Blue Nile College, Covid 19 Emergency Response Reading Material

CHAPTER ONE

HUMAN RESOURCE MANAGEMENT: AN OVERVIEW

Introduction
Organizations possess different kinds of resources to achieve their objectives. These
resources can be money, materials, machines, men, etc. of all these resources only men
(workers) have the ability to develop and improve their abilities and skills. Moreover,
workers control all other resources of an organization. Human resource management is one of
the many specialized fields of management. Moreover, it could be considered as the most
important fields of management since all the management functions: planning, organizing,
staffing, leading, and controlling functions of management are initiated, determined, and
implemented by the people who make up the organization. Hence, human resource
management deals about this basic and pivotal resource of organizations, humans.
1.1 Definitions of Human Resource Management
“HRM is the planning, organizing, directing and controlling of the procurement,
development, compensation, integration, maintenance and separation of human resources to
the end that individual, organizational and societal objectives are accomplished.”
- Edwin Flippo
“Human resource management is the process of attracting, holding and motivating people
involving all managerial levels (line and staff).”
- Dunn & Stephens
According to Ivancevich, Donnelly, and Gibson (1998) “Human resource management is the
process of accomplishing organizational objectives by acquiring, retaining, terminating,
developing and properly using the human resources in organization.” Since every work in
organization is composed of people, Aswathappa (1998) argues that:
Acquiring their service
Developing their skills
Motivating them to high levels of performance, and
Ensuring that they continue to maintain their commitment to the organization is
essential to achieving organizational objectives.
According to Dessler (2001), “human resource management refers to the policies and
practices you need to carry out the people or human resource aspects of your management
job.” In general, human resource management refers to the process of managing diverse
people talent to achieve a common goal.

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Human resource management was also known as personnel management. However, the term
personnel management was changed to human resource management in the 1970s, and is
widely used today. This development is in line with the changes on an international level,
which recognizes human resource as a major source in an organization. Nevertheless, there
are still groups that refer to human resource management as personnel management.

To sum up, in any organizations, management of resources including human resource is a

sensitive issue. Hence, the management of human resource effectively (with high attainment
of goals) and efficiently (with low wastage of their efforts, costs incurred on them, etc)
continues to be one of the most important functions of the total management process.
1.2 Importance of Human Resource Management
Human resource management has a lot of importance for organization including:
 Helping to create a climate in which employees are encouraged to develop and utilize
their skills to the fullest
 Helping to maintain performance standards and increase productivity through
effective job design; providing adequate orientation, training and development;
providing performance-related feedback; and ensuring effective two-way
communication
 Helping to establish and maintain a harmonious employer/employee relationship
 Helping to create and maintain a safe and healthy work environment
 Developing programs to meet the economic, psychological, and social needs of the
employees
 It helps the management in attracting and in retention of skilled employees. A good
HR department devises a good recruitment and selection policy which would attract
highly skilled and qualified professionals towards the organization and the same HR
department devises various ways and means(both monetary and non-monetary) to
retain the best of them
 It tries to minimize absenteeism and encourages higher commitment
 It helps the workers to get an opportunity to keep on learning and have the scope to
get advanced training as well as the chance of developing themselves
 Helps to match the right man to the right job in order to realize the organizations
reason for existence.

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1.3 Functions of human resource management

Human resource management functions as a reference towards the implementation of task
and responsibility of providing and coordinating human resource in an organization. Usually,
most human resource management functions of a small organization are carried out by the
owner or the operations manager, apart from carrying out other business activities. A
medium-sized organization usually employs a human resource manager or personnel
responsible for conducting all matters pertaining to human resource. Most of the time, the
human resource manager does not specialize in any human resource functions. On the other
hand, a larger organization will have its own human resource management department which
is responsible for carrying out all the functions of human resource. Each human resource
function is managed by human resource experts specializing in a field. Human resource
management functions are not just about record keeping and updating files. They involve a
holistic and integrated approach that includes various activities designed to contribute to the
effectiveness of an organization. In order to realize the organizational objectives,
organizations must perform the above functions.

HRM functions are a set of activities directed towards the effective and efficient utilization of
human resource in the pursuit of organizational objectives. The main functions of human
resource management in an organization consist of the following:
 Staffing- involves human resource planning process, job analysis, recruitment and
selection of manpower.
 Human Resource Development – deals with orientation, training, employee
development, performance evaluation, and career plan
 Compensation and Benefits- related to salary administration and incentive and
benefits
 Safety and Health- concerned with creating a work environment that is able to prevent
any safety and health hazards.
 Industrial Relations- also known as employer-employee relations, refers to the
relationship between employer and employee or trade union that represent employees.

1.4 Objectives of human resource management

The objectives of human resource management are derived from the organization’s strategic
mission and goals. To achieve this goals, integration of both organization’s and employees’
interest is so vital. Agrawal (2000) lists the objectives of HRM as follows:

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Goal achievement: HRM makes effective utilization of human resource to achieve the
organizational goals. It also helps to achieve social goals through creating employment
opportunities and fulfilling the social needs of employees.
Structure maintenance: HRM also helps to maintain an adequate organizational structure to
improve the working relationships among employees and employers.
Goal harmony: HRM creates a harmony between organizational goals and personal goals of
employees. It recognizes and satisfies individual needs with a higher attainment of
organizational goals too.
Productivity improvement: HRM continuously develops employees through training and
other opportunities. The better the quality of the workforce, the better productivity and vice
versa.
Efficiency promotions: HRM ensures cost-effective utilization of human resources. This also
results the minimization of wastage and promotes efficiency.

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CHAPTER TWO
THE ENVIRONMENT OF HUMAN RESOURCE MANAGEMENT

Introduction
HRM system is an open system and it is affected by the environment in which it operates.
The term environment refers to the sum total of all forces or elements (i.e. both internal and
external) that affect the organization day-to-day life and its performance. The external factors
of the environment are those factors beyond the control of an organization that consists of the
political, economical, socio-cultural, technological, and international forces. On the other
hand, the internal environment factors are factors that are under the control of the
organization. These factors can be in the form of inputs into the organization (e.g.
organizational plan) or the process used by the organization (e.g. acquisition and motivation)
or outputs (product/services of that organization).
2.1 The Environmental Factors Affecting HRM
Since managers are involved in managing people for the purpose of achieving organizations
goals and objectives, they must recognize the rapid and dynamic changes in their
environment. Certainly, such changes affect the management of people in the organization.
Many factors affect human resource management. Such factors, which act on people
management, are not purely internal to the organization, but factors outside the organization’s
control will also affect its operation. Hence, effective people management should take both
the internal and external environments of the organization into consideration for the effective
and efficient transformation of people’s effort into some value (output). Below, both the
external and internal environments that affect HRM are discussed briefly.
2.1.1 The External Environment
According to Bartol and Martin (1991) the external environment factors are the major forces
outside the organization that have the potential of significantly importing on the likely
success of products and services (human resources in this scenario). The external factors are
also subdivided in two parts: as mega or macro or indirectly interactive and task or directly
interactive environments. The macro or mega environment constitutes the more remote
factors of the external environment while the later comprises the external elements that
closely affect the internal environment. Each of these environments is briefly examined
below.

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The Mega or Macro or Indirectly interactive Environment

The mega sometimes known as the general environment constitutes those background forces
or conditions in the external environment that can be substantially influence the operations of
an organization. This environment has a secondary and more distant effect upon the
organization. It is the portion of the environment that forms the general context for
managerial decision making. Mega environment includes factors like:
Economic Forces: Virtually all organizations require economic inputs such as capital, land,
labour, etc to operate their activities. Capital in the form of machinery, office equipment, and
tools of all kinds and cash are needed by organizations to ensure smooth operations. This
means that all kinds of operations are dependent upon the availability and prices of needed
capital items (David, 1987). The kind of economic activity seen in the country as a whole has
a very important influence on HRM. When the economy is a fast growing one, the labor cost
tends to increase and decrease when the economy is sluggish one. Currently, companies once
operated in America and British are dismissing employees in their own respective countries
and locate their business in developing countries to take the advantage of lower labor costs.
The political- Legal Environment: the political-legal forces are the laws and governmental
systems within which an organization has to perform its reason for existence. Governments
affect the operation of HRM through their policies and regulatory agencies. In the context of
Ethiopia the legislative, executive and judiciary body of the government constitutes the total
political-legal environment of the nation. The legislative also called the House of People
Representative (HPR) is a law making body. The new labor law (No 377/2003) enforce as of
today was enacted by the HPR. The executive, the government, follow-up the implementation
of the laws enacted by the HPR. The judiciary, on the other hand, has the role of interpreting
the laws. Since each of the above institution has significant influence in the management of
human resource management, managers must be cognizant of the political-legal conditions
that can have impact on their conditions. A few articles of the federal civil servants
proclamation (No. 262/2002) in Ethiopia are worth mentioning here. Article 11 sub article 1
states that a person under the age of 18 years shall not be eligible to be a civil servant. Article
13 also prohibits discrimination on the grounds of ethnic origin, sex, religion, political
outlook or any other ground.
The Technological Environment: Another significant force affecting human resource
management is the development of technology and scientific advancements in the
organization environment. Accordingly, the introduction of new technology interrupts the
workforce unless they keep up with changing technology. These make it necessary, on the

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part of the organization to train employees to help them adapt to the rapidly advancing
technology. For example, skills required for manual typewriter are no more required because
of the introduction of computer in the offices. Technological advances create new ways of
performing jobs in an organization. Thus, change has resulted either in total elimination or
reduction of many jobs in an organization. When jobs are reduced or eliminated, certain
knowledge and/skills are no longer important. The situation necessitates retraining some
promising potential employees while terminating others. Thus, new technologies force
organizations to consider their mission and goals as well as their methods.
The Socio-Cultural Environment: the socio-cultural forces are made up of the attitude, values,
ethics and demographic patterns of the society in which the organization runs its business.
These forces are important since they determine the type of goods and/or services an
organization should produce to realize its raison d’être for existence. To sum up, people who
become members of an organization are the products of the society. As a result, their
personality, and their attitude towards work and their work ethics affect organizational
operations. According to Aswathappa (1998) in the context of an organization, ethics for
example, implies hard work and commitment to work. A strong work ethics ensures
motivated employees whereas the opposite results a weak work ethics.
The Physical Environment: the physical environment has considerable influence on people
management. Employee hiring, transfer, compensation and motivation are to be guided by the
climate, terrain and other natural conditions. The physical factors in which an organization
operates can have an effect on the organization’s ability to attract and retain employees. For
example, an employee transferred or newly assigned to an organization’s branch office
located in hot areas may be allowed weather and housing allowances. Thus, organizational
policies and practices related to human resource management must be tuned to meet the
environmental conditions like the physical environment.
The Task or Directly interactive Environment
The task environment consists of the actual organizations, groups, and persons with whom an
organization must interact in order to survive and prosper (schermerhorn, 2001). These
environmental elements have a direct and specific impact on the organization’s performance.
Important factors common to most organizations are:
Suppliers: these are institutions that provide human resources to an organization. Colleges,
universities, training institutions, employment exchange, etc are the sources that supply
personnel. Since organizational effectiveness and efficiency largely depend on the skills and

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knowledge of its employees choosing the right supplier should be an important strategic
decision of the management.
Competitors: an organization may face competition in the labor market. As the number of
institutions looking for employees increases, so does the importance of attractive
compensation, working conditions, motivation and other related HRM functions. When an
organization competes for one professional, the organization with better terms and conditions
of employment will naturally win.
Consumers: the people or the organizations that use the organization’s good and/or services
can directly affect its operations. Consumers demand high-quality products or service at a
reasonable price. This largely depends on the skills, knowledge and commitment of the
organization’s human resources.
2.1.2 The Internal Environment
Employee ability and productivity: If the employees are highly qualified and self-motivated
to work, the personnel policies would be much more employee friendly and the vice is also
true
Organizational climate: The kind of inter-personnel climate inside the organization plays an
important part in its HRM related policies. If the climate is friendly, cordial, cooperative and
based on mutual respect then the human resource policies would be entirely different than
that of an organization whose inter-personnel climate is vicious, competitive and conflict
based.
Management philosophy: The kind of philosophy the top managers have regarding human
resources dictated to a large extent the way personnel policies and procedures are evolved in
that organization. In addition to this the vision, mission, goal, strategy, work groups, culture
and policy of the organization also affects the HRM functions in the internal side.

