Personnel and Human Resource Management 9781642876215, 9788184883992

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PERSONNEL AND HUMAN RESOURCE MANAGEMENT

A. M. SARMA Former Member ofthe Faculty Tata Institute ofSocial Sciences Deonar,Mumbai

( SIXTH REVISED EDITION 200~

Hm GJIimalaya

5. The main responsibilities of TPF relate to salary and job

process values to reduce human wastage

an asset/capital

Objectives of HRM The primary objective ofHRM is to ensure the availability of competent and willing workforce to an organisation. Beyond this, there are other objectives too. Specifically, HRM objectives are four fold: soC4ietal, organisational, functional and personal (See Table 2.2). The societal objectives of HRM are concerned with the fulfillment of social and ethical obligations of the organisation toward the society. The failure of organisation to use their resources for society's benefit may lead to societal concerns.

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The organisational objectives deals with role of human resource management in bringing about organisational effectiveness. Human resource management is not an end in itself; it is only a means to assist the organisation with its primary objectives. Simply stated, the human resource department exists to serve the rest of the organisation. The functional objectives help to maintain the HR departments' contribution at a level appropriate to the organisation's needs. Resources are wasted when human resource is either more or less sophisticated to suit the organisation's demands. The department's level of service must be tailored to fit the organisation it serves. The personal objectives of HRM assist the employees in achieving their personal goals, at least insofar as these goals enhance the individual's contribution to the organisation. Personal objectives of employees must be met for their maintenance, retention, and motivation. Otherwise, employee performance and satisfaction may decline and employees may leave the organisation. Table 2.2 HRM Objectives and Functions

HRM Objectives 1. Societal Objectives

Supporting Functions 1. Legal compliance

2. Benefits 3. Union-management relations 2. Organisational Objectives

1. Human resource planning 2. Employee relations

3. Selection 4. Training and development 5. Appraisal 6. Placement 7. Assessment 3. Functional Objectives

4. Personal Objectives

1. Appraisal 2. Placement 3. Assessment 1. Training and development

2. Appraisal

3. Placement 4. Compensation

5. Assessment Source: William B. Werther, Jr. and Keith Davis, Human Resources and Personnel Management, p. 15.

RootsofHRM Human Resource Management activities have probably been performed since ancient times. As a formal discipline, however, its roots are traceable to the period immediately following the Industrial Revolution. The pioneering work of Peter Drucker and Douglas McGregor in the 1950s laid its formal foundation. Drucker, in his book, Practice of Management (Heinemann, 1959), wrote: "An effective management must direct the vision and effort of all managers towards a common goal." His concept of a visionary goal-directed leadership is fundamental to HRM. Douglas McGregor advocated management by integration and self-control, partly as a form of management by objectives, but more importantly, as a strategy for managing people which affects the whole business. He believed that a management philosophy needed to be built-up, based on attitudes and beliefs about people, and the managerial role of achieving integration. He, like Drucker, therefore, paV:Gd the way to the HRM philosophy that human resource policies and programmes must be built into the strategic objecti ves and plans of the business and must also aim to get everyone involved in the achievement of these objectives and plans.

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The Behavioural Science Movement: The behavioural science movement came into prominence in the 1960s. It was founded by writers such as Maslow whose hierarchy of human needs placed self-fulfilment or self-actualisation at the top of the pyramid, and Likert, who developed his integrating principle of supportive relationships. Another important figure in the behavioural science movement was Argyris who believed that organisation design should plan for integration and involvement and that individuals should feel that they have a high degree of self-control over setting their own goals and over the paths to defining those goals. The most influential member of the behavioural science school, however, was Herzberg who advocated job enrichment as a means of increasing organisational effectiveness claiming that such improvements should centre on the work itself as a source of motivation. If people feel that the job is challenging, they will be moved to perform it well. This school of thought made two useful contributions to HRM. First, it underlined the importance of integration and involvement, and second, it highlighted the idea that management should accept as a basic value the need, consciously and continuously, to improve the quality of working life as a means to obtaining increased motivation and improved results. The philosophy of Management by Objectives (MBO) can also be traced to this period. MBO mainly refers to: (1) establishment of goals and objectives, (2) formulation of action plans, and (3) reviewing and modifying human behaviour. The Organisation Development Movement: The concepts of the behavioural scientists provided the impetus for the Organisational Development (00) movement of the 60s and 70s, whose beliefs were summarised by Bennis (Organisational Development, Addison-Wesley, 1969) as follows: 1. A new concept of man based on increased knowledge of his complex and shifting needs which replaces an oversimplified, innocent, push-button idea of man. 2. A new concept of power, based on collaboration and reason, which replaces a model of power based on coercion and threat. 3. A new concept of organisation values, based on humanistic and democratic ideas, which replaces the mechanistic value system of bureaucracy. The organisation development specialists attempt to manipulate the attitudes, values, and behavioural patterns of individuals and work groups in order to promote greater co-operation among organisational members. The 00 movement advocated the implementation of programmes designed to improve the effectiveness with which an organisation functions and responds to change, with the particular emphasis on how people carry out their work and interact with one another. The management of change and team development are often important parts of an organisation development programme. One of the seminal works was "The Art of Japanese Management" by Richard Pascale and Anthony Athos (Simon and Schuster, 1981). This study of the secrets of Japanese business success attributed much of it to the creation of powerful organisational cultures, from which are derived shared values between management and workers which emphasise "mutuality" - a common interest in corporate excellence." Another influential work was "In Search ofExcellence" by Peters and Waterman (Harper & Row, 1982). They found that companies whose only articulated goals were financial, did not do nearly as well as companies that had broader sets of values. According to them, excellent companies were people-oriented, with a wide range of "people programmes." The main problems, according to Douglas McGregor (1969), to which behavioural scientists have directed their attention are: • Problems of structuring work and authority. • Understanding the motivation of people at work, incentives, and job satisfaction. • The causes of frustration and conflict in the workplace. • The leadership role of managers in optimizing employees' performance. • The development of better training techniques. • Communication systems. • The impact of physical and social environment on employees' health, attitudes, and working efficiency. • Methods of introducing changes to effect organisational improvement, especially those involving employee participation.

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Components of HRM Human Resource Organisation: Human resource organisation is concerned with achieving success by organisation design and development, motivation, the application of effective leadership, and the process of getting across the message about what the enterprise is setting out to do and how it proposes to do it. The fundamental objective of human resource organisation is to ensure that every aspect of the organisation, employment, motivation, and management of people is integrated with the strategic objectives of the business and contribute to the successful achievement of those objectives. The human resource organisation programme has to take account of cultural issues so that the desired corporate culture can be developed or reinforced. Moreover, organisational development programmes and interventions are needed to achieve better integration, improve teamwork, motivate human resource, develop proper leadership, facilitate communication system, manage conflict and change, and obtain commitment. Human Resource Planning: Human resource planning sets out to define how many people the organisation wants; the type of people the organisation needs at present and in the future, in terms of their expertise; and how they "fit" the corporate culture. It involves the forecasting of both the supply and demand for future labour. It provides the base for recruitment programmes and for human resource development plans. Human Resource Systems: Human resource systems are the essential programmes needed to recruit, appraise, pay and look after the health, safety and well-being of the employees in the organisation. The main key programmes are:

(a) Recruitment Management: It is a process. of obtaining the required human resource for an organisation. (b) Information Management: It is a method of ensuring that all policies and practices are to be well articulated and effectively communicated to the workforce. (c) Training Management: It is a system of identification of training needs, preparation of a training strategy, and an appropriate training system. (d) Performance Management: It is a technique of appraising performance systematically against defined criteria,

reviewing progress to date and assessing the potential for advancement. There are three main appraisal systems such as performance appraisal, potential appraisal, and performance coaching or counselling.

(e) Reward Management: It is a method to ensure that people are rewarded in accordance with their contribution. (j) Career Management: It is a system of charting special career paths for the individual employees for advancement in the organisation.

(g) Health and Safety Management: It is a system of maintaining a healthy and safe system of work in an organisation. (h) Discipline Management: It is a system of administering discipline to foster positive employee behaviour that will promote organisational objectives. (i) Culture Management: It is a system of thinking and behaving shaped by the values, attitudes, rituals and sanctions

in an organisation. Human Resource Development (HRD): Lippit (1978) points out that HRD as a system depends on: (a) the work itself which generates a higher degree of responsibility for the employees; (b) the individual's personal and professional growth; (c) the improved quality output as a result of increased responsibility; and (d) the organisation as an open system. Focus on all these aspects is what HRD is all about. Rao (1985) defines HRD as "a process by which the employees of an organisation are helped, in a continuous planned way to: (a) acquire or sharpen capabilities required to perform various tasks and functions associated with their present or expected future roles; (b) develop their general enabling capabilities as individuals so that they are able to discover and exploit their own inner potentials for their own and/or organisational development purposes; and (c) develop an organisational culture where superior-subordinate relationship, team-work, and collaboration among different sub-units are strong and contribute to the organisational health, dynamism and pride of employees." .' HRD is a series of organised activities conducted within a specified time and designed to produce behavioural change. Itis rooted in the beliefthat human beings have the potential to do better. It has two main purposes: (a) to provide employees with a greater opportunity to grow and succeed within a company; and (b) to strengthen management and professional teams at all organisational levels. Furthermore, it aims at developing employee capabilities in line with their career interests and with the manpower needs of the company.

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Pareek (1970), found the following sub-systems necessary for introducing HRD in the organisation:

1. Planning and administration of human resources. This includes four main aspects, viz., (a) manpower planning, (b) recruitment. (c) promotion, and (d) career planning. 2. The second HRD system is about job and salary administration like performance appraisal. job analysis. and potential appraisal. 3. The third aspect of HRD is mainly confined to training. performance feedback, counselling and organisational development. 4. The last system relates to the industrial relations and welfare of workers. HRD as a function consists of various activities related to training. education and development, and performance appraisal. All aspects of training and appraisal playa significant role in achieving the individual's growth and development. In this respect HRD is more a proactive and supportive function wherein the organisation has to take a lead in helping the people to grow and realise their potential role. Human resource development programmes help to ensure thatthe organisation has the people with the skills and knowledge it needs to achieve its strategic objectives. They aim to train new employees to the level of performance required in their jobs quickly and econOmically and to develop the abilities of existing staff so that performance in their present jobs are improved and they are prepared to take on increased responsibilities in the future. The thrust of human resource development is on training and development. It is a dynamic process which aims at improving the skills and talents of the personnel. Training fills the gap between what someone can do and what he should be able to do. Its first aim is to ensure that, as quickly as possible, people can reach an acceptable level in their jobs. Training then builds on this foundation by enhancing skills and knowledge as required to improve performance in the present job or to develop the potential for the future. Development can be defined as the modification of behaviour through experience. It provides for people to do better in the existing jobs and prepares them for greater responsibility in the future. It builds on strengths and helps to overcome weaknesses, and ensures that the organisation has the expertise it needs. Development operates at all levels - shop floor level, middle management level, and top management level covering executives and non-executives. Perhaps one of the biggest mistakes that many companies make is to delegate much of the HRD accountability to the personnel department. The personnel staff typically has the expertise in this area, but line management is in the best position to implement the programmes. Line management, not the personnel department is top management's key representative to employees in most organisations. The personnel department should establish key policies, practices, and programmes as well as advising line managers regarding the implementation. Human resource specialists should act as consultants to line managers, providing information about various techniques or suggestions about policies and ways to implement them. HRD is an important force for the future. The challenges to HRD will continue. Instead of doers, HRD practitioners will be the process designers, researchers, strategists, advisors, business managers. and consultants. Looking ahead to the 21st century, it is clear that the HRD community must accelerate the trends that have just begun. They must: (a) ensure that all people practice and support continuous development, learning and high performance; (b) work to create participative cultures and to dissolve autocratic and dependent mindsets; (c) help prepare people and institutions to succeed in a rapidly changing global village; (d) treat their employees like customers for enduring success of the organisation.

Human Resource Relationships: Human resource relationships deal with the handling of employees individually and collectively as members of trade unions or staff associations. Their main aim is to increase co-operation and trust and to involve employees actively in the company's affairs. It also deals with problem-solving techniques, particularly to solve problems relating to disciplinary cases and grievances. There are two sides to a dispute in most organisations - the management and the workers. There is a gap and the means have to be found to bridge that gap. Whether or not unions exist, it is highly desirable for the management to develop methods of dealing with employees collectively. Nonetheless, relationships with unions often involve confrontations. The necessary techniques must be evolved for encouraging mutuality and working together in the interests of all. Unions have to be managed like everything else in an organisation. Management normally gets the union it deserves. If it handles unions the wrong way, the results for the organisation can be disastrous. An approach to collective dealing should be: (a) the recognition of the union, (b) the respective role performance of management and union, (c) the type of procedures one can adopt to regularise relationships with unions, (d) the basic techniques of negotiating with unions, (e) the mechanism of involvement through participation, both traditional forms of joint consultation as well as the more recent Japanese import of quality circles.

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Human Resource Utilisation: According to Peters and Waterman, to achieve productivity through people, it is very essential to "treatthem as adults, treatthem as partners, treat them with dignity, and treatthem with respect." These fundamental human relations values provide the base for productivity management programmes, which use techniques such as method study to improve efficiency. Both managers and workers must be persuaded somehow to realise that they have a common interest in increasing the output. The following actions are required to improve the use of human resources: (a) conduct a productivity drive; (b) improve manpower budgeting and control techniques; (c) introduce work measurement; (d) use appropriate payment method by results, bonus and profit-sharing schemes; (e) improve motivation; (f) involve employees in improvement programmes; (g) introduce new technology; (h) negotiate appropriate productivity agreements; and (i) introduce training programmes based on an analysis of productivity needs. Human Resource Accounting (HRA): HRA means accounting for people as the organisational resource. It is the measurement of the cost and value of people to organisations and involves measuring the costs incurred on recruiting, selecting, hiring, training and developing employees and judging their economic value to the organisation. HRA can be very useful in managerial decision-making. For instance, whether it is recruitment and selection or replacement of an employee, HRA can provide an estimate of the cost involved in the process. Similarly, it can help the management in budgeting for development of human resources. HRA can also provide data pertaining to turnover costs, the cost of employee's absence and its impact on performance of others. Traditional accounting methods treat people only as expenses, so funds used to train people are computed as expenses when an organisation's net income is figured. Accordingly, managers tend to regard human resources as expenses to be minimised instead of assets to be optimised. Nevertheless, systematic human resource accounting would enable organisations to quantify the worth of people as organisational assets. An economy based largely on the knowledge and skills of human capital has important implications for the role of HRD professionals in organisations. They have come under pressure to become full business partners and are expected to make money for their organisations. This new role requires HRD professionals to think, speak, and operate more in economic and financial terms. There are no generally accepted accounting procedures for valuation of human assets. Valuation of employees differ from valuation of things because people are not owned. But, like other assets, people have future usefulness that adds value to an organisation. Human Resource Audit: The purpose of a human resource audit is to assess the effectiveness of the human resources function and to ensure regulatory compliance. The audit can be conducted by anyone with sufficient human resources experience. In auditing the human resource function, firstly the existing data has to be collected, such as, hiring statistics, turnover, compensation practice, exist interview summaries, employee complaints, human resources budget and expenditures, and so on. Secondly, interview has to be conducted to collect input from the internal customer on their human resources needs and how those needs are being met. It has to begin with top management and then percolate down to line managers. Human resource audit is a vast subject and covers many delicate aspects of human and organisational interactions. The HRD auditor has to study the organisation design, its objective, performance of its human resources, as well as the proper maintenance of HRD climate and practices. The job of the HR auditor is not an easy one. To gain success, he has to be very selective about the area and procedure he wishes to follow. Auditing in the field of human resources is a difficult job, more so because unlike other audits, the auditor has to deal with individuals vis-a-vis organisational priorities. Therefore, the HR auditor is required to be very systematic in his job, and define the task clearly as to which area he has to cover.

Human Resource Functions HR's primary function is managing the entirety of an organisation's human resources. HR involves nothing less than managing change, technology, innovation and diversity. HR has become dynamic, flexible and creative. It is no longer confined to the culture or ethos of any single organisation; its keynote is a cross-fertilisation of ideas from different organisations. Periodic social audit of HR functions are considered essential. Human resource functions can be divided into five categories: (a) managerial functions, (b) operational functions, (c) developmental functions, (d) analytical functions, and (e) strategic functions.

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Managerial functions entail planning, organising, directing and controlling. Operational functions include human resource planning, human resource acquisition, compensation and benefits, occupational health and safety, integration and maintenance of human resources, and employment relations. Developmental functions relate to human resource policy, career and succession planning, training and development, performance management, and total quality management. Analytical functions include HR consultation, human resource research, and accounting and auditing. Strategic functions involve human resource strategy, human resource outsourcing, and human resource mergers and acquisitions. HR professionals have an all-encompassing role. They are required to have a thorough knowledge of the organisation and its intricacies and complexities. The ultimate goal of every HR person should be to develop a linkage between the employee and the organisation because the employee's commitment to the organisation is crucial. The first and foremost role of HR functionary is to impart continuous education to employees about the changes and challenges facing the country in general, and their organisation in particular. The employees should know about their balance sheet, sales progress, diversification plans, restructuring plans, sharp price movements, turnover and all such details. The HR professionals should impart education to all employees through small booklets, video films, lectures, and the like. The primary responsibilities of a human resource manager are: 1. To develop a thorough knowledge of corporate culture, plans and policies. 2. To act as an internal change agent and consultant. 3. To initiate change and act as an expert and facilitator. 4. To actively involve himself in company's strategy formulation. 5. To keep communication lines open between the HRD function and individuals and groups both within and outside the organisation. 6. To identify and evolve HRD strategies in consonance with overall business strategy. 7. To facilitate the development of various organisational teams and their working relationship with other teams and individuals. 8. To try and relate people and work so that the organisation objectives are achieved effectively and efficiently. 9. To diagnose problems and to determine appropriate solution particularly in the human resources areas. 10. To provide co-ordination and support services for the delivery of HRD programmes and services. 11. To evaluate the impact of an HRD intervention or to conduct research so as to identify, develop or test how HRD in general has improved individual or organisational performance. The following are the nine new roles of HR practitioner as suggested by Pat McLegan: 1. To bring the issues and trends concerning an organisation's external and internal people to the attention of strategic decision-makers, and to recommend long-term strategies to support organisational excellence and endurance. 2. To design and prepare HR systems and actions for implementation so that they can produce maximum impact on organisational performance and development. 3. To facilitate the development and implementation of strategies for transforming one's own organisation by pursuing values and visions. 4. To create the smoothest flow of products and services to customers; to ensure the best and most flexible use of resources and competencies; and to create commitment among the people who help us to meet customers' needs w.hether those people work directly for the organisation or not. 5. To identify learning needs and then design and develop structured learning programmes and materials to help accelerate learning for individuals and groups. 6. To help individuals and groups work in new situations and to expand and change their views so that people in power move from authoritarian to participative models of leadership.

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7. To help people assess their competencies, values, and goals so that they can identify, plan, and implement development actions. 8. To assist indi viduals to add value in the workplace and to focus on the interventions and interpersonal skills for helping people change and sustain change. 9. To assess the impact of HRD practices and programmes and to communicate results so that the organisation and its people accelerate their change and development. To compete today, HR departments are asked to achieve four seemingly contradictory goals. First, HR functions are being asked to be more strategic. Second, HR functions are also being asked to be more flexible. Third, they are also being asked to take a hard line on costs. Finally, HR functions are still required to provide excellent service to managers and employees. In short, the HR departments have to be more strategic, flexible, cost-efficient, and system-oriented. Ironically, while the need for HR is obviously booming, the future of the human resource department itself sometimes seems in doubt. Human resource departments will face downsizing, reengineering and outsourcing. They face pressure from senior management to add value to the organisation or have their functions contracted out. The human resource activities which are normally outsourced are temporary staffing, recruiting, benefits and services administration, payroll, or training. Cost reduction is the most commonly cited explanation for these measures. What does the human resource departments have to do to keep themselves from getting outsourced? They need to focus more on activities that clearly add value to the company's bottom line activities such as strategic planning, change management, corporate culture transition, and development of human capital. Human resource management has received tremendous attention in recent years. Its role in organisations has also undergone a substantial change and many organisations have gradually oriented themselves from the traditional personnel management to a human resource management approach, although many see it as the "old wine in a new bottle." The basic approach ofHRM is to perceive the organisation in its totality. Its emphasis is not only on production and productivity but also on the quality of life. It seeks to achieve the fullest development of human resources and the fullest possible socio-economic development. There has been a great deal of HRM activity in organisations, although most of such HRM systems are designed without understanding the organisation's structure, tasks, processes and people. It is imperative for any HRM activity to have a conducive organisational climate to stabilise such efforts in reality. It is essential that HRM systems are designed in the framework of the total organisation. HRM efforts fail miserably in such organisations where no attention is paid to these systems. HR intranets offer the greatest innovation to HR departments since the advent of the desktop computer. HR intranets allow the HR department to be open virtually 24 hours per day to efficiently perform many of the routine tasks required of human resources organisations. These include: • Rapid dissemination of valuable information on a wide variety of topics. . • Collection of information from employees. • Enabling employees to perform HR related tasks with minimal HR time requirement.

Strategic HRM Traditionally, managers saw the HR functions as primarily administrative and professional. Traditional personnel management is still the prevalent form of HR activity in most organisations. HR staff focussed on administering benefits and other payroll and operational functions and did not think of themselves as playing a part in the company's overall strategy. In the strategic view of HRM the traditional functions of personnel department, no doubt, will continue to be important. However, given the changes in the business environment, some organisations are developing new structural and cultural patterns to meet the competitive demands of dynamic and international market place. Hence in the recent years, there is dramatic shift in the role of HR as a strategic partner in business. Strategic HRM is the linking of HRM with strategic goals and objectives, in order to improve business performance and develop organisational cultures that foster innovation and flexibility (Truss & Gratton: 1994). It ensures that an alignment between business strategy and human resource strategy takes place for superior organisational performance and competitiveness. It is primarily concerned with its ability to add value to the organisation and has to focus on what HRM contributes to the business instead of the activities it does.

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There are different perspectives of strategic human resource management (SHRM). Some believe that there is a universal set of HR practices that will always contribute to an organisation's success, regardless of the business environment or company's strategy. The role of strategic human resource managers is one of incorporating these universally effective HR practices in their organisations. Others believe that SHRM involves a process of matching specific HR practices to particular aspects of the organisations' strategy. Here the HR practitioner's role is to ensure a link between HR practices and business strategy. Also, HR practices must fit with one another. Another view ofSHRM is that of a service provider wh@seroleis to solve the problems and serve the HR needs of managers within different business units of a company. These various theoretical perspectives suggest that SHRM is a process that involves: 1. Integrating HR into strategic planning process. 2. Linking HR practices to business strategy and to one another. 3. Developing a partnership with line management so that HR programmes meet real business needs. 4. Internally transforming of HR structure and staff. 5. Enhancing HR administrative efficiency. 6. Measuring the bottom-line impact ofHR activities. Many HR management teams have a well-developed vision oftheir department's strategic value, but the CEO and senior line managers are at best skeptical of HR's role in the company's success. The root cause of this problem is HR's influence on company performance, which is difficult to measure. The new economic realities are putting pressure on HR to widen its focus from the traditional administrative role to a broader strategic role. As the primary source of production in our economy has shifted from physical to intellectual capital, senior HR managers have come under fire to demonstrate exactly how they create value for their organisations. Strategic HRM is concerned with the strategic choices associated with the use of labour in organisations and with explaining why some organisations are managing them more effectively than others. In this context, the most potent action the HR managers can take is to ensure their strategic contribution in developing a measurement system that convincingly showcases HR' s impact on business performance. With a properly developed strategic HR architecture, managers throughout the organisation can understand exactly how people create value and how to measure the value-creation process.

Total Quality Management Approach to HRM Total Quality Management (TQM) is a set of concepts and tools for getting all employees focused on continuous improvement in the eyes of the customer. It involves collection of data, multi-functional teams, brain storming, advance experimental methods and group based rewards and recognition. The journey towards total quality can be broadly segregated into six major steps: (a) preparation, (b) planning, (c) awareness, (d) deployment, (e) implementation, and if) continuous improvement. Preparation involves homework that top management must do. They must understand quality as a means of gaining competitive advantage and customer satisfaction. Planning necessitates setting broad goals for improving quality, selecting a quality management system and developing an improvement plan. Awareness is about communicating all that has been done. Everyone needs to become familiar with the philosophy, direction and approach that the management team has developed. This is where the management captures the heart and minds of people and makes them believe that pursuing TQM is in their best interest. Deployment involves organising teams, relevant and appropriate training and assigning responsibilities. At the implementation stage process and product improvements actually takes place. Continuous improvement is a never ending process. It involves assessing and rewarding progress, resetting improvement goals, and conducting on-going training. Philip Crosby, despite his reservations aboutHRexecutives, believes that "HR should be the architect of corporate culture." It is the funcdon of HR departments to build values and practices supporting continuous, incremental improvement in quality throughout the organisation. And that emphasis must be applied with equal force within the HR department itself. W. Edwards Deming talks about driving fear out of the workplace. Much of this fear is tied into the control and hierarchydominated fabric of many organisations. The "workers" fear the "bosses", and this fear distracts from high-quality, collaborative work.

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Once the HRM department has learned to make quality a way of life within its own function, it can assume an expanded role of supporting TQM throughout the organisation. A long history of research has focused on the relationship between product (and service) quality and a number of HR practices and systems. With the emphasis on TQM some of the current human resource practices need to be reviewed. The following HR practices can have a significant impact on quality performance: .. Selection: For decades, research in this field has validated various selection devices as indicators of how a candidate will perform on the job, in both productivity and quality. The current focus on total quality If the key premise is to build organisational capability, then there are three interacting parts to this system - people, process, and technology. A well managed change initiative ought to consider improvements to all three of the above. Management, however, has brought a new dimension into play. Ability testing, in particular, needs to be viewed differently. Organisations that adopt a total quality management approach require individuals who are keen problem solvers, and good at teamwork. These are the abilities which need to be tested during the selection process. Many Japanese companies that operate in the US have an extensive selection process. Selection should also identify candidates who can function well in group setting. Development and Training: Development and training are the major features of all TQM programmes. Typically, the training covers problem-solving techniques, problem analysis, statistical process control, and quality measurement. All these go beyond a specific job skill. Organisations also conduct extensive training in group process and group decision-making. At a higher level, managers and other are also required to be sensitized to the importance of quality. HR department can add value to the effort if they approach towards training with a customer service focus. Career Development: Traditionally, most organisations have supported linear careers, i.e., careers that move up the hierarchy. For TQM, however, a different focus is required. TQM requires employees with a system-orientation - a view of the whole as well as expertise in particular functions. It requires cross-functional experience, and more power and decisionmaking authority in the hands of individuals at lower levels of the organisation. Performance Management: In most organisations, performance appraisal is the basis of human resource management. It is used for determining reward levels, to validate tests, to aid career development, to improve communications, and to facilitate understanding of job duties. Most quality gurus are critical about the existing performance appraisal practices. They point out that these practices focus too much on the individual as far as quality problems are concerned. Deming argues that most quality problems are the product of systems and processes. According to him, focus on individuals is counterproductive, in that it diverts attention from the root causes of poor quality. Hence, he calls for total scrapping of individual performance appraisal systems particularly those that encourage competence within the organisation. An ideal performance management system can focus strongly on developing skills and abilities necessary to perform well and, as such, directly support collective responsibility. Pay Systems: Most pay systems have likewise focused on individuals. Job descriptions spell out what an individual is to do, job evaluation systems suggest how much the job is worth, and merit rating reflects how well the individual has done the job. Again, there is a strong, direct conflict between these traditional practices and the TQM emphasis on collective responsibility, horizontal relationships, and horizontalleaming. Quality management programmes have emphasised abandoning individual-based merit increase systems. Typically, however, they have not suggested an alternative. Perquisites: Perquisites are the trappings that go with a position. Allocating rewards based on hierarchy can influence how strongly individuals are motivated to seek advancement. Among other things, the hierarchy encourages individuals to listen to people because they are in a position of power rather than because they have greater expertise. Status symbols and perquisites tend to create an environment in which communication channels are easily clogged, especially when communications need to move across functional and hierarchical levels. Industrial Relations: Industrial relations experienced by most organisations are just the opposite of what is required under shared responsibility to produce high quality products and services. If union management agreements are based on contract, carefully specified jobs, accountabilities, and elaborate grievance procedure, there is little room for participation, problem-solving and systems solutions. TQM recognises unions as partners in the organisation's success and regard them as critical players. The union also assumes responsibility for quality improvement. All this creates a climate in which employees participate in important discussions. If there is no union support there is a danger that employees will not trust the purpose and activities that are part of the total quality programme. Thus, relationship with union has to be moved into a partnership mode for a TQM effort to succeed. It requires considerable change in related activities such as collective bargaining, grievance handling, and the like. Communication: Information is a very versatile commodity. Easier said than done making information flow within the organisation is a complex and difficult task. Information and total quality are inter-linked. Feedback about quality and information

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is critical to all quality improvement programmes. Open flow of information about quality and business results must be shared throughout the organisation. This is in contrast to prevailing practices in many large organisations which are secretive about their performance results, business plans and major changes for a variety of reasons. Employees who receive information should possess necessary skills to understand the same and participate in problem-solving activities.

HR Balanced Scorecard The HR balanced scorecard provides managers with the instrumentation they need to navigate to future competitive success. The BSE translates an organisation's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system. The BSE not only emphasises on achieving financial objectives, but also includes the performance drivers of their financial objectives. The balanced scorecard measures organisational performance across four balanced perspectives: financial, customers, internal business processes, and learning and growth. The scorecard enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth. While virtually all organisations do indeed have financial and non-financial measures, many use their non-financial measures for local improvements, and at their frontline and customer-facing operations. The scorecard emphasises that the financial and non-financial measures must be a part of the information system for employees at all levels of the organisation. The scorecard translates a business unit's mission and strategy into tangible objectives and measures. The measures represent a balance between external measures for shareholders and customers, and internal measures of critical business processes, innovation, and learning and growth. The measures are balanced between the outcome measures - the results from past efforts - and the measures that drive future performance. And the scorecard is balanced between easily quantified outcome measures (objective), and somewhat judgmental performance drivers of the outcome measures (subjecti ve). The balanced scorecard is more than a practical or an operational measurement system. Innovative companies are using the scorecard as a strategic management system, to manage their long run strategy. They are using the measurement focus of the scorecard to accomplish critical management processes: 1. Clarify and translate vision and strategy. 2. Communicate and link strategic objectives and measures. 3. Plan, set targets, and align strategic initiatives. 4. Embrace strategic feedback and learning. The balanced scorecard fills the void that exists in most management systems - the lack of a systematic process to implement and obtain feedback about strategy. Management processes built around the scorecard enable the organisation to become aligned and focused on implementing the long term strategy. The four perspectives of the balanced scorecard are as follows.

1. Financial Perspective: Financial perspective summarizes the key financial indicators or the readily measurable economic consequences of the actions already taken. It answers the question: Does the business strategy, implementation, and execution add value for shareholders? These objectives relate to profitability measured by operating income.

2. Customer Perspective: This perspective is used to identify customer and market segments in which the company will compete and measures of company's performance in these targeted segments. This perspective answers the question: How well has the business articulated and executed its customer and market strategies to deliver superior future financial returns? The core outcome measures include customer satisfaction, customer retention, new customer acquisition, and customer profitability. 3. Internal Business Process Perspective: This perspective identifies the critical internal processes the organisation must excel. It has to: (a) deliver the value proposition to attract and retain customers in targeted market segments; and (b) satisfy shareholder expectations of excellent financial returns. This perspective answers the question: How well the internal processes that will have the greatest impact on customer satisfaction and shareholder financial expectation have been executed in achieving company's financial objectives.

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4. Learning and Growth Perspective: This perspective identifies the infrastructure that the organisation must build to create long-term growth and improvement. This perspective answers the question: What are the people capabilities, learnings, and innovations that add value to the organisation? Company's learning and growth would come from three sources: people, systems and organisational procedures. Objectives articulated in this perspective include generic outcome measures like employee satisfaction, retention, training and particular skills required for new competitive environment. BOX 2.1

Creating an HR Scorecard An HR scorecard is a mechanism for describing and measuring how people and people management systems create value in organisations. Designing an HR scorecard is not so much a thing as it is a process. The difference between the HR scorecard approach and conventional HRM is that the entire people management and people measurement processes are organised around HR's deliverables, and not around HR's subfunctions such as recruiting, compensation, and benefits. An HR scorecard helps in two ways: (a) manageHR as a strategic asset; and (b) demonstrate HR' s contribution to a firm' s financial success. Although each firm will depict its scorecard in its own way, a well-thought out scorecard revolves around four major themes: 1. The key human resource deliverables in afinn 's overall strategy: Let us take the example of Hi Tech company's R&D function explore HR's potential role in this unit's strategy implementation model. As in many business units, it has two performance drivers: (a) revenue growth - profitability, and (b) productivity improvement. To build an HR scorecard for just this unit, we need to understand the role that HR plays in these two dimensions of the R&D strategy map. We could describe this role as follows:

• Revenue growth ultimately derives from increased customer satisfaction, which in turn is boosted by product innovation and reliable delivery schedules, among other things. Product innovation strategy depends on the presence of talented staff with significant company experience. Through competencybased selection methods and retention programmes, HR contributes to stable, high-talent staffing in R&D. Reliable delivery schedules in part hinge on the maintenance of optimal staffing levels in manufacturing. Even iftumover in manufacturing is low, the company must fill vacancies quickly. By reducing recruiting cycle time, HR supports optimal staffing levels. • Productivity improvement has links to the maintenance of optimal production schedules, which in tum depends on the maintenance of appropriate staffing levels. • There are two HR deliverables in this example. The first is stable, high-talent staffing in the R&D function. This deliverable has several dimensions. For one thing, the R&D staff must have the unique competencies defined by HiTech, and must demonstrate those competencies at the highest levels. As these competencies are specific to the company and require several years of firm experience to develop, the company must keep its R&D staffing turnover very low. The second HR deliverable is optimal staffing levels in the manufacturing unit. 2. High perfonnance work system: Once the HR deliverables have been clearly defined, we can begin to identify and measure the foundational high-performance work system elements that help to generate those deliverables. In the case of HiTech, this means designing and implementing a validated competency model linked to every element in the HR system, and providing regular performance appraisals to all employees. It is possible by indicating whether or not each element is either upto standard or below standard. 3. Identifying HR system alignment: In the case of stable, high-talent staffing in R&D, we can assume that the firm has developed a validated competency model. At HiTech, selection into these positions must correspond to the existing competency model, and the quality of the recruits should be at the highest levels. HiTech also needs to enact the kinds of retention policies that build experience in the R&D unit. At HiTech, a carefully chosen range ofHR activities and policies, from supervisory training to unique benefit packages, might appropriate alignment measure - for example, a fourteen day recruiting cycle - would reflect progress toward that objective. 4. Identifying HR efficiency measures: The HiTech in our example, could identify cost per recruit as a strategic efficiency measure. For both deliverables, cost per hire will probably be higher than average. But, the benefits of those hiring processes will also be well above average. The HR scorecard that HiTech develops should highlight these links between important costs and benefits.

