United School of Business Management, Bhubaneswar

Human Resource Management

Human Resource Management (Meaning):

• It is a process of making the efficient and effective use of human resources so that the set goals are achieved.
• It is a process of procuring, developing and maintaining competent human resources in the organization so
that the goals of an organization are achieved in an effective and efficient manner.

CHARACTERISTICS
• A Pervasive force: HRM is pervasive in nature. It is present in all enterprises.
• Action oriented: Its focus attention on action rather than on record keeping, written procedures or rules.
• Individually oriented: It tries to help employees develop their potential fully. It encourages them to give their
best to the organization.
• People oriented: It is all about people at work, both as individuals and groups. It tries to put people on
assigned jobs in order to produce good results.
• Future oriented: It helps an organization meet its goals in the future by providing for competent and well-
motivated employees.
• Integrating mechanism: It tries to build and maintain cordial relations between people working at various
levels in the organization.
• Inter disciplinary function :It is a multidisciplinary activity, utilizing knowledge and inputs drawn from
psychology, economics, etc
• Continuous function: HRM is not a one shot deal. It cannot be practiced only one hour each day or one day a
week. It requires constant awareness in every day operations.

Objectives:
• To help the organization to attain its goals effectively and efficiently by providing competent and motivated
employees.
• To utilize the available human resources effectively.
• To increase to the fullest the employee’s job satisfaction and self- actualisation.
• To develop and maintain the quality of work life (QWL) which makes employment in the organization a
desirable personal and social situation.
• To help maintain ethical policies and behaviour inside and outside the organization.
• To establish and maintain cordial relations between employees and management.
• To reconcile individual/group goals with organizational goals.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

SCOPE

FUNCTIONS OF HRM:

FUNCTIONS

MANAGERIAL OPERATIVE

MANAGERIAL FUNCTIONS

PLANNING

CONTROLLING ORGANIZING

COORDINATING STAFFING

DIRECTING

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Planning: This function is very vital to set goals and objectives of an organization. The policies and
procedures are laid down to achieve these goals. When it comes to planning the first thing is to foresee
vacancies, set the job requirements and decide the recruitment sources. For every job group, a demand and
supply forecast is to be made, this requires an HR manager to be aware of both job market and strategic goals
of the company. Shortage versus the excess of employees for that given job category is determined for a
given period. In the end, a plan is ascertained to eliminate this shortage of employees.
Organizing: The next major managerial function is to develop and design the structure of the organization.
It fundamentally includes the following:
1. Employees are grouped into positions or activities they will be performing.
2. Allocate different functions to different persons.
3. Delegate authority as per the tasks and responsibilities that are assigned.

Staffing: It is process by which managers select, train, promote and retire their subordinates. This involves
deciding what type of people should be hired, recruiting perspective employees, selecting employees, setting
performance standard, compensating employees, evaluating performance, counseling employees, training
and developing employees.
Directing: This function is preordained to inspire and direct the employees to achieve the goals. This can be
attained by having in place a proper planning of career of employees, various motivational methods and
having friendly relations with the manpower. This is a great challenge to any HR manager of an
organization; he/she should have the capability of finding employee needs and ways to satisfy them.
Motivation will be a continuous process here as new needs may come forward as the old ones get fulfilled.
Co-coordinating: Co-ordination is the unification, integration, synchronization of the efforts of group
members so as to provide unity of action in the pursuit of common goals. It is a hidden force which binds all
the other functions of management
Controlling: This is concerned with the apprehension of activities as per plans, which was formulated on the
basis of goals of the company. The controlling function ends the cycle and again prompts for planning. Here
the HR Manager makes an examination of outcome achieved with the standards that were set in the planning
stage to see if there are any deviations from the set standards. Hence any deviation can be corrected on the
next cycle.

OPERATIVE FUNCTIONS

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 PROCUREMENT
MAINTENANCE

COMPENSATION DEVELOPMENT

• Procurement: It involves procuring the right kind of people in appropriate number to be placed in the
organization. It consists of activities such as manpower planning, recruitment, selection, placement and
induction or orientation of new employees.

• Development: This function involves activities meant to improve the knowledge, skills, aptitudes and values
of employees so as to enable them to perform their jobs in a better manner in future. These functions may
comprise training to employees, executive training to develop managers, organization development to strike
a better fit between organizational climate / culture and employees.

• Compensation: This function involves determination of wages and salaries matching with contribution made
by employees to organizational goals. In other words , this function ensures equitable and fair remuneration
for employees in the organization. It consists of activities such as job evaluation, wage and salary
administration, bonus, incentives etc.

• Maintenance: It is concerned with protecting and promoting employees while at work. For this purpose,
various benefits such as housing, medical, educational, transport facilities etc. are provided to the employees.
Several social security measures such as provident fund, pension, gratuity, group insurance etc are also
arranged.

HUMAN RESOURCE PLANNING:

Meaning:
• It is a process of stricking balance between human resources required and acquired in an organization.

• HRP is a process by which an organization determines how it should acquire its desired manpower to
achieve the organizational goals.

Objectives:
1. Ensure adequate supply of manpower as and when required.
2. Ensure proper use of existing human resources in the organization.
3. Forecast future requirements of human resources with different levels of skills.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
4. Assess surplus or shortage, if any, of human resources available over a specified period of time.
5. Anticipate the impact of technology on jobs and requirements for human resources.
6. Control the human resources already deployed in the organization.
7. Provide lead time available to select and train the required additional human resource over a specified time
period.
Important of HRP:
1. Human resource planning meets the organization need for right type of people in right number at right
times.
2. By maintaining a balance between demand for and supply of human resources, human resource planning
makes optimum use of human resources, on the one hand, and reduces labour cost substantially, on the other.
3. Careful consideration of likely future events, through human resource planning might lead to the discovery
of better means for managing human resources. Thus, foreseeable pitfalls might be avoided.
4. Manpower shortfalls and surpluses may be avoided, to a large extent.
5. Human resource planning helps the organization create and develop training and succession planning for
employees and managers. Thus, it provides enough lead time for internal succession of employees to higher
positions through promotions.
6. It also provides multiple gains to the employees by way of promotions, increase in emoluments and other
perquisites and fringe benefits.
7. Some of the problems of managing change may be foreseen and their consequences mitigated.
Consultations with affected groups and individuals can take place at an early stage in the change process.
This may avoid resistance for change.
8. Human resource planning compels management to asses critically the strength and weaknesses of its
employees and personnel policies on continuous basis and, in turn, take corrective measures to improve the
situation.
9. Through human resource planning, duplication of efforts and conflict among efforts can be avoided, on the
one hand, and coordination of worker’s efforts can be improved, on the other.
10. Last but no means the least, with increase in skill, knowledge, potentialities, productivity and job
satisfaction, organization becomes the main beneficiary. Organization is benefitted in terms of increase in
prosperity/production, growth, development, profit and, thus, an edge over its competitors in the market.

Process of HRP:
Determining the Objectives of Human Resource Planning: The foremost step in every process is the
determination of the objectives for which the process is to be carried on. The objective for which the manpower
planning is to be done should be defined precisely, so as to ensure that a right number of people for the right kind
of job are selected.
The objectives can vary across the several departments in the organization such as the personnel demand may
differ in marketing, finance, production, HR department, based on their roles or functions.
Analyzing Current Manpower Inventory: The next step is to analyze the current manpower supply in the
organization through the stored information about the employees in terms of their experience, proficiency, skills,
etc. required to perform a particular job.
Also, the future vacancies can be estimated, so as to plan for the manpower from both the internal (within the
current employees) and the external (hiring candidates from outside) sources. Thus, it is to be ensured that
reservoir of talent is maintained to meet any vacancy arising in the near future.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Forecasting Demand and Supply of Human Resources: Once the inventory of talented manpower is
maintained; the next step is to match the demand for the manpower arising in the future with the supply or
available resources with the organization.
Here, the required skills of personnel for a particular job are matched with the job description and specification.
Analyzing the Manpower Gaps: After forecasting the demand and supply, the manpower gaps can be easily
evaluated. In case the demand is more than the supply of human resources, that means there is a deficit, and thus,
new candidates are to be hired.
Whereas, if the Demand is less than supply, there arises a surplus in the human resources, and hence, the
employees have to be removed either in the form of termination, retirement, layoff, transfer, etc.
Employment Plan/Action Plan: Once the manpower gaps are evaluated, the action plan is to be formulated
accordingly. In a case of a deficit, the firm may go either for recruitment, training, interdepartmental transfer
plans whereas in the case of a surplus, the voluntary retirement schemes, redeployment, transfer, layoff, could be
followed.
Training and Development: The training is not only for the new joinees but also for the existing employees who
are required to update their skills from time to time.
After the employment plan, the training programmes are conducted to equip the new employees as well as the old
ones with the requisite skills to be performed on a particular job.
Appraisal of Manpower Planning: Finally, the effectiveness of the manpower planning process is to be
evaluated. Here the human resource plan is compared with its actual implementation to ensure the availability of
a number of employees for several jobs.
At this stage, the firm has to decide the success of the plan and control the deficiencies, if any.
Thus, human resource planning is a continuous process that begins with the objectives of Human Resource
planning and ends with the appraisal or feedback and control of the planning process.

Job Analysis
What is Job?
• When the total work to be done is divided and grouped into packages, we call it a “Job”.
• A group of homogeneous tasks related by similarity of functions.
Job Analysis:
• A job analysis is a process used to collect information about the duties, responsibilities, necessary skills,
outcomes, and work environment of a particular job.
• Job Analysis is a process to identify and determine in detail the particular job duties and requirements and
the relative importance of these duties for a given job.
• Job analysis is the process of studying and collecting information relating to the operations and responsibility
of a specific job.

Purpose of Job Analysis:

• Determining Training Needs
Job Analysis can be used in training/"needs assessment" to identify or develop:
• training content
• assessment tests to measure effectiveness of training
• equipment to be used in delivering the training
• methods of training (i.e., small group, computer-based, video, classroom...)

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• Compensation
Job Analysis can be used in compensation to identify or determine:
• skill levels
• compensable job factors
• work environment (e.g., hazards; attention; physical effort)
• responsibilities (e.g., fiscal; supervisory)
• required level of education (indirectly related to salary level)
• Selection Procedures
Job Analysis can be used in selection procedures to identify or develop:
• job duties that should be included in advertisements of vacant positions;
• appropriate salary level for the position to help determine what salary should be offered to a candidate;
• minimum requirements (education and/or experience) for screening applicants;
• interview questions;
• selection tests/instruments (e.g., written tests; oral tests; job simulations);
• applicant appraisal/evaluation forms;
• orientation materials for applicants/new hires
• Performance Review
Job Analysis can be used in performance review to identify or develop:
• goals and objectives
• performance standards
• evaluation criteria
• length of probationary periods
• duties to be evaluated

Methods of Collecting Job Analysis Data:

• Job Performance
• Personal observation
• Critical incident
• Interview
• Panel of expert
• Diary method
• Questionnaire method
Benefits
• Organizational structure and design
• Recruitment and selection
• Performance appraisal and training/development
• Job evaluation
• · Promotions and transfer
• Career path planning
• · Labour relations
• · Health and safety
• · Acceptance of job offer

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Job Description and Job Specification
Job Analysis is a primary tool to collect job-related data. The process results in collecting and recording two
data sets including job description and job specification. Any job vacancy can not be filled until and unless
HR manager has these two sets of data. It is necessary to define them accurately in order to fit the right
person at the right place and at the right time. This helps both employer and employee understand what
exactly needs to be delivered and how.
Both job description and job specification are essential parts of job analysis information. Writing them
clearly and accurately helps organization and workers cope with many challenges while onboard.

