Unit – 4

HUMAN RESOURCE MANAGEMENT (HRM) is a relatively new approach to managing

people in any organisation. People are considered the key resource in this approach. it is
concerned with the people dimension in management of an organisation. Since an
organisation is a body of people, their acquisition, development of skills, motivation for
higher levels of attainments, as well as ensuring maintenance of their level of commitment
are all significant activities.
FUNCTIONS OF HUMAN RESOURCE MANAGEMENT

OPERATIVE FUNCTIONS:
The operative function are the function related to the particular department or section. It is
depending on the nature of department with other department.
ACQUISITION:
1. job analysis: a job analysis is the process used to collect information about the
duties, responsibilities, necessary skills, outcomes, and work evvironment of a
particular job.
2. Human resource planning: Human Resource planning is the process by which a
management determines how an organisation should move from its current manpower
position to its desired manpower position. Through planning a management strives to
have the right number and the right kinds of people at the right places, at the right
time, to do things which result in both the organisation and the individual receiving
the maximum long-range benefit.
3. Staffing : Staffing refers to the managerial function of employing and developing
human resources for carrying out the various managerial and non-managerial
activities in an organisation. This involves determining the manpower requirement,
and the methods of recruiting, selecting, training and developing the people for
various positions created in the organisation. Staffing is the process of filling
positions or posts in the organisation with adequate and qualified personnel. Staffing
 is the process of acquiring, deploying, and retaining a workforce of sufficient quantity
and quality to create positive impacts on the organisation effectiveness
4. RECRUITMENT: Recruiting involves attracting candidate to fill the positions in the
organization structure. Before recruiting, the requirement of positions must be cleared
identified. It makes easier to recruit the candidates from the outside. Enterprises with
a favourable public image find it easier to attract qualified candidates.
5. SELECTION: Human resource selection is the process of choosing qualified
individuals who are available to fill positions in an organization. In the ideal
personnel situation, selection involves choosing the information about the applicants
with a view to matching these with the job requirements. It involves a careful
screening and testing of candidates who have put in their applications for any job in
the enterprise. It is the process of choosing the most suitable persons out of best
applicant to fill a position. Selection is the process of choosing people by obtaining
and assessing all the applicants. The purpose of selection is to pick up the right person
for every job.
6. PLACEMENT: If the selected candidate decides to join the organisation, he/she has
to report to the concerned authority and formally joins the organisation by giving his
consent in writing. Then he/she is placed to perform specific job. Thus, placement
refers to selected candidate’s joining the positions in the organisation for which they
have been selected.

7. INDUCTION: Induction is the process of introducing new employees to the

organisation. The new employees should know under whom and with whom he/she is
to work, get acquainted and adjusted to the work environment, get a general idea
about the rules and regulations, working conditions etc. Usually the immediate
supervisor of the new employee introduces him to his work environment. A proper
induction programme is likely to reduce his anxiety on how to cope with the work and
how to become part of the organisation and helps in development of a favourable
attitude towards the organisation and the job.
8. PROMOTION ;When an employee is assigned a job involving greater
responsibilities, more pay, higher status and prestige than his/her present job, it is
known as promotion.
9. Transfer: Transfer refers to a type of job change where any employee is assigned a
different job of the same rank and pay, or when an employee is assigned a similar job
in another unit of the firm.
10. Demotion: When the performance of an employee is not satisfactory and it cannot be
improved, he may be assigned a job of lower rank carrying lower status and pay. This
is known as ‘demotion’.

Development: it is the process meant to improve the knowledge, skill, attitude and values of
employees so that they can better contribute to their job.
1. PERFORMANCE APPRAISAL: Performance appraisal or Performance evaluation
is a method of evaluating the behaviour of employees in a work place, normally
including both the quantitative and qualitative aspect of job performance.
Performance here refers to the degree of accomplishment of the tasks that makeup an
individual‘job.
 2. TRAINING: Training is an instrument of developing the employees by increasing
their skills and improving their behavior. Technical, managerial skills are needed by
the employees for performing the jobs assigned to the. Training is required to be
given to new employees as well as existing employees.

3. Career planning : it is a deliberate process of knowing who you are so that you can be
sure of where you want to go or what you want to be at some defined point in the
future.

4. Career development : Skill Development means developing yourself and your skill
sets to add value for the organization and for your own career development. Fostering
an attitude of appreciation for lifelong learning is the key to workplace success.
Continuously learning and developing one's skills requires identifying the skills
needed for mobility at Cal, and then successfully seeking out trainings or on-the-job
opportunities for developing those skills.

5. Collective bargaining: it is constitutes the negotiation between management and union

with the ultimate objective of the agreeing on a written contract covering with term
and conditions of the settlement of disputes issues.

6. Integration: it is the process of recounciling and reuniting the organisational goals

with its members.

7. Motivation: it is the act of stimulating and inspiring the subordinates to achieve the
goals of the organisational.

8. Job satisfaction: it is the result of various attitudes the employes holds towards his
related factors.

9. Grievances handling: It the feeling of any discontent or dissatisfaction, whether

expressed or not, whether valid or not, arising out of anything connected with the
company which an employee thinks believes or even feels to be unfair, unjust or
inequitable.

10. Employee participation: it is the involvement of employees in organization for

decision making and problem solving of the workers.

MAINTENANCE: it includes the following activities

1. Organizational Health: it is defined as an organization’s ability to function effectively,
to cope adequately, to change appropriately, and to grow from within.

