Tool
9.10 Let Us Sum Up
9.1 1 Clues to Answers

9.0 OBJECTIVES
After going through the Unit you should be able to:
understand the significance of Task Analysis as a poterttial HRD tool,
do Task Analysis of key jobs, and
. use Task Analysis for improving performance of individual employees and firms.

9.1 INTRODUCTION
Earlier in this Block you have read about job analysis and evaluation. Job is a broad term
as a job constitutes many tasks. The job analysis process is becoming more and more
difficult with the changes and complex nature of modern day jobs. Though job analysis is
popular in consideration for HR planning, more and more organisations are opting for
task analysis to find ways of delineating tasks, performance appraisal and employee
motivation. Hence, they are using task analysis for HRD.
In this Unit you will learn about the uses of task analysis in HRD. Both its traditional
forms (British and American) and proposed guidelines for successful task analysis,
combining the two traditional models have been dealt with in the Unit.

9.2 WHAT IS TASK ANALYSIS?

The traditional approach to task analysis is characterized by two models: the British
model and the American model. The British model bas emphasized analysis in terms
of specific activities for which the jobholder is held responsible whereas the
American model has included an emphasis on the competencies needed for the job.
With both models the analysis is usually carried out by management with the help of
experts. The two models are quite similar in many respects. Both have been found to be
useful in analysing semi-skilled and skilled work.
It is becoming obvious, however that the traditional approach to task analysis is not
suitable for the increasingly complex reality of organisational 'work. h particular, this
approach is inadequate when it is applied to:
Managing jobs that are more complex than those previously subjected to analysis,

98 . Jobs in public systems that are characterised by complex responsibilities, and

 Group or team tasks, which are increasingly emerging as a way of organising work in Task Analysis
industries.
What is needed .in order to address the more complex jobs that characterise today's
organisations is a different approach to task analysis.
Before we go ally further, one must get a comprehensive understanding of a few
definitions to understand task analysis better. According to Stephen P. Robbins:
a An Activity or an Element: A Job element is the smallest unit into which work can
be divided.
A task is a distinct set of work activity carried out for a distinct purpose. For
example, room rent costing is a task of front office executive.
a A duty is number of tasks. or
example, front office executive's duties include
meeting'and welcoming the client and explaining the features of the hotel and its
surroundings.
A position refers to one or more duties performed by one person in an organisation.
There are at least as many positions as there are workers in the organisation,
vacancies may create more positions than employees.
a A'job is a type of position within an organisation. For example, a hotel may employ -
a dozen front office executives, then there are a dozen positions but just one front
office executive job.
Task analysis can be defined as the process of identifying the tasks of a particular
job in a particular organisational context by analysing activities, establishing
performance criteria, determining required competencies, and analyzing any
discrepancies uncovered by this process:
This definition, which is based on the concept of task suggested by the Tavistock
School, indicates the following guidelines for successful task analysis:

I ) Analysis should be under taken only after developing an understanding of a

particular organisational context involved.

2) The job, should be broken down into specific activities performed and expected to be
performed by the jobholder or incumbent.

3) The activities should be grouped into tasks. A "task" is a set of related activities - a .
function that makes a distinct contribution to organisational goals.

4) Performance criteria and their indicates should be established.

5) The competencies required for effective performance of each task should be
identified.
6) The discrepancies between perceived and actual performance and between
importance attributed and importance reflected in time spent shouId be identified.

