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Essentials of HRM

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Course Design Committee
Prof Veena Vohra Dr M C Agarwal
Chairperson & Associate Professor HR & OB, Associate Dean (Executive Education Programs)
NMIMS & Professor HR and OB, NMIMS

Dr Sumi Jha Prof Sandeep Hegde

Assistant Professor in HR and OB at NITIE Assistant Professor in HRM, NMIMS
(National Institute of Industrial Engineering)
Mrs Nora Bhatia
Prof Sharon Pandey Head – Human Resources, Mahindra Intertrade
Associate Professor in HR & OB, NMIMS Limited & Visiting Faculty, NMIMS

Prof Manjari Srivastava

Associate Professor in HR & OB, NMIMS

Authors: Dr Sumi Jha, Prof. Sharon Pandey, Dr Manjari Srivastava

Reviewed by: Dr Sumi Jha
Assistant Professor in HR and OB at NITIE (National Institute of Industrial Engineering)

Copyright © 2010, SVKM's Narsee Monjee Institute of Management Studies (NMIMS)

Deemed-to-be University
All Rights Reserved

Produced and Printed

A-45, Naraina, Phase-I,
New Delhi-110028
School of Distance Learning,
V L Mehta Road,
Vile Parle (West), Mumbai – 400 056

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Page No.
Lesson 1 The Changing Social Context and Emerging Issues 7
Lesson 2 Job Analysis and Job Design 18
Lesson 3 Human Resource Planning 30
Lesson 4 Attracting the Talent: Recruitment, Selection and Outsourcing 39
Lesson 5 Competency Mapping and Assessment Centres 51
Lesson 6 Performance Planning and Review 61
Lesson 7 Potential Appraisal, Career and Succession Planning 86
Lesson 8 HR Measurement and Audit 93
Lesson 9 Human Resource Development System 103
Lesson 10 Training and Development 118
Lesson 11 Compensation and Rewards 139
Self Assessment Answers 157

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Page No.
Figure 2.1 Process of Job Analysis 20
Figure 2.2 Organisation of Information 23
Figure 3.1 The HRP Process 33
Figure 4.1 Hiring Process 40
Figure 9.1 Organizational Structure of Human Resource Department 107
Figure 9.2 HRD/Organizational Alignment Model 114
Figure 10.1 The Training Process 123
Figure 10.2 Needs Assessment and Remedial Measures 125
Figure 11.1 Factors that Affect Individual Compensation 140
Figure 11.2 Elements of a Total Reward System 149


Table 2.1 Job Characteristics 27

Table 4.1 Advantages and Disadvantages of Personality Tests 45
Table 5.1 Difference between Assessment Centre and Development Center 54
Table 10.1 Methods used in Training Needs Assessment 125
Table 10.2 Levels of Kirkpatrick's Model 133

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Objectives of HRM, Scope of HRM, Evolution of HRM, HRM functions, Challenges, Personnel Management
Job analysis, Information collection for job analysis, Job description and Job specification, Job design
Human Resource Planning: need, objectives, process and problems
Recruitment – sources and methods, Selection – process, induction and outsourcing
Competency Mapping – developing competency models, uses; Assessment Center: history, measurement tools,
difference between assessment center and development center
Performance appraisal: process, methods, benefits, problems; Coaching and Mentoring: process and
Potential Appraisal: purpose and techniques; Career Planning: meaning and process; Succession Planning:
meaning, pros and cons
HR Audit: objectives, role, significance, process, pros and cons; HR Accounting: methods, pros and cons; HR
Information Systems: application, pros and cons
Human Resource Development System: need, functions, systems, HRD process, HRD effectiveness, Strategic
management & HRM
Training and Development: training and education, stakeholders in training, need for training and development,
training and learning organisations, process of training, cross cultural training, team training, orientation training
Compensation and Rewards: need for compensation, uses, components of compensation, industry compensation,
international compensation, fringe benefits & FBT, reward management-goals, reward systems, recognition

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LESSON The Changing Social Context
and Emerging Issues


1.0 Aims and Objectives
1.1 Introduction
1.2 Objectives of HRM
1.3 Evolution of HRM
1.4 Scope of HRM
1.5 HRM Functions
1.5.1 Human Resource Planning
1.5.2 Recruitment and Selection
1.5.3 Performance and Career Management
1.5.4 Training and Development
1.5.5 Compensation
1.5.6 Retention, Attrition and Downsizing
1.6 HRM Challenges
1.6.1 Organizational Commitment and Empowerment
1.6.2 Organizational Learning
1.6.3 Ethical Facets
1.6.4 Workplace Diversity
1.7 Personnel Management
1.8 Policies
1.9 Let us Sum up
1.10 Keywords
1.11 Self Assessment
1.12 Review Questions
1.13 Suggested Readings


After studying this lesson, you should be able to:
z Analyse the concept of HRM
z Describe the emerging scenario of HRM
z Discuss the challenges of HRM
8 z Explain the HRM position in India
Essentials of HRM
z Analyse the concept of Personnel Management

Human resource management can be defined as managing the functions of employing,
developing and compensating human resources resulting in the creation and
development of human relations with a view to contribute proportionately to
individual, organizational and societal goals.
The liberalization of the Indian economy in 1991 has created a raft of challenges for
organizations operating in India the world's largest democracy. This country of over a
billion potential customers has some of the world's richest individuals, rocket and
nuclear technology, and an infrastructure that includes the world's largest slums, with
25% of the population earning less that one USD a day. An IT power house and one of
the fastest growing countries for outsourcing, India has the largest area of land under
cotton cultivation in the world. Textiles, jewellery and leather produced in this country
adorn the top echelons of fashion houses internationally. Indians are born into their
castes which creates a social hierarchy that spills over into organizational life. This is
the scenario within which Human Resource Management (HRM) is evolving from a
primarily industrial relations and personnel function to that of the creation and
molding of strategic and systemic policies and practices aligned with business goals in
an environment of intense global competition.
With its colonial heritage, India has legislative and financial systems that tend to fall
within the comfort zones of the West, a large workforce who are conversant with the
English language, and a fiercely independent media. Despite increasing numbers of
international Joint Ventures (JV) and Multi-National Corporations (MNC) vying with
each other for doing business in India, along with the Indian public and private sector
companies, and a growing body of theoretical and empirical literature on the use of
strategic and systemic HRM in India, a comprehensive picture of HRM in the Indian
context is lacking.


Societal objective: To be socially responsible to the needs and challenges of society
while minimizing the negative impact of such demands upon the organisation. The
failure of organizations to use their resources for society's benefit may result in
restrictions. For example, societies may pass laws that limit human resource decisions.
Organisational objective: To recognize that HRM exists to contribute to
organisational effectiveness and efficiency. HRM is not an end in itself; it is only a
means to assist the organisation with its primary objectives. Simply stated, the
department exists to serve the rest of the organisation.
Functional objective: To maintain the department's contribution at a level appropriate
to the organisation's needs. Resources are wasted when HRM is more or less
sophisticated than the organisation demands. A department's level of service must be
appropriate for the organisation it serves.
Personal objective: To assist employees in achieving their personal goals, at least
insofar as these goals enhances the individual's contribution to the organisation.
Personal objectives of employees must be met if workers are to be maintained,
retained and motivated. Otherwise, employee performance and satisfaction may
decline, and employees may leave the organisation.
1.3. EVOLUTION OF HRM The Changing Social Context
and Emerging Issues
z Royal Commission – 1931
z The Factories Act 1948
z Personnel function expanded beyond welfare aspect (1960)
z Emphasis shifted to human values and productivity through people
z The American Society of Personnel Administration (ASPA) changed its name to
the Society of Human Resource Management (SHRM).
A beginning was made when the government of India appointed the Royal
Commission on Labour in 1929 to look into the working conditions of industrial
workers. This commission submitted its repot in 1931. One of the recommendations
made was to appoint labour liaison officers to (1) deal with recruitment and dismissal
of labour and (2) improve their working conditions.
With the enactment of the Factories Act, 1948 the appointment of the welfare officers
was made statutory in every factory where more than 500 workers are employed.
Factories Act basically concentrated on the personnel function of welfare and later in
1960 more attention is paid to human aspects. In addition to the concentrating on
production aspects, managements are recognizing the importance of human resources
and their contribution to the organization viability.
The roots of the HR function can be traced to the early welfare and personnel systems
introduced by the Tata group of companies in the 1920s. There has been some overlap
in the usage of the terms HRD, HRM and Personnel in India with a number of
Personnel departments changing their names to HRD and then HRM though often
retaining their same function of administration of payroll and welfare. HRD is “like a
soft version of HRM lays emphasis on building employee competence, commitment
and strong organizational culture”. It is in this vein that a study of worker participation
in India with specific focus on the Banking Industry concluded that sustained efforts
aligned to HRM can create a sustainable participative culture. India took the lead in
the Asia Pacific region in 1985 by setting up the Ministry of Human Resource
Development – by renaming its Ministry of Education – though it has focused
primarily on education and culture and has much to learn from the corporate sector in
order to function as a change agent.
However, since the early 1990s, liberalization has resulted in Western systems of
HRM being brought in by MNCs, JVs, expatriate Indians and Indians educated in
Europe, UK and USA, with a move towards a more strategic approach. Thus while
there has been a general perception from students to managers in India that the
personnel management role is synonymous with HRM, in the last decade there has
been an evolution in the HRM function. This trend is reaffirmed by a survey of HRM
in 350 Indian Industries which found that 75% of organizations had a formal appraisal
system, 71% of employees in the HRM department and CEO's preferred compensation
packages which ensured that employees had maximum benefits, 86% of the managers
believed that adequate attention was paid to Training and Development (T&D)
activities, career planning was ignored by the majority of organizations, and 83% of
the CEO's of these companies believed that recruitment carried out by the HRM
department was well done. Thus as anticipated with the changing conditions in India
due to the opening up of the economy, the value of the HRM function is increasingly
gaining importance with a cross fertilization of ideas between the East and the West.
Essentials of HRM 1.4 SCOPE OF HRM
Based on the existing scholarly literature available on HRM, a general framework is
offered as scope of HRM.
HRM essentially emphasizes and incorporates those expectations which are not being
fulfilled through the traditional personnel management. It integrates in a meaningful
way the various sub-systems like performance appraisal, potential appraisal and
development, career planning, training and development, organization development
etc. Thus the scope of HRM moves from being present at the Macro level while
forming strategy, helping organistions through various human resource based
functions like recruitment selection, compensation etc and leading and the workforce
to an empowered workforce.


The role of human resource management is to plan, develop, and administer policies
and programmes designed to help employees and management to work in an
integrated way. The major functional areas in human resource management are:
Human resource planning, recruitment and selection, performance and career
management, training and development and compensation, retention, attrition and

1.5.1 Human Resource Planning

Human resource planning may be viewed as foreseeing the human resource
requirements of an organization and the future supply of human resources. The
important objectives of manpower planning in an organization are (1) to recruit and
retain the human resources of required quantity and quality, (2) to foresee the
employee turnover and make the arrangements for minimizing turnover and filling up
of consequent vacancies (3) to assess the surplus or shortage of human resources and
take measures accordingly. Thus human resources planning is a vital sub-activity of
the employment function in an organization.

1.5.2 Recruitment and Selection

Recruitment is the personnel function that attracts qualified applicants to fill job
vacancies. In the selection function most suitable candidates are selected for hiring
from among those attracted to the organization by recruiting function. Private sector
companies pay more attention to internal promotions and advertisements with a strong
reliance on social contacts and the accommodation of family members, relatives or
friends in their HRM strategies. They note that public sector organizations advertise
more externally to recruit, make more use of recruitment agencies and tend to recruit
managerial employees as apprentices. Selection procedures increasingly use
psychometrics and interview panels, besides referral letters and seniority and there is a
moving away from caste-based recruitment and nepotism towards talent based
recruitment and selection. Assessment centres though effective are expensive to run
and hence are used only by very large organizations.
While the Indian Constitution prohibits discrimination and forced labour and abolishes
untouchability the lower castes have generally been vulnerable to exploitation. The
Government instituted quotas for affirmative action though this primarily related to
the public sector and government enterprises and are not mandatory in the private
sector. The quotas provide relaxation of qualifications, age limits, and experience as
well as waiver of fees for application tests etc. However, the issue of affirmative
action continues to be a challenge for organizations operating in India.
1.5.3 Performance and Career Management 11
The Changing Social Context
Performance appraisal is essential to understand and improve the employees’ and Emerging Issues

performance through HRD. It is viewed that performance appraisal was useful to

decide upon employee promotion/transfer, salary determination and the like. Survey
results indicate that 70% of Indian organizations stated that their most frequent HRM
activity was training managers in performance appraisal. Thus performance appraisal
will be integrated into the HR systems along with nurturing leadership styles based on
the growing numbers of talented expatriates of Indian origin who are returning to
India. There is a need for using developmental performance management along with
the importance of self appraisals and potential appraisals.
The importance of cultural fit for performance management, rather than direct imports
from US organizations is stressed. In call centres formal and structured performance
appraisal was found with a focus on how well individuals have performed and
resultant linkages to compensation and increments. Performance appraisal is one of
the most effective techniques used by Indian organizations for career planning.
Studies indicate that supervisors inflate ratings of low performers which suggest the
moderating effects of local cultural norms in the role of interpersonal affect in
performance appraisal. Further MNCs and JVs tend to have more discussions with
their employees around performance management than Indian firms, with more
non-hierarchic, egalitarian sharing practices. Indian firms are also moving away from
using performance appraisal as a punitive measure towards enhancing the
performance of employees and facilitating their career management.

1.5.4 Training and Development

Employee training is the most important sub-system of human resource development.
Training is a specialized function and is one of the fundamental operative functions
for human resources management. Training improves changes and moulds the
employee’s knowledge, skill, behaviour and aptitude and attitude towards the
requirements of the job and the organization. There is a growing influence in the
importance of educational and vocational training setup on HRM practices in Indian
organizations with new courses in Human Resource Development (HRD) and
Industrial Relations being offered by educational institutions. National institutions
such as the HRD Academy, Indian Society for Training and Development, the
National Institute of Personnel Management, the All India Management Association,
National Institute of Industrial Engineering and Indian Society for Applied
Behavioural Sciences also play a role in the training and development of HRM
In a cross-national study of 252 Indian and 174 British companies on corporate
training and development policies and practices found that in both countries the
continuous pressure for quality innovation and productivity were the major drivers for
training and development initiatives. In India the percentage of payroll spent on
training was 1.2% compared with 5.4% in Britain. 55.3% of employees were trained
per year in India, in contrast to 61.7% in Britain, with HRD/training staff per 1000
employees being 2.3 in India and 4.0 in Britain. It is worth noting that in the same
study, 65% of Indian organizations perceived the absence of transfer of learning from
training to workplace as a major deficiency.
Interestingly MNC's have the reputation of providing marginally greater attention to
training, though they tend to provide intensive inputs in aspects concerning immediate
job performance in contrast to Indian companies which provide wider job knowledge.
In analysing business practices of MNC's in India he found that they were beneficial
to the educated and trained employees but seem to have adverse effects on lower
levels of the Indian society and economy and some managers in India found
12 US management practices lacking in humanistic and social concerns as they tend to be
Essentials of HRM
too market oriented and impersonal.

1.5.5 Compensation
Compensation or paying employees for work and developing structures of
compensation packages is one of the major responsibilities of HRM managers.
Compensation package consists of two kinds of payments during employment and
after employment. During employment package basically consists of four components
the basic salary, cash allowances, bonus and non-cash perquisites. Once the employee
has left the organization either voluntarily or on superannuation, he can continue to
draw certain kinds of benefits from it these may be in the form of pension, gratuity,
etc. Indian firms seem to employ a mixed approach to employee compensation based
on cultural values (e.g. respect for age) and legal requirements. In a study on 150
firms in India by factors such as the spread of family controlled conglomerates and
government involvement in private business and their impact on top executives'
compensation are examined. They found that CEO compensation was positively
related to CEO age and organizational performance, but tenure was negatively related
to compensation, however this may have been masked by regulatory reforms prior to
the liberalization in the 1990s. Family ownership was negatively related to CEO pay
possibly due to the dampening effect of close family ties on managerial excesses and
Indian tax laws concerned with compensation to family members. A transition
towards performance based pay rather than seniority based pay is taking place though
this is more evident in the private sector.

1.5.6 Retention, Attrition and Downsizing

Downsizing refers to the activities undertaken by the management to improve
efficiency, productivity and competitiveness of organizations by reducing their work
force. There is a dearth of studies in this area, though some research is available in the
IT industry and call centres. Retention is a major issue in IT, offshore outsourcing due
to poaching and no clear salary growth plan identified for employees. Employee
turnover, particularly at the junior level in call centres is severe and individuals often
leave due to dissatisfaction with work culture, e.g. shift work, as well as for better
opportunities. Researchers have investigated Voluntary Retirement Schemes (VRS)
and found different patterns in organizations and that most organizations do not
improve their performance after VRS. However, public sector enterprises are adopting
a systematic and formal approach to become more efficient and are adopting steps
such as divestment, downsizing, redundancies and voluntary retirement schemes.


Efficient and effective Human Resource management is a challenge to all HR
professionals. Staffing, training and helping to manage people so that the organization
is likely to increase the performance level is imperative to work in a productive
manner. Normally, human resource functions are tracking data points on each
employee. These might include experiences, capabilities, skills, data, personal
histories and payroll records. In the most general sense businesses carry out different
activities dealing with managing their approaches to employee benefits and
compensation, as well as employee records and personnel policies.

1.6.1 Organizational Commitment and Empowerment

Competitive pressure has been seen as a major factor in realigning organizations'
HRM policies and practices to seek and sustain organizational commitment in their
employees through the introduction of innovative HRM practices. These innovative
practices revolve around perceptions of employees on acquisition and retention 13
The Changing Social Context
strategies as well as on compensation, incentives, benefits and services. Such practices and Emerging Issues
in India and the perceived extent of their introduction by an organization is the most
significant predictor of organizational commitment, with importance placed on a
mutual-investment approach in the employee-organization relationship. The notion of
person–culture fit for those values which could predict commitment in the Indian
banking sector suggests the need for firms to pay attention to socialization practices
which would result in strong cultures and employee commitment.
Practices such as employee friendly work environment, career development,
development oriented appraisal and comprehensive training have a significant positive
relationship with organizational commitment among software professionals in India.
In an Indian sample of 1000 line/HR managers from the top middle and lower levels
of 50 organizations, psychological empowerment was predicted by affective,
normative and continuance commitment and empowerment and was seen as an
antecedent to organizational commitment. There also seems to be a need to align HR
strategies including aspects of talent management, enhancing trust, promoting
organizational citizenship behaviour and the policing role of HR in order to move
from control oriented to commitment oriented work practices. Discuss the importance
of power-sharing arrangements for employees at the bottom of the pyramid resulting
in employee empowerment as a strategic option despite the attempt of trade unions to
subvert the redistribution of power. Finally in a patriarchal society, initiatives to
empower women managers who have generally remained segregated in predominantly
female occupations are an urgent need.

1.6.2 Organizational Learning

Indian organizations have much to learn from their foreign counterparts in facilitating
and encouraging experimentation, tolerance and learning from mistakes. Business-led
R&D has resulted in organizations in India responding to market reforms,
liberalization and globalization and illustrate the increasing importance given to
learning competitive practices, learning through experience, learning from failures and
developing cognitive skills for improving conceptual knowledge. Successful
work-based learning and training interventions are crucial for strengthening
organizational commitment and self confidence and creating sustainable competitive
advantage. Organizational learning has a positive correlation with organizational
performance in a study of 100 senior managers in Delhi, India. On International
Standards Organisation (ISO) certification in India in SME's indicates that ISO
certified firms place greater emphasis on HR practices compared to those without the
ISO certification. To sum up organizational learning capability has been linked to the
perceptions of the HR function and its business partner role, as well as to the
perceptions of line managers on the HR function.

1.6.3 Ethical Facets

Traditionally work is seen as duty in India, yet translating this into globally
competitive work practices and profits while retaining core values is a daunting task.
A study on cultural values and management ethics notes that in collectivist cultures
like India, the relationship of the individual with the peer group in society or at work
is likely to be based on obligatory commitment so that the group as a collective entity
is promoted, hence ethical decision making is likely to be based on saving face and the
contingencies of the situation. Ethical attitudes can be to the cultural context and
society in a particular nation along with the level of economic development, hence
there may be differences into the components that go into the decision making process
and thus give rise to different decision outcomes. Future managers from collectivist
14 cultures may combine personal accomplishment and achievement along with the
Essentials of HRM
traditional values of forgiveness, obedience and helpfulness.

1.6.4 Workplace Diversity

The dimensions of workplace diversity include, but are not limited to: age, ethnicity,
ancestry, gender, physical abilities/qualities, race, sexual orientation, educational
background, geographic location, income, marital status, military experience, religious
beliefs, parental status, and work experience.
The future success of any organizations relies on the ability to manage a diverse body
of talent that can bring innovative ideas, perspectives and views to their work. The
challenge and problems faced of workplace diversity can be turned into a strategic
organizational asset if an organization is able to capitalize on this melting pot of
diverse talents. With the mixture of talents of diverse cultural backgrounds, genders,
ages and lifestyles, an organization can respond to business opportunities more rapidly
and creatively, especially in the global arena, which must be one of the important
organisational goals to be attained. More importantly, if the organizational
environment does not support diversity broadly, one risks losing talent to competitors.


The personnel department has staff relationship with other departments/managers in
the total organization. The personnel department is responsible for advising
management in all areas relating to personnel management and industrial relations.
Personnel management basically is a support function. Apparently the maintenance of
the personnel record and the development of statistics are the most frequent functions.
Finally the role of personnel manager is more advisory than decision-making, more
operational than strategic.

Policies and Procedure Manual

The manual provides guidelines to be followed in the administration of the policies,
and assists all employees in defining who is responsible for each human resource
management decision, and the correct procedure which is to be followed. The policies
are required to be consistent with those of best practice management principles and
should have the full support and commitment of company management. HR policies
must be kept current and relevant. Therefore, from time to time it is necessary to
modify and amend some sections of the policies and procedures, or for new
procedures to be added.

z Policy is a plan of action
z Deep thought to the basic needs of both the organization and the employees
z Consistent treatment of all personnel throughout the organization
z Continuity of action is assured
z Policies serve as a standard of performance
z Sound policies help build employees motivation and loyalty.

Specific Policies
z Policy of hiring people
z Policy on terms and conditions of employment
z Policy with regard to medical assistance 15
The Changing Social Context
z Policy regarding housing, transport, uniform and allowances and Emerging Issues

z Policy regarding training and development

z Policy regarding industrial relations.
Example of Policy
Effective Date: 1st November 1996
Approved by
Personnel Policy No.GPP004
To establish a uniform code for sanction of loan to assist employees during short
periods of financial difficulty.
This policy applies to all confirmed employees. Sanction of loans shall be at the sole
discretion of Management and may be discontinued without notice.
Personnel Department shall be responsible for sanction, monitoring and recovery of
1. Loan application stating amount, reason and installment to be deducted shall be
forwarded to Personnel Department.
2. Quantum: The Quantum of loan shall not exceed six months basic salary or
Rs.10000/- whichever is less.
3. Interest: Loans shall be free of interest for employees earning a basic salary of
Rs.3000/- and below. Employees earning Rs. 3001/- and above shall pay interest
@5% p.a. on the loan sanctioned which shall be recovered at the time of
4. Recovery: (a) Recovery shall be in twelve monthly installments from salary. If
recovery is not made in any month, following a special request, the amount
recoverable shall be increased proportionately in the following months so that the
total loan is recovered within twelve months. (b) Bonus, ex-gratia incentives and
any other payment due to the loanee shall be charged as a security for the loan and
shall be adjusted against the same. To that extent or if the loan is repaid earlier,
proportionate interest @ 5% p.a. shall be repaid to the loanee.
5. A fresh loan may not be sanctioned during the pendency of an earlier loan or before
completion of 6 months after repayment of the earlier loan.
6. Variations in the above terms and conditions may be made only with the prior
written sanction of the Chairman.


The functions and principles of management have been undergone a sea change since
the announcement of economic liberalizations in the country in 1991.
Effective organizations are not built merely on investment and returns but more on the
quality of their work force, its commitment to the goals of the organization and the
investment made to attract, train and retain superior human resources.
16 Greater level of involvement of HR people in the day-to-day life of employees is
Essentials of HRM
becoming the norm of the day for companies, which are looking for greater
commitment from employees.

Human Resource Management: Managing the functions of employing, developing
and compensating human resources resulting in the creation and development of
human relations.
Joint Ventures: A contractual agreement joining together two or more parties for the
purpose of executing a particular task.
MNC: Corporation that has its facilities and other assets in at least one other foreign
Human Resource Planning: Foreseeing the human resource requirements of an
organization and the future supply of human resources.
Human Resource Development: Framework for the expansion of human capital
within an organisation.
Recruitment: It is the personnel function that attracts qualified applicants to fill job
Selection: In this process the most suitable candidates are selected for hiring from
among those attracted to the organization by recruiting function.


Fill in the blanks:
1. The organisations should use all their resources keeping in mind the benefits of
the society. This relates to……………objectives of HRM.
2. Society of Human Resource Management was earlier known as…………………..
3. Organisations should realize that, along with training and development,
………………… also important.
4. Large organisations often use…………………….for their recruitment and
selection process.
5. Companies often downsize to improve………………..of the organisational
6. ……………………advises the management on issues like labour relations.
7. …………….is a plan of action that also serves as a standard of performance.


1. What do you mean by HRM? Discuss the objectives of HRM.
2. Explain the evolution of HRM.
3. “HRM functions help employees and management to work in an integrated way”.
4. Analyse the role of training and development in employee’s and organisation’s
5. What are the responsibilities of the personnel department?
6. What are the various challenges, HRM is facing?
1.13 SUGGESTED READINGS The Changing Social Context
and Emerging Issues
Mirza S. Saiyadain, Human Resource Management, Third Edition, Tata McGraw Hill.
P. Subba Rao, Personnel and Human Resource Management, Second Edition, Himalaya
Publishing House.
G. Dessler, Human Resource Management, 12th Edition, Pearson Education.
Essentials of HRM


2.0 Aims and Objectives
2.1 Introduction
2.2 Definition and Purpose of Job Analysis
2.3 Process of Job Analysis
2.4 Types of Information for Job Analysis
2.5 Methods of Gathering Information for Job Analysis
2.5.1 Personal Observation
2.5.2 Critical Incidents
2.5.3 Interview
2.5.4 Questionnaire Method
2.6 The Department of Labor
2.7 Job Description
2.8 Job Specification
2.9 Use of Job Analysis
2.10 Job Design
2.11 Problems with Job Design
2.12 Let us Sum up
2.13 Keywords
2.14 Self Assessment
2.15 Review Questions
2.16 Suggested Readings


After studying this lesson, you should be able to:
z Define Job Analysis (JA)
z Understand the process of JA
z Discuss the methods of JA
z Discuss the concept of job description and job specification
z Identify techniques of collecting information for JA
z Describe the process of job design
2.1 INTRODUCTION Job Analysis and Job Design

We have all experienced that appalling sense of having far too much work to do and
too little time to do it in. We can choose to ignore this, and work unreasonably long
hours to stay on top of our workload. The risks here are that we become exhausted,
that we have so much to do that we do a poor quality job and that we neglect other
areas of our life. Each of these can lead to intense stress. The alternative is to work
more intelligently, by focusing on the things that are important for job success and
reducing the time we spend on low priority tasks. Job Analysis is the first step in
doing this.
The first of the action-oriented skills that we look at is Job Analysis. Job Analysis is a
key technique for managing job overload – an important source of stress. To do an
excellent job, you need to fully understand what is expected of you. While this may
seem obvious, in the new, fast-moving, high-pressure role, it is oftentimes something
that is easy to overlook.
By understanding the priorities in your job, and what constitutes success within it, you
can focus on these activities and minimize work on other tasks as much as possible.
This helps you get the greatest return from the work you do, and keep your workload
under control.
Job Analysis is a useful technique for getting a firm grip on what really is important in
your job so that you are able to perform excellently. It helps you to cut through clutter
and distraction to get to the heart of what you need to do.
An important concept of Job Analysis is that the analysis is conducted of the Job, not
the person. While Job Analysis data may be collected from incumbents through
interviews or questionnaires, the product of the analysis is a description or
specifications of the job, not a description of the person.


A job analysis is the process used to collect information about the duties,
responsibilities, necessary skills, outcomes, and work environment of a particular job.
It is a procedure through which you determine the duties of the positions and the
characteristics of the people to hire for them. The activity of job analysis gives us two
results – job description and job specification.
Many organizations decide to use generic products (for example, employment tests,
training programs, and performance evaluation forms) that apply to a variety of jobs in
different organizations. However, if we conduct a job analysis, we will have specific
information that will allow us to create programs that are tailored to the unique
demands of the jobs in the organization. Research shows that programs based on job
analysis results are more effective and more readily accepted by employees than
comparable generic programs. Even if we decide to use generic human performance
management programs, job analysis information will help us select the most
appropriate products.

I. Planning the Job Analysis

A. Identify objectives of job analysis
B. Obtain top management support

II. Preparing for Job Analysis

A. Identify jobs and methodology
B. Review existing job documentation
C. Communicate process to managers/employees

III. Conducting the Job Analysis

A. Gather job analysis data
B. Review and compile data

IV. Developing Job Descriptions and Job Specifications

A. Draft job descriptions and specifications
B. Review drafts with managers and employees
C. Identify recommendations
D. Finalize job descriptions and recommendations

V. Maintaining and Updating Job Descriptions and Job Specifications

A. Update job descriptions and specifications as organization changes
B. Periodically review all jobs

Figure 2.1: Process of Job Analysis

1. Gather the appropriate people for the task: The manager to whom the position
will report takes the lead to develop a job description, but other employees who
are performing similar jobs can contribute to the development of the job
description. Additionally, if the position is new and will relieve current employees
of work load, they should be part of the discussion.
2. Planning the job analysis: Decide how the information will be used, since this
will determine the data you collect and how you collect them. The data collection
will require top management approval.
3. Preparing for job analysis: Review relevant background information such as
organization charts, process charts, identify jobs to be analyzed, prepare a
workflow chart that shows the flow of inputs to and output from a particular job.
4. Conducting job analysis: This activity involves collection of data on job
activities, required employee behaviours, working conditions and human traits and
abilities needed to perform the job. Verify the job analysis information with the
worker performing the job and with his or her immediate supervisor.
5. Developing job description and job specification: These are the two tangible
products of job analysis. The job description is a written statement that describes
the activities and responsibilities of the job, as well as its important feature, such
as working conditions and safety hazards. The job specification summarizes the
personal qualities, traits, skills and background required for getting the job done. 21
Job Analysis and Job Design
These are the normal components of the job description:
(a) Overall position description with general areas of responsibility listed,
(b) Essential functions of the job described with a couple of examples of each,
(c) Required knowledge, skills, and abilities,
(d) Required education and experience,
(e) A description of the physical demands, and
(f) A description of the work environment.
6. Review the job description periodically to make sure it accurately reflects what
the employee is doing and your expectations of results from the employee.


Work activities: Information on the activities requires to complete the work, such as
cleaning, selling, and recruiting. This list of information also include how, why, and
when the worker performs each activity.
Human behaviours: The specialist collects information about human behaviours like
sensing, communicating, deciding and writing.
Machines tools, equipment and work aids: This category includes information
regarding tools used, materials processed and services rendered.
Performance standards: The information on the job performance standards, in terms
of quantity and quality of minimum standards acceptable.
Job context: Included here is information about job conditions, work schedule and
organizational and social context.
Human requirements: This includes information regarding the job’s human
requirements, such as knowledge or skills (education, training, experience) and
personal attributes (aptitudes, physical characteristics etc).


2.5.1 Personal Observation
The analyst observes the worker(s) doing the job. The tasks performed, the pace at
which activities are done, the working conditions, etc., are observed during a complete
work cycle. During observation, certain precautions should be taken
z The analyst must observe average workers during average conditions.
z The analyst should observe without getting directly involved in the job.
z The analyst must make note of the specific job needs and not the behaviors
specific to particular workers.
z The analyst must make sure that he obtains a proper sample for generalization.
This method allows for a deep understanding of job duties. It is appropriate for
manual, short period job activities. On the negative side, the methods fail to take note
of the mental aspects of jobs.
22 2.5.2 Critical Incidents
Essentials of HRM
The Critical Incident Technique (CIT) is a qualitative approach to job analysis used to
obtain specific, behaviorally focused descriptions of work or other activities. Here the
job holders are asked to describe several incidents based on their past experience. The
incidents so collected are analyzed and classified according to the job areas they
describe. The job requirements will become clear once the analyst draws the line
between effective and ineffective behaviors of workers on the job. For example, if a
shoe salesman comments on the size of a customer’s feet and the customer leaves the
store in a huff, the behavior of the salesman may be judged as ineffective in terms of
the result it produced. The critical incidents are recorded after the events have already
taken place – both routine and non-routine. The process of collecting a fairly good
number of incidents is a lengthy one. Since, incidents of behavior can be quite
dissimilar, the process of classifying data into usable job descriptions can be difficult.
The analysts overseeing the work must have analytical skills and ability to translate
the content of descriptions into meaningful statements.

2.5.3 Interview
The interview method consists of asking questions to both incumbents and supervisors
in either an individual or a group setting. The reason behind the use of this method is
that job holders are most familiar with the job and can supplement the information
obtained through observation. Workers know the specific duties of the job and
supervisors are aware of the job’s relationship to the rest of the organization.
Due diligence must be exercised while using the interview method. The interviewer
must be trained in proper interviewing techniques. It is advisable to use a standard
format so as to focus the interview to the purpose of analyst.
Although the interview method provides opportunities to elicit information sometimes
not available through other methods, it has limitations. First, it is time consuming and
hence costly. Second, the value of data is primarily dependent on the interviewer’s
skills and may be faulty if they put ambiguous questions to workers. Last,
interviewees may be suspicious about the motives and may distort the information
they provide. If seen as an opportunity to improve their positions such as to increase
their wages, workers may exaggerate their job duties to add greater weightage to their

2.5.4 Questionnaire Method

The questionnaire is a widely used method of analyzing jobs and work. Here the job
holders are given a properly designed questionnaire aimed at eliciting relevant
job-related information. After completion, the questionnaires are handed over to
supervisors. The supervisors can seek further clarifications on various items by talking
to the job holders directly. After everything is finalized, the data is given to the job
The success of the method depends on various factors. The structured questionnaire
must cover all job related tasks and behaviors. Each task or behavior should be
described in terms of features such as importance, difficulty, frequency, and
relationship to overall performance. The job holders should be asked to properly rate
the various job factors and communicate the same on paper. The ratings thus collected
are then put to close examination with a view to find out the actual job requirements.
Questionnaire method is highly economical as it covers a large number of job holders
at a time. The collected data can be quantified and processed through a computer. The
participants can complete the items leisurely. Designing questionnaires, however, is
not an easy task. Proper care must be taken to see that the respondents do not
misinterpret the questions. Further, it is difficult to motivate the participants to 23
Job Analysis and Job Design
complete the questionnaires truthfully and to return them.


Job analyst uses observation and interview methods to gather information about an
employee. Information organized into three categories:
z Data
z People
z Things
Work Functions
Data People Things
0. Synthesizing 0. Mentoring 0. Setting up
1. Coordinating 1. Negotiating 1. Precision work
2. Analyzing 2. Instructing 2. Operating
3. Compiling 3. Supervision 3. Driving
4. Computing 4. Diverting 4. Manipulating
5. Copying 5. Persuading 5. Tending
6. Comparing 6. Speaking 6. Feeding
7. Serving 7. Handling
8. Helping

Source: U.S. Department of Labor, Dictionary of Occupational Titles, 4th ed. Revised (Washington, D.C.:
Government Printing Office, 1991), p.xix.

