Human Resource
Management
An introductory overview of Human
Resource Management
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HRM can broadly be defined as a common title
given to all aspects of a business related to
effective and efficient management of its
workforce.
HRM is representative of all issues or problems
related to people and their management, in a
manner that is most beneficial for the business.
Importance of HRM
“An organization is only as good as it’s people.”
Management as a process involves planning, organizing,
staffing, leading and controlling activities that facilitate
the achievement of an organization's objectives. All
these activities are accomplished through efficient
utilization of physical and financial resources by the
company’s human resources.
Human resource management is one of the most
complex and challenging fields of modern
management. It ensures the building up of an
effective workforce, the proper handling of
employee expectations and makes sure that they
perform at their very best…
Human resources is one of the most valuable and
unique assets of an organization. The term
human resources refers to the total knowledge,
skills, creative abilities, talents and aptitudes of
an organization’s workforce, as well as the
values, attitudes and beliefs of the individuals
involved.
Sound knowledge of HRM is crucial not just for a
HR manager but for all successful managers.
As a Manager or Entrepreneur you could do
everything right..
->Have great ideas
->Lay brilliant plans
->Draw clear organization charts
->Get state of the art equipment
and so on, but you could still fail by hiring the
wrong people or by a having a workforce which is
not motivated or negative.
Some Functions of HRM
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Human resource planning.
Recruitment and selection.
Training and development.
Performance and potential appraisal.
Internal mobility.
Compensation management.
Quality of working life.
People development and retention.
Employee satisfaction.
Job Enrichment.
Emerging HRM Functions
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Increasing organizational size and its complexity,
transition from traditional to professional
management, changing social and cultural
norms, globalization of industry and availability
of information technology are constantly
changing the profile of HRM functions.
HRM today plays a much more dynamic
role in not only performing the
maintenance function but in also creating
innovative ways to satisfy human
aspirations and to provide a competitive
edge to the organization on a sustainable
basis.
Division of HRM Functions
Line Functions:
>HR Planning
>Job Analysis
>Recruitment & selection
>Induction
>Training
>Performance & potential
>Appraisal
>Internal Mobility
>Compensation Management
Staff Functions:
>Educate employees on humane
issues
>Conduct surveys (ESAT)
>Survey & keep track of market trends
>Dealing with human issues
>Taking care of company's corporate
responsibility
>Ensure smooth flow of business
activities by taking care employee issues
Human Resource Planning
“If you fail to plan you are
planning to fail”
Human Resource Planning
Defined
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HR planning is the process including
forecasting, developing and controlling by
which a firm ensures that it has the right
number of people and the right kind of
people, at the right places at the right
time, doing work for which they are
economically most useful.
It is the process deciding what positions the
firm will have to fill, and how to fill
them. It embraces all future positions, from
maintenance clerk to CEO.
Human resource planning can be
described as a series of activities,
consisting the following:
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Forecasting future work force requirements,
either in terms of mathematical projections of
economic trends and industrial development
or through judgmental estimates based upon
specific future plans of the company.
Making an inventory of the existing man
power resources, and analyzing the degree to
which these resources are employed.
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Anticipating workforce problems, by
projecting present resources into the future
and comparing them with the forecast of
requirements, to determine their adequacy,
both quantitatively and qualitatively.
Planning the necessary programs of
recruitment, selection, training, deployment,
utilization, transfer, promotion, development,
motivation, and compensation so that the
future workforce requirements will be met.
Significance of Human
Resource Planning
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A concrete human resource plan helps
avoid sudden disruptions in an
enterprise’s production run, since it
indicates shortages of particular types
of personnel, if any, in advance; thus
enabling the management to adopt
suitable strategies to scope with the
situation.
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All companies irrespective of sector need to
plan their human resource requirements in
terms of numbers, skills, and occupation
groups-to meet increasing demands, either
due to business growth or expansion.
Besides, even if none of the above happened,
within an ongoing enterprise there would be
attrition, lay offs or internal mobility
(transfers or promotions), leaving gaps which
have to be filled in.
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A human resource plan that anticipates the need for
various types of skill requirements and levels of
personnel, well in advance, will be able to give
adequate lead time recruitment, selection, and
training of such persons. Human resource planning
becomes all the more crucial because the lead time
for getting personnel is a delaying factor in many
cases, and the skills that one may need are not
always available. No availability of suitable human
resources results in postponement or delays in
executing new projects and expansion plans, which
eventually leads to inefficiency and lower profitability.
Besides, changing job requirements, due to
technological change or the growing complexity of
business operations, make differing demands on the
number and type of manpower required.
Main objectives of HR Planning
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Searching for and recruiting highly skilled and
specially qualified employees.
Getting the best possible employee and assigning
him/her to the right work, so that the efficiency and
the production can be maximized.
Anticipating the changed requirements of personnel,
and be prepared for it organizationally.
A forward looking activity plan that will help the
management in identifying organizational needs, in
developing people, and in providing them growth
opportunities.
HR Planning Process
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Business Plan
Workload Analysis
Job Analysis
Job Description
Job Specification
Business Plan
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It is the basic exercise that has to be undertaken in
order to arrive at the scale of business activity over a
period of time.
It is basically a blue print of the desired objectives.
These objectives, stated in economic terms, would
incorporate the growth rate of the company,
diversification plans, market opportunities, etc.
Involves assessing where the organization is going,
it’s objectives and strategies for the future which in
turn determines its future human resource needs.
Workload Analysis
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Can be defined as the studies that are utilized to understand
the methods and processes of doing a particular job, and
can thus be helpful in work simplification, higher productivity
or efficiency, reducing the time and number of people
required to do a particular job successfully.
Workload analysis helps in determining the optimum number
of human resource required perform the task in hand in the
most effective and efficient manner possible.
There are a number of methods that could be used to
develop workload norms. They may vary from being as
simple as just observation on the job, to highly sophisticated
statistical models.
Gives an estimate of the number of employees needed, and
the nature and extent of the work to be done by them.
Job Analysis
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Job analysis is the process by which data, with
regard to each job, is systematically observed and
noted. It provides information about the nature of
the job and the characteristics or qualifications that
are desirable in the job holder. It provides
information in the following areas:
Job identification
Distinctive or significant characteristics of the job
What the typical worker does
Materials or equipment used
How the job is performed
Required personnel attributes
Job Description
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Refers to the job contents and the expectations that an
organisation has from its employees. Job descriptions usually
outline the minimum requirements of jobs.
A job description is a written statement of what the job holder
does, how it is done and why it is done.
It should accurately portray job content, environment, and
conditions of employment.
It usually includes the following:
The job title
The duties to be performed
Distinguishing characters of the job
The authority and responsibilities of the job holder
Job Specification
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The job specification states the minimum acceptable
qualifications that the employee must possess to perform the
job successfully. These may include:
Academic qualifications
Professional qualifications
Age
Years of experience
Relevance and nature of previous experience
Other skills and attitudes
They form the minimum eligibility requirements, which a
candidate must have, to be considered for appointment to a
job.
A clear indication of specifications helps in generating eligible
applications, because of self election.
Lack of clear-cut specifications may generate a large number
of applicants, leading to high costs, in terms of man hours, in
processing them.
Demand Forecasting
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Methods of Forecasting
Major Considerations in Forecasting.
Methods of Forecasting
Bottom up Technique:
This method of forecasting starts at the lowest level and
progresses upwards, through various levels in the
organization, till an aggregate projection for the organization
as a whole is ready. The basic idea is that the best person to
determine human resource requirement is the manager of the
unit or department. Department managers periodically project
their workforce requirements, while comparing their present
and future needs, keeping in mind productivity levels, market
demands, sales forecast; and mobility of staff in the
department.
Since this exercise is done periodically, it gives sufficient lead
time to human resource managers to identify available human
resources, both internally and externally.
Delphi Technique:
The objective of this technique is to predict future
developments in a particular area, by integrating the
judgments and opinions provided independently by many
experts. It is a structured approach for reaching a consensus
judgment, among the experts, regarding the number of
employees, who will be required in the future. These experts
are well versed with the plan of the organization, and the
internal and external factors that may influence these planned
activities, and hence, the demand for workforce. These
experts can come both from within or outside the
organization. The basic procedure consists of experts
presenting their forecast to other experts without physically
meeting them. Once the first forecast is collected and shared,
another round of forecasting takes place. This process of
sharing and revising goes on till a consensus has emerged,
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One of the major problems of the Delphi technique is
in the integration of varied opinions of experts. As a
result, it may drag on for a long time of many
reiterations. One of the reasons for this maybe the
physical absence of experts at one place to provide