9.3 USES OF TASK ANALYSIS

The type of Task.Analysis suggested here may be useful to the organisation and the
individual employees in several ways:

1) Selection and placement: Better recruitment and selection devices can be prepared
on the basis of a task analysis (especially competency analysis). Competency
analysis can also help an organisation to place people in jobs in which they can be
more effective (matching the roleljob with people).
Block 1: Human 2) Work planning, including the following:
Resource Development
a) Setting individual tasks for a specific period
b) Helping a job incumbent to decide priorities of task
c) Minimising overlap between jobs
d) identifying neglected tasks in a work unit
e) Planning delegation
f) Job enrichment
3) Performance appraisal, including:
a) Negotiated tasks and activities to be performed
b) Evaluation (by self and the supervisor) of the qualitylquantity standards of task
performance (both process and outcomes effectiveness)
c) Analysis of factors helping and hindering task performances
'4) Potential appraisal, including preparation of a system on the basis of the
competency analysis, and actual potential.appraisa1 work.
5) Employee development, including:
a) Feedback on strength and weaknesses
b) Performance counselling
c) Training
6) ' ~ e a mbuilding, especially:
a) Better understanding of each other
b) Locating areas of task conflicts and dealing 'with them
c) Building linkages and mutuality between jobs

9.4 CONTEXTUAL ANALYSIS

On the basis of the guidelines stated above, we can say that task analysis involves the
following steps:
1) Contextual analysis,
2) Activity analysis,
3) Task delineation,
4) Competency analysis,
5) Performance analysis, and
6) Discrepancy analysis.
It is essential to know the mission, orientation, and goals of the organisation of which the
job is a part. An understanding of the organisational context also helps in clarifying the
general arientation of the job. For example, the mission of a hotel may be defined as
providing effective hospitality services and related support to the guests wishing to use
the hotel. The term "related support" may be an important dimension of the mission of
the hptel and it may imply that the jobs of the managers and other staffers also need to
include "psychological support" as a task. If task analysis were undertaken in this
situation without the development of this understanding, the observers may not "see"
activities involving psychological support.
..
 The mission of a hotel may be defined as providing comfortable accommodation and Task Ana!ysis
customer care to the guests wishing to stay at the hotel. The "Customer care" term may
be an important dimension of the mission of the hotel as it may imply that the job of the
hotel staff includes undersfanding the needs of each guest and make them feel
comfortable and relaxed, as'a task. If task analysis were taken in this situation without
development of this understanding, the observers may not "see" activities involving
customer care.
Those who undertake task analysis must first develop an understanding of the
organisation's mission, which is the direction or combination of directions in which
the organisation is moving. The mission includes such elements as a definition of the
organisation's basic business how it markets its products or services and to whom; and its
intentions with regard to profitability, growth, liquidity, values, treatment of employees
and customers, and its stature in its field. Sometimes an organisation's mission exists in
written and published form. Regardless of whether a formal mission statement exists,
those responsible for task analysis should summarize the mission in a one-sentence
statement and should keep this statement handy throughout the process of task
analysis.
The organisation's broad goals or objectives also must be identified. These goals may or
may not be a part of the mission statement. A sampling of employees may be asked to
1 state these goals, and then these various statements may be compared with any goal
i statement that exists in formal documents. This exercise is also helpful in terms of testing
whether the employees know the organisation's formally stated goals or whether the
I goals have changed since they were originally stated in documents.
The last phase of contextual analysis, an optional one, is to identify the main tasks of the
organisation. Again, groups of employees may be asked to identify the tasks that pertain
to each goal and to identify the jobs mainly responsible for these tasks. These employee
statements then may be compiled and discussed. Such an exercise is also useful to
1 ,
analyse employee statements. This exercise also helps in clarifying goals and tasks and in
increasing employee's commitment to them.