Though preparing job description and job specification are not legal requirements yet play a vital role in
getting the desired outcome. These data sets help in determining the necessity, worth and scope of a specific
job.
Job Description
Job description includes basic job-related data that is useful to advertise a specific job and attract a pool of
talent. It includes information such as job title, job location, reporting to and of employees, job summary,
nature and objectives of a job, tasks and duties to be performed, working conditions, machines, tools and
equipments to be used by a prospective worker and hazards involved in it.
Purpose of Job Description
▪ The main purpose of job description is to collect job-related data in order to advertise for a particular job. It
helps in attracting, targeting, recruiting and selecting the right candidate for the right job.
▪ It is done to determine what needs to be delivered in a particular job. It clarifies what employees are
supposed to do if selected for that particular job opening.
▪ It gives recruiting staff a clear view what kind of candidate is required by a particular department or division
to perform a specific task or job.
▪ It also clarifies who will report to whom.
Job Specification
Also known as employee specifications, a job specification is a written statement of educational
qualifications, specific qualities, level of experience, physical, emotional, technical and communication skills
required to perform a job, responsibilities involved in a job and other unusual sensory demands. It also

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 includes general health, mental health, intelligence, aptitude, memory, judgment, leadership skills, emotional
ability, adaptability, flexibility, values and ethics, manners and creativity, etc.
Purpose of Job Specification
▪ Described on the basis of job description, job specification helps candidates analyze whether are eligible to
apply for a particular job vacancy or not.
▪ It helps recruiting team of an organization understand what level of qualifications, qualities and set of
characteristics should be present in a candidate to make him or her eligible for the job opening.
▪ Job Specification gives detailed information about any job including job responsibilities, desired technical
and physical skills, conversational ability and much more.
▪ It helps in selecting the most appropriate candidate for a particular job.
Job description and job specification are two integral parts of job analysis. They define a job fully and guide
both employer and employee on how to go about the whole process of recruitment and selection. Both data
sets are extremely relevant for creating a right fit between job and talent, evaluate performance and analyze
training needs and measuring the worth of a particular job.

Recruitment:
It is a process of searching for & obtaining applicants for jobs so that the right people in right number can be
selected.
It is a process of searching for prospective employees and stimulating & motivating them to apply for jobs in
an organization
Factors
• Internal Factors
Size of the Organization
Recruiting Policy
Image of Organization
Image of Job
• External Factors
Demographic Factors
Labour Market
Unemployment Situation
Labour Laws
Legal Considerations
Sources of recruitment:

• Internal Sources
Present Employees:
The present employees of a concern are informed about likely vacant positions. The employees recommend
their relations or persons intimately known to them. Management is relieved of looking out prospective
candidates. The persons recommended by the employees may be generally suitable for the jobs because they
know the requirements of various positions. The existing employees take full responsibility of those
recommended by them and also ensure of their proper behaviour and performance.

Employee Referrals: This is yet another internal source of recruitment. The existing employees refer
their family members, friends and relatives to the company as potential candidates for the vacancies to be
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
filled up in the organization. This source serve as one of the most effective methods of recruiting people in
the organization because employees refer to those potential candidates who meet the company requirements
known to them from their own experience.
Former Employees: It is another source of applicant for vacancies to be filled up in the organization.
Retired or retrenched employees may be interested to come back to the company to work on a part-time
basis. Similarly some former employees who left the organization for any reason, may again be interested to
come back to work. This source has the advantage of hiring people whose performance is already known to
the organization.
Previous Applicants: This is considered as internal source in the sense that applications from the
potential candidates are already lying with the organization. Sometimes the organizations are contact through
mail or messenger these applicants to fill up the vacancies particularly for unskilled or semi skilled jobs.
Advantages of Internal Sources:
The Following are The Advantages of Internal Sources:
1. Improves morale:
When an employee from inside the organisation is given the higher post, it helps in increasing the morale of
all employees. Generally every employee expects promotion to a higher post carrying more status and pay (if
he fulfills the other requirements).
2. No Error in Selection:
When an employee is selected from inside, there is a least possibility of errors in selection since every
company maintains complete record of its employees and can judge them in a better manner.
3. Promotes Loyalty:
It promotes loyalty among the employees as they feel secured on account of chances of advancement.
4. No Hasty Decision:
The chances of hasty decisions are completely eliminated as the existing employees are well tried and can be
relied upon.
5. Economy in Training Costs:
The existing employees are fully aware of the operating procedures and policies of the organisation. The
existing employees require little training and it brings economy in training costs.
6. Self-Development:
It encourages self-development among the employees as they can look forward to occupy higher posts.
Disadvantages of Internal Sources:
(i) It discourages capable persons from outside to join the concern.
(ii) It is possible that the requisite number of persons possessing qualifications for the vacant posts may not
be available in the organisation.
(iii) For posts requiring innovations and creative thinking, this method of recruitment cannot be followed.
(iv) If only seniority is the criterion for promotion, then the person filling the vacant post may not be really
capable.
(v) In spite of the disadvantages, it is frequently used as a source of recruitment for lower positions. It may
lead to nepotism and favouritism. The employees may be employed on the basis of their recommendation
and not suitability.
External Sources:
All organisations have to use external sources for recruitment to higher positions when existing employees
are not suitable. More persons are needed when expansions are undertaken.
The external sources are discussed below:
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
Methods of External Sources:
1. Advertisement:
It is a method of recruitment frequently used for skilled workers, clerical and higher staff. Advertisement can
be given in newspapers and professional journals. These advertisements attract applicants in large number of
highly variable quality.
Preparing good advertisement is a specialised task. If a company wants to conceal its name, a ‘blind
advertisement’ may be given asking the applicants to apply to Post Bag or Box Number or to some
advertising agency.
2. Employment Exchanges:
Employment exchanges in India are run by the Government. For unskilled, semi-skilled, skilled, clerical
posts etc., it is often used as a source of recruitment. In certain cases it has been made obligatory for the
business concerns to notify their vacancies to the employment exchange. In the past, employers used to turn
to these agencies only as a last resort. The job-seekers and job-givers are brought into contact by the
employment exchanges.
3. Schools, Colleges and Universities:
Direct recruitment from educational institutions for certain jobs (i.e. placement) which require technical or
professional qualification has become a common practice. A close liaison between the company and
educational institutions helps in getting suitable candidates. The students are spotted during the course of
their studies. Junior level executives or managerial trainees may be recruited in this way.
4. Recommendation of Existing Employees:
The present employees know both the company and the candidate being recommended. Hence some
companies encourage their existing employees to assist them in getting applications from persons who are
known to them.
In certain cases rewards may also be given if candidates recommended by them are actually selected by the
company. If recommendation leads to favouritism, it will impair the morale of employees.
5. Factory Gates:
Certain workers present themselves at the factory gate every day for employment. This method of
recruitment is very popular in India for unskilled or semi-skilled labour. The desirable candidates are
selected by the first line supervisors. The major disadvantage of this system is that the person selected may
not be suitable for the vacancy.
6. Casual Callers:
Those personnel who casually come to the company for employment may also be considered for the vacant
post. It is most economical method of recruitment. In the advanced countries, this method of recruitment is
very popular.
7. Central Application File:
A file of past applicants who were not selected earlier may be maintained. In order to keep the file alive,
applications in the files must be checked at periodical intervals.
8. Labour Unions:
In certain occupations like construction, hotels, maritime industry etc., (i.e., industries where there is
instability of employment) all recruits usually come from unions. It is advantageous from the management
point of view because it saves expenses of recruitment. However, in other industries, unions may be asked to
recommend candidates either as a goodwill gesture or as a courtesy towards the union.
9. Labour Contractors:

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

This method of recruitment is still prevalent in India for hiring unskilled and semi-skilled workers in brick
klin industry. The contractors keep themselves in touch with the labour and bring the workers at the places
where they are required. They get commission for the number of persons supplied by them.
10. Former Employees:
In case employees have been laid off or have left the factory at their own, they may be taken back if they are
interested in joining the concern (provided their record is good).
11. Other Sources:
Apart from these major sources of external recruitment, there are certain other sources which are exploited
by companies from time to time. These include special lectures delivered by recruiter in different institutions,
though apparently these lectures do not pertain to recruitment directly.
Then there are video films which are sent to various concerns and institutions so as to show the history and
development of the company. These films present the story of company to various audiences, thus creating
interest in them.
Various firms organise trade shows which attract many prospective employees. Many a time advertisements
may be made for a special class of work force (say married ladies) who worked prior to their marriage.
These ladies can also prove to be very good source of work force. Similarly there is the labour market
consisting of physically handicapped. Visits to other companies also help in finding new sources of
recruitment.
Merits of External Sources:
1. Availability of Suitable Persons:
Internal sources, sometimes, may not be able to supply suitable persons from within. External sources do
give a wide choice to the management. A large number of applicants may be willing to join the organisation.
They will also be suitable as per the requirements of skill, training and education.
2. Brings New Ideas:
The selection of persons from outside sources will have the benefit of new ideas. The persons having
experience in other concerns will be able to suggest new things and methods. This will keep the organisation
in a competitive position.
3. Economical:
This method of recruitment can prove to be economical because new employees are already trained and
experienced and do not require much training for the jobs.
Demerits of External Sources:
1. Demoralization:
When new persons from outside join the organization then present employees feel demoralized because these
positions should have gone to them. There can be a heart burning among old employees. Some employees
may even leave the enterprise and go for better avenues in other concerns.
2. Lack of Co-Operation:
The old staff may not co-operate with the new employees because they feel that their right has been snatched
away by them. This problem will be acute especially when persons for higher positions are recruited from
outside.
3. Expensive:
The process of recruiting from outside is very expensive. It starts with inserting costly advertisements in the
media and then arranging written tests and conducting interviews. In spite of all this if suitable persons are
not available, then the whole process will have to be repeated.
4. Problem of Maladjustment:
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 There may be a possibility that the new entrants have not been able to adjust in the new environment. They
may not temperamentally adjust with the new persons. In such cases either the persons may leave themselves
or management may have to replace them. These things have adverse effect on the working of the
organisation.
Suitability of External Sources of Recruitment:
External Sources of Recruitment are Suitable for the Following Reasons:
(i) The required qualities such as will, skill, talent, knowledge etc., are available from external sources.
(ii) It can help in bringing new ideas, better techniques and improved methods to the organisation.
(iii) The selection of candidates will be without preconceived notions or reservations.
(iv) The cost of employees will be minimum because candidates selected in this method will be placed in the
minimum pay scale.
(v) The entry of new persons with varied experience and talent will help in human resource mix.
(vi) The existing employees will also broaden their personality.
(vii) The entry of qualitative persons from outside will be in the long-run interest of the organisation.
Methods of Recruitment: Direct, Indirect and Third Party Method
1. Direct Method:
In this method, the representatives of the organisation are sent to the potential candidates in the educational
and training institutes. They establish contacts with the candidates seeking jobs. These representatives work
in cooperation with placement cells in the institutions Persons pursuing management; engineering, medical
etc. programmes are mostly picked up in this manner.
Sometimes, some employer firms establish direct contact with the professors and solicit information about
students with excellent academic records. Sending the recruiter to the conventions, seminars, setting up
exhibits at fairs and using mobile office to go to the desired centers are some other methods used to establish
direct contact with the job seekers.
2. Indirect Methods:
Indirect methods include advertisements in news papers, on the radio and television, in professional journals,
technical magazines etc.
This method is useful when:
(i) Organisation does not find suitable candidates to be promoted to fill up the higher posts
(ii) When the organisation wants to reach out to a vast territory, and
(iii) When organisation wants to fill up scientific, professional and technical posts.
The experience suggests that the higher the position to be filled up in the organisation, or the skill sought by
the more sophisticated one, the more widely dispersed advertisement is likely to be used to reach to many
suitable candidates.
Sometimes, many organizations go for what is referred to as blind advertisement in which only Box No. is
given and the identity of the organization is not disclosed. However, organizations with regional or national
repute do not usually use blind advertisements for obvious reasons.
3. Third Party Methods:
These include the use of private employment agencies, management consultants, professional
bodies/associations, employee referral/recommendations, voluntary organizations, trade unions, data banks,
labour contractors etc., to establish contact with the job- seekers.
Process:
• Recruitment planning
• Strategy Development
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 • Searching
• Screening
• Evaluation & Control

