HUMAN RESOURCE

MANAGEMENT
Dr. ANANDA KUMAR
Professor & Head,
Department of Management Studies
Christ College of Engg. & Tech.,
Puducherry, India.
Mobile: +91 99443 42433
E-mail: searchanandu@gmail.com
UNIT 1

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Human Resource Management
“HRM is the function performed in
organizations that facilitates the most
effective use of people to achieve
organizational and individual goals.”

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Human Resource Management
“Human resource or manpower management effectively
describes the process of planning and directing the
application, development and utilisation of human
resources in employment” - Dale Yoder

“The personnel function is concerned with the

procurement, development, compensation, integration
and maintenance of the personnel of an organisation for
the purpose of contributing towards the accomplishment
of that organisation’s major goals or objectives” – Flippo
Functions of HRM
HRM FUNCTIONS

Managerial Operative
Functions Functions

Planning Organising Directing Controlling

Procurement Compensation Maintenance

Development Integration
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 A. Procurement B. Development

1. Job Analysis 1. Training

2. Human Resource 2. Executive
Planning development
3. Recruitment 3. Career planning &
4. Selection development
5. Placement 4. Succession Planning
6. Induction and 5. Human Resource
Orientation Development
7. Internal Mobility

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 C. Motivation & Compensation D. Maintenance

1. Job Design 1. Health

2. Work Scheduling 2. Safety
3. Motivation 3. Employee welfare
4. Job Evaluation 4. Social security
5. Performance appraisal measures
6. Compensation
administration
7. Incentives & benefits

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 E. Integration Function

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

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Importance of HRM
1. It helps the organisation to identify correctly its
manpower needs
2. It ensures that the organisation does not suffer from
either surplus or shortage of manpower
3. It facilitates the selection of the right man for the right
job
4. It focuses attention on the development of the skill of
every individual in order to make him up-to-date
5. It recognises the need for the appraisal of the
employees performance
6. It considers the need to provide incentives to the
employees performing well
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Importance of HRM
7. It gives utmost importance to securing a favourable
employee attitude
8. It emphasizes the need for good human relations in
every workplace
9. It provides scope for collective bargaining

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Objectives of HRM
1. To make an optimum utilisation of the human
resource of the organisation
2. To ensure that the organisation has the required
number staff
3. To establish and maintain a sound organisation
structure
4. To reconcile personal and organisational goals
5. To provide scope for the development of personnel
6. To ensure that the employees have higher job
satisfaction
7. To provide scope for participation in decision-making
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Difference b/w Personnel Mgt & HRM
1. Personnel management is a traditional approach of managing
people in the organization. Human resource management is a
modern approach of managing people and their strengths in the
organization.

2. Personnel management focuses on personnel administration,

employee welfare and labor relation. Human resource
management focuses on acquisition, development, motivation and
maintenance of human resources in the organization.

3. Personnel management assumes people as a input

for achieving desired output. Human resource management
assumes people as an important and valuable resource for
achieving desired output.
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Difference b/w Personnel Mgt & HRM
4. Under personnel management, personnel function is
undertaken for employee's satisfaction. Under human resource
management, administrative function is undertaken for goal
achievement.

5. Under personnel management, job design is done on the basis

of division of labour. Under human resource management, job
design function is done on the basis of group work/team work.

6. Under personnel management, employees are provided with

less training and development opportunities. Under human
resource management, employees are provided with more
training and development opportunities.
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Difference b/w Personnel Mgt & HRM
7. In personnel management, decisions are made by the top
management as per the rules and regulation of the organization.
In human resource management, decisions are made collectively
after considering employee's participation, authority,
decentralization, competitive environment etc.

8. Personnel management focuses on increased production and

satisfied employees. Human resource management focuses on
effectiveness, culture, productivity and employee's participation.

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Nature / Scope of HRM

Control Acquisition
HR Audit HR Planning
HR Accounting Recruitment, Selection
HR Information System Placement.

Human
Resource
Maintenance Management Development
Remuneration Training, Career
Development,
Motivation
Organisation
Health & Safety Development, Internal
Social Security Mobility.
Industrial Relations
Performance Appraisal
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Environment of HRM
Environment comprises all those forces which have their
bearing on the functioning of various activities including
human resource activities. Environment scanning helps HR
manager become proactive to the environment which is
characterised by change and intense competition.

Two types of environments:

1. Internal environment
2. External environment

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

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

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Strategic HRM
Strategic human resource management is to ensure that
human resource management is fully integrated into strategic
planning, that HRM policies cohere both across policy areas
and across hierarchies and that HRM policies are accepted
and used by line managers as part of their every day work.

According to Donald F. Harvey, “Strategic management is

that set of managerial decisions and actions that determine
the long-term performance of a corporation. It includes
environmental scanning, strategy formulation, strategy
implementation and evaluation and control.

