CHAPTER 9

Human Resource Management—Processes

CHAPTER OBJECTIVES

After reading this chapter, you should be able to:

1. Understand the meaning of human resource management
2. Enumerate the characteristics and objectives of human resource management
3. List the steps in the process of human resource management
4. Understand the meaning and process of HR Planning
5. Explain the meaning and sources of Recruitment
6. Enumerate the process of selection
7. Understand the Meaning and methods of training
8. List the methods of management development
9. Present an overview of induction process
10. Explain the meaning and types of compensation
11. Understand the meaning and objectives of performance evaluation
12. Describe the performance evaluation methods

India’s Inspirational Managers

Adi Godrej is the chairman of Godrej groups, one of India’s leading business conglomerates. This group has achieved an annual turnover of over US$ 4.1 billion (2015) through its presence in nearly 60 countries. Under Adi Godrej’s stewardship, Godrej groups have won several accolades for their effective human resource practices. For instance, Godrej Consumer Products Limited (GCPL) is ranked as one of the Best Employers of India in Aon Hewitt’s Best Employers List 2018. Similarly, GCPL features in the Top 25 list of “Great Places to Work” in a survey conducted by Grow Talent in association with Businessworld for four years in a row. Adi Godrej firmly believes that people are the biggest asset in any product-oriented industry and “all corporate strengths are dependent on people.” His unequivocal emphasis that “nothing comes before ethics and quality” is the essence of the group’s management philosophy. The unique human resource initiatives of Adi Godrej include among others: (i) formation of a Young Executive Board (YEB), essentially a cross-functional team, that works on strategic issues like corporate structure and performance management, and reports directly to its chairman, (ii) GOLD (Godrej Organization for Learning and Development) programme—a Web-based learning programme for its workforce in association with UK-based NetG, (iii) standardized 360-degree programme where employees can give anonymous feedback, (iv) best performance award and merit award to recognize the talents of the employees, (v) national suggestion scheme day, and (vi) GALLOP—a programme for new management trainees and GURUKUL—a summer internship programme.

Adi Godrej’s success through HR-based initiatives provides a fitting introduction and right surrounding to a discussion on human resource management in this chapter.

Introduction

Staffing function of managers involves effective utilization of human resources (HR) towards organizational goal accomplishment. Herein, HR refers to the knowledge, education, skills and proficiency of the employees. As a part of staffing function, line managers usually perform recruitment and selection, training and development, orientation and placement, performance evaluation, and industrial relations maintenance activities of their department. Line managers may perform these HR-related functions independently or in active consultation with the HR managers depending upon the size, policies and practices of the organizations. In relatively smaller organizations, staffing functions are mostly carried out by the line managers themselves in the absence of a separate HR department. In case of large organizations, HR departments are mostly responsible for staffing functions. They consult and advice the line managers on matters relating to HR management in their respective departments.

The general perception among people is that effective utilization of human resources is a difficult task. This is because the behaviour of human beings is not identical and as such is difficult to be regulated through common policies and practices. In organizations too, employee behaviour may differ from one occasion to another and from one time to another even in identical situations. Obviously, HR management is a complex and specialized task.

Characteristics of Human Resource Management/Staffing

Basically, HRM is one of the primary managerial functions of the managers. In fact, all other managerial functions such as planning, organizing, directing and controlling can be carried out only through the staffing function. Thus, the HRM function of a line manager is mainly concerned with the management of the work life of the subordinates. The important characteristics of HRM/staffing are as follows:

• Managerial function—Staffing is a managerial function performed by managers along with all other managerial functions. Managers make several decisions as a part of their staffing function that includes selection, promotion and performance evaluation of their subordinates.
• Continuous activity—In every organization, staffing is performed by managers at regular intervals. As such, it is an activity that is performed continuously through the life of an organization.
• All-inclusive activity—The staffing function pervades through the entire organization and is performed by all the managers. Similarly, it is a universal activity because human resources are necessary for any form of organization.
• Liaison task—Through staffing, managers act as the link-up between the top management and the employees, especially for their own subordinates. Actually, they should care for the interest of both the management and the labour in all their activities.
• A process—Staffing is basically a process because it is typically performed through an established and routine set of procedures. Managers usually follow certain established policies and procedures for HR functions, such as recruitment, selection and training of employees.

Employees’ capabilities and performance are the critical determinants of the survival and growth of organizations, irrespective of their nature and size. Therefore, managers must ensure that employees are carefully recruited, properly trained, appropriately rewarded and accurately evaluated in their jobs and are nurtured well in the organization.

Objectives of HRM/Staffing

The main objective of human resource management is to take care of the work life of employees from the time of their joining the organization to the time of their leaving it. Managers must also ensure that they get the best possible and willing cooperation from the employees for the fulfilment of organizational goals and objectives. The specific objectives are as follows:

• To ensure the presence of adequate human resources in the organization and also its effective utilization to fulfil the organizational goals.
• To recruit the right persons for the right jobs at the right time at the right cost.
• To offer training to employees to develop their skills and performance so that the individual and organizational objectives are effectively accomplished.
• To evaluate the performance of the employees to determine and reward their job efficiency.
• To improve employee motivation, group morale and labour−management relations through the implementation of employee welfare schemes.
• To protect and promote the quality of work life of employees through necessary employee health and safety measures.
• To encourage ethical values and behaviour, and also socially-responsive actions among the employees.
• To develop a sense of team spirit, team work and collaborative attitude among the employees.

HRM Process

HRM function can be performed entirely by line managers or by HR managers in consultation with the line managers. In any case, the role of line managers in the HRM functions is indispensable. The HR functions usually include activities such as procurement, training and development, induction, compensation, evaluation, integration and retention of the organizational workforce. Besides, managers should also attend to the health and safety needs and disciplinary issues of the employees as a part of HRM. We shall now discuss these functions. Figure 9.1 shows the process of HRM.

Procurement—It is the first step in establishing an employment relationship with an individual. Procurement involves a series of activities undertaken by the managers for filling the existing and future vacancies of the organization. This process includes activities like job analysis and designing, HR planning and recruitment and selection of the right persons for the right positions. Job analysis involves the determination of specific tasks and responsibilities associated with a job and also the identification of the skills, knowledge and abilities required for the job holder. Human resource planning refers to the plans involving the estimation and determination of the number and nature of persons required for filling the available job vacancies. Recruitment involves gathering a pool of applicants from which suitable employees may be selected at the appropriate time. Selection involves screening, testing, interviewing and choosing the most suitable employees for the organization.