Figure 2.2: Organisation of Information


A job description is an organized, factual statement of duties and responsibilities of a
specific job. It should tell what is to be done, how it is done, and why.
A statement containing items such as:
z Job title
z Location
z Job summary
z Duties
z Machines, tools, and equipment
z Materials and forms used
z Supervision given or received
z Working conditions
z Hazards
24 Job Description Outline
Essentials of HRM

Manpower development division: Oberoi hotels

Department area code: 600
1. Job position: Executive Housekeeper
2. Category : Executive
3. Responsible to: Executive assistant manager
General Manager
Operations manger
4. Job definition: Organizes, supervises, and coordinate functions of her department for
safety, cleanliness, general maintenance and order, establishment renovation.
Responsible for excellent upkeep of entire hotel.
5. Day to day responsibilities:
(a) Supervises and takes inspection rounds of the hotel daily
(b) Checks departmental log book maintained by the supervisors
(c) Checks linen and uniform room for orderly maintenance of uniform, racks &
(d) Checks on lost and found property controls
(e) Schedules supervisory staffs for work
(f) Assists in training her staff at all level
(g) Directly controls: staffs working under her
(h) All equipments required for maintenance
6. Assigned area of activity: entire hotel
7. Authority: recommending authority for promotions, increments and dismissals. Hiring
as per recruitment committee.
8. Interdepartmental coordination: all departments of hotel and also the interior
decorating and controller of household. Attends/Conducts: general manager meetings
& departmental meetings
9. In addition to the above mentioned duties and functions any other assignment given
occasionally or on daily basis by the immediate supervisor or the management.
Prepared by:
Approved by:


The knowledge skills and abilities an individual needs to perform a job satisfactorily.
Knowledge, skills and abilities include education, work skill requirements, personal
abilities, mental and physical requirements.
Statement of human qualification necessary to do the job includes:
z Education
z Experience
z Training
z Judgment
z Initiative
z Physical effort
z Physical skills 25
Job Analysis and Job Design
z Responsibilities
z Communication skills
z Emotional characteristics
z Unusual sensory demands, as smell, sight
Specimen of Job Specification: Part 1
Job Title: Compensation Manager Job Code:
Supervisor’s Title: Vice President Grade:
of Human Resources
Department: Human Resources FLSA Status: Exempt
EEOC Class: O/M
General Summary: Responsible for the design and administration of all cash compensation
programs, ensures proper consideration of the relationship of compensation to performance
of each employee, and provides consultation on compensation administration to managers
and supervisors.
Essential Duties and Responsibilities:
1. Prepares and maintains job descriptions for all jobs and periodically reviews and
updates them. Responds to questions from employees and supervisors regarding job
descriptions. (25%)
2. Ensures that company compensation rates are in line with pay structures. Obtains or
conducts pay surveys as necessary and presents recommendations on pay structures on
an annual basis. (20%)
3. Develops and administers the performance appraisal program and monitors the use of
the performance appraisal instruments to ensure the integrity of the system and its
proper use. (20%)
4. Directs the job evaluation process by coordinating committee activities and resolves
disputes over job values. Conducts initial evaluation of new jobs prior to hiring and
assigns jobs to pay ranges. (15%)
5. Researches and provides recommendations on executive compensation issues. Assists
in the development and oversees the administration of all annual bonus payments for
senior managers and executives. (15%)
6. Coordinates the development of an integrated HR information system and interfaces
with the Management Information Systems Department to achieve departmental goals
for information needs. (5%)
7. Performs related duties as assigned or as the situation dictates.

Specimen of Job Specification: Part 2

Required Knowledge, Skills and Abilities
1. Knowledge of compensation and HR management practices and approaches.
2. Knowledge of effective job analysis methods and survey development and
interpretation practices and principles.
3. Knowledge of performance management program design and administration.
4. Knowledge of federal and state wage and hour regulations.
5. Skill in writing job description, memorandums, letters, and proposals.
6. Skill in use of word processing, spreadsheet, and database software.

26 7. Ability to make presentations to groups on compensation policies and practices.
Essentials of HRM
8. Ability to plan and prioritize work.
Education and Experience
This position requires the equivalent of a college degree in Business Administration,
Psychology, or a related field plus 3-5 years experience in HR management, 2-3 of which
should include compensation administration experience. An advanced degree in Industrial
Psychology, Business Administration, or HR Management is preferred, but not required.
Physical Requirements Rarely Ocassionally Frequently Regularly
(0-12%) (12-33%) (34-66%) (67-100%)
Seeing: Must be able to read reports X
and use computer
Hearing: Must be able to hear well X
enough to communicate with
Standing/Walking X
Climbing/Stooping/Kneeling X
Lifting/Pulling/Pushing X
Fingering/Grasping/Feeling: Must X
be able to write, type and use phone


Good personnel management demands both the employee and the employer to have a
clear understanding of the duties and responsibilities to be performed on a job. Job
analysis helps in this understanding by drawing attention to a unit of work and its
linkage with other units of work. More specifically, the uses of job analysis may be
summarized thus:
1. Human resource planning: Job analysis helps in forecasting human resource
requirements in terms of knowledge and skills. By showing lateral and vertical
relationships between jobs, it facilitates the formulation of a systematic promotion
and transfer policy. It also helps in determining quality of human resources
needed in an organization.
2. Recruitment: Job analysis is used to find out how and when to hire people for
future job openings. An understanding of the skills needed and the positions that
are vacant in future helps managers to plan and hire people in a systematic way.
For example, a company might be traditionally hiring MBA students for equity
research. A recent job analysis showed that the positions could be filled by
graduates with an analytical mind. Now, this would help the company hire equity
analysts from a greater number of available graduates by offering even a slightly
lesser salary.
3. Selection: Without a proper understanding of what is to be done on a job, it is not
possible to select a right person. If a Super bazaar manager has not clearly
identified what a clerk is to do, it is difficult to find if the person selected must be
able to position stores items, run a cash register, or keep the account books.
4. Placement and orientation: After selecting people, we have to place them on jobs
best suited to their interests, activities and aptitude. If we are not sure about what
needs to be done on a job, it is not possible to identify the right person suited for
the job. Similarly, effective job orientation cannot be achieved without a proper
understanding of the needs of each job. To teach a new employee how to handle a 27
Job Analysis and Job Design
job, we have to clearly define the job.
5. Training: If there is any confusion about what the job is and what is supposed to
be done, proper training efforts cannot be initiated. Whether or not a current or
potential job holder requires additional training can be determined only after the
specific needs of the jobs have been identified through a job analysis.
6. Counseling: Managers can properly counsel employees about their careers when
they understand the different jobs in the organization. Likewise, employees can
better appreciate their career options when they understand the specific needs of
various other jobs. Job analysis can point out areas that an employee might need
to develop to further a career.
7. Employee safety: A thorough job analysis reveals unsafe conditions associated
with a job. By studying how the various operations are taken up in a job,
managers can find unsafe practices. This helps in rectifying things easily.
8. Performance appraisal: By comparing what an employee is supposed to be doing
(based on job analysis) to what the individual has actually done, the worth of that
person can be assessed. Ultimately, every organization has to pay a fair
remuneration to people based on their performance. To achieve this, it is
necessary to compare what individuals should do (as per performance standards)
with what they have actually done (as per job analysis).
9. Job design and redesign: Once the jobs are understood properly, it is easy to
locate weak spots and undertake remedial steps. We can eliminate unnecessary
movements, simplify certain steps and improve the existing ones through
continuous monitoring. In short, we can redesign jobs to match the mental
make-up of employees.
10. Job evaluation: Job analysis helps in finding the relative worth of a job, based on
criteria such as degree of difficulty, type of work done, skills and knowledge
needed, etc. This, in turn, assists in designing proper wage policies, with internal
pay equity between jobs.


It integrates the work context (tasks, functions, and relationships), the rewards
(extrinsic and intrinsic) and the qualifications required (skills, knowledge, abilities)
for each job in a way that meets the needs of employees and the organizations.
z Job Enlargement: Broadening the scope of a job by expanding the number of
different tasks to be performed.
z Job Enrichment: Increasing the depth of a job by adding the responsibility for
planning, organizing, controlling, and evaluating the job.
z Job Rotation: The process of shifting a person from job to job.
Table 2.1: Job Characteristics
Skill Variety The extent to which the work requires several different activities for successful
Task Identity The extent to which the job includes a “whole” identifiable unit of work that is
carried out from start to finish and that results in a visible outcome.

Task Significance The impact the job has on other people.

Autonomy The extent of individual freedom and discretion in the work and its scheduling.
Feedback The amount of information received about how well or how poorly one has
1. Unless lower-level needs are satisfied, people will not respond to opportunities to
satisfy upper-level needs.
2. Job design programs may raise employees’ expectations beyond what is possible.
3. Job design may be resisted by labor unions who see the effort as an attempt to get
more work for the same pay.
4. Job design efforts may not produce tangible improvements for some time after the
beginning of the effort.


Job analysis is just one of many practical action-oriented techniques for reducing the
ambiguity of job overload.
These and other types of technique help you to resolve structural problems within
jobs, work more effectively, improving the way your teams function and become more
assertive so that other people respect your right not to take on an excessive workload.
These are all important techniques for understanding the priorities of job and the value
of job performance.
It helps employee being more clear what is expected of him/her as well as the roles
and activity clarity.
Good personnel management demands both the employee and the employer to have a
clear understanding of the duties and responsibilities to be performed on a job.
Job design integrates the work context (tasks, functions and relationships), the rewards
(extrinsic and intrinsic) and the qualifications required (skills, knowledge and
abilities) for each job in a way that meets the needs of employees and the

Job Analysis: It is the process used to collect information about the duties,
responsibilities, necessary skills, outcomes, and work environment of a particular job.
Job Context: It includes information about job conditions, work schedule and
organizational and social context.
Critical Incident Technique: It is a qualitative approach to job analysis used to obtain
specific, behaviorally focused descriptions of work or other activities.
Job Description: It is an organized, factual statement of duties and responsibilities of
a specific job.
Job Specification: It is a statement of human qualifications necessary to do the job.
Job Design: It integrates the work context, the rewards and the qualifications required
for each job.
2.14 SELF ASSESSMENT Job Analysis and Job Design

Fill in the blanks:

1. …………. reduces the time spent on less important job and is important for job
2. ……………. includes the statement of kind of conditions one will be exposed to
on the job.
3. …………… method of gathering data for job analysis is best suited when detailed
information on job duties is required.
4. …………… can be categorized into data, people or things.
5. …………… gives details about the place of work, the duties and responsibilities.
6. …………… is the process of assigning different jobs to the same person
7. Adding more responsibilities to a job is ……………


1. What do you mean by job analysis and how is it useful?
2. Analyse the process of job analysis with the help of an example.
3. How is the information gathered and organised, for job analysis?
4. Distinguish between job specification, job design and job description.
5. Develop a job description for the following position:
(a) Manager marketing
(b) GM HR
(c) Supervisor
6. Mahesh Rathi, customer service manager at client server, wants to conduct a job
analysis on how his employees interact with customers and other employees.
What steps should Mahesh take to implement a successful job analysis, and what
method should he use to analyze his employees?


G. Dessler, Human Resource Management, 12th Edition, Pearson Education.
S. Snell and G. Bohlander, Managing Human Resources, 13th Edition, Thomson.
Essentials of HRM


3.0 Aims and Objectives
3.1 Introduction
3.2 Objectives of HRP
3.3 Levels of HRP
3.3.1 Corporate Level Planning
3.3.2 Intermediate Level Planning
3.3.3 Operations Planning
3.4 Process of HRP
3.5 Techniques of HR Demand Forecasting
3.5.1 Qualitative Methods
3.5.2 Quantitative Methods
3.6 Factors Affecting HR Demand Forecasting
3.7 Guidelines for making HRP Effective
3.8 Let us Sum up
3.9 Keywords
3.10 Self Assessment
3.11 Review Questions
3.12 Suggested Readings


After studying this lesson, you should be able to:
z Analyse the concept of Human Resource Planning (HRP)
z Discuss the need and objectives of HRP
z Describe the process of HRP
z Discuss the problems of HRP

HRP process is invaluable to an organization’s well-being. It is the system of
matching the available resources either internally or externally, with the demand that
the organization expects to have over a period of time.
Thomson (1988) defines Human Resource Planning as courses of action are Human Resource Planning
determined in advance and continually updated, with the aim of ensuring that:
a) the organization’s demand for labour to meet its projected needs is as accurately
predicted as the adoption of modern forecasting techniques allows and
b) the supply of labour to the enterprise is maintained by deliberate and systematic
action to mobilize it in reasonable balance with these demands.
In simple words human resource planning is the process by which an organization
ensures that it has the right number and kind of people, at the right place, at the right
time, capable of effectively and efficiently completing tasks that will help
organization achieve its overall objective.


One of the aims of human resource planning is to create a situation in which
employees know what is going on in the organization and understand what their
contribution is. Effective workforce planning to specific enterprises involves
determining which actions are needed to achieve business objectives, identifying the
types and quantities of skills that are necessary to accomplish those actions,
determining how those skills may vary from the skills that are currently available, and
developing strategies for closing the gaps between today's workforce and the
workforce needed to accomplish the business objectives.
Human resource planning serves important purposes for a firm’s strategic human
resource management. Mello (2003) outlined five major objectives of HRP:
1. to prevent overstaffing and understaffing;
2. to ensure employee availability;
3. to ensure that the organization is responsive to the environment;
4. to provide direction to all HR activities; and
5. to build line and staff partnership.
Human resource planning constitutes an integral part of corporate plan and serves the
organizational purposes in more ways than one. For example, it helps organizations to
(i) capitalize on the strengths of their human resources; (ii) determine recruitment
levels; (iii) anticipate redundancies; (iv) determine optimum training levels; (v) serve
as a basis for management development programmes; (vi) cost manpower for new
projects; (vii) assist productivity bargaining; (viii) assess future requirements;
(ix) study the cost of overheads and value of service functions; and (x) decide whether
certain activities need to be subcontracted.


HRP is done at various levels in the organization to meet the resource requirements at
these levels. The flow of communication regarding HRP has to be both ways, that is,
from top to bottom as well as from bottom to top.

3.3.1 Corporate Level Planning

Corporate level HRP takes into consideration the changing market situation, strategic
plans of the organization, the technological changes anticipated etc, at a macro level.
These are influenced, like any other corporate level plan, by the philosophy and
culture of the organization. The role of human resource planning at this level is to
32 identify the broad policy issues relating to human resources. The various issues
Essentials of HRM
discussed at this stage are the employment policy, the welfare policy, development
policy etc.

3.3.2 Intermediate Level Planning

Intermediate level planning is done at the Strategic Business Unit Level. The HR
planning at this stage is done based on the corporate level HR plan. The decisions here
should complement the decisions at the higher level and help the SBU achieve its
goals and objectives. HR planning at this level includes determining the
recruitment/layoff strategy and retaining strategy etc.

3.3.3 Operations Planning

These plans are made at the operational level and, as in the case of planning at other
levels, are made in pursuit of the organizational objectives. These include simple plans
like plans for training and development of resources, recruitment etc. to match the
requirements laid down at a broader level.

Planning Short-term Activities

Planning at this level includes management of day-to-day activities like grievance
handling. Planning at this level and the operations level are very critical because, these
plans practically ensure the success or failure of the corporate plans. If these plans fail,
the corporate plans too are likely to fail.


HRP is a process of anticipating needs for change in an organization and of
monitoring responses to these needs. HRP links a company’s business plans and broad
objectives with the specific programmes and activities that make-up HRM.
The HRP process begins with an understanding of corporate strategy and business
plans. Organizational goals and objectives are translated into HR objectives by
determining the job categories and types of people required to be able to accomplish
business plans successfully. Human resource planning involves establishing HR
objectives and then assessing the extent to which the current employees of the firm
meet these objectives. It the skills available within the firm do not meet the skills
required for achieving organizational goals, the firm develops appropriate action plans
(hiring, training, etc.). The HRP process involves:
z Environmental scanning;
z Forecasting and analyzing demand for human resources;
z Forecasting and analyzing supply of human resources;
z Developing action plans to match human resource demand and supply.

Environmental Scanning
It is the systematic process of studying and monitoring the external environment of the
organization in order to pinpoint opportunities and threats. It involves a long-range
analysis of employment. The range of external environmental factors that are most
frequently monitored as part of environmental scanning include economic factors,
competitive trends, technological changes, socio-cultural changes, politico-legal
considerations, labour force composition and supply, and demographic trends.
Forecasting and Analyzing Human Resources Demand 33
Human Resource Planning
Once an organization has identified the opportunities and threats in its internal and
external environments, the next step in the HRP process is to forecast human resource
needs in the light of organizational strategies and objectives. The objective of
forecasting is to estimate future human resource requirements for specific periods.
Demand forecasting involves predicting the number and types of employees a firm
will need in the future. Environmental forces such as changes in technology, changes
in consumer buying behaviour, the economy, and governmental regulations are likely
to influence demand for HR – both in terms of numbers and in types of employees

Long range corporate

plans and objectives

Short-range plans of
the firm

Human resource

Human resource Environmental

inventory scanning


Supply forecast Demand forecast

Corporate demand-supply to
determine gaps, if any

Action plans

Source: Strategic Human Resource Management by Tanuja Agarwala, Oxford University Press 2007, p.216

Figure 3.1: The HRP Process

Forecasting and Analyzing Human Resources Supply

Once HR demand has been forecast, the next logical step is to determine the
availability (internal and external supply) of employees. Internal supply forecasts
relate to conditions inside the organization such as the age distribution of workforce,
termination, retirements, etc. External supply forecasts relate to external labour market
conditions and estimates of supply of labour to be available to the firm in the future in
different categories.
34 Matching Demand and Supply Forecasting
Essentials of HRM
Comparison of HR demand forecast with HR supply forecast helps a firm determine
the action plans that should be taken to balance demand-supply considerations. When
current HR demand is compared with current supply of human resources one of the
following conditions may result:
HR Supply = HR demand
HR Supply < HR demand (deficit/shortage)
HR Supply > HR demand (surplus)
A comparison of HR demand forecasts and HR supply forecasts may suggest that the
firm had a surplus or shortage of employees. Such discrepancy between demand and
supply requires that action plans should be developed to eliminate it.

Action Plans
Action plans need to be developed to meet the HRP objective. They involve
developing and implementing programmes such as staffing, appraising, compensating,
career development, layoffs, and training to ensure that people are available with the
appropriate characteristics and skills when and where the organization needs them.


Demand forecasting involves predicting the number and types of employees a firm
will need in the future. Understanding how business strategy and needs are likely to
affect HR requirements is crucial to forecasting its demand accurately.
Human resource demand forecasts may be internal or external. Internal demand
forecasts relate to the HR requirements of the firm for a specific time period – short
term, medium term, or long term. External demand forecasts relate to the HR
requirements of competitors or of those external to the firm. There are several
sophisticated techniques of forecasting HR demand. Two techniques of forecasting
HR demand are explained below:

3.5.1 Qualitative Methods

These are judgmental approaches to demand forecasting. Some of the judgmental
methods are described below:
1. Estimation: It is a method of demand forecasting that involves asking people in
position the question, ‘How many people will you need next year?’ Estimation
methods can be broadly classified into two approaches: (1) Centralized
(or top-down) and (2) Decentralized (or bottom-up). The centralized approach is
to have the HR department of a firm examine the business situation and estimate
the staffing requirement for the firm. The decentralized approach is to have the
manager of each unit or function subjectively estimates its staffing needs.
Estimates from all units or functions are pooled together to obtain an aggregate
comprehensive forecast for the company.
2. Expert Opinions: This method uses panel of experts or people within the firm
who have an understanding of the market, the industry, and the technological
developments that influence the HR requirements for particular future business
scenarios. Estimates from experts may be combined in several ways.
(a) Delphi techniques: This technique combines the opinions of individual
experts and returns the combined opinion to each individual expert till all the
experts agree. The experts do not meet face-to-face.
(b) Group brainstorming: This technique has the experts discuss the issues face to 35
Human Resource Planning
face. They make some assumptions about the future business direction. The
estimates are generated based on multiple assumptions.
(c) Nominal group technique: This method requires the experts to independently
and individually generate estimates, then share them with the group in a
face-to-face meeting; and modify individual estimates till they reach a
(d) Averaging: This method involves simple averaging of forecasts made by
individual experts.
3. Sales force estimate: It is used when the need for additional employees arises
consequent to the introduction of new products by the firm. When the new product
is launched, sales personnel are asked to estimate the demand of the product on
the basis of their familiarity with customer needs and interests. This information is
used to estimate the number of employees that will be needed to meet the demand.

3.5.2 Quantitative Methods

The quantitative approach of forecasting HR demand involves the use of statistical or
mathematical techniques. Some of the quantitative methods are discussed below:
1. Trend analysis and projection: Here the forecast is based on the past relationship
between a business factor related to employment and the employment level. The
historical information about the relationship between a significant business factor
and the employment level for a particular firm can be used in several ways to
develop trend projections. These can be Simple long run trend analysis and
Regression analysis.
2. Simulation models: These are highly sophisticated probabilistic simulation
models that use probabilities of future events to estimate future employment
levels. The simulation helps determine the variables and consequently the future
employment needs. Several alternative assumptions about the future, such as those
relating to economy, competition etc may be built into the model to discover their
probable consequences.
3. Workload analysis: It is a method that uses information about the actual content
of work based on a job analysis of the work. Workload analysis involves use of
ratios to determine HR requirements. Both the number of employees and the kind
of employees required to achieve organizational goals are identified. An important
aspect of workload analysis is the possibility of productivity change. When labour
productivity increases, the demand for labour decreases. This is because an
individual can work more efficiently. Employee demand can also be forecasted by
calculating average employee productivity.
4. Markov analysis: Similar to simulation method, Markov analysis is also a
probabilistic forecasting method. It shows the percentage (and actual number) of
employees who remain in each job from one year to the next, as also the
proportion of those who are promoted or transferred or who exit the organization.
This movement of employees (internal mobility) among different job
classifications can be forecast based upon past movement patterns. Past patterns of
employee movements (transitions) are used to project future patterns. The pattern
of employee movements through various jobs is used to establish transitional
probabilities and to develop a transition matrix. The transitional possibilities
indicate what will happen to the initial staffing levels in each job category, or the
probability that employees from one category will move into another job category.
There are various factors, which affect HR demand forecasting. It is very important to
consider them while forecasting demand for human resources in the organization.
Those factors can be explained as follows:

Social Factors
It is common experience that a number of well-conceived projects either do not take
off or get delayed due to social pressures. In such an event, the human resource
demand forecasts made by the planners will undergo substantial changes. Delays
result in cost escalation changes in technology to accommodate the needs/sentiments
of society, changes in location of project etc.

Technological Factors
Rapid changes in technology affect human resources forecasts. From the time a
project is conceived to the time is implemented, substantial time lag may occur during
which, changes in technology may make the entire project unviable. Businesses then
have to quickly catch up with new technology in order that the losses are minimized.

Political Factors
Unforeseen political factors might make considerable impact on the business plans of
enterprises. This is true especially for those organizations which demand mostly only
on international markets either for the sourcing of their raw materials or for selling of
their products and services.

Economic Factors
Economic factors often result in several planned activities being forced to undergo
considerable change. Recent examples are found in India, with economic reforms
being introduced in the early nineties. The traditional concept of manufacturing
everything indigenously, even if it meant just assemble at the component level had to
undergo substantial change and several organizations that had set up or were in the
process of setting up manufacturing activities suddenly found local manufacturing an
unviable proposition. This resulted in major changes in business strategies and for
some enterprises, even the threat of closure.

Demand Generation
Before dwelling on demand forecasting techniques, it is essential to examine the
reasons for the creation of employee demands. This will help us focusing only on
those factors that create demand.

Growth in traditional business, may lead to demand for higher levels of production,
sales volumes and services. If all possible productivity technique are already applied
and there is no further scope of improvement at that relevant time, simple statistical
models discussed before in this lesson can be applied to forecast future manpower
needs of an enterprise.

Employee Turnover
Employee turnover or attrition is another reason for generation of manpower demands
in an organization. While it is necessary to look at the trends of employee attrition, it
might not be appropriate to simply make a forecast based on the trends. Changing
business scenario and environment have to be considered before any assumptions on 37
Human Resource Planning
future turnover of employees can be made.


HR professionals must be careful to avoid some of the common pitfalls in the process
of HRP. The process should not be very complicated, especially when it is just
introduced in the organization. It is not necessary to employ the latest and the most
sophisticated techniques; simple methods that are suitable for the organization are
adequate. The HR manager has to have an understanding of all the area of business, to
design and implement a good HR plan. These areas include the market dynamics,
technological changes, the demographic environment, organizational objectives etc.
HRP is not the responsibility of HR function alone; to be effective, it needs the active
participation of all managers from the line functions also. Finally, the support and
contribution of the top management is essential for the acceptance and success of a
HR plan.


Human resource planning is the process by which an organization ensures that it has
the right number and kind of people, at the right place, at the right time, capable of
effectively and efficiently completing tasks that will help organization achieve its
overall objective.
The objectives of the HR planning are to prevent overstaffing and understaffing, to
ensure employee availability, to ensure that the organization is responsive to the
environment, to provide direction to all HR activities, and to build line and staff
HR planning is done at different levels like corporate level, intermediate level,
operations level and short-term level.
The HRP process involves steps like Environmental scanning, forecasting and
analyzing demand for human resources, forecasting and analyzing supply of human
resources, and developing action plans to match human resource demand and supply.
For employee demand forecasting qualitative and quantitative techniques are used by
the organization.
Various social, technological, political, economic factors, demand for employees,
growth in business and employee turnover affects the decisions of human resource
The support and contribution of the top management is essential for the acceptance
and success of a HR plan.

Human Resource Planning: It is the system of matching the available resources
either internally or externally, with the demand that the organization expects to have
over a period of time.
Corporate Level Planning: Takes into consideration the changing market situation,
strategic plans of the organization, the technological changes anticipated etc.
Intermediate Level Planning: It is done at the Strategic Business Unit Level and
includes determining the recruitment/layoff strategy, retaining strategy etc.
38 Operational Planning: It includes simple plans like plans for training and
Essentials of HRM
development of resources, recruitment etc. to match the requirements laid down at a
broader level.
Action Plans: Involves developing and implementing programmes such as staffing,
appraising, compensating, career development, layoffs, and training.
Estimation: It is a method of demand forecasting that involves asking people in
position the question of requirements for future.
Simulation Models: These are highly sophisticated probabilistic simulation models
that use probabilities of future events to estimate future employment levels.
Markov Analysis: It shows the percentage of employees who remain in each job from
one year to the next.


Fill in the blanks:
1. …………………..ensues that right amount and kind of people are employed at
right places.
2. ……………….level plans are most influenced by the culture of the organisation.
3. The success of corporate level plans depend on the success of………………plans.
4. While doing…………………, PEST analysis for the firm is done.
5. When the supply of human resources exceeds the demand for them, there will be
6. In …………….technique of getting expert opinion, the experts do not have to
present at one place.
7. Employee turnover rate is also referred to as employee…………….rate.


1. What do you mean by human resource planning? What are the objectives of
human resource planning?
2. Explain the various steps in the human resource planning process.
3. Describe the level at which human resource planning can be done.
4. Explain the techniques of employee demand forecasting.
5. What factors affect employee demand forecasting? Explain.
6. “The human resource planning process should not be very complicated”.


Agarwala, T., Strategic Human Resource Management, Oxford University Press., 2007, New
Aswathappa, K. (1999), Human Resources and Personnel Management, 2nd Edition, Tata
McGraw-Hill Publishing Company Ltd., New Delhi.
LESSON Attracting the Talent: Recruitment,
Selection and Outsourcing


4.0 Aims and Objectives
4.1 Introduction
4.2 Definition of Recruitment
4.3 Sources of Recruitment
4.3.1 Internal Sources of Recruitment
4.3.2 External Sources of Recruitment
4.4 Factors Affecting Recruitment
4.4.1 External Factors
4.4.2 Internal Factors
4.5 Definition of Selection
4.6 The Selection Process
4.6.1 Pre-screening
4.6.2 Pre Interview Screening and Preliminary Interview
4.6.3 Checking References
4.6.4 Tests
4.6.5 Interviews
4.6.6 Assessment Centers
4.6.7 Physical Examination
4.6.8 Job Offer
4.7 Problems Affecting the Objectivity of Selection Interviews
4.8 Induction
4.9 Outsourcing
4.10 Let us Sum up
4.11 Keywords
4.12 Self Assessment
4.13 Review Questions
4.14 Suggested Readings
After studying this lesson, you should be able to:
z State, explain and evaluate various methods of recruitment
z Explain the concept of selection
z Analyse the selection process
z Understand the purpose of induction and how it is carried out
z Analyse the function of outsourcing

Successful employee selection is dependent on a clear understanding of a job’s
components. A job analysis is used to identify job tasks and responsibilities. This may
be accomplished by collecting information about the position; by interviewing
workers, supervisors, and other farm employers; and by observing current employees.
Other sources, such as the Dictionary of Occupational Titles (DOT) or its
replacement, the Occupational Information Network (O*NET), provide written job
analysis data to get you started. End products of a job analysis include a job analysis
schedule, job specifications, and a job description.
Selection follows on from recruitment. Once the recruitment process has attracted the
right number and type of applicants, it is up to the selection process to sift between
them for those that are most suited to the position. These will be hired, the rest
(probably the majority) will be thanked for applying but not accepted. See Figure 4.1

Those who Those who

General get hired
apply for the

Recruitment Selection
process process

Figure 4.1: Hiring Process

As with recruitment, the quality and consistency of the selection process can have a
huge strategic impact on the organisation. If the right kind of people – those whose
characteristics are aligned with the corporate strategy – are hired, then the strategy
will be enabled. If the selection process for some reason is hiring people either whose
skills do not fit the job or organisation, or whose character does not (no matter what
their skills), then it may be very difficult to effectively implement strategy. Thus the
selection process is vital, and many (even most) HR and Labour Relations problems
can be avoided merely by hiring the right people in the first place.


According to Edwin B. Flippo, “Recruitment is the process of searching the
candidates for employment and stimulating them to apply for jobs in the
organisation”. Recruitment is the activity that links the employers and the job seekers. 41
Attracting the Talent: Recruitment,
A few definitions of recruitment are: Selection and Outsourcing
z A process of finding and attracting capable applicants for employment. The
process begins when new recruits are sought and ends when their applications are
submitted. The result is a pool of applications from which new employees are
z It is the process to discover sources of manpower to meet the requirement of
staffing schedule and to employ effective measures for attracting that manpower
in adequate numbers to facilitate effective selection of an efficient working force.
z Recruitment of candidates is the function preceding the selection, which helps
create a pool of prospective employees for the organisation so that the
management can select the right candidate for the right job from this pool. The
main objective of the recruitment process is to expedite the selection process.
z Recruitment is a continuous process whereby the firm attempts to develop a pool
of qualified applicants for the future human resources needs even though specific
vacancies do not exist. Usually, the recruitment process starts when a manger
initiates an employee requisition for a specific vacancy or an anticipated vacancy.
z Recruitment is the generating of applications or applicants for specific positions
through different sources. It is the process of finding and attracting capable
applicants for employment. The process begins when new recruits are sought and
ends when their applications are submitted. The result is pool of applicants from
which new employees are selected.


4.3.1 Internal Sources of Recruitment
1. Transfers: The employees are transferred from one department to another
according to their efficiency and experience.
2. Promotions: The employees are promoted from one department to another with
more benefits and greater responsibility based on efficiency and experience.
3. Upgrading and demotion: Others are upgrading and demotion of present
employees according to their performance.
4. Retired and retrenched employees may also be recruited once again in case of
shortage of qualified personnel or increase in load of work. Recruitment such
people save time and costs of the organisations as the people are already aware of
the organisational culture and the policies and procedures.
5. Deceased employees and disabled employees: The dependents and relatives of
deceased employees and disabled employees are also done by many companies so
that the members of the family do not become dependent on the mercy of others.

4.3.2 External Sources of Recruitment

1. Press advertisements: Advertisements of the vacancy in newspapers and journals
are a widely used source of recruitment. The main advantage of this method is that
it has a wide reach.
2. Educational institutes: Various management institutes, engineering colleges,
medical Colleges etc. are a good source of recruiting well qualified executives,
engineers, medical staff etc. They provide facilities for campus interviews and
placements. This source is known as Campus Recruitment.
42 3. Placement agencies: Several private consultancy firms perform recruitment
Essentials of HRM
functions on behalf of client companies by charging a fee. These agencies are
particularly suitable for recruitment of executives and specialists. It is also known
as RPO (Recruitment Process Outsourcing).
4. Employment exchanges: Government establishes public employment exchanges
throughout the country. These exchanges provide job information to job seekers
and help employers in identifying suitable candidates.
5. Labour contractors: Manual workers can be recruited through contractors who
maintain close contacts with the sources of such workers. This source is used to
recruit labour for construction jobs.
6. Unsolicited applicants: Many job seekers visit the office of well-known
companies on their own. Such callers are considered nuisance to the daily work
routine of the enterprise. But can help in creating the talent pool or the database of
the probable candidates for the organisation.
7. Employee referrals/recommendations: Many organisations have structured
system where the current employees of the organisation can refer their friends and
relatives for some position in their organisation. Also, the office bearers of trade
unions are often aware of the suitability of candidates. Management can inquire
these leaders for suitable jobs. In some organizations these are formal agreements
to give priority in recruitment to the candidates recommended by the trade union.


4.4.1 External Factors
The external forces are the forces which cannot be controlled by the organization. The
major external forces are:
1. Supply and Demand: The availability of manpower both within and outside the
organization is an important determinant in the recruitment process. If the
company has a demand for more professionals and there is limited supply in the
market for the professionals demanded by the company, then the company will
have to depend upon internal sources by providing them special training and
development programs.
2. Labour Market: Employment conditions in the community where the
organization is located will influence the recruiting efforts of the organization. If
there is surplus of manpower at the time of recruitment, even informal attempts at
the time of recruiting like notice boards display of the requisition or
announcement in the meeting etc will attract more than enough applicants.
3. Image/Goodwill: Image of the employer can work as a potential constraint for
recruitment. An organization with positive image and goodwill as an employer
finds it easier to attract and retain employees than an organization with negative
image. Image of a company is based on what organization does and affected by
industry. For example finance was taken up by fresher MBA’s when many finance
companies were coming up.
4. Political-Social-Legal Environment: Various government regulations prohibiting
discrimination in hiring and employment have direct impact on recruitment
practices. For example, Government of India has introduced legislation for
reservation in employment for scheduled castes, scheduled tribes, physically
handicapped etc. Also, trade unions play important role in recruitment. This
restricts management freedom to select those individuals who it believes would be
the best performers. If the candidate can’t meet criteria stipulated by the union but 43
Attracting the Talent: Recruitment,
union regulations can restrict recruitment sources. Selection and Outsourcing
5. Unemployment Rate: One of the factors that influence the availability of
applicants is the growth of the economy (whether economy is growing or not and
its rate). When the company is not creating new jobs, there is often oversupply of
qualified labour which in turn leads to unemployment.
6. Competitors: The recruitment policies of the competitors also affect the
recruitment function of the organisations. To face the competition, many a times
the organisations have to change their recruitment policies according to the
policies being followed by the competitors.