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

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CASE STUDIES:
PERFORMANCE APPRAISAL POLICIES
Berkely Investments is a reputed finance company having 15
branches in different part of the country. In the home office
there are more than 200 employees. This company has a
performance rating under which the employees are rated at
six months intervals by a committee of two executives.
Graphic scales have been used as means of appraisal. The
qualities considered are responsibility, initiative, and interest
in work, leadership potential, co-operative attitude and
community activity. After the performance is evaluated, the
ratings are discussed with the concerned employees by their
immediate boss who counsels them. The ratings aroused to
influence promotions and salary adjustments the employees
and also as a criterion for assigning further rating for them.
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PERFORMANCE APPRAISAL POLICIES
Recently three employees of the company called on the
company’s president to express their dissatisfaction with the
ratings they had received. Their scores and composite
ratings had been discussed with them. Because their ratings
were comparatively low, they had been denied annual
increments in salary. Approximately, two thirds of all the
employees received such increments. The aggrieved
employees argued that their ratings did not accurately
represent their qualifications or performance. They insisted
that “community activity” was not actually a part of their job
and that what they do off the job is none of the company’s
business. They expressed their opinion that employees
should organize union and insist that salary increase be
automatic.

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PERFORMANCE APPRAISAL POLICIES
The threat of a union caused concern to the officers of the
company. This particular experience convinced the top
officers that ratings may represent a serious hazard to
satisfactory relationship with employees. Even the chief
executive finds that performance appraisal is a dangerous
source of friction and its hazards outweigh its values; so it
should be discontinued altogether.
Questions:
1. How far do you agree with the management that
performance appraisal should be discontinued?

2. If you were the HR manager, how would you tackle the

situation?
3. What modifications would you suggest in the performance
appraisal system of the company
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UNIT – 2

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Human Resource Planning (HRP)
HRP includes estimation of how many qualified people
are necessary to carry out the assigned activities, how
many people will be available and what, if anything,
must be done to ensure that personnel supply equals
personnel demand at the appropriate point in the future.
- Terry L. Leap and Michael D. Crino
Human resource planning is a planning is a process of
determining and assuming that the organisation will
have an adequate number of qualified persons, available
at the proper times, performing job which meet the
needs of enterprise and which provide satisfaction for
the individuals involved. - Beach
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Objectives HRP
 Ensure adequate supply of manpower as and when
required.
 Ensure proper use of existing human resources in the
organisation.
 Forecast future requirements of human resources
with different levels of skills.
 Assess surplus of shortage, if any, of human
resources available over a specified period of time.
 Anticipate the impact of technology on jobs and
requirements for human resources.
 Control the human resources already deployed in the
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HRP Process
1. Analysing Organisational Plans and Objectives
2. Analysing Objectives of Human Resource Planning
3. Forecasting Demand for Human Resources
4. Forecasting Supply of Human Resources
5. Matching Demand and Supply
6. Monitoring and Control

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Human Resource Information System (HRIS)
HRIS refers to a computerised system that aids the
processing of information relating to human resource
management. It is a system of gathering, classifying,
processing, recording and disseminating the information
required for effective management of human resources
in an organisation. HRIS forms an integral part of the
Management Information System (MIS). HRIS collects
and analyses data relating to human resources of the
organisation. The input of HRIS include the information
relating to employees, their abilities, qualitifications,
potentialities, creative instincts, age, sex, their jobs, pay
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HRP Advantages
1. It is both time saving and cheaper device.
2. It gives accurate information relating to human
resources.
3. It makes information readily available as and when
desired.
4. It acts as a decision support system.
5. It establishes strong management control.

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Job Analysis
Job analysis is the process of getting information
about jobs: specially, what the worker does; how he
gets it done; why he does it; skill, education and
training required; relationship to other jobs, physical
demands; environmental conditions”.
- Jones and Decothis
Job analysis as the process of studying and
collecting information relating to the operations and
responsibilities of a specific job. The immediate
products of this analysis are job descriptions and job
specifications”. - Edwin B. Flippo
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Job Description: Job description is a
written statement showing job title, tasks duties
and responsibilities involved in a job.

Job Specification: Job specification also

known as man or employee specification is a
statement of minimum acceptable qualities
required in a job incurrent for the effective
performance of the job.

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 JOB ANALYSIS

Job Description Job Specification

Personal Characteristics: Age,

Job Title: A Title of the Job Sex, Education.
Job Activities: Tasks Physical Characteristics:
performed, materials used. Length, Weight, Vision.
Working Conditions: Light, Mental Characteristics: General
Heat, Noise. intelligence, Memory,
Social Environment: Size of Judgment.
work group members etc. Social & Psychological
Characteristics: Emotional
Stability, Initiative, Creativity.
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Job Evaluation
Job evaluation is a comparative process of
establishing the value of different jobs in a
hierarchical order. It allows one to compare jobs by
using common criteria to define the relationship of
one job to another. This serves as basis for grading
different jobs and developing a suitable pay structure
for them. It is important to mention that job
evaluation cannot be the sole determining factor for
deciding pay structures because job evaluation is
about relationships, and not absolutes.

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

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Methods / Techniques Job Design
1. Work Simplification
2. Job Rotation
3. Job Enrichment
4. Job Enlargement

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 Job Rotation Job Enrichment
(relief from (Increased
boredom) responsibility)

WORK DESIGN

Job Enlargement Job

(Extension of work Simplification
plus additional (Breaking down
tasks to obtain a into small sub-
complete unit) parts)
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Recruitment
Recruitment is the generating of applications or
applicants for specific positions to be filled up in the
organisation. In other words, it is a process of
searching for and obtaining applicants for jobs so
that the right people in right number can be selected.
Flippo has defined recruitment as “a process of
searching for prospective employees and stimulating
and encouraging them to apply for jobs in an
organisation.