Training and development—Training refers to the planned process of modifying the skills and behaviour of non-managerial workers to achieve effective performance in an activity or range of activities.¹ Training is normally a short-term programme to help workers overcome their skill deficits. Training generally focuses on the present job of the workers. In contrast, development is actually learning for the overall growth of an individual and does not normally relate to any particular job. Development may be defined as an attempt to improve the managerial effectiveness through a planned and deliberate learning process.² It is a long-term process meant to improve the analytical and decision-making abilities of managers. However, the purpose of both workers’ training and management development programme is to improve the employees’ performance in their job through improved knowledge, skills and abilities (KSA).

Induction—It is a planned and systematic process, administered by the management to help employees settle in their new job promptly and effectively.³ It is the first step in building a two-way relationship between the organization and the workers. An effective induction process facilitates the new employees to: (i) develop friendly relationship with the colleagues, supervisors and managers, (ii) become familiar with new processes, systems and equipment, (iii) navigate offices and buildings, (iv) understand employment conditions and (v) learn the job. The induction process usually involves orientation, socialization and placement. Orientation is the systematic process of offering essential information to new employees. Socialization means the process of exposing the new employees to the organizational culture and integrating them into it. Placement refers to the process of determining the exact job to which an accepted candidate is to be assigned.

Compensation—It means the fixation of the pay scale and other benefits for the employees. It is one of the crucial functions of the managers because it directly influences the costs of the organization. Similarly, compensation policy is also capable of offering maximum satisfaction to the employees. Therefore, it must serve the interests of both the employers and the employees. It must also reflect the realities of the organization, industry and the labour market. The effective compensation system must align well with the organizational objective and employee performance evaluation results.

Evaluation—It involves the evaluation of the individual and group performance of the employees of the organization. Performance evaluation is a systematic, periodic and impartial rating of an employee’s excellence in matters pertaining to his/her present job and his/her potential for a better job.⁴ It involves the process of measuring an employee’s actual performance and then comparing the same with the estimated standard performance to know his/her efficiency. Organizations can choose their own way of evaluating their employees’ performance and these can be both formal and informal.

Maintenance—It refers to the retention of able, efficient and experienced employees in the organization. Managers must not only recruit talented employees but also retain them in the organization for a reasonably long period of time. This is because their successful retention is critical to the long-term success and health of the business. When the employee attrition rate (number of employees leaving the organization) is high, organizations may suffer on account of high and repeated recruitment and training cost, lost knowledge, insecure feeling among employees and production disturbances. In contrast, organizations with high employee retention rate will enjoy high customer satisfaction levels, positive employee morale and consistent organizational performance and productivity.

Integration—It involves the process of aligning human resources with the business and its strategies. Human resources are central to the implementation of organizational goals and objectives. Cooperation and commitment of the employees are vital for organizations in acquiring the required capabilities and performance. It is therefore essential for managers to establish mutual cooperation and commitment by ensuring cordiality in their relations with the workers. In this regard, managers must ensure perfect integration between the human resource management processes and the organizational processes to achieve harmonious industrial relations. Maintenance and Integration are discussed elaborately in chapter-10. We shall first discuss the procurement function of HRM in detail.

Procurement

The basic aim of managers in performing Procurement functions is to ensure that they get the right persons for the right job at the right time and cost. We shall now see how managers get the required number of persons with the required competency and how their skills and abilities are further developed. The process of choosing people in organizations normally begins with HR planning followed by recruitment and selection. Let us discuss them in detail.

HR Planning

Human resource (HR) planning is the process of identifying and matching the HR requirements and HR availability in order to determine the future HR activities of an organization. Human resource planning is the first step in the process of recruitment and selection of employees. HR planning process involves the estimation of future manpower needs of an organization and meeting those needs through the labour force available to it. The three basic objectives of any HR planning are: (i) attracting, developing and retaining an efficient workforce, (ii) evaluating and rewarding its performance and (iii) developing and controlling HR plans and programmes to reduce HR cost. However, the direct and immediate purpose of human resource planning is investigating, forecasting, planning, controlling and matching demand and supply of manpower.⁵

Broadly, HR planning is affected by two important factors—the HR requirements of an organization and its availability within and outside the business. With regard to HR requirements, the role of human resource planning is the estimation of the number and nature of people needed for the accomplishment of a firm’s goals and strategies. As regards the HR availability, the task of human resource planning is to scan the environment to identify the availability of people with relevant skills.

Human Resource Planning Process

Human resource planning is an ongoing process for an organization to manage the changes in its internal and external environment on a sustained basis. The basic elements involved in human resource planning process are jobs, time, persons and funds.⁶ It is a continuous process because the changes in these elements are never ending. One such instance would be the entry and exit of employees. Employees might periodically leave a firm on account of retirement, resignation or death. Similarly, new employees might join on account of the vacancies caused by the quitting employees, expansion programmes undertaken, etc.

Although each organization should develop a tailor-made HR plan process to meet its own specific needs, the process shown in Figure 9.2 can be adopted by any organization by making necessary modifications. We shall now discuss the steps in HR planning in detail.

1. Formulation of organizational objectives and strategies: The first step in the HR planning process is the formulation of organizational objectives and strategies. The organizational strategy, along with the mission and vision statement, clearly expresses the future intent of the organization. The examination of the organizational strategy would provide a clear indication about the future HR requirements of the firm. Thus, HR plans are guided by the overall organizational objectives and strategies.
2. Scanning the environment: The basic purpose of environmental scanning is to examine the business environment to utilize the emerging opportunities and to tackle the threats. Environmental scanning involves the collection of information in the form of statements, actions and responses of people associated with the environment. This information is then closely scrutinized to figure out the likely changes in the environment. The important external environmental factors are: economic situations such as economic boom and recession; legislative measures such as labour and industrial laws; labour market conditions; technological advancements such as introduction of new technology and changes in the characteristics of workforce including the organization’s social–demographic profile.
3. Preparation of in-house skills and competencies inventory: In this phase of HR planning, an organization must assess the present strength of its labour force by preparing a skills inventory. A compilation of skills, competencies and qualifications of the entire workforce is described as skills inventory. The preparation of skills inventory may involve the determination of the sum of employees’ experience, knowledge, education and skill levels.