2. HR AUDIT: The human resource audit is based on the premise that human resource
processes are dynamic and must continually be redirected and revitalized to remain
responsive to the ever changing needs. Human Resource Audits are not routine
practices aimed at problem solving. Instead of directly solving problems, HR audits,
like financial audits, help in providing insights into possible causes for current and
future problems.
 3. Hr accounting: Human resources are considered as important assets and are different
from the physical assets. Physical assets do not have feelings and emotions, whereas
human assets are subjected to various types of feelings and emotions. In the same
way, unlike physical assets human assets never gets depreciated.

Compensation:
It includes the determination of wages and salaries matching with contribution made by the
employees to achieve organisational goals.
1. Job evaluation: it is the process of determining the relative worth of the job.

2. Wages: it is paid with in one day or 21 days. It also paid with in one month.

3. Salaries: it is paid after one month in the organisation.

4. Incentives: it is the additional payment to regular wages and salaries.

5. Bonus: it is also additional payment of statutory bonus according to the payment of

bonus act 1965.

MANAGERIAL FUNCTION
1. Planning : It is the basic function of management. It deals with chalking out a future course
of action & deciding in advance the most appropriate course of actions for achievement of
pre-determined goals. According to KOONTZ, “Planning is deciding in advance - what to do,
when to do & how to do. It bridges the gap from where we are & where we want to be”. A
plan is a future course of actions.
2. + Organizing : It is the process of bringing together physical, financial and human resources
and developing productive relationship amongst them for achievement of organizational
goals. Staffing is the process of hiring eligible candidates in the organization or company
for specific positions.
3. Staffing: It is the function of manning the organization structure and keeping it manned.
Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behavior etc.
4. Directing : It is that part of managerial function which actuates the organizational methods
to work efficiently for achievement of organizational purposes.
5. Controlling : It implies measurement of accomplishment against the standards and
correction of deviation if any to ensure achievement of organizational goals.
Job Description: Job description is an accurate and concise description of (a) the overall
purposes of the job (b) the principal duties of the person doing this job. The job description
emphasizes the job requirements. Clear job description constitutes the basis for advertising
the vacancy positions and for drawing up job specifications. Once individuals are selected to
the posts, job description allows them to know exactly what their roles are and what is
expected of them.
Job Evaluation: An attempt to determine and compare the demands which the normal
performance of particular job makes on normal workers without taking account of the
individual abilities or performance of workers concerned.
It rates the job not the rank.A job evaluation is a systematic way of determining the value/worth
of a job in relation to other jobs in an organization. The goal of job evaluation is to compare
jobs with each other in order to create a pay structure that is fair, equitable, and consistent
for everyone.  Four primary methods of job evaluations used to set compensation levels
are point factor, factor comparison, job ranking and job classification.
Objectives:
 To establish correct wage correct wage differentials for all jobs with in the factory

 To bring new jobs into their proper relatively with jobs previously established

 To help clarify lines of authority, responsibility and promotion

 To accomplish the foregoing by means of the facts and principles, which can be readily
explained to and accepted by all concerned

 To establish a general wage level for a given factory which will have parity with those of
neigh boring factories
Advantages:

 It is simple and inexpensive

 It is easily understood and easily administered

 It helps setting better rates than the arbitrary rates based purely an judgment and
experience.
Disadvantages:

 Job may be ranked on the basis of incomplete inform action and without the benefits of well
defined standards

 The rank position of different jobs is likely to be influenced by the prevailing wage ranks

 No one committee number is likely to be familiar with all the jobs

Method of Job Evaluation: It is broadly be classified as

Qualitative Method

Quantitative Method

1) Qualitative Method: It can broadly be classified as ranking or classifying the job from
lowest to highest.
Ranking technique: In this method, the jobs in the organization are arranged in either in the
ascending or descending order and numbered serially. The basis of such arrangement could
be the job description in terms of duties, responsibilities, qualifications needed, relative
difficulty involved in don the job, or value to the company.

Points considered:

Amount of work involved

Supervision needed

Extent of responsibility required

Difficulties involved in the work

Work conditions required

Classification Method: This is also called job-grading method. Here, the number of grades
and the salary particulars for each grade are worked out first. The grades are clearly described
in terms of knowledge, skill and so on. Major steps for job evaluation:

Deciding the number of grades

Writing grade descriptions

Identifying/listing of the jobs to be evaluated

Preparing job descriptions

2) Quantitative Method: Where point values are assigned to the various demands of a job
and relative value is obtained by summing all such point values.

a) Factor comparison method: Every job requires certain capabilities on the part of the person
who does the job. These capabilities are considered as critical factors, which can be grouped
as follows:

Mean effort Skill

Physical

Responsibility

Working conditions

Step involved in the factor comparison method:

Identify the key jobs

Rank the key job, factor by factor

Apportion the salary among each factor and rank the key jobs Compare factor ranking of
each job with its monetary ranking Develop a monetary comparison scale

Evaluate non-key jobs based on the monetary comparison scale

Point-rating method: There are four widely accepted factors used in the point-rating method,
skill, effort, responsibility and job conditions each of these factors is divided into sub-factors.
 Skills - 1. Education and training
2. Experience
3. Judgment and initiative
Efforts - 1. Physical
2. Mental
Responsibility towards - 1. Materials or product
2. Equipment or process
3. Safety of others
4. Work of others

Merit Rating: Merit rating is the process of evaluating the relative merit of the person on a
given job. It is an essential task of the personnel manager to distinguish the meritorious
employees from the other. The data collected from this task is used for strategic decisions
such as releasing an increment in pay, promotion, transfer, and transfer on promotion to a
critical assignment or even discharge.

Objectives of Merit Rating:

 To determine salary increments
 To decide who has to be transferred, promoted, or demoted
 To discover the workers needs for retaining and advanced training
 To unfold the exceptional skills among the employees based on their innate potentials
 To guide and monitor the performance of those who are lagging behind.