All the four above elements reflect a balance between the twin HR imperatives of cost control and value creation. Cost control comes through measuring HR efficiency. Value creation comes through measuring HR deliverables, external HR system alignment, and the high performance work system. Many line managers consider much of what HR does as overhead. In many instances, these managers are correct, which puts even more responsibility on HR to find efficiencies whereever possible. Hence, it is very important that every HR scorecard should include a dimension that captures the efficiency of the HR function. Only in this way can the human resource management system strengthen overall HR' s strategic influence in the organisation. Source: Becker, E.B., Huselid, A.M., Ulrich, D., The HR Scorecard - Linking People. Strategy, and Perfonnance, Harvard Business School Press, Boston, Massachusetts, 2001.

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People Capability Maturity Model (PCMM) In the knowledge economy, companies are competing in two markets - one for its products and services, and the other for the talent required to develop and deliver them. Recruiting and retention are now as important as production and distribution in the corporate business strategies of knowledge-intense companies. Although most companies understand the importance of attracting and retaining talent, many lack a coherent approach to achieving their talent goals. An organisation's success in its business market is determined by its success in the talent market. At the very time that business markets are expanding, talent markets seem to be shrinking. The people CMM is a tool to help address the critical people issues in an organisation. It is a road map for implementing workforce practices that continuously improve the capability of an organisation's workforce. Its primary objective is to improve the capability of the workforce. Workforce capability can be defined as the level of knowledge, skills and process abilities available for performing an organisation's business activities. If the key premise is to build organisational capability, then there are three interacting parts to this sytem - people, process, and technology. A well managed change initiative ought to consider improvements to all three of the above.

People CMM is more of a strategic management framework for building and growing organisational competencies. The people CMM practices help to retain, grow, and nurture competent individuals. People CMM has been designed to build a progressive, process-driven organisational improvement programme along four process threads that span the organisation, aiming at the following: • Developing individual capability or improving individual competency. • Building workgroups and culture. • Motivating and managing performance. • Shaping the workforce. Areas of disciplines addressed by the people CMM belong to these process area threads and are broadly identified as follows: • Career development • Competency development • Culture development • Communication and co-ordination • Performance management • Staffing • Training • Team building • Work environment If there is one model that has the ability to integrate people within an organisation, it is the people CMM. It is a discipline that lets empowered individuals speak up and be heard. Organisations experiencing difficulties with change management and organisational transformation must attempt the people CMM before attempting any other model. Implementing the people CMM is a team effort and for best results it requires the entire organisation to be enrolled into the programme.

Employ" Engagement Employee engagement from an employee perspective, means building a strong bond and developing a sense of belongingness towards the organisation. It also means an alignment with culture, values, vision and mission of the organisation and energizing people. Also, it is the feeling of being valued and a feeling of being involved in the organisational decision-making process. Employee engagement is fast becoming the latest mantra for HR managers, CEOs, and company executives. Whether an employee is fully engaged or not is determined by a few key elements that make up the workplace. Many companies implement employee engagement by providing excellent work environment, and amenities like recreational facilities, multi-cuisine

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restaurants, fitness centres, creche facilities, maternity and paternity leave, sabbatical, and part-time work. Implementation of engagement activities can also be carried out through various cross-functional committees. While these are great strategies to keep employees engaged, the real secret goes back to fundamental management practice- know your employees. This helps in business involvement and better participation levels. Equipping managers with the necessary skills so that they can connect and coverse with employees in the right way is a critical engagement tool. Organisational factors, such as the company's commitment to the environment, connections with customers, product quality, can also be important engagement factors. At the end of the day, having a 'fully engaged' employee is in a win-win situation. These employees stay longer and contribute in a more meaningful way to the retention programme of the company.

Computerising Human Resource Systems Consider the paper work required to manage the company's human resource system. Very small firms can handle all or most of the human resource record keeping through manual systems. But as the company grows, various components of the human resource systems have to be computerised if the firm is to remain competitive. As the company grows, it becomes increasingly unwieldy and uncompetitive to rely exclusively on manual human resource systems. There are firms which provide software solutions for virtually all personnel tasks ranging from benefits management, compensation, statutory compliance, employee relations, outsourcing, payroll, time and attendance systems, writing employee policy manuals, writing performance reviews, creating job descriptions, and conducting employee surveys.

Mergers and Acquisitions One strategy organisations can use in response to organisational pressure is to become smaller - i.e., to downsize. Another strategy is to become larger. Instead of just becoming a larger version of what the organisation already is, organisation can choose to "marry" another organisation as a way of increasing their size. Organisational marriages encompass the concepts of mergers and acquisitions. The technical distinction between mergers and acquisitions is slim. A merger is the joining of two organisations of equal status and power. Their union is mutually decided. Both organisations think they will be more prosperous by their formal association with the other. An acquisition, on the other hand, is the procurement of one organisation by the other. The purchasing organisation becomes more dominant and plays a powerful role . . Once the merger or acquisition is agreed, it has to be successfully managed. Employees need to be afforded opportunities to participate in the organisational change and communication process. People aspect is very important in any acquisition process. The success of any merger or acquisition is highly dependent on managing cultural differences. The various questions that can be raised in this context are:

1. How do the respective companies go about their business? 2. What are the social and educational backgrounds of key executives? 3. Does the company to be acquired have a hierarchical or flat structure? 4. What is the status of a trade union, if any, and how is the relationship being managed? 5. What do the compensation and benefit policies signify? These and other questions can provide the basis for an audit of human resource management that will provide essential information if the new company is to be successfully integrated. The communications framework is the most important factor for smooth integration in an acquisition. With effective communications the acquiring company can develop a climate of confidence and, hopefully, eliminate much of the friction which frequently occurs.

Downsizing Downsizing is one major organisational challenge that is all too common today. Downsizing is purposely becoming smaller by reducing the size of the workforce or by shedding entire divisions or business. Now it has become commonplace for firms to announce the elimination of thousands of jobs. In recent years General Motors, IBM and AT&T have each undergone major downsizing efforts involving thousands of employees. It has become an unfortunate fact-of-life in many corporations. Wholesale cutbacks involving layoffs, early retirement programmes, and outright termination have become common place. Downsizing has both positive and negative results. The firm that cuts staff presumably lowers its cost. Positive results often include quicker decision-making because fewer layers of management must approve every decision. But the people who

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leave may find that they are happier as well. Many start their own businesses and some find employment with companies that better meet their needs and goals. Unfortunately, others suffer the indignities of unemployment and financial insecurity. The rage in the mid 1980s among large organisations has been to downsize to quickly reduce costs. The problem is that although downsizing often does reduce costs in the short run, the benefits may be overshadowed by unforeseen problems and long-term costs can increase significantly. Several examples show that many companies experience major problems after downsizing. The recent trend toward downsizing has been triggered by three factors: 1. Many organisations have found it necessary to cut the size of their workforce due to a decline or crisis in the firm. For instance, many firms experience a decreased demand for their products or services due to a recessionary business climate or an increase in international competition. 2. A second factor accounting for the recent downsizing is the advent of technological advances, which has enabled many companies to produce more with fewer people. 3. A third factor accounting for the recent wave of corporate downsizing is organisational restructuring, in which the structure of a firm is modified to become less hierarchical by cutting out the layer of middle management. Many of the decisions typically reserved for middle managers are now made by employee teams, task forces, and committees. Consequently, many middle management jobs gets abolished. One of the biggest problems of downsizing is poor employee morale. Morale within an organisation can take a drastic turn as employees begin to worry about job security after seeing their colleagues leave the organisation. Moreover, the economic benefit which is expected by the organisation often fail to materialise. In sales, cutting costs can be disastrous. Digital Equipment company eliminated hundreds of sales and marketing staff because it reported losing $ 3 million per day. Customers then reported never seeing a DEC representative for months and began to use other computer equipment suppliers, such as IBM and Hewlett-Packard. In fact, some of the laid off sales people were hired by the competitors and immediately pulIed the former DEC customers with them. So who is better off after downsizing? Employees are without jobs, customers are without proper service, and companies often face rising, unexpected costs.

Outsourcing Outsourcing is the strategic use of outside resources to perform activities traditionalIy handled by internal staff and resources. It is a management strategy by which an organisation outsources major non-core functions to specialised and efficient service providers. The primary reasons for outsourcing are: (a) human resource is generic, (b) outsourcing of human resource function is cost effective, and (c) rapidly changing business conditions. The primary areas in outsoucing human resource functions are payrolI, wages and salary administration, recruitment and staffing, training and development, and employee benefits. The first step in outsourcing is identifying. the organisations core competency. Whatever activities that do not contribute directly to core competency are materials for outsourcing. Next, the organisation should develop performance benchmarks to measure in-house capabilities against those of external providers. In most cases, the benefits of outsourcing human resource functions should be clear and measurable. Outsourcing should cost less, deliver better results, afford employers more flexibility in providing other alternative measurable benefits. In outsourcing, it is vital to decide which tasks and activities will be administered internally and which will be outsourced. An assessment of the knowledge, skills, and cost required to perform critical functions should be gauged for both internal resources as well as outside service providers. Many multinationals currently outsource certain functions like relocation, culturellanguage training, legal matters including income tax and immigration.

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BOX 2.2 Outsourcing

Ten Reasons for Outsourcing 1. To reduce and control operating costs.

2. To improve company focus. 3. To gain access to world class capabilities. 4. To free internal resources for other purposes. 5. To meet internal resource crunch. 6. To accelerate reengineering benefits. 7. To avoid functional difficulties arising out of certain work activities. 8. To make capital funds available. 9. To share risks. 10. To infuse cash.

Ten Factors for Successful Outsourcing 1. Understanding company's goals and objectives.

2. A strategic vision and plan. 3. Selecting the right vendor. 4. Ongoing management of the relationships. 5. A properly structured contract. 6. Open communication with affected individuals/groups. 7. Senior executive support and involvement. 8. Careful attention to personnel issues. 9. Near term financial justification. 10. Use of maximum external expertise.

Business Process Outsourcing (BPO) Business Process Outsourcing (BPO) is one of the fastest growing segments in India today. Outsourcing is an appropriately structured arrangement between an organisation and an outsourcing supplier to perform services which were otherwise conducted in-house. More and more organisations are opting for BPO and reaping its benefits. Companies are moving their non-core business processes to outsource providers. BPO saves precious management time and resour~es and allows focus while building upon core competencies. The BPO wave in India has caught the fancy of a number of large software consultancy firms. A large number of credible organisations such as Infosys, Wipro, Satyam, HCL, HP, Intel, TCS, GE, IBM, and Cognizant are participating in the Indian BPO sector. The functional areas in which BPO services are in demand include finance, marketing, sales, human resources. health care, and administration. The BPO industry stands on three pillars - technology, processes, and people. Though technology and processes are keys to the business, people are the most important factor. Given the large workforce and the dependence on human interface in this business, the BPO service providers have many HR challenges to face. The attrition rate in this industry is very high. Hence, retention of employees tops the agenda ofHR professionals in this industry. Most of the software service firms look alike, sound alike, work alike, and all of them have a universal issue of attrition and retention. The benefits of BPO are the following: 1. Focus on Company's Core Business: Management will be able to focus more time, energy and resources on building the company's core and strategic business.

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2. Active Cost Reductions: Through process redesign, the latest technology and economies of scale, outsourcing reduces operating costs as much as 30-50 percent, while bringing other administrative costs under control. 3. Improved Service Quality: Outsourcing the business processes help to provide a higher level and quality of service to customers, both external and internal. 4. Maintain Competitive Edge: BPO enables management to focus on building a more competitive business and provide the supporting systems and services to the business. 5. Obtain Outside Expertise: By outsourcing the non-core business activities to specialist outsourcing company, the management can leverage the value enhancement which company may not have in-house. 6. Meet Changing Customer Demands: BPO provides management with flexible and scalable services to meet customers' changing requirements, and support the company's strategic moves. 7. Gain Access to Advance Technology: Outsourcing enables companies to design and implement leading-edge enterprise systems to support the business processes and manage the technology infrastructure with more efficient capital investments and training costs. 8. Achieve Revenue Enhancements: By outsourcing non-core processes, management can focus on increasing sales and market share, developing new and improved products, expanding its new markets, enhancing customer service, and increasing shareholder value.

Call Centre Broadly speaking, a call centre is a facility handling of inbound and outbound large volumes of telephone calls manned by 'Agents' (the people working at the centre). It deals with inbound and outbound communication with customers. Managers of high performance call centres keep their employees aware of what is going on in the industry. They consistently keep their employees updated of the latest happenings in the organisation. The most common example of BPO is a call centre. The typical call centre employee is a young person who works in a large, open plan office or fabricated building, which may well justify the white-collar factory description. Although, probably full-time, the employee is increasingly likely to be a part-time permanent employee working complex shift patterns which correspond to the peaks of customer demands. Promotion prospects and career advancement are limited - work consists of an uninterrupted and endless sequence of similar conversations with customers whom the employee never meets. The employee has to concentrate hard on what is being said, jump from page to page on a screen, making sure that the details entered are accurate, and right things has been said in a pleasant manner. The pressure is intense because the employee knows that hislher work is being measured and speech monitored. Such a state of affairs often leaves an employee physically, mentally and emotionally exhausted. BOX 2.3

Can Centres and their Employees • Relatively large workplaces - 150;. employees • 'Flat' organisational structure - few managerial and supervisory positions • Limited promotion prospects • Emphasis upon 'soft skills' (communications and team working) • Employees predominantly female and young (under 35) • Mixture of full-time and part-time contracts

• Low paid • High labour turnover

Benchmarking Benchmarking is the process qf identifying, understanding and adapting outstanding practices from within the same organisation or from other businesses to help improve performance. This involves a process of comparing practices and

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procedures to those of the best to ide!ltify ways in which an organisation can make improvements. Thus new standards and goals can be set which, in turn, will help better satisfy the customer's requirements for quality, cost product and service. Benchmarking is an organisational change process directed toward continuous improvement. It is a search for best practices among recognised leaders that lead to their superior performance. The basic idea is analysing what the superior organisation did to make improvement and then integrating whatever methods might be useful. Benchmarking consists of analysis, comparison and synthesis of components. Benchmarking may be classified as product benchmarking, performance benchmarking, process benchmarking, strategic benchmarking, and human resource benchmarking. Benchmarking is typically part of the human resource audit. An audit is an internal study of the human resource functions throughout the organisation, including those performed at managerial and supervisory levels. The first step in the audit is to evaluate the effectiveness of human resource functional areas. The second step in the audit is to benchmark human resource activities to ensure continuous improvement. Human resource professionals need to be aware of how to add value to the organisation, for which benchmarking provides value added tools. Designing a benchmark involves a four-step process:

1. Plan: • Link benchmarking efforts to the organisation's strategic plan and organisational goals. • Determine what internal information will be gathered. • Identify internal benchmarking opportunities. • Focus on specific, targeted issues and measures.

2. Research: • Identify what data sources are to be used as benchmarking targets. • Collect data.

3. Analyse: • Analyse data for common findings, suggested improvements and gaps.

4. Implement: • Present findings, establish goals, implement specific changes and monitor progress. • Redefine benchmarks as part of a continuous improvement process. The following are the steps to effective benchmarking: 1. Identify what is to be benchmarked. 2. Identify comparative companies. 3. Determine data collection method and collect data. 4. Determine correct performance levels. 5. Project future performance levels. 6. Communicate benchmarking findings and gain acceptance. 7. Establish functional goals. 8. Develop action plans. 9. Implement specific actions and monitor progress. 10. Recalibrate benchmarks. In 1987, the Malcolm Baldridge National Quality Award was started. This led to firming up of benchmarking criteria. To be eligible for the award, many organisations came to xerox to find out what benchmarking was. Internal benchmarking is first to be looked at. The ideal time for benchmarking, however, is not when business is bad. It should be taken up when the going is good. For, it is not a recovery process but an improvement process.

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Benchmarking helps organisations focus on the external environment and improve process efficiency. Benchmarking brings many advantages to an organisation: • It sets performance goals. • It helps accelerate and manage change. • It improves processes. • It generates an understanding of world-class performance. • It creates customer awareness and satisfaction. • It improves profitability. • It gains commitment to corporate goals. Benchmarking is an ongoing task at all levels of business. It is classic total quality management. This process was invented by Taiichi Ohro, who also developed the Just-In-Time (JIT) inventory system in Toyota. In 1980, the U.S. photocopier making Xerox Corporation benchmarked its products, processes, and costs against its competitors. In India, companies like Hindustan Lever, Citibank, RPG Group, Arvind Mills, and some others adopt this technique in different fields of management. In human resource management, the process where benchmarking can be adopted are absenteeism, salary package, downsizing, employee benefits, recruitment methods, empowerment, interview techniques, leadership development, payroll systems, employee productivity, record-keeping, redeployment, retirement plans, security management and employee appraisal techniques. After locating outputs for benchmfll'king, the organisation has to identify the best organisation with the best policies and practices in HRM. A collaborative relationship has to be forged involving an open exchange of information. Then, the data collection method has to be determined. Site visits, structured meetings, questionnaires combined with interview will elicit the required info~mation for bench-marking. After collecting the required data, they have to be analysed. After projecting the future performance levels and targets in HRM, the next step is to develop action plans in the functional areas. The action plan will have details of specified actions to be taken to reach the projected performance levels. The results may start flowing in and have to be monitored. If the desired results are not forthcoming, then re-work and corrective action has to be undertaken and the results must be promptly reported. If the results are not forthcoming due to factors beyond anyone's control then the bench-marks are to be rearranged and recalibrated. Once the desired results are achieved by the implementation of specific processes, the organisation obtains the leadership position and benchmarking gets introduced into practice.

Intellectual Capital Intellectual capital encompasses much more than patents, copyrights and other forms of intellectual property. It is the sum and synergy of a company's knowledge, experience, relationships, processes, discoveries, innovations, market presence and community influence. It is also the source of inspired innovation and wealth production - the precursor for the growth of financial capital. Managers who want to grow their company's intellectual capital must be able to expand intelligence, encourage innovation, and exercise integrity. Indeed, these are the three core competencies of intellectual capital. Knowledge is one aspect of intellectual capital, but it is not the same as intelligence. Knowledge is a synthesis of information, while intelligence is what it takes to create knowledge. Intelligence includes the inherent abilities to learn, transfer knowledge, reason, envision what's possible, find new insights, generate alternatives and make wise and value-based decisions. How do managers generate innovation, the main by-product of intelligence? This process is vital because innovation is the means by which intellectual capital produces new wealth. Promoting innovation can be especially challenging in older industries that are trying to leap into the future. Intellectual capital thrives on high-integrity relationships. In fact, integrity is the foundation of strategiC advantage because knowledge creation, innovation and customer collaboration depend on it. But integrity means much more than "ethics" or "character". It means oneness and unity. Ultimately, it is a congruency of thoughts, words and deeds. The challenge for managers is to develop the three core competencies of intellectual capital company-wide. The following can serve as a basic starting point:

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• Dialogue about the strategic importance of intellectual capital and the development of the core competencies. • Facilitate and train teams on knowledge creation and innovation. Conduct team-focused workshops to apply innovation skills to specific business challenges regarding revenue generation, quality, and so on. • Develop "intellectual capital networks" that tum individual learners into learning communities. • Coach specific project teams and sponsors on how to cultivate a better climate for innovation. Also coach executives as individuals and teams. • Assess the culture for intelligence and innovation. Conduct a "culture audit" to test for the values, mind-sets, behaviours and outputs of the innovative learning organisation. • Reengineer specific parts of the culture. Develop innovative approaches to technology networking, organisational structure, performance appraisals, rewards, and the like. An organisation cannot play the new game of intellectual capital unless senior managers step up to the challenge of growing intellectual capital. They must embrace the need to expand their own intelligence, promote their own innovativeness, and exercise high integrity in relationships to get the process going. Then they can begin to inspire courage in others to embrace the uncertainty of change, make internal transitions, and value the requirements of the new game.

Knowledge Management Knowledge management caters to the critical issues of organisational adaptation, survival and competence in face of increasingly discontinuous environmental change. Essentially, it embodies organisational processes that seek synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings. Knowledge management focuses on 'doing the right thing' instead of 'doing things right' . Knowledge management is a framework within which the organisation views all its processes as knowledge processes. In this view, all business processes involve creation, dissemination, renewal and application of knowledge toward organisational sustenance an~ survival. Knowledge management is necessary for companies because what worked yesterday mayor may not work tomorrow. For instance, companies that were manufacturing some best quality products became obsolete regardless of their processes since their product definition didn't keep up with the changing needs of the market.

Managing' biversity Diversity is the variation and differences between organisational staff members. Most organisations are going to continually confront, and will need to exist in, a changing and complex environment. an organisation is a portrait of diversity manifested in various forms. Diversity provides rich accumulation of preceptions and knowledge. Today, it is imperative to have cross-cultural competencies for an effective work relationship, which are critical for any organisation's success. By fostering and managing this diversity postiviely, the organisation handles uncertainity and challenge in a sophisticated manner that ensures success. For a number of organisations, globalisation is an important strategic consideration. In such organisations, the HR developer will become heavily involved in developing the staff to interact naturally and comfortably with different cultures. Issues such as the different communication processes, male-female interactions, having a knowledge of the host culture and recognising the effect of speaking or not speaking, and even the impact of speaking with an accent, will need to be addressed. When conducting overseas learning interventions, the HR developer will meet a number of challenges, including a variety of administrative issues in the host country, the different political environment and the distance of the overseas base from the organisational headquarters. Managing the creative asset of diverse workforce in organisations is absolutely essential. This approach includes emphasising the advantages to an organisation of managing positively the diversity among its employees. To help the organisations manage its diversity positively, the HR developer should initiate diversity training, develop managers and .' supervisors in the skills and attitudes of harnessing diversity at the workfront, and develop and foster members of minority or _. disadvantages groups. The advantages of diversity include cost savings, acquiring highly qualified staff, understanding the market better, and more creative and innovative employees, and leading to better problem solving and systems flexibility.

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International Human Resource Management For many companies today it is important not only to see their internal business but also international business. Many companies are focusing their marketing efforts not only in their own country but also abroad. Huge global companies like Proctor and Gamble, IBM, and Citibank have long had extensive overseas operations, of course. As a result of this internationalisation, companies must increasingly be managed globally, but this confronts managers with several challenges. Market, product, and production plans must be coordinated on a worldwide basis. For example, Ford Motor Company today is managed as global business. Activities such as product development and vehicle design are conducted on a worldwide basis, rather than in regional development centres. Manufacturing and purchasing are also handled globally. Ford approaches HR on the same global basis, "moving employees from anywhere to anywhere if they are the best ones to do the job." With more employees abroad, HR departments have had to tackle new global challenges. The three broad global HR challenges that emerged were as follows: • Deployment: Easily getting the right skills to where they are needed in the organisation regardless of geographical locations; • Knowledge and innovation dissemination: Spreading state-of-the-art knowledge and practices throughout the organisation regardless of where they originate; and • Identifying and developing talent on a global basis: Identifying who has the ability to function effectively in a global organisation and developing these abilities. Wide-ranging cultural differences from country to country require corresponding differences in HR practices among a company's foreign subsidiaries. For instance, incentive plans in Japan still tend to focus on the work group, while in the west the more usual prescription is still to focus on individual worker incentives. In fact, the list of cultural differences from country to country js almost endless. In Germany, for instance, one should never arrive even a few minutes late and should always address senior people formally, with their titles. Differences in economic systems among countries also translate into inter-country differences in HR practices including labour costs. Industrial relations, and specifically the relationship between the worker, the union, and the employer vary dramatically from country to country. In Germany, for instance, co-determination is the rule. In the United States, for instance, HR policies on most matters such as wages and benefits are set not by the state but by the employer, or by the employer in negotiations with its labour unions. In Germany, on the other hand, the various laws on co-determination, including the Works Constitution Act, 1972, largely determine the nature of HR policies in many firms.

HRM in the Indian Context The Indian economy has become an integral part of the global economy. Globalisation means facing the realities of competition, of producing goods and services of world standard quality. Total quality management, latest technology, sophisticated equipment, most up-to-date know-how, high skill, cost consciousness, production with less cost, and customer's satisfaction have become the hallmarks for us to compete with others. In such a fiercely competitive environment, with the Iiberalisation and globalisation of the economy, the management of the organisation will have to initiate radical changes within the organisation to enable itto compete effectively in adynamic market. The managers of these organisations will have to become the catalysts of change. The management of organisation has to continually enhance its efficiency and effectiveness for its survival and growth. For many organisations, accustomed to working in a sheltered market and in a monopoly, these changes have been indeed very painful. For some organisations, it has not been easy to adapt and adjust themselves to the economic and technological changes in the Indian environment. In many organisations, surplus workers have refused to accept voluntary retirement, even though very liberal schemes have been offered. In addition, poor performance has made operations in many organisations uneconomic. Some of the issues and challenges which are confronting the Indian industry are: • How do we make our organisation dynamic and vibrant? • How do we ensure an organisation culture and environment that encourages work commitment and involvement of employees?

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• How do we motivate our employees to set and achieve challenging goals? • How do we ensure teamwork which produces synergy and collaborative effort? • How do we make people productive and result-oriented? Four fundamental challenges faced by all organisations are -

mission, competition, performance, and change.

Mission: What are we trying to accomplish? Competition: How do we get a competitive edg~? Perfonnance: How do we deliver the results? Change: How do we cope with change? Human resource management is essential for any growth-oriented and dynamic organisation which wants to succeed in a fast changing and competitive environment. It is the route by which companies and employing organisations can come to terms with the new situation. It provides the means by which fullest potential of employees can be developed and used for the benefit of both themselves and their employees. Good human resource management practice will ensure that every employee knows that they matter as an individual and a human being while the employer will have the confidence that the workforce will perform to the levels needed and beyond for success in today's competitive world. The scenario that one can visualise is that human resource management has to be tackled from competition at the organisational level, and at the individual/group level. The function of human resource management should be handled continuously through training, education, job rotation, and reassignment of various kinds. There is need for a healthy climate, characterised by the values of openness, enthusiasm, mutuality, trust, and collaboration for developing human resources. The present situation demands that the men who are employed in an organisation work with a hundred per cent commitment, devotion and discipline. The way to remain competitive is by developing people continuously. It is very important for human resource professionals to understand various changes taking place in organisations and adapt human res~urce activities accordingly. There are five themes of quality-oriented HR practices, which sets them apart from conventional HR practices: 1. A focus on the organisation, rather than the job; 2. Support for group performance, rather than individual performance; 3. Egalitarianism, rather than hierarchy; 4. Change, rather than stability; and 5. Participation, rather than command and control. These five themes represent a radical break with the past as far as HR management is concerned. They demand major changes in the manner HR departments are run and in the type of systems they create and operate. There have been very rapid advances in technology; and with these, the emergence of more sophisticated and demanding consumers. Moreover, technology today is no longer the preserve of a particular firm or even a nation, and with the rapid advance of technology, the management of manufacturing systems has also undergone revolutionary changes. In the mid 1980s, the Indian manufacturing industry took up the task of imbibing advanced manufacturing technologies (AMTs) in an attempt to catch up with the rest of the world. The emergence of new and advanced technologies has also brought about a proliferation of new and improved products. Moreover, with the comparatively easy availability of technology, new manufacturers have entered the market and competition has become intense. This has changed customer perception. The customer now demands, and gets greater variety and better product quality at reasonable prices. Accordingly, the management of product quality has become a crititcal issue and most managements now view quality as a strategic weapon. The emergence of manufacturing software has created the need for new specialists, and a new breed of white-collar workers. These white-collar workers include, among others, programmers of CNC machines and machining centres, process designers and process system analysts, specialists engaged in the development and maintenance of new manufacturing software and packages, quality assurance system designers, and wherever needed specialists for updating integrated databases and maintenance of ERP systems.

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The use of information technologies has affected the organisational structure. Organisations have become flatter and many layers of middle management have become redundant. The ones who remain have to acquire new knowledge and become competent. The use of teams and teamwork, the assurance of product and process quality, restructuring of the organisation, and the management of middle managers and white-collar specialists, have become critical issues calling for attention at the highest level of management. The future challenges before the HRM academics and practitioners is to find out the various factors which affect HRM at both national and regional levels so that appropriate human resource practices and policies can be formulated and successfully implemented. The HRD professionals must actively market their services in the same way marketing specialists promote the organisation to external customers. The philosophy that human resource professionals should follow is : if you want to succeed you should strike out to new paths rather than travel the worn out paths of accepted success (John Rockfeller).

Challenges of HRM The greatest competitive challenge faced by organisations today is speed. The very survival of entire industries and seemingly solid companies becomes challenged, sometimes overnight, by the introduction of a new technology or a virulent new competitor. HR 's survival will be threatened to the extent that it insists on retaining the vestigious of the manufacturing era, rather than meeting the new requirement of a service era. HR should voluntarily reassess its infrastructure and eliminate unnecessary rules and systems thereby emphasising the need for individual judgement and accountability by managers. This reassessment can be a powerful catalyst toward enabling organisational speed, creating change, and encouraging risk-taking. Many personnellhuman resource functions are showing signs of insecurity, lack of identity and justification within their organisation. As a service function, HR/personnel is well aware that it plays primarily a supporting role to the main business, and therefore needs to deliver something that contributes to overall value. At present many organisations are under severe pressure due to reduced revenue, and their current existence is mainly dependent on tight control of overheads. For many organisations, this has meant cutbacks in terms of budgets, resources, equipment or layouts. Comparatively, the personnellHR function has a poor image due to lack of its internal marketing and presentation. Now under pressure, the HR/personnel profession is anxiously seeking ways and means to measure its effectiveness and demonstrate its contribution to organisational profitability. To remain competitive, today's organisation's, whether in the private or public sector need to be flexible and competitive. This has meant that traditional hierarchical management structures are to be replaced by business and project teams to meet customer requirements. Wherever organisations are undergoing cultural change, the HR function not only needs to take part in the change, but also playa key role in the process. The increasing pressures on HR practitioners are firstly to rationalise operations resulting in reduction in workforce, secondly, restructuring of the organisation, and reduce dependence on specialists. In the eyes of many operational managers, the personnel function does not provide a credible service. Very often the department is accused of being bureaucratic and reactive, but not business-oriented and responsive. Furthermore, the personnel profession is portrayed as slow and cumbersome, though in reality many are championing exciting innovative people initiatives. HR can help create powerful change by providing opportunities for the organisation to identify its weaknesses, and then facilitate organistional efforts to improve in those areas. A true limitation in major organisations today is the scarcity of principled leadership. Any such leadership must exist at all levels in an organisation, and not just at top management levels. Management education and skills training should designed and delivered by subject matter experts or other managers but not by HR professionals. The implication of the era of the customer is that organisations must focus on their target customers and meet the customer's requirements. HR should eliminate policies and practices which prevent an external focus on the customer. In addition, HR can introduce the primacy of the customer into every aspect of management practice by including customer orientation and customer service in performance reviews, promotion criteria, and incenti ve compensation plans. It must identify where to add value and eliminate non-value areas.

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To summarise, HR must do the following: • Eliminate HR systems and policies which inhibit speed in organisations. In the process, eliminate the excess HR staff. • Develop principled leaders at all levels of the organisation. • Eliminate HR's role in conducting training and education, by relinquishing that role to subject experts and line managers. • Eliminate non-value-added HR activities and outsource those HR activities which are not core competencies of the enterprise. • Increase the organisation's ability to learn and collaborate and to manage diversity, complexity and ambiguity. The HR profession will almost certainly come under continued challenge to its existence unless it changes to meet the new organisational needs. In brief, some of these HR challenges are as under: • Rapidglobalisation • New technology • Managing change • Market demands and customer needs • Cost containing • Diverse workforce • Skill shortages • Increasing use of knowledge management • Changing traditional power structures • Increasing women workforce • Cultural changes • Emerging workplace issues.

Future of HRM Human resources are an increasingly important factor in the economy. Investments in human capital are a key to improvements in productivity, wages, and national income. And the role of human capital will continue to expand as the economy becomes dominated by service-oriented jobs requiring extensive knowldege and training. At the same time, jobs in manufacturing. will be highly skilled and vital for maintaining the operating efficiency of manufacturing technology. In future, organisations have to meet five major challenges. These are: 1. Increased competition and therefore a need for better quality goods and services. 2. Increased use of information technology. 3. An increasing number of acquisitions, mergers, takeovers, and diversifications. 4. An increase in the availability and quantity of knowledge about the environment. S. A change in the structure of organisation such that bureaucracies give way to 'adhocracies.' Considering the trends in the business environment the organisations will have to pay more attention to the issues of employee health, safety and legal rights. Employers will be required to provide more information to employees on workplace health and safety, including potential health hazards and safety regulations. As technological advances are introduced into the workplace, there will be need to evaluate them in terms ofpotential health hazards. Organisations also cannot overlook unions. Several environmental trends indicate that the basic composition of union membership will change and that union's future will depend on how well they will serve members' needs. In an effort to attract new members and to retain old ones, unions can be expected to become involved in new issues of interest to workers.

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The entry of young and educated workers in the labour market will lead to a demand for challenging jobs, and less or no commitment to one job for a lifetime. The existing level of stress and frustration among the workforce is likely to increase in the future. The diversity of lifestyles and households will necessitate changes in current patterns of employment, compensation and benefits. Male and female workers will continue to seek somewhat different forms of compensation and the increased number of women in the workforce will necessitate greater recognition of such specific needs of child care and flexibility in the • workplace. In future, employers will be concerned with redesigning jobs in order to meet individual employee needs for personal growth, autonomy and recognition. The increasing turbulence in the business environment and in technology will create needs for skills that many companies existing workforces do not currently have. At the same time, these changes will make other skills obsolete. As we move further into the information age, more and more jobs will become obsolete. Hence, there will be the need for training and retraining. In future, the principal issue will be how the HRM function can transform its outlook from a traditional to a modem one: from being functionally-oriented, internally focused, reactive, activity-driven, centralised, and control-oriented to being business-oriented, customer-focused, proactive, effectiveness driven, decentralised, and empowerment-oriented. Workforce reductions- will become an unfortunate fact of corporate life, workers displaced from their jobs might be profoundly affected by how the organisation contributes its downsizing activities. For generations the prevailing work mode has been that management plans and gives orders and workers execute plans and produce. That rigid division will be replaced by management style encouraging employee involvement. Employee participation will become the responsibility of managerial leadership. In the future, companies will need to be concerned with extending their recruiting efforts, developing careful screening procedures, training employees to help them adapt to change, providing appropriate and sufficient educational programmes, and accounting for their investment in recruiting, selecting and training employees. The new generation of employees will weigh salary and benefits packages against their personal needs and values. Therefore, compensation and benefits packages will offer greater flexibility in order to meet individual needs. There are four roles which HR has to play, according to Dave Ulrich. The first, strategic partner role - turning strategy into results by building organisations that create value; the second, a change agent role - making change happen and, in particular, help it happen fast; the third, an employee champion role - managing the talent or the intellectual capital within a firm; and the fourth, an administrative role - trying to get things happen better, faster and cheaper. BOX 2A

Managing People - Audit 4 - Very true: 76% to 100% 3 - True: 51 % to 75% 2 - Partly true: 26% to 50% 1 - Not true: 0% to 25% 1.