Recruitment Planning
The first step involved in the recruitment process is planning. Here, planning involves to draft a
comprehensive job specification for the vacant position, outlining its major and minor responsibilities; the
skills, experience and qualifications needed; grade and level of pay; starting date; whether temporary or
permanent; and mention of special conditions, if any, attached to the job to be filled

Strategy Development
Once it is known how many with what qualifications of candidates are required, the next step involved in this
regard is to devise a suitable strategy for recruiting the candidates in the organization. The strategic
considerations to be considered may include issues like whether to prepare the required candidates
themselves or hire it from outside, what type of recruitment method to be used, what geographical area be
considered for searching the candidates, which source of recruitment to be practiced, and what sequence
of activities to be followed in recruiting candidates in the organization.
Searching
This step involves attracting job seekers to the organization. There are broadly two sources used to attract
candidates. These are:
1.Internal Sources, and
2.External Sources

Screening
Though some view screening as the starting point of selection, we have considered it as an integral part of
recruitment. The reason being the selection process starts only after the applications have been screened and
shortlisted. Let it be exemplified with an example

In the Universities, applications are invited for filling the post of Professors. Applications re-ceived in
response to invitation, i.e., advertisement are screened and shortlisted on the basis of eligibility and
suitability. Then, only the screened applicants are invited for seminar presentation and personal interview.
The selection process starts from here, i.e., seminar presentation or interview. Job specification is invaluable
in screening. Applications are screened against the qualification, knowledge, skills, abilities, interest and
experience mentioned in the job specification. Those who do not qualify are straight way eliminated from the
selection process. The techniques used for screening candidates vary depending on the source of supply and
method used for recruiting. Preliminary applications, de-selection tests and screening interviews are common
techniques used for screening the candidates.
Evaluation and Control
Given the considerable cost involved in the recruitment process, its evaluation and control is,therefore,
imperative. The costs generally incurred in a recruitment process include

i. salary of recruiters;
ii cost of time spent for preparing job analysis, advertisement, etc.;
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 iii administrative expenses;
iv cost of outsourcing or overtime while vacancies remain unfilled; and (
v. cost incurredin recruiting unsuitable candidates.
In view of above, it is necessary for a prudent employer to try to answer certain questions like :whether the
recruitment methods are appropriate and valid? and whether the recruitment process followed in the
organization is effective at all or not? In case the answers to these questions are in negative, the appropriate
control measures need to be evolved and exercised to tide over the situa-tion. However, such an exercise
seem to be only rarely carried out in practice by the organizations /employers .Having discussed recruitment
process, it will be now relevant to have an idea about recruitment practices in India. The following section
delineates the same.

Selection
• Selection is the process of choosing the most suitable candidate for the vacant position in the organization.
• Selection means weeding out unsuitable applicants and selecting those individuals with prerequisite
qualifications and capabilities to fill the jobs in the organization.
• Selection is the process of picking up individuals (out of the pool of job applicants) with requisite
qualifications and competence to fill jobs in the organization. A formal definition of Selection is as under

Process / Steps in selection

1. Preliminary Interview: The purpose of preliminary interviews is basically to eliminate unqualified
applications based on information supplied in application forms. The basic objective is to reject misfits. On
the other hands preliminary interviews is often called a courtesy interview and is a good public relations
exercise.

2. Application Blanks: It is the commonest device for getting information from a prospective candidate.
Almost all organizations require job seekers to fill up an application. This serves as a personal record of the
candidate bearing personal history profile, detailed personal activities, skills and accomplishments.
Application blank includes biographical information, educational information, work experience, salary, extra
curricular information and references.
3. Selection Tests: Jobseekers who past the preliminary interviews are called for tests. There are various
types of tests conducted depending upon the jobs and the company. These tests can be Aptitude Tests,
Personality Tests, and Ability Tests and are conducted to judge how well an individual can perform tasks
related to the job. Besides this there are some other tests also like Interest Tests (activity preferences),
Graphology Test (Handwriting), Medical Tests, Psychometric Tests etc.
4. Employment Interview: The next step in selection is employment interview. Here interview is a formal
and in-depth conversation between applicant’s acceptability. It is considered to be an excellent selection
device. Interviews can be One-to-One, Panel Interview, or Sequential Interviews. Besides there can be
Structured and Unstructured interviews, Behavioral Interviews, Stress Interviews.
5. Reference & Background Checks: Reference checks and background checks are conducted to verify
the information provided by the candidates. Reference checks can be through formal letters, telephone
conversations. However it is merely a formality and selections decisions are seldom affected by it.
6. Physical Examination: After the selection decision is made, the candidate is required to undergo a
physical fitness test. A job offer is often contingent upon the candidate passing the physical examination.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 7. Final Selection: The last step in the selection process is the final selection of the candidate for a job. The
candidates who have crossed all the previous hurdles are finally selected and a letter of job offer is issued to
them. The job offer i.e. appointment letter contains the details like pay-scale, allowances and other terms and
conditions of the job. It also contains when and whom he should report for joining the duty.

Difference between recruitment & Selection

Basis Recruitment Selection

Meaning It is an activity of establishing contact It is a process of picking up more competent and

between employers and applicants. suitable employees.
Objective It encourages large number of It attempts at rejecting unsuitable candidates.
Candidates for a job.
Process It is a simple process. It is a complicated process.

Hurdles The candidates have not to cross over Many hurdles have to be crossed.
many hurdles.
Approach It is a positive approach. It is a negative approach.

Sequence It proceeds selection. It follows recruitment.

Economy It is an economical method. It is an expensive method.

Time Less time is required. More time is required.

Consuming

Induction:
It is a process of receiving and welcoming an employee when he first joins a company and giving him the
basic information he needs to settle down quickly and happily and start work.

Objectives
• Providing basic in information about working arrangements
• To intimate them about the mission, aims and objectives of the company.
• To give a clear understanding of their roles and responsibility.
• To helps the new comer to over come his shyness and nervousness in meeting new people in a new
environment.
• To build new employee confidence in the organization.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
• To helps reducing labor turnover and absenteeism.
• It reduces confusion and develops healthy relations in the organization.
• To develop among the new comer a sense of belonging and loyalty to the organization.

Benefits
• Induction helps to build up a two-way channel of communication between management and workers.
• Proper induction facilitates informal relations and team work among the employees.
• Induction helps to develop good relations.
• A formal induction program proves that the company is taking interest in getting him off good staff
• Reduces employee dissatisfaction and grievances.
• Develops a sense of belongingness and commitment.
• Newcomer adjusts himself to the work quickly, and it sever the time of the supervisor.
• First impression matter a good deal and result in less turnover.
Steps
• Welcome to the organization
• Explain about the company
• Show the location/ department where the new employee will work
• Give the company’s manual to the new employee.
• Provide details about various work groups & the extent of unionism with the company
• Give details about pay, benefits, holidays, leave etc, Emphasize the importance of attendance or punctuality.
• Explain about future training opportunities and career prospects.
• Clarify doubts, by encouraging the employee to come out with questions.

Socialization
• Process by which new employees understand the company's policies, the internal culture, how the company
hierarchy works and the ways to function effectively in the organization.
• process of adapting the norms, values, culture, beliefs and working procedure adapted by the organization.
• process of making the new employees get acquainted to the new environment of the organization. This
reduces the anxiety of the new hires and allows them to adjust with the other existing employees in the
company.

Purpose of Socialization:
▪ Employment Situation: The basic purpose of every organization would be to make the new employees
industrious as soon as possible. Hence detailed information relating to work is provided at the initial stage
itself.
▪ Rules and Policies: The workforce should have a good understanding of the constraints and policies of the
organization for smooth and continuous operations. Therefore, all the jobs in the company have to be
performed as per those rules and policies.
▪ Compensation and benefits: Although this information is made clear during the recruitment process, an
analysis of this is required during socialization process. The employees will have some interest in knowing
the rewards offered by the company.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

▪ Corporate Culture: The organization culture affects the entire working pattern of any company. This
includes everything, from the way they dress to the way they behave with the other employees. Hence, a
glimpse of the culture should be given during Socialization.
▪ Working as a team: During Socialization, the importance of working as a leader is emphasized to add value
to the organization. This ability of leadership is assessed during the initial stages of selection and training.
▪ Dealing with Change: Coping with change is a big challenge to the employees at all levels in the
organization. The employees must have the ability to manage or deal with change for survival in their
respective jobs. Socialization helps them in preparing for change by continuously developing and training
their skills.

Process of Socialization
The Socialization process can be divided into three stages:
1. Pre- Arrival Stage: This stage recognizes that every individual employee comes with set of values and
hope. For example, in some jobs like the managerial kind, the employee might need a substantial degree of
socialization in training. During the selection process, most organizations inform their prospective candidates
about the process of Socialization. Selection process also helps the organization in determining the right
person to fit the right job. The success here depends mostly on the degree of forecasting made by the
selection team.
2. Encounter Stage: Here the employees bump into the real working conditions of the organization. For
example, the expectations of the job, co workers, immediate seniors and the business as a whole. Here, if the
expectations confirm to be more or less correct, this stage reaffirms the employees of the perceptions
generated in past. If the reality is different, socialization helps the employees in understanding to replace
these. But socialization cannot totally resolve the differences in expectations.
3. Metamorphosis Stage: The new employees, in this stage will work out solutions to meet any problems.
Hence this stage is called the metamorphosis stage. At this stage the new employees will have become
comfortable with their jobs and the team members. New hires will feel that they have been accepted by their
superiors and peers. Not only this, they would have by now understood the organization system as a whole.
They will also know what is expected of them, how they are evaluated and how productive they are towards
the goals of the organization.