1. Paired comparison method: Here, every employee is compared with all others in a
particular team in the department. By comparing each pair of employees, the manager
can decide which of the employees is more valuable to the organization.

2. Rating scale: Here, the factors dealing with the quantity and quality of work are
listed and rated. A numeric value may be assigned to each factor and the factors could
be weighed in the order of their relative importance. All the variables are measured
against a three or five point scale.

3. Forced distribution method: Here, employees are given a set of alternatives and
they have to choose one, which reflects their understanding of the true nature of the
job. Their thinking is conditioned by the given set of answers.

4. Narrative or essay method: Here, the candidate is required to narrate in an essay

format his/her strengths, weaknesses, and potential to perform. Here, the candidate is
not restricted by any given set of alternatives. The candidate is free to decide what to
furnish or what not to furnish.

Management by objectives (MBO): The short-term objectives mutually agreed upon by the
management and the employees are used as performance standards. This method considers
the actual performance as the basis for evaluation. It is a systematic method of goal setting. In
addition, it provides for reviewing performance based on results rather than personality traits
or characteristics. However, this is not practical at all levels and for all kinds of work in the
organizations.

Manpower Planning
Manpower planning is determination of right number and right skills of human force to suit
present and future needs. Manpower planning is defined by stainer “strategy for the
requisition, utilization, improvement and preservation of an enterprise’s human resource. It
relates to establishing job specifications or the quantitative requirements of jobs determining
the number of personnel required and developing sources of manpower.” Manpower planning
is a process determining requirements of right number and right kind of human force at right
place and right time.
Objectives of Manpower Planning:
1. Making correct estimate of manpower requirement
2. Managing the manpower according to the need of enterprises
3. Helps in recruitment and selection
4. Maintaining production level
5. Making employees development programme effecting
6. Establishing industrial peace
7. Reduction in labour costs
8. Minimization of labour costs.

RECRUITMENT
The term recruitment is often used to signify employment. It is true that normally
when we say we have recruited such and such persons, it signifies that we have employed
them. But as a part of staffing function, the term recruitment has limited scope. It just refers
to one of the initial steps in employment of people i.e., searching for suitable candidates for
the various job positions to be filled up from time to time in the organisation. Thus,
recruitment is the process of finding and attracting suitable applicants for employment.

Recruiting involves attracting candidate to fill the positions in the organization

structure. Before recruiting, the requirement of positions must be cleared identified. It makes
easier to recruit the candidates from the outside. Enterprises with a favourable public image
find it easier to attract qualified candidates.

Definitions –

Mc Fariand, “The term recruitment applies to the process of attracting potential employees of
the company.”
Flippo, “Recruitment is the process of searching prospective employees and stimulating them
to apply for the jobs in the organization.”