In this company, all human resoures issues are closely linked to every other business process.

432 1 2.

The human resources department is represented in strategy-formulation sessions of top management.

432 1 3.

Human resources issues are discussed explicitly when strategic plans are formulated.

432 1 4.

The performances of the human resources department and of the organisation are linked.

432 1

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PERSONNEL AND HUMAN RESOURCE MANAGEMENT

The human resources function is given as much importance as other functions, or even more. 432 1

6.

Human resources managers have sufficient power to suggest strategic initiatives to top management. 432 1

7.

The human resources department can easily compete for financial support and management involvement. 432 1

8.

The structure of the human resources department is effective in delivering competent services. 432 1

9.

Line managers are recruited along with trained specialists in the human resources department. 432 1

10.

The services of the human resources department are equally available to each and every one. 432 1

11.

The head of the human resources department is always accessible to all employees. 432 1

12.

The human resources department plans the company's manpower needs proactively. 432 1

13.

The human resources department conveys organisational goals to every employee. 432 1

14.

The human resources department links appraisal and compensation to corporate objectives. 432 1

15.

The human resources department meets the company's and individual's training needs. 4 3 2

16.

J

The human resources department disseminates information down the ranks. 432 1

17.·

The human resources functionaries have knowledge of behavioural sciences and industrial psychology. 432 1

18.

The human resources department gets feedback on its performance from other employees. 432 1

19.

Human resource practices are audited, their. the learner and the instructor connect to each other, even being present at different locations, through the use of information and communication technology. Collaborative E-learning: In this type of E-learning, the learner shares information and knowledge with other learners through discussion forums, chart rooms and bulletin boards. The following are the components of E-learning architecture: Learning Management System (LMS): This allows users to perform self paced E-learning. The LMS component also allows users to perform administrative tasks such as curriculum management and course publication. Learning Content Management System (LCMS): This helps in performing tasks such as preparing a course and sending the completed course to a delivery system. The LCMS component also provides a set of modules for the learning process. Learning Portels: These help access the learning information and provide services which help learners search for the learning content. The E-Iearning process consists of: E-learning Pro gramme: The E-Iearning programme may be designed for providing learning related to business applications or processes and development of technical skills. Delivery System for E-learning: The main delivery system for E-learning is the websites available on the internet and intranet. Organisations can also use CD-ROMs for providing E-learning courses. Online coaching and discussion forums can be set up for E-learning. Blended E-learning: Blended E-Iearning is a combination of electronic learning, face-to-face learning and informal group learning. Blended E-learning is provided through teams and communities which have common interest. There are various activities which need to be performed in order to develop the E-learning process. These activities are: • Analysingneeds • Determining the scope for E-learning • Developing E-learning programmes • Implementing E-learning programmes • Evaluating E-learning programmes

Sensitivity Training Sensitivity training is a part of human relations training which aims to make act and feel differently. It is based on the concept of empathy, which is to actually perceive a situation with another person's viewpoint and emotions. This method was originally developed by Kurt Lewin and popularised by the National Training Laboratories, USA. According to Chris, Argyris, "sensitivity training is a group experience designed to provide maximum possible opportunity for the individuals to expose their behaviour, give and receive feedback, experiment with new behaviour and develop awareness of self and of others." Sensitivity training promotes understanding of self, understanding of others, understanding of how groups work, and culture recognition. The objective of sensitivity training include an understanding of oneself and sensitivity to others; an ability to listen to others and to communicate diagnostic understanding of group problems; an ability; to contribute effectively and properly to the work of group; and an understanding of the complexities of inter-group and intra-organisation problems.

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The following are the merits of sensitivity training: (a) Sensitivity training leads to increased awareness of one's own self and that of others. It gives an opportunity for

introspection. (b) Sensitivity training leads to increased empathy towards the problems of others. (c) It results in a greater understanding that organisational problems are interdependent on each person's role in the

organisation. (d) It leads to increased interpersonal competenee in dealing in relationships and problem solving. (e) It leads to increase in organisational morale and motivation. It is an effective team building exercise.

(/) Sensitivity training goes with theHRM philosophy of considering human beings as assets and steering for their overall development. The following are the demerits of sensitivity training: (a) The result of sensitivity training programme is not predetermined and in the process of sharing experiences, difference

of opinion may arise which may worsen the problem. (b) Sensitivity analysis with its emphasis on emotions and feelings may lead to inability to take hard decisions. (c) Many a time the objectives of sensitivity training do not go hand-in-hand with corporate goals and missions.

(d) Undue exercise of sensitivity training may lead to either excessive depression or a state of extreme excitement and anxiety. (e) The trainer has no control over the training session. Hence, the results are not predetermined.

(/) The ultimate output of the sensitivity training programme cannot be ascertained. Sensitivity training is concerned with helping supervisors gain greater insight into themselves and into the manner in which others react to them. Instead of talking about abstract problems outside the group, discussion is centred on what is happening within the group itself. Sensitivity training has been called the "laboratory" method of training, because, in effect, the group is experimenting on itself. There is a close relationship between this form of training and group psychotherapy. Sensitivity training helps each man understand how he actually does behave - an awareness that he must have before he can decide in theory how he should behave. In a well-conducted sensitivity training programme, the trainees in effect train one another, though the trainer helps by asking a few skilful questions. Learning takes place through analysing one's own emotions, rather than through intellectual logic. There is no fixed agenda, and often no apparent limits are set on the content of the discussion. The group talks about what seems important to it at the moment. Whereas, lecture is the most rigidly controlled form of training, sensitivity training is the most loosely controlled form. Sensitivity training often touches on areas of high tension and deep frustration. If the criticism grows too sharp, the trainee may even suffer a mental breakdown. The trainee may become so tense and defensive that he is no longer able to learn. Moreover, if the session becomes overly painful, the participants may turn their aggressive,;ess against the trainer, or may decide that the programme is useless and abandon it altogether. As might be expected, sensitivity training has aroused considerable controversy. It creates tension higher than many people can handle. In particular, it has been attacked as leading to enmity and bad feeling rather than to insight and improved behaviour. Defenders of the technique respond that all true learning entails tension and frustration. To conclude, sensitivity training is a high-powered technique that should be used only by a leader of unusual skill and maturity.

Simulation Simulation is a powerful training approach - particularly for achieving behavioural changes. It permits trainees to act as if they were in a real situation. It also allows them to experiment with skills away from their jobs. It enhances learning effectiveness and presents certain advantages over experience-based training. A simulation is a training exercise where a model of reality is used. A simulation, unlike theoretical learning of skills, is based more on reality since it involves action on the part of the learner. There are basically three main objectives in using simulations - to change attitudes, to develop skills, and to identify needs and problem.

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Although simulations may involve the adoption of roles, they are not role plays as such, in that role plays may usually be thought of as dramatic in their nature. Simulations always involve decision-making about doing something or not doing something. Although roles may be assigned, it is usually the problem that is central to the simulation rather than the characters tackling the problem. Simulations involve trial and error, and errors provide a basis for learning. Simulations have many similarities to case studies, but are much more extensive, usually more complex and require the learners to take on individual roles, rather than only be part of a group. A simulation is a highly active process that allows people to discuss, analyse, reflect, propose action and review, almost every organisational process. In all simulations, in one way or another, every participant becomes involved and has a specific role to play. Participants perform roles which mayor may not reflect their own job roles. The simulation cannot be predicted accurately, as much of the progress will be dependent on the learners themselves. Simulations are probably the most complex and difficult training activity to prepare and perform, but a successful simulation can produce learning rewards obtainable by any other approach. BOX 11.2

Guidelines for Participants

Pre-session: • Approach your superior about your need for training before the program. • Think about the contents of the course and your objectives in attending the program .. • Decide what you want to achieve. • Discuss the program and your objectives with a senior. • Do not attend a program just for the sake of attending • Thoroughly read any program material given to you in advance. • Ensure that intimation about your nomination is known sufficiently in advance. • Reach the venue early to get acquainted with co-participants, faculty and the place.

Mid-session: • Recongise that you have been given valuable opportunity to learn. Take maximum advantage of it. • Be open to learning to new concepts and ideas. • Be unbiased about the program, faculty and co-participants. • Listen carefully to the instructors and fellow participants. • Do not be overcritical or close minded. • A void raising irrelevant issues in the program. • Be an active participant and contribute to class discussions and group sessions. • Clear/clarify any doubts that may arise even if they might appear silly in one's perception. • Work through assigned exercise, case studies, written tests and presentations. • Take advantages of the opportunity to meet new people and cross fertilisation of ideas through sharing of knowledge and experience. • Commit to transfer the learning from the classroom to the workplace and outside world.

Post-session: • Be very frank in giving effective feedback about the program. • Give a brief report about the usefulness or otherwise of the program to the nominating authority. with a copy to the HR department. • Plan to use new insights, ideas, knowledge or skills gained from the programmes in your work. • Meet your senior to discuss the program and how it can contribute your performance and to meet ing the business goals of the unit. • Share ideas and information with your colleagues. Ideas become more valuable with circulation. • Do all above at the earliest, on return from the program without procrastination, and before you forget the new things learnt. • Make sure that the training skills and knowledge are used and practiced; otherwise they will be lost.

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Training Plan The purpose of training plan is to provide a written description of the content, methods, materials, and time sequence of a training session. The training plan should connect training needs with the training objectives. The steps in preparing a training plan include: (a) conducting research. (b) developing training content, (c) determining training time frames, (d) selecting training methods, and (e) selecting training materials. Research is necessary to gather accurate material for the training. The content for the training is developed from the reading and research. The extent of time for the training will dictate the a~ount of information thafcan be presented and also has obvious implications for the methods that may be used. Final decisions about the training method are determined after the content has been finalised. The audio-visual materials and other tangible materials to be used in training are to be specified in the training plan. Six elements should be included in any written training plan:

1. Objectives: A complete statement of training objectives. 2. Training Contents: A summary of the information to be presented through lectures or by other methods. 3. Time: An estimate of the amount of time needed for each training activity. 4. Method: A clear description of the methods that will be used. 5. Materials: A brief description of al\ materials that will be used in the training session. 6. Evaluation: A programme of evaluation/assessment, and analysis of employee feedback.

Implementing a Training Programme A training programme is an ongoing process and its thrust has been changing from time-to-time, depending upon the current needs of the organisation. Training programmes in the true sense do not begin and end with the programme schedule/ time-table. For a participant, the programme starts when he is informed of his nomination. Sufficient care should be taken that nomination is need-based. Once a particular training programme has been designed, training and development professionals are responsible for its implementation. This responsibility includes planning and execution of training sessions and building a corpus of competent trainers. The training sessions must be well-planned. A poorly planned and executed programme may create a negative impression on the part of trainers and trainees alike. Trainers should know well in advance the general purpose of training and the dates, duration and location of the programme. More often, managers, supervisors, and personnel staff within the organisation serve as trainers. Training should also be imparted to those with training responsibilities. Training for trainers should include how to organise and present their material, motivate and reinforce trainees, and prepare them to apply the new learning material to the job. Training the trainers is an important responsibility of training specialists. The disappointments which arise from training programmes usual\y originate from: (i) the members being wrongly selected; (ii) the members being badly prepared and motivated;

(iii) the course being bad in content or method; (iv) the course objectives being inappropriate; and (v) the course not being related to organisational realities.

The factors which contribute to training success are as follows : • Top management support and commitment, preferably direct involvement. • The encouragement of team work, i.e., work achievement by co-operative effort towards defined goals. • High standards of professionalism; a sound knowledge of training principles and methods and an intimate knowledge of the organisation and how it operates; a reputation established by a good track record in identifying and satisfying needs.

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• Skill in recognising the necessity for change and being able to handle efficiently. • Adaptability in responding to varying individual and group characteristics. • Evaluation procedures which enable training activities to be monitored and if necessary modified. • Recognition that training should be cost-effective.

The Trainer The training philosophy and approach places high demand on the trainer. A trainer must possess sufficient knowledge, skill and practical experience in training. A trainer is someone who is competent in three fields: training know-how, training approach, and above all training co-operation. One of the major tasks of the trainer is to provide leadership in establishing goals for the training and development activity. To some extent the success of the training programme depends upon proper selection of the person who performs the training tasks. Personal characteristics are important factors in the selection of trainers. A trainer has to determine: (a) what training has been done? (b) what has been accomplished through the training efforts? and (c) what training is now planned or targeted for future? His major tasks are: • To identify training needs. • To identify all the tasks performed on-the-job. • To determine the learning requirements for those tasks. • To appraise the trainees' capacity to learn those tasks. • To formulate a training approach that matches the learning requirements for those tasks. • To develop a training programme that implements the approach. • To tryout the programme with a sample of the intended audience. • To make revisions based on test results. • To establish reasonable and measurable quality and quantity standards and plan the total input of training activities. • To undertake a comprehensive training audit periodically. A trainer needs to know, for example: • the number of participants, their position, their experience in the subject-matter; • the subject to be taught, breadth and depth of coverage, skills to be developed, level to be atained; • the teaching provided by the other trainers; • date, time, place, arrangements for travel, accommodation, training facilities; • outstanding professional experience on the subject presented; • 'a written summary of the lecture and any other materials which need to be reproduced and distributed to participants; • appropriate skills in teaching methods and in the use of audio-visual aids.

Evaluating Training Systems Hamblin (1970) defined evaluation of training as "any attempt to obtain information (feedback) on the effects of training programme and to assess the value of training in the light of that information for improving further training." Evaluation of training can be viewed as a method of measuring change in knowledge, skills, attitudes, job performance, costs and the quality of training facilities. It is simply a feedback. It has to be accepted as a process than an end product. It is about using the information of assessment to make judgments. The efficiency and effectiveness of in-house and external training programmes is taken "on faith" by many employers. For years, psychologists and many training professional have argued that organisations spend far too little money and time evaluating the effectiveness of training programmes. There are many reasons why training programmes should be thoroughly evaluated. A major reason to evaluate training programmes is to determine ifthey are accomplishing the specific training objectives.

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A training programme that does not change employees' knowledge, skills, or attitudes in the desired direction should be modified or replaced. A second reason for evaluation is to assure that any change in trainee's capabilities are due to the training programme and not to other conditions. In order to determine that a training programme is responsible for changes in trainees, it is necessary to compare the trainee's performance before and after the programme with a control group. Another reason to evaluate training programmes is to be able to explain programme failure should it occur.

Kirkpatrick Approach Probably the most well-known framework for classifying areas of evaluation comes from Kirkpatrick. In his model, he developed a conceptual framework to assist in determining what data are to be collected. His concept calls for four levels of evaluation, and answers four very important questions.

Questions

Level 1.

Reaction

Were the participants pleased with the program?

2.

Learning

What did the participants learn in the program?

3.

Behaviour

Did the participants change their behaviour based on what was learned?

4.

Results

Did the change in behaviour positively affect the organisation?

Reaction: Reaction is defined as what the participants thought of the programme, including materials, instructions, facilities, methodology, and content. It does not include a measure of the learning that takes place. Learning: This level of evaluation is concerned with measuring the learning of principles, facts, techniques, and skills presented in a programme. Behaviour: The term 'behaviour' is used in reference to the measurement of job performance. Just as favourable reaction does not necessarily mean that learning will occur, superior achievement in a programme does not always result in improved behaviour on the job. Evaluation in this category may include (a) before and after comparison; (b) observations from the participant's superiors, subordinates, and peers; (c) statistical comparison; and (d) long-range follow ups. Results: Evaluation at this level relate the results of the programme to organisational improvement. Some of the results that can be examined include cost savings, work output improvement, and quality changes. This involves collecting data before and after the programme and analysing the improvement. In this evaluation, every effort should be made to isolate the variables which could have caused the improvement.

Saratoga Institute Approach 1. Training satisfaction: The ,degree to which participants are satisfied with the training they have received. 2. Learning change: The actual learning that has occurred, with pre-and-post-course instruments. 3. Behaviour change: The on-the-job change in behaviour as a result of the training program. 4. Organisational change: The improvements in the organisation as a result of the training program, measured in quantitative terms.

If evaluation is to be effective, it must be conducted in accordance with accepted and proven principles and procedures. Here are the major considerations: . • Evaluation must be planned in advance; it should not be haphazard. What is to be evaluated, at what points, by what means, and by whom, must be decided in advance. • Evaluation must be conducted in terms of objectives and purposes. • Evaluation must be verifiable. Its results must be reliable and provide for a system of cross-checks. • Evaluation must be co-operative and harmonious. • Evaluation must be a continuous process, an everyday activity.

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• Evaluation must be specific and must be quantitative. • Evaluation must be administratively feasible. • Evaluation must result in usable information. There are many reasons why a basically sound programme may fail to meet the objectives. Perhaps training objectives were too ambitious or the programme was not implemented as planned due to the equipment breakdown or human failure. The training programme may either be retained or discontinued depending upon the results. Information from evaluation is necessary to revise, improve, or completely change the contents or methods of training programmes. Like any other personnel or business programme, training programme must demonstrate their cost effectiveness in order to justify their continuation. Understandably, training as a function is always on the defensive. Because, it is basically seen as a cost and not as a potent force which helps improve company results. It is seen as an activity undertaken more as a ritual rather than a bottom-line improving activity. Much hard work has to be done in establishing what has actually been achieved before it is possible to say whether the costs involved are justified. A report on the course attended by the participant is certainly desirable as a means of: (i) helping the man himself to clarify what he got from the experience; (ii) aiding the manager in discussing the course with him; and (iii) providing information on the potential value of the course to other people in the company.

Course Evaluation The main objectives of course evaluation are: • to assess the suitability of the aims and objectives of the course programme; • to identify whether the course is meeting these aims and objectives; • to consider the suitability of course content and structure; • to enable the participants to measure their development and progress; • to judge the relevance and usefulness of materials used in the course; • to assess the adequacy of the organisational and administrative arrangements; • to encourage the change and adaptation of materials and methods as a routine part of the training process; • to develop models of good training practice.

Identify training needs

I I

-

....

Set training objectives and cri teria to eval uate

1

Select or develop institutional material training methods. and methods of instructional delivery

4

Select training (experimental) design

~

~

Conduct training

Figure 11.2 Training Process

---.....

Evaluate training effectiveness ~~

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BOX 11.3 Post Course Evaluation Form Course Title:

Date:

1.

What was the main value of this course to you?

2.

Which topics did you consider the most useful?

3.

Was the course too long, too short or just right?

4.

Which topics were too long?

5.

Which topics could have been expanded?

6.

What did you like best about this course?

7.

What topics would you like to change?

8.

What topics would you like to add?

9.

What elements of the course will be of use to you in the workplace?

10.

Did the course meet its objectives?

11.

Do you recommed this programme to others? If so, why?

12.

What follow-up training (if any) would you suggest?

13.

Your suggestions for improving the course. BOX 11.4 Workshop Evaluation Form POOR

1.

The information you received prior to the commencement of the workshop Comments:

2.

The arrangement of the classroom and facilities Comments:

3.

The refreshments and food Comments:

2

EXCELLENT

3

4

5

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4.

The reading materials you received Comments:

5.

The value of the ideas that were presented Comments:

6.

The opportunities provided to apply them Comments:

7.

The likelihood that you will use them in your job Comments:

8.

The thoroughness, the breadth of coverage of topics Comments:

9.

The specificity, the depth of coverage of topics Comments:

10.

The length of the workshop Comments:

11.

The timing of segments, of breaks Comments:

12.

The sequence, the organisation of the material Comments:

13.

The use of visual aids Comments:

14.

An ability to participate and make presentations Comments:

15.

The discussion of specific examples Comments:

16.

The friendliness, the frankness of the class interaction Comments:

17.

The organisation and co-ordination of the programme Comments:

Training Costs It is useful to track training's full costs according to eight phases: administration, research and development, analysis, design, development, delivery, evaluation, and marketing. Costs for each training phase can be subdivided into: • Personnel costs: for people involved in a training project including in-house subject-matter experts and outside personnel's fees and expenses. • Outside purchase of goods and services: for materials and supplies brought from an outside provider for a specific training programme. • Facilities costs: for the use of rental facilities such as classrooms, research and development laboratories or work shops. • Incidental expenses: for travel and daily expense allowances during a training programme. General and administrative costs - for costs associated with maintaining the training department, although cannot be directly traced to a particular training programme. Such costs include general supplies and materials, equipment, facilities and administrative and staff support, their salaries, wages and fringe benefits.

Training Audit The training audit is to be conducted at the organisational level, functionalldepartmentallevel, and event/programme level. The process of auditing the training programme involves a detailed examination of a particular training programme to see if every stage of its design, implementation and validation has been carried out properly.

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A systematic approach to training involves the application of a number of processes, skills and techniques to a sequence of wide-ranging activities. In this regard, there needs to be some form of superordinate control function which monitors the system to ensure that it works properly. The training audit fulfils this objective. BOX U.5

Training Audit Questions 1. What are the broad aims of the current course? 2. When did the training commence and why? 3. Were the training needs analysis been undertaken, if so, when? 4. Is there a satisfactory balance between different methods of training? 5. Are the teaching methods relevant in the light of target population characteristics? 6. How are the trainers selected? 7. What is the training and development programme for the trainers to improve their skills? 8. What is the quality of hand-outs, exercise material, and other training aids? 9. How many persons have attended the course over the last two years? 10. Has there been any change in the participant profile? 11. At what points during the course are tests and exercises used? 12. How are the tests and exercises designed? Objective, self-assessment, and so on. 13. How far do the training materials meet the needs of the trainers? 14. How conversant is the training department with the organisation's policies, corporate objectives, and strategies and resources. 15. What methods does the training department employ to ascertain training needs? 16. Does the training function develop a training plan for every department? 17. Are training plans formulated in relation to the organisation'S corporate objectives and plans?

Training Research Every training activity is unique enough to warrant, at the very least, a modest but continuing research effort of its own. The objectives of research in training should be to provide data that will (a) assist in decision- making in training; (b) offer alternative solutions and new approaches to training problems; (c) insure adequate planning, programming, and budgeting of all research activities; and (d) prevent duplication of research efforts. Trainees may be asked to take up research projects in which they get the opportunity of collecting, processing and presenting their findings to others.

Training Budget The principal management control over training is the budget. The budget for training can best be measured in terns of training effectiveness. A budget must be realistic, in accordance with the mission and the assigned training responsibilities. Necessary changes in the budget should be made in advance and with the full knowledge of those affected. In preparing a training budget, the following steps are normally followed: 1. A request is made for an overall budget estimate for the fiscal period. 2. Estimates for each training function are collected, analysed and evaluated. 3. A tentative budget is drawn up and submitted for approval. 4. The budget is reviewed by the organisation's budget controller. 5. The training chief is informed of the approved budget. 6. Unforeseen changes and variances are reviewed monthly and corrective measures taken wherever possible.

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Development Programmes Worker Development: Worker development programme purports to enhance the skill and knowledge of the employees to advance in the company or to accomplish additional job responsibilities. The programmes can enable the organisation to have a workforce which can make more contributions and adapt to changing situations. Among these are included on-the-job training and apprenticeship training. Since most jobs in industry can be learned in a relatively short period of time, on-the-job training method is the most widely used. It has the advantage of strongly motivating the trainee to learn since it is not located in artificial situation of a classroom. The fact that the success of the scheme depends almost entirely upon the immediate supervisor, the personnel department has a major responsibility for making a good, effective trainer out of every supervisor. Apprenticeship programmes are designed for a higher level of skill and knowledge. In large organisations, there may well be several hundred apprentices of varying types, ranging from craft apprentices to graduate apprentices. All these schemes comprise a mixture of theoretical and practical training, i.e., on-the-job training and experience and classroom instruction in particular subjects. Apprenticeship programmes are available in a number of crafts such as machinists, electricians, welders, turners, and carpenters. The following steps will help to give momentum to the HRD of workers: • Human resource development for workers is a prerequisite for the progress and development of any organisation. • HRD for workers should be planned and systematic. • An increased interest in the workers' HRD on the part of both management and trade unions and their involvement in it is called for. • The line manager should be involved in all HRD activities meant for the workers. • A collaborative environment should be created so as to make the workers feel that their role is important in the development and progress of the organisation. The importance ofHRD for workers in the services sector is of prime importance. If the worker in this sector is developed properly, the quality of service would be of first rate. Railways, banks, insurance companies and educational institutions are the most important service sectors in which HRD for workers playa very vital role. Supervisory Development: The supervisory staff need training most, for they form a very important link in the chain of administration. The training programme for supervisors must be tailor-made to fit the needs of an undertaking. The training enables supervisors to cope with the increasing demands of the enterprise in which they are employed and to develop team spirit. Supervisory training aims at:( 1) helping the present supervisors to improve their performance; (2) helping them to prepare for greater responsibilities of the higher levels of management; (3) building up the security and status of supervisors; .and (4) ensuring their technical and human relations competence with a view to enabling them to know and understand all about the processes and operations in which their workers participate. The courses for supervisors concentrate upon those areas which are closely related to their day-to-day jobs. Supervisors' training may include the supply of necessary reading materials, job rotation to give them a wide in-plant experience, holding of staff meetings, visits to other industrial units, participation in the work of other departments, lectures and teaching, role playing, case studies and conferences. Nevertheless, the purpose of supervisory training is not to teach but to create within the individual the desire to learn. Managers and supervisors do not need to be taught as much as they need to be stimulated. Management Development: Managers are largely made, not born. This is a significant statement in modern management literature and forms the basis for numerous management development programmes. Management development is a systematic development of training and growth by which managerial personnel gain and apply skill, knowledge, attitudes and insights to manage the work in their organisations effectively and efficiently. In other words, management development is an educational process of utilising systematic and organised procedures by which managerial personnel learn the conceptual and theoretical knowledge for general purposes. These purposes concern: (1) productivity; (2) quality; (3) human resource planning; (4) morale; (5) indirect compensation; (6) health and safety; (7) obsolescence prevention; and (8) personnel growth. The objectives of management development programmes are: 1. To improve the performance of managers at all levels in their present jobs and to realise full potential for future jobs. 2. To ensure availability of appropriate number of managerial personnel to the organisation at all levels.

3. fO afford opportunities to executives to fulfill their career aspirations.

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4. To develop human relations skills in the managers. 5. To develop managerial skills for shouldering higher responsibilities. 6. To stimulate innovation, creativity, and analytical ability of the managers. The need for management development has been keenly felt since the beginning of this century. Earlier, only a few chosen persons were picked up to fill the key posts, but now business and industry concentrate on the development of all those who are in management positions, or who are fresh from management institutions and have a potential for development. If management development programmes are not evolved, the managerial personnel would become "obsolete." David Ewing4 has rightly said: "The management personnel must realise that they will not survive unless they keep pace with modem management education, research theory, principles and practices." The planning of management development programmes deserves the utmost attention. At the very outset, objectives of the programme should be defined. Specifically, these programmes purport to bring managers up-to-date in respect of technological and scientific advancements, provide knowledge of business responsibilities, develop a broader perspective, and provide understanding of people. Each organisation must design its own programme to suit the climate of the firm and the needs of the organisation. Management development programmes should be carefully evaluated with a view to determining effective methods, procedures and devices. Attempts should be made to assess the extent to which these programmes have accomplished the objectives and needs. Executive Development: Early identification and development of executive talent is one approach forefff;ctive utilisation of those judged to have a high or unlimited potential for senior corporate responsibility. It should be regarded as distinctive and separate from management development since it involves a small proportion of the organisation's members and is calculated to bring the best out of the best. There are various objectives of executive development, which are: 1. To prevent managerial obsolescence by exposing the managers to new concepts and techniques in their respective fields of specialisation. 2. To prepare the present executives for higher assignments so that they may be promoted from within. 3. To develop a second line of competent executives for future replacements.

4. To promote high morale and good organisational climate. Development programmes help executi ves in acquiring and developing variety of skills and knowledge, such as, decisionmaking skills, interpersonal skills,job knowledge, organisational knowledge, general knowledge, and specific individual needs. Self-Development: Success in management development cannot be achieved without strong elements of selfdevelopment. No formal training programme can produce results until a manager-trainee is sufficiently motivated and organised to use self-development approaches. In the field of management learning, the term self-development as a separate method has been in use since the late 1970s. During that time it has come to take on a number of different meanings. Self-development has two main characteristics - development of the self, and development by the self. In self-directed learning, the trainee takes the initiative and responsibility for what occurs. Trainees select manage and assess their own learning activities which can be pursued at any time, in any place, through any means and at any age.

Training Scenario Training and developing employees and managers is becoming the number one priority in today's workplace. Today's employer no longer has the option to train or not to train, but the question simply is, how much and when. Training is being brought to the forefront by the changing nature of the workforce. As we move farther into the Information age, there will be the need for training and retraining for jobs which did not exist a few years before. The training field is on the move. It is becoming increasingly sophisticated and professional. To meet this challenge, we need better equipped trainers and various types of training materials than ever before. The time in which we live is the era of the lifelong learner. We have to continue to learn all of our lives or we will become obsolete. This lifelong learning has to be deliberate, planned and continuous.

will

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Development of the self implies: • a new sense of confidence; • understanding oneself; • feeling a positive self-image; • understanding or tolerance of others; • acquiring new skills; • deciding what to do in the near future.

Development by the self implies: • thinking, sorting out new ideas; • giving up old ideas; • trying out something new; • taking a risk; • stepping into the unknown; • thinking about something that happened; • trying to achieve a goal.

In a dynamic work environment and a rapidly changing economic scenario, there is need for training and re-training personnel in order to enable them adopt to new situations. In this age of the knowledge worker, every person needs to embrace a lifetime of learning and it is up to the organisations to give their employees this opportunity. Only those organisations which are able to give relevant training to their personnel in order to prevent obsolescence will be able to survive in the market-driven and competitor-ridden economic environment of the future.

SUMMARY Training is a learning process that involves the acquisition of skills, concepts, and attitudes to enhance the performance of employees. Today, there is a higher priorityfortraining to cope with the challenges of globalisation, quality improvement and competition. Hence, in the emerging environment, the need is all the more to train employees in updating or acquiring new skills, determining the training needs, establishing objectives, and applying appropriate measures to meetthose needs. Training helps to communicate better, helps to percolate values down the line, and assist in building skills and healthy attitudes. All training activities encompass three stages: identifying learning needs, delivering the training, and evaluating the results. The analysis of training needs at all levels involves firstthe definition of the job to be done and the results required, and second, the identification of skills, knowledge or attitudes necessary to perform the job effectively. Effectiveness of training largely depends upon the proper diagnosis of the training needs and the formulation of strategy for implementing training as an appropriate intervention. Necessary in-house or external programmes may be designed for various levels of employees in the organisation. The usual questions underlying the training mission have been: Whom to train? What to train? When to train? The various steps in the evaluation oftraining and development include reaction,learning, behaviour and results. Training can be of significant value only when it contributes to organisational excellence and is carried out after a diagnosis of individual, group and organisational needs.

REVIEW QUESTIONS 1. What is training? What are the training needs and objectives? 2. How should on~ go about identifying training needs in an organisation? 3. Which methods of training are most suited for managerial training, and why? 4. Discuss important factors in evaluating training effectiveness. 5. Why,do organisations often overlook or lack proper evaluation of employee training and development programmes?

CASE 1 Motorol.! University

Motorola Un iversity was started in 1981 as the Motorola Training and Education Centre. It was created to provide training needs and established itself as a corporate department. During the 1980s, Motorola University's original aim was to help its company build a quality culture which would then develop an international training system. They set-up corporate-wide training plans and training investment policies. By 1990, Motorola University had expanded its operations in the United States, Eastern Europe, South America, and the Asia Pacific Region. Motorola continues to grow at a significant rate, with increasing number of employees every year. With this growth, Motorola has the need to train people to occupy different positions in their company. Jeff Oberlin, director of Motorola University's Department of Emerging Technologies and Human Resource Trends explained:

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'We can't keep using traditional classroom methods of instruction to spread the message for Motorola. Our reach isn't far enough to get to everybody. We mustfind creative ways to help new associates, world-wide, become productive members of a team and receive consistent messages about how we do business; the core values of Motorola, and the tools and techniques we use." Jeff's charter is to closely re-examine Motorola University's methods of spreading information, delivering training, and determining new and better ways of providing Motorolans with the knowledge and skills required to meet the ever-changing demands of the industry. Multimedia training would allow Motorola to: • Get training to all Motorolans world-wide, including emerging markets. • Reduce training times and cost. • Increase knowledge of the firm. "Once we determine how to use the various technologies available to us, we want to share that knowledge with the business." Motorola is looking for associates with expertise in a number of areas: • Computer based training • The internet • Satellite and business television • Wireless communication • Corporate education departments • Software • Video Today, many managers, supervisors and employees from all parts of Motorola have attended diversity training. This training helps participants to have more opportunities to develop and achieve their full potential. Discussion Questions

1. What is the secret of success of Motorola? 2. How to make in-house training programmes more effective?

CASE 2 Training Approach

The Loha Manufacturing Company is in a verjcompetitive metal products business. It employs 4,000 people. Because of the similarity in the product design and competitive prices with those of its competitors, it maintains its sales by emphasising quality and service. About a year ago the company lost two of its major customers, who had been dissatisfied with excessive manufacturing defects. After studying the problem, the company decided that its basic engineering was sound but carelessness and lack of quality consciousness on the part of production workers, inspectors, and manufacturing supervision were a prime cause of the trouble. Accordingly, it introduced a quality control programme to solve the problem. The course was given after working hours, from 7.00 to 9.00 p.m. each Th ursday for 10 weeks. Employees were not paid any additional amount to attend the classes. Technically, attendance was voluntary; however, management intimated that employees who attended sincerelywould have the fact recorded in their personnel records. This fact would be considered in future pay rise and promotions. The course was taught by a staff engineer from the quality control department. The course methodology mainly consisted of lectures, and at times movies on quality control and some discussions. The course covered such topics as the need for high quality, "quality can't be inspected into a product, it must be built- in", conditions affecting quality, costs of poor quality, inspection standards, inspection procedures and methods, statistical quality control, sampling inspection, and control chart procedures. The course was open to all interested employees in the plant, including supervisors. Attendance atthe early sessions averaged around fifty. Toward the end of the course ,it had declined to about twenty-five.

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The training manager made the following comment at the conclusion of the course: "Rajan (the instructor) did a good job of lecturing. He was interested, informative and spiced his talks with humour at appropriate times. It was not his fault that attendance fell off." Discussion Questions 1. Do you think this training programme was organised and administered properly? 2. Are there any other training methods that could properly have been used? 3. Evaluate the merits and demerits of the approach followed in improving product quality.