2.2 Models of Human Resource Management

The belief that employee’s involvement in an organization’s decision making increases
performance and in turn results employee satisfaction, commitment and motivation for
further involvement results in the development of the human resource management model.
But whatever model is used, HRM professionals are expected to be technical, cognitive,
flexible and communicative so as to achieve a learning organization (Senge, 1996) which is
efficient and innovative.

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Employee Organizational Satisfaction

Involvement Performance

Commitment and Willingness to become

more involved
Figure 2.2: The HRM Model
The Harvard Model
The Harvard model (Beer, Spector, Lawrence, Quin Mills and Walton, 1984) works as a
strategic map to guide all managers in their relations with employees and concentrates on the
human or soft aspect of HRM. It strives at employee commitment (Wood, 1995) not control.
It also works on the premise that employees needed to be congruent, competent and cost
effective.
Human resource flows into the organization are used for recruitment, selection; through the
organization, placement, promotion, out of the organization as termination pay.

The Michigan model

The Michigan model (Fombrun, Tichy and Devanna, 1984) focuses on hard HRM. It holds
that people should be managed like any other resources and so obtained cheaply, used
sparingly, developed and exploited fully. It also emphasized the interrelatedness of HRM
activities. According to this model, selection, appraisal, development and rewards were
geared towards organizational performance. The notion of the environment (Cusworth and
Franks, 1993) was ignored for it ignored situational factors, stakeholder interests and the
notion of strategic choice.
It advocated a mergence of internal human resource policies with external business strategy.
The advantage of the model laid on its attachment to market performance and organizational
growth.
It also led to cost minimization for employees were regarded as any other resources to be
obtained cheaply. However the disadvantage is the possibility of market failures due to
ignorance of environments.
Guest comparative model
Guest comparative model (Guest, 1997) works on the premise that a set of integrated HRM
practices (Purcell, 1999) will result to superior individual and organizational performance. It
advocates a significant difference of HRM from PM. It holds that HRM strategies like

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differentiation, innovation, the focus on Quality and cost reduction will lead to practices like
better training, appraisal, selection, rewards, job designs, involvement, and security leading to
more quality outcomes; commitment and flexibility. It will then affect performance in that
productivity will increase; innovation will be achieved as well as limited absences, labor
turnover, and conflict or customer complaints.
The ‘Choice’ model and its benefits
The choice model (Analoui, 2002, 2007), is an integrated or holistic model for HRM. It holds
those drivers for formulating HRM policies and frameworks are 3 sources namely; the
organization, personal and external.

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CHAPTER THREE
JOB ANALYSIS AND HR PLANNING
3.1 Job Analysis Defined
Developing an organizational structure, results in jobs which have to be staffed. Job analysis
is the procedure through which you determine the duties and nature of the jobs and the kinds
of people (in terms of skills and experience) who should be hired for them.’ It provides you
with data on job requirements, which are then used for developing job descriptions (what the
job entails) and job specifications (what kind of people to hire for the job). Some of the
definitions of job analysis ate given as follows, to understand the meaning of the term more
clearly:

According to Michael L. Jucius, “Job analysis refers to the process of studying the
operations, duties and organizational aspects of jobs in order to derive specifications or as
they called by some, job descriptions.”

According to DeCenzo and P. Robbins, “A job analysis is a systematic exploration of the

activities within a job. It is a basic technical procedure, one that is used to define the duties,
responsibilities, and accountabilities of a job.”

According to Herbert G Herman “A job is a collection of tasks that can be performed by a

single employee to contribute to the production of some product or service provided by the
organization. Each job has certain ability requirements (as well as certain rewards) associated
with it. Job analysis process used to identify these requirements.
The most basic building block of HR management, job analysis, is a systematic way to gather
and analyze information about the content and human requirement of jobs, and the context in
which jobs are performed. Job analysis usually involves collecting information on the
characteristics of a job that differentiate it from other jobs.

3.1.1 Purposes of Job Analysis

 Improve productivity level through careful study of the jobs

 Eliminate unneeded job requirements that might cause discrimination in employment

 Determine training and development needs for employees

 Compensate employees fairly and equitably

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 Helps to set a realistic performance standards

 Helps to redesign jobs in order to improve employees moral and performance

3.1.2 Job Analysis Methods

Job analysis information can be gathered in a variety of ways. One consideration is who is to
conduct the job analysis. Most frequently, a member of the HR staff coordinates this effort.
Depending on which of the methods discussed next is used, others who often participate are
managers, supervisors, and employees doing the jobs. Another consideration is the method to
be used. Common methods are observations, interviews, questionnaires, and specialized
methods of analysis. Combinations of these approaches frequently are used, depending on the
situation and the organization. Each of these methods is discussed in some detail next.
Observation
When the observation method is used, a manager, job analyst, or industrial engineer observes
the individual performing the job and takes notes to describe the tasks and duties performed.
Observation may be continuous or based on intermittent sampling. Use of the observation
method is limited because many jobs do not have complete and easily observed job duties or
complete job cycles. Thus, observation may be more useful for repetitive jobs and in
conjunction with other methods.
Managers or job analysts using other methods may watch parts of a job being performed to
gain a general familiarity with the job and the conditions under which it is performed.
Multiple observations on several occasions also will help them use some of the other job
analysis methods more effectively.

Interviewing
The interview method of gathering information requires that a manager or HR specialist visit
each job site and talk with the employees performing each job. A standardized interview form
is used most often to record the information. Frequently, both the employee and the
employee’s supervisor must be interviewed to obtain a complete understanding of the job. In
some situations, such as team directed jobs, group interviews also can be used, typically
involving experienced job incumbents and/or supervisors. It usually requires the presence of
a representative from the HR department as a mediator. For certain difficult-to-define jobs,
group interviews are probably most appropriate. The interview method can be quite time
consuming, especially if the interviewer talks with two or three employees doing each job.
Professional and managerial jobs often are more complicated to analyze and usually require
longer interviews. For these reasons, combining the interview with one of the other methods
is suggested.

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Questionnaires
The questionnaire is a widely used method of gathering data on jobs. A survey instrument is
developed and given to employees and managers to complete. The major advantage of the
questionnaire method is that information on a large number of jobs can be collected
inexpensively in a relatively short period of time. However, the questionnaire method
assumes that employees can accurately analyze and communicate information about their
jobs. Employees may vary in their perceptions of the jobs, and even in their literacy. For
these reasons, the questionnaire method is usually combined with interviews and observations
to clarify and verify the questionnaire information.

3.2. Stages in the Job Analysis Process

The process of job analysis must be conducted in a logical manner, following appropriate
management and professional psychometric practices. Therefore, a multistage process usually
is followed, regardless of the job analysis methods used. The stages for a typical job analysis
are outlined here, but they may vary with the methods used and the number of jobs included.
Step 1: Planning the Job Analysis
It is crucial that the job analysis process be planned before beginning the gathering of data
from managers and employees. Probably the most important consideration is to identify the
objectives of the job analysis. Maybe it is just to update job descriptions. Or, it may include
as an outcome revising the compensation programs in the organization. Another objective
could be to redesign the jobs in a department or division of the organization. Also, it could be
to change the structure in parts of the organization to align it better with business strategies.
Whatever the purpose identified, it is vital to obtain top management support. The backing of
senior managers is needed as issues arise regarding changes in jobs or the organizational
structure. Support from even the highest levels of management helps when managerial and
employee anxieties and resistance arise.

Step 2: Preparing and Introducing the Job Analysis

Preparation begins by identifying the jobs under review. For example, are the jobs to be
analyzed hourly jobs, clerical jobs, all jobs in one division, or all jobs in the entire
organization? In this phase, those who will be involved in conducting the job analysis and the
methods to be used are identified. Also specified is how current incumbents and managers
will participate in the process and how many employees’ jobs will be considered. Another
task in the identification phase is to review existing documentation. Existing job descriptions,
organization charts, previous job analysis information, and other industry-related resources

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all may be useful to review. Having details from this review may save time and effort later in
the process. A crucial step is to communicate and explain the process to managers, affected
employees, and other concerned people, such as union stewards. Explanations should address
the natural concerns and anxieties people have when someone puts their jobs under close
scrutiny. Items to be covered often include the purpose of the job analysis, the steps involved,
the time schedule, how managers and employees will participate, who is doing the analysis,
and whom to contact as questions arise. When employees are represented by a union, it is
essential that union representatives be included in reviewing the job descriptions and
specifications to lessen the possibility of future conflicts.

Step 3: Conducting the Job Analysis

With the preparation completed, the job analysis can be conducted. The methods selected will
determine the time line for the project. Sufficient time should be allotted for obtaining the
information from employees and managers. If questionnaires are used, it is often helpful to
have employees return them to supervisors or managers for review before giving them back
to those conducting the job analysis. The questionnaire should be accompanied by a letter
explaining the process and instructions for completing and returning the job analysis
questionnaires. Once data from job analysis has been compiled, it should be sorted by job, the
job family, and organizational unit. This step allows for comparison of data from similar jobs
throughout the organization. The data also should be reviewed for completeness, and follow-
up may be needed in the form of additional interviews or questions to be answered by
managers and employees.