9.5 ACTIVITY ANALYSIS

The second step is activity analysis. The successful completion of this step is dependent
on a clear understanding of the qualities of an activity. An activity has three
characteristics:
1) It is observable. For example, planning is not regarded as an activity because it
cannot be observed where as serving a guest is an observable activity.
2) It is descriptive. The behaviour concerned must be capable of being stated
specifically in terms that describe rather than evaluate or interpret. For example, if a
behaviour on the part of a nurse is recorded as taking a patient's temperature, this
behaviour qualifies as an activity; however, if the same behaviour were recorded as
doing diagnosis, this phrase would be an interpretation of what had occurred and
would not qualify as an activity.
3) It is objective. An activity, when observed by more than one person, should be
capable of being recorded in written form in the same way by all observers. This is
not to say that all observers will record all activities in the same way, but that anyone
reading the written record of all observers' descriptions of an activity would interpret
these descriptions to be of the same activity.
In addition, a distinction should be made between an activity and a sub-activity. An
activity is a behaviour undertaken to accomplish a task, while a sub-activity is one of a
set of behaviours undertaken to complete an activity. For example, when a front office
employee makes an entry in a guest register he or she is performing an activity whose
sub-activity might include taking the ledger from the shelf, opening the ledger, lifting a
pen, and so forth.
 Block I : Human Source of information about activities I
Resource Development
There are three main contributors of information for activity analysis: (I), the job
incumbent, (2) those who interact with the j ~ incumbent
b (called "role-set members"),
and (3) outside experts. The role-set members include the incumbent's supervisor,
subordinates, colleagues, and in some cases others who interact with the incumbent (for
example, minor passenger travelling alone and his or her family or relatives in the case of
air hostess. as job incumbent). The outside experts may be task analysts, educators,
specialists ,in the field, or the organisation's top management. These three sets of
contributors can produce a great deal of usable information based on their observations,
their reports of the activities that the job incumbent actually completes, and their
assessments of activities that the job incumbent is or should be expected to complete.
Collecting ihformation on activities
Several methods can be used to prepare a comprehensive list of activities. The most
commonly used methods are interviews, diaries; logbooks, and questionnaires.
1 ) Interview: The interview is the most widely used and useful method of collecting
information for activity analysis. Generally the respondent is simply asked to report
observations and expectations. Sometimes, however, it may be useful to ask
specifically what the job incumbent did on a particular day. Because respondents
tend to give general answers, it is necessary to probe in an interview so that actual
activities are revealed. For example, when interviewed about what a airhostess does,
a role-set member might say, "Well, she takes care of passengers. It then becomes
necessary to ask how the airhostess takes care of passengers; what she actually does.
For this reason interviews require patience on the part of the interviewer. After
questioning the respondent becomes "educated" about the concept of an activity, and
his or her answers become more pertinent and require less intervention from the
interviewer.
2) Logbooks: A logbook is a record that someone else keeps while' observing a job
incumbent. Again, it may be useful ta discuss the potential contents ~f the log with
the person keeping it. Providing a combination of instructions and examples may be
helpful in this regard.
3) Questionnaire: A questionnaire may be devised and administered to the job
incumbent, the role-set members, and/ or outside experts.

I The Product
After one or more of the suggested methods has been used for activity analysis the
product will be a long list of activities. At this point the list is comprehensive and has not
been subjected to any kind of sorting; it includes a number of essentially redundant items
as well as both highly specific and less-specific items.

You may prepare r)s many such lists for various job incumbents in hospitality sector.

9.5 TASK DELINEATION

After activity analysis has been completed, the next step is to group the activities into
tasks and to name these tasks. This process, known as task delineation, involves
subjective decision-making and should be undertaken only by people who know and
understand the job.
There is no set rule regarding the number of tasks to be delineated. However, they should
not be so few that one cannot review them and form a clear picture of a job. Similarly,
there should not be so many that the differences among the activities are not readily
apparent and that their numbers become cumbersome for performance appraisal and
other purposes.
 The tasks should be balanced in terms of the number of activities each comprises. If one Task Analysis
task has too many activities, it needs to be divided into two or more tasks. For example,
when delineating a tour executive's tasks one should not call "handling tours" a task
because too many activities are covered by this term. Instead, handling tours should be
broken down into requiring special skills (such as tour costing), tour activities requiring
few skills (such as getting the reconfirmation of hotel booking) and customer support.
After the tasks have been delineated, it is a good idea to rate the importance of each to
the job and to assess the percentage of time spent by the job incumbent on each.