   The skills inventory can be prepared with the help of (i) skills audit—involving assessment of the performance of the employees from the task perspective and (ii) core competency analysis, which is basically an internal analysis of the general strengths and weaknesses of a firm. Core competencies are some extraordinary abilities of a firm that enable it to acquire competitive advantage in the market. It may be advanced technology, well-reputed management, problem-solving ability, employees’ knowledge, skill and ability (KSA), etc.

4. HR forecasting—a need assessment: HR forecasting involves estimating the future requirements of the organization in terms of the nature and number of people. Information gathered through external environmental scanning and internal skills assessment is used to predict the future HR requirements of the organization. However, HR forecasting usually depends on an organization’s estimation of future demand for its goods or services in the market and the resultant profits. In addition to demand forecasting, an organization may also consider several other factors like management philosophy, absenteeism and labour turnover rates, the organizational growth pattern, planned technological improvements, proposed changes in product lines and the financial capabilities for forecasting HR requirements.⁷

An organization may use one or more of the available forecasting techniques for assessing the future HR requirements. Techniques for forecasting HR requirements are the Delphi technique, managerial judgment, work−study techniques and zero-base forecasting.

The Delphi technique is basically a group-based systematic forecasting method. This technique does not require any face-to-face participation by the experts.

Managerial judgement is a forecasting method in which the HR requirements are usually forecast by the senior managers of the organization.

The work−study technique aims at examining the business operations to achieve optimum utilization of available human and physical resources. The major purpose of the work−study technique is to improve employees’ productivity and organizational efficiency.

Zero-base forecasting is a new entrant in the existing series of techniques available to forecast the HR requirements of an organization. This method requires line managers to justify the need to continue with the positions or jobs that fall vacant in their department. It does not consider any position as eligible for routine continuance.

HR Forecasting—Estimation of Availability

Once the human resource requirements of the organization are assessed, the next critical process is the estimation of availability of the required number of employees. Through supply forecasting, an organization gets a fairly good idea about the availability of employees with the necessary Knowledge, Skills and Ability (KSA). It also helps in locating the sources with suitable persons for employment. Usually, organizations have two prominent sources to meet their recruitments. They are internal sources and external sources.

Internal supply of employees—Internal supply refers to the availability of employees within an organization. The existing employees are the main source of recruitment for an organization. Techniques for forecasting HR availability through internal sources are turnover rate, productivity level, overtime and absenteeism policies and succession planning.

External supply—Generally, organizations get a major chunk of their HR supplies from external sources. While determining the HR availability from the external sources, organizations should consider factors like demographic changes, technological developments, labour characteristics, trends in mergers and acquisitions, government rules and regulations, attitude of unions, deregulations, income tax rates, labour mobility and phase of economic cycle like depression or boom.

Development of HR Plans and Programs

Once the organization completes the process of forecasting HR requirements and HR availability, the next step is the comparison. Here, the HR requirements are compared with HR availability to identify the labour shortage or surplus. The outcome of such comparisons would be either recruitment of more employees or reduction of the existing workforce called decruitment. In any case the first prerequisite for successful HR planning is job analysis. We shall therefore discuss job analysis briefly before discussing recruitment and selection.

Job Analysis

Job analysis is the process of gathering relevant information about various aspects of a job including its content, context and job performer’s skill requirements. Job analysis specifies the tasks involved in a job and the factors that influence the performance of that job. Job analysis has applications in almost all HR activities of an organization. In reality, the job analysis process involves ascertaining what people do at the job and understanding why and how they do it. This will enable organizations not only to identify the problems but also to develop solutions. As such, the primary purpose of job analysis is to provide solutions to practically all employee-oriented problems in an organization.

Job Analysis Process

Job analysis is the process of breaking down a specific job into parts and scrutinizing each part to gather necessary information. The steps involved in the job analysis process are: (i) determination of the purpose of job analysis, (ii) gathering of background information about the job, (iii) choosing the representative jobs for analysis, (iv) collection of relevant job information, (v) review of gathered information and (vi) development of job description and job specification.

Job Description

Job description is a written statement that describes all aspects of a job. It aims at simplifying and standardizing an organization’s HR activities. It also enables employees to clearly understand what is expected of them in their job. It contains both organizational information (structure, relationship, etc.) and functional information relating to the job.

Job Specification

Job specification is a document that specifies the minimum acceptable qualities required for a person to complete the job satisfactorily. Job specification usually contains details of employee characteristics and qualifications important for a job. Job characteristics may include physical, mental, social and behavioural characters of the job holders. The qualification may include education, experience, skills and other background requirements for a job holder. Job Description and job specification help in recruitment of suitable persons for the jobs.

Recruitment and Decruitment

The primary task of human resource management is locating and reaching out to the right people and motivating them to offer themselves as prospective job aspirants. In this regard, recruitment provides the first contact for the company with the potential employees. Recruitment may be termed as a search for promising job applicants to fill the vacancies that may arise in the organization. Decruitment means the process of reducing an organisation’s workforce. Managers usually decruit employees when there is surplus labour force. The different forms of decruitment are removal (dismissal or discharge), lay-off, transfer early retirement, etc.

Sources of Recruitment

Developing different sources of recruitment is essential for building a large applicants’ pool, However, there is no single combination of resources and methods that will work well for all organizations or for to be noted all labour markets, or even within a labour market.⁸ Hence, an organization should use multiple recruitment sources to build its applicants’ pool.

Internal Sources

Internal recruitment refers to filling open jobs with the current employees of the organization. Internal sources normally consist of existing employees, past employees and employee referrals.

Existing employees—The most common source of internal recruitment is the existing employees. Promotions and transfers from among the existing employees are examples of internal sources of recruitment.

Former employees—Past employees are also considered as an internal source of recruitment because they are aware of the policies and practices of the organization. Further, they enjoy familiarity with the present employees.

Employee referrals—Under this method, the present employees provide information on prospective candidates who are willing to be considered for the present vacancies. The applicants may be the friends or relatives of the referring employees.

External Sources

External sources of recruitment refer to reaching out to the external labour market to meet the labour requirements. The important external sources are as follows:

Employment exchanges—Employment exchanges have been established by the government to act as a liaison between the job providers and job seekers. The twin tasks of employment exchanges are to help employers locate suitable candidates for the vacancies arising in their organization and the job seekers with information about such job opportunities.