Sources of Recruitment
The various sources of recruitment may be classified as
A. Internal sources or from within the organisation
B. External sources or recruitment from outside.
A. Internal sources – Many organisations in India give preference to people within the
company because the best employees can be found from within the organisation itself. Under
this policy, if there is any vacancy the persons already working in the organisation are
appointed to fill it. This method is followed mostly in Government organisations.
B. External sources or recruitment from outside – Internal sources may not always fulfill
the needs of an organisation. Naturally, most of the concerns have to look for the external
sources for recruitment the required number of employees with the requisite qualifications.
The external sources of recruitment include.
1. Direct Recruitment – Many organizations having one separate department called
personnel department to select right employees. For that organisaton may receive direct
applications from the candidate. The technical and clerical staff is appointed in this way.
2. Recruitment through the jobbers or Intermediaries – In India mostly unskilled or
illiterate workers are recruited through this method. Under this system the intermediary keeps
a vital link between workers and employers. They are always willing to supply the required
number of workers.
3. Recruitment at the factory gate – Mostly unskilled workers are appointed through this
method. Under this system, large number of unemployed workers assembles at the factory
gate for employment. The factory manager, or labour superintendent or some other official
may select the necessary workers.
4. Recruitment through advertisement – This is most common method for recruiting
skilled workers, clerical staff, managerial personnel, technical personnel. The vacancies are
advertised in the popular daily newspapers and applications are invited from the persons
having required qualifications.
5. Recruitment through the recommendation of the existing employees – The existing
employees recommend the suitable names for the employment.
6. Recruitment from colleges or universities or educational institutions – This method is
used in some enterprises or Government department, when the recruitment of persons
required for administration and technical personnel.
7. Recruitment through employment exchange – The workers who want help in finding
jobs make their registration in the nearest employment office where details are recorded.
Employment exchanges are the special offices for bringing together those workers who are in
need of employment.
SELECTION
Human resource selection is the process of choosing qualified individuals who are
available to fill positions in an organization. In the ideal personnel situation, selection
involves choosing the information about the applicants with a view to matching these with
the job requirements. It involves a careful screening and testing of candidates who have put in
their applications for any job in the enterprise. It is the process of choosing the most suitable
persons out of best applicant to fill a position. Selection is the process of choosing people by
obtaining and assessing all the applicants. The purpose of selection is to pick up the right
person for every job
Definition of selection
According to Dale Yoder, “selection is the process in which candidates for employment are
divided into two classes those who are to be offered employment and those who are not”.
According to Thomas stone, “ selection is the process of differentiating between applicants in
order to identify those with a great likelihood of success in a job”.
Selection process
1. Application Pool: Application pool built-up through recruitment process is the base for
selection process. The basic objective at the recruitment level is to attract as much
worthwhile applications as possible so that there are more options available at the selection
stage.
2. Preliminary Screening and Interview: It is highly noneconomic to administer and handle
all the applicants. It is advantageous to sort out unsuitable applicants before using the further
selection steps. For this purpose, usually, preliminary interviews, application blank lists and
short test can be used. All applications received are scrutinised by the personnel department
in order to eliminate those applicants who do not fulfil required qualifications or work
experience or technical skill, his application will not be entertained. Such candidate will be
informed of his rejection.
Preliminary interview is a sorting process in which the prospective candidates are
given the necessary information about the nature of the job and the organisation. Necessary
information is obtained from the candidates about their education, skills, experience,
expected salary etc. If the candidate is found suitable, he is elected for further screening. This
courtesy interview; as it is often called helps the department screen out obvious misfits.
Preliminary interview saves time and efforts of both the company and the candidate. It avoids
unnecessary waiting for the rejected candidates and waste of money on further processing of
an unsuitable candidate. Since rejection rate is high at preliminary interview, the interviewer
should be kind, courteous, receptive and informal.
3. Application Blank or Application Form: An application blank is a traditional widely
accepted device for getting information from a prospective applicant which will enable the
management to make a proper selection. The blank provides preliminary information as well
as aid in the interview by indicating areas of interest and discussion. It is a good means of
quickly collecting verifiable (and therefore fairly accurate) basic historical data from the
candidate. It also serves as a convenient device for circulating information about the applicant
to appropriate members of management and as a useful device for storing information for,
later reference. Many types of application forms, sometimes very long and comprehensive
and sometimes brief, are used. Information is generally taken on the following items:
(a) Biographical Data: Name, father’s name, data and place of birth, age, sex, nationality,
height, weight, identification marks, physical disability, if any, marital status, and number of
dependants.
(b) Educational Attainment: Education (subjects offered and grades secured), training
acquired in special fields and knowledge gained from professional/technical institutes or
through correspondence courses.
(c) Work Experience: Previous experience, the number of jobs held with the same or other
employers, including the nature of duties, and responsibilities and the duration of various
assignments, salary received, grades, and reasons for leaving the present employer.
(d) Salary and Benefits: Present and expected.
(e) Other Items: Names and addresses of previous employers, references, etc. An application
blank is a brief history sheet of an employee’s background and can be used for future
reference, in case needed. The application blank must be designed from the viewpoint of the
applicant as well as with the company’s purpose in mind.
4. Selection Tests: Many organisations hold different kinds of selection tests to know more
about the candidates or to reject the candidates who cannot be called for interview etc.
Selection tests normally supplement the information provided in the application forms. Such
forms may contain factual information about candidates. Selection tests may give information
about their aptitude, interest, personality, which cannot be known by application forms.
Types of tests and rules of good of testing have been discussed in brief below:
A. Aptitude Tests: These measure whether an individual has the capacity or talent ability to
learn a given job if given adequate training. These are more useful for clerical and trade
positions.
B. Personality Tests: At times, personality affects job performance. These determine
personality traits of the candidate such as cooperativeness, emotional balance etc. These seek
to assess an individual’s motivation, adjustment to the stresses of everyday life, capacity for
interpersonal relations and self-image.
C. Interest Tests: These determine the applicant’s interests. The applicant is asked whether
he likes, dislikes, or is indifferent to many examples of school subjects, occupations,
amusements, peculiarities of people, and particular activities.
D. Performance Tests: In this test the applicant is asked to demonstrate his ability to do the
job. For example, prospective typists are asked to type several pages with speed and
accuracy.
E. Intelligence Tests: This aim at testing the mental capacity of a person with respect to
reasoning, word fluency, numbers, memory, comprehension, picture arrangement, etc. It
measures the ability to grasp, understand and to make judgement.
F. Knowledge Tests: These are devised to measure the depth of the knowledge and
proficiency in certain skills already achieved by the applicants such as engineering,
accounting etc.
G. Achievement Tests: Whereas aptitude is a capacity to learn in the future, achievement is
concerned with what one has accomplished. When applicants claim to know something, an
achievement test is given to measure how well they know it. H. Projective Tests: In these
tests the applicant projects his personality into free responses about pictures shown to him
which are ambiguous.
5. Interview: An interview is a procedure designed to get information from a person and to
assess his potential for the job he is being considered on the basis of oral responses by the
applicant to oral inquiries by the interviewer. Interviewer does a formal in-depth conversation
with the applicant, to evaluate his suitability. It is one of the most important tools in the
selection process. This tool is used when interviewing skilled, technical, professional and
even managerial employees. It involves two-way exchange of information. The interviewer
learns about the applicant and the candidate learns about the employer.
6. Background Investigation: The next step in the selection process is to undertake an
investigation of those applicants who appear to offer potential as employees. This may
include contacting former employers to confirm the candidate’s work record and to obtain
their appraisal of his or her performance/ contacting other job-related and personal
references, and verifying the educational accomplishments shown on the application.
7. Physical Examination: After the selection decision and before the job offer is made, the
candidate is required to undergo physical fitness test. Candidates are sent for physical
examination either to the company’s physician or to a medical officer approved for the
purpose. Such physical examination provides the following information.
 Whether the candidate’s physical measurements are in accordance with job requirements or
not?  Whether the candidate suffers from bad health which should be corrected?
 Whether the candidate has health problems or psychological attitudes likely to interfere
with work efficiency or future attendance?
 Whether the candidate is physically fit for the specific job or not?

8. Approval by Appropriate Authority: On the basis of the above steps, suitable candidates
are recommended for selection by the selection committee or personnel department. Though
such a committee or personnel department may have authority to select the candidates finally,
often it has staff authority to recommend the candidates for selection to the appropriate
authority. Organisations may designate the various authorities for approval of final selection
of candidates for different categories of candidates. Thus, for top level managers, board of
directors may be approving authority; for lower levels, even functional heads concerned may
be approving authority.