REFERENCES 1. Price, N., Personnel- Human Resource Management, p. 572. 2. Mager, R.F., Preparing Instructional Objectives, 2nd ed. 3. Henricks, J.R., Personnel Training, in Handbook of Industrial Organisational Psychology, p. 856. 4. Ewing, David, W., 'The Knowledge ofan Executive', in The Educational Development Services, p. 181.

I don't think much of a man who is not wiser today than he was yesterday.

- Abraham Lincoln

EMPLOYEE COMPETENCY DEVELOPMENT

Competencies are the underlying characteristics of an individual- knowledge, skills, attitudes, values, self concepts, traits and motives that have casual relationship with effective/and or superior performance in ajob situation. Competencies may be classified as:

Classification of Competencies 1. Central and Surface Competencies: It may be mentioned that competencies exist at surface as well as at core personality level. The surface level competencies of ~nowledge and skills are visible in performance or behaviour and can be developed with appropriate training and development. However, the core motives and trait competencies reside within and are difficult to understand, measure and develop. 2. Threshold and Differentiating Competencies: Threshold competencies are characteristics required by a job holder to perform a job effectively whereas differentiating competencies are those characteristics which differentiate superior performers from average performers. A competency map is an assessment tool that outlines the skills and behaviours required to succeed as a manager and! or leader. More importantly, it is a vehicle by which team members are able to help focus and support a participant's learning process. The purpose of competency development, on the other hand, is to constantly enhance the capability of the workforce to perform their assigned tasks and responsibilities.

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The word "competencies" is used in many contexts, with very different meanings. Basically, competencies fall into three categories or types:

1. Organisational Competences - unique factors that make an organisation competitive through organisational culture or organisational changes. 2. lob-role Competences - things an individual must demonstrate to be effective in ajob, role, function, task, or duty, at a departmental level, or in the entire organisation. 3. Personal Competences - aspects of an individual that imply a level of skill, achievement, or output. Competences are measurable human capabilities that are required for effective and successful work performance. Competency analysis and modelling identifies and documents those capabilities and allows a company or organisation to use that information across a wide range of people management systems. Competency can be designed for a specific job, a unit, a division, or an entire organisation.

Identifying a Competency Identification of competencies and developing a competency model is a specialised task. A comparison of the two extreme groups - star performers and average performers throws up the data on how the two groups differ on performance criteria in a particular job/role in a particular organisation. Identification of competencies for various job positions can be done with the help of 360 degree feedback in which the employee, his supervisor, subordinates and peers can help identify competencies which differentiate star performers from average performers. Their ratings on a five or seven point scale can be assigned weightages and these weightages can be multiplied with the scores given by them to get the final score for a competency. Similarly, data would be collected on other competencies required for the job position. Based on these scores, competencies could be ranked in order of importance for a particular job position. A core competency is a bundle of skills and technologies that enables a company to provide particular benefits to customers. Core competence is communication, involvement, and a deep commitment to working across organisational boundaries. It involves many levels of people and all functions. Core competencies does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared. But competencies still need to be nurtured and protected; knowledge fades if it is not used. Skills are obtained through full or part-time work, volunteering for a campus or off-campus organisation, completing an internship or through extra curricular activities. There are certain transferable skills which can be used in any occupation. Speaking, listening, greeting people, writing, meeting deadlines, operating expensive equipment - cars, computers, and maintaining a budget are examples of learned skills. Many organisations are adopting competency based people management practices and systems to find new and innovative solutions for managing and motivating their workforces. An increasing number of research studies are confirming that when organisations switch to competency-based people management systems, they are seeing substantial performance improvements and the resulting financial benefits.

Individual and Collective Competencies Individual competence may be gained through education and experience. Competence obtained through education is general in the sense that it is applicable in more than one firm and often within a variety of jobs. Competence gained through experience may be firm- specific and difficult to obtain. A firm-specific competence is necessary to perform the tasks in a satisfactory manner. The firm embraces individuals with different competencies, and consequently, one challenge is to co-ordinate and utilise a range of dissimilar competencies that are spread among a large number of employees. It is reasonable to assert that the way in which this is accomplished strongly affects the performance of the firm. When competencies are not applied, they are of little or of no immediate value to the company. Still, once detected, competencies which are applicable in present or future work constitute a potential for the firm. When key competencies in the firm are unique compared to those of the competitors, they can generate important and sustained competitive advantages for the company. An illustrative example is the competence of Swiss watch-makers, which

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for a long time, until the industry was revolutioned by the quartz technology, provided the Swiss watch industry with extraordinary competitive advantages. In this case, the competence was closely linked to the mastering of advance precision technology, which, despite immitation proved difficult for others to accomplish. Organisational performance is determined by the manner in which the competencies are chosen, combined, and utilised. The utilisation of firm's competence has a social dimension - the way in which people interact and produce collective competence and teamwork. A well-known example is the tightly co-ordinated and collaborating cricket team that lacks star players, yet plays well enough to beat star-studded teams.

Core Competencies Core Competencies are descriptions of behaviours and success criteria that are unique to an organisation's past and continuing success. The premise of core competencies is that certain skills, attitudes and role-modeling behaviour will predispose individuals to meet goals. This creates it competitive advantage for the organisation Core competencies differ by organisation and industry. Nevertheless, in all cases, they reflect job content and success in terms of skiIls, knowledge, and personal characteristics.

Managerial Skills Managerial performances in any type of organisation occurs in a context of organisational change. Like human beings, organisations do not remain static, but go through a variety of phases and life cycles. And, different stages in the organisational life cycle may require different types of skills by the manager (Quinn & Cameron, 1983). The types of skills required of managers will vary depending on the manager's position in the organisational hierarchy. Furthermore, managers may be called on to use different skills at different points during their careers and over the course of the life of their organisations. Managers, whatever their level in the organisational hierarchy, have a range of responsibilities and are required to exhibit a variety of skiIls. According to Katz (1974), these skills may be broadly categorised as technical, interpersonal or human relations, and decision-making or conceptual skills. In entry-level managerial positions, technical skills tend to be important. However, their relative importance tends to diminish as managers move up the organisational structure. On the other hand, the need for decision making or conceptual skills tend to increase in importance as one moves up the organisational hierarchy. For top-level managers, conceptual skills are essential. Interpersonal or human relations skills, however, are equally important for managers at all levels of the organisational hierarchy (Katz, 1974; Whetten & Cameron, 1984).

Competencies for HR Professionals Competence refers to an individual's knowledge, skills, abilities, or personality characteristics that directly influence his or her job performance. The concept of individual competence has a long tradition in the managerial field. Most of this work has focused on leaders and general managers. Many companies have tried to identify critical HR competencies by asking line managers within the company what they expect from HR and the kinds of competencies HR professionals should exemplify. Normally, core human resource competencies centre on leadership and managerial skills, functional performance, and personal attributes. HR competencies could be divided into five distinct domains - knowledge of the business, delivery of HR practices, management of change, management of culture, and personal credibility.

Knowledge of the Business: HR professionals add value to an organisation when they understand how the business operates. Such an understanding allows them to adapt HR and organisational acti vities to changing business conditions. In order to be effective, they must possess knowledge of organisation's financial, strategic, technological, and human capabilities. They need to be more knowledgeable than ever about financial management, external competitive environment, and customer demands.

Delivery of HR Practices: Like any other staff members, HR professionals at the very least must be experts in their speciality. Mastery ofHR concepts and delivering innovati ve HR practices builds these professionals' credibility and earns them respect from the rest of the organisation. Management of Change: Human resource professionals are well positioned to bring about necessary organisational change. This competency involves knowledge of the change processes, skills as change agents, and abilities to deliver change.

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HR professionals with a strategic performance management competency are well equipped to facilitate the pace and extent of change in their organisations. This competency is an example of the increasing role of HR as business partner.

Management of Culture: In a way, a high-performance HR strategy is a leading indicator of a high-performance culture. Take for example, an insurance company embarked on a strategic shift from selling products to designing customer solutions. To make this possible, the organisation's culture had to move from one focused on products and costs to one focused on customer service. Personal Credibility: If the other four dimensions can be thought of as the pillars of HR competence, personal credibility might be described as the foundation on which those pillars rest. Credibility comprises of three dimensions: First, it requires that human resource professionals "live" the firm's values like openness, candor, ability to be a team player, capacity to treat individuals with respect, concern for due process and professional bent of mind. Second, HR professionals build credibility when their relationships with colleagues are founded on trust. Trusting relationship emerge when HR professionals serve as valued partners on management teams, are able to work well as team members and exert influence without authority, and when they skillfully support business objectives. Third, HR professionals earn the respect of their colleagues when they have the attitude of offering innovative ideas and solutions, and encouraging debate about key issues. Assessment of HR Performance: Like other organisational leaders, HR professionals should be assessed on both the results they achieve and the behaviours they exhibit. After assessing HR competencies, a firm may embark on suitable measures for development of HR professionals. To build the required competence of its HR professionals, a firm can take recourse to training intervention - both internal and external training programmes - as well as specific development experiences. BOX 12.1

Skill Identification and Skill Development Skill Identification Skill

Evaluation Criteria

Mental Agility

Ability to quickly understand and learn in any situation

Planning and Organising

Ability to systematically plan and prepare schedules. Set and prioritise goals. Accuracy in estimating time required to complete tasks assigned.

Creativity Time Management

Using new and innovative approaches to solving problems or devising new methods and processes at work. Ability to meet time commitments. Performing without reminders or monitoring. Ability to work with minimum supervision. Ability to manage multiple tasks.

Communication

Ability to keep others informed on schedules and status.

Quality

Ability to evaluate quality related problems and find alternatives solutions. Ability to set high standards and work towards achieving them.

Interaction

Ability to interact with ease in official situations.

Self-Improvement

Ability to improve knowledge and skills, keeping up-to-date with new technology.

Problem Solving

Ability to diagnose problems, obtain solutions, prevent recurrance.

Discipline

Ability to follow rules without deviation.

Teamwork

Ability to work harmoniously with superiors and peers.

Application Knowledge

Ability to understand success factors, sufficient backgroundknowledge, understanding of concepts and their practical application.

Job Tool Knowledge

Ability to effectively use the application development platform and operating system utilities to improve productivity.

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Programming

Ability to understand programme specification, efficient use of existing code, structured programming, use of comments and remarks in code.

Testing

Ability to prepare test plans, systematic documentation of test results, ability to carry out unit and intergration testing.

Training

Ability to impart knowledge, skills, and coaching to sub-ordinates on the job.

Decision-making

., Ability to quickly gather all information needed for decision-making, arrive at proper decision, and concern about implementing the decisions taken.

Leadership

Willingness and ability to lead by example. motivate and developothers, meet group targets through all members.

Flexibility

Ability to see things from others'point of view. ability to admit mistakes on advice from others.

Systems Analysis

Application/appreciation skills, ability to analyse input, output, and processes.

Documentation

Logical structure, correct language to be used. maintenance of documen tation.

Presentation Skills

Ability to prepare presentation, effective use of audio- visual aids.

Skill Development 1.

Planning and Organisation Skills •

Follow up with others to evaluate progress of tasks

•

Give praise and credit to others for work well done

•

Motivate others on group projects

•

Facilitate brainstorming activities

•

Develop goals for an organisation

•

Work effectively with organisation members

•

Identify tasks to be accomplished

•

Prioritise tasks

•

Facilitate discussions on programme planning processes

•

Give constructive feedback

2. Oral and Written Communication Skills • Organise and present ideas effectively for formal and spontaneous speeches •

Effectively participate in group discussions

•

Prepare concise and logically written materials

•

Listen carefully and respond to verbal and non-verbal messages

•

Effectively utilise campus resources for public relations

•

Respond appropriately to positive and negative feedback

•

Debate issues without being abrasive to others

•

Possess courteous telephone skills

3. Decision.making, Supervisory, Management and/or Leadership Skills • Understand the steps involved in effective decision-making •

Facilitate groups in the decision-making process

•

Implement sound decisions

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•

Take responsibility for decisions

•

Evaluate the effects and effectiveness of a decisio'n

•

Be able to make decisions without feeling pressured

•

Remain flexible with decisions

•

Explain to others unpopular decisions

•

Motivate others toward common goals

•

Use effective coaching/mentering skills with peers or subordinates

4. Financial Management Skills •

Develop a budget accurately estimating expenses and income

•

Justify the organisation's budget to others

•

Work within a budget

•

Keep accurate and complete financial records

•

Ensure timeliness of payments

•

Develop and implement a fund-raising event

5. Critical Thinking, Problem-solving and Conflict Resolution Skills •

Anticipate problems before they occur

•

Define the problem and identify possible/apparent causes

•

Identify possible alternative solutions and select the most appropriate ones

•

Facilitate group members in identifying and evaluating possible solutions

•

Develop plans to implement solutions

•

Handle several problems at one time

•

Understand the steps involved with critical thinking

•

Recognise if a problem needs to be addressed

6. Teamwork and Teambuilding Skills •

Motivate team members to work toward common goals

•

Understand strengths and weaknesses of members and use strengths to build team development

•

Collaborate on projects

•

Support and praise one another for reaching goals and accomplishments

7. Ethics and Tolerance Skills •

Define and explain ethical behaviour

•

Practice ethical behaviour in different situations

•

Accept others' opinions and actions in a non-judgmenual way

•

Interact with and appreciate people from diverse cultural, social, and religious backgrounds

•

Interact with and appreciate physically or mentally challenged individuals

8. Personal and Professional Management Skills •

Work effectively under pressure

•

Manage time and stress effectively

•

Seek additional opportunities for professional development

•

Regularly participate in a healthy combination of activities for stress management

•

Arrive at work at an appropriate time

EMPLOYEE COMPETENCY DEVELOPMENT •

Evaluate personal and professional strengths and weaknesses

•

Take initiative in job related duties

•

Discern appropriate behaviours for the workplace

9. Human Relations and Interpersonal Skills •

Keep a group "on track" while moving towards goal achievement

•

Maintain group co-operation and support

•

Delegate tasks and responsibilities

•

Interact effectively with peers, superiors, and subordinates

•

Understand the feelings of others

•

Make commitments to people

•

Be prepared to take risks

•

Teach a skill, concept. or principle to others

•

Demonstrate effective social behaviour in a variety of settings and under different circumstances

10. Career Building Skills •

Determine likes and dislikes of current position

•

Practice new skills involving small projects (low-risk)

•

Join new or different professional organisations related to new interests

•

Take continuing education or exploratory courses for professional growth

•

Acquire new interests outside of work

•

Work or volunteer in an organisation related to new interests

•

If applicable, plan and investigate a second career after retirement

11. Management and Administrative Skills •

Analyse tasks

•

Identify people who can contribute to the solution of a problem or task

•

Identify resource materials useful in the solution of a problem

•

Delegate responsibility for completion of a task

•

Motivate and lead people

•

Organise people and tasks to achieve specific goals

12. Miscellaneous Skills •

Political skills - getting things done

•

Cross cultural skills

•

Information technology skills

•

Self-management skills - time management and prioritization

•

Consultancy skills

•

Learning and knowledge skills

•

Negotiation skills

•

Feedback skills

155

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BOX 12.2

Essential Competencies Every employee irrespective ofhislher level or grade must possess the following competencies: • Adherence to system • Analytical ability • Business understanding • Communication • Cross-functional perspective • Customer-focus • Decision making • Innovation and change • Organisation skill • People management • Strategic thinking • Teamwork Andersen Consulting multinational study listed the following skills for effective leadership today and in the future: (Outlook, 1999, No. 2, p. 21) • Think globally • Anticipate opportunity • Create a shared vision • Develop and empower • Appreciate cultural diversity • Build teamwork and partnerships • Embrace change • Show technological savvy • Encourageconstructivechallenge • Ensure customer satisfaction • Achieve competitive advantage • Demonstrate personal mastery • Share leadership • Live the values

Assessment of Competencies Competencies are based on an analysis of the professional role(s) and/or a theoretical formulation of professional responsibilities. Competency statements describe outcomes expected from the performance of professionally related functions, or knowledge, skills and attitudes thought to be essential to the performance of those functions. In a competence-based assessment system, the focus is on outcomes of performance and assessment of individuals over a continuous period. There is no grading of results, only a simple judgement of 'yes, you have met the standards' or 'no, you have not met the standards yet'. The key factors of a competence-based system are: • focus on 'outcomes' • individualised assessment • no percentage rating

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• no comparison with other individuals' results • all standards (requirements) must be met • on-going processes leading to further development • only 'competent' or 'not yet competent' judgements made. The purpose of competence-based assessment system is to collect sufficient evidence that individuals can perform or behave to the specified standards in a specific role. If this assessment is linked to an award system, a further purpose is formal recognition of successful performance. The assessment serves the purpose of: (a) Measuring individual contribution to business objectives; (b) Measuring group/team contribution to business objectives; and (c) Identifying potential for further development. Assessment may be: • occupational/technical competence • personal/individual competence • general competence • all three or any combination. The competence-based assessment may be used for: • certification • performance appraisal • identifying training needs • skills audit • prior learning • recruitment and selection • evaluating training.

Competency Mapping Competency approach to job 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 of the organisation. The steps involved in competency mapping are presented below: (a) Conduct ajob analysis by asking incumbents to complete a position information questionnaire. (b) Using the results of the job analysis, a competency based job description is developed. (c) With a competency based job description, mapping the competencies can be done. (d) 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. It is not easy to identify all the competencies required to fulfill the job requirements. However, a number of methods and approaches have been developed and successfully tried out. These methods have helped management 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. Some major approaches of competency mapping are:

1. Assessment Centre: Assessment centre is a mechanism to identify the potential for growth .. It is a procedure specifically designed to evaluate a candidate's managerial potential. It's objective is to reinforce strengths, overcome weaknesses, and exploit potential of the employees through training and developmental efforts. The assessors observe the behaviour and make independent evaluation of what they have observed, which results in identifying strengths and weaknesses

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of the attributes being studied. Assessment centre comprises a number of exercises or simulations which have been designed to replicate tasks and demands of the job.

•

Data generated during the process of assessment can become extremely useful in identifying employee potential for growth. This data can be used for recruitment and promotion, early identification of talents among the employees, diagnosis of training and development needs, and organisational planning. The assessment centre exercise provides an opportunity for the organisation to review its HRM policies. Assessors must receive thorough training and demonstrate performance that meets requirements prior to participating in an assessment centre. The training should focus on processes of information, drawing conclusions, interview techniques and understanding behaviour. Most organisations use a combination of the following techniques to assess the strengths, weaknesses, and potential of employees. (a) Group discussion: In these, candidates are brought together as a committee or project team with one or a number of items to make a recommendation. Group discussion allows them to exchange information and ideas and gives them the experience of working in a team. (b) In 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, which assumed a new position or replaced their predecessor at short notice and has been asked to deal with their accumulated correspondence. (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. (d) Case studies: In this type of exercise the candidate is presented with the task of making a decision about a particular business case. Candidates generally work independently on such an exercise and their recommendation or decision is usually to be communicated in the form of a brief written report and/or a presentation made to the assessors. 2. Critical Incidents Technique: Critical incidents technique can be described as a set of procedures for systematically identifying behaviours that contribute to the success or failure of individuals or organizations in specific situations. It is useful for obtaining in-depth data about a particular role or set of tasks. It involves gathering facts, content analysis, and creating feedback. 3. Interview Techniques: Almost every organisation uses an interview in some shape or form, as part of competency mapping. The interview consists of interaction between interviewer and applicant. If handled properly, it can be a powerful technique in achieving accurate information and getting access to material otherwise unavailable. 4. Questionnaires: Questionnaires are written lists of questions that users fill out and return. This technique can be used at any stage of development depending on the questions that are asked in the questionnaire. 5. Psychometric Tests: Many organisations use some form 0f psychometric assessment as a part of their selection process. A psychometric test is a standardized objective measure of a sample of behaviour. These tests may be in the form of aptitu,de tests and/or achievement tests. BOX 12.3 Assessment Centre - Its Essential Elements

1. Ajob analysis of relevant behaviour to determine attributes, skills etc., for effecti ve job performance and what should be evaluated by assessment centre. 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. S. Multiple assessors must be used for each assessed. 6. Assessors must be thoroughly trained. 7. Behavioural observations by assessors must be classified into some meaningful and relevant categories ofattributes, skills and abilities, etc.

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8. Systematic procedures should be used to record observation. 9. Assessors must prepare a report. 10. All information thus generated must be integrated either by discussion or application of statistical techniques. Source: The International Personnel Management Association (IPMA) .

SUMMARY Human resource professionals must possess a wide range of knowledge, skills, and abilities and must perform many roles at various times. The particular balance of technical, interpersonal or human relations, and conceptual or decisionmaking skills required of a manager will vary, depending on the manager's position in the managerial hierarchy. Senior level managers are called upon to use conceptual skills to a greater extentthan are junior level managers. However, all managers, regardless of their location in the hierarchy, need to have good interpersonal skills. By understanding the multiple role demands and competing values of their jobs, managers may be better able to guide their organisations toward effective performance.

REVIEW QUESTIONS I. How are the competencies classified?

2. What is the concept of "Competency mapping"? 3. What are the major methods of competency mapping? A great leader shows the ability to make decisions and act boldly in the face of setbacks and adversity.

- Kautilya, the Arthashashtra

13 EMPLOYEE CAREER AND SUCCESSION 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. 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

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organisation. Basically career development practices are designed to enhance the career satisfaction of employees and to improve organisational effectiveness.

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. (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.

Career Planning Policy In career planning policy, the organisation has to decide on the extent to which (a) makes or develops its own managers, (b) brings talent from outside because offuture shortfalls in the availability of managers and ( c) recruits deliberately from outside. Organisations follow both short-term and long-term career planning policies. In short-term, they recruit and train high performers who will be good at the present job and are rewarded accordingly. If they are really good, they will be promoted. Employers who believe in long-term career planning develop highly structured approaches. They go in for elaborate performance and potential assessment programmes.

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 counselling, 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. 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 payoff. 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.

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Career Planning Structure The characteristics of a good career structure (sometimes known as career ladders) are: • It has steps consistent with the general value of jobs and with other career structures. • It makes clear that getting to the top of the structure is not a right but is based on merit and capability. • The entry requirements for each step are clear. • There is formal assessment procedure in order to progress from one step to another. • The career structure is known and understood by all. • It is controlled and implemented with integrity. • 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 allocatingjobs 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.

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. Career planning and development programmes help enhance employees' job performance and thus the overall effective.ness of the organisation. By developing employees for future positions, an organisation is assured of a supply of qualified, committed employees to replace the higherlevel 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. Table 13.1 Benefits of a Career Development System

Managers/Supervisors

Employees

Organisation

1. Increased skill in careers with career

Helpful assistance decisions

Better use of managing own employee skills

2. Greater retention of valued employees

Enrichment of present job and increased job satisfaction

Dissemination of information at all organisational levels

3. Better communication between manager and employee

Better communication between employee and manager

Better communication within the organisation as a whole manager

4. More realistic staff

Mor~

Greater retention of valued employees and expectations

S. Productive performance appraisal discussions

Better feedback on performance developer

Expanded public image as a people

6. Greaterunderstanding

Current information of the organisation

Increased effectiveness of personnel on the firm and the systems future

7. Enhanced reputation as a people developer

Greater personal responsibility for career

Greater clarification of goals of the organisation

realistic goals planning development

Source.' Z. B. Leibowitz, C. Farren, and B. L. Kaye, Desigllillg Career Developmellt Systems. San Francisco, CA; Jossey-Bass, 1986. p. 7.

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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.

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 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."1 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 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 fulfilment. 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 controll; and variety. Career anchors are the self-perceived sources of stability in the individual's internal career. When people enter a field or occupation, they typically are anchored only in the extremely defined criteria of progress; academic performance, test scores, and talents. As the individual progresses through educational institutions and early occupational experiences, he or she begins to form a self-image based on the matching of external feedback and internal feelings of accomplishment and satisfaction. If mismatches occur, they seek a change in career until there is some matching of talents and motives with external rewards. 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.2 Each stage represents different career needs and interests of the individual.

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;

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(3) Communication of information concerning career options and opportunities with the organisation; and (4) Career counselling 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. Career counselling typically involves a discussion on an individual's interests, work values, career goals, current job activities and performance, and action plans. Counselling can be formal or informal in nature. Formal career counselling is usually conducted by career counsellors and vocational psychologists in individual sesssions. Supervisors are considered a primary source of career information and can do a number of things to facilitate the career counselling process. However, counselling in many organisations is informal, while more established programmes provide staff positions for career counsellors. The way in which organisations assemble the four career planning elements results in a variety of unique career planning programmes. The questions which are normally asked in a career planning programme are: (a) Why do we want a career planning programme? (b) What are one's expectations from a career planning? (c) What specific groups or employees are to be provided with career planning facilities? (d) What should be the components in a career planning programme? (e) What career planning aids are needed?

Facilitating Career Planning Organisations can facilitate career planning in a number of ways. D.T. Hall divides the areas of concentration as follows: (1) organisational entry; (2) the job; (3) the boss; (4) organisational structure and procedures; and (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 counsellors 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. Anyone 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. HalP suggests that managers receive training in job analysis andjob restructuring so that they can identify a challenging job, or restructure ajob to make it more challenging. Additionally, they should receive training in interviewing and counselling 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 counselling efforts and on the information provided by human resource planners. If expected job vacancies fail to materialize or if unforeseen changes force alterations

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in the job structure, someone is likely to be disappointed. To avoid this, career planners and human resource 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 family's 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.

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. Top management support is needed to establish a climate that fosters career development. It is extremely important that supervisors be involved in career planning programmes. To play their roles successfully each must assume a set of responsibilities in career development. The organisation's responsibilities include: • Providing resources for self-understanding and goal setting • Setting and communicating missions, policies, and goals and objectives • Providing information on organisation's options and career paths • Providing training, education and mobility opportunities • Reinforcing and supporting the manager's role in career development and counselling. The manager's responsibilities include: • Giving clear feedback about what employees should reasonably expect • Providing forums for discussions • Providing support and opportunities • Identifying employee potential • Providing growth opportunities consistent with employee and organisation goals • Communicating the formal and informal realities of the organisation • Providing exposure for employees; and • Linking employees to appropriate resources and people. The Employee's responsibilities include: • Self-assessment • Setting goals and plans • Expressing expectations • 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 any, training to their current workforce. Many do not even have adequate knowledge of their employees' skills and talents - particularly large organisations. Companies must figure out a way to create an environment that is more adaptive, collaborative, and skill-ready.

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Table 13.2 Stages, Issues and Tasks of the Career Cycle

Stages

Growth, fantasy, exploration

Issues

Developing a basis for making realistic vocational choices Obtaining education or training

Specific Tasks

Developing and discovering one's own needs and interests Getting maximum career information

Entry into world of work

Becoming a member of an organisation or occupation

Learning how to look for and secure a job

Basic training

Becoming an effective member quickly

Overcoming the insecurity of inexperience Learning to get along with boss and co-workers

Full membership, in early career

Accepting the responsibility and discharging duties Developing and displaying special skills

Performing effectively Accepting subordinate status Developing initiative and realistic expectations

Full membership, mid-career

Choosing a speciality Remaining technically competent Establishing a clear identity

Mid-career crisis

Late career in non-leadership role

Late career in leadership role

Decline and disengagement Retirement

Reassessing own progress relative to ambitions Deciding relative importance of work and family Becoming a mentor Broadening interests Deepening skills Using skills and talents for organisation's welfare Selecting and developing subordinates Learning to accept reduced power and responsiblilty Adjusting to more drastic life style changes

Gaining a measure of independence Assessing own motives, talents Assessing organisational and occupational opportunities Becoming aware of career anchor Making specific choices about the present and future Remaining technically competent Developing interpersonal skills Dealing with younger persons Becoming more responsible for organisation Handling power Balancing career and family Finding new sources of satisfaction Maintaining a sense ofidentity and self-worth without job

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: • • • • • •

Are they used by employees? Do they provide accurate and useful information? Do they extend needed career development opportunities to employees? Are employees' career plans realised? Do employees experience fewer or less severe career problems than they did before? Do employees who participate have more successful careers than those who do not?

• Are the results worth the costs incurred?

Succession Planning Succession planning refers to the process and actions that aim at identifying and developing a pool of potential successors for senior or key jobs in the future. It ensures the continual supply of qualified executive talent to lead and support business growth.

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Succession planning is an ongoing dynamic process that helps an organisation to align its business goals and its human capital needs. It also ensures that an enterprise can keep pace with changes to the business, industry and overall marketplace. Innovati ve organisations use succession planning to develop and maintain strong leadership and to ensure that they address all the skills and competencies required for today's business environment. Succession planing can also be an extremely powerful tool in motivating and retaining top leadership. The following are the objectives of succession planning:

1. To build organisationalleaderslzip: Succession planning addresses the needs of the organisation in terms of filling up the senior positions as and when the occasion arises. 2. To help formulate contingency plan: Succession planning helps an organisation to prepare for an unexpected event. 3. To sustain organisational performance: Succession planning ensures that an organisation has the right personnel to function at peak efficiency. 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 individual's aspirations." Succession planning includes the following activities: • Analysis of the demand for managers and professionals by company level, function and skill. • Audit for existing executives and projection of likely future supply from internal and external sources. • Planning of indi vidual career paths based on objecti ve estimates of future needs and drawing on reliable performance appraisals and assessments of potential. • Career counselling undertaken in the context of a realistic understanding of the future needs of the firm, as well as those of the individuals. • Accelerated promotions, targeted against the future needs of the business. • Performance-related training and development to prepare indi viduals for future roles as well as current responsibilities. • Planned strategic recruitment not only to fill short-term needs but also future needs. • The actual activities by which openings are filled. To maximise the usefulness of succession planning, companies need to pay attention to the following processes:

1. Identify leadership competencies. 2. Develop a comprehensive database for the target group. 3. Review the strengths and weaknesses of the candidates to determine their promotability. 4. Provide feedback to the potential candidates in order to match the company's succession plans with the candidates' career aspirations. 5. Measure developmental progress of the candidates. 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 succession management programmes. Advances in information technology, changing management concepts and requirements have added new dimensions to succession planning. Professional managers have to cope

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successfully with various changes affecting succession planning programmes, particularly in expanding organisations. The expectations, as well as managerial and personal philosophies oftoday's young managers 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, with carefully spelt out principles and guidelines. Further, all levels of management must know each the processes in succession planning and understand how they fit into the total organisational system. -

0'

In a nutshell, succession planning has to be managed carefully and systematically. It should be conceived as a strategic planning process from which companies cultivate their most critical resources - high quality executive talent.

SUMMARY 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. Employees develop a more realistic sense of what is expected of them on the job and what their future with the organisation will entail. 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; and (5) develop career counselling, and education and training. A career plan should be periodically evaluat,ed and updated as changes occur in the work situation and in the individual. When career planning, career development, and career counselling 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.

REVIEW 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 and an organisation. 3. Is the concept of career planning and development realistic in today's rapidly changing environment?

CASE Succession Planning A sixty years old, pioneering company in the business of manufacturing biscuits and chocolates, after the death of the founder came into the hands of his two sons. The elder was a good technologist having got a Masters degree in the subject from Cornell University, USA. He was the managing director. The younger brother was only a B.Sc. and looked after marketing. The company had a good brand equity, all India distribution and good manufacturing facilities. The sibling rivalry saw the younger brother takeover the company. From this time the decline started. The elder brother had a son who did MBA but became a 'drug junkie'. The younger brother also had a son but was interested in running a printing press. Today, the company is closed and had approached BI FR for a 'revival package'. What went wrong?

REFERENCES 1. Schein, E.H., "How 'Career Anchors' Hold Executives in Their Career Paths ", Personnel, pp. 11-24. 2. Hall, D.T., and Lorgan, M.A., Career Development and Planning. 3. Hall, D.T., Careers in Organisations, Pacific Palisades, Goodyear Publishing, California.

Our dreams come true if we have the courage to pursue them. - WaUDisney

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Five 14. 15. 16.

Employee Performance Appraisal Employee Compensation Employee Promotion, Demotion and Transfer

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EMPLOYEE PERFORMANCE APPRAISAL

Performance appraisal is a systematic evaluation of present and potential capabilities of personnel and employees by their superiors, superior's superior or a professional from outside. It is a process of estimating or judging the value, ~xcellent qualities or status of a person or thing. It is a process of collecting, analysing, and evaluating data relative to job behaviour and results of indi viduals. The appraisal system is organised on the principle of goals and management by objecti ves. Management decisions on performance utilise several integrated inputs: goals and plans,job evaluation, performance evaluation, and individual history.

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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 an 'employee's performance is discussed. 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, timeliness, 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.

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 given time period, compared with required standards of performance. The developmental, a future-oriented 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 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 counselling the individual by his superior. Appraising employee performance is, thus, useful for compensation, placement, and training and development purposes.

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: • Determining appropriate salary increases and bonuses for workers based on performance measure. • Determining promotions or transfers depending on the demonstration of employee strengths and weaknesses. • Determining training needs and evaluation techniques by identifying areas of weaknesses. • Promoting effective communication within organisations through the interchange of dialogue between supervisors and subordinates.

EMPLOYEE PERFORMANCE APPRAISAL

•

173

• 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. It is generally accepted that performance appraisals serve one or more of the following purposes: 1. To bring about better operational or business results 2. To meet an individual's development needs 3. To provide information useful for manpower planning by identifying men with a potential for advancement and men with abilities not currently being used 4. To provide a basis for compensation action. 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. 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 increases, promotions, transfers, discharges, and for selection test validation. The other main use is for employee development including performance improvement training, coaching, and counselling.

Planning the Appraisal A meanigful 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 their 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 peforming on the job. The planning appraisal strategy has to be done:

Before the appraisal: 1. Establish key task areas and performance goals. 2. Set peformance 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. S. End the interview on an upbeat note.

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

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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, 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. Result-centred Systems: These appraisal systems (sometimes called work-centred or job-centred systems) are directly job related. They require that manager and subordinates 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: • What is your job title? • To whom are you responsible? • Who is responsible to you? • What is the main purpose of your job? • To achieve that purpose what are your main areas of responsibility? • 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 of 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? • Is there any other information you can provide about your job?

Components of Peformance Appraisal The components that should be used in a performance appraisal system flow directly from the specific objectives of apraisal. 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 counselling 7. Identification of training/development needs 8. Ratings/assessment by appraiser 9. Assessment/review by reviewing authority 10. Potential appraisal.

Types of Performance Appraisal There are two types of performance appraisal systems which are commonly used in organisations: (i) close ended appraisal system, and (ii) open ended appraisal system.

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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. In the open ended appraisal system, unlike in the close ended system, the performance of the individual is discussed with him, and he is ranked in a five or ten 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 tum out to be more subjective in nature due to insufficient data maintained on the individual. This system also leads to unnecessary and invidious 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. BOX 14.1

Rating Scale with Points Trait: QUjitY of Work

I Below

Unsatisfactory

7-8

Outstanding

Average

Average 9 -10

Above

Average

5-6

3-4

1- 2

In this case, each item appraised will carry with it a certain number of points. The range of points used may be the same or different for every trait or factor appraised.