9.6 COMPETENCY ANALYSIS

,
A job incumbent needs different types and levels of competencies in order to perform job
tasks well. Competency analysis helps in identifying the competencies that are necessary
for the tasks that have been delineated.
Competencies can be divided into five main types; knowledge, skills, abilities,
orientation, and experience. Of these five types, orientation may require some
explanation. Orientation is a general attitude reflecting the values of the jobholder.
For example, in the case of a front office assistant, respect for the guest may be deemed
to be an important orientation. Following is an example of an orientation description.

Orientation Description for the Position of District Health Officer

With the increasing government emphasis on community participation and
collaborative work in matters concerning health, the district health manager needs to
see the community and its various health agencies as resources. He or she needs to
respect and be willing to use community traditions and customs that promoti good
health. in addition, the district health manager should be proactive in identifying and
seeking community resources that can be harnessed for promoting health
programmes. He or she should be oriented towards innovation and experimentation in
solving problems and should encourage the doctors and other staff members in the
.district health clinics and hospitals to be similarly oriented. He or she needs to be
dedicated to providing strong, creative leadership for subordinates, including those on
staff at the district heath clinics and hospitals. Finally, the district health oficer should
be willing to learn and experiment in this position.

Activity: Give Orientation Description for hotel industry jobholders.

Another process that may be completed is the identifying of the job incumbent's present
level of each identified competency. A five-point scale is recommended for this purpose.
The same group that establishes competencies - with the possible exclusion of the job
incumbent, depending on his or her level of insight - may make this assessment.

9.7 PERFORMANCE ANALYSIS

The main purpose of performance analysis is to evaluate the impact of a job - how
effective it is being done or has. been done. This step consists of assessing how well the
job incumbent has performed the tasks for which he or she is responsible.
The effectiveness of a task can be measured in terns of its outcome, or the end result, as
well as in terms of its process, or how it is performed. .Hard data may be gathered
i indicating both kinds of effectiveness. For example, one can evaluate the task of taking
customer orders with regard to the number of orders taken (outcome) as well as with
regard to the time spent on the task or the number of mistakes made (process).
Block 1 Human
Resource Development 9.8 DISCREPANCY ANALYSIS
Discrepancy analysis is the identification of any discrepancies that become obvious as a
result of the previous five steps. For example, discrepancies may exist between activities
reported by the job incumbent and those reported by the role-set numbers, between
activities reported and those observed or expected, between the importance of a task and
the time spent completing it, between needed competencies and existing competencies,
and so on. These gaps may indicate a need for certain remedial measures, such as
redefining the role, training, additional work planning, delegating, increased monitoring,
or counselling.
It is a good idea to check periodically for discrepancies between the job definition as
reflected in the delineated tasks and actual job performance. Information about
performance can be obtained by any one or a combination of the following methods:
The job incumbent may monitor the time spent on each activity;
The role-set members may analyse the importance attributed to various tasks versus
the time spent on them; andlor
Trained observers may observe the job incumbent for a few days.
Discrepancies between desired activities or tasks and actual performance may then be
noted and acted on accordingly.

9.9 TASK ANALYSIS AS A SUPERVISORY TOOL

Task analysis, as briefly described in this Unit, can also be used as a supervisory tool to
improve the functioning of an organisation. Some uses of Task Analysis have already
been suggested. A few are focused below:
1 ) Designing training: Discrepancy analysis of the required competencies and the
present level of these competencies in the employees concerned will help in
identifying training needs, and then designing a training strategy, or at least training
programmes to upgrade the competencies which seem to be at a lower level.
Information about the importance of the various tasks may also help in designing
training programmes for high priority task. Similarly, the discrepancy between the
importance of a task and the time spent on it may give some useful information. One
reason for not spending enough time on a task may be lack of competency required to
do the task. Such information may help in indicating the training.
2) Performance monitoring: A performance monitoring system can be developed
based on the indicators of process and outcomes effectiveness for the various tasks.
Some of these indicators can be used in designing a format or a system of meetings
for purposes of performance monitoring.
3) Work planning: Analysis of the discrepancy between expected and reported
activities, or importance of the tasks and time spent on them, may indicate the need
of work planning, including delegation and redistribution of work among various
jobs in a work unit. The concerned employees may work in a group with the
supervisor in redistribution of work among various jobs in a work unit. The
concerned employees may also work in a group with the supervisor in redistribution
of tasks, so that each employee can maximise hisfher contribution to the
organisational goals.