timely feedback, or make timely adjustments in their
forecast.
Trend Analysis:
Trend analysis means studying variations in your
firm’s employment levels over the last few years. For
eg, you might compute the number of employees at
the end of each of the last five years, or perhaps the
number in each subgroup (like sales, production,
admin,etc),. He purpose is to identify trends that
might continue into the future.
Trend analysis can provide an initial estimate of future
staffing needs, but employment rarely depends on
the passage of time. Other factors like changes in
sales volume and productivity also affect staffing
needs.
Ratio Analysis:
Means making forecasts based on the historical
ratio between
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Some casual factor (like sales volume)
The number of employees required (for instance,
salespeople).
For eg, suppose a salesperson traditionally
generates RS.5,00,000/- in sales. If the sales
revenue to salespeople ratio remains the same, you
would require six new salespeople next year
(assuming each of whom produces an extra
Rs.5,00,000/-) to produce a hoped-for extra
Rs.30,00,000/- in sales.
Using Computers to Forecast Personnel
Requirements:
Computerized forecasts enable the manager to include more
variables into his or her personnel projections. These variables
may include direct labor hours required to produce one unit of
product (measure of productivity), and three sales projectionsminimum, maximum, and probable- for the product line in
question. Based on such input, a typical program generates
average staff levels required to meet product demands, as well
as separate computerized forecasts for direct labor( such as
assembly workers), indirect staff (such as secretaries), and
exempt staff (such as executives).
With programs like these, employers can more accurately
translate projected productivity and sales levels into forecasted
personnel needs. And, they can estimate the affects of various
productivity and sales level assumptions on personnel
requirements.
Major Considerations in
Forecasting.
Absenteeism:
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Is one of the major sources of unforeseen shortage of
employees on a given day. Each year organizations seem to
loose more work time due to absenteeism than due to strikes
or lockouts. Absenteeism is defined as unauthorized absence
from work. Such unscheduled absence from work causes
tremendous problems in planning and execution of the work.
The annual absentee ratio can be calculated using the
following formula:
Absentee ratio= Unauthorized absence x 100
Man shift worked
This will give an estimate of the average absenteeism rate,
which can be incorporated while projecting the actual number
of people required.
Retirements:
Another factor contributing to accurate planning has
to do with the age profile of the employees,
particularly close to retirement. Surprisingly, a large
number of organizations in India do not have any
idea of the profile of the employees in their
organizations. Often, the retirement of employees
comes as a surprise, leaving vacancies unfilled and
causing disruption in the output. Manning tables
should be carefully used to get an idea of the number
of employees who would be retiring during the plan
period, so that their replacements can be found.
Succession Planning:
Succession Planning has to do with the upward
movement of staff in the hierarchy of organizations.
It is process that ensures that a qualified person is
available to assume the position once it is made
vacant. In the process of forecasting, the number of
people needed in a planned year, filling up such
vacancies has to be considered.
Technology Upgrading:
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Technology is generally conceived in terms of machines and
equipment used in converting the input into output. However,
technology is not only the hardware, but it also refers to the
knowledge and information used in producing goods and
services. Technology change has caused obsolescence of human
skills, as the growth of technology has outpaced skill
development. HR planning has to be done keeping in mind:
Impact of better and more sophisticated technology on the
quantity and quality of people.
Would technology upgradation create redundancy in staff.
Effect of technology on the size of the workforce.
Supply Sources
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Internal Supply
External Supply
Internal Supply
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Before going out for the external supply of
human resources, organizations usually look
for what is internally available, and can be
used.
To be able to effectively use the internal
supply, organizations must conduct a total
audit of the existing human resources.
From the information that is gathered, a
personnel inventory and manning table or
skill inventory can be prepared.
External Supply
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Employment Exchange.
Employment Agencies.
Professional Association.
Campus Recruitment.
Employee referral program.
Advertisements (print, radio and
electronic media)
Recruitment and
Selection
Meaning Of Recruitment
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According to Edwin B. Flippo, recruitment is the process of
searching the candidates for employment and stimulating them to
apply for jobs in the organization”. Recruitment is the activity that
links the employers and the job seekers.
A few definitions of recruitment are:
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A process of finding and attracting capable applicants for
employment. The process begins when new recruits are sought and
ends when their applications are submitted. The result is a pool of
applications from which new employees are selected.
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It is the process to discover sources of manpower to meet the
requirement of staffing schedule and to employ effective measures
for attracting that manpower in adequate numbers to facilitate
effective selection of an efficient working force.
(continued)
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Recruitment of candidates is the function preceding the selection,
which helps create a pool of prospective employees for the
organization so that the management can select the right candidate
for the right job from this pool. The main objective of the recruitment
process is to expedite the selection process.
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Recruitment is a continuous process whereby the firm attempts to
develop a pool of qualified applicants for the future human resources
needs even though specific vacancies do not exist. Usually, the
recruitment process starts when a manager initiates an employee
requisition for a specific vacancy or an anticipated vacancy.
RECRUITMENT NEEDS ARE OF THREE TYPES
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PLANNED
i.e. the needs arising from changes in organization and retirement policy.
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ANTICIPATED
Anticipated needs are those movements in personnel, which an
organization can predict by studying trends in internal and external
environment.
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UNEXPECTED
Resignation, deaths, accidents, illness give rise to unexpected needs.
The Purpose and Importance of
Recruitment
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Attract and encourage more and more candidates to apply in the
organization.
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Create a talent pool of candidates to enable the selection of best
candidates for the organization.
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Determine present and future requirements of the organization in
conjunction with its personnel planning and job analysis activities.
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Recruitment is the process which links the employers with the
employees.
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Increase the pool of job candidates at minimum cost.
(continued)
•Help increase the success rate of selection process by decreasing number
of visibly under qualified or overqualified job applicants.
•Help reduce the probability that job applicants once recruited and selected
Will leave the organization only after a short period of time.
•Meet the organizations legal and social obligations regarding the composition
of its workforce.
•Begin identifying and preparing potential job applicants who will be appropriate
candidates.
•Increase organization and individual effectiveness of various recruiting
techniques and sources for all types of job applicants.
Recruitment Process
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The recruitment and selection is the major
function of the human resource department and
recruitment process is the first step towards
creating the competitive strength and the
recruitment strategic advantage for the
organizations. Recruitment process involves a
systematic procedure from sourcing the
candidates to arranging and conducting the
interviews and requires many resources and
time.
A general recruitment process is as follows:
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Identifying the vacancy:
The recruitment process begins with the human resource
department receiving requisitions for recruitment from any
department of the company. These contain:
• Posts to be filled
• Number of persons
• Duties to be performed
• Qualifications required
(continued)
•Preparing the job description and person specification.
•Locating and developing the sources of required number and
type of employees (Advertising etc).
•Short-listing and identifying the prospective employee with required
characteristics.
•Arranging the interviews with the selected candidates.
•Conducting the interview and decision making
Step 1
Identify vacancy
Step 2
Step 7
Prepare JA, JD, JS
Decision making
Recruitment Process
Step 6
Step 3
Interviews
Advertise the vacancy
Step 4
Step 5
Managing response
Short listing
Sources Of Recruitment
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Every organization has the option of choosing the
candidates for its recruitment processes from two kinds
of sources: internal and external sources. The sources
within the organization itself (like transfer of employees
from one department to other, promotions) to fill a
position are known as the internal sources of
recruitment. Recruitment candidates from all the other
sources (like outsourcing agencies etc.) are known as
the external sources of the recruitment.
SOURCES OF RECRUITMENT
Factors Affecting Recruitment
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The recruitment function of the
organizations is affected and governed by
a mix of various internal and external
forces. The internal forces or factors are
the factors that can be controlled by the
organization. And the external factors are
those factors which cannot be controlled
by the organization.
FACTORS AFFECTING RECRUITMENT
Recruitment Policy
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In today’s rapidly changing business environment, a well
defined recruitment policy is necessary for organizations
to respond to its human resource requirements in time.
Therefore, it is important to have a clear and concise
recruitment policy in place, which can be executed
effectively to recruit the best talent pool for the selection
of the right candidate at the right place quickly. Creating
a suitable recruitment policy is the first step in the
efficient hiring process. A clear and concise recruitment
policy helps ensure a sound recruitment process. It
specifies the objectives of recruitment and provides a
framework for implementation of recruitment program. It
may involve organizational system to be developed for
implementing recruitment programs and procedures by
filling up vacancies with best qualified people.
COMPONENTS OF THE RECRUITMENT POLICY
 The general recruitment policies and terms of the
organization
 Recruitment services of consultants
 Recruitment of temporary employees
 Unique recruitment situations
 The selection process
 The job descriptions
 The terms and conditions of the employment