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: • What to appraise? • How to appraise fairly and objectively? • How to communicate the appraisal and tum the total process into a motivator? • How the performance appraisal results can be put to good use? • How to implement the performance appraisal system smoothly?

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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 for. Pigors and Myers2 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 ro 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.

Methods of Performance Appraisal Strauss and Sayles3 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 ratee. 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, such as, job knowledge, judgment, organising ability, dependability, creativity, dealing with people, delegation, and leadership. The rating is assigned by putting a tick mark horizontally. Frequently, descriptive phrases are given in the form to guide the rater while evaluating the ratee. 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. 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

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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. The basic criticism of the traditional performance rating relates to its emphasis on personality traits instead of job performance. Such rating is highly subjective in the absence of objective standards. (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 a 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 unable to introduce personal bias into the evaluation process because he does not know which of the statements is indicativeof 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 Bums. 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. (vi) 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 personnel 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) Result-Oriented Appraisal: The result-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 MBO in 1954 in the Practice of Management. Drucker pointed to 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

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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 ofMBO, 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 4. 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 the employee often has helped to set. In the goal-setting phase of MBO, a superior and subordinate discuss job performance problems and a goal is agreed upon. Along with mutual goal-setting, a major component ofMBO is the performance review session between the superior and subordinate, which takes place regularly to evaluate progress towards specified goals. The MBO has been designed to overcome certain inherent problems of traditional appraisal systems. It really constitutes a new way of managing. Its major goal is to enhance the superior-subordinate relationship, strengthen the motivational climate, and improve performance. It helps to improve managerial performance and effectiveness. It provides a workable framework to the manager within which he can make decisions which are in the best interests of the organisation. The key concepts of MBO are emphasis on results, participation, human relations, and a regular review system. For the successful implementation ofMBO, proper planning and preparation are required. To achieve success with MBO, it.is necessary to have top management's full support and commitment, a realistic time-frame for implementation, adequate training of people who would be involved in the process, and a proper understanding of the role of MBO. The key features of management by objectives are as under: 1. Superior and subordinate get together and jointly agree upon the list of 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 inMBO :

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

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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. Team MBO enters in where individual setting leaves off. It is important to have effective team work among a group of managers or a group of subordinates. The work cannot be done properly unless people extend themselves to one another and do not take the narrowest possible view of their own duties. 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 difficul~ 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. However, the performance appraisal has assumed several added dimensions. Organisations are increasingly taking recourse to newer initiatives for tracking performance and measuring it against predetermined objectives, key result areas.

360 Degree: Over the years, a new approach has- been enunciated by the Western management gurus which is known as 360 degree appraisal - a performance management in which employees receive performance feedback on a variety of dimensions by an assortment of individuals with whom the person interacts, namely, their boss, their colleagues and peers, 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. Other terms used to describe 360 degree appraisals include multi-rater systems, upward feedback, and full-circle feedback. Thus, the feedback comes from all around them, 360 degrees. The steps in the 360 degree assessment includes: • Identify and define the key competencies for organisational success based on the organisation's vision, values, and goals.

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• Express the key competencies as attitudes against which participants can be assessed. • Select the persons to be evaluated - peers, customers, subordinates, managers, and so on. • Compile the results. Feedback is to be kept confidential. • Provide feedback to the individual. • Create an action plan to improve the individual's performance. The 360 degree performance assessment has an advantage over the traditional manager assessment process in that the individual receives feedback from multiple relevant sources, not just one. It helps foster interdependent partnership and develops team-based organisations. 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. One important factor for the success of 360 degree performance assessment is to ensure that the right people are selected to provide the feedback. Both critics and supporters of the individual should be selected. Another key factor for its success is aVOiding punishment for bad results. Rather, assessment participants must be positively encouraged to improve. Further, raters should be trained to use the rating form properly to help them make accurate appraisals. This form of performance ~valuation 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 constructive rather than destructive criticisim.

HR Balanced Scorecard: The Balanced Scorecard (BSC) creates a template for measurement of organisational performance as well as individual performance. It is a measurement based management system, which enables organisations to clarify vision and strategy before initiating action. It is also a monitoring system that inegrates all employees at all levels in all deparments 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 world-wide. Any business for its success needs a winning game plan and a team with a clear understanding of its plans and goals and how they fit in and contribute to the team effort. The balance scorecard is all about creating a business strategy where all moves fit together. It is about setting goals, measuring performances, communicating actions, and end-results to the teams. The balanced scorecard aims: • To achieve strategic objectives. • To provide quality with fewer resources. • To eliminate non-value added efforts. • To track progress. • To evaluate process changes. • To continually improve. • To increase accountability. The balanced scorecard is a part of management system of a company that tracks and reports data from four critical perspectives: customer, financial, operational, and strategic. The key information that is to be obtained in these areas are: 1. Is the company viewed as a great place to work? 2. Is HR viewed as an enabler to attracting and retaining top talent? 3. Is HR vi~wed as providing effective support systems to employees? 4. Are the HR plans and programmes competitive?

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5. Is the HR service delivery cost effective? 6. What is the return on investment in people? 7. Are the staffing support systems fostering better recruiting and selection? 8. Are other HR processes/transactions efficient and effective? 9. Is technology used to improve HR efficiency? 10. Is there considerable talent and leadership to meet future requirements? 11. How is HR helping to meet the customer needs? 12. Is HR creating an environment that encourages integration and shared vision? " 13. Is the company investing in developing HR capabilities? The result-oriented appraisal mainly includes MBO, 360 degree and balanced scorecard. This appraisal relates to future which can be improved rather than the past o~er which one has no control. It stresses forward planning which helps in overcoming problems beforehand. The superior is no longer a critic but a guide to improve subordinate's performance. The subordinates have definite targets and receive feedback as to where they stand. Thus, knowledge of results leads to improved performance. This procedure provides a framework within which individuals are highly motivated to improve themselves. However, it is not a panacea for all the ills of an organisation. This method should not be introduced as a crash programme in organisational settings. Rather, sufficient groundwork should be accomplished before launching the result-oriented appraisal programme.

Self Appraisal DevelQpment or change takes place only if the appraisee 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 reveiw and reflection through performance analysis. A thorough performance analysis done prior to the review discussion helps in making the review discussion fruitful. Review disucssion aims at making the appraisee and the appraisee 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.

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 positive trait influence the evaluation of the individual on other traits too. For example, an employee demonstrates a high degree of dependability and from this behaviour, a comparable high degree of integrity is inferred. 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.

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Central Tendency: This is the most common error that occurs when a rater assigns mainly 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. 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. According to McGregor, (1960) appraisal represented a judgemental and demotivating process. Similar concerns were voiced by Deming (1982) who suggested that appraisal was a deadly disease. Margerison (1976) went as far as to predict that appraisal would fall apart 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 appraisals has flourished.

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, (e) 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. Feedback: If the organisation believes in the development of human resources it should attempt to generate a climate of openness. Such a climate is required for 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 counselling 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.

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BOX 14.2

Appraisal Interview

Read the following statements and select the answer that best describes your actual relationship with your subordinates: When conducting an employee's performance appraisal:

Usually

1.

I try to put the employee at ease

2.

I make sure I fully understand the employee's job duties and responsibilities

3.

I encourage the employee to engage in self-evaluation

4.

I do most of the talking

5.

I try to avoid criticism

6.

I focus discussion on the employee's behaviour rather

Sometimes

Seldom

than on hislher personal characteristics

7.

I use specific examples to support my judgement

8.

I try to get the appraisal over as quickly as possible Scoring: For statements 1,2,3,6 & 7 give 3 points for Usually; 2 points for Sometimes; and 1 point for Seldom. For questions 4,5 & 8 give 3 points for Seldom; 2 points for Sometimes; and 1 point for Usually.

Total your Scores: _ _ _ _ _ __ Your Assessment: 21 and above:

Excellent performance appraisal skills.

16 to 20

:

Average.

Below 16

:

There is a need for considerable improvement.

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.

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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. Are the processes of the appraisal effective? 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 superior 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 take to improve his/her own performance? BOX 14.3

Performance Evaluation The characteristics below describe what an effective discussion leader must be able to do during the appraisal process. Circle the number that best represents where you think you are on the scale. When you have finished, write your score in the space provided. Be honest with yourself. Excellent 7 7 7 7 7 7 7 7 7 7 7 7

/

6 6 6 6 6 6 6 6 6 6 6 6

Poor

5 5 5 5 5 5 5 5 5 5 5 5

4 4 4 4 4 4 4 4 4 4 4 4

3 3 3 3 3 3 3 3 3 3 3 3

2 2 2 2 2 2 2 2 2 2 2 2

1. I Sincerely care about my employees. 2. I am concerned when my employees don't succeed. 3. I encourage my employees to come to me with problems.

1

4. 5. 6. 7. 8. 9. 10. 11. 12.

My employees feel free to come and talk with me about almost anything. I give positive feedback whenever possible. I can give corrective feedback when necessary. I want my employees to tell me what they think. I can listen to people without interrupting. I like being responsible for other people. I pay attention to the needs of my employees. I know what training and development resources are available for my employees. I always have a positive and caring attitude toward my employees.

Total score A score between 72 and 84 indicates that you have the characteristics needed to be an effective discussion leader. If you scored 54 to 71, you have a solid base on which to build. Take a look at items that you have rated 5 or below. These may indicate opportunities for improvement. But regardless of your score, look for ways to sharpen your skills and build on your strengths.

Performance Appraisal Guidelines A good appraisal system should measure important job characteristics, be free from extraneous influences, and must be fair to minorities, women, and other protected groups.

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The important guidelines to be observed in performance appraisal are: • Keep the system simple, and keep the paperwork burden down.

a

• It is managerial tool to be used for improving results under the manager's province. But it should not be used punitively and unjustly. • 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. • Once a system has been decided upon, apply it for several years; in other words don't tinker with the system annually. • 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. • Review performance formally atleast once in a year and also whenever there has been a repetition of negative employee behaviour. • The frequency offormal appraisals will depend on the nature of the organisation and on the objectives of the system.

Performance Appraisal in Practice Traditionally, appraisals are carried out by the supervisors of the employees. In some organisations,employees immediate superiors write and carry out appraisals which in turn gives senior managers an opportunity to comment on the report. Some companies do follow self-appraisal and compare the same with the traditional appraisal of the supervisors. The 360 degree 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 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. 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 counselling. 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 controloriented 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.

Performance Appraisal at Pepsi-Cola International: Pepsi-Cola International (PCI), with operations in over150 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

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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 bal:ij1ce the cultural and administrative imperatives of successfully managing the performance of a diverse workforce.

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 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 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 evaluatie)fl. He anticipates that the subordinate may show some hostility to negative evaluations and allows him to blow off steam. 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. 5. 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's also another way to make the human-touch appraisal process an ongoing activity. BOX 14.4 Tips for Giving and Receiving Feedback

Giving Feedback • Care about what you say and how you say it. • Believe in yourself and what you have to say. • Create and maintain report. • Be clear and concise. • Be specific. • Be constructive. • Praise unconditionally.

• If critical. concentrate on the present, than the future; not the past. • Involve rather than dominate. • Be descriptive. not judgemental. • Target the performance. not the personality.

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• Target what can be changed. and'suggest how this might happen. • Share ideas and information. • Use your skills and knowledge to suggest ways forward.

Receiving Feedback • Be assertive in getting feedback. • Be non-judgemental of the other person. • Be open to suggestions. alternative proposals. • Have confidence in yourself and the other person.

Source: Bishop Sue. Feedback Skills, Gower Publishing Ltd., Aldershot, Hampshire, 2000.

Giving feedback on performance requires an intelligent and diplomatic approach. Overwhelmingly negative feedback often causes genuine stress, demotivation, 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 teIl 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 tc achieve specific results, especiaIly established goals. And generaIly, 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-seIler, The One-Minute Manager, Dr. Ken Blanchard introduces the philosophy of "catching" your employees doing something right.

Strategies to Improve Performance Companies can do many things to improve employee performance. More specific and frequently used strategies include: • Positive reinforcement system; • Positive discipline programmes; • Employee assistance programmes; and • Employee counselling. The positive reinforcement system lets employees know how weIl 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 specificaIly 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. CounseIling 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 counseIIing subordinates are as foIlows : 1. Schedule periodic appraisals for all immediate subordinates. 2. Establish performance appraisal standards jointly with subordinates. 3. Prepare for each appraisal and counseIIing session, select an appropriate place, provide enough time, and review records. 4. Make appraisal sessions co-operative. 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.

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7. Help the subordinate to come to a self-determined solution to the problem 01' 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 counselling skills. Counselling is an important communication based activity. Counselling skills include listening, understanding, initiating effective communication, and evaluating solutions. Effective counselling skills are aimed at : 1. Bringing about some constructive change in the subordinate's behaviour. 2. Locating the root cause of subordinate's problem. 3. Reducing frustration by allowing subordinates to express their attitudes and feeling about their jobs. 4. Stimulating problem-solving for the purpose offinding solutions to the subordinate's problems and achieve excellence in his performance. Effective counselling demands effective communication, active listening, and transactional analysis. In addition, some specific counselling 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.

Responsibilities in Performance Appraisal The primary responsibility for managing performance is not that of manager but of the individual. The five major responsibilities in this context are: 1. COmmitting to goal achievement. 2. Soliciting performance feedback and coaching. 3. Communicating openly and regularly with manager. 4. Collecting and sharing performance data. 5. Preparing for performance reviews. For the manager, six major activities involved in the ongoing process of performance appraisal are: 1. Creating the conditions that motivate. 2. Observing and documenting performance. 3. Updating and revising initial objectives, performance standards, and job competency areas. 4. Providing feedback and coaching.

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5. Providing developmental experiences. 6. Reinforcing effective behaviour and progress toward goals. BOX 14.5

Ten Strategies for Revamping Appraisal System 1. Secure top management support and participation.

2. Put together an implementation team for developing successful performance appraisal forms, policies, procedures and practices. 3. The appraisal system's goals must be clear and map out the purposes the system will be expected to serve. 4. Design the appraisal form, involve people, and obtain feedback. 5. Address all critical administrative issues and executive biases. 6. Ensure ongoing communication, keep the development process invisible, and invite suggestions. 7. Train appraisers to make the programme fully effective. 8. Explain the programme's purposes and procedures in advance to all those who are likely to be affected by it. 9. Apply the results of appraisal in making promotions, giving rewards, effecting transfers. and developing training programmes. 10. Regularly audit the qualIty of appraisals, the extent to which the system is bemg used. and the extent to which the original objectives have been met. BOX 14.6

Periodic Peformance Appraisal EMPLOYEE NAME

POSITION

DIVISION

REVIEW MANAGER

HIRE DATE

APPRAISAL DATE

Indicate the period for this performance appraisal. (These are only suggested review umeframes. More or less frequent reviews may be appropriate.) QUARTERLY

I

PEFORMANCE CRITERIA CHECK(V } ONE

Job Knowledge Quality of Work Problem Solving and Decision Making Planning and Organisation Customer Service Responsibility and Accountability Business Judgement Creati vity/Initiative Interpersonal Relationships Communication Skills OVERALL

I

HALF-YEARLY EXCEEDS PERFORMANCE STANDARDS

I

I MEETS PERFORMANCE STANDARDS

YEARLY

I

I

BELOW PERFORMANCE STANDARDS

190

PERSONNEL AND HUMAN RESOURCE MANAGEMENT Comments/Recommendations Assessor's Name (Please Print)

Signature

Date

I

I have read this Periodic Performance Appraisal and discussed the contents with my manager. My signature signifies that I have been advised of my job performance and does not necessarily imply that I agree with it or its contents. Employee's Name (Please Print)

Signature

Date

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, 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 atthe positive end, instead of being spread throughoutthe performance scale. The central tendency occurs when all or most employees are ranked in the middle ofthe 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.

REVIEW 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 counselling for the growth of employees. 6. Prepare your SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis listing as many elements as you can. List at least two strengths which you intend to develop, and two weaknesses you intend to overcome.

CASE 1 Evaluation Interview 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 ofthe other people thoughtthat 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?

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EMPLOYEE PERFORMANCE APPRAISAL

CASE 2 Appraisal Interview Hari is new as a manager. He has been recently promoted to this position to head a small department having previously worked as an administrative assistant. He has worked for two separate organisations. Generally, his experience of apprisal has been pleasant. He feels that this has been largely because of the positive attitude and feedback skills of his bosses. He felt that his last appraisal interview as an administrative assistant was mutually helpful and motivating. Now he is determined to follow this example with his own staff as an appraiser. Annual appraisal time is approaching, and he discusses this with Girish, another manager, over lunch. Girish has been in management for a number of years . He obviously sees the annual appraisal process as a routine affair to be discharged as quickly as possible. "I use the same form each year", he says, "it's a system of boxes which you tick. You just assess each member of your team against set criteria. I'll give you a copy if you want." This sort of approach left Hari feeling deflated and despondent. Hari tries to convince Girish that appraisal interviews are mutually beneficial to the boss and appraisee and also to the organisation. Discussion Questions 1. Put yourself in Hari's shoes. How would you convince Girish? 2. List reasons why appraisals are of benefit to: (a) manager, (b) the appraisee, and (c) the organisation.

REFERENCES 1. 2. 3. 4.

Richard Henderson, Performance Appraisal : Theory to Practice, pp. 8-9. Pigors, P., and Myers, C.A., Personnel Administration. pp. 249-300. Strauss, G., and Sayles. L.R., Personnel - The Human Problems of Management. pp. 550-567. Comer, Bernard J., The Communication of Merit Rating, Personnel, Vol. 30, No. 2, p. 88.

Try not to become a man of success but rather to become a man of value.

- Albert Einstein

15 EMPLOYEE COMPENSATION

One of the most difficult functions of human resource management is that of determining the rates of monetary compensation. It is not only complex, but most significant, both to the organisation and employees. Compensation is any form of payment given to employees in exchange for work they perform. Financial payment made at or near the place where work is performed is called "direct compensation." Examples of direct compensation are wages, salaries, overtime pay, commissions, and bonuses. Wages are usually distinguished from salaries. An employee who is paid on a monthly, semi-monthly, or weekly basis receives a salary. Employees receiving a salary receive their pay regardless of the specific number of hours they work. Besides earning a wage or salary, most employees are also compensated for their efforts by certain benefits. Such benefits as leave travel concession and holidays, health care, insurance and pensions are forms of deferred or indirect compensation.

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The main problem facing any organisation is the laying down a fair and equitable compensation system. While the objective is simple, the process is complex. The compesation issues commanding most interest today and likely to continue in future will centre around questions of compensation levels and compensation structure. Obviously, this will raise questions concerning the level of compensation rates in the plant or firm, industry, region, or nation. Closely related to this is the broad question of the determinants of compensation relationships. This involves an understanding of various influences controlling compensation, the nature of decision-making bodies, and the different traditions and customary attitudes that have developed in individual firms or industries. The following are some of the factors that contribute to the complexity of employee compensation: • While other aspects of human resource systems (e.g., training, career management, appraisal systems, welfare programmes) are important to some employees, compensation is considered crucial almost by everyone. • One of the goals of compensation system is to motivate employees, yet there is tremendous variation in the value different individuals attach to specific reward or package of rewards. • Compensation systems consist of many components -

these are to be properly co-ordinated and balanced.

• A number of central and state rules and regulations affect compensation system. • Employees either directly or through collective bargaining arrangements, may desire to participate in the determination of compensation. • The cost of living varies considerably in different regions, an important consideration for companies with multiple locations.

Compensation Function Personnel people engage in a number of activities to facilitate compensation goals of attracting, retaining, and motivating employees while also trying to control compensation costs. The personnel functions that directly influence compensation policies and practices are human resource planning, job analysis, performance appraisal, and labour relations. Also compensation directly influences the functions of recruitment and selection, employee benefits, and career planning and development. The human resource planning function specifies human resource goals which can be enriched by compensation policies and programmes. The number and the type of employees needed have a substantial effect on an employer's compensation costs. Job analysis is basic to two activities of the compensation function - wage surveys and job evaluations. Wage surveys compare jobs in the organisation with similar jobs in other organisations. Wage surveys are conducted to ensure that the payment of an organisation is competitive and equitable in relation to what other organisations are paying for similar jobs. Complete and accurate job analysis data are essential to determine the similarity of jobs for the purpose of making pay comparisons. Job analysis information is also basic to conducting job evaluations. Job evaluations compare jobs on selected criteria, so that the jobs can then be ordered for the purpose of assigning differential pay. Performance appraisal affects compensation decision and costs since pay increases and -promotions are often based on performance appraisal data. Accurate performance measures are also necessary if pay is to be used as a motivational tool. Agreements negotiated between unions and managements affect the amount and form of compensation. The compensation function contributes to the organisational effectiveness in four basic ways: First, compensation can serve to attract qualified applicants to the organisation. Other things being equal, an organisation offering a higher level of pay can attract a larger number of qualified applicants than its competing units. Second, compensation helps to retain competent employees in the organisation. Although retaining competent workers is contingent on many factors, compensation policies help by maintaining a fair internal pay structure and by providing attractive benefits. Turnover is thus reduced, along with costs associated with recruiting, selecting, and training replacements. Third, compensation serves as an incentive to motivate employees to put forth their best efforts. Manufacturing and sales organisations, for example, use monetary incentives to attain higher levels of production or sales without hiring additional employees. When employees put forth their best efforts, average productivity of labour increases. With increased productivity, . fewer employees are needed to achieve the same level of output. Thus, labour costs are reduced and organisational profitability is increased.

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Finally, minimising the costs of compensation can also contribute to organisational effectiveness since compensation is a significant cost for most employers. In brief, compensation is provided for two reasons, namely, as a reward for past service. to the enterprise and as a stimulus to increased performance in the future.

Compensation Objectives According to Rynes (1987), compensation is particularly important as a recruitment tool because (1) it is a vehicle for satisfying a wide array of human needs, (2) salary offers are expressed in clear and comparable terms, (3) starting salaries have implications for future salary progression, and (4) pay systems "communicate so much about an organisation's philosophy, values, and practices." The objectives of any payment system are numerous and might include the following: 1. To enable the employee to earn a good and reasonable salary or wage; 2. To pay equitable sums to different individuals, avoiding anomalies; 3. To reward and encourage high quality work and output; 4. To encourage employees to develop better methods of working and their acceptance; 5. To discourage wastage of materials or equipment; 6. To encourage employees to use their initiative and discretion; 7. To discourage overtime working unless it is very essential; 8. To increase or maintain morale/satisfaction of employees.

Compensation Policy The aim of compensation statement is to set down the company's policy with regard to salary. It is the responsibility of all concerned to implement the compensation policies and to explain the same fully to their subordinates. A compensation policy should aim: . 1. To recognise the value of all jobs in relation to each other within the company; 2. To take account of wage rates paid by companies of similar size, product and philosophy; 3. To ensure stable earnings; 4. To enable individuals to reach their full

earnin~

potential as far as is reasonably practicable;

5. To ensure employees' share in the company's prosperity as a result of increasing efficiency. A compensation policy of an organisation should be transparent, fair, performance-oriented and market-oriented. It should promote employee motivation and be aligned with enterprise strategy. Compensation policies and practices differ widely between organisations and between employee groups within organisations. These differences give management a wide discretion to choose from an array of compensation policies.

Using Pay to Motivate Employees Financial compensation is of significance from the standpoints of the individual, the enterprise, and the national economy. Obviously, remuneration is the major source of purchasing power of the individual, which in turn, relates to his standard of living. Moreover, the principle of equity necessitates that the individual is fairly compensated for the work he accomplishes in the enterprise. Furthermore, compensation is a determinant of the status, prestige and worth of the individual in the society. There are three general types of incentive pay systems to motivate employees:

1. Individual-level Incentive Pay System: Under this system, employees who perform at minimal levels receive their standard pay for the job, but those who perform above the minimal level recei ve their standard pay plus incenti ve pay. Two common examples of individual incentive pay plans are the straight piece rate and the standard hour plan. 2. Group-level Incentive Pay System: This system links incentive pay to group performance. All members of a group receive the same amount of incentive pay which is determined by the level of group's output. Measurement of output is similar to that of individual incentive systems, except that output represents the collective efforts of a number of

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workers. Group-level incentive system is used when co-operation is required or when group output is more easily measured than individual output.

3. Plant-wide or Company-Wide System: This system bases incentive pay on performance and organisational results. Indeed, there are many such systems, and they vary substantially in what they do. Typical measures of organisational performance include an organisation's overall profitability, ratio of total labour costs to the value of production, scrap rates, reduction of overtime, and adherence to production schedules. The amount that an employer can afford to spend on compensation is affected by factors such as employer's position in the organisation. Since compensation costs represent a major part of an employer's labour cost, minimising these costs is one way to facilitate organisational effectiveness. Employers use cost-control system to minimise compensation costs while attaining other desired goals of compensation.

Compensation Administration From a corporate standpoint, compensation administration is normally an integral part of the human resource department which plays an important role in the total policy making. Sound compensation administration enables the organisation to achieve one of its important corporate objectives. A sound compensation programme can result only when the compensation plan is well thought out, thoroughly understood by employees at all levels and properly executed by management, and when it remains flexible to demands of the personnel involved. The primary purpose of compensation administration is to assure management a sound compensation system, and for employees an equitable compensation for services rendered. The objecti ves of a sound compensation administration programme can be sub-divided into specific sub-goals:

1.

~uitable

payment in proportion to relative work to the organisation.

2. Consistency of payments between comparable occupations. 3. Adjustment of payments in relation to changes in the labour market. 4. Recognition of individual capability and proficiency. 5. Comprehension of the plans by supervision and management. 6. Procedures to solve compensation problems rationally. Traditional theories define wage and salary administration as the process by which wage and salary levels and structures are determined in organisational settings. Beach! visualises four objectives of compensation administration in the company: 1. Compensation seeks to accomplish a labour market function of allocating human resources among the different enterprises in terms of perceived attractiveness of jobs as revealed in the rate of pay and related wage supplements. 2. Carefully designed compensation systems facilitate control of wages and salaries, and labour costs. 3. The financial compensation system seeks to maintain satisfaction of human resources, reducing voluntary separations, and complaints and grievances stemming from inadequate or inequitable wages as perceived by the employees. An effective wage and salary administration system is likely to give the feeling that the remuneration is fair and that no favouritism has been shown in its payment. 4. The financial compensation system purports to induce and reward improved performance and forms an effective motivator. Further, Beach provides seven principles of compensation administration: 1. The enterprise should have a clear-cut plan to determine differential pay level in terms of divergent job requirements involving varied skill, effort, responsibility and working conditions. 2. An attempt should be made to keep the general level of wages and salaries of the enterprise in line with that obtained in the labour market or industry. 3. Adequate care should be taken to distinguish people from the jobs.

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4. Irrespective of individual considerations, care should be taken to ensure equal pay for equal work depending upon flexibility of jobs - of course, variations may be permitted within a pay range. S. There should be a plan to adapt equitable measure for recognising individual differences in ability and contribution. 6. Attempt should be made to provide some procedure for handling wage grievances. 7. Adequate care should be taken to inform the employees and the union, if any, about the procedure followed in determining wage rates. Compensation administration plays an important role in assisting management to achieve competitive costs. A sound wage programme can also assure management of the ability to hire and retain a competent workforce. In the changing world of automation and job complexities, this can be a great asset toward achieving overall company goals. If the first goal of attracting capable employees to the organisation is to be achieved, personnel must perceive that the compensation offered is fair and equitable. As a first step in the pursuit of equity, there should be established consistent and systematic relationship among base compensation rates for all jobs within the organisation. The process of such establishment is termed "job evaluation."

Compensation administration for the management group is particularly complex, involving difficult and sometimes controversial questions. As the number and diversity of management positions continue to grow, these questions will undoubtedly become more complex and their satisfactory solution more and more important to the success of an enterprise. The quality of a manager's pay decision will improve when he understands the basic objectives of compensation administration and his responsibilities within the programme. The line manager is responsible for carrying out the programme of the company within the framework of established company compensation policies, programme and practices. His responsibilities are to: 1. Review all job descriptions to make sure that they represent the most efficient and economic distribution of job duties. 2. Effectively recommend pay increases of all types on the basis of the facts and equities of each within the framework of existing policy. 3. Carefully review work methods and work standards, where applicable. 4. Administer the wage incentive programme, where applicable. S. Control overtime work by determining the need for it and assure the equitable distribution of overtime assignments among employees. 6. Insure that employees get the full value of the fringe benefits provided. 7. Administer benefit programme and control abuses. 8. Report compensation needs and problems to appropriate levels of management. 9. Communicate all aspects of the compensation programme to subordinates. 10. Insure compliance of all statutory rules and regulations. 11. Insure compliance with union agreements and settlements. 12. Review and audit compensation decisions of subordinates as appropriate.

Job Evaluation Job evaluation is a term which is applied to a number of distinct but related administrative methods which rank or assess the relative value of different jobs or occupations. Job evaluation is a systematic and orderly process of determining the worth of a j ob in relation to other jobs. The objective of this process is to determine the correct rate of pay. It is an attempt to assess and compare the demands which the normal performance of a particular job makes on normal workers without taking into account the individual abilities or performance of the workers concerned. Individual abilities or efforts are reflected in the workers' earnings, but this is something entirely different from the ratings of the job. Job evaluation rates the job, not the man. It is a complex of job analysis, the study of jobs, job description, the statements of the results of the analysis upon which follows job grading, the placing of jobs in a sequence or ranking which is the basis of job assessment and the establishment of fair pay based on job grading.

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There are two essential features or characteristics of job evaluation. First, the focus of job evaluation is upon the job itself, its content or its demands upon the normal average or standard worker performing it rather than upon the person doing it and what he/she may choose to put into it. Second, the reliance of job evaluation is upon the exercise of human judgment as the method by which ranking of relative work or value of the different jobs in the family or population is arri ved at. Together, these distinguish job evaluation as a category of wages and salary determination. Objectives: The objectives of job evaluation are enumerated below :2 1. To secure and maintain complete, accurate and impersonal descriptions of each distinct job or occupation in the entire plant. 2. To provide a standard procedure for determining the relative worth or value of each job in a plant. 3. To determine a rate of pay for each job which is fair and equitable with relation to other jobs in the plant, community and industry. 4. To ensure that like wages are paid to all qualified employees on like work. S. To promote fair and accurate consideration of all employees for advancement and transfer. 6. To provide a factual basis for the consideration of wage rates for similar jobs both within the community and within the industry. 7. To provide information for the work organisation, employee's selection and training and numerous other important purposes. The basis of a sound wage structure is job evaluation. Job evaluation systems are useful in achieving internal equity of pay between different jobs in the organisations. The process of job evaluation uses selected criteria to compare jobs within an organisation so that they can be ordered for the purpose of assigning differential pay. Job evaluation systems provide a rationale for paying one job in an organisation more or less than another. It is the process of analysis and assessment of jobs to ascertain reliably their relative worth, using the assessment as a basis for a fair and equitable wage structure. It is in the interest of both the unions and the management that job evaluation is carried out on a joint basis. Methods: There are five basic methods of job evaluation: (1) ranking, (2) classification, (3) factor comparison, (4) point method, and (S) market pricing method. The simplest and most basic form of job evaluation is job ranking. It is a conventional method in which jobs are compared one with another, and arranged or ranked in the order of their importance, their difficulty, or their value to the organisation. It is highly subjective method and depends upon the experience of the people doing the ranking; a committee usually carries out the procedure. This method is most appropriate for small organisations and for those with a limited number of different jobs. Its advantage is that it can be done quickly and inexpensively. An obvious disadvantage is that jobs may be ranked without the benefit of well-defined standards. This means that the ranking may be somewhat superficial and lead to the ranking of the job-holder rather than the job itself. This makes the method less useful for establishing internal equity in an organisation's pay structure. The job classification method depends upon the recognition that there are differences in the level of duties, responsibilities and skills required for the performance of different jobs. These differences once recognised can be expressed as grades or levels. Jobs having been analysed can then be fitted into these various grades. These grades can then be defined and jobs classified by the selection of a particular grade for each job to correspond to its work. This method is widely used for salaried jobs, including those in government and service occupations. It is also used for manual jobs in some industries in which the same worker is called upon to perform a variety of more or less standardised jobs for which standardised rates of remuneration can be fixed, as in engineering workshops and in the electrical and shoe industries. The factor comparison method is a quantitative method of job evaluation which evaluates jobs according to several compensable factors. It is a sophisticated method of ranking in which jobs are compared to each other across several factors. There are five stages in this method. In the first stage, a job evaluation committee selects and rank-orders the "key jobs" in the organisation. Job evaluation committees usually consist of a personnel professional, one or more supervisors and/or managers and one or more employees' representatives. Key jobs represent the full range of jobs from the highest to the lowest levels and are typical of the various job families. When key jobs have been ranked, a monetary value is assigned to them. This monetary value is the current going wage of each key job.

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In the second stage, the evaluation committee rank-orders compensable factors in terms of their relative importance in each job. Though the coIl)lllittee could select their own compensable factors, the most commonly used factors for this purpose are mental requirement, skill requirement, physical effort, responsibility and working condition. The third stage involves assignment of a monetary value to each factor for each key job. The fourth stage is the development of job factor comparison scales for physical efforts and mental requirements based on the information from the third stage. Each scale is weighted by the highest monetary value assigned to it. The factor which is heavily weighted will be the most important of the compensable factors. The final stage in the factor comparison method is to evaluate other non-key jobs in the organisation using the factor comparison scales. The main advantage of the factor comparison method is that it permits of a more systematic comparison of jobs. It is also too easy to use, because evaluators rate jobs in terms of well-known jobs in their own organisation. However, comparison method has several limitations. The most important problem is that as the content of key-jobs changes, it becomes less accurate. Further, the complexity of this method makes it difficult for employees to understand and accept. The most complex and yet the most frequently used major job evaluation method is the point method. It is very similar to the factor comparison method in that separate scales are developed for each compensable factor. The two methods differ primarily in that the factor comparison method is based upon a set of key jobs existing in one organisation at one point in time, while the point method is independent of jobs in a particular organisation since the point systems are usually not unique to a specific or.ganisation. Many of the ready-made job evaluation systems are point systems. Scales based on the point method are more precise and accurate than the factor comparison scales, because the point systems use universal compensable factors which are further divided into sub-factors and degrees. The point method is the most accurate job evaluation system and remains relatively stable over time, unlike the factor comparison method whose key jobs are subject to change. Due to the accuracy and comprehensiveness of the method, employee acceptance is relatively high. One disadvantage of the point method is that administrative costs may be too high to justify its use in small and medium-sized organisations. The market pricing method is entirely different from the other four methods of job evaluation. This method relies entirely on the labour marketto determine how muchjobs should be paid. It is not concerned with the internal equity of pay, compensable factors, or assigning relative worth to jobs except in relation to the going rate in the labour market. In order to evaluate jobs using the market pricing method, an employer must conduct a pay survey to determine the market price. The market pricing method may prove difficult and impractical for a number of reasons. First, it may prove difficult to obtain pay information for some of the more unique jobs in an organisation. Second, market prices ofjobs vary from time-to-time. This makes it difficult to maintain stable pay structure. Market price fluctuations can also make cost control more difficult since labour costs are less predictable under this system. Finally, the market pricing method may cause internal equity problems, especially for persons in jobs for which demand has declined. When the demand declines, the going rate for the job declines. An obvious advantage of the market pricing method is that the job evaluation committees' and management bias in pricing jobs is avoided. The system is fairly simple, and the organisation may already have access to pay survey information for the purpose of attracting quality employees.