9. Final Employment Decision: After a candidate is finally selected, the human resource
department recommends his name for employment. The management or board of the
company offers employment in the form of an appointment letter mentioning the post, the
rank, the salary grade, the date by which the candidate should join and other terms and
conditions of employment. Some firms make a contract of service on judicial paper. Usually
an appointment is made on probation in the beginning. The probation period may range from
three months to two years. When the work and conduct of the employee is found satisfactory,
he may be confirmed. The personnel department prepare a waiting list and informs the
candidates. In case a person does not join after being selected, the company calls next person
on the waiting list.

10. Evaluation: The selection process, if properly performed, will ensure availability of
competent and committed personnel. A period audit, conducted by people who work
independently of the human resource department, will evaluate the effectiveness of the
selection process. The auditors will do a thorough and the intensive analysis and evaluate the
employment programme.

PERFORMANCE APPRAISAL

Introduction
Performance appraisal or Performance evaluation is a method of evaluating the
behaviour of employees in a work place, normally including both the quantitative and
qualitative aspect of job performance. Performance here refers to the degree of
accomplishment of the tasks that makeup an individual‘ job. It indicates how well an
individual fulfilling the job demands. Performance is measured in terms of results. Thus,
Performance appraisal is the process of assessing the performance or progress of an
employee, or a group of employees on th given job, as well as his potential for future
development. Thus, performance appraisal comprises all formal procedures used in
organisations to evaluate contributions, personality, and potential of individual employees. In
other words, performance appraisal includes the comparison of performance scales of
different individuals holding similar areas of work responsibilities and relate to determination
of worth of the scales for the achievement of organisation objective.

It is the systematic assessment of an individual with respect to his or her performance

on the job and his or her potential for development in that job. Thus, performance appraisal is
a systematic and objective way of evaluating the relative worth or ability of an employee in
performing his job. The two aspects of performance appraisal considered to be important are:
systematic and objective.
Definition of performance appraisal
According to Flippo, a prominent personality in the field of Human resources,
“performance appraisal is the systematic, periodic and an impartial rating of an employee’s
excellence in the matters pertaining to his present job and his potential for a better job.”
According to Yoder, “Performance appraisal refers to all formal procedures used in
working organizations to evaluate personalities and contributions and potential of group
members.” Thus performance appraisal is a formal programme in an organization which is
concerned with not only the contributions of the members who form part of the organization,
but also aims at spotting the potential of the people.”
Need and Importance of Performance Appraisal
1. Personal Attention: Performance appraisal evaluation, gives employee to draw personal
concern from supervisor and talk about their own strengths and weaknesses.
2. Feedback: Employees on a regular basis get feedback of their performances and issues in
which they lack, which needs to be resolved on a regular basis.
3. Career Path: It allows employees and supervisors to converse goals that must be met to
grow within the company. This may encompass recognizing skills that must be acquired,
areas in which improvement is required, and additional qualification that must be acquired.
4. Employee Accountability: Employees are acquainted that their evaluation will take place
on a regular basis and therefore they are accountable for their job performance.
5. Communicate Divisional and Company Goals: It not only communicates employees’
individual goals but provides an opportunity for managers to explain organizational goals and
in the manner in which employees can contribute in the achievement of those goals.
Objectives of Performance Appraisal
1. Salary Increase: Performance appraisal plays an important role in making decision about
increase in salary. Increase in salary of an employee depends on how he is performing his
job. Evaluation of an employee takes place on a continuous basis which may be formally or
informally. In a large as well as in small organizations performance appraisal takes place but
it may be in a formal or informal way. It shows how well an employee is performing and to
what extent a hike in salary would take place in comparison to his performance.
2. Promotion: Performance appraisal gives an idea about how an employee is work-
ing in his present job and what his strong and weak points are. In comparison to his strength
and weaknesses it is decided whether he can be promoted to the next higher position or not. If
necessary what additional training is required. Similarly it could be used for demotion,
discharge of an employee and transfer.
3. Training and Development: Performance appraisal gives an idea about strengths and
weaknesses of an employee on his present job. It gives an idea about the training required by
an employee for overcoming the limitations that an employee is having for better
performance in future.
4. Feedback: Performance appraisal gives an idea to each employee where they are, how
they are working, and how are they contributing towards achievement of organizational
objectives. Feed works in two ways. First, the person gets view about his performance and he
may try to conquer his weaknesses which may lead to better performance. Second, the person
gets satisfied after he relates his work with organizational objectives. It gives him an idea that
he is doing a meaning full work and can also contribute in a better way.
5. Pressure on Employees: Performance appraisal puts a sort of stress on employees for
better performance. If the employees are aware that they are been appraised in comparison to
their performance and they will have positive and acceptable behaviour in this respect.
Methods of Performance Appraisal

1. Ranking Method: It is the oldest and simplest method of performance appraisal in

which employees’ are ranked on certain criteria such as trait or characteristic. The
employee is ranked from highest to lowest or from worst to best in an organization.
Thus if there are seven employees to be ranked then there will be seven ranks from 1
to 7.

