Human Resources Management

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HUMAN RESOURCE MANAGEMENT
Dr. ANANDA KUMAR Professor, Department of
Management Studies Christ College of Engg.
Tech., Puducherry, India. Mobile [phone]
42433 E-mail searchanandu_at_gmail.com
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• UNIT 1

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Human Resource Management

• HRM is the function performed in organizations
  that facilitates the most effective use of people
  to achieve organizational and individual goals.

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Human Resource Management

• Human resource or manpower management
  effectively describes the process of planning and
  directing the application, development and
  utilisation of human resources in employment
  - Dale Yoder
• The personnel function is concerned with the
  procurement, development, compensation,
  integration and maintenance of the personnel of
  an organisation for the purpose of contributing
  towards the accomplishment of that organisations
  major goals or objectives Flippo

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Functions of HRM

HRM FUNCTIONS
Managerial Functions
Operative Functions
Controlling
Planning
Directing
Organising
Maintenance
Compensation
Procurement
Integration
Development
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• A. Procurement

B. Development

• Job Analysis
• Human Resource Planning
• Recruitment
• Selection
• Placement
• Induction and Orientation
• Internal Mobility

• Training
• Executive development
• Career planning development
• Succession Planning
• Human Resource Development

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D. Maintenance

• C. Motivation Compensation

1. Job Design
2. Work Scheduling
3. Motivation
4. Job Evaluation
5. Performance appraisal
6. Compensation administration
7. Incentives benefits

1. Health
2. Safety
3. Employee welfare
4. Social security measures

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• E. Integration Function

1. Grievance redressal
2. Discipline
3. Teams and teamwork
4. Collective bargaining
5. Employee participation empowerment
6. Trade unions
7. Employers Association
8. Industrial relations

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Importance of HRM

• 1. It helps the organisation to identify
  correctly its manpower needs
• 2. It ensures that the organisation does not
  suffer from either surplus or shortage of
  manpower
• 3. It facilitates the selection of the right man
  for the right job
• 4. It focuses attention on the development of the
  skill of every individual in order to make him
  up-to-date
• 5. It recognises the need for the appraisal of
  the employees performance
• 6. It considers the need to provide incentives to
  the employees performing well

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Importance of HRM

• 7. It gives utmost importance to securing a
  favourable employee attitude
• 8. It emphasizes the need for good human
  relations in every workplace
• 9. It provides scope for collective bargaining

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Objectives of HRM

• 1. To make an optimum utilisation of the human
  resource of the organisation
• 2. To ensure that the organisation has the
  required number staff
• 3. To establish and maintain a sound organisation
  structure
• 4. To reconcile personal and organisational goals
• 5. To provide scope for the development of
  personnel
• 6. To ensure that the employees have higher job
  satisfaction
• 7. To provide scope for participation in
  decision-making

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Difference b/w Personnel Mgt HRM

• 1. Personnel management is a traditional approach
  of managing people in the organization.
  Human resource management is a modern approach
  of managing people and their strengths in the
  organization.
• 2. Personnel management focuses on personnel
  administration, employee welfare and
  labor relation. Human resource management focuses
  on acquisition, development, motivation and
  maintenance of human resources in the
  organization.
• 3. Personnel management assumes people as a input
  for achieving desired output. Human resource manag
  ement assumes people as an important and valuable
  resource for achieving desired output.

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Difference b/w Personnel Mgt HRM

• 4. Under personnel management, personnel function
  is undertaken for employee's satisfaction. Under
  human resource management, administrative
  function is undertaken for goal achievement.
• 5. Under personnel management, job design is done
  on the basis of division of labour. Under
  human resource management, job design function is
  done on the basis of group work/team work.
• 6. Under personnel management, employees are
  provided with less training and
  development opportunities. Under human resource
  management, employees are provided with more
  training and development opportunities.

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Difference b/w Personnel Mgt HRM

• 7. In personnel management, decisions are made by
  the top management as per the rules and
  regulation of the organization. In
  human resource management, decisions are made
  collectively after considering employee's
  participation, authority, decentralization,
  competitive environment etc. 
• 8. Personnel management focuses on increased
  production and satisfied employees.
  Human resource management focuses on
  effectiveness, culture, productivity and
  employee's participation.

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Nature / Scope of HRM

• Control

Acquisition
HR Audit HR Accounting HR Information System
HR Planning Recruitment, Selection Placement.
Human Resource Management
Development
Maintenance
Training, Career Development, Organisation
Development, Internal Mobility.
Remuneration Motivation Health Safety Social
Security Industrial Relations Performance
Appraisal
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Environment of HRM

• Environment comprises all those forces which have
  their bearing on the functioning of various
  activities including human resource activities.
  Environment scanning helps HR manager become
  proactive to the environment which is
  characterised by change and intense competition.
• Two types of environments
• 1. Internal environment
• 2. External environment

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1. Internal Environment

• These are the forces internal to an organisation.
  Internal forces have profound influence on HR
  functions. The internal environment of HRM
  consists
• a. Unions
• b. Organisational Culture Conflict
• c. Professional Bodies

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1. External Environment

• External environment includes forces like
  economic, political, technological, demographic
  etc. these exert considerable influence on HRM.
  The external environment of HRM consists
• a. Economic
• b. Political
• c. Technological
• d. Demographic

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Strategic HRM

• Strategic human resource management is to ensure
  that human resource management is fully
  integrated into strategic planning, that HRM
  policies cohere both across policy areas and
  across hierarchies and that HRM policies are
  accepted and used by line managers as part of
  their every day work.
• According to Donald F. Harvey, Strategic
  management is that set of managerial decisions
  and actions that determine the long-term
  performance of a corporation. It includes
  environmental scanning, strategy formulation,
  strategy implementation and evaluation and
  control.