I Check Your Progress I

1) What do you understand by Task Analysis?
....... '..............................................................................................
..............................,.................................................................*.....
2) Discuss Activity Analysis. Task Analysis

3) Explain why Task Analysis is seen as a Supervisory Tool.

9.10 LET US SUM UP

In this Unit, you have read about Task Analysis and proposed guidelines for successful
task analysis. It is very important to understand the difference between the three -
activity, the smallest unit into which work can be divided, also it is an observable action
often bound by time; task, the distinct set of work activity carried out for a distinct
purpose; and job the type of position within an organisation.
The analysis can be said to involve the following steps. - Contextual Analysis,
Performance Analysis and Discrepancy Analysis. Task Analysis can also be used as a
supervisory tool to improve functioning of the employees as training modules can be
designed keeping the various tasks in mind. Performance of the employees can be better
monitored and also work planning can be done keeping in mind the various tasks to be
completed.

9.11 CLUES TO ANSWERS

I ) Task Analysis can be defined as the process of identifying the tasks of a particular
job in a particular organisational context by analysing any discrepancies uncovered
by this process. Read Sec. 9.2 and answer.

2) Activity analysis is based on information. These are three main contributions of

information for activity analysis. And these are several 'methods of collecting
information from the contributors. Read Sec. 9.4 and answer in detail.

3) Task analysis can help supervisors in designing training programmes, for

performance appraisal and also for planning for work. Read Sec. 9.9 and expand the
above answer.
UNIT 10 PERSONNEL OFFICE:
FUNCTIONS AND OPERATIONS
Structure
Objectives
Introduction
Characteristics and Objectives of Personnel Management
Functions and Operations of Personnel Management
Organisation of a Personnel Office
Personnel Manager's Role
Position of Personnel Department in the Organisation
Let Us Sum Up
Clues to Answers

10.0 OBJECTIVES
After reading this Unit you will be able to:
explain the concept of personnel management,

describe the key characteristics of personnel management,

identify the objectives of personnel management,

List the various functions of personnel management,

learn how a personnel office is organised,

understand the various roles of a personnel manager and the skills required to be a
successful personnel manager, and
appreciate the necessity of a personnel department in an organisation.