A recruitment policy of an organization should be such that:
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It should focus on recruiting the best potential people.
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To ensure that every applicant and employee is treated equally with
dignity and respect.
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Unbiased policy.
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To aid and encourage employees in realizing their full potential.
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Transparent, task oriented and merit based selection.
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Weightage during selection given to factors that suit organization
needs.
(Continued)
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Optimization of manpower at the time of selection process.
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Defining the competent authority to approve each selection.
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Abides by relevant public policy and legislation on hiring and
employment relationship.
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Integrates employee needs with the organizational needs.
FACTORS AFFECTING RECRUITMENT POLICY
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Organizational objectives
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Personnel policies of the organization and its competitors.
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Government policies on reservations.
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Preferred sources of recruitment.
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Need of the organization.
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Recruitment costs and financial implications.
Recent Trends in Recruitment
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OUTSOURCING
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In India, the HR processes are being outsourced from more than a decade now. A
company may draw required personnel from outsourcing firms. The outsourcing
firms help the organization by the initial screening of the candidates according to the
needs of the organization and creating a suitable pool of talent for the final selection
by the organization. Outsourcing firms develop their human resource pool by
employing people for them and make available personnel to various companies as
per their needs. In turn, the outsourcing firms or the intermediaries charge the
organizations for their services.
Advantages of outsourcing are:
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Company need not plan for human resources much in advance.
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Value creation, operational flexibility and competitive advantage.
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turning the management's focus to strategic level processes of HRM.
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Company is free from salary negotiations, weeding the unsuitable
resumes/candidates.
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Company can save a lot of its resources and time.
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POACHING/RAIDING
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“Buying talent” (rather than developing it) is the latest mantra being followed
by the organisations today. Poaching means employing a competent and
experienced person already working with another reputed company in the
same or different industry; the organisation might be a competitor in the
industry. A company can attract talent from another firm by offering attractive
pay packages and other terms and conditions, better than the current
employer of the candidate. But it is seen as an unethical practice and not
openly talked about. Indian software and the retail sector are the sectors
facing the most severe brunt of poaching today. It has become a challenge
for human resource managers to face and tackle poaching, as it weakens
the competitive strength of the firm.
E-RECRUITMENT
Many big organizations use Internet as a source of recruitment. Erecruitment is the use of technology to assist the recruitment
process. They advertise job vacancies through worldwide web. The
job seekers send their applications or curriculum vitae i.e. CV
through e mail using the Internet. Alternatively job seekers place
their CV’s in worldwide web, which can be drawn by prospective
employees depending upon their requirements.
Advantages of recruitment are:
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Low cost.
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No intermediaries.
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Reduction in time for recruitment.
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Recruitment of right type of people.
E-Recruitment
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The buzzword and the latest trends in recruitment is the “E-Recruitment”.
Also known as “Online recruitment”, it is the use of technology or the web
based tools to assist the recruitment processes. The tool can be either a
job website like naukri.com, the organization's corporate web site or its own
intranet. Many big and small organizations are using Internet as a source of
recruitment. They advertise job vacancies through worldwide web. The job
seekers send their applications or curriculum vitae (CV) through an e-mail
using the Internet. Alternatively job seekers place their CV’s in worldwide
web, which can be drawn by prospective employees depending upon their
requirements.
The internet penetration in India is increasing and has tremendous potential.
According to a study by NASSCOM – “Jobs is among the top reasons why
new users will come on to the internet, besides e-mail.” There are more
than 18 million résumé's floating online across the world.
The two kinds of e-recruitment that an organization can
use is –
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Job portals: i.e. posting the position with the job description and the job
specification on the job portal and also searching for the suitable resumes
posted on the site corresponding to the opening in the organization.
Creating a complete online recruitment/application section in the companies
own website. - Companies have added an application system to its website,
where the ‘passive’ job seekers can submit their resumes into the database
of the organization for consideration in future, as and when the roles
become available.
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Resume Scanners: Resume scanner is one major benefit provided by the
job portals to the organizations. It enables the employees to screen and
filter the resumes through pre-defined criteria’s and requirements (skills,
qualifications, experience, payroll etc.) of the job.
Job sites provide a 24*7 access to the database of the resumes to the
employees facilitating the just-in-time hiring by the organizations. Also, the
jobs can be posted on the site almost immediately and is also cheaper than
advertising in the employment newspapers. Sometimes companies can get
valuable references through the “passers-by” applicants. Online recruitment
helps the organizations to automate the recruitment process, save their time
and costs on recruitments.
Online recruitment techniques
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Giving a detailed job description and job specifications in the job postings to
attract candidates with the right skill sets and qualifications at the first stage.
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E-recruitment should be incorporated into the overall recruitment strategy of
the organization.
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A well defined and structured applicant tracking system should be integrated
and the system should have a back-end support.
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Along with the back-office support a comprehensive website to receive and
process job applications (through direct or online advertising) should be
developed.
Therefore, to conclude, it can be said that e-recruitment is the “Evolving face
of recruitment.”
Advantages & Disadvantages Of E-Recruitment
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There are many benefits – both to the employers and the job seekers but
the e-recruitment is not free from a few shortcomings. Some of the
advantages and the disadvantages of e-recruitment are as follows:
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Advantages
Lower costs to the organization. Also, posting jobs online is cheaper than
advertising in the newspapers.
No intermediaries.
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Reduction in the time for recruitment (over 65 percent of the hiring time).
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Facilitates the recruitment of right type of people with the required skills.
Improved efficiency of recruitment process
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Gives a 24*7 access to an online collection of resumes.
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Online recruitment helps the organizations to weed out the unqualified
candidates in an automated way.
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Recruitment websites also provide valuable data and information regarding
the compensation offered by the competitors etc. which helps the HR
managers to take various HR decisions like promotions, salary trends in
industry etc.
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Disadvantages of E-Recruitment
Apart from the various benefits, e-recruitment has its own share of
shortcomings and disadvantages. Some of them are:
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Screening and checking the skill mapping and authenticity of million
of resumes is a problem and time consuming exercise for
organizations.
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There is low Internet penetration and no access and lack of
awareness of internet in many locations across India.
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Organizations cannot be dependant solely and totally on the online
recruitment methods.
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In India, the employers and the employees still prefer a face-to-face
interaction rather than sending e-mails.
Recruitment Vs Selection
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Both recruitment and selection are the two phases of the employment
process. The differences between the two are:
1. The recruitment is the process of searching the candidates for
employment and stimulating them to apply for jobs in the organization
WHEREAS selection involves the series of steps by which the candidates
are screened for choosing the most suitable persons for vacant posts.
2. The basic purpose of recruitments is to create a talent pool of
candidates to enable the selection of best candidates for the organization,
by attracting more and more employees to apply in the organization
WHEREAS the basic purpose of selection process is to choose the right
candidate to fill the various positions in the organization.
3. Recruitment is a positive process i.e. encouraging more and more
employees to apply WHEREAS selection is a negative process as it
involves rejection of the unsuitable candidates.
4. Recruitment is concerned with tapping the sources of human resources
WHEREAS selection is concerned with selecting the most suitable
candidate through various interviews and tests.
5. There is no contract of recruitment established in recruitment WHEREAS
selection results in a contract of service between the employer and the
selected employee.
Recruitment Management System
Recruitment management system is the comprehensive tool to manage
the entire recruitment processes of an organization. It is one of the
technological tools facilitated by the information management systems to
the HR of organizations. Just like performance management, payroll and
other systems, Recruitment management system helps to contour the
recruitment processes and effectively managing the ROI on
recruitment.
The features, functions and major benefits of the recruitment
management system are explained below:

Structure and systematically organize the entire recruitment processes.

Recruitment management system facilitates faster, unbiased, accurate
and reliable processing of applications from various applications.

Helps to reduce the time-per-hire and cost-per-hire.
(continued)

Recruitment management system helps to incorporate and integrate the various
links like the application system on the official website of the company, the unsolicited
applications, outsourcing recruitment, the final decision making to the main
recruitment process.

Recruitment management system maintains an automated active database of the
applicants facilitating the talent management and increasing the efficiency of the
recruitment processes.

Recruitment management system provides and a flexible, automated and interactive
interface between the online application system, the recruitment department of the
company and the job seeker.

Offers support to enhance productivity, solutions and optimizing the recruitment
processes to ensure improved ROI.

Recruitment management system helps to communicate and create healthy
relationships with the candidates through the entire recruitment process.

The Recruitment Management System (RMS) is an innovative information system
tool which helps to save the time and costs of the recruiters and improving the
recruitment processes.
ROI On Recruitment
Before making any investment, every organization would want to
evaluate the investment by answering the following questions in
quantifiable terms:
What are the costs and the corresponding and related risks on the
investment?

What are the expected returns of the investment?

What is the expected pay-back period of the investment?
An organization makes a tremendous amount of investment in its
recruitment processes. A lot of resources like time and money are
spent on recruitment processes of an organization. But assessing or
quantifying the returns on the recruitment process, or, calculating the
return on investment (ROI) on recruitment is a complicated task for
an organization. Indeed, it is difficult to judge the success of their
recruitment processes. Instead, recruitment is one activity that
continues in an organization without anyone ever realizing its worth
or measuring its impact on the organization's business.
According to a survey, 38 % of organizations do not prepare or
produce any kind of documents or reports on their The recruitment
processes, and there is no accountability of the HR department for
the costs incurred and the opportunities missed.
With the increasing strategic focus on the human resources, more and more
organizations are adopting one or the other way for calculating the ROI on
its recruitments. Many organizations are examining their HR functions and
processes and are trying to quantify their results and returns.
A recruitment professional or manager can calculate and maximize the
return on investments on its organization's recruitment by:

Clear definition of the results to be achieved from recruitment.

Developing methods and ways measuring the results like the time – to –
hire, cost-Per-Hire and effectiveness of the recruitment source etc.

Estimating the costs associated with the recruitment project

Estimating the tangible and intangible benefits to the organization including
the payback period of the recruitments.

Providing and ensuring proper training and development of the recruitment
professionals.
Assessing the ROI on recruitments can assist an organization to
strengthen its HR processes, improving its recruitment function and to build
a strategic human resource advantage for the organization.
Outsourcing Recruitment

Outsourcing Recruitment is the human resource (HR) processes is the
latest practice being followed by middle and large sized organizations. It is
being witnessed across all the industries. In India, the HR processes are
being outsourced from nearly a decade now. Outsourcing industry is
growing at a high rate.
Human Resource Outsourcing refers to the process in which an
organization uses the expert services of a third party (generally professional
consultants) to take care of its HR functions while HR management can
focus on the strategic dimension of their function. The functions that are
typically outsourced are the functions that need expertise, relevant
experience, knowledge and best methods and practices. This has given rise
to outsourcing the various HR functions of an organization. HR
Consultancies such as Ma Foi and Planman Consulting provide such
services through expert professional consultants. Human resources
business process outsourcing (HR BPO) is a major component of the
worldwide BPO market. Performance management outsourcing involves all
the performance monitoring, measurement, management being outsourced
from a third party or an external organization.
Many organizations have started outsourcing its recruitment process i.e.
transferring all or some part of its recruitment process to an external
consultant providing the recruitment services. It is commonly known as RPO
i.e. recruitment process outsourcing. More and more medium and large
sized organizations are outsourcing their recruitment process right from
the entry level jobs to the senior level jobs.

The present value of the recruitment process outsourcing industry (RPO) in India is
estimated to be $2.5 billion and it is expected to grow at the annual rate of 30-40 per
cent for the next couple of years. According to a recent survey, only 8-10 per cent of
the Indian companies are complete recruitment processes. However, the number of
companies outsourcing their recruitment processes is increasing at a very fast rate
and so is the percentage of their total recruitment processes being outsourced.
Outsourcing organizations strive for providing cost saving benefits to their clients.
One of the major advantages to organizations, who outsource their recruitment
process, is that it helps to save up to as much as 40 per cent of their recruitment
costs. With the experience, expertise and the economies of scale of the third party,
organizations are able to improve the quality of the recruits and the speed of the
whole process. Also, outsourcing enables the human resource professionals of
organizations to focus on the core and other HR and strategic issues. Outsourcing
also gives a structured approach to the whole process of recruitment, with the
ultimate power of decision making of recruiting with the organization itself. The
portion of the recruitment cycle that is outsourced range from preparing job
descriptions to arranging interviews, the activities that consume almost 70 per cent of
the time of the whole recruitment process.
Outsourcing the recruitment processes for a sector like BPO, which faces an attrition
of almost 50-60 per cent, can help the companies in BPO sector to save costs
tremendously and focus on other issues like retention. The job seekers are also
availing the services of the third parties (consultants) for accessing the latest job
opportunities.
In India, the trend of outsourcing recruitment is also catching up fast. For example:
Vodafone outsources its recruitment activities to Alexander Mann Solutions (RPO
service provider). Wipro has outsourced its recruitment process to MeritTrac. Yes
bank is also known to outsource 50 per cent of its recruitment processes.
Advantage Of Outsourcing
Recruitment

Traditionally, recruitment is seen as the cost incurring process in an
organization. HR outsourcing helps the HR professionals of the
organizations to concentrate on the strategic functions and
processes of human resource management rather than wasting their
efforts, time and money on the routine work.
Outsourcing the recruitment processes helps to cut the
recruitment costs to 20 % and also provide economies of scale to
the large sized organizations.
The major advantages of outsourcing recruitment performance
management are:
Outsourcing is beneficial for both the corporate organizations that use the
outsourcing services as well as the consultancies that provide the service to the
corporate. Apart from increasing their revenues, outsourcing Process provides
business opportunities to the service providers, enhancing the skill set of the service
providers and exposure to the different corporate experiences thereby increasing
their expertise.
The advantages are:

turning the management's focus to strategic level processes of HRM

accessibility to the expertise of the service providers

freedom from red tape and adhering to strict rules and regulations

optimal resource utilization

structured and fair performance management.

a satisfied and, hence, highly productive employees

value creation, operational flexibility and competitive advantage
Therefore outsourcing helps both the organizations and the consultancies to grow
and perform better.
Outsourcing Process
Head Hunting

Headhunting refers to the approach of
finding and attracting the best experienced
person with the required skill set.
Headhunting is also a recruitment
process involves convincing the person to
join your organization.
Headhunting Process
Recruitment Strategies

Recruitment is of the most crucial roles of the human resource
professionals. The level of performance of and organization
depends on the effectiveness of its recruitment function.
Organizations have developed and follow recruitment strategies to
hire the best talent for their organization and to utilize their
resources optimally. A successful recruitment strategy should be
well planned and practical to attract more and good talent to apply in
the organization. For formulating an effective and successful
recruitment strategy, the strategy should cover the following
elements:
Identifying and prioritizing jobs
recruitment keep arising at various levels in every organization; it is almost a neverending process. It is impossible to fill all the positions immediately. Therefore, there is a
need to identify the positions requiring immediate attention and action. To maintain the
quality of the recruitment activities, it is useful to prioritize the vacancies whether to
focus on all vacancies equally or focusing on key jobs first.
Candidates to target
The recruitment process can be effective only if the organization completely
understands the requirements of the type of candidates that are required and will be
beneficial for the organization. This covers the following parameters as well:
Performance level required: Different strategies are required for focusing on hiring
high performers and average performers.
Experience level required: the strategy should be clear as to what is the experience
level required by the organization. The candidate’s experience can range from being a
fresher to experienced senior professionals.
Category of the candidate: the strategy should clearly define the target candidate.
He/she can be from the same industry, different industry, unemployed, top performers of
the industry etc.
(continued)

Sources of recruitment
The strategy should define various sources (external and internal) of
recruitment. Which are the sources to be used and focused for the
recruitment purposes for various positions. Employee referral is
one of the most effective sources of recruitment.