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 Sources of Recruitment

Internal Sources External Sources

1. Employment Exchange
1. Present Employees 2. Advertisements
2. Employee Referrals 3. Employment Agencies
3. Former Employees 4. Campus Recruitment
4. Previous Applicants 5. Word-of-Mouth

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

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Selection
Selection is the process of choosing from among the
candidates from within the organisation or from the
outside, the most suitable person for the current
position or for the future position.
Selection is hiring the best candidate from the pool of
applications. It refers to the process of offering jobs
to one or more applicants/candidates from the
applications received through recruitment. In other
words, it is the process of picking the suitable
candidates from the pool of job applications to fill
various jobs in the organisation.
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Selection Methods / Process
1. Preliminary Interview
2. Application Blank
3. Selection Tests
4. Selection Interview
5. Reference Checks
6. Physical Examination
7. Final Selection

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

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

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Performance Appraisal
Performance appraisal is the process of
making an assessment of the performance
and progress of the employees of an
organisation. Once an employee has been
inducted into the organisation and given the
necessary training, the next step is to assess
his performance periodically. Such an
assessment would indicate whether he is
efficient or not. Performance appraisal is also
known as ‘merit rating’ or ‘efficiency rating’.
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Performance progress of employee
1. Knowledge of work
2. Extent of co-operation with colleagues and
superiors
3. Initiative
4. Quality of work 10. Honesty
5. Target attainment 11. Ambition
6. Aptitude
7. Degree of skill
8. Discipline
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Objectives of Performance Appraisal
1. Salary Increase
2. Promotion
3. Training and Development
4. Feedback
5. Pressure on Employees

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360 Degree Appraisal
A 360 degree appraisal is a type of employee
performance appraisal in which subordinates, co-
workers, and managers all anonymously rate the
employee. A 360 degree appraisal is a type of
employee performance review, where a staffer's
work for a specific period of time is discussed and
critiqued. The 360 degree process is different in
that it obtains feedback from co-workers and
subordinates, instead of just from the direct
supervisor. The goal of the process is to better
understand how the employee is functioning as
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Potential Appraisal
The potential appraisal refers to the appraisal i.e.
identification of the hidden talents and skills of a
person. The person might or might not be aware
of them. Potential appraisal is a future – oriented
appraisal whose main objective is to identify and
evaluate the potential of the employees to
assume higher positions and responsibilities in
the organizational hierarchy. Many organisations
consider and use potential appraisal as a part of
the performance appraisal processes.

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

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UNIT – 3

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

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

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

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Training and Development
Development is related to the all-round progress of
an employee. A development programme enables
executives to acquire skills in their present jobs
and capabilities to perform future jobs better.
Training is required to improve skills for performing
a job. Development, on the other hand, is related
to the all-round progress of executives. While
training is job oriented, development is career
oriented. Training is essential for operative
workers. On the other hand, a development
programme is required for executives.
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Case Study
Amrit Electrical is a family owned company of approximately
250 employees. Mr. Rajesh Khaitan recently took over as
president of the company. A short time after joining the
company, he, began to following a discussion with the HR
director that the pay of the salaried employees was very
much a matter of individual bargaining. Factory workers were
not a part of the problem because they were unionized and
their wages were set by collective bargaining. An
examination of the salaried payroll showed that there were
75 employees ranging in pay from that of the president to
that of receptionist. A closer examination showed that 20 of
the salaried employees were females. Five of these were
front time factory supervisors and one was the HR director.
The other fourteen were non-management.
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Case Study
This examination also showed that the HR director was underpaid
and that the five female supervisors were paid somewhat less than
any of the male supervisors. However, there were no similar
supervisory jobs in which there were both male and female
supervisors. When questioned, the HR director said that she thought
that the female supervisors were paid at a lower rate mainly because
they were women and because they supervised less skilled
employees than did the male supervisors. However, Mr. Khaitan was
not convinced that this was true. He decided to hire a compensation
consultant to help him. Together they decided that all 75 salaried jobs
should be in the same job evaluation cluster, that a modified job
evaluation method should be used and that the job descriptions
recently completed by the HR director were correct and usable in the
study, the job evaluation also showed that the HR director and the
five female supervisors were being underpaid in comparison with the
male employees.
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Case Study
Mr. Khaitan was not sure, what to do. If he gave these four female
employees an immediate salary increase which may large enough
to bring them upto where they should be, he was afraid the male
supervisors could be upset and the female supervisors might
comprehend the situation and demand arrears of pay. The Hr
director agreed to take a sizeable salary increase with the no
arrears of pay. So this part of the problem was solved. Mr. Khaitan
believed that he had three choices relative to the female
supervisors: (1) To gradually increase their salaries (ii) to increase
their salaries immediately (iii) to do nothing.
Questions:
1. What would you do if you were Mr. Khaitan?
2. How do you think the company got into a situation like this in
the first place?
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 Methods of Training
On-the job training Off-the job training

a) Induction Training a) Lectures & Conferences

b) Apprenticeship Training b) Role Playing
c) Refresher Training c) Case study
d) Job Rotation d) Management games
e) Placement as assistants e) Brain storming
f) Vestibule Training f) Sensitivity training