1 0 . INTRODUCTION
An organisation is formed for the fulfilment of certain objectives like earning a desired
rate of profit on investment, exploitation of certain natural resources, development of a
given geographical area, or supplying to the public some essential goods or services.
Machines, materials, money and natural resources etc. are the tools used to achieve the
organisational goals. But these tools are operated by persons at different levels with
different skills. Thus, a proper selection of personnel, their tactful handling and proper
management is essential for the success of any organisation. In the case of hospitality and
hotel management this is not just essential but is the key for success because of the very
nature of the services product.
However, this is the most difficult of all the management tasks in an organisation. Some
people also say that 'management' means 'managing men tactfully'. Yet many
organisations hardly pay any attention in this area, though they always keep complaining*
about not getting the properly trained employees. This is equally true in the case of
hospitality organisations.
One often comes into contact with the personnel department of an organisation handling
selection, placement, training, discipline, grievance handling, wage administration,
dismissal, etc. However, there are certain aspects of the work of a personnel department
which may not be very obvious. In this Unit an attempt has been made to familiarise you
with various issues related to personnel management.
 Personnel Ofice: Functions
10.2 CHARACTERISTICS AND OBJECTIVES OF and Operations
PERSONNEL MANAGEMENT
Personnel Management is known by various names .over different periods of time. These
are Personnel Administration, Labour Management, Industrial Relations, Employee
Relations, Manpower Management, etc. Irrespective of the size of the organisation these
functions exist in every firm and hospitality establishment are no exception. The manager
who performs this function is also, likewise, called by various names, like Personnel
Manager, Employee Relations Manager, Industrial Relations Manager, Labour Relations
Manager, Labour Officer, Labour Welfare Officer, Personnel Officer, Employee
Relations Officer and Industrial Relations Officer.
The following are the basic facts and characteristics of Personnel Management can be
summed u p as:
I ) It is concerned with employees: Personnel Management is concerned with
employees both as individuals and also as a group. Personnel Management is a
function or activity aiding and directing employees.in maximising their personal
contrib~~tion
and satisfaction in employment, bringing them an equitable, just and
humane treatment, and adequate security from employment.
2) It covers all levels of personnel: It refers not only to unskilled or semi-skilled or,
what you may call 'blue collared' employees, like doorman, housekeeping
attendants, waiters and drivers etc. but also the 'white collared' employees, like
professional and technical workers, managers, officials, clerical workers, sales
-. workers, concierge, etc.

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3) It is inherent in all organisations: It is as useful and effective in government
departments and non-profit organisations as in a business organisation. Moreover, it
coveis all types of hnctional areas of management such as production management,
financial management, marketing management, etc.
4) It is of a continuous nature: Personnel management requires constant alertness and
awareness of human relations and their importance in everyday operations.
5) It attempts at getting the willing cooperation of the people for the attainment of
the desired goals: This is necessary because work cannot be effectively performed
in isolation without the promotion and development of an esprit de corps.
The objectives of Personnel Management are given below:
1) To achieve an effective utilisation of human resources for the achievement of
organisation goals.
2) To establish and maintain an adequate organisationall structure and a desirable
working relationship among all the members of an organisation by dividing the
organisational tasks into functions, positions, jobs and by defining the responsibility,
accountability, authority for each job and its relation with other jobs/personnel in the
organisation.
3) To secure the integration of the individuals and groups with the organisation by
reconciling individual/group goals with those of an organisation in such a manner
that the employees feel a sense of involvement, commitment and loyalty towards it.
In its absence employees will face frictions, personal jealousies and rivalries.
4) To generate maximum development of individualls/groups within an organisation
by providing opportunities for advancement to employees through training and on the
job education or by offering transfers or by providing retraining facilities.
5) To recognise and satisfy individual needs and group goals by offering an adequate
and equitable remuneration, economic and social security in the form of monetary
compensation, and protection against such hazards of life as illness, old age,
disability, death, unemployment .etc. With ade'quate compensation and security,
employees work willingly and cooperate to achieve an organisation's goals.
 lock 1 Human 6 ) ,To maintain high morale and better human relations inside an organisation by
Resource sustaining and improving the conditions so that employees may stick to their jobs for
a longer period.
Considering these objectives, you will perhaps agree that the objectives are in the best
interests of all those to whom management is responsible i.e. owners of enterprise, the
community, the consumers of its goods and services, and members of the organisation
itself, including groups who may belong to unions.
For enabling the Persoonel Manager to fulfil these objectives the top management has to
create some conditions as the prerequisites. These are described below:

1) Existence of capable people in the organisation pCicked up on the basis of their merits
and not on other considerations.

2) Plans for effective utilisation of efforts and potentialities of individuals and groups
for appreciation of work well done and for future advancement and training.
3 ) . Considering employees as co-workers rather than as subordinates.
4) A proper division of tasks of an organisation in accordance with a sound plan into
functions and positions, each indicating a clear-cut authority, responsibility and
duties as also relationship of one position with another. In the absence of such a
division, chaotic conditions will prevail and no work will be done properly or even
done at a1I.

