CHAPTER 19

Job Rotations

CHAPTER OBJECTIVES

After reading this chapter, you should be able to:

1. Understand the objectives, characteristics and types of promotion
2. List the criteria for promotion
3. Explain the essentials of a sound promotion policy
4. Understand the objectives, characteristics and types of demotion
5. List the types of transfers and separations

The New India Assurance Company Limited is a leading global insurance company with a significant presence in India and abroad. The company has a workforce of nearly 21,000 employees engaged in more than 1,068 offices. It offers personal, commercial, industrial, liability and social insurance policies. It is the only insurance company in India to be given an “A” (Excellent) grade by A. M. Best, an international rating agency.

This company has excellent HR policies and practices that serve the interests of its employees. For instance, it is the first Indian insurance company to introduce the concept of “model office training”. It provides periodic training to its employees through its corporate training centres (CTC), regional training centres (RTC) and zonal training centres (ZTC). These centres prepare their yearly calendar for regular and special training on technological changes, departmental changes, and for transfers and promotions. As part of its career-development programme, the company provides training to its employees through Personalitree.com. It also conducts training programmes for its staff in preparation for promotion-oriented competitive examinations.

New India Assurance has comprehensive promotion policies for various categories of employees. The essence of its promotion criteria is appropriate recognition of merit and due respect for seniority, consistent with the efficiency of the organization. The process of promotion for the managerial cadre would involve their assessment under the parameters of conceptual level/vision, depth and range of overview of the industry and economy, planning ability, decision-making ability, management traits, positive attitude, problem-solving ability, and overall leadership ability.

The importance of the unambiguous promotion policies in the success of New India Assurance Company Limited highlights its significance. We shall now discuss the relevance of promotion and other policies in this chapter.

Introduction

Promotion can be defined as the advancement of an employee from one position to another, resulting in his financial benefit. It is certainly a good and effective motivator for employees. Organizations employ promotion as a tool to recognize and reward the merit and sincerity of the employees. Internal promotion, as compared to external hiring, for filling the job vacancies in an organization can increase the loyalty and morale of the employees. Promotions, which are normally accompanied by financial incentives, also fulfil the economic needs of the employees, in addition to fulfilling the social need of attaining increased status in the society. In fact, the promise of a promotion acts as an incentive to many employees.¹ However, a promotion is often viewed as a double-edged sword because an imprudent and unfair promotion can cause exactly the opposite effect on the employees. For instance, a faulty promotion can cause dissatisfaction, de-motivation and even alienation among them. It can also push up the rate of absenteeism and labour turnover in the organization.

It is highly essential for an organization to develop a promotion policy that facilitates the advancement of the most suitable person to the available position in the organization. Besides, an organization should also make the employees believe that its promotion policy is fair, just and up to date. Although following a fair promotion policy may require a lot of diligence on the part of the management, it can certainly improve employee commitment and performance in the long run. Therefore, each organization must develop appropriate policies and procedures for assessing the general attributes of the potential candidate in the new job.²

Advancement in the career of an employee is the essence of the definitions of promotion. We shall now see a few definitions of promotion in Box 19.1.

We may define promotion as an employee’s upward mobility in the organizational structure accompanied by increased authority, responsibility, compensation and social status.

Characteristics of Promotion

The characteristics of promotion are identified as follows:

• A promotion normally involves the movement of an employee from one position to another within an organization. However, a promotion can also take place without a change of duties but with increased compensation.⁵
• A promotion is normally accompanied by an increase in authority, responsibility and compensation, and demands more skills.

• Normally, a promotion involves the permanent movement of employees to the higher positions in the organization. Moving an employee to a higher position on a temporary basis without any increase in compensation is not usually viewed as a promotion. For instance, if an employee is appointed to a higher position for a few months, this does not constitute promotion.
• The promotion of an employee is an administrative act as the management has every right to decide on the matters pertaining to promotion.
• The promotion of an employee to the next level is normally decided on the basis of merit or seniority or both.
• A simple addition of duties to the existing positions or a hike in the financial compensation at the existing position cannot become a promotion automatically.⁶

Objectives of Promotion

Promotions play an important role in providing socio-economic and psychological satisfaction to the employees. Employees often view promotions as recognition of their hard work and loyalty. Certainly, the absence of adequate promotional opportunities for employees can affect work quality, employee discipline, and cooperation, and can cause acute skill short-ages.⁷ We shall now see the objectives of promotion.

• The primary objective of promotion is to fill the job vacancies available within the organization by upgrading the employees.
• Organizations seek to encourage efficiency and loyalty among the employees through promotion.
• Promotion aims at attracting and retaining the competent employees in the organization.
• Organizations rely on promotion to develop constructive competition among the peer group members to improve their performance and productivity.
• Through promotion, organizations aim at providing the employees a sense of growth within the organization.
• Organizations look to accomplish the long-term organizational goals effectively and continuously with the promise of promotion to the employees.
• They strive to develop the culture of continuous learning among the employees by linking promotion to employee competence and knowledge.
• Through promotion, organizations seek to fulfil the career growth aspirations of the employees and shape up the succession plans of the organization.