UNIT-2
Performance Appraisal:
It is Systematic, periodic and an impartial rating of an employee's excellence in matters pertaining to his
present job and his potential for a better job
It is a systematic evaluation of the individual with regard to his or her performance on the job and his
potential for development
In short it is a systematic way of judging the relative worth of an employee in performing his task

Objectives
◼ Compensation decisions
◼ Promotion decisions
◼ Training and development programmes
◼ Feedback
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
◼ Personal development
◼ Diagnose the strengths and weaknesses of individuals
◼ Provide coaching, counseling, and career planning to subordinates
◼ Develop positive relation and reduce grievance
◼ Facilitates research in personnel Management

Methods:
Traditional Methods:

• Ranking method: In this method one employee is compared with all others for the purpose of placing them
in a simple rank order of worth. The employees are ranked from the highest to the lowest or from the best to
worst.
• Paired comparison: In this method each employee is compared with other employees on one-on – one basis,
usually based on trait only. The rater is provided with a bunch of slips each containing a pair of names, the
rater puts a tick mark against the employee whom he considers the better of the two. The number of items
this employee is compared as better with others determines his or her final ranking. The number of possible
pairs for a given number of employee is ascertained by the following formula: N x (N-1) / 2

• Grading: In this method , certain categories of worth are established in advance and carefully defined. There
can be three categories established for employees: Outstanding, satisfactory, and unsatisfactory. There can be
more than three grades. Employee performance is compared with grade definitions. The employee is then
allocated to the grade that best describes his or her performance. Such type of grading is done is semester
pattern of examination and in the selection of a candidate in the public sector.
• Forced distribution method: It is a method of appraising employees on the basis of a predetermined
distribution scale. The evaluator is asked to rank 10% employees in the best category, 20% in the next
category, 40% in the middle category, 20% in before the low, and 10% in the lowest brackets.
• Forced choice method: The series of statements arranged in the blocks of two or more are given and the
rater indicates which statement is true or false. The rater is forced to make a choice. HR department does
actual assessment. Advantages – Absence of personal biases because of forced choice.
• Checklist method : The appraiser is given a checklist of several behaviours, traits, or job characteristics of
the employees on job. The checklist contains a list of statements on the basis of which the evaluator
describes the on the job performance of the employees. If the rater believes that employee does have a
particular listed trait it is marked as positive check, otherwise the item is left blank.The company has a
choice to choose either Weighted Checklist Method or Forced Checklist Method.

• Graphic rating scale method: In this method, an employee’s quality and quantity of work is assessed in a
graphic scale indicating different degrees of a particular trait, i.e., behavior or characteristics as they relate to
work performance.
For example a trait like Job knowledge may be judged on the range of average, above average, outstanding
or unsatisfactory or on the basis of numbers (1,2,3,4, 5, and so on). The list of factors to be appraised is
dependent upon the company requirements.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• Essay method: : In this method the rater writes down the employee description in detail within a number of
broad categories like, overall impression of performance, promoteability of employee, existing capabilities
and qualifications of performing jobs, strengths and weaknesses and training needs of the employee.
Advantage – It is extremely useful in filing information gaps about the employees that often occur in a
better-structured checklist. Disadvantages – It its highly dependent upon the writing skills of rater and most
of them are not good writers. They may get confused success depends on the memory power of raters.

• Field review method: In this method, a representative of the HR department or a training officer discusses
and interviews the supervisors to evaluate and rate their respective subordinates. This method is very time
consuming method. However, this method helps to reduce the superiors’ personal bias.

Modern method
• Management by objectives (MBO): The concept of ‘Management by Objectives’ (MBO) was given by
Peter F. Drucker in 1954. It can be expressed as a process whereby the employees and the superiors come
together to identify common goals – the organizational goals as well as individual goals, the standards to be
taken as the criteria for measurement of their performance and contribution and deciding the course of action
to be followed.
• Behaviorally anchored rating scales : Behaviourally Anchored Rating Scales (BARS) is a modern
technique which is a combination of the graphic rating scale and critical incidents method. It comprises
predetermined critical areas of job performance or sets of behavioral statements describing important job
performance qualities as good or bad (like the qualities such as inter-personal relationships, adaptability and
reliability, job knowledge etc.).
The typical BARS includes seven or eight performance behaviours each one measured by a seven-or-nine
point scale. These statements are developed from critical incidents.
In this method, an employee’s actual job behaviour is judged against the desired behaviour through recording
and comparing the behavior with BARS. Developing and practicing BARS needs expert knowledge.

• Assessment centers: This technique was first developed in USA and UK in 1943. An assessment center is a
central location where managers may come together to have their participation in job related exercises
evaluated by trained observers. It is more focused on observation of behaviors across a series of select
exercises or work samples. Assesses are requested to participate in in-basket exercises, work groups,
computer simulations, role playing and other similar activities which require same attributes for successful
performance in actual job
• 360 degree appraisal (It is a technique which is systematic collection of performance data on an individual
group, derived from a number of stakeholders like immediate supervisors, team members, customers, peers
and self. )
• Cost accounting method (Human resource method attaches money values to the value of a firms internal
human resources and its external customer good will. Under this method, performance is judged in terms of
costs and contributions of employees. Difference between the cost and contribution will reflect the
performance of the employees.)

Barriers to / Obstacles of Performance Appraisal

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

1. First Impression (primacy effect): Raters form an overall impression about the ratee on the basis of some
particluar characteristics of the ratee identified by them. The identified qualities and features may not
provide adequate base for appraisal.
2. Halo Effect: The individual’s performance is completely appraised on the basis of a perceived positive
quality, feature or trait. In other words this is the tendency to rate a man uniformly high or low in other traits
if he is extra-ordinarily high or low in one particular trait. If a worker has few absences, his supervisor might
give him a high rating in all other areas of work.
3. Horn Effect: The individual’s performance is completely appraised on the basis of a negative quality or
feature perceived. This results in an overall lower rating than may be warranted. “He is not formally dressed
up in the office. He may be casual at work too!”.
4. Excessive Stiffness or Lenience: Depending upon the raters own standards, values and physical and mental
makeup at the time of appraisal, ratees may be rated very strictly or leniently. Some of the managers are
likely to take the line of least resistance and rate people high, whereas others, by nature, believe in the
tyranny of exact assessment, considering more particularly the drawbacks of the individual and thus making
the assessment excessively severe. The leniency error can render a system ineffective. If everyone is to be
rated high, the system has not done anything to differentiate among the employees.
5. Central Tendency: Appraisers rate all employees as average performers. That is, it is an attitude to rate
people as neither high nor low and follow the middle path. For example, a professor, with a view to play it
safe, might give a class grade near the equal to B, regardless of the differences in individual performances.
6. Personal Biases: The way a supervisor feels about each of the individuals working under him - whether he
likes or dislikes them - as a tremendous effect on the rating of their performances. Personal Bias can stem
from various sources as a result of information obtained from colleagues, considerations of faith and
thinking, social and family background and so on.
7. Spillover Effect: The present performance is evaluated much on the basis of past performance. “The person
who was a good performer in distant past is assured to be okay at present also”.
8. Recency Effect: Rating is influenced by the most recent behaviour ignoring the commonly demonstrated
behaviours during the entire appraisal period.
9. Poor appraisal forms
10. Incompetence
11. Negative approach
12. Multiple objectives
13. Resistance (conflict)
14. Lack of support from top Management.
15. Lack of knowledge
16. Lack of rater preparedness
17. Ineffective organizational policies and practices
18. Supervisors lack skills in appraisal techniques.
19. Lack of suitable appraisal tool.

Performance Appraisal Process

The six steps involved in process of performance appraisal are as follows:
• Establish Performance Standards
• Communicate Performance Expectation to Employee

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• Measure Actual Performance
• Compare Actual Performance with Standards
• Discuss the Appraisal with the Employee
• Initiate Corrective Action
1. Establish Performance Standards:
The appraisal process begins with the establishment of performance standards. The managers must determine
what outputs, accomplishments and skills will be evaluated. These standards should have evolved out of job
analysis and job descriptions.These performance standards should also be clear and objective to be
understood and measured.
2. Communicate Performance Expectations to Employees:
Once the performance standards are established, this need to be communicated to the respective employees
so that they come to know what is expected of them’.The feedback from the employees on the standards
communicated to them must be obtained. If required, the standards may be modified or revised in the light of
feedback obtained from the employees. It is important to note that communication is a two-way street.
3. Measure Actual Performance:
This is the third step involved in the appraisal process. In this stage, the actual performance of the employee
is measured on the basis of information available from various sources such as personal observation,
statistical reports, oral reports, and written reports.
4. Compare Actual Performance with Standards:
In this stage, the actual performance is compared with the predetermined standards. Such a comparison may
reveal the deviation between standard performance and actual performance and will enable the evaluator to
proceed to the fifth step in the process, i.e., the discussion of the appraisal with the concerned employees.
Discuss the Appraisal with the Employee:
The fifth step in the appraisal process is to communicate to and discuss with the employees the results of the
appraisal. This is, in fact, one of the most challenging tasks the manager’s face to present an accurate
appraisal to the employees and then make them accept the appraisal in a constructive manner. A discussion
on appraisal enables employees to know their strengths and weaknesses. This has, in turn, impact on their
future performance.
6. Initiate Corrective Action:
The final step in the appraisal process is the initiation of corrective action when it is necessary. The areas
needing improvement are identified and then, the measures to correct or improve the performance are
identified and initiated. The corrective action can be of two types. One is immediate and deals predominantly
with symptoms. This action is often called as “putting out fires.” The other is basic and delves into causes of
deviations and seeks to adjust the difference permanently. This type of action involves time to analyse
deviations. Hence, managers often opt for the immediate action, or say, “put out fires”. Training, coaching,
counselling, etc. is the common examples of corrective actions that managers initiate to improve the
employee performance