Step 4: Developing Job Descriptions and Job Specifications

At this stage the job analysts will prepare draft job descriptions and job specifications.
Generally, organizations have found that having managers and employees write job
descriptions is not recommended for several reasons. First, there is no consistency in format
and details, both of which are important given the legal consequences of job descriptions.
Second, managers and employees vary in their writing skills. Also, they may write the job
descriptions and job specifications to reflect what they do and what their personal
qualifications are, not what the job requires. Once the drafts are completed, they should be
reviewed by managers. Whether employees review the drafts or wait to receive the final job
descriptions is often determined by the managerial style of the supervisors/managers and the
culture of the organization regarding employee participation and communication. When

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finished, job descriptions are distributed by the HR department to managers, supervisors, and
employees. It is important that each supervisor or manager review the completed description
with individual employees so that there is understanding and agreement on the content that
will be linked to performance appraisals, as well as to all other HR activities.
Step 5: Maintaining and Updating Job Descriptions and Job Specifications
Once job descriptions and specifications have been completed and reviewed by all
appropriate individuals, a system must be developed for keeping them current. Otherwise, the
entire process, beginning with job analysis, may have to be repeated in several years. Because
organizations are dynamic and evolving entities, rarely do all jobs stay the same for years.
Someone in the HR department usually has responsibility for ensuring that job descriptions
and specifications stay current. Employees performing the jobs and their managers play a
crucial role because, as those closest to the jobs, they know when changes occur. One
effective way to ensure that appropriate reviews occur is to use job descriptions and job
specifications in other HR activities. For example, each time a vacancy occurs, the job
description and specifications should be reviewed and revised as appropriate before recruiting
and selection efforts begin.

Job Descriptions and Job Specifications

The output from analysis of a job is used to develop a job description and job specifications.
Together, they summarize job analysis information in a readable format and provide the basis
for defensible job-related actions.
Job Descriptions
A job description indicates the tasks, duties, and responsibilities of a job. It identifies what is
done, why it is done, where it is done, and briefly, how it is done. There is no standard format
for a job description, but most well-written, useful descriptions include: job title, summary,
equipment, environment and activities.
Job Specifications
While the job description describes activities to be done, it is job specifications that list the
knowledge, skills, and abilities an individual needs to perform a job satisfactorily.
Knowledge, skills, and abilities (KSAs) include education, experience, work skill
requirements, personal abilities, and mental and physical requirements. Job specifications for
a data entry operator might include a required educational level, a certain number of months
of experience, a typing ability of 60 words per minute, a high degree of visual concentration,
and ability to work under time pressure. It is important to note that accurate job specifications

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identify what KSAs a person needs to do the job, not necessarily what qualifications the
current employee possesses.

3.3 Importance of Job Analysis Information

The information generated by the job analysis is used as a basis of several
interrelated personnel management activities:
 For Recruitment and Selections Activities
 To decide on the training and Development needs
 For placement and Orientations
 Planning the Human Resource
 For Career Development
 To undertake Employee Performance Appraisal
 Compensation
 Employee Counseling
 Safety and Health
3.4 Human Resource Planning
3.4.1 Human Resource Planning
Human resource planning is both a process and a set of plans. It is how organizations assess
the future supply of and demand for human resources. If planning and effective utilization of
human resources is not a significant goal for the organization, employment planning is likely
to be informal and slipshod. If top management values stable growth, HR planning will be
less important than if the goals include rapid expansion or diversification.
3.4.2 Importance of HR planning
 Provides mechanisms to eliminate gaps that may exist between supply and demand
 In order to meet the requirements of expansions and diversification programs of the
organization a HR plan is important.
 The present situation of fast paced change in technology, and changing needs of the
workforce has also necessitated creation of an effective HR plan to cope with future
uncertainties.
 It is useful in deploying the right kind of personnel to the right kind of job at the right
time which would ensure higher productivity.

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3.4.3 The HR Planning Process

All effective HR Planning share the same features. It is generally agreed that HR Planning
involves four phases or stages.
Step1: Situation Analysis & Environmental Scanning
The first stage of HR planning is the point at which HRM and strategic planning first interact.
The strategic plan must adapt to environmental circumstances, and HRM is one of the
primary mechanisms an organization can use during the adaptation process.

Step2: Forecasting Demand for Employees

The next phase of HR planning process is estimating not only how many but also will what
kinds of employees will be needed.
Demand forecasting techniques
The Expert Estimate: One or more “experts” provide the organization with demand estimates
based on experience, guesses, intuition, and subjective assessments of available economic
and labor force indicators.
Trend Projection: This top-down technique develops a forecast based on a past relationship
between a factor related to employment and employment itself. Example: Sales levels are
related to employment needs.
Modeling & Multiple-Predictive Techniques: This top-down approach uses the most
sophisticated forecasting and modeling techniques. Trend projections relate a single factor,
such as sales, to employment. A more advanced approach relates many factors to
employment such as sales, gross national product and discretionary income. Or, the
organization may be mathematically modeled so that simulations can be run. These types of
forecasting techniques include markov chain and regression analysis.
Unit demand forecasting: This is a bottom-up approach. Unit managers analyze current and
future needs person-by-person and job-by-job. Headquarters totals the unit forecasts. The
sum is the corporate employment forecast.
Step 3: Analyzing the Current Supply of Employees
This phase of HR planning should answer the question, “How many and what kinds of
employees do I currently have, in terms of the skills and training necessary for the future?”
Step 4: Action Decisions in HR Planning
After the supply of and demand for workers has been analyzed, the two forecasts must be
compared. Whenever there is a gap between the two estimates, a course of action must be
chosen

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If the supply of workers is less than the demand: It can be filled with present employees who
are willing to work overtime, if there is a shortage of skilled employees train and/or promote
present employees or recruit less-skilled employees and recall employees who were
previously laid off.

When comparison of demand for and supply of employees indicate a surplus, possible
solutions include: attrition, early retirements, demotions, layoffs and terminations. Most
organizations avoid layoffs by using attrition, early retirement, creation of work, and so on.
Attrition can be accelerated by encouraging employees to leave early. If voluntary reductions
don’t eliminate the gap between supply and demand, layoffs may be necessary. Poorly
designed workforce reductions can kill morale.

3.5 Factors Affecting the HR Planning

Type and Strategy of the Organization: Type of the organization determines the production
processes involve, number and type of staff needed and the supervisory and managerial
personnel required. HR need is also defined by the strategic plan of organization. If the
organization has a plan for organic growth
then organization need to hire additional employees. On the other hand If the organization is
going for mergers and acquisition, then organization need to plan for layoffs, as mergers can
create, duplicate or overlap positions that can be handled more efficiently with fewer
employees.
Organizational Growth Cycles and Planning: All organizations pass through different
stages of growth from the day of its inception. The stage of growth in which an organization
is determines then mature and extends of HRP. Small organizations in the earlier stages of
growth may not have well defined personnel
planning. But as the organization enters the growth stage they feel the need to plan its human
resource. At this stage organization gives emphasis upon employee development. But as the
organization reaches the mature stage it experience less flexibility and variability resulting in
low growth rate. HR planning becomes
more formalized and less flexible and less innovative and problem like retirement and
possible retrenchment dominate planning
Environmental Uncertainties: Political, social and economic changes affect all
organizations and the fluctuations that are happening in these environments affect
organizations drastically. Personnel planners deal with such environmental uncertainties by
carefully formulating recruitment, selection, training and development policies and

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programmers. The balance in the organization is achieved through careful succession

planning, promotion channels, layoffs, flexi- time, job sharing, retirement, other personnel
related arrangements.

Time Horizon. HR plans can be short term or long term. Short term plans spans from six
months to one year, while long term plans spread over three to twenty years. The extent of
time period depends upon the degree of uncertainty that is prevailing in an organizations
environment. Greater the uncertainty, shorter the plan time horizon and vice versa.

Type and Quality of information: The information used to forecast personnel needs
originates from multitude of sources. The forecast depends to a large extent upon the type of
information and the quality of data that is available to personnel planners. The quality and
accuracy of information depend upon the clarity with which the organizational decision
makers have defined their strategy, structure, budgets, production schedule and so on.
Nature of Jobs Being Filled: Personnel planners need to be really careful with respect to the
nature of the jobs being filled in the organization. Employees belonging to lower level who
need very limited skills can be recruited hastily but, while hiring employees for higher posts,
selection and recruitment need to be carried out with high discretion. Organization need to
anticipate vacancies far in advance as possible, to provide sufficient time to recruit suitable
candidate.

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CHAPTER FOUR
RECRUITMENT AND SELECTION
I. Introduction
After the demand for additional human resource is approved by both the human resource
department and other units of the organization in the process of human resource planning,
recruitment, the second stage in the procurement of human resource follows. The recruitment
process acts as a bridge between the prospective employees and the organization.
4.1 Recruitment – Definition
Recruitment is defined as the process of inviting potential applicants for actual or anticipated
organizational vacancies. Hence, the main purpose of recruitment is to identify sources of
manpower so as to satisfy the man power requirement of the organization. It is the most
important function of the personnel department.
4.1.1 Features and Purposes of Recruitment
The recruitment practice of any organization is characterized by creating a pool of applicants
in order to increase the selection ratio- the number of employees for the job openings.
The organization can’t be successful unless and otherwise it attracts best and qualified
personnel towards it. The best personnel policies, the best devised plans, and the latest
technology can’t be harnessed properly if the manpower is of low quality.
4.1.3 Factors Affecting Recruitment
There are various factors that affect the recruitment practice of the organization. Shortly, we
can classify them as:
External environmental factors- including:
 Government and union restrictions
To determine if an organization has violated the law, government agencies review:
 Recruitment sources
 Recruiting advertising
 Estimates of the firm’s employment needs for the coming year
 The number of applicants processed by demographic area and job category
 The evidence which was used to verify the legal right to work
 Labor market condition
If there is a surplus of labor at recruiting time, even informal attempts at recruiting will
probably attract more than enough applicants. However, when full employment is nearly
reached in an area, skilful and prolonged recruiting may be necessary to attract any applicants
who fulfill the expectations of the organization.

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 Composition of labor force and location of organization

As the number of legal requirements has increased, it has become important for an
organization to analyze the composition of its workforce. Such an analysis is done to
determine whether the firm’s employment practices are discriminatory. The location of the
organization and the relevant labor market will play an important role in the composition of
the workforce. However, regardless of the location of organization, an aggressive diversity
management program will be essential for organizations entering the 21st century.
Internal environmental factors- consist of:
 Organizational Policies and Practices
HRM policies and practices affect recruiting and who is recruited. One of the most significant
is hiring from within. Many organizations recruit from outside only at the initial hiring level.
Most employees favour this approach. Some employers feel it helps protect trade secrets.
However, an organization may become so stable that it is set in its ways. Other factors
include favouring the disabled, veterans, or ex-convicts, and nepotism
 Organizational Image
All else being equal, it is easier for an organization with a positive image to attract and retain
employees. Recruitment is also easier for organizations with a strong community presence or
positive name recognition.
4.1.4 Source and Methods of Recruitment
Sources of Recruitment are the places, agencies, and institutions to which recruiters go and
seek potential candidates that will fill the vacant positions or the job needed. The sources of
recruitment are generally categorized in to two. These are:
A) Internal recruitment: recruitment from the organization itself
B) External recruitment: recruiting from outside of the organization
Internal Recruitment: This involves recruitment from within the organization; it could be
through promotion, demotion or lateral transfer. The employees who already are a part of the
organization are given an opportunity for felling up vacant positions. Here, not only the
current employees but also ex-employees of the organization belong to the internal source of
recruitment.