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

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Reason for Evaluation of Training
Companies are investing millions of dollars in
training programs to help gain a competitive
advantage.
Training investment is increasing because learning
creates knowledge which differentiates between
those companies and employees who are
successful and those who are not.
Because companies have made large dollar
investments in training and education and view
training as a strategy to be successful, they expect
the outcomes or benefits related to training to be
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Steps of training programme
1. Identification of training needs
2. Setting training objectives
3. Designing training methods
4. Administration of training programmes
5. Evaluation of training

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

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

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

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

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

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Types of Promotion

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

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Purpose of Promotion
 To recognize an employees skill and knowledge
and utilize it to improve the organisational
effectiveness.
 To reward and motivate employees to higher
productivity.
 To develop competitive spirit and inculcate the
zeal in the employees to acquire skill, knowledge
etc.
 To promote employees satisfaction and boost
their morale.
 To build loyalty among the employees toward
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Purpose of Promotion
 To promote good human relations.
 To retain skilled and talented people.
 To attract trained, competent and hard working
people.
 To impress the other employees that
opportunities are available to them too if they also
perform well.

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Transfer
A transfer refers to lateral movement of employees
within the same grade, from one job to another.
According to Flippo, “a transfer is a change in the
job (accompanied by a change in the place of the
job) of an employee without a change in
responsibilities or remuneration”.
Transfer differs from promotion in the sense that
the latter involves a change of job involving
increase in salary, authority, status and
responsibility, while all these remain
unchanged/stagnant in the case of the former.
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Need for Transfer
1. To meet organisational needs
2. To satisfy employee needs
3. To better utilize employee
4. To make the employee more versatile
5. To adjust the workforce
6. To provide relief
7. To punish employee

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

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

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Retirement
Retirement is the major cause of separation of
employees from the organisation. It can be defined
as the termination of service of an employee on
reaching the age of superannuation. For example,
at present the superannuation age for the teachers
working in the Central Universities is 62 years and
is case of some state government employees, it is
58 years.

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Resignation
Resignation is termination of service by an
employee by serving a notice called ‘resignation’
on the employer. Resignation may be voluntary or
involuntary.
A voluntary resignation is when an employee
himself/herself decides to resign on the grounds of
ill health, marriage, better job prospects in other
organisations, etc.
Resignation is considered involuntary or
compulsory when the employer directs the
employee to resign on grounds of duty and
indiscipline or face the disciplinary action.
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Dismissal
Dismissal is termination of service of an employee
as a punitive measure. This may occur either on
account of unsatisfactory performance or
misconduct. Presistent failure on the part of
employee to perform upto the expectations or
specified standard is considered as unsatisfactory
performance.

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UNIT – 4

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

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COMPENSATION
“Wage and Salary Administration refers to the
establishment and implementation of sound
policies and practices of employee
compensation. It includes such areas as Job
evaluation, surveys of wages and salaries,
analysis of relevant organizational problems,
development and maintenance of wage structure,
establishing rules for administering wages, wage
payments, incentives, profit sharing, wage
changes and adjustments, supplementary
payments, control of compensation costs and
other related items.”
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COMPONENTS OF COMPENSATION
1. Wage and Salary
2. Incentives
3. Fringe Benefits
4. Perquisites

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

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WAGE
Concept / Types of Wage:
1. Minimum Wages
2. Living Wages
3. Fair Wages

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WAGE
1. Minimum Wages:
 Paid by the employer to his workers
irrespective of his ability to pay
 Fixed by government (Both by Central and
State Government)
 Takes into consideration the cost of living
 This is the wage which must provide not only
for bare sustenance of Life but for the
preservation of efficiency of the worker –
Government Committee on Wages (1948)
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WAGE
2. Living Wages:
 Highest among the three
 Must provide basic amenities of life and social
needs like medical, education, etc.
 A Living wage is one which should enable the
earner to provide for himself and his family not only
the bare essentials of food, clothing and shelter but
a measure of frugal comfort including education for
his children, protection against ill-health,
requirements of essential social needs and a
measure of insurance against the most important
misfortunes including old age.
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WAGE
3. Fair Wages:
Fixed by employer
At present, the concept of fair wages is followed
by most of the business organization
Determined on the basis of :
 Productivity of labor
 Prevailing wage rates in similar jobs
 Level of national income and its distribution
 Place of industry in the economy
 The employer’s capacity to pay

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1. WAGE AND SALARY
Salary:
 Monthly-rated payment to workers
 Paid to White-Collar employees.
 Salary is defined as the remuneration paid to
the clerical and managerial personnel
employees on monthly or annual basis.
 Both Wages and Salary are paid based on a
fixed period of time.
 They are not associated with productivity of an
employee at a particular time
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2. INCENTIVES
2. Incentives:
 Additional payment besides wage & salary
 Linked with productivity either in terms of
higher production or cost saving or both.
 Given on individual basis or group basis.