4.4.2 Internal Factors

The internal forces i.e. the factors which can be controlled by the organisation are:
1. Recruitment Policy: The recruitment policy of an organisation specifies the
objectives of recruitment and provides a framework for implementation of
recruitment programme. It may involve organizational system to be developed for
implementing recruitment programmes and procedures by filling up vacancies
with best qualified people.
2. Human Resource Planning: Effective human resource planning helps in
determining the gaps present in the existing manpower of the organization. It also
helps in determining the number of employees to be recruited and what
qualification they must possess.
3. Size of the Firm: The size of the firm is an important factor in recruitment
process. If the organization is planning to increase its operations and expand its
business, it will think of hiring more personnel, which will handle its operations.
4. Cost: Recruitment incur cost to the employer, therefore, organizations try to
employ that source of recruitment which will bear a lower cost of recruitment to
the organization for each candidate.
5. Growth and Expansion: Organization will employ or think of employing more
personnel if it is expanding its operations.


It is a process of differentiating between applicants in order to identify (and hire) those
with a greater likelihood of success in a job. Thus the definition of selection is:
“Selection is the process of choosing from a group of applicants the individual(s) best
suited for a particular position”.


Depending on the various factors, the following are possible methods that might be
included as a part of a typical selection process:
1. Pre screening
2. Initial interview
3. Reference and other checks
4. Application forms or ‘blanks’
5. Selection testing
6. Comprehensive interview
44 7. Job offer
Essentials of HRM
8. Medical examination

4.6.1 Pre-screening
A certain amount of screening will probably already have been already done before
the initial interview, possibly in the recruitment phase and through some screening
processes (probably an analysis of the CV, an application form etc).

4.6.2 Pre Interview Screening and Preliminary Interview

This is generally the starting point of any employee selection process. Pre Interview
Screening eliminates unqualified applicants and helps save time. Applications
received from various sources are scrutinized and irrelevant ones are discarded.
A preliminary Interview may be conducted as well.
Application Form: A candidate who passes the preliminary interview and is found to
be eligible for the job is asked to fill in a formal application form. Such a form is
designed in a way that it records the personal as well as professional details of the
prospective sales employee. Application bank Paper-and-pencil questionnaires,
interviews, and communications with past employers are part of selection process in
order to assess an individual's behavioral reliability, integrity, and personal
adjustment. In order to implement this technique a validation study would have to be
Personal Interview: Most sales managers believe that the personal interview is an
absolute 'MUST'. It helps them in obtaining more information about the prospective
employee. It also helps them in interacting with the candidate and judging his
communication abilities, his ease of handling pressure etc. In some Companies, the
selection process comprises only of the Interview.

4.6.3 Checking References

Most application forms include a section that requires prospective candidates to put
down names of a few references. References can be classified into – former employer,
former customers, business references, reputable persons. Such references are
contacted to get a feedback on the person in question including his behaviour, skills,
conduct etc.

4.6.4 Tests
Different types of tests are conducted to evaluate the capabilities of an applicant, his
behaviour, special qualities etc. Separate tests are conducted for various types of jobs.

Types of Personality Tests

1. Personal Attribute Inventory: An interpersonal assessment instrument which
consists of 50 positive and 50 negative adjectives from Gough's Adjective Check
List. The subject is to select 30 which are most descriptive of the target group or
person in question. This instrument was specifically designed to tap affective
reactions and may be used in either assessing attitudes toward others or as a self-
concept scale.
2. Personality Adjective Checklist: A comprehensive, objective measure of eight
personality styles (which are closely aligned with DSM-III-R Axis II constructs).
These eight personality styles are: introversive, inhibited, cooperative, sociable,
confident, forceful, respectful, and sensitive. This instrument is designed for use
with non-psychiatric patients and normal adults who read minimally at the eighth
grade level. Test reports are computer-generated and are intended for use by
qualified professionals only. Interpretive statements are based on empirical data 45
Attracting the Talent: Recruitment,
and theoretical inference. They are considered probabilistic in nature and cannot Selection and Outsourcing
be considered definitive.
3. Cross-cultural Adaptability Inventory: Self-scoring six-point rating scale is a
training instrument designed to provide feedback to individuals about their
potential for cross-cultural effectiveness. It is most effective when used as part of
a training program. It can also be used as a team-building tool for culturally
diverse work groups and as a counseling tool for people in the process of
cross-cultural adjustment. The inventory contains 50 items, distributed among 4
subscales: emotional resilience, flexibility/openness, perceptual acuity and
personal autonomy.
4. California Psychological Inventory: Multipurpose questionnaire designed to
assess normal personality characteristics important in everyday life that
individuals make use of to understand, classify, and predict their own behaviors
and that of others. In this revision, two new scales, empathy and independence,
have been added; semantic changes were made in 29 items; and 18 items were
eliminated. The inventory is applicable for use in a variety of settings, including
business and industry, schools and colleges, clinics and counseling agencies, and
for cross cultural and other research. May be used to advise employees/applicants
about their vocational plans.
Personality Tests: A selection procedure measures the personality characteristics of
applicants that are related to future job performance. Personality tests typically
measure one or more of five personality dimensions: extroversion, emotional stability,
agreeableness, conscientiousness, and openness to experience.
Table 4.1: Advantages and Disadvantages of Personality Tests
Advantages Disadvantages
• Can result in lower turnover due if • Difficult to measure personality traits
applicants are selected for traits that are that may not be well defined
highly correlated with employees who • Applicant's training and experience may
have high longevity within the have greater impact on job performance
organization than applicant's personality
• Can reveal more information about • Responses by applicant may be altered
applicant's abilities and interests by applicant's desire to respond in a way
• Can identify interpersonal traits that may they feel would result in their selection
be needed for certain jobs • Lack of diversity if all selected
applicants have same personality traits
• Cost may be prohibitive for both the test
and interpretation of results
• Lack of evidence to support validity of
use of personality tests

4.6.5 Interviews
I. Unstructured Interview: Involves a procedure where different questions may be
asked of different applicants.
II. Situational Interview: Candidates are interviewed about what actions they would
take in various job-related situations. The job-related situations are usually
identified using the critical incidents job analysis technique. The interviews are
then scored using a scoring guide constructed by job experts.
Essentials of HRM III. Behavior Description Interviews: Candidates are asked what actions they have
taken in prior job situations that are similar to situations they may encounter on
the job. The interviews are then scored using a scoring guide constructed by job
IV. Comprehensive Structured Interviews: Candidates are asked questions pertaining
to how they would handle job-related situations, job knowledge, worker
requirements, and how the candidate would perform various job simulations.
Interviews tapping job knowledge offer a way to assess a candidate's current level
of knowledge related to relevant implicit dimensions of job performance
(i.e., "tacit knowledge" or "practical intelligence" related to a specific job
V. Structured Behavioral Interview: This technique involves asking all interviewees
standardized questions about how they handled past situations that were similar to
situations they may encounter on the job. The interviewer may also ask
discretionary probing questions for details of the situations, the interviewee's
behavior in the situation and the outcome. The interviewee's responses are then
scored with behaviorally anchored rating scales.

Merits of Interview Process

z Allows optimum utilization of time by interviewers
z Eliminates bias and prejudices from recruitment process
z Helps match job specs to candidate’s abilities
z Successfully evaluates candidates behavioural qualities
z Introduces company and applicant to each other.

4.6.6 Assessment Centers

An Assessment Center consists of a standardized evaluation of behavior based on
multiple evaluations including: job-related simulations, interviews, and/or
psychological tests. Job Simulations are used to evaluate candidates on behaviors
relevant to the most critical aspects (or competencies) of the job.
Several trained observers and techniques are used. Judgments about behavior are
made and recorded. These judgments are pooled in a meeting among the assessors or
by an averaging process. In discussion among assessors, comprehensive accounts of
behavior, often including ratings, are pooled. The discussion results in evaluations of
the performance of the assessees on the dimensions or other variables.

Leaderless Group Discussion

1. The leaderless group discussion is a type of assessment center exercise where
groups of applicants meet as a group to discuss an actual job-related problem. As
the meeting proceeds, the behavior of the candidates is observed to see how they
interact and what leadership and communications skills each person displays
(Schultz & Schultz, 1994).
2. Problems with this technique:
(a) This type of exercise was not feasible for selecting candidates from a potential
applicant pool of 8000 individuals because of the time and cost involved with
training the individuals rating the applicants.
(b) Since every group would be different, individuals could argue that the process Attracting the Talent: Recruitment,
is biased or unfair. Selection and Outsourcing

(c) The process is not standardized.

Role Playing
1. Role playing is a type of assessment center exercise where the candidate assumes
the role of the incumbent of the position and must deal with another person in a
job-related situation. A trained role player is used and responds "in character" to
the actions of the candidate. Performance is assessed by observing raters.
2. Problems with this technique:
(a) Since this technique is not conducive to group administration, test security
would be an issue.
(b) Job content areas identified in the job analysis were not as amenable to this
type of exercise as they were to the selection techniques utilized in the final

4.6.7 Physical Examination

If all goes well, then at this stage, a physical examination is conducted to make sure
that the candidate enjoys sound health and does not suffer from any serious ailment.
Medical examinations would include general physical exams, aids testing etc. In the
past, they have been used as a selection variable (e.g. testing all applicants for AIDS
and rejecting those who have it). Many companies however only did testing on those
who have already been selected, often for medical aid reasons.

4.6.8 Job Offer

A candidate who clears all the steps is finally considered right for a particular job and
is presented with the job offer. An applicant can be dropped at any given stage if
considered unfit for the job. Only after successfully clearing all the hurdles, an
applicant can enjoy the feeling of being selected for a particular job.


z Unclear role of interviewer
z Unprepared interviewer
z Halo effect
z The pitch fork effect
z Snap judgement
z Personal biases
z Ineffective communication
z Contrast effect
z Reflection effect
z Satisfying one’s own needs
Essentials of HRM 4.8 INDUCTION
When you take on a new employee, it is important that you give them the right
induction that will benefit themselves and your business. This induction period can be
considered as the foundations for getting the most out of the employee and to
determine their long term success in your business.
An induction should be given at the beginning of employment and may stretch for
several weeks, or even months. During this time, the quality of the induction will have
an effect on how the employee visualizes your business and how well they will
integrate into it.
Some companies often make the mistake of ignoring induction periods. Instead, they
leave the new employee to pick things up themselves, and from existing employees,
which costs time and money. This defeats the idea of induction which is to integrate
the employee so that they reach their full potential as soon as possible.
If your new employee is to be recruited through an interview, then it is a good idea to
start the induction at that specific time. Even if the applicant isn't definitely going to
be your new employee, it still gives them a chance to maintain interest in your
business. Introduce your company by specifying the size (no. of employees, branches,
etc), the history and how your company operates. The employee may have already
researched your business but any additional information is always good to know. Let
them know about any procedures you have in your business. This may include the
terms and conditions of employment, disciplinary action, and dress code. Also, show
them what to do and where to assemble in case of fire. Inform them of anything
concerning their job: give them a job description listing what tasks are involved, their
responsibilities and accountabilities. Tell them what training is needed (if any) to
match their job requirements. If tools, equipment, computers, etc are involved, make
sure they know where and how they can obtain it. If your business has many forms,
letters etc it's a good idea to build an induction manual for them to keep. The manual
should show and explain the basics of completing, say, a form from start to end.

Outsourcing the Human Resource (HR) processes is the latest practice being followed
by middle and large sized organizations. It is being witnessed across all the industries.
In India, the HR processes are being outsourced from nearly a decade now.
Outsourcing industry is growing at a high rate.
Human Resource Outsourcing refers to the process in which an organisation uses the
expert services of a third party (generally professional consultants) to take care of its
HR functions while HR management can focus on the strategic dimension of their
function. The functions that are typically outsourced are the functions that need
expertise, relevant experience, knowledge and best methods and practices. This has
given rise to outsourcing the various HR functions of an organisation. HR
Consultancies such as Ma Foi and Planman Consulting provide such services through
expert professional consultants. Human resources business process outsourcing (HR
BPO) is a major component of the worldwide BPO market. Performance management
outsourcing involves all the performance monitoring, measurement, management
being outsourced from a third party or an external organisation.
Many organizations have started outsourcing its recruitment process i.e. transferring
all or some part of its recruitment process to an external consultant providing the
recruitment services. It is commonly known as RPO i.e. recruitment process
outsourcing. More and more medium and large sized organizations are outsourcing
their recruitment process right from the entry level jobs to the C-level jobs.
The present value of the Recruitment Process Outsourcing industry (RPO) in India is 49
Attracting the Talent: Recruitment,
estimated to be $2.5 billion and it is expected to grow at the annual rate of 30-40 Selection and Outsourcing
per cent for the next couple of years. According to a recent survey, only 8-10 per cent
of the Indian companies are complete recruitment processes. However, the number of
companies outsourcing their recruitment processes is increasing at a very fast rate and
so is the percentage of their total recruitment processes being outsourced.
Outsourcing organizations strive for providing cost saving benefits to their clients.
One of the major advantages to organizations, who outsource their recruitment
process, is that it helps to save up to as much as 40 per cent of their recruitment costs.
With the experience, expertise and the economies of scale of the third party,
organizations are able to improve the quality of the recruits and the speed of the whole
process. Also, outsourcing enables the human resource professionals of organizations
to focus on the core and other HR and strategic issues. Outsourcing also gives a
structured approach to the whole process of recruitment, with the ultimate power of
decision making of recruiting with the organisation itself. The portion of the
recruitment cycle that is outsourced range from preparing job descriptions to arranging
interviews, the activities that consume almost 70 per cent of the time of the whole
recruitment process.
Outsourcing the recruitment processes for a sector like BPO, which faces an attrition
of almost 50-60 per cent, can help the companies in BPO sector to save costs
tremendously and focus on other issues like retention. The job seekers are also
availing the services of the third parties (consultants) for accessing the latest job
In India, the trend of outsourcing recruitment is also catching up fast. For example:
Vodafone outsources its recruitment activities to Alexander Mann Solutions
(RPO service provider). Wipro has outsourced its recruitment process to MeritTrac.
Yes bank is also known to outsource 50 per cent of its recruitment processes.


The lesson begins with an overview of recruitment and selection, explaining the
process and methods used in recruiting and selection various candidates.
It emphasizes on various interview methods, its merit and demerits. The new concept
of doing selection i.e. assessment centre is also touched upon.
Companies try to have good recruitment and selection practices as it ensures right
candidate for right job.
The induction period is considered as the foundations for getting the most out of the
employee and to determine their long term success in your business.
Human Resource Outsourcing refers to the process in which an organisation uses the
expert services of a third party (generally professional consultants) to take care of its
HR functions while HR management can focus on the strategic dimension of their

Recruitment: It is the process of searching the candidates for employment and
stimulating them to apply for jobs in the organisation.
Employment Exchanges: Exchanges provide job information to job seekers and help
employers in identifying suitable candidates.
50 Recruitment Policy: It specifies the objectives of recruitment and provides a
Essentials of HRM
framework for implementation of recruitment programme.
Selection: It is the process of choosing from a group of applicants the individual(s)
best suited for a particular position.
Personality Tests: A selection procedure that measures the personality characteristics
of applicants that are related to future job performance.
Assessment Center: It consists of a standardized evaluation of behavior based on
multiple evaluations including: job-related simulations, interviews, and/or
psychological tests.
Human Resource Outsourcing: It refers to the process in which an organisation uses
the expert services of a third party to take care of its HR functions.


Fill in the blanks:
1. …………… of employees offer them more benefits and responsibility in the
2. ………… are private recruitment specialists that recruit on behalf of the company.
3. CVs of the candidates are screened in the………………phase of selection
4. …………… test is not definitive in nature and is probabilistic.
5. In a …………… .interview, various questions are asked that vary from candidate
to candidate.
6. ……………….is an exercise where the applicants assume different characters.
7. By………………. the recruitment process, companies can save 40% of their
recruitment costs.


1. What is recruitment and how is it done?
2. What are the various sources of recruitment?
3. Analyse the factors that are likely to affect the recruitment process of an
4. What do you mean by selection? Analyse the role of tests in selection process.
5. Explain selection process. Analyze various issues involved in the selection
6. What are the major problems of the interview as a selection device? What can
HRM do to reduce some of these problems?
7. Write short note on: Outsourcing in India.


P. Jyothi and D. N. Venkatesh, Human Resource Management, Oxford Press, First Edition,
G. Dessler, Human Resource Management, Pearson Education, 12th Edition.
LESSON Competency Mapping and
Assessment Centres


5.0 Aims and Objectives
5.1 Introduction
5.2 Developing Competency Models
5.3 Various Competency Models – Brief Outline
5.4 Uses and Benefits of Competency Approach in an Organisation
5.5 History of Assessment Centres
5.5.1 The use of Assessment Centres in the US
5.5.2 Definition – Assessment Center
5.6 Measurement Tools Uses in an Assessment Centre
5.6.1 Psychometric Tests
5.6.2 The Leaderless Group Discussion (LGD)
5.6.3 In-basket Exercise
5.6.4 Group Exercises
5.6.5 Behavioral Event Interviews
5.7 A Typical Assessment Centre
5.8 Future Trends in Competency Modeling
5.9 Let us Sum up
5.10 Keywords
5.11 Self Assessment
5.12 Review Questions
5.13 Suggested Readings


After studying this lesson, you should be able to:
z Analyse the concept of competency mapping and various methods involved in it
z Understand the benefits of competency mapping
z Analyse the concept of Assessment Centres

Competency mapping is a process through which one assesses and determines one’s
strengths as an individual worker and in some cases, as part of an organization. It
generally examines two areas: emotional intelligence or Emotional Quotient (EQ), and
52 strengths of the individual in areas like team structure, leadership, and decision-
Essentials of HRM
making. Large organizations frequently employ some form of competency mapping to
understand how to most effectively employ the competencies of strengths of workers.
They may also use competency mapping to analyze the combination of strengths in
different workers to produce the most effective teams and the highest quality work.
The value of competency mapping and identifying emotional strengths is that many
employers now purposefully screen employees to hire people with specific
competencies. They may need to hire someone who can be an effective time leader or
who has demonstrated great active listening skills. Alternately, they may need
someone who enjoys taking initiative or someone who is very good at taking
direction. When individuals must seek new jobs, knowing one’s competencies can
give one a competitive edge in the job market.
However, competency mapping can ultimately serve the individual who decides to
seek employment in an environment where he or she perhaps can learn new things and
be more intellectually challenged. Being able to list competencies on resumes and
address this area with potential employers may help secure more satisfying work. This
may not resolve issues for the company that initially employed competency mapping,
without making suggested changes. It may find competency mapping has produced
dissatisfied workers or led to a high worker turnover rate.
Defining Competency: Although the definition appears to vary widely (Schippmann,
et al., 2000), competencies are typically defined as a combination of knowledge,
skills, abilities and other individual characteristics that can be reliably measured and
that can be shown to differentiate performance (Mirabile, 1997; Schippmann, et al.,
2000; Spencer, McClelland, & Spencer, 1994).


Competency practitioners and consultants have followed various combinations of
steps in developing the model and assessing the competencies. Steps have been added,
deleted, modified, and refined depending on both the internal and external factors.
In general, all the practitioners or consultants have addressed the following six issues
while developing the model.
z Strategize: Assess business needs, evaluate contextual drivers, engage
stakeholders and set goals.
z Initiate: Identify methodologies, develop project plans, review existing data,
benchmark competencies, and collect competency data.
z Model: Analyse and synthesize data, identify competencies and develop models,
and validate models.
z Pilot: Develop implementation and evaluation plans, develop and initiate
competency applications, and continuously communicate activities.
z Link: Link to all human resources system components, and phase in
implementation of other competency based applications.
z Evaluate: Establish and evaluate measures, and continuously improve the system.


z Job Competencies Assessment Model: This is developed using interviews and
observations of outstanding and average performers to determine the
competencies that differentiate between them in critical incidents (Dubious 1993).
z Modified Job Competence Assessment Model: This also identifies such 53
Competency Mapping and
behavioral differences, but to reduce costs, interviewees provide a written account Assessment Centres
of critical incidents (ibid).
z Generic Model Overlay Method: Organizations purchase an off-the-shelf generic
competency model for a specific role or function (ibid).
z Customized Generic Model Method: Organizations use a tentative list of
competencies that are identified internally to aid in their selection of a generic
model and then validate it with the input of outstanding and average performers
z Flexible Job Competency Model Method: This seeks to identify the competencies
that will be required to perform effectively under different conditions in the future
z Systems Method: This demands reflecting on not only what exemplary performers
do now, or what they do overall, but also behaviors that may be important in the
future (Linkage, Inc. 1997).
z Accelerated Competency Systems Model: This places the focus on the
competencies that specifically support the production of output, such as an
organization’s products, services or information (ibid).
The process used to develop a model must be straightforward and easy to implement.
The final product must have immediate practical application, commitment and buy in
for those who will be expected to implement or change their behavior based on it. The
development process should include a step to ensure that the behaviors described in
the model correlate with effectiveness on the job.


Some of the uses and benefits are as follows:
1. Improved recruitment and selection process.
2. Better performance and of unnecessary development activities by focusing on the
need of the job.
3. Systematic approach to training initiatives and learning programmes.
4. Developing employees according to the need of the organizations.
5. Promotes ongoing employee development.
6. Helps in career development of employees.
7. Enhances organisation stature and competitive position.
8. Enhanced productivity.
9. Improved communication between employee and employer.
10. Increase in competency levels and improved working conditions, thus benefiting
both individual and organizations.


We can trace the existence of assessment centres back to 1942 when they were used
by War Office Selection Boards (Anstey, 1989). Their introduction stemmed from the
fact that the existing system was resulting in a large proportion of those officers it had
predicted would be successful being 'returned to unit' as unsuitable. This is hardly
54 surprising when one considers that the system as it was relied on interviewing to select
Essentials of HRM
officers and had as selection criteria things like social and educational background.
Even the criteria of 'achievement in the ranks' which one might imagine as being more
job relevant included things like 'exceptional smartness'. No wonder unsuitable people
were chosen as officers and potentially excellent officers overlooked. The assessment
centre approach subsequently adopted was an attempt to accurately elicit the types of
behaviour that an officer was required to display in order to be successful in their job.
The tasks included leaderless group exercises, selection tests and individual interviews
by a senior officer, junior officer and psychiatrist respectively. This new system
resulted in a substantial drop in the proportion of officers being 'returned to unit' as
unfit for duty. During the post war years this system was so successful that it was
introduced for selection to the Civil Service and a variation of it is still used for officer
selection in the armed forces to this day.

5.5.1 The use of Assessment Centres in the US

In the United States assessment centres were initially used by the Office of Strategic
Studies to select spies during the Second World War. Subsequently the use of
assessment centres was taken up by the private sector especially the giant American
Telephone and Telegraph Company (AT&T) which began using assessment centres
for management selection in 1956 as well as Standard Oil Ohio, IBM, Sears and
General Electric. There were differences between the US and UK approaches which
largely stemmed from the original background to their introduction. In the UK a
greater emphasis was placed on group exercises with an appointed leader, group
discussions and long written exercises whereas in the US more emphasis was placed
on in-tray exercises, leaderless group exercises with assigned roles and two person
role plays (Woodruffe, 1993).

5.5.2 Definition – Assessment Center

An assessment center consists of a standardized evaluation of behavior based on
multiple inputs. Multiple trained observers and techniques are used. Judgments about
behaviors are made, in major part, from specifically developed assessment
simulations. These judgments are pooled in a meeting among the assessors or by a
statistical integration process.
Table 5.1: Difference between Assessment Centre and Development Center
Assessment Centre Development Centre
have a pass/fail criteria do not have a pass/fail criteria
are geared towards filing a job vacancy are geared towards developing the individual
address an immediate organisational need address a longer term need
have fewer assessors and more participants have a 1:1 ratio of assessor to participant
involve line managers as assessors do not have line managers as assessors
have less emphasis placed on self-assessment have a greater emphasis placed on self-

focus on what the candidate can do now focus on potential

are geared to meet the needs of the organisation are geared to meet needs of the individual as
well as the organisation
assign the role of judge to assessors assign the role of facilitator to assessors
place emphasis on selection with little or no place emphasis on developmental feedback and
developmental feedback and follow up follow up with little or no selection function

Competency Mapping and
give feedback at a later date give feedback immediately Assessment Centres
involve the organisation having control over the
information obtained
have very little pre-centre briefing
tend to be used with external candidates


5.6.1 Psychometric Tests
These are structured exercises used for measuring a person’s aptitude, competence,
skill, sensitivity, memory, intelligence and personality. Some employers may use
these tests as part of their recruitment and selection methods. Individuals may also use
a test to help with career decision-making. There are two main types of test: Aptitude
tests, which assess your abilities and personality questionnaires, which give a profile
of your personality.

Types of Psychological Tests

z IQ/Achievement tests: IQ tests are measures of ability, while achievement tests
are measures of the use and level of develop of use of the ability.
z Projective tests: are measures of ability, while achievement tests are measures of
the use and level of develop of use of the ability.
z Situational tests: Situations are given and an individual’s behavior/response is
z Psychometric tests:
™ Personality Questionnaire
™ Interest Questionnaire
™ Values Questionnaire

5.6.2 The Leaderless Group Discussion (LGD)

The Leaderless Group Discussion (LGD) evaluates group interaction skills, which are
known to be critical to success in supervisory/managerial positions by presenting
candidate groups with problems that face virtually all managers. The LGD is a highly
effective method for separating those who desire to rule from those who desire to lead,
those who desire to lead, those who rely upon their position power from those who
rely upon their personal power, and those who value their own ideas exclusively from
those who are open to the ideas of others. Effective leadership is based on influencing
others in a way that builds commitment, loyalty and group cohesiveness.
Four to six assesses are told they are a member of a management committee that has
been convened to discuss and develop consensus recommendations on how to deal
with one or more management problems. Typically, four problems are included, and
the group is given 45 minutes to complete its task. The instructions prohibit the group
from selecting anyone to serve as chairperson. Assesses who posses effective group
interaction, problem solving, decision-making and leadership skills are usually quite
apparent. The most effective assesses are able to lead and guide others in a way that
increases group cohesiveness and morale while maintaining the need for high quality,
meaningful solutions.
56 5.6.3 In-basket Exercise
Essentials of HRM
An in-basket exercise assesses a candidate's ability to perform a manager’s job from
an administrative perspective. In the exercise, the candidate is confronted with issues
and problems that have accumulated in the manager’s “in-basket” after returning to
work from an extended absence. A sample of in-basket items might include memos,
correspondence, e-mails, directives, requests, reports, forms, messages, minutes,
hand-written notes, etc., from management, supervisors, staff members, inmates, and
other stakeholders. The candidate's task is to review the in-basket items and then take
action on these varied issues and problems using action forms to record notes,
comments, and responses. These actions are then assessed and rated based on job
related competencies through a formal question and answer session by a group of
trained raters. Standardized criteria and predefined rating scales are used to assess the

5.6.4 Group Exercises

Group exercises may involve anything from solving a murder mystery to discussing a
given topic or even acting out a job-related scenario. Here are some guidelines for
tackling group exercises:
z Find a balance between pushing your case and helping the group to complete the
z It's the quality of your contributions that's important, not the quantity.
z Never try to win by putting other people down.
z If you're feeling nervous, think about all the times in your life that you have been
in groups.
A group exercise normally consists of between 4 and 6 candidates who are observed
by assessors. The group exercise will focus on solving a problem or the completion of
a task.
Whilst working as a group your behavior will be observed and recorded by an
assessor. The assessor will be assessing you against a list of specific competencies.
They could be looking for evidence of good communications skills, team work or how
you deal with others.
Once you have read the brief and you know how much time you have to complete the
task – agree a structure. For example, if you have 15 minutes agree that you will all
brainstorm for 5 minutes; agree what you are going to do for 5 minutes and then for
the last 5 minutes put the plan into action.
You do not need to speak first but you do need to contribute early on in the exercise.
Listen and respond when other people speak – build on their ideas if you can.
Encourage someone who has not spoken yet to take part in the discussion – either by
asking them what they think or by encouraging them to speak through smiling or other
method of positive body language.

5.6.5 Behavioral Event Interviews

One of the most important techniques used in the assessment centre is Behavioral
Event Interviews. A full competency study takes two to three months, depending on
the logistics of scheduling and conducting the Behavioral Event Interviews (BEI’s),
and takes about 30 person-days. A rule of thumb is to budget one and a half
person-days per BEI; a half-day to conduct the BEI, a half-day to code it, and an
additional half for concept formation, report writing and project administration.
Behavioral Event Interviews constitute a powerful tool for numerous organizational 57
Competency Mapping and
processes like recruitment, selection, performance management and even research. Assessment Centres
The interviews are backward looking and are based on the assumption that human
behavior has patterns which repeat. Like the track record of a horse or sportsman,
behavioral event interviews seek actual behaviors of a person and the underlying
characteristics which power the behaviors like – attitudes, motives, intents, self image,
world views or even drives.
BEI Interview method technique was pioneered by Flanagan (1954) is based on the
premise that a few critical incidents in the life of the interviewer will provide accurate
evidence of the interviewee’s competence.


z Candidates participate in a series of exercises that simulate on the job situations.
z Trained assessors carefully observe and document the behaviors displayed by the
participants. Each assessor observes each participant at least once.
z Assessors individually write evaluation reports, documenting their observations of
each participant’s performance.
z Assessors integrate the data through a consensus discussion process led by the
centre administrator, who documents the ratings and decisions.
z Each participant receives objective performance information from the
administrator or one of the assessors.

Pre-requisites for Assessment Centre

In planning the assessment process, the following three factors merit consideration:
z List of competencies or other qualities to be assessed and the procedure for
scoring and rating;
z The weightage to be assigned to each element & exercise; and
z The various forms of assessments for a competency to ensure consistency of
judgment and the prevention of any bias.

Case: Competency Models at HP

H ewlett-Packard Company considers the development of competency models

as a critical factor in its future success. One recent program at HP (2003)
focused on using competency models to improve the overall quality and
performance of its sales force. Working with Reza Sisakhti from Productivity
Dynamics, the Sales Competency Modeling Program team followed the approach
described in Figure 1.

Figure 1: Sisakhti Approach

This project started by creating straw models for various job roles, using input from
key stakeholders in particular geographies and businesses. These included the role
requirements, key competencies for successful performance, and logical learning
roadmaps and career paths.
58 The straw models were then validated through reviews and one-on-one interviews
Essentials of HRM with practitioners, including managers and expert performers. During the interviews
and subsequent analysis and validation, consideration was made for role
similarity/overlap, account size and line-of business differences, and geographic
The program generated a Learning, Development, and Career Planning Toolkit,
comprised of role-specific competency models, competency inventory and gap
analyses, learning opportunity roadmaps, and suggested career paths. To date, several
thousand employees and managers in the sales function have undergone competency
assessments, and the sales teams are rigorously using the learning roadmaps and
career pathing information to improve overall performance.
Another competency modeling project at HP (2004) focused on improving
performance of the people in HP Workforce Development who are chartered with
providing performance oriented solutions for the rest of HP. Competency models
were created or each key WD job role. These models separated competencies into
three levels: foundational, core, and role excellence.
As a result of this effort, new foundational training courses, along with other
performance interventions, were developed for WD professionals, and the
competency models were fully integrated into WD's performance management
processes. According to members of the project team, "The journey continues, and
opportunities abound for improvement and further refinement. We have already
shifted the actual performance of the workforce closer to desired performance, but
there is still a great deal of work to do."
Analyse the concepts given in the case.


As organizations increasingly focus on human assets as a competitive advantage, they
expect higher levels of performance from their employees. Schoonover and Anderson
(2000) anticipate the use of competencies as a strategic intervention to continue, and
even to accelerate.
Moreover, Schoonover (2000) predicts that breakthroughs in information technology
will have a big impact on HR activities such as competency modeling. Until recently,
available software applications addressed various HR activities separately. Some
applications are now starting to incorporate job descriptions, competency models,
performance assessments, and development opportunities into a single integrated
system so that data can be shared between the various processes.
According to Schoonover, "The ways human resource activities are performed must
change substantially to respond to business challenges. New technology applications
will be the most critical enabler."


A competency driven organization delivers better results.
This being a self-driven process and learning occurs in an experiential manner.
For all this to happen the employees and employers have to work together to achieve
such goals.
These are structured exercises used for measuring a person’s aptitude, competence,
skill, sensitivity, memory, intelligence and personality. Some employers may use
these tests as part of their recruitment and selection methods.
The LGD is a highly effective method for separating those who desire to rule from 59
Competency Mapping and
those who desire to lead, those who desire to lead, those who rely upon their position Assessment Centres
power from those who rely upon their personal power, and those who value their own
ideas exclusively from those who are open to the ideas of others.
Group exercises may involve anything from solving a murder mystery to discussing a
given topic or even acting out a job-related scenario.
Behavioral Event Interviews constitute a powerful tool for numerous organizational
processes like recruitment, selection, performance management and even research.

Competency: Combination of knowledge, skills, abilities and other individual
characteristics that can be reliably measured and that can be shown to differentiate
Assessment Center: It consists of a standardized evaluation of behavior based on
multiple inputs.
Development Center: Focuses on development of individuals in organisations.
Psychometric Tests: Structured exercises used for measuring a person’s aptitude,
competence, skill, sensitivity, memory, intelligence and personality.
Leaderless Group Discussion: It evaluates group interaction skills, which are known
to be critical to success in supervisory/managerial positions by presenting candidate
groups with problems that face virtually all managers.
In-basket Exercise: It assesses a candidate's ability to perform a manager’s job from
an administrative perspective.
Behavioral Event Interviews: They constitute a powerful tool for numerous
organizational processes like recruitment, selection, performance management and
even research.


Fill in the blanks:
1. …………… often used by firms to analyse the combinations of strengths in
different workers.
2. To develop a competency model, an organisation at first should develop
3. …………………model differentiates workers on competencies, in critical
4. …………….also reflects on the behavior of the performers in future.
5. ………………… focus on the future potential of the candidates.
6. …………………..makes a distinction between rulers and leaders.
7. ……………………are based on assumption that humans tend to repeat their


1. What is competency mapping and how is it useful for an organisation?
2. How do you develop competency models?
60 3. What are assessment centers and what purpose do they serve?
Essentials of HRM
4. What are the uses and benefits of a competency approach in an organisation.
5. What are psychometric tests? Examine their usefulness.
6. “Leaderless group discussion separates those who want to rule and those who
want to lead”. Discuss.
7. Write short notes on: BEI, In-basket exercise and development centers.