Trained recruiters
The recruitment professionals conducting the interviews and the
other recruitment activities should be well-trained and experienced
to conduct the activities. They should also be aware of the major
parameters and skills (e.g.: behavioral, technical etc.) to focus while
interviewing and selecting a candidate.

How to evaluate the candidates
The various parameters and the ways to judge them i.e. the entire
recruitment process should be planned in advance. Like the rounds
of technical interviews, HR interviews, written tests, psychometric
tests etc.
Forms Of Recruitment

The organizations differ in terms of their size,
business, processes and practices. A few
decisions by the recruitment professionals can
affect the productivity and efficiency of the
organization. Organizations adopt different
forms of recruitment practices according to the
specific needs of the organization. The
organizations can choose from the centralized or
decentralized forms of recruitment, explained
below:
CENTRALIZED RECRUITMENT

The recruitment practices of an organization are centralized when the HR /
recruitment department at the head office performs all functions of
recruitment. Recruitment decisions for all the business verticals and
departments of an organization are carried out by the one central HR (or
recruitment) department. Centralized from of recruitment is commonly seen
in government organizations.
Benefits of the centralized form of recruitment are:

Reduces administration costs

Better utilization of specialists

Uniformity in recruitment

Interchangeability of staff

Reduces favoritism

Every department sends requisitions for recruitment to their central office
DECENTRALIZED RECRUITMENT
Decentralized recruitment practices are most commonly
seen in the case of conglomerates operating in different
and diverse business areas. With diverse and
geographically spread business areas and offices, it
becomes important to understand the needs of each
department and frame the recruitment policies and
procedures accordingly. Each department carries out its
own recruitment. Choice between the two will depend
upon management philosophy and needs of particular
organization. In some cases combination of both is used.
Lower level staffs as well as top level executives are
recruited in a decentralized manner.
Equal Employment Opportunity

Equal employment opportunity refers to the
approach of the employers to ensure the
practice of being fair and impartial in the
employment process. It protects from
discrimination against employees on the basis of
race, sex, creed, religion, color, or national
origin. It also covers the discrimination on the
basis of the minority status.
Discrimination in employment








Discrimination refers to the any kind of prejudice, biasness or
favoritism on the basis of
disability
race
age
sex
sexuality
pregnancy
Marital status
in employment. No person should be treated less favorably than any
other on the basis of the specified issues above.

Diversity in workforce
With the globalization and the increasing size of the organizations,
the diversity in the workforce is increasing i.e. people from diverse
backgrounds, educational background, age groups, race, gender,
abilities etc come together to work for one organization and common
objectives. Therefore, it is the responsibility of the employer to
create an equality-based and discrimination-free working
environment and practices.

Equal opportunity means treating people equally and fairly irrespective of
their race, religion, sex, age, disability etc. Giving women an equal
treatment and access to opportunities at the workplace. Any employee
should be ill-treated or harassed by the employer or other employees.
Equal Employment Opportunity principles help to realize and respect the
actual worth of the individual on the basis of his knowledge, skills, abilities
and merit. And the policy should cover all the employees of an organization
whether permanent or temporary, contractual etc.
Equal employment opportunity is necessary to ensure:



To give fair access to the people of all development opportunities
To create a fair organization, industry and society.
To encourage and give disadvantaged or disabled people a fair chance to
grow with the society.
Training and
Development
What is Training?

Training means giving new or present employees
the skills they need to perform their job.

Training is the most effective tool to convert
potential into performance.


It is a learning process that involves the
acquisition of knowledge, sharpening of skills,
concepts, rules, or changing of attitudes and
behaviors to enhance the performance of
employees.
Training is activity leading to skilled behavior.




A well conceived and conducted
training program:
Reduces time required to reach
maximum efficiency.
Is cost effective.
Achieves clear evaluation of results.
Has an element of predictability.
Importance Of Training and Development
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Optimum Utilization of Human Resources
Development of Human Resources
Development of skills of employees
Helps in increasing the productivity
Helps in inculcating the sense of team work
Helps building the positive perception and feeling
about the organization
Helps in improving upon the quality of work and
work- life.
Helps in creating the healthy working environment.
Prevents obsolescence
Helps in improving the morale of the work force
Helps in creating a better corporate image.
Leads to improved profitability and more positive
attitudes towards profit orientation.
Role of Training
Training
objectives
Training
Evaluation
Identification of
Training needs
Training
Functions
Admin of
Training
programs
Training
methods
Objectives of Training



The basic objective of training is to
establish a match between employee and
his/her job.
Objectives of training differ according to
the employees belonging to different
levels of organizations.
Training is designed to improve
knowledge, skills and attitude, thus, equip
the individual to be more effective in his
present job or to prepare him for a future
assignment.
Objectives
of
Training
Induction/
Orientation
Product/
Process
Knowledge
Skill
Updating
Profile
Enhancement
Competency
development
Identification
of
Training
needs
Organizational
Analysis
Task
Analysis
Man
Analysis
Analysis of
Equipment
Brainstorming
Problem
Clinic
Simulation
Training
Methods
Lectures
OJT
Simulation
Methods
Experiential
Methods
Programmed
Instructions
E-Learning
Admin of
Training
programs
Training
Contents
Training
Programs
Implementation
of Training Plan
Training Evaluation

The process of examining a training
program is called training evaluation.
Training evaluation checks
whether training has had the desired
effect. Training evaluation ensures
that whether candidates are able to
implement their learning in their
respective workplaces, or to the
regular work routines
When setting any objectives for training we should be using the standard management
practice of using SMART objectives:
S - Specific
M - Measurable
A - Achievable
R - Realistic
T - Time-bound
Performance
Management and
Appraisal

Performance management can be defined
as a process that consolidates Goal
Setting, Performance appraisal, and
development into a single, common
system, the aim of which is to ensure that
the employee’s performance is supporting
the company’s strategic aims..
Why Appraise Performance?
1.
2.
3.
4.
From a practical point of view, most employers still base
pay and promotional decisions on the employees
appraisal.
Appraisals play an integral role in the employer’s
performance management process. Periodic review of
performance helps translate the employer’s strategic
goals into specific employees goals.
Appraisals lets the boss and subordinate develop a plan
for correcting any deficiencies, and to reinforce the things
the subordinate does right.
Appraisals serve a useful career planning purpose. They
provide an opportunity to review the employee’s career
plans in light of his/her exhibited strengths and
weaknesses.
Some
objectives
of
Performance
appraisal
Promotion
&
Transfer
Determining
Wage
increase
Training
&
Development
Informing
Employees
Where they
stand
Supervisors
know
their
employees
Personnel
research
Steps in Appraising
Performance

Defining the job means making
sure that you & your subordinate
agree on his/her duties and job
standards.

Appraising performance means
comparing your subordinate’s
actual performance to the
standards that have been set; this
usually involves some type of
rating
form.
Providing feedback require the
two of you to discuss the
subordinate’s performance and
progress, and make plans for any
development required.

Step3:
Provide
feedback
Step 1:
Define the job
Step2:
Appraise
performance
Who should do the appraising?
Appraisals
Can be
Done by:
Immediate
supervisor
Peer
Appraisals
Rating
Committees
Self
Ratings
Appraisals
By
Subordinates
360
Degree
Feedback
360 degree feedback

360 degree appraisals are a powerful developmental method and
quite different to traditional manager-subordinate appraisals (which
fulfill different purposes). As such a 360 degree process does not
replace the traditional one-to-one process - it augments it, and can
be used as a stand-alone development method.

360 degree appraisals involve the appraisee receiving feedback
from people (named or anonymous) whose views are considered
helpful and relevant. The feedback is typically provided on a form
showing job skills/abilities/attitudinal/behavioral criteria and some
sort of scoring or value judgment system. The appraisee should
also assess themselves using the same feedback instrument or
form.