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

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

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OBJECTIVES OF COMPENSATION
MGT.
1. Attracting and retaining personnel
2. Motivating personnel – higher productivity
3. Optimizing cost of compensation
4. Consistency in compensation – Both internal
consistency and external consistency

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TYPES OF COMPENSATION
1. Primary Compensation
2. Incentive Compensation

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

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2. Incentive Compensation
 Any reward of benefit paid to employee over
and above is wage/salary.
 Includes both monetary as well as non-
monetary rewards.
 “Wage incentives are extra financial
motivation. They are designed to stimulate
human effort by rewarding the person, over
and above the time-rated remuneration, for
improvements in the present or targeted
results” – The National Commission of Labor
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INCENTIVE COMPENSATION
Classification of Incentives:
1. Financial or pecuniary or wage incentives
2. Non-Financial incentives

Financial Incentives:
 Wages
 Salary
 Premium
 Bonus
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INCENTIVE COMPENSATION
Non-Financial Incentives:
 Job Security
 Recognition
 Participation
 Pride in job
 Delegation of Responsibility
 Quick Promotion

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Case Study: Job Analysis
A large, well known Candian company had found full
depreciation of the equipment which was used to make
specialized automobile companies for north-American
automobile producers. Although the equipment had been
well maintained and worked well, it required to be handled by
a large number of labourers. The result was the high labour
costs that made the company’s brake assemblies,
manufacturer, and related products unprofitable. A decision
was made to replace the equipment with more highly
automated, numerically controlled machine tools. Since the
economic value of the old equipment exceeded its value as
scrap, the equipment was shipped to the company’s
Brazilian operations, where labour costs were considerable
lower.
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Case Study: Job Analysis
Upon arrival and after the setting up of a new facility,
the company received numerous profitable orders from
Brazil’s rapidly growing automobile industry. Though the
labour hours per product remained about the same the lower
Brazilian labour rates allowed the new facility to be profitable.
Soon a second shift was added and with it problems began.
The equipment began to experience a growing
“downtime” because of machine failures and quality-
particularly on part dimensions- declined dramatically.
At a staff meeting the Brazilian plant manager met his staff,
including several industrial engineers who had been trained
in Canada and the United States. The engineers argued that
the problems were almost certainly caused by maintenance
since the machinery had worked well in Canada and initially
in Brazil. The HR director agreed that it was perhaps the old
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Case Study: Job Analysis
machinery but be also noted that many of the on-machine
instructions and maintenance manuals had not been
translated into Portuguese. He also observed that the
problems began after the second shift was hired.
Questions:
1. From the discussion of job analysis information and job
design, what actions would you recommend to HR
department?
2. Given the problems associated with the second shift, what
differences would you look for between first shift and second
shift workers?
3. Since the Canadian workers had considerable experience
with the equipment but the workers particularly in second
shelf in Brazil had very little experience, what implications do
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CONCEPT OF JOB EVALUATION
It is a systematic way of determining the value
or worth of a job in relation to other jobs in an
organization.
It tries to make a systematic comparison
between jobs to assess their relative worth for
the purpose of establishing a rational pay
structure.

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CONCEPT OF JOB EVALUATION
Definition:
Wendell French defines Job Evaluation as : “a
process of determining the relative worth of the
various jobs within the organization, so that
differential wages may be paid to jobs of different
worth. The relative worth of a job means relative
value produced. The variables which are
assumed to be related to value produced are
such factors as responsibility, skill, effort and
working conditions.”
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METHODS OF JOB EVALUATION
Non-Quantitative Methods: (Whole job is
compared)
Ranking or Job Comparison
Grading or Job Classification

Quantitative Methods: (Key factors of a job is

compared)
Point Rating
Factor Comparison
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METHODS OF JOB EVALUATION
1. Ranking method:
 As per this method, Jobs are arranged from
highest to lowest, in order of their values or
merit to the organization.
 Jobs can also be arranged according to the
relative difficulty in performing them.
 The job at the top has the highest value and
job at the lowest has the lowest value.
 Jobs are arranged in each department and
then department ranking are combined to
develop an organization ranking.
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METHODS OF JOB EVALUATION
2. Grading/Classification Method:
 Under this method, job grades or classes are
established by an authorized body or
committee appointed for this purpose.
 A job grade is defined as a group of different
jobs of similar difficulty or requiring similar
skills to perform them.(ex-skilled and unskilled)
 Job grades are determined on the basis of
information derived from job analysis.
 Different wage/salary rate is fixed for each
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METHODS OF JOB EVALUATION
3. Point Rating method:
 Jobs are expressed in terms of key factors.
 Points are assigned to each factor after
prioritizing each factor in order of importance.
 The points are summed up to determine the
wage rate for the job.
 Jobs with similar points totals are placed in
similar pay grades.