Broadbanding Broadbanding is defined as a strategy for salary structures that consolidate a large number of pay grades into a few "broad bands." One of the trends today is for employers to reduce their salary grades and ranges, a process called broadbanding. Broadbanding is a pay innovation that collapses a pay structure with many pay grades into a structure with a few larger ranges called bands (Caudron, 1993). Each band covers a pay range that formerly represented several pay grades. Broadbanding gives managers greater flexibility to encourage employees to move in a horizontal direction in their careers by broadbanding their skills and competencies. Broadbanding can be used to reinforce teamwork and collaboration since it reduces hierarchy and status differences between employees in the pay structure. Firms that use the pay and promotion system to recognise status and hierarchial

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differences between employees may not have a culture that is supportive of a broadbanding pay policy. Brodbanding has been successfully implemented in large, hierarchical organisations which attempted to flatten their organisations and remove levels of management. For example, organisations that had eight levels of management could eliminate four levels, widen the salary ranges of remaining four levels, and simply slot each manager into one of those ranges. Broadening bands can have a positive impact on motivation because it can give managers more flexibility in rewarding employee performance within a very broad band. It also encourages employees to focus on developing skills that make them more valuable. • With broadbanding, a manager can more easily encourage his/her employees to broaden their skills and abilities. This is valuable to organisations because employees with broad skills and abilities are critical for the success in a total quality/continous improvement environment. In contrast, the jobs in traditional organisations are narrow and specialised. In fact, broadbanding is an attractive alternative to rigid, structured, specialised, and hierarchical organisations.

Compensation Structure A sound compensation structure must be based on job evaluation programme in order to establish fair differentials in payments depending upon differences in job contents. Besides the basic factors provided by a job description and job evaluation, those that are usually taken into consideration for determining compensation structure are: • The organisation's ability to pay • Supply and demand of labour • The prevailing market rate • The cost of living • Productivity • Trade union's bargaining power • Job requirements • Managerial attitudes • Psychological and sociological factors. The compensation structure must be linked to what the company is trying to achieve. It is not unusual to find a company with a wage structure in direct conflict with the company's overall objectives. For example, a company may plan to produce a high quality product while, at the same time, it may have a direct incentive geared to quality. It is necessary to identify the company's management style. Is it predominantly autocratic, paternalistic, participative or laissezJaire? Since the pay structure expresses to employees how the company values them, a real attempt must be made to draw up a rational wage policy. An attitude survey should be made to ascertain what needs have to be satisfied through a compensation structure. What are the employees' attitudes towards the current pay structure and what are their deeper expectations? The pay structure, to a large extent, determines and reinforces attitudes. Two of the areas a survey ought to highlight are the reasons why employees work for a particular company, and what motivate them. The survey should be done by an outside specialist in order to gain the confidence of the workforce.

Pay Equity A company's pay structure is its method of administering its pay philosophy. The two leading types of pay structures are the internal equity method, and market pricing method. Internal equity method is a tightly constructed grid ensuring that each job is compensated according to the jobs above and below it in a hierarchy. In market pricing method, each job in an organisation is tied to the prevailing market rate. Determining pay has never been an exact science. Various criteria may be used in fixing the pay of an individual, both within the organisation and in relation to the external labour market. Internal equity is a primary concern in the design of pay systems. Thus, pay levels are determined through both internal and external factors. But there is a dichotomy between the needs of the internal market for equity and fairness and the differential price at which labour can be purchased in the external labour market.

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Three elements of equity can be distinguished - internal, external and individual. Internal equity refers to the relationship among jobs within a single organisation. Employees expect the president of a company to earn more than the executive vice president, who is turn earns more than plant manager, and so on. Internal equity exists when the pay differentials between different jobs within the organisation are perceived as fair - neither too large nor too small. External equity refers to comparisons of similar jobs in different organisations (e.g., the pay received by CEO's of various electronic firms) depending on sales turnover of companies. Individual equity refers to comparisons among individuals in the same job with the same organisation. In many ways this is the most difficult problem to be resolved in practice. Managing pay equity is managing employee perception and creating an agile system. Steps for creating such a system are listed below: 1. Categorise employees by job. Fewer jobs are better than more. Too many jobs can cause the compensation system to be cumbersome and difficult to administer. Considering the speed at which jobs change today, an agile and flexible system is needed. 2. Compare pay levels with that of the labour market. There are many commercial salary surveys available. Another source is the internet. 3. Manage internal equity. Managing internal equity is more important than external equity. 4. Link pay with job performance. Those employees who perform their jobs better should receive larger salary increases than those who do not. 5. Communicate the compensation system and how it works. To achieve internal pay equity, companies may establish meaningful compensable factors - common elements of all jobs that the organisation considers important to the extent that it is willing to pay for them. Using the process of job evaluation, the companies then determine the worth of each job in relation to other jobs in the organisation and decide which jobs within the company should be paid more than others. Even when salary rates are subject to collective bargaining, job evaluation can assist the organisation in maintaining some degree of control over its wage structure. Companies often conduct formal or informal surveys of their competitors to get an idea of appropriate pay levels. This helps them to achieve external pay equity by comparing the differences that may exist among similar operations in a particular labour market. The external considerations when developing a compensation plan may include labour market conditions, cost of living and economic factors.

Compensation Survey A compensation survey is a process of collecting data and facts about compensation policies, practices, and programmes of firms in some labour market. It provides information that has many uses. This information is particularly relevant to the problem of establishing and adjusting salary levels. It may also be used to validate the compensation structure. The objectives of compensation survey vary from one firm to another. Before conducting a compensation survey, an organisation should study the compensation data that are already available. If such information is not available, a firm may either conduct its own survey or participate with other organisations in a co-operative effort. In a compensation survey, one has to decide on (a) what is the information to be sought, (b) selection of jobs about which information should be sought, and (c) the units which should be approached to furnish the desired information. Moreover, one has to ensure that information sought through survey should be for jobs having identical job content. The compensation data collected should include not only information on the key jobs and their comparability to the surveyed organisation's jobs but also information on benefits, bonuses, and other methods of compensation besides direct salary. Failure to include these factors would give a distorted picture of the total compensation package offered. It is also useful to collect information on the characteristic of the organisation to determine how similar the organisation is to the surveyed firm. In either case, great care must be given to compensation survey procedures. Conducting a compensation survey is a complex, costly and time-consuming process. For this reason, employers should thoroughly examine existing compensation surveys before planning to conduct one of their own. Before deciding to use an

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existing standard survey, an employer should consider a number of factors. First, will the survey provide information to suit the organisation's needs? If one survey does not meet an employer's needs, perhaps several surveys will provide the needed information. Second, how representative are the surveyed organisations of those with which an employer wishes to make pay comparisons? If organisations are not representative of comparable organisations, then using the survey data can lead to false conclusions regarding the competitiveness of an organisation's pay levels. Third, does the existing survey provide sufficiently detailed job descriptions to permit detailed comparison with jobs in one's organisation? Here are some guidelines that the human resources department frequently follows for effectively conducting wage surveys: 1. Look at operations that are similar to yours in size and nature of product or service. Also consider other factors, such as location, growth opportunities, prestige, and so on. 2. Compare not only basic wages or salaries, but also other incentives and benefits. In some operations, wages and salaries may be lower, but the benefits package helps attract and retain good employees. 3. Find out if wages and salaries have been adjusted recently or if adjustments will be made in the near future. Include that information on the survey, since it affects the accuracy of the data. There are three basic methods of conducting a compensation survey: personal interviews, mail questionnaires, and telephone interviews. The most reliable is the personal interview, however, it is time-consuming and expensive. A compensation survey is a mUlti-purpose tool. It is a valuable tool for the compensation administrator to acquire useful and necessary information concerning community rates and practices. It will also equip him to compare his rates and practices with those of the community or industry and will enable him to apply fair standards of compensation administration. A compensation survey will aid the organisation in solving problems of individual compensation and also in effective administration of compensation structure.

Fringe Benefits The term 'fringe benefits' is normally taken to mean those labour-cost items which represent some benefit to the employee at some cost to the employer. They come outside the normal definition of earnings, though they may be sometimes direct cash payments such as long service awards or gifts on retirement. Fringe benefits include items which may be expressed in monetary terms, but which are over and above the normal earnings, granted by an employer to his employees. Fringe benefits range from holidays with pay and sick pay schemes, to that of pension schemes and credit cards. In between are the mass of fringe benefits which are becoming more and more important in the total compensation package. Occupational pension schemes are probably the most popular of these, and in many ways they are the most satisfactory benefits to all parties concerned. Most organisations today offer some type of health insurance coverage to their employees. This coverage has become one of the most important benefits for employees because of the tremendous increase in the cost of health care. Profit sharing and stock ownership serve important symbolic purposes. Profit sharing emphasises that workers and management share a common interest in achieving a good rate of profits. Companies use stock options to retain valuable talent by enforcing a lock-in period before the options can be traded in for stocks. Stock options are a powerful counter to employee turnover. Job pricing within an organisation may be fixed by using ajob evaluation method. Many companies emphasise that their total compensation is equal to or better than other companies in the market. Variable pay such as stock or incentive pay may comprise a considerable portion of employees pay in some organisations. Arguably, the best approach is paying equal to the market (on the average), allowing for a diversity of skills and styles, differentiating in pay between the best performers and less valued performers, and providing career advancement opportunities. When an employer considers offering benefits to employees, one of the main considerations is to keep costs down. Traditionally, employers attempted to do that by providing a slate of benefits to their employees - irrespecti ve of their need or use. Companies learned, in due course. that these benefits offered very little to motivate their employees. or to provide an incentive for them to be more productive. Employees viewed benefits as "given". This fact coupled with the rising costs of benefits and a desire to allow employees to choose what they want, led employers to search for flexible benefits.

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The term "flexible benefits" refers to a system whereby employees are presented with a set of benefits and are asked to select, within monetary limits imposed, the benefits they desire. The aim of flexible benefits programme is to confer specific advantages to both the employee and the employer.

Incentive Plans There are several types of incentive plans. Individual incentive programmes give income over and above base salary to individual employees who meet a specific individual performance standard. Group incentive programmes are like individual incentive plans but they give pay over and above base salary to all team members when the group or team collectively meet a specified standard for performance, productivity, or other work related behaviour. Probably the oldest form of incentive pay is a piece rate system or piece work, in which employees are paid a given rate for each unit produced. Piece rate systems rely heavily on setting output standards which establish the base pay an employee earns. Performance above standard results in increased pay to the employee. Piece rate systems are popular in labour-intensive industry with a high degree of cost competition. Its problems include difficulty in setting the initial standards, providing allowances for problems beyond the control of the employee, and maintaining employee acceptance of the system. In group incenti ve plans, the measure of production or producti vity is at the group or the organisation level. Group incenti ve plans are designed to foster performance in situations where teamwork is vital, where there is relatively high task interdependence,and where it is difficult to measure individual performance. Examples of organisation-wide incentive plans include Scanlon Plan and Rucker Plan. These incentive plans are also called profit sharing or gainsharing plans. Several incentive plans are particularly well suited for employees doing production work. Piece work is the oldest incentive plan and is still the most commonly used. Earnings are tied directly to what the worker produces; the person is paid a piece rate for each unit he or she produces. On the other hand, team or group variable pay incentive plans pay the incentive based on the team's results, rather than to individual employees based on their individual performance. Profit sharing plans are generally organisation-wide incentive programmes that provide employees with a share of the organisation's profits in a specified period. Gain sharing plans are designed organisation-wide to reward employees for improvements in organisational productivity. The stock option is the most popular long-term incentive. A stock option is the right to purchase a specific number of shares of company stock at a specific price during a period of time. The price at which the employee can buy the stock is equal to the market price at the time the stock option was granted. The employee's gain is equal to the market value of the stock at the time it is exercised, less the grant price. The assumption is that the price of the stock will go up, rather than go down or stay the same. Several trends have increased the attracti veness of stock options as a long-term executi ve incentive and retention tool. Variable pay is employee compensation that varies with the organisation's business performance. The classic type of variable.pay is sales commission in which the sales representative receives an award for each sale. Variable pay is countercyclical. It is more costly to the organisation that is performing well; yet the organisation that is performing well is better able to afford the expense. It is less costly when the business is not doing well and is less able to afford variable pay. If the organisation performs well, then the employees will earn more income. The most effective variable pay systems have been those that have established business team or business unit performance targets. For effective implementation of incentive plans:

1. Link the incentive with the company's strategy. 2. Ensure that effort and rewards are directly related. 3. Make the plan understable and calcualable by the employees. 4. Set effective standards. 5. Guarantee the standards. 6. Guarantee an hourly base rate. 7. Get support for the plan. 8. Develop good measurement systems.

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9. Emphasise long-term as well as short-term success. 10. Take the corporate culture into consideration. In summary, any incentive plan is more apt to succeed if implemented with management support, employee acceptance, and a supportive culture characterised by teamwork, trust, and involvement at all levels. In a nutshell, different monetary benefits provided to employees are: • Formal bonus or incentive plans. • Profit sharing plans. • Lumpsum merit awards. • Gainsharing plans. • Stock plans. • Pay for time not worked -

sick leave, holidays, vacations, maternity leave, payment for lay-off and so on.

• Insurance benefits - hospitalisation, medical and disability health care costs. • Retirement benefits -

social security benefits and pension.

• Employee service benefits - subsidised transportation, food services, educational subsidies, executive perquisites, creche and child- care.

Reward Systems Reward systems and their role in organisations have been studied from many perspectives and by multiple disciplines. Economics, sociology and psychology, in particular, have contributed to the growing literature on reward systems. Reward systems have a wide-ranging impact on organisations, and that their impact is greatly affected by their design and by the organisational context in which they operate. Reward systems influence attraction and retention of employees. High reward levels lead to high satisfaction, which in turn leads to lower turnover and more job applicants. There are mainly seven elements of an effective rewards and recognition programme: • People-oriented work culture. • Celebration as a part of every event. • Proper communication of programme. • Sincere and timely delivery. • Customisation of rewards. • Emphasis of informal recognition. • Good superior-subordinate relations. Some of the reward systems in an organisation are discussed below:

Profit Sharing: Profit sharing is associated with participative management theories. Profit sharing is a group-based organisation plan. The fundamental objectives of profit sharing are: (a) to encourage employees to identify themselves more closely with the company by developing a common concern for its progress; (b) to stimulate a greater interest among employees in the affairs of the company as a whole; and (c) to encourage better co-operation between management and employee. Gain Sharing: Gain sharing plans are designed organisation-wide to reward employees for improvements in organisational productivity. Gain sharing differs from profit sharing in at least three ways. First, under gain sharing, rewards are based on a productivity measure rather than profits. The goal is to link pay to performance outcomes that employees can control. Second, gain sharing plans usually distribute any bonus payments with greater frequency (e.g., monthly or quarterly versus annually). Third, gain sharing plans distribute payment during the current payment period rather than deferring them as profit sharing plans often do. As gain sharing plans do not pay more for better performance, they do not necessarily motivate employees to stay. Unlike profit sharing, it pays bonus even when the organisation is not earning profits. Stock Options: Stock options are similar in many ways to profit sharing plans. The basis for payouts is organisational performance in the stock market. Important goals of the plan are (a) to motivate employees to act in the best interest of the

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organisation as a whole, (b) to enhance employee identification with the organisation, and (c) to have labour costs vary with the organisational performance. Stock options have long been a common programme for executives, but some organisations, like Pepsi-Cola and Hewlett-Packard, grant them to all employees. There is evidence that this approach is becoming more widespread. The stock option is the most popular long-term incentive. A stock option is the right to purchase a specific number of shares of company stock at a specific price during a period of time. The price at which the employee can buy the stock is equal to the market price at the time the stock option was granted. The employee's gain is equal to the market value of the stock at the time it is exercised, less the grant price. The assumption is that the price of the stock will go up, rather than go down or stay the same. Several trends have increased the attractiveness of stock options as a long-term executive incentive and retention tool.

Competence-related Pay: Competence-related pay may be defined as a method of rewarding people wholly or partly by reference to the level of competence they demonstrate in carrying out their roles. This definition has two important points: (1) pay is related to competence, and (2) people may be rewarded with reference to their level of competence. Competence-related pay is not about the acquisition of competence. It is about the effective use of competence to generate added value. Competence-related pay works through the processes of competence analysis of individual competences and levels of competence.

Skill-based Pay: Skill-based pay links pay to the level of skills used in the job and, sometimes, the acquisition and application of additional skills by the person carrying out the job. The term is sometimes used interchangeably with competencerelated pay. But skill-based pay is usually concerned with the skills used by manual workers, including fitters, fabricators, and operators. In competence-related pay schemes, however, the behaviours and attributes used by an individual to perform a role effectively are assessed in addition to pure skills. Skill- based pay may in many ways seem to be a good idea, but its potential costs as well as its benefits need to be evaluated rigourously before its introduction. Initially, they may provide strong motivation for individuals to increase their skills. But they may out-live their usefulness and hence need to be revised or even replaced if they are no longer cost effective. Team-based Pay: Many organisations are now trying to encourage teamworking and want to see this reflected in their pay schemes. Team-based pay schemes provide financial rewards to individual employees working within a formally established team. Payments are linked to team performance or the achievement of the agreed team objectives. While team rewards may offer some important advantages, their implementation is by no means easy and can be a high-risk strategy. Experience suggests that improving team performance cannot be left to the reward system alone. The quality of teamwork depends on a whole range of factors, including the organisation culture, management style, and performance management systems. There are three basic elements to a reward package that includes teamworking. First, there is the individual element, the basic salary which varies in relation to performance or skills/competence. Second, there is a team element related to the achievement ofteam targets. Third, there is an organisation element related to business performance measured as profit or added value. These may be in the form of cash or shares. The drawback of team pay can be that individuals may feel that their specific contribution is diminished. Teams may also compel people to conform to oppressive group norms. This may result in low output that is sufficient only to gain a reasonable reward.

Executive Compensation In modern business the executives hold the most pivotal place in an organisation and the modern corporations are constantly trying to come up with a compensation plan to attract, hold, and motivate the executives. The compensation plans are numerous and every company attempts to innovate a compensation plan that is better than the other. Most executive compensation plans emphasise current and deferred salary provision and usually a combination of them is offered. The first step in the establishment of executive compensation is to provide an adequate job-evaluation and rating plan. Payment for results philosophy must be adopted. What an executive has done and what is he likely to do in the future must be critically appraised. The considerations in evolving the compensation policy and system is : • To keep it administratively simple • To keep it favourable with other companies • To maintain internal parity within certain levels

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• To keep certain positions in certain grades on some rational basis • To consider the impact of grade revision on other grades • To provide a favourable compensation structure which will attract, retain and motivate employees. For the higher management, salaries are influenced by the size of a company, by the specific industry, and in part by the contribution of the incumbent to the process of decision-making. The bigger the firm, the greater is the compensation paid to the executives. Straight salaries. bonuses, stock purchase plans and profit-sharing are used to compensate executives. Of these, the straight salary is the most common method. In addition, executives are compensated for the various expenses incurred by them, for taxation takes away a major portion of their salary. Such payments are in the form of (a) medical care; (b) professional service in legal, tax and financial matters; ( c) facilities for entertaining customers and for dining out; (d) company recreational services; (e) the cost of education and training of executives, scholarships for their children, and allowances for business magazines and books; and (f) free well-furnished accommodation, conveyance and servants. All these go under the head of perquisites. Based upon research findings, Megginson offers the following generalisations: 1. Satisfaction with pay is a function of comparison with another's pay, with downward comparison having the greatest impact. 2. A manager's satisfaction with his income and its motivational effect appears to be directly related to anticipated pay raises. 3. Those managers who expect large increases in future apparently are less satisfied with their existing level of income; those expecting little or no increases are more satisfied. 4. The choice of merit, as opposed to seniority, as the basis for determining salary rates tends to increase with education and position. The actual determinants of pay differentials seem to be job level supervisory experience and professional experience. S. Managerial incentive compensation has tended to become rigid rather than flexible. If the various compensation media are to be used to motivate managers, there must be a return to a greater flexibility and less rigidity. 6. Satisfaction with pay increases with increased managerial level, and increased salary but decreases with post-graduate training. The whole area of international comepsation management presents some tricky problems. One trend today is to award long-term incentive pay to overseas managers. Many U.S. multinationals have allowed top managers at corporate headquarters to participate in long-term incentive programmes like stock option plans. More and more multinationals are devising performance-based long-term incentive plans that are tied more closely to peformance at the subsidiary level. These can help build a sense of ownership among key local managers while providing the financial incentives needed to attract and keep people at overseas. As company grows, it becomes increasingly unwieldy and uncompetitive to rely exclusively on manual HR system. There are firms which provide software solutions for virtually all personnel tasks, ranging from benefits management to compensation, statutory compliance, employee relations, outsourcing, payroll, and time and attendance systems. Larger companies are intergrating their separate HR systems into integrated human resource information systems. This consists of interrelated components working together to collect, process, store, and disseminate information to support decision-making, coordination, control; analysis, and visualisation of an organisation's human resource management activities. There is a wealth of information available on the Internet websites that employers and employees can use to help them carry out their HR tasks.

Assessing Total Compensation Compensation is multi-dimensional, incorporating such aspects as pay structure, pay level, systems for recognising individual differences in performance, and employee benefits. Contemporary pay systems are characterised by cost containment. pay and benefit levels commensurate with what a company can afford, and programmes that encourage reward performance. Generally speaking, pay systems are designed to attract, retain and motivate employees; to achieve internal, external, and individual equity; and to maintain a balance in relationships between direct and indirect forms of compensation and between

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the pay rates of supervisory and non-supervisory employees. Pay systems need to be tied to the strategic mission of an organisation, and they should take their direction from the strategic mission. However, actual wage levels depend on labour market conditions, collective bargaining management attitudes, and an organiation's ability to pay. In assessing how effectively an organisation administers its compensation programme, the following major purposes of total compensation must be kept in mind • Attract potentially qualified employees • Motivateemployees • Retain qualified employees • Administer payment schemes within legal constraints • Attain personnel and strategic plans. If an organisation hopes to achieve the above goals, employees need to be satisfied with their pay. This means that pay levels should be extremely competiti ve, employees should perceive internal pay equity, and the compensation programme should be properly administered. To survive and be successful in a global economy, an organisation must be competitive. A major factor underlying organisational competitiveness is labour cost. Not only must an organisation pay its workforce a competitive wage within its geographic region, but also it must vary their kinds and amounts of rewards offered, recognising differences in individual contributions. A major difference in individual contributions relates to the knowledge and skills the employee brings to the workplace and the interest, effort, and innovative qualities the employee provides in completing work assignments. The pay and reward system of the organisation must stimulate acceptable levels of peformance from all employees. BOX 15.1

Rewarding Employees

The Indian Electric Company is a city based manufacturer of welding machines and motors. When Mr. NiradShah established the company in 1970, he was keenly aware of the importance of a highly motivated workforce, and how the company's success, in fact, depended on it. Therefore, Mr. Shah had to ensure that each employee would work as diligently as possible for the good of the organisation. Mr. Shah realised that the best way to motivate employees would be to link the company's reward and recognition system to its goals. To establish this connection, Shah developed and implemented a comprehensive incentive system. Its aim was to improve the company's overall performance by allowing contributing workers to share in the proceeds. The plan rewards employees for turning out quality products efficiently while controlling costs. The system includes the following components: Paying by the Piece Rate: Production workers are paid according to the number of "pieces" or product units they produce that are not defective. If a customer sends a defective part back to the company, the employee who produced it must repair it on his or her own time. Providing Year-end Bonus: To reward workers further for their efforts, Shah introduced a year-end bonus system that gives all workers opportunity to nearly double their base wages. Workers get the bonus if the company's annual profit increases. Providing Stock Options: Shah also provided his employees with the option of buying company's stock at a low cost. Employees are also given shares of the company's stock based on annual profits. All the above financial incentive payments enabled the employees to earn more and helped to improve their morale and motivation.

SUMMARY The goals of compensation administration are to design the lowest cost-pay structure that will attract, motivate, and retain competent employees. Compensation is usually composed of the base wage or salary, any incentives or bonuses, and any benefits. It also consists of an organisation's policies, procedures, and rules determining the compensation system. Pay dissa-tisfaction can influence an individual's feelings about his or her job. The question offair pay involves both internal and external equity. Internal equity refers to what an employee is being paid for dOing his or her job compared to what other employees are being paid to do their jobs in the same organisation. External equity refers to what employees in other organisations are being paid for performing similar jobs. Job evaluation serves as the foundation of most wage and salary systems. There are many job evaluation systems, but most are a variation of three general types: job ranking, job classification and the point method. It is a systematic method of making judgments on the relative value of jobs. The primary objective of job evaluation is to build and maintain an internal wage structure that workers consider equitable. It is a continuing process and, therefore, must be maintained if it is to retain its usefulness.

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REVIEW QUESTIONS 1. What are the basic principles of wage/salary administration? 2. Identify the major parts of a compensation programme. 3. What are the important factors influecing the rate of pay of an employee? 4. What is job evaluation? List several objectives of job evaluation. 5. Suppose your organisation's recently completed wage survey showed that pay rates of several jobs were either less than or more than they should be. How would you bring these jobs "into line"? 6. What are the advantages of tailor made wage and salary surveys? How should a wage and salary survey be conducted?

CASE United National Bank The United National Bank has just decided to open a branch in a town "X", which is an exclusive resort located about 40 kms. away from a large city "Y". There is no bank in that town at present. The United National Bank is anxious to determine the appropriate salaryforthe clerical staff it expects to recruit. Clerks in the bank's offices in the neighbouring city "Y" receive a starting salary of Rs. 3,000 a month. As a matter of company policy, pay scales have been fixed on a par »,ith other banks in the city. A survey of local establishments atthe town "X", primarily insurance offices and other comparable concerns, indicates that the salary for qualified clerical personnel is Rs. 3,500 a month. The higher salary in town "X" may be attributed in part to the substantial higher cost of living, the limited number of people seeking employment and the fact thatthere are no other banks. Banks in city "Y" have traditionally paid lesser salaries than other establishments, on the ground that banks offer better working conditions and higher dignity.

Discussion Questions 1. What should be the salary structure for the clerical staff in the United National Bank? 2. If there is difference in pay scales in two different locations, how could the bank justify the same?

REFERENCES 1. Beach, D.S., Personnel, The Management of People at Work, pp. 643-44 and p. 652. 2. Louden, 1.K., and Newton, T.e., Job Analysis, 1948, p. 23. 3. Megginson, Leon C., Personnel and Human Resources Administration, p. 413.

An organisation needs to offer its employees a more attractive value proposition than the ones that are offered to them by other organisations. - Edward E. lAwler

16 EMPLOYEE PROMOTION, DEMOTION AND TRANSFER

In almost every organisation, whether it be a commercial, charitable or governmental, there is considerable shifting of employees from job-to-job. There is also movement of employees into and out of the organisation. This may be due to top management's decision to conduct the business more effectively by making certain changes in the organisation structure. The expansion in the volume of production and employment also necessitates creation of new jobs and the promotion of some employees to positions of greater scope and responsibility. Another cause for change of jobs and status is the introduction of new products, services, processes, and methods of operation.

Promotion Promotion may be defined as an upward movement or advancement of an employee in an organisation to another job, which commands better payor wages, better status or prestige and higher challenges, and responsibilities and opportunities. According to Scott and Clothier, 1 "A promotion is the transfer of an employee to ajob which pays more money or one that carries some preferred status." The purposes of promotion may be outlined as follows:

1. To recognise an individual's performance and reward him for his work 2. To retain and reward an employee for his unbroken continuous service to the organisation

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3. To increase an employee's organisational effectiveness 4. To build loyalty, morale, and belongingness on the part of the employee 5. To promote job satisfaction among the employees 6. To attract suitable and competent workers for the organisation. The importance of promotion is that it provides incentive to initiative, enterprise, and ambition; minimises discontent and unrest; attracts capable individuals; necessitates logical training of advancement and forms an effective reward for loyalty, cooperation, and long service. Promotions also afford an opportunity for greater self-actualisation through more varied and challenging assignments. Many organisations do not make advance plans for administering promotions. When a vacancy occurs, they start locating for someone who is qualified to fill the post. This process is haphazard and often leads to hasty, poorly considered decision. A promotion system may be open or closed - An open promotion system considers all indi vi duals within the organisation as potential candidates. Also it takes specific steps to announce or internally advertise position openings as they occur. In a closed promotion system, a company does not announce vacancies. It also restricts the candidacy of all the individuals within the organisation in relation to promotion openings,. A carefully conceived promotion programme consists of the following elements: (1) policy; (2) identification of promotion channels; (3) promotion appraisal; and (4) centralised records. Promotion Policy: Promotion is often a loaded issue. Hence, it must be based on a clear-cut policy. A sound promotion policy should be consistent, fair and impartial, and a planned activity. The personnel administrator must not only help the management to formulate the company policy of promotion but also educate all the employees regarding the same through effective communication. The National Institute of Personnel Management (NIPM)2 suggested a promotion policy on the following lines: 1. Encouragement of promotion within the organisation instead of looking outside to fill vacancies in higher places. 2. An understanding that ability as well as seniority will be taken into account in making promotions. Ability, efficiency, attitude, job performance, physical fitness, leadership, experience, and length of service are some of the factors considered in making promotions. 3. Drawing up an organisation chart to make clear to all the ladder of promotion. Where there is a job analysis and a planned wage policy, such chart is quite easy to prepare. 4. Making the promotion system clear to all concerned who may initiate and handle cases of promotion. Though departmental heads may initiate promotion, the final approval must lie with the top management, after the personnel department has been asked to check from its knowledge whether any repercussion is likely to result from the proposed promotion. 5. All promotions should be for a trial period to ascertain whether the promoted person is found capable of handling the job or not.,Normally, during this trial period, he draws the pay of the higher post, but it should be clearly understood that if "he does not make the grade" he will be reverted to his former post and former pay scale. The usual policy in promotion is to take merit into consideration. Sometimes, the length of service, education, training courses completed, and previous work history are factors which are given weight while deciding on a promotion. Although promotions are made on the basis of ability, hard work, co-operation, merit, honesty, many informal influences are powerful determinants of a promotion policy. There is a great controversy on the question of whether promotions should be given on the basis of seniority or ability. Trade unions generally insist that years of service or seniority should be the main criterion for making promotions. On the other hand, managements favour promotions on the basis of merit and ability, although no management would like to ignore the seniority of an employee altogether. However, a sound promotion policy must have a suitable combination of merit and seniority and fair and objective administration. Whenever there are two employees of equal seniority, ability or merit should clinch the issue and promotion should go to that employee who is more competent between the two. Where there are two employees of almost equal competence, seniority should be the decider as to who will get the promotion. Pigors and Myers have observed3 : "Management should stress ability above seniority in promotion .... Seniority should be considered, but only when the qualifications of two candidates for a better job are, for practical purposes, substantially equal." Whatever basis for promotion are used, attempt should be made to maintain fairness and objectivity as much as possible.

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In any policy governing promotion by seniority the following questions are to be answered: • When is seniority to begin? • How is it affected by different types of service interruptions? • What groups are to be given special treatment in seniority, for example, ITI certificate holders, diploma holders, degree holders, and so on? • What is the range and area of seniority: in organisation, department, grade, and the like? • What aspects of employment situation is to be affected by seniority, for example, lay-off, redeployment training, transfers, choice of shifts, and so on? • If people are hired on the same day, how to determine seniority?

Promotion to higher positions has several advantages. They are: 1. It is good public relations; 2. It builds morale; 3. It encourages competent individuals who are ambitious; 4. It improves the probability of good selection, since information on the individual's performance is readily available; 5. It is less costly than going outside to recruit; 6. Those chosen internally are familiar with the organisation; and 7. When carefully planned, promoting from within can act as a training device for developing middle and top level managers. It may be noted that although promotion from within is considered as a strong morale-building device, it does not form an unmixed blessing. One that has been widely publicised is the so-called Peter Principle, i.e., that successful people are promoted until they finally reach a level at which they are unable to perform adequately. Another danger associated with promotion from within is that infighting for promotions can become overly intense and have a negative effect on the morale and performance of people who are not promoted. Hence, sometimes, infusion of new blood from the outside is highly desirable in organisational setting. Explicitly, a systematic objective promotion system involves clear-cut definition of lines of advancement, detail personnel records, clear-cut formal promotion channels, and careful selection and appraisal. In addition, attempts may be made to develop effective training programmes with a view to preparing employees for higher jobs, especially where the job structure and contents are rapidly changing in view of automation and allied technological innovations. Promotion Channels: Promotion channels should be identified and recorded on paper. This process is intimately related to job analysis and to organisation planning. Promotion Appraisals and Centralised Records: The selection of individuals for promotion is clearly related to performance appraisal and centralised records maintenance. The education, experience, skills, abilities and evaluation of all employees should be recorded and maintained in central files in the personnel department.

Demotion "Demotion" or a "down grading" refers to the lowering down of the status, salary and responsibilities of an employee. It is used as a punitive measure when there are serious breaches of duty on the part of an employee. It is the reassignment of an individual to ajob of a lower rank and pay usually involving lower level of responsibility.

Demotion Policy: Yoder, Heneman, Turnbull and Stone have suggested a five-fold policy in regard to the demotion practice: 1. A clear and reasonable list of rules should be framed, violations of which would subject an employee to demotion. 2. This information should be clearly communicated to employees. 3. There should be a competent investigation of any alleged violation. 4. If violations are found, there should be a consistent and equitable application of the penalty, preferably by the immediate superior. 5. There should be a provision for review.

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Demotions may be caused because of elimination of several higher jobs and combinations of departments. Moreover, individuals may be demoted in view of their inadequacies to meet job standards. This may occur in the case of newly-promoted employees who are unable to meet the standards of performance as well as in situations where old employees fail to adapt to new technology and methods. Demotion is used as a disciplinary measure. It may be noted that it does not serve the desired purpose. The habitual patterns of behaviour, such as, violation of the rules of conduct, poor attendance record, insubordination, still continue on the lower jobs where the individuals are demoted. Therefore, demotion should not be used normally for disciplinary causes. Demotions have a serious impact on need fulfilment. Needs for esteem and belonging are frustrated leading to a defensive behaviour on the part of the person demoted. Hence, demotions are made quite infrequently. Many managers prefer to discharge employees rather than face the problems arising from demotion. Whatever be the causes of demotion, the management should take enough care to handle the problems arising from such situations. It should serve a useful purpose in keeping the employees alert and alive to their responsibilities and duties.