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People Management Indian Scenario

• In the 50s there was a strong belief that
  employees were recruited not to question why
  but only to do and die. In the 60s, terms like
  manpower, staff and personnel came to be used and
  instead of controlling the employees, it became
  more and more acceptable to manage personnel as
  it was felt that the productivity of the workers
  could be improved, if they were organized for the
  work. While hierarchy, status, authority,
  responsibility and accountability are structural
  concepts, in the Indian context, emotions,
  feelings, empathetic perceptions, impressions
  influenced people more than anything else.

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CASE STUDIESPERFORMANCE APPRAISAL POLICIES

• Berkely Investments is a reputed finance company
  having 15 branches in different part of the
  country. In the home office there are more than
  200 employees. This company has a performance
  rating under which the employees are rated at six
  months intervals by a committee of two
  executives. Graphic scales have been used as
  means of appraisal. The qualities considered are
  responsibility, initiative, and interest in work,
  leadership potential, co-operative attitude and
  community activity. After the performance is
  evaluated, the ratings are discussed with the
  concerned employees by their immediate boss who
  counsels them. The ratings aroused to influence
  promotions and salary adjustments the employees
  and also as a criterion for assigning further
  rating for them.

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PERFORMANCE APPRAISAL POLICIES

• Recently three employees of the company called on
  the companys president to express their
  dissatisfaction with the ratings they had
  received. Their scores and composite ratings had
  been discussed with them. Because their ratings
  were comparatively low, they had been denied
  annual increments in salary. Approximately, two
  thirds of all the employees received such
  increments. The aggrieved employees argued that
  their ratings did not accurately represent their
  qualifications or performance. They insisted that
  community activity was not actually a part of
  their job and that what they do off the job is
  none of the companys business. They expressed
  their opinion that employees should organize
  union and insist that salary increase be
  automatic.

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PERFORMANCE APPRAISAL POLICIES

• The threat of a union caused concern to the
  officers of the company. This particular
  experience convinced the top officers that
  ratings may represent a serious hazard to
  satisfactory relationship with employees. Even
  the chief executive finds that performance
  appraisal is a dangerous source of friction and
  its hazards outweigh its values so it should be
  discontinued altogether.
• Questions
• 1. How far do you agree with the management that
  performance appraisal should be discontinued? 
• 2. If you were the HR manager, how would you
  tackle the situation?
• 3. What modifications would you suggest in the
  performance appraisal system of the company

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• UNIT 2

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Human Resource Planning (HRP)

• HRP includes estimation of how many qualified
  people are necessary to carry out the assigned
  activities, how many people will be available and
  what, if anything, must be done to ensure that
  personnel supply equals personnel demand at the
  appropriate point in the future.
• - Terry L. Leap and Michael D. Crino
• Human resource planning is a planning is a
  process of determining and assuming that the
  organisation will have an adequate number of
  qualified persons, available at the proper times,
  performing job which meet the needs of enterprise
  and which provide satisfaction for the
  individuals involved. - Beach

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Objectives HRP

• Ensure adequate supply of manpower as and when
  required.
• Ensure proper use of existing human resources in
  the organisation.
• Forecast future requirements of human resources
  with different levels of skills.
• Assess surplus of shortage, if any, of human
  resources available over a specified period of
  time.
• Anticipate the impact of technology on jobs and
  requirements for human resources.
• Control the human resources already deployed in
  the organisation.

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HRP Process

1. Analysing Organisational Plans and Objectives
2. Analysing Objectives of Human Resource Planning
3. Forecasting Demand for Human Resources
4. Forecasting Supply of Human Resources
5. Matching Demand and Supply
6. Monitoring and Control

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Human Resource Information System (HRIS)

• HRIS refers to a computerised system that aids
  the processing of information relating to human
  resource management. It is a system of gathering,
  classifying, processing, recording and
  disseminating the information required for
  effective management of human resources in an
  organisation. HRIS forms an integral part of the
  Management Information System (MIS). HRIS
  collects and analyses data relating to human
  resources of the organisation. The input of HRIS
  include the information relating to employees,
  their abilities, qualitifications,
  potentialities, creative instincts, age, sex,
  their jobs, pay scales, organisational
  objectives, policies and procedures, etc.

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HRP Advantages

1. It is both time saving and cheaper device.
2. It gives accurate information relating to human
   resources.
3. It makes information readily available as and
   when desired.
4. It acts as a decision support system.
5. It establishes strong management control.

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Job Analysis

• Job analysis is the process of getting
  information about jobs specially, what the
  worker does how he gets it done why he does it
  skill, education and training required
  relationship to other jobs, physical demands
  environmental conditions.
• Jones and Decothis
• Job analysis as the process of studying and
  collecting information relating to the operations
  and responsibilities of a specific job. The
  immediate products of this analysis are job
  descriptions and job specifications.
  - Edwin B. Flippo

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• Job Description Job description is a
  written statement showing job title, tasks duties
  and responsibilities involved in a job.
• Job Specification Job specification
  also known as man or employee specification is a
  statement of minimum acceptable qualities
  required in a job incurrent for the effective
  performance of the job.