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METHODS OF JOB EVALUATION
4. Factor Comparison method:
 Under this method, instead of ranking complete
jobs, each job is ranked according to a series of
factors.
 These factors include mental effort, physical
effort, skill needed, responsibility, working
conditions, etc…
 Pay will be assigned in this method by comparing
the weights of factors required for each job.
 This system is used to evaluate white collar,
professional and managerial positions.
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MORALE
Morale refers to the attitude of employees of an
organization towards their job, the
management, the fellow-employees, the
superiors and the subordinates.
Such an Attitude may be positive or negative
If it is positive, then the morale of the group is
said to be high
If it is negative, then the morale of the group is
said to be low

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MORALE
Flippo – “Morale refers to a mental condition or
attitude of individuals and groups which
determines their willingness to co-operate. Good
morale is evidenced by employee enthusiasm,
voluntary conformance with regulations and
orders, and willingness to co-operate with others
in the accomplishment of an organization’s
objectives. Poor morale is evidenced by
surliness, insubordination, a feeling of
discouragement and dislike of the job, company
and associates”
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FACTORS AFFECTING MORALE
The following are the determinants/factors that
influence Morale:
Nature of work
Service conditions
Type of Managers
Inter-personal relationships
Work environment
Personal factors

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MORALE AND PRODUCTIVITY
 There is no definite direct relationship between
morale and productivity.
 There can be two possible relationships
between the two:
 High Morale and High Productivity
 Low Morale and Low Productivity

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STEPS TO IMPROVE EMPLOYEE
MORALE
 Selection of right man for the right job
 Conducive working environment
 Proper superior-subordinate relationship
 Provision of suitable incentives
 Evaluation of employee performance
 Job rotation
 Sound promotion and transfer policy
 Grievance redressal machinery
 Workers’ participation in management
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MEASUREMENT OF MORALE
The following methods are usually followed for
the purpose of measuring the level of morale of
employees:
1. Company records and reports
2. Observation
3. Attitude surveys

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1. COMPANY RECORDS AND REPORTS
 Rate of absenteeism
 Participation in strikes organized by employee
unions
 Complaints made against superiors and fellow-
employees
 Remarks of superiors about subordinates
 Output produced
 Target attainment
 Loss to the organization due to the negligence
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2. OBSERVATION
The Manager will probably assume that the
morale of his subordinates is high, when they
don’t:
 Lag behind in their duties
 Find their targets unattainable
 Complain about the fellow-employees often
 Blame the tools and equipment
 Find fault with the management’s policies

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

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Motivation
Motivation means a process of stimulating people
to action to accomplish desired goals – W.G.
Scott.

Motivation is the process of attempting to

influence others to do your will through the
possibility of gain or reward. - Edwin B. Flippo

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Motivation
The important task before every manager is to
secure optimum performance from each of his
subordinates. The performance of the
subordinate, in turn, is determined by his ability to
work and the extent to which he is motivated.
Motivation is the process of inducing and
instigating the subordinates to put in their best.
Motivation is influenced significantly by the needs
of a person and the extent to which these have
been fulfilled. To motivate the subordinates, the
manager must, therefore, understand their needs.
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Importance of Motivation
1. Inducement of employees
2. Higher efficiency
3. Optimum use of resources
4. Avoidance of loss due to mishandling
and breakage
5. No complaints and grievances
6. Better human relations
7. Avoidance of strikes and lock-outs
8. Reduction in labour turnover
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Nature & Characteristics of
Motivation
1. Motivation is a psychological concept
2. Motivation is always total and not piece-meal
3. Motivation may be financial or non-financial
4. Method of Motivation may be positive as well
as negative
5. Motivation is a continuous process

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Motivation Content Theories

1. Abraham Maslow’s Need Hierarchical

Theory
2. Herzberg’s Two Factor Theory
3. Douglas McGregor’s Theory X and Theory Y
4. Alderfer’s ERG Theory
5. David C. McClelland’s Three-Need Theory

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Motivation Process Theories

1. Vroom’s Expectancy Theory

2. Porter and Lawler’s Expectancy Theory
3. Adam’s Equity Theory

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Abraham Maslow (1908-
1970)

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

ESTEEM NEEDS

LOVE, AFFECTION, AND

BELONGINGNESS NEEDS

SAFETY NEEDS

PHYSIOLOGICAL OR SURVIVAL NEEDS

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Maslow’s Need Hierarchy Theory

Self-
Actualization

Esteem

Belonging

Safety

Physiological

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

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

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

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4. Esteem Needs
These needs arise in view of a person’s desire to
have his ego satisfied. The satisfaction of these
needs gives a person the feeling that he is above
others. It gives a person self-respect, self-
confidence, independence, status, recognition
and reputation. Some people show preference
for luxury cars, expensive jewels and so on not
just because they can afford it but also due to the
fact that possession of such goods satisfies their
ego.
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5. Self-Actualisation needs
According to Maslow, a person, who reaches this
stage, wants to achieve all that one is capable of
achieving. In other words, a person wants to
perform to his potentials. A professor may, for
example, author books. A singer may compose
music and so on. The desire to excel need not
necessarily be in the filed one is attached to. It
can be in some other sphere also. For example,
an actor or actress may excel in politics.

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McGregor’s ‘X’ and ‘Y’ Theories
McGregor developed a philosophical view of
humankind with his Theory X and Theory Y in 1960.
He developed two theories on motivation that explain
the positive and negative qualities of individuals. He
gave the theories the names ‘X’ theory and ‘Y’
theory. His work is based upon Maslow’s Hierarchy
of needs, where he grouped the hierarchy into lower
– order needs (Theory X) and higher – order needs
(Theory Y).
He suggested that management could use either set
of needs to motivate employees, but better results
would be gained by the use of Theory Y, rather than
Theory X. These two views theorized how people
view human behaviour at work and organizational
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(THEORY X)
McGregor looked at the way in which employers
and employees traditionally viewed work – The
employer paid the money and gave instructions,
and the worker did the job without asking
questions
1. People, in general, dislike work. They shirk
their duties and are basically lazy.
2. Most people are unambitious. They do not
voluntarily accept any responsibility.
3. Most people lack creativity. They show no
preference for learning anything new.
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(THEORY X)
4. Satisfaction of physiological and safety needs
along is important for most people. Workers in
general are only bothered about their salary, job
security and such other extrinsic factors.
5. While at work, an employee needs to be
closely supervised and watched.