Rating scales offer the advantages of flexibility comparatively easy use and low cost.
Nearly every type of job can be evaluated with the rating scale, the only condition being
that the Job-performance criteria should he changed’
.In such a way, a large number of employees can be evaluated in a shorter time period.
Thus, the greatest limitation of this method is that differences in ranks do not indicate
how much an employee of rank 1 is better than the employee whose rank is last.
2. Paired Comparison: In method is comparatively simpler as compared to ranking
method. In this method, the evaluator ranks employees by comparing one employee
with all other employees in the group. The rater is given slips where, each slip has a
pair of names, the rater puts a tick mark next those employee whom he considers to be
the better of the two. This employee is compared number of times so as to determine
the final ranking.
3. Grading Method: In this method, certain categories are defined well in advance and
employees are put in particular category depending on their traits and characteristics.
Such categories may be defined as outstanding, good, average, poor, very poor, or
may be in terms of alphabet like A, B, C, D, etc. where A may indicate the best and D
indicating the worst. This type of grading method is applied during Semester pattern
of examinations. One of the major limitations of this method is that the rater may rate
many employees on the better side of their performance.
4. Forced Distribution Method: This method was evolved to abolish the trend of rating
most of the employees at a higher end of the scale. The fundamental assumption in
this method is that employees’ performance level conforms to a normal statistical
distribution. For example, 10 per cent employees may be rated as excellent, 40 per
cent as above average, 20 per cent as average, 10 per cent below average, and 20 per
cent as poor. It eliminates or minimizes the favoritism of rating many employees on a
higher side. It is simple and easy method to appraise employees. It becomes difficult
when the rater has to explain why an employee is placed in a particular grouping as
compared to others.
5. Forced-choice Method: The forced-choice rating method contains a sequence of
question in a statement form with which the rater checks how effectively the
statement describes each individual being evalu-
ated in the organization. There may be some variations in the methods and statements 
used, but the most common method of forced choice contains two statements both of
which may be positive or negative. It may be both the statement describes the
characteristics of an employee, but the ratter is forced to tick only one i.e the most
appropriate statement which may be more descriptive of the employee. For example, a
ratter may be given the following two statements: (i) The employee is hard working.
(ii) The employee gives clear instructions to his subordinates.
6. Check-list Method: The main reason for using this method is to reduce the burden of
evaluator. In this method of evaluation the evaluator is provided with the appraisal
report which consist of series of questions which is related to the appraise. Such
questions are prepared in a manner that reflects the behavior of the concerned
appraise. Every question has two alternatives, yes or no, as given below: 1. Is he/she
respected by his/her subordinates? Yes/No 2. Is he/she ready to help other employees?
Yes/No
Critical Incidents Method: This method is very useful for finding out those employees
who have the highest potential to work in a critical situation. Such an incidence is
very important for organization as they get a sense, how a supervisor has handled a
situation in the case of sudden trouble in an organization,
which gives an idea about his leadership qualities and handling of situation. It is also s
aid to be a continuous appraisal method where employees are appraised continuously
by keeping in mind the critical situation. In this method, only the case of sudden
trouble and behavior associated with these incidents or trouble are taken for
evaluation
7. Graphic Scale Method: It is one of the simplest and most popular techniques for
appraising performances of employee. It is also known as linear rating scale. In
graphic rating scale the printed appraisal form is used to appraise each employee.
Such forms contain a number of objectives, and trait qualities and characters to be
rated like quality of work and amount of work, job knowhow dependability, initiative,
attitude, leadership quality and emotional stability.
The rater gives an estimate the extent to which subordinates possess each quality. The
extent to which quality is possessed is measured on a scale which can vary from three
points to several points. In general practice five-point scales is used. Some
 organizations use numbers in order to avoid the propensity of the rater to tick mark
central points. It may be numbered or defined. Thus numbers like 5, 4, 3, 2 and 1 may
denote points for various degrees of excellent-poor, high-low, or good-bad, and so on.
Such numbers may be expressed in terms like excellent, very good, average, poor and
very poor; or very high, high, average, low and very low.
8. Essay Method: In this method, the rater writes a detailed description on an
employee’s characteristics and behavior, Knowledge about organizational policies,
procedures and rules, Knowledge about the job, Training and development needs of
the employee, strengths, weakness, past performance, potential and suggestions for
improvement. It is said to be the encouraging and simple method to use. It does not
need difficult formats and specific training to complete it.
9. Field Review Method: In this method of appraisal direct superior is not going to
appraise an employee but appraised by another person, usually, from personnel
department .The rater, in such a case, appraises the employee on the basis of his past
records of productivity and other information such as absenteeism, late corning, etc. 

MODERN METHODS
1. Management by Objectives (MB0): The concept of ‘Management by Objectives’
(MBO) was coined by Peter Drucker in 1954. It is a process where the employees and
the superiors come together to identify some goals which are common to them, the
employees set their own goals to be achieved, the benchmark is taken as the criteria
for measuring their performances and their involvement is there in deciding the course
of action to be followed.
The basic nature of MBO is participative, setting their goals, selecting a course of
actions to achieve goals and then taking decision. The most important aspect of MBO
is measuring the actual performances of the employee with the standards set by them.
It is also said to be a process that integrates organizational objectives into individual
objectives.
2. Behaviorally Anchored Rating Scales: This method is a combination of traditional
rating scales and critical incidents methods. It consists of preset critical areas of job
performance or sets of behavioral statements which describes the important job
performance qualities as good or bad (for e.g. the qualities like inter personal
relationships, flexibility and consistency, job knowledge etc). These statements are
developed from critical incidents.

These behavioral examples are then again translated into appropriate

performance dimensions. Those that are selected into the dimension are retained. The
final groups of behavior incidents are then scaled numerically to a level of
performance that is perceived to represent. A rater must indicate which behavior on
each scale best describes an employee’s performance.
3. Assessment Centres: It is a method which was first implemented in German Army in
1930. With the passage of time industrial houses and business started using this
method. This is a system of assessment where individual employee is assessed by
many experts by using different technique of performance appraisal. The techniques
 which may be used are role playing, case studies, simulation exercises, transactional
analysis etc.

In this method employees from different departments are brought together for
an assignment which they are supposed to perform in a group, as if they are working
for a higher post or promoted. Each employee is ranked by the observer on the basis
of merit .The basic purpose behind assessment is to recognize whether a particular
employee can be promoted, or is there any need for training or development. This
method has certain advantages such as it helps the observer in making correct
decision in terms of which employee has the capability of getting promoted, but it has
certain disadvantages also it is costly and time consuming, discourages the poor
performers etc.