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JOB ANALYSIS

Job Specification
Job Description
Job Title A Title of the Job Job Activities
Tasks performed, materials used. Working
Conditions Light, Heat, Noise. Social
Environment Size of work group members etc.
Personal Characteristics Age, Sex,
Education. Physical Characteristics Length,
Weight, Vision. Mental Characteristics General
intelligence, Memory, Judgment. Social
Psychological Characteristics Emotional
Stability, Initiative, Creativity.
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Job Evaluation

• Job evaluation is a comparative process of
  establishing the value of different jobs in a
  hierarchical order. It allows one to compare
  jobs by using common criteria to define the
  relationship of one job to another. This serves
  as basis for grading different jobs and
  developing a suitable pay structure for them. It
  is important to mention that job evaluation
  cannot be the sole determining factor for
  deciding pay structures because job evaluation is
  about relationships, and not absolutes.

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Job Design

• Job design as the process of deciding on the
  contents of a job in terms of its duties and
  responsibilities, on the methods to be used in
  carrying out the job, in terms of techniques,
  systems and procedures, and on the relationships
  that should exist between the job holder and his
  superiors, subordinates and colleagues.

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Methods / Techniques Job Design

1. Work Simplification
2. Job Rotation
3. Job Enrichment
4. Job Enlargement

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WORK DESIGN
Job Rotation (relief from boredom)
Job Enrichment (Increased responsibility)
Job Simplification (Breaking down into small
sub-parts)
Job Enlargement (Extension of work plus
additional tasks to obtain a complete unit)
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Recruitment

• Recruitment is the generating of applications or
  applicants for specific positions to be filled up
  in the organisation. In other words, it is a
  process of searching for and obtaining applicants
  for jobs so that the right people in right number
  can be selected.
• Flippo has defined recruitment as a process of
  searching for prospective employees and
  stimulating and encouraging them to apply for
  jobs in an organisation.

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• Sources of Recruitment

Internal Sources
External Sources

1. Employment Exchange
2. Advertisements
3. Employment Agencies
4. Campus Recruitment
5. Word-of-Mouth

1. Present Employees
2. Employee Referrals
3. Former Employees
4. Previous Applicants

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Recruitment Process

1. Recruitment Planning
2. Strategy Development
3. Searching
4. Screening
5. Evaluation and Control

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Selection

• Selection is the process of choosing from among
  the candidates from within the organisation or
  from the outside, the most suitable person for
  the current position or for the future position.
• Selection is hiring the best candidate from the
  pool of applications. It refers to the process of
  offering jobs to one or more applicants/candidates
  from the applications received through
  recruitment. In other words, it is the process of
  picking the suitable candidates from the pool of
  job applications to fill various jobs in the
  organisation.

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Selection Methods / Process

1. Preliminary Interview
2. Application Blank
3. Selection Tests
4. Selection Interview
5. Reference Checks
6. Physical Examination
7. Final Selection

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Placement

• Placement is understood as assigning jobs to the
  selected candidates. Assigning jobs to employees
  may involve a new job or different job. Thus,
  placement may include initial assignment of job
  to new employee, on transfer, promotion or
  demotion of the present employees. In this
  section, placement refers to the assignment of
  jobs to new employees only.

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Induction

• Induction is welcoming a new employee to the
  organisation. In other words, it is a well
  orchestrated event to socialise the new entrant
  with the people and the work environment in a
  particular organisation.
• According to Michael Armstrong, Induction is the
  process of receiving and welcoming an employee
  when he first joins a company and giving him
  basic information he needs to settle down quickly
  and happily and start work.

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Performance Appraisal

• Performance appraisal is the process of making an
  assessment of the performance and progress of the
  employees of an organisation. Once an employee
  has been inducted into the organisation and given
  the necessary training, the next step is to
  assess his performance periodically. Such an
  assessment would indicate whether he is efficient
  or not. Performance appraisal is also known as
  merit rating or efficiency rating.

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Performance progress of employee

1. Knowledge of work
2. Extent of co-operation with colleagues and
   superiors
3. Initiative
4. Quality of work 10. Honesty
5. Target attainment 11. Ambition
6. Aptitude
7. Degree of skill
8. Discipline
9. Punctuality

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Objectives of Performance Appraisal

1. Salary Increase
2. Promotion
3. Training and Development
4. Feedback
5. Pressure on Employees

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360 Degree Appraisal

• A 360 degree appraisal is a type of employee
  performance appraisal in which subordinates,
  co-workers, and managers all anonymously rate the
  employee. A 360 degree appraisal is a type of
  employee performance review, where a staffer's
  work for a specific period of time is discussed
  and critiqued. The 360 degree process is
  different in that it obtains feedback from
  co-workers and subordinates, instead of just from
  the direct supervisor. The goal of the process is
  to better understand how the employee is
  functioning as part of the team, and to improve
  the ways team members work together.