Criteria for Promotion

Promotion is one of the highly sensitive tasks of the HR managers, especially when it involves selection from a pool of prospective candidates. This is because the employees who fail to get a promotion may blame the system if it is not transparent. They could soon become disillusioned with the whole organization. Therefore, an organization needs to be cautious with its promotion policy and criteria. Since promotion basically involves decision-making, a fair and transparent promotion policy and concrete criteria alone can help gain the confidence of the employees in the promotion decisions of the organization.

A good promotion decision requires an objective evaluation of the relevant competences of the prospective candidates. Depending upon the overall promotion policy, the organization must evolve a procedure for determining the promotions of its employees. The critical task in the development of a procedure is the identification of the promotion criteria for deciding the suitable persons to fill the job vacancies. Some organizations may keep competencies as the sole criteria for promotion while others may have seniority as the basis for determining promotion. A few other organizations may consider both of these for deciding on promotion. In any case, it is essential for the organization to ensure that its criteria are objective and practical in nature. However, in practice, organizations rarely publicize their promotion criteria in detail.⁸ We shall now see the general promotion criteria of organizations.

Merit

Merit as a basis for promotion means fulfilling the job positions in an organization with the most talented persons available within the organization for those positions. In this category of promotion, merit is given an appropriate consideration while other factors like seniority become insignificant in the promotion decision. In such cases, the candidate’s identification, evaluation, and selection for promotion will be based only on job-related criteria. The strengths of merit as the standard are:

• It improves both employee efficiency and organizational performance.
• It acts as an incentive and real motivator for the competent and diligent employees of the organization.
• The organization becomes a real hunting ground for people who like to challenge the limits of life.
• Promotion on the basis of merit necessitates continuous skill and knowledge acquisitions by the employees throughout their career to remain competitive in the labour market.
• It increases the creativity of the employees and keeps the organization dynamic to meet the challenges from the external environment.

Though merit as a promotion criterion has quite a few advantages, it also has a few limitations. These are:

• Merit as a standard for promotion makes an organization stand firm on a slippery surface. This is because the determination of merit may require considering subjective factors and abstract elements like concentration, involvement, and mental ability. It is difficult to measure subjective factors with a fair amount of accuracy.
• Organizations may find it difficult to convince the employees and their unions about the fairness of the promotion system when merit is the sole criterion in promotion.
• This method can cause intense and destructive rivalry among the employees, leading to a mutual blocking of performance.
• It may favour the younger employees with fresh and relevant knowledge, thereby putting the aged employees in a disadvantageous position.
• It can cause undue stress for the employees, especially for those who miss out in promotion, as they may be branded as incompetent and unfit or they may perceive themselves to be so.

Seniority

In the case of seniority-based promotion, the length of service of the employees is considered for promotion, while other factors like competence and commitment are overlooked. As such, the job positions available within the organization are filled with persons who have the maximum number of years of service in the organization. The length of service in the organization or in the present position becomes the sole criterion in promotion decisions. The seniority-based system is normally followed in public sector organizations. In organizations where the seniority is the sole basis, promotions are time-bound and also a formality. The strengths of seniority-based promotion are:

• It is a highly objective and non-controversial form of promotion because subjective elements are not considered for promotion.
• This method is better suited for strongly unionized organizations as the scope for a potential conflict with the unions is reduced.
• It may improve the loyalty of the employees as the length of service and experience are recognized and respected by the organization.
• Unlike the merit-based system, there arise no bitter feelings among any employee at the end of the promotion process. In fact, employees are treated fairly and in a dignified manner till the end of their service.
• Seniority-based promotion is simple and straightforward. The employees can themselves compute the time of promotion on the basis of the length of their service.

In spite of having several inherent strengths, seniority-based promotion has a few major weaknesses. These are:

• The major limitation of this method is that it offers no incentive for the efficiency, creativity and commitment of the sincere and hardworking employees. Thus, promotion cannot be viewed as a motivational tool by the management.
• It kills the learning habit of the employees as they never feel any urgent need to acquire new knowledge, skill or ability.
• It can undermine the preparedness of the organization in tackling the challenges from the external environment effectively. In fact, employees often resist changes in these organizations due to their inability to cope with the skill and ability requirements of the changing situation.
• Organizations may find it difficult to attract and retain the enterprising young people who wish to have challenges in their work life.
• The significance of employee performance evaluation is diluted when promotions are not linked to the performance of the employees.

Seniority-cum-Merit-Based Promotions

In this method, an organization considers both merit and seniority for determining the promotion of an employee. The primary purpose of this method is to include the positive features of both the promotion criteria. The organization may decide the weights for merit and seniority on the basis of its HR and promotion policies. For instance, an organization may decide to have the proportion of merit and seniority in the ratio of 70 and 30 in order to evaluate the potential candidates., A model standard of selection for promotion procedure, based on this proportion, has been developed in Box 19.2.