Transfer Yoder and others 4 define "transfer" as a lateral shift causing the movement of individuals from one position to another, usually without involving any marked change in duties, responsibilities, skills needed or compensation. Employees may be transferred either because of the needs of the business or at their own request. Transfers are usually effected to build up a more satisfactory work team and to achieve the following purposes: 1. To increase the effectiveness of the organisation 2. To increase versatility and competence of key positions 3. To deal with fluctuations in work requirements 4. To correct incompatibilities in employee relations 5. To correct erroneous placement 6. To relieve monotony 7. To move an employee in the interests of health or age 8. To provide creative opportunity 9. To train employees for later advancement or promotion. There are various types of transfers such as :

1. Production Transfers: This type of transfer is effected to meet the company requirements and at times, to forestall lay-offs. When production is declining in one department, and increasing in another department, where additional help is needed, some employees from the former may be transferred to the latter. Such production transfers are an essential part of employment stabilisation programmes. 2. Replacement Transfers: This takes place to replace a new employee who has been in the organisation for a sufficiently long time, the purpose being to give some relief to an old employee from the heavy pressure of work. 3. Versatility Transfers: This type of transfer is designed to benefit both the company and the employee. Here the employee may be moved from one job to another to provide ample opportunities for gaining a varied and broader experience of work. Such a transfer make it possible for an employee to enjoy the facility of job enrichment. which in tum gives to the management a more effective and experienced employee for a higher job. 4. Personnel or Remedial Transfers: This type of transfer is effected to correct erroneous placement, where the employee is ineffective or unhappy and uninterested. For reasons of health or age of the employee, such transfers are resorted to. Ifthe employee is unable to get along with his colleagues, he may be transferred. Generally, remedial transfers are used to promote employee interest in the job and job satisfaction. 5. Shift Transfers: Shift transfers are pretty common where there is more than one shift and where there is regularised rotation. Mutually agreeable employee transfers are used here.

Transfer Policy: Every organisation should have a fair and impartial transfer policy which should be known to each employee. The responsibility for effecting transfers is usually entrusted to an executive with power to prescribe the conditions

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under which requests for transfers are to be approved. For successful transfer policies, it is necessary to have a proper job description and job analysis. Care should be taken to ensure that frequent or large-scale transfers are avoided by laying down adequate selection and placement procedures for the purpose. A good transfer policy should: 1. Clarify the types of transfers and the conditions under which these will be made. 2. Locate the authority in some officer who may initiate and implement transfers. 3. Indicate whether transfers can be made only within a sub-unit or also between departments, divisions/plants. 4. Indicate the basis for transfer, i.e., whether it will be based on seniority oron skill, and competence or any other factor. 5. Intimate the fact of transfer to the person concerned well in advance. 6. Communicate the name in writing to all concerned. Proper administration of the transfer programme is highly useful not only in adjusting to varying situations, but also in placing individuals gainfully in different economic and personal situations.

SUMMARY A promotion may be defined as an upward movement or advancement of an employee in the organisation to another job, which commands better payor wages, better status or prestige, and higher challenges, and responsibilities and opportunities. Good service of an employee has to be rewarded. So also long and loyal service. Demotion and downgrading are the reverse of promotion and upgrading. A transfer is a lateral movement of an employee from one position ordepartment orfrom one plant to another, generally without involving any significant change in compensation, duties, res.ponsibilities and status. No matter what system or policy is applied to the problem of promotion and transfer, whether the rules are stated or unstated, rigid or flexible, the human equation is of paramount importance. Because, ultimately it is people, not systems, who will determine the promotion and transfer policies, practices and procedure.

REVIEW QUESTIONS 1. What is promotion? Draw a promotion policy for your company. 2. Describe the advantages and disadvantages of promotion from within. 3. What is transfer? What are the prinCiples in a transfer policy?

CASE 1 Promotion Problem George was a mechanical engineer before being promoted to supervise a department of engineers. While George believed in delegation of functions, he could not resist getting involved in the technical problems of the work. This took time from some of the personnel and scheduling problems that came to him. In the due course, George found that one of his subordinates, a young engineer by the name of Ramesh, was keen to take on new job responsibilities and challenges connected with the department. George delegated some of his functions to Ramesh who in turn handled many of the workassignments satisfactorily. Ramesh was, in effect, an assistant supervisor, though his designation appeared nowhere on the department's organisation chart. Afterfourmonths ofthis informal arrangement which had worked well, George requested a formal promotion for Ramesh to a managerial position. While George's superiors were willing to add an additional manager to the division, they turned down Ramesh as being too inexperienced and lacking a requisite qualification. George had a difficult problem to resolve. Should he take away the additional duties, although Ramesh did not request him to do so, or should he encourage Ramesh to seek a job in another division that would recognise his managerial capabilities and not discriminate against him for his lack of suitable qualification? Discussion Questions 1. What should George's decision be? 2. Did George handle appropriately the informal upgrading of Ramesh? 3. Are there circumstances that justify a promotion without a commensurate increase in income and status?

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CASE 2 Criteria for Promotion At the insistence of the trade union, negotiation started concerning the proper role of seniority in making promotion decisions. Management prefers the clause, ''when ability is substantially equal, seniority will govern the decision." The union prefers, ''the senior employee who is able to meet the minimum requirements for the job will be preferred in promotion decisions." Name Rakesh Bhaskar Anthony Islam Shankar Harish D'Silva Discussion Questions

Ability Index

Seniority (years)

95 85 78 71

02 08

68 62 60

30

15

20 08 20

1. Under the management preferred clause, who would be selected for promotion? 2. Under the union preferred clause, who would be selected for promotion? 3. How can you arrive at a compromised decision on promotion? 4. According to you, who would be the right candidate for promotion?

REFERENCES 1. Scott, Clothier and SpriegeaI, Personnel Management, p. 173. 2. NIPM, Personnel Management in India, pp. 212-213. 3. Pigors, P. and Myers, C.A., Personnel Administration, 1951, p. 208. 4. Yoder D., Heneman, H.G., Turnbull, lG., and Stone, C.H., Handbook of Personnel Management, pp. 9, 20.

Every right implies a responsibility; every opportunity an obligation; every possession a duty.

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Employee Motivation Employee Morale and Job Satisfaction Employee Participation and Empowerment

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EMPLOYEE MOTIVATION

Motivation is the process of creating organisational conditions which will impel employees to strive to attain company goals. "Motivation represents an unsatisfied need which creates a state of tension or disequilibrium, causing the individual to move in a good-directed pattern towards ... restoring a state of equilibrium by satisfying the need."1 According to Dubin, "motivation is the complex of forces starting and keeping a person at work in an organisation."2 Seen from the corporate perspective, motivation is the willingness to put forth effort in pursuit of organisational objectives. Motivation refers to the willingness of individual members to set and accept challenging goals, and to take responsibility, their involvement in work, and their job satisfaction. The purpose of motivation is to create conditions in which people are willing to work with zeal, initiative, interest and enthusiasm, with a sense of responsibility, loyalty and discipline, and with pride and confidence in the most cohesive manner, so that the goals of an organisation are achieved effectively. Motivational techniques are utilised to stimulate employee growth. Motivation is a combination of many diverse elements which are rather difficult to define. However, two elements have been regarded as important: (a) understanding of the fundamental drives, urges, needs of the people which are subject to emotional stimulation or motivation, and (b) communication with people so that they may have a satisfactory stimulus to their urges. Motivation is a function which a manager performs in order to g~t his subordinates to achieve job objectives. It is not merely a management process; there is another side to it - the individual being motivated. Psychologists call individual motivation a state of tension. The motivation of a group is as important as self-motivation. A group can be motivated by improving human

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relations and dealing with people in a humane way, by developing the will to do, by encouraging involvement in their work, and by giving them an opportunity to improve their performance and by complimenting or praising them. Other important factors which motivate individuals include respect for individuality, good pay, opportunity to do interesting work, feeling that the job is important, a large amount of freedom on the job, and opportunity and self-development. No firm can be productive without motivated employees.

Motivating Factors Some managers try to motivate employees through the use of rewards, punishments and formal authority. But, motivation is much more complicated than that. It involves ideas of family, team work, variety, growth, learning, salary, other benefits, and the like. Work in itself has become more important than the employer or the organisation. Executives today are interested in challenging assignments that involves application of one's mind. Risk involvement is appreciated and viewed as exciting so much so that easy jobs involving simple tasks and no risks are demotivating. Workers, executives and managers today would like to have a 'say' in policies, the rules and regulations, the targets and other job-related issues. Employees do not enjoy a routine, monotonous role of being a cog in the wheel. They prefer taking risks, making decisions and delivering the goods. Need for individuality and for unique identity is felt strongly among young executives today. Innovation and creativity have come to be crucial needs for executives today. They like to be listened to, for their suggestions and new ideas. They also enjoy implementing new, better and effective strategies to reach the goals of their team! organisation. There is also the need for the job profile to suit one's aptitude - a software consultant who has aptitude for development but no inclination for teaching, if allocated as training faculty will not be motivated. Another consultant who enjoys teaching will be highly motivated when allocated as training faculty. There is also the growing need amongst today's workers/executives for enriching one's skills, i.e., for individual development. Employees look forward to development of new skills rather than security of jobs in an organisation. Training and development programmes also provide a break from the daily routine and work pressure. In the absence of such activity, an employee feels demotivated and is unable to give his best to his employer. Today's employees, therefore, want to add value to themselves as they make valuable contributions to their organisations. Just as employees have a need for challenging work involving risks, they also need to be forgiven for any mistakes made in the process. Employees feel motivated and perform better when mistakes are forgiven or ignored.

Importance of Motivation Probably, no concept of human resource management receives as much attention of academicians, researchers, and practising managers as motivation. The increased attention towards motivation is justified by several reasons. 1. Motivated employees are always looking for better ways to do ajob: This statement can apply to corporate strategies, and to production workers. When people actively seek new ways of doing things, they usually find them. It is the responsibility of managers to make employees look for better ways of doing their jobs. An understanding of the nature of motivation is helpful in this context. 2. A motivated employee, generally, is more quality oriented: This is true whether we are talking about a top manager spending extra time on data gathering and analysis for a report, or a clerk taking extra care when filing important documents. In either case, the organisation benefits, because individuals in and outside the organisation see the enterprise as quality conscious. A clear understanding of the way motivation work, helps a manager make his employees quality oriented. 3. Highly motivated workers are more productive than apathetic workers: The high productivity of Japanese workers and the fact that fewer workers are needed to produce an automobile in Japan than elsewhere is well-known. The high productivity of Japanese workers is attributable to many reasons, but motivation is the main factor. 4. Every organisation requires human resource, in addition to financial and physical resources for it to function: Three behavioural dimensions of human resource are significant to the organisation: (a) people must be attracted not only to join the organisation but also to remain in it; (b) people must perform the tasks for which they are hired, and must do so in a dependable manner; and (c) people must go beyond this dependable role performance and engage in some

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form of creative, spontaneous, and innovative behaviour at work. In other words, for an organisation to be effective, it must come to grips with the motivational problems of stimulating both the decision to participate and the decision to produce at work.

5. Motivation as a concept represents a highly complex phenomenon that affects, and is affected by, a multitude of factors in the organisational milieu: A comprehensive understanding of the way in which an organisation functions requires that increasing attention be directed towards the question of why people behave as they do, on their jobs. 6. Yet another reason why increasing attention is paid towards motivation can be found in the present and future technology requiredfor production: Increased use of technology results in greater efficiency, higher productivity and better standard of living to the people.

Motivation Steps Jucius 3 has observed that the following steps be adopted in motivation: (a) Sizing Up: This involves ascertaining motivational needs. All employees need motivation but of varying kinds and in varying degrees. (b) Preparing a Set of Motivating Tools: This requires a selection of specific tools of motivation. An executive, from personal experience, from the experiences of others, and with the help of the personnel department, may draw up a list of devices that may motivate different types of people under different circumstances. (c) Selecting and Applying Motivation: The executive should decide the words, the tone of voice and the gestures to be used and make necessary rehearsal for their proper use. Besides, it has also to be considered where and when motivation is to be applied. The place and timing for this purpose are important. (d) Feedback: This involves the finding whether an individual has been motivated; if not, some other device may be applied. While establishing the steps of moti vation, an executi ve should be guided by certain rules. According to J ucius, 4 these rules are: (a) Self-interest and Motivation: People are by nature, selfish. When a person realises that his own interests are best served by the attainment of an organisation's goals, he is likely to be motivated. (b) Attainability: It is necessary to establish goals that are attainable and when such goals are achieved, it leads to employee satisfaction. Unattainable goals frustrate people. (c) The Human Element: Motivation appeals to emotions and feelings. The executive, who is most successful as a motivator, can trace his success invariably to his skiIl in dealing with peoples' feelings. He can bring out the best in people because he makes them feel good, feel significant, feel worthwhile, and feel that they are growing. (d) Individual Group Relationship: Motivation must be based upon group as well as individual-centred stimuli. (e) Managerial Theory: Management must base its motivational efforts on sound theory.

Types of Motivation If a manager wants to get work done by his employees, he may either hold out a promise of a reward for them for doing work in a better or improved way or instil fear into them to do the desired work. In other words, he may utilise a positive or negative motivation. Both these types are widely used by managements. Positive motivation includes praise and credit for work done, competition, pride, delegation of responsibility, appreciation, and pay. Positive motivation leads to a good team spirit, cooperation and feeling of happiness. Negative motivation is based upon force and fear. Fear causes persons to act in a certain way because they are afraid of the consequences if they don't. Fear motivation is a "push" mechanism. Imposition of punishment frequently results in frustration among those punished, and an unfavourable attitude to the job. In spite of these demerits, negative motivation has been used to achieve the desired behaviour in some cases. There is no management which has not used the negative motivation at sometime or the other. However, in recent years the trend has been towards the use of positive motivation. Extrinsic motivation is concerned with external motivators which employees enjoy - pay, promotion, status, fringe benefits, holidays, retirement plans and health insurance schemes. By and large, these motivators are associated with financial rewards. Intrinsic motivation, on the other hand, is concerned with the feeling of having accomplished something worthwhile,

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i.e., the satisfaction one gets after doing one's work well. Praise, responsibility, recognition, esteem, power, status are examples of such motivation.

Theories of Motivation 1. Maslow's Theory of Hierarchy of Needs: People go to work in order to satisfy their needs and aspirations. These needs are not constant but they change according to circumstances status, environment, society, groups, and so forth. From Prof. A.H. Maslow (1943), we have a theory of motivation where he identified a hierarchy of needs as shown in Fig. 17.1.

ESTEEM

SOCIAL

SAFETY PHYSIOLOGICAL Figure 17.1 Maslow's Hierarchy of Needs

Maslow argued that as one's need is met, then the individual moves on to the next need. First of all, the individual has the basic physiological needs such as food, shelter, clothing, and works in order to satisfy these needs. Once these needs are satisfied, the indi vidual moves to a higher plane of needs. Secondly, an indi vidual has safety needs such as security and protection - the need to provide a safe and secure physical and emotional environment, an environment that is free from threats to continued existence. Once these needs are met, the individual moves on to satisfy the third type of needs called "social needs" or "belongingness needs." These needs relate to one's desire for social acceptance and friendship. The fourth type is self-respect and self-esteem. The esteem needs focus on one's desire to have a positive image to receive recognition, attention and appreciation from others for one's contribution. The last type of needs are those of self-fulfilment and self-actualisation for realising the fullest stature. People who have become self-actualised are self-fulfilled and have realised their full potential. Selfactualisation is an individual's motivation to transform the perception of self into reality. 2. McGregor's Theory X and Theory Y: Prof. Douglas McGregor has presented two opposite sets of assumptions about employees. These have been represented by Theory X and Theory Y. Theory X represents standard bureaucratic and authoritarian attitude towards employees and is based on certain assumptions such as: (i) the average person dislikes work and, whenever possible, will avoid it; (ii) most people are not ambitious, have little desire for responsibility and prefer to be directed; (iii) to get people to work, it is necessary to use strict control, threats, constant pressure, coercion, persuasion, and even punishment; (iv) most people have little capacity for creativity in solving organisational problems; and (v) people actually like to be directed and supervised very closely. McGregorS drawing heavily on Maslow's hierarchy of needs, concluded that the "theory X assumptions about human nature, when universally applied, are often inaccurate and that the management approaches that develop from these assumptions may fail to motivate many individuals to work towards organisational goals." He observes: "Management by direction and control may not succeed because it is a questionable method for motivating people whose physiological and safety needs are reasonably satisfied and whose higher level needs are becoming predominant." He, therefore, developed an alternative theory of human behaviour called Theory Y. Theory Y assumes that people are not by nature lazy and unreliable. They enjoy work, show initiative and imagination in self-direction and self-control. Some assumptions of Theory Yare: (i) Work is a natural

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activity, like playing and rest, if the conditions are favourable. (ii) Close supervision and threats of punishment are not the only ways to get people to do things. (iii) Motivation occurs at the social esteem and self-actualisation levels, as well as at the physiological and security levels. (iv) People can be self-directed and be creative at work if properly motivated. 3. Herzberg's Two-Factor Theory: A significant development in motivation research was made by Frederick Herzberg (1959) and associates who distinguished between motivational and maintenance factors in the work situation. Maintenance of hygiene factors are those which belong to the company policies and administration, supervision, inter-personal relations, working conditions, pay,job security, personal life, status. Herzberg6 propounds that these factors help in removing discomfort, dissatisfaction and discontent on the part of the employees but are not motivators as traditionally perceived by management. These potent dissatisfiers are called maintenance factors on the job because they are necessary to maintain a reasonable level of satisfaction in employees. They are also known as hygiene factors because they support employees' mental health. But in themselves, they are not motivators according to Herzberg and his team. The real motivators that primarily build strong motivation and high job satisfaction among employees are achievement, recognition, advancement, work itself, possibility of growth, and responsibility. According to Herzberg, the motivating factors are intrinsic to the job, while the maintenance and hygiene factors are extrinsic to it. According to Dumette, Campbell and Hakel (1967), Herzberg's Motivation Hygiene Theory has accomplished three important objecti ves: 1. It has discovered those features of job situation that make the difference between satisfaction and dissatisfaction. 2. Unlike the tradition of most previous research it emphasises those job features that lead to change in feelings towards the job. 3. It developed a taxanomy of job situations consisting of satisfying and dissatisfying features. Satisfying features which the employees would like to attain and the dissatisfying features that they would like to avoid. Herzberg's theory has, however, been criticised by many authors. For example, Keith Davis has observed that alimited testing of the model on blue-collar workers suggests that some items normally considered as maintenance factors are frequently considered motivational factors by the blue-collar workers. Some authorities doubted whether the factors leading to satisfaction and dissatisfaction are really different from each other. In less developed countries, it is likely that workers will designate some of the maintenance factors or hygiene factors as motivators, since they are yet to meet some of their lower order needs. 4. McClelland's (1953) Theory of Motivation: This theory of moti vation is quite extensi ve and involved. His contribution in developing the concepts of need for achievement and need for power is of great significance. According to him, two moti ves are innate, namely, striving for pleasure and seeking to avoid displeasure or pain. All the other motives are acquired. According to him people can be classified into two broad groups - one small and the other large. Those falling in the small group are challenged by opportunities and are willing to work hard to achieve some goal. People in the large group, on the other hand, have less need of achievement and are not so challenged by opportunities. Achievement-oriented people possess certain characteristics. They prefer a moderate degree of risk because they feel that their efforts and abilities will probably influence the outcome. In business, such people are successful entrepreneurs; and the organisation with many such people grows faster and is profitable. McClelland differentiates between personal power and institutional or social power. Indi viduals high in need for personal power like to inspire subordinates and expect the latter to respect and obey them. Managers who are high in institutional power, however, tend to exert authority and influence so as to achieve the goals of the organisation rather than to gain any personal ego satisfaction. S. Vroom'~ Expectancy Theory: Expectancy Theory, as applied to behaviour at work, has been formulated mainly by Victor H. Vroom (1964). It explains that motivation is a product of the values one seeks and one's expectations of the probability that a certain action will lead to those valuC(s. According to this theory, an employee's moti vation is a force driving him to achieve some level of job performance. The force or effort depends upon his perception of the probability or likelihood of certain outcomes resulting from his efforts, as related to the value he places on these outcomes. For example, if an employee believes that ifhe performs at a high level, he will be paid a higher income which is of value to him, then he will produce more. In achieving a high level of performance, he has the satisfaction which, in tum, influences his future effort. The essence of this theory is that an employee performs a kind of cost-benefit analysis. If the estimated benefit is enough to justify the cost of greater effort he is likely to put in greater effort.

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6. Skinner's Behaviourist Theory: The Harvard University Psychologist, Prof. Skinner (1953), has contributed a new concept of motivating people and the concept is variously called "behaviour technology", "behaviour modification" or "positive reinforcement." Prof. Skinner suggests that people perform better and gain better in psychological satisfaction on the job when they receive proper appreciation and praise for their good work. 7. Likert's Employee-Centred Approach: Rensis Likert7 (1961, 67) believes that as organisations move from a highly exploitative autocratic system to a democratic style, they will meet the needs of human beings and become productive organisations. Likert and his colleagues conducted research at the U ni versity of Michigan, and came to the conclusion that "both human resources and capital resources need to be considered as assets requiring proper management." They also suggested that if a supervisor wants to motivate his workers, he should be "employee-centred" rather than "job-centred." 8. Argyris (1957, 64): He feels that organisations treat individuals in the system as children, assigned to them simple tasks, and create dependence in them by exercising too much control over them. This is dysfunctional to healthy humans and results in frustration and a lack of work role involvement. Angyris argues that by giving increased responsibility, a broader range of tasks, and independence, employees will reach their potential and increase their productivity. Thus, by treating individuals like mature adults, organisations can increase productivity while at the same time meet the needs of individuals for independence and growth. 9. Lyman Porter and Edward Lawler (1968): They came up with a comprehensive theory of motivation. If the reward to be obtained is attractive or of expected utility then the individual will decide to put in the necessary effort to perform the job. If the expected reward is not so, he will lower his efforts. In addition, the individual performing the job should also have accurate role perceptions. Role perceptions refers to the way in which people define their jobs. We often hear managers say that the job is what the employee makes of it. Some people may take on additional responsibilities and expand the scope of their job. Others may avoid some aspects of their job and hence narrow its scope. Thus, people may perceive their roles differently. Porter and Lawler's model is of great significance to managers since it sensitises them to focus attention on the following to keep their employees motivated: 1. Put the right person on the right job. 2. Carefully explain to employees what their role is, and make sure they understand it. 3. Prescribe in concrete terms the actual performance levels expected of the individuals. 4. Make sure that the rewards dispensed are valued by the employee. That is, find out what kind of rewards are appropriate and attractive to the employee and see if such rewards can be given to them.

Economic and Non-Economic Motivation Economic motivation is connected directly or indirectly with money. Factors such as wages and salary, bonuses, profitsharing, leave with pay, medical reimbursement, and the like are included under this type of motivation. Money is a means through which one can satisfy higher-order needs. Frederick Taylor (1911), proposed an economic view of man over seven decades ago. He suggested that man is essentially motivated by economic reward and the industrial management should reckon with this point of view. He operationalised his philosophy in what has come to be known as scientific management. One major component of scientific management is its emphasis on how money can be used to maximise productivity. The practice of piece rate payment system is a direct outcome of such a thinking. With the advent of the human relations movement, the emphasis on money as a motivator is toned down to some extent. However, in the Indian context, money still seems to playa very significant role in influencing job satisfaction and productivity of an average Indian emp!oyee. Non-economic motivators are not connected with monetary rewards. In the words of Dubin, "non-financial incentives are the psychic rewards, or the rewards of enhanced position, that can be secured in the work organisation." Some of the most commonly used non-financial motivators are: (a) appraisal, praise and prestige; (b) status and pride; (c) competition; (d) delegation of authority; (e) participation; (f) job security; (g) job enlargement; (h)job rotation; (i)job loading; (j)job enrichment; and (k) quality of work life.

Reward Systems One of the important attributes of work organisation is its ability to give rewards to their members. Pay, promotions, fringe benefits, and status symbols are perhaps the most important rewards. Because these rewards are important, the way they are distributed have a profound effect on the quality of worklife as well as on the effectiveness of organisations.

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There are several principles for setting up an effective reward system in an organisation. • Give value to the reward system. Employees must have a preference for the types of rewards being offered. Many employees prefer cash awards and plaques. Some employees like to see their name in the company newsletter. Others like the public recognition surrounding award ceremonies. • Make the reward system simple to understand. Elaborate procedures for evaluating performance, filling out forms, and review by several levels of management lead to confusion. The system must be easy to understand if it is to be used effectively. • Lay down performance standards within the control of the team. • Make the reward system fair and effecti ve. • Ensure participation in the reward system. Involve people in the change process and empower them to do the needful. Most organisations use several different types of rewards. The most common are wages or salary, incentive systems, benefits perquisites, and awards. For most people, the most important reward for work is the pay they receive. For one thing, an effectively planned and administered pay system can improve motivation and performance. Examples of recognition and rewards include money, plaques, trophies, certificates or citations, public recognition, time off official perquisites, special assignments, parties or celebrations or other meaningful considerations. Incentive systems are plans in which employees can earn additional compensation in return for certain types of performance. Examples of incentive programmes include piece work, gain-sharing, bonus, merit pay plans, profit sharing plans, and so on. Another major component of reward system is the employee benefits plan. These include payment for time not worked both on and off, the social security contributions, life and health insurance measures. Perquisites are special privileges, rewarded to selected members of an organisation, usually senior managers. For years, the top executives of many businesses were allowed privileges such as air travels paid, vacations, a car and a driver, mobile phone, furnished accommodation and so on. Money may not actually motivate people. Surprisingly, there is no clear evidence that increased earnings will necessarily lead to higher performance. A great deal of research has been done on what determines whether an individual will be satisfied with the rewards he or she receives from a situation. Five conclusions can be reached about what determines satisfaction with rewards.

First, satisfaction with a reward is a function of both how much is received and how much the individual feels should be received. When individuals receive less than they feel they should receive, they are dissatisfied. When they receive more than they feel they should, they tend to feel gUilty and uncomfortable. These feelings are overcome by a change in the wayan indi vidual perceives the situation, for instance, by an increase in his perception of his own work. Second, people's feelings of satisfaction are influenced by comparisons with what happens to others. These comparisons are made both inside and outside the organisations they work in, but they are usually made with similar people. Individuals tend to rate their inputs higher than others. Third, in addition to obvious extrinsic rewards individuals receive (e.g., pay, promotion, status symbols), they also may experience internal feelings that are rewarding to them. These include feelings of competence, achievement, personal growth, and self-esteem. The overall job satisfaction of most people is determined both by how they feel about their intrinsic rewards and how they feel about their extrinsic rewards. Fourth, people differ widely in the rewards they desire and in how important the different rewards are to them. Probably the most frequently and hotly debated topic in this area concerns how important the different rewards are to employees. One group says money is the most important, another says interesting work is. Both groups, of course, are able to find examples to support their point of view, since for some people money is most important while for others jobs content is the most important. People differ substantially and in meaningful ways in what is important to them. Fifth, many extrinsic rewards are important and satisfying only because they lead to other rewards. There is nothing inherently variable about many of the things which people seek in organisations. They are important only because they lead to other things or because of their symbolic value.

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Organisations typically rely on reward systems to do four things: (a) motivate employees to perform effectively, (b) motivate employees to join the organisation, (c) motivate employees to come to work, and (d) reinforce the organisational structure by indicating the position of different individuals in the organisation. An effective reward system should link reward to performance. Workers who work harder and produce more or produce better quality results should receive greater rewards than poor performers. Also, criteria for receiving rewards should be clear and workers should know whether they will receive rewards for quality performance, innovation, effort or attendance. Management must ensure that workers perceive the distribution of rewards as equitable. Furthermore, for organisations to attract, motivate and retain qualified and competent employees, they must offer rewards comparable to their competitors.

How to Improve Motivation It is very difficult to answer the question "What motivates people ?" Many factors have been listed above. There may be several other factors, but probably the most important would be the need for satisfaction. Keeping this in view the following are suggested: • • • • • •

Adequate and fair compensation. Safe and healthy working conditions. Security and growth opportunity. Opportunity to use and develop creativity. Respect for the individuals' personal rights. Work and family life. Table 17.1

What Motivates You

The following self-assessment questionnaire may help to illustrate the relative importance of different motivational factors. Rank each item below in order of importance to you. Compare your results with your colleagues. What do they imply? Pay Good colleagues Pleasant working environment Promotion prospects Fringe benefits Holidays Hours of work Sense of achievement Job challenge Variety Security Recognition Training Status Doing a worthwhile job Interesting work

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SUMMARY There are a whole range of theories and beliefs about what motivates people in organisations. In regard to almost all the theories propose9 there is evidence both for and against. On the whole there is no consensus about motivation. The motivating process centres on needs, which produce motives that lead to the accomplishment of objectives. The types of rewards that an organisation offers its employees playa crucial role in determining the level of motivation. In addition, rewards have an impact on the quality and quantity of personnel that the organisation is able to recruit, hire, and retain. Employees can be motivated, both as individuals and members of groups. Organisational rewards include both intrinsic and extrinsic rewards. Six basic theories of motivation are the traditional, need hierarchy, motivation maintenance, preferenceexpectancy, reinforcement and equity theories. The traditional theory is based on the assumption that money is a primary motivator - employees will produce more for greater financial gain. Although each of the basic motivation theories may appearto be different, most are not in conflict but rather deal with a different segment ofthe overall motivational process or the same segment from different perspectives.

REVIEW QUESTIONS 1. What do you mean by motivation? Describe the theories on motivation. 2. "Most people can be motivated with money." Discuss your views on this statement. 3. Discuss the salientfeatures of Herzberg's Motivation-Hygiene Theory and show its relevance to the Indian situation. 4. Supervisors often complain thatthey are unable to really motivate their subordinates to high levels of performance because of organisational poHcies. To what extent do you believe that this position is legitimate?

CASE 1 Creativity

In 1883, a creative engineer named John Roebling was inspired by an idea to build a spectacular bridge connecting New York with Long Island. However, bridge experts throughout the world thought that this was an impossible feat and told Roebling to forget the idea. It just could not be done. It was not practical. It had never been done before. Roebling could not ignore the vision he had in his mind of this bridge. He thought about it all the time and felt it could be done. He just had to share the dream with someone else. After much discussion and persuasion he managed to convince his son Washington, an up and coming engineer, that the bridge could be built. Working together for the first time, father and son developed concepts of how it could be accomplished and how the obstacles could be overcome. With greater excitement and inspiration, and the headlines of a wild challenge before them, they hired their crew and began to build their dream bridge. The project started well, but when it was only a few months under -way a tragic accident on the site took the life of John Roebling, Washington was injured and left with a certain amount of brain damage, which resulted in him not being able to walk or talk or even move. "We told them so." "Crazy men and their crazy dreams." "It's foolish to chase wild visions." Everyone had a negative comment to make and felt that the project should be scrapped since the Roeblings were the only ones who knew how the bridge could be built. In spite of his handicap, Washington was never discouraged and still had a burning desire to complete the bridge and his mind was still as sharp as ever. He tried to inspire and pass on his enthusiasm to some of his friends, but they were too daunted by the task. As he lay on his bed in his hospital room, with the sunlight streaming through the windows, a gentle breeze blew the flimsy white curtains apart and he was able to see the sky and the tops of the trees outside for just a moment. It seemed that there was a message for him not to give up. Suddenly an idea hit him. All he could do was to move one finger and he decided to make the best use of it. By moving this, he slowly developed a code of communication with his wife. He touched his wife's arms with the finger, indicating to her that he wanted her to call the engineers again. Then he used the same method of tapping her to tell the engineer what to do. It seemed foolish but the project was under-way again.

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For 13 years, Washington tapped out his instructions with his finger on his wife's arm, until the bridge was finally completed. Today the spectacular Brooklyn Bridge stands in all its glory as a tribute to the triumph of one man's indomitable spirit and his determination not to be defeated by circumstances. It is also a tribute to the engineers and their teamwork, and to their faith in a man who was considered mad by half of the world. It stands too as a tangible monument to the love and devotion of his wife who forthose 1310ng years patiently decoded the message of her husband and told the engineers what to do. Discussion Questions

1. How to develop and utilise creativity among the employees? 2. What is the secret of success of Roebling? Source: The Hindu, March 8,1987.

CASE 2 Motivation to Work

Shivshankar has been employed with Premier Data Systems (PDS) for five years and during that time has progressed to his current position of senior programmer analyst. He is generally happy with the company and thoroughly enjoys the creative demands of his job. One Saturday afternoon during a snooker game with his friend and co-worker Ram Swarup, Shivshankar.cJiscovered that his department had hired a recently qualified university graduate as a programmer analyst. Shivshankar, although a good-natured fellow, got upset when he learned that the newly appointed employee's starting salary was only Rs. 500 a month lower than his own. Shivshankar was bewildered. He felt that he was being treated unfairly. The following Monday morning, Shivshankar met Rajan, the personnel director and asked him what he heard was true. Rajan apologetically admitted that it was true and attempted to explain the company's situation thus: "Shivshankar, the market for programmer analyst is very demanding, and in order to attract right candidates, we have to offer a higher starting salary. We desperately needed another analyst, and this was the only way we could meet our requirements." Shivshankar asked Rajan whether his salary would be adjusted accordingly. Rajan answered, "your salary will be revaluated periodically at the time of performance appraisal. You are doing a good job, but I am not sure about the recommendation from your boss to this effect." Sh ivshankar than ked Rajan for his time but left the office disappointed and wondering about his future with PDS. Discussion Questions

1. Do you feel that Rajan's explanation was satisfactory? Discuss. 2. What is likely to be the impact of this incident on Shivshankar's motivation to work? 3. What action do you think the company should have taken with regard to Shivshankar? Explain.

REFERENCES 1. Viteles, Morris, S., Motivation and Morale in Industry, p. 73.

2. 3. 4. 5. 6. 7. S.

Dubin, Robert, Human Relations in Administration, p. 53. Jucius, MJ., Personnel Management, pp. 41-52. Ibid., pp. 42-44. Hersey, Paul and Blanchard, Kenneth, H., Management of Organisational Behaviour, p. 47. Herzberg, The Motivation to Work, pp. 59-62. Likert, Rensis, Human Organisation. Ibid., p. 69.

Motivation is getting people to do what you want them to do because they want to do it.