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Potential Appraisal

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

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Methods of Performance Appraisal

1. Ranking method
2. Graphic scale rating method
3. Forced choice method
4. Essay appraisal method
5. Paired comparison method
6. Field review method

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• UNIT 3

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Training

• The term training is used here to indicate the
  only process by which the aptitudes, skill and
  abilities of employees to perform specific jobs
  are increased.
• - Jucius
• Training is the organised procedure in which
  people learn knowledge and / or skill for
  definite purpose. - Dale S.
  Beach
• Training is the act of increasing the knowledge
  and skills of an employee for doing a particular
  job. - Edwin B. Flippo

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Need for Training

1. To enable the new recruits to understand work
2. To enable existing employees to update skill and
   knowledge
3. To enable an employee who has been promoted to
   understand his responsibilities
4. To enable an employee to become versatile
5. To enable the employees to adapt to change in
   work methods

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Importance of Training

1. Improvement in skill and knowledge
2. Higher production and productivity
3. Job satisfaction
4. Better use of resources
5. Reduction in accidents
6. Reduced supervision
7. Reduction in complaints
8. Adaptability
9. Stability

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Training and Development

• Development is related to the all-round progress
  of an employee. A development programme enables
  executives to acquire skills in their present
  jobs and capabilities to perform future jobs
  better. Training is required to improve skills
  for performing a job. Development, on the other
  hand, is related to the all-round progress of
  executives. While training is job oriented,
  development is career oriented. Training is
  essential for operative workers. On the other
  hand, a development programme is required for
  executives.

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Case Study

• Amrit Electrical is a family owned company of
  approximately 250 employees. Mr. Rajesh Khaitan
  recently took over as president of the company. A
  short time after joining the company, he, began
  to following a discussion with the HR director
  that the pay of the salaried employees was very
  much a matter of individual bargaining. Factory
  workers were not a part of the problem because
  they were unionized and their wages were set by
  collective bargaining. An examination of the
  salaried payroll showed that there were 75
  employees ranging in pay from that of the
  president to that of receptionist. A closer
  examination showed that 20 of the salaried
  employees were females. Five of these were front
  time factory supervisors and one was the HR
  director. The other fourteen were non-management.

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Case Study

• This examination also showed that the HR director
  was underpaid and that the five female
  supervisors were paid somewhat less than any of
  the male supervisors. However, there were no
  similar supervisory jobs in which there were both
  male and female supervisors. When questioned, the
  HR director said that she thought that the female
  supervisors were paid at a lower rate mainly
  because they were women and because they
  supervised less skilled employees than did the
  male supervisors. However, Mr. Khaitan was not
  convinced that this was true. He decided to hire
  a compensation consultant to help him. Together
  they decided that all 75 salaried jobs should be
  in the same job evaluation cluster, that a
  modified job evaluation method should be used and
  that the job descriptions recently completed by
  the HR director were correct and usable in the
  study, the job evaluation also showed that the HR
  director and the five female supervisors were
  being underpaid in comparison with the male
  employees.

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Case Study

• Mr. Khaitan was not sure, what to do. If he gave
  these four female employees an immediate salary
  increase which may large enough to bring them
  upto where they should be, he was afraid the male
  supervisors could be upset and the female
  supervisors might comprehend the situation and
  demand arrears of pay. The Hr director agreed to
  take a sizeable salary increase with the no
  arrears of pay. So this part of the problem was
  solved. Mr. Khaitan believed that he had three
  choices relative to the female supervisors (1)
  To gradually increase their salaries (ii) to
  increase their salaries immediately (iii) to do
  nothing.
• Questions1. What would you do if you were Mr.
  Khaitan?
• 2. How do you think the company got into a
  situation like this in the first place?

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Methods of Training

• On-the job training

Off-the job training

1. Lectures Conferences
2. Role Playing
3. Case study
4. Management games
5. Brain storming
6. Sensitivity training

• Induction Training
• Apprenticeship Training
• Refresher Training
• Job Rotation
• Placement as assistants
• Vestibule Training

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Evaluation of Training

• Training evaluation refers to the process of
  collecting the outcomes needed to determine if
  training is effect.
• Evaluation of training activity is defined as
  any attempt made to obtain information, or say,
  feedback on the effects of training programme and
  to adjudge the value or worth of the training in
  the light of that information. The time and money
  spent in training underlines the need for
  evaluation of training.

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Reason for Evaluation of Training

• Companies are investing millions of dollars in
  training programs to help gain a competitive
  advantage.
• Training investment is increasing because
  learning creates knowledge which differentiates
  between those companies and employees who are
  successful and those who are not.
• Because companies have made large dollar
  investments in training and education and view
  training as a strategy to be successful, they
  expect the outcomes or benefits related to
  training to be measurable.

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Steps of training programme

1. Identification of training needs
2. Setting training objectives
3. Designing training methods
4. Administration of training programmes
5. Evaluation of training

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What is a Career?

• A career can be defined as all the jobs held by a
  person during his working life. It consists of a
  series of properly sequenced role experience
  leading to an increasing level of responsibility,
  status, power, and rewards.
• According to Flippo, a career is a sequence of
  separate but related work activities that provide
  continuity, order, and meaning in a persons
  life.

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Career Planning

• Career Planning can be defined as a systematic
  process by which one decides his/her career goals
  and the path to reach these goals. Career
  planning is a managerial technique for mapping
  out the entire career of employees from the
  employment stage to the retirement stage. It
  involves discovery, development, planned
  employment and reemployment.