Job Evaluation:
A job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs in an
organization. It tries to make a systematic comparison between jobs to assess their relative worth for the
purpose of establishing a rational pay structure.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Job evaluation begins with job analysis and ends at that point where the worth of a job is ascertained for
achieving pay equity between jobs.
It tries to make a systematic comparison b/w jobs to assess their relative worth for the purpose of
establishing a rational pay structure.
There are four basic methods of job evaluation currently in use which are grouped into two categories:
1. Non-quantitative Methods:
(a) Ranking or Job Comparison (b) Grading or Job Classification
2. Quantitative Methods:
(a) Point Rating (b) Factor Comparison
The basic difference between these two methods lies in the sense that, under non-quantitative methods, a job
is compared as a whole with other jobs in the organisation, whereas in case of quantitative methods, the key
factors of a job are selected and, then, measured. The four methods of job evaluation are now discussed one
by one.
Ranking Method:
The ranking method is the simplest form of job evaluation. In this method, each job as a whole is compared
with other and this comparison of jobs goes on until all the jobs have been evaluated and ranked. All jobs are
ranked in the order of their importance from the simplest to the hardest or from the highest to the lowest.
The importance of order of job is judged in terms of duties, responsibilities and demands on the job holder.
The jobs are ranked according to “the whole job” rather than a number of compensable factors.
Grading Method:
Grading method is also known as ‘classification method’. This method of job evaluation was made popular
by the U.S. Civil Service Commission. Under this method, job grades or classes are established by an
authorised body or committee appointed for this purpose. A job grade is defined as a group of different jobs
of similar difficulty or requiring similar skills to perform them. Job grades are determined on the basis of
information derived from job analysis.
The grades or classes are created by identifying some common denominator such as skills, knowledge and
responsibilities. The example of job grades may include, depending on the type of jobs the organisation
offers, skilled, unskilled, account clerk, clerk-cum-typist, steno typist, office superintendent, laboratory
assistant and so on.
Once the grades are established, each job is then placed into its appropriate grade or class depending on how
well its characteristics fit in a grade. In this way, a series of job grades is created. Then, different wage/salary
rate is fixed for each grade.
Points Rating:
This is the most widely used method of job evaluation. Under this method, jobs are broke down based on
various identifiable factors such as skill, effort, training, knowledge, hazards, responsibility, etc. Thereafter,
points are allocated to each of these factors.
Weights are given to factors depending on their importance to perform the job. Points so allocated to various
factors of a job are then summed. Then, the jobs with similar total of points are placed in similar pay grades.
The sum of points gives an index of the relative significance of the jobs that are rated.
Factor Comparison Method:
This method is a combination of both ranking and point methods in the sense that it rates jobs by comparing
them and makes analysis by breaking jobs into compensable factors. This system is usually used to evaluate
white collar, professional and managerial positions.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 Compensation Management:
• Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an
employer in return for work performed as required.
• Compensation is a systematic approach to providing monetary value to employees in exchange for work
performed.
• It refers to a methods of maintaining balance between interest of company & attracting, developing, retaining
and rewarding high quality staff through wages and salaries
• It is the money received in the performance of work plus the many kinds of benefits and services that the
organization provides to its employees. It includes any direct or indirect payments to employees such as
wages, bonuses and benefits.
Components of compensation:
• Wages: Wages are the most important component of compensation and these are essential irrespective of the
type of organization. Wage is referred to as remuneration to workers.
• Salary: Salary refers to as remuneration paid to white-collar employees including managerial personnel. It is
the compensation to an employee for service rendered on a monthly or annual basis.
• Incentives: Incentives are the additional payment to employees besides the payment of wages and salaries.
Often these are linked with productivity, either in terms of higher production or cost saving or both. These
incentives may be given on individual basis or group basis.
• Fringe Benefits: Fringe benefits include such benefits which are provided to the employees either having
long-term impact like provident fund, gratuity, pension; or occurrence of certain events like medical benefits,
accident relief, health and life insurance; or facilitation in performance of job like uniforms, Canteens,
recreation, etc.
• Perquisites: These are normally provided to managerial personnel either to facilitate their job performance
or to retain them in the organization. Such perquisites include company car, club membership, free
residential accommodation, paid holiday trips, stock options, etc.
• Non-monetary benefits: These include challenging job responsibilities, recognition of merit, growth
prospects, competent supervision, comfortable working conditions, job sharing, and flextime.
Objectives
• To enable the employee to earn a good and reasonable salary or wage.
• To pay equitable sums to different individuals
• To reward and encourage high quality work and output.
• To encourage employees to develop better methods of working and their acceptance
• To discourage wastage of materials or equipment.
• To discourage overtime working unless it is very essential
• To increase or maintain morale/ satisfaction of employees.
• A good compensation package is important to motivate the employees to increase the organizational
productivity.
Types

Types
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

Non-
Financial
 Financial
• Direct
– Wages
– salaries
– commissions,
– bonuses
– Long term incentives
– Indirect
– Insurance plans
• life, health, disability
– Social assistance benefits
• retirement plans, social security, workers’ comp
– Paid absences
• vacations, holidays, sick leave
• Non-Financial
• Job
– interesting, challenging, responsible
– opportunity for recognition, advancement
– feeling of achievement
• Job Characteristics
– Skill Variety
– Task identity
– Task Significance
– Autonomy
– Feedback
• Job Environment
– Policies
– supervision,
– co-workers,
– status symbols,
– working conditions,
– job sharing,
– flexible benefits programs

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Wages:
• According to Benham “ A wage may be defined as a sum of money paid under contract by an employer to a
worker for the services rendered.”
• According to Prof. J.L Hanson “Wage is a payment to a labourer for its assistance to production”.
Difference between Salary & Wage

BASIS FOR SALARY WAGE

COMPARISON
Meaning A fixed pay that an A variable pay that an individual draws on
individual draws for the basis of hours spent in completing the
the work done by him certain amount of work.
on an annual basis.

Skills Skilled personnel

Semi-skilled or unskilled

Type of cost Fixed Variable

Rate of payment Fixed rate Wage rate

Payment cycle Monthly Daily

Basis of payment Performance basis Hourly basis

Paid to whom Employees Labor

Nature of work Administrative-office Manufacturing-process work

work
KRA Yes No
(Key resultant area)

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

Extra pay for extra No Yes
hours

Types of Wages:
Minimum Wages—The minimum wage may be defined as the lowest wage necessary to maintain a worker
and his family at the minimum level of subsistence, which includes food, clothing and shelter. When the
government fixes minimum wage in a particular trade, the main objective is not to control or determine
wages in general but to prevent the employment of workers at a wage below an amount necessary to
maintain the worker at the minimum level of subsistence.
Living wages: It is not only for the bare essentials for the worker and his family, but also for protection
against ill-health, decency, social needs and insurance for old age
Fair wages: It is in-between minimum wages and living wages, but below the living wage.

Different theories of wages

Subsistence theory : This theory was propounded by David Recardo (1772-1823). According to this theory,
“The labourers are paid to enable them to subsist and perpetuate the race without increase or diminution”.
This payment is also called as ‘subsistence wages’. The basic assumption of this theory is that if workers are
paid wages more than subsistence level, workers’ number will increase and, as a result wages will come
down to the subsistence level.
On the contrary, if workers are paid less than subsistence wages, the number of workers will decrease as a
result of starvation death; malnutrition, disease etc. and many would not marry. Then, wage rates would
again go up to subsistence level. Since wage rate tends to be at, subsistence level at all cases, that is why this
theory is also known as ‘Iron Law of Wages’. The subsistence wages refers to minimum wages.

Wage fund theory : This theory was developed by Adam Smith (1723-1790). His theory was based on the
basic assumption that workers are paid wages out of a pre-determined fund of wealth. This fund, he called,
wages fund created as a result of savings. According to Adam Smith, the demand for labour and rate of
wages depend on the size of the wages fund. Accordingly, if the wages fund is large, wages would be high
and vice versa.
Marginal productivity theory: Propounded by Phillips Henry and John Bates Clark.
According to this theory in a competitive labour market situation labour like other factor of production is
determined by the marginal productivity of labour. The rate of wages paid to the workers tends to be equal to
the marginal net production of the labour. Wage is determined on the production contributed by the worker.
As long as workers contributes more to the total value than the cost or wages , it pays the employer to hire
workers but when contribution is just equal to the cost the employer may prefer superior technology than
workers.
Bargaining theory: John Davidson was the propounder of this theory. According to this theory, the fixation
of wages depends on the bargaining power of workers/trade unions and of employers. If workers are stronger
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
in bargaining process, then wages tends to be high. In case, employer plays a stronger role, then wages tends
to be low.
Residual claimant theory : This theory owes its development to Francis A. Walker (1840-1897). According
to Walker, there are four factors of production or business activity, viz., land, labour, capital, and
entrepreneurship. He views that once all other three factors are rewarded what remains left is paid as wages
to workers. Thus, according to this theory, worker is the residual claimant.
Behavioral theory: Based on research studies and action programmes conducted, some behavioural
scientists have also developed theories of wages. Their theories are based on elements like employee’s
acceptance to a wage level, the prevalent internal wage structure, employee’s consideration on money or’
wages and salaries as motivators.
Surplus Value Theory of Wages:
This theory was developed by Karl Marx (1849-1883). This theory is based on the basic assumption that like
other article, labour is also an article which could be purchased on payment of its price i e wages. This
payment, according to Karl Marx, is at subsistence level which is less than in proportion to time labour takes
to produce items. The surplus, according to him, goes to the owner. Karl Marx is well known for his
advocation in the favour of labour.

Criteria of Wage Fixation

Factors influencing Wage and Salary Administration

External factors

Demand and supply: When the demand of a particular type of labor is more and supply is less then the
wages will be more. On the other hand, if supply of labor is more demand on the other hand, is less then
persons will be available at lower wage rates also. In the words of Mescon, ‘the supply and demand
compensation criterion is very closely related to the prevailing pay, comparable wage and ongoing wage
concepts since, in essence all of these remuneration standards are determined by immediate market forces
and factors.
Cost of living: The wage rates are directly influenced by cost of living of a place. The workers will accept a
wage which may ensure them a minimum standard of living. Wages will also be adjusted according to price
index number. The increase in price index will erode the purchasing power of workers and they will demand
higher wages..
Trade unions bargaining power: The wage rates are also influenced by the bargaining power of trade
unions. Stronger the trade union higher well be the wage rates. Union’s last weapon is strike which may also
be used for getting wage increases. If the workers are disorganized and disunited then employers will be
successful in offering low wages.
Government legislation: To improve the working conditions of workers, government may pass legislation
for fixing minimum wages of workers. This may ensure them a minimum level of living.. In India, Minimum
Wages Act, 1948 was passed to empower government to fix minimum wages of workers.
Economy: Economy also has its impact on wage and salary fixation. While it may be possible for some
organizations to thrive in a recession, there is no doubt that economy affects remuneration decisions. A
depressed economy will probably increase the labor supply. This, in turn, should lower the going wage rate.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Technological development: With the rapid growth of industries, there is a shortage of skilled resources.
The technological developments have been affecting skills levels at faster rates. Thus, the wage rates of
skilled employees constantly change and an organization has to keep its level up-to the mark to suit the
market needs.
Psychological and social factors: Psychological the level of compensation is perceived as a measure of
success in life. Management should take into consideration the psychological needs of the employees while
fixing the wage rates so that the employees take pride in their work. Sociologically and ethically, the
employees want that the wage system should be equitable, just and fair. These factors should also be taken
into consideration while devising a wage programme.

Prevailing market rates: No enterprise can ignore prevailing or comparative wage rates. The wage rates
paid in the industry or other concerns at the same place will form a base for fixing wage rates. If a concern
pays low rates then workers leave their jobs whenever they get a job somewhere else. It will not be possible
to retain good workers for long.
Internal factors:
Ability to pay: The ability to pay of an enterprise will influence wage rates to be paid. If the concerns is
running into losses then it may not be able to pay higher wage rate. A profitable concern may pay more to
attract good workers. During the period of prosperity, workers are paid higher wages because management
wants to share the profits with labor.
Job requirements: Basic wages depend largely on the difficulty level, and physical and mental effort
required in a particular job. The relative worth of a job can be estimated through job evaluation. Simple,
routine tasks that can be done by many people with minimum skills receive relatively low pay. On the other
hand, complex, challenging tasks that can be done by few people with high skill levels generally receive high
pay.
Management strategy: The overall strategy which a company pursues should determine to remuneration to
its employees. Where the strategy of the organization is to achieve rapid growth, remuneration should be
higher than what competitors pay. Where the strategy is to maintain and protect current earnings, because of
the declining fortunes of the company, remuneration level needs to be average or even below average.
Employee: Several employees related factors interact to determine his remuneration.
1. Performance or productivity is always rewarded with a pay increase. Rewarding performance motivates
the employees to do better in future.
2. Seniority. Unions view seniority as the most objective criteria for pay increases whereas management
prefers performance to affect pay increases.
3. Experience. Makes an employee gain valuable insights and is generally rewarded.
4. Potential. Organizations do pay some employees based on their potential. Young managers are paid more
because of their potential to perform even if they are short of experience.