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Advantages and disadvantages of Internal Sources of Recruitment

Advantages Disadvantages
Economical: The cost of recruiting internal Limited Choice: The organization is forced
candidates is minimal. No expenses are to select candidates from a limited pool. It
incurred on advertising may have to sacrifice quality and settle
down for less qualified candidates.
Suitable: The organization can pick the Inbreeding: It discourages entry for
right – candidates having the requisite talented people, available outside an
skills. The candidates can choose a right organization. Existing employees may fail
vacancy where their talents can be fully to behave in innovative ways and inject
utilized. necessary dynamism to enterprise activities.
Reliable: The organization has knowledge Inefficiency: Promotions based on length of
about the suitability of a candidature for a service rather than merit, may prove to be a
position. “Known devils are better than blessing for inefficient candidates. They do
unknown angels.” not work hard and prove their worth.
Satisfying: A policy of preferring people Bone of Contention: Recruitment from
from within offers regular promotional within may lead to infighting among
avenues for employees. It motivates them employees aspiring for limited, higher level
to work hard and earn promotions. They positions in an organization. As years roll
will work with loyalty, commitment and by, the race for premium positions may end
enthusiasm. up on a bitter note.

External source of Recruitment: Here, the potential candidates are totally coming from
the external environment (i.e. outside the organizations). These sources mainly consists of
new entrants or fresh bloods, the educated, but unemployed section of the society, employees
of other organizations, retired persons, etc.
Advantages and disadvantages of external Sources of Recruitment
Advantages Disadvantages
Wide Choice: the organization has the Expensive: hiring costs could go up
freedom to select candidates from a large substantially. Tapping multifarious sources
pool. Persons with requisite qualifications of recruitment is not an easy task either.
could be picked up.
Injection of fresh blood: People with Time Consuming: It takes time to advertise
special skills and knowledge could be hiredscreen, to test and to select suitable
to stir up the existing employees and pave employees, where suitable ones are not
the way for innovative ways of working available, the process has to be repeated.
Motivational Force: It helps in motivating Demotivating: Existing employees who
internal employees to work hard and have put in considerable service may resist
complete with external candidates while the process of filling up vacancies from
seeking career growth. Such a competitive outside. The feeling that their services have
atmosphere would help an employee to not been recognized by the organization
work to the best of his abilities. forces them to work with less enthusiasm
and motivation.
Long Term Benefits: Talented people Uncertainty: There is no guarantee that the
could join the ranks, new ideas could find organization, ultimately, will be able to hire
meaningful expression, a competitive the services of suitable candidates. It may

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atmosphere would compel people to give end up hiring someone who does not ‘fit’
out their best and earn rewards, etc. and who may not be able to adjust in the
new set-up.

4.1.4 Methods of recruitment

Direct recruitment method: The recruiters are sent directly to the colleges, universities,
educational institutions, and contract the production students and select the best among them.
The recruiters also contract the prospective employees directly, the recruiters may hold
conference and seminars for the prospective employees and encourage them to apply for
vacancies, and the recruiters may participate in job exhibitions or job fairs to attract
prospective employees.
Indirect recruitment method: In this method the organization encourage prospective
employees to apply for vacancies through advertisements in newspapers, magazines, journal
etc. Generally the advertisements for top-level position are given in national newspapers and
for lower level and workers advertisements are given in regional newspapers. The
advertisements could be detailed (name of the organization, Postal number, type of the job,
salary and other benefits of the job).
Third party method: There are many private employment agencies which carry out the
recruitment process of an organization for a fee. Governments also have employment
exchange which provide organizations with manpower. Placement services of colleges and
universities, trade unions etc, are also part of the third party method of recruitment.
4.2 Selection
Selection is the procedure, which is concerned with securing and extracting relevant
information about an applicant. The objective of the selection process is to help the
organization in determining whether the applicant has the required qualifications for a
specific job or position and in hiring the best candidate among all the applicants.

4.2.1 The Process of Selection

To select the best workers who best fit to the position from the potential candidates, there are
various stages that one should follow. These are:-
1. Application Blank: The applicants are made to fill up a predesigned application
form which tries to extract detailed information about the applicant's personal
information (name, age, sex, family background etc) educational qualifications,
training programs undergone, work experience, salary expected, future career plans,

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self assessment of previous work, reasons for leaving the current or previous
employer etc, or the applicant is asked to submit his/her bio-data instead of filling up
the form. This information is used by the interviewer at the time of final interview and
is filled in the employee record if the applicant is selected.
2. Preliminary Interview: This is generally done by a junior executive of the human
resource department where in the general information about the company and the
job/positions given and brief information about the applicants, educational and
professional qualifications and obtained. Observation is also made of the general
physical feature and physical fitness of the applicant.
3. Final Interview: Interview is the most widely used selection tool. It is a complex
process in which the interviewer tries to form and opinion about the interviewee's
personality, intelligence, technical competence, interests, attitudes etc. through face-
to-face interaction. It is an attempt to secure maximum amount of information from
the candidate concerning his/her suitability for the job under consideration. This
technique can also be used for purposes other than selection like, in performance
appraisal, in grievance handling, in disciplinary action, for counseling and other
general problems solving.
Basic Objectives of Interviews
To properly judge an applicant’s qualifications and characteristics
To give the applicant important and relevant information about the job and the
organization
To establish a good rapport with all the candidates attending the interview
To promote the good will of the organization to all applicants
To observe the applicants appearance, personality, level of confidence, etc.
Types of interviews
Patterned or structured interview: This is a very common type of interview in
which the focus is on asking structured and predetermined questions in a strict
sequence.
Non-directive or free interview: these interviews are unstructured and unplanned.
The basic aim of this type of interview is to judge the real nature of the applicant.
General, unstructured questions are asked and the candidate is given adequate time to
answer in detail. The discussions in the interview may be regarding various subjects
unrelated to the job under consideration.

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Depth or action interview: It is a combination of the patterned and free interview

styles. The aim of this interview is to obtain detailed information about both the
personal as well as the professional life of the interview.
Group or discussion interview: The interview is held for more than one candidate
and the role of the interviewer becomes that of the observer, wherein he/she tries to
identify the persons with the required qualities for the concerned job. The group of
candidates is given a topic or a problem for discussion and the observers identify the
persons who are having good leadership skills, who influence the discussion, who are
good analyzers, who have good communication skills etc. and select the ones most
suitable for the given job.
Panel or Board interview: In this type of interview the number of interviewer would
be many and the interviewee will be one. The panel /board/ consists of experts of
different areas which give this type of interview an advantage in the range of
questions asked and the area of discussion covered.
Stress interview: In this type of interview, the interviewer pretends to be hostile and
provokes the candidate by asking questions rapidly, by criticism, and by generally
trying to annoy him/her. This interview is generally conducted to find out the reaction
of the candidate under pressures and also to observe the presence of mind of the
candidate when he/she is angry or confused.
4. Reference check: after a candidate has passed successfully all the above stages in the
process of selection, a reference check is made wherein the human resource manager gets all
relevant information’s about the applicant from his/her current or previous employer.
5. Physical Examination: the human resource department organizes physical examination of
the short listed candidates after the interview. A medical expert examines the candidate both
physically and medically for the purposes finding out whether the candidate has the physical
ability to do the job reasonably well, to identify existing disabilities and get details of the
candidate's health record so as to limit the organizations responsibility at the time of
compensation, if the candidate develops any complication, after selection; to identify
candidate who are infected with communicable diseases and are generally unfit so as to filter
them out, and physical examination is also seek to identify the find of disabilities/handicap
the candidates have so as to help the management in allocation of jobs.
6. Final selection and communication: after getting a positive reference, a final list of
selected candidates is made and this information is passed on to the candidates, the concerned
line managers and other people.

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CHAPTER FIVE
TRAINING AND DEVELOPMENT
5.1 Training & Development: Meaning and Importance
Having both qualified and well trained personnel is a basic necessity for any organization to
perform various jobs it has. Training becomes necessary because of changing technology, the
need to increase the productivity of workers, etc. Training and development seem to indicate
the same meaning, but a detailed examination would reveal some differences among them.
Training is a process of learning a sequence of programmed behavior, which helps the
trainees in improving their job performance and apply their knowledge especially to their
current career. On the other hand, development covers not only performance improvement
activities but also those activities which enhance personality, attitudes, values and behavior
employees. The scope of development is wider than training. To understand the difference
between training and development more clearly we need to look at their impact on the
learning dimensions.
Learning Dimensions Training Development
Who is the target? Non managers Managers
What knowledge to transfer? Technical & Operational Theoretical, conceptual, etc
Why? For job improvement For general development
When or time duration? Short-term orientation Long-term orientation

By looking at the above table, we can understand that training in generally meant increasing
the job performance and skills of workers and the duration of the program is a short time. On
the other hand, development programs are used for increasing the knowledge and enhancing
the personality and behavior of the managers and it is undertaken with a longer duration.
5.2 Objectives of Training
Every training program has a certain objective to achieve. Some of the common objectives of
training are listed as follows:
 To make the workers perfect in their work, so as to increase their productivity.
 Proper training would help the worker in producing quality products.
 Help the management to develop qualified personnel for future expansions/
diversifications.
 Proper training will help the worker in adopting safe work procedures and will prepare
him/her in avoiding the pollution generated from the production process thus, protecting
the workers health.

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 Training will help workers so energetic by giving them a chance to update their skills,
knowledge, technology and procedures of work.
 Training will help the workers in their personal growth, within and outside the
organization. Trained workers will be given priority in promotions and transfers.
Because of the given objectives training assumes a lot of importance and is one of the most
primary functions of the human resource department of any organization.
5.3 Management Development
Management development is designed to improve the overall effectiveness of managers in
their present positions and to prepare them for greater responsibility when they are promoted
(Stoner et al., 1996). In other words, Glueck (1978) defines management development as the
process by which managers gain the experience, skills, and attitudes to become remain
successful leader in their enterprises. It develops managerial potential by increasing
conceptual, human and technical skills.
Objectives of Development
Some of the more common objectives of any development program are:
To provide the managers and other higher officials with leadership skills
To enhance the performance of the executives
To help the management in ensuring better control in the organization
To develop a unity of purpose and improve morale of the managers
To make managers socially more conscious and ethical in their practices
To prepare managers for managerial succession
To facilitate the managers capability to adapt with the environmental
5.4 The Process of Training
Training programs are expensive and time consuming. Hence, they should be created in a
very objective and careful way. In most organizations, the following steps are undertaken to
create a good training program.
1. Identifying the training needs: All training programs are created to meet the various needs
of the organization. To properly identify the needs of the organization it is very important
to first conduct a thorough organizational analysis, operations analysis, and analysis of the
manpower it possesses. Organizational analysis basically involves analysis of the
organizational goals and the resources allocated to achieve these goals. Operations
analysis focuses on the way in which a job or task is to be done in an effective way.
Manpower analysis tries to find out the qualities, knowledge, attitudes, etc., of the present
workers of the organization.