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Career Development

• Career development is an ongoing process of
  gaining knowledge and improving skills that will
  help an individual to establish a career plan.
• Career development consists of actions undertaken
  by the individual employee and the organisation
  to meet career aspirations and job requirements.

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Promotion

• Promotion may be defined as an upward movement of
  an employees position in the enterprise. An
  employee who has been promoted moves to a
  higher-level job that gives higher salary,
  greater authority and accountability as well.
• A promotion is the advancement of an employee to
  a better job better in terms of greater
  responsibilities, more prestige or status,
  greater skill and especially, increased rate of
  pay or salary.

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Promotion

• Promotion has following three elements and must
  be present in promotion
• Transfer of an employee to some higher job
  having more prestige, better status more benefits
  and privileges.
• Reassignment of an employee to a position having
  increased responsibilities.
• Higher job grade.

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Types of Promotion

1. Horizontal promotion
2. Vertical promotion
3. Dry promotion

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Purpose of Promotion

• To recognize an employees skill and knowledge
  and utilize it to improve the organisational
  effectiveness.
• To reward and motivate employees to higher
  productivity.
• To develop competitive spirit and inculcate the
  zeal in the employees to acquire skill, knowledge
  etc.
• To promote employees satisfaction and boost
  their morale.
• To build loyalty among the employees toward
  organisation.

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Purpose of Promotion

• To promote good human relations.
• To retain skilled and talented people.
• To attract trained, competent and hard working
  people.
• To impress the other employees that
  opportunities are available to them too if they
  also perform well.

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Transfer

• A transfer refers to lateral movement of
  employees within the same grade, from one job to
  another.
• According to Flippo, a transfer is a change in
  the job (accompanied by a change in the place of
  the job) of an employee without a change in
  responsibilities or remuneration.
• Transfer differs from promotion in the sense that
  the latter involves a change of job involving
  increase in salary, authority, status and
  responsibility, while all these remain
  unchanged/stagnant in the case of the former.

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Need for Transfer

• To meet organisational needs
• To satisfy employee needs
• To better utilize employee
• To make the employee more versatile
• To adjust the workforce
• To provide relief
• To punish employee

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Demotion

• Demotion is just the opposite of promotion. It is
  the downward movement of an employee in the
  organisational hierarchy with lower rank/status
  and pay.
• According to D.S.Beach, Demotion is the
  assignment of an individual to a job of lower
  rank and pay usually involving lower level of
  difficulty and responsibility.

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Separation

• Separation is a situation when the service
  agreement of an employee with his/her
  organisation comes to an end and employee leaves
  the organisation. In other words, separation is a
  decision that the individual and organisation
  part from each other.

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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 is case of some
  state government employees, it is 58 years.

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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 organisations, etc.
• 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.

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Dismissal

• Dismissal is termination of service of an
  employee as a punitive measure. This may occur
  either on account of unsatisfactory performance
  or misconduct. Presistent failure on the part of
  employee to perform upto the expectations or
  specified standard is considered as
  unsatisfactory performance.

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• UNIT 4

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COMPENSATION

• Compensation includes direct cash payments,
  indirect payments in the form of employee
  benefits and incentives to motivate employees to
  strive for higher levels of productivity.
• Other names
• Wage and Salary Administration
• Remuneration Management
• Reward Management

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COMPENSATION

• Wage and Salary Administration refers to the
  establishment and implementation of sound
  policies and practices of employee compensation.
  It includes such areas as Job evaluation, surveys
  of wages and salaries, analysis of relevant
  organizational problems, development and
  maintenance of wage structure, establishing rules
  for administering wages, wage payments,
  incentives, profit sharing, wage changes and
  adjustments, supplementary payments, control of
  compensation costs and other related items.

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COMPONENTS OF COMPENSATION

1. Wage and Salary
2. Incentives
3. Fringe Benefits
4. Perquisites

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1. WAGE AND SALARY

• Wage
• Hourly-rated payment to workers.
• Paid to Blue-collar employees.
• Wages are paid to the direct labor, either in the
  form of time rate or piece rate.
• International Labor Organization defines Wages
  as the remuneration paid by the employer for the
  service of hourly, daily, weekly and fortnightly
  employees.

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WAGE

• Concept / Types of Wage
• Minimum Wages
• Living Wages
• Fair Wages

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WAGE

• Minimum Wages
• Paid by the employer to his workers irrespective
  of his ability to pay
• Fixed by government (Both by Central and State
  Government)
• Takes into consideration the cost of living
• This is the wage which must provide not only for
  bare sustenance of Life but for the preservation
  of efficiency of the worker Government
  Committee on Wages (1948)

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WAGE

• 2. Living Wages
• Highest among the three
• Must provide basic amenities of life and social
  needs like medical, education, etc.
• A Living wage is one which should enable the
  earner to provide for himself and his family not
  only the bare essentials of food, clothing and
  shelter but a measure of frugal comfort including
  education for his children, protection against
  ill-health, requirements of essential social
  needs and a measure of insurance against the most
  important misfortunes including old age.