Sanghi, S, The Handbook of Competency Mapping, Sage Publications, New Delhi.
Shermon, Ganesh, Competency Based HRM, Tata McGraw Hill.
LESSON Performance Planning
and Review


6.0 Aims and Objectives
6.1 Introduction
6.2 Steps to Implement Performance Planning and Review
6.3 Performance Appraisal: Brief History
6.4 Concept of Performance Appraisal
6.5 Objectives of Performance Appraisal
6.6 Goals of Performance Appraisal
6.7 Process of Performance Appraisal
6.8 Improving the Performance Appraisal Process
6.9 Importance of Effective Performance Appraisals
6.10 Challenges in Performance Appraisals
6.11 Techniques/Methods of Performance Appraisals
6.11.1 Past Oriented Methods
6.11.2 Future Oriented Methods
6.12 Pitfalls that should be Avoided while Designing an Appraisal System
6.13 Meaning of Performance Coaching
6.14 Objectives of Performance Coaching
6.15 Role of the Supervisor and Manager in Coaching
6.16 The HRD Professional’s Role in Coaching
6.17 Conditions for Effective Coaching
6.18 Conducting the Coaching Analysis
6.19 The Coaching Discussion
6.19.1 An Analysis and Synthesis of the Two Approaches
6.19.2 What if the Coaching Discussion Fails?
6.20 Skills for Effective Coaching
6.21 The Effectiveness of Coaching
6.22 Recommendations for Organizations to Promote Effective Performance
Management and Coaching
6.23 Concept of Mentoring
6.24 Why is Mentoring Important?
6.25 The Mentoring Implementation Process

62 6.25.1 Introducing the Mentoring Process
Essentials of HRM
6.25.2 Identifying Mentors and Mentees
6.25.3 Training of Mentoring Co-ordinators
6.25.4 Matching Mentors and Mentees
6.25.5 Implementation
6.25.6 Evaluation
6.25.7 Improvement
6.26 Let us Sum up
6.27 Keywords
6.28 Self Assessment
6.29 Review Questions
6.30 Suggested Readings


After studying this lesson, you should be able to:
z Analyse the concept of performance appraisal
z Analyse the performance appraisal process and appraisal methods
z Discuss the benefits and problems in appraisal
z Define coaching and mentoring
z List the goals of performance coaching and mentoring
z Describe the process of coaching and mentoring
z Highlight the process of implementing them in organization

Performance Appraisal is a formal system of measuring, evaluating, and influencing
an employee’s job-related attributes, behaviors and outcomes. The objectives are:
z to determine how productive an employee is
z to determine if an employee’s productivity can be improved
Performance appraisals serve an important purpose in managing people and meeting
company goals.
Managing employee performance is not an easy job. Managers in the organization are
at cross roads many a times when they are unable to handle the performance in a
proper manner because the do not have good enough approach. Their disciplinary
actions to mange performance may give rise to the problems rather than solving them.
Managers who employee disciplinary approach to solve problems may not get the
desired result as it never helps and this may lead to either ignoring the poor performer
or awarding the task among better performers or employee exit. It can also result into
conflict and constant worry among employees and feeling of discrimination.
Helping employees for their growth and development should be the motto of work
organizations. Therefore, it is necessary that managers and supervisor must realize and
take an active and positive role in employee performance. They should make certain
that goal is met. Their role is to manage employee performance, to ensure that 63
Performance Planning
employees know what they are to do, and can do. Prepare them to face the challenges and Review
on job and adapt to changes. Therefore, performance management requires that
managers and supervisors play the role of coaching and mentoring employees not
controlling them. Coaching is one of the most important functions a manger performs.
Coaching in the organizations requires that managers and employees work in
partnership role to get the job done. It conveys a very positive and participative
management approach, which empowers employees towards the growth and success.
An old Chinese proverb is, “give man a fish you feed him for a day. Teach a man to
fish you feed him for a life time.” The same is true for performance management


1. If desired, develop performance standards for job. Select critical behaviors.
2. Managers and individuals create goals and complete their performance plans.
Optionally, they may create development plans.
3. Performance is managed online and tracked throughout the year. Interim reviews
can be conducted.
4. Final performance reviews are completed and performance planning begins anew.


The history of performance appraisal is quite brief. Its roots in the early 20th century
can be traced to Taylor's pioneering Time and Motion studies. As a distinct and formal
management procedure used in the evaluation of work performance, appraisal really
dates from the time of the Second World War – not more than 60 years ago.
Yet in a broader sense, the practice of appraisal is a very ancient art. The human
inclination to judge can create serious motivational, ethical and legal problems in the
workplace. Without a structured appraisal system, there is little chance of ensuring
that the judgments made will be lawful, fair, defensible and accurate.
The process was firmly linked to material outcomes. If an employee's performance
was found to be less than ideal, a cut in pay would follow. On the other hand, if their
performance was better than the supervisor expected, a pay rise was in order. Little
consideration, if any, was given to the developmental possibilities of appraisal. If was
felt that a cut in pay, or a rise, should provide the only required impetus for an
employee to either improve or continue to perform well.


Performance appraisal is the process of obtaining, analyzing and recording
information about the relative worth of an employee. The focus of the performance
appraisal is measuring and improving the actual performance of the employee and also
the future potential of the employee. Its aim is to measure what an employee does.
According to Flippo, a prominent personality in the field of Human resources,
“performance appraisal is the systematic, periodic and an impartial rating of an
employee’s excellence in the matters pertaining to his present job and his potential for
a better job.” Performance appraisal is a systematic way of reviewing and assessing
the performance of an employee during a given period of time and planning for his
64 Performance appraisal may be defined as a structured formal interaction between a
Essentials of HRM
subordinate and supervisor, that usually takes the form of a periodic interview
(annual or semi-annual), in which the work performance of the subordinate is
examined and discussed, with a view to identifying weaknesses and strengths as well
as opportunities for improvement and skills development.
In many organizations – but not all – appraisal results are used, either directly or
indirectly, to help determine reward outcomes. That is, the appraisal results are used to
identify the better performing employees who should get the majority of available
merit pay increases, bonuses, and promotions.


The objectives of performance appraisal are:
z To review the performance of the employees over a given period of time.
z To judge the gap between the actual and the desired performance.
z To help the management in exercising organizational control.
z Helps to strengthen the relationship and communication between superior –
subordinates and management – employees.
z To diagnose the strengths and weaknesses of the individuals so as to identify the
training and development needs of the future.
z To provide feedback to the employees regarding their past performance.
z Provide information to assist in the other personal decisions in the organization.
z Provide clarity of the expectations and responsibilities of the functions to be
performed by the employees.
z To judge the effectiveness of the other human resource functions of the
organization such as recruitment, selection, training and development.
z To reduce the grievances of the employees.


The following are the goals of performance appraisal:
z Each objective should be SMART – specific, measurable, agreed, realistic and
z Each objective must be in an area over which the employee has control.
z Give each objective a deadline.
z A clear target allows you to measure whether the employee is making the progress
you expect.
z Provide information to assist in the HR decisions like promotions, transfers etc.


Establishing Performance Standards
The first step in the process of performance appraisal is the setting up of the standards
which will be used to as the base to compare the actual performance of the employees.
This step requires setting the criteria to judge the performance of the employees as
successful or unsuccessful and the degrees of their contribution to the organizational
goals and objectives. The standards set should be clear, easily understandable and in 65
Performance Planning
measurable terms. In case the performance of the employee cannot be measured, great and Review
care should be taken to describe the standards.

Communicating the Standards

Once set, it is the responsibility of the management to communicate the standards to
all the employees of the organization. The employees should be informed and the
standards should be clearly explained to the. This will help them to understand their
roles and to know what exactly is expected from them. The standards should also be
communicated to the appraisers or the evaluators and if required, the standards can
also be modified at this stage itself according to the relevant feedback from the
employees or the evaluators.

Benefits for the Employee

z Gaining a better understanding of their role
z Understanding more clearly how and where they fit in within the wider picture
z A better understanding of how performance is assessed and monitored
z Getting an insight into how their performance is perceived
z Improving understanding of their strengths and weaknesses and developmental
z Identifying ways in which they can improve performance
z Providing an opportunity to discuss and clarify developmental and training needs
z Understanding and agreeing their objectives for the next year
z An opportunity to discuss career direction and prospects.

Benefits to the Line Manager/Supervisor/Team Leader

z Opportunities to hear and exchange views and opinions away from the normal
pressure of work
z An opportunity to identify any potential difficulties or weaknesses
z An improved understanding of the resources available
z An opportunity to plan for and set objectives for the next period
z An opportunity to think about and clarify their own role
z An opportunity to plan for achieving improved performance
z An opportunity to plan for further delegation and coaching
z An opportunity to motivate members of the team.

Benefits to the Organisation

z A structured means of identifying and assessing potential
z Up-to-date information regarding the expectations and aspirations of employees
z Information on which to base decisions about promotions and motivation
z An opportunity to review succession planning
z Information about training needs which can act as a basis for developing training
z Updating of employee records (achievements, new competencies etc)
66 z Career counseling
Essentials of HRM
z Communication of information.


Even though conducting employee performance appraisals is an important part of
every manager's job, most supervisors don't look forward to sitting down with their
employees and going through the formal evaluation process. But there are several
things managers can do to improve their ability to conduct effective performance
appraisals with a minimal level of stress.

Tips for Preparing for Performance Appraisals

z Review the job description and make sure you understand it
z Verify that you know the specific job duties and requirements
z Consider each duty and job requirement individually
z Focus on what is expected of the employee in the current position
z Don't allow personality characteristics to factor into the evaluation process
z Focus the review on actual performance, not on expectations for the future
z Do not fall into the trap of the "halo" or "horn" effect, which leads to assuming
that outstanding or poor performance in one area indicates the presence of the
same in other aspects of the job
z Reflect on performance throughout the entire rating period, not just the most
recent events.


1. Communication Link: Having an effective performance appraisal system in place
can improve the flow of communication between supervisors and their employees.
Every employee needs to know how he or she is doing on the job. Timely
appraisals build respect and trust and when done well can dramatically improve
2. Improved Feedback Mechanism: Providing feedback to employees on an
ongoing basis is an important part of any manager's job. However, all too often,
managers overlook the importance of consistent feedback unless there are specific
problems that need to be addressed. The performance appraisal process provides
an important mechanism for much needed feedback – both positive and negative –
which can easily be overlooked without the presence of a formal employee
evaluation system. Employees may grumble about performance appraisals, but
most of them actually appreciate feedback from their supervisors.
3. Identification of Competency Gaps: Employee performance appraisals can be the
best way for managers to become aware of gaps in employee competency.
Without sitting down and speaking directly with employees about their job
performance, supervisors often have no way of recognizing what their employees
really don't know how to do. The performance appraisal process is beneficial in
helping managers and workers identify gaps in competency, and can lead to the
development of training action plans to fill in the gaps.
4. Goal Setting Tools: The action plans developed through the performance 67
Performance Planning
appraisal process can become specific goals for performance improvement. and Review
Setting concrete goals is the most beneficial outcome of conducting effective
performance appraisals. The defined goals can form the basis of a written action
plan for the employee and the manager, and provide the foundation for future
performance appraisal discussions. When managers and employees are able to
agree on performance improvement goals that tie directly to competency gaps, the
end results include greater organizational productivity and enhanced employee
5. Providing Necessary Documentation: In addition to providing managers with
many tools and techniques for helping employees become more productive,
performance appraisals also serve the important purpose of presenting the
documentation necessary to take adverse actions regarding poorly performing
employees. Supervisors who have team members performing below standard may
be able to justify employee terminations based on weak performance.


In order to make a performance appraisal system effective and successful, an
organization comes across various challenges and problems. The main challenges
involved in the performance appraisal process are:
z Determining the evaluation criteria: Identification of the appraisal criteria is one
of the biggest problems faced by the top management. The performance data to be
considered for evaluation should be carefully selected. For the purpose of
evaluation, the criteria selected should be in quantifiable or measurable terms.
z Create a rating instrument: The purpose of the Performance appraisal process is
to judge the performance of the employees rather than the employee. The focus of
the system should be on the development of the employees of the organization.
z Lack of competence: Top management should choose the raters or the evaluators
carefully. They should have the required expertise and the knowledge to decide
the criteria accurately. They should have the experience and the necessary training
to carry out the appraisal process objectively.
z Errors in rating and evaluation: Many errors based on the personal bias like
stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all
other traits) etc. may creep in the appraisal process. Therefore the rater should
exercise objectivity and fairness in evaluating and rating the performance of the
z Resistance: The appraisal process may face resistance from the employees and the
trade unions for the fear of negative ratings. Therefore, the employees should be
communicated and clearly explained the purpose as well the process of appraisal.
The standards should be clearly communicated and every employee should be
made aware that what exactly is expected from him/her.


Numerous methods have been devised to measure the quantity and quality of
performance appraisals. Each of the methods is effective for some purposes for some
organizations only. None should be dismissed or accepted as appropriate except as
they relate to the particular needs of the organization or an employee.
68 Broadly all methods of appraisals can be divided into two different categories:
Essentials of HRM
z Past Oriented Methods
z Future Oriented Methods

6.11.1 Past Oriented Methods

1. Rating Scales: Rating scales consists of several numerical scales representing job
related performance criterions such as dependability, initiative, output, attendance,
attitude etc. Each scales ranges from excellent to poor. The total numerical scores
are computed and final conclusions are derived.
Advantages: Adaptability, easy to use, low cost, every type of job can be
evaluated, large number of employees covered, no formal training required.
Disadvantages: Rater’s biases.
2. Checklist: Under this method, checklist of statements of traits of employee in the
form of Yes or No based questions is prepared. Here the rater only does the
reporting or checking and HR department does the actual evaluation.
Advantages: Economy, ease of administration, limited training required,
Disadvantages: Raters biases, use of improper weighs by HR, does not allow rater
to give relative ratings.
3. Forced Choice Method: The series of statements arranged in the blocks of two or
more are given and the rater indicates which statement is true or false. The rater is
forced to make a choice. HR department does actual assessment.
Advantages: Absence of personal biases because of forced choice.
Disadvantages: Statements may be wrongly framed.
4. Forced Distribution Method: Here employees are clustered around a high point
on a rating scale. Rater is compelled to distribute the employees on all points on
the scale. It is assumed that the performance is conformed to normal distribution.
Advantages: Eliminates biasness.
Disadvantages: Assumption of normal distribution, unrealistic, errors of central
5. Critical Incidents Method: The approach is focused on certain critical behaviors
of employee that makes all the difference in the performance. Supervisors as and
when they occur record such incidents.
Advantages: Evaluations are based on actual job behaviors, ratings are supported
by descriptions, feedback is easy, reduces recency biases, chances of subordinate
improvement are high.
Disadvantages: Negative incidents can be prioritized, forgetting incidents, overly
close supervision; feedback may be too much and may appear to be punishment.
6. Behaviorally Anchored Rating Scales: Statements of effective and ineffective
behaviors determine the points. They are said to be behaviorally anchored. The
rater is supposed to say, which behavior describes the employee performance.
Advantages: Helps overcome rating errors.
Disadvantages: Suffers from distortions inherent in most rating techniques.
7. Field Review Method: This is an appraisal done by someone outside employees’ 69
Performance Planning
own department usually from corporate or HR department. and Review
Advantages: Useful for managerial level promotions, when comparable
information is needed.
Disadvantages: Outsider is generally not familiar with employees work
environment, Observation of actual behaviors not possible.
8. Performance Tests & Observations: This is based on the test of knowledge or
skills. The tests may be written or an actual presentation of skills. Tests must be
reliable and validated to be useful.
Advantages: Tests may be apt to measure potential more than actual performance.
Disadvantages: Tests may suffer if costs of test development or administration are
9. Confidential Records: Mostly used by government departments, however its
application in industry is not ruled out. Here the report is given in the form of
Annual Confidentiality Report (ACR) and may record ratings with respect to
following items; attendance, self expression, team work, leadership, initiative,
technical ability, reasoning ability, originality and resourcefulness etc.
Advantages: The system is highly secretive and confidential. Feedback to the
assessee is given only in case of an adverse entry.
Disadvantages: It is highly subjective and ratings can be manipulated because the
evaluations are linked to HR actions like promotions etc.
10. Essay Method: In this method the rater writes down the employee description in
detail within a number of broad categories like, overall impression of
performance, promotability of employee, existing capabilities and qualifications
of performing jobs, strengths and weaknesses and training needs of the employee.
Advantages: It is extremely useful in filing information gaps about the employees
that often occur in a better-structured checklist.
Disadvantages: It its highly dependent upon the writing skills of rater and most of
them are not good writers. They may get confused success depends on the
memory power of raters.
11. Cost Accounting Method: Here performance is evaluated from the monetary
returns yields to his or her organization. Cost to keep employee, and benefit the
organization derives is ascertained. Hence it is more dependent upon cost and
benefit analysis.
12. Comparative Evaluation Method (Ranking & Paired Comparisons): These are
collection of different methods that compare performance with that of other
co-workers. The usual techniques used may be ranking methods and paired
comparison method.
(a) Ranking Methods: Superior ranks his worker based on merit, from best to
worst. However how best and why best are not elaborated in this method. It is
easy to administer and explanation.
(b) Paired Comparison Methods: In this method each employee is rated with
another employee in the form of pairs. The number of comparisons may be
calculated with the help of a formula as under.
N × (N – 1)/2
70 6.11.2 Future Oriented Methods
Essentials of HRM
1. Management by Objectives: It means management by objectives and the
performance is rated against the achievement of objectives stated by the
management. MBO process:
(a) Establish goals and desired outcomes for each subordinate
(b) Setting performance standards
(c) Comparison of actual goals with goals attained by the employee
(d) Establish new goals and new strategies for goals not achieved in previous
Advantages: It is more useful for managerial positions.
Disadvantages: Not applicable to all jobs, allocation of merit pay may result in
setting short-term goals rather than important and long-term goals etc.
2. Psychological Appraisals: These appraisals are more directed to assess
employee’s potential for future performance rather than the past one. It is done in
the form of in-depth interviews, psychological tests, and discussion with
supervisors and review of other evaluations. It is more focused on employees
emotional, intellectual, and motivational and other personal characteristics
affecting his performance. This approach is slow and costly and may be useful for
bright young members who may have considerable potential. However quality of
these appraisals largely depend upon the skills of psychologists who perform the
3. Assessment Centers: This technique was first developed in USA and UK in 1943.
An assessment center is a central location where managers may come together to
have their participation in job related exercises evaluated by trained observers. It
is more focused on observation of behaviors across a series of select exercises or
work samples. Assesses are requested to participate in in-basket exercises, work
groups, computer simulations, role playing and other similar activities which
require same attributes for successful performance in actual job. The
characteristics assessed in assessment center can be assertiveness, persuasive
ability, communicating ability, planning and organizational ability, self
confidence, resistance to stress, energy level, decision making, sensitivity to
feelings, administrative ability, creativity and mental alertness etc. Costs of
employees traveling and lodging and psychologist’s ratings are strongly
influenced by assessee’s inter-personal skills. Solid performers may feel
suffocated in simulated situations. Those who are not selected for this also may
get affected.


Some of the most frequent faults employees find with performance appraisal systems
1. The reported evaluations tend to be non-specific (generalities cannot help an
employee make improvement)
2. The comments in the appraisal document are inconsistent with actual performance
(at least as perceived by the employees) – the observations lack empirical
3. The meetings are handled poorly and dominated by superiors who tend to use 71
Performance Planning
one-way communication and Review
4. Little or no constructive suggestions for improvement are made during the
5. Consistent with the observation that superiors frequently engage in one-way
communication, the individual employee has little or no input
6. The process is mechanical and contributes little to either the betterment of the
organization or the employee
7. Given the faults listed above, the process engenders hostility in the employees.

Problems of Rating/Rating Biases

1. Leniency & Severity
2. Central Tendency
3. Halo Effect
4. Rater Effect
5. Primacy & Recency Effect
6. Perceptual Sets
7. Performance Dimensions Order
8. Spillover Effects
9. Status Effect


Performance coaching is concerned with collaborative effort towards managing
performance with a focus on expanding excellence towards individual learning growth
and development. Coaching helps employees to be able to react to opportunities,
threats in positive way. Performance coaching can be understood as an approach that
requires, teaching, educating, mentoring, counseling, providing feedback to employees
and motivate them to succeed. “It is a process that equips employees with the tools,
knowledge and opportunities that are needed for self development and become
The performance coaching process involves five strategies:
1. Creating a partnership role: To make employees realize that both employees and
manger are responsible for performance and build trust amongst them.
2. Commitment: Inspiring employees to be committed to the goals.
3. Competency development: Awareness towards developing skills and
competencies required to reach to organizational goals.
4. Perseverance: Developing ‘never say die’ attitude among organizational
5. Shaping the environment: Creating conditions for employee development.
Coaching aims at developing employees in an organization, by the following:
1. Helping them to realize their potential as managers.
2. Helping them to understand themselves-their strengths and weaknesses.
3. Providing them opportunity to acquire more insight into their behavior and
analyze the dynamics of behavior.
4. Helping them to have a better understanding of the environment.
5. Increasing their personal and interpersonal effectiveness by giving them feedback
about their behavior and assisting them in analyzing their competence.
6. Encouraging them to set goals for improvement.
7. Encouraging them to generate alternatives for dealing with various problems.
8. Providing them with empathic atmosphere for sharing and discussing tensions
conflict and problems.
9. Helping them to develop various action plans for further improvement.
10. Helping them to review in a non threatening way their progress in achieving
various objectives.
11. Strengthen the dyadic relationship between the employees and his/her boss.
This is done by performing two distinct activities:
1. Coaching analysis, which involves analyzing performance and conditions under
which it occurs, and
2. Coaching discussions, or face to face communication between employee and
supervisor both to solve problem and to enable though employee to maintain and
improve performance.


It should be clear now that employees’ direct supervisor or manager is responsible for
coaching though others in the organization can also prove support in skill building,
mentoring etc. The supervisor delegates tasks to his/her junior employees, establishes
the goals, standards and monitors performance. Supervisor has all the information and
authority to carry out coaching. They have to assure that unit working under them
delivers performance effectively. And if coaching is to deliver the significant benefits,
employers need to ensure that their line managers are provided with updated,
cutting-edge training as the 'Manager as Coach' to be able to deliver the results. When
organizations fail in helping their managers/leaders develop cutting-edge performance
coaching skills, there are significant bottom-line consequences.
Kinlaw suggested that in high performing teams, team members will also act as
coaches. In high performing teams members have easy access to each other, they have
information about each others’ strengths and weakness and have opportunity to work
with each other. The only hunch is in many cases they lack the authority to do so. One
of the challenges of having self managed teams is to clearly define the role for the
manager to whom the team reports, as well the role of the members. Often, one of the
primary roles of managers and supervisors in team based organization is that of coach.
and Review
According to Desimone, Werner & Harris (2002), HRD professional can help
managers and supervisors become effective coaches by providing training in the
coaching processes and ensuring that the coaches have the interpersonal skills needed
to be effective. In addition, problems uncovered by a coaching analysis may be solved
by using other HRD programs, such as training. HRD professional can also help
management create a climate that encourages coaching through the use of
Organizational Development (OD) techniques. HRD professionals must understand
the coaching process and the skills require conducting it properly. They need to
prepare line managers and concern employees for the responsibility. Line mangers
must be trained to be effective coaches and concerned employees should be able to
understand the performance issues identified by coach. HRD professionals should
make it very clear that coaching is an HRD intervention where Coaches need to
understand the value in staying ahead of the rapidly evolving process of performance
The only way to improve coaching knowledge is to change the many unfounded
beliefs into valid ordered knowledge that is, coaching best-practice processes and
standards. The introduction of orderliness, if it is accepted, also reduces error.


Coaching does not happen on its own. It requires support system to make it happen
successfully. There are certain mandatory conditions which make coaching effective.
1. General climate of openness and mutuality: A healthy climate which reflects
mutual trust and honor for each other is a must for commencement of coaching.
Transparency in the work culture enhances the better functioning of employees.
2. General helpful and empathic attitude of management: Coaching requires
effective helping, which is possible if coach has general helping attitude and
empathy for the counselled.
3. Uninhibited participation by the subordinates in the review process: The
coaching environment require psychological safety where counseled can
participate without inhibition in the process of review and feedback. It is a two
way processes where both coach and counseled are at ease with each other and
they share the view openly.
4. Dialogic relationship in goal setting and performance review: Performance
coaching focuses on the counselee’s achievement of the performance goals set in
consultation with his manager. Joint participation by the employee and his
reporting officer is necessary both in goal setting and performance review.
Without collaborative efforts, coaching cannot achieve its purpose.
5. Focus on work oriented behavior: To improve upon performance employee must
focus on the goals to be achieved hence focusing on work related behavior rather
than diffusing attention on other areas. While discussion other issues may also
emerge but employees need to keep tracking back to improvement roles rather
than personal issues.
6. Focus on work related problems and difficulties: Performance coaching is not
only related to the achievement of goals, but also to the contextual problems in
achieving or not achieving the goals. Analysis of performance therefore becomes
the basis of coaching.
74 7. Avoidance of discussion of salary and other rewards: Salary and other reward
Essentials of HRM
related issues should be avoided when dealing with performance coaching. The
purpose is enhancing of performance through appraisal rather than relating reward
the performance. Bringing such issues may disrupt the whole purpose.


According to Fournies, coaching analysis is a nine step process designed to identify
both the causes of poor performance and possible solutions. In each step, the
supervisor answers a question about the performance incident and determines how to
proceed. The steps are as follows:
1. Identify the Unsatisfactory Employee Performance.
2. Is it worth your time and effort to address?
3. Do subordinates know that their performance is not satisfactory?
4. Do subordinates know what is supposed to be done?
5. Are there obstacles beyond the employee’s control?
6. Does the subordinate know how to do what must be done?
7. Does a negative consequence follow effective performance?
8. Does a positive consequence follow nonperformance?
9. Could the subordinate do it if he or she wanted to?
(Source: F. F. Fournies (1978). Coaching for improved work performance. New York: Van Nostrand Reinhold.)

Another Question: Can the Task or Job be Modified?

In addition to the issues just raised, one should keep a check whether the task or job
can be modified or simplified to increase the chances of correct performance. For
example, some tasks, such as maintenance checks, require multiple steps. While it
may be reasonable to require that maintenance workers remember all of these steps, an
easier way would be to provide them with a job aid, such as a checklist that would be
completed each time the worker services a piece of equipment.

What if the Problem Persists?

If the employee is capable of performance effectively and if the coaching analysis has
failed to improve performance, then a coaching discussion is called for. During this
discussion, the employee and supervisor talk over the problem and its causes, and, it is
hoped, agree on a course of action to improve performance. The mechanics of this
discussion are discussed next.


Coaching discussion can be a part of performance appraisal. It is a careful procedure
towards coaching. To guide the discussion at least two approaches can be used:
Kinlaw’s three-stage process and Fournies’ five-step process. Both the approaches
have merit and are described below.

Kinlaw’s Approach
Kinlaw suggests a three-stage approach to the coaching discussion, as follows:
z Confronting or presenting
z Using reactions to develop information
z Resolving or resolution
The goals of the confronting or presenting stage are to limit any negative emotion the 75
Performance Planning
employee might feel toward the problem situation, to specify the performance to be and Review
improved, and to establish that the goal is to help the employee change and improve.
Kinlaw argues this can be done by specifically describing the performance that needs
to be changed, limiting the discussion to a specific problem behavior, and avoiding
assignment of blame by focusing on the future.
At the second stage, ‘using reactions to develop information’, Kinlaw notes that
employees may resist dealing with the problem after being confronted with it, and
argues that supervisors can reduce this resistance by focusing on the employee’s
concerns rather than their own. The supervisor may then develop information by
attending to the employee’s explanations, acknowledging important point, probing for
information, and summarizing what has been discussed. At the end of this second
stage of the coaching discussion, the employee and supervisor should be in a position
to agree on the nature of the problem and its causes.
The third and final stage of Kinlaw’s coaching discussion is called resolving or
resolution. In this stage, the employee takes ownership of the problem and agrees
upon the steps needed to solve it. Both parties at this point express commitment to
improving performance and to establishing a positive relationship. This is done by
examining alternative courses of action, reviewing key points of the session, and
affirming that performance can be successfully improved.

Fournies’ Approach
Fournies suggests a five-step coaching – discussion process that assumes the
supervisor has conducted a thorough coaching analysis (as described above), and has
determined that the employee could perform the task if he or she wanted to. The goal
of the discussion is to get the employee to agree that a problem exists and to commit
to a course of action to resolve it.
Step 1: Get the employee’s agreement that a problem exists
Step 2: Mutually discuss alternative solutions to the problem
Step 3: Mutually agree on actions to be taken to solve the problem
Step 4: Follow-up to measure results
Step 5: Recognize any achievement when it occurs

6.19.1 An Analysis and Synthesis of the Two Approaches

There are common points in both the approaches suggested by Kinlaw and Fournies.
Both emphasize the need to get employees to verbally accept responsibility for
improving performance and to involve them in developing the courses of action
needed to solve the problem. They differ most in terms of the assumptions made about
employee willingness to address performance problems. Kinlaw’s approach highlights
the emotional aspect of discussing performance problems with employees and offers
more guidance to supervisors in how to deal with employees’ emotions and resistance.
Fournies’ approach is more rational in the sense that he strongly maintains that an
employee faced with evidence of a performance problem and its consequences with
almost always be willing to deal with it.
Both approaches offer constructive ways to discuss performance problems and that a
supervisor can benefit from adopting either approach, or some combination of the two.
One point that neither approach makes clear is the importance of setting specific goals
for performance improvement. While this is implied in each approach (e.g. agreeing
on what will be done and when), It is believe that the supervisor and subordinate must
76 concur upon a clearly stated performance goal before generating options to the
Essentials of HRM

6.19.2 What if the Coaching Discussion Fails?

There is no guarantee that the coaching process will resolve all performance problems.
Some employees are unable or unwilling to improve performance even after being
given an opportunity to do so. If the employee is unable to improve, the supervisor
should either transfer the employee to work he or she can perform effectively or
terminate the employee. If the employee is unwilling to improve performance, the
supervisor should discipline the employee according to the organization’s policies
(and if that fails, pursue termination).


Communication and Interpersonal skills are two important skills for effective
coaching. Unless a manager has the ability both to listen to employees and to get them
to understand what effective performance is and how to achieve it, coaching will not
Fournies suggests that, only way a manager knows whether an employee understands
what has been said is if the employee restates it. The process of getting employees to
state what the problem of performance is, why it is a problem, and what they are going
to do to remedy the problem, and then having the manager express his or her
agreement with what the employee has said, is called thought transmission. One
should be specific and descriptive in communicating with employees.
In addition to communication skills, interpersonal skills are also important to effective
coaching. These interpersonal skills include:
1. Indicating respect
2. Immediately (i.e., focusing on the present; dealing with problems as they occur)
3. Objectivity (i.e. emphasizing factual information over subjective opinion)
4. Planning
5. Affirming (i.e. commenting on the employee’s successes and positive prospects
for improvement)
6. Consistency of behavior
7. Building trust
8. Demonstrating integrity


To make coaching effective following steps should be taken and especially during
performance review meeting it is important that supervisor should be very positive in
his/her approach.
1. Employee participation in discussion
2. Being supportive
3. Using constructive criticism
4. Setting performance goals during discussion
5. Training and the supervisor’s credibility
6. Organizational support


For performance management to be most effective, top managers and HRD
professionals must ensure that as many of the following conditions and tasks as
possible are actually present or done:
1. An effective performance management system is operating within the
organization. Among other things, this means that the organization’s recognition
and rewards system popularly rewards mangers and supervisors for effective
2. All managers and supervisors are properly trained in coaching skills and
3. A through coaching analysis has been done before employee performance issues
are discussed with employers.
4. Supervisors prepare in advance for the coaching discussion.
5. Supervisors comments are constructive, helpful and supportive.
6. Supervisors provide specific and behavioral feedback on employee performance.
7. Employees are involved in the coaching discussion.
8. Specific goals are set during the discussion.
9. An action plan is jointly established between the employee and the supervisor.
10. Coaching discussions are followed-up, to ensure that the employee is following
the action plan and to recognize performance improvements when they occur.


Mentorship is a process where an experienced person provides help, guidance, support
to nurture and develop a less experienced person, referred to as a protégé, apprentice,
mentee, or (person). It improves the self esteem of mentee and increases his/her
chance for success.
There are two types of mentoring relationships: formal and informal. Informal
relationships grow on their own between partners and make relationship strong.
Formal mentoring, on the other hand, are assigned relationships as per organizational
roles, often associated with organizational mentoring programs designed to encourage
employee development.
There are formal mentoring programs that are values-oriented, while social mentoring
and other types focus specifically on career development. Some mentorship programs
provide both social and vocational support. In well-designed formal mentoring
programs, there are program goals, schedules, training (for both mentors and
protégés), and evaluation. Mentoring is an activity that can potentially promote
spiritual development. (Source:
There are many kinds of mentoring relationship, for example
z New-hire mentorship: In some programs, newcomers to the organization
(protégés) are paired with more experienced people) in order to obtain
information, good examples, and advice as they advance. It is considered that new
employees who are paired with a mentor are twice more likely to remain in their
job than those who do not receive mentorship.
78 z High-potential mentorship: In other cases, mentoring is used to groom up-and-
Essentials of HRM
coming employees deemed to have the potential to move up into leadership roles.
Here the employee (protégé) is paired with a senior level leader (or leaders) for a
series of career coaching interactions. A similar method of high-potential
mentoring is to place the employee in a series of jobs in disparate areas of an
organization, all for small periods of time, in anticipation of learning the
organization's structure, culture, and methods. A mentor does not have to be a
manager or supervisor to facilitate the process. (Source:
z Mentorship in Education: In many secondary and post-secondary schools,
mentorship programs are offered to support students in program completion,
confidence building and transitioning to further education or the workforce –
Starting from school or community-based relationships to e-mentoring
There are many perspectives on the definition of mentoring, especially in case of
recent times when personal and professional coaching is getting a huge attention by
academicians and practitioners. Traditionally, mentoring is understood as one of the
important activities conducted by a person (the mentor) for another person
(the mentee) to help that other person towards better and effective job performance. It
may lead to a progressive career building. The mentor was probably someone who had
"been there, done that" before. A mentor might use a variety of approaches,
e.g., coaching, training, discussion, counseling, etc. Today, there seems to be much
ongoing discussion and debate about the definitions and differences regarding
coaching and mentoring.


When most people think about mentors, they think about positive characteristics of
other people who have helped them. Employees are looking for some one could be
supportive and show how to do deal with certain aspects of the job which an
experienced mentor already knows. Mentor may give encouragement, may provide an
honest feedback and lend an ear when one has a question. This highlight reasons why
mentoring is important: it makes people feel good in their jobs. But it goes further
than that. Mentoring is important for many reasons.
z Mentoring helps people quickly “learn the ropes” of a new job.
z Mentoring helps people meet their new colleagues and build a social network.
z Mentoring helps people do their job correctly.
z Mentoring helps people build confidence, because they get feedback about if they
are doing their jobs correctly.
z Mentoring helps people get supplies and information more efficiently.
z Mentoring helps people feel competent by having someone who gives them credit
for their work.
z Mentoring helps people feel satisfied in their workplace by providing a venting
place for frustrations.
z Mentoring helps people stay in their jobs, by helping to make the workplace a nice
place to work.
z Mentoring helps people feel like they are in a professional setting, working with
people who are serious about their jobs.
Performance Planning

Like all other organization development interventions, mentoring must be

implemented in a carefully planned manner, both in terms of the process and content
of the intervention.

6.25.1 Introducing the Mentoring Process

The first step in implementing a mentoring process is to specify the objectives of the
intervention i.e. the process and programme are aimed at:
a) Developing managers,
b) Empowerment,
c) Fostering inter-cultural understanding and awareness,
d) Succession planning, or
e) Fast-tracking to achieve employment equity targets.
Mentoring support structures are needed to steer the implementation of the mentoring
strategy. These support structures may take various forms, depending on the unique
nature of the organization. A carefully-selected group of stakeholders, or Mentoring
Design Team, identifies mentoring objective guidelines, and action plans based on the
specific needs of the organization. The Mentoring Design Team produces a Mentoring
Plan, which outlines the sequence of events necessary to implement the program. The
Mentoring Plan addresses how the organization will approach each of The Mentoring
Connection’s core design principles. For example, it will need to answer the
z How mentoring can help the organization meet its strategic goals?
z How top management support will be achieved?
z How mentors and mentees will be selected and matched?
z What will be expected of mentors and mentees?
z What learning experiences will be available to participants?
z How the overall program will be evaluated and refined?
It also identifies the program support structure, and outlines roles and responsibilities
of a Program Champion, Program Coordinator and the Mentoring Design Team.
Where large-scale mentoring programmes are launched, mentor co-ordinators need to
be appointed to ensure that the process is implemented and maintained to the
advantage of the mentors, mentees as well as the organisation. Typically these
individuals would also assess the process to ensure its continued effectiveness. They
could also provide the necessary information and feedback to the organisation’s
employment equity committee.