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2. Getting ready for the job: In this stage the human resource managers or the trainer decide
who is to be trained, the duration of the training program, what kind of training material to
be collected, and other kinds of preparation for the program.
3. Preparation of the learner: In this step the learner is told about the importance of the
training program, its contents, and its contribution to improved performance of the
individual as well as the organization. A learner is generally nervous before any training
program and it is the duty of the trainer to psychologically put him/her at ease and
generate interest in the program.
4. Presentation of Operations and Knowledge: It is the most important step in the training
program. It involves the actual transmission of knowledge or operations through lectures,
illustration, discussions, demonstrations, etc. Usage of audio visual teaching aids enriches
the teaching-learning process of these programs.
5. Performance try out: In this step the trainees are tested and the effectiveness of the training
program is found out. Performance try out is generally carried out by, asking the trainees
undertake written or oral tests to ascertain their subject or technical knowledge, by
observing the performance of the trainees on the job itself, by taking the evaluation of the
trainees about the program, by conducting structured interviews and by making the
trainees fill up questionnaires, by taking the feedback of the top managers about the
program and by comparing the actual performance of the trainees before and after training.
6. Feed back: In this last stage, the trainees are left on their own and checked frequently to
see how far they follow the new techniques learnt in the training program and its impact
on their productivity.
5.5 The Process of Developing a Management Development Program
The process of developing a management development program differs from organization to
organization, but the general patterns that can be seen in most of the organizations are
outlined as follows.
1. Analysis of the organizations objectives: When the organizations objectives and goals are
analyzed accurately, the areas in which the managers or executives are to be developed
can be easily identified.
2. Identifying the development needs: Accurate identification of the development needs
would solve half the development related problems faced by the organization.
3. Appraisal of present management talents: to know the strengths and weaknesses of the
current managerial manpower, an appraisal of their skills, traits and operational abilities
becomes necessary.

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4. Preparation of management manpower inventory: this makes the identification of the

managers who are in need of development so easier.
5. Planning for individual development programs: development programs are customized to
suit the individual management employee and they generally take into consideration their
needs, their attitudes and behavior, their interests, their strengths and weaknesses and
also the interests of the organization and department to which they belong.
6. Establishment of the development programs: the actual development program is
implemented in this stage and all efforts are made to prepare relevant courses and in
provision of all the necessary aids in the transmission of knowledge and skills.
7. Evaluation of the programs: feedback is generally taken on the effectiveness of the
development program and its usefulness in achieving the organizations objectives. The
evaluation is generally done through observations, ratings, training surveys and
interviews, etc.
5.6 Types and Methods of Training Development
Broadly training programs can be classified into two: On-the-job training and off-the job
training.
1. On-the-job training methods: In this type of training, an employee is put on the work
floor directly and superior or experienced worker is assigned to the trainee in order to
teach/guide the worker to do the work practically. These methods are a part of the everyday
job activity of the organization. This is the most common method of training because it is
practical oriented, less expensive and focuses on the job. There are various methods of
training used under this method. Some of them are:
Coaching/understudy/apprenticeship: in this case the supervisor or an experienced worker
gives personal and in depth guidance to an employee or subordinate.
Job rotation: in this method the employees are assigned to different jobs after certain period
of time so as to get working knowledge in all area of the organization.
Special assignments or committees: in this method the lower level employees are assigned to
temporary committees or are given temporary assignments so that they get a chance of
knowing about other activities in the organization and also give them problem solving
abilities.
2. Off-the-job training methods: This type of training is given to the trainees away from the
work floor and everyday activity of the worker. The trainees are imparted theoretical
knowledge in a class room or a training center and the most popular kind of off-the-job

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training methods are lectures, conferences, group discussions, case studies, role play,
programmed instructions, etc.
5.7 Career Development
According to cascio (1978) career is a sequence of positions, jobs, and/or occupations that
one person engages in during his/her working life. Career development, on the other hand, is
the human resource activity which helps employees to plan their future careers that contribute
for the success of the organization’s s and their development needs. Every one aspire better
life in society. This is also true for employees in an organization. Employees often ask
questions like:
 How do we advance our career?
 What are the bases for promotion?
 Do we have a job security?
The answer to the above questions enables organizations to identify the actions required to
further career. Based on staffing need, organization can facilitate the career planning process
and help answer employees’ questions about career progress within the organizations.

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CHAPTER SIX
PERFORMANCE APPRAISAL
6.1 Performance Appraisal - Definition
Performance appraisal is a process of evaluating the performance of employee’s on his/her
assigned job. It also evaluates how the management is effective in the processes of recruitment,
selection and training, etc. It basically involves the estimation of the value, excellence and quality
of the personnel of the organization. Performance appraisal is also called as merit ratings,
employee evaluation, progress report, staff assessment, etc.
6.2 Purposes of a well-designed formal evaluation system:
 Development: It can determine which employees need more training, and it can help
evaluate the results of training programs.
 Motivation: It can encourage initiative, develop sense of responsibilities and propel
efforts towards improving performance.
 Human resource planning: Functions as a valuable input to human resource planning
activities.
 Communication: It can serve as a basis for ongoing discussion between supervisor and
subordinate regarding job-related matters. Through interaction and an effective
feedback process, the parties get to know each other better.
 Legal compliance: It can serve as a legally defensible reason for promotions, transfers,
rewards and discharges.
 HRM research: It can be used to validate selection tools such as a testing program.
6.3 The Process of Performance Appraisal
Even though there is no general accepted process of performance appraisal process, most of the
organizations use the following steps of performance appraisal.
1. Establishing Performance Standards: Performance standards are developed at the time of
developing job descriptions and job specifications. These standards should be clear, precise
and objective.
2. Communication of Standards to Employees: The performance standards should be
communicated to all the concerned employees because unless and until the employees are
aware of the standards they will not be in a position to meet them.
3. Measurement Actual Performance: In this third stage the actual performance of the employees
is noted and the information about the employees performance is collected through personal
observation, statically reports, oral reports and written reports.
4. Comparing Actual Performance with the Standard: An objective and impartial comparison of
the actual performance with the standard performance is carried out. Short falls, if any, of the

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employees are identified and deviations, if any, are noted down. This comparison is also
used to identify the most promising employees who have the potential for growth and
advancement.
5. Communicating the result to Employees: These results are communicated to the concerned
employees and discussions are held with them to identify their strengths and weaknesses and
also to identify the difficulties in carrying out their activities. Objective discussions and
accurate information about the performance will help the employee in bettering his
performance.
6. Take a Corrective Action: If there are any short falls in the performance of the employees the
management along with the concerned employee should identify the reasons for the short
falls. After the reasons are properly identified, the ways and means of overcoming these
difficulties are devised and implemented.
Approaches to performance appraisal can be casual or unsystematic, which was a common
approach to appraisal; traditional or highly systematic measurement, where the management
devises a very structured appraisal system which is common to all employees; and behavioral
approach which emphasizes on the inclusion of the employees in mutual goal setting and also in
the process of performance appraisal.
6.4 Methods of Performance Appraisal
Not all organizations use the same methods of performance appraisal. The method depends upon
many factors like the kind of traits or qualities to observe and the different kinds of employees
who have to be assessed. Some of the most common appraisal methods exercised by most
organizations are listed as follows:
Straight Ranking Method: This is the oldest and simplest method of assessing the performance of
the workers. The worker is rated in his entirety, which means that the worker’s performance is
judged not in fractions but as a whole. The worth and merit of each employee is found out and
they are put in an order of merit, which is basically a list of all employees ranked according to
their merit.
Man to Man comparison Method: In this method certain factors which are important to perform a
job effectively are selected, like for example, leadership ability, initiative, honesty, etc., and a
scale of an ideal employee is designed which acts as a standard. Each employee in that particular
position or carrying out same kind of activities is compared with the ideal employee scale (model
man) and a score is given. The drawback of this method is that setting scale for the model
employee is complicated.
Grading Method: In this method also the appraiser selects some features, which an employee
should have, and rates them on a scale. Like for example, the appraiser may want to find out how
much job knowledge an employee has and the scale is A-outstanding; B-very good; C-

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good/average; D-fair; E-poor. Basing on the employees performance and his assessment the appraiser
gives certain grades to all important factors of an employee, and an overall picture of him (fit for
promotion, etc.) is made by the human resource department.
Graphic or Linear Rating Method: This is a very common method of rating used by many
organizations. A printed form is used by the appraiser in which common employee characteristics
like, initiative, leadership, cooperativeness, dependability, loyalty, emotional stability attitude, etc.,
and employee contribution in the areas of quality and quantity of work, the kind of responsibility
assumed, the specific goals achieved, attendance, etc., are stated for assessment. These traits are
evaluated on a continuous scale, meaning the different grades are in a continuum. As an example the
different grades for the trait attitude could be; A: No interest; B: Indifferent; C: Interested; D:
Enthusiastic and E: Very enthusiastic.
Checklist: In this type of appraisal a list of questions are prepared which try to get information about
the employee and his behavior. The answer to the questions is either positive or negative (yes/no).
The appraiser collects only the information, whereas the actual rating is done by somebody else, like
the human resource manager.
6.5 Challenges of Performance Appraisal
Regardless of which technique or system is chosen, there are going to be many problems encountered
in its use. No technique is perfect; they all have limitations. Even if a system is well designed,
problems can arise if raters are not cooperative and well trained. Some of these are:
Halo effect: This is a tendency seen in the appraisers. The appraiser assesses the individual (either
high or low) basing on a single trait/characteristic while ignoring the other traits/characteristics. For
example, if the appraiser feels that a worker is honest, he tends to ignore his other traits like
absenteeism, lack of initiative, etc., and rate him higher. This halo effect can be either positive or
negative.
Leniency or Strictness: The value systems of different appraisers are different, some appraise
leniently and some are too strict. This distorts the actual performance appraisal.
The Central Tendency Problem: Most of the appraisers tend to avoid controversies and give average
rankings to everyone. This is also a distorting influence in performance appraisals.
Similarity error: When the appraiser considers the person to be either similar or dissimilar to him/her
it will affect the way rating is done. For example, if the appraiser discovers that the employee has
graduated from the same university as he, the kind of rating he gives him will be more positive.
“Recency of events” error: The recency effect occurs when a rater gives greater weight to recent
events when appraising an individual’s performance.
Contrast effects: The contrast error is the tendency to rate people relative to other people rather than
to performance standards.
Other biases: There are many other biases which influence the appraisers from making correct and
accurate assessments. Biases like sex, age, region, religion, position, etc., might influence many
appraisers and mislead their judgment.

