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Introduction to
UNIT 1 INTRODUCTION TO HUMAN Human Resource
Planning System: The
RESOURCE PLANNING SYSTEM: Emerging Context

THE EMERGING CONTEXT


Objectives
After going through this unit, you will be able to:
l understand various approaches to human resource planning and important trends
that will affect organisations, employees and job applicants;
l realise the importance of human resource planning in current organisational
scenario;
l understand the HRP process and the impact of external and internal issues on
HRP process; and
l appreciate the dynamics of various forecasting techniques.

Structure
1.1 Introduction
1.2 Why is Human Resource Planning Important?
1.3 Meaning and Definition of HRP
1.4 Need for Planning
1.5 Types of Plans
1.6 The Planning Process
1.7 Forecasting Techniques
1.8 Examining External and Internal Issues
1.9 Determining Future Organisational Capabilities
1.10 Determining Future Organisational Needs
1.11 Implementing Human Resource Programmes to Address Ancitipated Problems
1.12 Role of HRP Professionals
1.13 Barriers to HRP
1.14 Summary
1.15 Self-Assessment Questions
1.16 Further Readings

1.1 INTRODUCTION
Planning the right man for right job and developing him into effective team member is
an important function of every manager. It is because HR is an important corporate
asset and performance of organisations depends upon the way it is put in use. HRP is
a deliberate strategy for acquisition, improvement and preservation of enterprise’s
human resources. It is a managerial function aimed at coordinating the requirements,
for and availability of different types of employees. This involves ensuring that the
organisation has enough of right kind of people at right time and also adjusting the
requirements to the available supply.
5
Basics of Human HRP is a forward looking function and an organisational tool to identify skill and
Resource Planning competency gaps and subsequently develop plans for development of deficient skills
and competencies in human resources to remain competitive. HRP is influenced by
technological changes and other global business compulsions. HRP ensures benefits to
the organisations by creating a reservoir of talent, preparing people for future cost-
cutting and succession planning besides creating a back-up plan in case of
diversification and expansion.
Human resource planning should be an integral part of business planning. The
planning process defines projected changes in the types of activities carried out by the
organisation and the scale of those activities. It identifies the core competencies
required by the organisation to achieve its goals. Human resource planning interprets
people requirements in terms of stalls and competencies. As Quinnmills indicates,
human resource planning is a decision making process that combines three important
activities (1) identifying and acquiring the right number of people with the proper
skills, (2) motivating them to achieve high performance, and (3) creating interactive
links between business objectives and resource planning activities.
Human resource planning is indeed concerned with broader issues about the
employment of people than the traditional quantitative model approach of manpower
planning. But it specifically focuses on those aspects of human resource management
that are primarily about the organisation’s requirements for people from the viewpoint
of numbers, skills and how they are deployed.
However, it must be recognized that although the notion of human resource planning
is well established in the HRM vocabulary it does not seem to be established as key
HR activity.

1.2 WHY IS HUMAN RESOURCE PLANNING


IMPORTANT?
Human resource planning is important for helping both organisations and employees
to prepare for the future but you might be thinking “Are not things always changing?”
for example, a few years ago, the legal profession seemed to be a good field. But it is
now very crowded. So what is the value of planning? The answer is that even an
imperfect forecast of the future can be quite helpful. Consider weather forecasts. You
can probably think of occasions when it snowed, even though the television weather
forecaster predicted there would be no snow. Conversely, you can probably think of
times when it did not snow, even though the weather forecaster predicted a foot of
snow by the next morning. You may be surprised to lean that as inaccurate as weather
forecasts sometimes seem to be many organisations pay a forecasting service for
regular weather updates. The reason for this is quite simple. Even a production that is
sometimes wrong is better than no forecast or production at all. Perhaps the best
example is the stock market. If someone had even a fairly accurate way to predict
which stocks would go up and which stocks would go down, that person could make a
great deal of money investing in the stock market, even though there would be some
mistakes. The key is whether ones production tool improves the chances of making the
right decisions. Even though the predictive tool may not be always accurate, as long
as it is more accurate than random guessing it will result in better decisions.
The same point applies to human resource planning. Even though neither
organisations nor employees can look into the future, making predictions can be quite
helpful, even if they are not always accurate. The basic goal of human resource
planning, then, is to predict the future and, based on these predictions, implement
programmes to avoid anticipated problems. Very briefly humans resource planning is
6 the process of examining an organisations or individuals future human resource needs
(for instance, what types of skills will be needed for jobs of the future) compared to Introduction to
future human resource capabilities (such as the types of skills employees or you Human Resource
Planning System: The
already have) and developing human resource policies and practices to address Emerging Context
potential problems for example, implementing training programmes to avoid skill
deficiencies.

1.3 MEANING AND DEFINITION OF HRP


In simple words HRP is understood as the process of forecasting an organisation’s
future human resource demand for, and supply to meet the objectives such as the right
type of people in the right number. After this process only the HRM department can
initiate recruitment and selection process. HRP is a sub-system in the total
organisational planning. Organisational planning includes managerial activities that
set the company’s objectives for the future and determines appropriate means for
achieving those objectives. HRP facilitates the realization of the company’s objectives
for the future and determines appropriate means for achieving those objectives. HRP
also facilitates the realization of the company’s objectives by providing the right type
and the right number of personnel. HRP is variously called manpower planning,
personnel planning or employment planning.
Human resource planning is the process by which an organisation ensures that it has
the right number and kind of people, at the right place, at the right time, capable of
effectively and efficiently completing tasks that will help the organisation achieve its
overall objective. Human resource planning, then translates the organisation’s
objectives and plans into the number of workers needed to meet those objectives.
Without a clear cut planning, estimation of human resource need is reduced to mere
guesswork.

1.4 NEED FOR PLANNING


The need for planning arises mostly due to the fact that modern organisations have to
survive, operate and grow in highly competitive market economics where change is the
order of the day. The change may be either revolutionary (sudden) or evolutionary
(slow). The different areas of change include: change in technology, change in
population, change in economic structures and systems, change in policies of
government, change in employee attitudes behaviour. etc. These changes create
problems for the management through threats and challenges. Managers have to bear
the problems caused due to the changes and act upon them tactfully in order to avoid
or reduce the effects of these problems on the survival, operation and growth of the
organisation.
Efficient managers can foresee the problems likely to occur and try to prevent them.
As pointed by Terry, successful managers deal with foreseen problems and
unsuccessful managers struggle with unforeseen problems. The difference lies in
planning. Managers have to foresee to make the future favourable to the organisation
in order to achieve the goals effectively. They introduce action, overcome current
problems, prevent future uncertainties, adjust the goals with the unforeseen
environmental conditions and exert all their resources to achieve their goals.
According to Megginson, et al “to have an organisation that looks forward to the
future and tries to stay alive and prosper in a changing world, there must be active,
vigorous, continuous and creative planning”.
Thus, there is a greater need for planning in order to keep the organisation dynamic in
a changing situation of uncertainty.
7
Basics of Human More specifically, HRP is required to meet following objectives:
Resource Planning
1) Forecast HR requirement.
2) Cope-up with the change — in market conditions, technologies, products,
government regulations and policies, etc.
3) Use existing HR productivity.
4) Promote employees in a systematic manner.
If used properly, it offers a number of benefits:
1) Create reservoir of talent.
2) Prepares people for future.
3) Expand or contract.
4) Cut cost.
5) Succession planning.

1.5 TYPES OF PLANS


There are nine types of plans, such as, philosophy, purpose, objectives, strategies,
policies, procedures and rules, programmes and budgets. Now we shall discuss in
brief each of these types of plans.
1) Philosophy: The organisations’ role that they wish to play in society in terms of
philosophy. The philosophy of the company should have clarity of thought and
action in the accomplishment of economic objectives of a country. The
philosophy bridges the gap between society and the company.
2) Purpose: Every kind of organized group activities or operations has a purpose.
For example, the purpose of a bank is to accept deposits and grant loans and
advances.
3) Objectives: Objectives are the ends towards which organisational activity is
aimed. Every department has its own objectives which may not be completely
same as of the other department or organisation.
4) Strategies: Strategy is determination of the basic long term objectives of an
enterprise and the adoption of courses of action and allocation of resources
necessary to achieve these goals.
5) Policies: Policies are general statements or understandings which guide or
direct thinking and action in decision making. However, all policies are not
statements.
6) Procedure and Rules: Procedures are plans that establish a desired method of
handling future activities. They detail the exact manner in which a certain
activity must be accomplished.
7) Programmes: These are complexes of goals, policies, procedures, task
assigment rules, steps to be taken, or sources to be employed and other elements
necessary to carry out a given course of action.
8) Budget: A budget is a statement of expected results in terms of members. It may
be referred to as a numerical programme. Cash budget, sales budget, capital
expenditure budget are some of the examples of budget.

1.6 THE PLANNING PROCESS


The planning process is influenced by overall organisational objectives and the
8 environment of business. HRP essentially involved forecasting human resource needs,
assessing human resource supply and matching demand supply factors through human Introduction to
resource related programmes. Human Resource
Planning System: The
The HRP Process Emerging Context

Environment

Organisational

s
s
Objectives and Policies
s s

HR Needs Forecast HR Supply Forecast


s s s
s

HR Programming
s

HRP
Implementation
s

Control and
Evaluation of Programme

s s
Surplus Shortage
Restricted Hiring Recruitment
Reduced Hours and Selection
VRS, Lay Off, etc.

Source: Human Resource and Personnel Management by K. Aswathappa

Organisational Objectives and Policies


HR plans to be made based on organisational objectives implies that the objectives of
the HR plan must be derived from organisational objectives. Specific requirements in
terms of number and characteristics of employees should be derived from the
organisational objectives.
Organisational objectives are defined by the top management and the role of HRP is to
subserve the overall objectives by ensuring availability and utilization of human
resources.

1.7 FORECASTING TECHNIQUES


Forecasting techniques vary from simple to sophisticated ones. It may be stated that
organizations generally follow more than one technique. The techniques are:
1) Managerial Judgement
2) Ratio Trend Analysis
3) Work Study Techniques
4) Delphi Technique
5) Flow Models
6) Others.
All these above mentioned techniques will be covered in detail in the next Unit.
9
Basics of Human HR Demand Forecast
Resource Planning
Demand forecast is the process of estimating the future quantity and quality of people
required. The basis of the forecast must be the annual budget and long term corporate
plan, translated into activity levels for each function and department.
Demand forecasting must consider several factors — both external as well as internal.
The external factors are competition, economic climate, laws and regulatory bodies,
changes in technology and social factors. Internal factors include budget constraints,
production levels, new products and services, organisational structure and employee
separations.

HR Supply Forecast
Personnel Demand analysis provides the manager with the means of estimating the
number and kind of employees that will be required. The next step for the management
is to determine whether it will be able to procure the required number of personnel and
the sources for such procurement. This information is provided by supply forecasting.
Supply forecasting measures the number of people likely to be available from within
and outside an organisation, after making allowance for absenteeism, internal
movements and promotions, wastage and changes in hours and other conditions of
work.

New Venture Analysis


New venture analysis will be useful when new ventures contemplate employment
planning. This technique requires planners to estimate HR needs in line with
companies that perform similar operations. For example, a petroleum company that
plans to open a coal mine can estimate its future employment by determining
employment levels of other coal mines.

Other Forecasting Methods


The organisations follow more than one technique for forecasting their peoples’ needs.
L&T, for example, follows ‘bottom-up’ of management judgement and work study
techniques for demand forecasting. Forecasting process in L&T begins during
November of every year. The Department heads prepare their personnel estimates
(based on details of production budget supplied to them) and submit the estimates to
the respective personnel managers. The personnel heads will review the estimates with
the departmental heads and will send final reports to Bombay office where centralized
HR department is located. Estimates are reviewed by the HR department and final
figures are made known to those personnel managers who initiate steps to hire the
required number of people in the following year. The forecast is made for once in Five
yars quinquennium, but is broken down to yearly requirements.
We turn now to approaches to human resource planning and discuss some important
trends that will affcet organisation, employees, and job applicants alike. Each of these
steps is discussed below in detail.

1.8 EXAMINING EXTERNAL AND INTERNAL ISSUES


External and internal issues are the forces that drive human resource planning. An
issue is any event or trend that has the potential to affect human resource outcomes,
such as employee motivation, turnover, absenteeism, the number and types of
employees needed and so forth. External issues are events or trends outside of the
organisation, such as work force demographics and technology. Internal issues refer to
events or trends within the organisation, such as business strategy, organisations
10 structure and company profitability.
Work Force Demographics: Potentially important external issue is the composition Introduction to
of the national workforce. Specifically, there are likely to be changes in the social, Human Resource
Planning System: The
gender and age composition of the workforce. Asians will comprise a large percentage Emerging Context
of the workforce in the future. Women are also expected to comprise a large segment
of the workforce than in the past. The number of married women who are employed
has doubled since 1970. The increased participation of women will have a pressure on
organisations to provide pro-family policies, such as flexi time, and child care to
support working mothers. Increased representation of minorities will result in more
emphasis on diversity programmes to ensure harmonious relations between workers
from different racial and ethnic groups.
Technology: Organisation are investing so much amount on information technology
during the 1980s. Given the size of the investment, a variety of changes in the human
resource area have occured. Human resource requirements have come down
drastically due to technological changes.
There are many organisations who have announced plans to reduce its workforce
around 50 per cent employees as a result of technological changes. Now that you have
read about some of the external issues that affect human resource planning, you will
learn about some important internal issues.
Organisational Structure: Many businesses today are changing their organisational
structure. Organisational structure refers to how work tasks are assigned, who reports
to whom, how communications and decisions are made? As part of their restructuring
during some companies are creating teams to perform the work.
Business Strategy: The approach that a company adopts in conducting business is
referred to as its business strategy. For example, a particular compnay may adopt
strategy on quality enhancement, cost reduction and so on and so forth. It is important
for organisations to monitor both the internal and external environment to anticipate
and understand the issues that will affect human resources in the future.

1.9 DETERMINING FUTURE ORGANISATIONAL


CAPABILITIES
The second step of the human resource planning process involves an analysis of future
organisational or personal capabilities. Capabilities include the skill level of
employees, productivity rates and number of employees, etc.
In the past, more emphasis was on predicting the number of employees of human
resource supply the company was likely to have in the future. Organisations may use
varieties of procedures to estimate the supply. These procedures are generally
categories as either quantitative which use mathematical or statistical procedures or
qualitative which use subjective judgement approaches.
The quantitative procedure generally use past information about job categories and the
number of people retiring, being terminated, leaving the organisation voluntarily and
being promoted. One of the most well known quantitative procedures is the Markov
analysis. This technique uses historical rates of promotion, transfer and turnover to
estimate future availabilities in the workforce. Based on the past abilities, one can
estimate the number of employees who will be in various positions within the
organisation in the future. Qualitative or judgemental approaches are much more
popular in forecasting human resource supplies. Among the most frequent used
methods are replacement planning, succession planning and vacancy analysis.
Replacement planning evolves an assessment of potential candidates to replace
existing executives and other top level managers as they retire or leave for other
organisations. Succession planning is similar to replacement planning, except that it is 11
Basics of Human more long term and developmentally oriented. Finally, vacancy analysis is much like
Resource Planning the Markov analysis, except that it is based on managerial judgements of the
probabilities. If knowledgeable experts provide estimates, vacancy analysis may be
quite accurate.
In recent years, organisations have become concerned with a broader range of issues
of future capabilities. For example, organisations have begun to estimate their future
productivity levels. Towards this end, bench marking is a technique that has become
popular. Bench marking involves comprising an organisation’s human resource
practices and programmes to other organisations.
Although bench marking often focuses on an organisation’s competitors, best practices
bench marking focuses on the programmes and policies used by outstanding
organisation. For example, Federal express, leadership evaluation system, employee
survey programme and total quality management efforts are frequently studied by
other organisations because of their reputations.

1.10 DETERMINING FUTURE ORGANISATIONAL


NEEDS
In this step, the organisation must determine what is human resource needs will be in
the future. This includes the number of employees that will be needed, the types of
skills that will be required. Productivity rates needed to complete successfully. There
are methods for examining the future number of employees, also several procedures
are there for predicting the number of employees needed in the future. This is referred
to as the human resource demand two basic approaches or estimating human resource
demand are qualitative and quantitative methods.
Two quantitative techniques for estimating human resource demand are ratio analysis
and regression analysis. Ratio analysis involves comparing the number of employees
to some index of work load. If your organisation was planning its future training and
development (T&D) staffing demand in five years, you could estimate the number of
employees likely to be employed by the company in five years. And then use this ratio
to determine the number of T&D employees needed in given years. For example, if
your company was expecting to have 5,000 employees in five years, this ratio would
suggest that around 21 T&D employees would be needed.
Regression analysis relies on factors or predictors that determine the demand for
employees, such as revenues, degree of automation, and so forth. Information on these
predictors from past years, as well as the number of workers employees in each of
these years is used to produce an equation or formula. The organisation can then enter
expected figures for the predictors, such as revenues and degree of automation into the
formula to obtain an estimated number of employees needed in future years.
Regression analysis is more sophisticated than ratio analysis and should lead to more
accurate predictions of employee demand. Although both procedures are widely used,
they have their weaknesses. A major weakness is the factors that were related to
workforce size may not be relevant factors in future years.
Turning now to qualitative tools for estimating the demand for employees, the most
common tool is the bottom-up forecast where department managers make estimates of
future human resource demands based on issues, such as new positions needed,
positions to be eliminated or not filled, expected overtime hours to be worked by
temporary, part-time or independent contractor employees and expected changes in
workload by department. Like any other technique, bottom-up forecasting has its
shortcomings. For instance, line managers may overestimate the demand in order to
ensure that they don’t find themselves understaffed.

12
Introduction to
1.11 IMPLEMENTING HUMAN RESOURCE Human Resource
PROGRAMME TO ADDRESS ANTICIPATED Planning System: The
Emerging Context
PROBLEMS
In this step the organisation must determine the gaps between future capabilities and
future needs and then employ the necessary human resource programmes to avoid the
problems arising from these gaps.
In implementing a new human resource programme, following basic steps are
recommended to obtain employee acceptance.
1) Communicate need for the programme: Employees would like to know why
the programme is being reduced. Many people believe the old saying “If it aint’s
broke, don’t fix it”. It is imperative to explain, then exactly why the change is
needed.
2) Explain the programme: Management must explain precisely what the
programme is, how it will be implemented and what its effects will be on other
practices and programmes.
3) Explain what is expected of the employees: Management must discuss how the
behaviours of employees are expected to change as a result of the new
programme system. For example, implementation of a new pay for performance
system may also redirect employee activities.
4) Establish feedback mechanisms: No matter how carefully planned and
implemented, almost any new policy or practice is likely to lead to questions and
problems. It is critical, therefore, for mechanisms to be established to resolve
problems and answer concerns that arise. Such mechanisms may include a
telephone hotline, ongoing survey programme as well as a dispute resolution
policy.
Finally, utility analysis is a relatively recent approach to choosing which, if any,
human resource programmes should be implemented. Utility analysis and related
approaches such as human resource accounting, consider the financial benefits versus
the costs of any human resource programme and attempt to base choice of a
programme on its rupee value of the organisation. Using such techniques organisations
are able to determine the best way to invest money in employees.

1.12 ROLE OF HRP PROFESSIONALS


HRP professionals have to perform the following roles that may be divided into three
categories:
1) Administrative role
– Managing the organisational resources
– Employees welfare activities.
2) Strategic role
– Formulating HR strategies
– Managing relationships with managers.
3) Specialized role
– Collecting and analyzing data
– Designing and applying forecasting systems
– Managaing career development.
13
Basics of Human These roles are neither necessarily found in every HRP work, nor they are evenly
Resource Planning weighed in time allocation. Many combinations of roles are possible with different
focuses based on circumstances of the organisation. The first two roles managing
relationships with managers and for mutating strategies are weighed equally. The
activities in these areas are equally important to HRP because of the implicit purposes
of anticipating and implementing change in the organisation. The strategic roles are
crucial to the HR professionals effectiveness. These skills are very difficult to develop
when compared to administrative skills. The administrative aspects of the work are
represented in managing the staff function of HRP and in managing employee
welfare activities. These aspects are often seen as supplementary to other aspects and
demand a lot of attention. The remaining three roles represent specialized functions
performed. Primary attention is given to a combination of three categories of
activities – collecting and analyzing data, deisgning and applying forecasting systems
and managing career development. These activities are new to the HR function in
many organisations, and are closely linked with the mission of anticipating and
managing change. Accordingly, they are viewed as central roles of HRP
Professionals.

Activity A
As a HR Manager, what factors you would like to consider for human
resource planning? Briefly explain, how these factors are contributing in planning
process.
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................

Activity B
What are the forecasting techniques that have been used for human resource planning
in your own organisation or any organisation you are familiar with? Briefly mention
reasons why these techniques are being used.
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................
..........................................................................................................................................................................................

Impact of HRP
HRP itself is a process of determining human resources needs in the future and of
monitoring responses to these needs. HRP links a company’s business plans and
broad objectives with the specific programmes and other HRM activities.
Organisations need to learn to forecast HR needs more effectively. More analytic
techniques, driven by strategic planning are vital. Organisations must learn to
manage employee performance more effectively. Even though performance
measurement is complex and ill-defined, yet it is critical to effective management for
this very reason. Organisations must also learn to manage careers of their employees
more effectively.
14
Impact of Technology on HRP Introduction to
Human Resource
In order to cope with the competition, organisations have to ensure on: Planning System: The
Emerging Context
a) Producing goods and services more efficiently and economically.
b) Innovating product and processes so as to gain competitive advantages.
Advances in computer technology have offered organisations new opportunities to
enhance and streamline their processes. Computer aided design (CAD), and computer
aided manufacturing (CAM) reduce human resource involvement and shrink the cycle
time. Advances in information technology has reduced efforts required in impacting,
retrieval, processing, and sharing of data. Accurate and timely information can be
made available to different levels of management for decision making. All these
changes in technology result in a change in occupational and skill profile of
manpower.
Different manufacturing technologies have different skills required to design, operate
and maintain the machines and equipment. Also, the same technology can have a
different impact on different categories of workers and industries. The actual skill
implications of technology change will depend on:
a) Management policy for deployment of manpower
b) Attitudes bargaining strength of the union
c) Ability of manpower to adjust and adopt to the new technology.
According to ILO, introduction of new technology can affect other aspects of working
like workers responsibilities, skill requirements, job-content, physical and mental work
load, career prospects and communication and social relationships at workplace.
Skills and knowledge are required for operating and maintaining new technology and
participating in innovative processes. The manual content of skill tends to decrease for
skilled workers and office staff but requirements for mathematical skills and ability to
plan and anticipate future situations tend to increase. The methods, systems and style
of management also need changes in line with high skill demands on personnel. A
more democratic and decentralized management style is necessary to motivate highly
educated employees.
The present education system of our country is inadequate to match the technological
needs. The syllabus is outdated, teachers are not fully acquainted with the new
technology and there is a lack of infrastructure facilities. Therefore, companies will
have to provide appropriate training to add these skills. Manpower planners should
keep in mind this requirement and also the requirement of retraining. There may also
be a need for rationalization of the trade structure because of multi-skilling. For
example, traditional and relatively conceived metal trades which date back to 1930s
have been replaced by six broadly defined occupations. Lathe, mulling, grinding could
be clubbed as cutting mechanics, production engineering, machine and systems.
Engineering, precision engineering and light engineering could be put as industrial
mechanics. In office context, we now require persons who are computer trained and
also operate other office equipment such as fax, and xeroxing machines – this will
also require restructuring of employees.
Changes in work and work design are to be created.

HR Programming
Once an organisations personnel and supply are forecast, the two must be reconciled
in order that vacancies can be filled by the right employees at the right time. HR
programming assumes greater importance in the planning process.

15
Basics of Human HR Plan Implementation
Resource Planning
Implementation is nothing but converting an HR plan into action. A series of action
programmes are initiated as a part of HR plan implementation. Some such
programmes are recruitment, selection and placement, training and development,
retraining and redeployment, the retention plan and the redundancies plan.

Control and Evaluation


The HR plan should include budgets, targets and standards. It should also clarify
responsibilities for implementation and control, and establish reporting procedures
which will enable achievements to be monitored against the plan. These may simply
report on the numbers employed against establishment and on the numbers recruited
against the recruitment targets. They should also report employment costs against
budget, and trends in wastage and employment ratios.

1.13 BARRIERS TO HRP


Planners face significant barriers while formulating an HRP. The major ones are
following:
1) HR practitioners are perceived as experts in handling personnel matters, but are
not experts in managing business.
2) People question the importance or making HR practices future oriented and the
role assigned to HR practitioners in formulation of organisational strategies.
There are people when needed offer handsome packages of benefits to them to
quit when you find them in surplus. When the task is so simple, where is the need
for elaborate and time consuming planning for human resources.
3) HR information often is incompatible with other information used in strategy
formulation. Strategic planning efforts have long been oriented towards financial
forecasting, often to the exclusion of other types of information. Financial
forecasting takes precedence over HRP.
4) Conflict may exist between short term and long term HR needs. For example,
there arises a conflict between the pressure to get the work done on time and long
term needs, such as preparing people for assuming greater responsibilities. Many
managers are of the belief that HR needs can be met immediately because skills
are available on the market as long as wages and salaries are competitive.
Therefore, long time plays are not required, short planning are only needed.
5) There is conflict between quantitative and qualitative approaches to HRP. Some
people view HRP as a number game designed to track the flow of people across
the department.
6) Non-involvement of operating managers renders HRP ineffective. HRP is not
strictly an HR department function. Successful planning needs a co-ordinated
effort on the part of operating managers and HR personnel.

1.14 SUMMARY
Today, human resource planning is viewed as the way management comes to grasp the
ill-defined and tough-to-solve human resource problems facing an organisation.
Human resource planning as a process of determining the human resources required
by the organisation to achieve its goals. Human resource planning also looks at
broader issues relating to the ways in which people are employed and developed in
order to improve organisational effectiveness. HRP is a decision making process that
16 combines activities such as identifying and acquiring the right number of people with
the proper skills, motivating them to achieve high performance and creating interactive Introduction to
links between business objectives are resource planning activities. HRP sets out Human Resource
Planning System: The
requirements in both quantitative and qualitative terms. Accurate manpower plan is a Emerging Context
dream. A common error of many managers is to focus on the organisation’s short term
replacement needs. Any human resource plan, if it is to be effective, must be derived
from the long term plans and strategies of the organisation. The various approaches to
human resource planning under which a number of major issues and trends in today’s
work plan that will affect organisation and employees are (1) Examine external and
internal isses, (2) Determining future organisations capabilities, (3) Determining
future organisational needs, and (4) Implementing human resources programmes to
address anticipated problems.
Although change is occuring very rapidly in the work world it is important for both
organisations and employees to monitor issues and events continuously and consider
their potential effects.

1.15 SELF-ASSESSMENT QUESTIONS


1. Explain the role of HR professional in human resource planning process in
organisations.
2) Describe the various forecasting techniques and how these techniques are being
used in human resource planning.
3) Explain the barriers to HRP. Bring out the requisites for effective planning.

1.16 FURTHER READINGS


Lloyed L. Byars and Leslie W. Rue (1997), Human Resource Management
(5th edition), The McGraw-Hill Companies, USA.
Michael Armstrong (1999), A Handbook of Human Resource Management Practice
(7th edition), Kogan Page Limited, 120 Pentonvelle Road, London.
Biswajeet Pattanayak (2001), Human Resource Management, Prentice Hall of India
Pvt. Ltd., New Delhi.
K. Aswathappa (1999), Human Resource and Personnel Management (2nd edition),
Tata McGraw-Hill Publishing Company Ltd., New Delhi.
P. Subba Rao (2004), Management and Organisation Behaviour (First edition),
Himalay Publishing House.

17
Basics of Human
Resosurce Planning UNIT 2 PROCESS AND FUNCTIONS OF
HUMAN RESOURCE PLANNING
(HRP)
Objectives
After reading this unit, you should be able to:
l the concept and process of HRP,
l the determination of the manpower required and the means of supplying those
requirements,
l the review process of manpower plan and how it balances the competing and
conflicting elements, and
l the manning and utilizations of manpower.
Structure
2.1 Concept and Process of HRP
2.2 Preliminaries to Review
2.3 Manning Standards and Utilization
2.4 HR Information Systems
2.5 HR Inventory and Analysis
2.6 HR Supply Planning
2.7 HR Control and Audit
2.8 Management HR Planning
2.9 Application to Individual Decisions
2.10 Summary
2.11 Self-Assessment Questions
2.12 Further Readings

2.1 CONCEPT AND PROCESS OF HRP


The objective of human resource planning is to provide continuity of efficient manning
for the total business and optimum use of manpower resources, although that optimum
utilization of people is heavily influenced by organization and corporate culture.
A manpower planning is concerned with manning in the business, it cannot be a stand-
alone activity, but must exist as a part of the planning process for the business itself.
The lack of suitable manpower can place severe restrictions on the ability of a
business to achieve its objectives, which highlights both the importance of realistic
manpower planning and the need for it to be fully integrated with the overall business
planning process.
Human resource planning constitutes an integral part of corporate plan and serves the
organizational purposes in more ways than one. For example, it helps organizations to
(i) capitalize on the strengths of their human resources; (ii) determine recruitment
levels; (iii) anticipate redundanceis; (iv) determine optimum training levels; (v) serve
as a basis for management development programmes; (vi) cost manpower for new
projects; (vii) assist productivity bargaining; (viii) assess future requirements; (ix)
study the cost of overheads and value of service functions; and (x) decide whether
18 certain activities need to be subcontracted.
Human resource planning influences corporate strategy and is in turn influenced by it. Process and Functions
The HRP process may incorporate all the stages shown in Figure below. The planning of Human Resource
Planning (HRP)
process may not always give exact forecasts, and to be effective it should be a
continuous process with provision for control and review.
The manpower plan itself falls into two parts – the determination of the manpower
required to run the business at a series of points in time into the future, and the means
of supplying those requirements. This not limited to central or specialist activities but
should involve all the managers fully in the review of options.
The review process, which brings needs and supply together, is frequently given
insufficient time and attention. This may be because, once all data are brought
together, the result can seem complex and difficult to grasp, but any reduction in
complexity if achieved only by ignoring some of the data and taking a limited view,
which could reduce the potential for achieving the most effective resourcing.
The purpose of the comprehensive periodic review is to consider all of the needs
across the business and to match these with the career preferences and development of
the people so that a complete pattern of decisions can be devised for the resourcing
actions anticipated over the months ahead. This review provides a base of preliminary
decisions for all following actions regarding people. There may be sound reasons for a
subsequent change of decision, but then the options and alternatives, which were
considered in the review, provide a starting point for the fresh assessment. If some

The HRP Process


Company Objectives & Strategic Plans

P
Market Forecast Production Objectives/process Capital/financial plans H
A I
S
Time horizon (Short/long term) E

Human Resource Estimating Human Human Resource


Demand Forecast Resource Inventory P
N Number Requirements based on H
s
s

O Objectives & top A II


s
R Category management approval S
M Human Resource Supply E
S Skills Forecast

Action Plans
l Recruitment
l Retraining
l Redundancy
l Productivity
l Retention P
H
s A III
S
Monitoring and Control E

Source: Personnel Management and Human Resource by C.S. Venkat Ratnam and B.K. Srivastava,
Tata McGraw Hill Publishing Co. Ltd. New Delh, p. 57 19
Basics of Human new requirement emerges, the considerations noted in the original review should help
Resosurce Planning define the updated options quickly, and the implications of alternative actions. Should
the scale of unplanned change of extensive, a fresh review might be initiated, at least locally.
In the review process itself, the management task is to balance the many competing
and sometimes conflicting elements. Some examples might be:
l conflicting demands for available research and development resources at peaks of
activity, with an excess supply available;
l imbalance of skills emerging as technology alters the product range; and
l uncertain timing of developments, which affects the timing of deployments.
These reviews cannot anticipate situations which develop at short notice, but should
take into account the need for flexibility to cope with the manpower implications of
events such as intended future acquisitions, new business opportunities not allowed for
in plans or retention actions needed to avoid the loss of key individuals which might
damage establishment plans.
The review process may be viewed as the master programme which integrates
resourcing activities with business planning at an operational level to ensure that
organization structures and the prepration of manpower resources are matched with
the manpower requirements necessary to achieve business objectives and respond to a
changing and possibly hostile enviroment. In parallel, the process should optimize the
utilization and growth of the human resources available. The emphasis in most
reviews may be on the short-term (one to two year) actions, but there must be a longer
term (three to five or five to ten year) perspective – particularly for management
continuity, which is a special section of the same process – as the lead time for supply
can require this notice.
Meaningful manpower plans are only possible if the review process brings together all
of the relevant information at regular intervals and uses these data to re-examine, at
every level, the relevance of present and planned future organizations and the
competencies which will be required against those available. Outputs from each
review should include: detailed decisions on future organization changes and
anticipated manpower deployments for a period through two to three months after the
next scheduled review; outline decisions on longer term organization changes,
deployments and culture change plans; plus confirmation that business requirements
can be adequately resourced (or not).
All manpower supply plans and actions should stem from this process and should
incorporate provision for continuous reappraisal to identify fresh problems, to respond
to new or changed needs, and then to implement actions or monitor progress towards
action. This is essentially the means of driving the process of effective resourcing
within the business and involves management at every level in a network of associated
decisions and action.

2.2 PRELIMINARIES TO REVIEW


Reviews require sound preparatory work and comprehensive personnel records, which
give accurate and objective data on all employees. We cannot make judgements on the
supply of particular skills unless we have sufficient data on the skills possessed by
existing employees. Building up full records requires both an effective system and
determination to ensure the data are complete, up-to-date and accurate. Also, the
information must be in a form that facilitates easy access during a review.
Personnel records can be seen simply as raw data and their contribution to reviews
may come more from analysis of the overall inventory of personnel. Any flaws in that
20
inventory, identified before the review begins, provide part of the review agenda. For Process and Functions
example, heavy loss rates for a key employee group can be analysed carefully in of Human Resource
Planning (HRP)
advance, so that part of the action agreed in the review addresses the identified
problem. Or, a progressively worsening distortion of the age profile of a category may
need to be tackled.
Analyses of the manpower inventory and of flows can establish whether problems are
developing which are likely to affect required manning levels, and should play key
part in preparing the agendas for reviews. Equally, as other agenda items emerge,
analyses may offer potential solutions.

2.3 MANNING STANDARDS AND UTILIZATION


The whole manpower planning process depends enormously on the base of manning
standards. This will start with what exists and what should be, and take in all of those
factors which will change current standards, including by how much and when.
Without some measures of this sort, meaninglful planning is very difficult. Many
organisations start with what exists now and refine the position as they identify the
separate forecastable categories, the bases for assessing standards and the rates of
change.
Manager, supervisor and employee involvement and interest is needed to determine
standards of all sorts; the first-hand measures they have of the utilization of people are
key factors in planning forward needs and subsequent implementation and control.
Ideally, manning standards should be developed from analysis of essential work
requirements, with some form of productivity measurement wherever possible.
Measurement is by no means restricted to direct manufacturing operations – it can
also be applied to many offices or support functions. Where local attitudes or
management style make straightforward measurement difficult, existing data in the
hands of supervisors and managers can provide useful standards which will encourage
supervisors to improve their own human resources utilization, thereby improving
manpower productivity.
Wherever this type of analysis is carried out, opportunities should be sought to
restructure and enrich jobs and to match people’s abilities to job demand, thereby
raising the level of job satisfaction. With this comes lower manpower loss rates, lower
absenteeism and tighter manning standards generally.
For all this, existing standards have an inertia which we must try to overcome. If we
aim to improve the use of people in partnership with subordinate supervisors and
managers, we may find the secret of radical improvement in overall manning quality
as well as numbers. This is an area for experimentation to determine what works in
your environement.
Manpower requirement planning follows on from the establishment of the main
assumptions in the business plan. Once we know the level of sales volumes and mix,
the manufacturing schedules required, the research and development programmes,
etc., we are well on the way to establishing the matching manpower requirements. The
plans should include built-in assumptions about the organization structures to be used,
and their effects on the levels of manpower required.
Plans should be set out with schedules of associated manpower requirements, giving
precise categories, skills and levels for every function. This detail will be necessary as
a starting point when the questions of supply planning are tackled. Where appropriate,
requirement plans should be based on manning standards associated with work
demand factors to facilitate modification as volumes or systems change.
21
Basics of Human
Resosurce Planning 2.4 HR INFORMATION SYSTEMS
Modern management depends on having comprehensive data on which to make
decisions. For any system, specification of required inputs and outputs is essential. In
building up the manpower database, full coverage of traditional personnel records is
required, and it is increasingly possible to cover sophisticated elements, such as
competencies required for effective performance of a job, and the competencies
possessed by individuals. Data on absenteeism and overtime are also part of the
system.

2.5 HR INVENTORY AND ANALYSIS


Who are our employees; what skills do they have; how good are they; how are they
developing? These are just some of the many questions to which we need answers.
Much of the analysis should come from the information system, but the current
inventory is altering all the time with recruitment and losses, promotions and transfers.
Assessing the rate and form of change in the inventory is vital to questions of
manpower supply because, what we cannot provide from within, we must seek out
from other sources.
Data of appraisal of performance, assessment of future potential and the use of
psychological tests are all part of the information we use to get the answers we need.

Flows
Analyses of the patterns or flows of people through parts of the organization are
invaluable to the manpower planner; flows provide the major part of our supplies data
and identifying changes in flow patterns can point to possible difficulties, such as
when an existing flow pattern becomes insufficient to meet a changing demand.
Flows tell us about the availability of people who are ready to advance to their next
career stages and also provide information such as the average rates at which
individual’s progress through job, and how those rates vary for different types of
people in different functions.

2.6 HR SUPPLY PLANNING


This is the crunch point where we bring together all the data we have on our future
requirements, and on our present manpower stock and the ways we expect it to
change. From these analysis, we see the future manpower supply set against the
developing inventory, detailed by function, category, skill and level. These show our
future recruitment needs, highlight needs to increase the promotion rates of some
categories by intensive training and development, show retraining and redevelopment
needs and idenfify excess staff who are likely to become redundant.
In all these areas, we need action programmes to ensure that we meet our recognized
needs. We must be sure that the actions required are taken and are successful.
Otherwise, basic assumptions on the provision of human resources within the
business plan may be adversely affected so that business of objectives are
endangered.

2.7 HR CONTROL AND AUDIT


The philosophy is one of planning ahead, but this requires basic controls and audits.
22 The logic of controls on every aspect of manning should be evident. We are dealing
with an expensive resource that can be easily misused or underutilized. Controls Process and Functions
should be low key, yet quietly ensure that we continually try to use those resources in of Human Resource
Planning (HRP)
the best ways possible, and do not casually add additional and non-essential resources.
Controls are exercised on current actions and decisions.
Subsequently, we audit results to be sure that intentions have been achieved and that
decisions have not been overlooked or ignored. This happens far more than we expect
where there is little or no audit. In the whole area of management development in
particular, and across the spectrum of planning following the review process, ensuring
that plans are followed through is essential. If this is not done, there is little benefit
from the considerable use of valuable time involved.

2.8 MANAGEMENT HR PLANNING


Above a certain level, manpower planning ceases to be a matter of numbers by
category, and becomes linked to individual positions and individual incumbents. For
the top slice of the company, we are dealing with a combination of business
development, organization development and individual career development. It must be
handled with considerable care, by unbiased and imaginative executives; it must also
take into account the employees’ viewpoints and preferences, and involve them fully if
it is to be a workable plan.

Corporate culture
How a company is managed, its organization structure, its manning standards and
thinking on ‘how we do things around here’ are also determined within a corporate
culture. Any significant change in efficiency is almost certainly going to be culture
related, but culture is both difficult and slow to change.
If the business demands a change of pace or efficiency, or a different way
of doing things, it is not going to come about solely from planning changes in
manpower standards or utilization. There will be a need for some radical
action to change what people accept as norms for many aspects of their work
behaviour, which may well result in a severe disturbance in current manpower
and organization.

Periodic full reviews


The way reviews are carried out is likely to vary enormously from one enterprise to
the next, but the principles should be more uniform. The most critical is involvement.
All of management should participate, with the lowest levels contributing their parts
first and progressive reviews forming a reverse cascade up through the organization
structure, finishing with a review of the overall manpower plan and the management
continuity position at the top.
At the bottom end, each manager should discuss requirements of and deployments
with his direct subordinates. Then he can prepare for the review with his boss. A
reasonable target time per level might be three weeks, if planned early into business
diaries. As reviews progress up the structure, they should concentrate on the
continuous two or three levels in the organization, progressively dropping off the
lower levels as the review progress upwards. However, issues thought to be of concern
at higher levels will be carried forward, such as skills’ shortages which may have an
impact on the business.
The supporting paper work will vary, with much being prepared as working notes by
the participating managers, but it is sensible to assemble and retain some basic record
of the discussions and agreements to enable progress to be monitored later, or as the
23
Basics of Human starting point for fresh consideration if an unforeseen development occurs. There
Resosurce Planning might be sections in the notes for:
l business and environmental changes;
l organization and manning reviews; and
l human resource action plans.
The first section should record the business situation and assumptions on
which the review was based. The notes might include a brief appraisal of actual
business progress against the business plan, and changes in the environment which
differ from the assumptions in the associated environmental scenario, followed by
updated views and an evaluation of the implications for human resource
management.
The organization and manning plans section should concentrate on: the
immediate organization structure, including any fresh thinking on its evolution; the
filling of all senior positions at each review level, both currently and in the future,
including preparatory development; and reviews of manning specifications,
standards and levels, and how they may change. It will be useful if all the main
assumptions made in the plan are recorded, so that any need has a firm base on
which to build.
The third section, covering human resource action plans will include
reference to major human resource strategies associated with the achievability
of business objectives. There should be notes on progress against the
milestones in current action plans, plus details any new plans triggered by new
business or environmental developments, and the associated human resource
implications.

Frequency
The frequency of this process should be determined by need. One company in a
rapidly changing high-technology sector runs through it at quarterly intervals with
strong line management support for what they see as sensible discipline which keeps
their organization and manpower utilization finely tuned. In less dynamic industries, a
major annual review plus a less formal, but ongoing, mid year update may be
sufficient.
The drive to carry through the review process must come from the top and from the
line, who must recognize its value to themselves and to the business or they will not
spend the time doing it! The human resource function may need to provide some of the
drive plus some strong supporting back up. Reviews compete for management time
and must demonstrate their contribution to business development and profitability.
Local management is generally supportive if the process is working properly and they
can see value for their efforts but, even then, resistance to allocating sufficient time
may arise as a result of operational pressures.
Essential actions triggered by these reviews, such as manpower movement between
divisions, may be difficult to arrange without the involvement of higher management.
Usually, these moves need to capitalize on knowledge of the immediate business and
be local to those business areas the individuals concerned know well. Movement
should generally be within functional disciplines, so that the fast learning is limited to
the new business area.

24
Activity A Process and Functions
of Human Resource
Assuming you are a HRD Manager in a organisation, you need to create an HR Planning (HRP)
staffing plan. Briefly explain what criteria will be undertaken and why?
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
Activity B
Briefly describe the practices of human resource planning of your organisation or any
organisation you are aquainted with. List out the reasons, why this practice is being
adopted.
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................

2.9 APPLICATION TO INDIVIDUAL DECISIONS


The periodic in-depth manpower review establishes a scenario or framework of
preliminary decisions. Following this, there will be many day-to-day actions to take
before gaining a final overview and implementing the decisions. For example, a chain
of individual moves and appointments may be planned to follow a retirement. These
should be under scrutiny as the implementation time approaches and they would
normally be implemented in a straightforward fashion. However, one of the links in a
chain may fail. Someone may resign, performance may falter, or other events may
change the situation, causing the plan to be reshaped.
If circumstances change, the obvious starting point for fresh consideration should be
the notes from the previous review supporting the original intention, which may record
the options and contingencies considered. It is logical to go over this ground in detail,
starting from the original review. It should not be acceptable to take a fresh ad hoc
decision, which is quite unrelated to the careful, and wider ranging considerations,
which took place in the review process.
Actions involving changes from plans should require the discipline of reference back
to the comprehensive discussion. For example, a decision to send someone on a
training course should fit into his longer term development plans; secondments to meet
an emergency are unlikely to have been planned far ahead, but should match a need to
broaden experience; a change to a career plan may have been proposed on the basis of
one incident, but should be viewed against the full assessment and track record; and so on.
Perhaps the most serious unscheduled actions occur when a key person resigns, or
when an unplanned business opportunity requires an immediate appointment. (The
review process may have covered these possibilities and noted contingency actions
but, more often, the necessary response will upset the plan). One such appointment
was followed by a chain of seven other changes down the line, severely: disturbing an
entire plan. If that happens, a fresh examination of that sector of the business becomes
a necessity. Indeed, any event which triggers a significant volume of unscheduled
deployment changes should be followed by a full review to assess the degree of its
weakness caused and the actions which can be taken to reinforce the reserves of
management. 25
Basics of Human Human Resource Planning: A Win-Win Process
Resosurce Planning
Wins for Employees Wins for the Enterprise
1. Competitive pay and benefits plans. 1. Appropriate organization structure and
people to face challenges and meet corporate
objectives, both short and long term.
2. Career development and 2. Development of internal resources, leading
opportunities for growth. to stability and culture building.
3. Reduced fear of redundancy. 3. Improved motivation and morale of
employees, leading to improved
performance.
4. Training and development, leading 4. Productivity gains, leading to cost reduction.
to continued marketability.
5. Continuity of employment due to 5. Improved customer satisfaction, leading to
organization’s ability to retain improvement in business.
workforce.
6. Fuller realisation of potential, 6. Reduction in hiring and training costs due
leading to job satisfaction. to the improved ability to retain employees
and development of internal resources to fill
future vacancies.
7. Conducive work culture and
management style leading to
satisfaction.

2.10 SUMMARY
Human resource planning is a process of human resource development.
The objective of human resource planning is to provide continuity of efficient
manning for the total business and optimum use of manpower resources, although
that optimum utilization of people is heavily influenced by organisation and corporate
culture.
Human resource planning constitutes an integral part of corporate plan and serves the
organisational purposes in more than one way. Human resource planning influences
corporate strategy and is in turn influenced by it. The planning process may not
always give exact forecasts and to be effective it should be a continuous process with
provision for control and review.
The review process, which brings needs and supply together, is frequently given
insufficient time and attention. The purpose of the comprehensive periodic review is to
consider all of the needs across the business and to match these with the career
preferences and development of the people.
The appropriate requirement plans should be based on manning standards
associated with work demand factors to facilitate modification as volumes or
systems change. Modern management depends on HR information system, HR
inventory and flow of people through parts of the organisation. Flows tell us
about the availability of people who are ready to advance to their next career stages
and also provide information such as the average rates at which individuals progress
through jobs, and how those rates vary for different types of people in different
functions.

26
Process and Functions
2.11 SELF-ASSESSMENT QUESTIONS of Human Resource
Planning (HRP)
1) Explain the review process of human resource planning. Discuss how it balances
the competing and conflicting elements.
2) Explain the concept of human resource forecasting. Discuss the manning and
utilization of manpower.
3) Describe the various forecasting techniques. Explain how these techniques are
being used in forecasting process.

2.12 FURTHER READINGS


Krishnaswamy, K N, 1985. “Manpower Planning Practices in Indian Manufacturing
Organisations”, ASCI Journal of Management, Vol. 15 no. 1, Sept. pp. 47-76.
Mozine, S. 1984. Guide to Planning for Manpower Development, ICPE: Ljubljana
(Yugoslavia).
Walker, J.W. 1980. Human Resource Planning, McGraw-Hill, New York.
Agrawal, Satya Prakash, 1970. Manpower Demand: Concepts and Methodology,
Meenakshi Prakashan, Meerut.
Sikula, Andrew, F. 1976. Personnel Administration and Human Resource
Management, John Wiley, Santa Barbara.
Stainer, Gereth, 1971. Manpower Planning: The Management of Human Resource,
Heinemann, London.
Suri, G.K. 1988. Human Resource Development and Productivity: New Perspectives,
National Productivity Council.
Vetter, Eric, W. 1962. Manpower Planning for High Talented Personnel, Ann Arbor
Bureau of Industrial Relations, Graduate School of Business Administration,
University of Michigan, Ann Arbor.
Bramham, J. 1989. Human Resource Planning, IPM, London.
Bramham, J. 1990. Practical Staffing Planning, IPM, London.
Flamholtz, E. and Lacey, J. 1981. Personnel Management: Human Capital Theory
and Human Resource Accounting, UCLA Press, Los Angeles.

27
Basics of Human
Resosurce Planning UNIT 3 METHODS AND TECHNIQUES OF
DEMAND MANAGEMENT
Objectives
After going through this unit, you should be able to:
l the concept of human resource forecasting and the various factors contributing to
demand forecasting,
l the issues in demand forecasting and its relevance to the factors influences to
change,
l the various techniques used in forecasting human resource requirements, and
l the creation of an HR/staffing plan.

Structure
3.1 Introduction
3.2 HR Forecasting
3.3 Forecasting Demand for Employees
3.4 Issues in Demand Forecasting
3.5 Forecasting Techniques
3.6 Other Forecasting Methods
3.7 Creation of an HR/Staffing Plan
3.8 Summary
3.9 Self-Assessment Questions
3.10 Further Readings

3.1 INTRODUCTION
In this unit, the focus is on the understanding of business shifts in a dynamic
environment and, on the basis of such shifts, preparation of estimates of human
resource needs. An understanding of the trends and an estimation of the needs of an
enterprise provide possible clues to planners on the future, and thereby enables them
to take suitable steps to bridge the gap between demand and supply. In the absence of
any systematic work in this area, an organisation may face surprises and therefore be
unable to face challenges. The absence of the right resources at the right time, may
prohibit the accomplishment of corporate plans, and also lead to losses because of the
organisations’ inability to cash in on opportunities.
Forecasting of demand of human resource needs is the first and most important step in
any human resource planning process. This step results in an estimation of staffing
requirement of an organisation, for both the short and long term and is, therefore, the
foundation of the planning activity. Here, both the quantitative as well as qualitative
aspects of human resource requirements are dealt with.
It is pertinent to note at this point that demand forecasting is not a very accurate
exercise over a long-term period. For short range planning of less than a year,
a fairly accurate forecast is perhaps possible. No processes or techniques exist that
can take into account all the parameters and circumstances required for accurate
long-term estimation of manpower needs. Dynamic business circumstances, rapidly
28
changing technologies and their impact on products and methods of production, Methods and Techniques of
political and social changes and ever increasing competition keep changing the set of Demand Management
circumstances assumed at the time to forecast. Exhibit 1 illustrates the set of
assumptions that a human resource planner has to make at the time of demand
estimation.
In the 1980s, because of international economic competition, staffing planning had to
reorient its contribution to organisations, focussing more on reducing staffing levels
and building in a capacity for flexibility and change. The 1987 report of the
Staffing Services Commission (UK) emphasised ‘competence, commitment and the
capacity to change’ and drew little on the traditions of staffing planning. More
realistically, therefore, the state of contemporary staffing planning will have
restructure itself and reorient its own values and approach to the regulation of
employment. In a 1990 study, it has been reported that organisations ‘prefer neither to
use the term “staffing” nor to return to the large and elaborate planning documents
produced by head offices a decade age’. Many organisations are placing the
responsibility for staffing planning with production line managers while maintaining
strategic hold and direction at corporate level as against the earlier practice of
centralised and specialised staffing planning. You will appreciate, no doubt, that
this is consistent with some of the supposed moves towards human resource
management in general.
Now let us look at the nomenclature, HR Planning. Traditional practices are giving
way to flexible staffing use, novel forms and contracts of employment, together with
innovative approaches and succession planning. Does the term “HR Planning” capture
the essence of contemporary and HR Planning? Bennison and Casson (1984) do not
seem to think so. According to them, planning ‘belongs to the world of calculation,
computers and big bureaucracies’. Many theories recommending that organisations
seek to develop strategies and policies that address ‘labour shortages and cultural
change rather than hierarchical structures, succession plans, and mathematical
modelling’ (Cowling and Walters 1990: 3).