6.25.2 Identifying Mentors and Mentees

The most important qualifying aspect of participation is mentors’ voluntary
participation but one doesn’t have to wait until they nominate themselves, as some
might be hesitant to do this. Rather, ask other members in the organisation to suggest
names of potential mentors. This includes asking potential mentees themselves about
whom they suggest. This exercise enhances the credibility of the programme.
Approach the nominated members and establish whether they are willing to
80 participate. If mentors select themselves for the programme it demonstrates their level
Essentials of HRM
of commitment. This is clearly advantageous to the mentoring initiative.

6.25.3 Training of Mentoring Co-ordinators

Although mentoring co-ordinators might be positively inclined towards the process
and its implementation, they need knowledge and skills to implement mentoring
effectively. Their training would typically revolve around the mentoring process, as
also broader aspects of organisation development and transformation. Joint induction
training for mentors and mentees provides valuable opportunities for them to become
acquainted and reach agreement about expectations. Even those who know each other
very well will need to set parameters in terms of their existing relationship to
encompass the roles of mentor and mentee.
The induction programme must address the following minimum issues:
1. Establishing the mentor relationship (rapport and empathy)
2. Clarifying expectations
3. Setting clear parameters, and goals
4. Phases of mentoring relationships
5. Giving feedback
6. Ethical issues such as confidentiality
7. Establishing timelines and meetings
8. Evaluation requirements.
To enable them to be effective in their new role, mentors need to be develop skill at
reflective interviewing and discussion skills. Which includes important features like:
a) Establishing rapport, and maintaining empathy
b) Listening skills
c) Giving and receiving feedback
d) Questioning skills
e) Coaching
f) Goal setting
g) Interpersonal conflict handling
h) Negotiation

6.25.4 Matching Mentors and Mentees

Ideally, the linkages between the mentor and mentees should be a natural process.
There are times where it is necessary to ensure that all learners are linked to a mentor
and have a mentoring relationship at a formal level.
The matching of mentors and mentees is absolutely critical. We can allow mentees to
identify and approach their own mentors. Where there was already a mentoring aspect
of some sort between manager and employee, this must be encouraged to strengthen
the relationship. In other instances try to find out as much information about what the
potential participants consider important so that one has a strong foundation on which
the matching can be based. One may also generate a dossier for the participants to
choose from.
The mentor and mentees have a discussion where the developmental goals are set. Part
of this discussion includes the quality of evidence required to determine whether the
objectives of the programme will be met. A useful mechanism in formulating 81
Performance Planning
developmental goals is the use of some form of diagnostic instrument. Such an and Review
instrument may comprise questionnaire batteries for completion by mentee and
supervisor, tests of potential and the like.
To ensure that there is clarity as to what is to be achieved, a learning contract serves as
a mechanism to ensure effective communication and understanding. Some guidelines
are useful in the documenting of what needs to be achieved and how the achievements
will be evaluated.
For the above process to work, goals need to be set. Such goals need to be specific.
A helpful acronym is SMART where the goals are
z S = specific/stretched, the goal must be written in language that relates to specific
and that would "stretch" the learners to perform;
z M = measurable, there needs to be a way to ensure that the goal has been achieved
or progress has been made in achieving the result;
z A = achievable, the question is whether the result can be expected within this time
z R = relevant, the task or activity needs to be relevant to the learner, where what
needs to be done is not relevant to the mentee, the mentee will have difficulty in
completing what needs to be completed; and
z T = time framed, where there is a point in time when the result must be available.
Another instrument important in managing the mentoring relationship is the
maintenance of a contact log of all interactions between the mentor and mentee. This
can be used to exercise control over the mentoring relationship and to ensure that all
actions are documented for future reference and follow-up action.

6.25.5 Implementation
Flexibility is very important during the process of implementation; in other words
adapting the mentoring process to suit the needs of the programme. However, it is
essential that both mentors and mentees should realise that they have a responsibility
to keep to the deadlines and action plans decided upon by both parties.
An effective relationship will be based on mutual respect and should be flexible
enough to examine options and brainstorm strategies. Remember that many of us
"talk our way to understanding" when we are given freedom and encouragement to
express our creative thoughts without fear of judgement. Active listening on the part
of both mentor and mentee is important.
The relationship should be subject to re-negotiation in order to accommodate new
issues and address needs as they arise. Unambiguous and brief records of dates of
meetings should be kept. The duration of each meeting may vary as per mentee’s
requirement to discuss issues. Still a separate time for meeting should be reserved.
The meeting times and venues should be conducive to focused and confidential
discussions and should be mutually convenient. The meeting space should be private.
The times of meetings should vary, but should not always be at the end of a working
day or week.
Periodic feedback and discussion are essential to ensure the continued development
and support of the mentee. This would also be an opportunity to establish progress and
the provision of resources and other aids. All the progress should be recorded so as to
provide an indication of what needs to be done in the next review period.
82 Feedback needs to focus on learning. Ensure that the feedback session is a dialogue
Essentials of HRM
where the mentees also have the opportunity to voice ideas and opinions relating to
the issues at hand. Feedback would first be given on positive issues, for example
something the mentee has done well, then moving to the areas where development is
still required, ending off with issues regarding areas where the mentee has performed
well again.
Feedback should be descriptive, specific, in the mentee’s interests, useful, given at the
right time, clearly formulated and correct. Conditions under which feedback occur
should be socially minded; refrain from demoralizing the mentee and giving
subjective interpretations; do not confuse feedback with value judgments; be open and
honest. Finally, the feedback should relate to the learning and how performance may
be improved.
The learning contract would be completed when the mentees have evidence that all the
learning included in the contract has been acquired. The completion would depend on
the learners being able to apply what has been learnt.

6.25.6 Evaluation
One of the shortcomings of mentoring programme is that very few of them carry out
systematic evaluation. There is great benefit in having mentors and mentees
participate in evaluation. There can be two “progress reviews:” one at mid-point and
one at the end of the program. These reviews give participants the opportunity to ask
questions and share their challenges and success stories. This kind of information also
allows the program coordinator to make any mid-point or program-end adjustments
that will enhance current or future programs.
Programme should be evaluated in terms of measuring relationship outputs for
z How many of the learning objectives were reached?
z Has the mentee improved key scores on his or her performance appraisal?
z Does the supervisor feel that mentoring is helping the mentee make progress?
Measuring programme outputs for example:
z Decrease in mentee labour turnover.
z Achievement of performance appraisal scores on key competencies.
z Number of mentees considered suitable for promotion after a set period.
Unlike other people management interventions such as performance management, or
skill training, mentoring has more medium and long term implications. For certain
skill areas, it will be impossible for the mentee to develop the required skills within a
year. It may be necessary for the mentee to attend other courses, or to study a degree
before he or she will obtain the overall level of competence required.

6.25.7 Improvement
No mentoring programme will be perfect. Like many other functions in an
organization, mentoring depends to a large extent on the human element, which means
that mistakes are inevitable. All role players should therefore see the programme as a
learning experience. The long-term objective should be to improve employee
performance and development.
6.26 LET US SUM UP Performance Planning
and Review
The performance appraisal process provides an opportunity for introducing
organizational change.
It facilitates the process of change in the organizational culture.
The interactive sessions between the management and the employees, the mutual goal
setting and the efforts towards the career development of the employees help the
organization to become a learning organization.
Conducting performance appraisals on a regular basis helps it to become an ongoing
part of everyday practice and helps employees to take the responsibility of their work
and boosts their professional development.
Even though conducting employee performance appraisals is an important part of
every manager's job, most supervisors don't look forward to sitting down with their
employees and going through the formal evaluation process.
In order to make a performance appraisal system effective and successful, an
organization comes across various challenges and problems.
Successful organizations are revolutionizing the way they are developing their
They are moving away from traditional training approaches that rely on formal
classroom training alone and are creating conditions where learning happens
continuously through a variety of developmental experiences and mentoring
Performance coaching and Mentoring are very important for employee development.
Performance coaching refers to giving feedback to employees, counseling, mentoring,
educating, building morale etc. The dynamics of performance counseling are
applicable to Mentoring as well.
The mentoring relationship refers to the interaction between mentor and mentee while
the mentoring process focuses on the steps that must be implemented to make the
overall mentoring process work.
Mentoring could also be part of a larger initiative to support skills development in an
organisation. However, for both the mentoring and performance coaching relationship;
the ultimate goal is same.
Taking cognizance of the dynamics of the relationship, Coaching and Mentoring
process must be managed well to ensure intervention effectiveness.

Performance Appraisal: It is a formal system of measuring, evaluating, and
influencing an employee’s job-related attributes, behaviors and outcomes.
Rating Scales: It consists of several numerical scales representing job related
performance criterions such as dependability, initiative, output, attendance, attitude
Forced Choice Method: In this method, a series of statements is arranged in the
blocks of two or more and the rater indicates which statement is true or false.
Forced Distribution Method: Here employees are clustered around a high point on a
rating scale.
84 Critical Incidents Method: This approach is focused on certain critical behaviors of
Essentials of HRM
employee that makes all the difference in the performance.
Field Review Method: This is an appraisal done by someone outside employees’ own
department usually from corporate or HR department.
Management by Objectives: In this method, the performance is rated against the
achievement of objectives stated by the management.
Mentoring: It is a process where an experienced person provides help, guidance,
support to nurture and develop a less experienced person.
Performance Coaching: It is concerned with collaborative effort towards managing
performance with a focus on expanding excellence towards individual learning growth
and development.


Fill in the blanks:
1. Performance appraisal finds it base in Taylor’s …………………
2. The objectives should be Specific, Measurable, agreed, ………… and ………
3. Checklist is a kind of …………. oriented method.
4. Rating Scale Method often suffers from the problem of ……………
5. ………………. contain highly sensitive and secretive records.
6. ……………… appraisals attempt to assess employee’s future rather than past.
7. In …………… method, the rater lists down the worker’s description in details.
8. …………… is a three stage approach to coaching discussion.
9. …………….. are the concerned persons who mostly lead the coaching process.
10. Teachers in schools and colleges are often referred to as ………………..


1. Analyse the concept of performance appraisal.
2. What are the objectives and uses of performance appraisal?
3. Discuss the steps of performance appraisal.
4. How important is it to effectively implement a performance appraisal process?
5. Discuss the challenges that a HR manager comes across while implementing a
appraisal process.
6. Analyse the techniques of performance appraisal.
7. Design a performance appraisal system in a company of your choice.
8. Analyse the concept of performance coaching and discuss its objectives.
9. Describe the process of performance coaching.
10. Write a note on the process of mentoring.
Performance Planning

Mirza S. Saiyadain, Human Resource Management, Third Edition, Tata McGraw Hill.
P. Subba Rao, Personnel and Human Resource Management, Second Edition, Himalaya
Publishing House.
G. Dessler, Human Resource Management, 12th Edition, Pearson Education.
Essentials of HRM


7.0 Aims and Objectives
7.1 Introduction
7.2 Potential Appraisal
7.2.1 Purpose of Potential Appraisal
7.2.2 Techniques of Potential Appraisal
7.3 Career Planning
7.3.1 Steps in Career Planning Process
7.3.2 Advice on Career Planning
7.3.3 Career Anchors
7.4 Succession Planning
7.4.1 Succession Planning: Pros and Cons
7.5 Let us Sum up
7.6 Keywords
7.7 Self Assessment
7.8 Review Questions
7.9 Suggested Readings


After studying this lesson, you should be able to:
z Explain the concept of potential appraisal and its importance
z Analyse the process of career planning and its importance
z Analyse the concept of succession planning and differentiate it from career

Potential appraisal done in a systematic way it would contribute to having well-
designed career plans and succession planning. A career plans would indicate the
preferred growth path of an individual in an organization. Succession planning is the
process where every individual manager is expected to develop a subordinate who
would take over from him over a period of time. Many managers feel insecure about
this process and avoid indulging in this developmental activity. What they fail to
realise is that, if an individual has the potential and shows good performance, there is
always room at the top. Unless they develop their own people, they themselves 87
Potential Appraisal, Career
become stagnant. Succession planning too would succeed if and only if a good and Succession Planning
potential appraisal system exists and is in firm place. If potential appraisal is not done
in a planned manner, you may promote an undeserving employee.


The potential appraisal refers to the appraisal i.e. identification of the hidden talents
and skills of a person. The person might or might not be aware of them. Potential
appraisal is a future-oriented appraisal whose main objective is to identify and
evaluate the potential of the employees to assume higher positions and responsibilities
in the organizational hierarchy. Many organisations consider and use potential
appraisal as a part of the performance appraisal processes.

7.2.1 Purpose of Potential Appraisal

Potential appraisal serves the following purposes:
z To advise employees about their overall career development and future prospects.
z Help the organisation to chalk out succession plans.
z Motivate the employees to further develop their skills and competencies.
z To identify the training needs.

7.2.2 Techniques of Potential Appraisal

z Self-appraisals
z Peer appraisals
z Superior appraisals
z Psychological and psychometric tests
z Management games like role playing
z Leadership exercises etc.
Potential appraisal helps to identify what can happen in future so that it can be guided
and directed towards the achievement of individual and organizational growth and
goals. Therefore, potential should be included as a part of the Performance appraisal in
In most Indian organizations, people earn promotions on the basis of their past
performance. The past performance is considered a good indicator of future job
success. This could be true, if the job to be played by the employee to be promoted is
similar. However, in actual practice, the roles that a role holder played in the past may
not be the same he is expected to play if he assumes a different job after his transfer or
promotion to a new position. Past performance, therefore, may not be a good indicator
of the suitability of an indicator for a higher role.
To overcome this inadequacy, organizations must think of a new system called
potential appraisal. The objective of potential appraisal is to identify the potential of a
given employee to occupy higher positions in the organizational hierarchy and
undertake higher responsibilities.
88 Potential appraisals are required to:
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z Inform employees about their future prospects;
z Help the organization chalk out of a suitable succession plan;
z Update training efforts from time to time;
z Advise employees about what they must do to improve their career prospects.


A career is the work a person does. Another definition of a career is the sequence of
jobs that an individual has held throughout his or her working life. “Career Planning”
therefore embraces a person’s entire life – the spiritual, social, educational and
vocational. Career Planning is the life-long process a person goes through to learn
about himself (his purpose, personality, interests, skills and talents) develop a
self-concept, learn about careers, and work situations and then make a career choice
based on information gathered while developing coping and social skills. It also
includes the skills
It is the sequence of jobs that an individual has held throughout his or her working
life. For example, during the course of a career, a person may have held several jobs in
the occupation of nursing. One job may have been that of a surgical nurse. Each
surgical nurse in a hospital holds a particular position that consists of several related
duties. These duties might include preparing the operating room for surgery and
monitoring the patient’s vital signs during surgery. The duty of preparing the
operating room for surgery could include several tasks, such as sterilizing surgical
instruments, checking monitoring instruments to ensure that they are working
properly, and obtaining supplies of blood.
The task of career planning is quite a laborious one and it requires systematic planning
of every step and a calculated execution. Take the onus of planning your own career.
One might seek the services of a career development professional to help facilitate his
or her journey through this process. Whether or not you choose to work with a
professional, or work through the process on your own is less important than the
amount of thought and energy you put into choosing a career.

7.3.1 Steps in Career Planning Process

Career planning involves the following steps:
Step One: Self Assessment: The first and foremost step in career planning is to know
and assess yourself. You need to collect information about yourself while deciding
about a particular career option. You must analyze your values interests, abilities,
aptitudes, desired lifestyle, and personal traits and then study the relationship between
the career opted for and self. Gather information about yourself.
Step Two: Goal Setting: Set your goals according to your academic qualification,
work experience, priorities and expectations in life. Once your goal is identified, then
you determine the feasible ways and objectives how to realize it.
Step Three: Academic/Career Options: Narrow your general occupational direction
to a particular one by an informatory decision making process. Analyze the career
option by keeping in mind your present educational qualification and what more
academic degrees you need to acquire for it. Explore the occupations in which you are
interested. Research the industries in which you would like to work.
Step Four: Plan of Action: Recognize those industries and particular companies
where you want to get into. Make the plan a detailed one so that you can determine for
how many years you are going to work in a company in order to achieve maximum 89
Potential Appraisal, Career
success and then switch to another. Decide where you would like to see yourself after and Succession Planning
five years and in which position. Explore alternatives and choose both a short term
and a long term options.
Step Five: Catch Hold of Opportunities: Whenever you get any opportunity to prove
yourself and get into your desired career, try to convert it in every way for suiting your
purpose. A successful professional is also quite opportunistic in his moves, examining
every opening to turn to his favor.

7.3.2 Advice on Career Planning

z Try not to waste much time and wait too long between career planning sessions.
z Don't ever judge and analyze yourself, like your likes and dislikes, abilities, etc.
by listening to what people around you say. Be your best judge.
z Be open to constructive criticisms.
The major focus of Career Planning should be on matching personal goals and
opportunities that are realistically available. A ‘Career path’ is a flexible line of
movement through which an employee may move during employment with an
organization. One can think of career planning as building bridges from one’s current
job/career to next job/career. Without the bridge, one may easily stumble or lose
direction, but with the bridge there is safety and direction.

7.3.3 Career Anchors

Quite a few studies have shown that individuals' career values, motivations and
attitudes are consistent throughout their careers after an initial adjustment following
the first three years or so of workplace experience. According to Schein, a person's
abilities, motives, and values are mutually interactive and inseparable. He also
developed the theory of "internal" careers (individuals' subjective opinions) and
"external" careers (the progression of positions or jobs). Schein (1980) describes
internal careers as those "activities designed to help individuals develop a clearer self-
concept around their own occupational activities, a set of plans that make sense to the
individual". Additionally, the internal career "reflects the goals and values held by an
individual in relation to his working life and the criteria of success by which he judges
himself' (Van Maanen and Schein, 1977). External careers refer to the "actual job
sequence that specifies a path through an occupation or organization" (Schein, 1980).
Schein's (1990) typology of career anchors are as follows:
z Technical/functional competence: Primarily excited by the content of the work
itself; prefers advancement only in his/her technical or functional area of
competence; generally disdains and fears general management as too political.
z General managerial competence: Primarily excited by the opportunity to analyze
and solve problems under conditions of incomplete information and uncertainty;
likes harnessing people together to achieve common goals; stimulated (rather than
exhausted) by crisis situations.
z Autonomy/independence: Primarily motivated to seek work situations which are
maximally free to organizational constraints; wants to set own schedule and own
pace of work; is willing to trade-off opportunities for promotion to have more
z Security/stability: Primarily motivated by job security and long-term attachment
to one organization; willing to conform and to be fully socialized into an
organization's values and norms; tends to dislike travel and relocation.
90 z Entrepreneurial creativity: Primarily motivated by the need to build or create
Essentials of HRM
something that is entirely their own project; easily bored and likes to move from
project to project; more interested in initiating new enterprises than in managing
established ones.
z Service/dedication to a cause: Primarily motivated to improve the world in some
fashion; wants to align work activities with personal values about helping society;
more concerned with finding jobs which meet their values than their skills.
z Pure challenge: Primarily motivated to overcome major obstacles, solve almost
unsolvable problems, or to win out over extremely tough opponents; define their
careers in terms of daily combat or competition in which winning is everything;
very single-minded and intolerant of those without comparable aspirations.
z Lifestyle: Primarily motivated to balance career with lifestyle; highly concerned
with such issues as paternity/maternity leaves, day-care options, etc.; looks for
organizations that have strong pro-family values and programs.


Succession Planning refers to the process of developing the second line for taking up a
higher role in the organization. This enables organizations to rely on internal
recruitments for various organizational roles. This also ensures that the organization
does not face a major disruption when any of its executives move out of their existing
roles due to various reasons. A good succession planning system ensures smooth
transition of a new incumbent into the role when the previous role holder moves out of
the particular role in an organization.
Succession Planning involves having senior executives periodically review their top
executives and those in the next lower level to determine several backups for each
senior position. This is important because it often takes years of grooming to develop
effective senior managers. There is a critical shortage in companies of middle and top
leaders for the next five years. Organizations will need to create pools of candidates
with high leadership potential. A careful and considered plan of action ensures that the
least possible disruption to the person’s responsibilities and therefore the
organization’s effectiveness.

7.4.1 Succession Planning: Pros and Cons

z Employee turnover in any company is a given and today, there are huge costs
involved in hiring an external back-up. Succession planning is a cost effective
z Today, there is a clear talent crunch in certain leadership positions in the market in
India. So hiring from outside is not only cost consuming but also very difficult for
certain functions or industries.
z A lot of multinationals today are looking to buy out the notice period of their
prospective employees. Thus if you lose an employee, there is a very good
possibility that he may not serve his entire notice period. Having succession
planning in place will save you the opportunity loss created from a vacant
z A successor is usually a known devil.
Disadvantages Potential Appraisal, Career
and Succession Planning
z Have come across a lot of candidates who quit their jobs because his/her peer is
now his/her boss.
z If succession planning is not done well, it could land up promoting an incompetent
person to a role and in the bargain run the risk of losing other team members.
z Sometimes it helps to get fresh blood from outside the company in the role.
A successor more or less will have the same ideas and approach as the predecessor
and this may not always be good.
The lack of succession planning has been identified as one of the most important
reasons why many first-generation family firms do not survive their founders. Also,
lack of succession planning at various levels within the organization would necessitate
recruiting outside talent which may take time in induction process as well as adjusting
to the organizational culture. Developing internal talent is often a preferred option in
many organizations.


Individual career plans must be matched with organizational career management
systems in order to address issues ranging from retention to employee satisfaction and
performance management.
The succession planning system must be integrated with the organizational career
management system to ensure that second line employees can move into higher roles.
This would contribute to satisfying their career aspirations while fulfilling
organizational talent requirements.
In most Indian organizations, people earn promotions on the basis of their past
performance. The past performance is considered a good indicator of future job
success. This could be true, if the jobs to be played by the employee to be promoted
are similar.
Career Planning is the life-long process a person goes through to learn about himself
(his purpose, personality, interests, skills and talents) develop a self-concept, learn
about careers, and work situations and then make a career choice based on information
gathered while developing coping and social skills
The major focus of Career Planning should be on matching personal goals and
opportunities that are realistically available.
Succession Planning involves having senior executives periodically review their top
executives and those in the next lower level to determine several backups for each
senior position.

Potential Appraisal: It refers to the appraisal i.e. identification of the hidden talents
and skills of a person.
Career: It is the sequence of jobs that an individual has held throughout his or her
working life.
Career Planning: It is the life-long process a person goes through to learn about
himself, develop a self-concept, learn about careers, and work situations and then
make a career choice based on information gathered while developing coping and
social skills.
92 Internal Career: It reflects the goals and values held by an individual in relation to his
Essentials of HRM
working life and the criteria of success by which he judges himself.
External Careers: It refers to the actual job sequence that specifies a path through an
occupation or organization.
Succession Planning: It refers to the process of developing the second line for taking
up a higher role in the organization.


Fill in the blanks:
1. …………………is instrumental in designing career plans and succession plans.
2. Potential appraisal is a part of …………………….
3. The very first in career planning is to assess…………………..
4. ………………is a flexible path through which an employee may move during his
5. ……………….relate to individual subjective opinions.
6. In……………………, senior executives are required to constantly review their
top performing executives.


1. Analyse the concept of potential appraisal.
2. Discuss the purpose and techniques of potential appraisal.
3. “Career planning is the life-long process”. Substantiate.
4. Discuss the steps in career planning process.
5. Explain succession planning and cite a company that has followed this process.
6. Discuss the pros and cons of succession planning.


Mirza S. Saiyadain, Human Resource Management, Third Edition, Tata McGraw Hill.
P. Subba Rao, Personnel and Human Resource Management, Second Edition, Himalaya
Publishing House.
LESSON HR Measurement and Audit


8.0 Aims and Objectives
8.1 Introduction
8.2 Human Resource Audit: An Introduction
8.3 Role of HR Audit in Business Improvements
8.4 Why conduct an HR Audit?
8.5 The HR Audit Process
8.5.1 Interviews/Questionnaires
8.5.2 Observation and Recording
8.5.3 Follow-up and Corrections done
8.6 Advantages for Human Resource Audit
8.7 Human Resource Accounting: An Introduction
8.8 Methods of Human Resource Accounting
8.8.1 Methods based on Cost
8.8.2 HR Accounting based on Value
8.9 Impacts and Implications of Human Resource Accounting
8.10 Human Resource Information Systems (HRIS): An Introduction
8.11 Why HRIS?
8.12 HRIS – Application and Utilities
8.13 HRIS – Benefits
8.14 HRIS – Disadvantages
8.15 Let us Sum up
8.16 Keywords
8.17 Self Assessment
8.18 Review Questions
8.19 Suggested Readings


After studying this lesson, you should be able to:
z Understand the concept of Human Resource Audit, its objectives and significance
z Analyse the role of HR audit in business improvements
z Analyse the audit process and enumerate the advantages of HR audit
94 z Understand the concept of Human Resource Accounting (HRA), its methods and
Essentials of HRM
impacts and implications of human resource accounting
z Analyse the role of a Human Resource Information System and its benefits and

Human Resource audit is a comprehensive evaluation of the existing human resource
development strategies, structure, systems, styles and skills in accordance with both
short-term and long-term business plans of the organization. It involves the study and
analysis using a variety of methodologies like interviews, questionnaires, available
records, workshops etc.
Human resource accounting aims at depicting the human resources potential in money
terms while casting the organisation’s financial statements.
Human Resource Information System (HRIS) is a systematic way of storing data and
information for each individual employee. This aids in planning, decision making,
preparing and submission of reports for use both internally and external to the
organization. It helps maintain details such as employee profiles, attendance/absence
reports, compensation, personal, training and various kinds of details on employees.


Audit helps the organization have a clear understanding of the lacunae and better align
the HR processes with Business goals.
The audit itself is a diagnostic tool, not a prescriptive instrument. It helps in
identifying what is missing or needs to improve. It is most useful when an
organization is ready to act on the findings, and to evolve its HR function to play a
greater strategic role.
Objectives of HR Audit are:
z To review the performance of the Human Resource Department and related
activities to assess the effectiveness of implementation of policies to achieve the
organizational goals.
z Identification of gaps, lapses, irregularities, short-comings, in implementation of
Policies, procedures, practices, of HR.
z Suggesting measures and corrective steps to rectify the mistakes, shortcomings if
any, for future guidance, and effective performance of HR Department.


z HR audit is cost effective and it can give many insights into a company's affairs.
™ It helps provide details on the present processes, their adherence and
improvements for the future. It is like a report card and provides details on the
present state of system, structure and processes within the company.
z Provides Role clarity on HR Department and the role of line managers in HR.
™ In today’s business scenario, Human Resources and people development is
everyone’s job and not restricted to the HR department alone. HR Audit, not
only emphasises on HR’s role but also focuses on the role of line managers in
people development.
z Facilitates improvements in HR systems. HR Measurement and Audit

™ It studies the existing processes and systems and suggests modifications based
on future business requirements. This helps in process improvements within
the organization.
z Increased focus on human resources and human competencies.
™ The organization understands that people are its greatest assets and to ensure a
competitive edge in today’s challenging business scenario, the focus is on
people development. HR audit provides guidelines for developing and
enhancing employee’s competencies.
z Strengthening accountabilities through appraisal systems and other mechanisms
within the organization.
™ The HR audit brings in a sense of responsibility and ownership of the systems
and processes within the company. This helps in improving accountability in
appraisal systems and other processes in the organization.


An organisation conduct HR audit because of the following reasons:
z It helps promote more professionalism and professional management.
™ HR audit helps an organization to be aware of its present practices, policies
and their adherence. There is also a constant effort to improvise thereby
promoting a greater degree of professionalism.
z Benchmarking to improve HR practices.
™ The organization can benchmark its processes with best-in-class organizations
and can adopt HR practices that may be customized to suit the organizational
z Provides inputs for organizational growth and diversification.
™ HR audit suggest improvement measures keeping the organizational strategic
goals and vision in mind, thus facilitating organizational growth and


8.5.1 Interviews/Questionnaires
The audit team interviews the following:
z Top Management (CEO, Unit Heads)
z Line Managers (e.g. Managers in production, quality, purchase and marketing)
z HRD Staff
z Workmen and others
The audit process consists of a series of questions covering the key components of the
HR function, some are detailed below:
z Roles, employee head count, and HR information systems (HRIS) – (e.g. are job
descriptions updated? Is employee career history captured in the HR system)
96 z Recruitment (hiring process, sources of recruitment, selection process, are
Essentials of HRM
opportunities provided to internal candidates for a vacancy?)
z Documentation (e.g. are reference checks documented? Is training feedback
z Training and career management (how are training needs identified? how are
training programs designed?)
z Compensation and benefits (Does the organization have a compensation policy?
What is the basis for increments, promotions in the organization?)
z Performance measurement and evaluation (Are employees aware of their targets at
the start of the year? How is the performance evaluation process?)
z HR policies (Are policies documented? are they adhered to? Any deviations?)
The Human Resource Audit may also cover the following aspects and suggests
suitable recommendations:
1. Rate of absenteeism of the staff members: Is there a particular period when
absenteeism is high, the possible causes for the same.
2. Ratios relating to costs: E.g., the ration of personnel or human capital cost to
company turnover.
3. Man-days (working days) loss due to various reasons: The number of days
production stopped or was disrupted due to safety reasons, accidents, maintenance
of machinery etc.
4. Grievance, disputes, punishments, safety and accidents: Number of employee
grievance. Is there a grievance redressal mechanism in place? Number of
accidents in the Plant / Unit, types of safety measures for fire, accidents.
5. Accuracy and regularity of the staff members: Are staff adequately trained to
perform job functions? Does staff attend office regularly?
The team works to collect information to answer the HR audit questions in each of
these categories. The focus is on how these tasks and activities are presently
performed in the organization. The idea is to collect signification information and the
process of getting information by itself can be quite informative.

8.5.2 Observation and Recording

Once information is gathered, the audit team reviews each major section and notes
disparities between paper (what we think or say we do) and practice (what we actually
do, as revealed by the answers to the audit questions). This can then be compared to
best practices (what we should do to best support our organization’s mission).

8.5.3 Follow-up and Corrections done

A work plan is prepared, with timelines, accountability, and deliverables. This may
help facilitate faster access to information, cost reduction, increasing the system’s user
friendliness, making relevant data available at the required time, process
improvements, etc.
Follow-up and review should be a regular management function, performed on an
ongoing basis.

HR audit serves the following advantages:

1. Assessment of the contribution of the Human Resource Department to the
(a) HR audit is like a report card and assesses HR’s contribution to the
organization, the development of its employees and organization’s readiness
to take on future challenges.
2. Encourages greater responsibility and professionalism among members of the
Human Resource Department and remedial follow up action.
(a) After an HR audit, a suggested improvement plan is drawn. This brings in an
element of responsibility and accountability among the HR team to implement
3. Organization of the Personnel Policies, Programmes, Practices systematically and
to derive uniformity.
(a) An HR audit identifies deviations in present policies being following across
locations and across various Plants/Units in the company. It ensures there is
uniformity in policies and practices across the company.
4. Possibility of review of HR Policies based on the recommendations of HR Audit
(a) The HR team can explore refinement and modifications in HR policies taking
into account the suggestions from HR audit, and for effective realization of
the Organizational goals and objectives.


“Our main asset is our people!” is an often used phrase today.
While most organisations can readily give detailed information about their tangible
assets like plant and machinery, land and buildings, transport and office equipment,
there may not be a formal record of investment in employees.
The American Accounting Association’s Committee on Human Resource Accounting
(1973) has defined Human Resource Accounting as “the process of identifying and
measuring data about human resources and communicating this information to
interested parties”.
It is the measurement and reporting of the cost and value of people in organizational
Human resource accounting in India: The Companies’ Act, 1956 does not explicitly
provide for disclosure on human assets in the financial statements of the companies.
But sensing the benefits derived from valuing and reporting the human assets, many
companies have voluntarily disclosed all relevant information in their books.


In today’s economic scenario, recognition of human capital as an important part of the
enterprises total value has gained importance. HR accounting not only involves
measurement of all the costs or investments related to recruitment, training and
development of employees, but also the quantification of the economic value of the
people in an organisation.
98 This has led to two important issues:
Essentials of HRM
z The methods to assess the value of human capital
z The methods to improve the development of human capital in enterprises.
Organisations, trying to reflect the ‘value’ of “its people” are using different

Methods of Valuing and Accounting of Human Resources

The methods to value and account for human resources can be classified into the
following categories:
1. Methods based on costs (which include costs incurred by the company to recruit,
hire, train and develop human resources)
2. Methods based on economic value of human resources and the capitalisation of
company’s earnings.

8.8.1 Methods based on Cost

Historical Cost Method
Under this method, the cost of acquisition i.e. selection, hiring, training costs of
employees are capitalised and written off over the expected useful life of the
employees. In case, the personnel leave the company before the anticipated period of
service, then the unamortised portion of costs remaining in the company’s books is
written off against the profit and loss account in that year. If the period of service
exceeds the anticipated time, then amortisation of costs is rescheduled.

Replacement Cost Method

Under this method, the human resources are valued at their replacement cost i.e. the
monetary implications of replacing existing personnel. Replacement costs could be
positional i.e. replacing personnel for particular positions or personal i.e. replacing
specific talent or ability of particular persons.

Standard Cost Method

Under this method, standard costs of recruiting, hiring, training, and developing per
grade of employees are determined annually. The total standard cost for all personnel
of the company is the value of human resources.

8.8.2 HR Accounting based on Value

Economic Value Method
Under this method, the net present value of incremental cash flows attributed to
human resources is taken as the asset value.


According to Likert (1971), Human Resource Accounting serves the following
purposes in an organisation:
z It furnishes cost/value information for making management decisions about
acquiring, allocating, developing, and maintaining human resources in order to
attain cost-effectiveness;
z It allows management personnel to monitor effectively the use of human
z It provides a sound and effective basis of human asset control, that is, whether the 99
HR Measurement and Audit
asset is appreciated, depleted or conserved;
z It helps in the development of management principles by classifying the financial
consequences of various practices.
Human resource accounting provides quantitative information about the value of
human assets, which assists the top management in taking decisions regarding human
resources, recruitment and selection of personnel, training and development.
External to the organisation, quantitative data on the most valuable asset has an impact
on the decisions of the investors, clients, and potential staff of the company.
HR Accounting serves as a management tool which is designed to assist senior
management to understand the long term cost and benefit implications of their HR
decisions and facilitate better future business decisions.


The Human Resource function in an organization tends to the key resource of the
company – the most valuable asset – its employees. HR looks after the complete life
cycle of an employee in the organization, right from recruitment and selection,
induction, training and development, appraisal, up to compensation, performance
management, and welfare of the employee.
An information system, may be automated or manual, and involves collecting,
processing, transmitting, and disseminating data that represents user information.