Outsourcing recruitment consultants—Transferring the whole or some parts of the recruitment process to an external HR consultant providing recruitment services is called outsourcing recruitment. In recent decades, there has been a sizeable increase in the number of private employment agencies providing qualified applicants to the private organizations in need of them.

Advertisements—Printed advertisements are the preferred mode of external recruitment for several reasons. As printed advertisements reach many people in a short period of time, the vacancies can be quickly communicated to the potential candidates.

Campus recruiting—When company representatives are sent to college campuses to recruit applicants to create an applicant pool from graduating classes, it is called campus recruiting.

Walk-ins and write-ins—When applicants directly write to the organization or just walk into the office to state their interest for employment, it is called write-ins and walk-ins. Walk-ins may be self-initiated or in response to an advertisement in newspaper placed by the organization.

Internet recruiting—Internet recruiting refers to placing an advertisement on the Internet calling for applications from potential applicants to fill the vacancies specified. Organizations can also use computers to scan, digitize and process the applicants’ resumes automatically. Electronic Curriculum Vitae (CVs) are used in Internet recruiting to collect information about the candidates.

Raiding or poaching—Raiding or poaching refers to attracting the employees of the rival organizations with attractive offers. Organizations may directly or indirectly contact the talented employees of their rival organization and gradually persuade these employees to join them. The selection process begins after the potential applicants are identified and successfully persuaded to apply for job positions.

Selection

Selection is the systematic process of identifying suitable candidates for the jobs available in the organization from the available applicant pool. The aim of this process is to finally select candidates who are best suited for the vacant jobs.

A good selection process must be able to distinguish applicants who are likely to perform well in the job from those who are not. Various steps are adopted by an organization in the selection process to predict the likely performance of each applicant in the job The steps are:

1. Employment application form/blank—This is a standardized format used to collect necessary information about an applicant to determine his/her suitability for the job. The purpose of an application form is to collect necessary information about an applicant in a short span of time. These bits of information are extremely useful in determining the suitability of the applicants for the job.
2. Selection test—This is a psychological test for comparing and contrasting the behaviour of two or more persons based on a standardized measure to predict their likely job performance, if selected. The important types of selection tests are: Intelligence (IQ) test, Aptitude test, Achievement test, Personality tests, Interest test and Honesty or integrity test
3. Selection interview—This is a face-to-face conversation with the candidate to collect the required information to determine his/her suitability for a job. Selection interview is one of the most widely used means of collecting necessary information about applicants. Interviews are used for gathering information that could not be collected through other selection tools.
4. Reference check—The next step in the selection process is checking the references furnished by the candidates. Many organizations have reference columns in their application forms. They instruct the applicants to mention a few names as referees. The purpose of collecting such references is to crosscheck the information provided by the candidates in different stages of the selection process.
5. Physical examination—It is a medical test to ensure that the selected candidates meet the physical requirements of the job. The aim of this examination is to make sure that the selected candidate is physically fit for the job.
6. Job offer—A job offer is a formal communication from the employer to the selected candidate, which specifies the details of an offer of job. Once the employee positively responds to the offer of employment, the process of integrating that employee into the job is set in motion. This process usually begins with training programmes for the new entrants.

Training

Training is the process by which an employee acquires the necessary knowledge and skills to perform the job well. Training plays a vital role in enhancing the efficiency, productivity and performance of the employees. In fact, a company’s strategic goals usually form the basis for its training programmes. Training typically comprises predetermined programmes to achieve desired performance efficiency at various levels, viz., individual, group and organizational.

Training is usually a short-term skill development exercise meant for non- managerial employees either to learn a job or to overcome the deficiency in the performance of the present job. The success of any training programme is in recognizing the training needs and then designing training programmes based on those needs.

Methods of Training

A wide range of training methods is available to an organization to deliver training to its employees. As shown in Figure 9.3, training methods are broadly divided into two categories: namely, on-the-job training and off-the-job training. We shall discuss these training methods now.

On-the-Job Training Methods

In these methods, employees learn their job by actually doing it. The basic idea of this kind of training is to transfer skills and knowledge from an experienced employee to a new employee, while sustaining the productivity of both employees. The various kinds of on-the-job training methods are as follows:

• Apprenticeship training—In this method, the superior becomes the instructor and imparts knowledge to the trainees (called apprentices) at the work spot.
• Job rotation—In this method, employees are moved from one job to another just to widen their skill, knowledge and experience. Job rotation training programmes aid employees in acquiring multiskills to manage their jobs comfortably.
• Internship—Internship is concerned with gaining supervised practical experience As a training technique, it permits participants to combine the theory learned in the classroom with business practices.
• Job instruction training—The step-wise process of imparting training to employees is called job instruction training. In this method, all the necessary steps in the job, together with brief write-ups about each step, are compiled sequentially. Each step would have a corresponding self-explanatory note. Each note would explain what needs to be done, why it has to be done and how it has to be done.

Off-the-Job Training Methods

In these methods, workers are given training at a place away from their usual workplace. This place could be a classroom or a training centre. The purpose of off-the-job training methods is to minimize distractions to the trainees. The following training methods are broadly regarded as off-the-job training methods:

• Programmed learning—In this method, trainees are made to reply to job-oriented questions, problems, concepts, cases and facts. As soon as this process is over, they are provided with feedback. The basic purpose of this method is to give sufficient information to the learners and then test their authority over the subject matter.
• Simulation method—In this method, the trainee gets trained either on the actual or on the simulated equipment but only in an off-the-job mode. The trainers review the performance, prepare the reports and make them available to the trainees.
• Laboratory training—This method is also called sensitivity training or T-group training. This training is typically organized for a small group of trainees who are normally not familiar with one another. It is organized under the supervision of seasoned trainers. Sessions are organized to let trainees meet personally to share their feelings, opinions, attitude, perceptions and values.
• Case study—In this method, trainees are provided with necessary information in a case study format. They are then expected to come up with decisions based on their understanding of the given cases. The case studies may deal with the activities of an organization or with the specific problems faced by it.
• Lecture method—This method is also called the chalk-and-talk method. This is a traditional method of imparting knowledge to a large number of trainees at the same time. It is a verbal form of delivering information in a classroom environment.
• Role-playing—Role-playing refers to acting out a particular role. This method is simply the learning-by-doing technique. The trainee, responds to the particular problem by acting out real-life situations. As mentioned earlier, training is meant for promoting non-managerial employees whill managers are provided with all round development.