3.2 HR FORECASTING
What is certain is the uncertainty of the future. As time passes, the working
environment changes internally as well externally. Internal changes in the
organisational environment include product mix and capacity utilisation, acquisition
and mergers, and union-management relations among many other areas. Changes in
the external environment include government regulations, consumerism, and
competence levels of employees, among a host of other factors.
HR plans depend heavily on forecasts, expectations, and anticipation of future events,
to which the requirements of staffing in terms of quality and quantity are directly
linked. Uncertainty adds complexity of forecasting. However, change does not obviate
the need for staffing planning, though this is the argument raised by those who oppose
the concept. Where the futures are certain, there would be no need to plan.
Justifications for planning are threefold:
l Planning involves developing alternatives and contingency plans.
l As long as survival and success are the main objectives of any enterprise, the
uncertainty future is no excuse for not trying.
l Science has developed a lot of knowledge for the use of mankind. Scientific
management has developed operations reearch techniques and statistical methods
to predict the future with accuracy and reliability.

29
Basics of Human
Resosurce Planning 3.3 FORECASTING DEMAND FOR EMPLOYEES
Economic factors: As business is an economic activity, forecasts must consider
economic aspects like per capita income, employees’ expectations of wages and
salaries, cost and price of raw materials, inflation rate, etc. Fiscal policies and
liberalisation of trade will also influence requirements.
Social factors: Here, we consider the expectations of existing and potential employees
on wages, working condition and government regulations and future trends in political
influences and public opinions.
Demographic factors: Decisively influential upon future requirements, these include
availability of youth, training facilities, women in the active labour force, sex ratio,
facilities for professional education, income level, education/literacy, etc.
Competition: Competitors strategies, including advertising, quality of product,
pricing, and distribution influence future staffing in a variety of ways. For
example, if we can only preserve our market share by improving the quality of our
product, we may have to employ conpetent R & D engineers to tackle the product
design.
Technological factors: Technology has to be statge of the art if company is to survive
the competition. Technology, both in terms of quality and extent to which it is used,
will determine the capital and labour force requirements. Given that our future staffing
needs obviously depend on expected trends in technology, ‘technology forecasting’ has
become a specialist field in modern management.
Growth and expansion of business: Future growth and expansion plans will affect
future staffing requirements. Growth is possible through:
l Product diversification
l Increased capacity of production.

Expansion plans are executed through:


l Merger
l Acquisition
l Joint venture participation
l Formation of horizontal and vertical integration
l Establishment of national and international value chains.
All these activities require additional staffing with right qualities in the right numbers
at the right times.
Management philosophy/Leadership: Top management ultimately decides what
levels of staffing are required. The philosophy of the top management will largely
determine the policies that inform decisions on future staffing needs. In many
developing countries, there are ‘public-sector enterprises’ and ‘private-sector
enterprises’. The public-sector enterprises owned by the government very often adopt
a liberal philosophy of employing labour, leading to enterprises that are overstaffed.
Managers in the private sector, whose philosophies are more, determined by economic
and entrepreneurial considerations than by social policy, try to employ the optimum
number of employees.
Innovative management: As competition increases with globalization and
liberalization of trade, management needs to be innovative to stay afloat and sustain
competitive advantage. Emotionally intelligent workplaces, continuous improvement,
30 relationship management, customer, loyalty, economics of variety, etc., are the
innovations in management that need to be adopted. Future staffing needs will be Methods and Techniques of
influenced by these innovative practices. Demand Management

Managerial Dilemma
Questions that always confront the mnangers are: why should I worry about future
needs when the future is uncertain? Why should I spend my time in human resource
planning when I know for sure that the forecast made today will not survive over the
long term? Examples of giants like IBM and Digital which had to layoff or retrench
several thousand employees loom large in the minds of planners.
Exhibit 1 : Assumptions at the Time of demand Forecasting

Assumptions of
social
environment

Assumptions of Business
political Plans
environment
s

DEMAND
s
s s

FORECASTING
s

EXERCISE
s
Assumptions of Assumptions of
technology labour market
conditions

Assumptions of
economic
trends

Source: Strategic Human Resource Planning, Vivek Paranjpe, Hewlett-Packard, p. 57.


The answer to these and such other questions will, however, depend on what one is
looking for in human resource forecasting? Are we looking for an accurate number or
for some trends that will enable us to take proactive steps? If one is looking for
accurate numbers in the long range, no existing human resource-planning model will
help. One can, however, look at the trends which do provide invaluable data and can
help to prepare an organisation face possible changes in a proactive manner.
Another issue, which often confronts managers, is the differentiation between the
annual budgeting exercise and human resource planning. In the annual budgeting
exercise, managers are expected to broadly indicate the number of employees required
during the year. Such input enables the finance group to estimate employee costs for
incorporation in the budget. In the larger, long term context of the business of such an
exercise is not only inadequate but is also inaccurate and unrealistic. The mangers
generally have a tendency to overestimate their departmental needs during such an
exercise. The reasons for such a tendency could be attributed to the following factors
either singularly or collectively:
— Many managers believe that their superiors will cut down the budgets in any
case. Such a curtailment is assumed to be a normal trait in order to establish the
locus of power. It is, therefore, considered prudent to over-estimate, so that after
the axe falls on the estimates, the final budget will hopefully be near realistic.
— Absence of forecasting skills may also lead to managers playing safe games.
Excess forecasting, if approve, (in case of expenses and manpower deployment)
cannot create any damage to individual performance, and in fact, could be very 31
Basics of Human helpful. Managing expenses and deploying staff at levels lower than those
Resosurce Planning indicated in the budget, while producing desired results, may lead to a pat on the
back of the manager.
— In those organisations where job evaluation has some linkage to the span of
control and the number of people in the department, the tendency to overstaff
does exist. If a higher number of people are budgeted and approved, the chances
of the managerial job getting reviwed for higher level of scoping is excellent.
This leads not only to over-staffing, but also to acrimonious battles and debates
on staffing with hidden agendas in the minds of the warring factions.
— The human tendency to control a large number of people in order to satisfy the
“power need” can lead to over-budgeting and excess staffing in an enterprise.
An annual budgeting exercise which is the only form of human resource planning in
many organisations sometimes fails to consider the qualitative aspects of manpower
requirements and ignores the long-term needs of the enterprise. Annual budgeting
programmes get focussed on annual revenue, costs, cash flows and annual
profitability. This annual number crunching activity or the activity of counting heads,
popularly known as “headcounts” is aimed at projecting and controlling employee
costs rather than at the finer aspects of the quality of workforce, its deployment, long-
term utility, long-term adquacy, ability to retain and hire etc. In most enterprises,
managers spend a lot of their valuable time in negoatiating, demanding and worrying
about numbers rather than the finer, long-term objectives. Enterprises are often seen
approving 0.5 headcount for certain departments and in some cases, they go to
ridiculous levels of approving 0.25 headcount for a given work, with a promise to
review in future. In this numbers game, the issue of productivity improvement
opportunities, employee development issues, training etc., get side-tracked. The
enterprise’s inability or refusal to focus, beyond the short term, which in turn leads to
non-recognition of the long term demands of the business, scarcity of the right
resources, finally resulting in compromises “by re-deployment or by hiring of talents
which do necessarily meet requirements”. One can see several instances of wrong per
holding important positions in various enterprises. A conservative estimate that at
least 8 to 10 per cent of the positions in any organisation are staffed by the wrong
persons, making them a drag on the organisation. One of the reasons for such a
mismatch is lack of planning.

3.4 ISSUES IN DEMAND FORECASTING


Before discussing possible techniques of human resource demand estimation it is
worth examing related factors that influence the process. In this section some such
factors are discussed, with a view to trigger readers to consider other similar issues
that may influence their own enterprises.

Social Factors
It is common experience that a number of well-conceived projects either do not take
off or get delayed due to social pressures. For example, a large-scale petrochemical
project might get delayed or even shelved due to the pressures created for
environmental and other reasons. In such an event, the human resource demand
forecasts made by the planners will undergo substantial changes. Delays result in cost
escalation, changes in technology to accommodate the needs/sentiments of society,
changes in the location of the project etc. If careful, conservative hiring is not done by
the enterprise, when such major changes occur, there is a possibility that the enterprise
will be saddled with surplus staff right at the beginning of the project. A change of
location or of technology may result in the non-availability of planned resources and
32 therefore further delay the activities.
More examples can be seen in the form of product formulations, which are Methods and Techniques of
unacceptable because of religious or cultural reasons, such as the unacceptability in Demand Management
the Indian market of food products using fat extracted from beef.

Technological Factors
Rapid changes in technology many a times adversely affect human resources
forecasts. From the time a project is conceived to the time is implemented, substantial
time lag may occur during which, changes in technology may make the entire project
unviable. Businesses then have to quickly catch up with new technology in order that
the losses are minimized. Several examples of this can be found in the electronic
industry.

Political Factors
Unforeseen political factors might make considerable impact on the business plans of
enterprises. This is true especially for those organisations which depend mostly only
on international markets either for the sourcing of their raw materials or for selling of
their products and services. Several examples can be seen in the recent past. Indian
enterprises were dependent on the export market to the erstwhile USSR. With the
changed political scenario, the market suddently vanished, compelling some
enterprises to either close or restructure their business. The Gulf War similarly made a
major impact on some enterprises, which were dependent on the construction business
in that part of the world.

Economic Factors
Economic factors often result in several planned activities being forced to undergo
considerable change. Recent examples are found in India, with economic reforms
being introduced in the early nineties. The traditional concept of manufacturing
everything indigenously, even if it meant just assemble at the component level had to
undergo substantial change and several organisation that had set up or were in the
process of setting up manufacturing activities suddenly found local manufacturing an
unviable proposition. This resulted in major changes in business strategies and for
some enterprises, even the threat of closure.

Demand Generation
Before dwelling on demand forecasting techniques, it is essential to examine the
reasons for the creation of employee demands. This will help us focussing only on
those factors that create demands.

Growth
Growth, in traditional business, may lead to demand for higher levels of production,
sales volumes and services. If all possible productivity technique are already applied
and there is no further scope of improvement at that relevant time, simple statistical
models discussed in the later part of this chapter can be applied to forecst future
manpower needs of an enterprise.

Employee Turnover
Employee turnover or attrition is another reason for generation of manpower demands
in an organisation. Exhibit 2 shows a model of the trends employee turnover of certain
jobs and the resultant demand that gets created in an enterprise. While it is necessary
to look at the trends of employee attrition, it might not be appropriate to simply make
a forecast based on the trends. Changing business scenario and environment have to
be considered before any assumptions on future turnover of employees can be made.
To illustrate this point, in India, till the end of the eighties and before the opening of 33
Basics of Human the Indian economy, a turnover of not more than 5-6 per cent amongst the profession
Resosurce Planning and managerial personnel is stable, well managed organisations could be safely
assumed. This picture, however, changed with the economic reforms, which brought
several new multinationals into the country and woke up traditionally managed Indian
business houses. Past trends of low turnover have now changed to moderate and might
go up still further. Such changes in employee turnover trends vary from profession to
profession and skill to skill depending on the demand and supply position. In Exhibit
2, based on business forecast and the analysis of employee turnover, a gap between

Exhibit 2: Demand Generation due to Employee Turnover and Business Growth

Job Category Employe Turnover Level of Require- Expected Normal Cap**


Rate(%) Employ- ment as Turnover 1996 Retitre- (B + A) +
ment as of 1.1.97 ments C+D
1993 1994 1995 Rate Number
of 1.1.96 (B)* during
% (C)
(A) 1996 (D)

Manager in Sales and 9.5 10 11 13 14 12 1.5 1 3


Marketing
Sales Executives 8 12 14 100 120 15 16 Nil 35
Advertising and 10 13 14 15 16 15 2.25 1 4
Marketing Services
Professionals
Managers in 10 12 12 17 18 11 1.87 3 5
Application
Engineering Group
Application 22 20 21 70 79 20 14 Nil 23
Engineers
Hardware Enginers 2 4 6 20 22 6 1.2 3 6
Commercial Clerks 2 2.5 4 25 26 5 1.25 4 6
* As per businss projections.
* Rounded off to lower whole number
Source: Strategic Human Resource Planning, Vivek Paranjpe, Hewlett-Packard, p. 61.

the existing inventory of skills and future demand is worked out for certain jobs. Such
an analysis gives ample time to the staffing group to fill the vacancies.

Technological Shifts
Changes in technology makes an impact on an enterprise in more than one fashion.
This may change the methods of manufacturing, processes and techniques, selling
strategies could also become different and in the office, automation could bring about
a major change in the nature of work. Such changes may result in a redundant and
surplus workforce and might also bring about shortages in the new skills required to
manage the technology. A technological change in an enterprise does not happen
overnight but is always forewarned, over a short or long period of time. Hence,
whenever any shift is planned, either on the basis of previous experience with similar
technology or on the basis of the experience of other enterprises, a demand forecast
can be made of the skills that might soon be in short supply internally.
There are several good reasons to conduct demand forecasting. It can help:
(i) quantify the jobs necessary for producing a given number of goods, or offering a
given amount of services; (ii) determine what staff-mix is desirable in the future;
(iii) assess appropriate staffing levels in different parts of the organisation so as to
avoid unnecessary costs; (iv) prevent shortages of people where and when they are
needed most; and (v) monitor compliance with legal requirements with regard to
reservation of jobs.
34
Activity A Methods and Techniques of
Demand Management
Suppose HR planners estimate that because of several technological innovations, your
company will need 25 per cent fewer employees in three years. What action would you
take today?
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Activity B
Why should HR plan be integrated with the overall organisational strategic plan? How
can this integration be achieved?
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................

3.5 FORECASTING TECHNIQUES


Forecasting techniques vary from simple to sophisticated ones. Before describing each
technique, it may be stated that organisation generally follow more than one technique.
The techniques are:
1. Managerial judgement
2. Ratio-trend analysis
3. Work study techniques
4. Delphi technique
5. Flow models
6. Others
Managerial Judgement
This technique is very simple. In this, managers sit together, discuss and arrive at a
figure, which would be the future demand for labour. The technique may involve a
‘bottom-up’ or a ‘top-down’ approach. In the first, line managers submit their
departmental proposals to top managers who arrive at the company forecasts. In the
‘top-down’ approach, top managers prepare company and departmental forecasts.
These forecasts are reviewed with departmental heads and agreed upon. Neither of
these approaches is accurate – a combination of the two could yield positive results.
In the ‘bottom-up’ and ‘top-down’ approaches, departmental heads are provided with
broad guidelines. Armed with such guidelines, and a consultation with the HRP
section in the HRM department, departmental managers can prepare forecasts for
their respective departments. Simultaneously, top HR managers prepare company
forecasts. A committee comprising departmental managers and HR managers will
review the two sets of forecasts, arrive at a unanimity, which is then presented to top
managers for their approval. Exhibit 3 is a typical forecast prepared using this
technique. Needless to say, this technique is used in smaller organisations or in thos
companies where sufficient database is not available. 35
Basics of Human Exhibit 3 : Staff Forecast Form
Resosurce Planning
Category of Staff.................................................. Year...............................

Sl.No. Staff Members and Movements No. of staff to Remarks


be provided

1. Number of staff at 1.1 Age groups:


(excluding known resignations) 75 – Under 25 30
25-34 20
35-44 15
45 and over 10

2. a) Expected retirements, (dates to be specified)


transfers out and promotions
during year 8
b) Less expected transfers in
promotions and new
appointments already made 3 5

3. a) Number of staff required on Increase in number to


1 January, next year 80 be substantiated by
b) Less present sfaff 75 5 O & M report

4. Expected staff losses due to Estimated by age


normal wastage of existing staff groups:
15 Under 25 12
25-34 2
35-44 1
45 and over –

5. Expected losses of staff to be 5 5 Short service staff


recruited in the period turnover at 20% of 25
(events 2 + 3 + 4) above)

6. Total staff to be provided during 30 5 to be recruited by 1


the period Feruary, others to be
programmed later.

Source: Handbook of Personnel Management by Armstrong

Ratio-trend Analysis
This is the quickest forecasting technique. The technique involves studying past
ratios, say, between the number of workers and sales in an organisation and
forecasting future ratios, making some allowance for changes in the organisation or its
methods. Exhibit 4 shows how an analysis of actual and forecast ratios, between the
number of routine proposals to be processed by an insurance company’s underwriting
department and the number of underwriters employed could be used to forecast future
requirements.
Exhibit 4 : Demand Forecast – Inspectors

No. of Employees Ratio


Year Inspector: Production
–3 1500 150 1. : 10
Actual –2 1800 180 1 : 10
Last year 2000 180 1 : 11
Next year 2200* 200** 1 : 11
+2 2500* 210** 1 : 12
+3 2750 230** 1 : 12
36
Work-study Technique Methods and Techniques of
Demand Management
Work-study techniques can be used when it is possible to apply work measurement to
calculate the length of operations and the amount of labour required. The starting
point in a manufacturing company is the production budget, prepared in terms of
volumes of salable products for the company as a whole, or volumes of output for
individual departments. The budgets of productive hours per unit of output are then
multiplied by the planned volume of units to be produced to give the total number of
planned hours for the period. This is then divided by the number of actual working
hours for an individual operator to show the number of operators required. Allowance
will have to be made for absenteeism and idle time. Following is a highly simplified
example of this procedure:

1. Planned output for next year 20,000 units


2. Standard hours per unit 5
3. Planned hours for the year 1,00,000
4. Productive hours per man/year (allowing normal 2,000
overtime, absenteeism and idle time)
5. Number of direct workers required (4/5) 50

Work-study techniques for direct workers can be combined with ratio-trend analysis to
forecast for indirect workers, establishing the ratio between the two categories. The
same logic can be extended to any other category of employees.

Delphi Technique
The Delphi technique is a method of forecasting human resource needs. It is a
decision Making tool. It is been used in estimating personnel needs from a group of
experts, usually managers. The HR experts act as intermediaries, summarises the
various responses and reports the findings back to experts. The experts survey again
after they get this feedback. Summaries and surveys are repeated until the experts
opinions begin to agree. This agreement reached is the forecasting of the human
resource needs.

Flow Models
Flow models are very frequently associated with forecasting personnel needs. The
simplest one is called the Markov model. In this technique, the forecasters will :
1. Determine the time that should be covered. Shorter lengths of time are generally
accurate than longer ones. However, the time horizon depends on the length of
the HR plan which, in turn, is determined by the strategic plan of the
organisation.
2. Establish categories, also called states, to which employees can be assigned.
These categories must not overlap and must take into account every possible
category to which an indivdual can be assigned. The number of states can neither
be too large nor too small.
3. Count annual movements (also called ‘flows’) among states for several time
periods. These states are defined as absorbing (gains or losses to the company)
or non-absorbing (change in position levels or employment status). Losses
include death or disability, absences, resignations and retirements. Gains include
hiring, rehiring, transfer and movement by position level.
4. Estimate the probability of transitions from one state to another based on past
trends. Demands a function of replacing those who make a transition.
37
Basics of Human There are alternatives to the simple Markov model. One, called the semi-Markov,
Resosurce Planning takes into account not just the category but also the tenure of individuals in each
category. After all, likelihood of movements increases with tenure. Another method is
called the Vacancy Model, which predicts probabilities of movement and number of
vacancies. While the semi-Markov model helps estimate movement among those
whose situations and tenure are similar, the vacancy model produces the best results
for an organisation.
Markove analysis is advantageous because it makes sense to decision makers. They
can easily understand its underlying assumptions. They are, therefore, likely to accept
results. The disadvantages include: (i) heavy reliance on past-oriented data, which
may not be accurate in periods of turbulent change, and (ii) accuracy in forecasts
about individuals is sacrificed to achieve accuracy across groups.

3.6 OTHER FORECASTING METHODS


As in other fields, mathematical models are used in human need forecasting too. One
such widely used technique is the one given below:

E n = (Lagg n + G ) lx
y

where, En is the estinated level of personnel demand in n planning periods (e.g. years).
Lagg is the overall or aggregate level of current business activity in rupees. G is the
total growth in business activity anticipated through period n in today’s rupees.
Rupees.
x is the average productivity improvement anticipated from today through planning
period n (e.g. if x = 1.08, it means an average productivity improvement of 8%).
y is a conversion figure relating today’s overall activity to personnel required (total
level of today’s business activity divided by the current number of personnel). It
reflects the level of business activity per person.
The main purpose of this model is to predict En , the level of personnel
necessary in n periods. Prior to applying this model, estimates of G, x and y must be
made. Such estimates may be based on the previous experiences of management, as
well as on future strategic choices to which the organisation’s decision-makers are
committed.

3.7 CREATION OF AN HR/STAFFING PLAN


Now that you have been exposed to the techniques employed in HR planning let’s look
more closely at those factors – both internal and external – which contribute to or
influence the final outcome of the staffing plan.
Internal Considerations
As people are leaving the organisation, we often will have to replace them. In small
organisations, a person’s departure will be more evident than in a large organisation.
Staffing planners will be concerned with the average number of employees who leave
and therefore need replacing just in order to maintain a constant number of employee
resources in the organisation.
Wastage Analysis
In large organisations, it requires a far more rigorous calculation of ‘wastage’ than the
rule of thumb and management-owner discretion in smaller firms. The simplest way of
38 calculating wastage is through turnover analysis that reviews features such as the
positions being vacated, the average ages of the people who are leaving, the type of Methods and Techniques of
skills that are being lost, etc. Such an analysis gives only a broad picture of the Demand Management
current state of employees and it is usual to consider a 25% turnover rate as
acceptable in modern large organisations. If the turnover analysis approaches 30-35%,
then the situation warrants deeper analysis.
There are features that the turnover analysis will not reveal, so you may prefer an
alternative calculation called the Labour Stability Index. This index is calculated from
the following formula:

Number of employee exceeding one year' service


× 100 = y%
Total number of employees one year ago

3.8 SUMMARY
The best business plans are subject to change in today’s dynamic world and no matter
how well a planner considers the various contributing factors, there always exists a
certain amount of uncertainty and chance. This requires that instead of attempting to
forecast the precise number of people required by an organisation, the trends be
studied, in order to understand the possible changes in the business and evolve a
strategy to cope with an emergent scenario.
It may be prudent to make two different forecasts:
l A forecast of manpower requirements as per the business plan. Here the
assumption is that the plans will go through without any major changes.
l A forecast needs, which is conservative. Here, the impact of various negative
factors on the business can be considered.
When it comes to actual advance hiring, it is wise to hire people against only the key
positions of the first forecast and the balance staff based on the second forecast. Such
a strategy will enable an enterprise to sail through without any major problems. Here,
key jobs are defined as those where skills are scarce and therefore require a longer
lead time to hire, or those jobs where skills are not available in the market, therefore
requiring the organisations to invest training where once again the lead time is
considerable.

3.9 SELF-ASSESSMENT QUESTIONS


1) Explain the concept of human resource forecasting. Discuss various techniques
used in forecasting human resource planning.
2) Explain the issues in demand forecasting. Discuss the different factors
contributing to demand forecasting.

3.10 FURTHER READINGS


Gautam, V. 1988. Comparative Manpower Practices, National Publishing House,
New Delhi.
Mozina, S. 1984. Guide to Planning for Manpower Development, ICPE: Ljublijana
(Yugoslavia).
Agrawal, Satya Prakash 1970. Manpower Demand: Concepts and Methodology,
Meenakshi Prakashan, Meerut.
Armstrong, Michael 1988. A Handbook of Human Resource Management, Kogan
Page, London. 39
Basics of Human Beer Michael et al. 1985. Human Resource Management: A General Manager’s
Resosurce Planning Perspective Text and Cases, Free Press, New York.
Suri, G.K. 1988. Human Resource Development and Productivity: New Perspectives,
National Productivity Council.
Vetter, Eric W. 1962. Manpower Planning for High Talented Personnel, Ann Arbor
Bureau of Industrial Relations, Graduate School of Business Administration,
University of Michigan, Ann Arbor.
Bramham, J. 1989. Human Resource Planning. London: IPM.
Bramham, J. 1990. Practical Staffing Planning; London: IPM.
Cowling, A. and Walters, M. 1990. Staffing Planning – Where Are We Today?
Personnel Review 19 (3).

40
Methods and Techniques
UNIT 4 METHODS AND TECHNIQUES FOR for Supply Management

SUPPLY MANAGEMENT
Objectives
After going through this unit, you will be able to:
l the concept and dimension of manpower supply,
l the various methods of manpower supply in an organisation — internal as well
external, and
l the different techniques to supply of HR within an organisation.

Structure
4.1 Introduction
4.2 Human Resource Inventory
4.2.1 Age Distribution
4.2.2 Skills Inventory
4.2.3 Length of Service
4.3 Factors Affecting Internal Levels
4.3.1 Reasons for Increase in Employee Groups
4.3.2 Reasons for Decrease in Employee Groups
4.4 Employee Turnover Analysis
4.5 The Cohort Method
4.6 The Census Method
4.7 Markov Chain
4.8 Renewal Models
4.9 Summary
4.10 Self-Assessment Questions
4.11 Further Readings

4.1 INTRODUCTION
HR demand analysis provides the Manager with the means of estimating the number
of kind of employees that will be required. The next logical step is to determine
whether it will be able to procure the required number of personnel. This information
is supplied by supply forecasting. Supply forecasting measures the number of people
likely to be available from within and outside an organisation; after making allowance
for absenteeism; internal movement and promotion, wastage and change in hours and
conditions of work.
Reasons for supply forecast are the following:
a) Helps quantify number of people and positions likely to be available in future to
achieve objectives;
b) Helps clarify the staff mixes that will exist in future;
c) Assess staff level in different parts of organisation;
41
Basics of Human d) Prevent shortage of people where they are needed most; and
Resource Planning
e) Monitor future conditions with legal requirement for job reservations.
Forecasting the internal supply human resources is an important activity in manpower
planning. Human resource planners need to look at the sources of supply and evaluate
them through in-depth studies to ensure that suitable strategies are evolved to meet
business demands. For the purposes of discussion, the supply source will be divided
into two categories, viz.:
A – Internal supply
B – External supply
In this chapter, the salient features of internal supply are discussed along with the
techniques used to evaluate and study the same.
One of the obvious sources of manpower supply is the internal group of employees. It
is essential to understand and evaluate this internal group in order to assess its
possibilities in meeting future business demand. Studies on this source of supply are
therefore focussed on evaluating internal circumstances, possible changes in its
character and complexion, and the impact on their availability in future.

4.2 HUMAN RESOURCE INVENTORY


As a first step, it is essential to categorise the existing employees into various groups.
The extent to which such segmentation is done will depend on how the planners intend
to actually utilise the data. It needs to be kept in mind that a lot of data that may get
generated could be of “like to know” type rather than “need to know” type. It is,
therefore, essential to decide what type of studies the planners wish to undertake with
relevance to their practical usage in the planning process. The stratification of the
existing population can be done in several manners, some of which are as follows:
— Categorisation by age. One can study average age, average distribution,
minimum and maximum age etc., by job categories, functions, skills,
qualifications etc.
— Segmentation of employees by functions, job groups, departments, skills,
location etc.
— Categorisation by gender i.e. male and female, ethnic groups, religion, language
etc.
— Segmentation by performance levels.
— Segmentation by organisational hierarchy, i.e. staff, junior management, middle
management, senior management, etc.
— Segmentation by salary groups.
It will thus be seen that the same work group can be broken up in several different
types of segments, depending on the purpose for which such segmentation is done. In
this section, a few important categorisations are discussed, along with their direct
application to the planning process.

4.2.1 Age Distribution


Segmentation of existing employees by age is a useful technique to understand the
characteristics of the internal supply. It provides considerable information about
future levels of supplies and their quality, apart from being a good diagnostic tool in
problem analysis. A study of the age distribution, can be done for either the whole
organisation or for each function separately, or for various skills depending on the
42 application of the study.
Some of the applications of this exercise are in: Methods and Techniques
for Supply Management
— Understanding the exact wastage due to normal retirement. This will indicate the
level of shrinkage in each work group that is likely to take place during the plan
period.
— Learning potential and the adaptability of the work group. The younger the work
group, the higher the probability of their adapting to new methods. Though such
an assumption cannot always be hundred per cent accurate and therefore cannot
be applied to all situations and segments, but all the same it has a good
probability of being right, if it is tested over a period of time.
— Comparing the average age of fresh recruits with the average age of the
organisation, one can perhaps, draw some inferences on the rate of growth of the
employees thus reflecting on the promotion policies of the enterprise.
— Comparing various work groups will indicate the comparative growth rates,
levels of fresh intake, stagnation, frustrations, etc.
It should be understood that data on age distribution alone is of very little significance,
unless it is supplemented with employee turnover, performance levels, salary groups,
etc. However, mapping age distribution amongst various other applications has
tremendous use in decisions related to voluntary separation plans, in the devising of
education roadmaps, review of promotion policies, working out pension and other
retirement benefits, etc.

4.2.2 Skills Inventory


Taking an inventory of skills and knowledge is another method of evaluating the stock
of human resources in an organisation. This gives information on the qualitative
aspects of human resources and provides an insight into redeployment possibilities,
promotions, transfers, the gap between future needs and the level of current skills, etc.
Such an inventory becomes an essential input for the assessment of the training needs
and recruitment strategies of an organisation.
In order to obtain a fuller understanding of manpower characteristics, the skills and
knowledge inventory has to be superimposed with data on employee turnover and
performance evaluations to get a complete understanding of the characteristics of
manpower. When such an exercise is carried out, useful analysis and conclusions are
obtained, some of which are:
— Turnover analysis along with skills inventory may give indications of the
likelihood of the shortage of certain skills in the future and also provides possible
indications of the supply position in the market.
— Performance ratings and skills inventory can together give excellent insight into
the validity of managerial perceptions on the why and how of performance
trends. It enables the enterprise to draw appropriate training strategies and
determine the quality of personnel to be hired in future, since desired
qualifications can be determined on the basis of performance of the current
recruits.
— Matching the skills and knowledge inventory of employees with their job
descriptions can indicate where over-qualified or under-qualified personnel are
employed in the organisation, thus helping planners to evolve redeployment
strategies and review hiring practices and policies.

4.2.3 Length of Service


Another method of mapping a human resource inventory is by the length of service of
the employees. This can be done in a format similar to Exhibit 1 – instead of age, the
43
Basics of Human breakdown of the workforce would then be by length of service. It could also be done
Resource Planning by job category, department, location, etc., for the entire workforce, depending on the
use to which the data is to be put.
If supplemented with other information, such data can highlight an organisation’s
ability to retain employees by job categories, department, skills, etc. This also
provides a good insight into recruitment methods and procedures, the organisation’s
ability to retain employees etc. During growth in a particular year an enterprise may
hire a considerable number of employees leading to a reduction in the average length
of service in that year. Similarly, curtailment of the workforce might lead to a large
number of older employees opting for voluntary retirement, thus reducing the average
length of service.

4.3 FACTORS AFFECTING INTERNAL LEVELS


A human resource planner needs to consider the various factors that influence the
levels of human resosurce inventory of an enterprise. In order to understand these
factors clearly, a model is shown in Exhibit 1. As a sample case, take a small
segment of an organisation, say a small job group and consider two
broad factors:
– Why or how this job group will increase in size?
– Why or how this job group will decrease in size?
These two factors are discussed here to develop a basic understanding of the question.

4.3.1 Reasons for Increase in Employee Groups

Promotions In
One of the obvious methods for increasing the level of the existing work group is
through promotion of employees from within. Planners consider this aspect to assess
the number of likely entrants into a particular job level and it is therefore important to
study the trends of past promotions and, evaluate the feeder stock to assess its
potential for promotion, training needs, etc. Other aspects of employee feeder groups,
such as their retention analyses, age and performance profiles, skills and knowledge
profiles should also be studied. It is always desirable to fill positions from within
through internal promotions. Depending on the needs, one can plan strategies to work
on the feeder groups to facilitate promotions.
Some organisations follow a policy of promotion by time-scale irrespective of the
needs of the organisation. This is an undesirable method of promotions. If such a
system exists in an enterprise, planners should, during the planning cycle itself,
assess the number of employees that will be promoted due to the lapse of time
and put in special efforts to ensure that employees are adequately trained before
they move up.

Redeployment In
Redeployment is another method of filling in positions in a group. Redeployment
strategies can be adopted by an enterprse to utilise excess employees of one job group
to fill in the gaps of another. Such redeployment strategies have to be carefully
chalked out, considering the actual redeployability of employees, the investments that
will have to be made in order to provide training to make these employees effective in
the new job, etc. One will also have to consider issues related to implications on
industrial relations, salary, benefits structure and other such factors.
44
Exhibit 1: Influences on HR Inventory Levels Methods and Techniques
for Supply Management

Promotions Redeployment External Mergers and


In In Hiring Acquisitions

s
s

s
s HUMAN
RESOURCE
INVENTORY

s
s

s s
s s

Promotions Redeployment Voluntary Retire- Involun- Sabbaticals,


out out Separations ment tary Long
Separa- Illnesses,
tions Deaths etc.

Exhibit 2: Promotion Channels (Inwards)

Job Group Under


Consideration
s
Promotions
in

s s s

Feeder Feeder Feeder


Group Group Group
‘A’ ‘B’ ‘C’

External Hiring
Planners proposing external hiring have to consider issues of the supply position, lead
time to hire, lead time to induct, time to provide core training, the ability of the
enterprise to retain new employees, the wastage rate for at least the first twenty four
months, the ability of the enterprise to attract right talents, etc. It is, however, always
preferable to fill the gap between demand and supply through internal promotions and
redeployments as far as possible, before resorting to external hiring.

Mergers and Acquisitions


Mergers and acquisitions also affect the human resource supply and may increase
stock levels.

4.3.2 Reasons for Decrease in Employment Groups Promotions Out


Promotions out to other job levels is a reason for depletion in a particular work group.
Planners must consider the trend of “promotions out” in the past, and possibilities
future losses.
45
Basics of Human Exhibit 3 illustrates that for a particular job group, there could be more than one
Resource Planning group of jobs serving as a receiving group. Planners, therefore, have to first assess the
demands of the receiving group and the promotability from the feeder group and thus
arrive at an analysis of what is likely to be the loss due to out-bound promotions.

Exhibit 3: Promotion Channels

Receiving Receiving Receiving


Group Group Group
‘A’ ‘B’ ‘C’
s s s

s Promotions
out
Job Group Under
Consideration

Exhibit 3 illustrates an example of feeder and receiving groups in relation to a group


of jobs that exists in a typical sales and marketing environment.
The excess employees of a particular job group can be decreased through conscious
implementation of the redeployment strategy. Such a strategy should always be
implemented with caution and care and after consideration of the various issues
specified earlier in the “redeployment in” section in this unit.

Voluntary Separations
Voluntary separations are primarily a result of employees resigning from the services
of a company for various reasons. In this unit a detailed discussion on employe
turnover is available, which will give a fairly good insight on the handling of reduction
of employee turnover.
Voluntary separations may also arise due to employees opting for early retirement or
because of voluntary separation plans announced by the enterprise. While announcing
such plans the organisation must make an assessment of their likely fall-out.
Depending on how the scheme is designed, the percentage of loss from a particular
group can be assessed and the enterprise must therefore design schemes taking into
consideration the age and service profiles of the target groups, that is, those groups
from where the enterprise expects maximum separations to take place.

Exhibit 4: Feeder and Receiving Group for Promotions


Sales Regional
Executives Sales
Managers
s

Marketing Group of Product


s

Executives Area Sales Managers Managers


s
s

Distribution
Marcom Channel
Executives Managers

Feeder Group Receiving Group


46
A planner is thus expected to study the trends of normal attrition and the impact of Methods and Techniques
early retirement plans, if any, so as to assess the extent to which the stock of a for Supply Management
particular job group is likely to be depleted during the plan period.

Retirement
In most countries, organisations specify the age of retirement or superannuation. Once
a person attains the specified age, he/she automatically retires from employment and
thus planners can easily calculate the number of retirees for a particular year. In those
countries/enterprises where the age of retirement is not specified, an assessment can be
made on what percentage of employees are likely to be lost due to retirements based
on the trends of the past and the current age profile.

Other Reasons
In organisations where there are excesses all over, and redeployment strategies are
either not possible or are inadequate, and where the organisation is incapable of
offering “golden handshakes” in the form of voluntary separation plans,
involuntary separations in the form of retrenchment can be used to reduce
the workforce to an optimum level. This strategy, however, should be the last
resort. Depending on the legal framework, different methods will have to
be used. Such strategies will vary from country to country and enterprise
to enterprise.
Involuntary separations could also be due to disciplinary or performance related
factors where the management of an enterprise initiates the separation of the
employees. The proportion of such separations could be minimal, though the
planners must be conscious of this factor. Prolonged illness, deaths and
incapacities due to accidents are some more reasons for depletion in the human
resource inventory. However, these numbers are generally insignificant in most
of the organisations.

Activity A
Identify the techniques being used for forecasting the internal supply of human
resources in your organisation or any organisation you are familiar with.
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................

Activity B
Write briefly about the assessment of staff level being done in different departments of
your organisation or any organisation you are aquainted with.
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
47
Basics of Human
Resource Planning 4.4 EMPLOYEE TURNOVER ANALYSIS
Although discussion on employee turnover analysis appears in the previous chapter
under the section on demand generation, its relevance to the forecasting of supply
renders is important enough to warrant further discussion here.
Annual employee turnover is a method of measuring the attrition or wastage of
employees. It is also known as the index of turnover or percentage of wastage, being
the percentage of employees who quit employment. Generally this analysis is done for
those employees who voluntarily separate from the services of an enterprise. To
calculate the turnover, the following formula is generally used:

Number of employees
Who leave during the year
× 100 = Annual employee turnove
Average number of employees
employed during the year

For example, if in an organisation the average number of employees during 1996 were
5,000, and sixty out of these left during the year, the annual rate of employee turnover
is calculated as follows:
60/5000 × 100/1 = 1.2 per cent
This means that 1.2 per cent of the employees left this organisation during 1996.
Employee turnover analysis can be done in many ways for the entire organisation,
department or location wise, by reasons for turnover, and by performance rating.
In addition to internal supply, the organisations need to look out for prospective
employees from external sources. External sources are important for specific reasons.
i) Availability of new blood and new experience;
ii) Replenishment of lost personnel; and
iii) To meet expansion/diversification needs.
Sources of external supply vary from organisation to organisation, industry to
industry, geographical locations to locations.

4.5 THE COHORT METHOD


Before understanding the ‘Cohort Method’, a word about the concept of survivor
analysis is to be understood. This is the reverse of employee turnover analysis. Here,
the percentage of employees who continue in the employment of an enterprise is
measured as opposed to the percentage who quit employment.
In the Cohort Method, an analysis is done of a homogeneous group, i.e. a group of
same or similar employees or those with same or similar characteristics. Such a
group is called Cohort. At the end of each year the number of employees from the
cohort who survive is calculated and expressed as a percentage of the total
number of employees hired when the cohort was formed. This technique is generally
applied to a group of employees whose survival in an enterprise is short. Exhibit 5
shows an anlysis of the survivor function over a period of three years, using the
cohort function.
In this exhibit, the pattern of retention by an enterprise over a period time clearly
shows the changing retention profile. Such a change could be due to the influence of
various factors such as personnel policies, product and marketing strategies,
leadership styles, etc.
48
Exhibit 5: Cohort Survivors Function Applied Over Three Years Methods and Techniques
for Supply Management

% of
Survivors

Year III
Year II

Year I
20

10

0
1 2 3 4 5 6 7
Time in years

An analysis of this nature enables the planner to estimate the probability of a


particular group of employees, with a defined length of service, leaving the
organisation. A cohort analysis can also be done on the basis of age. The graphical
representation of this analysis is known as “Log-normal wastage curve” the converse
of which is a survival curve. The theory behind this method was developed by K.F.
Lane and J.E. Andrew.
While there are several advantages of this method, there are also practical difficulties
in managing this exercise. Some of the problems are:
— each leaver of an enterprise should be historically related to his/her cohort and
the size of the cohort should be known.
— if there exists a low rate of wastage, the relative time taken to plot the cohorts
could be ordinarily long.
— planners invariably start forecasting the wastage of groups who have not even
joined the organisation.

4.6 THE CENSUS METHOD


The Census Method overcomes some of the problems of the Cohort Method by taking
a bird’s eye view of the different cohorts at one point of time. These views are then
combined to make an estimation of the survival, either by age or by length of service.
In Exhibit 5, using the Census Method, the survivor function is calculated based on
the length of service. This is a very simple method of tabulating the data. In the first
column, we have the length of service in years and in the second column we have the
number of employees against each of the service length groups: at the beginning of the
year. In the third column the number of employees who left employment is tabulated
against each of the service groups and in the next column the wastage rate is
calculated. In the last column the survivor rate is computed.
To get the survivor function for the second year, the survival rate of the first year is
multiplied with the second year. For the third year, the survivor function of the second
year is multiplied with the survival rate of the third year and so on. Here, the
survivor function depends on the assumption that people in their second year of 49
Basics of Human employment will have experienced the same pattern of survival in their first year, as
Resource Planning do the people who are now in their first year. In calculating the central rates survivor
function we use average stock in the calculations as against the stock at the beginning
of the year.
When the survivor function falls, it indicates a low rate of survivals and high rate of
wastage. While interpreting this function, it is important to note that it is a cumulative
curve.
Once the survivor function is established for a group of employees, it is possible to
predict the probability of separation that exists in various service length groups of
employees.

4.7 MARKOV CHAIN


In most organisations, employees are divided into several grades and they move
up the organisational ladder from one grade to another. This may be deemed the
hierarchical form of a manpower system. By and large, the routes that employees
follow through the system are well defined. Exhibit 6 illustrates an example
of this nature.
In a simple form of growth and hierarchy, an employee may grow from level I to level
II, and then to level III and so on. It is, therefore, assumed that for level II the feeder
group is level I, for level III it is level II and so on. From each group natural wastage
can be expected due to the exist of employees.
Under certain circumstances accelerated entry or growth is also possible, as illustrated
in Exhibit 6, where an employee has skipped level IV and moved from level III to level
V directly. Similarly, a few employees may join at higher level as illustrated in case of
accelerated entry to Level II.
Exhibit 6: Census Method Used to Calculate Survivor Function

Length of # of Emplo- # Empl. Turnover rate Survival Rate Survivor


Service on yees as Separated (Wastage) Function
1.1.95 in yrs. on 1.1.95 during 95
0-1 20 6 0.3 0.7 0.7
2-3 20 4 0.2 0.8 0.56
3-4 25 5 0.2 0.8 0.448
4-5 10 3 0.3 0.7 0.313
5-6 18 3 0.167 0.833 0.26
6-7 24 4 0.167 0.833 0.216
7-8 10 2 0.2 0.8 0.172
8-9 15 3 0.2 0.8 0.137
9-10 8 1 0.125 0.875 0.119
10-11 16 1 0.16 0.84 0.099
11-12 18 1 0.555 0.445 0.044
12-13 10 0 0 1 0.044
13-14 17 0 0 1 0.044
14-15 7 1 0.143 0.857 0.037
Total 218 34 0.156 0.844

Complex hierarchical models also exist, as illustrated in Exhibit 7 where multiple


streams of promotions are seen, which may cover and/or diverge at different levels
depending on how the organisation is structured. Similarly, there exists the possibility
of movements between the two streams at various levels. It is also possible that there
50 will be a common entry level for more than one stream.
Exhibit 6.1: Markov Chain Methods and Techniques
for Supply Management

Leavers Level

s
VI
s

Leavers Level

s
s
V
s

Leavers s Level accelerated


IV entry/promotion
s

Leavers Level
s

III
s

Leavers Level accelerated


s

II entry
s

Leavers Level
s

The model in Exhibit 7 is classified as Young & Almond’s model and can be described
as a model for understanding the ‘Markov Chain’. Young & Almond devised this
model in 1961 for a company. Here, the assumption is that an employee moves up the
ladder by means of a ‘push’ promotion. In this model there exists no requirement of a
vacancy, and the employees move up the hierarchy as long as he/she meets with
certain predetermined criteria, such as length of service and attainment of a particular
level of skills or performance rating.

Exhibit 7: Complex Ladder for Promotions

Level
VI
s
s

s
s
s

Level Level Level


s s

s s

V V V
s

s s

Level Level Level


IV IV IV
s s
s

Level Level
s s

III III
s

s s

Level Level
II II
s s
s

Level Level
s

I I
s s
Entry Entry
Stream ‘A’ Stream ‘B’

51
Basics of Human As an illustration, consider a typical hierarchy where the following situation exists:
Resource Planning

Level I Level II Level III Level IV


Current strength of employees 40 60 30 30
Rate of annual employee turnover 20% 15% 10% 8%
Percentage of promnotions to next grade 60% 10% 5% 3%

At the end of the first year, in Level II, the scenario will be as follows:
i) 60 × 0.15 = 9 will exit (A)
ii) 60 × 0.1 = 6 will sget promoted to Level III (B)
iii) 40 × 0.6 = 24 will get into Level II from Level I (C)

Thus, the final picture of Level II will be


[60 – (A+B)] + C
or [60 – (9+6)] + 24
or 69 employees.
The assumption is that the higher levels of grades will expand further every year while
the 1ower levels of grades will keep decreasing. Prof. D.J. Bartholomew in his book
“Stochastic Models for Social Processes” (Wiley 1967) has discussed a model of
Markov chain and the same is elaborated in detail by D.J. Bell in his book ‘Planning
Corporate Manpower’ (Longman 1974). Here the push factor 9i::promotion is not as
severe as was discussed in the earlier model. Exhibit 8 shows a different Markov
Chain. A person hired at Level I will enter the box marked ‘A’. If he continues to
remain in this level for three years he will automatically move to Box ‘B’ and after ten
years to Box ‘C’. He may, however, within three years move to Level II as shown by
the vertical arrow or after three years to Level II as shown by the diagonal arrow.

Exhibit 8: Markov Chain

Level III
s

s s

s s
s s s
s
s

Level II
s

s s s

A B C
s

s
s

Level I

0-3 3-10 10+


Length of Service (years)
Based on data of past trends of this nature and after considering employee turnover
from each of the boxes, the planners may predict the supply level of employees from
internal sources.

4.8 RENEWAL MODELS


In Markov model, the assumptions are changing grade size and fixed movement
possibilities due to the push factor. In the renewal theory, the assumption is again that
of fixed grade size but upward movements are linked to vacancies at higher levels.
Such vacancies are caused either due to natural wastage or due to upward movements.
This model, therefore, works on the probability of employees leaving an organisation
52 at some point or another. Such exits are at a series of intervals, depending on either
the age profile or the profile of length of service. The proportion of leavers is likely to Methods and Techniques
follow normal distribution. As and when a vacancy is created, the assumption is that it for Supply Management
will be filled up through internal promotions. Promotions could fall into either of two
possibilities, viz.: promotion based on seniority, which will trigger chain reaction and
cause recruitment at the lowest level of hierarchy, or promotion due to merit where the
promotability of individuals will be considered. Prof. Bartholomew has developed
models based on these assumptions.
Institute of Manpower Studies (1972) in its report have compared the Markov Chain
model and the renewal theory model as follows:
“The Markov or ‘Push’ type models assume that promotions are not dependent on
vacancies occurring, but istead are the result of management ‘pushing’ individuals
along career paths at fixed rates ——.”
“At the other exteme the renewal or ‘Pull’ type models assume that all promotions are
the result of vacancies to fill gaps as they arise.”
It should be noted that in real life, a combination of Push and Pull is seen. At times
both are seen independently. It is, therefore, necessary to consider historical trends and
arrive at well-studied assumptions on future patterns.
Most mathematical models can be applied to big organisations only, where the
population is large enough for the projections to be correct. It should also be
remembered that these models work only in stable socio-economic and political
scenarios, with stable markets. In situations where there are changing variables that
are likely to make a significant impact on the enterprise, these models may not work,
as the future may not necessarily follow the trends of the past. At senior levels of the
hierarchy, the possibilities of mathematical model working is likely to be low, not only
due to small numbers but also due to the fact that several internal as well as external
factors continuously work on this group in a profound fashion.

4.9 SUMMARY
Human resource planners need to look at the sources of supply and evaluate them
through in-depth studies to ensure that suitable strategies are evolved to meet business
demands. The supply source will be divided into two categories viz., Internal supply
and External supply. External supply is determined by factors extraneous to the
company or enterprise level. Internal supply over which a company or enterprise has
control is governed by the wastage rate (i.e. the rate of leavers from the company) and
the internal flows caused by transfers and promotions. Methods of analysis and
forecasting is, however, a well defined MIS based on personnel history records of each
individual employee.
Annual employee turnover is a method of measuring the attrition or wastage of
employees. There are several methods to be used to measure various aspects related to
employee service, age, employee exit, etc. In turnover analysis, this analysis is known
as “Long-normal wastage curve”. Most mathematical models can be applied to big
organisations only, where the population is large enough for the projection to be correct.

4.10 SLEF-ASSESSMENT QUESTIONS


1) Explain the various methods of human resource supply in an organisation.
2) Describe the factors affecting internal levels. Explain the reasons for increase in
employee groups.
3) Discuss the employee turnover analysis. Explain the different techniques for
supply management. 53
Basics of Human
Resource Planning 4.11 FURTHER READINGS
Bennison, Management and J Casson, 1983. The Manpower Planning Handbook,
McGraw-Hill, London.
Mozine, S. 1984. Guide to Planning for Manpower Development, ICPE: Ljubljana
(Yugoslavia).
Walker, J.W. 1980. Human Resource Planning, McGraw-Hill, New York.
Agrawal, Satya Prakash, 1970. Manpower Demand: Concepts and Methodology,
Meenakshi Prakashan, Meerut.
Rowland, K.M. and Summers, S.L. 1981. Human Resource Planning: A Second
Look, Personnel Administrator, Vol. 26 No. 12, pp. 73-80.
Sikula, Andrew, F. 1976. Personnel Administration and Human Resource
Management, John Wiley, Santa Barbara.
Stainer, Gereth, 1971. Manpower Planning: The Management of Human Resource,
Heinemann, London.
Suri, G.K. 1988. Human Resource Development and Productivity: New Perspectives,
National Productivity Council.
Cowling, A. & Walters, M. 1990. Staffing Planning – Where Are We Today?
Personnel Review 19 (3).
Dessler, G. 2001. Human Resource Management, 7th Ed., Prentice-Hall of India
Private Ltd., New Delhi.
Flamholtz, E. & Lacey, J. 1981. Personnel Management: Human Capital Theory and
Human Resource Accounting, UCLA Press, Los Angeles.

54
Contemporary Trends in
UNIT 5 CONTEMPORARY TRENDS IN Managing Demand
and Supply
MANAGING DEMAND AND SUPPLY
Objectives
After going through this unit, you will be able to:
l the concept of emerging organisational structure,
l the transformations through social, economic, organisational and technological
changes at workplace,
l building an organisational culture, and
l the various resource systems supported through performance appraisal system in
an organisation.