8.11 WHY HRIS?

z It helps store information and data for each individual employee.
™ This includes employee personal data like address, telephone number right up
to data on compensation, training and skills acquired, performance appraisal
ratings, date of last promotion.
z It aids planning, decision making, controlling and other human resource functions.
™ Easy access to employee data helps in decisions on succession planning,
employee rotation, promotion decisions.
z Helps in meeting daily transactional requirements such as attendance, leave, late
™ The HR system helps provides easy access to routine employee information
like regularity in attendance, leave balance details.
z It helps in providing data and submitting returns to statutory agencies.
™ Employee data is crucial while filing quarterly and annual returns with various
government and statutory agencies eg. Income Tax, Prof Tax returns.


z Personnel administration: It will encompass information about each employee,
such as name address, personal details etc.
z Salary administration: Generate personnel cost reports, conduct ‘what if
analysis’, provide compensation history.
100 z Leave and absence recording: Essentially being able to provide comprehensive
Essentials of HRM
method of tracking absences, late coming, reports on excess leave availed, leave
z Skill inventory: Recording of acquired skills and monitor the skill database at the
employee and organisational level.
z Performance appraisal: The system should record individual employee
performance appraisal data, such as appraisal ratings, due date of appraisal,
training needs identified during the appraisal process.
z Recruitment: Record recruitment cost, lead time to fill a vacant position,
recruitment methods, applicant and resume management.
z Career planning: HRIS System can provide succession plan reports identifying
employees earmarked for future position.


HRIS serves the following benefits:
z Higher Speed of retrieval and processing of data.
™ Data is easily available when required. As required customized employee
reports can be quickly prepared and thus aid in the decision making process.
z Avoiding duplication of efforts leading to cost reduction
™ If an HRIS is not available, an organization may have data available at
different locations in different formats. This may lead to duplication of efforts
and related costs as more personnel are involved in data maintenance and
z Ease in classifying and reclassifying data.
™ Once a main employee data template is made and standardized across the
organization, it is relatively easy to customize reports as required.
z Efficient analysis leading to more effective decision making.
™ An HRIS ensures that employee information is easily available, thereby
facilitating the decision making process, e.g. employee past performance
history aids decision on employee promotions.
z Higher accuracy of information, reports generated.
™ An HRIS ensure that select personnel are involved in data entry points within
the system. Thus data accuracy of reports generated is assured.
z Quick response to queries.
™ When responding to queries HR should ideally not have to go through hard
copies of papers and files. An HRIS helps information being available at the
finger tips. The aids fast response to queries.
z Better work culture.
™ Quick and easy access to data brings in an element of professionalism in the
decision making process and responding to employee queries. All this
promotes a better work culture within the company.
z Streamlined and systematic procedure.
™ An HRIS helps avoid duplication of data. There is ease of data retrieval and
standardization on information processes within the company.
8.14 HRIS – DISADVANTAGES HR Measurement and Audit

HRIS has the following disadvantages:

z May be expensive – financing the technology.
™ Most human resource information systems can be costly. However, the
organization must be willing to spend on technology keeping in mind present
and long term organizational gains.
z Thorough understanding of what constitutes quality information for the user.
™ It is not sufficient just providing information to the management. To facilitate
the decision making process, it is important for the HR team to understand the
purpose for which the information is required. Once this is clear, it helps
provide quality information, with customized reports, if required.
z Computer cannot substitute human beings.
™ An HR system helps store and retrieve data. It aids the decision making
process. However, a computer system cannot replace or be a substitute for
human beings. The personal involvement of the HR in handling employee
queries is desirable.
The benefits of HRIS far outweigh the limitations. Also an appropriate HRIS enables
employees to do their own benefits updates and address changes, thus freeing HR staff
for more strategic functions.


Human Resource Audit reflects on and evaluates the Plans, Policies, Practices,
Procedures, Programmes, to ascertain their effectiveness and efficiency.
It is like a check on work done and if policies, procedures, have been fully
implemented thereby yielding the desired results.
HR audit also makes suggestions for future improvements in policies, practices
Programmes based on findings or outcomes from Audit.
Auditing all or portions of the HR function helps strengthen HR in an organization
and keep it aligned with the goals/objectives of the organization.
Human resource accounting aims at depicting the human resources potential in money
terms while casting the organisation’s financial statements.
Human Resource Information System (HRIS) is a systematic way of storing data and
information for each individual employee.
This aids in planning, decision making, preparing and submission of reports for use
both internally and external to the organization.

Human Resource Audit: It is a comprehensive evaluation of the existing human
resource development strategies, structure, systems, styles and skills.
Human Resource Accounting: It is the process of identifying and measuring data
about human resources and communicating this information to interested parties.
Historical Method: Under this method, the cost of acquisition i.e. selection, hiring,
training costs of employees are capitalized and written off over the expected useful
life of the employees.
102 Replacement Cost Method: Under this method, the human resources are valued at
Essentials of HRM
their replacement cost i.e. the monetary implications of replacing existing personnel.
Standard Cost Method: Under this method, standard costs of recruiting, hiring,
training, and developing per grade of employees are determined annually.
Economic Value Method: Under this method, the net present value of incremental
cash flows attributed to human resources is taken as the asset value.
Human Resource Information System: It is a systematic way of storing data and
information for each individual employee.


Fill in the blanks:
1. HR audit serves as ………………tool for the organisation.
2. The……………….have the responsibility of interviewing the employees during
3. HR accounting measures the investment in…………………..of the organisation.
4. The main aim of HR accounting is to find out the…………..of its people.
5. The cost of replacing existing personnel is known as……………….
6. …………….helps in storing all relevant data related to employees.
7. The monitoring of skills and recording of acquired skills is done in


1. What do you understand by the term ‘Human Resource audit’? Explain the
significance of HR Audit.
2. What role does HR audit play in an organisation?
3. Describe the HR audit process.
4. Analyse the advantages and limitation of HR audit.
5. What is ‘Human Resource Accounting (HRA)’? Explain HR accounting methods
impact and implications of human resource accounting.
6. Describe a Human Resource Information System (HRIS), and the benefits and
disadvantages of HRIS.
7. “People are the main assets of organisations”. Do you agree with the statement?
Justify your answer.


P. Jyothi and D. N. Venkatesh, Human Resource Management, First Edition, 2006, Oxford
G. Dessler, Human Resource Management, 12th Edition, Pearson Education.
LESSON Human Resource
Development System


9.0 Aims and Objectives
9.1 Introduction
9.2 Concept of Human Resource Development
9.3 HRD Department and its Functions
9.4 Human Resource Development Systems
9.5 Human Resource Development Process
9.6 Critical Elements of HRD Effectiveness
9.7 Strategic Management and HRD
9.8 HRD/Organization Alignment Model
9.8.1 Organization Mission/Goals
9.8.2 Core Competencies
9.8.3 Needs Assessment
9.8.4 Integrated Solutions
9.8.5 Organization Outcomes
9.9 Let us Sum up
9.10 Keywords
9.11 Self Assessment
9.12 Review Questions
9.13 Suggested Readings


After studying this lesson, you should be able to:
z Analyse the concept of Human Resource Development
z Analyse the need for HRD
z List the various HRD systems
z Describe sub-systems of HRD
z Analyse the changing boundaries of HRD

People are the assets on which competitive advantage is built, whether in the public or
private sector, whether in the corporate world or in the world of education. In the
104 words of the latest theory on human resource management, people are an “inimitable”
Essentials of HRM
asset. People and their skills are the one thing that competitor organizations cannot
imitate so human resource management and the practices associated with it have
become accepted by managers in all forms of organizations as one of the most
important strategic levers to ensure continuing success.
The traditional emphasis of what used to be called “personnel management” was on
the regulation of the management of people in organizations. This regulatory role was
reinforced, by increasing government regulation of employment conditions through
legislation concerned with the conduct of industrial relations, discrimination,
employment rights, health and safety and other employment conditions. In many
organizations today, this older notion of personnel administration still holds sway with
its emphasis on rules and regulation.


But in the 1980s and 1990s, a different concept of human resource management began
to gain ground. At the heart of the new approach was the belief that the management
of people gives an organization competitive advantage. This leads to a number of
distinct differences between human resource management and personnel management.
Firstly, human resource management is clearly not simply the province of the human
resource manager. Line managers play a critical role in human resource management
and, in fact, could be argued to be the main organizational exponents of people
Secondly, human resource management is firmly embedded in business strategy.
Unlike the personnel manager, the human resource manager is part of the top level
strategic team in the organization and human resource management plays a key role in
the achievement of business success.
Thirdly, the shaping of organizational culture is one of the major levers by which
effective human resource management can achieve its objectives of a committed
workforce. Thus, human resource management is concerned not only with the formal
processes of the management of people but also with all the ways in which the
organizational culture is established, re-enforced and transmitted.
The objective of Human Resources is to maximize the return on investment from the
organization's human capital and minimize financial risk. It is the responsibility of
human resource managers to conduct these activities in an effective, legal, fair, and
consistent manner.
Human resource management serves these key functions:
1. Selection
2. Training and development
3. Performance evaluation and management
4. Promotions
5. Industrial and employee relations
6. Record keeping of all personal data.
7. Compensation, pensions, bonuses etc in liaison with Payroll
8. Confidential advice to internal 'customers' in relation to problems at work
9. Career development.
The traditional but extremely narrow context of hiring, firing, and job description is 105
Human Resource
considered a 20th Century anachronism. Most corporate organizations that compete in Development System
the modern global economy have adopted a view of human capital that mirrors the
modern consensus as above. Some of these, in turn, belittle "human resources" as
Human Resources Development is a framework for the expansion of human capital
within an organization. Human Resources Development is a combination of Training
and Education that ensures the continual improvement and growth of both the
individual and the organization. Adam Smith states, “The capacities of individuals
depended on their access to education”. It is the medium that derives process between
training and learning. Human Resources Development is not a defined object, but a
series of organized processes, “with a specific learning objective”. It has potential for
individual development and reaching organizational goals, where both individuals and
organizations reap the benefits.
The Human Resources Development framework views employees, as an asset to the
enterprise whose value will be enhanced by development. Its primary focus is on
growth and employee development. It focuses on organization’s competencies at the
first stage, training, and then developing the employees through education. Which
eventually satisfy the long term goals of organizations and look into the career goal of
In a nutshell, ‘Human Resources Development’ can be defined simply as developing
the most important section of any business its human resource by skill up gradation,
education, changing attitude and attaining organizational effectiveness. From business
perspective it is not just individual’s growth and development but also to enhance
organization’s value through the empowered human resources.


In management the concept of Human Resource Development (HRD) was formally
introduced in 1969 by Prof. Len Nadler in America at American Society for Training
and Development conference. Larsen and Toubro Ltd. was the first private sector
company who introduced this concept in 1975 in India. Bharat Heavy Electricals Ltd.
was among the first in public sector company which introduced this concept. The
philosophy of human resource management is reflected in the values and beliefs,
climate and culture and various activities of mangers throughout the organization.
HRD play a very crucial role in organization. Henery Ford once said, “take out my
building, take out my machines, take out all capital but leave my men with me and
I will become Henry Ford again”. HRD is considered as key to higher productivity,
better relations and greater profitability for any organization. According to Daftur,
“HRD is a system and process concerned with an organized series of learning
activities within specified time limits, designed to produce behavioral changes in the
learner in such a way that it acquires desired level of competence for present or future
role”. HRD is not a piecemeal or a one time exercise but it is a continuous process. In
the organizational context HRD is a process by which the employees of an
organization are helped in a continuous and planned way to:
1. Acquire or sharpen capabilities required to perform various functions of their
present and future roles;
2. Develop their general capabilities as individuals and bring out inner potential for
organizational development purposes;
3. Develop an organizational culture which is conducive to motivation and pride of
employees; and
106 4. HRD process is facilitated by mechanisms like performance appraisals, job
Essentials of HRM
rotation, training and career development (Ghosh, 2000).
There are different ways of strengthening the HRD functions. Some of them are:
1. Using the existing Personnel Department as HRD is an integral part of personnel
function, there is no need for a separate HRD department.
2. Strengthening the Personnel Department by equipping them with new
3. Creating a new role of HRD managers, or
4. Setting up HRD departments.
HRD is a holistic concept; it is looked upon as a sub system of a larger system.
Traditional personnel function is exclusive responsibility of personal department, but
HRD is the concern of all managers in the organization. Therefore, all managers are
considered as human resource managers, since they all get involved in recruitment,
selection, training etc. Both line and staff functions are inclusive of HRD functions.
A Line Function: Directing the activities of the people within department and service
A Coordinative Function: HRD executives also function as coordinators of the
personnel activities, duty usually referred to as “functional control.” The HRD
manager and the department act as the right arm of the top executive to assure him
those personnel objectives, policies and procedures which have been adopted by line
organization are being consistently carried out by line managers.
Staff Function: The staff function carry out the support role. It supports the line in its
performance. The objective of staff is to help line executives by relieving them of
certain specialized activities.
While on the overall organization chart of a company, the HRD manager is a staff
man to the rest of the organization, his relationship with his own subordinates in his
department is always ‘line’. He manages a department which may run as high as
hundred employees and his managerial duties are as heavy as those of most line
managers. Like them, he is concerned with production, quality of work, planning,
organizing and controlling the efforts of his department as well as with the
recruitment, selection and placement of people on his staff and their training,
leadership and motivation.
The organization structure of the Human Resources Department has a pyramid – like
shape with the HRD Manager or HRD Director at the head. In many large
organizations the HRD Manager is also a Member of the board and would be
designated as HRD Director or Vice President, HRD. Where he is not a Member of
the Board, the appropriate designation would naturally be HRD Manager. Right below
the HRD Manager there is another level with personnel officers who will report
directly to the HRD Manager.
Human Resource
Development System
HRD Manager or Vice President, HRD

Research Officer

Personnel Officer Personnel Officer Personnel Officer

Industrial Relations Wage and Salary Recruitment, Placement,

Administration Training

Figure 9.1: Organizational Structure of Human Resource Department

Figure 9.1 indicates that the top HRD Manager delegates the performance of certain
functions to Personnel Officers. The number of divisions depends upon the extent of
the activities which vary from company to company. Within the personnel department,
the HRD Manager has line authority over all the personnel officers under him. Within
the department itself there is a Research Officer who performs a staff function with
regard to the HRD or Personnel Department. Thus within the personnel department,
which performs a staff function in relation with other departments in the organization
there can be both line and staff authority.
Human resource development can be a standalone function, or it can be one of the
primary functions within the HRM department. The structure of the HRD function and
its scope has been shaped by the needs faced by organizations.


HRD functions are carried out through its systems and sub systems. HRD has five
major systems and each of the systems has sub systems as elaborated here: the first
three systems viz., Career system, Work system and Development system, are
individual and team oriented while the fourth and the fifth systems viz. Self renewal
system and Culture Systems are organization based.
1. Career system: As an HRD system, career system ensures attraction and retention
of human resources through the following sub-systems:
(a) Manpower planning
(b) Recruitment
(c) Career planning
(d) Succession planning
(e) Retention
2. Work system: Work-planning system ensures that the attracted and retained
human resources are utilized in the best possible way to obtain organizational
objectives. Following are the sub systems of the work planning system.
(a) Role analysis
(b) Role efficacy
108 (c) Performance plan
Essentials of HRM
(d) Performance feedback and guidance
(e) Performance appraisal
(f) Promotion
(g) Job rotation
(h) Reward
3. Development system: The environmental situation and the business scenario are
fast changing. The human resources within the organization have to rise up to the
occasion and change accordingly if the organization wants to be in business. The
development system ensures that the retained (career system) and utilized
(work system) human resources are also continuously developed so that they are
in a position to meet the emerging needs of the hour. Following are some of the
developmental sub-systems of HRD that make sure that human resources in the
organization are continuously developed.
(a) Induction
(b) Training
(c) Job enrichment
(d) Self-learning mechanisms
(e) Potential appraisal
(f) Succession development
(g) Counseling
(h) Mentor system
4. Self-renewal system: It is not enough to develop individuals and teams in the
organizations but occasionally there is a need to renew and rejuvenate the
organization itself. Following are some of the sub systems that can be utilized to
renew the organization.
(a) Survey
(b) Action research
(c) Organizational development interventions
(d) Organizational retreats
5. Culture system: Building a desired culture is of paramount importance in today’s
changed business scenario. It is the culture that will give a sense of direction,
purpose, togetherness, and teamwork. It is to be noted that whether an
organization wants it or not along with the time common ways of doing things
(culture) will emerge. If not planned carefully and built systematically such
common traits may not help the business but may become a stumbling block.
Hence it is very important to have cultural practices that facilitate business. Some
of the culture building subsystems are given below:
(a) Vision, mission and goal
(b) Values
(c) Communication
(d) Get-togethers and celebrations
(e) Task forces 109
Human Resource
(f) Small Groups Development System


HRD is a process-oriented function. HRD functions in many organizations fail
because the processes involving the systems are not adequately addressed. The
concept of process essentially concerns the question of “how” and to a great extent the
question of “why”. It emphasizes the behavioral and interactional dimensions. All the
HRD processes are centered around four constituents of an organization viz, the
employee, role, teams and the organization itself. Each of the unit has its own
behavioral patterns and framework, which, if not addressed adequately may not bring
in the desired outcomes. It is through these processes that the HRD systems are
effectively implemented. Implementations of the HRD systems are, in turn indented to
bring in right processes in organizations. Hence HRD systems and HRD processes are
closely linked. Their relationships are well explained by Rao (1990).
1. Individual: Individual is the basic constituent of an organization. All the
behavioural pattern and dynamisms emerge from individuals. Hence individual
based HRD process explained below are vital for HRD function and for
implementation of the HRD systems:
(a) Efficacy
(b) Effectiveness
(c) Styles
(d) Leadership
2. Role: Role is a dynamic entity which involves the expectations of significant
others and self from the position of the role holder. A large number of behavioral
patterns and dynamism in organizations are centered around the roles. The role
occupier and all others who have some linkage or relationship to that role form a
constituent. Following are some of the role related, HRD processes in
(a) Competencies for job performance
(b) Commitment
(c) Motivation
(d) Frustration
(e) Stress and Burnout
3. Teams: Work in organizations is performed through teams or groups. When
individuals begin to work in team, behavioural patterns and dynamisms emerge.
Following HRD processes are to be addressed if team work should bring in the
desired results:
(a) Communication
(b) Feedback
(c) Conflict resolution
(d) Collaboration
4. Organization: A large number of HRD processes are organization related. Unless
and until these processes are in place, HRD cannot take off. However, in a number
of organizations as a result of implementation of HRD systems, these processes
110 were set right. HRD systems can contribute towards the development and maturity
Essentials of HRM
of these processes:
(a) Organizational climate
(b) Communication
(c) Learning organization
(d) Organizational change
(e) Organizational development
An ASTD (American Society for Training and Development) – sponsored study by
Pat McLagan sought to identify the HRD roles and competencies needed for an
effective HRD function. The study identified four trends affecting modern HRD:
1. Greater diversity in the workforce.
2. More people involved in knowledge work, which requires judgment, flexibility,
and personal commitment rather than submission to procedures.
3. Greater expectations of meaningful work and employee involvement.
4. A shift in the nature of the contract between organizations and their employees.
The ASTD study documented a shift from the more traditional training and
development topics to a function that included career development and organization
development issues as well. The study depicted the relationship between HRM and
HRD functions. Wherein, activities of HRM in HRD explain the broader range of
developmental perspectives like; career development, training, organization
development, etc.
The three primary HRD functions are:
1. Training and development,
2. Organization development, and
3. Career development.

Training and Development (T&D)

Although training and development appears synonymous, there is recognized
difference between the two. Training typically involves providing employees the
knowledge and skills needed to do a particular task or job, though attitude change may
also be attempted (especially in rank and file jobs). Developmental activities, in
contrast, have a longer-term focus on preparing for future work responsibilities, while
also increasing the capacities of employees to perform their current jobs. T&D
activities begin when a new employee enters the organization, usually in the form of
employee orientation and skills training. HRD staff and the hiring supervisor generally
conduct the orientation process, by imparting organizational values and cultural
sensitivity and conducting general orientation sessions including the initial skills
Once new employees have become proficient in their jobs, HRD Activities should
focus more on developmental activities specifically, coaching, counseling and
mentoring. Employees are encouraged to take up the responsibility for their actions, to
address any work-related problems, and to achieve and to sustain superior
performance. Coaching involves treating employees as partners in achieving both
personal and organizational goals. Counseling and mentoring techniques are used to
help employees deal with personal and professional problems-that may interfere with
the achievement of these goals. Counseling programs may address personal issues as
stress management, substance abuse, addressing interpersonal conflicts, or fitness 111
Human Resource
issues. Mentoring may involve career guidance, preparing people for next assignment Development System

Organization Development
Another primary function of HRD is Organization Development (OD) is defined as
the process of enhancing the effectiveness of an organization and the wellbeing of its
members through planned interventions that apply behavioral science concepts. OD
activities are at two levels – (a) Micro OD and (b) Macro OD.
Micro level activities include individual and team aspects, where as macro changes are
intended to ultimately improve the effectiveness of the organization. For example,
many organizations have sought to improve organizational effectiveness by
introducing employee involvement programs that require fundamental changes in
work expectations, reward systems, and reporting procedures. The role of the HRD
professional involved in an intervention is to function as a change agent. Facilitating
change often requires consulting with and advising line managers on strategies that
can be used to effect the desired change. The HRD professional may also become
directly involved in carrying out the intervention strategy, such as facilitating a
meeting of the employees responsible for planning and implementing the actual
change process.

Career Development
Career development is an ongoing process by which individual’s progress through a
series of stages. Career development involves two distinct processes: career planning
and career management. Career planning is done by the individual self, often with the
assistance of counselors and others, to assess his or her skills and abilities in order to
establish a realistic career plan. Career management involves taking the necessary
steps to achieve that plan, and generally focuses more on what the organization can do
to foster employee career development.
(Source: From P. A. Me Lagan (1989)_ Models for HRD Practice, Training and Development Journal, 41:53.)


HRD develops the organization. Organizations can become dynamic and grow only
through the efforts and competencies of its resources. There are certain necessary
steps to be taken for the effectiveness of the organization system. Research findings
by Neal Chalofsky and Carlene Reinhart. provide the foundation from which HRD
practitioners can begin to effectively deliver the resources their organization need.
1. The HRD Function has the Expertise to Diagnose Problems in Order to
Determine Appropriateness of Potential Solutions: Further analysis of the data
breaks the responses under this critical event into three categories, all of which
contribute to its significance:
a. Expertise to diagnose organizational problems.
b. Expertise to diagnose individual problems.
c. Expertise to identify solutions in terms of processes, products, and resources,
and ultimately the expertise to recommend solutions.
2. The HRD Manager Maintains an Active Network with other Key Managers in
the Organization: Positioning this as the second most important contribution to
effectiveness indicated that people recognize that more important information
frequently resides in the informal networks within an organization than in any
formal management information system.
112 3. There is a Corporate Training and Development Mission Statement or
Essentials of HRM
Corporate HRD Policy: This, the third-ranked element, was seen as an essential
framework for the HRD function. The mission statement or policies do not
necessarily need to be overtly stated. They might exist in the form of an operating
plan and budget; they might also be implied in the culture of the organization.
4. The Evaluation of Training Focuses on Behavioral Change or Organizational
Results: Formal evaluation of training in an effective HRD function takes place in
some form, but not the "smile sheets" or "happiness measures" still used by many
trainers at the end of a training session. The effective HRD function generally uses
competency-based training and evaluates against clearly stated course outcomes
for accountability reasons: to find out if behaviors have indeed changed as stated
in the course objectives, or if the course needs to be revised in some way, or to
make decisions about HRD interventions.
5. The HRD Manager Routinely Participates in Corporate Strategy Sessions with
Other Key Staff Persons and Senior Managers: For many HRD managers, this
may translate into having input into the annual operating plan at an early enough
stage to make some impact. It may mean being included in the early stages of
discussion of a new product. In a large number of responses, it was seen as a
desirable but not yet fully achieved objective.
6. Training Needs Associated with Major Changes in the Organization are
Anticipated: This critical element is actually linked directly to element 5: if the
HRD manager is a part of the strategic thinking and planning processes of the
organization, then he/she will be a part of the change design process and will be
able to identify and plan for the required training at the same time. In an effective
HRD function the HRD manager is involved in all levels of organizational
7. Allocations of HRD Resources are based at least in Part on the Priorities of the
Organization: Several of research panel members felt strongly that the effective
HRD function must also engage in future thinking and planning, and certainly a
part of its resources must be targeted in some way to meeting the HRD needs of
the organization five to ten years out as well as within the current fiscal year.
8. The HRD Function Conducts Needs Assessments to Determine Organizational
Requirements: Research panelists noted that the effective HRD function, when
directly involved in all organizational planning, is normally called on to conduct
various types of front-end analyses (task analysis, needs assessments),
performance analysis, or organizational diagnosis to determine when training or
other interventions may be required to improve productivity, the quality of work
life, or organizational functioning.
9. The Roles, Responsibilities, and Priorities of the HRD Function are Clearly
Defined: The most effective HRD functions are managed and staffed by
professional HRD personnel who also know their industry or business. When this
situation exists, they are able to build and model appropriate HRD performance
with their staff in appropriate roles.
10. The HRD Management and Staff Routinely meet to Discuss Problems and
Progress with Current Programs: In the effective HRD function, clear and open
communications are built into the function's operating model. There is a high level
of trust. The managers are trusted because they communicate openly with staff,
and they trust their personnel lo produce what is required of them.
(Source: Neal F. Chalofsky and Carlene Reinhart, Effective Human Resource Development: How to Build a Strong
and Reponsive HRD Function, Jossey Bass Business and Management Series.)
Development System
Strategic management involves a set of managerial decisions and actions that are
intended to provide a competitively superior fit with the external environment and
enhance the long-run performance of the organization. The past decade has seen
increasing interest, research, and action concerning strategic human resource
management. The emphasis has been on more fully integrating HRM with the
strategic needs of the organization. The strategy of the organization must be aligned
with the mission, goals, beliefs, and values that characterize the organization. Further,
there needs to be alignment among the various sub-systems that make up the
organization. Some areas that need to be addressed include:
z Management practices – how employees are managed and treated (e.g., how much
do employees participate in decision making?)
z Organizational structure – how the organization is structured (e.g., how “flat” is
the organization’s managerial hierarchy?)
z Human resource systems – how employees are selected, trained, compensated,
appraised, and so on (e.g., how closely is pay linked to individual, team, or
organizational performance measures?)
z Other work practices and systems (e.g., to what extent is technology or
information systems used to facilitate the work process?)
The value of this approach lies in looking at the organization as an entire system. All
of the parts of an organization must work together as a whole to reach the goals of the
organization. Some of the desired outcomes of such a high performance work system
are increased productivity, quality, flexibility, and shorter cycle times, as well as
increased customer and employee satisfaction and quality of work life. As one
example, Federal Express uses several different practices – that foster high
performance. Much of their employee training is conducted via inter-active video
instruction. A pay-far-knowledge system has been implemented that rewards
employees who have completed the video training and passed job knowledge tests. A
performance management system is in place that allows employees to track service
performance, and an elaborate information system is used to monitor the progress of
each item in the FedEx system. All of this is complemented by a survey feedback
process that allows employees to “grade” their manager’s leadership skills and suggest
solutions for any problems they encounter. As you can see, it is the effective synergy
of everything working together that defines high performance work systems.
A current challenge (or opportunity) for HRD professionals is to play a more strategic
role in the functioning of their organization. Progress has been made in moving
toward a more strategically integrated HRD. In particular, HRD executives and
professionals should demonstrate the strategic capability of HRD in three primary
1. directly participating in their organization’s strategic management process,
2. providing education and training to line managers in the concepts and methods of
strategic management and planning,
3. providing training to all employees that is aligned with the goals and strategies of
the organization.
First, HRD executives should contribute information, ideas, and recommendations
during strategy formulation and ensure that the organization’s HRD strategy is
consistent with the overall strategy. The HRD strategy should offer answers to the
questions concerning organization’s objectives, strategies, policies, performance
budgets etc.
114 Second, HRD professionals should provide education and training programs that
Essentials of HRM
support effective strategic management. Training in strategic management – concepts
and methods can help line managers to develop a global perspective that is essential
for managing in today’s highly competitive environment. HRD professionals must
ensure that all training efforts are clearly linked to the goals and strategies of the


Integrating the HRD function with strategic agency goals takes time, persistence, and
an in-depth knowledge of the process involved. The HRD/Organization Alignment
Model, Figure 9.2, illustrates the process of aligning HRD with the Human Resources
function (HR) and the organizational planning function.
The three levels in each block represent the relationship among the organization, HR,
and HRD functions. An example of this relationship is shown in Figure 9.2 through
one block of the model.

1 2 3

Organization Core Needs

Mission/Goals Competencies Assessment

Performance Human
Requirements Resources Needs
Training Needs
HRD Philosophy HRD Strategies Assessment
HRD Policy HRD Systems Organizational
HRD Goals Career Paths Occupational,

4 5

Organization Integrated
Outcomes Solutions

Human Resources Human Resources

Results Planning

Transfer of Training
HRD Priorities
Cost Benefits of HRD
HRD Programs
Critical Success
HRD Practices

Figure 9.2: HRD/Organizational Alignment Model*

* The HRD/Organization Alignment Model was developed by Marjorie L. Budd and has been published in the
following: U.S. Office of Personnel Management, Training Needs Assessment Handbook: A Guide for Conducting a
Multi-Level Needs Assessment, HRDG Document 024 (Washington, DC, 1994); and Marjorie L. Budd and Mary
L. Broad, "Training and Development for Organizational Performance," in James L. Perry, ed., Handbook of Public
Administration, 2nd ed. (San Francisco: Jossey-Bass, 1996).
9.8.1 Organization Mission/Goals Human Resource
Development System
z Organization Missions/Goals: What are the organization’s mission/goals and
strategic plans?
z Human Resource Function: How are HR functions (e.g. staffing, work systems,
performance management system, etc.) designed to support the agency’s mission
and goals?
z HRD Philosophy, Policy, Goals: How do the HRD Philosophy, Policy, Goals
reflect the organization’s mission and goals?

9.8.2 Core Competencies

z What are the Core Competencies of the agency (knowledge, skills, and abilities
that are essential to the organization's mission)?
z How is the agency Performance Requirements established, based on the essential
competencies of the agency?
z How do the HRD Strategies, Systems, and employee Career Paths strengthen and
promote the agency's core competencies?

9.8.3 Needs Assessment

z How does the organization's Needs Assessment process identify the agency's
broad cross-cutting performance issues and opportunities for innovation?
z When HR Needs are examined, how are they linked to the broader organization's
assessment of performance needs?
z How does the Training Needs Assessment process explore organizational,
occupational, and individual needs? How is the information used to make
decisions for allocating training resources to meet organizational priorities?

9.8.4 Integrated Solutions

z What are the Integrated Solutions (approaches requiring input from multiple
sources such as improving management systems, automating work, training, and
development, etc.) used by the agency to solve its performance issues and make
z How do HR Plans help solve the agency's performance issues and make
improvements? Do the plans link the various HR functions?
z How are HRD Priorities, Programs, and Practices configured to support the
broader HR plans so they become part of the organization's integrated solutions?

9.8.5 Organization Outcomes

z What are the Organization's Outcomes that result from addressing the agency's
performance issues?
z How do HR Results (those emanating from recruiting, training, managing
performance, etc.) contribute to the agency's overall improvement?
z How does HRD ensure Transfer of Training and Cost/Benefits of its services?
z How do HRD's Critical Success Factors reflect the genuine needs of the agency?
Essentials of HRM 9.9 LET US SUM UP
There are numerous benefits that accompany the integration of the HRD function with
the organization's mission and strategic goals.
These include: optimum use of the HRD function as a tool to increase organizational
productivity, a sound rationale for the organization to invest in HRD programs and
allocate resources according to priority needs, visibility for how HRD supports other
HR functions as well as other agency systems, increased involvement of supervisors,
line management, and executives in the training and development of their workforce,
orderly system of planning for current and future workforce needs, mission-related
standards and guidelines against which HRD activities can be evaluated, increasingly
responsive, results-driven, customer-driven HRD activities, Containment of costs as
human resource services become inextricably linked to the business requirements of
the agency.
Human resources, in the context of strategic HRD, are seen as a vital factor in
business planning and survival. This means moving HRD from a series of fragmented
activities to a situation where training and development is systematically linked to the
agency master plan and overall tactical objectives.
Understanding and developing Human Resources is a key to organizational success.
Organizations should be able to work out the systems in an effective manner. HRD
systems require the efforts from recruitment of employees to career development.
Alignment of HR with Organizational strategies is of prime importance. Once HRD is
dealt at strategic level in the organization, it can contribute to positive workforce,
increased productivity and organization success.

Personnel Management: It is the strategic and coherent approach to the management
of an organisation's most valued assets – the people.
Human Resource Development: It is a framework for the expansion of human capital
within an organisation.
Line Function: Directing the activities of the people within department and service
Staff Function: It carries out the support role, it support the line in its performance.
Strategic Management: It involves a set of managerial decisions and actions that are
intended to provide a competitively superior fit with the external environment and
enhance the long-run performance of the organization.
Core Competencies: A company's primary area of business and greatest expertise.


Fill in the blanks:
1. Traditionally, HRM was concentrated on………………of management of people.
2. Objective of HRM and HRD is to maximize the return on investment on ………..
3. When an HR manager coordinates the activities of personnel, it is referred to
as ………….
4. If the HRD manager is on the board, he is designated as……………….
5. OD interventions are often used for…………………of the organisation.
6. Career Planning and Career Management are two processes of……………….. 117
Human Resource
7. Now-a-days, there is an increased practice of aligning HRM with ……………… Development System


1. Describe the concept of HRD and its need in present scenario.
2. Give a brief description of the Functions of HRM Department. Is it line or staff
3. What are the critical elements of HRD effectiveness?
4. What are the principals in designing a HRD system?
5. Discuss the HR Development process.
6. What is strategic management? Explain its relation with HRM.
7. How one can align HRD at strategic level in the organization?


Pareek, V. and Rao, T.V., Designing and Managing Human Resource Systems, Oxford & IBH
Publishing Co. New Delhi.
Biswanath Ghosh, Human Resource Development and Management, Vikas Publishing House
Pvt. Ltd. New Delhi.
Tripathi, P.C., Human Resource Development, Sultan Chand & Sons, New Delhi.
Essentials of HRM


10.0 Aims and Objectives
10.1 Introduction
10.2 Training and Education
10.3 Training and Development: Concept
10.4 Stake Holders in Training and Development
10.5 Training and Learning Organization
10.6 Need for Training and Development
10.7 The Training Process
10.7.1 Organizational Objectives and Strategies
10.7.2 Needs Assessment
10.7.3 Training and Development Objectives
10.7.4 Designing Training and Development Program
10.7.5 Implementation of the Training Program
10.7.6 Evaluation of Training Program
10.8 Special Topics in Training and Development
10.8.1 Cross-cultural Training
10.8.2 Orientation Training
10.8.3 Team-training and Cross-training
10.8.4 Diversity Training
10.9 Let us Sum up
10.10 Keywords
10.11 Self Assessment
10.12 Review Questions
10.13 Suggested Readings


After studying this lesson, you should be able to:
z Explain the concept of training
z Analyse the need and importance of training
z Describe the process of training 119
Training and Development
z Analyse dimensions of learning organization and discuss special training program
that need our concern

The term training refers to the acquisition of knowledge, skills, and competencies as a
result of the teaching of vocational or practical skills and knowledge that relate to
specific useful competencies. It forms the core of apprenticeships and provides the
backbone of content at technical colleges and polytechnics. In addition to the basic
training required for a trade, occupation or profession, observers of the labor-market
recognize today the need to continue training beyond initial qualifications: to
maintain, upgrade and update skills throughout working life. People within many
professions and occupations may refer to this sort of training as professional
Training differs from exercise in that people may dabble in exercise as an occasional
activity for fun. Training has specific goals of improving one's capability, capacity,
and performance.
A training program can serve a range of diverse purposes, and organizations initiate
training programs for many different reasons. In broadcasting one of the strongest
motives is the need to respond to challenges presented by new technologies. As our
technology changes at an increasingly rapid pace, it requires new skills. The resulting
changes in job descriptions frequently blur boundaries between previously distinct
jobs, producing greater demands for a multi-skilled staff. In any event, many persons
will need to be trained in the new skills required by technology changes, and some of
that retraining will be conducted within their organizations.
Improving efficiency and performance to ensure that the organization is capable of
responding to the challenges of its competitors will sometimes require a very different
kind of training program. But in striving for enhanced efficiency and levels of
performance, training should also be seen as a part of individual professional
development. An organization can increase the likelihood that it will keep valued
employees if it demonstrates that it is willing to invest in their professional
development, by helping them gain new skills and expertise through organizational
support for their training.