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WAGE

• 3. Fair Wages
• Fixed by employer
• At present, the concept of fair wages is followed
  by most of the business organization
• Determined on the basis of
• Productivity of labor
• Prevailing wage rates in similar jobs
• Level of national income and its distribution
• Place of industry in the economy
• The employers capacity to pay

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1. WAGE AND SALARY

• Salary
• Monthly-rated payment to workers
• Paid to White-Collar employees.
• Salary is defined as the remuneration paid to the
  clerical and managerial personnel employees on
  monthly or annual basis.
• Both Wages and Salary are paid based on a fixed
  period of time.
• They are not associated with productivity of an
  employee at a particular time

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2. INCENTIVES

• 2. Incentives
• Additional payment besides wage salary
• Linked with productivity either in terms of
  higher production or cost saving or both.
• Given on individual basis or group basis.

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3. FRINGE BENEFITS

• Benefits provided for employees having long-term
  impact like PF, Gratuity, Pension etc
• Occurrence of certain events life medical
  benefits, accident relief, health and life
  insurance
• Like uniforms, canteens, recreation etc

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4. PERQUISITES

• Provided to Managerial Personnel
• It includes company car, club membership, free
  residential accommodation, paid holiday trips,
  Employee Stock Option Plan (ESOP) etc

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OBJECTIVES OF COMPENSATION MGT.

• Attracting and retaining personnel
• Motivating personnel higher productivity
• Optimizing cost of compensation
• Consistency in compensation Both internal
  consistency and external consistency

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TYPES OF COMPENSATION

1. Primary Compensation
2. Incentive Compensation

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1. Primary Compensation

• It refers to the Basic Pay in the form of
  Wages/Salaries.
• Dearness Allowance(DA), House Rent
  Allowance(HRA), City Compensatory Allowance(CCA),
  Travelling allowance, Provident Fund(PF),
  Gratuity, Leave Travel Allowance(LTA), Group
  linked insurance, medical benefits, etc

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2. Incentive Compensation

• Any reward of benefit paid to employee over and
  above is wage/salary.
• Includes both monetary as well as non-monetary
  rewards.
• Wage incentives are extra financial motivation.
  They are designed to stimulate human effort by
  rewarding the person, over and above the
  time-rated remuneration, for improvements in the
  present or targeted results The National
  Commission of Labor

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INCENTIVE COMPENSATION

• Classification of Incentives
• Financial or pecuniary or wage incentives
• Non-Financial incentives
• Financial Incentives
• Wages
• Salary
• Premium
• Bonus

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INCENTIVE COMPENSATION

• Non-Financial Incentives
• Job Security
• Recognition
• Participation
• Pride in job
• Delegation of Responsibility
• Quick Promotion

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Case Study Job Analysis

• A large, well known Candian company had found
  full depreciation of the equipment which was used
  to make specialized automobile companies for
  north-American automobile producers. Although the
  equipment had been well maintained and worked
  well, it required to be handled by a large number
  of labourers. The result was the high labour
  costs that made the companys brake assemblies,
  manufacturer, and related products unprofitable.
  A decision was made to replace the equipment with
  more highly automated, numerically controlled
  machine tools. Since the economic value of the
  old equipment exceeded its value as scrap, the
  equipment was shipped to the companys Brazilian
  operations, where labour costs were considerable
  lower.

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Case Study Job Analysis

• Upon arrival and after the setting up of a new
  facility, the company received numerous
  profitable orders from Brazils rapidly growing
  automobile industry. Though the labour hours per
  product remained about the same the lower
  Brazilian labour rates allowed the new facility
  to be profitable. Soon a second shift was added
  and with it problems began.
• The equipment began to experience a growing
  downtime because of machine failures and
  quality- particularly on part dimensions-
  declined dramatically.At a staff meeting the
  Brazilian plant manager met his staff, including
  several industrial engineers who had been trained
  in Canada and the United States. The engineers
  argued that the problems were almost certainly
  caused by maintenance since the machinery had
  worked well in Canada and initially in
  Brazil. The HR director agreed that it was
  perhaps the old 

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Case Study Job Analysis

• machinery but be also noted that many of the
  on-machine instructions and maintenance manuals
  had not been translated into Portuguese. He also
  observed that the problems began after the second
  shift was hired.
• Questions
• 1. From the discussion of job analysis
  information and job design, what actions would
  you recommend to HR department?2. Given the
  problems associated with the second shift, what
  differences would you look for between first
  shift and second shift workers?3. Since the
  Canadian workers had considerable experience with
  the equipment but the workers particularly in
  second shelf in Brazil had very little
  experience, what implications do you see for the
  job design?

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CONCEPT OF JOB EVALUATION

• It is a systematic way of determining the value
  or 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.

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CONCEPT OF JOB EVALUATION

• Definition
• Wendell French defines Job Evaluation as a
  process of determining the relative worth of the
  various jobs within the organization, so that
  differential wages may be paid to jobs of
  different worth. The relative worth of a job
  means relative value produced. The variables
  which are assumed to be related to value produced
  are such factors as responsibility, skill, effort
  and working conditions.

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METHODS OF JOB EVALUATION

• Non-Quantitative Methods (Whole job is compared)
• Ranking or Job Comparison
• Grading or Job Classification
• Quantitative Methods (Key factors of a job is
  compared)
• Point Rating
• Factor Comparison

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METHODS OF JOB EVALUATION

• 1. Ranking method
• As per this method, Jobs are arranged from
  highest to lowest, in order of their values or
  merit to the organization.
• Jobs can also be arranged according to the
  relative difficulty in performing them.
• The job at the top has the highest value and job
  at the lowest has the lowest value.
• Jobs are arranged in each department and then
  department ranking are combined to develop an
  organization ranking.