4. 360 Degree Performance Appraisals: This method is also known as ‘multi-rater

feedback’, it is the appraisal in a wider perspective where the comment about the
employees’ performance comes from all the possible sources that are directly or
indirectly related with the employee on his job. In 360 degree performance appraisal
an employee can be appraised by his peers, managers (i.e. superior), subordinates,
team members, customers, suppliers/ vendors - anyone who comes into direct or
indirect contact with the employee and can provide necessary information or feedback
regarding performance of the employee the “on-the-job”. The four major component
of 360 degree performance appraisal are 1. Employees Self Appraisal 2. Appraisal by
Superior 3. Appraisal by Subordinate 4. Peer Appraisal.
5. Cost Accounting Method: In this method performance of an employee is evaluated
on the basis of monetary returns the employee gives to his or her organization. A
relationship is recognized between the cost included in keeping the employee in an
organization and the benefit the organization gets from him or her. The evaluation is
based on the established relationship between the cost and the benefit. The following
factors are considered while evaluating an employee’s performance: 1. Interpersonal
relationship with others. 2. Quality of product produced or service given to the
organization. 3. Wastage, damage, accidents caused by the employee. 4. Average
value of production or service by an employee. 5. Overhead cost incurred

THE PERFORMANCE APPRAISAL PROCESS

1. Establish Performance Standards: It begins by establishing performance standards i.e.
what they expect from their employee in terms of outputs, accomplishments and skills that
they will evaluate with the passage of time. The standards set should be clear and objective
enough to be understood and measured. The standards which are set are evolved out of job
analysis and job descriptions. Standards set should be clear and not the vague one. The
expectation of the manager from his employee should be clear so that it could be
communicated to the subordinates that they will be appraised against the standards set for
them.
2. Communicating the Standards Set for an Employee: Once the standards for
performance are set it should be communicated to the concerned employee, about what it
expected from them in terms of performance. It should not be part of the employees’ job to
estimate what they are expected do. Communication is said to be two ways street, mere
passing of information to subordinate does not mean that the work is done. Communication
only takes place when the information given has taken place and has been received and
understood by subordinate. . If necessary, the standards may be tailored or revised in the light
of feedback obtained from the employees.
3. Measuring of the Actual Performances: It is one of the most crucial steps of
performance appraisal process. It is very important to know as how the performance will be
measured and what should be measured, thus four important sources frequently used by
managers are personal observation, statistical reports, oral reports, and written reports.
However, combination of all these resources gives more reliable information. What we
measure is probably more critical to the evaluation process than how we measure. The
selection of the incorrect criteria can result in serious consequences. What we measure gives
an idea about what people in an organization will attempt to achieve. The criteria which are
considered must represent performance as stated in the first two steps of the appraisal
process.
4. Comparing Actual Performance with Standards Set in the Beginning: In this step of
performance appraisal the actual performance is compared with the expected or desired
standard set. A comparison between actual or desired standard may disclose the deviation
between standard performance and actual performance and will allow the evaluator to carry
on with the discussion of the appraisal with the concerned employees.
5. Discussion with the Concerned Employee: In this step performance of the employee is
communicated and discussed. It gives an idea to the employee regarding their strengths and
weaknesses. The impact of this discussion may be positive or negative. The impression that
subordinates receive from their assessment has a very strong impact on their self esteem and,
is very important, for their future performances.
6. Initiate Corrective Action: Corrective action can be of two types; one is instant and deals
primarily with symptoms. The other is basic and deals with the causes. Instant corrective
action is often described as “putting out fires”, where as basic corrective action gets to the
source from where deviation has taken place and seeks to adjust the differences permanently.
Instant action corrects something right at a particular point and gets things back on track.
Basic action asks how and why performance deviated. In some instances, managers may feel
that they do not have the time to take basic corrective action and thus may go for “perpetually
put out fires
TRAINING AND DEVELOPMENT

Training is an instrument of developing the employees by increasing their skills and

improving their behavior. Technical, managerial skills are needed by the employees for
performing the jobs assigned to them. Training is required to be given to new employees as
well as existing employees. The methods to be used for training and the duration for which
training should be given is decided by the management according to the objectives of the
training, the number of persons to be trained and the amount of training needed by the
employees. Training leads to overall personal development. The major outcome of training is
learning. Trainees learn new habits, new skills, useful information that helps to improve their
performance.
Definition:
According to Flippo:
“Training is an act of increasing the knowledge and skill of an employee for doing a
particular job.”

Importance of training and development:

1. Reduction in learning time
2. Better performance
3. Reduced supervision
4. Increases Morale of the employees
5. Facilitates organizational stability and flexibility
6. Develops employees skills, talents, competency
7. Decreased accidents
8. Better use of raw material and other resources
9. Increase in production

Methods of Training: There are two methods of training

On-the job training
Off-the job training

On-the job training: It is designed to make the employees immediately productive. It is

learning by physically doing the work. The focus here is to provide specific skills in a real
situation. These methods include:

1) Job instruction training: This is a method used for such jobs which can be performed with
relatively low skill. Here, the trainees systematically acquire skills by following routine
instructions in key processes from a qualified instructor.

2) Experiential learning: This is a modern approach to the learning process. This method is
more . used for training the senior executives. It is a technique, which empowers the
manager-trainee with the freedom of choice to act upon and the capacity to initiate, rather
than simply respond, to

circumstances.