Management Development

Management development is the process of upgrading the competencies of the managers through relevant learning experiences. The managerial job often involves decision making based on the knowledge of the latest developments in the related fields and excellent analytical skills. Managers cannot adopt a trial-and-error approach while making their choices in decision making. This is because their decisions may even affect the survival and growth of the organization. Thus, the sustained development of the capabilities of the managers is essential for accomplishing the goals of the business.

Management development programmes help organizations to make their managers better fit for existing and future managerial positions. Management development is a long-term process by which the managers’ conceptual knowledge and competencies are developed.

Methods of Management Development

The development programmes for managers usually include job rotation, internships, programmed learning, simulation method, laboratory training, case study, lecture method, audio–visual methods, role playing, business games, coaching, behaviour modelling, in-basket training, action learning, university-based programmes, executive coaches, in-house development centres and executive orientation. Let us now see the methods not discussed earlier in methods of training.

Mentoring—Mentoring refers to teaching by an intelligent and trusted guide and advisor. Mentoring, as a concept, aims at enhancing the personal and professional competencies of trainees through the process of advising and coaching.

Business games—The primary goal of business games is to ensure the involvement of the trainees in the learning process. In the business games technique, the trainees form teams and assume managerial roles in two or more imaginary but rival companies. These teams operate in a realistic but simulated situation and compete against one another. This method ensures that the trainees learn to take decisions without fear of the consequences of a wrong decision.

Coaching—Coaching refers to teaching and supervising someone. In the coaching method, senior managers are made responsible for coaching and developing the trainees who work directly under them.

Behaviour modelling—In this method, managers learn by imitating the behaviour (called a model) of others. The behaviour model enables the trainees to learn the right way of behaving in different situations. It is considered to be an ideal method for acquiring relevant skills and knowledge from others.

In-basket training—In-basket training is a development technique which educates trainees about the techniques of prioritizing the situations that await their responses. It helps managers in prioritizing the numerous business papers, reports, emails and telephone messages before acting on them.

Action learning—It is a development technique that allows trainee managers to work on the problems of some other departments and not on those of their own department. The basic idea behind this technique is to help managers widen their sphere of knowledge and get expertise in different fields. This method helps an organization to improve its in-house transfers and promotions of its managers.

University-based programmes—In this method, managers seek to develop knowledge by joining the programmes offered by universities, colleges and centres of excellence like the IIMs and the IITs.

Executive coaches—It is a programme of one-to-one collaboration between a certified external coach and a manager. Through executive coaching, managers improve their leadership skills, gain new perspectives and reach maximum potential. Executive coaching is acknowledged as an important element of standard leadership development programme for top-ranking executives.

In-house development centres—Large companies are establishing their own in-house development centres to develop the required skills and knowledge among their employees. It is a technique for exposing future managers to practical training courses so that they can enhance their managerial competencies.

Executive orientation—Executive orientation is the technique adopted by an organization to assist its new managers in learning the firm’s structure, culture and practices as soon as possible.⁹ After training, employees are finally made ready to take up their new rules in the organisation through induction process

Induction

Employee Induction is a process adopted by organisation to welcome new employees and prepare them for their new job responsibilities. It is actually a three stage process. These are orientation, socialization and placement. we shall now discuss them briefly.

Orientation

Employee orientation is the systematic process of offering essential information to new employees to make them feel comfortable in the organization. Employee orientation is a crucial stage in the hiring process of an organization. The newly-joined employees get a first impression of the organization through the orientation programmes. In orientation programmes, employees are usually briefed about the history of the firm, organizational culture, values and attitude, management’s expectations, job and department details and product or service information.

Socialization

Socialization is the process of introducing or integrating the new employees into the organizational culture. In simple terms, it is a process by which new employees learn the organizational culture. While orientation and placement are concerned about the smooth integration of employees into the job, socialization aims at inculcating suitable values, culture and behavioural standards in them.

Placement

Placement is the process of finding an appropriate fit between people and positions in an organization. It is actually the determination of the job to which an accepted candidate is to be assigned, and his/her assignment to that job.¹⁰

Once an employee successfully completes the stipulated orientation, he is next placed in the job. Based on the employees’ work performance and behaviour in the orientation programme, organizations choose not only appropriate jobs but also appropriate supervisors for placing the employees.¹¹

The next major HR function to be performed by managers is the determination of compensation payable to new and existing employees.

Compensation

Compensation is the sum of rewards for the job-related efforts of the employees and for their commitment and involvement in the job. Compensation administration is always a difficult issue for managers in the management of human resources. They often struggle to develop compensation packages that satisfy the interest of both the organization and the employees. Modern management no longer views compensation as merely a reward for the work done by the employees. It considers compensation as an effective tool to accomplish both the organizational and individual needs in a systematic and satisfactory manner.

Types of Compensation

Typically, an organization provides compensation to its employees in two forms. They are direct compensation and indirect compensation. We shall now discuss direct and indirect compensations.

Direct compensation—Direct compensation normally includes the amount payable to the employees as direct cash rewards for the work done by them. This compensation may include any form of monetary benefit payable to the employee at periodic intervals. Basic pay and variable pay are the important components of direct compensation. We shall now briefly discuss them.

Basic pay—This is the basic salary received by the employee as a direct compensation for the work done by him/her. It is a fixed component in the compensation and it often forms the basis for the computation of variable components like bonus and other benefits.

Variable pay—This is a pay which is basically linked to the performance of the individual, group or the organization. Variable pay may include incentives, commissions, profit-sharing, gain-sharing, and bonuses. We shall now discuss the important components of variable pay.

• Profit-sharing—In this variable type of pay, an organization distributes a part of its profit to its employees. An important form of a profit-sharing plan is the bonus plan, in which the employees get a share of the profit at the end of the year.
• Gain-sharing—In gain-sharing, compensation is determined on the basis of the group or organizational performance. Normally, savings in costs, increase in quality, productivity, and customer satisfaction are the measures used sharing the gains made by the organization.
• Equity plans—Equity stock option plans (ESOPs) offered by companies are also one of the direct compensation schemes. The purpose of ESOPs is to create an ownership interest for the employees in the organization.

Indirect compensation—Indirect compensation includes the benefits enjoyed by the employees but paid by the organization. Usually, indirect compensations are available to all employees irrespective of their performance in the job. Typically, the components of indirect compensation are health-care schemes like MediClaim, insurance schemes, leave travel concessions, retirement benefits and other social security schemes. An organization may also offer facilities like club membership, car and vacation at holiday resorts as a part of indirect compensation.