- Durignt D. Eisenhower

EMPLOYEE MORALE AND JOB SATISFACTION

Morale is a combination of all the attitudes of an individual toward the things that affect him and are important to him. Because of motivational impact, attitudes also influence the actions and performance of personnel. Morale is a matter of degree; a subordinate may have a high morale, low morale, or something in between. High morale exists when an individual's attitudes are predominately favourable toward the things that affect him. Low morale exists when an individual's attitudes are predominately negative and drives him to poor performance. An attitude is a person's predisposition or sentiment toward other persons, objects, institutions, practices, ideas, or situations that result in a tendency to react in a characteristic way. Attitudes determine how the individual wiIl react to similar situations, persons, or groups.

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Concept of Morale "Morale" is a very widely used tenn. It has been variously defined by different authorities. According to Yoder, "Morale is a feeling somewhat related to esprit de corps, enthusiasm or zeal." Flippol has described morale as a mental condition or attitudes of individuals and groups which determine their willingness to co-operate. Theo Haimann 2 observes that "morale is a state of mind and emotion affecting the attitude and willingness to work, which, in tum, affect individual and organisational objectives." Organisational morale is basically a mental condition which leads individuals and groups willingly to subordinate their personal objectives, temporarily and within reason, to further the company's objectives. Good morale is evidenced by employee enthusiasm, voluntary conformance with regulations and orders, and willingness to co-operate with others in the accomplishment of an organisation's objectives. High morale leads to a high degree of cohesiveness, togetherness and group effectiveness. Employee morale is a very complex phenomenon and is influenced by many factors on and off the shop floor. According to McFarland,3 the important factors which have a bearing on morale are: (i) the attitudes of executives and managers towards their subordinates; (ii) working conditions, including pay, hours of work, and safety rules; (iii) effective leadership and an intelligent distribution of authority and responsibility in the organisation; (iv) the design ofthe organisation's structure which facilitates the flow of work; and (v) the size of the organisation.

Causes of Low Morale The reasons for low morale can be individual or organisational.

Employees' Personal Problems • Domestic difficulties and unhappiness • Financial problems • Poor health • Worry • Lack of self-confidence • Lack of goals • Substance abuse

lob-related Problems • Ineffective leadership • Inadequate supervision • Salary dissatisfaction • Feeling of unfair treatment • Lack of recognition • Dissatisfaction with status in the organisation • Fear of superior/supervisor • Lack of involvement • Lack of feeling of security • Not understanding the importance of the work • Lack of opportunity to use one's highest skills and abilities.

Indicators of Low Morale 1. Absenteeism and Tardiness: Absenteeism and tardiness form a major problem in an industrial setting. They are indicators of low efficiency and reflect an attitude of dissatisfaction, unrest, lack of interest and grievances. They provide an index of job satisfaction and employee morale.

2. Disciplinary Problems: Ineffective administration of disciplinary action exerts adverse effects on the employees' morale. Indeed, abundance of disciplinary actions themselves are indicative oflow morale. These actions are required

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only when all other measures prove to be an utter failure. The best course of action is self-discipline and self-control. The need for disciplinary action is minimised by effective managerial practices.

3. Employee Grievances: Any dissatisfaction or discontent relating to the company policy and activities can be designated as a grievance. Grievances reflect the state of employee morale in an organisation. Effective handling of grievances helps in building up employee morale.

4. Employee Turnover: Employee turnover forms a response to severe unrest, dissatisfaction and morale problems. However, the turnover stemming from low morale should be separated from that arising from illness, death, lay-off and retirement.

5. Employee Unrest: Employee unrest reveals a low level of employee morale and lack of job satisfaction. Unrest may be in several forms and influence both the individual and the group. Poor morale is evidenced by insubordination, a feeling of discouragement and dislike of the job, and company and associates. It is also characterised by slow-down, strikes, grievances, absenteeism and high labour turnover.

Measurement or Evaluation of Morale Kahn and Katz 4 consider morale as a combination of attitudes towards the company, job and the immediate supervisor. This definition is highly significant from the standpoint of the measurement of morale. Morale can be measured by evaluating an individual's attitude. Behavioural scientists have developed several techniques for the measurement of employee attitude and job satisfaction. Among these measures are included inference, prediction from behavioural data, interviews, questionnaires and scales. Morale can be assessed by surveys using the questionnaire or interview technique. Davis classifies morale surveys in three categories such as objective surveys, descriptive surveys, and projective surveys. The measurement of morale through objective surveys involves the presentation of both questions and choice of answers in a manner that the respondents simply put a tick mark on the answer to indicate his choice. The measurement of morale through descriptive surveys involves the presentation of the questions but the respondent is allowed to answer in his own words. The measurement of morale through projective surveys relates to the presentation of abstract situations, apparently unrelated to job or company and requiring the respondent to analyse and comment upon these situations. Frequently, in morale questionnaires, both the objective and descriptive approaches are used. Measurement of morale has several advantages. First, information obtained through a morale survey serves as a reflection of management in the minds ofthe workers as well as knowledge about their feelings, opinions and attitudes. It reveals the general morale in the company and forms an effective diagnostic tool for analysing employee problems. Second, the morale surveys provide an effective channel of upward communication in organisational settings. Third, morale surveys improve the attitudes of the employees and provide a safety valve, an emotional outlet, and a chance to get things off one's chest. Fourth, morale surveys are useful in determining the training needs, especially for supervisors. Finally, morale surveys provide valuable information to the unions enhancing their knowledge regarding their member's feelings, opinions and attitudes. Notwithstanding these benefits, sometimes, it has adverse effects on employees as well as on employers. These surveys are not opposed because of its belief that they will dig up the latent dissatisfaction among the employees. The management is also opposed to such surveys in view of the costs involved in them. Admittedly, as Davis observes, the morale surveys do not provide solutions to all the problems.

Improving Morale It need not be emphasised that the promotion and maintenance of high morale are possible when certain positive measures are taken to reconcile individual interests with the interests of the organisation. These positive measures are: 1. Job Satisfaction: Job satisfaction is of utmost significance from the standpoint of employee morale. It is a complex of different attitudes possessed by an individual. These attitudes relate to several aspects of the job such as wages, supervision, steadiness of employment, conditions of work, opportunity for advancement, job security, working hours, fringe benefits, recognition and allied factors. In addition to these job-related factors, individual adjustment and group relationship outside the job also form major determinants of job satisfaction. 2. Job Enrichment: This involves a greater use of the factors which are intended to motivate the worker. The idea is to reduce employee discontent by changing or improving ajob. Job enrichment also opens up for the employee an opportunity for greater recognition, growth, advancement, and responsibility.

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3. Building Responsibility into a Job: Employees should be encouraged to take risk-decisions. This can be ensured by delegating authority to th-em. 4. Rotation of Jobs: Job rotation helps to reduce an employee's boredom which arises out of the monotonous nature of work. Imaginative managers can develop many more ways of making a job interesting for their employees. For example, an employee may be temporarily transferred to another job or he may be assigned to a special project.

Approaches to Morale Building Most companies use simultaneously two approaches to morale building: the group approach and the individual approach. The group approach is the most economical and the most commonly used. It always stresses conformity. The individual approach to morale building is more difficult and more expensive to maintain. Individual approach is one of the most effective morale builder and one of the best investment management can make on human beings. It does not supplant group techniques but rather supplements them, and many programmes can be devised incorporating both approaches. The individual approach is always oriented to the unique feelings of each employee. While recognising that people work in groups and have common wants, it also recognises that an employee must make his own personal positive adjustment to his particular work situation. Among the more successful individual morale-building techniques are in the areas ofjob placement,job training,jobenlargement, job rotation, job description, performance evaluation, personnel counselling, open channels of promotion, and merit awards. Psychological research and industrial experience have indicated that high productivity can exist only where there is high morale and that production decreases when morale declines. Here, however, we must be clear what we are talking about when we speak of "high morale" in industry. It is possible, for example, for a company to have employees with a high morale but low job efficiency and production output. This may be termed as "personally-oriented morale." On the other hand, when both employees and management gain a feeling of well-being by working together on the common production goals, we have "production-oriented morale" - a condition in which the unique ambitions of all concerned are realised. Whenever a company has production-oriented morale, other things being equal, high production is inevitable. Thus, high morale alone does not guarantee high production - it depends entirely on what kind of high morale exists. Measures to improve morale and productivity relate to the human relations approach, in general, and participation, effective communication, and group cohesiveness, in particular.

Job Satisfaction The term job satisfaction was brought to limelight by Hoppock (1935). He reviewed 35 studies on job satisfaction conducted prior to 1933 and observed that job satisfaction is a combination of psychological, physiological and environmental circumstances that cause a person to say, "I am satisfied with my job." Such a description indicates the variety of variables that influence the satisfaction of the individual but tell us nothing about the nature of job satisfaction. Job satisfaction has been most aptly defined by Pestonjee (1973) as job, management, personal adjustment, and social relations. Morse (1953) considers job satisfaction as dependent upon job content, identification with the company, financial and job status and pride in group performance. According to Pestonjee,job satisfaction can be taken as a summation of employee's feelings in four important areas. These are:

1. Job - nature of work (dull, dangerous, interesting), hours of work, fellow workers, opportunities on the job for promotion and advancement (prospects), over-time regulations, interest in work, physical environment, and machines and tools.

2. Management - supervisory treatment, participation, rewards and punishments, praises and blames, leave policy, and favouritism. 3. Social Relations - friends and associates, neighbours, attitudes towards people in community, participation in social activities, sociability, and caste barriers. 4. Personal Adjustment - health and emotionality. Evans and Laseau (1950) found the following factors affecting job satisfaction, in order of preference: 1. Income 2. Interesting and important job

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3. Pride in company 4. Fellow workers

5. Immediate boss 6. 7. 8. 9.

Management Working conditions Security Chance to get ahead

10. Benefit plans 11. Safety and medical facilities.

In his study on American employees, Hoppock identified six factors that contributed to job satisfaction among them. These are as follows: 1. The way individual reacts to unpleasant situations. 2. The facility with which he adjusts himself to other persons. 3. His relative status in the social and economic group with which he identifies himself. 4. The nature of the work in relation to the abilities, interests and preparation of the worker. 5. Security. 6. Loyalty.

Ways of Measuring Job Satisfaction Various ways of measuring job satisfaction are: (a) Rating Scale: It is one of the most common methods of measuring job satisfaction. The popular rating scales used to measure job satisfaction is to include: Minnesota Satisfaction Questionnaire (MSQ): It helps to obtain a clear picture of pertinent satisfactions and dissatisfactions of employees. Job Description Index (JDI): It measures job satisfaction on the dimension identified by Smith, Kendall and Hulin. Porter Need Identification Questionnaire (PNIQ): It is used only for management personnel and revolves around the problems and challenges faced by managers. (b) Critical Incidents: This method of measuring job satisfaction was popularised by Fredrick Herzberg and his associates. It involves asking employees to describe incidents on the job when they were particularly satisfied or dissatisfied. Then the incidents are analysed in terms of their contents and identifying those closely related aspects responsible for the positive and negative attitudes. (c) Personal Interviews: This method facilitates an indepth exploration through interviewing of job attitudes. The main advantage in this method is that additional information or clarifications can be obtained promptly. (d) Action Tendencies: By this method,job satisfaction can be measured by asking questions and gathering information on how they feel like behaving with respect to certain aspects of their jobs. This method provides employees more opportunity to express their indepth feeling. Because human resource managers often serve as intermediaries between employees and management in conflicts, they are concerned with job satisfaction or general job attitudes of the employees. Philip Applewhite has listed the five major components of job satisfaction as "(i) attitude toward work group; (ii) general working conditions; (iii) attitude toward company; (iv) monetary benefits; and (v) attitude toward supervision." Other components that should be added to these five are the individual's state of mind about the work itself and about life in general. The individual's health, age, level of aspiration, social status, and political and social activities can all contribute to the job satisfaction. A person's attitude toward his or her job may be positive or negative.

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How to Increase Job Satisfaction Various ways of increasing job satisfaction are: Job Enlargement: To check the harmful effects of specialisation, the engineering factors involved in each individual job must be carefully analysed. Perhaps the assembly lines can be shortened so that there will be more lines and fewer workers on each line. Moreover, instead of assigning one man to each job, a group of men can be assigned to a group of jobs and then allowed to decide for themsel ves how to organise the work. Such changes permit more social contacts and greater control over the work process. Job Rotation: Many companies are seeking a solution to on-the-job boredom through systematically moving workers from one job to another. This practice provides more variety and gives employees a chance to learn additional skills. The company also benefits since the workers are qualified to perform a number of different jobs in the event of an emergency. Change of Pace: Anything that will give the worker a chance to change his pace when he wishes will lend variety to his work. Further if workers are permitted to change their pace that would give them a sense of accomplishment. Scheduled Rest Periods: Extensive research on the impact of rest periods indicates that they may increase both morale and productivity. Scheduled rest periods bring many advantages: • They counteract physical fatigue. • They provide variety and relieve monotony. • They are something to look forward to -

getting a break gives a sense of achievement.

• They provide opportunities for social contacts. Shorter Hours: Shorter work-day in many cases lead to higher production, reduced absenteeism in and accident rate. Gi ving a feeling of accomplishment. Most people get a sense of accomplishment from completing a whole job. If the job becomes too specialised, the worker loses his feeling for the relationship between his work and the overall process. The concept of whole job gives satisfaction to a worker: (i) that he plays a significant part in the work process as a whole, and (ii) that the process itself is important. Greater Autonomy: Possibly the single most effective way of increasing job satisfaction is to give workers more freedom to do their work in their own way. People will work harder and derive satisfaction if they are given the freedom to make their own decisions. Automation: The effect of automation on job satisfaction depends largely on the degree of automation that is introduced. Clearly, automation means different things in different situations and it is difficult to state firmly that it either decreases or increases job satisfaction.

Impact of Job Satisfaction Many managers subscribe to the belief that a satisfied worker is necessarily a good worker. In other words, if management could keep all the workers "happy", good performance would automatically follow. There are two propositions concerning the satisfaction-performance relationship. The first proposition which is based on the traditional view is that satisfaction causes performance. The second proposition is that satisfaction is the effect rather than the cause of performance. This proposition says that effort in a job leads to rewards, which result in a certain level of satisfaction. In another proposition, both satisfaction 'and performance are considered to be functions of rewards. Various research studies indicate that to a certain extent job satisfaction affects employee turnover, and consequently organisations can gain from lower turnover in terms of lower hiring and training costs. Also research has shown an inverse relationship between job satisfaction and absenteeism. When job satisfaction is high there could be low absenteeism, but when job satisfaction is low, it is more likely to lead to high absenteeism. What job satisfaction people need? Each employee wants: 1. Recognition as an individual. 2. Meaningful task. 3. An opportunity to do something worthwhile.

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4. Job security for himself and his family. 5. Good wages. 6. Adequate benefits. 7. Opportunity to advance. 8. No arbitrary action -

a voice in matters affecting him.

9. Satisfactory working conditions. 10. Competent leadership -

bosses whom he can admire and respect as persons and as bosses.

Job satisfaction is not synonymous with organisational morale, which is the possession of a feeling of being accepted by and belonging to a group of employees through adherence to common goals and confidence in the desirability of these goals. Morale is a by-product of the group, while job satisfaction is more an indi vidual state of mind. However, the two concepts are interrelated in that job satisfaction can contribute to morale and morale can contribute to job satisfaction. It must be remembered that satisfaction and motivation are not synonymous. Motivation is a drive to perform, whereas satisfaction reflects the individual's attitude toward the situation. The factors that determine whether an individual is adequately satisfied with the job differ from those that determine whether he or she is motivated. The level of satisfaction is largely determined by the comfort offered by the environment and the situation. Motivation, on the other hand, is largely determined by the value of rewards and their dependence on performance. The result of high satisfaction is increased commitment to the organisation, which mayor may not result in better performance. A wide range of factors affect an individual's level of satisfaction. While organisational rewards can and do have an impact, job satisfaction is primarily determined by factors that are usually not directly controlled by the organisation. A high level of satisfaction leads to organisational commitment, while a low level, or dissatisfaction, results in a behaviour detrimental to the organisation. For example, employees who like their jobs, supervisors, and factors related to the job will probably be loyal and devoted. People will work harder and derive satisfaction if they are given the freedom to make their own decisions.

SUMMARY Morale means "evident commitmenf', i.e., exhibiting the behavioural symbols and symptoms of personal commitment. Morale, like health, requires attention. It is a composite of feelings, and maintaining high morale is a continuous task for management. In employment, the term refers to partiCipant's attitudes toward achievement ofthe organisation's objectives. Some usage suggests that morale is personal; other usage sees it as a group attitude. It is the "sum of satisfactions" experienced by an employee as a job-holder and member of an organisation. This concept relates morale to the needs of the individual and to his need satisfaction. The more successful the company, the higher the worker's morale. On the other hand the term "job satisfaction" refers to an employee's general attitude toward his job. To the extent that a person's job fulfils his dominant needs and is consistent with his expectations and values, the job will be satisfying. A number of characteristics such as pay and benefits, supervision, working conditions, the nature of the work itself, and company policies, influence job satisfaction.

REVIEW QUESTIONS 1. 2. 3. 4.

What are the factors which influence morale? What are the indicators of low morale? What is job satisfaction? What are its major components? Identify factors that would help in increasing job satisfaction of Indian workers and Indian managers.

CASE 1 Poor Morale

You are the manager of a plant that manufactures sewing machines. Forthe past several weeks there has been hostility in the works due to an increased amount of work pressure on the part of the employees. In the past, the employees were required to produce fifty machines an hour. Gradually, the assembly line was speeded up and the number of production units was increased to seventy machines per hour. The worker's union was informed accordingly when the company decided to

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increase the target of production. The union took a favourable stand towards the increase. However, many of the employees resented the move of the company and felt that the demand of the management was unreasonable. One day while inspecting the plant you and your supervisor noticed a worker pushing one of the sewing machines off the assembly line belt. The machine fell on to the auxiliary belt and caused the entire assembly line to come to a sudden halt. The worker who did this began to walk towards his rest room amidst a loud roar of approval from his fellow workers. Under the circumstances, what should you do ? Discussion Questions

1. 2. 3. 4.

Immediately discipline the disgruntled worker? Do nothing that day but contact the worker the next day? Close your eyes to the event? As a manager, how would you handle the basic issue of poor morale?

CASE 2 The Desktop Publisher

Maria is an expert typist responsible for desktop publishing in a medium-sized management consultancy. The work is of high pressure, with over twenty people requiring Maria to produce perfect proposals and other documentation within short deadlines. On the whole, Maria loves her work and likes many of her colleagues. Her excellent work standards are widely acknowledged and she has twice refused promotion since she does not wish to take on additional responsibility. She is able to keep her family and work lives separate but they are both very important to her. Unfortunately, as business has expanded, so has Maria's workload. What was barely manageable but a matter of pride for Maria a few years ago, has become an avalanche of work with which she can barely cope. Initially, she was reluctant to delegate any of her work since she did not trust her colleagues to produce work to the right standards and she did not have the time to coach them. To some extent, she enjoyed the process of prioritising work so that she was the person who decided which piece of work was handled first. Attempts to speed up the workflow by equipping Maria with a high-powered computer, installed as a surprise during her annual leave, backfired when it took her three weeks to learn the system, adding to her distress. As time has moved on, Maria has learnt to delegate some of her functions. She feels threatened, however, by the changing values evident in the organisation. The introduction of new staff with different values from the old has left Maria feeling sad and disoriented. She particularly dislikes the more political behaviourof some of her colleagues and feels that increasing management controls on her are undermining her confidence. Though confident of her value addition to the organisation, she is now questioning her commitment to it. Discussion Questions

1. What are the steps to be taken to improve trust relationship in the organisation? 2. What is to be done to improve and retain the commitment levels of Maria?

REFERENCES 1. Flippo, Edwin B., Principles of Personnel Management, pp. 416-17. 2. Haimann, The Professional Management, p. 453. 3. McFarland, Management: Principles and Practices, p. 517. 4. Kahn, R.L., and Katz, D., Leadership Practice in Relation to Productivti' and Morale, p. 616.

Pursue your goal even in the face of difficulties. Convert difficulties into opportunities. Keep your morale high in spite of setbacks. At the end, you are bound to succeed. - Dhirubhai Hirachand Ambani

19 EMPLOYEE PARTICIPATION AND EMPOWERMENT

Participative programmes for enhancing quality of work life have been in existence for years. They have become even more popular because numerous companies have adopted participative employee involvement programmes in recent years. Generally, it is believed that involving employees in decision-making processes will result in improved job attitudes and cooperation and reduced turnover, absenteeism, and grievances. Almost everywhere the supporters of participation claim that it is not only morally sound, but it reduces alienation and improves morale. Further, it enhances productivity efficiency, fosters industrial harmony, and enriches human personality. These effects are, however, contingent upon whether there is sufficient time to involve employees in decision~making and upon whether employees have the ability to participate and have an interest in participating.

Concept of PartiCipation Participation is an overriding concept which includes a variety of forms and practices. Though many authors have defined the concept of participation differently, there seems to be a general agreement that participation means sharing, in an appropriate way the decision-making powers with lower levels in the organisation. Participative management is essentially a style of managing human resources which deals with the process rather than the structure. The basic objective is to provide workers a sense of importance, pride, freedom, opportunity for self expression, a feeling of belongingness so as to create positive conditions for industrial relations and an atmosphere of industrial peace.

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Workers may participate in decision-making on work organisation either directly or indirectly, namely, through their representatives. Traditionally, the latter was virtually the exclusive channel of workers' participation in decision-making within enterprises. What is new in the 1980s and the 1990s is the rapid spread of direct participation of workers. Direct participation may take a variety of forms. Even in the absence of any institution for participation, there is participation wherever there is some room for workers' autonomy or initiatives in the conception or execution of their work. Accordingly, a simple exercise of work enrichment may be a form of promoting direct participation of workers. Direct participation may be on an individual basis, e.g., through suggestion schemes or "enriched" work. It may also be on a group basis, e.g., quality circles or other small group activities; teamwork in itself constitutes a form of group-based direct participation. The participation systems may be classified into three types according to their decision-making processes. The first model is the joint consultation model, in which management makes the final decision but employee representatives are heard. This system is used in Great Britain, India, Sweden and France. The second model is the joint decision-making model, in which worker representatives and management are jointly represented on a decision-making body. Illustrative of this model is codetermination in Germany and the Histadrut's joint management plan in Israel. The third model is the workers' control model, where final decision-making authority resides in the elected representatives of the work force. This is the system prevalent in Yugoslavia and Germany. Other well-known participative interventions are committees, suggestion schemes, quality circles, and total quality management.

Committees Committees are ubiquitous. They exist in all kinds of organisations and serve many different purposes. A committee is a group of persons, either elected or appointed, created to perform some function or mission. A group of people called together for one meeting does not constitute a committee. A committee has an existence of its own, a chairman, designated members, a defined purpose, and often an agreed upon set of operating procedures. It may be a temporary or ad-hoc committee constituted to accomplish a specific mission and when its goal has been accomplished, it goes out of existence. Also, a committee may be permanent. Although, the committee system is subject to faults and its potential weaknesses have been highly publicized, they can serve a very useful purpose. Many authorities feel that complex organisations cannot be managed successfully without the use of some committees which can be used to tap the expertise of people from varied backgrounds. In additi~n to problem-solving, the committees can also provide valuable training and self-development to its members. The members acquire specific knowledge about organisational matters, they gain perspective and understanding, and may improve their skills at the give and take of group interaction.

Meetings: Meetings are normally convened to discuss various issues and problems confronting the organisations. Sometimes, certain important policy decisions are taken in a meeting. There are certain functions that meetings will always perform better than any of the more recent communication devices: Firstly, a meeting defines the team, the group, or the unit. Secondly, a meeting is the place where the group revises, updates, and adds to what it knows as a group. Thirdly, a meeting helps every individual understand both the collective aim of the group and the way in which his own and everyone else's work can contribute to the group's success. Fourthly, a meeting creates among its members a commitment to the decisions it makes and the objectives it pursues. To make the meeting more effective: 1. Carefully consider whether a meeting is necessary.

2. Delegate responsibility for arrar.ging meeting. 3. Prepare an agenda. 4. Start on time and keep a careful eye on the clock. S. Give everyone an opportunity to contribute: keep people focussed on the important issues.

Suggestion Schemes Employee suggestion schemes exist in many countries, in both the public and private sectors. In some countries (Egypt, Hungary, Mexico) there are special laws and regulations laying down basic principles for employee suggestion schemes. The

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overall working of the scheme is regulated by collective agreements, administrative rules and, in some cases, individual contracts. In Austria, for instance, under the terms of Collective Labour Relations Act, 1973, collective agreements may be concluded between the employer and a workers' council concerning suggestion schemes within the establishment. Many employers in India, both in the public and private sectors have made special efforts to draw their employees' creative ideas through voluntary suggestion schemes. These schemes complement as well as supplement other productivity improvement activities such as total quality management and safety management. Suggestion schemes are one of the ways in which employees can participate directly in productivity improvement activities in the company. A suggestion system benefits all. For the management it reduces costs, increases efficiency, and builds better employer-employee relations. For employees, it offers the chance to earn extra money and the realisation that they and their ideas are appreciated. For customer, it means better products and service. One of the biggest benefits of a suggestion system is that it focuses the thinking ofthe employees on doing things better and developing creativity. They also provide a very effective two-way channel of communication between employees and management. The main aims of any suggestion scheme are: • To provide an organised method by which the employees may get recognition and compensation award from the company • To harness the initiative, imagination, enthusiasm of the employees for all round improvement of the company operations both in production shops as well as in offices by utilising their ideas • To give employees an opportunity for self-development through creative and constructive thinking • To improve human relations and morale by providing two-way communication channel between employees and the management • To provide a forum for bringing employees suggestions to the attention of the management and promote employee participation in management • To achieve cost reduction and productivity improvements through creative ideas from employees. A suggestion scheme is a cost reduction tool used in an industry to improve efficiency, reduce wastage, simplify methods and procedures, and improve quality of the products. While higher productivity is always welcome, the primary objective of the suggestion scheme should be the development of the employees through induced creative and constructive thinking. The scheme should attract all types of suggestions which will benefit the organisation or its employees. More specifically, the suggestion schemes should be designed to: • Increase operating efficiency • Improve savings in money, human efforts, time, materials • Improve products, processes, equipment and tools • Improve methods and procedures and to make them more effective, easy and interesting • Provide safer, healthier and pleasant working conditions. An effective suggestion scheme not only improves productivity and quality, but also fosters a participative culture in the organisation. Experience indicates that successful organisations have perceived suggestion schemes not as a set of rules and rewards, but rather as a platform to channelise employees' initiatives towards organisational goals, resulting in increased competitiveness in the market place. Operating a suggestion system is not simple as it might appear. It is recommended to adopt the following specific implementing practices. • Carefully. define what constitutes a suggestion • Draw up specific eligibility standards • Explain the system clearly to all employees • Evaluate each system according to a formal procedure • Ensure that a fair and reasonable award is made • Explain in writing why a suggestion is rejected • Establish an appeals procedure for employees who want their suggestions reconside-red

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• Enlist the support of top management • Publicize the programme on a regular basis • Keep meticulous records, independent of the suggestion process, of ideas and proposals reviewed • Monitor the progress of the scheme on a company-wide basis. Monetary awards are one of the key elements of any suggestion scheme. In order to ensure continued employee participation and interest in the schemes, a great variety of evaluation and award methods have been developed. The criteria most frequently applied to determine an award are: (i) the status and wage level of the author of the suggestion, (ii) the relationship of the suggestion to its author's work, (iii) the originality of the idea, and (iv) the degree of maturity and applicability of the suggestion. Minimum or "token" awards are often granted for the adoption of ideas that are of limited application and which yield only minor savings but display a certain amount of initiative or ingenuity. In Japan, a token award is paid for 90 per cent of all suggestions. "Encouragement" or "recognition" awards are also given to basically good ideas that cannot be implemented for one reason or another. All members of a company, agency on manufacturing entity should be eligible to participate in suggestion plan. Many companies, however, limit eligibility to employees below the management level. Where the management level begins, may vary from company to company, of course. Suggestions which could be viewed as a part of a person's normal job are very often not considered for suggestion award. Further, suggestions that cannot be awarded are those pertaining to government's policies and other activities beyond management's control, complaints and grievances, routine maintenance and services, collective bargaining matters, and management policy matters. However, when a person makes a suggestion out of his normal area of competence, he or she should certainly be considered for proper reward. Suggestion schemes are not channels for employees to submit their complaints and grievances. Hence, companies must give clear guidelines on what constitutes a suggestion, and what does not. A clear definition is the first basic step in setting up a suggestion scheme. Some examples of the acceptance criteria used by companies are as follows : • Suggestions which improve the production processes or equipment • Suggestions which contribute to cost savings on expenditure, raw materials, components, and the like • Suggestions which contribute to elimination of waste • Suggestions which contribute to the improvement of quality. In addition to the acceptance criteria, companies can also specify the criteria for rejecting a suggestion. For example: 1. If a suggestion is not clear and definite. 2. If a similar suggestion has been proposed and/or implemented. 3. If the cost of implementation is too high. 4. If quality and performance will be affected and/or safety problems will arise if the suggestion is implemented. 5. If the suggestion is a mere criticism or complaint, and lacks constructiveness. 6. If the ideas merely elucidate the problem without offering a solution. The suggestions are usually evaluated by a committee comprising of chairman, vice-chairman. secretary and members. The members of the committee are normally the departmental representatives of the company because, in many cases, it will be necessary to review not only production but also cost accounting impact on personnel. and sales reaction to proposed changes. Also such a working committee should consist of management personnel who are available, knowledgeable and interested. Representatives of employees are to be nominated. The decision of the suggestion committee is the final one and this needs to be specified somewhere in the rules of the company. The suggestion committee should: • Establish and interpret rules and policies. • Decide about eligibility of a suggestion. • Make necessary recommendations for improvement in the scheme. • Evaluate and establish awards. • Monitor any problem relating to the operation and implementation of the scheme.

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A suggestion system should not be taken lightly; it will require time and effort to make it work properly. The essentials of a successful suggestion system programme are : • The suggestion must be written and the idea must be adequately described. The rules of the suggestion plan must be communicated to the suggester preferably right on the back of the suggestion form. • The supervisor must be part of the suggestion chain because, sooner or later, that supervisor will likely be called upon to evaluate the suggestion. Properly motivated supervisors are essential to the stimulation oftlow of good suggestions. • The awards must commensurate with the value of the savings to be expected from the implementation of the suggestion. • Management must be involved with the system from the top down because if insufficient personnel or money is allocated to the operation of the system, it will die a swift death from bottlenecks or disinterest. • Evaluation and reward for adopted suggestions must be made in a timely manner. Interest in the programme will soon be lost if recognition and reward are too far distant from the inception of the ide'a in the first place. • Worker involvement in the running of the scheme is very essential not only to increase productivity and save costs but also to improve working conditions and the quality of working life. • A good pUblicity programme is essential to maintain interest in the suggestion system. It may include posters, handbills, letters from management, honour rolls of successful suggestions, and stories about winners and their winning ideas. The main requirements for a successful suggestions scheme can be summarized as good publicity, worthwhile awards, and above all, swift and fair treatment. All suggestions should be acknowledged immediately, and the actual results announced within a few weeks. Sometimes delays are unavoidable, if prolonged tests have to be carried out; the suggestor should be kept informed of these. Nothing will discredit a suggestion scheme as much as unnecessary delays or inadequate explanation of what is happening about the suggestions submitted. The number of suggestion schemes existing in Japan and the high rate of worker participation in them reflect the degree of employee-employer partnership, and the extent to which employees identify themselves with the goals and operation of their enterprise. However, in our country, worker involvement rate has remained rather low. This might be due to lack of interest and motivation on the part of the workers and lack of support and commitment on the part of the employers. Some enterprises have therefore launched intensive suggestion promotion schemes or publicity campaigns, and provided for higher financial rewards to attract useful suggestions. For many employers they have become an important source of tapping creative capabilities and innovative ideas of their employees and an integral component of their human resource management.

Quality Circles A quality circle is a small group of employees (usually 7 to 10) who volunteer to meet several hours each week to address productivity and quality problems. The members identify, analyse, and make recommendations about problems in their work area. Usually, the employees are members of a work unit from the same department. Often, their supervisor serves as the circle leader, while the human resource staff member is a facilitator who helps to guide the circle thro~gh the problem-solving process. The main objectives of a quality circle are: • To make employees important and effective decision-makers in their work areas • To make employees contribute to the overall effectiveness of organisation by developing awareness of cost, housekeeping and safety • To recognise the potential among workers and provide opportunities for them to do more innovative rather than routine work • To encourage a participative approach to organisational problems • To train people to understand and utilise their skills and to enrich their quality of worklife • To improve the morale of workforce by providing them opportunities for decision-making. Quality circle programmes can be used in a variety of ways, including:

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(1) collecting ideas for work improvements from those closest to the work itself (i.e., the work group),

(2) providing opportunities for problem-solving, (3) dealing with special projects on a temporary basis, (4) enhancing personal and professional growth of quality circle members, (5) team building, and (6) helping the organisation make the transition to a more participative culture. The evolution of quality circles is best understood in the context of the Japanese system which is characterised by a lifetime employment, company-based unions, decision-making by consensus, a seniority based wage system, and an intensive and continuous education and training. The quality circles first developed in Japan during the late 1950s and early 1960s. The Japanese Union of Scientists and Engineers (JUS E) undertook the responsibilities of educating the Japanese managers, supervisors and workers in quality circle techniques through training programmes, seminars and dissemination of relevant information. Over a period of years, the quality circles have increased at a phenomenal rate in Japan. The characteristic features of Japanese quality circles are: (i) use of small group activities to involve workmen; (ii) personal guidance to the top management in quality circle activities and their periodical auditing; (iii) education and training in quality circles on a continuous basis; (iv) implementation of quality circle techniques at all levels of the organisation; and (v) promotion of quality circle on a nation-wide basis. Quality circles, pioneered by Dr. K. Ishikawa in the early sixties, helped Japanese industry and business to make a miraculous recovery from the ravages of the Second World War and was it major factor in transforming its earlier image as producer of substandard products into a leading industrial country with high productivity and reliable quality. The concept has since spread to over sixty other nations including USA, U.K., Norway, Austria, Germany, Mexico, South Korea, Philippines, India, France, Singapore, Indonesia, Malaysia and Thailand. BOX 19.1 Quality Circles Inoue Hospital in Osaka, Japan specialises in hemodialysis. It has 22 doctors and 420 staff. Its hemodialysis division has 127 beds for hospitalised patients and 180 beds for visiting patients. One important group activity at the hospital is active quality circles, which were introduced in 1983. This table shows how the number of quality circles at the hospital has grown over the years. Year

No. of Circles

No. of Staff Involved

1983

10

127

1985

18

132

1990

23

232

1995.

41

429

The main subject areas addressed by quality circles are, in order of the number of projects: safety, and cost. A total of 189 projects have completed since the first quality circle was organised. Other topics addressed by the quality circles of the hospital included the following: • Improvement of clinical diagnosis forms • Improvement of fail-safe switch for blood pump to catch f