Structure
5.1 Introduction
5.2 Emerging Organisational Structures
5.3 Transformations at the Workplace
5.4 Flexible Workforce
5.5 Building a Culture
5.6 Performance Appraisal
5.7 Staffing
5.8 Compensation and Benefits
5.9 Dealing with Relocations and Redundancies
5.10 Human Resource Measures and Adult
5.11 Trends in Labour Supply
5.12 Trends in Labour Demand
5.13 Summary
5.14 Self-Assessment Questions
5.15 Further Readings

5.1 INTRODUCTION
“The new organisation equation for success is that profit and productivity are best
created by half of the workforce, paid twice as well as producing three times as
much” — Charles Hardy.
In fast changing world, there have been qualitative shifts in pattern of employment, yet
the importance of deploying the right human resource at right times has not
diminished. In the modern world, due to continuous changing technology and dynamic
character of business, there is an increasing demand for skilled, multi-skilled
knowledge workers and professionals who are difficult to find and retain. Increasing
demands of consumers to get “value for money” and global competition, keep
enterprises on their toes, resulting in increased demand for people with appropriate
talents along with the right values and beliefs. Shifts in demographics, globalization of
markets, rapidly changing technologies, increasing consumer demands, curtailment of
product life cycles, excess or shortage of workforce, continuously shifting political
and economic alliances and several other environmental factors have posed several
challenges for industries and, in turn, for human resource management. 55
Basics of Human
Resosurce Planning 5.2 EMERGING ORGANISATION STRUCTURES
Today’s dynamic and fast changing environment has given rise to flatter
organizational structures. Some organizations like to display flat and reversed
pyramids, with the customer at the top level and the first line staff at the second level
and so on as shown in Exhibit 1.
Exhibit 1: Organization Structures

Customer

New Pyramid (Reversd)

Customer
Traditional Pyramid

In reality, however, and for long-term survival, the organisational structure should be
like a flexible ring, with the customer and the market place at the centre. The ring has
to be organic with the fluid organistion changing its complexion to suit the demands of
the market place.
These are the days of neo-conglomerates, where multiple organisations get together to
manage specific demands of the market. At the same time, two organisations might be
competing for one product line in a market and working as partners for a second
product line, acting as distributors for each other for a third and for a fourth might be
indifferent to each other. In this ever changing, dynamic corporate world, new
definitions of hierarchy, chains of command and reporting relaltionships continuously
emerge. Self-managed work groups, with focus on providing quality services and
products that cater to specific customer demands are the realities of today. There is a
clear shift from function centered to process centered organisation structures, where
every process that the organisation evolves is with a specific purpose to satisfy some
customer need. Performance measures are established to evaluate and continuously
improve processes with irrelevant processes being abolished and new ones being
evolved continuously. This type of an organisation is organic, relevant and stand the
test of time. Long-term survival, however, depends on the organisation culture. Values
and beliefs evolved by the enterprise would have their focus on people and the market
in order to sustain over a long period. If values and beliefs do not focus on these key
factors (customers and employees) the probability of the enterprise surviving for a
long-term will be dismal.
This is indeed a challenging era for the human resource planner who has to plan for a
dynamic flexible work force which cannot be precisely defined.

5.3 TRANSFORMATIONS AT THE WORKPLACE


Social, economic, organisational and technological changes influence the
occupational structures at the workplace. Traditional trades have given way to new
occupations, and new definitions of work are emerging. Some of these trends are
discussed here.
56
Trend – 1 Contemporary Trends in
Managing Demand
A progressive shift from blue-collar jobs both from the service as well as and Supply
manufacturing sectors to white collar jobs primarily in the service sector. Shift of this
nature is obviously resulting in inter-sectoral movement of people, with the bulk of
this shift being from the manufacturing sector to the service sector.

Trend – 2
A shift from the agricultural to the service sector. The old trend of rural to urban
movement still continues and even within a rural setting there is rapid growth in the
service industry.

Trend – 3
Growth in the educated, skilled work force as opposed to the semi- and unskilled
employees of the past. This changing pattern of the work force has its own
behavioural and attitudinal implications in this work place.

Trend – 4
Decline of traditional occupational groups. New classifications, based on broad
skill sets, are emerging in today’s industry mainly due to multi-skilling and multi-
tasking. We can, in today’s context, see teams of production workers and teams of
maintenance engineers with hardly any difference within them in terms of
grades/skills.

Trend – 5
With the increasing focus on productivity improvement, employment in the higher
occupational grades is increasing and the number of jobs in the lower grades is on the
decline. This is because the knowledge and skills required to manage and operate new
technologies and work processes are of higher levels than those in the past.
Enterprises are, therefore, continuously demanding advanced skills. General workers
are using fewer manual skills since advanced machines at their disposal make
increasing demands on their mental skills. Thus, in the modern production
environment, requirements of the mental, mathematical and abstract skills is greater
than that of manual skills. Employees seem to almost establish intellectual
relationships with their machines.

Trend – 6
In the service sector, technical skill requirements are slowly reducing and being
replaced by social skills including interpersonal, communication skills and so on. Soft
skills to improve customer interfaces are of great value, since service is more at a
modular than at a component level.

Trend – 7
The formal, centralized management practices of the past are slowly giving way to
looser, more democratic and informal styles of management. This change is necessary
because of the changing profile of people and of the work itself. Employees at all
levels need to acquire broader skills and abilities in order to adjust to new technology
and work organisations. Since organisations or educational institutions cannot teach
every skill or technology, today’s workers need to be intelligent, with broad conceptual
skills so that they can acquire the right knowledge at the right time in an ever-
changing world.

57
Basics of Human
Resosurce Planning 5.4 FLEXIBLE WORKFORCE
In the present dynamic business environment, the traditional concept of a specialized
workforce trained to do one job well is fast fading. The traditional workforce came to
an organisation with a skill set or learned a skill set and performed the same tasks
over a long period, perhaps even for a lifetime. Restricted, narrow skills and specific
job design was traditionally the most accepted for job structure. Employees were
proud of the skills they possessed and unions resisted and change in job descriptions.
These rigid occupational demarcations of the past gave a tremendous sense of security
to employees but put limits on the progress of their careers. Time bound promotions,
primarily aimed at giving remuneration and social status, were the norm. Such
promotions did not necessarily change the nature of the work and nor did they indicate
the attainment of higher skills or good performance. They did, however, indicate
seniority. Under such circumstances, any attempt of the management to introduce
changes or induce flexibility in job design met with strong resistance.
In today’s world of ever changing technologies and dynamic market conditions, a need
for multiple tasking and several careers in one’s lifetime is the differentiating factor
between a successful and an unsuccessful enterprise. It is, therefore, imperative that
planners attempt to create a culture that enables smooth technological and process
transitions and makes an organisation flexible and adaptable. The need for continuous
reorganization in order to meet changing business needs requires a flatter and less
hierarchical structure. All these are possible only if the workforce is qualified, skilled,
flexible and in a continuous learning mode. (These are pre-requisites not only for the
organization’s but even for the individual’s survival).
For human resource planners this new environment poses new challenges. Instead of
planning for specific jobs, they have to plan for broad job groups. Strategies for
hiring, training and re-training the workforce should revolve around the broad-based
skills required for a particular job group, rather than around specific occupations. Job
descriptions and performance measures have to be reviewed and revised on a regular
basis. In addition, the planner has to create a flexible, adaptive work culture that will
provide opportunities and stimulate continuous learning.

5.5 BUILDING A CULTURE


Building the right organisation culture is the key concern of a human resource planner.
Some of the cultural imperatives in today’s environment are:
l Flexibility and adaptability of both the enterprise as well as the individuals
working for it.
l Global perspective.
l Obsession with quality.
l Customer orientation.
l People orientation, and
l Creation of a low cost, profitable operation.
Culture is really a way of life for an organisation. It is the sum total of the beliefs,
values and objectives of an enterprise which are manifested through its behaviour. In
today’s turbulent environment, the anchors that an enterprise has are:
l Corporate vision.
l Basic beliefs and values.
l Continuous training and development.
58
l Respect for people. Contemporary Trends in
Managing Demand
l Customer centric orientation. and Supply
A strong culture, which is well internalized by employees and reflected through the
processes and systems, leads to the formation of a truly flexible workforce because the
need to have detailed rules and regulations diminished. A handful of guiding values
provides clarity to employees and helps them know what they are supposed to do in
most situations.
In the absence of a strong culture, employees stay on with an enterprise for the
positions that they hold, the remuneration that they receive and the status that they
enjoy. Any attempt to change this meets with tremendous resistance because the
employee is working for only these reasons. This reduces the flexibility of the
enterprise. Highly culture-driven organisations have employees who work for
the enterprise because of the alignment of values, beliefs and objectives and an
acceptance of all the related processes and systems. This makes the
organisation flexible.
Long-term sustenance of a culture is possible only if it is aligned to the market place
and is customer oriented. Coupled with this, a culture that respects individuals, and
encourages creativity and teamwork is the one likely to stand the test of time.
One cannot attract and retain people only through the attractiveness of the
Compensation and Benefits Plans. Attractive compensation plans coupled with
challenging work and is satisfying work culture is a recipe for attraction and retention.
It is here that the human resource planner has a major role to play, by inducing
management to evolve a culture that supports all the human resource systems and
leads the company to a competitive position in the marketplace.

5.6 PERFORMANCE APPRAISALS


For the human resource planning process to succeed, in any enterprise it is essential
that an effective performance appraisal system be in position to support the various
human resource systems.
A good performance appraisal system should focus on the developmental aspect of an
individual, rather than the evaluation aspect. To this extent, delinking rewards with the
appraisals is essential.
A good appraisal system should achieve the following:
l Provide periodic constructive feedback to the employee on his/her areas of
strengths and areas where improvement is possible.
l Enable the manager and employee to jointly evolve and periodically review the
development plans.
l Should enable the drawing up of objectives in alignment with the company’s
policy, for forthcoming years.
l Enable an employee to comfortably communicate his/her aspirations/
expectations/limitations to management and understand the company’s plans and
management’s expectations of him/her.
One of the major reasons for the failure of appraisal systems is the linkage that exists
between them and annual salary increases and other rewards. Such a linkage vitiates
the healthy developmental climate that ought to be created during appraisal meetings
and counseling sessions.
Another reason for the limited success of appraisals is because of the tendencies of
managers to evaluate the potential of an employee rather than performance.
59
Basics of Human In a large number of enterprises appraisals are an annual feature with all employees
Resosurce Planning evaluated in the course of a month. This drastically brings down the quality of
appraisals. Imagine a manager having a span of control of 10 employees doing 10
appraisals in one month while doing his/her other duties also. Let us look at the
reviewing manager who may have to not only do appraisals of his/her 8/10 direct
reports but also to review appraisals of 50 to 100 employees who may report to his/
her direct reports. Further, the quality of inputs that the Personnel Department can
provide when confronted with a large number of appraisals almost simultaneously
naturally deteriorates. To improve the quality of appraisals it is highly desirable to
spread them throughout the year.
The appraisal system should necessarily be appraisable centered with feedback from:
l Immediate supervisor,
l Customers to whom appraisee caters,
l Peers with whom the appraisee has to team up, and
l Subordinates, who are led by the appraisee.
The absence of systematic feedback from any quarter will render the system
ineffective, since appraisal systems are an important vehicle for career development,
productivity improvement, rationalization of work, etc. which, are all integral parts of
the human resource planning activities. Human resource planners have to continuously
monitor the health of this vital system.

5.7 STAFFING
Staffing is another key area of focus for a human resource planner. Traditional focus,
while staffing or hiring employees, used to be hiring the best possible people, based on
their qualifications, experience and general backgrounds. In today’s dynamic business
climate, however, the focus should be on the following qualities:
l The candidates must possess the knowledge and skills required to perform the job
for which they are being hired.
l Values and beliefs of the candidates should be in conformity with that of the
organisation.
l The candidate should have an open mind and should be adaptable.
l Conceptual skills of a high level are important so that the employee is able to
grasp and learn new processes and technologies with ease.
l The employee should be in the learning mode. The concept of lifelong learning is
extremely important in order to succeed in the competitive environment of
modern days.
l Aspirations and objectives of the employee should be such that they will not
conflict with the organisation.
l In transient organisations creativity is another aspect that the candidates must
possess.
Employment of people who meet the requirements not only of today’s job but also that
of emergent jobs is extremely important.
In order that the enterprise is able to hire the right people, preparation of job
descriptions and performance measures should be coupled with a listing of knowledge
and competencies required for effective performance. The selectors should devise
appropriate tests and direct the interviews in order to identify the qualities listed. The
success of any HR planning process lies in giving adequate lead time to recruiters in
selecting the right persons who will perform well.
60
Contemporary Trends in
5.8 COMPENSATION AND BENEFITS Managing Demand
and Supply
With the increased mobility of labour and crossing of national borders, the need for a
competitive compensation and benefits system is paramount. C&B plans should be
oriented both to attracting as well as retaining key professionals and should be
designed so as to provide considerable flexibility in organisational restructuring.
Multiple grades, catering to various professions, occupations or trades, create
impediments and reduce the ease of organisational restructuring. C&B plans, in
today’s scenario, have to be simple, with minimal classifications to meet broad skills
levels. There should be adequate schemes and processes to enable the corporation to
transfer people from one location to another and one job to another with ease.
Incentives for easy mobility have to be built in.
Rewards should cater to one-time achievements and be short-term in nature rather
than long-term salary increases. Since employees in a fast-changing scenario might
not have the ability to sustain good performance over long durations, recognition
should be in the form of improved assignments, jobs and higher visibility. C&B
professional should design schemes that enable managers to provide rewards and
recognition to good performers at the right time. Empowering managers by
decentralizing the decision-making process is the ‘key’ in today’s competitive
scenario.
Concern over the rentention of employees was never so great in the past as it is today.
Increasing labour mobility, a highly competitive labour market and virtual war
between corporations to attract the right talents is forcing managements to design
“Golden Handcuff” plans. These plans should not be of a very long-term duration
again because of the question of the employee’s ability to sustain his performance. A
plan to retain an employee for four to five years, with the right vesting period is
adequate. Through yearly administration of the schemes the handcuff can always be
extended.
Another challenge that today’s enterprises face is in the selling of C&B plans to
employees. The concept of total compensation, benefits tailor made to meet the
individual’s needs and visibility of the total structure are the keys to success. The
importance of fair play, equity and merit-linked rewards continue to be the
foundations of any successful C&B plan.
In the perspective of a human resource planner the C&B plans become extremely
critical as they have to cater to retention, attraction and flexibility that a human
resource planner is continuously looking for.

5.9 DEALING WITH RELOCATIONS AND


REDUNDANCIES
Some of the major problems that a human resource planner is confronted with are the
issues related to the relocation of staff and dealing with redundancy in the work force.
Redundancies occur due to either of the following:
1. Job getting abolished because of restructuring. These create surplus manpower
that is redundant in the revised context of the business.
2. The changing profile of many jobs is as a result of technology changes,
ultimately causing redundancy of employees, although the jobs themselves may
not get abolished as such.
Relocation is not uncommon in the new competitive context, where business
necessities often require an enterprise to relocate employees from one city to another.
A large number of employees find it difficult to migrate due to various personal 61
Basics of Human reasons. Employees, unions and society at large have always opposed these critical
Resosurce Planning factors in human resource planning. Governments have protected jobs or have made it
difficult for employers to retrench/layoff through legislations. This situation is true of
most under-developed/developing countries, wherein unemployment rates are high. As
a result, the implementation of modern technologies and processes that result in a
shrinkage of the workforce have always met with tremendous resistance.
In this complex situation, employers have to resort to various strategies to manage the
problems of redundancies and relocations. Some strategies adopted by Indian
businesses are listed as follows:
l Employers have reconciled to the fact that they cannot downsize. Surplus
workforce is carried over by the business.
l Wide scale downsizing or even closure of operations, by offering attractive
voluntary separation or voluntary retirement plans.
l Outplacement programmes.
l Investing in retraining the redundant work force, either with a view to absorbing
them in the revised organisation structure or to outplace them.
l Offering incentives and support to the redundant workforce to start their own
enterprises, thus overcoming the problem of surplus labour. Such programmes
include offering of financial assistance. In most such cases, employees take up
distributorship of products or become suppliers of spare parts, stationery etc. to
the origianal enterprise.
The degree of success in handling redundancies and relocation issues depends on the
degree and quality of planning and the extent of communication that the management
has established with the employees and unions. As soon as managements are seen to
be sincere in their efforts to rehabilitate the redundant workforce, unions and
employees usually provide cooperation. The important factors here are:
l Communication.
l Sincerity of efforts to rehabilitate.
l Taking employees and unions into confidence on the reasons for such action.
l Creating a win-win situation for all the parties.
l Being open minded to negotiate/discuss.
l Providing valid reasons for the downsizing.

5.10 HUMAN RESOURCE MEASURES AND AUDIT


In order that the human resource planning process is effective and relevant to the
organisation, a system of periodic review in the form of an audit and the tracking of
business fundamentals, in the form of measures of effective performance of critical
systems and processes, is essential.
Before identification of the measures and system of audit, it is important to determine
the scope and role of the human resource function. The basic management
philosophies set the expectations from the human resource function in an enterprise.
Exhibit 2 illustrates some fo the measures that can be used to evaluate the
performance of the human resource department.
For periodic reviews and audits the following points are important:
1. Alignment of the personnel department’s objectives with the organisation’s
objectives, critical business issues and key success factors.
62
2. Existence of well documented key processes that cater to the needs of the Contemporary Trends in
organisation, especially the key issues. Such processes must have performance Managing Demand
and Supply
measures and improvement plans.
The auditors/reviewers may look at the following areas during the periodic audits/
reviews:
l Does the department have vision, mission and value propositions and are these in
alignment with the organisation’s objectives and values?
l What are the success factors for achieving the departmental objectives and what
are the action plans for these?
l Are the elements of the strategic focus, i.e. the mission, vision and value
propositions oriented to meet customer needs?
l Are the key processes in the department identified? Are the process owners
identified with the process performance measures?
l How is the department structured? Is the structure supportive of the key
processes of the entity and the objectives of the departments?
l What strategies and practices are in place to determine the needs of the
cutomers? What actions are taken to seek feedback, give feedback and to take
corrective actions?
l How are future needs determined? What actions are taken to cater to the
emerging needs?
l What strategies are in place to collect market information, competitive data, best
practices from the environment, etc.? How are corrective actions initiated on the
basis of such data?

l How does the department go about determining the short-term and long-term
plans? How often is the progress reviewed? What are the course corrective
strategies and contingency plans?
Is the depatment effective in its communication processes across the organisation? Do
customers of the department feel involved in the department’s activities and plans?
Does the entity management provide resources and commitment to the human resource
department’s activities?

Exhibit 2: Personnel Measures


Some examples of measures and business fundamental that can be used to assess
the performance of the personnel function:
1. Selection and Recruitment:
(a) Acceptance rates of professional hires
(b) Recruitment cost
(c) Lead time to hire
(d) Percentage of hires from the internal data bank
(e) Performance levels of new hires
(f) Retention rate of new hires
2. Succession and Career Planning:
(a) Number of qualified backups for each key job
(b) Ratio of internal placements to external hires
(c) Internal relocation cost
63
Basics of Human
Resosurce Planning 3. Training and Development:
(a) Training days per employee
(b) Cost of training per employee
(c) Training effectiveness – Relevance – Relevance
– Timeliness
– Application/applicability
4. General:
(a) Employee satisfaction survey rating
(b) Compliances with performance appraisal process
(c) Achievements in affirmative action goals
(d) Span of control
(e) Employee turnover analysis – by department
– by performance levels
– by age group etc.
(f) Ratios of revenue to employees
Ratios of profits to employees
Ratios of output to employees
(g) Availability of well defined job descriptions

From among the various issues that need to be reviewed, critical ones will be the
following:
1. Effectiveness and cost of C&B plans, its competitiveness, packaging and
employee acceptance. System of periodic reviews and revisions. Question of
equity and fair play.
2. Training and development activities, their relevance, timeliness and effectiveness.
3. Employee attitude survey, corrective action plans, periodicity of the surveys,
their relevance, etc.
4. Hiring processes, their cost, quality of hires, etc.
5. Frequency, effectiveness and relevance of the two-way communication processes.
6. Grievance handling systems, etc.
An effective audit and performance measure tracking system will ensure not only that
the human resosurce plans are successfully implemented but also they are relevant.

5.11 TRENDS IN THE LABOUR SUPPLY


Within the population of a country, people above a certain age are considered to be in
the labour force. Of these, a certain number are in employment, the balance being
unemployed. The age at which people are considered to be active in the labour force
varies from country to country. The proportion of the number of people in the labour
force to the total number that are eligible to be in the labour force also therefore varies
from country to country. A variety of factors influence the labour force participation
of the people. Some of these are demographic factors while the others relate to
economic and social conditions which fluctuate ever so often in many countries.

Changes in the Composition of the Population


Are you comfortable with the fact that labour supply of a country can significantly
64 vary with demographic changes taking place over a period of time? For instance, a
decline in the birth rate of a population means that, as these age cohorts reach the age Contemporary Trends in
of being considered part of the labour force, the number of young entrants into the Managing Demand
and Supply
labour market will decrease. Therefore, the labour force participation rate depends to
some extent on the demographic composition of the population at any given time.
When HR planners look at these data, the past labour force data too are important as
the behaviour of the labour force reveals certain trends that allow planners and policy
makers to make projections. For most countries, participation rate for men is higher
than for women and people between the ages of 25 and 54 participate at higher rates
than those younger and older. As mentioned above, significant changes in population
policies may lead to increase or decrease in the birth rate and that will have an
influence on the participation rates.
Subgroup Participation Changes
With increased levels of literacy and policies ensuring of equal employment
opportunities, more women are coming into the labour market thus signalling a
marked change in the participation rates. There have also been changes in
participation rates of various age cohorts. In many developing countries a large
number of young people seek employment and this number has been on the increase.
Similarly, in many countries where there was a decline in birth rates during the 70s
and early 80s, their labour force will be ageing (e.g., Japan and the Peoples Republic
of China).
Labour Force Quality
Examine the labour statistics of your country. You will notice that over a span of
twenty years, participation rates of different age groups in the labour market have
changed considerably.
Level of Education
With increased educational opportunities, there have been great strides in the
educational attainments of those entering the labour market. More high school and
university graduates are entering the labour market. This has an impact on those who
are holding certain jobs. As the educational attainments of those who enter the labour
market increase, those having lower levels of education and already holding jobs in the
labour market will be vulnerable.

Women in the Labour Force


In recent years, there has been a substantial increase in the participation rates of
women in the labour market. If you examine your country’s labour force statistics for
the past two decades (1980s and 90s) this will be evident. In general, the number of
married women in the labour force also has increased. Equal employment
opportunities and more access to education have been two reasons adduced for
increased participation of women in the labour force.

The Older Employee


In order to protect the older worker, countries like the United States have adopted age
discrimination legislation that defines an older employee as one between the ages of 40
and 65. In the US, approximately about 23 per cent of the labour force currently is in
this category. The portion of the labour force is protected because some employers
hold negative stereotypes about older workers.
Therefore, employers may find it difficult to accommodate older employees, firstly
because of such negative stereotyping but also because more qualified younger
persons are available in the labour market. Another reason for employers’ negative
attitudes towards older employees is the assumption that because the employee is older
he is less qualified and less able to adapt. 65
Basics of Human Handicapped Workers in the Labour Force
Resosurce Planning
There are increasing numbers of employees coming into the labour market with
various physical disabilities. You would observe that employers today are more
accommodating than they were a decade or two ago, in employing handicapped
persons. This is partly due to the legislation mooted byUN and affiliated agencies to
afford some relief to the handicapped in the labour market. Many governments have
passed legislation providing a definite percentage of employment opportunities to the
disabled and handicapped. The entry of handicapped persons into the labour market
has seen substantial changes in the facilities that the employers have had to provide to
their work forces.
Even with legislation providing for such employment, many handicapped persons have
had great difficulty finding employment of any kind because employers and fellow
workers believe that they could not do the job or would cause an excessive number of
accidents. Also, as mentioned earlier, employers fear that it will be costly to employ
handicapped workers because infrastructure requirements, such as layout changes,
special work-stations, ramps to replace or in addition to stairs, provision of special
toilets and other such special facilities entail high direct costs, and higher rates of
compensation and insurance.
Have you ever observed people using their faculties to do a particular job? It would
have been quite evident to you that few people use all their faculties on a job. Many
jobs can be found for those who do not possess all their faculties. In two thorny issues
that concern employers, namely, absenteeism and turnover, employers could take
consolation that for handicapped they are normally lower. This may be adduced to two
reasons: the handicapped have had their abilities matched to their jobs better, and most
handicapped workers seem better adjusted to working, with more favourable attitudes
toward work, and thus are better motivated to do a good job.
As you will agree, some handicapped persons are physically or psychologically unable
to undertake any form of work. Some are marginally employable and they can work in
light jobs without much stress and strain. However, for those able to work, it is most
important that you treat them as you would treat other workers. In the case of most
handicapped, they will respond better to fair treatment than to paternalism. All they
want is an opportunity.
We must start perceiving handicapped workers as an asset rather than a libaility. It is
in the interest of your country’s economy that you should perceive them so because
then you would be able to transform them from being a nation’s liabilities to assets. In
general, it is also important to the affected individuals to be able to attain employment
and thus attain economic and psychological independence.

Part-time and Full-time Time Work


Part-time work has increased during the 1980s. Usually, a part-time worker is a
person who works less than the normal rate of 40 hours a week (or whatever the
country’s norm is). To understand well the notion of part-time work, you have to draw
a distinction between voluntary and involuntary part-time employees. A person who is
working part-time because he/she cannot get full-time employment is voluntarily a
part-time employee for whom the position means something different than to a co-
worker who wished for a part-time assignment.
The major groups of part-time workers are:
l Women: Traditionally, with the responsibilities of running homes and child
rearing, more women have preferred to work part-time. Furthermore, some
experts have found that more husbands would rather have their wives work part-
time than full-time.
66
l Student: In developed countries such as the US and UK, a large number of Contemporary Trends in
students between the ages 18–24 enrolled in higher education institutions work Managing Demand
and Supply
part-time. In the US, on the average students work 20 hours a week.
l Retired and older persons: In order to keep active and to supplement any
retirement income or social security payments, a number of older citizens work
part-time. Most of these persons are highly skilled and could serve as training
resources to new recruits.
l Persons with a physical or mental disability: Part-time work is often more
suited for handicapped and disabled persons. In some specific disabilities, only
part-time work enables individuals to work without aggravating their disabilities.
While most part-time work is in the service industries, there are also numerous
opportunities in the retail and wholesale trades and in manufacturing.
In a great number of circumstances, there are many advantages in part-time work for
employees, such as flexibility in scheduling, ability to spend more time with their
families, additional compensation and stabilization of employment. However, for
employers, there are also certain disadvantages, such as part-time work requiring
additional training and record keeping expenses, lack of protection from trade unions
etc. Trade unions sometimes oppose the use of part-timers, viewing them as robbing
work opportunities from additional full-timers who would become their members.

5.12 TRENDS IN LABOUR DEMAND


It is the consumer that determines the demand for labour in any industry. The labour is
employed to produce either goods or services. From time to time consumers change
their preferences, and the volume of demand for particular products and services also
changes, directly affecting the demand for labour.
For you to understand this phenomenon well, take the case of robots or programmable
mechanised systems in manufacturing. The cost of robots over a period time has
become affordable and some of the manual work in many industries is now being
handled by such equipment, for example, welding, painting and other assembly
operations in automobile maufacturing. This has had a profound effect on the demand
for labour in the new plants in certain industries.

Implications for Personnel/HR Activities


If you are engaged in personnel or HR activities in your organisation you would
realise that major trends in the supply and demand of labour concern you. The reason
should be clear to you. However, let me explain it further. When there are changes in
the supply and/or demand, there are opportunities as well as potential problems. In
many countries, low birth rates are causing concern among HR professionals. There
will be a death of young persons in the labour market. At the same time, high levels of
education raise the expectations of people. As a result, certain categories of labour,
such as non-skilled manual workers, would be in short supply. The HR personnel are
called upon to find solutions to problems of this nature. As you have seen earlier in
this lesson, there are many factors influencing the nature of the labour market and HR
personnel will have to be vigilant to address some of the emerging issues.

Succession Planning
What really do you understand by this term? It is basically a plan for identifying
who is currently in post and who is available and qualified to take over in the
event of retirement, voluntary leaving, dismissal or sickness. A typical succession
chart includes details of key management references to their possible
successors. 67
Basics of Human Succession planning is a strategic activity in an organisation. As such it should be
Resosurce Planning managed not as a year round activity but as a year round guide. It is unreasonable to
expect that when a key position opens, it will be filled by the chosen successor and
things will proceed from there. A succession plan, like all other plans, is simply a
plan. Let us go back to the basics to understand the rationale behind plans. A plan is a
set of intentions based on a set of assumptions at a given time. Over time, both the
assumptions and the intentions may change, given new information. In organisations
today, actual succession decisions are made as the need arises based on the latest
information that includes, but is not limited to, the succession plan. Succession
planning should provide a framework in which to make everyday decisions it should
not provide the absolute decisions. With this understanding managers should redefine
their expectations of succession planning and conceive of it as a strategy.
Activity A
As a HRD manager how you deal with relocation and redundancies on account of
technological changes in a company?
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Activity B
Do you think that there is any change in the trends of demand and supply? If so, list
out the major changes that took place in organisations.
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
Assessment Centres
When job vacancies are anticipated, several policy decisions must be made. A basic
one involves the relevant candidate pool. We could limit our discussion to those
already in the organisation, meaning we will only discuss filling the anticipated
vacancy from among internal candidates.
Assessment centres provide a means of systematically gathering and processing
information concerning the promotability (as well as the development needs) of
employees. Such centres provide a more comprehensive approach to selection,
incorporating a range of assessment techniques. Some of the salient features of
assessment centres are as follows:
l Those assessed are usually lower to middle level managers.
l Multiple predictors are used, at least some of which are work samples (for
example, in-baskets, leaderless group discussions).
l The focus of the assessment centre is on behaviour.
l Exercises are used to capture and simulate the key dimensions of the job. These
include one-to-one role-plays and group exercises. The assumption here is that
performance in these simulations predicts behaviour on the job.
l Assessments are made off-side to ensure standarised conditions.
l A number of people (raters) are used to assess or rate the candidates. They are
carefully trained and their ratings are made using standarised formats. Using
68 multiple raters increases the objectivity of assessments.
l Raters must reach consensus on those being assessed wherever possible. Contemporary Trends in
Managing Demand
l Final reports may be used to make decisions about both internal selection and and Supply
employee development, although assessment centre results are rarely the only
input in either area.
l Assessment centres are costly to run, but the benefits have the potential to
outweight these costs by a substantial margin.
Considerable research has been conducted to determine the reliability, validity, and
fairness of the assessment centres (unlike other promotion predictors). Most has been
supportive, inter-rater reliability is generally high, as have been the validity
coefficients.
Although the costs of running assessment centre are high, they can provide real
benefits, indicating the extent to which candidates match the culture of the
organisation. Assessment centres are most appropriate when candidates who are being
considered for jobs with complex competence profiles. A well-operated centre can
achieve a better forecast of future performance and progress than judgements made by
line or even personnel managers in the normal, unskilled way.

Employee Replacement Chart


In an employee replacement chart, the basic information provided is a hierarchical
representation of the positions within an organisation and the names of their current
holders. Also indicated are those who are candidates for promotion to each position.
Present performance is indicated along with the age of each person and through a
coding system each employee’s promotion potential is also indicated.

5.13 SUMMARY
In a traditional sense, staffing planning attempted to reconcile an organisation’s need
for human resources with the available supply of labour in the local and national
labour market. In many organisations, specialist units within personnel departments
may be established to concentrate exclusively on staffing planning. In the current
pursuit of HRM, many organisations appear to be replacing staffing planning with
employment planning, the personnel process that attempts to provide adequate human
resources to achieve future organisational objectives.
All organisations perform HR or employment planning, informally or formally. The
major reasons for formal HR planning are to achieve more satisfied and more
developed employees and more effective equal employment opportunity planning.
HRM theory recognises that the HR department should be an integral part and
member of the business strategy-making body. As time passes, working environment
changes internally as well as externally. HR plans depend heavily on forecasts,
expectations, and anticipation of future events. Planning involves developing
alternatives and contingency plans.
A number of factors will influence what is required of forecasting to assure
satisfactory future staffing. Planners have a choice of employment forecasting
techniques of different levels of sophistication to focus on both the inernal
considerations and the external factors that influence the final outcome of the staffing
plan. However, only a few organisations practice the most theoretical and statistically
sophisticated techniques for planning, forecasting and tracking of employees.
In staffing planning, the manager is concerned with the numerical elements of
forecasting, supply-demand matching and control. HR planning is defined as a long-
term, strategic planning of human resources concerned more with the development of
69
Basics of Human skill, quality and culture change than statistical numerical forecasting, succession
Resosurce Planning planning and hierarchical structure. The term labour market refers to the large number
of changing influences and activities involving labour demand and supply, which,
themselves greatly depend on economic conditions. From the organisation’s point of
view, the numbers and types of employees needed during a given period reflect the
relative demand for labour. The age at which people are considered to be active in the
labour force varies from country to country. A variety of factors influence the labour
force participation of the people.
Part-time work has increased for decades. To understand well the notion of
parti-time work, we have to draw a distinction between voluntary and involuntary
part-time employees.
If you are engaged in personnel or HR activities in your organisation you would
realise that major trends in the supply and demand of labour concern you. Succession
planning is a strategic activity in an organisation. A succession plan, like all other
plans, can change as its determinants change. Many companies are now engaged in
comprehensive career management programmes comprising the three major
components: planning, development and counselling. A typical career planning
involves four major steps. Career development is the process through the action plans
are determined. Career development, therefore, is of significance for both individual
and organisation and for human resource development.

5.14 SELF-ASSESSMENT QUESTIONS


1) Explain the various human resource systems supported through performance
appraisal systems in organisations.
2) Explain the transformational process through social, economic, organisational
and technological changes at workplace.
3) Discuss the role of human resource measures and audit in HRP system.

5.15 FURTHER READINGS


Butler, Ferris & Napier, 1991. Strategy and Human Resource Management. South
Western Publishing Co.
Bell, D.J., 1974. Planning Corporate Manpower. Longman Group Ltd., London.
Rashid Amjad (Ed.) 1987. Human Resource Planning – The Asian Experience – ILO.
Asian Employment Programme, (ARTEP), New Delhi.
Tom Peters, 1993. Liberation Management: A Fawcett Combined book. Balantine
Books.
Udesh Kohli & Vinayshil Gautam (Eds), 1988. Human Resource Development and
Planning Processes in India. Vikash.
Vicki Elliot & Anna Orgera, Competing for and with Workforce – 2000. H.R.
Publication, June 1993.

70
Job Analysis
UNIT 6 JOB ANALYSIS
Objectives
After going through this unit, you should be able to understand:
l the concept of job analysis and its significance to the organisations,
l the different methods of collecting information for job analysis, and
l job-anlaysis and its relationship vis-a-vis job description and job specification.

Structure
6.1 Introduction
6.2 Job Analysis
6.3 Some Considerations
6.4 Method of Collecting Information
6.5 Job Analysis: Process
6.6 Steps in the Job Analysis Process
6.7 Job Description
6.8 Design of Job Description
6.9 Uses of Job Description
6.10 Job Specification
6.11 Summary
6.12 Self-Assessment Questions
6.13 Further Readings

6.1 INTRODUCTION
Organisation is described as a rational coordination of the activities of employees
through division of labour, responsibility, authority and accountability. Built in this
description is the realisation that organisations perform a series of activities and that
to perform these activities different kinds of skills are required. Each activity carries
its own set of responsibilities and the employees are given appropriate authority to
perform these activities. Not only this, they are also accountable to the organisation
through their immediate supervisors for accomplishing these activities according to
specifications. Hence, a clear understanding of what they are supposed to do becomes
a pre- requisite for effective utilisation of organisational resources. Job analysis helps
us to achieve this objective.

6.2 JOB ANALYSIS


There exists a wide range of job evaluation methods. The choice of an evaluation
method is dependent on the number and kind of jobs to be evaluated, the cost of the
operation, available resources, the degree of precision required and the organisations’
environments- both internal and external. However, whatever be the chosen method,
systematic gathering and analysis of information about jobs is a prerequisite. The job
analysis process involves gathering of such information.

5
Approaches to Job analysis is the process by which data, with regard to each job, is systematically
Analysing Job observed and noted. It provides information about the nature of the job and the
characteristics or qualifications that are desirable in the jobholder. The data from job
analysis could be used for a variety of purposes. The job analysis study attempts to
provide information in seven basic areas:
1. Job Identification or its title, including the code number, if any.
2. Distinctive or significant characteristics of the job, its location setting, supervi-
sion, union jurisdiction, and hazards and discomforts, if any.
3. What the typical worker does: Specific operations and tasks that make up the
assignment, and their relative timing and importance; the simplicity, the routine,
or complexity of tasks, responsibility for others, for property, or for funds.
4. What materials and equipment the worker uses: Metals, plastics, grain, yarns;
and lathes, milling machines, electronic ignition testers, corn huskers, punch
presses, and micrometers are illustrative.
5. How the job is performed: The emphasis here is on the nature of operations, and
may specify such operations as handling, feeding, removing, drilling, driving,
setting up, and many others.
6. Required personnel attributes: Experience, training apprenticeship, physical
strength, coordination or dexterity, physical demands, mental capabilities,
aptitudes, and social skills are some attributes.
7. The conditions under which the work is performed: Working conditions and
work environments is a major contributing factor in the performance of the job,
and the satisfaction of the employee. A dimly highlighted, poorly ventilated and
crowded place of work hampers efficiency. The workers are forced to spend
more energy to accomplish tasks, which they can do, in much lesser efforts in
otherwise conditions. Poor working conditions have been found to cause greater
fatigue, negligence, absenteeism, indiscipline and insubordination among the
employees.
Each of these piece of information is essential; it is not sufficient to merely list a
series of tasks or duties, because each piece of information is used in determining the
level of work and responsibility and the knowledge, skill and abilities needed to
perform them to an acceptable level of proficiency.
The process of assembling and recording information on such essential
characteristics of jobs is known as job analysis. In other words, jobs are subjected to
analysis to find out precisely what the duties, responsibilities, working environment
and other requirements of a job are and to present these in a clear, concise and
systematic way. Job analysis should be undertaken by trained job analyst working in
close collaboration with managers and jobholders.
Before proceeding further, certain terms used in job analysis and related stages in the
job evaluation process need to be clarified.
Element: The smallest unit into which work can be divided.
Task: A distinct identifiable work activity, which comprises a logical, and
necessary step in the performance of a job.
Duty: A significant segment of the work performed in a job, usually
comprising several tasks.
Post (or): One or more duties, which require the services or activities of one
worker for their performance;
Job: A group of posts that are identical or involve substantially similar tasks.
Occupation: A group of jobs similar in terms of the knowledge, skills, abilities,
training and work experience required by workers for their successful
6
performance.
Job Analysis
6.3 SOME CONSIDERATIONS
Job analysis might give the impression that while identifying components of job, we
are looking at everything that concerns the job. However, in analysing the job,
following considerations must be kept in mind:
1. Job analysis is not a one-time activity. Jobs are changing continuously. What
was a job yesterday is not the same job today and would not remain the same in
future. These changes are caused by changing technology, competition, chang-
ing profile of the workforce, changing expectations of end users and a host of
other factors. Hence, analysis must be continuously done to update the nature of
job.
2. The Job and not the person—an important consideration in job analysis is
conducted of the job and not of the person. While job analysis data may be
collect from incumbents through interviews or questionnaires, the product of the
analysis is a description or specifications of the job, not a description of the
person doing the job.
3. All activities relating to job analysis give us only the minimum requirements of
the job. No analysis can identify either the ultimate or full and complete require-
ments. What it does is simply highlights what are minimum activities that are
entailed in a job. The reason is simple. No one can foresee the final outcome
because of changes taking place in the nature of job.

6.4 METHOD OF COLLECTING INFORMATION


There are several ways in which information about a job can be collected. In order to
have a full understanding of the job contents, a number of sources should be
explored. By and large, the following sources are generally used.In all the following
three methods, verification of the information collected from the holder of the job is
necessary. Very often, while collecting information people tend to describe those
aspects of the job that they are not doing or would like to do. Hence, after the
information has been collected from the employee, an interview with immediate
supervisor must be conducted to verify the authenticity of the information.

1. Job Questionnaire
To make a start, a job questionnaire could be administered to all concerned
employees asking them about the job, its various components, time spent on each of
them, and so forth. The completed questionnaire could be given to the supervisors for
their comments. In some cases, job-reviewing committees are formed, consisting of
union representatives and specialists from the personnel, work-study, or industrial
engineering department.The questionnaire has the following advantages:
1. First of all, it is the most cost effective method, since it can elicit information
from a wide number of workers and their immediate superiors in a relatively
short period of time. The main task of the analyst becomes one of planning the
questionnaire well and checking the responses provided.
2. Secondly, workers take an active part in completing the questionnaire providing
intimate detailed knowledge of their jobs, which is not available elsewhere.
3. Thirdly, the questionnaire has to be structured in advance, and this facilitates the
processing of the results.
4. In some cases, once the responses to the questionnaire have been verified, they
can conveniently be used with little further processing to prepare a job
description. 7
Approaches to The questionnaire method however has the following disadvantages:
Analysing Job
1. To start with, the people required to complete it must have a certain level of
education; and even then, questions may be interpreted in different ways so that
the answers may be beside the point.
2. Furthermore, not everyone is able to describe fully and exactly the task that
constitute their job. One may, for example, over-emphasise some features of it
and completely ignore others when they are important.
3. There is less risk of this with a detailed questionnaire that includes a checklist of
points, questionnaire suited to all jobs is not easily drawn up and may be unduly
long.
In practice, while a well-structured questionnaire can get essential information
quickly, it is virtually impossible to get complete comparable information solely by
questionnaire, and this method is generally used in combination with interviews and
direct observation.

2. Interview
In practice, an interview is almost always necessary in order to obtain precise,
complete and comparable information. The interview conducted by the analyst is an
effective way of checking on the information already available on job. The analyst
asks the jobholders questions on the duties and main tasks of their job, generally
working from a previously prepared list of questions as with a questionnaire. After
the interview, the analyst draws up a report, which is shown, to the jobholder and his
immediate superior for their approval. The analyst usually drafts the report in the
form of a job description, which effectively speeds up the preparatory work of job
evaluation.
Following are some of the disadvantages of this method:
1. Interviews are time consuming. At least an hour or two may be necessary for
each case, plus the time spent by the analyst in drawing up his report and by the
jobholder and his immediate superior in checking it. In a large enterprise a team
of analysts would be necessary.
2. The main difficulty of the interview lies in finding high quality analysts who
can win the jobholder’s confidence. As has been noted, “ too many imagine
interviewing to be relatively simple whereas nothing could be farther from the
truth.” Obtaining information from a jobholder about his job is difficult.
3. Many workers show a natural distrust of the analyst who comes to examine their
work, while others will give a lot of information, much of it useless. It is
accordingly essential to have a well trained and experienced team of analysts if
the interview is to be the only method used.
However interview has some advantages:
1. Interview does provide in- depth information, which cannot be achieved through
any other method.
2. It also helps in collecting data about tasks that are not part of the job and yet the
jobholder has to do it.
3. At the same time it can also help in finding ways and means to simplify some of
the operations involved in the job.

3. Observation
For jobs of a simple and repetitive nature, the observation technique could provide
adequate information on the job being performed. A clear picture may be obtained
8 regarding the working conditions, equipment used, and skills required. Although all
jobs could be usefully observed, this technique alone is not enough for more complex Job Analysis
jobs, especially those that have many components or interactions.
Some advantages of this method are:
1. It is most suitable for simple and repetitive jobs.
2. Direct observation by the analyst can clear up points left unclear by other
methods.
At the same time, some of the disadvantages of this method are:
1. The presence of analyst causes stress. The workers may dislike being observed.
2. The jobholders may purposely reduce the pace of activity to justify overtime.
3. Observation cannot be a suitable method where the job calls for considerable
personal judgment and intellectual ability.
4. It may not take into account all the tasks in a work cycle stretched over a week
or a month.

4. Independent observers
In addition to the employees themselves providing information about the jobs they
are doing, trained observers could also be used to supplement the employees’ data
and to discover inadequate performance in “ crucial tasks”, which would lead to job
failure.
In addition there are some not so often used method of job analysis. Some of them
are presented here:
1. Diary: One or more incumbents are asked to keep a diary of duties noting the
frequency of the tasks performed. These diaries then become the basis for doing
job analysis.
2. Critical incidents: Ask one or more incumbents to brainstorm (if there is only
one person you will have to participate in the brain storming) about critical
incidents that happen routinely and infrequently while working. Separate these
into two lists. Generate one list of incidents indicating good or excellent perfor-
mance and one, which indicates poor performance. This approach is excellent
for determining training and selection strategies. The results lend themself to
meeting discrimination complaints concerning selection choices where the
person chosen clearly possesses the skill and knowledge to perform the most
critical duties indicating success on the job. The analyst will have to extrapolate
a list of duties to be performed from the incidents.
3. Photo tape recording of job performance: This is a good approach because it
can be watched over and over again to perform analysis and because it can be
pulled out later to re-evaluate. Having such a tape is excellent source for
undertaking job analysis.
4. Review of records: Records of work such as maintenance requests is reviewed
and a list of requested repairs is made. In this situation it is important to take
representative samples so that seasonal variations in work requests do not
mislead. This is a good approach for such jobs as mechanic or electrician. The
kinds of repairs being performed and, thus, the duties being performed most
often can be itemized. However, this approach could also be used for computer
programming and computer trouble-shooting jobs in which incumbents have
records of work requests or work competed.
The data to be gathered by all these methods is dependent in large part on the purpose
the analysis is to be put to. Information about training needs requires information
about the transaction of the work so that the trainer can determine the critical skills
and knowledge that must be improved. Selection decisions require the same
information usually on a broader scale. A lot of information can be inferred from 9
well-written task statements.
Approaches to Some of the examples of the kind of data, which can be gathered for job analysis, are
Analysing Job given below.
l List of tasks
l List of decisions made
l Indication of results if decisions are not made properly
l Amount of supervision received
l Supervision exercised
l Kind of personnel supervised
l Diversity of functions performed by supervised staff
l Interactions with other staff (description of the staff interacted with)
l Physical conditions
l Physical requirements (For instance how heavy are the objects that are lifted.
How much stooping and bending is conducted and under what conditions)
l Software used
l Programming language used
l Computer platform used
l Interpersonal contacts with outsiders (customers)
l Interpersonal persuasive skills or sales skills
l Amounts of mental or psychical stress
l Necessity to work as a team member
l Needed contributions to a work group
l Authority or judgment exercised
l Customer service skills
Generally, it is preferable to use a combination of several methods to get information
about the job. One method could well supplement the other, where the objective is to
gain as much information as possible about the job, the crucial tasks, and the
essential qualifications required to perform them satisfactorily. An objective data
gatherer would avoid introducing his own ideas, and also avoid describing the
employees performing the job, rather than the “job” itself, for many of the
employee’s personal traits may have little or no relevance to the job.

6.5 JOB ANALYSIS: PROCESS


To be meaningful and useful for personnel related decision-making, job analysis must
be carried more at frequent intervals. Jobs in the past were considered to be static and
were designed on the basis that they would not change. While people working on
these jobs were different, the jobs remained unchanged. It is now realised, that for
higher efficiency and productivity, jobs must change according to the employees who
carry them out. Some of the major reasons leading such change are:
Technological Change: The pace of change in technology necessitates changes in the
nature of job as well as the skills required. Word processing has drastically changed
the nature of secretarial jobs. Computerization and automation likewise give rise to
new requirements of certain jobs while older requirements become redundant.
Union- Management Agreements: The agreements entered between management and
the union can bring about change in the nature of job, duties and responsibilities. For
example, under employees participation scheme, the workers are encouraged to
10 accept wider responsibilities.
People: Human beings are not robots; each employee brings with him his own Job Analysis
strengths and weaknesses, his own style of handling a job and his own aptitude.
There is a saying that the job is what the incumbent makes of it.
Thus, the job analysis process must take into account the changing nature of job on
account of the factors listed above. Often, role analysis techniques are used in dealing
with the dynamic nature of job requirements.

6.6 STEPS IN THE JOB ANALYSIS PROCESS


The major steps to be followed in carrying out job analysis in an on-going
organization are given below:
1. Organization Analysis: The first step is to get an overall view of various jobs in
the organisation with a view to examine the linkages between jobs and the
organisational objectives, interrelationships among the jobs, and the contribu-
tion of various jobs towards achieving organisational efficiency and effective-
ness. The organisation chart and the work flow or process charts constitute an
important source of information for the purpose.
2. Uses of Job Analysis Information: Depending on organisational priorities and
constraints, it is desirable to develop clarity regarding the possible uses of the
information pertaining to job analysis. In the previous pages it has been already
indicated that such information could be utilised practically for all personnel
functions. Nevertheless, it is important to focus on a few priority activities in
which the job analysis information could be used.
3. Selection of Jobs for Analysis: Carrying out job- analysis is a time- consuming
and costly process. It is, therefore, desirable to select a representative sample of
jobs for purposes of analysis.
4. Collection of Data: Data will have to be collected on the characteristics of job,
the required behaviour and personal attributes needed to do the job effectively.
Several techniques for job analysis are available. Care needs to be taken to use
only such techniques, which are acceptable and reliable in the existing situation
within the organisation.
5. Preparation of Job Description: The information collected in the previous step
is used in preparing a job description for the job highlighting major tasks,
duties, and responsibilities for effective job performance.
6. Preparation of Job Specification: Likewise, the information gathered in step (4)
is also used to prepare the job specification for a job highlighting the personal
attributes required in terms of education, training, aptitude and experience to
fulfil the job description.
Job Analysis thus carried out provides basic inputs to the design of jobs so that it is
able to meet the requirements of both the organization (in terms of efficiency and
productivity) as well as the employees (in terms of job satisfaction and need
fulfilment). Developing appropriate job design is then the outcome of the job analysis
process.
The most important use of job analysis is to produce a basic job description of what
the job is to facilitate basic human resource problem solving. The second is to
provide employees and supervisors with a basic description of jobs describing duties
and characteristics in common with and different from other positions or jobs. When
pay is closely associated with levels of difficulty these descriptions will help foster a
feeling of organisational fairness related to pay issues. Other important uses of job
analysis are given below:
l Indicate training needs
l Put together work groups or teams 11
Approaches to l Provide information to conduct salary surveys
Analysing Job
l Provide a basis for determining a selection plan
l Provide a basis for putting together recruitment
l Describe the physical needs of various positions to determine the validity of
discrimination complaints
l As part of an organisational analysis
l As part of strategic planning
l As a part of any human relations needs assessment
l As a basis for coordinating safety concerns
Job analysis is indeed an essential part of any modern human resource management
system. The kind of information gathered through job analysis varies considerably
depending upon the specific uses to be made of it. Accordingly, job analysis
programmes are usually tailor-made for the specific purpose.

Activity A
“Smaller organisations do not need job analysis for their jobs because most of their
employees conduct a myriad of activities, too far-reaching for a standard job
analysis”. Give your view point.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................

Activity B
Discuss the sources of errors in your own organisation or any organisation you are
familiar with, that can distort or render job analysis information inaccurate.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................

6.7 JOB DESCRIPTION


Data collected for job analysis provides the basis for preparing job description. It
refers to the job contents and the expectations that an organisation has from its
employees. Job descriptions usually outline the minimum requirements of jobs for
many reasons:
1. First, despite all the attempts, a perfect and fully inclusive job description is not
possible. In fact, as one moves up in the hierarchy of an organisation, a detailed
job description becomes very difficult.
2. Secondly, most organisations would prefer not to describe the job fully, if it is
possible, because employees would then stick to what has been described and
would not do anything beyond it.
3. Thirdly, if a job were fully described, supervision would automatically be taken
care of by the duties performed, making some of the duties of the supervisory
staff redundant.
4. Fourthly, technology is changing fast and hence the nature of job is also chang-
ing. Unless an organisation continuously updates the job description, it would
12 be difficult to monitor the performance of the employees.
Job Analysis
6.8 DESIGN OF JOB DESCRIPTION
A primary output or result of job analysis is job description. Information obtained by
job analysis is shifted and recorded concisely, clearly and fully in the job description.
The job description must assemble all the important elements of a job, such as
essential tasks, responsibilities, qualifications required and the functional relation of
the job to other jobs.
There is no universally accepted standard format for job descriptions for the reason
that the form and structure of the job descriptions must depend on the kind of work
being analysed and the job evaluation plan being used. For example, if the job
evaluation form comprises factors such as physical and intellectual effort,
knowledge, skills, responsibilities and working conditions, it follows that job
description should be structured to reflect these factors so as to facilitate factor by
factor comparison and evaluation of the jobs. With non- analytical methods, job
description may be more flexible and simpler but most specify the title of the job and
its position in the organisation, summarises the tasks performed and list the skills and
abilities required.
It is helpful to follow the following guidelines when writing a job description:
1. Always be accurate about what is expressed.
2. Omit expressions which are attributes— such as uninteresting, distasteful, etc.
3. Personal pronouns should be avoided— if it is necessary to refer to the worker,
the word “ operator” may be used.
4. Do not describe only one phase of the job and give the impression that all
phases are covered.
5. Generalized or ambiguous expressions, such as ‘prepare’, ‘assist’, ‘handle’ etc.
should be omitted unless supported by data that will clarify them.
6. All statements should be clearly defined and simply set down- promiscuous use
of adjectives only reflects one’s own opinion.
7. Describe the job as is being done, by the majority of workers holding the
designation.
8. Write in simple language— explain unusual technical terms.
9. Description of a job, which is part of teamwork, should establish the team
relationship.
10. The length of description is immaterial; it is not expected even with printed
forms that all job descriptions should be of equal length but write concisely.
11. When the job analyst finds that the data he has to work with is insufficient, s/he
should stop until sufficient data is available.
12. Put the date of completion of each description and revise it as often as changes
in jobs and occupation require.
13. Job description should have the concurrence of the concerned supervisor.
14. Description should contain the initials of the persons who compile them.