Incentives and Benefits

Wage incentive is any form of performance-based financial and/or non-financial rewards payable to attract and retain the best talents without any permanent financial commitment for the firm. The primary purpose of providing wage incentives is to enhance the organizational performance and employee productivity. They motivate employees to work harder in their jobs to get recognition in monetary and non-monetary terms.

Fringe Benefits

Fringe benefits are a kind of compensation available to employees over and above the usual fixed basic pay and variable wage incentives. The primary purpose of fringe benefits is to enhance the general well-being of the employees of an organization. These fringe benefits are mostly paid in kind in the form of perquisites. Such benefits include, among others, health and accident insurance, contribution to superannuation funds, leave facilities, education facilities, housing facilities, free or concessional ticket to travel, entertainment, provision of hospitality, accommodation in the nature of guest house, festival celebrations, scholarship and tours. Managers often use performance evaluation report for determining the employee compensation objectively. We shall now discuss about performance evaluation as a HR function.

Evaluation

Performance evaluation is an objective review and rating of an employee’s performance in comparison with the relative performance standards. An organization, through performance evaluation, seeks to know what an employee does. It is concerned with the evaluation of individual and group performance of employees. Each organization can have its own way of appraising the performance of its employees. The mode of appraisal may be formal or informal.

Objectives of Performance Evaluation

Every organization practices some form of performance evaluation to achieve the pre-specified objectives. Through performance evaluation, organizations look to:

Identify the performance gap—Performance evaluation helps in determining the gap between the actual performance of the employee and the performance expected or desired by the organization.

Ascertain the basis for promotion, transfer and termination—Performance evaluation facilitates the process of identifying the employees who deserve promotions, transfers or even terminations in an objective manner.

Design training and development programmes—The results of performance evaluation can be used to identify the specific skills required to be developed for each employee and thus can help in developing the training and development programmes.

Establish wage and salary administration—Performance evaluation helps in determining compensation packages like wage fixation, rewards allocation and incentives for the employees on a scientific basis.

Increase employee effectiveness—Performance evaluation facilitates an organization in improving the effectiveness of its employees by helping them identify their strengths and eliminating their weaknesses.

Improve interpersonal relations—It helps in building a cordial industrial relationship by encouraging good contact between the management and the labour. It acts as a mechanism for communication between the superiors and the employees.

Performance Evaluation Methods

Managers have to carefully choose from the number of evaluation options available to them. We shall now discuss the performance evolution methods briefly.

The Rating Scales Method

In this method, evaluators record their assessments of the performance of the employees on a scale. The scale lists a group of traits and a range of performance expected for each trait. These traits are usually job-related factors like the quality and quantity of job and personal factors such as reliability, interpersonal skills and adaptability. The scale may have various scores representing outstanding, average, improvement required, etc. The supervisor evaluates an employee by circling in the evaluation form, a scale of each factor that best describes his or her performance. Finally, the assigned values are summed up for each trait.

The Ranking Method

In this method, each employee is ranked by the evaluator on the basis of their relative worth to the organization, as compared to other employees. Each evaluated employee secures a place in a ranking order ranging from topmost to the worst for selected characteristics. In brief, the best employee in the list is ranked the highest and the poorest one is at the bottom for selected characteristics.

The Paired Comparison Method

In this method, two employees of a group are considered as a unit or pair. On the basis of predetermined criteria such as total performance, one employee is compared with another. This process of comparing a pair of employees continues till all the employees have been compared. Finally, the employee with the greatest number of favourable responses in inter-person comparison gets the highest ranking.

The Forced Distribution Method

In this method, the evaluator is forced to assign the employees to various performance categories like excellent, good, average and poor, each with a predetermined percentage. For instance, the evaluator must have to distribute 10 per cent of the employees to the excellent performer category, another 10 per cent to the poor performer category, and the remaining to in-between performer categories.

The Forced Choice Method

In this method, the evaluator has to evaluate the employees with the help of a series of statements (or list of traits). The series may contain both favourable and unfavourable statements. Each statement would carry weights or scores, which may not be known to the evaluator. Now, the evaluator has to choose the most appropriate statement, which best represents the individual being evaluated.

The Critical Incident Method

In this method, the manager is required to keep a written record of positive and negative work-related actions of the employees. For instance, when a critical incident relating to the behaviour of the employee affects the department’s functioning positively or negatively, the manager should record it. During the evaluation, these records can supplement other data effectively in evaluating the employee’s performance.

The Essay Method

In this method, the evaluator writes a short description of an employee’s performance. The evaluator has to provide a narrative of the employee’s strengths, weaknesses and potentials. This method focuses less on the employees’ regular day-to-day performance and more on their extreme behaviours at work.

The Checklist Method

In this method, a checklist containing a series of statements on the traits of the employees is prepared and presented to the evaluator, usually the immediate supervisor. The checklist has both positive and negative statements. Each statement is to be answered in the “Yes” or “No” format. It carries a score based on its importance to the overall evaluation. Once the evaluator completes the evaluation by ticking the appropriate columns that best represent the employee, the checklist is sent to the HR department for further processing like assigning predetermined scores and totalling such scores.

The Field Review Method

In this method, the evaluation of an employee is done by someone other than his/her own superiors. The purpose of this is method to avoid any possibility of the evaluator’s bias and prejudice. Normally, evaluation is done by the HR people, who scrutinize the records of those employees being evaluated and conduct interviews with them and their superiors.

The Confidential Report (CR)

Confidential report is a kind of evaluation practised mostly in government and public-sector organizations. In this method, the evaluation records are kept strictly confidential and are accessible only to the pertinent officials. The evaluation report is prepared by the immediate superiors, usually on the basis of the continuous observation of employees over a period of time, say, in a year.