Components of wages:
• Basic wages: Basic wage means the minimum price which the employer must pay to all its employees
belonging to a particular category. It means the minimum wage which an employer must pay irrespective of
the change in the consumer price index. It is a stable wage paid for a given job with all its requirements of
skill, training .It is paid over a period of time and fixed monthly, weekly or daily basis.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• Dearness Allowance: It refers to an allowance paid to employees in order to enable them to face the
increasing dearness of essential commodities. It paid by the employer to neutralize the effect of upward
change in price level. The main objective of DA as a component of wage is to neutralize the increase in
price. In certain cases the DA is more than the basic pay or double the basic pay. The DA is computed
according to changes in consumer price index and sometimes the DA is linked to pay slabs also, i.e., as the
basic pay goes up, the rate of DA will come down
• Overtime Allowance: Overtime is paid to workers where the employee has to work beyond his normal duty
hours. Payment of overtime allowance has become necessary due to improper allocation of manpower and
scheduling Absenteeism or shortage of manpower situation emerging out of some emergency like
breakdown of machinery or power failure. Rush of jobs during the financial year end.
• Bonus: An award in cash or equivalent by an employer to an employee for accomplishment being
considered desirable and implemented through not required by the contract of employment. According to
payment of Bonus Act 1965 the minimum rate of bonus is 8-1/3% and maximum is 20%.
• Fringe Benefits: It refers to the extra benefits provided to the employees in addition to the normal
compensation paid in the form of wage and salary.
• Apart from wages D.A, and Bonus an employee receives a number of cash and non-cash benefits from his
employer which may be known as fringe benefits such as HRA, medical benefits, provident fund, pension
fund.
Wage differentials
1. Occupational Differences:
Occupations in an organization widely differ from one another in terms of skill requirement and the extent of
requirement and the extent of responsibility. Accordingly, wages vary from occupation to occupation. Such
differences in occupations induce people/workers to undertake more challenging jobs, encourage workers to
develop their skills by way of education and training. It is varying skill requirement for different occupation
that shapes the manpower planning in an organization-be it an industrial organization or educational
institution.
2. Inter-firm Differentials:
There are wage differentials of workers in different plants in the same area and occupation. Factors like
differences in quality of labour employed by different firms, imperfections in the labour market and
differences in the efficiency of equipment’s and supervision result in inter-firm wage differentials. Added to
these are differences in technological advance, managerial efficiency, financial capability, firm’s age and
size, availability of raw material, power and transport facilities also account for differences in wages among
firms.
3. Regional Differences:
Not only wages differ among occupations, but these also differ in case of workers working in the same
occupation at different geographical regions. These differences are the result of working conditions prevalent
in different regions of the country For example; the Central Government employees serving in the remote
and disturbed areas like the North Eastern States of India are paid additional remuneration in the form of the
Remote Area Allowance. Sometimes, such wage differentials are used to attract people to serve in particular
regions.
4. Inter-Industry Differences:
These differences in wages surface in case of workers working in the same occupation and the same area but
in different industries. These differences are the result of varying skill requirements, level of unionisation,
nature of product market, ability to pay, the stage of development of an industry, etc.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 5. Personal Wage Differences:
These differences arise because of the differences in the personal characteristics (age or sex) of workers
working in the same unit and occupation. Though provision of ‘equal pay for equal work’ is certainly there,
but it is still not the reality. Instances are there when woman worker is paid less than her male counterpart for
doing the same job. Of course, there are other reasons also which cause wage differentials between male and
female workers.
After all, what is the rationale behind wage differentials? There are two views about it. One, in view of the
principles of socialistic pattern of society in which the object of the representative. Government is to
minimise inequalities, in incomes and distribution of wealth.
EXECUTIVE COMPENSATION
It is a collective term for all the components that make up the remuneration package of the executives of the
company.
A company’s Board of Directors designs executive Compensation packages, typically by the Compensation
Committee consisting of independent directors, with the purpose of incentivizing the executive team, who
have a significant impact on company strategy, decision-making, and value creation (Pay for Performance)
as well as enhancing Executive Retention

Objectives of executive compensation

• Aligning managerial interest with ownership interest
• Bringing in the best executives ,to retain them and to avoid poaching
• Enhancing employeemotivation, involvement and commitment.
• Promoting managerial efficiency.
• Ensuring complete financial security.
• Encouraging progressive treatment.
• Favorable tax treatment for the company.

Factors affecting executive compensation

Complexity of the job
Competency required
Capacity to pay
Organization philosophy
International impact(MNC)

Elements/ Components of executive compensation

1. Base pay/ Salary-It is the first component of executive compensation.Generally salary make upto 40-60
percent of the top managerial annual compensation.
A basic salary is regarded as a “fixed” element of pay and it does not normally vary in relation to company
performance. Since salary establishes the executive’s basic standard of living, it is necessary for both high
and low-performing firms to pay at the going market rates.

2.Bonus -Because executive performance may be difficult to determine, bonus compensation must reflect
some kind of performance measure if it is to be meaningful.
Four types of bonus are common.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 Discretionary bonus
It is provided under four conditions
Company profit
Financial condition of the co
Business conditions
Prospects for the future

 Performance contingent bomus-( Attainment of specific performance criteria)

 Predetermined allocation bonus -( It is done at a fixed formula when the co attains profit).
 Target plan bonus (Depends upon executive’s performance.)

Short term incentives-These type of incentives usually apply to a group of selected executives within a
company. Basically for achieving milestone work objectives. These are designed to reward them for meeting
immediate performance criteria.

Profit sharing and gain sharing plans-Profit sharing plans pay a portion of their profits to employees
separate from base pay .which may be payment in cash or can be deferred cash payments.
In Gain sharing plan, group incentive systems provide participoarting employees with an incentive payment
based on improved company performance such as increased productivity,increased customer
satisfaction,lower costs, or better safety records.
.
Long term incentives /Deferred core compensation-Company stock /shares are the main form of
executives deferred compensation.these is designed to promote an executives sense of ownership of the
company.
. Depending on the plan, the share unit holder may receive cash or actual stock at the point of exercise. Share
unit holders will also normally receive the same dividends as regular shareholders Because each share unit
has more value than a stock option, fewer units need to be granted to provide the same compensation value
to the executives.

Perks / fringe benefits-Executives also receive discretionary benefits like other employees like-protection
program benefits,paid time –off, and employee services.

Designing the Pay structure

Compensation is a critical area of human resource (HR) management, and one that can greatly affect
employee behavior. To be effective, compensation must be perceived by employees as fair, competitive in
the market, accurately based, motivating and easy
to understand. HR professionals might create the pay structure for their organization, or they might work
with an external compensation
consultant.

There are several steps to designing a pay structure: job analysis; job evaluation; pay survey analysis; pay
policy development; and pay structure formation. Each step is briefly explained below.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
Step 1: Job Analysis
Job analysis is the process of studying jobs in an organization. The outcome of this process is a job
description that includes the job title, a summary of the job tasks, a list of the essential tasks and
responsibilities, and a description of the work context. Also included are the knowledge, skills and abilities
needed to perform the job.
Step 2: Job Evaluation
Job evaluation is the process of judging the relative worth of jobs in an organization. The outcome of job
evaluation is the development of an internal structure or hierarchical ranking of jobs. Job-based evaluation is
used more often than person-based evaluation, and so the former will be the focus in this case. There are
three methods of job-based evaluation: the point method
(which is the most commonly used); ranking; and classification. Job evaluation helps to ensure that pay is
internally aligned and perceived to be fair by employees.
Step 3: Pay Policy Identification
Pay policy identification is the process of determining whether the organization wants to lead, lag or meet
the market in compensation. The pay policy or strategy will likely influence employee attraction and
retention. Pay policies can vary across job families (i.e., groups of similar jobs) and job levels if the top
management feels that different strategies can be effective in different areas of the organization.
Step 4: Pay Survey Analysis
Pay survey analysis is the process of analyzing compensation data gathered from other employers in a survey
of the relevant labor market. Gathering external pay data (e.g., base pay, bonuses, stock options and benefits)
is essential to keep the organization’s compensation externally competitive within its industry. Employee
attraction and retention can be improved by maintaining externally aligned pay structures.
Step 5: Pay Structure Creation Pay structure creation is the final step, in which the internal structure (Step
2) is merged with the external market pay rates (Step4) in a simple regression to develop a market pay line.
Depending on whether the organization wants to lead, lag or meet the market, the market pay line can be
adjusted up or down. To complete the pay structure, pay grades and pay ranges are developed.

To ensure that the pay structure is externally competitive, a pay survey will be conducted. For the results of a
survey to be valid,the market pay data must be from the relevant labor market for each benchmark job.
You develop a streamlined pay survey and administer it to industry competitors. Descriptive organization
data (e.g., size, industry,annual revenue) is gathered as well as compensation data for each of the benchmark
jobs, including base pay, bonuses, stock options and benefits.

UNIT-3

Training:

Training: Meaning
Training constitutes a basic concept in human resource development. It is concerned with developing a
particular skill to a desired standard by instruction and practice. Training is a highly useful tool that can bring

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

an employee into a position where they can do their job correctly, effectively, and conscientiously. Training
is the act of increasing the knowledge and skill of an employee for doing a particular job.
Definition of Training:
Dale S. Beach defines training as ‘the organized procedure by which people learn knowledge and/or skill for
a definite purpose’. Training refers to the teaching and learning activities carried on for the primary purpose
of helping members of an organization acquire and apply the knowledge, skills, abilities, and attitudes
needed by a particular job and organization.
According to Edwin Flippo, ‘training is the act of increasing the skills of an employee for doing a particular
job’.
Need for Training:
Every organization should provide training to all the employees irrespective of their qualifications and skills.
Specifically the need for training arises because of following reasons:
1. Environmental changes:

Mechanization, computerization, and automation have resulted in many changes that require trained staff
possessing enough skills. The organization should train the employees to enrich them with the latest
technology and knowledge.
2. Organizational complexity:
With modern inventions, technological upgradation, and diversification most of the organizations have
become very complex. This has aggravated the problems of coordination. So, in order to cope up with the
complexities, training has become mandatory.
3. Human relations:
Every management has to maintain very good human relations, and this has made training as one of the basic
conditions to deal with human problems.
4. To match employee specifications with the job requirements and organizational needs:
An employee’s specification may not exactly suit to the requirements of the job and the organization,
irrespective of past experience and skills. There is always a gap between an employee’s present
specifications and the organization’s requirements. For filling this gap training is required.
5. Change in the job assignment:
Training is also necessary when the existing employee is promoted to the higher level or transferred to
another department. Training is also required to equip the old employees with new techniques and
technologies.