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CHAPTER SEVEN
COMPENSATION MANAGEMENT
Introduction
One of the most difficult functions of human resource management is that of determining the
rates of monetary compensation. It is not only complex, but significant both to the organization
and to employees. Employee compensation decisions are crucial for the success of an
organization since it directly influence key outcomes like job satisfaction, attraction, retention,
productivity, skill acquisition, cooperation, etc of the day today practice of the firm.
7.1 Compensation – Definition
Employees are the real wealth of an organization. The attainment of organizational objectives
largely depends on employees’ motivation to work. Among other things, employees are
motivated to do a good job when they are provided a fair financial and non-financial
compensation for work rendered to the organization. Here, one should know the fact that
employees work in organizations for the sole purpose of earning enough money to live
comfortably and satisfy all their needs. Compensation not only allows organizations to get the
right people into the right job at the right time but it also facilitates the effective utilization of its
workforce. Compensation should be also balanced so as to keep the parties involved (the
employer and the employee) so happy and satisfied. Compensation is the just reward for the work
done by an employee. On the other hand, Myers (1989), compensation is the process of directly
and indirectly rewarding employees for their performance of assigned tasks. It arises from their
employment.
7.2 Types of Compensation
There are two types of compensation. These are:
 Financial compensation;
 Non – financial compensation
7.2.1 Financial Compensation
Financial compensation consists of both direct financial compensation which is paid to
employees in the form of wage, salaries, bonuses, and commissions in exchange of their
performance and indirect financial compensation that includes all financial rewards that are not
included indirect compensation. The indirect financial (non-monetary) compensation is a reward
employees receives such as health benefit, paid time off from work such as annual leave,
maternity leave, sick leave, and other related benefits. Social security retirement income a
civil servant receives upon reaching the age of 60 is an example for indirect benefit.

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Compensation

Financial Non-Financial

The Job Job Environment

Direct Indirect
Wage Insurance plans Interesting duties
Sound polices
Salaries Life, health care
Social assistance Challenging-
Allowances Benefits
Appropriate status
Commissions responsibility Comfortable
 Retirement
working
Bonus  Educational
environment
assistance Opportunity for
Team sprit
 Employee service recognition
 Paid absences Job sharing, etc
 Vacations, holidays, Feeling of
sick leaves
achievement and
advancement, etc

Figure 7.1 Components of Compensation (modified version)

It is important here to distinguish wage from other forms direct financial compensation.
Wages are payments based on the number of units (hours, days) that a person works for the
organization or the number of units produced (piece rate pay system). It is a payment to
manual or blue – collar workers for a short time period. Salaries are money paid monthly or
annual basis to employees whose output cannot be easily quantified. Managerial,
professional, clerical and administrative staff employees receive salary. Bonuses, on the other
hand, are lump-sum payments offered to employees in recognition of successful performance,
whereas commission is a special form of incentive in which payments to sales representatives
are made on the basis of a percentage of the sales value they generate.
7.2.2 Non – Financial Compensation
Non- financial compensation includes any satisfaction, which employees receive from the
job, such as the fulfillment of need for recognition, personal growth, advancement and
affiliation. On the other hand the job environment like pleasant work companions, work
setting and the like results non- financial compensation. For example, being a member of
successful department results satisfaction for the member (for each individual).

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7.3 Objectives of Compensation

Compensation is used for a variety of objectives. It establishes fair and equitable rewards to
the employees so that they are motivated to do the job in a better way for the organization. It
also adds value for recruitment, job performance and job satisfaction. To sum up,
compensation has the following objectives:
To acquire qualified employees
To retain current manpower
To ensure equity
To reward (reinforce) the desired behavior
To control costs: to prevent both overpayment and underpayment
To comply with legal regulation imposed by the government
To facilitate understanding or to build harmony in the organization
To improve further administrative efficiency: to assure the optimal use of all
available organizational resources
Helps to assure the maximum prosperity to both the employer and the employees via
maximum productivity.
7.4 Determinants of Financial Compensation
Financial compensation system is influenced by a series of internal and external factors.
Some of the factors are discussed as follows:
Organizations ability to pay: the financial strength of the organization.
Supply and demand of labor: if the supply of labor is more than the requirement then
the management can pay less wages and salaries to its employees and the reverse is
true in the case of labor shortage.
The prevailing market rate: The current wage rate or salary in the industry influences
the wage and salary policy of the organization. An organization cannot give less
salary/wage than the average salary/wage of the given industry.
The cost-of-living: The cost of living differs in different cities. For example, the cost
of living is higher in Addis Ababa than in Jimma and if a person is transferred, with
the same position from Jimma to Addis Ababa he/she should get a higher salary.
The productivity of the Employees: the productivity of the workers has an impact on
the kind of wages/salaries he/she gets. The more productive the worker is the better
the salary or wage he/she gets and the vice is also true.
The bargaining power of the trade unions: powerful trade unions generally have a lot
of influence on the kinds of wages and salaries given by the organization.

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The nature of the job (the job requirement): some jobs are more hazardous and
dangerous than others and the employees undertaking them would get more pay than
others who are in relatively safer positions.
Managerial attitude: The top management has a lot of influence on the wage and
salary administration because they can choose whether to pay the industry average
wage/salary and above or below the average salary; the kind of working conditions to
be provided to the employees; the length of service, etc.
7.5 Compensation Decisions
Pay for a position is set relative to three groups:
 Group A: employees working on similar jobs in other organizations
 Group B: employees working on different jobs within the organization
 Group C: employees working on the same job within the organization
The decision to examine pay relative to group A is called the pay-level decision. The
objective is to keep the organization competitive in the marketplace. The major tool used in
this decision is the pay survey. The pay decision relative to group B is the pay-structure
decision. Use job evaluations to set a value for each job relative to all other jobs. The pay
decision relative to group C is individual pay determination. In pay level decision managers
compare the pay of people working inside the organization to those outside it. There are three
pay-level strategies:
High-pay strategy: Managers pay at higher-than-average levels to attract and hold the best
employees. Companies using this strategy are called pacesetters.
Low-pay strategy: The manager pays at the minimum level needed to hire enough employees.
This strategy may be used because this is all the organization can pay.
Comparable-pay strategy: The most frequently used strategy is to set the pay level at the
going wage level. The going rate is determined from pay surveys.
7.6 Methods of Payment
Employees can be paid for the time they work, the output they produce, skills, knowledge,
competencies or a combination of these factors.
7.6.1 Variable Pay: Incentive Compensation
Variable pay is any compensation plan that emphasizes a shared focus on organizational
success, opens incentives to non traditional groups and operates outside the base pay increase
system. Included in the calculations of variable pay are individual incentive awards,
individual recognition awards, group and team awards, and scheduled lump-sum awards. To
implement successful variable pay systems, companies must based their plans on clear goals,

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unambiguous measurements, and visible linkage to employees' efforts. Key design factors
include: support by management, acceptance by employees, supportive organizational
culture, and timing. Total compensation includes: base pay, variable pay, and indirect pay. A
method of paying employees on the basis of output is referred to as an incentive.
7.6.2 Merit Incentives
The most widely used plan for managing individual performance is merit pay. Can be
defined as a reward based on how well a job was done. Merit plans can work where the job is
well designed and the performance criteria are well delineated and assessable. Merit pay
systems depend on a reward to produce an effect rather than planning and designing the
effect at the outset. Merit pay should promise of increased salary in exchange for a promise to
perform satisfactory future work. Many existing merit plans are not clearly linked to an
individual's performance, so merit increases are not always viewed as meaningful.
7.6.2.1 Individual Incentives
Individual incentives are given to reward the effort and performance of individuals. Some of
the most common means of providing individuals variable pay are piece-rate systems, sales
commissions, and bonuses. Other means include special recognition rewards such as trips or
merchandise. Two widely used individual incentives focus on employee safety and
attendance.
7.6.2.2 Team Incentives
Individual incentives can be paid to teams of individuals. Reasons to choose a team incentive
plan: it is difficult to measure individual output, cooperation is needed to complete a task or
project, and management thinks this is a more appropriate measure on which to base
incentives. Team incentive plans can also reduce administrative costs. For small-group
incentives to be effective, management must define its objectives, analyze the situation, and
select the most appropriate group incentive.
In individual and group incentive systems, competition can result in withholding information
or resources, political gamesmanship, not helping others, and sabotaging the work of others.
To minimize these problems, some organizations are using organization-wide incentive.
7.6.2.3 Organization-wide Incentives
Organization-wide incentives are more common than individual or group incentives.
Payments are usually based on one of two performance concepts: a sharing profits generated
by the efforts of all employees altogether and a sharing money saved as a result of employees'
efforts to reduce costs. Three approaches to incentive plans are used at the organization wide
level:

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Suggestion systems: Suggestion system is a formal method of obtaining employee advice

about organizational effectiveness; it includes some kind of reward based on the successful
application of the idea. The key to success is employee involvement. These programs are
quite cost-effective. Suggestion systems can improve employee relations, foster high-quality
products, reduce costs, and increase revenue.
Gain sharing Incentive Plans: Gain-sharing plans are company-wide group incentive plans
that, through a financial formula for distributing organization-wide gains, and unite diverse
organizational elements in the common pursuit of improved organizational effectiveness.
Through cash bonuses, these systems share the benefits of improved productivity, reduced
costs, and improved quality.
Profit-Sharing Plans: Profit-sharing plans distribute a fixed percentage of total profit to
employees in cash or deferred bonuses. Profit-sharing plans are typically found in three
combinations: cash or current distribution plans, deferred plans, and a combination of both.
7.6.3 People-Based Pay
The bureaucratic job-based method of determining pay will not be used in the future. Instead,
the new designs will be people-based. Variants of people-based pay: skill-based, knowledge-
based, credential-based, feedback, and competency-based.
Skill-Based Pay sets pay levels on the basis of how many skills employees have, or how
many jobs they can do. Expected positive outcomes include increased quality, higher
productivity, a more flexible workforce, improved morale, and decreased absenteeism and
turnover. Methods for defining individual skills: direct observation, testing, and measurable
results.
Knowledge-based Pay rewards employees for acquiring additional knowledge to both the
current and new job.
Credential-based Pay rests on the fact that an individual must have: a diploma or license, or
Pass one or more examinations from a third-party professional or regulatory agency.
Credential-based pay is more cut-and-dried than skill-based or knowledge-based pay.
Feedback pay is based on aligning pay with strategic business objectives and then
establishing a direct connection between the jobholder and his/her part in accomplishing
goals. This design must conform to four principles: (1) flows directly from strategic business
goals, (2) directly links employees' actions to these goals, (3) provides sufficient opportunity
for rewards to hold employees' attention, and (4)is timely.
Competency-based pay is actually a combination of skill-based, knowledge-based, and
credential-based. In fact, it the term is often applied to skilled based pay designs used with

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highly educated “knowledge workers.” It also includes cognitive or subjective measures not
usually considered in evaluating a job.
7.7 Issues in Compensation Administration
Managers must make policy decisions that involve the extent to which (1) compensation will
be secret, (2) compensation will be secure, and (3) pay is compressed.
Pay Secrecy or Openness There are degrees of pay secretiveness and openness. In many
organizations, pay ranges and individual pay are open to the public and fellow employees
(open system). With the secret system, pay is known only to the employee, her/his superior,
and HRM/payroll. In some organizations, employees cannot discuss pay matters and,
specifically, their own pay.
Pay Security Current compensation can motivate performance. So can the belief that there
will be future compensation security. Plans for providing this security include: a guaranteed
annual wage, supplementary unemployment benefits, cost of living allowances (COLAs),
severance pay, seniority rules, and employment contracts.
Pay Compression Pay compression is a situation in which employees perceive too narrow a
difference between their own pay and that of their colleagues.
7.7 Employee Benefits (Indirect Compensation)
Benefits are given to all employees immaterial of their output or productivity, whereas the
incentives are generally given to outstanding employees or above average performers. The
main purpose of benefits is to maintain or retain an employee and not to encourage him to work
harder. To better understand benefits, we need to look at their features which are:
 Benefits are not directly related to work,
 they boost the earnings of the workers and gives them extra money to spend,
 The bases for benefits might be the length of service, sex(maternity benefit), sickness, etc.
 Benefits are basically enjoyed by all employees,
7.7.1 Types of Benefits
According to Werther and Davis (1996) employees benefit can be categorized into three major
categories as discussed below:
Insurance benefit: the financial risks encountered by employees and their families can be
spread by insurance. These risks are shared when funds are pooled in the form of
premiums. Then, when insured risk occurs, the covered employees or their families are
compensated. Here, organizations can purchase life, health and work related accident
insurance.
Security benefit: these are non-insurance benefits that provide income protection to
employees before and after retirement. Provision of such benefit is based on earning and