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METHODS OF JOB EVALUATION

• 2. Grading/Classification Method
• Under this method, job grades or classes are
  established by an authorized 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.(ex-skilled and unskilled)
• Job grades are determined on the basis of
  information derived from job analysis.
• Different wage/salary rate is fixed for each
  grade.

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METHODS OF JOB EVALUATION

• 3. Point Rating method
• Jobs are expressed in terms of key factors.
• Points are assigned to each factor after
  prioritizing each factor in order of importance.
• The points are summed up to determine the wage
  rate for the job.
• Jobs with similar points totals are placed in
  similar pay grades.

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METHODS OF JOB EVALUATION

• 4. Factor Comparison method
• Under this method, instead of ranking complete
  jobs, each job is ranked according to a series of
  factors.
• These factors include mental effort, physical
  effort, skill needed, responsibility, working
  conditions, etc
• Pay will be assigned in this method by comparing
  the weights of factors required for each job.
• This system is used to evaluate white collar,
  professional and managerial positions.

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MORALE

• Morale refers to the attitude of employees of an
  organization towards their job, the management,
  the fellow-employees, the superiors and the
  subordinates.
• Such an Attitude may be positive or negative
• If it is positive, then the morale of the group
  is said to be high
• If it is negative, then the morale of the group
  is said to be low

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MORALE

• Flippo Morale refers to a mental condition or
  attitude of individuals and groups which
  determines their willingness to co-operate. Good
  morale is evidenced by employee enthusiasm,
  voluntary conformance with regulations and
  orders, and willingness to co-operate with others
  in the accomplishment of an organizations
  objectives. Poor morale is evidenced by
  surliness, insubordination, a feeling of
  discouragement and dislike of the job, company
  and associates

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FACTORS AFFECTING MORALE

• The following are the determinants/factors that
  influence Morale
• Nature of work
• Service conditions
• Type of Managers
• Inter-personal relationships
• Work environment
• Personal factors

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MORALE AND PRODUCTIVITY

• There is no definite direct relationship between
  morale and productivity.
• There can be two possible relationships between
  the two
• High Morale and High Productivity
• Low Morale and Low Productivity

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STEPS TO IMPROVE EMPLOYEE MORALE

• Selection of right man for the right job
• Conducive working environment
• Proper superior-subordinate relationship
• Provision of suitable incentives
• Evaluation of employee performance
• Job rotation
• Sound promotion and transfer policy
• Grievance redressal machinery
• Workers participation in management

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MEASUREMENT OF MORALE

• The following methods are usually followed for
  the purpose of measuring the level of morale of
  employees
• Company records and reports
• Observation
• Attitude surveys

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1. COMPANY RECORDS AND REPORTS

• Rate of absenteeism
• Participation in strikes organized by employee
  unions
• Complaints made against superiors and
  fellow-employees
• Remarks of superiors about subordinates
• Output produced
• Target attainment
• Loss to the organization due to the negligence of
  employees

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2. OBSERVATION

• The Manager will probably assume that the morale
  of his subordinates is high, when they dont
• Lag behind in their duties
• Find their targets unattainable
• Complain about the fellow-employees often
• Blame the tools and equipment
• Find fault with the managements policies

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3. ATTITUDE SURVEYS

• Attitude surveys are often conducted in
  workplaces to ascertain the job attitudes of
  employees
• Such surveys may be conducted with the help of a
  questionnaire and through interview method.

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Motivation

• Motivation means a process of stimulating people
  to action to accomplish desired goals W.G.
  Scott.
• Motivation is the process of attempting to
  influence others to do your will through the
  possibility of gain or reward. - Edwin B. Flippo

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Motivation

• The important task before every manager is to
  secure optimum performance from each of his
  subordinates. The performance of the
  subordinate, in turn, is determined by his
  ability to work and the extent to which he is
  motivated. Motivation is the process of inducing
  and instigating the subordinates to put in their
  best. Motivation is influenced significantly by
  the needs of a person and the extent to which
  these have been fulfilled. To motivate the
  subordinates, the manager must, therefore,
  understand their needs.

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Importance of Motivation

• 1. Inducement of employees
• 2. Higher efficiency
• 3. Optimum use of resources
• 4. Avoidance of loss due to mishandling and
  breakage
• 5. No complaints and grievances
• 6. Better human relations
• 7. Avoidance of strikes and lock-outs
• 8. Reduction in labour turnover

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Nature Characteristics of Motivation

• Motivation is a psychological concept
• 2. Motivation is always total and not piece-meal
• 3. Motivation may be financial or non-financial
• 4. Method of Motivation may be positive as well
  as negative
• 5. Motivation is a continuous process

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Motivation Content Theories

1. Abraham Maslows Need Hierarchical Theory
2. Herzbergs Two Factor Theory
3. Douglas McGregors Theory X and Theory Y
4. Alderfers ERG Theory
5. David C. McClellands Three-Need Theory

120
Motivation Process Theories

1. Vrooms Expectancy Theory
2. Porter and Lawlers Expectancy Theory
3. Adams Equity Theory

121

• Abraham Maslow (1908-1970)

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Maslows Need Hierarchy Theory

• Abraham H. Maslow, a psychologist, developed a
  theory called the Need Hierarchy Theory. It is
  one of the oldest theories on motivation. Maslow
  was of the view that human behaviour is directed
  towards the satisfaction of certain needs.
• He classified all human needs into a hierarchical
  manner from the lower to the higher order. In
  essence, he believed that once a given level of
  need is satisfied, it no longer serves to
  motivate man. Then, the next higher level of
  need has to be activated in order to motivate the
  man.