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

Skilled = Theory Y
Unskilled = Theory X

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

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

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Hygiene Factors
According to Herzberg, hygiene factors do not
actually motivate a person but their absence will
lead to dissatisfaction. These factors are also
known as ‘extrinsic factors’ or ‘maintenance
factors’. They help to maintain a reasonable level
of job satisfaction among the employees. These
are:
1. Company policies and Administration
2. Type of supervision
3. Inter-personal relationships
4. Working conditions
5. Salary
6. Job Security and
7. Status
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Motivational Factors
The motivation factors are also known as intrinsic
factors. According to Herzberg, the presence of
the intrinsic factors will motivate the employees
but their absence will not lead to dissatisfaction.
These are:
1. Work itself
2. Achievement
3. Recognition
4. Advancement
5. Growth and
6. Responsibility
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Hygiene Factors
The maintenance factors are known as hygiene
factors as they influence the mental framework of
the employees.

Motivational factors
Herzberg calls upon managers to use
motivational factors to induce the employees to
perform well.

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Vroom’s Expectancy Theory
Vroom’s developed a theory on motivation called
the ‘expectancy theory’. One of the most widely
accepted explanations of motivation is offered by
Victor Vroom in his Expectancy Theory. It is a
cognitive process theory of motivation. The
theory is founded on the basic notions that people
will be motivated to exert a high level of effort
when they believe there are relationships
between the effort they put forth, the performance
they achieve, and the outcomes/rewards they
receive.

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 Vroom’s Expectancy Theory

Perfor Rewar
Effort mance d

Will my effort Will rewards

Will performance
improve my satisfy my
lead to rewards?
performance? individual goals?
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 Vroom’s Expectancy Theory
He tried to explain motivation through the
following concepts:
1. Valence
2. Expectancy and
3. Instrumentality
According to Vroom’s theory, motivation is the
sum of the product of valence, expectancy and
instrumentality. That is,

Motivation= Valence x Expectancy x

Instrumentality
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 Vroom’s Expectancy Theory
8645981773

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 Vroom’s Expectancy Theory
1. Valence: Valence, according to Vroom,
means the value or strength one places on a
particular outcome or reward.

2. Expectancy: It relates efforts to

performance

3. Instrumentality: By instrumentality, Vroom

means, the belief that performance is related
to rewards.

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VALUES
A ‘value’ is commonly formed by a particular
belief that is related to the worth of an idea or
type of behaviour. Values are one of the sources
of individual differences. Values are general
beliefs tinged with moral flavour containing an
individual’s judgemental ideas about what is
good, right or desirable.
“Value is a concept of the desirable, an
internalised criterion or standard of evaluation a
person possesses. Such concepts and standards
are relatively few and determine or guide an
individual’s evaluations of many objects
encountered in everyday life.”
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ATTITUDES
The word ‘attitude’ can refer to a lasting group of
feelings, beliefs and behaviour tendencies
directed towards specific people, groups, ideas or
objects.

Attitudes are the expression of our values. They

are expressed through what we say or do, while
values make us agree to certain things and
discard others. How we act and what we say
brings out our attitudes.

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Conflicts
Conflict means disagreement between the
persons employed in an organisation. It may also
mean clash of interests. It is the result of
differences in the opinion of employees of an
organisation over any issue.
Conflict is any situation in which two or more
parties feel themselves in opposition. It is an
interpersonal process that arises from
disagreement over the goals or the methods to
accomplish those goals”

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QUALITY OF WORK LIFE
Meaning:
QWL refers to the extent to which the members
of an organization find the work environment
conducive
Quality of relationship between employees &
total work environment
A process by which an organization responds to
employee needs
The favorableness or unfavorableness of a total
job environment for people
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QUALITY OF WORK LIFE
Definition:
J. Richard and J. Loy – “Quality of Work Life is
the degree to which members of a work
organization are able to satisfy important
personnel needs through their experience in the
organization”

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OBJECTIVES OF QWL
To improve the standard of living of the
employees
To increase the productivity
To create a positive attitude in the minds of the
employees
To increase the effectiveness of the
organization(Profitability, goal accomplishment
etc…)

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CRITERIA FOR MEASURING QWL
1. Adequate and fair compensation
2. Safe and healthy working condition
3. Opportunities to utilize and develop human
capacities
4. Better career prospects
5. Social integration in the workforce
6. Constitutional protection
7. Proper balance between work and personal
life
8. Social relevance of the employee’s job
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MEASURES TO IMPROVE QWL
1. Pay and stability of Employment
2. Reduce/Eliminate Occupational Stress
3. Employee Health
4. Alternative Work Schedule
5. Participative Management
6. Recognition
7. Harmonious Supervisor-Worker Relationship
8. Grievance Procedure
9. Adequacy of Resources
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MEASURES TO IMPROVE QWL
10. Seniority and Merit in Promotions
11. Employment on Permanent basis

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UNIT – 5

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TRADE UNIONS
Meaning:
A Trade union is essentially an association of
employees of a particular trade or industry
formed to safeguard the interests of its
members against certain vindictive
management actions.
It enables the employees to act together as an
individual employee is in a weak bargaining
position to negotiate with the employer.