Methods of Training: On-the-job Training Method and Off-the-Job Methods:

1. On-the-job Training (OJT) Methods:

This is the most common method of training in which a trainee is placed on a specific job and taught the
skills and knowledge necessary to perform it.
On-the-job training methods are as follows:
1. Job rotation:
This training method involves movement of trainee from one job to another gain knowledge and experience
from different job assignments. This method helps the trainee understand the problems of other employees.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

2. Coaching:
Under this method, the trainee is placed under a particular supervisor who functions as a coach in training
and provides feedback to the trainee. Sometimes the trainee may not get an opportunity to express his ideas.
3. Job instructions:
Also known as step-by-step training in which the trainer explains the way of doing the jobs to the trainee and
in case of mistakes, corrects the trainee.
4. Committee assignments:
A group of trainees are asked to solve a given organizational problem by discussing the problem. This helps
to improve team work.
5. Internship training:
Under this method, instructions through theoretical and practical aspects are provided to the trainees.
Usually, students from the engineering and commerce colleges receive this type of training for a small
stipend.
2. Off-the-job Methods:
On the job training methods have their own limitations, and in order to have the overall development of
employee’s off-the-job training can also be imparted. The methods of training which are adopted for the
development of employees away from the field of the job are known as off-the-job methods.
The following are some of the off-the-job techniques:
1. Case study method:
Usually case study deals with any problem confronted by a business which can be solved by an employee.
The trainee is given an opportunity to analyse the case and come out with all possible solutions. This method
can enhance analytic and critical thinking of an employee.
2. Incident method:
Incidents are prepared on the basis of actual situations which happened in different organizations and each
employee in the training group is asked to make decisions as if it is a real-life situation. Later on, the entire
group discusses the incident and takes decisions related to the incident on the basis of individual and group
decisions.
3. Role play:
In this case also a problem situation is simulated asking the employee to assume the role of a particular
person in the situation. The participant interacts with other participants assuming different roles. The whole
play will be recorded and trainee gets an opportunity to examine their own performance.
4. In-basket method:
The employees are given information about an imaginary company, its activities and products, HR employed
and all data related to the firm. The trainee (employee under training) has to make notes, delegate tasks and
prepare schedules within a specified time. This can develop situational judgments and quick decision making
skills of employees.
5. Business games:
According to this method the trainees are divided into groups and each group has to discuss about various
activities and functions of an imaginary organization. They will discuss and decide about various subjects
like production, promotion, pricing etc. This gives result in co-operative decision making process.
6. Grid training:
It is a continuous and phased programme lasting for six years. It includes phases of planning development,
implementation and evaluation. The grid takes into consideration parameters like concern for people and
concern for people.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 7. Lectures:
This will be a suitable method when the numbers of trainees are quite large. Lectures can be very much
helpful in explaining the concepts and principles very clearly, and face to face interaction is very much
possible.
8. Simulation:
Under this method an imaginary situation is created and trainees are asked to act on it. For e.g., assuming the
role of a marketing manager solving the marketing problems or creating a new strategy etc.
9. Management education:
At present universities and management institutes gives great emphasis on management education. For e.g.,
Mumbai University has started bachelors and postgraduate degree in Management. Many management
Institutes provide not only degrees but also hands on experience having collaboration with business
concerns.
10. Conferences:
A meeting of several people to discuss any subject is called conference. Each participant contributes by
analyzing and discussing various issues related to the topic. Everyone can express their own view point.

Steps / Process of Training

1. Needs assessment: The first step in the training process is to assess the need for training the employees. The
need for training could be identified through a diagnosis of present and future challenges and through a gap
between the employee’s actual performance and the standard performance.
The needs assessment can be studied from two perspectives: Individual and group. The individual training is
designed to enhance the individual’s efficiency when not performing adequately. And whereas the group
training is intended to inculcate the new changes in the employees due to a change in the organization’s
strategy.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

2. Deriving Instructional Objectives: Once the needs are identified, the objectives for which the training is to
be conducted are established. The objectives could be based on the gaps seen in the training programmes
conducted earlier and the skill sets developed by the employees.
3. Designing Training Programme: The next step is to design the training programme in line with the set
objectives. Every training programme encompasses certain issues such as: Who are the trainees? Who are the
trainers? What methods are to be used for the training? What will be the level of training? etc.Also, the
comprehensive action plan is designed that includes the training content, material, learning theories,
instructional design, and the other training requisites.
4. Implementation of the Training Programme: Once the designing of the training programme is completed,
the next step is to put it into the action. The foremost decision that needs to be made is where the training
will be conducted either in-house or outside the organization.
Once it is decided, the time for the training is set along with the trainer who will be conducting the training
session. Also, the trainees are monitored continuously throughout the training programme to see if it’s
effective and is able to retain the employee’s interest.
5. Evaluation of the Training Programme: After the training is done, the employees are asked to give their
feedback on the training session and whether they felt useful or not. Through feedback, an organization can
determine the weak spots if any, and can rectify it in the next session.The evaluation of the training
programme is a must because companies invest huge amounts in these sessions and must know it’s
effectiveness in terms of money.
What is career?
• Career is an occupation or profession, that one undertakes for a long period of his life time & derive
monetary benefits from it.
• It is a sequence of positions held by a person during the course of a life time. It comprises of a series of work
related activities that provide continuity, order and meaning to a person’s life.
• It is a sequence of jobs that constitute what a person does for a living.

Career planning

➢ Career planning consists of activities and action that you take to achieve your individual goal.
➢ It is a systematic process by which one decides his/ her career goals and the path to reach these goals.
➢ It is a difference between success & failure which always leads to satisfactory result.
➢ It is a process of systematically matching career goals and individual capabilities with opportunities for
their fulfillment.

Objectives of Career Planning

• To identify positive characteristics of the employees.

• To develop awareness about each employee’s uniqueness.
• To respect feelings of other employees.
• To attract talented employees to the organization.
• To attract and retain persons in an organization
• To utilize human resources optimally

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• To reduce employee turnover
• To make employees adaptable to changes

STAGES OF CAREER DEVELOPMENT MODEL

 Exploration
 Establishment
 Mid career
 Late career
 Decline

Exploration Stage
• A career stage that usually ends in the mid-twenties as one makes transition from formal education to job
(earn i.e. work)
 Ensure the availability of accurate information about the various occupations existing in the organization to
the new employee
 Create opportunities to enable new employees to get information with the organizational careers through job
rotation, internship, visit different units, seminars, etc.
 Sponsor educational and training programmes for ensuring supply of potential talent in future.
Establishment Stage

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• Establishment period begins with the search of work and includes accepting your first job,
being accepted by your peers, learning the job and gaining the first tangible evidence of success or failure
in the real world.
 Identification of the best possible talent for the organization
 Communicating the correct and positive of the organization to the employee
 Maximum learning and favorable attitudes of the employees towards the organization
 Assigning challenging jobs to employees to enable them test their abilities and skills
 Designing of development plan ,identification of development needs, deciding career steps, etc
Mid career crisis and its management
Mid career or maintenance is a stage that is typically reached between the age of 35 and 50.at this point one
may continue to show improved performance, level off or begin to decline, one is no longer viewed as a
learner. Mistakes committed would be viewed seriously and may invite penalties as well. If one is good
enough, one may grow and turn out good results. If one does not have the same fire in the belly when they
started their career, the best thing would be to hold on to what one has.
One of the tasks the individual faces at the mid career is a re-examination of the life structure and choices
that were adopted during the early career. Two events that often occur during mid career are plateauing (a
lack of significant increases in responsibilities/or job advancement) and obsolescence (finding one’s skill are
not sufficient to perform tasks required by technological change) the individual who successfully resolves
these challenges will remain productive, while one does not will experience frustration and stagnation.
Late career
This is the stage where one relaxes a bit and plays the part of an elder states person. For those who continue
to grow through the mid career stage, this is the time to command respect from younger employees. Your
varied experience and judgment are greatly valued and your word will carry weight, undoubtedly you can
teach others and share your experiences with others.
For those who have stagnated or deteriorated during the previous stage, the late career brings the reality that
they are no longer required to run the race and it’s better to redirect the energies to family, friends and
hobbies.

Decline career-
During this period a person’s attention may turn to retirement. The achievements of a long career and the
frustrations and anxieties that go along with that phase are left behind. Regardless of one is leaving a
glorified career or a dismal job, one has to make adjustments and get along with people and things.

Succession planning

It is the process of identifying, developing and tracking key individuals for executive positions.
Succession planning is a process by which one or more successors are identified for key posts and
development activities are planned for these successors.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

Difference between career planning and succession planning

BASIS FOR CAREER PLANNING SUCCESSION PLANNING

COMPARISON

Meaning Career planning is an ongoing process It is the process by which an

where an employee explores his or her organization identifies and develops new
interests and capabilities and employees to take up key leadership
purposefully plan career goals. roles when the existing leaders
leave for a different career, retire or die.

Nature It is conducted from the point of the It is conducted from the point of the
employee. organization.

Scope In career planning, one employee will In succession planning, one role will be
perform various roles over a period of performed by a number
time. of employees over a period of time.

Subset of Career Management Succession Management

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 What is it? Individual Planning Organizational Strategy

Position One employee holds different positions, One position is held by different
in his/her work life. employees, over a period of time.

Ensures Success in one's career. Continuity in leadership for all key

positions.

Promotion
 An upward movement of an employee from current job to another that is higher in pay, responsibility,
status and organizational level.
 An advancement of an employee to a better job. i.e Better in terms of responsibility , More prestige or
status , Greater skill , Increased rate of pay or salary.
 Involves a change from one job to another that is better in the terms of status and responsibilities.

Purposes of Promotion

 To utilize the employee’s skill, knowledge at the appropriate level in the organizational hierarchy
resulting in organizational effectiveness and employee satisfaction.
 To develop competent internal source of employees ready to take up jobs at higher levels in the changing
environment.
 To develop competitive spirit and zeal in the employees to acquire the skill and knowledge etc. required by
higher level jobs.
 To promote employee self-development and make them await their turn of promotions. It reduce
labour turnover.
 To create among employees feelings of contentment with their present working conditions and encourage
them to succeed in the company.
 To built loyalty among employees and to boost their morale.

Types of Promotion

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Vertical Promotion Upgrading
Promotion Dry Promotion

• Under this type of • Under this type of • Under this

promotion, promotion, the Promotion, the
employee is moved salary of an employee is moved
to the next higher employee is to the next higher
level, in the increased without a level in the
organizational corresponding organizational
hierarchy with grater change in job grade hierarchy without
responsibility, increasing salary.
authority, pay and
status.

Bases of promotion

Bases of Promotion

Seniority Cum-
Seniority Bases Merit Bases
Merit Bases

Seniority as a bases of Promotion

 Seniority refers to relative length of service in the same job and in the same organization.
 If seniority as a bases of promotion, the senior most person in a lower grade shell be promoted as and when
there is an opening in a higher position.
 The logic behind considering the seniority as a bases of promotion is that there is a positive correlation
between the length of service in the same job and the amount of knowledge and the level of skill acquired by
an employee in the organization.

Merits as a bases of Promotion

 Merit means ability to work.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
 Denote an individual employee’s skill, knowledge, ability, efficiency and aptitude as measured from
educational, training and past employment record.
 Employees are evaluated in terms of quality or quantity of work, this basis ensures that only best employees
are promoted.
 Merit may be determined by job performance and by analysis of employee potential for development through
written or oral examinations or personal interviews or other record of performance.

Seniority cum- merit as a bases of Promotion:

 A combination of both merit and seniority can be considered as the basis for promotion satisfying the
management for organizational effectiveness and the employees and trade unions for respecting the length of
service.
 Management mostly prefer merit as a basis of promotion as they are interested in enriching organizational
effectiveness by enriching its human resources.
 Trade unions favour seniority as the sole basis of promotion with a view to satisfy the interests of majority of
their members.
 The combination of both seniority and merit may be considered as a sound basis for promotion.

TRANSFER

 The moving of employee from one job to another. It may involve a promotion, demotion or no change in job
status other than moving from one job to another.
 A transfer is a horizontal or lateral movement of an employee from one job, section, department, shift, plant
or position to another at the same or another place where his salary, status and responsibility are the same.