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years of services in the organization. The benefits are effective during separation,
retirement, death, and disability. In the Ethiopian context a permanent civil servant got a
retirement benefit at the age of 60.
Time - off benefit: in this type of benefit employees are eligible to get payment for time
not involved in actual working time. Time-off benefit includes sick leave, casual leave,
vacation pay, study leave, holidays, maternity leave and other related absence. For
example, as per the Federal Civil Proclamation (No.262/2002) of Ethiopia, sick leave for
any permanent civil servant shall be:
 With full pay for the first three months;
 With half pay for the next three months;
 Without pay for the last two months.
Employee service: these services include educational or training assistance, subsidized food
service, financial and social services and the like. For instance, any permanent civil servant in
Ethiopia may be trained to improve his/her capability and achieve better performance or to
prepare him/her for higher responsibility based on career development (Federal Civil Service
Proclamation No. 262/2002).

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CHAPTER EIGHT
EMPLOYEE RELATIONS MANAGEMENT

Introduction
Employee relations are a set of human resource practices that seek to secure commitment and
compliance with organizational goals and standards through the involvement of employees in
decisison – making and by managerial disciplinary action. Management of all organizations
is mainly concerned with what should be done to enhance the contributions of its employees
to achieve organizational objectives. This means maintaining good employees relations
through creating good working atmosphere, providing attractive rewards, having good
leadership, and assigning employees to interesting and challenging jobs. According to Beech
and McKenna (1955) employees relations is the interactions between the employer
(represented by the mangement) and the work – force (represented by trade unions). Here,
interactions imply that management must support and address isues of employee job
satisfaction and employees must show commitment towards the success of the organization.
Moreover, according to Armstrong (1996) employee relations is concerned with:
 Managing and maintaining formal and informal relationships with trade unions and
their members.
 Sharing information with employees and involving them in decision making on
matters of mutual interest
 Creating and transmittting information of interest to employees

Integration: integration is generally considered as the assimilation of the new comers with
the existing employees and the working environment of the organization that constitutes
rules, regulation, procedures, etc.
Maintenance: Upholding or preserving of best performers with the organization to assure the
maximum prosperity for the organization is known as maintenance.
As employees are integrated and maintained with the organization employees and the work
setting, they might involve in employees relation to secure their prosperity (to secure the
maximum possible salary).
8.1 Trade Unions
Trade unions are voluntary organization of workers whose purpose is to protect and maintain
the interests of union members. Workers are often represented by trade unions in
negotiiations with management about pay and conditions, in which case both parties enter
into collective bargaining. As workers representative, trade unions provide workers with a
“collective voice” to make their wishes known to management and thus bring actual and

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desired conditions closer together (Armstrong, 1966). This worker organization is established
to bargain with the management about pay, working hours, conditions of employement and
to make a joint decision with management on matters affceting their members’ wellbeing.
Furthermore, the following broad objectives characterize the trade unions as a whole:
 To secure and, if possible, improve the living stanadards and economic status of its
members
 To enhance and, if possible, guarantee individual security against threats and
contingencies that might result from market fluctuations, technological change, or
management decsions
 To create mechanisms to guard against the use of arbitrary and caparicious policies
and practices in the workforce (Mondy and Noe, 1990).
8.2 Collective Bargaining
Collective bargaining takes place when representatives of trade union meet management
representatives to determine employees’ wages and benefits, to create or revise work rules,
and to resolve disputes or violations of the labor contract. It is basic to labor – management
and trade unions who negotiate to establish pay and conditions employement (Beardwell and
Holden, 1996). This contractual agreement is hoped to give workers and management an
identify of purposes and provide an atmosphere in which both focus their attentions towards
the achievement of organizational objectives. Such union management agreement enables to
negotiate better positions to urge workers to do their jobs as per the contract.
In an orgainzation where a trade union is established and recognized by the management,
collective bargaining will take place. For the bargaining to take place, according to Beardwell
and Holden (1996) the following conditions must exist:
 Employees must be prepared to act collectively and recognize their common interests
 Management must recognize trade unions and their representatives as legitmate
bargaining agents for labor. Trade unions must be free to organize employees without
pressure from state or employees control.
Collective bargaining is a means to reach negotiable agreements on matters pertaining to
employement. This joint labor-management agreement has two outcomes. These are:
 Substantive agreement: they set out agreed terms and conditions of employement
covering pay and working hours and other aspects such as holidays, overtime
regulations, flexibility arrangements and allowances (Armstrong, 1996).

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 Procedural agreements: this set out an agreed courses of action for various
eventualities such as equal opportunities for recruitment, selection, redundency, and
discipline, etc (Howe, 1995).
Three Types of Bargaining
Distributive Bargaining occurs when labour and management are in conflict on an issue and
the outcome is a win-lose situation.
Integrative bargaining occurs when the two sides face a common problem. Both parties can
attack the problem and seek a solution that provides for a win-win outcome.
Concession bargaining exists when something of importance is given back to management.
Concessions can consist of wage cuts, benefits, changes in work rules that result in increased
flexibility for management, and other similar actions.
The bargaining process
The process of bargaining is carried out by negotiation where workers’ representative (union)
and management discuss issues with a view to reaching a common agreement. Howe (1995)
stated that formal negotiations has the following threee major stages.
Stage I: Preparation
 Set objectives which are normally priortized into three levels. These are:
 The basic minimum requirements that must be achieved
 The desirable requirements that the negotiator would like to achieve
 The optimum requirement or best level of achievement
 Research the background to the negotiation including the bargaining power of the
other party
 Prepare the case to be argued
 Select the negotiators who should be good communicators, persuasive, emotional
stable, logical, cult personality employees, acceptable to the other party, sage
employees, and authoritative to pass decision in the name of their represented group.
Stage II: Negotiation
 Exchange information
 Listen to the other party’s position
 Signal likely compromise points
 Propose way forward
Stage III: Closing
 Summarize positions
 Propose a final offer, which meets the needs of both parties

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 Reach an agreement
Bargaining Impasse
Regardless of the structure of the bargaining process, labour and management do not always
reach agreement on the issues. If impasse occurs, then the disputes can be taken to
conciliation, mediation, or arbitration.
Conciliation In conciliation, the third party attempts to keep union and management
negotiators talking so that they can reach a voluntary settlement but makes no proposals for
solutions.
Mediation In mediation, the third party assists the negotiators in their discussions and also
suggests settlement proposals. In neither conciliation nor mediation does the third party
attempt to impose a solution.
Arbitration The submission of a dispute to a neutral third party. Both sides of the issue are
heard by an arbitrator who acts as judge and jury. After weighing the facts, the arbitrator
renders a decision
8.3 Employee Discipline
Employee rights have been an appropriate introduction to employee discipline, because
employee rights are often an issue in disciplinary cases. Discipline is a form of training that
enforces organizational rules. Those most often affected by the discipline systems in an
organization are problem employees. Fortunately, problem employees comprise a small
number of employees, but they often are the ones who cause the most disciplinary situations.
If employers fail to deal with problem employees, negative effects on other employees and
work groups often result.
Categories of Difficult Employees
1. Those whose quality or quantity of work is unsatisfactory, owing to lack of abilities,
training, or motivation. / Ineffective employees /
2. Those whose personal problems off the job begin to affect their productivity on the job.
These problems can include alcoholism, drugs, or family relationships. /Alcoholic and
substance-abusing employees/
3. Those who violate laws while on the job by such behaviour as stealing from the
organization or its employees or physical abuse of employees or property. /Participants in
theft and other illegal acts/
4. Those who consistently break company rules and do not respond to supervisory reactions.
/Rule violators/

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Approaches to Discipline
The Hot Stove Rule
This approach to discipline is discussed in terms of what happens when a person touches a
hot stove. The consequences are:
1. Warning System: Before any behaviour has occurred, a good manager has communicated
what the consequences of the undesirable behaviour are.
2. Immediate burn: If discipline is required, it must occur immediately after the undesirable
act is observed. The person must see the connection between the act and the discipline.
3. Consistency: There are no favourites-stoves burns everyone alike. Any employee who
performs the same undesirable act will be disciplined similarly.
4. Impersonality: Disciplinary action is not pointed toward a person; it is meant to eliminate
undesirable behaviours.
Positive Discipline Approach
The positive discipline approach builds on the philosophy that violations are actions that
usually can be constructively corrected without penalty. In this approach, the focus is on fact-
finding and guidance to encourage desirable behaviours, instead of on using penalties to
discourage undesirable behaviours. There are four steps to positive discipline.
1. Counselling: Counselling can be an important part of the discipline process, because it
gives a manager or supervisor the opportunity to identify employee work behaviour problems
and discuss solutions. The goal of this phase is to heighten employee awareness of
organizational policies and rules. Knowledge of disciplinary actions may prevent violations.
The emphasis is similar to that on preventing accidents. Counselling by a supervisor in the
work unit can have positive effects. Often, people simply need to be made aware of rules.
2. Written documentation: If employee behaviour has not been corrected, then a second
conference is held between the supervisor and the employee. Whereas the first stage was
done orally, this stage is documented in written form. As part of this phase, the employee and
the supervisor develop written solutions to prevent further problems from occurring.
3. Final warning: When the employee does not follow the written solutions noted in the
second step, a final warning conference is held. In that conference the supervisor emphasizes
to the employee the importance of correcting the inappropriate actions. Some firms
incorporate a decision-day off, in which the employee is given a day off with pay to develop a
firm, written action plan to remedy the problem behaviours. The idea is to impress on the
offender the seriousness of the problem and the manager’s determination to see that the
behaviour is changed.

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4. Discharge: If the employee fails to follow the action plan that was developed and further
problem behaviours exist, then the supervisor will discharge the employee.