360 degree respondents can be the appraisee's peers, up-line
managers/execs, subordinate staff, team members, other staff,
customers, suppliers - anyone who comes into contact with the
appraisee and has opinions/views/reactions of and to the appraisee.
Performance Appraisal
Methods
There are many types of performance appraisal
methods. Some of them are :
1) Job results
2) Essay method
3) Mixed Standard Scales
4) Forced Distribution
5) Graphic Rating Scale
6) Behavioral Checklist
7) Behavioral Anchored Rating Scales (BARS)
8) Management by Objectives (MBO)
Job Results

Though not an appraisal method per se, job
results are in themselves a source of data that can
be used to appraise performance. Typically, an
employee's results are compared against some
objective standard of performance. Results
indexes are often used for appraisal purposes if an
employee's job has measurable results. Examples
of job results indexes are volume of sales, and
quantity and quality of work produced. Results
indexes such as turnover, absenteeism, grievances,
profitability, and production rates can be used to
evaluate the performance of organization units.
Essay Method


The essay method involves an evaluator's written
report appraising an employee's performance,
usually in terms of job behaviors and/or results. The
subject of an essay appraisal is often justification
of pay, promotion, or termination decisions, but
essays can be used for developmental purposes as
well.
Since essay appraisals are to a large extent
unstructured and open-ended, lack of
standardization is a major problem. The openended, unstructured nature of the essay appraisal
makes it highly susceptible to evaluator bias, which
may in some cases be discriminatory
Mixed Standard Scales


Mixed standard scales are a relatively recent innovation in rating
scales. They contain statements representing good, average,
and poor performance based on behavioral examples
obtained from knowledgeable persons, usually supervisors. An
evaluator's task is to indicate whether an employee either
fits the statement, is better than the statement, or worse
than the statement.
In a mixed standard scale, each performance dimension has
three statements relating to it: one illustrating good
performance, one average, and one poor. Thus, this mixed
standard scale has nine statements, three for each of the three
dimensions used. Statements in mixed standard scales are
randomly mixed, tending to reduce rater errors by making it less
obvious which statements reflect effective or ineffective
performance.
Example of a mixed standard scale
Instructions: If the employee fits the statement, put a ?=? in the
space opposite the statement. If the employee is better than the
statement, put a ?v?. If the employee is worse than the statement,
put ?x?.









1. Is on good terms with everyone. Can get along with people even
in disagreement.
2. Employee's work is spotty, sometimes being all right and
sometimes not. Could be more accurate and careful.
3. Has a tendency to get into unnecessary conflicts with people.
4. Is quick and efficient, able to keep work on schedule. Really
gets going on a new task.
5. The accuracy of employee's work is satisfactory. It is not often
that you find clear evidence of carelessness.
6. Gets along with most people. Only very occasionally has
conflicts with others on the job, and these are likely to be minor.
7. Is efficient enough, usually getting through assignments and
work in reasonable time.
8. Work is striking in its accuracy. Never any evidence of
carelessness in it.
9. There is some lack of efficiency on employee's part. Employee
may take too much time to complete assignments, and sometimes
does not really finish them









1. Is on good terms with everyone. Can get along with people even in
disagreement.
2. Employee's work is spotty, sometimes being all right and sometimes
not. Could be more accurate and careful.
3. Has a tendency to get into unnecessary conflicts with people.
4. Is quick and efficient, able to keep work on schedule. Really gets going
on a new task.
5. The accuracy of employee's work is satisfactory. It is not often that you
find clear evidence of carelessness.
6. Gets along with most people. Only very occasionally has conflicts with
others on the job, and these are likely to be minor.
7. Is efficient enough, usually getting through assignments and work in
reasonable time.
8. Work is striking in its accuracy. Never any evidence of carelessness in
it.
9. There is some lack of efficiency on employee's part. Employee may take
too much time to complete assignments, and sometimes does not really
finish them
Forced Distribution


Forced distribution is a form of comparative evaluation in
which an evaluator rates subordinates according to a
specified distribution. Unlike ranking methods, forced
distribution is frequently applied to several rather than only one
component of job performance.
Use of the forced distribution method is demonstrated by a
manager who is told that he or she must rate subordinates
according to the following distribution: 10 percent low; 20
percent below average; 40 percent average; 20 percent
above average; and 10 percent high. In a group of 20
employees, two would have to be placed in the low category, four
in the below-average category, eight in the average, four above
average, and two would be placed in the highest category. The
proportions of forced distribution can vary. For example, a
supervisor could be required to place employees into top, middle,
and bottom thirds of a distribution.
Graphic rating scale

Perhaps the most commonly used method of
performance evaluation is the graphic rating scale.
Off course it is also one of the oldest methods of
evaluation in use. Under this method, a printed form,
as shown in the table, is used to evaluate the
performance of an employee. A variety of traits may
be used in these types of rating devices, the most
common being the quantity and quality of work.
The rating scales can also be adapted by including
traits that the company considers important for
effectiveness on the job.
Table: Typical Graphic Rating Scale
Employee Name................... Job title .................
Department ......................... Rate ...............
Date ..................................
Quantity of work: Volume
of work under normal
working conditions
Quality of work:
Neatness, thoroughness
and accuracy of work
Knowledge of job
A clear understanding of
the factors connected
with the job
Attitude: Exhibits
enthusiasm and
cooperativeness on the
job
Dependability:
Conscientious, thorough,
reliable, accurate, with
respect to attendance,
relief's, lunch breaks, etc.
Cooperation: Willingness
and ability to work with
others to produce desired
goals.
Unsatisfactory
Fair
Satisfactory
Good
Outstanding

From the graphic rating scales, excerpts can be obtained about
the performance standards of employees. For instance, if the
employee has serious gaps in technical-professional knowledge
(knows only rudimentary phases of job); lacks the knowledge to
bring about an increase in productivity; is reluctant to make
decisions on his own (on even when he makes decisions they are
unreliable and substandard); declines to accept responsibility;
fails to plan ahead effectively; wastes and misuses resources; etc.,
then it can safely be inferred that the standards of the performance
of the employee are dismal and disappointing.

The rating scale is the most common method of evaluation of an
employee’s performance today. One positive point in favor of the
rating scale is that it is easy to understand, easy to use and
permits a statistical tabulation of scores of employees. When
ratings are objective in nature they can be effectively used as
evaluators.
Behavioral Checklist
A behavioral checklist is a rating form containing statements describing both
effective and ineffective job behaviors. These behaviors relate to a number of
behavioral dimensions determined to be relevant to the job.
Items from a behavioral checklist for a salesperson's job
Instructions: Please check those statements descriptive of an employee's behavior.

1. Calls on customers immediately after hearing of any complaints

2. Discusses complaints with customer

3. Gathers facts relevant to customers' complaints

4. Transmits information about complaints back to customers and
resolves problems to their satisfaction

5. Plans each day's activities ahead of time

6. Lays out broad sales plans for one month ahead

7. Gathers sales information from customers, other salesmen, trade
journals, and other relevant sources

Behavioral checklists are well suited to employee
development because they focus on behaviors and
results, and use absolute rather comparative
standards. An advantage of behavioral checklists is
that evaluators are asked to describe rather than
evaluate a subordinate's behavior. For this
reason, behavioral checklists may meet with less
evaluator resistance than some other methods. An
obvious disadvantage of behavioral checklists is that
much time and money must be invested to construct
the instrument.
BARS - Behaviorally Anchored
Rating Scales

Also known as the behavioral expectations scale,
this method represents the latest innovation in
performance appraisal. It is a appraisal tool that
anchors a numerical rating scale with specific
behavioral examples of good or poor
performance. It is a combination of the rating
scale and critical incident techniques of
employee performance evaluation. The critical
incidents serve as anchor statements on a scale
and the rating form usually contains six to eight
specifically defined performance dimensions. The
following chart represents an example of a sales
trainee’s competence and a behaviorally
anchored rating scale.
Table: An Example of Behaviorally Anchored Rating Scale
(BARS)
Performance
Points
Behavior
Extremely good
7
Can expect trainee to make
valuable suggestions for
increased sales and to have
positive relationships with
customers all over the country.
Good
6
Can expect to initiate creative
ideas for improved sales.
Above average
5
Can expect to keep in touch
with the customers throughout
the year.
Average
4
Can manage, with difficulty, to
deliver the goods in time.
Below average
3
Can expect to unload the trucks
when asked by the supervisor.
Poor
2
Can expect to inform only a part
of the customers.
Extremely poor
1
Can expect to take extended
coffee breaks and roam around
purposelessly.
Confidential report