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TRADE UNIONS
Definition:
• Section 2(h) of the Trade Unions Act, 1926 has
defined a Trade Union as:
• “Any combination whether temporary or
permanent formed primarily for the purpose of
regulating the relations between workmen and
employers or between workmen, between
employers and employers or for imposing
restrictive conditions on the conduct of any
trade or business and include any federation of
two or more trade unions”
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OBJECTIVES OF TRADE UNIONS
Wages/Salaries
Working conditions
Discipline
Personnel policies
Welfare
Employer-employee relation
Negotiating machinery
Safeguarding organizational health and interest
of the industry
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FUNCTIONS OF TRADE UNIONS
Militant/Fighting Functions:
 To achieve higher wages and better working
conditions.
 To raise the status of workers as part of
industry.
 To protect labours against victimization and
unfairness.

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FUNCTIONS OF TRADE UNIONS
Fraternal Functions:
 To take up welfare measures for improving the
morale of workers
 To generate self-confidence among workers
 To encourage sincerity and discipline among
workers
 To provide opportunities for promotion and
growth
 To protect women workers against
discrimination
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REASONS FOR JOINING TRADE UNIONS
 Greater Bargaining power
 Minimize Discrimination
 Sense of Security
 Sense of Participation
 Sense of Belongingness
 Platform for self expression
 Betterment of relationships

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REGISTRATION OF TRADE UNIONS
 Minimum of 7 members required to register a Trade
Union
 Application is sent to the Registrar for registration in
the particular state
 Application contains names and other details of the
employees who wish to be members of the trade
union
 Application should also contain suggestions for the
Name of the trade union
 On registration, the union becomes a body corporate
and enjoys privileges such as raising of general and
political funds, immunity from trail for civil conspiracy
and allowance for minors to be members.
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COLLECTIVE BARGAINING
 Collective Bargaining is a process of negotiations
between employers and a group of employees aimed
at reaching agreements that regulate working
conditions.
 Typical issues covered in a labor contract are hours,
wages, benefits, working conditions and the rules of
the workplace.
 Once both sides have reached a contract that they
find agreeable, it is signed and kept in a place for a set
period of time, most commonly three years.

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COLLECTIVE BARGAINING
Definition:
According to Edwin. B. Flippo :
“Collective Bargaining is a process in which the
representatives of business organization meet and
attempt to negotiate a contract or agreement which
specifies the nature of the Employee-Employer union
relationship.”

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OBJECTIVES OF COLLECTIVE
BARGAINING
 To promote a democratic approach to solving work
related problems.
 To do away with the need for third party intervention
for finding solution.
 To provide for better employer-employee
relationships.
 To prevent unilateral action on the part of the
management.
 To ensure that the trade union is given due recognition
 To arrive at a settlement that is mutually beneficial

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TYPES OF BARGAINING
Walton and McKersie have identified the following 4
types of Bargaining strategies:
1. Distributive Bargaining
2. Integrative Bargaining
3. Attitudinal Restructuring
4. Intra-organizational Bargaining

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TYPES OF BARGAINING
1. Distributive Bargaining:
 Under it, the economic issues like wages, salaries
and bonus are discussed.
 In distributive bargaining, one party’s gain is another
party’s loss.
 This form of bargaining is sometimes referred to as
win-lose bargaining.

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TYPES OF BARGAINING
2. Integrative Bargaining
 It creates a cooperative negotiating relationship that
benefits both parties
 This involves negotiation of an issue on which both
the parties may gain, or at least neither party loses.
 The issues like better job evaluation process, better
training programs, better working conditions etc…
are discussed
 This is considered as the best bargaining strategy

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TYPES OF BARGAINING
3. Attitudinal Restructuring
 This involves shaping and reshaping some attitudes
like trust or distrust, friendliness or hostility between
labor and management.
 Examples of attitudinal structuring and shaping may
be from hostile to friendly, from non-cooperative to
cooperative, from untrust to trust, and so on.

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TYPES OF BARGAINING
4. Intra-organizational Bargaining
 It generally aims at resolving internal conflicts.
 This is a type of direction to achieve consensus with
the workers and management.
 Even with the union, there may be differences
between groups.

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WORKERS PARTICIPATION IN
MANAGEMENT
Workers Participation in management is a system of
communication and consultation, either formal or
informal, by which employees of an organisation are
kept informed about the affairs of the undertaking and
through which they express their opinion and
contribution to management decisions.
It is industrial democracy in action based on the
principles of equity, equality and voluntarism.
It is distribution of social power in industry so that it
tends to be shared among all who are engaged in the
work rather than concentrated in the hands in minority.

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IMPORTANCE OF WORKERS
PARTICIPATION IN MANAGEMENT
1. Mutual Understanding
2. Higher Productivity
3. Industrial Harmony
4. Industrial Democracy
5. Less Resistance to change
6. Creativity and Innovation

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