The strengths of the seniority-cum-merit method are:

• This method reduces the element of subjectivity in promotion decisions considerably but it does not rule it out entirely.
• It encourages efficiency among the employees even while having due consideration for their length of service.
• Employees in general can not have any serious objections against this criterion, provided the management is sincere and objective in its evaluation.
• In an intensely competitive external environment, this method is ideal for keeping the organization efficient and dynamic and for protecting the interests and future of the employees.

Although the seniority-cum-merit method has several strengths, it also has a few weaknesses. These are:

• Organizations may assign weightages to the two criteria in such a way as to make one of them simply irrelevant. For instance, if the ratio of merit and seniority is 80:20, it may open possibilities for manipulation in the promotion process so that the importance of the length of service of the employees gets undermined.
• Since this method does not rule out subjectivity altogether, it may suffer from all the weaknesses of merit-based promotion.
• It may be difficult for the management to explain the rationale behind the determination of weightages for merits and seniority.

Kinds of Promotion

Promotional opportunities to the employees can be classified into different forms based on factors like advancement in the organizational structure, and eligibility. We shall now see two important classifications of promotions.

Horizontal Versus Vertical Promotion

Generally, promotion means going up in the organizational structure or ladder. A vertical promotion indicates the advancement of employees to higher positions in the organization. Thus, a vertical promotion is accompanied by increased authority, responsibility, accountability and status, and a higher designation. For instance, moving a person from the clerical cadre to the position of an administrative officer can be an example of a vertical promotion.

On the other hand, a horizontal promotion brings more responsibility and compensation, but the employee does not go to a higher level in the organizational structure. This method is usually adopted when the chances of ‘going up’ in the organizational structure are limited.⁹ By and large, organizations view horizontal promotion as an element of an employee’s career growth.

The Open Versus Closed System of Promotion

Promotion can also be classified into open and closed systems of promotions. In case of the open system of promotion, an organization does not limit promotional opportunities to any particular section of employees. On the contrary, it keeps them open to all the eligible employees. In practice, all vacancies are openly advertised within the organization in this method, and applications are invited from all the employees who fulfil the eligibility conditions prescribed by the organization.

In contrast, the closed system restricts the promotional opportunities to a select list of employees. In this method, an employee gets his promotion through a closed promotional recruitment system established by the organization. In practice, an organization may reserve certain categories of jobs, especially those at the higher levels of management, for a closed system of promotions, leaving the rest of the categories for the open system.

Essentials of a Sound Promotion Policy

The primary purpose of a promotion policy is to ensure uniformity in the way promotions are managed in the organization. It may also cover transfers and demotions. It aims at streamlining the activities involving identification, evaluation and selection of the employees from within the organization to fill the job vacancies on a continuous basis. The promotional policy of an organization must provide equal opportunities to all the employees and should never discriminate against them on unlawful grounds like gender, caste, religion or race. It must also offer clear-cut guidelines to the people engaged in the promotional recruitment process. An effective promotion policy should normally ensure the following:

• A good promotion policy should be consistent with the organizational objectives, HR policies and relevant contractual agreements with the employees or their union.
• It should provide equal promotional opportunities to all the employees of equal abilities.
• It should clearly spell out the promotion criteria for different categories of jobs. In other words, it would ensure that these performance standards are not vague, subjective or open to manipulations.
• It should state the promotion procedure and the role of different authorities in it unambiguously.
• An effective promotion policy should treat all the eligible candidates uniformly at the time of promotional recruitment and selection. It should also have adequate safeguards against all forms of discrimination on any basis except employee competency or seniority.
• It should keep the promotion procedure transparent and simple. It facilitates the employees in knowing what is required for attaining promotion in the job.
• A good promotion policy should permit the eligible employees who fail in the promotional selection to discuss the promotion issues with the appropriate authorities.
• It should help the promoted employees in the initial transition process. It may provide for transition programmes for the employees. The transition programmes may orient the employees on role description and expectations.¹⁰
• A good promotion policy should insist on a systematic and scientific evaluation of the job performance of the employees. Employees must also be aware of the performance requirements for promotion from the beginning.
• It should have all preferences or reservations for different categories of employees like women, the physically challenged and the socially disadvantaged, in the written form to avoid any misuse of these provisions.

Box 19.3 outlines the promotion policy of a banking sector organization.

Demotion

Demotion is just the reverse of the term promotion. It means the transfer of employees to lower positions in the organizational structure. It is often used as a punishment for employees for serious breach of rules and regulations and for consistent performance deficiency. However, a demotion can also be effected by the organization on the request of the employee concerned. It may involve either being assigned a different position or a reclassification of the existing position of the employee with lower designation.

The essence of demotion is a decrease in the job status of the employee. Several definitions of demotion revolve around this factor. We shall now see a few of the definitions.

We may define demotion as an employee’s downward mobility in the organizational structure which is normally accompanied by reduced authority, responsibility, compensation and social status.

Reasons for Demotion

An employee may be demoted for several reasons including administrative convenience and punishment. We shall now see the important reasons for demotions.