6.9 USES OF JOB DESCRIPTION


Apart from being a basis for job evaluation, the job descriptions can be put to many
uses. They are as under:
1. Supervisor- Employee Communication: The information contained in the job
description outlines the work, which the incumbent is expected to perform.
13
Approaches to Hence, it is an extremely useful document for both the supervisor and the
Analysing Job subordinate for purposes of communication. Furthermore, it helps employees to
understand just what work their associates are expected to perform, thus,
facilitating integration of efforts at the work site by the employees themselves.
2. Recruitment, Selection, Promotion, Transfer: Information pertaining to the
knowledge, skills and abilities required to perform the work to an acceptable
standard, can be used as a sound basis on which to base standards are
procedures for recruitment, selection, promotion and transfer.
3. Work Performance Appraisal: To be sound and objective, a performance
appraisal system must be rooted in the work performed by the employee; such
work is indicated by the duties in the job description. In such an approach, using
each duty as the basis for discussion, the employee and the supervisor agree on
work performance goals for the period to be covered by the subsequent
evaluation report; they also agree on the criteria to be used to determine the
extent to which the goals have been attained. The reports resulting from this
methodology minimize subjectivity by focusing attention on the job, as distinct
from the personality traits, habits or practices of the employee. As a conse-
quence, the results are more factual; valid and defensible than is the case in
other types of systems.
4. Manpower Planning, Training and Development: These three processes are
closely interrelated. The job description showing, in specific terms, the
knowledge, skill and ability requirements for effective performance of the
duties, is a sound and rational basis for each of these processes. Analysis of
various types of jobs at progressively more senior levels will indicate logical
sources of supply for more senior posts, as part of manpower planning. It will
also indicate the gap to be bridged in terms of knowledge, skill and ability, thus
providing a sound basis for preparing job- related training and development
programmes.
5. Industrial Relations: Frequently, issues arise in the industrial relations field,
which have their origin in the work to be undertaken. In these instances the job
description may be used to form a factual basis for discussion and problem
resolution.
6. Organization and Procedure Analysis-The duties and responsibilities outlined in
the job description may be used to a great advantage by management in
analysing organisation and procedures, because they reveal how the work is
organised, how the procedure operate and how authority and responsibility are
appointed.
A Job Description should include a:
1. Job Title: It represents a summary statement of what the job entails.
2. Job Objective or Overall Purpose Statement: This statement is generally a
summary designed to orient the reader to the general nature, level, purpose and
objective of the job. The summary should describe the broad function and scope
of the position and be no longer than three to four sentences.
3. List of Duties or Tasks Performed: The list contains an item-by-item list of
principal duties, continuing responsibilities and accountability of the occupant
of the position. The list should contain each and every essential job duty or
responsibility that is critical to the successful performance of the job. The list
should begin with the most important functional and relational responsibilities
and continue down in order of significance. Each duty or responsibility that
comprises at least five percent of the incumbent’s time should be included in the
list.
14
4. Description of the Relationships and Roles: the occupant of the position holds
within the company, including any supervisory positions, subordinating roles Job Analysis
and/or other working relationships.

6.10 JOB SPECIFICATION


Workload analysis helps in identifying the minimum qualification needed to perform
a particular job. These may include academic qualifications, professional
qualifications, age, years of experience, relevance and nature of previous experience,
and other skills and attitudes. They form the minimum eligibility requirements, which
the candidate must have, for the appointment to a job. A clear indication of
specifications helps in generating eligible applications, because of self-selection. The
candidates who do not possess those qualifications do not apply. On the other hand,
lack of clear- cut specifications may generate a large number of applications, leading
to high costs, in terms of man-hours, in processing them.
There is a great deal of disagreement with regard to developing complete and correct
job specification unlike the job description, which provides more objective
assessment of job requirements. The decision to specify minimum human
requirements for a job is a difficult one as it involves considerable degree of
subjectivity. There is a general feeling that organisations generally tend to establish
relatively high requirements for formal education and training, resulting in a situation
where highly qualified people end up doing jobs of routine nature. Particularly, in
India, highly qualified personnel are recruited for jobs where their abilities, skills and
knowledge are under- utilized.
Despite these problems, however, minimally acceptable human requirements need to
be specified for various jobs and category of jobs. The format for job specification
should include the following items:
l Position Title
l Education/ Training
l Experience
l Knowledge
l Abilities
l Skills
l Aptitude
l Desirable Attributes
l Contra-indicators, if any.
From job analysis to jobless world
Job enrichment means redfining in a way that increases the opportunities for workers
to experience building of responsibility, achievement, growth and recognition by
doing job well.
l Analysing together the job
l Establishing client recognition
l Vertical loading
l Job-Sharing
l Flexible job doing pattern etc.
l Open feedback channels.
Whether specialised, enlarged or enriched, workers skill generally like to have
15
Approaches to specific job to do and the job require job descriptions. But in the emerging
Analysing Job organisation today jobs are becoming more amorphous and more difficult to define.
In other words the trend is towards “do-jobbing in many modern organisation.

6.11 SUMMARY
Job Analysis is the process of job-related data. The data collected will be useful for
preparing job description and job specification. Job description lists job title, duties,
machines and equipment involved, working conditions surrounding a job and the
like. Job specification lists the human qualifications and qualities necessary to do the
job.
Job analysis is useful for HRP, recruitment and selection, training and development,
job evaluation, remuneration, performance appraisal, personnel information and
safety and health programmes. It also aides analysis of the organisation structures and
the work systems/procedures and contribute towards improving the productivity of
the organisation.
A logical sequence to job analysis is job design which is nothing but organisation of
tasks, duties and responsibilities into a unit of work.

6.12 SELF-ASSESSMENT QUESTIONS


1. What do you mean by job analysis? Explain the process of job analysis.
2. Explain various methods of collecting information for job analysis.
3. Define job description. Explain the uses of job description.

6.13 FURTHER READINGS


Aswathappa, A. (2002) Human Resource and Personnel Management: New Delhi:
Tata McGraw.
Beddoe Robin Forbes (1988). How to prepare a job evaluation: Job Description,
Working Time Analysts.
Burns, M (1978). Understanding Job Evaluation, Institute of Personnel Management,
London, IPM.
ILO (1986), Job Evaluation, ILO, Geneva.
Morris, J. Walker (1973). Principles and Practice of Job Evaluation, London,
Heinemann Halley Court, Jordan Hill, Oxford.
Peterson T.T(1972). Job Evaluation: A manual for Peterson Method. Vol 2, London,
Business Books.
Saiyadain, M.S(2003) Human Resource Management (3rd ed), New Delhi: Tata
McGraw
US Civil Service Commission (1976): Job Analysis. Washington D.C: U.S.
Government Printing Press.

16
Changing Nature
UNIT 7 CHANGING NATURE OF ROLES of Roles

Objectives
After going through this unit, you will be able to understand:
l the concept of role, the need and significance of roles,
l the various approaches to role definition, and
l the factors leading to changes required in role description.

Structure
7.1 Introduction
7.2 Role Description
7.3 Kinds of Roles
7.4 Need for Role Descriptions
7.5 Uses of Role Descriptions
7.6 Changing Roles: Approaches
7.7 The Changing World of Work
7.8 Factors Contributing to Role Changes
7.9 Role Expectations
7.10 Summary
7.11 Self-Assessment Questions
7.12 Further Readings

7.1 INTRODUCTION
The concept of role and changes taking place in roles can best be understood in the
context of the expectations an organisation has with its employees.
An organisation can be described as the rational coordination of the activities of a
number of people for the achievement of some common objective through division of
labour, hierarchy of authority and accountability. Such a description highlights the
following ingredients of organisations:
1. Organisations are rational entities. This means that they have clearly defined
goals and most economic means to achieve these goals. Rationality demands
maximisation of returns on minimum investment.
2. Organisational goals must be equally understood, shared, and subscribed to by
all the employees in the organisation.
3. A single person does not make an organisation. It requires a minimum of two or
more persons to fulfil the requirements of coordination.
4. One person cannot do all the roles of the organisation; hence these have to be
done through division of labour and function. Each individual has a clearly
defined responsibility that is non-overlapping. Along with responsibility comes
the authority to complete the role.
5. For every individual in the organisation there is an immediate supervisor.
Subordinates are accountable to their immediate supervisor. This is true for all
the levels in the hierarchy except the very top-level employee who does not
have a structurally defined supervisor and the very bottom level employee who
17
does not have subordinates.
Approaches to Given this general description of organisation, roles that are clearly defined play a
Analysing Job significant part in accomplishing the goals of the organisation. Roles can be seen in a
variety of ways.

Role and Role Dynamics


A role is a set of expectations associated with a job or a position. When roles are
unclear or complicated performance problem can occur. Role ambiguity occurs when
some one is uncertain about what is expected of him or her. To do any job; the people
need know what is expected of them. Role clarity is important for every member of
the group, but that is more important for new members. Role ambiguity creates
problems and the whole efforts is either wasted or of appreciated.
Expecting too much or too little may create problem. Role overload occurs when too
much is expected and individual feels overloaded with work/responsibility. Role
underload occurs when too little is expected and the individual feels underutilized
therefore, a balanced and realistic role load is expected.
Role–conflict occurs when a person is unable to meet the expectations of others. The
individual understands what needs to be done but for some reasons can not comply.
The resulting tension can reduce job satisfaction, affects both work performance and
the relationship with other groups members. The Common forms of role conflict are:
1. intra sender role-conflicting which occurs when the same person sends conflict-
ing expectations.
2. inter sender role-conflict occurs when different people send conflicting expecta-
tions.
3. Person–Job–conflict-occurs when one’s personal values & needs come into
conflict with role expectations.
4. inter role conflict occurs when the expectations of two or more roles held by the
same individual becomes incompatible–such as conflict between work & family
demands.
One way of managing role-dynamics in any group or work setting is the role-
negotiation. This is the process through which individual negotiat to clarify the role
expectation each holds for the other.

7.2 ROLE DESCRIPTION


Well-written role descriptions define the work of the organisation and its reasons for
existence as an employer of human resources. Moreover, they define and help
quantify the relative importance of work, what each position contributes to a process
and the organisation as a whole. This definition illustrates an important point
regarding role descriptions. Used in today’s work environment, they describe not
only what the role is all about but also how it contributes to the work of the
organisation. They describe the nature of the work to be done by stating the purpose
and main responsibilities. They may also include information on the type of person
who is best suited to perform the job. Role descriptions are a valuable resource. They
have the potential to be a useful organisational tools, however, to realize their
potential they must be properly monitored. There are two main types of role
descriptions, the generic or general and the specific or individual.
Generic role descriptions are written in broadly stated general terms without
identifying specific responsibilities, requirements, purpose and relationships. Some
organisations use generic role descriptions for the same level within an organisation.
For particular positions an additional duty statement may be developed.
18
Specific role descriptions provide information on all essential responsibilities Changing Nature
assigned to the person performing the role. They are usually quite detailed and of Roles
comprehensive.
Following are some of the important ingredients of roles:
1. A role description must be accurate but not a minutely detailed list of an
employees tasks and duties.
2. Role descriptions are meant to be a guide only staff must not interpret them
rigidly or role descriptions become a barrier to success they are just a ‘map’ that
shows direction.
3. Roles may indicate the authority that the employee must be provided to
accomplish the role expectations.
4. Roles may also specify the areas of accountability.
5. Roles accomplishment or otherwise may become the basis for rewarding or
reprimanding the employees.

7.3 KINDS OF ROLES


In the late 1960s, a graduate student at MIT, Henry Mintzberg, undertook a careful
study of five executives to determine what they did in their jobs. Based on his
observations of these executives, Mintzberg concluded that they perform ten highly
different but interrelated roles, or sets of behaviours, attributable to their roles. These
ten roles can be grouped as being primarily concerned with interpersonal
relationship, the transfer of information, and decision-making. The three groups and
specific roles within each of the groups are given below:
1. INTERPERSONAL– Following three roles are included in this group:
a) Figurehead: Symbolic head, required to perform a number of routine duties
of a legal or social nature;
b) Leader: Responsible for the motivation and direction of subordinates, and
c) Liaison: Maintains a network of outside contacts who provide favours and
information.
2. INFORMATIONAL– Following three roles are included in this group:
a) Monitor: Receives wide variety of information; serves as nerve center of
internal and external information of the organisation;
b) Disseminator: Transmits information received from outsiders or from other
subordinates to members of the organisation, and
c) Spokesperson: Transmits the information to outsiders on organisational
plans, policies, actions, and results; serves as experts on organization’s
industry.
3. DECISIONAL– Following four roles are included in this group:
a) Entrepreneur: Searches organisation and its environment for opportunities
and initiates projects to bring about change;
b) Disturbance handler: Responsible for corrective action when organization
faces important, unexpected disturbances;
c) Resource allocator: Making or approving significant organisational
decisions, and
d) Negotiator: Responsible for representing the organisation at major

19
Approaches to negotiations.
Analysing Job

7.4 NEED FOR ROLE DESCRIPTIONS


An accurate and detailed role description is increasingly becoming a crucial
component of the effective use of valuable human resources in libraries and other
organisations. It is needed because of the following reasons:
1. The primary function of a role description is as a communication tool. It effec-
tively communicates a great deal of information about a role, especially between
the manager and employee.
2. When employees have a road map to success they often perform much better
and that translates into continued business growth for the organisation.
3. They include reporting relationships; skill requirements; major responsibilities;
where the role fits into the organisation and what is required of the position.
This allows them to use the information in relation to many human resource
functions such as recruitment, induction, training and performance management.
4. Well-written role descriptions also provide information to prospective employ-
ees about organisational expectations of a particular role. This aids in attracting
and retaining employees who know about the culture of the organisation and
what is expected of them.

7.5 USES OF ROLE DESCRIPTIONS


Role descriptions have the potential to be used for a number of human resource
functions. Some of these are given below:
1. Selection and recruitment: Role descriptions may be used to advertise roles,
screen applicants, develop questions for the role interview and identify essential
and desirable criteria.
2. Induction and orientation: Role descriptions provide a good introduction and
overview of the role, which enables the employee to understand what the
organization expects of them.
3. Role descriptions allow the employee to see where they fit into the big picture
of the organisation, and how their role contributes to the organisation.
4. Role descriptions may identify initial training requirements for a new employee.
If they are included in a performance management system they may be used as
an aid in identifying training to improve performance or additional training
needed as a result of changing responsibilities.
5. Role descriptions are the foundation of an effective performance management
system and are used in conducting performance reviews or role evaluations.
6. A study of role descriptions can help employees determine what qualifications,
experience and skills are needed to apply for different positions within the
organisation. This information can then be used in career planning or
development.
Additionally they can be used for the following purposes:
1. Orienting new employees on what their subordinates and bosses do
2. Analysing work flows and methods
3. Mentoring the employees
4. Dealing with industrial relations
20 5. Job restructuring
6. Organisational and personal goal setting
7. Conducting an organisational audit Changing Nature
of Roles
8. Defining or reviewing organisational structure
9. Measuring accurate salary administration
10. Quickly preparing substitute workers or temporary help.

7.6 CHANGING ROLES: APPROACHES


Of late there has been an attempt to examine role in different manner. Much of this
thinking has been the result of new light being shed on changing management
practices: Some of these attempts are presented below:
1. Skill Behaviour Matrix: British Petroleum replaced role descriptions with a
matrix reflecting skills and behaviour. This matrix focuses on skills and
behaviours rather than individual roles. Each skill matrix describes steps in the
career ladder, from the lowest to the highest, along the vertical axis. The hori-
zontal axis describes the skills and competencies that are required for each step.
It is argued that skill matrices differ significantly from role descriptions. They
specify roles and levels of performance rather than roles in a box. Through this
system managers know what to expect of their employees and employees know
what the organisation expects of them.
2. Configuration Matrix: Another approach looks at the role descriptions by
defining roles in terms of a ‘contribution matrix’. This matrix identifies team
outputs and contribution made by each member within a team. Agreed outputs
are written along the vertical axis and team members names along the horizontal
axis. Under each output the processes and contributions made by each team
member are listed. The output is then assigned to the person who has the overall
responsibility. Following are some of the advantages of this approach:
1. It focuses on the whole department rather than the individual role,
2. It incorporates team involvement,
3. It can be used to show use of resources, and
4. It is a good vehicle to identify improvement opportunities.
3. Other Approaches: Besides these approaches the shifts in some of the tradi-
tional role responsibilities to more recent descriptions are presented below:
1. There is a shift, from description of duties to description of responsibilities.
Duties represent the methods by which the responsibility areas are accom-
plished. Responsibilities are like mini-roles that must be done to get the
total role successfully completed. In a fast changing work environment,
responsibility areas generally remain constant whereas, duties change
constantly with advances in technology and improvements in processes.
Focusing on duties make it difficult to keep a role description current and
does not represent the true nature of the role to be performed. When focus-
ing on responsibilities it is important that these relate to meeting
organisational objectives.
2. The focus is on what the person is required to do and implies looking at the
role from an inside out approach. However, when focusing on the end
results it implies looking at the role from an outside-in approach. Focusing
on end results helps employees understand why the work is important.
Knowing the results also allows employees to discover new ways to accom-
plish results thus encouraging initiative and creativity.
3. In the past, the department wrote role descriptions with little or no input
from the employee actually doing the role. Today’s role descriptions are
21
usually written by the affected employees and managers. The department
Approaches to now provides a consulting role in the development of role descriptions and
Analysing Job their role is to show managers how to define roles. This approach provides a
more accurate role description, as it is the employees and managers who
have the best insight into the role and are aware of the responsibilities and
results expected. Employee involvement in describing their roles also
creates ownership.
4. Role is not meant to list every duty an employee performs. However, in the
past many roles included statements such as and other duties and responsi-
bilities that may be required on either a temporary or permanent basis. This
allowed
managers to change duties or add duties without discussing this with
employees. In today’s organisation role are marketed differently in that they
are promoted to staff as a role profile outlining the main responsibilities, not
all the duties that need to be performed. Changes to these responsibilities
are discussed between the manager and employee.
5. If roles are to be used as a career development tool they need to be available
for all staff within an organisation. Some organisations make them available
on-line through their intranet. This often was not the case in the past where
roles were only available to the person doing the role, their manager and
senior
management.
6. Traditional roles were often described in a way that implied complete
independence from other positions within the organisation and were very
individualistic in nature. It was not quite clear how a particular role is
related to other positions and processes within the organisation. This type of
description encourages independent rather than group action. Today roles
need to reflect the interdependence of processes and people within the
organisation. If the organisation is based on teams and employees are
expected to work together to accomplish objectives and goals, this needs to
be reflected in the roles.
7. Roles were often only reviewed when a role became vacant or new duties
were added. In today’s work environment roles are incorporated into the
organisations performance management system in order to ensure they are
reviewed regularly with the employee. This maintains currency, accuracy,
relevance and usefulness of the role description.
8. It was stated that roles are not a work schedule, however, in the past many
indicated how much time is spent on different tasks. In today’s work
environment time percentages or frequency have been replaced with perfor-
mance measures or indicators, which provide a clearer indication of what is
expected from the role.

7.7 THE CHANGING WORLD OF WORK


When considering a career action one needs to assess the changes occurring at the
workplace. Most employment environments are changing from what they have been
once. Here are some of the implications of these changes for roles and careers.
1. Previously future was some what predictable. Today there is less certainty and
more ambiguity in roles.
2. Earlier there was a move to a specific job. Now the focus is on matching one
self to work contents based on one’s values.
3. In the past there was an attempt to carry predetermined tasks. Today there are
22 frequent changes in the task and greater focus on teams working.
4. There was a time of stability in work situation. Today the needs of the Changing Nature
organisations are continuously changing. of Roles

5. Traditionally having one job title was the requirement. Now there is a range of
roles and a person may perform many functions.
6. In the past employees joined one occupational stream and retired from the same.
Today, organisations are insisting on transferring skills into many work fields.
7. Previously change was avoided. Today change is embraced.
8. Earlier career success was defined by others. Today the worthwhileness of the
job is realised by individual employee himself/ herself.

7.8 FACTORS CONTRIBUTING TO ROLE CHANGES


Given the changed scenario there is a need to change and / or modify the roles.
Some of the major factors contributing to the need for change are technology,
information processing, competition, changing gender profile of workforce and
changing culture.

1. Technology upgradation
Technology continues to advance rapidly offering wider choices. There are very
sophisticated machines that provide rapid output with zero defects. Manual work has
been replaced by automation. Not only this machine upgradation is taking place at a
very fast pace, and hence there is an urgent need to upgrade the skill level of the
employees. They need to be continuously sent for training programmes to keep them
updated. How many people in accounts still count on fingers, though their roles have
changed to using computers for accounts purposes.

2. Information Technology
Today much of the focus is on Internet and World Wide Web Information technology
has brought a revolution in access, storage and retrieval of information. Electronic
mail is making it easier to seek guidance and advice from specialists around the
world. Transition from printed information to electronic publicity has resulted in
multimedia information service. None of these applications of information
technology can be achieved without trainers and users having the appropriate skills.
It will therefore be vital not only to develop program to improve the skills of users,
but ensure that the information professional has the skills to be able to change roles.
With the availability of high-speed networks, new services and applications, training
becomes an even more urgent issue.
On top of this there is a need for improvement of information and knowledge
handling in the “ subject content”. Content is king, without quality data any system
is devoid of use.

3. Competition
With the globalization and creating a world without border competition has become
the force to reckon with. It has given boost to consumer preferences, better product
quality expectations, and reliable service. Just about 20 years ago, there were only
2-3 models of cars. Today we have as many as 30-35 models available in the easiest
possible way. Business executive cannot afford to live in their own world and sell
whatever they produce. It is a buyers market now. They have to get out from the
comforts of their offices, identify customers’ preferences and satisfy them before they
loose out in the competition.

4. Women in work
Taking care of others is the primary role of women. Traditionally, women have 23
Approaches to tended the home. It was their duty, honour, and obligation to devote themselves to the
Analysing Job young, the sick, and the elderly. Women were raised to be “good wives and wise
mothers,” and still are. Yet there is a quiet revolution going on. Women make up 40
percent of the labour force. More than half of all the married women work.
Management positions held by women in India have doubled as compared to ten
years ago. Though this figure still represents only about 1 percent of all management
positions, as opposed to over 10 percent, as is the case in the United States. In
addition, women are shedding their traditionally subordinate roles and using the
courts to assert their rights. If one goes by the number of women students in
professional courses, their number in workforce is going to increase. Hence some of
the traditional roles have to be modified to suits the requirements of female
workforce.

Activity A
List out the factors contributing to role changes in your organisation or any
organisation you are acquainted with.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................

Activity B
What kinds of roles do you feel that are more useful in any organisation. List out the
defferent approaches to roles followed in your organisation or any organisation you
are familiar with.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................

7.9 ROLE EXPECTATIONS


Some of the emerging role expectations are presented below:
1. Top leaders and managers must serve as learning roles models by sharing their
own learning goals and by encouraging others to learn. They should also
recognize the need for individual learning for all levels of employees.
2. Individual employees have to accept responsibility for their own careers and
their own personal learning. They should not wait to be taught nor expect the
organisation to provide career paths.
3. Learning and personal growth must be actively encouraged and rewarded. There
must be incentives for individuals to stretch their abilities.
4. The “not invented here” syndrome should not practiced by individuals. There
should be constant scanning of the internal and external environment for new
ideas and trends that will lead to improvement.
5. Employees must be held accountable for their performance and excellence must
be rewarded.
6. Procedures and policies must be in place to ensure on going and timely
reevaluation of changing job skill and requirements. Roles and job require-
24
ments must be examined regularly to accurately reflect the work being per- Changing Nature
formed or skills required. of Roles

7.10 SUMMARY
The concept of role can better be understood in the context of the expectations an
organisation has with its employees. A single person does not make an organisation,
it requires two or more persons to fulfil the requirements of coordination. One person
cannot do all the roles of the organisation. Each individual has a clearly defined
responsibility which is completely different from others, along with responsibility
comes the authority to complete the role. Each role has its written descriptions define
the work of the organisation and its reasons for existence as an employer of human
resources.
There are different kinds of roles, these are Interpersonal, Informational and
Decisional. These roles can be grouped as being primarily concerned with
interpersonal relationship.
The role of description is needed as a communication tool; it effectively
communicates a great deal of information about a role, especially between the
manager and employee. Role descriptions have the potential to be used for selection
and recruitment, induction and orientation, analysing work flows and methods, job
structuring, etc.
Roles will be changing from time to time according to prevailing situation. There is a
shift from description of duties to description of responsibilities; when considering a
career action one needs to assess the changes occurring at the work place. Most
employment environments are changing from what they have been once. Some of the
major factors contributing to the need for change are: technology, information
processing, competition, changing gender profile of workforce and changing culture.
Roles and job requirements must be examined regularly to accurately reflect the work
being performed or skills required.

7.11 SELF-ASSESSMENT QUESTIONS


1. Explain the various approaches to role definition.
2. Describe the factors leading to changes required in role descriptions.
3. Define role description and explain the uses of role descriptions.

7.12 FURTHER READINGS


Davis and NewsStrom , (1985) Human Behaviour at Work; organizational
Behaviour: New York: McGrawHill.
Flippo, F. B. (1971), Principles Of Personnel Management, NewYork: McGraw Hill.
Geisler, E. B. (1967) Manpower Planning: An Emerging Staff Function, New York:
AmericanManagement association.
Koontz, H. and O’ Donnel, C. (1959) Principal Of Management, New York:
McGraw Hill.
Mintzberg H (1973) The Nature of Managerial work, New York: Harper & Raw.
Prasad, L. (1973) Personnal Management and Industrial Relations in the Public
Sector, Bombay: progressive.
Saiyadain, M.S.(2003) Human Resources Management (3rd Ed.), New Delhi: Tata
McGraw Hill. 25
Stephen P. Robbins (1997) Organizational Behavior Concepts Controversies Appli-
Competency Approaches
UNIT 9 COMPETENCY APPROACHES TO to Job Analysis

JOB ANALYSIS
Objectives
After going through this unit, you will be ale to understand
l the concept of competency and competency mapping,
l the various methods of the competency mapping, and
l the benefits of competency approach to job analysis.

Structure
9.1 Introduction
9.2 What is Competency Approach
9.3 How is it Used by Organisations
9.4 The Benefits of the Competency Approach
9.5 Competency Mapping
9.6 Approaches to Competency Mapping
9.7 Summary
9.8 Self-Assessment Questions
9.9 Further Readings

9.1 INTRODUCTION
We presume that you are doing this course to acquire or enhance your knowledge
about the modern management concepts and techniques. This understanding should,
undoubtedly, improve your skills as a manager, especially as a manager of men. You
will also appreciate that an effective manager is one who is able to handle his people
efficiently. In order to be a good manager of men, it will also be imperative for you to
have an adequate understanding of the jobs assigned to them as also the relative job
differentials in terms of their level of difficulty, responsibility, knowledge and skill.

9.2 WHAT IS COMPETENCY APPROACH?


A skill is a task or activity required for competency on the job. Competency in a skill
requires knowledge, experience, attitude, and feedback. Performance assessment
criteria clearly define the acceptable level of competency for each skill required to
perform the job. The individual’s level of competency in each skill is measured
against a performance standard established by the organisation.
These competency skills are grouped according to a major function of the
occupation, and are presented in a two-dimensional chart. Each skill has its own set
of “learning outcomes”, which must be mastered before a competency in the
particular skill is acknowledged.
The competency based job analysis involves the following steps:
1. Identification of major job functions.
2. Identification of skills performed within each of the major job functions.
3. Generation of several drafts to be reviewed by employers and employees and
modified to accurately reflect the skills performed on the job. 39
Approaches to 4. Development of an occupational analysis chart. The chart is a two-dimensional
Analysing Job spreadsheet chart displaying the major job functions and skills.
5. Identification of performance standards for each skill using a competency-based
rating scale which describes various levels of performance.

9.3 HOW IS IT USED BY ORGANISATIONS?


The job analysis is a foundation upon which to build a variety of human resource
development initiatives. This adaptable, flexible and scalable tool has been used for
the following benefits to the organisation:
1. Provide a systematic approach to planning training;
2. Customize training delivery to the individual or organisation;
3. Evaluate suitability of training programmes to promote job competence;
4. Provide employees with a detailed job description;
5. Develop job advertisements;
6. Interview and select personnel;
7. Conduct performance appraisals;
8. Target training to skills that require development;
9. Give credit for prior knowledge and experience;
10. Focus on performance improvement;
11. Promote ongoing employee performance development;
12. Identify employee readiness for promotion;
13. Guide career development of employees;
14. Develop modular training curriculum that can be clustered as needed; and
15. Develop learning programs.

9.4 THE BENEFITS OF THE COMPETENCY APPROACH


There are many different approaches to competency analysis while some competency
studies take months to complete and result in vague statements that have little
relevance to people in the organisation but if done well they provide the following
benefit:
1. Increased productivity,
2. Improved work performance,
3. Training that is focused on organisational objectives,
4. Employees know up front what is expected of them,
5. Employees are empowered to become partners in their own performance
development, and
6. The approach builds trust between employees and managers.
One of the strong points of this approach is that it requires interaction between the
employer and the employee. The job analysis is a catalyst to meaningful discussion
of job performance because the employer and employee have a common
understanding of expectations. This is due to the explicit nature of the competency
statements pertaining to the job. The fact that the employee conducts a self-appraisal
of performance and the employer must confirm this assessment requires a counselling
type of interaction to take place. The growth plan requires input from the employer
40 and the employee for its development and follow-up.
Competency Approaches
9.5 COMPETENCY MAPPING to Job Analysis

Competency approach to job analysis depends on competency mapping. Competency


Mapping is a process to identify key competencies for an organisation and/or a job
and incorporating those competencies throughout the various processes (i.e. job
evaluation, training, recruitment) of the organisation. A competency is defined as a
behaviour (i.e. communication, leadership) rather than a skill or ability. Competency
is the combination of knowledge, skills, attitude and personality of an individual as
applied to a role or job in context of the present or future environment that accounts
for sustained success within the framework of organisational values.
The steps involved in competency mapping are presented below:
1. Conduct a job analysis by asking incumbents to complete a position information
questionnaire (PIQ). This can be provided for incumbents to complete, or used
as a basis for conducting one-on-one interviews using the PIQ as a guide. The
primary goal is to gather from incumbents what they feel are the key behaviours
necessary to perform their respective jobs.
2. Using the results of the job analysis, is developed a competency based job
description. It is developed after carefully analysing the input from the
represented group of incumbents and converting it to standard competencies.
3. With a competency based job description, mapping the competencies can be
done. The competencies of the respective job description become factors for
assessment on the performance evaluation. Using competencies will help to
perform more objective evaluations based on displayed or not displayed
behaviours.
4. Taking the competency mapping one step further, one can use the results of
one’s evaluation to identify in what competencies individuals need additional
development or training. This will help in focusing on training needs required to
achieve the goals of the position and company and help the employees develop
toward the ultimate success of the organisation.

Activity A
Do you think that the competency approach is being followed in your organisation?
If yes, then list out the benefits of competency approach to the organisation.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................

Activity B
Are you aware of the competency mapping process of your organisation? If yes,
identify key competencies required to fulfil the job requirements.
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
41
Approaches to
Analysing Job 9.6 APPROACHES TO COMPETENCY MAPPING
It is not easy to identify all the competencies required to fulfil the job requirements.
However, a number of methods and approaches have been developed and
successfully tried out. These methods have helped managers to a large extent, to
identify and reinforce and/or develop these competencies both for the growth of the
individual and the growth of the organisation. In the following section, some major
approaches of competency mapping for job analysis have been presented.

1. Assessment Centre
Employees are not contented by just having a job. They want growth and individual
development in the organisation. “Assessment Centre “ is a mechanism to identify
the potential for growth. It is a procedure (not location) that uses a variety of
techniques to evaluate employees for manpower purpose and decisions. It was
initiated by American Telephone and Telegraph Company in 1960 for line personnel
being considered for promotion to supervisory positions. An essential feature of the
assessment centre is the use of situational test to observe specific job behaviour.
Since it is with reference to a job, elements related to the job are simulated through a
variety of tests. The assessors observe the behaviour and make independent
evaluation of what they have observed, which results in identifying strengths and
weaknesses of the attributes being studied.
The International Personnel Management Association (IPMA) has identified the
following elements, essential for a process to be considered as assessment centre.
1. A job analysis of relevant behaviour to determine attribute skills, etc. for
effective job performance and what should be evaluated by assessment center.
2. Techniques used must be validated to assess the dimensions of skills and
abilities.
3. Multiple assessment techniques must be used.
4. Assessment techniques must include job related simulations.
5. Multiple assessors must be used for each assessee.
6. Assessors must be thoroughly trained.
7. Behavioural observations by assessors must be classified into some meaningful
and relevant categories of attributes, skills and abilities, etc.
8. Systematic procedures should be used to record observations.
9. Assessors must prepare a report.
10. All information thus generated must be integrated either by discussion or
application of statistical techniques.
Assessment centre is multi-technique approach to individual assessment which
focuses on individual behaviour. That is grouped under various competencies.
Competencies is a group of behaviour the some total of individual’s competencies is
his potential. This can be classified under the following groups.
1. Intellectual competencies–Analytical ability, organisation ability, communica-
tion skills, creativity and innovativeness and decisions taking ability etc.
2. Emotional competencies–self confidence, tolerance to pressure, leadership skills
etc.
3. Social competencies–inter-personal skills, team spirit, sense of responsiblity,
etc.
4. Motivational competencies–Achievement drives willpower, risk taking
42
ability, etc. Competency Approaches
to Job Analysis
Data thus generated can become extremely useful in identifying employees with
potential for growth. Following are some of the benefits of the assessment centre.
1. It helps in identifying early the supervisory/ managerial potential and gives
sufficient lead time for training before the person occupies the new position.
2. It helps in identifying the training and development needs.
3. Assessors who are generally senior managers in the organisation find the
training for assessor as a relevant experience to know their organisation a little
better.
4. The assessment centre exercise provides an opportunity for the organisation to
review its HRM policies.
Assessment Centre is a complex process and require investment in time. It should
safeguard itself from misunderstandings and deviations in its implementation. For
this, the following concerns should be ensured:
1. Assessment Centre for diagnosis are often converted as Assessment Centre for
prediction of long range potential.
2. The assessors’ judgement may reflect the perception of reality and not the
reality itself.
3. One is not sure if the benefits outweigh the cost.

Methods in Assessment Centre


Assessment Centre comprises a number of exercises or simulations which have been
designed to replicate the tasks and demands of the job. These exercises or simulations
will have been designed in such a way that a candidate can undertake them both
singly and together and they will be observed by assessors while they are doing the
exercises.
The main types of exercises are:
a) Group Discussions: In these, candidates are brought together as a committee or
project team with one or a number of items to make a recommendation on.
Candidates may be assigned specific roles to play in the group or it may be
structured in such a way that all the candidates have the same basic information.
b) Tray: This type of exercise is normally undertaken by candidates individually.
The materials comprise a bundle of correspondence and the candidate is placed
in the role of somebody, generally, who assumed a new position or replaced
their predecessor at short notice and have been asked to deal with their
accumulated correspondence. Generally the only evidence that the assessors
have to work with are the annotations which the candidates have made on the
articles of mail.
c) Interview Simulations / Role Plays: In these exercises candidates meet
individually with a role player or resource person. Their brief is either to gather
information to form a view and make a decision, or alternatively, to engage in
discussion with the resource person to come to a resolution on an aspect or issue
of dispute. Typically, candidates will be allowed 15 -30 minutes to prepare for
such a meeting and will be given a short, general brief on the objective for the
meeting. Although the assessment is made mainly on the conduct of the meeting
itself, consideration are also be given to preparatory notes.
d) Case Studies / Analysis Exercises: In this type of exercise the candidate is
presented with the task of making a decision about a particular business case.
They are provided with a large amount of factual information which is generally
43
Approaches to ambiguous and, in some cases, contradictory. Candidates generally work
Analysing Job independently on such an exercise.

2. Critical Incidents Technique


It is difficult to define critical incident except to say that it can contribute to the
growth and decay of a system. Perhaps one way to understand the concept would be
to examine what it does. Despite numerous variations in procedures for gathering and
analysing critical incidents researchers and practitioners agree the critical incidents
technique can be described as a set of procedures for systematically identifying
behaviours that contribute to success or failure of individuals or organisations in
specific situations.
In real world of task performance, users are perhaps in the best position to recognise
critical incidents caused by usability problems and design flaws in the user interface.
Critical incident identification is arguably the single most important kind of
information associated with task performance in usability -oriented context.
Following are the criteria for a successful use of critical incident technique.
a. Data are centred around real critical incidents that occur during a task
performance;
b. Tasks are performed by real users;
c. Users are located in their normal working environment;
d. Data are captured in normal task situations, not contrived laboratory settings;
e. Users self report their own critical incidents after they have happened;
f. No direct interaction takes place between user and evaluator during the
description of the incident(s);
g. Quality data can be captured at low cost to the user.
Critical Incidents Technique is useful for obtaining in-depth data about a particular
role or set of tasks. It is extremely useful to obtain detailed feedback on a design
option. It involves the following three steps.
Step 1:Gathering facts: The methodology usually employed is an open-ended
questionnaire, gathering retrospective data. The events should have happened fairly
recently: the longer the time period between the events and their gathering, the
greater the danger that the users may reply with imagined stereotypical responses.
Interviews can also be used, but these must be handled with extreme care not to bias
the user. There are two kinds of approaches to gather information:
a) Unstructured approach where the individual is asked to write down two good
things and two bad things that happened when one was carrying out an activity.
b) Moderate structured approach where the individual is asked to respond to
following questions relating to what happened when s/he was carrying out an
activity.
1. What lead up to the situation?
2. What was done that was especially effective or non- effective?
3. What was the result (outcome)?
Step 2: Content analysis: Subsequent steps in the CIT consist of identifying the
content or themes represented by clusters of incidents and conducting “retranslation”
exercises during which the analyst or other respondents sort the incidents into content
dimensions or categories. These steps help to identify incidents that are judged to
represent dimensions of the behaviour being considered. This can be done using a
simple spreadsheet. Every item is entered as a separate incident to start with, and then
44
each of the incidents is compiled into categories. Category membership is marked as Competency Approaches
identical, quite similar and could be similar. This continues until each item is to Job Analysis
assigned to a category on at least a “quite similar” basis. Each category is then given
a name and the number of the responses in the category are counted. These are in turn
converted into percentages (of total number of responses) and a report is formulated.
Step 3:Creating feedback: It is important to consider that both positive and negative
feedback be provided. The poor features should be arranged in order of frequency,
using the number of responses per category. Same should be done with the good
features. At this point it is necessary to go back to the software and examine the
circumstances that led up to each category of critical incident. Identify what aspect of
the interface was responsible for the incident. Sometimes one finds that there is not
one, but several aspects of an interaction that lead to a critical incident; it is their
conjunction together that makes it critical and it would be an error to focus on one
salient aspect .
Some of the advantages and disadvantages of critical incident technique are presented
below:

Advantages
1. Some of the human errors that are unconsciously committed can be traced and
rectified by this method. For example, a case study on pilots obtained detailed
factual information about pilot error experiences in reading and interpreting
aircraft instruments from people not trained in the critical incident technique
(i.e., eyewitness or the pilot who made the error).
2. Users with no background in software engineering or human computer interac-
tion, and with the barest minimum of training in critical incident identification,
can identify, report, and rate the severity level of their own critical incidents.
This result is important because successful use of the use reported critical
incident method depends on the ability of typical users to recognise and report
critical incidents effectively.

Disadvantages
1. It focuses on critical incidents therefore routine incidents will not be reported. It
is therefore poor as a tool for routine task analysis.
2. Respondents may still reply with stereotypes, not actual events. Using more
structure in the form improves this but not always.
3. Success of the user reported critical incident method depends on the ability of
typical end users to recognise and report critical incidents effectively, but there
is no reason to believe that all users have this ability naturally.

3. Structured Interview Techniques


In this kind of interview what is to be asked is already structured and hence they are
called structured or Patterned Interview. Data considered essential for the job are
listed in a comprehensive and orderly fashion. Often the questions and the order in
which they would be asked is also predetermined. The structured interview process
can be described to have several characteristics.
a) It is based exclusively on job duties and requirements that are critical to job
performance.
b) In some ways it is like a selection test because the responses can be oral,
written, or physical.
c) Questions are predetermined and responses are rated on a point scale defined
explicitly in advance. 45
Approaches to d) Ensures objectivity by having more than one interviewer or multiple raters, who
Analysing Job in case of wide variations in ratings should discuss them before they are
finalised.
e) The consistency is important. For all applicants, it should be the same
committee, same set and order of questions. The consistency is important to
ensure that each applicant gets the same chances.
f) Since questions and responses are identical, inter- applicant comparisons are
easy to make. It also provides a basis for defending selection decision in case
some frustrated applicant decides to go to the court.
g) The patterned interview provides systematic and chronological information,
which makes it easy to apply certain sophisticated statistical tests. The statistical
tests help in taking into account the finer shades of variations before final
decisions are taken.
Successful evaluation of certain factors leads to accurate predictions about the
applicant’s suitability for a job. Three such factors— basic character traits,
motivation and emotional maturity, have been identified. The focus of the patterened
interview is usually on these factors.
In addition, a large number of methods have been developed to measure and map
competencies. Most of them are of recent origin and are designed to identify those
skills, attitudes and knowledge that suits them most for specific jobs. Some of these
techniques are briefly presented below:
1. Common Metric Questionnaire (CMQ) examines some of the competencies to
work performance. It has five sections:
(1) Background,
(2) Contacts with People,
(3) Decision Making,
(4) Physical and Mechanical Activities, and
(5) Work Setting.
The background section asks 41 general questions about work requirements such as
travel, seasonality, and license requirements. The Contacts with People section asks
62 questions targeting level of supervision, degree of internal and external contacts,
and meeting requirements. The 80 Decision Making items in the CMQ focus on
relevant occupational knowledge and skill, language and sensory requirements, and
managerial and business decision making. The Physical and Mechanical Activities
section contains 53 items about physical activities and equipment, machinery, and
tools. Work Setting contains 47 items that focus on environmental conditions and
other job characteristics. The CMQ is a relatively new instrument. It has been field
tested on 4,552 positions representing over 900 occupations in the Dictionary of
Occupational Titles (DOT), and yielded reasonably high reliabilities.
2. Functional Job Analysis- The most recent version of FJA uses seven scales to
describe what workers do in jobs:
(1) Things,
(2) Data,
(3) People,
(4) Worker Instructions,
(5) Reasoning,
(6) Maths, and
46 (7) Language.
Each scale has several levels that are anchored with specific behavioural statements Competency Approaches
and illustrative tasks and are used to collect job information. to Job Analysis

3. Multipurpose Occupational System Analysis Inventory (MOSAIC) – In this method


each job analysis inventory collects data from the office of personnel management
system through a variety of descriptors. Two major descriptors in each questionnaire
are tasks and competencies. Tasks are rated on importance and competencies are
rated on several scales including importance and requirements for performing the
task. This is mostly used for US government jobs.
4. Occupational Analysis Inventory- It contains 617 “work elements.” designed to
yield more specific job information while still capturing work requirements for
virtually all occupations. The major categories of items are five-fold:
1) Information Received,
2) Mental Activities,
3) Work Behaviour,
4) Work Goals, and
5) Work Context. Respondents rate each job element on one of four rating scales:
part-of-job, extent, applicability, or a special scale designed for the element.
Afterwards , the matching is done between competencies and work require-
ments.
5. Position Analysis Questionnaire (PAQ) is a structured job analysis instrument to
measure job characteristics and relate them to human characteristics. It consists of
195 job elements that represent in a comprehensive manner the domain of human
behaviour involved in work activities. These items fall into following five
categories:
a. Information input (where and how the worker gets information),
b. Mental processes (reasoning and other processes that workers use),
c. Work output (physical activities and tools used on the job),
d. Relationships with other persons, and
e. Job context (the physical and social contexts of work).
6. Work Profiling System(WPS) is designed to help employers accomplish human
resource functions. The competency approach is designed to yield reports targeted
toward various human resource functions such as individual development planning,
employee selection, and job description. There are three versions of the WPS tied to
types of occupations: managerial, service, and technical occupations. It contains a
structured questionnaire which measures ability and personality attributes .

9.7 SUMMARY
The individual’s level of competency in each skill is measured against a performance
standard established by the organisation. A skill is a task or activity required for
competency on the job. Competency in a skill requires knowledge, experience,
attitude and feedback. Competency approach to job analysis depends on competency
mapping. Competency mapping is a process to identify key competencies for an
organisation. There are different methods and approaches to competency mapping,
these methods have helped managers to a large extent, to identify and reinforce and
develop these competencies both for the growth of the individual and the growth of
the organisation.

47
Approaches to
Analysing Job 9.8 SELF-ASSESSMENT QUESTIONS
1. Explain the concept of competency and competency approach to job analysis.
2. Describe the various methods of the competency mapping.
3. Explain the major benefits of competency approach to job analysis.

9.9 FURTHER READINGS


Saiyadain, M.S.(2003). Human Resource Management. New Delhi: Tata McGraw
Hill.
Sanghi, S.(2004). The Handbook of Competency Mapping. New Delhi: Sage
Publications.

48
Recruitment
UNIT 10 RECRUITMENT
Objectives
After going through this unit, you should be able to:
l formulate a recruitment policy for your company,
l understand the importance of recruiting right people for the right jobs and at
the right time,
l evaluate various sources of recruitment of employees in the Indian context,
l realise the importance of executive search in a dynamic business environment.

Structure
10.1 Introduction
10.2 Recruitment Function
10.3 Recruitment Purpose
10.4 Recruitment Policy
10.5 Recruitment Process
10.6 Sources of Manpower Supply
10.7 Methods and Techniques of Recruitment
10.8 Executive Search
10.9 Assessment and Improvement of Recruiting
10.10 Summary
10.11 Self-Assessment Questions
10.12 Case
10.13 Further Readings

10.1 INTRODUCTION
Recruitment is the development and maintenance of adequate manpower sources.
It involves the creation of a pool of available human resources from which the
organisation can draw when it needs additional employees. Recruiting is the
process of attracting applicants with certain skills, abilities, and other personal
characteristics to job vacancies in an organisation. According to Denerley and
Plumblay (1969), recruitment is concerned with both engaging the required
number of people, and measuring their quality. It is not only a matter of satisfying a
company’s needs, it is also an activity which influences the shape of the company’s
future. The need for recruitment may arise out of: (i) vacancies due to promotion,
transfer, termination, retirement, permanent disability, or death; (ii) creation of
vacancies due to business expansion, diversification, growth, and so on.

10.2 RECRUITMENT FUNCTION


The function of recruitment is to locate the sources of manpower to meet job
requirements and specification. Recruitment forms the first stage in the process
which continues with selection and ceases with the placement of the candidate.
Effective supply of varied categories of candidates for filling the jobs will depend 5
Key HR Practices upon several factors such as the state of labour market, reputation of the
enterprise and allied factors. The internal factors include wage and salary policies,
the age composition of existing working force, promotion and retirement policies,
turnover rates and the kind of personnel required. External determinants of
recruitment are cultural, economic and legal factors.
Recruitment has been regarded as the most important function of personnel
administration. Unless the right type of people are hired, even the best plans,
organisation charts and control systems will be of no avail. A company cannot
prosper, grow, or even survive without adequate human resources. Need for trained
manpower in recent years has created a pressure on some organisations to establish
an efficient recruitment function.

10.3 RECRUITMENT PURPOSE


The general purpose of recruitment is to provide a pool of potentially qualified
candidates to meet organisational need. Its specific purposes are to:
l Determine the present and future requirements of the organisation in
conjunction with the personnel planning and job analysis activities.
l Increase the pool of job candidates with minimum cost.
l Help increase the success rate of the selection process by reducing the number
of underqualified or overqualified job applicants.
l Help reduce the probability that job applicants, once recruited and selected,
will leave the organisation only after a short period of time.
l Meet the organisation’s legal and social obligations regarding the composition of
its workforce.
l Start identifying and preparing potential job applicants who will be appropriate
candidates.
l Increase organisational and individual effectiveness in the short and long term.
l Evaluate the effectiveness of various recruiting techniques and sources for all
types of job applicants.

10.4 RECRUITMENT POLICY


Recruitment policy may involve a commitment to broad principles such as filling
vacancies with the best qualified individuals. It may embrace several issues such as
extent of promotion from within, attitudes of enterprise in recruiting its old
employees, handicaps, minority groups, women employees, part-time employees,
friends and relatives of present employees. It may also involve the organisation
system to be developed for implementing recruitment programme and procedures.
A well considered and pre-planned recruitment policy, based on corporate
goals, study of environment and the corporate needs, may avoid hasty or
ill-considered decisions and may go a long way to man the organisation with the
right type of personnel. A good recruitment policy must contain the following
elements:
l Organisation’s objectives - both short term and long term.
l Identification of the recruitment needs.
l Preferred sources of recruitment.
l Criteria of selection and preferences.
6 l The cost of recruitment and financial implications of the same.
A recruitment policy in its broadest sense involves a commitment by the employer to Recruitment
(i) find the best qualified persons for each job; (ii) retain the best and most promising
of those hired; (iii) offer promising opportunities for life-time working careers; and
(iv) provide programmes and facilities for personal growth on the job.

Activity A
Give a brief outline of recruitment policy of your organisation or any other
organisation with which you are familiar.
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................

10.5 RECRUITMENT PROCESS


To be successful, the recruitment process must follow a number of steps. These are:
1. Defining the job
2. Establishing the person profile
3. Making the vacancy known
4. Receiving and documenting applications
5. Designing and using the application form
6. Selecting
7. Notification and final checks
8. Induction.