Many a times training is often confused with education. Training is different from
education. Clearly there are overlaps, and the boundary between the two can
sometimes be blurred but Milano & Ullius (1998, p.4) summarized the distinction
very well when they wrote that: “Education focuses on learning about; training
focuses on learning how.”
Education has broader goals than training and the material covered is intended to be
used in many different contexts. This distinction is clear if we contrast for example,
broadcast education with broadcast training. In addition to including courses to learn
skills in such areas as production or management a university’s undergraduate
curriculum in broadcasting will also include courses in topics such as the history of
broadcasting, its social purpose, the legal and regulatory frameworks that shape its
performance, and the ways its output has been critiqued. The graduates of that
program will move on to many different occupations and they will use what they have
learned in a variety of ways.
120 While training may, of necessity, occasionally touch on these more inclusive areas of
Essentials of HRM
knowledge they will be less central to the activity. Fundamentally, training helps
someone do something better and the skills it develops are usually specific to a
particular task. Therefore, the objectives in training are more specific than those in
education. In training it is usually easier to state the goals in a clear and ultimately
measurable form because the expected outcome is more easily defined.
In education the objectives are less specific and thus determining whether or not those
goals have been achieved becomes much more challenging. Because of the difference
in aims between training and education, the strategies and techniques each uses in
instruction are different. A common problem for trainers is to “unlearn” teaching
methods they have acquired without thinking during their schooling years. Breaking
habits of instruction that teachers use can be the first step toward becoming a highly
effective trainer.


In the field of human resource management, training and development is the field
concerned with organizational activity aimed at improving the performance of
individuals and groups in organizational settings. It has been known by several names,
including employee development, human resource development, and learning and
development. Harrison observes that the name was endlessly debated by the
‘Chartered Institute of Personnel and Development’ during its review of professional
standards in 1999/2000. The term "Employee Development" was looked as negative
depicting the master-slave relationship between employer and employee for those
organizations where employees are given the status of "partners" or "associates" to be
comfortable with. "Human Resource Development" was rejected by academics, who
objected to the idea that people were "resources" — an idea that they felt to be
demeaning to the individual. Eventually, the CIPD settled upon "Learning and
Development", although that was itself not free from problems, "learning" being an
over general and ambiguous name. Moreover, the field is still widely known by the
other names (Harrison, R.; 2005).
Training and development encompasses three main activities: training, education, and
development. Garavan, Costine, and Heraty, of the Irish Institute of Training and
Development, note that these ideas are often considered to be synonymous. However,
to practitioners, they encompass three separate, although interrelated, activities
(Harrison 2005; Montana & Charnov 2000; Garavan, et al., 1995):
1. Training: This activity is both focused upon, and evaluated against, the job that
an individual currently holds.
2. Education: This activity focuses upon the jobs that an individual may potentially
hold in the future, and is evaluated against those jobs.
3. Development: This activity focuses upon the activities that the organization
employing the individual, or that the individual is part of, may partake in the
future, and is almost impossible to evaluate.


Training and development is an integrated activity for the people and by the people of
organizations. Many a times there is confusion related to the roles associated with
training and development and identifying the stakeholders who may impact training or
who may have an impact or get affected by training and development activities.
According to Torrington, Hall and Taylor (2004) the "stakeholders" in training and 121
Training and Development
development are categorized into several classes. They are understood as following;
a) Sponsors: The sponsors of training and development are senior managers.
b) Clients: The clients of training and development are business planners. Line
managers are responsible for coaching, resources, and performance.
c) Participants: The participants are those who actually undergo the processes.
d) Facilitators: The facilitators are Human Resource Management staff.
e) Providers: The providers are specialists in the field. Each of these groups has its
own agenda and motivations, which sometimes conflict with the agendas and
motivations of the others.
The conflicts with perhaps the most devastating career consequences are those that
take place between employees and their bosses. The number one reason people leave
their jobs is conflict with their bosses. And yet, as author, workplace relationship
authority, and executive coach, Dr. John Hoover points out, "Tempting as it is, nobody
ever enhanced his or her career by making the boss look stupid." Training an
employee to get along well with authority and with people who entertain diverse
points of view is one of the best guarantees of long-term success. Talent, knowledge,
and skill alone won't compensate for a sour relationship with a superior, peer, or


Training cannot be imparted unless organizations function as learning organization.
According to following management professionals, "Learning Company is an
organization that facilitates the learning of all its members and continually transforms
itself" (Pedler, Burgoyne & Boydell, 1991). "The essence of organizational learning is
the organization's ability to use the amazing mental capacity of all its members to
create the kind of processes that will improve its own"(Dixon 1994). "Organizations
where people continually expand their capacity to create the results they truly desire,
where new and expansive patterns of thinking are nurtured, where collective
aspiration is set free, and where people are continually learning to learn together"
Learning organizations are those that have in place systems, mechanisms and
processes, that are used to continually enhance their capabilities and those who work
with it or for it, to achieve sustainable objectives – for themselves and the
communities in which they participate.
The important points to note about this definition are that learning organizations:
z Are adaptive to their external environment
z Continually enhance their capability to change/adapt
z Develop collective as well as individual learning
z Use the results of learning to achieve better results.
A learning organization is one in which people at all levels, individually and
collectively are continually increasing their capacity to produce results they really care
about. A learning organization is an ideal state, a vision. Becoming a learning
organization requires a cultural change for most organizations. To be successful
agencies should work with all staff members to:
1. Create and communicate a shared vision for the organization.
2. Make information in the organization accessible to all.
122 3. Help employees manage change and creating the type of change desired by the
Essentials of HRM
4. Empower employees to act.
5. Acknowledge and support the need to take risks.
6. Learn to manage the organization’s knowledge by:
(a) Keeping information current
(b) Maintaing historical knowledge
(c) Addressing increasing volumes of information.
Members of the organization need to promote a learning culture to meet the challenges
faced by agencies because successful implementation of training can only happen if
organization has the culture that encourages learning. Promoting a Learning
Organization culture is really required because organizations are facing so many
challenges during their life cycle. Following are some of the challenges faced by
1. Rapid Change: Change in the workplace is occurring rapidly. Agencies are being
forced to quickly adapt work processes. In a Learning Organization, change is
seen as an opportunity to learn through problem solving.
2. Shifting Focus: Business agencies are changing their focus from a role of
ensuring compliance to one of serving customers. A Learning Organization can
ensure that there is a strategic alignment between customer needs, organizational
goals, individual learning, and resource allocations.
3. Eroding Knowledge Bases: The recent attrition of employees, reductions-in-force,
and expected retirements are eroding the organizational knowledge bases. A
Learning Organization fosters information exchange and captures expertise from
all levels of personnel. And, technology is leverage to support information
4. Limited Training Resources: Training budgets are shrinking while staff members
have less time to attend formal training sessions. A Learning Organization can
make use of alternative strategies that integrate learning into the workplace. These
alternative methods cost less and are effective.
5. Evolving Roles of Supervisors: Supervisors are assuming increasing
responsibility for traditional human resource functions. In a Learning
Organization, managers serve as teachers and each individual is empowered to be
responsible for his or her own learning.


Training is important for industry as every organization needs well experienced and
skilled people to carry out their activities. Since organizations are becoming more
complex the importance for training and educating employees are all the more high.
Some of the reasons are listed below:
1. Technological advances: Business environment is changing rapidly because of
the fast pace change in technology. Today, even a small company has its
processes automated resulting into demand for skilled manpower. It is thus
important for the employees to upgrade their technical proficiency and adapt to
the new processes and techniques relevant to their profession.
2. Organizational complexity: Organizations require coordination and integration of
activities at various levels. Though technological advances may provide a support
to deal with the complexity of organizations, especially the advancement in
communication systems, Information technology, still it requires training and 123
Training and Development
retraining their manpower to adapt to the complex system. Unfamiliar situations in
the organization require coordination of efforts from diverse background.
Operations research and other newly emerging disciplines have developed a
variety of new, mathematically sophisticated techniques to attack such complex
organizational problems as inventory control, scheduling and transportation
coordination. However many of these techniques require an understanding of
mathematics and calculus which managers might not be possessing. For such
activities it becomes mandatory to go for training in related field.
3. Organizational tenure: Employees serving in the organization are expected to
perform well not only in present but also in future. Their total organizational
tenure is dependent on their potential to perform well. Organizations make
investment in management development programmes to provide a ladder to the
career of the employees in the organization and have a successful outcome.
4. Human relations movement: Human relations movement has led to the
realization that employees work in the organization not just to fulfill their lower
order needs related to monetary benefits and security but also to fulfill the needs
of recognition, socialization and self actualization. They would like to work for
the organizations which provide them interesting and challenging job rather than
dull and monotonous job. As dull job bring inefficiency, management has to look
for innovative ways to make job interesting and this requires continuous efforts of
making job attractive. And the same time employees handling job should also be
ready to change and have required skill set. Training and development of
employees at all the levels becomes necessary to make it happen.


This Figure 10.1 outlines important steps in a typical training process.

Organizational objectives
and strategies

Assessment of training needs

Establishment of training

Devising training programme

Implementation of training

Evaluation of results

Figure 10.1: The Training Process

124 10.7.1 Organizational Objectives and Strategies
Essentials of HRM
The first step in the training process in an organization is the assessment of its
objectives and strategies. What business are we in? At what level of quality do we
wish to provide this product or service? Where do we want to be in the future? It is
only after answering these and other related questions that the organization must
assess the strength and weakness of its human resource.

10.7.2 Needs Assessment

Needs assessment diagnoses present problems and future challenges to be met through
training and development. Organizations spend vast sums of money (usually as a
percentage or turnover) on training and development. Before committing such huge
resources, organizations would do well to assess the training needs of their employees.
Organizations that implement training programmes without conducting needs
assessment may be making errors. For example, a needs assessment might reveal that
less costly interventions (e.g. selection, compensation package, and job redesign)
could be used in lieu of training.

Conducting Training Needs Assessment – Levels of Analysis

HR department should be ready to assess the needs of training. They should identify
what kinds of training are required, who needs training, what are different methods to
deliver training etc. Need assessment is generally done at three levels:
(a) Organizational analysis: Need assessment at organizational level is concerned
with identifying the broad forces like examination of environment, resources and
strategies that can influence the working of the system. For example, increased
terrorism across globe has influenced the security systems various public and
private enterprises. Such kind of environmental problem may require training of
security personnel. Merger and acquisitions, corporate restructuring require
employees to take up new roles and adaptation to new culture, strategies which
may be done through training.
(b) Task analysis: Task analysis requires detailed study of task content. Reviewing
job description and specifications to identify activities performed in a particular
task. Once all the activities to carry out the job are listed down, second step is to
identify the type of performance, skill and knowledge required to carry those
activities. Along with task analysis the methods suited to carryout the job are also
(c) Personal analysis: Person analysis helps in determining the specific individuals
who need training and who do not. It helps in identifying the correct person
sending for training. An individual obviously needs training when his or her
performance falls short or standards i.e. when there is performance deficiency.
Inadequacy in performance may be due to lack of skill or knowledge or any other
problem. The problem of performance deficiency caused by absence of skills or
knowledge can be remedied by training. Faulty selection, poor job design,
uninspiring supervision or some personal problem may also result in poor
performance. Transfer, job redesign, improving quality of supervision, or
discharge will solve the problem. Figure 10.2 illustrates the assessment of
individual training needs and remedial measures. It also helps in career
development of employees.
Training and Development

Lack of skill or
Other causes

Training Non-training

Figure 10.2: Needs Assessment and Remedial Measures

Assessment of training needs must also focus on anticipated skills of an employee
Technology changes fast and new technology demands new skills. It is necessary that
the employee be trained to acquire new skills. This will help him to progress in his or
her career path. Training and development is essential to prepare the employee to
handle more challenging tasks. Deputation to a part-time MBA programme is ideal to
train and develop such employees.
Individuals may also require new skills because of possible job transfers. Although job
transfers are common as organizational personnel demands vary, they do not
necessarily require elaborate training efforts. Employees commonly require only an
orientation to new facilities and jobs. Recently, however, economic forces have
necessitated significant retraining efforts in order to assure continued employment for
many individuals. Jobs have disappeared as technology, foreign competition, and the
force of supply and demand are changing the face of our industry.

Assessment of Training needs must also Focus on Anticipated Skills of an

Assessment of training needs occurs at the group level too. Any change in the
organization’s strategy necessitates training of groups of employees. For example,
when the organization decides to introduce a new line of products, sales personnel and
production workers have to be trained to produce, sell and service the new products.
Training can also be used when high scrap or accident rates, low morale and
motivation, or other problems are diagnosed. Although, training is not a cure-all, such
undesirable happenings reflect poorly trained workforce.

Needs Assessment Methods

How are training needs assessed? Several methods are available for the purpose, as
shown in Table 10.1, some are useful for organizational level needs assessment and
others for individual needs assessment.
Table 10.1: Methods used in Training Needs Assessment
Group or Organizational Analysis Individual Analysis
Organisational goals and objectives Performance appraisal
Personnel/skills inventories Work sampling
Organisational climate indices Interviews
Efficiency indices Questionnaire
Exit interviews Attitude survey

126 MBO or work planning systems Training progress
Essentials of HRM
Quality circles Rating scales
Customer survey/satisfaction data Observation of behaviour
Consideration of current and projected changes

Benefits of Needs Assessment

As was pointed above, needs assessment helps diagnose the causes of performance
deficiency in employees. Causes require remedial actions. This being a generalized
statement, there are certain specific benefits of needs assessment. They are:
1. Trainers may be informed about the broader needs of the training group and their
sponsoring organizations.
2. The sponsoring organizations are able to reduce the perception gap between the
participant and his or her boss about their needs and expectations from the training
3. Trainers are able to pitch their course inputs closer to the specific needs of the

10.7.3 Training and Development Objectives

Once training needs are assessed, training and development goals must be established.
Without clearly set goals, it is not possible to design a training and development
programme and, after it has been implemented, there will be no way of measuring its
effectiveness. Goals must be tangible, verifiable and measurable.

10.7.4 Designing Training and Development Program

Every training and development program must address certain vital issues:
i) Who participates in the program?
ii) Who are the trainers?
iii) What methods and techniques are to be used for training?
iv) What should be the level of training?
v) What learning principles are needed?
vi) Where is the program conducted?

Who are the Trainees?

Trainees should be selected on the basis of self nomination, recommendations of
supervisors or by the human resource department itself. Whatever the basis, it is
advisable to have two or more target audiences. For example, rank – and – file
employees and their supervisors may effectively learn together about a new work
process and their respective roles. Bringing several target audience together can also
facilitate group processes such as problem solving and decision making, elements
useful in quality circle projects.

Who are the Trainers?

Training and development programs may be conducted by several people, including
the following:
z Immediate supervisors
z Co-workers, as in buddy systems
z Members of the personnel staff 127
Training and Development
z Specialists in other parts of the company
z Outside consultants
z Industry associations
z Faculty members at universities
Which of these people selected to teach, often depends on where the program is held
and the skill that is being taught. For example, programs teaching basic skills are
usually done by the members of the human resource department or specialists in other
departments of the company. On the other hand, interpersonal and conceptual skills
for managers are taught at universities. Large organizations generally maintain their
own training departments whose staff conducts the programs. In addition, many
organizations arrange basic skill training for computer literacy.

Methods and Techniques of Training

A multitude of methods of training are used to train employees. The most commonly
used methods. The various training methods and presents a summary of the most
frequent uses to which these methods are put.
As can be seen from the table below, training methods are categorized into two
groups: on-the job and off-the-job methods. On-the-job methods refer to methods that
are applied in the workplace, while the employee is actually working. Off-the-job
methods are used away from workplaces.
Training techniques represent the medium of imparting skills and knowledge to
employees. Obviously, training techniques are the means employed in the training
methods. A wide variety of methods are employed to train employees at various
levels. Some methods are specifically used for non managerial employees where as
other are used especially for management development. Among the most commonly
used techniques are lectures, films, audio cassettes, case studies, role playing, video
tapes and simulations.
Some of these techniques are discussed here.

Lecture is a verbal presentation of information by an instructor to a large audience.
The lecturer is presumed to possess a considerable depth of knowledge of the subject
at hand. A virtue of this method is that it can be used for very large groups, and hence
the cost per trainee is low. Lecture method is mainly used in colleges and universities,
though its application is restricted in training factory employees.
Limitations of the lecture method account for its low popularity. The method violates
the principle of learning by practice. If constitutes a one way communication. There is
no feedback from the audience. Continued lecturing is likely to bore the audience. To
break the boredom, the lecturer often resorts to anecdotes, jokes and other attention –
getters. This activity may eventually overshadow the real purpose of instruction.
However, lecture method can be made effective if it is combined with other methods
of training.

Audio Visuals
Audio visuals include television slides, overheads, video tapes and films. These can be
used to provide wide range of realistic examples of job conditions and situations in the
condensed period of time. Further, the quality of the presentation can be controlled
128 and will remain equal for all training groups. But, audio-visuals constitute a one-way
Essentials of HRM
system of communication with no scope for the audience to audience.

On-the-job Training (OJT)

To acquire knowledge and skills through actual practice and experience, ‘on the job’
experiences provides mangers an opportunity to lean under pressure and learn from
mistakes. Majority of industrial training is of the OJT type. OJT is conducted at the
work site and in the context of the job. Often, it is informal, as when an experienced
worker shows a trainee how to perform the job tasks.
OJT has advantages. It is the most effective method as the trainee learns by
experience, making him highly competent. Further, the method is least expensive
since no formal training is organized. The trainee is highly motivated to learn since he
or she is aware of the fact that his or her success on the job depends on the training
received. Finally, the training is free from artificial situation of a classroom. This
contributes to the effectiveness of the program.
OJT suffers from certain demerits as well. The experienced employee may lack
expertise or inclination to train the juniors. The training program itself is not
systematically organized. In addition, a poorly conducted OJIT program is likely to
create safety hazards, result in damaged products or materials, and bring unnecessary
stress on the trainees.

Programmed Instruction
This is a method where training is offered without the intervention of a trainer.
Information is provided to the trainee in blocks, either in book from or through a
teaching machine. After reading each block of material, the learner must answer a
question about it. Feedback in the form of correct answers is provided after each
response. Thus, Programmed Instruction (PI) involves:
i) Presenting questions, facts, or problems to the learner
ii) Allowing the person to respond
iii) Providing feedback on the accuracy of his or other answers
iv) If the answers are correct, the learner proceeds to the next block. If not, he or she
repeats the same.
The main advantage of PI is that it is self-paced; trainees can progress through the
program at their own speed. Strong motivation is provided to the learner to repeat
learning. Material is also structured and self-contained, offering much scope for
The disadvantages are not to be ignored. The scope for learning is less, compared to
other methods of training. Cost of preparing books, manuals and machinery is
considerably high.

Computer Assisted Instruction (CAI)

This is an extension of programmed instruction. The speed, memory and data
manipulation capabilities of the computer permit greater utilization of basic PI
concepts. For example, the learner’s response may determine the frequency and
difficulty level of the next frame.
CAI is an improved system when compared to the programmed instruction, in at least
three respects. First, CAI provides for accountability as tests are taken on the
computer so that the management can monitor each trainee’s progress and needs.
Second, a CAI training program can also be modified easily to reflect technological
innovations in the equipment for which the employee is being trained. Third, this 129
Training and Development
training also tends to be more flexible in that trainees can usually use the computer
almost any time they want, and thus get training when they prefer. Not to be ignored is
the fact that feedback from CAI is as rich and colorful as modern electronic games,
complete with audio and visual displays. A deterrent with regard to CAI is its high
cost, but repeated use may justify the cost.

A simulator is any kind of equipment or technique that duplicates as nearly as possible
the actual conditions encountered on the job. Simulation then, is an attempt to create a
realistic decision-making environment for the trainee. Simulations present likely
problem situations and decision alternatives to the trainee. For example, activities of
an organization may be simulated and the trainee asked to make a decision in support
to those activities. The results of those decisions are reported back to the trainee with
an explanation of what would have happened had they actually been made in the
workplace. The trainee learns from this feedback and improves his subsequent
simulation and workplace decisions.(Source: K. Ashwathappa, in Human Resource Management)

Training Methods for Management Development

z Seminars and Conferences: Similar to class room instruction seminars and
conferences bring lot of people together to discuss diverse ideas. They use it as a
platform for discussion related to problems, challenges faced by management and
z Case Study: Case study is a written description of an actual situation in business
which provokes in the reader the need to decide what is going on, what the
situation really is or what the problems are and what can and should be done.
Taken from the actual experiences of organizations, these cases represent attempts
to describe as accurately as possible, real problems that managers have faced.
Trainees study the cases to determine problems, analyze causes, develop
alternative solutions select the best one, and implement it. Case study can provide
stimulating discussions among participants, as well as excellent opportunities for
individuals to defend their analytical and judgmental abilities. It appears to be an
ideal method to promote decision – making abilities within the constraints of the
limited data.
z Role Playing: It generally focuses on emotional (mainly human relations) issues
rather than actual ones. The essence of role playing is to create a realistic
situation, as in the case study, and then have the trainees assume the parts of
specific personalities in the situations. For example, a male worker may assume
the role of a male worker. Then both may be given a typical work situation and
asked to respond as they expect others to do. The consequence is a better
understanding among individuals. Role playing helps promote interpersonal
relations. Attitude change is another result of role playing. Case study and role
playing are used in management development programs.
z Management Games: They are now widely used as a tool for development. It
makes training interesting where players are faced with the task of making a series
of decisions affecting hypothetical organization. The effect that every decision has
on each area is simulated with a computer programmed for the game. It requires
high participation. Games can be designed for general use as well as can be
adapted to specific requirement from the industry.
z Sensitivity Training: Sensitivity training uses small numbers of trainees, usually
fewer than 12 in a group. They meet with a passive trainer and gain insight into
their own and others behavior. Meetings have no agenda, are held away from
130 workplaces and questions deal with the “here and now” of the group process.
Essentials of HRM
Discussions focus on “why participants behave as they do, and how they perceive
one another, and the feelings and emotions generated in the interaction process”.
The objectives of sensitivity training are to provide the participants with increased
awareness of their own behavior and how others perceive them; greater sensitivity
to the behavior of others, and increased understanding of group processes.
Specific results sought include increased ability to empathize with others,
improved listening skills, greater openness, increased tolerance of individual
differences and increased conflict resolution skills. The drawback of this method
is that once the training is over the participants are themselves again and they
resort to their old habits.
Sensitivity training can go by a variety of names – laboratory training, encounter
groups, or T-group (training groups).

Learning Principles in Training

Training and development programme are more likely to be effective when they
incorporate the following principles of learning:
z Employee motivation
z Recognition of individuals differences
z Practice opportunities
z Reinforcement
z Knowledge of results (feedback)
z Goals
z Schedules of learning
z Meaningfulness of material
z Transfer of learning.
Motivation to learn is the basic requisite to make training and development program
effective. Motivation comes from awareness that training fetches some rise in status
and pay. Motivation alone is not enough. The individual must have the ability to learn.
Ability varies from individual to individual and this difference must be considered
while organizing training programs.
Regardless of individual differences and whether a trainee is learning a new skill or
acquiring knowledge of a given topic, the trainee should be given the opportunity to
practice what is being taught. Practice is also essential after the individual has been
successfully trained. It is almost impossible to find a professional cricket player who
does not practice for several hours a day. Practice can be a form of positive
Reinforcement may be understood as anything that both increases the strength of
response and tends to induce repetitions of the behavior that preceded the
reinforcement. Distinction may be made between positive reinforcement and negative
reinforcement. Positive reinforcement strengthens and increases behavior by the
presentation of desirable consequences. The reinforcement (event) consists of a
positive experience for the individual. In more general terms, we often say that
positive reinforcement consists of reward for the individual and, when presented the
contingent upon behavior tends to increase the probability that the behavior will be
repeated. For example, if an employee does something well and is complimented for it
by the boss, the probability that the behavior will be repeated will strengthen.
In negative reinforcement, the individual exhibits the desired behavior to avoid 131
Training and Development
something unpleasant. An example might be an employee who does something to
avoid incurring a reprimand from his or her boss. If an employee who had the habit of
coming late to work, assuming this as unpleasant experience, the employee might
begin to come on time to avoid criticism. Thus, the effect of negative reinforcement is
avoidance is avoidance of learning.
Knowledge of results is a necessary condition for learning. Feedback about the
performance will enable the learner to know where he or she stands and to initiate
corrective action if any deviation from the expected goal has taken place. There are
certain tasks for which such feedback is virtually mandatory for learning. A crane
operator, for example, would have trouble learning to manipulate the controls without
knowing how the crane responds to control actions.
Goal setting can also accelerate learning, particularly when it is accompanied by
knowledge of results. Individuals generally perform better and learn more quickly
when they have goals, particularly if the goals are specific and reasonably difficult.
Goals that are too difficult or too easy have little motivational value. Further, goals
will have better motivational value if the employee has scope for participation in the
goal-setting process.
Probably one of the most well established principles of learning is that distributed or
spaced learning is superior to continuous learning. This is true for both simple
laboratory tasks and for highly complex tasks.
Schedules of learning involve
i) Duration of practice sessions
ii) Duration of rest sessions and
iii) Positioning of rest pauses.
All the three must be carefully planned and executed.
A definite relationship has been established between learning and meaningfulness of
the subject learnt. The more meaningful the material, the better the learning process.
What is learnt in training must be transferred to the job. The traditional approach to
transfer has been to maximize the identical elements between the training situation
and the actual job. This may be possible for training skills such maintaining a cash
register, but not for teaching leadership or conceptual skills. Often what is learned in a
training session faces resistance back at the job. Techniques for overcoming resistance
include creating positive expectations on the part of trainee’s supervisor, creating
opportunities to implement new behavior on the job, and ensuring that the behavior is
reinforced when it occurs. Commitment from the top management to the training
program also helps in overcoming resistance to change.
Though, it is desirable that a training and development program incorporates all these
principles, seldom is such a combination effected in practice. (Source: K. Aswathappa, Human
Resource Management)

Conduct of Training
A final consideration is where the training and development program is to be
conducted. Actually, the decision comes down to the following choices:
z At the job itself.
z On site but not on the job – for example, in a training room in the company.
132 z Off the site, such as in a university or college classroom, hotel or conference
Essentials of HRM
Typically, basic skills are taught at the job, and basic grammar skills are taught on the
site. Much of interpersonal and conceptual skills are learnt off the site.

10.7.5 Implementation of the Training Program

Once the training program has been designed, it needs to be implemented.
Implemented is a beset with certain problems. In the first place, most managers are
action-oriented and frequently say they are too busy to engage in training efforts.
Secondly, availability of trainers is a problem. In addition to possessing
communication skills, the trainers must know the company’s philosophy, its
objectives it’s formal and informal organization and the goals of the training program.
Training and development requires a higher degree of creativity than, perhaps, any
other personnel specialty.
Scheduling training around present work is another problem. How to schedule training
without disrupting the regular work? There is also the problem of record keeping
about the performance of a trainee during his or her training period. This information
may be useful to evaluate the progress of the trainee in the company.
Program implementation involves action on the following lines:
z Deciding the location and organizing training and other facilities
z Scheduling the training program
z Conducting the program
z Monitoring the progress of trainees.
Training is quite astounding task, which require efforts from various departments in
the organization. Total responsibility for training has to be shared among:
1. The top management who should identify the authorities to frame the basic
training policies, approve the broad outlines of training plans and program and
approve training budgets.
2. The personnel department, which should plan, establish and evaluate instructional
3. The supervisor who should implement and supply the various development plans.
4. Employees who should provide feedback, revision and suggestion for
improvement in the program.

10.7.6 Evaluation of Training Program

Training like any other HRM function should be evaluated to determine its
effectiveness. Evaluation includes getting ongoing feedback, e.g., from the learner,
trainer and learner's supervisor, to improve the quality of the training and identify if
the learner achieved the goals of the training.
There are four basic criteria to evaluate training, also known as ‘Kirkpatrik’s Model of
Training Evaluation.’ The most well-known and used model for measuring the
effectiveness of training programs was developed by Donald Kirkpatrick in the late
1950s. It has since been adapted and modified by a number of writers; however, the
basic structure has well stood the test of time. The basic structure of Kirkpatrick’s
four-level model is shown here.
Kirkpatrick Model for Evaluating Effectiveness of Training Programs 133
Training and Development
Table 10.2: Levels of Kirkpatrick’s Model

Level 4 - Results What organizational benefits resulted from the training?

To what extent did participants change their behavior back in

Level 3 - Behavior
the workplace as a result of the training?

To what extent did participants improve knowledge and skills

Level 2 - Learning
and change attitudes as a result of the training?

Level 1 - Reaction How did participants react to the program?

1. Reactions: The first level includes participants reaction related to training. What
does the learner feel about the training? Happy trainees will be more likely to
want to focus on training principles to utilize the information on the job.
2. Learning: Apart from what participants think about training, it should be checked
whether they actually learned. What facts, knowledge, etc., did the learner gain?
3. Behaviors: What is learned in a training program never gets used back on the job.
It’s not that the training was ineffective rather the reason could be transfer of
training did not happen. Transfer of training refers to the effective application of
principles learned to what is required to do on the job. The issue of concern in
evaluating behavior is; what skills did the learner develop, that is, what new
information is the learner using on the job?
4. Results or Return on Investment (ROI): Training managers are under pressure to
show that their program produces “bottom line” results. They measure ROI. A
company’s ROI refers to the benefits derived from training relative to cost
incurred. HR managers need to calculate and present these benefits to top
management. The benefits include higher revenues generated, increased
productivity, lower costs, customer satisfaction, job satisfaction, lower employee
turnover. The questions raised are, How much did quality improve because of
training? What results occurred, that is, did the learner apply the new skills to the
necessary tasks in the organization and, if so, what results were achieved? How
much it contributed to profit? How much productivity has improved and how
much has reduced?
Although level 4, evaluating results and effectiveness, is the most desired result from
training, it's usually the most difficult to accomplish. Evaluating effectiveness often
involves the use of key performance measures – measures you can see, e.g., faster and
more reliable output from the machine after the operator has been trained, higher
ratings on employees' job satisfaction questionnaires from the trained supervisor, etc.
This is where following sound principles of performance management are of great

The process of benchmarking developmental services and practices against those of
recognized leaders in the industry is another important activity linked to ROI. While
134 there is no single exact model of benchmarking, Edwards Deming’s classic four step
Essentials of HRM
process is advocated to carry out benchmarking process. These four step process are:
1. Plan: Conduct self audit to define internal process and measurement; decides on
areas to be benchmarked and choose the compression anchor.
2. Do: Collect data through surveys, interviews, site visits, and historical records.
3. Check: Analyze the deal to find performance gaps and communicate finding with
suggestion for improvements.
4. Act: Establish goals, implement changes, monitor performance and redefine
benchmarks as continuous process.


After going through the understanding about training process, methods and evaluation
of training program there are certain other relevant issues which need our focus. These
issues have emerged because of globalization and changing nature of business
organizations, hence requiring to provide training in that specific area.

10.8.1 Cross-cultural Training

As globalization changes the way organizations operate and their employees
communicate, it is becoming increasingly common for staff in one country to be
regularly dealing with colleagues, clients or suppliers in another country, over the
telephone, by email, via video-conference, or face-to-face. The lack of cultural
awareness preparation has many levels of impact – from an embarrassing moment to a
breakdown in inter-company communication to a lost deal or accord. The differences
in cultures lead to significant differences in the way people react to a stimulus. The
motivational needs of the managers and executives vary across the cultures. The
motivational factors that work in India may not be relevant in China; hence the
expatriates will need to understand the basic differences in the employee behavior.
The production facilities of firms may be similar across all the subsidiaries but the
employee behavior in these facilities may not remain the same. Misinterpretations and
misconceptions are common when the same situation is viewed differently by people
from different cultures. The basis of inter-cultural relations are not about changing
other people, but adapting oneself to another culture. In India, while earlier the focus
was on training professionals working with software companies on international
assignments, today it is an integral part of BPO culture for those personnel who have
to interact with overseas clients. Cross-cultural training is conducted by many Indian
IT organizations to equip their employees with skills to do business in a global
environment. But there is much more to cross-cultural training than a crash course in
etiquette or learning how to order a five-course meal; it is about a deeper
understanding of the values and ethos that define a culture. However, this starts by
understanding one’s own culture and then graduating to understanding and
appreciating the differences of another.
Cultural training utilizes various tools. Lectures, reading material, video recording
movies are useful for background information, but cultural sensitivity is more often
taught through role playing, simulations and meeting with former international assigns
and natives of countries now living abroad.

10.8.2 Orientation Training

To get new employees off to a good start, organizations generally offer a formal
orientation program. Orientation is the formal process of familiarizing new employees
with the organization, their jobs, and their work units. Most executives, 82 percent in 135
Training and Development
one survey conducted by Robert Half International, believe that formal orientation
programs are effective in helping to retain and motivate employees. These and other
reported benefits include the following:
1. Lower turnover
2. Increased productivity
3. Improved employee morale
4. Lower recruiting and training costs
5. Facilitation of learning
6. Reduction of the new employee’s anxiety.
The more time and effort spent in helping new employees feel welcome, the more
likely they are to identify with the organization and become valuable members of it.
Unlike training, which emphasizes what and the how, orientation often stresses the
why. It is designed to influence employee attitudes about the work they will be doing
and their role in the organization. It defines the philosophy behind the organization’s
rules and provides a framework for job-related tasks. And as plans, policies, and
procedures change in organizations, even current employees need to be kept up to date
and continually reoriented to changing conditions.

10.8.3 Team-training and Cross-training

Organizations rely on teams to attain strategic and operational goals. Whether the
team is an aircrew, a research team or a manufacturing or service unit, the
contributions of the individual members of the team are not only a function of the
KSAs of each individual but of the interaction of the team members.
Coca-Cola’s Fountain Manufacturing Operation (which makes the syrup for Coke and
Diet Coke) developed team training for its manufacturing employees. The program
focused on three skill categories:
1. Technical
2. Interpersonal
3. Team action.
The technical component, called Four-Deep Training, meant that each individual
should learn four different jobs to allow for team flexibility. The interpersonal skills
component, called Adventures in Attitudes, focused on listening, conflict resolution,
influence, and negotiation. Team-action training focused on team leadership,
management of meetings, team roles, group dynamics, and problem solving – all skills
needed to function effectively as a team. The training not only increased quality and
customer satisfaction, but has also helped decrease costs and set up a model for
preparing employees for the future.
Closely related to team training is cross-training. Cross-trained employees learn how
to do different jobs within an organization as well as their own. Part of the motivation
for cross-training is that it gives firms flexible capacity. Workers can be dynamically
shifted when and where they are needed, unlike specialized workers and equipment,
which cannot. Moreover, by keeping workers interested and motivated, cross-training
can cut turnover, increase productivity, pare down labor costs, and lay the foundation
for careers rather than dead-end jobs.
136 10.8.4 Diversity Training
Essentials of HRM
Two out of three U.S. companies have broadened their diversity programs because of
increasing globalization, according to a survey of 1,780 human resources and training
executives by the Boston-based consulting firm Novations/J. Howard & Associations.
Of those that have not done so, most expect to update diversity efforts in the near
Increasingly, diversity training is being combined with other training programs, an
occurrence that some believe represents the “mainstreaming” of diversity with other
strategic issues facing organizations. Honeywell, for example, subsumes diversity
training within a week-long advanced management program and as part of its sales
training programs. General Electric trains mentors and protégés in a program that isn’t
explicitly a diversity initiative but nevertheless clearly helps women and ethnic
Organizations that have been successful with diversity training realize that it is a
long-term process that requires the highest level of skill. Ineffective training in this
area can be damaging and can create more problems than it solves.