The Behaviourally Anchored Rating Scales (BARS) Method

The Behaviourally Anchored Rating Scales (BARS) method is a combination of the positive features of several other methods like critical incident, essay method and rating scales. In this method, the different performance levels of employees are shown by the side of the scale, with each level described in terms of specific behavioural example, either good or bad performance. This method specifies the various dimensions to be rated in behavioural terms and makes use of critical incidents to explain the various levels of performance. It helps the evaluators with a uniform frame of reference for evaluating the employees. The following steps have been suggested to develop BARS:¹²

• Developing critical incidents
• Formulating performance dimensions
• Reassigning the incidents
• Rating the incidents
• Evolving a final instrument

The evaluations based on this method seem to be relatively consistent and reliable, since the ratings of the same person done by different evaluators tend to be similar.¹³ Further, among all the evaluation techniques, the BARS method is perhaps the most highly defensible in court because it is based on actual observable job behaviours.¹⁴

The 360-degree Feedback Method

The 360-degree feedback method is gaining popularity as a comprehensive technique to evaluate the performance of employees. The uniqueness of this method is that all those who interact with an employee in any capacity will prepare an evaluation report on him/her. This list may include senior managers, supervisors, employees, peers, team members, internal or external customers and even the employees themselves.¹⁵ Ward defines the 360-degree feedback as “the systematic collection and feedback of performance data on an individual or group derived from a number of the stakeholders on their performance.”¹⁶ The main purpose of the 360-degree feedback method is to ensure a objective and comprehensive evaluation of a person’s performance. Fig 9.6 Shows the evolution of 360 degree evolution.

Management by Objectives

Management by objectives (MBO) is a popular method that counts on joint goal-setting to formulate and achieve objectives for the organization, the department and the individual. The uniqueness of the MBO method is that it enables the employees to get involved in the evaluation process by setting their own goals. Basically, MBO involves setting specific measurable goals by the managers in consultation with the employees and, subsequently, examining the latter’s progress toward those goals. In a broader sense, an MBO Programme involves the following phases.

• Projecting the goals: Employees are asked by their managers to propose their own preliminary goals for a given period of time, in harmony with the organizational and department goals.
• Discussing the goals: Managers and employees elaborate on the goals and, if necessary, modify them before reaching an agreement regarding the specific goals.
• Developing yardsticks: Managers, in consultation with the employees, develop yardsticks for measuring performances to determine how far the objectives have been met.
• Executing performance reviews: The employee’s actual as well as agreed performance is reviewed periodically to assess the progress and problems in accomplishing the goals.
• Providing feedback: After assessing the employee’s progress, managers discuss the ways and means for improving performance, if needed, with the employees.

Performance evaluation generally provides essential information to the management to determine the monetary benefits and the future job assignments of the employees.

Employee Life Cycle

The employee life cycle refers to the various stages of employment process. The primary goal of any employee life cycle management is to implement processes aimed at improving the quality, productivity, and job retention of employees. This life cycle actually describes the stages of an employee’s time with a particular company and the role to be performed by human resource (HR) department at each stage. Employee’s life cycle in an organization begins with recruitment and ends with termination, which also includes several stages in between including career development. In simple terms, employee life cycle involves hiring of employees, then managing them on a day-to-day basis, and finally preparing them to exit from organization. Employee life cycle management involves identification of the stages in employees’ career and to help guide their career management in a mutually beneficial manner.

The employee life cycle in a particular organization can last for decades, years, or even days. The various stages of the employee life cycle decide the HR techniques for each individual employee. Each employee is usually at a different place at a different time in this cycle. This employee life cycle involves the execution of specific HR activities such as recruitment planning and selection, induction preparation, performance management, motivating, engaging and developing employees, managing discipline and grievance, succession planning, and managing the transition. Many managers believe that effective employee life cycle management can help them in reducing the organization’s cost per employee. As a result, managers are developing strategies for each stage of employee life cycle. We shall now see the common stages in employee life cycle (Figure 9.7) and the HR intervention required.

The following are the stages of employee life cycle management:

1. Acquire: The first and most important stage in employee life cycle is acquiring or hiring suitable people for the jobs. This stage requires careful analysis of the job and its function. Besides, organizations should use appropriate selection techniques for choosing the right persons. When a wrong person is hired, then the life cycle will be short. Moreover, the cost of replacing a wrong hire usually exceeds the cost of hiring the best person in the first attempt.
2. Inspire: After hiring, the next stage in employee life cycle is inspiring the employees to perform better in their job. In this regard, organizations normally conduct various training and orientation programmes to make sure that the employees are aware of their responsibilities and comfortable in the new role. Through training, employees get a feel of the organization which in turn helps them shape their attitude towards the job and the organizational members. This stage also involves challenging and motivating employees to give their best efforts for their personal as well as organizational growth.
3. Admire: After inspiring the employees to work willingly and effectively towards goal accomplishment, the next stage in employee life cycle is admiring the employees for the good work done. When employees are not recognized in a just and timely manner, their motivation and satisfaction is bound to decline. When the employees perceive their job, superiors, or organization negatively, they are more likely to leave the organization early. efficient performance evaluation, fair and timely promotional opportunities, and effective monetary incentive are useful HR techniques for recognizing and admiring the good work of employees.
4. Retire: At this stage, the employees’ relationship with the organization comes to an end. it may happen through retirement, resignation, or termination of employees. When an employee completes full or long tenure with the organization before leaving, it indicates the success of HR practices adopted at various stages of employee life cycle. When the organization succeeds in hiring, inspiring, and admiring the right talents, it can enhance both the employee life cycle and organizational life cycle substantially. When employees stay longer, it encourages other potential employees to join the organization. it also creates goodwill for the organization in the labour market.

Generally, the employee life cycle approach to people management calls for a unique set of HR initiatives and processes. This is because the employee life cycle generally differs from one organization to another depending on the size and nature of operations. However, a well-planned and flexible employee life cycle approach to HR management can add great value to any organizations.