10.6 SOURCES OF MANPOWER SUPPLY


Once the job analysis is completed and the job specification or behavioural
competencies are identified, the next stage is to consider how to attract people who
meet the requirements. A key decision is about whether to recruit internally or
externally.
Before an organisation actively begins recruiting applicants, it should have a
knowledge of the sources of supply and methods of tapping them. The sources of
supply do not remain constant but vary from time to time. The sources of supply of
manpower can be divided into two groups — internal and external sources.
Internal sources relate to the existing working force of an enterprise while external
sources relate to the employment exchanges, colleges, institutes, and universities. The
particular sources and means by which workers are recruited vary greatly. It
depends upon management policy, the types of jobs involved, the supply of labour
relative to demand, and labour market. In deciding which recruitment source to use,
consider (a) the nature and size of the company; (b) the level of vacancies to be
filled up; (c) the number of vacancies to be filled up; (d) budget allocation; and
(e) the time period to fill the vacancy.
Internal Sources: Internal sources are the most obvious sources. These include
personnel already on the pay-roll of an organisation, i.e., its present working force. 7
Key HR Practices Whenever any vacancy occurs, somebody from within the organisation is upgraded,
transferred, promoted or sometimes demoted. Internal recruitment seeks applicants
for position from among those who are currently employed.
The use of internal search, on the whole, has some merits:
1. It improves the morale of employees.
2. The employer is in a better position to evaluate those presently employed
than outside candidates.
3. It promotes loyalty among the employees, for it gives them a sense of job
security and opportunities for advancement.
4. It is less expensive and job openings can be filled more quickly.
5. Internal candidates are more familiar with organisational policies and
practices, and thus require less orientation and training.
However, this system suffers from certain defects as well.
1. It often leads to inbreeding, and discourages new blood from entering an
organisation.
2. There are possibilities that internal sources may “dry up”, and it may be difficult
to find the requisite personnel from within an organisation.
3. As promotion is based on seniority, the danger is that really capable
hands may not be chosen.
Internal recruitment can lead to problems, however, when a position becomes
vacant, many employees may be considered for that slot. The likes and dislikes of
the management may also play an important role in the selection of personnel.
Usually, internal sources can be used effectively if the number of vacancies are not
very large, adequate employee records are maintained, and employees have prepared
themselves for promotions.
Because internal methods are often not sufficient to supply a suitable pool of
applicants, most organisations make use of external sources to attract potential
recruits. External recruitment brings in individuals from outside.
External Sources: Among the external sources are included the employment
agencies, educational and technical institutes, casual labour, trade unions,
application files and other sources. External sources provide the requisite type of
personnel for an organisation, having skill, training and education up to the required
standard. Since persons are recruited from a large market, the best selection can be
made without any distinction of caste, sex or creed. However, this system suffers
from what is called the ”brain drain.” The advantages of internal recruitment are
basically the disadvantages of external recruitment.
Labour market considerations are very important in external search. A labour
market is a geographic area within which workers seek employment and employers
recruit workers. It is the place where the forces of supply and demand interact. A
labour market tends to be unstructured for the most part; it is unorganised. The
procedures by which a company recruits workers and the methods by which workers
go about obtaining jobs are highly variable.
Lack of labour mobility is still another characteristic of a labour market. One
important reason for lack of mobility is that the average working man possesses
quite incomplete and inaccurate knowledge of job opportunities in his labour
market. Wage rate data are not generally made public.
A labour market is characterised by a great diversity of wage rates for the same
occupations. This variation in wages for the same kind of work is caused by many
8 factors. Principal ones are differences among the employers in their ability to pay,
productivity, and management attitude towards wage rates. Certain non-wage factors, Recruitment
such as greater job security, may still attract and hold the employees.
An organisation must decide whether to recruit employees internally or
externally. External recruitment is limited primarily to entry-level jobs. Jobs above
the entry level are usually filled with current employees through promotions.
Promotional opportunities lead to reduced turnover, increased job satisfaction,
and better job performance.

10.7 METHODS AND TECHNIQUES OF RECRUITMENT


While recruitment sources indicate when human resources may be procured, the
recruitment methods and techniques deal with how these sources should be tapped.
Dunn and Stephens follow a three-tier classification of recruitment method -
direct, indirect and third party.
Direct Methods: The most frequently used direct method is at schools, colleges,
management institutes and university departments. Usually, this type of recruiting is
performed in co-operation with placement bureaus of educational institutions
providing assistance in attracting students, arranging interviews, and making
available space and students’ resumes. The organisations have definite advantages
through campus recruitment. First, the cost is low; second, they can arrange
interviews at short notice; third, they can meet the teaching faculty; fourth, it gives
them an opportunity to ‘‘sell” the organisation to a large student community seeking
campus recruitment. In addition to managerial and supervisory positions,
several organisations use travelling recruiters to recruit skilled and semi-skilled
employees from vocational schools and industrial training institutes. Sometimes,
even unskilled workers are also attracted by this method. Other direct methods
include sending recruiters to establish exhibits at job fairs, using mobile camps to
visit shopping centres in rural areas and places where unemployed may be contacted.
Indirect Methods: The most frequently used indirect method or technique of
recruitment is advertisement in publications such as newspapers, magazines and
trade journals as well as technical and professional journals. The choice of media,
place and timing of the advertisements and appeals to the reader, all determine the
efficacy of advertisements.
A useful advertisement has to give a brief summary of the job; a summary of the
organisation covering product/service, size, type of industry, profitability, expansion
programmes; and an offer of compensation package. A good advertisement has to
be specific, clear-cut, reader-friendly and appealing. Ambiguously worded and broad-
based advertisements may generate a lot of irrelevant applications which would, by
necessity, increase the cost of processing them. In preparing an advertisement,
therefore, lot of care has to be taken to ensure that self-selection takes place among
applicants. In other words, people meeting specific requirements should think of
responding to advertisement. A carefully worded sound advertisement can help in
building the image of the organisation. The advertisements should indicate
information about the organisation and the job providing opportunity to the
potential candidates to contact the recruitment office in confidence.
Other indirect methods include advertising in the radio and television. Another
method of advertising frequently used is a notice-board placed at the gates of the
company.
Third-party Methods: The most frequently used third-party methods are public and
private employment agencies. Public employment exchanges have been largely
concerned with factory workers and clerical jobs. They also provide help in
recruiting professional employees. Private agencies provide consultancy services and 9
Key HR Practices charge a fee. They are usually specialised for different categories of operatives,
office workers, salesman, supervisory and management personnel. Other third-
party methods include the use of trade unions.
Internet Recruiting: Internet recruiting is an emerging field and therefore relatively
few companies have gathered substantive data at this point. Companies are
successfully attracting a high proportion on-line resumes, even for non-technical
positions, because increasing numbers of job seekers are turning to the internet. Job
seekers are turning to the internet because it simplifies the process of searching and
applying for a position.
The internet is playing a more important role in recruitment. It advertises jobs and
serves as a place to locate job applicants. Websites can provide internet users with
information on the type of work the company is involved in and the job
opportunities that are available. Interested parties can respond by email. This has
the advantage of a quick turnaround time and reduces the amount of paperwork
that would normally be associated with written job applications. Further, the
internet allows an organisation to reach a larger and broader range of applicants
than traditional methods.
Internet recruiting is cheaper due to:
1. reduced direct costs of newspaper advertisements, job fairs and head hunter fees
2. reduced mailing costs
3. reduced workload for the HR department.
The majority of companies involved in active internet recruiting believe that it helps
them to attract better quality applicants, given that internet users tend to be better
educated and obviously more computer literate than non-users.

Activity B
What are the important methods used in your organisation for recruiting
management trainees, managerial, and supervisory personnel?
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10.8 EXECUTIVE SEARCH


Executive search means a thorough analysis of the market and the virtual elimination
of chance. It is a planned, systematic and persistent campaign designed to
determine and evaluate candidates’ proven ability, with the experience, knowledge,
specific skills and the personal qualities required. It requires detailed knowledge of
the industrial, business and functional areas from which to select a group of potential
candidates. Further, needs of each candidate has to be assessed against realistic
definitions of the job itself, and of the individual best suited to fill it.
The recruitment of senior executives is one of the most important tasks facing
management. As Henry Ford put it ‘in the final analysis, it is the quality of the
management that determines the success, or failure, of an enterprise’. From time to
10 time most employers face a deficiency of a suitably qualified managerial staff to
meet the needs of the growing organisation. The solution is almost invariably to Recruitment
recruit executives from outside the organisation. It may turn out to be a complex,
costly and time-consuming exercise to locate candidates with the required
skills and experience. Frequently, advertising and/or personal contact fails to
locate the best talent and this precipitates the demand for use of executive search or
headhunting.
When filling top-level positions, many organisations use management consulting
firms that specialise in the recruitment of executive personnel. They find and
screen candidates, check references, and present the most qualified candidates.
Hence, the choice of a suitable executive recruitment firm is crucial. An
assignment is successful only if there is a mutual understanding of the requirements
of the job to be filled. If the specifications are not made clear or shift a lot, a search
can be prolonged and costly. The advantages of using search firms are several.
Consultants can operate tactfully and with discretion and avoid embarrassment to
the client, company, and candidates and without upsetting customer or competitive
relationships.
Executive search is costly but well worth the investment when dealing with the
selection of top management staff. If the search firm is chosen wisely, company time
and money will actually be saved. Today’s highly competitive market ensures that
most headhunters charge similar fees and claim the same competence and
professionalism in undertaking assignments and evaluating candidates.
Increasingly, however, it is the competence and credibility of the individual
consultant rather than the executive search consultancy itself that determines the
client’s assessment of the quality of the organisation.

10.9 ASSESSMENT AND IMPROVEMENT OF


RECRUITING
The recruitment activity is supposed to attract the right people at the right time. It
is concerned with attracting those whose personalities, interests, and preferences
will most likely to be matched by the organisation and who have the skills,
knowledge, and abilities to perform adequately.
Many companies think that attracting and keeping staff is mainly a monetary factor.
Rewards and benefits are the two basic factors that attract individuals to work for a
company and these come in two forms: (i) tangible (for e.g. monetary), and
(ii) intangible (for e.g. training, career paths, working environment).
However, in the recruitment process, people usually place too much emphasis
on the issue of salary, forgetting sometimes that it is more important to find the
right candidate for the job and that the process begins with using the correct
hiring methods.
Recruitment practices vary from one organisation to another. Some organisations
resort to centralised recruitment and some others to decentralised recruitment. Both
the systems have their merits and demerits. Hence, the management has to weigh
both the merits and demerits of each system before taking a final decision
about centralising or decentralising the recruitment.
Apart from looking at qualifications and experience, other personality traits like
eagerness to learn and adapt, independence and creativity are just as important.
Besides having a logical and analytical mind, they have to be willing to try and not
to be afraid of failure.
Normally organisations do not face difficulty in finding adequate employees for
manual, clerical, sales, and general run types of work. But they often do have a 11
Key HR Practices problem in obtaining the professional and managerial talent they require. The
growing complexity and sophistication of technology has meant that increasing
numbers of professionals and managers are needed to run our modern enterprises.
The long-run solution to the shortage of personnel in these fields is for private
organisations, government, and society in general to initiate programmes that will
channel more young men and women into these fields and to give more financial
support to students and educational institutions. In the short run, the organisation
faced with a shortage of qualified talent must resort to an aggressive recruiting
effort through such techniques as advertising, campus recruitment, and contacts
with management consulting firms.
Manpower managers must constantly review and improve methods of recruitment
and sources of manpower supply. Any method or source which is highly effective at
present may prove to be quite ineffective later on in view of changed situations.
However, most managers fail to develop a long-range recruiting programme through
careful assessment. A sound recruitment programme necessitates appraisal of each
source and each technique from the standpoint of the relative qualities of the
personnel it has provided. For each major category of jobs, the present personnel
can be evaluated in terms of job success. The evaluation procedure consists of
assessing the existing employees in terms of their job success, determining the
sources existing from which “good” and “poor” employees come from and that of
the method used.
Manpower managers should also attempt to improve their recruitment system.
The results assessment or problems faced during the recruitment process may
themselves indicate the need for the improvement of the programme. A method to
improve recruiting is to look at the enterprise as a candidate would and taking
appropriate measures to improve its image. Further, recruitment activity should be
integrated with the human resource plans of the organisation.

10.10 SUMMARY
Recruitment forms a significant function in the personnel process. It involves
seeking and attracting qualified candidates from a wide variety of internal and
external sources for job vacancies. There is little agreement over the relative
effectiveness of these sources; each has unique advantages and disadvantages that
depend on the particular position to be filled. Questions that are addressed in the
recruitment process include: “What are the sources of qualified personnel?” “How
are these qualified personnel to be recruited?”, “Who is to be involved in the
recruitment process?” “And what inducement does the organisation have to attract
qualified personnel?” Indeed, without a sufficient flow of qualified candidates to
build up an efficient working force, the enterprise cannot function efficiently.
An effective recruitment programme necessitates a well-defined policy, a
proper organisational structure, effective procedures for locating sources,
proper techniques and methods for tapping them, and constant assessment and
improvement.

10.11 SELF-ASSESSMENT QUESTIONS


1. What is recruitment? What are the methods and techniques of recruitment?
2. Give several advantages of recruiting from internal sources and external
sources.

12
Recruitment
10.12 CASE
Powermat, Inc. has encountered difficulty over the last few years in filling its
middle-management positions. The company, which manufactures and sells
complex machinery, is organised into six semi-autonomous manufacturing
departments. Top management believes that it is necessary for these departmental
managers to know the product lines and the manufacturing process, because many
managerial decisions must be made at that level. Therefore, the company originally
recruited employees from within. However, they soon found that employees
elevated to the middle-management level often lack the skills necessary to
discharge their new duties.
A decision then was made to recruit from outside, particularly from educational
institutes with good industrial management programmes. Through the services of
a professional recruiter, the company was provided with a pool of well qualified
management graduates. Some of them were hired and placed in lower management
positions as preparation for advancement to the middle-management jobs. They all
left the company, however, within two years of their recruitment.
Management reverted to its former policy of promoting employees from within and
experienced basically the same results as before. Faced with the imminent retirement
of employees in several key middle management positions, the company decided to
call in a consultant who could suggest solutions.

Discussion Questions
1. What is the problem of recruiting in this company?
2. If you were the consultant, what would you recommend?

10.13 FURTHER READINGS


David, A. DeCenzo, and Stephen P. Robbins, Personnel/Human Resource
Management, PHI, New Delhi, 1989.
Dessler, G., Human Resource Management (8th Ed)., Prentice-Hall, New Jersey,
2000.
Flippo, Edwin B., Principles of Personnel Management, McGraw-Hill Company,
New York, 1980.
Randall S. Schuler, Effective Personnel Management, West Publishing Company,
New York, 1989.

13
Key HR Practices
UNIT 11 SELECTION
Objectives
After going through this unit, you should be able to:
l appreciate the dynamics of various selection tests for different categories of
employees;
l understand the problems inherent in interviewing and workout suitable
guidelines to interviewers;
l realise the importance of exit interview and how to conduct the same;
l develop a comprehensive executive retention programme for an organisation.

Structure
11.1 Introduction
11.2 Selection Process
11.3 Selection Procedures
11.4 Selection Tests
11.5 Test Construction
11.6 Interview
11.7 Physical Examination
11.8 Reference Checks
11.9 Placement Processes
11.10 Placement
11.11 Exit Interviews
11.12 Retention
11.13 Summary
11.14 Self-Assessment Questions
11.15 Case 1
11.16 Case 2
11.17 Further Readings

11.1 INTRODUCTION
The most valuable asset of any large-scale organisation is the high-calibre
personnel. Good morale and motivation bind the employees together and breed
enthusiasm and goodwill in them, leading to better output. An important part of
personnel selection, therefore, is to make reasonably sure that the person appointed
to any position is interested in the work he has to do. The acquisition of new
employees is the most important and complex task. To find and employ the best
individuals available is every personnel manager’s goal.
Finding people and putting them to work is an expensive affair. Therefore, the
selection process has to be very sound to build a first-rate staff. One of the
important aspects in personnel selection is individual difference. Individuals differ
in their ability to perform the different types of activities. They differ in their
physical characteristics, intelligence and intellectual aptitudes, in interests, in
temperament, and in character. These differences in the individuals are to a large
14
extent uncorrelated. Because of these large differences in human abilities, the Selection
problem of proper selection becomes a very important one for modern industry.
A systematic and accurate occupational information is necessary before the
employees can be recruited, selected or placed on the job. Though, in the recent
past, the need for a systematic occupational information has been recognised, not
much work has been done in this regard by most personnel or employment
departments. A careful and thoughtful preparation of a job specification for each
important type of work, followed by regular and conscientious use of these
specifications, reduce errors in selection process.
After a complete job analysis, the planning of a recruitment programme can be
done. In this process, we may also consider the likely needs of the applicants.
Recruiting is selling the idea that a particular organisation is a better place to work
than the other competing organisation. A recruitment and selection programme can
be made more positive and successful if (a) there is a cultivation of the best
employment market for the positions involved; (b) use of attractive recruiting
literature and of adequate publicity; (c) employment of up-to-date tests of high
selectivity and reliability; (d) adequate search for candidates from within the
service; (e) a placement programme that puts the right man on the right job; and
(f) a follow-up probationary programme as an integral part of the selection
process.

11.2 SELECTION PROCESS


Recruitment and selection are the two phases of the personnel practices and
procedures complimentary to each other. Recruiting consists of whatever activity
is necessary to bring in enough applicants for specific positions so that there is
opportunity for real selection. Recruiting is done mainly through three common
sources i.e., advertisement, employment exchanges or private employment
agencies, and present employees. In addition, educational institutions, labour
unions, casual applications and deputations are also utilised. After identifying the
potential applicants, the next step taken is to evaluate their experience and
qualifications for making a selection. As has been quite often said, selection is
essentially a process of picking out the best suited personnel for the organisation’s
requirements.
The selection of unskilled labour or of semi-skilled labour for particular jobs does
not cause much of a problem and therefore, an elaborate selection procedure is not
required for it. But for supervisory and higher levels and specialist jobs,
particularly in the public undertakings, private companies and industries, the need for
a sophisticated selection procedure has been felt and is now being introduced. The
selection practices and procedures vary from one organisation to another, depending
upon the situation and needs of the organisation, as well as the level on which the
selection is made.
Generally the selection activities will begin with an initial screening interview and
conclude with the final employment decision. Usually, the selection process consists
of seven steps: (1) initial screening interview, (2) completion of the application form,
(3) employment tests, (4) comprehensive interview, (5) background investigation,
(6) physical examination, (7) final employment decision. Each of these steps
represents a decision point requiring some affirmative feedback for the process to
continue. Every step in the selection process tries to expand the organisation’s
knowledge about the applicant’s background, abilities and motivation, and it
increases the information from which decision makers will make their predictions
and final choice.
15
Key HR Practices An important technique in selection is the use of application blanks in which the
questions are structured and determined in advance. The main items of information
requested on application blanks are the name, address, age, marital status and
dependents, education, experience, and references. Other items on the application
blanks vary considerably from one organisation to another and from job to job.
These application blanks serve the dual purpose of providing preliminary
information about the candidate and aids the interviewer by opening up areas of
interest and discussion. An application blank serves the following purpose:
1. They provide the candidate’s first formal introduction to the company.
2. They generate data in uniform formats and hence make it easy to make cross
comparison of the applicants.
3. The data so generated may serve as a basis to initiate a dialogue in the
interview.
4. Data in the application blank can be used for purposes of analysis and research
in personnel.
Though the information sought in application blanks may vary according to the
level of the position and the organisation, most application blanks seem to contain
personal data, marital data, physical data, educational data, employment data,
extra-curricular data, and references.
Formal application blanks are of two kinds:
1. Preliminary application blanks which seek only information on the personal
and educational qualifications and experience of the applicant, help the company
to decide whether a candidate qualifies in the first round. These are used for
short-listing the candidates for subsequent selection.
2. The comprehensive application blanks seek very detailed information from
applicants who have been short-listed in a preliminary screening. The
purpose of this application blank is to develop a comprehensive profile of the
applicant and identify areas that would have to be further explored in the
interview to assess the suitability of the applicant to the job.

11.3 SELECTION PROCEDURES


While selection procedures must satisfy a number of requirements, according to Roe
and Greuter (1989), it is important that they fulfill four main functions:
1. Information Gathering: This involves generating information about the
organisation, the job, career paths, employment conditions on the one hand; and,
on the other, about candidates, including their experience, qualifications and
personal characteristics.
2. Prediction: Using information on past and present candidate characteristics as
a basis for making predictions about candidates’ future behaviour.
3. Decision-Making: Using the predictions about candidates’ future behaviour as
a basis for making decisions about whom to accept or reject.
4. Information Supply: Providing information on the one hand, about the
organisation, the job, and employment conditions to candidates, and, on the
other, providing information about the results of the selection process to the
various parties involved - line managers, personnel specialists, and others.
While many options are available to organisations in designing and
developing selection procedures, an important consideration is that all the four
functions should be carried out adequately.
16
Selection
11.4 SELECTION TESTS
The basic assumption underlying the use of tests in personnel selection is that
individuals are different in their job-related abilities and skills, and that these skills
can be adequately and accurately measured. The main advantage of a selection test
is that it may uncover qualifications and talent that would not be detected by
interviews or by listings of educational and job experience. Some of the commonly
used types of tests and the purposes for which they are designed are discussed below:
a) Performance Tests: The simplest and perhaps the most obvious type of testing
procedure is the performance test in which the applicant is asked to
demonstrate his ability to do the job. For example, prospective typists are
asked to type some pages and their speed and accuracy are then calculated.
However, these tests have certain limitations and cannot be developed for each
and every job.
b) Intelligence Tests: Many companies use general intelligence tests under the
assumption that quick-learning, alert, bright people can learn more quickly any
job in comparison with those who are less well-endowed. However, developing
of accurate and reliable intelligent tests need professional expertise. The
intelligent tests too have their limitations because there is no general
agreement amongst the psychologists about the concept of “intelligence” itself.
c) Aptitude Tests: An aptitude test measures the potential ability of a candidate
to learn a new job. Psychologists have developed a large number of
specialised aptitude tests, such as clerical, mechanical, spatial relationship
and manual dexterity, abilities and skills which seek to predict the likelihood
that an applicant can learn a certain type of job effectively. Aptitude tests do
not measure motivation and, therefore, are supplemented by interest and
personality tests.
d) Personality Tests: These tests seek to assess an individual’s motivation,
adjustment to the stresses of everyday life, capacity for inter-personal relations
and self-image. These are expressed in terms of the relative significance of
such traits within the person as self-confidence, ambition, decisiveness,
optimism, patience, fear and distrust. The most popular personality tests are of
the pencil-and-paper variety. Pencil-and-paper personality tests proceed on
the assumption that the persons responding have sufficient self-insight to be
able to describe themselves accurately. In many cases, this assumption is
probably unjustified. In management jobs, these tests are valued very much
because the most important component of many managerial jobs is the ability
to deal effectively with people.
e) Situational Tests: The aspects of both performance and personality testing
are combined in situational tests to observe how job applicants react to stressful
but realistic real-life situations.
This technique is applied in leaderless group situations. Several candidates for
managerial positions are presented with a problem that requires group collaboration.
It is through such techniques men are able to exercise and gain acceptance of their
leadership skills.
Beach (1975) offers the following guidelines regarding the use of tests as employee
selection devices:
1. tests should be used only as a supplement to other selection devices, not as a
substitute for them;
2. tests are more accurate at predicting failures than success;
3. tests are more useful in picking a select group of people from among a much
larger group; 17
Key HR Practices 4. tests should be validated in one’s own organisation;
5. tests can make their greatest contribution in situations where it is difficult to
use other selection methods;
6. high test scores are not necessarily better predictors of satisfactory job
performance than slightly lower scores.

11.5 TEST CONSTRUCTION


There are certain fundamental principles of test construction such as (a) validity,
(b) reliability, (c) standardisation, and (d) evaluation. Tests should have validity, i.e.,
they should actually measure what they purport to measure. The validity of a test
is determined by relationship between the test results and some criterion of efficiency
on the job. The coefficient of correlation has become the most widely employed index
of validity. (It is a statistical index expressing the degree of relationship between two
variables). By the reliability of a test is meant the consistency with which it serves as
a measuring instrument. No test is of value in personnel work unless it has a high
degree of reliability. The process of standardisation includes the scaling of test
items in terms of difficulty and the establishment of norms.

11.6 INTERVIEW
The interview is the heart of the employment process. The personal interview,
along with the application blank, continues to be used by almost every employer.
Interviewing is considered to be the most useful selection method. The interview is a
conversation with a purpose. Its aim is to provide the candidate with information
about the job and the company and also to give the candidate a favourable
impression of the company. There are three purposes that may be served:
obtaining information, giving information, and motivation. The employment interview
should serve each of these three purposes. It should provide an appraisal of
personality by obtaining relevant information about the prospective employee’s
background, his training, work history, education and interests. Interview should
give information about the company, the specific job, and the personnel policies.
The interview should also help to establish a friendly relationship between the
employer and the applicant and motivate the applicant to work for the company,
whereas, in practice, we find that interviews lack mostly in one aspect or the other
and fail to achieve these purposes. For instance, obtaining information is commonly
found in many interviews rather than giving information or motivating the
prospective employees. It has been criticised because of the scope for bias.
Interview Content : Knowing what to discuss with an applicant is central to effective
interviewing. The applicant’s previous life history, education, work experience, and
personal qualifications form the basic content of the interview.
1. Personal Qualities: This area includes the personal qualifications required
in the position: physical appearance, health, dress and grooming, voice
quality, diction, vocabulary poise, alertness, and aggressiveness. Most of these
qualities are assessed by the interviewer’s observations rather than by the
applicant’s answers to his questions.
2. Academic Achievement: This area covers the type of schooling, quality of
grades, class standing, social activities, relationship with teachers, honours
and awards, and athletic accomplishments. Questions in this area can provide a
good indication of an applicant’s initiative, independence, reliability, intellectual
competence, and emotional stability.
18
3. Occupational Experience: This area emphasises not merely an applicant’s Selection
technical competence but also the level of responsibility and skill he has
attained in previous jobs, the position level and salary progression achieved,
and reasons for leaving former jobs. Questions in this area should focus at
obtaining evidence of good judgment, initiative, drive and energy, and
ability to assume responsibility.
4. Interpersonal Competence: This area includes the applicant’s ability to get
along with others. It is not enough to evaluate this area on the basis of the
applicant’s behaviour during the interview. Specific questions must be asked
about his family history, leisure-time activities, hobbies, and community
interests to ascertain his degree of social adjustment.
5. Career Orientation: This area covers the applicant’s career aspirations, his
immediate and long-range goals, and his potential for advancement. Answers to
questions in this area form the heart of a managerial applicant’s qualifications.
The interview is the most indispensable tool, not because of its information potential,
which is considerable, but also because of its distinctly human aspects. It is a two-
way street. No applicant wants to be judged for a position without an opportunity to
discuss it face- to-face in a meeting with a company representative. The interview
gives the applicant the feeling that he matters,and that he is being considered by a
human being rather than by a computer.
Interview Problems: Some of the typical problems are as follows:
l Interviewers do not seek applicant information dimensions needed for
successful job performance. Often, they do not have a complete job
description or an accurate appraisal of the critical job requirements. In addition,
the interviewer often does not know the conditions under which the job is
performed.
Interviewers may make snap judgements early in the interview. Consequently,
they block out further potentially useful information.
l Interviewers permit one trait or job-related attribute to influence their
evaluation of the remaining qualities of an applicant. This process, called the
halo effect, occurs when an interviewer judges an applicant’s entire potential
for job performance on the basis of a single characteristic, such as how well
the applicant dresses or talks.
l Interviewers have a tendency to be swayed by negative information about
the applicants.
l Information from interviews is not integrated or discussed in a systematic
manner. If several interviewers share information on an applicant, they may do
so in a haphazard manner. They do not identify job-related information or
seek to examine any conflicting information. This casual approach may save
time and confrontation, but only in the short run. In the long run, everyone in the
organisation will pay for poor hiring decisions.
l Interviewers’ judgements are often affected by the pressure to favour a
candidate or fill the position, hence they lower the standards.
l Interviewer’s judgement regarding an applicant is often affected by the list
of available applicants. For example, a good person looks better in contrast to
a group of average or below average applicants.
l Some interviewers may place more weight on certain attributes than others, or
they may combine attributes differently, as they make their overall decisions.
For instance, some interviewers may give emphasis to educational
experiences while others give weightage to work experiences.
19
Key HR Practices Do’s
l Sex, race and attitudes similar to those of the interviewer may lead to
favourable evaluation. Guidelines to Interviewers : Some do’s and dont’s of
interviewing are as under:
l Use a quiet comfortable place.
l Put the interviewee at ease.
l Be interested in the person as well as the job.
l Outline clearly the requirements of the job.
l Explain fully the conditions of employment.
l Tell about benefits, promotions, opportunities, and so on.
l Avoid certain types of questions.
l Encourage the applicant to ask questions.
l Guide the interview.
l Listen, let him talk freely.
l Be natural, use a conventional tone.
l Know when and how to close the interview.
l Announce your decision or explain your next step.

Dont’s
l Keep the applicant waiting.
l Build false hopes.
l Oversell the job.
l Interrupt the applicant or the interview.
l Rush through the interview.
l Repeat questions already answered on the application form.
l Develop a “canned” interview approach.
l Give opinions, just answers.
l Pry into his personal life needlessly.
l Prejudge and reflect prejudices.
l Use a phony excuse for turning him down.
l Send him away with a bad taste in his mouth.
Interview Techniques: The most commonly used interviewing techniques are
briefly discussed below:
i) Preliminary Interview: It is also called screening interview. The purpose is to
decide through mutual information sharing whether a comprehensive interview
is desired. In this interview, besides providing information about the job and
the organisation, preliminary information is sought on past work experience,
education and motivation. Most of those interviews are generally conducted by
personnel people who, sometimes, involve people from the areas where the
applicant is finally going to be placed. This is usually done for jobs that are
technical in nature.
ii) Patterned Interview: In this kind of interview what is to be asked is already
structured and hence they are called structured interviews. Patterned
interviews are a combination of direct and indirect questioning of the
applicant in conjunction with the application blank and is considered to be much
20 more accurate than less standardised interviews.
iii) Non-directive Interview: In this interviewing technique, there is a minimum Selection
use of direct questions. Questions that can yield “yes” or “no” answers are
avoided, and instead broad general questions are asked in the interview. Such
questions help in revealing the applicant’s real personality. It is felt that the
more the applicant is allowed the freedom to talk about himself, the more he will
reveal his personality as it really is.
iv) Stress Interview: It is a deliberate attempt to create tension and pressure to
observe how an applicant performs under stress. Stress is induced by not
allowing him to complete his answers or too many questions are asked in quick
succession. Some may react in a mature way by keeping their cool and yet
try to answer the questions, others might lose their cool and react sharply.
The most important advantage of this interview is that it helps to demonstrate
important personality or characteristics which would be difficult to observe in
tension-free situations. Such interviews are useful in jobs where emotional
balance is a key requirement.
v) Depth Interview: The purpose of depth interview is to get total information on
an applicant in order to develop a comprehensive profile based on indepth
understanding of his personality. This kind of interview is usually is very time
consuming because a lot of time is spent with the applicant to get detailed
information on various core areas of knowledge and skills of the job. Its major
advantage, of course, is in getting a complete, detailed understanding of the
applicant. Its major drawback is the cost in terms of time. In any case it is not
a usual method of selection.
vi) Group Interview: It is a recently developed technique. It offers some promise
for the appraisal of leadership but it lacks proper validity. A topic of
discussion is assigned to the group of applicants and their performance is
evaluated by the observers. The observers’ main focus is to see whether any
one of the applicants assumes leadership, how this is done, and how it is
accepted by other members of the group.
vii) Panel Interview: Interviewing candidates by a single person may not be
effective as he cannot judge the candidates in different areas/skills. Hence
most organisations invite a panel of experts, specialised in different
disciplines, to interview candidates. The great advantage of this interview is
that it helps to coordinate the collective judgment and wisdom of members of
the panel. This type of interview is done usually for supervisory and managerial
positions.
The interviews for selection have advantages as well as limitations. On the
positive side, it is possible to determine from an interview whether or not the candidate
is impressive and how he reacts in conversation. The personality traits that can be
demonstrated in an interview are responsiveness, alertness in conversation,
manners, presence of mind and poise. The limitations of interview are that the
interviewer cannot judge from a man’s face such personality and character traits
as honesty. The employment interview can be made satisfactorily accurate if it is
carried out with sufficient care. We still have shortage of skilled interviewers. The
interviewer must maintain an objective attitude towards the applicant. In brief, an
interviewer needs the following qualifications:
1. He should have emotional maturity in order to avoid the errors of bias as
well as to provide a base for developing rapport with the applicants.
2. He should be a good listener.
3. He should be as intelligent as the upper quarter of those he will interview.
4. He should show objectivity rather than emotionality or softness in his
appraisal of others.
5. He should have a thorough knowledge of the job for which he is interviewing. 21
Key HR Practices We still have shortage of skilled interviewers. Hence every organisation must
surely see that administrators, supervisors and personnel managers handling
personnel selection get the necessary training to ensure high quality of performance
in interviewing.
The success of an interview depends on careful planning. The plan should cover such
elements as setting objectives, choosing the persons to be interviewed, evaluating
available information about the interviewees, designing questions and arranging the
physical setting.
Gathering information about interviewees and their performance is a most important
preparatory step. Then the interviewer prepares the questions likely to reveal the
required facts. An important step in interview planning is allocating sufficient time
for each interview.
Interview success can be enhanced by a suitable physical setting, which should
include privacy, comfort and freedom from interruptions and distractions.
The following checklist may help in getting adequate information:
l Convert job descriptions into questions that would help to assess whether the
applicant is really capable of excellent performance.
l Choose a physical setting which is comfortable and pleasant enough to
generate greater interaction and hence more information.
l Put the applicant at ease by asking certain general questions about his
journey, weather, sports, and so on. Such an attempt would help in developing
greater rapport.
l Start by asking simple questions and slowly move to more difficult questions.
l Ask open-ended questions instead of those that lead to yes-no answers.
l Avoid asking leading or loaded questions that might lead to debate instead of
dialogue.
l Listen carefully to what the applicant has to say without interruption. Provide
positive feedback to encourage him to talk.
l Ensure that sufficient time is taken by the applicant while replying to
questions.
l Terminate the interview naturally. An abrupt ending might convey the
meaning that more could have been achieved.
l First make independent ratings on the applicant and then discuss them.
l According to Goodrich and Sherwood, an HRM consulting firm, companies
look most often for the following six-pack skills when interviewing applicants
for management jobs.
l Public Speaking: The ability to convey a message to strangers in a less-than-
relaxed situation.
l Financial Management: Experience in operating a budget successfully, with an
eye on costs.
l People Management: An indication of leadership skills, and the abilities to
delegate, lead by example, and motivate employees.
l Interviewing: The ability to handle an interview effectively, as both interviewer
and interviewee.
l Training: The ability to train and develop subordinates, not only to ensure that
the work gets done properly, but also to ensure that competent managers are
available for succession.
22 l Writing: The ability to communicate clearly through the written word.
The interviewer can ask open-ended questions or close-ended questions. Open- Selection
ended questions, such as “tell me about your experience in financial analysis”,
or “what do you consider your weaknesses as an employee?” Allow the interviewer
to structure the response to the question and present information that he or she feels
is important. Close-ended questions, such as “tell me the first thing you would say to
a potential customer”, or “how many employees have you supervised during the past
year?” Allow the interviewer to focus a response more precisely. Some combination
of the two approaches is most effective. For example, in interviewing supervisory
candidates a manager might ask the following questions:
1. Why do you want to be a supervisor?
2. What are the functions and duties of a supervisor as you see them?
3. What personal characteristics and other qualifications do you have that would
help you to become a good supervisor?
4. How do you feel about taking on the added responsibilities and demands
that come with a supervisory job?
Avoid all questions which can be answered with a “yes” or ”no”. Use “what”,
“why”, “when”, “where” and “how”.

List of Interview Questions


Ask
l What are your long and short-range objectives?
l What is it about the position that particularly attracted your interest?
l What kinds of things have you done that we should be particularly
interested in?
l Here is a problem......How would you go about solving it?
l What kinds of things you don’t like to do?
l Tell me about a product, organisation and person, and so on you admire and
why?
l What has been your most significant accomplishment? Tell me why it was so
significant?
l Which of your personal strengths do you think should be useful to this company?
l Do you prefer working alone or in a team?
l How did you get along with your subordinates and superiors?
l What would be the ideal job for you? Why?
l Why do you want to leave your current position?
l What was your most disappointing experience in your current position? What
you might have done to improve the situation?
l What has been your best job so far? Why?
l Are you willing to travel? (ask this only if it is a job requirement)
l Have you ever just taken a thing or a situation and improved? Tell me about it?
l Have you ever been in a situation where you have taken independent charge of a
job and provided a leadership?

Don’t Ask
l Any question about caste or religious affiliations;
l Questions that might be considered overly personal, such as, “Do you intend to
have a family?” “Are you a single parent?” 23
Key HR Practices l Questions that might pry into someone’s socio-economic status, such as, “Do
you own a car?” “Do you have a telephone/fax?” You would only need to
know about such things if the job specifically requires them.

Activity A
Try to recollect your last selection interview you attended either as a candidate or
member of interview panel.
See if you can answer the following questions (Yes or No).
l did you like the physical setting?
l did the interview commence on time?
l was there more than one member in the interview panel?
l were the questions clear and precise?
l were the questions relevant to your position?
l did you get sufficient time to respond to questions?
l was the environment friendly and relaxing?
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................

Post-Employment Interview Evaluation


The selection committee should ask the following kinds of questions following
the employment interview and prior to the job offer to determine whether the
applicant will indeed be the right choice.

Work experience and history


1. Does the applicant have the kind and amount of experience needed?
2. Did the applicant remain on past jobs for a reasonable length of time?
3. Does the applicant’s record show normal growth in responsibility and
earnings?
4. Does the applicant have sound reasons for leaving prior positions?
5. Does the applicant’s work history indicate that he or she gets along well with
others?

Professional and educational indicators


1. Has the applicant achieved a desirable level of education?
2. Has the applicant assumed positions of leadership in schools, social, or
business activities?
3. Does the applicant’s history indicate a willingness and ability to assume
responsibility?
4. Does the applicant’s background indicate resourcefulness, initiative, and
ambition?

24
5. Does the applicant appear to be an emotionally and socially mature person? Selection

6. Does the applicant express himself or herself effectively?

Interpersonal communication skills


1. Does the applicant have the ability to be self-critical and objective?
2. Does the applicant reveal personal security and confidence in manner and
attitude?
3. Does the applicant seem sympathetic to the problems of others?
4. Does the applicant have a sound estimation of his/her worth to the organisation?
5. Does the applicant accept people as they are?
6. Is the applicant tolerant or critical?
7. Does the applicant accept others’ point of view?

Personal motivation and attitude


1. Are the applicant’s ambitions and goals in line with the organisation’s goals?
2. Does the applicant have a realistic view of his or her future?
3. Does the applicant seem to be the kind of person who will grow in
effectiveness?
4. Does the applicant have sound reasons for wanting the position?

11.7 PHYSICAL EXAMINATION


Certain jobs require unusual stamina, strength or tolerance of unpleasant working
conditions. A physical examination reveals whether or not a candidate possesses
these qualities. A physical examination serves the following purposes:
1. It indicates whether a candidate is physically able to perform the job.
Those who are physically unfit are rejected.
2. It discovers existing disabilities and obtains a record of the employee’s health
at the time of hiring.
3. It prevents the employment of those who suffer from some type of contagious
diseases.

11.8 REFERENCE CHECKS


The use of references is common in most selection procedures, for it involves only a
little time and money, and minimum of effort. The procedure places reliance on the
evaluation of former employers, friends and professional personnel. Reference
checks are made by mail or by telephone, and occasionally in person, or by using a
reference. It is vitally important that references should indicate how long and in what
capacity the referees had the contact with the applicant. Some employers consider
references-checking as an integral part of the total over-all selection and assessment
programme.
The questions that are normally asked in any reference check are the following:
1. What was the nature of his/her job?
2. Whether the statement of earnings when he or she left the service is correct or
incorrect?
3. What did his/her superiors think of him/her?
25
Key HR Practices 4. What did his/her subordinates think of him/her?
5. Did he/she have supervisory responsibility?
6. How hard did he/she work?
7. How did he/she get along with others?
8. What were his/her reasons for leaving?
9. Would you reemploy him/her? If no, why?
10. Did he/she have any domestic/financial or personal trouble which interfered
with his/her job?
11. What are his/her strong points?
12. What are his/her weak points?
13. Any other relevant information?

Exhibit 1
Employer Speak

* What we look for when selecting a candidate


We look for a set of competencies, which we believe will determine the future
success of that candidate. These include:
1. A passion for winning
2. A clear ability to lead
3. Strong analytical skills
4. The ability to think innovatively
5. The ability to identify and work constructively towards opportunities
6. The ability to work collaboratively with others
7. A drive for continuous self-improvement
8. A genuine interest in the development of others
* Our recruitment procedure

The process is made up of the following simple steps:


1. The candidate fills in a company-provided management application form.
2. The company conducts a simple problem-solving test.
3. If the candidate’s application is progressed beyond the first two stages, he/she
is interviewed anywhere between one to three times by managers.
4. The decision to hire/not hire is communicated to the candidate post
interviews.
Source: ASCENT, The Times of India, May 6 2002.

11.9 PLACEMENT PROCESSES


Placement involves deciding which jobs people are to be assigned after they have
been hired. It must also be decided which job best matches the person’s talents and
abilities. It is the determination of the job to which an accepted candidate is to be
assigned and his assignment to that job. The organisation usually decides the final
placement after the initial training is over on the basis of the candidate’s aptitude
and performance during the training/probation period. The new employee is usually
26
put on probation for a specified period during which he is kept on trial. The period of Selection
probation may vary from few weeks or months, and sometimes a year or two.
If the performance is not up to the mark, the organisation may extend the
probation period, terminate the service of the probationer, or ask him to quit the
organisation.
The difficulty with placement is that we tend to look at the individual but not the
job. Often, the individual does not work independent of others. Whether the
employee works independent of others or is dependent depends on the category of
jobs.
Placement is a crucial task which needs a clear-cut match between employees’
knowledge, skills, aptitude, value systems, and so on. The problems associated with
placement (mismatch between the job and the employee) include employee
expectations from the job, job expectation from the employee, technological changes,
changes in organisational structure, and social and psychological factors at the
workplace.
Placement can be made more effective by such measures as job rotation, job
enrichment, teamwork, continuous training and development programmes, and
empowerment.
Selection and placement form a crucial manpower function. It may be noted that
the trends towards automation and computerisation have increased the significance
of those processes. The terms ”selection” and ”placement” are two separate
phases in staffing. Frequently, selection means rejection of candidates for a
position and it is considered a negative process accordingly. On the other
hand, placement is viewed as a positive process involving filling positions with the
most suitable candidates. While formulating selection and placement policy,
attempts should be made to take preview of organisational requirements
as well as technical and professional dimensions of selection procedures. Such
policies should be based on effective blending of professional and industrial
relations needs, organisational planning, and employee development goals.
Effectiveness of selection programme should be constantly reviewed through
intensive research.

11.10 PLACEMENT
After an employee has been hired and oriented, he or she must be placed in his/her
right job. Placement is understood as the allocation of people to jobs. Assignment of a
new employee to a job apparently seems to be a simple task but the task is not as
simple as it looks like. The difficulty with placement is that we tend to look at the
individual but not the job. Often, the individual does not work independent of
others. Jobs in this context may be classified into three categories: independent,
sequential, and pooled.
In certain cases jobs are independent, for example, postal service or field sales.
Here, non-overlapping routes or territories are alloted to each worker. In such
situations, the activities of one worker have little bearing on the activities of other
workers. In sequential jobs, activities of one worker are dependent on the
activities of a fellow worker. Assembly lines best exemplify sequential jobs.
Where jobs are pooled together, there is high interdependence among activities.
The final output is the result of contribution of all the workers. Project teams,
temporary task forces, and assembly teams represent pooled jobs. It is the teamwork
which matters.

27
Key HR Practices
11.11 EXIT INTERVIEWS
The exit interview is the final step in the employment procedure. It is conducted by
the human resource department during the terminating employee’s last day on
the job. This interview often discloses departmental or job-related problems. Its
purpose is to:
1. Try to uncover the real reason behind the quitting/ termination.
2. Locate the probable reasons that contribute to turnover.
3. Assure the departing employee of his rights and benefits.
4. Part as friends.

Exhibit 2
Exit Interview - Aide-memoire
Relationships Is there any indication that there was a poor relationship
between the departed employee and supervisor? If so, why?
Is there any indication that the departed employee did not
get on well with his colleagues? Why?
Finance Is there any indication of dissatisfaction concerning salary,
fringe benefits, and so on?
Conditions Is there any indication of bad working conditions?
Personal Is there any indication of domestic or personal reasons for
leaving? What are they?
Promotion Is there any indication that promotion or career
development prospects have not been realised?
Training Is there any indication that the departed employee has not
received appropriate training?
Others Are there other reasons for leaving?
An exit interview, like any other interview, is a ”conversation with a purpose”.
During the exit interview, the employee will be permitted to express himself freely
about the reasons for leaving. Any misunderstanding that might have resulted in his
leaving will be corrected. In most instances, a form is used by the interviewer to
record the substance of the interview. This interview often discloses departmental or
job-related problems, and serves as a storehouse of information.

Exhibit 3
Some Do’s and Don’ts in Exit Interview
Do’s Don’ts
l Listen 80% of the time instead l Defend your company against
of talking. criticism or attacks.
l Rely heavily on non-directive l Justify actions which may
techniques like eye-contact. have annoyed the employee.
l Listen for sensitive topics and l Attack the departee’s views
feelings to be probed. or choice of new company or job.
l Cover all topics on the checklist l Convince the employee to
while being flexible. change his mind about leaving the job.
l Keep the interview constructive l Counsel the interviewee about
instead of eliciting woes. career options or his future.
28
Activity B Selection

Is there exit interview in your organisation? If yes, who conducts the interview and
what feedback is obtained?
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................
.....................................................................................................................................

11.12 RETENTION
Employee retention programme is a significant challenge for most companies today.
For most employers it is the most compelling problem they face. A key employee
retention programme will help the employer to retain key employees and ensure
their commitment to the organisation.
An organisation must have a comprehensive approach to attract and retain good
employees so that quality customer service can be given. There cannot be loyal
customers without loyal employees. There are six keys to comprehensive employee
retention plan.
1. Have a planned approach.
2. Retain people as individuals, not groups.
3. Value people through a strong organisational vision.
4. Invest in employees.
5. Boost retention with innovative compensation and training programmes.
6. Approach retention as a long-term and short-term strategy.
There are nine tips to help keep good employees:
1. Beware of anything that can become an entitlement, because it can become
expensive and you may not need it.
2. Develop processes by which people can increase their employability in the
areas of competencies, skills and intellectual growth.
3. Use special projects as incentives or rewards.
4. Have a positive corporate environment to foster employee development.
5. Realise that retention of valued people is a long-term process, not a knee-jerk
reaction.
6. Create a consistent corporate culture in which managers communicate corporate
vision and values uniformly to employees.
7. Build in rewards for supervisors and managers who keep good employees.
8. Use exit interviews to obtain important data that will provide information about
your organisation.
9. Provide anonymous suggestion programmes to make workers understand the
importance of their ideas.

29
Key HR Practices
11.13 SUMMARY
The acquisition of new employees is an important and complex task. To find and
employ the best individuals available is the goal of every human resource manager.
The purpose of the selection process is to choose individuals who are most likely to
perform successfully in a job from those available to do the job. A series of steps is
normally followed in the selection process. These include the completion and
screening of the application form, employee testing, diagnostic interview,
reference checking, physical and medical examination, and making the
decision on final selection. Each step in the sequence should contribute to
extracting new information data. The application blank can elicit more factual
information. A reference check can provide the experience of others.
Psychological tests can measure such qualities as intelligence and aptitude. Any
tests used should relate directly to the jobs for which the individuals have
applied. If information cannot be obtained in any other way, it can be done so
through the interview.

11.14 SELF-ASSESSMENT QUESTIONS


1. Outline the steps in the personnel selection process.
2. What are the common interview problems? How can they be overcome?
3. Explain in some detail how you would go about analysing and evaluating
the effectiveness of an employee selection programme.
4. “Tests often do not reflect an individual’s true ability.” What are your views
on this statement?

11.15 CASE 1
The Bharat Paint Company recruits sales people to sell its products to retail
stores. The company looks for employees who have the energy, ability to work
hard, and ability to speak enthusiastically and intelligently about the company’s
products. In addition to skill, the company expects flexibility, accuracy, and
patience from its sales employees.
Nirmala has applied for a sales job. The interviewer who is going to interview her has
noted the following entries on her application blank:
Nirmala is 26 years old.
She has completed one year of college education.
She has held two jobs since leaving school - clerk in a school (two years), and senior
assistant in a financial organisation.
There is a gap of one year in between. Nirmala indicates on her application that she
was sick during that period and was undergoing medical treatment.

Discussion Questions
1. If you were the interviewer, what objectives would you set for your interview
with Nirmala?
2. How would you phrase your questions?

30
Selection
11.16 CASE 2
As a result of rapid growth in sales, the Simpson company had to double the size of
the central secretarial pool. Many of the current secretarial staff, aged about 40 to
50, had been with the company since its inception. None had more than a high
school education. Subsequently, 10 new secretaries were recruited with advanced
data processing skills. They had college education and all were in their 20s.
Unexpectedly, the performance level of the pool fell off drastically even though
doubled in size. The manager interviewed a few of the old staff members and they
told him that the new secretaries just did not fit in. They were uncooperative, would
not listen, and would not take messages. When their mistakes were corrected, they
got offended. In interviewing, a few of the new secretaries resented that the older
secretaries refused to accept new and more innovative ideas. They complained their
inability to use new knowledge and skills and the older secretaries would not
socialise with them.

Discussion Questions
1. What are the reasons for the declining productivity of the group?
2. What are your recommendations for improving the situation?

11.17 FURTHER READINGS


Armstrong, M., Managing People, Kogan Page, Vol. 4, India, 1999.
Bhadury, B., Managing the Workforce, Response Books, New Delhi, 2000.
Edmund R. Gray, and Larry R. Smeltyzer, Management - The Competitive Edge,
Macmillan, New York, 1990.
Scheer, Wilhert, Personnel Administration Handbook, Dartnel Corporation,
Chicago, 1979.
Wayne, F. Cascio, Werther, W.W., Davis, K., and Elios M. Awad, Human Resource
and Personnel Management, McGraw-Hill, New York, 1993.

31
Key HR Practices
UNIT 12 DISLOCATION AND RELOCATION
OF EMPLOYEES
Objectives
After going through this unit, you should be able to:
l understand the significance of dislocation and problem of dislocated
employee;
l identify various causes of job dislocation in an organisation; and
l appreciate the need to help the dislocated employee through the process of
retraining and relocating.

Structure
12.1 Introduction
12.2 When Dislocation Occurs
12.3 Coping with Dislocated Employee
12.4 Helping the Dislocated Employee
12.5 Summary
12.6 Self-Assessment Questions
12.7 Further Readings

12.1 INTRODUCTION
One of the most difficult problems facing the human resource manager is the
dislocated employee. Any discussion on dislocation involves the definition of
dislocated employee, how to cope with it and why it occurs. Broadly speaking, the
dislocated employee is any employee whose job has outgrown him or who is
incapable (for whatever reason) of satisfactorily performing the requirements of his
job. Usually an employee gets dislocated when he is incapable of performing, or
unwilling to perform, a significant portion of his work in a satisfactory manner. It is
obvious that employees seldom become dislocated overnight because job requirements
are rarely that flexible and employee skills are barely that stable.