It is mostly used in government organizations. It is a descriptive
report prepared, generally at the end of every year, by the
employee’s immediate superior. The report highlights the
strengths and weaknesses of the subordinate. The report is not
data based. The impressions of the superior about the
subordinate are merely recorded there. It does not offer any
feedback to the appraisee. The appraisee is not very sure about
why his ratings have fallen despite his best efforts, why others
are rated high when compared to him, how to rectify his
mistakes, if any; on what basis he is going to be evaluated next
year, etc. Since the report is generally not made public and
hence no feedback is available, the subjective analysis of the
superior is likely to be hotly contested. In recent years, due to
pressure from courts and trade unions, the details of a negative
confidential report are given to the appraisee.
Management by Objectives

Management by objectives (MBO) involves setting specific
measurable goals with each employee and then periodically
discussing his/her progress toward these goals. The term MBO
almost always refers to a comprehensive organization-wide goal
setting and appraisal program that consist of six main steps:

1. Set the organization's goals. Establish organization-wide plan
for next year and set goals.

2. Set departmental goals. Here department heads and their
superiors jointly set goals for their departments

3. Discuss and allocate department goals. Department heads
discuss the department's goals with all subordinates in the
department (often at a department-wide meeting) and ask them to
develop their own individual goals; in other words, how can each
employee contribute to the department's attaining its goals?

4. Define expected results (set individual goals).
Here, department heads and their subordinates set
short-term performance targets.

5. Performance review and measure the results.
Department heads compare actual performance for
each employee with expected results.

6. Provide feedback. Department heads hold
periodic performance review meetings with
subordinates to discuss and evaluate progress in
achieving expected results.
MBO
Features

MBO emphasizes anticipatively set goals that are tangible, verifiable and
measurable.

MBO focuses attention on what must be accomplished (goals) rather than how
it is to be accomplished (methods).

MBO, by concentrating on key result areas translates the abstract philosophy
of management into concrete phraseology. The technique can be put to general
use (non-specialist technique). Further it is “a dynamic system which seeks to
integrate the company’s need to clarify and achieve its profit and growth
targets with the manager’s need to contribute and develop himself”.

MBO is a systematic and rational technique that allows management to attain
maximum results from available resources by focusing on achievable goals. It
allows the subordinate plenty of room to make creative decisions on his own.
Unclear
standards
Halo
effect
Bias
Problems
in
Appraising
performance
Leniency
Or
strictness
Central
tendency
How to Avoid Appraisal Problems
Keep
A
diary
Know
problems
Use
Right
Tool
Control
Outside
influences
Train
Supervisors
Performance Management
System
Performance Management is a systematic process of :
•Target setting - Planning work and output expectations
•Performance Appraisal and Monitoring - Continually monitoring performance
•Rewarding good performance and managing poor performance
•Competency Management and Assessment
•Personal Development Planning - Developing and enhancing the capacity to
perform
•Performance and Competency Rating - Periodically rating and assessing
performance
in a summary fashion
COMPENSATION
MANAGEMENT
 Human Resource is the most vital resource
for any organization. It is responsible for each
and every decision taken, each and every work
done and each and every result. Employees
should be managed properly and motivated by
providing best remuneration and
compensation as per the industry
standards. The lucrative compensation will
also serve the need for attracting and
retaining the best employees.
 Compensation is an integral part of human
resource management which helps in
motivating the employees and improving
organizational effectiveness.
 Compensation is the remuneration received
by an employee in return for his/her
contribution to the organization. It is an
organized practice that involves balancing the
work-employee relation by providing monetary
and non-monetary benefits to employees.
 Employee compensation refers to all forms of
pay going to employees and arising from their
employment.
Need of Compensation
Management

A good compensation package is important to motivate the
employees to increase the organizational productivity.

Unless compensation is provided no one will come and
work for the organization. Thus, compensation helps in
running an organization effectively and accomplishing its
goals.

Salary is just a part of the compensation system, the
employees have other psychological and self-actualization
needs to fulfill. Thus, compensation serves the purpose.

The most competitive compensation will help the
organization to attract and sustain the best talent. The
compensation package should be as per industry
standards.
Motivation
Compensation
Employee
Retention
Need
Satisfaction
Components of Compensation System
 Compensation
systems are designed
keeping in minds the
strategic goals and
business objectives.
Compensation system
is designed on the
basis of certain factors
after analyzing the job
work and
responsibilities.
Components of a
compensation system
are as follows:
Pay structure
refers to the process of setting up the pay for a job in an
organization. The process deals with internal and external
analysis to estimate the compensation package for a job
profile.
Objectives of Salary Survey
 To gather information
regarding the industry
standards
 To know more about the
market rate i.e.
compensation offered by the
competitors
Salary Survey
 To design a fair
compensation system
 To design and implement
most competitive reward
strategies
 To benchmark the
compensation strategies
Standard
Custom
Types of Compensation
 Compensation provided to employees can be
direct in the form of monetary benefits
and/or indirect in the form of non-monetary
benefits known as perks, time off, etc.
Compensation does not include only salary
but it is the sum total of all rewards and
allowances provided to the employees in
return for their services. If the compensation
offered is effectively managed, it contributes to
high organizational productivity.
Compensation
Direct financial
payments
Indirect financial
payments
Basic
Salary
Medical
Reimbursement
Special
Allowances
Direct
Compensation
House rent
allowances
Bonus
Conveyance
Leave travel
allowances
Overtime
policy
Leave
Policy
Insurance
Indirect
Compensation
Flexible
Timings
Retirement
Benefits
Holiday
Homes
Strategic Compensation

Strategic compensation


Using the compensation plan to support the
company’s strategic aims.
Focuses employees’ attention on the values of
winning, execution, and speed, and on being
better, faster, and more competitive..
Compensation Policy Issues

Pay for performance

Pay for seniority

The pay cycle

Salary increases and promotions

Overtime and shift pay

Probationary pay

Paid and unpaid leaves

Paid holidays

Salary compression

Geographic costs of living differences
Forms of Equity

External equity


Internal equity


How fair the job’s pay rate is, when compared to other jobs within
the same company
Individual equity


How a job’s pay rate in one company compares to the job’s pay
rate in other companies.
How fair an individual’s pay as compared with what his or her coworkers are earning for the same or very similar jobs within the
company.
Procedural equity

The perceived fairness of the process and procedures to make
decisions regarding the allocation of pay.
Methods to Address Equity
Issues

Salary surveys


Job analysis and job evaluation


To maintain internal equity,
Performance appraisal and incentive pay


To monitor and maintain external equity.
To maintain individual equity.
Communications, grievance mechanisms,
and employees’ participation

To help ensure that employees view the pay
process as transparent and fair.
Establishing Pay Rates

Step 1. The salary survey

Aimed at determining prevailing wage rates.


A good salary survey provides specific wage rates for
specific jobs.
Formal written questionnaire surveys are the most
comprehensive, but telephone surveys and
newspaper ads are also sources of information.
Establishing Pay Rates (cont’d)

Step 2. Job evaluation

A systematic comparison done in order to
determine the worth of one job relative to another.
Establishing Pay Rates
(cont’d)

Step 3. Group Similar Jobs into Pay Grades

A pay grade is comprised of jobs of approximately
equal difficulty or importance as established by
job evaluation.
Establishing Pay Rates
(cont’d)

Step 4. Price Each Pay Grade
— Wage Curve

Shows the pay rates currently paid for jobs in
each pay grade, relative to the points or rankings
assigned to each job or grade by the job
evaluation.