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Maslows Need Hierarchy Theory

SELF- ACTUALIZATION
ESTEEM NEEDS
LOVE, AFFECTION, AND BELONGINGNESS NEEDS
SAFETY NEEDS
PHYSIOLOGICAL OR SURVIVAL NEEDS
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Maslows Need Hierarchy Theory

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1. Physiological Needs

• These are the primary or the basic needs of a
  person that must be fulfilled. These include,
  among others, food, clothing and shelter that are
  vital for the survival of mankind. A person
  cannot think of recognition or status when he is
  not able to earn adequately to satisfy his basic
  needs.

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2. Safety Needs

• The safety or security needs emerge once the
  basic or physiological needs of a person are
  fulfilled. Job security is one such need.
  People, generally, prefer secured jobs.
  Similarly, every employee wants to contribute to
  provident fund, insurance and such other schemes
  that protect his interest particularly in his old
  age when he cannot work and earn.

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3. Social Needs

• At this stage, a person wants friendship,
  companionship, association, love and affection of
  particularly those with whom he mingles often.
  In the work place he may long for the association
  of the fellow employees. In fact, it is for this
  reason that informal groups are formed within a
  formal organisation. In the living place he may
  desire to have the friendship of his neighbours.

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4. Esteem Needs

• These needs arise in view of a persons desire to
  have his ego satisfied. The satisfaction of
  these needs gives a person the feeling that he is
  above others. It gives a person self-respect,
  self-confidence, independence, status,
  recognition and reputation. Some people show
  preference for luxury cars, expensive jewels and
  so on not just because they can afford it but
  also due to the fact that possession of such
  goods satisfies their ego.

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5. Self-Actualisation needs

• According to Maslow, a person, who reaches this
  stage, wants to achieve all that one is capable
  of achieving. In other words, a person wants to
  perform to his potentials. A professor may, for
  example, author books. A singer may compose
  music and so on. The desire to excel need not
  necessarily be in the filed one is attached to.
  It can be in some other sphere also. For
  example, an actor or actress may excel in
  politics.

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McGregors X and Y Theories

• McGregor developed a philosophical view of
  humankind with his Theory X and Theory Y in 1960.
  He developed two theories on motivation that
  explain the positive and negative qualities of
  individuals. He gave the theories the names X
  theory and Y theory. His work is based upon
  Maslows Hierarchy of needs, where he grouped the
  hierarchy into lower order needs (Theory X) and
  higher order needs (Theory Y).
• He suggested that management could use either set
  of needs to motivate employees, but better
  results would be gained by the use of Theory Y,
  rather than Theory X. These two views theorized
  how people view human behaviour at work and
  organizational life.

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(THEORY X)

• McGregor looked at the way in which employers and
  employees traditionally viewed work The
  employer paid the money and gave instructions,
  and the worker did the job without asking
  questions
• People, in general, dislike work. They shirk
  their duties and are basically lazy.
• Most people are unambitious. They do not
  voluntarily accept any responsibility.
• Most people lack creativity. They show no
  preference for learning anything new.

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(THEORY X)

• 4. Satisfaction of physiological and safety needs
  along is important for most people. Workers in
  general are only bothered about their salary, job
  security and such other extrinsic factors.
• 5. While at work, an employee needs to be closely
  supervised and watched.

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(THEORY Y)

• Theory Y shows a participation style of
  management that is de-centralized. It assumes
  that employees are happy to work, are
  self-motivated and creative, and enjoy working
  with greater responsibility.
• Theory Y workers
• Enjoy their work
• Will work hard to get rewards
• Want to see new things happening
• Will work independently
• Can be trusted to make decisions
• Are motivated by things other than money
• Can work unsupervised

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• Workers attitudes
• Good worker Theory Y
• Lazy worker Theory X
• Skilled Theory Y
• Unskilled Theory X

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Evaluation of X and Y Theories

• The two theories X and Y bring out the two
  extreme qualities of a person. Theory X talks
  about the negative qualities along and theory Y
  talks only about the positive aspects.
• Practically speaking, no person is either too
  good or too bad. Every person has his or her own
  strong and weak points. By providing the right
  kind of environment and with proper motivation
  any individual can be made to perform well.

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Herzbergs Two Factor Theory

• Two factor theory states that there are certain
  factors in the work place that cause job
  satisfaction, while a separate set of factors
  cause dissatisfaction.

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138
Hygiene Factors

• According to Herzberg, hygiene factors do not
  actually motivate a person but their absence will
  lead to dissatisfaction. These factors are also
  known as extrinsic factors or maintenance
  factors. They help to maintain a reasonable
  level of job satisfaction among the employees.
  These are
• Company policies and Administration
• Type of supervision
• Inter-personal relationships
• Working conditions
• Salary
• Job Security and
• Status

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