12.2 WHEN DISLOCATION OCCURS


The job dislocation occurs as a result of the erosion of one’s skills and capabilities
or the changing job requirements and technology. The most common excuse for an
employee becoming dislocated in his job is inability to adjust to change. It is a fact
that people do not resist change, rather they fail to change because of fear of the
unknown.
There are fundamentally two reasons that men permit their jobs to outgrow them:
attitudinal and physical. Attitudinal causes are far and away the most serious because
they not only are the most common cause of dislocation but they also are the least
tangible to deal with. People are confronted with common fears and worries when
they are faced with changing ways of doing things. These include the fear of losing
one’s job, the fear of losing status in the eyes of co-workers, the fear of losing
privileges, and the fear of lesser chance for promotion.
32
The reasons for job dislocation are: Dislocation and
Relocation of
1. Physical deterioration of the individual Employees
2. Aging and senility
3. Indifference to work
4. Group pressure
Let us look at each of these factors, and how they can cause job dislocation.
1. Physical Deterioration: Although it is uncommon, it is possible that an
employee may become unfit for a particular job from a physical standpoint.
Sometimes, of course, the job itself is the cause of the physical unfitness, as in
the case of mine workers getting pneumoconiosis. In other cases, an accident
or chronic illness can cause the person to become incapable of performing
satisfactorily the whole job or a significant portion of it. Obviously, when an
employee becomes physically unfit to do a job, he is dislocated and corrective
action must be undertaken.
2. Age and Senility: A second factor which may cause chronic or hard-core job
dislocation is aging and senility. While most people look at aging as a physical
process, the HR manager in facing the problem of a dislocated employee, must
recognise that aging is more of a mental problem than it is physical. Of
course, there is no particular problem with the mental slowing down as long as
one has a wealth of experience to rely and utilise in effectively performing at
work.
3. Indifference to Work: The third chronic job dislocation is the attitudinal
problem of indifference. They include withdrawal from participation, reluctance
to compete for any kind of reward, animosity towards superiors and colleagues,
and so on. Attitudes are extremely difficult to change without extensive
psychological counseling.
4. Group Pressure: Another cause of extreme difficulty when an employee is job-
dislocated is the group pressure. Group pressure is a significant factor in
determining the behaviour of an individual. The organisation can convince the
employee that the proposed change is to his benefit, but if the group (or union) is
opposed to the change, the situation becomes very difficult. When a group
plants seeds of distrust and discontentment in the minds of any individual, it
is almost impossible to get him think along constructive lines.

12.3 COPING WITH DISLOCATED EMPLOYEE


Some of the remedies to overcome dislocation are as follows:
l Tell the employee why new method or technique of learning is necessary.
l Permit the employee to participate in implementation of the change.
l Provide a standard of performance which has realistic and achievable goals.
l Recognise that the employees will have difficulty in carrying out the new job
and that they are not expected to be perfect to begin with.
l Recognise the efforts of the employee in achieving the target.
l Explain all instructions to the employee as and when necessary.
l Allow time for the employee to familiarise with the new way of doing things.
Many employees become displaced in their jobs not as a result of their own failings,
but as a result of technological advancement, changes in production processes, and
33
Key HR Practices changing economic circumstances. Moreover, individual attitudes also contribute to a
great extent to the problem of job dislocation.
Coping with the dislocated or replaced employee can be effectively
accomplished by two ways, namely, through the process of retraining or the process
of relocating the employee. In some cases, retraining is the solution, and in other
cases relocating the employee.
Basically, the union’s concern with job dislocation revolves around giving advance
notice of dislocation to the employee and compensating the employee who is
dislocated. It need not be emphasised that union co-operation is very essential in
solving the problem of job dislocation. Normally unions do not like job dislocation
and may jeopardise any attempt made in this direction.
The obvious solution in dealing with dislocation is to retrain the employee. Training
or retraining needs are to be determined on the basis of projected new skills and
capabilities required on the part of any dislocated employee to perform his task.
For this, future training needs are to be assessed through formal and informal
consultations and discussions. A thorough job analysis has to be carried out in
advance to facilitate retraining.
If the employee cannot be retrained the only other solution is to relocate him.
Relocation means that the employee is likely to be transferred, demoted, possibly
promoted, or removed from the organisation (by taking recourse to law, if
necessary). Hence, relocating an employee means to move him to a different job in
the organisation or to sever his relationship with the company. In case of chronically
dislocated employee the main problem the manager of human resource will face is
how to relocate him somewhere else within the organisation. The unavoidable
technique of relocation is, of course, the severance of the individual from the
organisation.

Activity A
Suppose in your organisation some employees are in the process of dislocation of
their jobs due to different reasons. Your organisation has decided to retrain them as
an obvious solution to cope with the problem. Keeping in view retraining technique,
your focus will be on:
l how retraining needs are to be determined on the part of employees who are apt
to be dislocated in their jobs?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
l how to develop new skills and capabilities of dislocated employees?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
34
Dislocation and
12.4 HELPING THE DISLOCATED EMPLOYEE Relocation of
Employees
Due to various reasons relocation is not a successful intervention. Any
dislocated employee who is relocated elsewhere in the organisation probably will not
be pleased with his circumstance. In fact, he may be outwardly hostile toward the
organisation and resentful of the change. The HR manager should not take it for
granted that a job relocation is necessarily successful just because a man accepts
such an offer. The outward acceptance by the man may be due to various pressures
generated by the job or the family or by the community. Before transferring an
employee, the HR manager must be carefully attuned to such mundane matters as
school, vacation, holidays, weather and various other factors which normally affect
the work life of the employee. The policy decision of relocation should take place at
the convenience of the company and must commensurate with the employee’s
convenience and needs.
The company should make its efforts to ameliorate or minimise the problems which
the employee and his family are likely to face as a result of dislocation, both
financially and emotionally. When it comes to the question of emotional problems of
relocation by the employee and the family, the obligation of the organisation is to
attempt to familiarise both with the new situation. Attempting to physically
relocate an employee at a new site is expensive. Therefore, the organisation should
make all necessary efforts to cope with the financial problems arising out of
dislocation of an employee.
Employers wish to retain the flexibility of moving key employees to new job
assignments to enhance the effectiveness of both the individual and the
organisation. The provision of various relocation services will fulfill both the
objectives.
Among the various services that may be provided are:
1. Helping in the sale of home, if any, of the relocated employee.
2. Transporting household goods, and disbursing employee travelling expenses.
3. Employment assistance for the employee’s spouse, if required.
4. Information and advice concerning the new area, such as schools, medical
facilities, conveyance facilities, and so on.
5. Helping in finding and purchasing a new home, if the employee so desires.
6. Providing relocation counseling service to the employee and his family.
Policies of companies who relocate employees vary tremendously and depend upon
many factors like the practice of the industry, the geographical location of the
company, and the level of the relocated employee in the organisation. Normally most
organisations lay down a policy for various levels of employees, e.g., top level
executives, middle management and supervisory personnel, and rank and file
employees.

Activity B
If an employee cannot be retrained, the other option is job relocation. If you
are planning for relocating an employee by taking into consideration the future
needs of your organisation, what are your avenues?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
.......................................................................................................................... 35
Key HR Practices
12.5 SUMMARY
Job dislocation which is a slow erosion process causes immense hardship to both
the HR manager and the employee(s) affected. The problem of the dislocated
employee is serious and can become acute under certain circumstances. The home
life of the employee has a considerable impact on performance at work. Financial
and other forms of relocation assistance appear to have been generally successful in
overcoming employee reluctance to move. Any policy designed to cope with this
problem must call for positive outlook and immediate, corrective and
humanitarian action. The HR manager must ensure that necessary preventive action
and purposeful implementation of job dislocation and relocation of employees is
carried out with all efforts that it deserves.

12.6 SELF-ASSESSMENT QUESTIONS


1. What are the main causes of job dislocation?
2. What are the solutions to deal with dislocated employees?

12.7 FURTHER READINGS


Bennis, W.G., K.D., Benne, and R. Chin (eds.), The Planning of Change, Holt,
Rinehart and Winston, Inc., New York, 1961.
Famularo, J.J., Handbook of Modern Personnel Administration, McGraw-Hill Book
Company, 1972.
Lawrence, L.S., Managing the Marginal and Unsatisfactory Performer, Addison-
Wesley Publishing Co., Massachusetts, 1969.

36
Orientation
UNIT 13 ORIENTATION
Objectives
After going through this unit, you should be able to:
l appreciate the importance of inducting new employees and re-orienting old
employees in an organisation;
l prepare an orientation checklist for supervisors and for those in charge of
orientation programme;
l evaluate the success of orientation in the context of organisational aims and
objectives.

Structure
13.1 Introduction
13.2 Orientation Objectives
13.3 Why Orientation?
13.4 Orientation Policy
13.5 Orientation Contents
13.6 Orientation Responsibilities
13.7 Orientation Programme
13.8 Orientation Checklist
13.9 Orientation Evaluation
13.10 Summary
13.11 Self-Assessment Questions
13.12 Further Readings

13.1 INTRODUCTION
Orientation or induction is the process of introducing new employees to an
organisation, to their specific jobs and departments, and in some instances, to their
community. Orientation also marks the beginning of the process by which employees
are integrated into the organisation. This process is primarily one of the
organisation members informing the new member of the company’s expectations.
The orientation process communicates basic organisational philosophy, policies,
rules, and procedures. Orientation programmes can be either formal or informal.
Formal programmes are planned, and structured sessions are conducted at a set
time. Informal programmes are unstructured in content and are typically conducted
by supervisors and/or co-workers in an employee’s first day at work.
A new recruit needs orientation. The orientation meeting is the official welcome from
the company. It should be conducted with warmth and understanding. The first few
days on the job are filled with doubts and fears. The new employee needs assurance,
confidence, and a nudge in the right direction until he finds his own way.
In most organisations, some form of orientation follows selection and hiring of new
employees. Orientation provides new employees with the basic information
regarding working conditions, policies, procedures, pay, and benefits, and
37
Key HR Practices introduces them to the management and its co-workers. Orientation does not include
training in the performance of job tasks and responsibilities. That comes in the
training programme. It includes those things that are done to introduce a new
employee to the work environment, to fellow employees, to the work station, and to
general policies and procedures that a new environment creates.
Performance appraisal relates to orientation function in that the new employees are
informed of the acceptable levels of performance. Orientation function typically
leads to the training and development function. For almost all jobs, some degree of
training follows orientation. While orientation provides new employees with
general information, training provides them with the specific knowledge and skills
necessary to perform the job.

13.2 ORIENTATION OBJECTIVES


The objectives of orientation are:
1 To welcome the new employee, relieve his anxieties, and make him feel at home.
2. To develop a rapport between the company and the new employee and
make him feel part of the organisation as quickly as possible.
3. To inspire the new employee with a good attitude toward the company and his
job.
4. To acquaint new employees with company goals, history, management,
traditions, policies, departments, divisions, products, and physical layouts.
5. To communicate to new employees what is expected of them, their
responsibilities, and how they should handle themselves.
6. To present the basic information the employee wants to know: rules and
regulations, benefits, payday, procedures, and general practices.
7. To encourage the new employee to have an inquiring mind, show him how to
learn, and assist him toward a discipline effort in developing additional
knowledge.
8. To provide basic skills, terms, and knowledge of the business world and
help the new employee in human relations.

13.3 WHY ORIENTATION?


Orientation marks the beginning of socialisation, the process by which the employee
is indoctrinated to the organisation’s norms, values, and ways of doing things.
Socialisation is a period of adjustment for new employees, in which they learn what
is expected of them in terms of appropriate behaviour and acceptable performance.
An ideal orientation programme gives to each new employee confidence and pride in
himself and the company he works for. It makes him feel part of the company team.
Orientation contributes to organisational effectiveness by facilitating the
socialisation process so that new employees become integrated into the
organisations as soon as possible. The sooner new employees feel comfortable in
the organisation, the sooner they can be productive workers.
The ease with which employees adjust to the new job and work environment is
often a function of the expectations they bring to the job. If expectations are
realistic, adjustment will be relatively simple. If, however, expectations are
unrealistic or unreasonable, adjustment will be more difficult. In the latter case,
orientation can be instrumental in modifying employee expectations.
38
Most companies realise that the first impressions of new employees affect Orientation
future job satisfaction, competence, and company loyalty. Organisations make
investments of time and money in new employees and, therefore, want to obtain
their best efforts on the job, greatest level of efficiency in the shortest period of time,
as well as their loyalty and respect. An orientation programme is a critical factor
in shaping the work attitude. The attitudes formed in the early days on the job tend to
persist and are not easily changed. An orientation programme, therefore, must be
sound, follow a carefully thought-out plan and adhere to a reasonable timetable.
The benefits of orientation are:
1. It can cut down recruitment costs.
2. It can be a motivating factor for new staff.
3. It can be used as a supplement to improve training and development
functions.
4. It can have a beneficial effect on existing staff.
5. It can make a contribution to quality initiatives.

13.4 ORIENTATION POLICY


1. That the organisation is committed to full orientation for all new entrants.
2. That every new member of the organisation would have to undergo a
comprehensive and appropriate orientation programme.
3. That as a part of the orientation process, each new member would have the
opportunity to discuss a training plan to meet agreed needs.
4. That every entrant would be given an opportunity to discuss aspects of
orientation at appraisal meeting and exit interviewing.
5. That all those involved in orientation will receive appropriate training to
carry it out.
6. That a review team would be set up to monitor all aspects of the orientation
policy.

13.5 ORIENTATION CONTENTS


Formal orientation rests almost entirely with personnel professionals. They are
responsible for seeking that orientation programming is initiated in the first place,
and that is carried out according to plan. They determine the programme content
and how information will be conveyed and prepare programme materials. They
also train line supervisors in the performance of their orientation responsibilities.
They also schedule, conduct and evaluate formal orientation programmes. The
information provided in orientation programmes typically covers things like:
1. the objectives and philosophy of the organisation;
2. company history, policies, practices;
3. company products and/or services;
4. company plans and facilities;
5. organisation structure (in general);
6. employee responsibilities to company;
7. company responsibilities to employee;
8. employee compensation benefits;
39
Key HR Practices 9. personnel policies;
10. work schedules;
11. training opportunities; and
12. safety measures and regulations.
Another responsibility is conducting follow-ups to the orientation programme, whether
formal or informal. Like any other personnel function, orientation programmes should
be evaluated to determine whether they are accomplishing their stated objectives.
Orientation programmes can be evaluated by soliciting opinions from the new
employees or from the employee’s supervisor. Personnel records can also be used in
evaluating orientation programme’s effectiveness. Exit interviews are also a good
source of evaluation data.

13.6 ORIENTATION RESPONSIBILITIES


The supervisor plays the most important role in orientation. He is expected to have a
complete understanding of the company’s policies and practices and share his
enthusiasm and knowledge with his new recruits. An orientation checklist is a handy
tool for the supervisor. It provides an outline of the items he should cover with the
new employees and can be used as a good follow-up technique. The supervisor
is expected to give the new recruit the information he needs when he first reports
to work and to answer questions the employee may have. He can use the orientation
checklist as a means of making sure that the employee has sufficient understanding
of the policies and practices that he needs to know.
An orientation programme helps to establish teamwork between the personnel
specialist and the supervisor. The personnel specialist introduces the policies and
practices of the company and provides motivation toward a good performance and
the supervisor capitalises on motivation by developing the employee’s interest.
Once this is accomplished, the supervisor can turn his major interest to the
immediate training and development of his new staff member. •

13.7 ORIENTATION PROGRAMME


The orientation programme of a new employee into the company is such an
important part of the management function that it merits special attention. The
programme is intended to help a new employee become integrated as soon as
possible functionally and socially into the company and its environment. The
main responsibility for implementing and evaluating the programme lies with the
concerned line and personnel managers. The contents and methods of the programme
will vary in details depending upon the position and the new employee’s background.
A new employee should be met by the responsible line and staff manager at the
beginning and end of the programme. The initial meeting is necessary with a view to:
l explain the aim, objectives and plan of the induction programme;
l inform the new employee where and how he may obtain assistance wherever
needed;
l encourage him to consult his supervisors, line managers or human resource
manager if any problem arises; and
l ascertain whether there are any initial problems or queries that need to be dealt with.
A meeting at the end of the programme is held so that line and staff managers can
assess the progress made by the employee and decide on the future plans. The human
40 resource department has to follow-up the programme from the beginning to the end.
An orientation programme may not succeed due to several reasons. Some of them are: Orientation

l Supervisor who is entrusted with the job is not trained or is too busy.
l Employee is overwhelmed with too much information in a short time.
l Employee is overloaded with formalities to complete.
l Employee is pushed into the job with a sketchy orientation under the mistaken
belief that actual work at the work place is the best orientation.
l Employee is forced to fill in the gaps between a broad orientation by the
human resource department and a narrow orientation at the department level.

13.8 ORIENTATION CHECKLIST


l Welcome the new employee to the organisation.
l Chat with the employee to reduce tension.
l Build the employee’s confidence. Convince him/her of success on the job.
l Make the employee feel important. Explain the importance of the job.
l Provide a go-round of the entire work area (departments).
l Introduce some of the officers and employees during the visits. Try to show
a friendly atmosphere of the works/departments.
l Explain the basic duties and responsibilities of the job.
l Explain office practices, services and benefits.
l Introduce the new employee to his/her immediate supervisor.
l Introduce the new employee to the training department/trainers.
l Make sure the employee understands whom he/she reports to during the training
period.
l Describe the training to the employee and its importance in career progression.
l Let the new employee know how long he/she is considered to be in training and
the duration and conditions of any probationary period.
l Explain the job performance standards during the training period and after the
training period.
l Make arrangements to ensure that the new employee has frequent contact with
his/her immediate superior.
l Make sure the employee knows whom to contact in the event of problems.
l Show the new employee that he/she is important to the organisation and its
people.
l Make the new employee aware of his/her career path.
The checklist is a guideline for the human resource specialist and the supervisor as
to exactly what they should do. It is an outline of the company’s expectations of the
employee and what the employee may expect of the organisation.

13.9 ORIENTATION EVALUATION


To measure how well the orientation programme meets its objectives,
you may use:
1. Testing or questionnaires to see if factual material was learned
2. The checklist
3. Evaluation forms or opinions 41
Key HR Practices 4. Discussions with immediate supervisors of newly oriented employees
5. Formal or informal interviews during probationary periods or at the end of a
month’s employment
6. Exit or terminal interviews.
A systematic orientation programme should have an evaluation and follow up.
Evaluating the costs and benefits of orientation programme can follow several
approaches. One is to compute the cost per new employee. This is done as follows:
Direct Costs
– Cost of trainers or orientation specialists.
– Cost of materials provided.
– Cost of space used (if applicable).
Indirect Costs
– Cost of time of supervisors, trainers/orientation specialists.
– Cost of supervision of new employees on the job.
Trainees can be asked to evaluate the benefits of orientation by administering a
questionnaire. Companies can also experiment and measure orientation programme
versus no programme. In all cases, it is easier to compute costs than benefits. A
personnel representative or a manager can evaluate the effectiveness of the orientation
by follow-up interviews with the new employees a few weeks or months after the
orientation. A reorientation programme in which all employees are periodically
given a refresher “introduction” should be a part of the follow-up. Reorientation is
especially important if significant changes in organisational policies or structure
have occurred.

Activity A
Do you have formal orientation programme for new recruits in your organisation?
If so, how is it carried out in practice?
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................

If you are aware of any informal orientation activity in your organisation, give a
brief account of the same.
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
....................................................................................................................................
42
Orientation
13.10 SUMMARY
Orientation is the guided adjustment of a new employee to the organisation, work
environment, and job. An orientation programme is the result of a plan. Though
orientation is basically meant for new employees, a company must continue to
orient all its employees as change and innovation develop the need. The objectives of
orientation are multifold. In carrying out such a programme, the management seeks to
create a favourable attitude toward the company, its policies, and its personnel. It
can instill a feeling of belonging and acceptance. It can generate enthusiasm and
high morale. A general company orientation presents topics of relevance and
interest to all employees. The responsibility for orientation is normally shared by
the human resource department and the new employee’s immediate superior.
However, someone should be made responsible to take periodic inventory of what
innovations have taken place and of what renewal-orientation seems to be
necessary and to develop special programmes for this need. An orientation kit
provides written material to supplement the verbal orientation programme.
Orientation programmes range from the brief informal introduction to lengthy
formal programmes. Formal and systematic follow-up of initial orientation is
essential.

13.11 SELF-ASSESSMENT QUESTIONS


1. What is orientation? What is an orientation kit?
2. Identify the importance of orientation and tell how you would orient a new
management trainee?
3. ”Induction is the guided adjustment of employee to the organisation and
his work environment.” Discuss.

13.12 FURTHER READINGS


Aswathappa, K., Human Resources and Personnel Management, Tata McGraw-Hill
Publishing Company Ltd., New Delhi, 1997.
Bernardin, H. J., and Russel, J.E.A., Human Resource Management - An
Experimental Approach, McGraw-Hill, New York, 1993.
Meighan, M., How to Design and Deliver Induction Training Programmes, Kogan
Page, London, 1995.

43
Key HR Practices
UNIT 14 CAREER AND SUCCESSION
PLANNING
Objectives
After going through this unit, you should be able to:
l follow the aims and objectives of career planning and its various benefits;
l appreciate the role of key players in facilitating career development
programmes;
l develop succession planning by identifying high potential employees for key
executive positions.

Structure
14.1 Introduction
14.2 Aims and Objectives of Career Planning
14.3 Career Planning Process
14.4 Career Structure
14.5 Benefits of Career Planning
14.6 Career Planning: A Personnel Function
14.7 What People Want from their Careers?
14.8 Career Planning Programmes
14.9 Facilitating Career planning
14.10 Responsibilities in Career Development
14.11 Evaluating Career Management
14.12 Succession Planning
14.13 Summary
14.14 Self-Assessment Questions
14.15 Further Readings

14.1 INTRODUCTION
Career planning is a relatively new personnel function. Established
programmes on career planning are still rare except in larger or more progressive
organisations. Organisational involvement in career planning is increasing, however.
Many candidates, especially highly-educated ones, desire a career, not “just a job”.
Many of today’s workers have high expectations about their jobs. There has been
a general increase in the concern for the quality of life. Workers expect more
from their jobs than just income. A further impetus to career planning is the need
for organisations to make the best possible use of their most valuable resources -
people - in a time of rapid technological growth and change.
A career development system is a formal, organised, planned effort to achieve a
balance between individual career needs and organisational workforce
requirements. It is a mechanism for meeting the present and future human resource
needs of an organisation. Basically career development practices are designed to
44
enhance the career satisfaction of employees and to improve organisational Career and Succession
effectiveness. Planning

A career has been defined as the evolving sequence of a person’s experiences over
time. It is viewed fundamentally as a relationship between one (or more)
organisation(s) and the individual. To some a career is a carefully worked out plan
for self-advancement; to others it is a calling - a life role; to others it is a voyage of
self-discovery; and to still others it is life itself.

14.2 AIMS AND OBJECTIVES OF CAREER PLANNING


Career planning aims at matching individual potential for promotion and
individual aspirations with organisational needs and opportunities. Career planning
is making sure that the organisation has the right people with the right skills at the
right time. In particular, it indicates what training and development would be
necessary for advancing in the career, altering the career path or staying in the
current position. Its focus is on future needs and opportunities and removal of
stagnation, obsolescence and dissatisfaction of the employee. In the process, it opens
avenues for growth to higher levels of responsibilities for each and every
employee of the organisation through hierarchy of position, and training and
development activities to equip the individuals with the requisites for succession.
The principal objectives of career planning are:
1. to secure the right man at the right job and at the right time;
2. to maintain a contended team of employees;
3. to provide adequate career avenues to employees to higher levels of
responsibilities; and
4. to strengthen the retention programme of the organisation.
An effective career management plan takes care of an individual’s interest, aptitude,
specialisation and expertise while deciding on the placement. An organisation which
believes in a sound career management programme is not only committed to and
conscious of the development of human resources but also provides structural
facilities for manpower research, manpower training and development.

14.3 CAREER PLANNING PROCESS


Career planning is the process of setting individual career objectives and devising
developmental activities necessary to achieve them. It is, in the broadest sense, the
personal process of planning one’s future work. In this process, an individual
analyses his or her interest, values, goals, and capabilities. From the management
view point, career planning and development should remain an individual
responsibility. However, many individuals lack the insight, skills, or initiative to
determine their own career progress effectively. Among the techniques to aid
individual career planning are career counseling, career and life planning, and self
development activities.
Career planning involves four fundamental elements which, when taken together,
represent the career planning process.
Direction: This involves the career goals one sets and the organisation’s ability to
act favourable upon these goals, especially in the light of business objectives and
realities.

45
Key HR Practices Career Time: This relates to distance and velocity factors - how far one wants
to go in an organisation or on the career path and how fast that person expects to
get there.
Transition: This is the resistance one encounters while moving toward career goals.
Transition relates to the changes expected, say, in knowledge, skill and attitude en
route to a career goal. Outcomes: This relates to the probabilities that one’s
investment and sacrifices for career progress will pay off.
The important influences on careers are of course the organisation and the
individual themselves. Both the organisation and the individual are important and
career planning can be seen from the perspective of both parties.

14.4 CAREER STRUCTURE


The characteristics of a good career structure (sometimes known as career ladders)
are:
l It has steps consistent with the general value of jobs and with other career
structures.
l It makes clear that getting to the top of the structure is not a right but is based on
merit and capability.
l The entry requirements for each step are clear.
l There is formal assessment procedure in order to progress from one step to
another.
l The career structure is known and understood by all.
l It is controlled and implemented with integrity.
l It links with the development review part of appraisals.
Organisations view careers in a variety of different ways. Some see them as a way of
allocating jobs and providing training, i.e. the emphasis is on developing managers.
Another way in which organisations view careers is as tracks or ladders, which
take people up the management hierarchy. A successful career is one which
takes the individual to the top of the ladder. Some organisations view careers as a
type of competition - only those managers who are successful in winning the
tournament will have a progressive career.

14.5 BENEFITS OF CAREER PLANNING


The career planning encourages individuals to explore and gather information which
enables them to synthesise, gain competencies, make decisions, set goals and take
action. Career planning benefits not only the individual employee, but also the
organisation. By developing employees for future positions, an organisation is assured
of a supply of qualified, committed employees to replace the higher-level
employees. This facilitates internal staffing of the organisation and reduces the costs
of external recruiting and selection. In addition, a career planning strategy enables
organisations to develop and place employees in positions compatible with their
individual career interests, needs, and goals. This promotes employee satisfaction
and optimal use of employee abilities. Finally, career planning can help to retain
and motivate employees. Through the career planning process, employees are helped
to set realistic goals and to develop the required skills and abilities for target
positions.

46
Exhibit 1 Career and Succession
Benefits of a Career Development System Planning

Managers/Supervisors Employees Organisation


1. Increased skill in Helpful assistance Better use of
managing own careers with career decisions employee skills
2. Greater retention of Enrichment of present Dissemination of
valued employees job and increased job information at
satisfaction all organisational levels
3. Better communication Better communication Better communication
between manager and between employee and within the organisa-
employee manager tion as a whole
4. More realistic staff More realistic goals Greater retention of
development planning and expectations valued employees
5. Productive performance Better feedback on Expanded public
appraisal discussions performance image as a people
developer
6. Greater understanding Current information Increased effective-
of the organisation on the firm and the ness of personnel
future systems
7. Enhanced reputation Greater personal Greater clarifica-
as a people developer responsibility for tion of goals of
career the organisation.
Source: Z.B.Leibowitz, C.Farren, and B.L.Kaye, Designing career development systems,
San Francisco, CA; Jossey-Bass, 1986, P.7.

14.6 CAREER PLANNING: A PERSONNEL FUNCTION


From an employee’s perspective, career planning takes place after some amount of
time on the job and after the organisation has had a chance to appraise employee
performance. From an organisational perspective, career planning is an ongoing
management function with close ties to human resource planning and employee
development functions. Performance appraisal information is essential to the
setting of realistic individual career goals. Such goals are often set within the
developmental performance appraisal interviews. The career planning function also
has valuable inputs to the human resource planning function. Human resource
planners provide career planners with predictions of expected job vacancies. Career
planners use these data to give employees a reasonable expectation of their
opportunities for advancement.
One of the responsibilities of the career planning functions is to inform employees of
career opportunities within the organisation. This responsibility involves the starting
of career paths, logical progressions between jobs or from one job to a target
position. With regard to employee development, the career planning function
provides goals for the systematic development of employees. When mutually
agreed upon, career objectives of individual employees are specified, and
developmental activities can be selected and channeled in a direction meaningful
to both the individual and the organisation.

14.7 WHAT PEOPLE WANT FROM THEIR CAREERS?


In addition to opportunities for growth and development, what do people want from
their careers ? Making generalisations is difficult because of the wide range of 47
Key HR Practices individual differences. Further, what people want from their career tends to change
over time : career advancements and advancing age spark new career interests and
changing needs. Nonetheless, E.H. Schein has identified five dominant motives
which underline people’s career choices and long-range goals. Schein refers to these
basic motivating factors as “career anchors”.
Edgar Schein (1978) says that career planning is a continuing process of discovery
- one in which a person slowly develops a clearer occupational self-concept in the
terms of what his or her talents, abilities, motives, needs, attitudes and values are.
Schein also says that as you learn more about yourself, it becomes apparent that
you have a dominant career anchor, a concern or value that you will not give up
if a choice has to be made. Schein believed that people developed certain ‘career
anchors’ at an early stage in their career which will govern their individual career
paths.
Schein’s career anchors represent the aspects of work that are especially valued or
needed by people for their personal fulfillment.
They include:
1. Managerial Competence: The individual desires opportunities to manage.
2. Technical/Functional Competence: The individual desires to use various
technical abilities and special competencies.
3. Security: The individual is basically motivated by a need for job security or
stability in the work situation.
4. Creativity: The individual is motivated by a need to create or build something.
5. Autonomy and Independence: The individual’s primary interest is the
opportunity to work independently and without organisational constraints.
Later, he added the need for a basic occupational identity - service to others; power,
influence and control; and variety.
Career planning and development activities allow employees to grow in any of the
desired directions. What people want from their careers also varies according to the
stage of one’s career. What may have been important in an early stage may not be
important in a later one. Four distinct career stages have been identified: trial,
establishment/advancement, mid-career, and late career. Each stage represents
different career needs and interests of the individual.

14.8 CAREER PLANNING PROGRAMMES


There are four distinct elements of a career planning programme. They include:
1. individual assessments of abilities, interests, career needs, and goals;
2. organisational assessments of employee abilities and potential;
3. communication of information concerning career options and opportunities with
the organisation; and
4. career counseling to set realistic goals and plan for their attainment.
Career planning programmes vary in the degree to which certain elements are
emphasised. Some programmes offer little assistance in employee self-assessment,
while others aid this process by providing workbooks and workshops. Assessment
centres are a part of some programmes, but the majority of organisations rely on
the judgment of supervisors and managers in assessing employee potential. Career
path information is provided by some organisations, while others simply post job
vacancy information.
48
Career counseling typically involves a discussion on an individual’s interest, Career and Succession
work values, career goals, current job activities and performance, and action plans. Planning
Counseling can be formal or informal in nature. Formal career counseling is usually
conducted by career counselors and vocational psychologists in individual
sessions. However, counseling in many organisations is informal, while more
established programmes provide staff positions for career counselors. Supervisors
are considered a primary source of career information and can do a number of
things to facilitate the career counseling process. The way in which organisations
assemble the four career planning elements results in a variety of unique career
planning programmes.

14.9 FACILITATING CAREER PLANNING


Organisations can facilitate career planning in a number of ways. D.T. Hall
categories the areas of concentration as follows: (1) organisational entry; (2) the
job; (3) the boss; (4) organisational structure and procedures; (5) personnel policy.
Efforts to facilitate career planning can begin before or at the time an individual takes
a job. One of the earliest pre-entry points of influence is contacts between an
employer and institute placement staff or faculty. Job counselors and others may
discuss career planning with the potential job applicants. Increasingly,
organisations have included such information in recruiting messages and materials.
Career planning and development can be facilitated in the job itself. Evidence from
a number of different organisations and occupations demonstrates the importance of
a challenging and demanding first job. Related to the job progression idea is job
rotation, which allows employees to work in a variety of capacities and provides
growth and development opportunities at all stages of career development. Job
rotation is a fairly common method of management development at all levels.
Another agent of career planning in organisation is the boss. The importance of the
immediate supervisor, especially an employee’s first boss, cannot be underestimated.
The boss assigns tasks, judges performance, provides feedback, rewards and
punishes, and provides a model for the employee’s own behaviour and future
leadership style. Further, bosses often counsel employees in career planning. Any one
of these factors can have a large effect on employee career but taken together they
make the boss a key to career progress. Unfortunately, many supervisors and
managers fail to make the most of their potential to influence employee careers in a
positive direction. Some may feel unequal to the task: they may lack the ability to
help develop their subordinates. This problem can be remedied through training.
Hall suggests that managers receive training in job analysis and job restructuring
so that they can identify a challenging job, or restructure a job to make it more
challenging. Additionally, they should receive training in interviewing and
counseling skills, interpersonal skills, and performance appraisal, including
providing constructive feedback.
The most obvious way to facilitate career planning is, of course, to provide career
planning services and programmes. Although this is done on an informal basis in
many organisations, established programmes are still rare. Some organisations
hesitate to involve themselves in career planning. They believe that career
planning activities may raise employee expectations for career advancement and that
unfulfilled expectations will lead to dissatisfaction and possible turnover. This
may well be true, but risks can be minimised.
This depends to a large extent on the success of career counseling efforts and on the
information provided by human resource planners. If expected job vacancies fail to
materialize or if unforeseen changes force alterations in the job structure, someone
is likely to be disappointed. To avoid this, career planners and human resource 49
Key HR Practices planners need to keep lines of communication open. Personnel Policies can also
facilitate career planning. An internal recruiting policy, for example, enables
employees to plan their career with greater certainty than does a policy of external
recruiting. Additionally, a policy of job posting promotes employee awareness of
available openings and necessary qualifications. A policy of making human resource
forecasts available to employees also facilitates career planning. Compensation
policy can also affect career planning activities. Hall suggests two additional
personnel policies to facilitate career planning. They are : (1) providing incentive
for an employee not to leave the organisation, and (2) involving families in career
decisions. As people’s needs for job satisfaction increase, so does the families role
in affecting career decisions. Since family considerations are important to
employees, organisations should maintain a policy of actively seeking to involve
employees’ family members in significant career decisions. More emphasis must
be placed on growth opportunities within the organisation than through
relocation and transfer.

14.10 RESPONSIBILITIES IN CAREER DEVELOPMENT


Three key players share responsibility for an employee’s career development: the
employee, the organisation and the manager. Primary responsibility for an
employee’s career lies with the employee, but managers and the organisations can
provide vital assistance. To play their roles successfully each must assume a set of
responsibilities in career development.
The organisation’s responsibilities include:
l providing resources for self-understanding and goal setting;
l setting and communicating missions, policies, and goals and objectives;
l providing information on organisation’s options and career paths;
l providing training, education and mobility opportunities; and
l reinforcing and supporting the manager’s role in career development.
The manager’s responsibilities include:
l giving clear feedback about what employees should reasonably expect;
l providing forums for discussions;
l providing support and opportunities;
l identifying employee potential;
l providing growth opportunities consistent with employee and organisation goals;
l communicating the formal and informal realities of the organisation;
l providing exposure for employees; and
l linking employees to appropriate resources and people.
The employee’s responsibilities include:
l self-assessment;
l setting goals and plans;
l expressing expectations; and
l making use of opportunities, education and training.
Career development is an area that organisations must now recognise and
address if they hope to find and retain employees who will help them meet their
constantly shifting business demands. Most companies do not provide enough, if
50 any, training to their current workforce. Many do not even have adequate
knowledge of their employee’s skills and talents - particularly large organisations. Career and Succession
Companies must figure out a way to create an environment that is more adaptive, Planning
collaborative, and skill-ready.

14.11 EVALUATING CAREER MANAGEMENT


Career management is the implementation of organisational career planning.
Organisations adopting comprehensive career management systems, or parts
thereof, would be interested in evaluating their results on the following lines:
l Are they used by employees?
l Do they provide accurate and useful information?
l Do they extend needed career development opportunities to employees?
l Are employees’ career plans realised?
l Do employees experience fewer or less severe career problems than they did
before?
l Do employees who participate have more successful careers than those who do
not?
l Are the results worth the costs incurred?

Activity A
Is there any involvement of your organisation in career development of employees?
If yes, give a brief outline.
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14.12 SUCCESSION PLANNING


Forecasting the availability of inside or outside candidates is particularly important
in succession planning. In a nutshell, succession planning simply refers to the
plans a company makes to fill its most important executive positions. In practice,
however, the process often involves a fairly complicated series of steps. A more
comprehensive definition of succession planning is that it is “the process of
ensuring a suitable supply of successors for current and future senior or key jobs
arising from business strategy, so that the careers of individuals can be planned and
managed to optimise the organisation’s needs and the individuals’ aspirations.”
Succession planning includes these activities:
l Analysis of the demand for managers and professionals by company level,
function and skill.
l Audit for existing executives and projection of likely future supply from internal
and external sources. 51
Key HR Practices l Planning of individual career paths based on objective estimates of future
needs and drawing on reliable performance appraisals and assessments of
potential.
l Career counseling undertaken in the context of a realistic understanding of the
future needs of the firm, as well as those of the individuals.
l Accelerated promotions, targeted against the future needs of the business.
l Performance-related training and development to prepare individuals for
future roles as well as current responsibilities.
l Planned strategic recruitment not only to fill short-term needs but also future
needs.
l The actual activities by which openings are filled.
Succession planning identifies high potential employees as possible replacements
for key jobs, by encouraging hiring from within, succession planning helps
employees develop careers, not just hold jobs. Succession planning is part of a long-
term HR strategy that plans for future vacancies and changing work
requirements. A sophisticated succession planning system is oriented at developing
leaders at the levels of the organisation through ongoing training, education and
development. Also it involves proactive planning for future talent needs at all levels
and implementing programmes designed to ensure that the right leaders are available
for the right jobs in the right places and at the right times to meet organisational
needs.
The accelerating rate of change, both within the organisations and in the
environment which they function has created an ever-increasing need for
management succession programmes. Advances in information technology, changing
management concepts and requirements have added new dimensions to succession
planning. Professional management have to cope successfully with various changes
affecting succession planning programmes, particularly in expanding organisations.
The expectations, as well as managerial and personal philosophies of today’s
younger managerial employees have changed.
They expect to be able to mature and progress in a professional management
atmosphere that will permit them to realise their full potential. Each organisation,
therefore, must have a well-designed and understood system of management
succession, with carefully spelt out principles and guidelines. Further, all levels of
management must know each of the processes in succession planning and understand
how they fit into the total organisational system.

Activity B
Give a brief outline of succession planning programme, if any, for key positions in
your organisation.
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52
Career and Succession
14.13 SUMMARY Planning

Career planning is the focal point of a human resource management programme of an


organisation. A career is a sequence of separate but related work activities that
provides continuity, order, and meaning to a person’s life. The increasing rate of
change in the existing political, economic, technological, and social systems has
made career planning and development much more important than it was in the past.
Career planning and development is primarily the responsibility of the individual.
However, the organisation and the immediate manager should act as catalysts in the
process. The key ingredients of an effective career-management programme are:
(1) integrate with human resource planning, (2) design career paths, (3)
disseminate career information, (4) publicise job vacancies, (5) develop career
counseling, and education and training. A career plan should be periodically
evaluated and updated as changes occur in the work situation and in the
individual. Where career planning, career development, and career counseling are
combined in the appropriate sequence, a comprehensive career management
system is created. Clearly, organisations must use career planning programmes
carefully to ensure positive results.

14.14 SELF-ASSESSMENT QUESTIONS


1) What is a career? What are the factors which go into the shaping of a career?
2) Name at least two ways that career planning might benefit an individual.
3) Is the concept of career planning and succession planning realistic in today’s
rapidly changing environment?

14.15 FURTHER READINGS


Hall, D.T., Careers in Organisations, Pacific Palisades, Goodyear Publishing,
California, 1976.
Hall, D.T., and Lorgan, M.A., Career Development and Planning, 1979.
Schein, E.H., Organisational Psychology, Prentice-Hall of India, New Delhi, 1973.

53
Key HR Practices
UNIT 15 PERFORMANCE AND
POTENTIAL APPRAISAL
Objectives
After going through this unit, you should be able to:
l understand different objectives and uses of performance appraisal system in an
organisation;
l develop various approaches to performance appraisal and draw a distinction
between traditional and newer rating methods.
l identify various errors in performance appraisal in practice and the need for
periodic performance review and feedback.

Structure
15.1 Introduction
15.2 Objectives of Performance Appraisal
15.3 Uses of Performance Appraisal
15.4 Planning the Appraisal
15.5 Approaches to Performance Appraisal
15.6 Components of Performance Appraisal
15.7 Types of Performance Appraisal
15.8 Concerns and Issues in Appraisal
15.9 Steps in the Appraisal Programme
15.10 Methods of Performance Appraisal
15.11 Errors in Performance Appraisal
15.12 Potential Appraisal
15.13 Self Appraisal
15.14 Performance Appraisal Assessment
15.15 Performance Appraisal Guidelines
15.16 Performance Appraisal in Practice
15.17 Performance Review and Feedback
15.18 Strategies to Improve Performance
15.19 Summary
15.20 Self-Assessment Questions
15.21 Case
15.22 Further Readings

15.1 INTRODUCTION
Performance appraisal is a systematic evaluation of present potential capabilities
of personnel and employees by their superiors, superior’s superior or a professional
54 from outside. It is a process of estimating or judging the value, excellent qualities or
status of a person or thing. It is a process of collecting, analysing, and Performance and
evaluating data relative to job behaviour and results of individuals. The appraisal Potential Appraisal
system is organised on the principle of goals and management by objectives.
Management decisions on performance utilise several integrated inputs: goals and
plans, job evaluation, performance evaluation, and individual history. It connotes
a two-dimensional concept - at one end of the continuum lies the goals set by the
authority, and at the other end, the performance achieved by the individual or any
given group.
Performance appraisal can be either formal or informal. Usage of former systems
schedule regular sessions in which to discuss an employee’s performance.
Informal appraisals are unplanned, often just chance statements made in passing
about an employee’s performance. Most organisations use a formal appraisal
system. Some organisations use more than one appraisal system for different types of
employees or for different appraisal purposes. Organisations need to measure
employee performance to determine whether acceptable standards of performance
are being maintained. The six primary criteria on which the value of performance
may be assessed are: quality, quantity, timelineness, cost effectiveness, need for
supervision, and interpersonal impact. If appraisals indicate that employees are
not performing at acceptable levels, steps can be taken to simplify jobs, train, and
motivate workers, or dismiss them, depending upon the reasons for poor
performance.
The results of appraisal are normally used to: (1) estimate the overall effectiveness
of employees in performing their jobs, (2) identify strengths and weaknesses in job
knowledge and skills, (3)determine whether a subordinate’s responsibilities can be
expanded, •(4) identify future training and development needs, (5) review
progress toward goals and objectives, (6) determine readiness for promotion, and
(7) motivate and guide growth and development.•

15.2 OBJECTIVES OF PERFORMANCE APPRAISAL


Performance appraisal plans are designed to meet the needs of the organisation and the
individual. It is increasingly viewed as central to good human resource management.
This is highlighted in Cumming’s classification of performance appraisal
objectives. According to Cummings and Schwab (1973), the objectives of
performance appraisal schemes can be categorised as either evaluative or
developmental. The evaluative purpose have a historical dimension and are
concerned primarily with looking back at how employees have actually performed
over a given time period, compared with required standards of performance.
The developmental performance appraisal is concerned, for example, with the
identification of employees’ training and development needs, and the setting of
new targets.
The broad objectives of performance appraisal are:
1. To help the employee to overcome his weaknesses and improve his strengths
so as to enable him to achieve the desired performance.
2. To generate adequate feedback and guidance from the immediate
superior to an employee working under him.
3. To contribute to the growth and development of an employee through helping
him in realistic goal setting.
4. To provide inputs to system of rewards (comprising salary increments,
transfers, promotions, demotions or terminations) and salary administration.
55
Key HR Practices 5. To help in creating a desirable culture and tradition in the organisation.
6. To help the organisation to identify employees for the purpose of
motivating, training and developing them.
7. To generate significant, relevant, free, and valid information about
employees.
In short, the performance appraisal of an organisation provides systematic
judgments to backup wage and salary administration; suggests needed changes in
one’s behaviour, attitudes, skills, or job knowledge; and uses it as a base for
coaching and counseling the individual by his superior. Appraising employee
performance is, thus, useful for compensation, placement, and training and
development purposes.

15.3 USES OF PERFORMANCE APPRAISAL


The appraisal systems do not operate in isolation; they generate data that can
contribute to other HRM systems - for example to succession planning and
manpower planning.
Some of the common uses of appraisals include:
l Determining appropriate salary increases and bonuses for workers based on
performance measure.
l Determining promotions or transfers depending on the demonstration of
employee strengths and weaknesses.
l Determining training needs and evaluation techniques by identifying areas of
weaknesses.
l Promoting effective communication within organisations through the
interchange of dialogue between supervisors and subordinates.
l Motivating employees by showing them where they stand, and establishing a
data bank on appraisal for rendering assistance in personnel decisions.
Organisations use performance appraisals for three purposes: administrative,
employee development, and programme assessment. Programme appraisal
commonly serve an administrative purpose by providing employers with a
rationale for making many personnel decisions, such as decisions relating to pay
increases, promotions, demotions, terminations and transfers. Valid performance
appraisal data are essential to demonstrate that decisions are based on job related
performance criteria. An employee’s performance is often evaluated relative to
other employees for administrative purposes, but may be assessed in relation to an
absolute standard of performance. Performance appraisal for employee
development purposes provide feedback on an employee’s performance. The intent
of such appraisals is to guide and motivate employees to improve their performance
and potential for advancement in the organisation. Appraisal data can also be used
for employee development purposes in helping to identify specific training needs of
individuals. Programme assessment requires the collection and storage of
performance appraisal data for a number of uses. The records can show how effective
recruiting, selection, and placement have been in supplying a qualified workforce.
Performance measures can be used to validate selection procedures and can also be
used as ”before” and “after” measures to determine the success of training and
development programmes.
In brief, the various uses of performance appraisal can be classified into two
broad categories. One category concerns the obtaining of evaluation data on
employees for decision-making for various personnel actions such as pay
56
increases, promotions, transfers, discharges, and for selection test validation. The Performance and
other main use is for employee development including performance improvement Potential Appraisal
training, coaching, and counseling.

15.4 PLANNING THE APPRAISAL


A meaningful performance appraisal is a two-way process that benefits both the
employee and the manager. For employees, appraisal is the time to find out how the
manager thinks they are performing in the job. For a manager, a formal appraisal
interview is a good time to find out how employees think they are performing on the
job. The planning appraisal strategy has to be done:

Before the appraisal


1. Establish key task areas and performance goals.
2. Set performance goals for each key task area.
3. Get the facts.
4. Schedule each appraisal interview well in advance.

During the appraisal


1 Encourage two-way communication.
2. Discuss and agree on performance goals for the future.
3. Think about how you can help the employee to achieve more at work.
4. Record notes of the interview.
5. End the interview on an upbeat note.

After the appraisal


1. Prepare a formal record of the interview.
2. Monitor performance.

15.5 APPROACHES TO PERFORMANCE APPRAISAL


George Odiorne has identified four basic approaches to performance appraisal.
Personality-based systems: In such systems the appraisal form consists of a list
of personality traits that presumably are significant in the jobs of the individuals
being appraised. Such traits as initiative, drive, intelligence, ingenuity, creativity,
loyalty and trustworthiness appear on most such lists.
Generalised descriptive systems: Similar to personality-based systems, they differ
in the type of descriptive term used. Often they include qualities or actions of
presumably good managers: “organises, plans, controls, motivates others,
delegates, communicates, makes things happen,” and so on. Such a system, like the
personality-based system, might be useful if meticulous care were taken to define
the meaning of each term in respect to actual results.
Behavioural descriptive systems: Such systems feature detailed job analysis and
job descriptions, including specific statements of the actual behaviour required from
successful employees.
Results-centred systems: These appraisal systems (sometime called work-centred or
job-centred systems) are directly job related.

57
Key HR Practices They require that manager and subordinate sit down at the start of each work
evaluation period and determine the work to be done in all areas of responsibility and
functions, and the specific standards of performance to be used in each area.
When introducing performance appraisal a job description in the form of a
questionnaire has to be preferred. A typical questionnaire addressed to an individual
would cover the following points:
l What is your job title?
l To whom are you responsible?
l Who is responsible to you?
l What is the main purpose of your job?
l To achieve that purpose what are your main areas of responsibility?
l What is the size of your job in such terms of output or sales targets, number of
items processed, number of people managed, number of customers? What
targets or standards of performance have been assigned for your job? Are there
any other ways in which it would be possible to measure the effectiveness with
which you carry out your job?
l Is there any other information you can provide about your job?

15.6 COMPONENTS OF PERFORMANCE APPRAISAL


The components that should be used in a performance appraisal system flow
directly from the specific objectives of appraisal. The following components are
being used in a number of Indian organisations.
1. Key Performance Areas (KPAs) / Key Result Areas (KRAs)
2. Tasks/targets/objectives; attributes/qualities/traits
3. Self appraisal
4. Performance analysis
5. Performance ratings
6. Performance review, discussion or counseling
7. Identification of training / development needs
8. Ratings / assessment by appraiser
9. Assessment / review by reviewing authority
10. Potential appraisal.

15.7 TYPES OF PERFORMANCE APPRAISAL


There are two types of performance appraisal systems which are normally used in
organisations: (i) close ended appraisal system and, (ii) open ended appraisal system.
In the close ended appraisal system, commonly used in government organisations and
public enterprises, a confidential report is submitted on the performance of the
employee. Only where an adverse assessment is made against an individual, the
concerned individual is informed about the same. The main shortcoming of this
system is that an individual is not informed about his/her inherent strengths and
weaknesses and, therefore, is not given an opportunity to respond to the assessment
made on him/her. The employees are, therefore, in a constant dilemma as to how
their performance is viewed by the management.
58
In the open ended appraisal system, unlike in the close ended system, the Performance and
performance of the individual is discussed with him, and he is ranked in a five or ten Potential Appraisal
point rating scale. The company uses this tool primarily for rewarding a good
performer or for other considerations like promotions. The main weakness of this
system is that all the employees are ranked in a particular scale, and whereas the
good performers are rewarded, there is no concerted effort to motivate the average
performers in performing better. Another weakness of the grading system is that the
appraisal may turn out to be more subjective in nature due to insufficient data
maintained on the individual. This system also leads to unnecessary comparisons
made on different individuals performing similar jobs.
Performance appraisal can be a closed affair, where the appraisees do not get
any chance to know or see how they have been evaluated; or it can be completely
open, where the appraisees have the opportunity of discussing with their superiors
during the evaluation exercise.

15.8 CONCERNS AND ISSUES IN APPRAISAL


1. Identifying job responsibilities and duties and performance dimensions,
standards and goals.
2. Prioritizing and weighing performance dimensions and performance goals.
3. Determining appropriate methods for appraising performance.
4. Developing suitable appraisal instruments and scoring devices.
5. Establishing procedures that enhance fair and just appraisals of all
employees.
6. Providing performance feedback to all employees.
7. Relating observed and identified performance to the rewards provided by
organisation.
8. Designing, monitoring and auditing processes to ensure proper operation of
the system and to identify areas of weakness.
9. Granting employees opportunities for appeal whenever and wherever such
action is appropriate.
10. Training of employees in all phases of the appraisal system.
The basic issues addressed by performance appraisal are:
l What to appraise?
l How to appraise fairly and objectively?
l How to communicate the appraisal and turn the total process into a motivator?
l How the performance appraisal results can be put to good use?
l How to implement the performance appraisal system smoothly?

15.9 STEPS IN THE APPRAISAL PROGRAMME


As in other personnel programmes, performance appraisal forms a line
responsibility to be accomplished with advice and help of the personnel department.
Indeed, the appraisal programme is likely to be an utter failure if it lacks the
support of top management; if superiors are not adequately trained, or have no
trust in its value; if the results of appraisal are not discussed with the subordinates;
and if the appraisal is not used to serve the purposes it is meant.
59
Key HR Practices Pigors and Myers suggest several steps to develop and administer the programme
effectively.
1. The personnel department may attempt to obtain as much as possible the
agreement of line management in respect of the needs and objective of the
programme. A choice has to be made among different kinds of appraisal
methods judiciously.
2. The personnel department has to examine the plans of other organisations as
well as the relevant literature in the field to formulate the most suitable plan
for the appraisal programme.
3. Attempts should be made to obtain the co-operation of supervisors in
devising the appraisal form and discuss with them the different factors to be
incorporated, weights and points to be given to each factor, and description or
instructions to be indicated on the form.
4. The personnel or industrial relations manager tends to explain the purpose
and nature of the programme to all the superiors and subordinates to be
involved and affected by it. Care should be taken to take into confidence the
representatives of the union, if it exists in the company.
5. Attempt is to be made to provide intensive training to all the supervisors with
a view to obtaining unbiased and uniform appraisal of their subordinates.
6. Care may be taken to acquire line and staff co-ordination and mutual checking
of appraisals with a view to achieving intra and inter-departmental consistency
and uniformity.
7. There should be an arrangement for periodic discussion of the appraisal by
the superior with each of the subordinates where attempts may be made to
stress good points, indicate difficulties, and encourage improved performance.
Explicitly, in this context, the discussion should be in the form of a progress
review and every opportunity should be given to the subordinate to express
himself, if he feels that the appraisal has been biased and that it should be
otherwise.
8. As soon as the appraisal has been duly discussed, attempts may be made to
recommend for salary increases or promotion, if these decisions seem plausible
in the light of appraisals.
9. There should be provision for challenge and review of appraisals, if the
employees or their union representatives are dissatisfied with the personnel
decisions which the management has taken on the basis of these appraisals.
These steps, if followed carefully, are likely to help the superiors to
evaluate their subordinates effectively.