Shows the relationships between the value of the
job as determined by one of the job evaluation
methods and the current average pay rates for
your grades.
Plotting a Wage Curve
Figure 11–4
Establishing Pay Rates
(cont’d)

Step 5. Fine-tune pay rates

Developing pay ranges
 Flexibility in meeting external job market rates
Easier for employees to move into higher pay grades
 Allows for rewarding performance differences and seniority
Correcting out-of-line rates
 Raising underpaid jobs to the minimum of the rate range for
their pay grade.
 Freezing rates or cutting pay rates for overpaid (“red circle”)
jobs to maximum in the pay range for their pay grade.


Wage
Structure
Note: This shows overlapping wage classes
and maximum–minimum wage ranges.
Figure 11–5
Pricing Managerial and
Professional Jobs

Compensating managers




Base pay: fixed salary, guaranteed bonuses.
Short-term incentives: cash or stock bonuses
Long-term incentives: stock options
Executive benefits and perks: retirement plans,
life insurance, and health insurance.
Pricing Managerial and
Professional Jobs

What Really Determines Executive Pay?

CEO pay is set by the board of directors taking
into account factors such as the business
strategy, corporate trends, and where they want to
be in a short and long term.

Firms pay CEOs based on the complexity of the
jobs they filled.

Boards are reducing the relative importance of
base salary while boosting the emphasis on
performance-based pay.
Pricing Managerial and
Professional Jobs

What Really Determines Executive Pay?

CEO pay is set by the board of directors taking
into account factors such as the business
strategy, corporate trends, and where they want to
be in a short and long term.

Firms pay CEOs based on the complexity of the
jobs they filled.

Boards are reducing the relative importance of
base salary while boosting the emphasis on
performance-based pay.
What Is Competency-based
Pay?

Competency-based pay


Where the company pays for the employee’s
range, depth, and types of skills and knowledge,
rather than for the job title he or she holds.
Competencies

Demonstrable characteristics of a person,
including knowledge, skills, and behaviors, that
enable performance.
Why Use Competency-Based
Pay?

Traditional pay plans may actually backfire if
a high-performance work system is the goal.

Paying for skills, knowledge, and
competencies is more strategic.

Measurable skills, knowledge, and
competencies are the heart of any company’s
performance management process.
Other Compensation Trends

Broadbanding

Consolidating salary grades and ranges into just a
few wide levels or “bands,” each of which contains
a relatively wide range of jobs and salary levels.

Wide bands provide for more flexibility in assigning
workers to different job grades.
Broadbanded
Structure and
How It Relates to
Traditional Pay
Grades and
Ranges
Figure 11–7
Motivation, Performance, and
Pay

Incentives

Financial rewards paid to workers whose
production exceeds a predetermined standard.
Individual Differences

Law of individual differences




The fact that people differ in personality, abilities,
values, and needs.
Different people react to different incentives in
different ways.
Managers should be aware of employee needs
and fine-tune the incentives offered to meets their
needs.
Money is not the only motivator.
Types of Incentive Plans

Pay-for-performance plans

Variable pay (organizational focus)


A team or group incentive plan that ties pay to some
measure of the firm’s overall profitability.
Variable pay (individual focus)

Any plan that ties pay to individual productivity or
profitability, usually as one-time lump payments.
Why Incentive Plans Fail

Performance pay can’t replace good management.

You get what you pay for.

“Pay is not a motivator.”

Rewards punish.

Rewards rupture relationships.

Rewards can have unintended consequences.
Implementing Effective
Incentive Plans










Ask: Is effort clearly instrumental in obtaining the reward?
Link the incentive with your strategy.
Make sure effort and rewards are directly related.
Make the plan easy for employees to understand.
Set effective standards.
View the standard as a contract with your employees.
Get employees’ support for the plan.
Use good measurement systems.
Emphasize long-term as well as short-term success.
Adopt a comprehensive, commitment-oriented approach.
Benefits

Benefits


Indirect financial and nonfinancial payments
employees receive for continuing their
employment with the company.
Types of employee benefit plans




Supplemental pay: sick leave and vacation pay
Insurance: workers’ compensation
Retirement: Pensions
Employee services: child-care facilities
Private-Sector Employer
Compensation Costs,
June 2003
Source: “Total Employer Costs Rose to 22.61 in Second Quarter,”
BNA Bulletin to Management, September 11, 2003, p. 293
Figure 13–2
Types of Employee Benefits




Pay for time not worked
Insurance benefits
Retirement benefits
Services
Issues in Developing Benefits
Plans







Benefits to be offered.
Coverage of retirees in the plan
Denial of benefits to employees during initial
“probationary” periods
Financing of benefits.
Benefit choices to give employees.
Cost containment procedures to use.
Communicating benefits options to
employees.
Pay for Time Not Worked

Unemployment insurance


Provides for benefits if a person is unable to work
through no fault of his or her own.
Vacations and holidays



Number of paid vacation days varies by employer.
Number of holidays varies by employer.
Premium pay for work on holidays.
Pay for Time Not Worked (cont’d)

Sick leave


Provides pay to an employee when he or she is
out of work because of illness.
Parental leave

The Family Medical Leave Act of 1993 (FMLA)




Up to 12 weeks of unpaid leave within a one-year
period
Employees must take unused paid leave first.
Employees on leave retain their health benefits.
Employees have the right to return to their job or
equivalent position.
Pay for Time Not Worked (cont’d)

Severance pay

A one-time payment when terminating an
employee.

Reasons for granting severance pay:

Acts as a humanitarian gesture and good public
relations.

Mirrors employee’s two week quit notice.

Avoids litigation from disgruntled former employees.

Reassures employees who stay on after the employer
downsizes its workforce of employer’s good intentions.
Insurance Benefits

Workers’ compensation

Provides income and medical benefits to workrelated accident victims or their dependents,
regardless of fault.



Death or disability: a cash benefit based on earnings
per week of employment.
Specific loss injuries: statutory list of losses
Controlling worker compensation costs




Screen out accident-prone workers.
Make the workplace safer.
Thoroughly investigate accident claims.
Use case management to return injured employees to
work as soon as possible.
Insurance Benefits (cont’d)

Hospitalization, health, and disability
insurance

Provide for loss of income protection and grouprate coverage of basic and major medical
expenses for off-the-job accidents and illnesses.

Accidental death and dismemberment

Disability insurance
Retirement Benefits (cont’d)

Types of pension plans

Contributory: employees contribute to the plan.

Noncontributory plans: employer makes all
contributions to the plan.

Qualified plans: plans that meet requirements for
tax benefits for employer contributions.

Nonqualified plans: plans not meeting
requirements for favorable tax treatment.
Retirement Benefits (cont’d)

Types of pension plans (cont’d)

Defined contribution: contributions of employees
and employers are specified; plan payouts are
not.

Defined benefit plans: plan payouts are specified;
however, contributions must be sufficient to insure
payouts.
Family-Friendly Benefits






On-site or subsidized
child care
Elder care
Fitness and medical
facilities
Food services
Flexible work
scheduling
Telecommuting






Educational subsidies
Sabbaticals
Loan programs for
home office equipment
Stock options
Concierge services
Trauma counseling
Flexible Benefits Programs

The cafeteria (flexible benefits) approach


Each employee is given a benefits fund budget to
spend on the benefits he or she prefers.
Flexible spending accounts

Enable employees to pay for medical and other
expenses with pretax dollars by depositing funds
in their accounts from payroll deductions.
Flexible Work Arrangements

Flextime

A plan whereby employees’ workdays are built
around a core of mid-day hours when all workers
are required to be present.

Workers can arrange their own starting and
stopping hours before and after the core period.

Positive effects on employee productivity, job
satisfaction, satisfaction with work schedule, and
employee absenteeism.

Positive effect on absenteeism was much greater than
on productivity.
Flexible Work Arrangements
(cont’d)

Compressed workweeks


Increase productivity

Less disruption from shift changes

Longer time-off-work periods

Reduced absenteeism
Longer workdays; fewer workdays:

Four-day workweeks, with four 10-hour days.

Two days on, two days off, three days on, then two
days off, two days on, and so forth.

Three 12-hour shifts, and then off for the next four
Other Flexible Work
Arrangements

Job sharing


Work sharing


Allowing two or more people to share a single fulltime job.
A temporary reduction in work hours by a group of
employees during economic downturns as a way
to prevent layoffs.
Telecommuting

Employees work at home using telephones and
the Internet to transmit letters, data, and
completed work to the home office.