5) The formulation of objectives must be formulated in consultation with senior persons

in the organisation and common understanding among managers at all levels of the
objectives. If the senior staff or personnel are not involved in the formulation of
objectives they may not feel any real responsibility for achieving these. If managers
at any level do not understand the objectives, they will not know why they are doing
a given work, what is expected of them and as a result may not even do it properly.
6 ) The presence of clearly defined and comprehensive objectives and' proper '
communication to all. concerned. If objectives to all concerned are not clear and if
people, who are expected to work for achieving these, do not know about these, they
cannot be expected to achieve them.

10.3 FUNCTIONS AND OPERATIONS OF PERSONNEL

MANAGEMENT
Personnel functions are generally divided into two categories, i.e. Managerial and
Operational. In fact, these are two levels at which each function is to be performed. Each
function is part of a management plan and has to be given practical shape at the
operational level. This will be clear from Chart-1 which shows various functions
classified under the broad hnctions of management, viz., Planning, Organising, Staffing,
Motivating and Controlling. It also gives objectives in relation to each, what may be
called managerial function. Under each objective are given operations performed for
achieving the objective concerned.
chart-1: Functions of Personnel Management
(A) PLANNING MANPOWER REQUIREMENT

Function: Anticipating Vacancies

Objective: To anticipate and provide for fUture openings.
Operations: 1 Anticipating deaths, dismissals, retirements, and resignations
2 Anticipating.future promotions
3 Anticipating future transfers
4 Estimating future vacancies from the above causes
5 Estimating additional future positions
 Function: Recruitment Personnel Ofice: Functions
and Operations
1 Objective: To seek and attract qualified applicants to fill vacancies
Operations: 1 Preparing job analysis
2 Preparing job specifications
3 Analysing the sources of potential employees
4 Attracting potential employees

(B) ORGANISING THE MANPOWER RESOURCES

Function: Organisational Planning

. Objective: To determine the organisational structure and manpower needed to effectively
meet the company objectives.
Operations: 1 Analysing organisational structure
2. Forecasting manpower requirements
3 Recommending organisational changes
4 Analysing key position requirements

Function: Selection
Objective: To analyse applicants' qualifications for determining their suitability
Operations: 1 Preparing questionnaires
2 Weeding out undesirables through analysis or questionnaires
3 Interviewing the applicants
4. Testing the applicants psychologically, where necessary
5 Investigating their references
6 Arranging medical examination, if necessary
7 Evaluating the applicants and making the final selection

Function: Classification of Employees

Objective: To assign officially each employee to an appropriate position clearly defmed
regarding its responsibilities.
Operations: 1 Preparing the job descriptions
2 Assigning of proper title to each position
3 Reviewing periodically the correctness of job descriptions

(C) STAFFING

Function: Induction
Objective: To ensure that new recruits are provided with appropriate training and
information to enable them to perform their duties effectively.
Operations: 1 Orienting new employees into their jobs
2 Ascertaining training requirements of such employees to make them'more
competent for their jobs
3 Providing facilities for their future education and development

Function: Trarisfer and Promotion

Objective: To provide for increasing the utilisation of the employee's capabilities
Operations: 1 Continuously analysing job descriptions
2 Evaluating employee qualifications
3 Determining training requirements
4 Promotion according to employee's development

Function: Manpower Development

Objective: To provide for the individual employee's development
Operations: 1 Developing performance standards
2 Appraising performance
3 Planning individual development programmes
 - - -

~ l o c k ' lHuman Function: Training

Resource
Objective: To arrange programmes as required for developing existing personnel
Operations: 1 Planning and preparing training programmes
2 Providing training staff and faculty resources
3 Conducting the training programmes
4 Evaluating the training results

(D) MOTIVATING

Function: Rate Determination

Objective: To set rupee values on job positions that are fair and equitable when compared
with the other positions in the company as well as what prevails outside.
Operations: 1 Analysing jobs and giving job descriptions
2 Evaluating such jobs
3 Developing wage scales