Summary

1. HRM pertains to the policies, practices and organizational structure that facilitate the best use of human resources for accomplishing the organizational and individual goals.
2. Characteristics of human resource management/staffing are: (i) it is a managerial function, (ii) a continuous activity, (iii) an all-inclusive activity, (iv) a liaison task and (v) a process.
3. HRM process or functions include procurement, training and development, induction, compensation, valuation, maintenance and integration.
4. Human resource planning is the process of identifying and matching the HR requirements and HR availability in order to determine the future HR activities of the organization on the basis of the overall organizational objectives.
5. The steps in the HR planning process are setting organizational objectives and strategies, assessing the external environment, preparing in-house skills and competencies inventory, HR forecasting—need assessment, HR forecasting—estimation of availability, and developing HR plans and programmes.
6. Job analysis is the process of gathering relevant information on various aspects of a job including its content, context and the job performer’s skill requirements. Job description is a written statement that describes all the aspects of a job. Job specification is a document that specifies the minimum acceptable qualities required for a person to complete the job satisfactorily.
7. Recruitment may be termed as a search for promising job applicants to fill vacancies that may arise in an organization. Organizations have two sources of recruitment. One is internal recruitment, which refers to filling open jobs with the current employees of the organization, and the other is external recruitment, which refers to reaching out to the external labour market to meet the labour requirements.
8. Selection is the systematic process of identifying suitable candidates for the jobs available in the organization from the available applicant pool. The various stages of the selection process are employment application forms/blanks, selection tests, selection interview, reference checks, physical examination and job offer.
9. Training may be termed as the process by which an employee acquires the necessary knowledge and skills to perform the job.
10. The methods of training are broadly classified into on-the-job training and off-the-job training. In this the On-the-job training methods include apprenticeship training, job rotation, internship and assistantship and job instruction training. Off the-job training methods include programmed learning, simulation method, laboratory training, case study method, lecture method and role playing.
11. Induction process comprises three stages, namely employee orientation, socialization and placement. Employee orientation is the systematic process of offering essential information to new employees to make them feel comfortable in the organization and also in the job. Socialization is the process of exposing the new employees to the organizational culture systematically and integrating them into it eventually.
12. Compensation is the sum of rewards for the job related efforts of the employees and for their commitment and involvement in the job. It can be classified as direct and indirect compensation. The elements of direct compensation are basic and variable pay, which includes profit-sharing, gain-sharing and equity plans.
13. Wage incentives are any form of performance based financial and/or non-financial rewards of any permanent financial commitment for the organization. Fringe benefits are benefits payable to the employees over and above the direct compensation and usually without any reference to their performance.
14. Performance evaluation is an objective review and rating of an employee’s performance in comparison with the relative performance standards.
15. The objectives of performance evaluation are identifying the performance gap; providing a basis for promotion, transfer and termination; aiding in designing training and development programmes; assisting in wage and salary administration; helping in increasing employee effectiveness; improving interpersonal relations; and identifying employees’ grievances.
16. The performance evaluation methods are: rating scales, ranking method, paired comparison, forced distribution, forced choice, critical incident, essay method, cost–benefit, work standard, checklist, field review, confidential report (CR) and result-based evaluation system.
17. BARS is a combination of positive features of several other methods like critical incident, essay method and rating scales. In 360-degree feedback method, all those who interact with an employee in any capacity will provide an evaluation report on him. Management by objectives (MBO) counts on joint goal-setting to formulate and achieve the objectives of the organization.

Review Questions

Short-answer questions

1. Define the term human resource management.
2. State the characteristics and importance of HRM.
3. What are the objectives of HRM?
4. Define the term human resource planning.
5. What do you mean by the term job analysis?
6. Define the term employee orientation.
7. How will you define the term socialization?
8. What is meant by placement?
9. What do you understand by the term training?
10. What do you mean by management development?
11. State the meaning of the term compensation.
12. State the meaning of the term performance evaluation.
13. What are the objectives of performance evaluation?
14. Write a note on management by objective.

Essay-type questions

1. Discuss in detail the steps involved in the human resource planning process.
2. Enumerate the different internal sources of recruitment with examples.
3. Describe in detail the various external sources of recruitment.
4. Critically explain the steps in the selection process.
5. Describe the purposes of employee orientation with relevant examples.
6. Discuss in detail the on-the-job training methods with relevant examples.
7. Enumerate the off-the-job training methods with suitable illustrations.
8. Discuss the strategic role of management development programmes in the growth of an organization in detail.
9. Training is not an expense but a long-term investment on people. Discuss.
10. Describe any five management development programmes adopted by Indian industrial organizations.
11. Discuss in detail the different types of compensations using relevant examples.
12. Enumerate the methods of performance evaluation with relevant examples.
13. Critically examine the role and relevance of the Behaviourally Anchored Rating Scales as a performance evaluation technique.

Case Study

When PMS Lacks Employees Confidence

Kaveri Boilers Private Limited is a medium-sized company engaged in the production of industrial boilders for the past 40 years. It has 5,800 employees. It is basically a non-unionized company with traditional HR policies and practices. The performance management (PM) policy of this company primarily focused on rewarding efficiency and chastising incompetence. This company attached immense weightage to its annual performance evaluation practice and treated it as a major event in the organization. Even though the outcome of the performance evaluation process often formed the basis for compensation fixation, promotion, transfer, and disciplinary actions, many employees viewed it as a mere fault-finding exercise without any performance improvement initiative. The PM system of Kaveri worked as follows.

When an employee’s performance declines beyond the permissible levels, a warning is issued to him and he is usually asked to explain the reason for the decline. In the absence of any convincing reply or significant improvement in his performance within a reasonable time-frame, the company resorts to lateral transfers and the poor performer is normally shifted out of his present department and moved to another. However, the same appraisal system is continued there too and the employee is monitored closely. If the employee still continues to fare poorly, his services are terminated after due notice. This practice goes will with the over-all objective of the company’s performance management system, which focuses on quality sustenance at all levels without making any compromise even while preserving the morale of the performing employees by quickly recognising their talents and rewarding them rightly.

Questions

1. Can we blame the existing performance management system for all the problem of the company?
2. Are there any HR issues other than performance appraisal involved? If yes, what are they?
3. If you were to be the HR manager, what will you do to resolve the crisis?

Note: The solution for the above case is available at www.pearsoned.co.in/duraipom2e

References

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10. Paul Pigors and Charles A. Myers, Personnel Administration (New York: McGraw-Hill, 1973), p. 285.
11. Arun Monappa and Mirza S. Saiyadain, Personnel Management, 2nd ed. (New Delhi: Tata McGraw-Hill, 1996), p. 157.
12. Donald Schwab, Herbert Heneaman III, and Thomas DeCotiis, “Behaviorally Anchored Scales: A Review of the Literature,” Personnel Psychology (1975), 28: 549–62.
13. Kevin R. Murphy and Joseph Constans, “Behavioral Anchors as a Source of Bias in Rating,” Journal of Applied Psychology (1987), 72(4): 573−7.
14. Joseph J. Martocchio, Strategic Compensation, 2nd ed. (Upper Saddle River, NJ: Prentice Hall, 2001), p. 77.
15. Sue Bowness, “Full-Circle Feedback,” Profit (2006), 25: 77.
16. P. Ward, “A 360-Degree Turn for the Better,” People Management (1995): 20–2.