Administrative Convenience Due to external developments and/or internal restructuring, an organization may be forced to abolish certain categories of jobs or merge the jobs for administrative purposes. In such cases, the incumbent employees of the merged or abolished jobs may be moved to lower positions. Occasionally, organizations also consider demotion as a viable alternative to a layoff when staff reduction becomes inevitable.

Inefficiency Employees can be moved out of the existing position to some lower level for consistent failure to meet the performance goals of the organization. The intention of demotion in such cases is to reduce the work responsibilities of the employees so that they will be able to meet the performance requirements of the new position without much difficulty.

Disciplinary Action An organization may impose demotion as a punishment for any serious violation of code of conduct. Demotion is considered as less severe punishment than dismissal or discharge of employees from the job. However, demotion as a punishment is normally opposed by unions strongly due to its psychological effects on the employees. Besides, demotions can also have a demoralizing effect on other employees who happen to work with the demoted employee. The organizations must fulfil all legal requirements before initiating serious punishments like demotion and dismissal as these punishments are often challenged in the court of law.

Voluntary Demotion It is also called demotion on request. It involves shifting an employee to a lower designation upon his request or concurrence. Employees may request a voluntary demotion when they are not willing or able to perform the existing duties any longer or shoulder the responsibilities of their current positions properly. Specifically speaking, an employee may seek a voluntary demotion due to illness, job difficulty, a misunderstanding with supervisors, stress in the current job, relocation of residence, and the unwillingness or inability to accept forced transfers. Organizations usually demand a written request from the employees seeking a demotion before acting on such a request. The employees should also agree to a reduction in pay if required. They must also be made to understand that the demotions are permanent and cannot be reversed. A voluntary demotion can be within the same department or from one department to another. It may be initiated either by the employees or by the employers.

Transfer

A horizontal shifting of employees from one job to another without any job related increase in the pay, benefits and status of the employees is called a transfer. It can broadly be classified into two categories, namely, imposed transfers and requested transfers. In case of the former, an employee is transferred for administrative convenience with or without his concurrence. For instance, an organization may carry out transfers for better utilization of skills and knowledge of the employees. It may also transfer employees as part of the on-the-job training process. Transfers may also be used to see whether an employee is fit for permanent placement in that position as a part of promotion. In case of requested transfers, an employee is transferred to another job or place because he has requested for the transfer. Transfers are often requested by the employees for personal reasons.

The lateral movement of employees from the existing job to another with comparable duties, responsibilities and pay range is the essence of the definitions of transfer. We shall now see a few definitions of transfers.

We may define transfer as an employee’s lateral mobility in the organization structure without any significant change in the authority, responsibility, compensation and social status.

Objectives of Transfer

Transfers can serve several purposes for both the organization and the employees. We shall now see the major purposes of transfers.

Optimum Utilization of Skills Organizations may transfer employees from places where there is an underutilization of skills due to labour surplus to other places within the organization that suffer from skill shortages. The aim of this exercise is to facilitate a better utilization of the available skills and talents. Thus, transfers can be used as an effective means to meet the changing labour needs of the different departments/units of the organization.

Training of Employees Many organizations utilize employee transfers as a tool to train the employees in different jobs of the organization. Such transfers help the organization assess the difficulties of the employees in performing the jobs effectively and the employees acquire the necessary job skills through training and other programmes.

Disciplinary Action As part of disciplinary action, employees may be transferred to the least preferred jobs or destinations without any change in the job authority, responsibility and compensation packages. Since the purpose of transfers in such a case is to punish and discipline the employees, it can also be called a punitive transfer.

Employee Request Organizations may order a transfer to fulfil the request of an employee for it. Employees may cite health, family or other personal problems for seeking voluntary transfers. They may also seek transfers for job-related reasons like job difficulties and high level of stress.

Motivational Tool Many organizations view transfer as an effective means to motivate their employees. When the employees cannot be moved upwards in the organizational structure due to lack of promotional opportunities, organizations can resort to their horizontal movement to provide variety and challenges in the job. In fact, job enlargement and enrichment have made the lateral transfer of employees a good alternative to vertical transfer, namely, promotion.¹⁵

Types of Transfer

A transfer takes place when an employee is moved to another job or place with the same or a similar position. Such transfers may take place for a variety of reasons like poor health, performance shortage, mutual basis and training. We shall now see the different methods of employee transfers.

Inter-departmental Versus Intra-departmental Transfers When employees are rotated from one job to another within the same department, it is called intra-departmental transfer. For instance, when a clerk in a bank branch is made an accountant and if both the jobs carry similar levels of responsibilities and compensation, it is called intra-departmental transfer.

When employees are moved from one department to another within the same job classification, it is called inter-departmental transfer. The salary range, responsibilities and duties are the same or similar for both the jobs.

Voluntary Versus Involuntary Transfers When an employee voluntarily applies for a transfer to some other position or place within the same job classification, it is called a voluntary transfer. An employee may request for a transfer to another position within or outside the department.