15.10 METHODS OF PERFORMANCE APPRAISAL


Strauss and Sayles have classified performance appraisal into three groups:
traditional performance rating, newer-rating method, and result-oriented appraisal. A
brief description of each is as follows:
(a) Traditional Performance Rating: Traditional rating involves a completion of a
form by the immediate supervisor of the individual who is being evaluated. In some
cases, attempts are made to accomplish the rating by a committee consisting of the
immediate supervisor, the supervisor’s superior and one or two more officers of the
company who are familiar with the rates. Although ratings by the committee bring
several viewpoints together and overcome the superior’s bias, if any, they are highly
time-consuming. The conventional rating scale form incorporates several factors,
60
such as, job knowledge, judgment, organising ability, dependability, creativity, Performance and
dealing with people, delegation, and leadership. The rating is assigned by putting a Potential Appraisal
tick mark horizontally. Frequently, descriptive phrases are given in the form to
guide the rater while evaluating the rates. This method is very simple to understand
and easy to apply. On the basis of ratings on specific factors, it is possible to
identify areas in which the individual requires further development. The ratings
on specific factors can be summated to obtain a composite performance score.
The merit-rating scales are frequently criticised from the standpoints of clarity in
standards, differing perceptions, excessive leniency or strictness, the central tendency,
the halo effect, and the impact of an individual’s job. The basic criticism of the
traditional performance rating is concerned with its emphasis on personality traits
instead of job performance. Such rating is highly subjective in the absence of
objective standards.
Other criticisms of traditional performance rating relates to: First, there is a
divergence of opinion among raters as to what is meant by such standards as
“unsatisfactory”, “good” and so on. Second, there may be divergent perceptions
and accordingly, different standards of judgments among the raters. Third, the
raters may be susceptible to excessive leniency or strictness error. Fourth, there is
an error of central tendency involving a cluster of ratings near the middle of the
scale. Fifth, there is a chance of the occurrence of a halo effect. Sixth, there is a
tendency on the part of the raters to assign high ratings to individuals holding high-
paid jobs.
(b) Newer Rating Methods: Because of several inadequacies in the traditional rating
scale, attempts have been made to devise new procedures which are less
susceptible to the above weaknesses. Among these are included rank order, paired
comparison, forced distribution forced choice, critical incident and field review. These
methods are discussed below:
(i) The Rank-order Procedure: It is effective where ten or lesser number of
individuals are to be evaluated. According to this procedure, each individual is
assigned such ranks as first, second, third and so on. If the evaluation process
involves several traits, the ranking is made separately for each trait. Although this
method is simple to understand and easy to apply, this technique becomes
cumbersome and difficult when a large number of employees are to be evaluated in
the organisation.
(ii) Paired-comparison System\: Under this, each individual is compared with every
other individual. The appraiser is required to put a tick-mark against the name of the
individual whom he considers better on the trait in question. The final ranking is
determined by the number of times he is judged better than the other. This method
becomes complicated when the number of individuals for evaluation is large.
(iii) The Forced Distribution Procedure: It is a form of comparative
evaluation in which an evaluator rates subordinates according to a specified
distribution. Here judgments are made on a relative basis, i.e., a person is assessed
relative to his performance in the group he works. This procedure can be used for
numerous traits if required by evaluating the individuals separately on each trait.
The forced distribution method is primarily used to eliminate rating errors such as
leniency and central tendency.
(iv) The Forced Choice Technique: It forces the rater to select from a series of
several statements or traits, the one which best fits the individual and one which least
fits, and each of these statements is assigned a score. Since the appraiser does not
know the score value of statements, this method prevents the rater from
deliberately checking only the most favourable trait. Moreover, the appraiser is
61
Key HR Practices unable to introduce personal bias into the evaluation process because he does not
know which of the statements is indicative of effective performance. This enhances
the overall objectivity of this procedure.
However, it is a costly technique and also difficult for many raters to understand.
(v) The Critical Incident Method: This technique of performance appraisal was
developed by Flanagan and Burns. Under this procedure, attempts are made to
devise for each job a list of critical job requirements. Superiors are trained to be on
the lookout for critical incidents on the part of the subordinates in accomplishing
the job requirements. The superiors enlist the incidents as they happen and in the
process, tend to build up a record of each subordinate with debit on the minus side
and credit on the plus side. The merit of this procedure is that all evaluations are
based on objective evidence instead of subjective rating.
(vii) The Field Review: It is an appraisal by someone outside the employee’s own
department, usually someone from the corporate office or from the employee’s own
human resource department. The field review process involves review of employee
records, and interviews with the employee, and sometimes with the employee’s
superior. Field review as an appraisal method is used primarily in making promotion
decisions at the managerial level. Field reviews are also useful when comparable
information is needed from employees in the different units or locations.
(c) Results-Oriented Appraisal: The results-oriented appraisals are based on the
concrete performance targets which are usually established by superior and
subordinates jointly. This procedure has been known as Management by Objectives
(MBO).
MBO: The definition of MBO, as expressed by its foremost proponent, Dr.
George S. Odiorne, is: “Management by objectives is a process whereby the
superior and subordinate managers of an organisation jointly identify its
common goals, define each individual’s major areas of responsibility in terms of
the results expected of him, and use these measures as guides for operating the unit
and assessing the contribution of each of its members.”
Much of the initial impetus for MBO was provided by Peter Drucker (1954) and by
Douglas McGregor (1960). Drucker first described management by objectives
in 1954 in the Practice of Management. Drucker pointed the importance of
managers having clear objectives that support the purposes of those in higher
positions in the organisation. McGregor argues that by establishing performance
goals for employees after reaching agreement with superiors, the problems of
appraisal of performance are minimised. MBO in essence involves the setting out
clearly defined goals of an employee in agreement with his superior. Carroll and Tosi
(1973), in an extensive account of MBO, note its following characteristics:
1. The establishment of organisational goals.
2. The setting of individual objectives in relation to organisational goals.
3. A periodic review of performance as it relates to organisational goals.
Effective goal-setting and planning by top management.
5. Organisational commitment.
6. Mutual goal-setting.
7. Frequent individual performance reviews.
8. Some freedom in developing means of achieving objectives.
MBO is, thus, a method of mutual goal-setting, measuring progress towards the goals,
taking action to assure goal attainment, feedback, and participation. It is a result-
oriented philosophy, enabling an employee to measure progress toward a goal which
62
the employee often has helped to set. In the goal-setting phase of MBO, a superior Performance and
and subordinate discuss job performance problems and a goal is agreed upon. Potential Appraisal
Along with mutual goal-setting, a major component of MBO is the performance
review session between the superior and subordinate, which takes place regularly to
evaluate progress towards specified goals.
The key features of management by objectives are as under:
1. Superior and subordinate get together and jointly agree upon the list the
principal duties and areas of responsibility of the individual’s job.
2. The subordinate sets his own short-term performance goals or targets in co-
operation with his superior.
3. They agree upon criteria for measuring and evaluating performance.
4. From time to time, as decided upon, the superior and subordinate get
together to evaluate progress towards the agreed-upon goals. At those
meetings, new or modified goals are set for the ensuing period.
5. The superior plays a supportive role. He tries, on a day-to- day basis, to help
the subordinate achieve the agreed upon goals. He counsels and coaches.
6. In the appraisal process, the superior plays less of the role of a judge and
more of the role of one who helps the subordinate attain the organisation
goals or targets.
7. The process focuses upon results accomplished and not upon personal traits.
There are four main steps in MBO:
1. Define the job. Review, with the subordinates, his or her key responsibilities
and duties.
2. Define expected results (set objectives). Here specify in measurable terms
what the person is expected to achieve.
3. Measure the results. Compare actual goals achieved with expected results.
4. Provide feedback, appraise. Hold periodic performance review meetings with
subordinates to discuss and evaluate the latter’s progress in achieving
expected results.
MBO as a mutual goal setting exercise is most appropriate for technical,
professional, supervisory, and executive personnel. In these positions, there is
generally enough latitude and room for discretion to make it possible for the
person to participate in setting his work goals, tackle new projects, and discover
new ways to solve problems. This method is generally not applied for lower
categories of workers because their jobs are usually too restricted in scope. There is
little discretionary opportunity for them to shape their jobs.
MBO may be viewed as a system of management rather than an appraisal
method. A successful installation of MBO requires written mission statements that
are prepared at the highest levels of top management. Mission statements provide
the coherence in which top-down and bottom-up goal setting appear sensible and
compatible. MBO can be applied successfully to an organisation that has sufficient
autonomy, personnel, budget allocation, and policy integrity. Managers are
expected to perform so that goals are attained by the organisation. Too often MBO
is installed top-down in a dictatorial manner with a little or no accompanying
training. If properly implemented, it serves as a powerful and useful tool for the
success of managerial performance.
MBO is a tool that is inextricably connected with team building so that the work
commitment of team members can be increased and their desire to excel in
performance can be inspired. It is important to have effective team work among a 63
Key HR Practices group of managers or a group of subordinates. The group of employees or
subordinates must be looked upon as a team that needs to be brought together. Goals
should be set by manager-subordinate pairs, and also by teams. The basic superior-
subordinate relationship in an organisation is in no way undermined in this concept of
team goal setting. Lines of responsibility, authority, and accountability remain clear.
MBO has many benefits, since it:
1. Provides a way for measuring objectively the performance of subordinates.
2. Co-ordinates individual performance with company goals.
3. Clarifies the job to be done and defines expectations of job accomplishment.
4. Improves superior-subordinate relationships through a dialogue that takes
place regularly.
5. Fosters increased competence, personal growth, and opportunity for career
development
6. Aids in an effective overall planning system.
7. Supplies a basis for more equitable salary determination, especially incentive
bonuses.
8. Develops factual data for promotion criteria.
9. Stimulates self-motivation, self-discipline and self-control.
10. Serves as a device for integration of many management functions.
MBO has certain potential problems, such as:
1. It often lacks the support and commitment of top management.
2. Its objectives are often difficult to establish.
3. Its implementation can create excessive paperwork if it is not closely monitored.
4. It concentrates too much on the short run at the expense of long-range planning.
5. It may lead to excessive time consuming.
Traditionally, in most performance evaluations a supervisor evaluates the
performance of subordinate. Recently, a new approach has been enunciated by the
western management gurus, which is known as 360 degree appraisal - a performance
management in which people receive performance feedback from those on all
sides of them in the organisation - their boss, their colleagues and peers, and their
own subordinates, and internal and external customers. The list can grow to
include vendors and consultants, human resource professionals, suppliers and
business associates, even friends and spouses. The 360 degree feedback refers to the
practice of using multiple raters often including self-ratings in the assessment of
individuals. Thus, the feedback comes from all around. It is also a move
towards participation and openness. Many American companies are now using this
360 degree feedback. Companies that practice 360 degree appraisals include
Motorola, Semco Brazil, British Petroleum, British Airways, Central Televisions,
and so on. Barring a few multinational companies, in India this system of appraisal is
uncommon.
This form of performance evaluation can be very beneficial to managers because
it typically gives them a much wider range of performance-related feedback than
a traditional evaluation. That is, rather than focusing narrowly on objective
performance, such as sales increase or productivity gains, 360 degree often focuses
on such things as interpersonal relations and style. Of course, to benefit from 360
degree feedback, a manager must have thick skin. The manager is likely to hear some
personal comments on sensitive topics, which may be threatening. Thus, a 360
degree feedback system must be carefully managed so that its focus remains on
64 constructive rather than destructive criticism.
Balance Score Card: The Balance Score Card (BSC) creates a template for Performance and
measurement of organisational performance as well as individual performance. It is Potential Appraisal
a measurement based management system, which enables organisations to clarify
vision and strategy before initiating action. It is also a monitoring system that
integrates all employees at all levels in all departments towards a common goal. BSC
translates strategy into performance measures and targets, thus making it operational
and highly effective. It helps cascade corporate level measures to lower level so that
the employees can see what they must do well to improve organisational
effectiveness and helps focus the entire organisation on what must be done to
create breakthrough performance. BSC was introduced in 1992 by Dr. Robert
Kaplan and David Nortan and has been successfully adopted by numerous
companies worldwide.
Assessment Centre– Experts from various departments are brought together to
evaluate individuals or groups specially their potentials for promotions.

Activity A
What type of executive performance appraisal system exists in your organisation?
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15.11 ERRORS IN PERFORMANCE APPRAISAL


Differences in perception and value systems influence evaluations. For
instance, two raters observe an employee disagreeing with a supervisor. One
perceives this as insubordination, but the other sees it as a willingness to stand up
for what he believes in. Individual rater bias can seriously compromise the
credibility of an appraisal. Some of the common syndromes are:
Halo Effect: This is a tendency to let the assessment of a single trait influence the
evaluation of the individual on other traits too.
Horns Effect: This is a tendency to allow one negative trait of the employee to
colour the entire appraisal. This results in an overall lower rating than may be
warranted.
Leniency or Constant Error: Depending upon the appraiser’s own value system
which acts as a standard, employees may be rated leniently or strictly. Such
ratings do not carry any reference to actual performance of the employees. Some
appraisers consistently assign high values to all employees, regardless of merit. This
is a leniency error. The strictness tendency is a reverse situation, where all
individuals are rated too severely and performance is understated.
Central Tendency: This is the most common error that occurs when a rater assigns
most middle range scores or values to all individuals under appraisal. Extremely
high or extremely low evaluations are avoided by assigning ‘average ratings’ to all.
Spill-over Effect: This refers to allowing past performance to influence the
evaluation of present performance. 65
Key HR Practices Personal Bias: Perhaps the most important error of all arises from the fact that
very few people are capable of objective judgments entirely independent of their
values and prejudices.
The above errors have evoked concerns about performance appraisal. McGregor
(1960), with his concern for the human side of enterprise, appraisal represented a
judgemental and demotivating process. Similar concerns were voiced by Deming
(1982) who suggested that appraisal was ‘a deadly disease’ which blamed
individuals for problems systematic to organisations. Margerison (1976) went as far
as to predict that appraisal would ‘fall apart at the seams’ due to a combination of
managerial indifference, employee ambivalence and union opposition. This theme
was reiterated by Fletcher (1993), who suggested that the days of standardised
appraisal were numbered. But, despite these gloomy predictions, the use of
performance appraisal has flourished.

15.12 POTENTIAL APPRAISAL


In consonance with the philosophy of human resource development that has
replaced the erstwhile personnel management in many organisations, more
emphasis has been laid on the appraisal of the employees’ potential in addition to
their performance. Performance is a thing of the past, while potential includes the
possible knowledge, skills, and attitudes the employee may possess for better
performance.
The purposes of a potential review are:
1. to inform employees of their future prospects;
2. to enable the organisation to draft a management succession programme;
3. to update training and recruitment activities;
4. to advise employees about the work to be done to enhance their career
opportunities.
The following are some of the requirements and steps to be followed when
introducing a potential appraisal system:
Role Description: A good potential appraisal system would be based on clarity of
roles and functions associated with the different roles in an organisation. This
requires extensive job descriptions to be made available for each job. These job
descriptions should spell out the various functions involved in performing the job.
Qualities Required: Besides job descriptions, it is necessary to have a detailed list of
qualities required to perform each of these functions. These qualities may be
broadly divided into four categories - (1) technical knowledge and skills, (2)
managerial capabilities and qualities, (3) behavioural capabilities, and (4)
conceptual capabilities.
Indicators of Qualities: A good potential appraisal system besides listing down
the functions and qualities would also have various mechanisms for judging these
qualities in a given individual. Some of the mechanisms for judging these qualities
are - (a) rating by others, (b) psychological tests, (c) simulation games and
exercises, (d) performance appraisal records.
Organising the System: Once the functions, the qualities required to perform these
functions, indicators of these qualities, and mechanisms for generating these
indicators are clear, the organisation is in a sound position to establish and operate
the potential appraisal system. Such establishment requires clarity in
organisational policies and systematisation of its efforts.
66
Feedback: If the organisation believes in the development of human resources it Performance and
should attempt to generate a climate of openness. Such a climate is required for Potential Appraisal
helping the employees to understand their strengths and weaknesses and to create
opportunities for development. A good potential appraisal system should provide
an opportunity for every employee to know the results of assessment. He should be
helped to understand the qualities actually required for performing the role for
which he thinks he has the potential, the mechanisms used by the organisation to
appraise his potential, and the results of such an appraisal.
A good potential appraisal system provides opportunities continuously for the
employee to know his strengths and weaknesses. These are done through periodic
counseling and guidance sessions by either the personnel department or the managers
concerned. This should enable the employee to develop realistic self-perceptions and
plan his own career and development.

Activity B
Are you aware of any potential appraisal system in practice? If so, give a brief
account of the same.
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15.13 SELF APPRAISAL


Development or change takes place only if the appraise is interested in
development or change. Such a desire is normally an outcome of self-review or
reflection. It is an opportunity for the appraisee to recapitulate and list down his
accomplishments and failures. The most important part of self appraisal is the
process of review and refletion through performance analysis.
A thorough performance analysis done prior to the review discussion helps in
making the review discussion fruitful. Review discussion aims at making the
appraiser and the appraise understand each other better by communicating the
performance analysis of the appraisee’s performance. It is in this discussion that the
appraiser should:
1. complement the appraisee for his accomplishments and good qualities;
2. understand and appreciate his difficulties and make action plans to help him in
the future;
3. understand the appraisee’s perceptions of the situation and correct the
perceptions if necessary;
4. help him to recognise his strong points and weak points;
5. communicate the expectations of the appraiser from the appraisee; and
6. identify developmental needs of the appraisee and chalk out a course of action
for meeting these needs.
67
Key HR Practices
15.14 PERFORMANCE APPRAISAL ASSESSMENT
The quality of an appraiser is much more crucial than the appraisal methods. It
is desirable to make the immediate superior a party to the appraisal programme. The
assessment can be accomplished by an individual or by a combination of the
immediate superior, other managers acquainted with the assessee’s work, a higher
level manager, a personnel officer, the assessee himself, and the assessee’s
subordinates. Training of appraisers has been largely stressed as a measure to
improve performance appraisals. Appraisers can be trained with a view to improving
their ability to evaluate subordinates and discuss evaluations with them effectively.
The following questions can provide an assessment of performance appraisal system:
1. What purposes does the organisation want its performance appraisal system to
serve?
2. Do the appraisal forms really get the information to serve the purposes?
3. Are the appraisal forms designed to minimise errors and ensure consistency?
4. Do the processes of the appraisal serve the purpose of effective
communication between the appraiser and the appraisee?
5. Are supervisors rewarded for correctly evaluating and developing their
employees?
6. Are the evaluation and developmental components separated?
7. Are superiors relatively free from task interference in doing performance
appraisal?
8. Are the appraisals being implemented correctly?
The following questions serve as guidelines for assessing the end-product of
performance appraisal:
1. Did the appraisal session motivate the subordinate?
2. Did the appraisal build a better relationship between the supervisor and the
subordinate?
3. Did the subordinate come out with a clear idea of where he or she stands?
4. Did the superior arrive at a fairer assessment of the subordinate?
5. Did the superior learn something new about the subordinate?
6. Did the subordinate learn something new about the superior and pressures he or
she faces?
7. Does the subordinate have a clear idea of what corrective actions to be taken to
improve his/her own performance?
Exhibit 1
Executive Performance Contents and Criteria
Contents
l Job Knowledge
l Quality of Work
l Leadership
l Problem Solving and Decision Making
l Planning and Organising
l Responsibility and Accountability
l Customer Service
68 l Business Judgment
l Ability to Work with Others Performance and
Potential Appraisal
l Motivating Others
l Creativity
l Initiative and Enthusiasm
l Interpersonal Competence
l Communication Skills
l Integrity and Courage
l Honesty and Sincerity

Criteria
Periodicity of Appraisal (tick any one):
Quarterly Half-Yearly yearly
Performance Criteria (tick any one):

Exceeds Performance Meets Performance

Below Performance Standards Standards

15.15 PERFORMANCE APPRAISAL GUIDELINES


l Keep the system simple, and keep the paperwork burden down.
l It is a managerial tool to be used for improving results under the manager’s
province. But it should not be used punitively and unjustly.
l Establish and maintain two entirely different performance appraisal systems:
one geared to making pay decisions and the other designed to yield
information about employee development.
l Once a system has been decided upon, apply it for several years; in other words
don’t tinker with the system annually.
l Do not rely on formal performance appraisals to do the entire job in
communicating on performance; day-to-day informal contacts must do the
bulk of the job.
l Review performance formally atleast once in a year and also whenever there
has been a repetition of negative employee behaviour.

15.16 PERFORMANCE APPRAISAL IN PRACTICE


Traditionally appraisals are carried out by the supervisors of the employees. Some
companies do follow self appraisal and compare the same with the traditional
appraisal of the supervisors. A new approach has been recently enunciated by the
western management gurus, which is known as 360 degree appraisal whereby
appraisals are required to be carried out not only by the supervisors, but also by
those supervised (subordinates) and peers. This approach also needs a re-look in
the context of leadership concepts being practiced universally. If one requires to be
appraised on how well he performs the leadership role, the appraisal should
originate from the followers (bottom to top approach) and not from their
supervisors alone.
While the supervisors can appraise, on the performance standards, goals, targets,
achievements, the leadership attributes need to be appraised only by those being
69
Key HR Practices supervised. This argument is quite valid for higher level executives including CEOs.
Therefore, all the three approaches, top-bottom, bottom-top and peer level appraisal
will be very relevant. Perhaps, appropriate weightage is required to be assigned
for appraisals being carried out in the 360 degree system, which is yet to take off
seriously in many organisations.
It is quite disappointing to note that appraisals are not being carried out with the
due importance and seriousness they deserve though the systems provide scope for
periodic and timely appraisals. Normally appraisals are being carried out once a year
or at the most twice a year as per the existing practice. Many organisations do
follow monthly and quarterly appraisals for management trainees till they are
confirmed, and follow the by-annual or annual appraisal system thereafter.
Appraisal is a continuous process, to be scientifically carried out day in day
out, if one has to seriously carry out appraisals.

15.17 PERFORMANCE REVIEW AND FEEDBACK


Performance review or evaluation interview is necessary with a view to
communicate effectively with each employee on his performance. The main thrust of
the system is to effectively develop the communication process between the
appraiser and the appraisee so that individual strengths and weaknesses are
identified and necessary corrective actions taken. If the performance of the
employee falls short of the standards set in the process of goal setting, the
employee is encouraged to improve his performance. Similarly, if the employee has
exceeded the standard, he is encouraged to accept a higher goal.•
Evaluation interviews are not easy to conduct, and if they are poorly handled they
may lead to hostility and greater misunderstanding. Performance review can
be quite beneficial to the organisation and to the individual involved if done
properly. Consequently, many companies have spent a great deal of time and
effort on training their supervisors to handle evaluation interviews more effectively.
To ensure that no essential part of the interview is left out, supervisors are often
encouraged to follow a standardised outline. For example:
1 The supervisor tells the subordinate the purpose of the interview, and that it is
designed to help him do a better job.
2. The supervisor then presents the evaluation, giving the strong points first and
then the weak points.
3. Next the supervisor asks for general comments on the evaluation.
4. The supervisor then tries to encourage the subordinate to give his own picture
of his progress, the problems he is meeting, what he can do to solve them,
and how his supervisor can help him.
The interview ends with a discussion of what the subordinate can do by himself to
overcome his weak points and what the supervisor can do to help. The supervisor
tries to accept any criticism or aggression on the part of the subordinate without
argument or contradiction.
Feedback is important in letting your employees know how they are doing. Without
feedback, employees tend to assume that their performance is acceptable. If they
make the wrong assumption for an extended period of time, a serious performance
problem can develop - one that may be hard to correct. There are two types of
feedback - positive and corrective. Providing regular feedback is important if you
want to demonstrate to your employees that you care about them. It is also another
way to make the human-touch appraisal process an ongoing activity.
70
Giving feedback on performance requires an intelligent and diplomatic approach. Performance and
Overwhelmingly negative feedback often causes genuine stress, demotivation, Potential Appraisal
demoralisation, and even depression, all of which can have a serious impact on how
someone does his job. Positive feedback strengthens performance. There are some
managers who think that, as long as you don’t tell an employee there’s a problem, the
employee should assume that everything is okay. Some of these managers think
that giving positive feedback is a sign of weakness. But the fact is, most people are
motivated by the desire to achieve specific results - especially established goals.
And generally, employees will work to achieve these goals as long as they believe
that what they do is recognised and appreciated.
In his all-time best-seller, The One-Minute Manager , Dr. Ken Blanchard
introduces the philosophy of “catching” your employees doing something right.

Activity C
Do you follow periodic performance review and give feedback to the assessee
during the appraisal process.
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15.18 STRATEGIES TO IMPROVE PERFORMANCE


Companies can do many things to improve employee performance. More specific
and frequently used strategies include:
1. Positive reinforcement system
2. Positive discipline programmes
3. Employee assistance programmes
4. Employee counseling.
The positive reinforcement system lets employees know how well they are meeting
specific goals and rewards improvements with praise and recognition. In the sense
that no money is involved, it is a unique incentive system. Like all incentive
systems, a basic premise of positive reinforcement is that behaviour can be
understood and modified by its consequences. Some organisations improve
performance through the use of positive discipline or non-punitive discipline.
Employee assistance programmes are designed specifically to assist employees
with chronic personal problems that hinder their job performance and
attendance. Such programmes are often used with employees who are alcoholics
or who have severe domestic problems.
Counseling is an inescapable and necessary part of appraisal. It has to do with a
personal relationship, and interaction between two people one of whom is wiser or
more experienced than the other. The main steps in appraising and counseling
subordinates are as follows:
1. Schedule periodic appraisals for all immediate subordinates.
2. Establish performance appraisal standards jointly with subordinates. 71
Key HR Practices 3. Prepare for each appraisal and counseling session, select an appropriate
place, provide enough time, and review records.
4. Make appraisal sessions cooperative. The subordinate must be encouraged to
appraise his own performance and share his ideas and feelings with the
appraiser.
5. Establish and maintain rapport with the subordinate by words, actions, and
attitude.
6. Jointly explore alternative solutions and the consequences of selecting each
one.
7. Help the subordinate to come to a self-determined solution to the problem or
deficiency.
8. Terminate the session gracefully.
9. Complete records of the session and decisions for future reference.
10. Carry out the decisions and actions.
11. Follow up and evaluate results.
Many situations that arise at work demand effective counseling skills. Counseling
is an important communication based activity. Counseling skills include
listening, understanding, initiating effective communication, and evaluating
solutions. Effective counseling skills are aimed at:
(i) bringing about some constructive change in the subordinate’s behaviour;
(ii) locating the root cause of subordinate’s problem;
(iii) reducing frustration by allowing subordinates to express their attitudes and
feeling about their jobs; and
(iv) stimulating problem-solving for the purpose of finding solutions to the
subordinate’s problems and achieve excellence in his performance.
Effective counseling demands effective communication, active listening, and
transactional analysis. In addition, some specific counseling guidelines include:
1. Avoid making your subordinates defensive; recognise that defensive behaviour is
normal.
2. Never attack a person’s defense; try to concentrate on the act itself (inadequate
sales, decreasing profits and so on) rather than on the subordinate.
3. Postpone action; sometimes, the best thing to do is nothing at all.
4. Be an active listener; be sure you understand not only the words, but, more
importantly, the feelings and attitudes underlying them.
5. Try not to criticise; criticism often just evokes defensive behaviour.
6. Try to counsel often, on a daily basis, rather than once or twice a year; give
feedback.
7. Use critical incidents. No one likes being told with vague generalities that his
performance is not up to the mark. Try to be especially specific about the
behaviour you consider unsatisfactory.
8. Agree on standards of improvement. Best results are always achieved when the
superior and subordinate set specific goals to be achieved.
9. Get your subordinates to talk.

72
Activity D Performance and
Potential Appraisal
What is the strategy of your organisation to improve overall performance of
employees?
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There is great degree of unhappiness all around with performance appraisals. Rarely
does one come across managers who are happy with the appraisal systems in their
organisations. But managers find it difficult to do without them because in the
absence of an appraisal mechanism, howsoever weak it may be, it is difficult to get
work out of people. It is a good mechanism to control people. In practice, a
development-oriented performance appraisal system has to be evolved by combining
certain key elements such as performance analysis, self-appraisal, performance
ratings, and counseling. Voltas have evolved a development-oriented appraisal
system on the basis of their own experiments and experiences over the years.
Larsen & Toubro Limited is the first company in India to introduce a
development-oriented performance appraisal system almost a decade ago as a part
of an integrated human resource development system. The State Bank of India also
introduced such a system in some of its branches covering a large number of
officials. Any organisation interested in changing its appraisal system from
control-oriented confidential reports to a development oriented system is actually
initiating a change in its culture. Such a change is slow, and is likely to be resisted
even if it is good for the employees and, therefore, should be carefully planned
and monitored.
Exhibit 2
Performance Appraisal at Pepsi-Cola International
Pepsi-Cola International (PCI), with operations in over 150 countries, has
devised a common performance appraisal system that focuses on motivating
managers to achieve and maintain high standards of performance. Administrative
consistency is achieved through the use of a performance appraisal system of five
feedback mechanisms - instant feedback, coaching, accountability based
performance appraisals, development feedback, and a human resource plan. The
common system provides guidelines for performance appraisal, yet allows for
modification to suit cultural differences. For example, the first step of instant feedback
is based on the principle that any idea about any aspect of the business or about
an individual’s performance is raised appropriately and discussed in a sensitive
manner. The instant feedback message can be delivered in any culture; the important
thing is not how it is done but that it is done. The purpose of instant feedback is
always to improve business performance, not to criticise cultural styles. Using this
system, PCI tries to balance the cultural and administrative imperatives of
successful managing the performance of a diverse workforce.

15.19 SUMMARY
The performance appraisal system ideally is an organisation designed programme
involving both the organisation and the personnel to improve the capability of both.
The elements of performance management include: purpose, content, method, 73
Key HR Practices appraiser, frequency, and feedback. The appraisal process involves determining
and communicating to an employee how he or she is performing the job and
establishing a plan of improvement. The information provided by performance
appraisal is useful in three major areas: compensation, placement, and training and
development. Appraisal helps to improve performance by identifying the strengths
and weaknesses; it helps to identify those with a potential for greater
responsibility; and assists in deciding on an equitable compensation system. The
methods of performance appraisal include rating scale, critical incident, ranking
methods, and management by objectives. Several common errors have been
identified in performance appraisal. Leniency occurs when ratings are grouped at
the positive 7end instead of being spread throughout the performance scale. The
central tendency occurs when all or most employees are ranked in the middle of the
rating scale. The halo effect occurs when a manager allows his or her general
impression of an employee to influence judgment of each separate item in the
performance appraisal. A sound appraisal system involves assessing employee
performance on a regular basis. Performance appraisal can be done by superiors
who rate subordinates, subordinates who rate their superiors, and self-appraisal. A
suitable performance appraisal system has to be designed keeping in view the culture
and requirements of an organisation.

15.20 SELF-ASSESSMENT QUESTIONS


1. Discuss the objectives of performance appraisal.
2. Describe the methods used in performance appraisal.
3. What is Management by Objectives (MBO)? What are its key features?
4. What is the purpose and significance of performance review?
5. Highlight the significance of performance counseling in developing
employees.

15.21 CASE
Johnson, age 25, has been with the advertising department as a copyman for three
years. His job is to design advertisements for use in newspapers and magazines. He
must work closely with the girls in the art department, with the members of the sales
department, and with the vice president, sales and promotion, who is in charge of the
whole division.
Johnson is an extremely enthusiastic worker with many good ideas. But he has
considerable trouble in dealing with people. He is too impatient with the girls in the
art department and constantly chasing them to finish his own work in time. He makes
it perfectly clear that his ideas are always best while dealing with the people in the
sales department. When the vice president was thinking loud during a
conference, Johnson cut short the speech of the vice president by an aggressive
answer. It was a good answer, and the vice president did not mind, but some of the
other people thought that Johnson had behaved badly. As a manager you are
concerned about the animosity he is creating in your department. As per the
company policy, each employee has to undergo an evaluation interview every six
months. There are no performance evaluation forms.

Discussion Questions
1. What should your strategy be in handling evaluation interview with Johnson?
2. What remedial measures do you suggest to tackle the situation?
74
Performance and
15.22 FURTHER READINGS Potential Appraisal

Corner, Bernard J., The Communication of Merit Rating, Personnel, vol. 30,
No. 2, p. 88.
Davis, Keith, Human Behaviour at Work, Tata McGraw-Hill, New Delhi, 1977.
Fisher, M., Performance Appraisals, Kogan Page Ltd., London, 1995.
Pigors, P., and Myers, C.A., Personnel Administration, McGraw-Hill, Tokyo, 1973.
Richard Henderson, Performance Appraisal: Theory to Practice, Reston Publishing
Co., 1980.
Strauss, G., and Sayles, L.R., Personnel - The Human Problems of Management,
Prentice-Hall Inc., Englewood Cliffs, New Jersey, 1960.
Yoder, Dale, Personnel Management and Industrial Relations, Prentice Hall of
India, New Delhi, 1975.

75
Human Resource
UNIT 16 HUMAN RESOURCE Information Systems

INFORMATION SYSTEMS
Objectives
After going through this unit, you should be able to :
l understand the criticality of systematizing information for effective planning;
l examine the significance of information systems in Human Resource
Management;
l appreciate various approaches to managing information at the macro and the
micro level;
l assess the disadvantages of the manually maintained information systems; and
l understand the advantages of computerizing HR information systems.

Structure
16.1 Introduction
16.2 Concepts of HRIS
16.3 Need of HRIS
16.4 Technolgy Shifts and HRIS
16.5 Effectiveness of HRIS
16.6 IT Supported HRIS
16.7 Designing and Implementing an HRIS
16.8 HRIS as a Tool
16.9 Prerequisites for Introduction of a Transformational HRIS
16.10 HRIS Leadership
16.11 Summary
16.12 Self-Assessment Questions
16.13 Further Readings

16.1 INTRODUCTION
An information system is an inter-related set of procedures and processes to provide
informaion for decisions. Information is data that have been processed so that they are
meaningful. It adds to the representation of an idea. It corrects and confirms previous
information. It tells us something which we did not know. Many organisations have
computer-assisted information systems.
An information system especially developed for human resource management is
referred to as HRIS – a human resosurce information system. Human resosurce
management, when it doesn’t include the human resource planning function, requires
only a basic HRIS. If this basic HRIS is computer-supported, it is likely to include a
transition processing system or mangement information system. An information
system provides for the accumulation by gathering, processing by deleting extraneous
information, deciding among divergent information and putting the information in a
logical arrangement that promotes its understanding. Finally, the information is stored
in a readily accessible configuration.
5
Intellectual Capital Information is maintained by ensuring its security and by updating it. Information is
Accounting delivered to potential users in a configuration and at a time most suited for its use.

16.2 CONCEPTS OF HRIS


HRIS is a key management tool which collects, maintains, analyses and reports
information on people and jobs. It is a system because it integrates all the relevant
data, which otherwise might have been lying in a fragmented and scattered way at
various points in the larger system; converts this data into meaningful conclusions or
information and makes it accessible to the persons, who need it for their decisions.
This integration of data can be at the macro level at the level of a nation or a
geographical regional groupings- or at the micro level, that is, at the level of an
organisation.
Macro level HRIS is generally focused towards manpower planning and includes
statistical information on population, technology and economy. Such information can
be obtained from several sources like publications of the Planning Commission,
Ministry of Labour, The National Sample Survey Organisation, The National Labour
Institute, The World Economic Forum, International Labour Organisation etc. to name
a few.
At the micro level, the information requirements include modules on recruitment,
personal data, skills assessment, training and development, performance appraisal,
rewards and punishment, grievance handling and so on. This information is used for
understanding the patterns of HR policies, actions, and employee behaviours as well
as for identifying gaps in the HR system and the effectiveness of the HR system. As
we shall see in the next Unit, HR Audit is an activity that cannot be undertaken unless
a proper HRIS is in place.

16.3 NEED OF HRIS


At the macro level, HRIS is critical for effective planning and budgeting of national
resources. Based on HRIS the Government and other agencies involved in manpower
planning and manpower productivity, such as the central and the State Governments,
AICTU or educational institutions etc, can develop proper strategies to increase the
numbers as well as the utilization of the pool of people available for jobs. Efforts can
be made to develop the required skills and competencies among the labour pool to
meet the national/regional requirements by allocating adequate budgets on the basis of
their expected optimum use. The recent initiatives of the Indian Government to
upgrade the regional engineering colleges to IIT standards, or to create centres of
excellence, or invest in bio-technology research etc. are all results of a national level
information base regarding the trends in the demand and the expected supply of
manpower made possible because of an HRIS at the macro level.
At the micro or enterprise level, HRIS has become critical for decision-making and
policy formulation as well as for ensuring fairness and equity in HR policies and
practices. There is an increasing realization that for organisational survival and
growth in a competitive environment, human resource is the most critical resource.
This coupled with the increase in the cost of hiring, retaining, developing and
motivating people to perform at their best has pushed organisations to base their HR
decisions on sound logic and thereby, on proper information. HRIS becomes a major
asset from this point of view.
The growing need for transparency among the employees and the society is another
factor that is compelling organisations towards proper management of information in
6 all areas, including HR.
As the economies are becoming more knowledge driven and thereby, moving towards Human Resource
more qualified and educated workforce, it is being increasingly realized that Information Systems
better-information makes employees more involved, connected, and productive. A
major source of connect between the employees and their companies is through the
information that they receive and the feedback that they provide. Information
management, in general and HRIS in particular, thus, has become a critical factor in
managing employee performance. Companies are increasingly realizing the advantage
of having systems that capture, analyze, and report on the host of human resource
aspects that are critical to running a business and share it with the employees so that
they self-regulate their contribution. HRIS is a tool to achieve this objective.
Finally, in human management, perceptions of equity and justice are extremely
important for managerial credibility and employee satisfaction. Consequently, HRIS,
which helps in identifying policy effects as well as the pattern of policy
implementation at various locations, by different people at different points of time,
helps in detecting infringements of equity.

Activity A
It is stated that “national strategy of education has to ensure the availability of highly
educated and motivated manpower for dealing with the challenges which are inherent
in the modernisation and globalisation of the economy”. Study the National Education
Policy Document and examine what directions does it provide towards attainment of
the stated objective.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................

Activity B
In your organisation, analyse existing records, reports and forms to determine the
adequacy and requirements for data in the Human Resource Information System.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................

Activity C
Study the existing Human Resource Information System (HRIS) in an organisation
and comment on the procedure followed for maintaining the security of confidential
data.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................

Activity D
If there is not an existing human resource information system, carry out a rudimentary
investigation to identify what data are available in personnel files, dossiers, etc., which
could be easily collected for purposes of Human Resource Planning.
.......................................................................................................................................
.......................................................................................................................................
....................................................................................................................................... 7
Intellectual Capital
Accounting 16. 4 TECHNOLOGY SHIFTS AND HRIS
Technological advancements have resulted in a dramatic change in consumer
interaction and the methods of service delivery. Consumers are now experimenting
with new ways of conducting business. Take, for example, developments regarding
automated teller machines (ATMs). Over the course of their more than 15-year
history, ATMs have evolved to provide basic banking services 24 hours a day 7 days a
week. Finally, new technology is bringing banking services directly into the customer’s
home. In the medical industry, rising costs have increased the availability of at-home
diagnostic equipment and tests. Software packages let people construct their own
wills, and even design the house of their dreams.
Changes, such as those described above, in the external environment have serious
implications for strategic planning within the organisation, especially with regard to
the human resource planning and service delivery functions. As in other cases,
mentioned above, in the work-related matters too the employees are expecting greater
speed, transparency and empowerment. These in turn, need increased availability and
access to the information about their organisation, their work, themselves and their
colleagues. Some changes that have taken place within organisations to fulfill the
requirement of speed and quick response have been well chronicled. Organisations
have been restructured through downsizing, rightsizings, and re-engineering that trim
the work force, eliminate middle management, flatten the organization, and improve
communication and decision making functions. However, proper information
management and communication planning is seen to be the most critical and
sustainable move to satisfy employee expectations of self-regulation, greater control
over their work-life, and greater opportunity to contribute to the organisational goals.
HRIS is, therefore, often seen to be an imperative in a fast changing technological
environment.

16.5 EFFECTIVENESS OF HRIS


According to Tang et al. (1987) the key to the effective planning of manpower and
improvement of people productivity is an effective HRIS. However, in order to be
effective an information system must take into account the following :
Adequacy of information: Too much or too little information, both lead to defective
decision-making. Therefore, there must be some understanding regarding what
information and in how much detail and covering what periods should be maintained.
Specificity: Even where it is not possible to quantify the information, the information
should be made as specific as possible.
Relevance: Information is to be managed in the light of the requirements of the
decision makers. Therefore, HRIS should focus on the needs of the decision-makers
and stakeholders rather than on what is interesting or easily available or palatable to
the people. The system, therefore, must also have the built in capability for deletion
and updating of data.
Comprehensiveness: The information should be complete from the point of view of
the decision-maker giving details of who, what, how, when, where and why .
Reliabilty: Since the information is going to be the basis of critical decisions, it must
satisfy the requirements of validity and reliability.
Moreover, to ensure effectiveness, not only should the information provided be
relevant and reliable but the delivery system should also be the most satisfying and
cost effective. A wealth of information but not accessible when needed or available at
8 an inhibiting personal cost in terms of energy and time, is of hardly any use.
HRIS, thus, is not just a matter of collating data but also of ensuring data quality and Human Resource
interpretation and the quality of delivery of information to the users. Information Systems

16.6 IT SUPPORTED HRIS


In today’s enterprises, HRIS are typically Information Technology (IT) supported
systems. This is not to say that without IT HRIS cannot be introduced. But
information technology allows much greater effectiveness of HRIS than a manual
system. Some of the deficiencies of the Manual Systems which an IT based HRIS
overcomes to a considerable extent are given below.

Deficiencies of the Manual System


High Investment of time: In manual systems, the entry, up-dation, maintenance, and
retrieval of information are all time consuming.
Accuracy: The manual transfer of data, and multiple entries of the same data
increases the chances of error. As a result, the accuracy and reliability of the manual
system is suspect. Moreover, verification of data, and corrections in it are time
consuming.
Fragmentation: Manual Information Systems are often fragmented with several
pieces of related information being physically placed in different places. This too
makes retrieval difficult.
Duplication: More often than not, the same data may be held by different personnel
but in different forms. If any changes are to be made then they need to be made at all
the points which leads to duplication of effort.
Difficulty of analysis: The manual analysis of data is time consuming and
cumbersome. The difficulty in extracting information promptly from manual systems
considerably reduces both, the efficiency and the effectiveness of the system.

Advantages of Computerisation
While it is presumptuous to assume that computerization automatically remedies all
the problems associated with manual systems, in the fast changing technological and
information processing environment, it does present several potential benefits.
Convenience: In IT enabled systems, data entry, update and retrieval are all
significantly faster. Redundant data may be easily replaced.
Integration: A computerized system can greatly reduce fragmentation and duplication
of data. All data can be stored in a single system to enable retrieval of complete
picture of each employee or of each defined parameter in a desired number of
permutation and combinations. Moreover, depending on the requirement, reports can
be generated in different ways that provide an accurate picture. Verification of data
and error rectification are also relatively easy in computerized systems.

Multi-user benefit
Different people can access the data simultaneously, which facilitates quick
dissemination across geographical and structural boundaries and facilitates faster
decision-making. Moreover, on-line data entry is possible that leads to automatic
up-dating of data resulting into better informed decisions.
However, to obtain these advantages, it is important that the knowledge and expertise
is available to the organisation, internally or from outside, to develop and tailor- make
the system to suit the organisation’s unique needs.
9
Intellectual Capital
Accounting 16.7 DESIGNING AND IMPLEMENTING AN HRIS
According to Mathis and Jackson (2000) to design and implement an effective HRIS,
the following are necessary:
Details about the required data, such as:
l What information is available and what needs to be collected?
l To what use this information be put?
l In what format this information be presented?
l Who should have access to what information?
l When and how often this information is needed?
The answers to these questions will help in the choice of both the hardware and the
software.
Formation of a Project team: it is useful to establish a cross functional project team
to “ review user needs, identify desired capabilities of the system, solicit and examine
bids from software and hardware vendors and identify the implementation process
required to install the system.”( 58)
Training of those who will be managing and using HRIS: Both to ensure proper
inputs into the system and effective outputs from the system, training of users is
desirable. In some of the firms, where HRIS has been successfully implemented, a
complete team of trainers was established to give proper training to the employees.

Ensuring Security and Privacy


Proper controls must be built into the system to protect the privacy rights of the
employees. They are required both for getting employee acceptance as well as for
legal and moral protection against indiscriminate usage of information.

16.8 HRIS AS A TOOL


HR data are wide in their variety, and include job history (transfers, promotions, etc.),
current and historical pay details, inventories of skills and competencies, education
and training records, performance assessment details, absence, lateness, accident,
medical and disciplinary records, warning and suspensions, holiday entitlements,
pensions data and termination records. An HRIS normally provides an electronic
database for the storage and retrieval of this data which is, at least potentially,
available to anyone who may want to access it. The important issue however, is- how
this IT system is actually used in carrying out the HR tasks and for what purpose.
This relates to the philosophy behind HRIS.
Zuboff (1988) distinguishes between the “automating” and “informating” capacity
of IT. The term “automate’’ is associated with the idea of substitution of human
agency by technology to save physical and mental labour involved in carrying out an
activity. From this point of view, an HRIS can be used as a tool to enhance efficiency
of HR information management by increasing the speed of decisions, communication
of decisions, and also the reduction of overhead costs by task mechanisation and
process automation, so that the number of HR specialists required goes down.
Handled with care, this can result in an improved HR service, by offering a faster
service and improved quality and consistency of information (Hall and Torrington,
1989). For instance, it is possible that an employee receives a note from the human
resource department requesting feedback on the employee’s manager. The employee
10
goes to an employee kiosk, identifies him-or herself, uses the one-time-only PIN
number contained in the note, and completes the questionnaire. Similarly an employee Human Resource
uses a phone to request a pension calculation. The automated system asks for various Information Systems
inputs that are made by pressing the telephone buttons. At the end of the interchange,
the employee is given a time when a personal pension advisor will call and provide a
detailed report of the calculations. The employee later receives the pension calculation
at the printer in the employee kiosk, while talking to the counselor.
While the automating potential of IT can improve efficiency in many ways, it is still
rooted in the “direct control’’ mind-set of the traditional organisations. Since
employees’ activities and levels of productivity can become more “transparent’’ to the
line or HR manager, the system facilitates close supervision and monitoring of tasks
and people.
However, to realise the full potential of the HRIS, it is necessary that the system be
used as a tool for empowering employees rather than as a tool for stricter control. This
requires use of, what Zuboff calls, the “informating” capacity of IT. This is the
capacity of IT to integrate large pools of individual data into collective information
regarding trends and patterns, which can be easily shared across the boundaries of
departments and geographical locations. Whether HRIS will be used as an
“informating” tool or not, however, depends on the philosophy of the organisation
which determines what information will be made available and to whom.
Adopting an “automating” strategy assumes that the system itself is capable of
handling many decisions. Its focus, therefore, is on reducing the input of human
operators and eventually to replace them altogether, as far as possible. With respect to
HRIS, thus, automating strategy involves computerisation of data management to
replace employees as far as possible with machines and to increase the surveillance of
employees through real time information. Access to the database in such a case is
restricted to the HR specialists and they use the data to monitor and enforce direct
control over employees.
Adopting an “informating” strategy involves providing employees with access to
information generated from more powerful IT tools, so that they can make improved
decisions based on their unique human capacity to interpret and adapt to the particular
situation. IT would be used as an enabler for the managers to integrate their objectives
with wider corporate objectives and to allow individual employees to access relevant
parts of the HRIS to find out for themselves information about their job, training and
career structures, remuneration, terms of conditions of employment and organizational
plans for employee involvement. This way, the employees can become more
“empowered’’, having greater control over their work and work-lives.
However, in order to act as an effective stimulus towards the introduction and
maintenance of a culture of empowerment, HRIS system would require several
compatible information and communication technologies. The HRIS would need to be
designed to operate beyond the usual functional HR department boundaries, by
extending access to the line management and individual employees. Sometimes, it may
even have to go beyond the organisational boundaries, for example, in those cases
where some of the HR activities have been outsourced.

16.9 PRE-REQUISITES FOR INTRODUCING


“INFORMATING” HRIS
Generally three types of conditions must prevail to allow the use of HRIS as a tool for
empowerment. These are : The Corporate Climate, An Enlightened Human Resource
Function, and The Technology Platform. All three must be in place or just around the
corner before the new HRIS is pursued.
11
Intellectual Capital 1. The Corporate Climate
Accounting
The corporate culture must be conducive to employee empowerment and, thereby, to a
flatter organisation structure. Introduction of transformational HRIS in large
bureaucratic organisations, therefore, requires some degree of change towards,
downsizing, team work, procedural review and reduction.

2. An Enlightened Human Resource Function


The human resource function must be enlightened and ready to serve. Where HR
functionaries view themselves as controllers and auditors rather than as service
providers and enablers, HRIS cannot be introduced as an empowering tool. The fear
of marginalization will trigger off resistance from the HR function itself and if thrust
upon, will lead to alienation among the functionaries.

3. The Technology Platform


The technology platform available or planned for, must be capable of allowing the
required connectivity. This includes the networks to move the data as well as employee
PCs and kiosks for data input and access. To be effective, the system has to
continuously reach every employee through multiple channels.

Activity E
Your organisation proposes to establish a wholly separate information system for
Human Resource Planning purposes only. As personal manager, you are required to
prepare a note setting out several uses and applications of computerized personnel
records system to be used for purposes of staff orientation in Human Resource
Information System Concepts.
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................