3) Demonstration: Here, the work procedures are demonstrated to the trainees. Each of the
trainees is asked to carry out the work, on a sample basis, based on his/her observation and
understanding of the demonstration.
4) Apprentice training: Those who are selected to work in the shop floor are trained as
apprentices in the factory for a brief period ranging from three months to one year, depending
upon the complexity of the training. Those who show good progress in this training are likely
to be absorbed in the same organization. Those who complete apprentice training are likely to
get good jobs outside also.

B) Off-the-job training methods: provide a relatively broad idea relating to a given job or
task. These are meant for developing an understanding of general principles, providing
background knowledge, or generating an awareness of comparative ideas and practice. These
methods include:

Lectures/talks and class room instructions: These techniques are designed to communicate
specific interpersonal, technical, or problem-solving skills. Here, the trainer can maintain a
tight control over learning. However, this method restricts the trainee's freedom to develop
his/her own approaches to learning.

Conferences: Conferences refer to get-together of the experts from different areas of a given
topic. These experts present their views based on their work experience and research results.
When employees participate in such events they get a feel of the real world. They may also
get motivated to perform better.

Seminars: Seminars are held periodically by the professional organisations for the benefit of
all the practicing managers by taking into consideration the recent advances in a specialized
area. Participation in such seminars enables the executives to get exposed to the recent
developments in the area of their interest.

Team discussions: This technique develops team spirit among the executives from different
departments. It also enables them to understand and appreciate each other's problems. It
reinforces a feeling of unity among those who work towards common goals.

Case study: This is a predominant technique followed even in premier management institutes.
This technique helps to provide an understanding of what has gone wrong in a particular case,
such as Delhi Cloth Mills (DCM). Similarly, what are the factors responsible for the success
of organizations such as Reliance or Hindustan Lever. Case study technique is a very good
method of learning the principles and concepts. However, this method has one weakness. The
circumstances you are likely to face in your life may be very different from the cases you
have analyzed earlier! Case studies help to enhance the analytical & decision making skills.

Role-playing: The participants are assigned roles and are asked to react to one another, as
they would do in their managerial jobs. These roles are eventually exchanged. In other words,
each participant will get a turn to play all the roles. For instance, the role-playing in a
grievance-handling situation involves two players: In the first step, the worker presents his
grievance to the personnel manager. In the second step, the worker plays the role of the
personnel manager while the personnel manager plays the role of the worker. Role-playing
allows participants to understand problems of each other. It enhances the interpersonal-
handling skills.

Programmed instruction: It is a system of instruction within which pre-established subject

matter is broken into small, discrete steps and carefully organized into logical sequence in
which, it can be learned by the trainee. Each step is built upon the previous one. The
programmed instruction techniques can be in the form of programmed tests and manuals, or
video displays. For instance, withdrawal of money through automatic teller machines
(ATMs) involves responding to programmed instructions; working on a personal computer or
internet involves responding to a series of programmed instructions.

Simulation exercises: These include interactive exercises in which trainees practice their
skills on working models or in mock situations based on real-life situations.

Group decision-making: Group decision-making refers to the process of making decisions

based on the opinions expressed by all the concerned — may be subordinates, peers, or
outside consultants. The manager thus ensures that more people are involved in taking
decisions. Each member of the group will accept the responsibility for the decisions made as
he is a party to it. This method facilitates to generate more alternative solutions to a given
problem because more people are involved in the thinking exercise. This facilitates
coordination among the groups also.

Development: Development is an activity aimed at career growth rather than immediate

performance. Employee development is the process, which helps him or her to understand
and interpret knowledge rather than teaching a specific set of functional skills. Development,
therefore, focuses more on employee's personal growth in the near future.

Placement: After training, the employee is placed in his/her position under the charge of a
manager. The new recruit is allowed to exercise full authority and is held responsible for the
results.

Promotion: Promotion refers to the advancement of an employee to a job with a higher

authority and responsibility. It may also carry a better compensation package. Promotion can
also be viewed as a means of filling up vacancies in the organization occurring from time to
time.

Demotion: Where an employee is not in a position to perform a given job, he may be

demoted or transferred to a position with a lower authority and salary. In other words,
demotion is a punishment.

Transfer: It is a lateral shift that moves an individual employee from one position to another.
It may be in the same department, or to a different department or location. This does not
involve any changes in the duties, responsibilities, or skills needed. The salary benefits also
may remain the same.

Separation: Separation refers to termination of employment. In other words, the employee is

separated from his job. In case of misconduct or misbehavior, where the employee is not in a
position to improve his performance despite notice, his/her employment is terminated. This is
also called dismissal.

Absenteeism: Absenteeism refers to the practice of an employee who does not report to work
for any particular reason. Absenteeism affects the productivity adversely. It becomes difficult
for the departments to cope up with the work pressures, if any particular employee is absent.
As a measure of control, the employees are not allowed to be absent without prior permission
from the management.
Wages and Salary Administration: Wages and salary administration is the process of fixing
wages/salary for different jobs in the organization through job evaluation, negotiations with
the unions, and so on.
WAGES: wages is the return given to workers for their mental and physical efforts which
they put into the production process.

Elements of an ideal wages system

 Guarantee of minimum wages
 Based on ability of the workers
 Simple
 Motivating
 Flexible
 Regular payment
Types of wages
 Time wages system: in this system, the workers are paid wages according to the time
spent at the work place. E.g. a day, a week, a month etc.
 Piece wage system: in this system, wages are paid to workers according to their
output. This wage system is directly related to the skill, production capacity, speed
and precision of the worker.

Grievance Handling: A complaint from employees, when ignored, takes the form of a
grievance. Grievance is a complaint genuine or otherwise, about any issue relating to the job
such as about supervisor, wages, working conditions and so on. It is necessary to create an
in-build mechanism to redress the grievances, at the earliest, at the departmental level. If the
individual grievances are ignored, they may take the form of industrial disputes.