When employees are transferred by the organization for administrative or other reasons without their concurrence, it is called involuntary transfer. For instance, an organization may transfer an employee when his existing position or job is marked for abolition as part of the restructuring process. Similarly, an organization may transfer an employee to fill a vacancy caused by the death or sudden resignation of an employee in another job.

Replacement Transfers This is an infrequent type of transfer in an organization. This transfer is normally carried out by an organization to avoid the imminent layoff of the senior employees due to a difficult organizational situation. In this situation, a junior employee is relieved from his position by the organization as part of the layoff programme and the senior employee is transferred and posted to that position.

Versatility Transfers Versatility means possessing a wide variety of skills. Transfers may facilitate employees in acquiring different skills required to perform the jobs in higher positions in the organization. For instance, the entry-level managers may be trained in different positions with comparable responsibilities and duties ahead of their promotion to the higher levels of management.

Shift Transfers This is frequently done in organizations with a multiple-shift system. In this method, the employees are transferred from one shift to another but remain in the same job. For instance, an employee may be transferred from the day shift to the night shift. It is often done on a rotation or request basis. The statutory requirements which ban odd-hour shifts (night shift) for women and other factors like employee health can influence the shift transfers.

Remedial Transfers Remedial transfers are usually carried out to set right the past mistakes in the appointment or transfers concerning an employee. A wrong placement of employees in the organization may cause numerous problems for both the organization and the employees. Besides causing performance problems, faulty placement can cause tension in the superior–subordinate relationships and employee stress. To rectify such a situation, organizations usually resort to remedial transfers, which enable the employees to find the right job and the right environment.

Production Transfers The purpose of a production transfer is to stabilize production by redistributing the employees from labour-surplus units to labour-deficit ones. This internal arrangement helps the management in avoiding or at least postponing employee reduction measures like layoff and retrenchment.

Employee Separation

Employee separation is a sensitive issue for any organization. Usually, an employee leaves the organization after several years of service. Thus, the permanent separation of employees from an organization requires discretion, empathy and a great deal of planning. An employee may be separated as consequence of resignation, removal, death, permanent incapacity, discharge or retirement. The employee may also be separated due to the expiration of an employment contract or as part of downsizing of the workforce. Organizations should never harass the employees, especially in the case of resignation, just because they are quitting the organization. In fact, a quitting employee of the organization must be seen as a potential candidate of the future for the organization and also the brand ambassador of its HR policies and practices. However, many organizations are still treating their employees as “expendable resources” and discharging them in an unplanned manner whenever they choose to do so.¹⁶

Each organization must have comprehensive separation policies and procedures to treat the departing employees equitably and ensure smooth transition for them. Further, each employee can provide a wealth of information to the organization at the time of separation. Exit interviews can be conducted by the HR department to ascertain the views of the leaving employees about different aspects of the organization, including the efficacy of its HR policies.

Reasons for Separation

Employee separation constitutes the final stage in the staffing process of an organization.¹⁷ An employee can leave the organization for any reason which he deems fit for seeking separation. However, separation is classified basically into two types. These are: voluntary separation and involuntary separation. Voluntary separation refers to the separation of employees on their own request, while involuntary separation means the separation of employees for organizational reasons which are beyond the control of the employees. We shall now discuss the causes of these separations in detail.

Voluntary Separation Voluntary separation, which normally begins after a request is placed in this regard by the employee, can happen due to two reasons: professional reason and personal reason.¹⁸ We shall now discuss these reasons in detail.

Professional reasons—Employees may seek separation when they decide to seek better positions, responsibilities and status outside the present organization. Efficient employees would seek to expand their realm of knowledge and skills continuously by working in different capacities/positions in various organizations. In their quest for greater responsibility, power and status, they may seek separation from the organization.

Personal reasons—The important personal reasons for voluntary separation are relocation for family reasons like marriage of the employees and health crisis of family members, maternity and child-rearing. For instance, when working women get married, they often prefer to settle in the partner’s place of occupation. Similarly, an employee may seek voluntary separation to look after the child or parent.

Involuntary Separation As mentioned earlier, an involuntary separation is caused by the factors which remain beyond the purview of the employees. However, these factors may be classified broadly into health problems, behavioural problems and organizational problems. We shall now discuss these factors in detail

Health problems—Major health problems crippling the employees may make them invalid or unfit to continue in the profession. For instance, accidents causing permanent disabilities and illness of the employees like brain stroke and other terminal illnesses can lead to their involuntary separation. Death of employees is another factor which results in their involuntary separation.

Behavioural problems—An employee’s objectionable and unruly behaviour within the organization may also lead to his involuntary separation from the organization. When the employee’s behaviour is unethical or violates the code of conduct in force, the organization may initiate disciplinary actions, which may eventually result in his termination. This may constitute an act of involuntary separation. Consistent failure to reach performance goals by an employee can also result in his involuntary separation.

Organizational problems—Organizational problems are another important factor that contributes to the involuntary separation of employees. The poor financial performance of an organization may cause it to terminate the services of some of its employees as part of cost control measure. Such terminations are also classified as involuntary separation. Similarly, automation, organizational restructuring and rationalization can also result in employee termination, discharge or layoff, broadly called involuntary separation.