16.10 HRIS LEADERSHIP


According to Joseph Collette (2001) the traditional reactive staff role of HRIS and HR
leaders needs to become more proactive and strategic in nature, if “informating”
HRIS is to be successful. Consequently, those leading the HRIS initiative must have
some key competencies like, strategic vision, hands on technical skills, HR business
acumen, the ability to influence and negotiate, team leadership ability, and project
management skills.
Vision: It is essential for today’s HRIS leaders to have the vision to see the big picture
and be forward thinking. Having vision means being able to take existing technologies
and processes and create a blue print of how they will fit together. In creating the blue
print, one must strongly consider how the blue print will contribute to achieving
business objectives and goals, thereby making the HR organization more strategic and
building competitive advantage. Vision is the first requirement for implementing
technologies that will fit into the overall business plan and be consistent with long
term goals.
Technical Skills: In order to determine and help establish the vision, a thorough
understanding of the technical landscape is required. It is critical to understand which
technologies to apply and which ones not to. Sometimes the best technical decisions
made are the ones wherein one choses not to undertake or implement a particular
technology. Keeping up and staying current with available technologies to apply to
12
different situations is important in being able to make solid recommendations. The Human Resource
better informed an HRIS leader is, the more alternatives he/she will be able to provide Information Systems
when creating solutions for the business.
Business Acumen: Understanding the requirements of the business is essential for
delivering solutions that add value. In order to create a vision that supports the goals
of the HR organization, HR must speak the language of the business as well as speak
the technical jargon. The role of HRIS is technical in nature but it’s primary purpose
is to provide support for the business objectives through HR information
management.
Ability to Influence and Negotiate: Successful technology implementations require
the commitment of resources, financial and human. Securing these resources requires
the support of senior management. Also, with new technology, usually comes a new
process. Process change needs to have support from the highest levels of the
organization. In addition to the ability to influence, there is also usually a need to
negotiate for the resources required. HRIS leaders have to be respected within
management circles in order to successfully influence and negotiate for required
resources.
Team Leadership: The process of organizing and implementing technology initiatives
should involve cross-functional teams of professionals with various backgrounds and
levels. Managing this team requires skill to motivate and inspire a diverse group of
people. Also, since the HRIS leader can’t do it all, a strong team must be built and
nurtured in order to facilitate the successful completion of a variety of tasks, both
functional and technical in nature. It is the role of the HRIS leader to promote the
group’s cohesiveness and resolve any personnel conflicts that may arise.
Project Management: In the end, it’s project management skills that are required to
implement and deliver on the vision, ideas and initiatives. The HRIS leader should be
effective in organizing, directing and planning the projects. This includes mobilizing
the required resources, setting timelines and milestones, monitoring and reporting
progress to senior management and project stakeholders, and being able to focus on
key individual project components as needed. As with any project lifecycle, the HRIS
leader must make effective use of continuous feedback and evaluation methodologies
in order to properly examine and adjust project initiatives to ever changing
environments and business requirements.

16.11 SUMMARY
Information is the raw material of planning. A quality planning effort cannot be
accomplished without sound and adequate information. Information is provided in an
organisation by an inter-related set of procedures and process known as an
information system.
An information system especially developed for the human resource management
function is called an HRIS – a human resource information system.
There are certain basic requirements upto which the information must conform.
At the macro level, although there do exist institutional arrangements for providing
manpower data, but the need for improving the effectiveness of human resource
planning and policy has been articulated at several fora.
At the micro level the importance of having a well-defined and detached manpower
information system within the organisation has been emphasised. The point has been
made that at the enterprise level there is need for a comprehensive human resource
information system. In this context, the deficiencies and shortcomings of manual
13
Intellectual Capital human resource information system have been noted in order to develop a clearer
Accounting perspective for going in for a computerised personnel record system. Several
advantages and applications manually doing information system and of using
computerised information system have been brought into focus. Those of you
who may be interested in the design process of a computerised human resource
information would be well advised to read further the subject itself being so
specialised in nature.

16.12 SELF-ASSESSMENT QUESTIONS


1. Explain the significance of Information System in Human Resource Management.
2. Discuss the criticality of systemising information for effective planning.
3. Explain the various approaches to manageing information at the macro and micro
level.
4. Explain the advantages of computerising human resources information system.

16.13 FURTHER READINGS


HRFocus- May 2002: What’s in store for HR information systems?
HRFocus- May 2003: What Are the Top HRIS Issues in 2003?
http://www.emerald-library.com: Effecting HRM-style practices through an integrated
human resource information system
Kirstie S. Ball (2003) : The use of human resource information systems: a survey;
Birmingham Business School, University of Birmingham; http://www.emerald-library.com
Cohen, S. (1998), “Knowledge Management’s Killer Application’’, Training and
Development, Vol. 52 No. 1
Davenport, T.H. (1998), “Putting the Enterprise into the Enterprise System” Harvard
Business Review, July/August
Davenport, T.H. and Short, J.E. (1990), “The New Industrial Engineering: Information
Technology and Business Process Redesign” Sloan Management Review. Vol. 31 No. 4
Hall, L. and Torrington, D. (1989), “How Personnel Managers come to Terms with the
Computer” Personnel Review, Vol. 18 No. 6
Broderick, R. and Boudreau, J.W. (1992), “Human Resource Management, Information
Technology and the Competitive Edge” Academy of Management Executive, Vol. 6 No. 2
Carolin, B. and Evans, A. (1988), “Computers as a Strategic Tool” Personnel Management,
Vol. 20 No. 7
Zuboff, S. (1988): In the Age of the Smart Machine. Oxford: Heinemann.
Collette, Joseph (2001): HRIS Leadership; IHRIM, Winter, New England Chapter’s News
Letter; www.ihrim-ne.org/documents/leaders.

14
Human Resource Audit
UNIT 17 HUMAN RESOURCE AUDIT
Objectives
After going through this unit, you should be able to:
l understand the concept of Human Resource Audit;
l to grasp the similarities and difference between the HR Audit and the Financial
audit;
l to appreciate the need, purpose and the scope of the HR Audit; and
l develop a perspective on how such Audits are carried.

Structure
17.1 Introduction
17.2 Concepts of Human Resource Audit
17.3 Nees of HR Audit
17.4 The Scope of HR Audit.
17.5 The Frequency of HR Audit
17.6 Conducting HR Audit
17.7 Audit Process : Essential Steps
17.8 Techniques in HR Audit
17.9 Summary
17.10 Self-Assessment Questions
17.11 Further Readings

17.1 INTRODUCTION
Conventionally, the independent accountant, after completing an audit, is in a position
to render a certificate covering his findings, mentioning the period covered by audit.
An assertion is included in the certificate that a review has been made of the
company’s internal control system and of the accounting procedure followed. A brief
statement of the scope of audit is made. Any qualification that are applicable to
execution of the assignment or to the company’s accounts are prefaced. Finally, the
independent accountant renders his opinion regarding the company’s financial
statements and the basis on which the accounts have been kept. Professional ethics is
observed by independent accountants. Material facts are neither missed nor
mis-stated.
Again, conventionally, during manpower audit disbursements made on account of
payrolls are checked to underlying records. This may even require verification of
employees’ signatures on payroll receipts to the extent considered necessary. Record
of the time of arrival and departure of employees is checked; so also the reports of the
number of pieces turned out by piece workers. Payroll records covering bonuses and
commission on sales to employees are subjected to scrutiny. Also, certain payroll
deductions and contributions in accordance with several social security and welfare
laws is checked to compliance and accuracy.
In the matter of quantum of audit and manner of selections, the auditor may introduce
the elements of last check and surprise being left to his sole discretion.

15
Intellectual Capital It is a general practice for independent accountants to analyse the changes which took
Accounting place in respect of employees of company during the period covered by the audit. The
net increase or decrease in the number of employees in any one function or occupation
is discussed with one of the company’s senior executives in order to obtain the benefit
of his comments regarding the situation.
Careful consideration is given by the independent accountant to the company’s system
of internal control and check while determining the scope of the programme of audit.
Obviously, much of the quantum and thrust of audit can be directly related to
effectiveness of the company’s internal control system.
The managerial control implies two things: one is checks and the other is
measurements. Checks imply monitoring the working of various parts of the
organisation by observing the working by getting feedback and take corrective action
wherever necessary. In the measurement process, control refers to standards of
measurement which are set in advance to determine how well the assigned functions
are being performed.
In human resource management, audit is one of the most important devices and
significant step in the human resources planning process. Rather, it is considered as
the first step in planning of human resources.

17.2 CONCEPTS OF HR AUDIT


The word “audit” comes from the Latin verb audire , which means, to listen.
Listening implies an attempt to know the state of the affairs as they exist and as they
are expected/ promised to exist. Auditing as a formal process is rooted in this feature
of listening. Consequently, it is a diagnostic tool to gauge not only the current status of
things but also the gaps between the current status and the desired status in the area
that is being audited.
Auditing has been a routine exercise in the area of finance, especially because it is a
statutory obligation. However, in case of Human Resource, there is no legal
binding to adopt auditing. Some of the companies nevertheless prefer to have
HR audits.
Like any audit, the Human Resource Audit is also a systematic formal process, which
is designed to examine the strategies, policies, procedures, documentation, structure,
systems and practices with respect to the organization’s human resource management.
It systematically and scientifically assesses the strengths, limitations, and
developmental needs of the existing human resources from the larger point of view of
enhancing organisational performance.
The human resource audit is based on the premise that human resource processes are
dynamic and must continually be redirected and revitalized to remain responsive to
the ever changing needs. Human Resource Audits are not routine practices aimed
at problem solving. Instead of directly solving problems, HR audits, like
financial audits, help in providing insights into possible causes for current and
future problems.
The findings of these audits aid decision making in the organisation and are usually
internal documents that need not necessarily be shared with the public. Moreover,
unlike Financial Audits that are routine, regulated and standardised, Human Resource
Audits are non-routine and may be designed to cater to the unique needs of the
organisation at a particular point in time. These are in fact, studies of an unusual
nature. The manner in which the Audit is conducted could vary from self-directed
surveys to interventions by outside consultants.
16
Human Resource Audit
17.3 NEED OF HR AUDIT
Human Resource practices and functions have a far reaching impact on the
employees morale and performance, which in turn, affects the overall performance of
the organisation. This is why they are claimed to be closely related to a business’s
‘balance scorecard’ through “productivity, people, and processes” (Ulrich, ). Given its
criticality, a regular assessment of the HR function, like that of finance function,
becomes essential for sustaining organisational health and growth. The need for such
assessment is even greater in today’s dynamic and, at times, turbulent, environment,
where human resource management needs continuous up-gradation and re-alignment.
Moreover, with increased importance of the human contribution to organisations’
competitive advantage, especially in the knowledge driven economy, the human
resource function itself is under transformation. It is gradually moving from the role
of a service provider to that of a strategic business partner. In order to perform this
emerging role effectively, the HR function has to continually assess :
l Whether it is adding tangible value to the organisation through its strategies,
policies, processes and practices;
l Whether it is doing so at a competitive cost; and
l Whether it is doing so in a manner that is satisfying to its people, acceptable to
the society and the law, and, from a long term perspective, sustainable.
Answers to all these questions need regular HR Audit.
Moreover, HR Audit becomes significantly critical in situations of Merger or
Acquisition. Often Human Resource is not even informed about such transactions
till they are complete. However, most often if mergers or acquisitions fail, it is due to
the people related issues. Consequently, it is important that managements spend
adequate time and energy to learn about the human resource component of the target
company. An audit or due diligence prior to the closure of the deal can have a direct
impact on the success or failure of the acquisition.
Regulatory Compliance is another area of major concern for most organisations. With
increased judicial scrutiny and pressures for compliance with the statutory
requirements of the country, it has become vital that HR continually remains vigilant
with respect to the legal compliance. It must keep itself abreast with the new laws and
regulations, ensure that they are being followed and also eliminate the gaps between
what it does and what it says, as that by itself, carries legal liability.

17.4 THE SCOPE OF HR AUDIT


The HR audit usually covers three parameters, namely, the HR policies and
practices, the HR professionals and the HR department.
With respect to each of these, the Audit tries to find out :
l The actual state;
l The congruence between the desired/professed state and the actual state;
l The alignment with the overall organisational strategy and goals; and
l The compliance with the laws and regulations.

Auditing HR Practices
All HR departments provide several services that may be clustered into six key
domains (Ulrich and Lake,1990), staffing, training and development, appraisal,
rewards, oraganisation governance and communication. For each of these six
domains, Ulrich recommends four types of assessments. 17
Intellectual Capital The first is an assessment of activity that not only describes the services being
Accounting provided by the HR department but also assesses the focus of the HR strategies, the
distribution of responsibility, the resource utilisation, and the competencies of the HR
portfolio.
The second type of assessment is that of customer value. HR departments may be said
to be providing a range of services to customers, who are the employees of the firm.
Customer surveys are conducted to capture the employees’ perceptions about the
importance and the quality of the HR services.
Often Cost benefit or utility analyses of HR functions are made to define the value of
each of the HR functions. Formulae that can trace the cost and benefit of the services,
are developed and the results compared over time and with the results of other
companies, to make an assessment.
Research, involving HR experiments, are also sometimes conducted by using
experimental and control groups. These groups may be formed across sites, or across
departments. The purpose of these research studies is to identify the effective HR
practices by generating comparative data. This data enables the organisation to adopt
the best HR practices.

Auditing HR Professionals
An audit of HR professionals is essentially an assessment of the extent to which the
professionals demonstrate competence for HR function. Such an assessment requires a
360 degree feedback, and, according to Ulrich, usually employs the following five
steps :
1. Developing a Model of Competencies: Before embarking on an assessment of
competence, it is necessary to first determine what are the competencies that
make a successful HR professional. These competencies usually stem from
knowledge of business, knowledge of HR, knowledge of change and finally
personal credibility. In addition to determining the competencies that account for
a successful HR professional, it is also important to determine the behavioural
attributes that reflect these competencies. A model that reflects both these aspects
may be said to be a comprehensive model for auditing of HR professionals.
2. Collect data using the Model: Several techniques may be employed to collect
data about the extent to which an HR professional exhibits the modeled
competencies. These include interviews, questionnaires and focussed groups.
3. Summarise data and give feedback to the HR professionals: The quantitative
and qualitative data, that is collected in the above mentioned ways, needs to be
synthesised and codified so that specific themes emerge. These themes are then
used as aids to help the HR professionals identify his/her strengths and
weaknesses.
One of the key activities of an HR audit is to give feedback. This needs to be
done in a way that protects the confidentiality of the participants. The manner of
the feedback should take into account the sensitivities of the receiver. The tenor
of the feedback should neither be accusatory nor defensive. In addition, the
individual data that is collected may be integrated into an audit for the overall
HR function.
4. Create action plans: The HR audit goes beyond defining the competencies and
inadequacies of the HR function. It also identifies the measures to develop the
competencies at both, the individual and the departmental level. At the
institutional level, this may involve doing an ‘HR for HR.’ At the individual
level, the action plan will concentrate on developing a tailored set of trainings,
readings, assignments and training opportunities.
18
5. Continuous Improvement: Auditing of HR professionals is not a one time Human Resource Audit
activity but an ongoing continuous process through which HR professionals are
able to constantly build on their HR competencies and strengthen the HR
functions in the organisation.

Auditing HR Function or Department


Auditing HR function and the HR department may be an integration of individual HR
competencies. However, at the same time, there are additional overall indicators of HR
functions, such as ratio of total employees to HR professionals, the performance of the
department against the plan, the ratio of expenditure on HR to total sales, general
costs and other such measures. Temporal and spatial analyses of these can provide an
overall assessment of the HR department. Comparisons against benchmarks is also a
technique often used in HR audits.

17.5 THE FREQUENCY OF HR AUDIT


There is no uniform norm regarding how often the HR Audits should be conducted in
an organisation. Generally, it differ in case of different organisations depending upon.
l the purpose of the Audit. For example, if the purpose is to know the extent of
compliance with the company policies, Audit may be an annual exercise.
Whereas if the purpose is to assess the cultural shift as a result of a planned HR
intervention, the Audit may be undertaken once in three or five years ;
l the periodicity of changes in the external business environment. The faster and
the more discontinuous the changes, the higher should be the frequency of the
audits so that timely actions can be initiated where gaps exist between
expectations and the reality.
l the frequency of changes in the strategies, policies, and personnel within the
organisation;
l the rapidity of technological changes which are expected to impact the
psychology of people; and
l the speed of change in the legal, socio-economic and political conditions.

17.6 CONDUCTING HR AUDIT


The Audit can be carried out internally or with the help of an external consultant.
Where it is conducted internally, four things are extremely important :
l unless the scope of the Audit is very limited, the Audit should be conducted by a
team and not an individual;
l the team should represent a cross-section of the organization’s staff, including,
the line personnel, middle and upper management, and those responsible for HR
functions;
l the team should be trained in survey techniques and data analysis; and
l the organisational culture should be trust based and open. Otherwise, the
information given will be distorted and the whole diagnosis will become
inaccurate.
Many firms prefer to engage independent consultants to conduct the audit. This is
done primarily with a view to obtain greater objectivity and impartiality in diagnosis
and reporting. Moreover, consultants are expected to have wider experience and
specialization in the field. They, therefore, tend to possess an uncanny eye for details
and data that might otherwise be looked as insignificant by the internal personnel.
Their audits, thus, are supposed to be both free of prejudice and more professional
and accurate. 19
Intellectual Capital
Accounting 17.7 AUDITING PROCESS: ESSENTIAL STEPS
The Auditing process is a function of the objectives and the scope of the Audit, the
nature of the organisation and the level of involvement of the top management.
Though this process may vary from organisation to organisation, it essentially follows
the stages described below.
1) Briefing and orientation: This is a preparatory meeting of key staff members to:
i) discuss particular issues considered to be significant
ii) chart out audit procedures, and
iii) develop plans and programme of audit
2) Scanning material information: This involves scrutiny of all available records
and documents pertaining to the personnel as well as personnel handbooks and
manuals, guides, appraisal forms, material on recruitment, computer capabilities,
and all such other information considered relevant.
Human Resource Audit is the critical analysis of the existing human resource
management within the organization. To be able to do that, the audit will
have to be served with the data that is quantitative, authentic as well as
comprehensive. In other words, the success of this stage of human resource
planning solely rests upon the manner in which personnel records and
other information are maintained. Hence, the quality of the HRIS
becomes critical.
3) Surveying employees: Surveying employees involves interview with key
managers, functional executives, top functionaries in the organizations, and even
employees representatives, if necessary. The purpose is to identify and enumerate
issues of concern, present strengths, anticipated needs and managerial
philosophies on human resources.
4) Conducting interviews: The key issue here is to list the pertinent and probing
questions. The decision on these questions depends on the scope and purpose of
the Audit as well as on the culture of the organisation. The skill of the
interviewer lies in getting relevant and correct information without threatening
the interviewees.
5) Synthesising: The data thus gathered is synthesized to present the:
l current situation
l priorities
l staff pattern, and
l issues identified.
Similarly, future needs are identified and appropriate criteria developed for
spotlighting the human resource priorities and specific recommendations made.
6) Reporting: Like planning meetings for briefing and orientation, the results of the
audit are discussed within several rounds with the managers and staff specialists.
In the process, the issues get further crystallized. Based on the findings and the
discussion during the meetings, then a final report is prepared and presented
formally to the Management. This report should include, the “state of the
organisation” report, the assessment of effectiveness and efficiency of various
areas covered by the Audit, a legal compliance/ areas of concern report, and
critical recommendations for improvement.

20
Human Resource Audit
17.8 COMMON RESEARCH TECHNIQUES IN HRA
As mentioned above, there are several techniques that may be employed in conducting
an HR Audit, especially in collecting data. Most of these techniques are, however,
variants of Questionnaires, interviews, and methods of Observation.

Interviews
Interview of key HR stakeholders can provide a valuable insight into the strengths and
weaknesses of the HR practices, professionals and department, as perceived by the
stakeholders. Interviews can be part of either an exploratory or descriptive mode of
inquiry.
Interviews as a part of HR Audits may either be individual interviews or group
interviews. While the former is more time consuming, the data generated is less likely
to be influenced by group processes and dynamics, especially group think. At different
levels in the organisation, the context of the interview and its type varies. Hence, the
aim and scope of interviews with the CEO, top management and with HR
professionals, the line managers and the field staff are likely to be quite different.

Questionnaires
In HR Audits, questionnaires may be used for generating data that serves as input to
the HR Scorecard. There are several such questionnaires available. They measure
HRD systems and their comprehensiveness; the effectiveness of HR functions; the
competencies of the HR professionals and the HR staff; and the HR culture in the
organisation.
The questionnaires used usually comprise of a series of open-ended and closed - ended
questions that cover a number of dimensions like career systems, work planning,
development systems and planning, and the overall HRD climate and functioning.
Some of the commonly used questionnaires include the HRD Audit Questionnaire, a
102 item Map your HRD Practice Profile (see La Piana Associates, Inc, 2002) the
HRD Climate Survey, the Training Effectiveness Questionnaire, Performance
planning, analysis and development questionnaire and the Supervisory and Leadership
Beliefs Questionnaire, to name a few.
Activity A
Assuming you are required to conduct a HR audit interview in your organisation.
Prepare a suitable questionnaire covering compensation and performance appraisal.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
Activity B
Try and assess the major HR audit concerns of your organisation by talking widely to
line managers, personnel staff and other employees with useful knowledge. Before
doing that, prepare a checklist of key questions to be asked.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
............................................................................................................................... 21
Intellectual Capital
Accounting 17.9 SUMMARY
Finding out what is inadequate is the first step toward improvement. Similarly, there is
no meaning in carrying out an Audit if the management has no intention of taking
measures to plug the gaps pointed out by the Audit. HR Audit, therefore, should be
undertaken only as a part of the overall improvement/change strategy of the
organisation rather than as an isolated activity.
Human resource audit is an important approach to human resource planning. It is
practical because, if correctly conducted, it can increase the effectiveness of the design
and implementation of human resource policies, planning and programmes. A periodic
and systematic audit helps human resource planners develop and update employment
and programme plans.
An HR audit reviews the full range of HR activities, including how an organization is
structured to deliver the HR function, recruitment/selection, compensation and benefits
administration, performance management, employee communications, safety and
recordkeeping. Identifying “gaps” between policy and practice can not only increase
legal compliance but also increase efficiency and productivity of the organization’s HR
activities. It can significantly contribute to the quality improvement processes and
employee satisfaction.
However, a comprehensive audit will be most useful if an organization is ready to act
on the findings and develop its Human Resource functions to a level where the full
potential of HR to support the organization’s goals and objectives can be realized.

17.10 SELF-ASSESSMENT QUESTIONS


1. Explain the need, purpose and the scope of the HR Audit.
2. Explain the similarities and differences between the HR Audit and Financial Audit.

17.11 FURTHER READINGS


Ulrich, Dave and Dale Lake. 1990. Organizational Capability: Competing from the Inside/
Out. New York: Wiley.
Ulrich, D. 1996. Human Resource Champions: The Next Agenda for Adding Value and
Delivering Results. Harvard Business School Press.
Thierauf, Rober J. (1980) Management Auditing: A Questionnaire Approach, AMA COM,
NY.
La Piana Associates, Inc (2002): Introduction to The Human Resources Audit,, Prepared by
Bill Coy, Senior Associate for HR Consultation
ÓLa Piana Associates, Inc., www.lapiana.org/consulting

22
Human Resource
UNIT 18 HUMAN RESOURCE ACCOUNTING Accounting

Objectives
After going through this unit, the reader should be able to:
l understand and define the concept of Human Resource Accounting, its
objectives and its role in Human Resource Management;
l understand the measurements of Human Resource Costs; and
l understand the measurements of Human Resource Value.

Structure
18.1 Introduction
18.2 What is HRA?
18.3 Why HRA?
18.4 Historical Development of HRA
18.5 Information Management for HRA
18.6 Measurement in HRA: Two Approaches
18.7 The Cost Approach
18.8 The Economic Value Approach: Monetary Value Based Approaches
18.9 The Non-Monetary Value Based Approaches
18.10 Measurements of Group Value
18.11 Summary
18.12 Self-Assessment Questions
18.13 Further Readings

18.1 INTRODUCTION
The past few decades have witnessed a global transition from manufacturing to
service based economies. The fundamental difference between the two lies in the
very nature of their assets. In the former, the physical assets like plant, machinery,
material etc. are of utmost importance. In contrast, in the latter, knowledge and
attitudes of the employees assume greater significance. For instance, in the case of an
IT firm, the value of its physical assets is negligible when compared with the value of
the knowledge and skills of its personnel. Similarly, in hospitals, academic
institutions, consulting firms etc., the total worth of the organisation depends mainly
on the skills of its employees and the services they render. Hence, the success of
these organizations is contingent on the quality of their Human Resource- its
knowledge, skills, competence, motivation and understanding of the organisational
culture. In knowledge –driven economies therefore, it is imperative that the humans
be recognised as an integral part of the total worth of an organisation. However, in
order to estimate and project the worth of the human capital, it is necessary that some
method of quantifying the worth of the knowledge, motivation, skills, and
contribution of the human element as well as that of the organisational processes, like
recruitment, selection, training etc., which are used to build and support these human
aspects, is developed. Human resource accounting (HRA) denotes just this process of
quantification/measurement of the Human Resource.

23
Intellectual Capital
Accounting 18.2 WHAT IS HRA?
The American Accounting Association’s Committee on Human Resource Accounting
(1973) has defined Human Resource Accounting as “the process of identifying and
measuring data about human resources and communicating this information to
interested parties”. HRA, thus, not only involves measurement of all the costs/
investments associated with the recruitment, placement, training and development of
employees, but also the quantification of the economic value of the people in an
organisation.
Flamholtz (1971) too has offered a similar definition for HRA. They define HRA as
“the measurement and reporting of the cost and value of people in organizational
resources”.
As far as the statutory requirements go, the Companies Act, 1956 does not demand
furnishing of HRA related information in the financial statements of the companies.
The Institute of Chartered Accountants of India too, has not been able to bring any
definitive standard or measurement in the reporting of human resources costs. While
qualitative pronouncements regarding the importance of Human Resources is often
made by the chairmen, in the AGM, quantitative information about their contribution
is rarely recorded or communicated. There are a few organizations, however, that do
recognize the value of their human resources, and furnish the related information in
their annual reports. In India, some of these companies are : Infosys, Bharat Heavy
Electricals Ltd (BHEL); the Steel Authority of India Ltd. (SAIL), the Minerals and
Metals Trading Corporation of India Ltd. (MMTC), the Southern Petrochemicals
Industries Corporation of India (SPIC), the Associated Cement Companies Ltd,
Madras Refineries Ltd. , the Hindustan Zinc Ltd. , Engineers India Ltd, the Oil and
Natural Gas Commission, Oil India Ltd., the Cement Corporation of India Ltd. etc.

18.3 WHY HRA ?


According to Likert (1971), HRA serves the following purposes in an organisation:
l It furnishes cost/value information for making management decisions about
acquiring, allocating, developing, and maintaining human resources in order to
attain cost-effectiveness;
l It allows management personnel to monitor effectively the use of human
resources;
l It provides a sound and effective basis of human asset control, that is, whether
the asset is appreciated, depleted or conserved;
l It helps in the development of management principles by classifying the
financial consequences of various practices.
Basically, HRA is a management tool which is designed to assist senior management
in understanding the long term cost and benefit implications of their HR decisions so
that better business decisions can be taken. If such accounting is not done, then the
management runs the risk of taking decisions that may improve profits in the short
run but may also have severe repercussions in future. For example, very often
organisations hire young people from outside on very high salaries because of an
immediate business requirement. Later on, however, they find that the de-motivating
impact of this move on the existing experienced staff has caused immense long term
harm by reducing their productivity and by creating salary distortions across the
organisational structure.
HRA also provides the HR professionals and management with information for
24 managing the human resources efficiently and effectively. Such information is
essential for performing the critical HR functions of acquiring, developing, Human Resource
allocating, conserving, utilizing, evaluating and rewarding in a proper way. These Accounting
functions are the key transformational processes that convert human resources from
‘raw’ inputs
(in the form of individuals, groups and the total human organization) to outputs in the
form of goods and services. HRA indicates whether these processes are adding value
or enhancing unnecessary costs.
In addition to facilitating internal decision making processes, HRA also enables
critical external decision makers, especially the investors in making realistic
investment decisions. Investors make investment decisions based on the total worth
of the organisation. HRA provides the investors with a more complete and accurate
account of the organisations’ total worth, and therefore, enables better investment
decisions. For example, conventional financial statements treat HR investments as
“expenditures. Consequently, their income statement projects expenditures to acquire,
place and train human resources as expenses during the current year rather than
capitalizing and amoritizing them over their expected service life. The balance sheet,
thus, becomes distorted as it inaccurately presents the “total Assets” as well as the
“net income” and, thereby, the “rate of return” which is the ratio of net income to the
total assets. HRA helps in removing this distortion.
Furthermore, in a business environment where corporate social responsibility is
rapidly gaining ground, HRA reflects the extent to which organisation contributes to
society’s human capital by investing in its development.
Finally, in an era where performance is closely linked to rewards and, therefore,
the performance of all groups/departments/functions needs to be quantified to
the extent possible, HRA helps in measuring the performance of the HR function
as such.

18.4 HISTORICAL DEVELOPMENT OF HRA


The traces of a rudimentary HRA can be found in the Medieval European practice of
calculating the cost of keeping a prisoner versus the expected future earnings from
him. The prisoners in those days were seen to be the general property of the capturing
side. Consequently, after the victory a quick decision regarding whether to capture a
prisoner or to kill him had to be taken based on the costs involved in keeping him and
the benefits accruing from killing him. However, these represented very rough
measurements with limited use. The development of HRA as a systematic and
detailed academic activity, according to Eric G Falmholtz (1999) began in sixties. He
divides the development into five stages. These are :
First stage (1960-66): This marks the beginning of academic interest in the area of
HRA. However, the focus was primarily on deriving HRA concepts from other
studies like the economic theory of capital, psychological theories of leadership-
effectiveness, the emerging concepts of human resource as different from personnel
or human relations; as well as the measurement of corporate goodwill.
Second stage (1966-71): The focus here was more on developing and validating
different models for HRA. These models covered both costs and the monetary and
non-monetary value of HR. The aim was to develop some tools that would help the
organisations in assessing and managing their human resource/asset in a more
realistic manner. One of the earliest studies here was that of Roger Hermanson, who
as part of his Ph.D. studied the problem of measuring the value of human assets as an
element of goodwill. Inspired by his work, a number of research projects were
undertaken by the researchers to develop the concepts and methods of accounting for
25
Intellectual Capital human resource.
Accounting
Third Stage : (1971-76) This period was marked by a widespread interest in the field
of HRA leading to a rapid growth of research in the area. The focus in most cases
was on the issues of application of HRA in business organisations. R.G. Barry
experiments contributed substantially during this stage. (R.G.Barry
Corporation:1971)
Fourth Stage (1976-1980): This was a period of decline in the area of HRA
primarily because the complex issues that needed to be explored required much
deeper empirical research than was needed for the earlier simple models. The
organisations, however, were not prepared to sponsor such research. They found the
idea of HRA interesting but did not find much use in pumping in large sums or
investing lot of time and energy in supporting the research.
Stage Five (1980 onwards) : There was a sudden renewal of interest in the field of
HRA partly because most of the developed economies had shifted from
manufacturing to service economies and realized the criticality of human asset for
their organisations. Since the survival, growth and profits of the organisations were
perceived to be dependent more on the intellectual assets of the companies than on
the physical assets, the need was felt to have more accurate measures for HR costs,
investments and value.
An important outcome of this renewed interest was that unlike the previous decades,
when the interests were mainly academic with some practical applications, from mid
90s the focus has been on greater application of HRA to business management.
Different types of models to suit the specific requirements of the organisations have
been developed incorporating both the tangible and the intangible aspects. Also,
larger number of organisations actually began to use HRA as part of their managerial
and financial accounting practice.
Today, human and intellectual capital are perceived to be the strategic resources and
therefore, clear estimation of their value has gained significant importance. The
increased pressures for corporate governance and the corporate code of conduct
demanding transparency in accounting have further supported the need for
developing methods of measuring human value.
In India, human resource valuation has not yet been institutionalized though, as
mentioned above, many public as well as private have adopted HRA.

18.5 INFORMATION MANAGEMENT IN HRA


Like any accounting exercise, the HRA too depends heavily on the availability of
relevant and accurate information. HRA is essentially a tool to facilitate better
planning and decision making based on the information regarding actual HR
costs and organisational returns. The kind of data that needs to be managed
systematically depends upon the purpose for which the HRA is being used by an
organisation.
For example, if the purpose is to control the personnel costs, a system of standard
costs for personnel recruitment, selection and training has to be developed. It helps in
analyzing projected and actual costs of manpower and thereby, in taking remedial
action, wherever necessary.
Information on turnover costs generates awareness regarding the actual cost of
turnover and highlights the need for efforts by the management towards retention of
manpower.

26 Accountability in the management process is often enhanced when information


involving an evaluation of managerial effectiveness is generated. Human Resource
Accounting
Finally, information on the intangibles like intellectual capital/human capital
becomes necessary to measure the true worth of the organisation. This information,
though un-audited, needs to be communicated to the board and the stockholders.

18.6 MEASUREMENTS IN HRA


The biggest challenge in HRA is that of assigning monetary values to different
dimensions of HR costs, investments and the worth of employees. The two main
approaches usually employed for this are:
1. The cost approach which involves methods based on the costs incurred by the
company, with regard to an employee.
2. The economic value approach which includes methods based on the economic
value of the human resources and their contribution to the company’s gains.
This approach looks at human resources as assets and tries to identify the stream
of benefits flowing from the asset.

18.7 THE COST APPROACH


Cost is a sacrifice incurred to obtain some anticipated benefit or service. All costs
have two portions, viz., the expense and the asset portions. The expense portion is
that which provides benefits during the current accounting period (usually the current
financial year), whereas the asset portion is that which is expected to give rise to
benefits in the future. Arriving at a clear distinction between the two, however,
remains an accounting problem even today (Flamholtz, 1999).
Two types of costs are of special importance in HRA. These are original or historical
cost, and replacement cost. The historical cost of human resources is the sacrifice
that was made to acquire and develop the resource. These include the costs of
recruiting, selection, hiring, placement, orientation, and on the job training. While
some of the costs like salaries, for instance, are direct costs, other costs like the time
spent by the supervisors during induction and training, are indirect costs.
Sometimes, opportunity cost method, that is, a calculation of what would have been
the returns if the money spent on HR was spent on something else, is also used.
However, this method is seen to be not as objective as desired. Hence its use is
restricted to internal reporting and not external reporting.
The replacement cost of human resources is the cost that would have to be incurred if
present employees are to be replaced. For instance, if an employee were to leave
today, several costs of recruiting, selection, hiring, placement, orientation, and on the
job training would have to be incurred in order to replace him. Such costs have two
dimensions- positional replacement costs or the costs incurred to replace the services
rendered by an employee only to a particular position; and personal replacement cost
or the cost incurred to replace all the services expected to be rendered by the
employee at the various positions that he might have occupied during his work life in
the organisation.
Though replacement cost method can be adapted for determining the cost of
replacement of groups, this method is used essentially to determine the replacement
cost of individuals.
Other cost based methods that may be used are the standard cost method and the
competitive bidding method. In the standard cost method, the standard costs
associated with the recruitment, hiring, training and developing per grade of 27
Intellectual Capital The Cost Approach
Accounting
Positional Replacement Cost
s s s

Acquisition Costs Learning Costs Separation Costs


s s s s s s

Direct Indirect Direct Indirect Direct Indirect


Cost Cost Costs Costs Costs Costs
ss s s s ss s s s s

Cost of Cost of Separation Loss of Cost of


Promoti Trainer’s Pay Efficiency vacant
on or Time prior to position
Transfer separati during
from on search
within
Recruitment Formal
Selection Training
Hiring and
orientation
Placement On the job
Training

employees are determined annually. The total costs for all the personnel signify the
worth of the human resources.

18.8 THE ECONOMIC VALUE APPROACH


The value of an object, in economic terms, is the present value of the services that it
is expected to render in future. Similarly, the economic value of human resources is
the present worth of the services that they are likely to render in future. This may be
the value of individuals, groups or the total human organisation. The methods for
calculating the economic value of individuals may be classified into monetary and
non-monetary methods.

Monetary Measures for assessing Individual Value


a) Flamholtz’s model of determinants of Individual Value to Formal Organisations
According to Flamholtz, the value of an individual is the present worth of the
services that he is likely to render to the organisation in future. As an individual
moves from one position to another, at the same level or at different levels, the profile
of the services provided by him is likely to change. The present cumulative value of
all the possible services that may be rendered by him during his/her association with
the organisation, is the value of the individual.
Typically, this value is uncertain and has two dimensions. The first is the expected
conditional value of the individual. This is the amount that the organisation could
potentially realize from the services of an individual during his/her productive
service life in the organization. It is composed of three factors:
l productivity or performance (set of services that an individual is expected to
provide in his/her present position);
l transferability (set of services that he/she is expected to provide if and when he/
she is in different positions at the same level);
l promotability (set of services that are expected when the individual is in higher
level positions).
28
These three factors depend, to a great extent, on individual determinants like
activation level of the individual (his motivation and energy level) and Human Resource
organizational determinants like opportunity to use these skills or roles and the Accounting
reward system.
The second dimension of an individual value is the expected realizable value, which
is a function of the expected conditional value, and the probability that the individual
will remain in the organisation for the duration of his/her productive service life.
Since individuals are not owned by the organisation and are free to leave,
ascertaining the probability of their turnover becomes important.

Flamholtz’s Model

Detriments Elements of
of conditional conditional
value value

Skills Promotability Individuals’s


Conditional
Individual Value
Productivity s
s

Activation
level Individual’s
s Transferability Expected

s
s realizable
s

value
s to a formal
s organization
Probability of
Satisfaction
s

maintaining
s

organizational
membership
s

Role
s

Hypothesized determinant
s s s s

Organization Hypothesizad interaction


s

Rewards
A subset
Possible determinant

The interaction between the individual and organizational determinants mentioned


above, leads to job satisfaction. The higher is the level of job satisfaction, the lower
is the probability of employee turnover. Therefore, higher is the expected realizable
value.

b) Flamholtz’s Stochastic Rewards Valuation Model


The movement or progress of people through organizational ‘states’ or roles is called
a stochastic process. The Stochastic Rewards Model is a direct way of measuring a
person’s expected conditional value and expected realizable value. It is based on the
assumption that an individual generates value as he occupies and moves along
organizational roles, and renders service to the organisation. It presupposes that a
person will move from one state in the organisation, to another, during a specified
period of time. In this model, exit is also considered to be a state. Use of this model
necessitates the following information:
1. The set of mutually exclusive states that an individual may occupy in the
system during his/her career;
2. The value of each state, to the organisation; 29
Intellectual Capital 3. Estimates of a person’s expected tenure in the organisation
Accounting
4. The probability that in future, the person will occupy each state for the specified
time.
5. The discount rate to be applied to the future cash flows.
A person’s expected conditional value and expected realizable value will be equal, if
the person is certain to remain in the organisation, in the predetermined set of states,
throughout his expected service life.
The main drawback of this model, however, is the extent of information required to
make the necessary estimates of the values of the service states, the expected tenure,
and the probability that the individual will occupy the state for the specified period of
time. However, if this information can be made available, this model emerges as one
of the most sophisticated models for determining the value of individuals.

c) The Lev and Schwartz Model


As mentioned earlier, the Lev and Schwartz model is the basic model employed by
Indian organisations (see Table 1.and 2). According to this model, the value of human
capital embodied in a person who is ‘y’ years old, is the present value of his/her
future earnings from employment and can be calculated by using the following
formula

E ( Vy) Py ( t 1) I (T) /(I R ) t y

T Y T

where E (Vy) = expected value of a ‘y’ year old person’s human capital
T = the person’s retirement age
Py (t) = probability of the person leaving the organisation
I(t) = expected earnings of the person in period I
r = discount rate
The basic theme of Lev, Schwartz model is to compute the present value of the future
direct and indirect payments to their employees as a measure of their human resource
value. While doing so, the common assumptions set by the Indian companies are the
pattern of employee compensation, normal career growth, and weightage for
efficiency. Moreover, companies adapt this model to their practical requirements by
making necessary alterations. For instance, different organisations use different
discount rates for ascertaining the present value of future cash flows.
This method of accounting is basically oriented towards measuring changes in the
employees’ value rather than employers’ gains from the employees. Unless the
employees’ payments are directly linked to employee productivity or the company
performance, the changes in the value of employees will not reflect the changes in the
employees’ contribution. As pointed out by Prabhakara Rao (1993) under the Lev,
Schwartz model, the value of human resources will be more or less increasing, even
if the organisations continuously incur losses/decrease in profitability. The attitude
and morale of the employees, the contribution of the employees to the organisation,
and such other factors are out of the purview of the Lev, Schwartz model.

Table 1: Lev and Schwartz Model

SAIL BHEL MMTC


Years Number Value Number Value Number Value
1984-85 74464 1216 206414 9581 3638 96
1985-86 75915 1358 206198 9589 3760 121
30
1986-87 74918 1588 203292 10828 3830 140 Human Resource
Accounting
1987-88 74813 1827 197296 12013 3862 158
1988-89 75116 2183 194872 12725 3825 174
1989-90 74436 2673 193223 15790 3825 196
Note :Adapted from Prabhakar Rao (1993)
Table 2: NTPC’s Human Resource Value,’94-95 ( discount factor of 0.12)

Category No. of Per Capita Total Value


employees (Rs. lakhs) (Rs Crores)
executives 6841 17.76 1215
supervisors 3010 15.11 455
workmen 12445 13.71 1705
Total 22296 15.14 3375
Source: Annual Report.

d) Hekimian and Jones Competitive Bidding Model


In this method, an internal market for labour is developed and the value of the
employees is determined by the managers. Managers bid against each other for
human resources already available within the organisation. The highest bidder ‘wins’
the resource. There is no criteria on which the bids are based. Rather, the managers
rely only on their judgement.

18.9 NON-MONETARY METHODS FOR


DETERMINING VALUE
The non-monetary methods for assessing the economic value of human resources
also measure the Human Resource but not in dollar or money terms. Rather they rely
on various indices or ratings and rankings. These methods may be used as surrogates
of monetary methods and also have a predictive value. The non-monetary methods
may refer to a simple inventory of skills and capabilities of people within an
organization or to the application of some behavioral measurement technique to
assess the benefits gained from the Human resource of an organisation.
1. The skills or capability inventory is a simple listing of the education,
knowledge, experience and skills of the firm’s human resources.
2. Performance evaluation measures used in HRA include ratings, and rankings.
Ratings reflect a person’s performance in relation to a set of scales. They are
scores assigned to characteristics possessed by the individual. These
characteristics include skills, judgment, knowledge, interpersonal skills,
intelligence etc. Ranking is an ordinal form of rating in which the superiors rank
their subordinates on one or more dimensions, mentioned above.
3. Assessment of potential determines a person’s capacity for promotion and
development. It usually employs a trait approach in which the traits essential
for a position are identified. The extent to which the person possesses these
traits is then assessed.
4. Attitude measurements are used to assess employees’ attitudes towards their job,
pay, working conditions, etc., in order to determine their job satisfaction and
dissatisfaction.

18.10 MEASUREMENTS OF GROUP VALUE


a) The Likert and Bowers Model:
Causal, intervening and end-result variables. Likert and Bowers propose causal, 31
Intellectual Capital intervening, and end-result variables, which determine the group’s value to an
Accounting organization. Causal variables are those which can be controlled by the organization.
These variables include managerial behaviour and organisational structure.
Intervening variables reflect organizational capabilities and involve group processes,
peer leadership, organization climate, and the subordinates’ satisfaction. Both, the
causal and the intervening variables determine the end result variables of the
organization. Figure 1 illustrates the elements used to measure human organisational
causal and intervening variables.
The end-result, dependent variables reflect the achievements of the organization or
the total productive efficiency in terms of sales, costs, earnings, market performance,
etc. They are dependent on the causal and the intervening variables.
Figure 1: Elements used to measure human resource organisational causal and
intervening variables.

MANAGERIAL AND PEER LEADERSHIP


Support Friendly; pays attention to what you are saying;
Team Building Listens to subordinates’ problems; encourages
subordinates to work as a team’ encourages exchange of
opinions and ideas
Goal Emphasis Encourages best efforts; maintains high standards.
Help with work Shows ways to do a better job; helps subordinates plan,
organize and schedule; offers new ideas, and solutions
ORGANISATIONAL CLIMATE
Communication flow Communication flow is amicable
Decision making Subordinates know what is going on; superiors are
practices receptive.
Concern for persons Subordinates are involved in setting goals; decisions are
made at levels of accurate information; persons affected
by decisions are asked for their ideas; know-how of
people of all levels is used.
Influence on department The organization is interested in individual’s welfare;
tries to improve working conditions; organizes work
activities sensibly.
Technological adequacy From lower level supervisors, employees who have no
subordinates.
Motivation Improved methods are quickly adopted; equipment and
resources are well managed.
Differences and disagreements are accepted and worked
through; people in organization work hard for money,
promotions, job satisfaction and to meet high money,
promotion, job satisfaction and to meet high expectations
from others and are encouraged to do so by policies,
working conditions, and people.
GROUP PROCESS
l Planning together, coordinating efforts.
l Making good decision’s solving problems
l Knowing jobs and how to do them well
l Sharing information
l Wanting to meet objectives
l Having confidence and trust in other members
32 l Ability to meet unusual work demands.
SATISFACTION
With fellow workers; superiors; jobs; this organization compared with others; pay; Human Resource
progress in the organization upto now; chances for getting ahead in the future. Accounting

Source: Rensis Likert and David G. Bowers, “Improving the Accuracy of P/L Reports
by Estimating the Change in Dollar Value of the Human Organization”,
Michigan Business Review, March 1973.

b) Brummet, Flamholtz, and Pyle’s economic value model


The Brummet, Flamholtz, and Pyle model follows the principle that a resource’s
value is equal to the present worth of the future services it can be expected to
provide, and therefore it can provide a basis of measuring the value of a group of
people. According to this method, groups of human resources should be valued by
estimating their contribution to the total economic value of the firm. Thus a firm’s
forecasted future earnings are discounted to determine the firm’s present value, and a
portion of these earnings is allocated to human resources according to their
contribution.

c) Hermanson’s unpurchased goodwill model


According to Hermanson, the unpurchased goodwill notion is based on the premise
that ‘the best available evidence of the present existence of un-owned resources is the
fact that a given firm earned a higher than normal rate of income for the most recent
year. Here Hermanson is proposing that supernormal earning are an indication of
resources not shown on the balance sheet, such as human assets. Even though his
method of valuing human resources is explicitly intended for use in a company’s
published financial statements rather than for internal consumption, this would
necessarily involve forecasting future earnings and allocating any excess above
normal expected earnings to human resources of the organization. However, the
assumptions would be subject to the uncertainties involved in any forecast of future
events.
This method suffers from several limitations: Firstly, since the methods limits
recognition of human resources to the amount of earnings in excess of normal, the
human resource base that is required to carry out normal operations is totally ignored.
As a result, the value of human assets will be an underestimation. Secondly, the
method only uses the actual earnings of the most recent year as the basis for
calculating human assets, thereby, ignoring the forecasts of future earnings that are
equally relevant for managerial decision making.

d) Human organizational dimensions method


Based on the Likert-Bowers model of group’s value to an organization, discussed
earlier, this method is based on the relationship among causal, intervening and
end-result variables. The causal variables influence the intervening variables, which,
in turn, determine the organization’s end result variables. Hence changes in the key
dimensions of organisation can be used as dependable indicators for forecasting
future changes in productivity and financial performance. Monetary estimations of
changes in human value of organisations.
For computing a monetary estimate of the expected change in the value of human
organization, the following steps are suggested:
1. Measure the key dimensions of human organization, using a Likert scale at
specified time periods. These are in non-monetary measurements.
2. The scaled responses to questionnaire items called ‘scores’ are then standardized
by statistical methods to take into account the degree of variability of the set of
responses. This is done for responses in each time period.
33
Intellectual Capital 3. The difference between two standardized scores from one period to the next is
Accounting then calculated. This difference (called delta) represents the change in an index
of specified dimensions of the human organization.
4. From present changes in dimensions of the human organization, the expected
future change in end result variables is estimated. Specifically, for a given
variable the delta is multiplied by coefficient or correlation between that
variable and the end result variable. This provides an estimate in standard scores
of the anticipated change in the end result variable attributable to a change in the
human organisational dimension believed to cause that change.
5. Lastly, the standard scores are converted into the measuring monetary units for
the end result variables.
Likert points out that changes in the productive capability of a firm’s human
organization cannot be assessed correctly unless periodic measurements of causal and
intervening dimensions of that organization are taken regularly. Current profit and
loss reports often encourage us to believe that changes are occurring. When profits
increase, it is often assumed that the human organization has become more
productive, but steps taken to maintain earnings or prevent losses may actually result
in a decrease in the productive capability of the human organization.
There is some controversy about the validity and reliability of this method.
According to Flamholtz, future research on this method is necessary because its
validity and feasibility have not yet been established. Likert, however, maintains that
the method is feasible where reliable and valid measurements of the coefficients are
available.

e) Methods for valuation of expense centre groups


Flamholtz proposes three methods for valuation of expense centre groups. In all these
measures, the surrogate value is used for estimation. The three methods are:
1. Capitalization of Compensation
2. Replacement Cost Valuation, and
3. Original Cost Valuation

Capitalization
The capitalisation method involves capitalizing a person’s salary and using it as a
surrogate measure of human value. This value may be ascertained for groups as well
as individuals. The value of the group is essentially the aggregate value of the
individuals compromising the group.
Capitalization of compensation method is not considered an ideal method of group
valuation because it ignores the possible effects of synergy. However, this method
may be used to arrive at an approximation of a group’s value to the firm.

Replacement cost valuation


The replacement cost of a group is defined as the sacrifice that would have to be
incurred today to recruit, select, hire, train and develop a substitute group capable of
providing a set of services equivalent to that of a group presently employed.
This method involves considerable subjective estimates, which reduce its validity and
replicability.

Original cost valuation


The original cost valuation method involves estimation of the original cost of
34 recruiting, selecting, hiring, training, and developing a firm’s existing human
organization. The need for using original costs to value groups arises out of the Human Resource
necessity of estimating the cost of developing an effectively functioning team. Accounting
Teamwork is essential for effective communication, decision-making, coordination
and several other critical organisational processes. Yet, when the original costs are
used to make an estimation of the value of the expense centre, the costs of generating
this teamwork are largely ignored.

Activity A
Identify an actual organisation for which human resource accounting may be
appropriate:
a) How would you determine if human resource accounting is appropriate for this
organisation?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
b) What kind of information is this organisation likely to require about its human
resources?
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
c) Outline how you would plan to obtain the information.
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................

Activity B
Identify an organisation and make an attempt to work out the human resource costs
of.
a) Recruitment and selection
b) Training for a period of one year.
Compare the cost figures worked out by you independently with the
accounting figures maintained by the organisation. Analyse the differences
and comment.
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................

18.11 SUMMARY
During the past decade, the concept of HRA has been tuned to the requirements of a
knowledge economy by focusing on such intangible assets as intellectual capital ,
relationship capital, etc. Various tools for this purpose have been developed, some of
them being Skandia Navigator, HR Balance Score Card, Knowledge Capital 35
Intellectual Capital Earnings, Economic Value Added, Intellectual Asset Valuation, Knowledge Audit
Accounting Cycle etc. ( For a comprehensive summary see Karl-Erik Sveiby, 2004).
Whatever the tool or approach to HRA, much of the potential for developing human
resource accounting capability and gaining its advantage depends upon the
availability of and accessibility to the required data. In those organisations, where
the data is not readily available or routinely maintained, the first step towards HRA
will have to be HRIS.

18.12 SELF-ASSESSMENT QUESTIONS


1. What is human resource accounting? Discuss with reference to a few definitions
of human resource accounting.
2. What is human resource cost? Discuss the measurement of human resource cost.
3) What are the major components of the original cost of human resources?

18.13 FURTHER READINGS


American Accounting Association Committee of Accounting for Human Resources,
Report of the Committee on Human Resource Accounting, 1973, The Accounting
review Supplement to vol. XLVIII
D. Prabhakar Rao 1993, Human Asset Accounting: An Evaluation of the Indian
Practices, ASCI Journal Of Management, Vol. 22.
Eric G. Flamholtz (1971): A Model for Human Resource Valuation : A Stochastic
Process with Service Rewards. The Accounting Review April.
Eric G. Flamholtz (1999; Third edition) : Human Resource Accounting : Advances in
Concepts, Methods and Applications; Kulwer Academic Publishers.
Karl-Erik Sveiby, 2004, Methods for Measuring Intangible Assets, http://
www.sveiby.com/articles/Intangible Methods. htm.
Lev B, Schwartz B A (1971): On the Economic Concept of Human Capital in
Financial Statements. The Accounting Review, January.
Likert R. (1971); Human Organizational Measurements: Key to Financial Success”;
Michigan Business Review, May 1971, 1-5
R.G.Barry Corporation (1971) Annual Report. (Details in Flamholtz 1999)

36