Progressive Discipline Approach

This is an approach in which a sequence of penalties is administered, each one slightly more
severe than the previous one. In other words, the goal is to build a discipline program that
progress from less severe to more severe punishment. The objective is to create and maintain
a productive, responsive workforce.
Steps in Progressive Discipline:
1. Identify the problem and explain how the employee’s behaviour detrimentally
2. Provide a clear warning and explain the consequences of failing to make the necessary
behavioural changes.
3. Document progressive disciplinary actions taken to prove the employee’s failure to make
behavioural changes.
4. Demonstrate that disciplinary actions were consistently applied to others under similar
circumstances.
8.4 Grievance Handling
To understand what a grievance is, you must clearly be able to distinguish between
dissatisfaction, compliant and grievances. Below are useful categorizations in this regard:
Dissatisfaction: anything that disturbs an employee, whether or not he/she expresses his/her
unrest in words.
Compliant: a spoken or written dissatisfaction brought to the attention of the supervisor.
Grievance: a compliant which has been formally presented to a management representative
or to a union official (Foot and Hook, 2005).
According to Glueck (1978), a grievance is a formal dispute between an employee and
management on the conditions of employment. Beach (1980) has also defined grievance as
any dissatisfaction or feeling of injustice in connections with one’s employment situation that
is brought to the attention of the management. Therefore, grievance is a formal and a
relatively drastic step, compared to dissatisfaction and complaints. If we analyze the above
definitions of grievance, the following noticeable features emerge clearly:
 Grievance reefers to any form of discontent or dissatisfaction with any aspect of the
organization
 The dissatisfaction must arise out of employment and not due to personal or family
problems.
 The discontent can arise out of a real or imaginary reasons

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 The discontent may be voiced or unvoiced. But it must find expressions in some form
 A grievance traceable to perceived non-fulfilment of one’s expectations from the
organization.
Forms of Grievances
A grievance may take any one of the following forms:
 Factual: a factual grievance arises when legitimate needs of employees remain
unfulfilled, e.g. wage hike (pull or lift up) has been agreed but not implemented citing
various reasons.
 Imaginary: when an employee’s dissatisfaction is not because of any valid reason but
because of wrong perception, wrong attitude or wrong information he/she has. Such a
situation may create an imaginary grievance. Though management is not at fault in
such instances, still it has to clear the “Fog” immediately.
 Disguised: an employee may have dissatisfaction for reasons that are unknown to
him/her (Beach, 1980).
Causes of grievances includes economic reason, work environment, supervision, work group
discomfort and miscellaneous.
Steps in a Grievance Procedure
Step 1: The employee meets with the supervisor and the union steward and presents the
grievance
Step 2: If the grievance is not settled, there is a conference between middle management and
union officials
Step 3: A representative of top management and top union officials attempt to settle the
grievance
Step 4: Both parties turn the grievance over to an arbitrator, who makes a decision

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CHAPTER NINE
PROMOTION, TRANSFER AND SEPARATION
9.1 Promotion
Promotion involves an increase in status, responsibilities and pay. But, in certain cases, only the
pay increases, and the other elements remain stagnant. In other cases, the status only increases
without a corresponding increase in pay or responsibilities
9.1.1 Purposes of Promotion
To motivate employees for higher productivity
To attract and retain the services of qualified and competent people
To recognize and reward the efficiency of an employee
To increase the effectiveness of the employee and of the organization
To fill up higher vacancies from within the organization
To build loyalty, morale and a sense of belongingness in the employee
To impress upon others that opportunities are available to them too in the organization, if
they perform well
9.1.2 Types of Promotion
Promotions may be classified into the following types:
i) Horizontal Promotion: This type of promotion involves an increase in responsibilities and pay,
and a change in designation. But the employee concerned does not transgress the job
classification. For example, a lower division clerk is promoted as an upper division clerk. This
type of promotion is referred to as 'upgrading' the position of an employee.
ii) Vertical Promotion: This type of promotion results in greater responsibility, prestige and pay,
together with a change in the nature of the job. A promotion is vertical when a canteen employee
is promoted to a skilled job. The concerned employee naturally transgresses the job classification.
iii) Dry Promotions: Dry promotions are sometimes given in lieu of increases in remuneration.
Designations are different but no change in responsibilities. The promotee may be given one or
two annual increments.
9.2 Demotion
Demotion means the placement of an employee in another post in the organization in respect
which the maximum of the salary scale applicable to such other post is higher than that applicable
to the post he/she occupies before such placement took place.
9.2.1 Grounds for Demotion
The employees may demote based on the following ground/s:
Misconduct
Reorganization
Incapacity (Physical and/ Mental disability)

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9.3 Transfer
A transfer involves a change in the job (accompanied by a change in the place of the job) of an
employee without a change in responsibilities or remuneration. A transfer differs from a
promotion in that the latter involves a change in which a significant increase in responsibility,
status and income occurs, but all these elements are stagnant in the former. Another difference is
that transfers are regular and frequent, as in banks and other government establishments, but
promotions are infrequent, if not irregular.
9.3.1 Reasons of transfer
The reasons for transfers vary from organization to organization, and from individual to
individual within an organization. Broadly speaking, the following are the reasons for transfers:
 There is a shortage of employees in one department or plant because of a heavy demand,
which necessitates an increase in the number of shifts or expansion of production capacity.
In another department or plant of the same organization, employees may be surplus because
of slackened demand for the products manufactured by that department. If the demand is
undisturbed, increased mechanization may render some employees redundant. Workers are
transferred from the surplus department to another department or plant where there is a
shortage of staff.
 Removal of the incompatibilities between the worker and his or her boss and between one
worker and another worker.
 Correction of faulty initial placement of an employee.
 A change has taken place in the interests and capacities of an individual, necessitating his or
her transfer to a different job.
 Over a period of time, the productivity of an employee may decline because of the monotony
of his or her job. To break this monotony, the employee is transferred.
 The climate may be unsatisfactory for an employee's health. He or she may request a transfer
to a different place where his or her health will not be affected by its climate.
 Family related issues cause transfers, especially among female employees. When they get
married, the female employees want to join their husbands, and this fact necessitates
transfers or resignations.
9.3.2 Types of transfer
Broadly transfers can be classified into three types:
1. Those designed to enhance training and development
2. Those making possible adjustment to varying volumes of work within the firm
3. Those designed to remedy the problem of poor placement
Specifically, transfers may be production, replacement, versatility, shift and remedial.

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Production Transfers: A shortage or surplus of the labor force is common in different

departments in a plant or several plants in an organization. Surplus employees in a department
have to be laid off, unless they are transferred to another department. Transfers effected to avoid
such imminent lay-offs are called production transfers.
Replacement Transfers: Replacement transfers, too, are intended to avoid imminent layoffs,
particularly, of senior employees. A junior employee may be replaced by a senior employee to
avoid laying off the latter. A replacement transfer program is used when all the operations are
declining, and is designed to retain long-service employees as long as possible.
Versatility Transfers: Versatility transfers are effected to make employees versatile and
competent in more than one skill. Clerical employees in banks, for example, are transferred from
one section to another over a period of time so that they may acquire the necessary skills to attend
to the various activities of the bank. Versatile operations are valuable assets during rush periods
and periods when work is dull. Versatile transfers may be used as a preparation for production or
replacement transfers.
Shift Transfers: Generally speaking, industrial establishments operate more than one shift.
Transfers between shifts are common, such transfers being made mostly on a rotation basis.
Transfers may also be effected on special requests from employees. Some request a transfer to the
second shift or the night shift in order to avail the free time during the day to take up part time
jobs, although this is not permitted by law.
Remedial Transfers: Remedial transfers are effected at the request of employees and are,
therefore, called personal transfers. Remedial transfers take place because the initial placement of
an employee may have been faulty or the worker may not get along with his or her supervisor or
with other workers in the department. He or she may be getting too old to continue in his or her
regular job, or the type of job or working conditions may not be well-adapted to his or her present
health or accident record. If the job is repetitive, the worker may stagnate and would benefit by
transfer to a different kind of work.
9.4 Separations
Lay-offs, resignations and dismissals separate employees from their employers. Separations are
painful to both the parties and should, therefore, be administered carefully.
9.4.1 Lay-off
A lay-off is a temporary separation of the employee from his or her employer at the instance of
the latter without any prejudice to the former. It is also defined as the failure, refusal or inability
of an employer to give employment to a worker whose name is present on the rolls but who has
not been retrenched. A lay-off may be for a definite period on the expiry of which the employee
will by recalled by the employer for duty. It may extend to any length of time, with the result the
employer is unable to estimate when he or she can recall his or her employees.

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A lay-off may be occasioned by one of the following reasons:

1. Shortage of coal power or raw materials
2. Accumulation of stocks
3. Breakdown of machinery
4. For any other reason
As the employees are laid off at the instance of the employer, they have to be paid compensation
for the period they are laid off. It is mandatory on the part of the employer to pay compensation
for all the days of the lay-off. The compensation must be equal to half the normal wages the
employee would have earned if he or she had not been laid off.

When a part of a section or department is laid off, the management shall define the basis for
laying off individuals. The basis for the lay-off may be merit or seniority. If merit is the basis,
employees with unsatisfactory performance are laid off first. Performance appraisal is essential
for the purpose of establishing who is efficient and who is below expectations. Competence as the
basis for lay-off is not possible in unionized companies because of the outright resistance offered
by union leaders. In such companies, seniority determines who should be laid off first. It goes
without saying that the employees with the shortest period of service to their credit are first laid
off and the older employees are retained as long as conditions permit.

Similarly, the basis for recalling the employees as soon as the lay-off is lifted needs to be made
clear. After the lay-off, the management seeks to return to normal production as quickly as
possible. Naturally, key employees must be the first to be recalled. The seniority system usually
specifies that those who were laid off last will be called back first. Presumably, the more senior
workers will have held the more important positions. This correlation is not always a perfect one
however, and the management may seek to recall junior employees whose skills are essential for
the resumption of production.
9.4.2 Resignation
A resignation refers to the termination of employment at the instance of the employees. An
employee resigns with he or she secures a better job elsewhere, in the case of a female employee,
when she marries and had to quit for personal reasons, or when an employee suffers from ill
health, and for other reasons. The administration of separation caused by resignation is very
simple because the employee himself/ herself is responsible for it.
9.4.3 Dismissal or Discharge
Where the termination of employment is initiated by the employer, it is known as dismissal or
discharge, which is a drastic step and should be taken after careful thought. A dismissal needs to
be supported by just and sufficient reasons.

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The following reasons lead to the dismissal of an employee:

1. Excessive absenteeism and serious misconduct.
3. False statement of qualification at the time of employment.
4. Theft of company's property.
Dismissal shall be the last step and may be resorted to after all the efforts in employee have
failed.
9.4.4 Retrenchment
Retrenchment, too, results in the separation of an employee from his/her employer. It refers to the
termination of the services of employees because of the replacement of labor by machines or the
closure of a department due to continuing lack of demand for the products manufactured in that
particular department of the organization. Retrenchment, like, lay-off, entitles the employees to
compensation which, is equivalent to fifteen days' average pay for every completed year of
continuous service. However, retrenchment differs from lay-off in that, in the latter, the employee
continues to be ill the employment of the organization and is sure to be recalled after the end of
the period of lay-off.
But in retrenchment the employee is sent home for good, and his or her connections with the
company are severed immediately. Retrenchment differs from dismissal as well. An employee is
dismissed because of his or her own fault. Retrenchment, on the other hand, is forced on both the
employer and his employees. Moreover retrenchment involves the termination of the services of
several employees. But dismissal generally involves the termination of the services of one or two
employees.

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