Types of Employee Separation

Depending upon the reason, an organization may initiate voluntary or involuntary separation of employees by adopting any one of the forms mentioned in Figure 19.1.

Retirement This is a common form of separation of employees from the organization. Depending upon its retirement policy, an organization would initiate the necessary steps to separate the employees upon attaining the specific age. The age of retirement from government services in India differs from one state to another within the range of 55 to 65 years. However, private organizations can have their own retirement policies. In addition to regular retirements, an organization may also adopt voluntary retirement scheme (VRS) and compulsory retirement scheme (CRS) to separate the employees from the organization. In case of VRS, organizations usually offer large sums of money over and above the actual retirement benefits to make the employees willingly leave the organization before their retirement age. This strategy is adopted by organizations when they are confronted with labour surplus and high HR cost. Organizations can also go for a CRS after completing due formalities like necessary notices to the employees. For instance, an organization may keep the absolute right to retire any employee who completes the specified years of service or attains the specified years of age by issuing a proper notice, say a three-month notice, as part of the CRS programme.

Resignation When an employee seeks to resign from the job for personal or professional reasons, the organization, after a due consideration of the reasons, may initiate the separation process. In case of efficient workers seeking to resign, an organization would undoubtedly make every possible effort to put an end to the cause for which the employee wishes to resign from the job. For instance, if an employee wants to resign due to family commitment or unsuitable working hours, the organization may offer e-commuting or flexible hours as solutions to retain the employees. Similarly, it may offer a transfer to the desired place to prevent the employee from quitting the job. When the employee is unyielding in his decision, the organization would begin the separation process and ensure that the employee resigns the job as per the employment contract. In the absence of a specific employment contract, the resignation rules of the organization or the relevant provisions of the statutory acts would come into force. As per the company policy, the employee may be asked to give three months’ or one month’s prior notice to the management, expressing his desire to resign from the organization.

Removal (Including Dismissal or Discharge) An organization may resort to dismissal or discharge of the employees from the services for reasons like behavioural problems, including unethical behaviour and a breach of the code of conduct. Being an involuntary separation, it is initiated against the employees only by the organization on its own accord but in agreement with the legal provisions. In case of dismissal, an employee is not entitled to get the terminal benefits like provident fund, gratuity, and so on, whereas a discharged employee is eligible for all the terminal benefits. In any case, both dismissal and discharge are always viewed as an extreme punishment and challenged in the various legal forums. It is thus essential for the organization to observe the disciplinary proceedings and the statutory provisions concerning employee termination strictly. For instance, an industrial dispute can be raised as per the Industrial Disputes Act, 1947, when the disciplinary proceedings reach the stage of dismissal or discharge of an employee.¹⁹ Besides, the Industrial Employment (Standing Order) Act, 1946 and the Payment of Wages Act, 1936, also deal with certain aspects of disciplinary actions.

Retrenchment Retrenchment is a kind of involuntary separation which an organization adopts to downsize it labour force. The purpose of retrenchment is to reduce the expenditure of the business and raise the profitability, especially during the difficult times of the organization. The need for retrenchment may arise due to the closure of unprofitable business operations, the automation of operations, and shifting business from one region or country to another. In case of retrenchment, employees are entitled to necessary compensation under Section 25(f) of the Industrial Disputes Act, 1947. However, retrenchment can have a demoralizing effect on the employee morale and put the remaining employees under excessive work pressure due to a reduced labour force.

Layoff A layoff is similar to retrenchment except that it is a temporary separation of employees from the organization. Organizations usually resort to layoffs to overcome the problems of business slowdown and other temporary business interruptions. Since a layoff is a temporary separation, the employees would be called back once the business fortunes revive and get stabilized. Section 2(KKK) of the Industrial Disputes Act, 1947, defines a layoff as the failure, refusal or inability of an employer, on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other connected reason, to give employment to a workman whose name appears on the muster rolls of his industrial establishment and who has not been retrenched. However, as per Section 25A of the Companies Act, organizations which employ less than 50 employees on an average working day for the preceding calendar month, are not bound by the layoff provisions.

The laid-off employees are entitled to a compensation equal to 50 per cent of the basic wages and dearness allowances that would have been payable to him had he not been laid off. In order to be eligible for the compensation, the laid-off employees should fulfil the following conditions: (i) he should not be a badli or casual worker; (ii) his name should appear on the muster roll of the industrial establishment; and (iii) he should have put in one year of continuous services. However, layoff compensation need not be paid to employees when

• the employee declines to accept the offer of an alternate employment by the organization that does not call for additional skills and experience and is located within a five-kilometre radius of the original employment
• the employee fails to present himself for the job at the establishment at the appointed time during normal working hours at least one time in a day
• the layoff is due to a strike by workmen in another division or part of the establishment.

In any case, it is the responsibility of the organization to prove the above-mentioned reasons to make the employees ineligible for compensation.