Function: Recreation ,

Objective: To provide facilities for employee's enjoyment of the job and make the
company more attractive and satisfying as a work place.
Operations: 1 Conducting social activities
2 Conducting recreational activities
3 Providing recreational facilities for employees

Function: Communications
Objective: To provide the needed exchange of information throughout the organisation.
Operations: 1 Developing channels and media for information presentation to employees
2 Introducing and administering suggestion scheme
3 Conducting opinion surveys
4 Developing grievance redressal procedures

Function: Collective Bargaining

Objective: To build up rapport with officially recognised and legally established employee
organisations in the best interests of both the company and its employees.
Operations: 1 ~ e ~ o t i a iagreements
in~
2 Interpreting and administering such agreements

Function: - Employee Discipline

Objective: To develop effective work regulations and harmonious working relationships.
Operations:. 1 Establishing rules for conduct
2 ~dmibisterin~ disciplinary measures, where necessary

Function: Performance Evaluation

Objective: To appraise objectively each employee's performance in relation to the duties
and responsibilities assigned.
Operations: 1 Developing performance evaluation
2 Conducting performanceevaluation interviews
3 Analysing performance evaluation results

Function: Employee Counselling

Objective: To help employees solve their personal problems.
Operations: 1 Selecting and training counsellors
2 Arranging counselling interviews
3 Assessing extent of help actually rendered

Function: Safety
Objective: To develop facilitieq and procedures for prevention of on-the-job accidents.
 Operations: 1 Establishing safety rules Personnel Office: Functions
2 Investigating accidents and Operations
3 Conducting safety inspections
4 Preventing or eliminating hazards
Function: Medical Services
Objective: To prevent diseases and physical ailments as well as care for diseases, ailments,
and injuries sustained by employees on the job.
Operations: I Developing and administering prevention programmes .
2 Examining employees and job applicants
3 Providing medical treatment
4 Educating in health matters
Function: Protection and Security
Objective: To provide precautionary measures for safeguarding the company and its
property from theft, fire, etc.
Operations: 1 Developing and administering security regulations
2 Organising fire fighting services
3 Providing guard or watchman service
Function: Personnel Research
Objective: To develop improved employee attitudes and conditions of work
Operations: 1 Analysing personnel problems
i 2 Recommending improved practices

The chart above gives us one way of classifying the functions of Personnel Management.
Different experts of Personnel Managdment, and Institutions like the Indian Institute of
Personnel Management, have classified these functions differently.

10.4 ORGANISATION OF A PERSONNEL OFFICE

The first step in the organisation of a personnel office is to list all the activities that are
performed keeping in view not only the present requirements of the organisation but also
the future requirements. These future requirements shall be well assessed and based on
authentic sources of information.
It may be noticed that not all the personnel functions are equally important to all
organisations at all times. Their relative importance would differ from each other
depending upon various factors. Some of these factors are the size, the nature, its social,
economic, cultural, political and legal environment, the mental makeup of personnel
officers, and the overall philosophy of business. These factors not only vary from
organisation to organisation but also from country to country.
The less important of these factors may be suitably combined with the closely related
I important ones. The activities should then be grouped function-wise and put under the
' concerned functions. A group of related functions should be put under a particular
i
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Section and the various Sections under the Personnel Manager. Depending upon the
number of Sections and functions, the Personnel Manager can have one or more Deputy
i '
Managers or Assistant Managers. Much will depend upon the size of the organisation, the
m a n a g e m ~philosophy
t and management appreciation of personnel functions. Personnel
1 Manager can also depute some persons to advise him or her.
I

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You will notice here that for some functions the Personnel. Maflager is helped by the
I Deputy Personnel Manager but for others by an Assistant Personnel Manager or an
Officer. This depends on the relative amount of work in or importance of a function. In a
smaller organisation the Organisation Chart is simpler, as given in Figure 11.
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