The term training refers to the acquisition of knowledge, skills, and competencies as a
result of the teaching of vocational or practical skills and knowledge that relate to
specific useful competencies.
A training program can serve a range of diverse purposes, and organizations initiate
training programs for many different reasons. In broadcasting one of the strongest
motives is the need to respond to challenges presented by new technologies.
Training and development is an integrated activity for the people and by the people of
organizations. Many a times there is confusion related to the roles associated with
training and development and identifying the stakeholders who may impact training or
who may have an impact or get affected by training and development activities.
Training is important for industry as every organization needs well experienced and
skilled people to carry out their activities.
The training process includes six different steps which are integrated effectively to
benefit the employees.
As globalization changes the way organizations operate and their employees
communicate, it is becoming increasingly common for staff in one country to be
regularly dealing with colleagues, clients or suppliers in another country, over the
telephone, by email, via video-conference, or face-to-face.
To get new employees off to a good start, organizations generally offer a formal
orientation program. Orientation is the formal process of familiarizing new employees
with the organization, their jobs, and their work units.
Organizations that have been successful with diversity training realize that it is a long-
term process that requires the highest level of skill. Ineffective training in this area can
be damaging and can create more problems than it solves.

Training: It refers to the acquisition of knowledge, skills, and competencies as a result
of the teaching of vocational or practical skills and knowledge that relate to specific
useful competencies.
Education: This activity focuses upon the jobs that an individual may potentially hold 137
Training and Development
in the future, and is evaluated against those jobs.
Development: This activity focuses upon the activities that the organization
employing the individual, or that the individual is part of, may partake in the future,
and is almost impossible to evaluate.
Learning Organizations: These are those that have in place systems, mechanisms and
processes, that are used to continually enhance their capabilities and those who work
with it or for it, to achieve sustainable objectives – for themselves and the
communities in which they participate.
Person Analysis: It helps in determining the specific individuals who need training
and who do not.
Simulator: It is any kind of equipment or technique that duplicates as nearly as
possible the actual conditions encountered on the job.
Orientation: It is the formal process of familiarizing new employees with the
organization, their jobs, and their work units.


Fill in the blanks:
1. Objectives of training are more……………than those of education.
2. The ……………are specialists who take in training and development process.
3. Training can be successful only in those organisations that have a culture that
fosters …………………
4. …………………helps to identify the correct persons who require training.
5. Most of the industrial training is ……………….
6. In………………method, the trainees are given problem situations and decision
7. In……………………, the trainees attempt for a detail analysis of his won and
fellow trainee’s behavior.
8. ……………………means that each individual should learn four different jobs to
allow for team flexibility.


1. Define training and discuss its importance.
2. How training needs are identified in the organization?
3. Explain the concept of learning organization.
4. What do you mean by need analysis and how is it done?
5. What are the ways of evaluation of a training program?
6. What are the methods of executive training?
7. What are the principles of learning?
8. Discuss the importance of team training and cross-cultural training in modern
Essentials of HRM 10.13 SUGGESTED READINGS
Aswathappa K, Human Resource Management – Text and Cases, Tata McGraw Hill.
Decenzo & Robbins, Human Resource Management, John Wiley & Sons Inc.
Snell & Bohlander, Human Resource Management, Cengage Learning.
LESSON Compensation and Rewards


11.0 Aims and Objectives
11.1 Introduction
11.2 Compensation: Overview
11.3 Need for a Compensation Management System
11.4 Job Evaluation Technique
11.5 Components of Compensation System
11.6 Use of a Compensation Plan
11.7 Compensation Equity
11.8 Challenges of a Compensation and Benefits Strategy
11.9 Industry’s Compensation (Micro-level)
11.10 International Compensation
11.11 Fringe Benefit Tax
11.11.1 Reasons for Introducing Fringe Benefit Tax
11.11.2 What is Fringe Benefit Tax?
11.12 Compensation Survey
11.13 Motivation and Reward Management
11.14 Goals and Objectives of Rewarding
11.15 Rewards System
11.16 Forms of Recognition
11.17 Let us Sum up
11.18 Keywords
11.19 Self Assessment
11.20 Review Questions
11.21 Suggested Readings


After studying this lesson, you should be able to:
z Analyse the need and uses of a compensation plan
z Enumerate the components of compensation plan
z Analyse industry and international compensation
140 z Learn the concept of fringe benefit taxation
Essentials of HRM
z Analyse the concept of reward management

Human Resource is the most vital resource for any organization. It is responsible for
each and every decision taken, each and every work done and each and every result.
Employees should be managed properly and motivated by providing best
remuneration and compensation as per the industry standards. The lucrative
compensation will also serve the need for attracting and retaining the best employees.
Compensation is the remuneration received by an employee in return for his/her
contribution to the organization. It is an organized practice that involves balancing the
work-employee relation by providing monetary and non-monetary benefits to
Compensation is an integral part of human resource management which helps in
motivating the employees and improving organizational effectiveness.
Employee motivation is the psychological feature that arouses an employee to behave
in a certain manner for accomplishing certain organizational goals. It is imperative for
the organization to enhance motivation level of the employees in order to bring out the
best in them. Reward system management is the framework that envisions formulation
of different types of reward systems to boost the motivation employees. Often new
businesses require a different approach and therefore a different reward system.


Compensation is the process of directly and indirectly rewarding employees on a
current or deferred basis, for their performance of assigned tasks. It consists of:
z Direct Financial Compensation: Wages, salaries, bonuses, commissions
z Indirect Financial Compensation: All financial rewards not included in direct
compensation (benefits)
z Non-financial Compensation: Satisfaction received from the job or from the
psychological and/or physical environment of the job.

Nature of Job Performance

Seniority Competencies



Cost of Living Company Success

Figure 11.1: Factors that Affect Individual Compensation

11.3 NEED FOR A COMPENSATION MANAGEMENT Compensation and Rewards
A good compensation plan is always needed by organisations because of the following
z A good compensation package is important to motivate the employees to increase
the organizational productivity.
z Unless compensation is provided no one will work for the organization. Thus,
compensation helps in running an organization effectively and accomplishing its
z Salary is just a part of the compensation system, the employees have other
psychological and self-actualization needs to fulfill. Thus, compensation serves
the purpose.
z The most competitive compensation will help the organization to attract and
sustain the best talent. The compensation package should be as per industry
The fair compensation system will help in the following:
z An ideal compensation system will have positive impact on the efficiency and
results produced by employees. It will encourage the employees to perform better
and achieve the standards fixed.
z It will enhance the process of job evaluation. It will also help in setting up an ideal
job evaluation and the set standards would be more realistic and achievable.
z Such a system should be well defined and uniform. It will be apply to all the
levels of the organization as a general system.
z The system should be simple and flexible so that every employee would be able to
compute his own compensation receivable.


Job evaluation is a method used to describe, analyse, compare and evaluate jobs
within a unit, branch or an industry on the basis of the work content and the job
requirements in order to place them under a particular wage of salary grad.
The general step-wise procedure for job evaluation is as under:
1. Select the group of jobs
2. Study the job (job analysis)
3. Prepare job description – approval
4. Device an evaluation plan – common characteristics/traits
5. Establish a committee of raters and rate/evaluate
6. Group or classify the jobs
7. Convert job grades to money value along with Wage survey
8. Obtain approval from Union and Management
9. Establish a suitable grievance procedure
This evaluation technique is one of the most prevalent methods of establishing base
pay. They also play an important role in the administration of compensation.
Compensation systems are designed keeping in minds the strategic goals and business
objectives. Compensation system is designed on the basis of certain factors after
analyzing the job work and responsibilities. Components of a compensation system
are as follows:
1. Basic Wages/Salaries: These refer to the cash component of the wage structure
based on which other elements of compensation may be structured. It is normally
a fixed amount which is subject to changes based on annual increments or subject
to periodical pay hikes. It is structured based on the position of an individual in
the organization and differs from grades to grades.
2. Dearness Allowance: The payment of dearness allowance facilitates employees
and workers to face the price increase or inflation of prices of goods and services
consumed by him. The onslaught of price increase has a major bearing on the
living conditions of the labour. The payment of dearness allowance, which may be
a fixed percentage on the basic wage, enables the employees to face the increasing
3. Bonus: The bonus can be paid in different ways. It can be fixed percentage on the
basic wage paid annually or in proportion to the profitability. The Government
also prescribes a minimum statutory bonus for all employees and workers.
There is also a bonus plan which compensates the Managers and employees based
on the sales revenue or Profit margin achieved. Bonus plans can also be based on
piece wages but depends upon the productivity of labour.
4. Commissions: Commission to Managers and employees may be based on the
sales revenue or profits of the company. It is always a fixed percentage on the
target achieved. For taxation purposes, commission is again a taxable component
of compensation.
The payment of commission as a component of commission is practised heavily
on target based sales. Depending upon the targets achieved, companies may pay a
commission on a monthly or periodical basis.
5. Mixed Plans: Companies may also pay employees and others a combination of
pay as well as commissions. This plan is called combination or mixed plan. Apart
from the salaries paid, the employees may be eligible for a fixed percentage of
commission upon achievement of fixed target of sales or profits or performance
Now-a-days, most of the corporate sectors follow this practice. This is also termed
as variable component of compensation.
6. Piece Rate Wages: Piece rate wages are prevalent in the manufacturing wages.
The laborers are paid wages for each of the quantity produced by them. The gross
earnings of the labour would be equivalent to number of goods produced by them.
Piece rate wages improves productivity and is an absolute measurement of
productivity to wage structure. The fairness of compensation is totally based on
the productivity and not by other qualitative factors.
The GANTT productivity planning and Taylor's plan of wages are examples of
piece rate wages and the related consequences.
7. Sign on Bonuses: The latest trend in the compensation planning is the lump sum
bonus for the incoming employee. An employee, who accepts the offer, is paid a
lump sum as a bonus.
Even though this practice is not prevalent in most of the industries, Equity 143
Compensation and Rewards
research and investment banking companies are paying this to attract the scarce
8. Profit Sharing Payments: Profit sharing is again a novel concept now-a-days.
This can be paid through payment of cash or through ESOPS. The structuring of
wages may be done in such a way that, it attracts competitiveness and improved
Profit sharing can also be in the form of deferred compensation at the time of
retirement. At the time of retirement the employees may be paid a lump sum or
retiral benefits.
9. Fringe Benefits: The provision of fringe benefits does not attract any explanation.
This includes:
a) Company cars.
b) Paid vacations.
c) Membership of social/cultural clubs.
d) Entertainment tickets/allowances.
e) Discounted travel tickets.
f) Family vacation packages.
10. Reimbursements: Employees, depending upon their gradations in the organization
may get reimbursements based on the Expenses incurred and substantiated.
Certain expenses are also paid based on expenses incurred during the course of
In many cases, employers provide advances to the employees for incurring certain
expenses that are incurred during the course of the business.
Some examples are:
a) Travel expenses.
b) Entertainment expenses
c) Out of pocket expenses
d) Refreshments expenses during office routine outside office premises.


Compensation is used as a tool to:
z Recruit and retain qualified employees.
z Increase or maintain morale/satisfaction.
z Reward and encourage peak performance.
z Achieve internal and external equity.
z Reduce turnover and encourage company loyalty.
z Modify (through negotiations) practices of unions.
Equity refers to the perception that one is being treated fairly. Different types of equity
z External Equity: Employees are paid comparably to those who perform similar
jobs in other terms.
z Internal Equity: Employees are paid according to relative value of their jobs
within an organisation.
z Employee Equity: Individuals performing similar jobs for the same firm are
rewarded according to factors unique to the employee, such as performance level
or seniority.
z Team Equity: More productive teams receive greater rewards than less productive


A compensation plan must consider the following:
z Ensure employees’ livelihood
z Driving performance according to the company’s strategy
z Procedural and distributive equity for employees
z Attraction and retention of talented candidates and employees
z Legal compliances with all appropriate laws and regulations.


Compensation policies need to be evolved in every enterprise taking the following
aspects into consideration, besides due regard to the provisions of public policy; job
evaluation and collective bargaining etc.
1. Attraction and Retention: Usually an enterprise endeavors to recruit and retain
the best people available. One of the ways of attracting and retaining the best and
the brightest is to pay more than what they would get anywhere else for similar
skills and levels. Some firms endeavor to be ‘wage leaders’. This deliberate
corporate strategy may create a situation of ‘wage islands’ which pose problems
from societal point of view.
2. Internal Consistency: Compensation policies should take into account the
differentials in skills, and levels in respect to both, responsibility and authority. A
sense of proportion needs to be maintained to achieve internal consistency so that
wage/salary levels conform to the differences in hierarchy and skills.
3. External Parity: The simplest and most widely used criteria is to consider, what is
generally known as the ‘going rate’ in the labour market for comparable jobs in
the industry/region. For key jobs if the rates are not uniform, inter and
intrasectorally and among industry groups, there may be imbalances in the
distribution of skills and talents.
4. Capacity to Pay: Wherever minimum wage legislation is applicable, enterprises
should pay minimum wages, enterprises pay more depending upon their ability to
5. Pay for Performance: Linking pay to performance is sound and makes good 145
Compensation and Rewards
sense. However, in the organized sector in India, the compensation policies have,
unfortunately, a remote relationship, if ever, between pay and performance.
6. Labour Costs and Productivity: Wages and salaries can be linked to the
productivity and profitability of an enterprise. Growing and profit-earning
enterprises find it easier to pay more than stagnant and loss-incurring enterprises
though it is the latter category which would be most hard pressed to attract and
retain skills.
7. Cost of Living: Dearness Allowance (DA) and City Compensatory Allowance
(CCA) now form an integral part of most wage structures. The general principle
underlying these allowances is to neutralize at least a portion of the increase in the
cost of living. Where these allowances do not form part of the wage structure, ad
hoc and lumpsum increase in pay are unilaterally announced by managements to
partially provide for such neutralization.
8. Merit and Seniority Progression: Merit progression refers to the practice of
rewarding a person according to one’s contribution. Merit progression is usually
based on annual performance appraisal. When the person’s performance is
outstanding or distinctively above average, the organization may like to reward
him with extra (over and above the normal) increment(s). There are, of course,
other less used ways of rewarding merit/superior performance.
9. Motivation: ‘Money may not be everything but everything else may be way
behind’. Company compensation policy can be an effective tool to motivate
people for superior performance.


Objectives of international compensation are:
z Attract and retain employees qualified for service abroad.
z Facilitate transfers between foreign affiliates and between home country and
foreign affiliates.
z Arrange reasonable compensation, in the various locations, in relation to the
practices of leading competitors.
z Compensation for reasonable services, tax equalization and reimb. Of reasonable
z Be cost effective.

Elements of Expatriate Compensation

Basic Pay: Amount of money that an expatriate receives from home country. Used for
Bonus calculation.
z One third of compensation
z Extra vacation, special leaves, air fares for their families for an annual visit home,
emergency leaves
z Housing
z Utilities – air conditioner, bottled water, electricity, telephone, call expenses
z Car – car expenses, chauffeur, hired vehicle
146 z Helping hands: servants, gardeners, security
Essentials of HRM
z Club subscription
z Educational benefits

z COLA – cost of living between home country and foreign country, inflation
z Relocation allowances
z Hardship allowances
z Separation allowances
z Clothing allowances – very cold climates
z Home leave allowances
z Spouse assistance allowances.


Fringe Benefit Tax has been introduced in India recently, but it's not a novel concept.
This tax is already levied in the United States, the United Kingdom, Canada,
Australia, New Zealand, Japan and some other nations.
The fringe benefit tax rules proposed in the Budget by the finance minister are
modeled on the Australian system. With the only difference that fringe benefit tax is
proposed to be taxed at between 10 per cent and 50 per cent in India, whereas in
Australia it is taxed at a flat rate of 60%.

11.11.1 Reasons for Introducing Fringe Benefit Tax

Attribution of the personal benefit poses problems, or for some reasons, it is not
feasible to tax the benefits in the hands of the employee, thereby, it was proposed to
levy a separate tax known as the fringe benefit tax on the employer on the value of
such benefits provided or deemed to have been provided to the employees.
Perquisites which can be directly attributed to the employees will continue to be taxed
in their hands in accordance with the existing provisions of the Income-tax Act and
subject to the method of valuation outlined in the Income-tax Rules.

11.11.2 What is Fringe Benefit Tax?

The taxation of perquisites or fringe benefits provided by an employer to his
employees, in addition to the cash salary or wages paid, is fringe benefit tax.
Any benefits or perks that employees (current or past) get as a result of their
employment are to be taxed, but in this case in the hands of the employer.
This includes employee compensation other than the wages, tips, health insurance, life
insurance and pension plans.
Fringe benefits as outlined in section 115WB of the Finance Bill, mean any privilege,
service, facility or amenity directly or indirectly provided by an employer to his
employees (including former employees) by reason of their employment.
They also include reimbursements, made by the employer either directly or indirectly
to the employees for any purpose, contributions by the employer to an approved
superannuation fund as well as any free or concessional tickets provided by the
employer for private journeys undertaken by the employees or their family members.
FBT will be taxed on: 147
Compensation and Rewards
(a) entertainment;
(b) festival celebrations;
(c) gifts;
(d) use of club facilities;
(e) provision of hospitality of every kind to any person whether by way of food and
beverage or in any other manner, excluding food or beverages provided to the
employees in the office or factory;
(f) maintenance of guest house;
(g) conference;
(h) employee welfare;
(i) use of health club, sports and similar facilities;
(j) sales promotion, including publicity;
(k) conveyance, tour and travel, including foreign travel expenses;
(l) hotel boarding and lodging;
(m) repair, running and maintenance of motor cars;
(n) repair, running and maintenance of aircraft;
(o) consumption of fuel other than industrial fuel;
(p) use of telephone;
(q) scholarship to the children of the employees.


It is a process of collection data and fact about compensation practices, policies that
exist in companies. As conducting a survey by the company itself, is a very time
consuming process. Hence, most companies commission studies of Compensation
levels and practices across industries and locations. These companies track the trends
and help organisations benchmark compensation and benefits and develop alternative
structures and schemes. They analyze and advise on the issues of salary, compensation
and benefits in all their multi-hued manifestations.
Some of the basic methods of conducting survey are questionnaires, telephonic
interviews and personal interviews. A compensation survey is valuable to the
organisation as it acquires useful and necessary information concerning industry pay
structures and practices.


Pay is an important feature of human resource management – after all, it is the main
reason why people work. It is a sensitive and controversial area that has been
extensively debated at both practical and theoretical levels. In the US the term
'compensation' is used to encompass everything received by an employed individual in
return for work. For example, Milcovich et al (2001).
"Employees may see compensation as a return in exchange between their employer
and themselves, as an entitlement for being an employee of the company, or as a
reward for a job well done" (original emphases).
148 The reward or compensation people receive for their contribution to an organisation
Essentials of HRM
includes monetary and non-monetary components. Remuneration does not simply
compensate employees for their efforts – it also has an impact on the recruitment and
retention of talented people.
The term 'reward management' covers both the strategy and the practice of pay
systems. Traditionally, human resource or personnel sections have been concerned
with levels and schemes of payment whereas the process of paying employees – the
payroll function – has been the responsibility of finance departments. There is a trend
towards integrating the two, driven by new computerised packages offering a range of
There are two basic types of pay schemes, although many organisations have systems
which include elements of both:
z Fixed levels of pay: Wages or salaries which do not vary from one period to the
next except by defined pay increases, generally on annual basis. There may be
scales of payments determined by age, responsibility or seniority. Most
'white-collar' jobs were paid in this way until recently.
z Reward linked to performance: The link may be daily, weekly, monthly or
annualised. Payment for any one period varies from that for any other period,
depending on quantity or quality of work. Sales functions are commonly paid on
the basis of turnover; manual and production workers may be paid according to
work completed or items produced. Catering staff typically rely on direct payment
from satisfied customers in the form of service charges or tips (gratuities).
Both methods work smoothly, provided that scales are easy to understand and the
methods of measuring completed work are overt, accurate and fair. However, there
has been considerable dissatisfaction with the management of pay on both sides of the
employment relationship. In recent years, attempts have been made to remedy the
situation through new systems and a greater reliance on performance-related pay.

Monetary Rewards
Monetary rewards are those paid by any negotiable instrument – cash, cheque, money
order and direct deposit. It can also be any item that can be readily converted to cash
such as savings bonds or gift-cards/certificates.

Non-monetary Rewards
These can be in the form of meals, trips, plaques, trophies, desk items, cups and mugs,
personal items and clothing such as caps, shirts and sweatshirts and other items such
as tools, electronics, radios and sports equipments (The Business Research Lab, 2006).

To insure fair and consistent application, set of rewards and recognition programmes
should be developed. This should be characterized by pre-arranged frequently
scheduled ways of acknowledging contributions and accomplishments for an
individual or team. Reward and recognition should be given as acknowledgements and
appreciation for attendance, safety, customer service, productivity, public service,
outstanding achievements and the like.
Another approach to employee recognition is by providing employee rewards and
recognition at anytime for demonstration of behaviours and values of the organization;
contributions to the goals and objectives of the organization or work unit and to
acknowledge individual or team accomplishments. Such behaviours and contribution
are team work, project completion, suggestion for a new or modified business
practice, exemplary efforts, employee appreciation, employee of the month and 149
Compensation and Rewards
honouring separating employees (Joan Llyod at Work, 2007).

Figure 11.2: Elements of a Total Reward System


Attendance reward is given as an incentive to reduce the number of unplanned sick
days or lost days due to injury and to reduce the level of over time required to back
bill absent employees. Customer service rewards help to promote and recognize
employees for outstanding customer service. Sales award provides an incentive for
employees to increase the sales margin over the previous fiscal year, such as in a
The main purpose of this rewarding strategy is to support business goals and to recruit
and retain high performers. Compensation and rewarding is important. A recognition
programme can be arranged anytime and it does not have to be expensive. All it needs
is fairness, high visibility and consistency. To be fair, a programme must not favour
one employee over another. Making certain that a programme is highly visible will
help to ensure consistent implementation. The reward should just be part of the
Recognition, however, can be achieved by the reward given at a gathering of
employees. A good manager automatically knows that employee satisfaction is
essential to healthy teamwork and productivity. The best manager will always try to
find ways to bring out the strengths in every employee but when an employee just isn't
fit for the job, the manager should take a hard look for a better way to use their talents.


One of important attributes of work organization is the ability to give reward to their
members. Pay, promotions, fringe benefits, and status symbols are perhaps the most
important rewards. Because these rewards are important, the ways they are distributed
150 have a profound effect on the quality of work life as well as on the effectiveness of
Essentials of HRM
Organization typically relies on reward system to do four things:
1. Motivate employees to perform effectively,
2. Motivate employee to join the organization,
3. Motivate employee to come to work, and
4. Motivate individuals by indicating their position in the organization structure.
There are several principles for setting up an effective reward system in an
z Give value to reward system. Employees must have preference for the type of
rewards being offered. Many employees prefer cash reward and plaques. Some
employees like to see their name in company news letter. Others like the public
recognition surrounding award ceremony.
z Make the reward system simple to understand. Elaborate procedures for
evaluating performance, filling out forms and review by several levels of
management lead to conclusion. The system must be easy to understand if it is to
be used effectively.
z Lay down performance standards within the control of the team.
z Make the reward system fair and effective.
z Ensure participation in the reward system.
z Involve people in the reward process and empower them to do the needful.
Most organizations use different types of rewards. Examples of recognitions and
rewards include money, plaques, trophies, certificates/citations, public recognition,
official prerequisites, special assignments, parties or celebrations or other meaningful
celebrations. The most common are wages or salary, incentive systems, benefits and
prerequisites, and awards. For majority of people, the most important rewards for
work is the pay they receive. For one thing an effectively planned and administered
pay system can improve motivation and performance.
Money may not actually motivate people. Surprisingly, there is no clear evidence that
increased earning will necessarily lead to higher performance. A great deal of research
has been done on what determines whether an individual will be satisfied with the
rewards he or she receives from a situation.

Reward System as Followed by Organisations

1. Incentive and Rewards: Organizations design financial incentives which are
designed to provide direct motivation i.e. ‘do this and you will get that’. Financial
rewards provide a tangible form of recognition and can therefore serve as indirect
motivators, as long as people expect that further achievement will produce
worthwhile results.
Financial incentives aim to motivate people to achieve their objectives, improve
their performance on enhance their competence or skills by focusing on specific
targets and priorities. Financial rewards provide financial recognition to
employees for their achievement in the shape of attaining or exceeding their
performance targets or reaching the level of competence skill. Achievement
bonus, team based lump sum payment our organization provides in this category.
2. Competency Related Pay: Competency related pay may be defined as a method of 151
Compensation and Rewards
rewarding people wholly or partly by reference to the level of competence they
demonstrate in carrying out their roles. This definition has two important points:
(1) pay is related to competence (2) people may be rewarded with reference to
their level of competence.
Organizations promote competence-related pay for effective use of competence to
generate value. Competence related pay works through the process of competence
analysis of individual competences and level of competence.
3. Skill Based Pay: Skill based pay links pay to the level of skills used in the job
and, sometimes, the acquisition and application of additional skills by the person
carrying out the job. But skill-based pay is usually concerned with the skills used
by manual workers, including fitters, fabricators, and operators. In competence
related pay scheme the behaviors and attributes of an individual has to use to
perform a role effectively are assessed in addition to pure skill.
4. Team Based Rewards: Team-based rewards as followed by organizations are
payments or other forms of non-financial rewards provided to members of a
formally established team which are linked to the performance of that team. Team
based rewards are shared amongst members of the teams in accordance with a
scheme or ad hoc basis for exceptional achievement. Rewards for individuals may
also be influenced by assessments of their contribution to team results. To develop
and manage team based rewards it is necessary to understand the nature of teams
and how they function. Team based rewards are not always easy to design or
5. Profit Sharing: Profit sharing is better known, older and more widely practiced
which is associated with participative management theories. Profit sharing is a
group based organization plan. The fundamental objectives of profit sharing are
(a) to encourage employees to identify themselves more closely with the
organization by developing a common concern for its progress. (b) to stimulate a
greater interest among employees in the affairs of the organisation as a whole, and
(c) to encourage better co-operation between management and employees.
6. Merit Pays: Merit pay is the most widely used in organizations for paying
performance. Merit pay system typically gives salary increases to individuals
based on their supervisor’s appraisal of their performance. The purpose of merit
pay is to improve motivation and to retain the best performers by establishing a
clear performance reward relationship.
7. Employee Ownership: A number of plans that exist that help get some or all the
stake ownership of organizations into the hands of employees. Unlike companies
which offer stock option plans, stock purchase plans and employee stock
ownership plans. Organizations provide opportunities to qualified, loyal and high
performing employees. This is a great motivator for employees to contribute fully
to organization.
8. Employee Benefits: Employee benefits are elements of remuneration given in
addition to the various forms of cash pay. Organizations provides a quantifiable
value for individual employees which maybe deferred or contingent like a pension
scheme, insurance cover or sick pay, or may provide an immediate benefit like a
organization vehicle. It also includes elements that are not strictly remuneration,
such as annual holydays. Benefits in general do not exist in isolation. They are a
part of comprehensive compensation package offered by organizations.
9. Statutory and Voluntary Benefits: Most organizations provide both statutory and
voluntary benefits. Statutory benefits are given to the employees by the
152 organisation regardless of whether it wants to or not. Like social security benefits,
Essentials of HRM
insurance, provident fund etc. Voluntary benefits are vacations, holydays, special
leave, sick leave, health insurance, educational assistance, employee discounts,
medical benefits canteen facility, mobile phones, recreational facilities, credit
cards etc.
10. Other Financial Rewards: Financial rewards provide a tangible form of
recognition and can therefore serve as indirect motivators, as long as people
expect that further achievement will produce worthwhile results. Financial
incentives aim to motivate people to achieve their objectives, improve their
performance on enhance their competence or skills by focusing on specific targets
and priorities. They provide financial recognition to employees for their
achievement in the shape of attaining or exceeding their performance targets or
reaching the level of competence skill. Achievement bonus, team based lump sum
payment are examples of financial rewards.


Examples of Formal Recognition
1. Milestone Service Anniversary Awards (5,10,15,20, 25 years of service)
2. Ideas, Improvement & Performance Awards
3. Service Awards
a) Teamwork/leadership
b) Customer Service
c) Citizenship
d) Innovation
e) Attendance
4. Awards would include:
a) Plaques/Desk trophies
b) Certificates
c) Gifts/Certificates
d) Picture in the webpage

Examples of Informal Recognition

1. Team Building Retreats
2. Acknowledgement of Dept/Division goals achieved
3. Project Completion meals
4. Birthday cakes and cards
5. Picnics
6. Staff Appreciation Day
7. Holiday Parties
8. Dress-up Days
9. Corporate Merchandise
Few simple and great ways to reward employees (low cost ideas): 153
Compensation and Rewards
1. Flexible working hours
2. Thank you notes
3. Make work fun
4. Reward effort as well as success
5. Give them a free movie passes
6. Birthday and anniversary celebrations
7. Applaud their efforts
8. Gift employees and their spouse bouquet of flowers on special occasions
9. Nominate employees to the Wall of Fame
10. Complementary parking spaces
11. Publicize their successes
12. Telecommuting for a few days in a month.
A caselet on how informal recognition is being used:
“Petroleum marketers have used informal rewards to recognize their employees' good
works. Chevron (San Fransisco, CA) keeps a large box, secured with a Padlock, filled
with gifts. An employee being recognized on the spot for some accomplishment is
brought to the “Treasure Chest” by his or her supervisor, who holds the keys. The
employee gets to choose an item from the box, which could be anything from a gift
certificate, to a coupon for lunch or dinner, to movie tickets.”


The goals of a compensation design framework are to attract and retain talent. Hence,
if the compensation is not effectively designed and not perceived equitable by
employees, they will tend to get disappointed and attrition will tend to increase.
Pay is a key element in the management of people.
The importance of pay begins with pay administration that deals accurately and
swiftly with payroll-related matters.
Much of the information used by pay administrators is shared with the human resource
Pay evaluation systems also impinge on human resource territory. Most organizations
are particularly concerned with performance-related pay as a motivating factor but this
trend appears to be ideological rather than rational since practical schemes that deliver
the results intended are extremely difficult to construct.
Current evidence shows that performance pay is likely to demotivate more people than
it motivates.
Employers and mangers should pay attention to their employees and special attention
to the best employees. This is done to encourage good performers, to push them to
greater heights.
Positive recognition for people can ensure a positive and a productive organization.
The recognition of outstanding performance aims to create an understanding of what
behaviour might add significant value to the organization and to promote such
154 Awards – monetary and non-monetary – should be given based on the achievements
Essentials of HRM
and accomplishments of workers.

Compensation: It is the remuneration received by an employee in return for his/her
contribution to the organization.
Job Evaluation: It is a method used to describe, analyse, compare and evaluate jobs
within a unit, branch or an industry on the basis of the work content and the job
requirements in order to place them under a particular wage of salary grade.
Piece Rate Wages: It is prevalent in the manufacturing wages; the laborers are paid
wages for each of the quantity produced by them.
Expatriate: Person who lives and works in a foreign country.
Compensation Survey: It is a process of collection data and fact about compensation
practices, policies that exist in companies.
Reward System Management: It is the framework that envisions formulation of
different types of reward systems to boost the motivation employees.
Voluntary Benefits: Benefits vacations, holidays, special leave, sick leave, health
insurance, educational assistance, employee discounts, medical benefits canteen
facility, mobile phones, recreational facilities, credit cards etc.


Fill in the blanks:
1. The fringe benefits form a part of ……………… compensation.
2. Dearness allowance is paid to the employees to negate the effects of …………….
3. The piece rate system forces labor to concentrate on ………………and as a result
they often forgo quality.
4. The refund sought for expenses incurred during working hours is referred to
5. …………………… ensures that employees as per the industry standards.
6. The tax paid on facilities like club membership, personal car, gifts etc. is known
7. Sometimes organisations fund the part-time higher education courses, of its
currently working employees. This benefits is a part of …………………….
8. Awards, plaques, certificates, milestone awards are all part of …………….


1. What are the components of a compensation system?
2. What are the various uses of a compensations system? Why is a good
compensation system important?
3. What is job evaluation and why is it important?
4. List the components of expatriate’s compensation. Is it different from general
compensation plan?
5. Discuss the concept of fringe benefits and fringe benefit taxation. 155
Compensation and Rewards
6. What are the challenges faced in designing an effective compensation system?
7. List the various Reward Systems that exist in organizations.
8. Analyse the objectives and goals of a reward management system.


Tropman John, Compensation Solution, 2001, Jossey-Bass Publication.
Martocchio Joseph, Strategic Compensation – HRM Approach, 2001, Prentice Hall.
Singh BD, Compensation and Reward Management, Excel Books, New Delhi.
Armstrong M, Morris Helen and Murlin Helen, Reward Management, 1998, Kogan Page Ltd.

1. Societal
2. American Society of Personnel Administration
3. Career Development 4. Assessment Centre
5. Efficiency 6. Personnel Department
7. Policy

1. Job Analysis 2. Job Context
3. Personal Observation 4. Information
5. Job Description 6. Job Rotation
7. Job Enrichment

1. Human Resource Planning 2. Corporate
3. Intermediate, Operations and Short-term 4. Environment Scanning
5. Surplus 6. Delphi
7. Attrition

1. Promotion 2. Placement Agencies
3. Pre-screening 4. Personal Adjective Checklist
5. Unstructured 6. Role Playing
7. Outsourcing

1. Competency Mapping 2. Strategies
3. Job Competencies Assessment Model 4. Systems Method
5. Development 6. Leaderless Group Discussion
7. Behavioural Event Interview

1. Time and Motion Study 2. Realistic and Time Limited
3. Past 4. Rater’s Biasness
5. Annual Confidentiality Report 6. Psychological
7. Essay 8. Kinlaw’s Approach
9. Supervisors 10. Mentors
Essentials of HRM LESSON 7
1. Potential Appraisal 2. Performance Appraisal
3. Yourself 4. Career Path
5. Internal Career 6. Succession Planning

1. Diagnostic 2. Auditors/Audit Team
3. Employees 4. Value
5. Replacement Cost 6. HR Accounting
7. Skills Inventory

1. Regulation 2. Human Capital
3. Functional Control 4. Vice President/Director HRD
5. Self-renewal 6. Career Development
7. Strategic Management

1. Specific 2. Providers
3. Learning 4. Personal Analysis
5. On-the-job Training 6. Simulation
7. Sensitivity Analysis 8. Four-deep Training

1. Indirect Financial 2. Inflation
3. Quantity 4. Reimbursement
5. External Equity 6. Fringe Benefit Tax
7. Voluntary Benefits 8. Formal Recognition