Summary

1. A promotion is defined as an employee’s upward mobility in the organizational structure accompanied by increased authority, responsibility, compensation and social status.
2. The three criteria for employee promotion are merit, seniority, and seniority-cum-merit.
3. A demotion is defined as an employee’s downward mobility in the organizational structure which is normally accompanied by reduced authority, responsibility, compensation and social status.
4. The purposes of demotion are administrative convenience, inefficiency, disciplinary action and voluntary demotion.
5. A transfer is defined as an employee’s lateral mobility in the organizational structure without any significant change in authority, responsibility, compensation and social status.
6. The purposes of transfers are optimum utilization of skills, training of employees, disciplinary action, fulfilling an employee’s request and being a motivational tool.
7. The types of transfers are inter-departmental versus intra-departmental transfer, voluntary versus involuntary transfer, replacement transfer, versatility transfer, shift transfer, remedial transfer and production transfer.
8. Separation is basically classified into two types. These are: voluntary separation and involuntary separation. Voluntary separation refers to the separation of employees on their own request, while involuntary separation means their separation for organizational reasons which are beyond their control.
9. The reasons for voluntary separation are professional and personal. The reasons for involuntary separation are employee health problems, employee behavioural problems and organizational problems.
10. The types of separation are retirement, resignation, removal (including dismissal or discharge), retrenchment and layoff.

Review Questions

Essay-type questions

1. Discuss the meaning, objectives and characteristics of employee promotion.
2. Evaluate critically the various criteria for conducting promotion selection.
3. Enumerate the essentials of an effective promotion policy.
4. “Demotion is always heartbreaking for the employees.” Do you agree with this statement? Substantiate your stand.
5. Describe the different types of transfer with relevant examples.
6. Elucidate the reasons for the separation of an employee from the organization critically.
7. Illustrate the various types of separation with examples.
8. “Separation is a sensitive issue and thus requires the utmost care and caution.” Discuss.
9. Explain the various purposes for which an employee can be transferred.
10. Compare and contrast merit and seniority as the promotion criteria.

Skill-development Exercises

Objective – The objective of this exercise is to show you how to develop a promotion policy that can increase employee performance and job satisfaction.

Procedure Note – The class is split up into groups. Each group has (1) an HR manager, (2) two HR team members, (3) an external expert, (4) two office-bearers of trade unions, and (5) two observers of the meetings. The role of the observer is to observe the various aspects of the role-playing sessions and report on them.

Situation

Rainbow Bank is a private sector banking company with a presence in different part of the country. It offers several unique deposit schemes besides the traditional fixed deposits, recurring deposits, savings bank deposits and current accounts. The company has comprehensive HR policies for all its HR activities. In fact, the compensation package of the company is considered to be one of the best in the industry and has successfully attracted many enterprising youths to the bank.

However, the labour turnover rate of the business has been an area of concern for the bank for a long time. Many experienced employees left the bank in the middle of their career, especially when they were unsuccessful in the promotion selection. The anxious management conducted exit interviews with employees who left the organization recently and found out from them that they were disillusioned with the existing promotion policy, which overtly favoured seniority and left little scope for merit and hard work. Having sensed the mood of the employees regarding the promotion policy, the management instructed the HR department to design a new promotion policy with due regard to employee merit. The HR manager soon swung into action.

Steps in the exercise

There are four steps in the exercise:

Step 1: The HR manager meets the office-bearers of the trade unions to ascertain their views on the existing promotion policy and seeks their suggestions for the new promotion policy.

Step 2: He contacts external experts to ascertain their views on promotion policies and find out the general industry trend from them.

Step 3: He convenes a meeting of his HR team to finalize the new promotion policy after duly considering the relevant reports and guidelines. The new promotion policy is sent to the top management for approval.

Step 4: The observers analyse the performance of the members in the role-playing session and give their feedback.

Case Study

Hirthick & Co is a popular company engaged in textile production. It has production sites in three different places. It produces high-value pure-wool, wool-blended and premium-polyester-viscose-worsted suitings. Hirthick enjoys a sizeable market share for the finest fabrics and designer wears. In fact, this company has a large variety of worsted suitings to cater to the needs of the assorted customers. The company has a workforce comprising 7,500 employees. The HR department is headed by Mr Uday Shankar, the General Manager (HR). The company has HR policies and practices for almost all its staffing activities.

Hirthick’s promotion policy stipulated that the company adopt internal recruitment for non-managerial and entry-level managerial cadres as a first choice, whereas, for all other ranks above the entry-level managerial position, external recruitment should be the only option. The company had a smooth sailing on the manufacturing front till a few weeks ago when Mr Suresh Kulkarni, the production chief at the level of general manager, submitted his letter of resignation. He cited personal reasons for his decision to leave the company and all the efforts of the management to persuade him to take back his resignation failed. Left with no other option, the management instructed the HR department to begin the separation process for Mr Suresh Kulkarni and the recruitment process to fill the consequent vacancy.