Purposes and reasons of transfer

 To meet organizational requirements

To satisfy such needs of an organization as may arise out of change in the quantity of production,
fluctuations in work requirements, and changes in the organization structure, introduction of new line of
production need for suitable adjustment in business operations. The purpose of such transfer is to stabilize
employment in the organisation such transfer are known as production transfer, flexibility transfer or
organizational transfer.
 To meet employee request
To meet an employee’s own request when he feels uncomfortable on the job because of his dislike of his
boss or his fellow workers or because better opportunities for his future advancement do not exist there or
because of family circumstances which may compel him to change the place of his residence. Such transfer
are known as personal transfer.
 To increase productivity of the employees

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 To utilize properly the services of an employee when he is not performing adequately and when the
management feels that he might be more useful or suitable elsewhere where his capacities will be better
utilized. Such transfer is known as remedial transfer.
 To make employees more versatile
To increase the versatility of the employees by shifting from one job to another so that they have ample
opportunities for gaining a broad experience of work. Such transfers are known as versatility transfer. This is
also known as rotation transfer.
 Adjusting the workforce
To adjust the workforce of one plan with that of another particularly when one is closed down for reasons
beyond the control of the employer. Such transfers are known as plant transfer.
 To give relief to an old employee
To replace a new employee by an employee who has been in the organization for a sufficiently long time.
Such transfers are known as replacement transfer. The purpose is to give relief to an old employee from the
heavy pressure of the work.
 Adjusting the employee timing
To help employees work according to their convenience so far as timing are concerned for eg an employee is
transferred from the night shift to morning shift. This is known as shift transfer
 Penalizing employees
To penalize the employee transfers are also done, under which either a person may be transferred to a remote
branch where he cannot continue his activities. This is known as penal transfer.

Types of Transfer:

1. Production Transfer: Such transfers are resorted to when there is a need of manpower in one department
and surplus manpower in another department. Such transfers are made to meet the company requirements.
2. Replacement Transfers: Replace an existing employee who has been in the organization for a long time
with a new employee and thereby giving some relief to an old employee from the heavy pressure of work.
3. Remedial Transfers: As the name suggest, these transfers are made to rectify the situation caused by faulty
selection and placement procedures. Such transfers are made to rectify mistakes in placement and
recruitments.
4. Versatility Transfer: Such transfers are made to increase versatility of the employees in more than one job
and department. This type of transfer, also referred to as ‘Job Rotation’ is a tool to train employees.
5. Shift Transfers: are transfers of workers from one shift to another on the same type of work. Workers
generally dislike second or third shift as it affects their participation in community life.
6. Penalty Transfer: Transfers initiated as a punishment to in disciplinary action of employees.

Benefits of Transfer:

 Increase in productivity and effectiveness of the organization.

 Greater job satisfaction to employees.
 Stabilize fluctuating job needs.
 Improve employee skills.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 Remedy for wrong placement.
 Improve labour relationships.
 Develop employees for future promotions.
 Avoid monotony and boredom.

Problems of Transfer
 Adjustment problem to the employee to the new job, place, environment, superior and colleagues
 Company initiated transfers result in reduction in employee contribution
 Discriminatory transfers effect employee morale, job satisfaction, commitment
 Employees may or may not fit in the new location
 Shifting of experienced hands may affect productivity.
 Discriminatory transfers may affect employee moral.
 Inconvenient to employees who otherwise don’t want to move

SEPARATION:
 It is a situation when the service agreement of an employee with his/ her organization comes to an end and
employee leaves the organization.
 Separation of an employee exists when the service of an employee comes to an end because of one reason or
other.
 The termination of employees from membership of the organization is referred as employee separation.
 Separation means termination of service or agreement with the organization for one or other reason.
Forms / Types of Separation
1. Retirement:
Retirement is the major cause of separation of employees from the organisation. It can be defined as the
termination of service of an employee on reaching the age of superannuation. For example, at present the
superannuation age for the teachers working in the Central Universities is 62 years and in case of some state
government employees, it is 58 years. Some people characterize retirement as ‘role less role’.
Retirement may be of two types:
(i) Compulsory Retirement:
This is the retirement when employees retire compulsorily from service on attaining the age of
superannuation. Some organisations like Universities may have a policy to reappoint professionals and
others who possess rare skills and expertise for a limited time even after attaining superannuation.
(ii) Voluntary Retirement:
When organisations give option to its employees to retire even before superannuation, it is called ‘voluntary
retirement’. This scheme is termed as, ‘voluntary retirement scheme (VRS)’. Of late, in their efforts to
downsize the employees, organisations by providing certain incentives, are trying to encourage their
employees to opt for voluntary retirement. Employees in return of voluntary retirement are given lump sum
payment. This type of retirement is also called ‘Golden Hand Shake’.
2. Resignation:
Resignation is termination of service by an employee by serving a notice, called ‘resignation’ on the
employer. Resignation may be voluntary or involuntary. A voluntary resignation is when an employee
himself/herself decides to resign on the grounds of ill health, marriage, better job prospects in other
organizations, etc.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
Resignation is considered involuntary or compulsory when the employer directs the employee to resign on
grounds of duty and indiscipline or face the disciplinary action. However, in case of involuntary resignation,
a domestic enquiry should be conducted before asking the employee to resign. This is because otherwise the
affected employee can go to the union or court of law and complain that he was asked to resign under duress.
3. Layoff:
Layoff implies denial of employment to the employees for reasons beyond the control of employer.
Breakdown of machinery, seasonal fluctuations in demand, shortage of power, raw materials, etc. are the
examples of reasons leading to layoff.
According to Section 2 (KKK) of the Industrial Disputes Act, 1947, lay off is defined as “the failure, refusal
or inability of an employer, on account of shortage of coal, power or raw materials or accumulation of stocks
or breakdown of machinery or by any other reason, to give employment to a workman whose name appears
on the muster rolls of his industrial establishment and who has not been retrenched”.
It is important to note that the employee-employer relationship does not come to an end but is suspended for
some time Layoff may be temporary. In seasonal Industries like mines, sugar, etc., lay off occurs routinely.
Layoff also may occur for an indefinite time. When layoff becomes a permanent one, it is called
‘retrenchment’.
According to the Section 25© of the Industrial Disputes Act, 1947, a laid off worker is entitled to
compensation equal to 50 per cent of the basic wages and dearness allowance that would have been payable
to him had he not been laid off.
4. Retrenchment:
Retrenchment means permanent termination of an employee’s services for economic reasons. Retrenchment
occurs on account of surplus staff, poor demand for products, general economic slowdown, etc. It’s worth
noticing that termination of services on account of retirement, winding up of a business, illness or on
disciplinary grounds does not constitute retrenchment.
Retrenchment is mainly seen in plantations, agricultural services, forestry and logging, food products,
manufacture of machinery and cotton textile. The reasons pointed out behind retrenchment were mainly
financial stringency and lack of demand for their products.
5. Death comes without call. Some employees may die in service before attaining the age of superannuation.
When death occurs due to occupational hazards, the employee gets compensation as per the provisions of
Workmen’s Compensation Act, 1923.
Some organisations have provisions to give employment to the spouse/child or dependent of an employee
who dies in service. The normal separation of employees from an organisation owing to resignation,
retirement and death is known as ‘attrition’.
6. Dismissal:
Dismissal is termination of service of an employee as a punitive measure. This may occur either on account
of unsatisfactory performance or misconduct. Persistent failure on the part of employee to perform up to the
expectations or specified standard is considered as unsatisfactory performance. Wilful violation of rules and
regulation by the employee is treated as misconduct. Dismissal is a drastic step seriously impairing the
earnings and image of the employee.

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

 HR Outsourcing:
• HR Outsourcing is a process in which the human resource activities of an organization are outsourced so as
to focus on the organization`s core competencies.
• Human resource outsourcing (HRO) occurs when a business instructs an external supplier to take
responsibility (and risk) for HR functions and perform these tasks for the business.

Stages of HR Outsourcing
• Planning for outsourcing
• Determination of contract
• Analysis
• Negotiation
• Selection
• Transition
• Transformation
• Management

ADVANTAGES
• Access to pool of talent, sustainable sources of skill
• Efficiency, focus on core business, core resources
• Cost saving, no investment for infrastructure, software…
• Cost restructure: move fixed cost to variable cost and make variable cost more predictable
• Risk management: transfer risk of non tax and legal compliance to outsourced vendor
• Back up plan
• Risk Management
• Cost saving
DISADVANTAGES
• More expenses if not choosing a good outsourced vendor
• Sensitive information may leak to competitors
• Less control of the processes
• Weak connection with staff/end users
• Dependency on outsourced vendor
Employee Engagement:
In simple terms, Employee engagement is the level of commitment and involvement an employee has
towards their organization and its values.
An engaged employee is aware of business context, and works with
colleagues to improve performance within the job for the benefit of the organization.

Employee Engagement is the means or strategy by which an

organization seeks to build a partnership between the organization
and its employees
Advantages
• Better Performance
• Better Communication

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

• Greater customer satisfaction
• Better team working
• Greater commitment
• Lower employee turnover
Strategies to Enhance Employee Engagement
• Invest in training and development
• Respect employee’s needs for work-life balance
• Create favorable work conditions
• Maintain open channels of communication

TALENT MANAGEMENT
It is a continuous process that involves sourcing, hiring, developing, retaining and promoting them while
meeting the organization’s requirements simultaneously.
It refers to the skills of attracting highly skilled workers of integrating new workers and developing and
retaining current workers to meet current and future business objectives. It is also known as Human Capital
Management.
TALENT= COMPTENCE+ COMMITMENT+ CONTRIBUTION
Benefits for organization:
• Increased productivity and capacity
• Linkage between individual efforts and business goals
• Commitment of valued employees
• Better fit between people’s jobs and skills.
Benefits for employees:
• Higher motivation & commitment
• Career development
• Increased knowledge
• Contribution towards company goals
• Job satisfaction

Process of Talent Management

• Recognizing Talent
• Attracting talent
• Selecting talent
• Retaining talent
• Managing succession
• Change organization culture

BENEFITS
• Right Person in the right Job: Through a proper ascertainment of people skills and strengths, people
decisions gain a strategic agenda. The skill or competency mapping allows you to take stock of skill
inventories lying with the organization. This is especially important both from the perspective of the
organization as well as the employee because the right person is deployed in the right position and employee
productivity is increased. Also since there is a better alignment between an individual’s interests and his job
profile the job satisfaction is increased.
MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo
• Retaining the top talent: Despite changes in the global economy, attrition remains a major concern of
organizations. Retaining top talent is important to leadership and growth in the marketplace. Organisations
that fail to retain their top talent are at the risk of losing out to competitors. The focus is now on charting
employee retention programs and strategies to recruit, develop, retain and engage quality people. Employee
growth in a career has to be taken care of, while succession planning is being performed those who are on the
radar need to be kept in loop so that they know their performance is being rewarded.
• Better Hiring: The quality of an organization is the quality of workforce it possesses. The best way to have
talent at the top is have talent at the bottom. No wonder then talent management programs and trainings,
hiring assessments have become an integral aspect of HR processes nowadays.
• Understanding Employees Better: Employee assessments give deep insights to the management about their
employees. Their development needs, career aspirations, strengths and weaknesses, abilities, likes and
dislikes. It is easier therefore to determine what motivates whom and this helps a lot Job enrichment process.
Better professional development decisions: When an organization gets to know who its high potential is, it
becomes easier to invest in their professional development. Since development calls for investment decisions
towards learning, training and development of the individual either for growth, succession planning,
performance management etc, an organization remains bothered where to make this investment and talent
management just make this easier for them.

WHAT IS COMPETENCY MAPPING?

• Competency mapping involves the process by which we determine:
The nature and scope of a specific job role, the skills required, the level of knowledge required,
and the behavioral capacities required to apply those skills and knowledge in that role.
• Competency mapping is the process of identification of the competencies required to perform successfully a
given job or role or a set of tasks at a given point of time

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo

MBA 2nd Semester HRM Notes Dr. Sushree Sangita Sahoo