As regards the recruitment of a new incumbent for the vacant position, the management was in favour of external sources of recruitment as per the policy and they wanted the General Manager (HR) to search widely to choose the best candidate for the job. However, Mr Uday Shankar had different ideas for the post as he wanted to fill the vacancy by providing promotion to one of the three production managers in charge of the three production units of the company. These senior production managers had been with the company for quite a long time and had nearly unblemished service records. He believed strongly that the promotional opportunities can motivate these managers and improve their morale greatly. Therefore, he made a request to the top management for exempting this job position from the general promotion policy on a trial basis. The top management agreed to the proposal reluctantly and permitted the GM (HR) to proceed with his plan to fill the post by promoting one of the production managers as GM (Production).

As per its general promotion policy, the company adopted merit as the sole criterion for choosing the best candidate for the post. The HR department, after a series of promotional selection processes and a due consideration of the past performance records of the three production managers, chose one of the managers as GM (Production). However, the promoted manager happened to be the youngest of all the three managers and had the least number of years of service in the company. The top management approved the selection done by the HR department and issued the job-offer letter to the selected manager accordingly. Soon, the news of the selection spread and the unsuccessful managers expressed shock and disbelief as their first reaction. They could not believe that they were less efficient than the promoted manager. They expressed their displeasure to the top management and faulted the HR department for not selecting them.

The efforts of the management to convince them bore no fruits. Their performance began to decline and they showed all symptoms of leaving the organization early. In contrast, the promoted manager in his capacity of GM performed brilliantly and justified his selection. Thus, the decisions of Mr Uday Shankar produced mixed results for the company.

Questions for discussion

1. Do you agree with the decision of Mr Uday Shankar in resorting to internal recruitment for the GM (Production) post?
2. Had you been the GM (HR), how would you have filled up the post of GM (Production)?
3. According to you, what is the solution to the problem arising out of the internal recruitment?

Notes

1. Norman R. F. Maier, Psychology in Industrial Organization, 4th ed., (Boston, MA: Houghton Mifflin Company, 1973), p. 517.
2. George C. Thornton III and Deborah E. Rupp, Assessment Centers in Human Resource Management: Strategies for Prediction, Diagnosis, and Development (London: Routledge, 2006), p. 221.
3. Wendell French, The Personnel Management Process: Human Resources Administration, 2nd ed. (Boston, MA: Houghton Mifflin Company, 1970), p. 274.
4. The Policy Manual, University of North Texas, Classification Number: 1.3.12; available atwww.unt.edu/policy/UNT_Policy/volume1/1_3_12.html.
5. Oliver P. Field, Civil Service Law (Minneapolis: READ BOOKS, 2007), p. 134.
6. Oliver P. Field, Civil Service Law (Minneapolis: READ BOOKS, 2007), p. 135.
7. William J. Grinker, Donald D. Cooke and Arthur W. Kirsch, Climbing the Job Ladder: A Study of Employee Advancement in Eleven Industries (New York: E. F. Shelley and Company, 1970), p. 17.
8. Bruce W. Tuckman (1979) referred by Ali Balci in “Promotion in Rank in Higher Education”; available at http://dergiler.ankara.edu.tr/dergiler/40/520/6527.pdf.
9. Don A. Josi and Dale K. Sechrest, The Changing Career of the Correctional Officer: Policy Implications for the 21st Century (Boston: Butterworth-Heinemann, 1998), p. xii.
10. Linda Roussel, Richard J. Swansburg and Russell C. Swansburg, Management and Leadership for Nurse Administrators (Sudbury, MA: Jones & Bartlett, 2005), p. 198.
11. Ali Balci in “Promotion in Rank in Higher Education,” p. 3; available at http://dergiler.ankara.edu.tr/dergiler/40/520/6527.pdf.
12. Policy Manual, University of North Texas, Classification Number: 1.3.12; available at www.unt.edu/policy/UNT_Policy/volume1/1_3_12.html.
13. Dale Yoder, H.G, Heneman, J.G. Turnbull and C. H. Stone, Handbook of Personnel Management and Labour Relations (New York: McGraw-Hill, 1958).
14. The Policy Manual, University of North Texas, Classification Number: 1.3.12; available at www.unt.edu/policy/UNT_Policy/volume1/1_3_12.html.
15. Julius E. Eitington, The Winning Manager: Leadership Skills for Greater Innovation, Quality, and Employee Commitment (Houston, TX: Gulf Publishing, 1997), p. 191.
16. R. Coulson , The Termination Handbook (New York: Free Press, 1981).
17. V. M. Conley, “Separation: An Integral Aspect of Staffing Process,” College Student Affairs Journal, 21, no. 1, (2001): 57–63.
18. Steven Janosik, Roger B. Winston, Don G. Creamer and Diane L. Cooper, Supervising New Professionals in Student Affairs: A Guide for Practitioners (Washington: Hemisphere Pub, 2003), p. 158.
19. J. Mankidy, Disciplinary Rules and Procedures: India, Malaysia, Philippines, International Labour Organization, 1994, p. 3.