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Recruitment, Selection, Training &
Development
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Masters of Business Administration
International Business
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Semester IV

Amity University

Syllabus

Recruitment, Selection, Training & Development

Course Objective:
The main Purpose of this paper is to familiarize the participants understanding the applicability
and techniques of Recruitment, Selection, Training and Development in any organisation on
global context. A Broader and wider perspective is undertaken in relation to the management of
employment relationship. The module is designed to understand the role of HR Planning,
development and its effective link to policies and strategic practices in organisation for effective
people management right from forecasting the requirement of employees to the effective
development.
Learning Outcomes:
On the successful completion of this module the student will be able to:
Identify the key issues of Selection, training and development
Understand the factors effecting recruitment due to mergers, acquisitions & globalisation
Appreciate the various tools of training and structured training programmes in organisation
Forecast demand & supply of human resources, training and development
Course Contents:
Module I: Introduction to Recruitment
Introduction and Importance of Recruitment, Recruitment strategies in diverse work force,
Labour Market information & Sources, Forecasting supply and demand for labour, Internal &
External Applicants, Summary, Review Questions & Case Studies
Module II: Employee Selection
Selection An HR Responsibility, Evaluating Abilities & Selection Process, Screening & Hiring
Alternatives
International HRM, Expatriate Rights, Temporary and Leasing Help, Summary, Review
Questions & Case Studies
Module III: Trends effecting HRM & Requirement of Training
Impact of technology, Diversity initiatives at Intel, Cisco Systems, Industry and occupational
trends, Strategies to accommodate change.
Module IV: Managerial Effectiveness & Training

Tools to improve managerial effectiveness Kaizen, Quality Circles - Time Management,

Training Process and Methodology Need and objectives, Tools and Aids for Training,
Learning Principles, Climate for Change.
Module V: Retaining Human Resources
Global Dilemma, Managing Transnational Teams, Motivation Rewarding and Rewarded Jobs,
Team / Incentive based systems, Design and redesign of working systems

Index
Chapter I: Introduction to Recruitment
Chapter II: Employee Selection
Chapter III: Trends effecting HRM & Requirement of Training
Chapter IV: Managerial Effectiveness & Training
Chapter V: Retaining Human Resources

CHAPTER I: INTRODUCTION TO RECRUITMENT

1.0 INTRODUCTION
The most valuable asset of any large-scale organization is the high-calibre employees. Finding
right people and putting them at right job is the most important challenge for any organization.
At the stage of Human Resource Planning, as we have already discussed in the previous unit, the
human resource requirement is forecasted. Keeping in mind the forecast the function of attracting
the best available talent is carried out by an organization. It involves functions like; recruitment,
selection, induction. All these are discussed in this unit.
1.1 SOME DEFINITIONS
Recruitment
Recruitment is the process of identifying the prospective employees, stimulating and
encouraging them to apply for a particular job or jobs in an organization. It is a positive action as
it involves inviting people to apply. The purpose is to have an inventory of eligible persons from
amongst whom proper selection of the most suitable person can be made.
Selection
Selection is the process of examining the applicants with regard to their suitability for the given
job or jobs, and choosing the best from the suitable candidates and rejecting the others. Thus,
you will notice that this process is negative in nature in the sense that rejection of candidates is
involved.
Placement
Placement is the determination of the job for which a selected candidate is best suited and
assigning that job to him. The ideal situation is the right man for the right job. A proper
placement of a worker reduces employee turnover, absenteeism, accident rates, etc., and
improves morale, motivation, work, etc.
Induction
Induction is introducing an employee to the job and to the organization. The primary purpose of
induction is to sell the company to the new employee so that he may feel proud of his
association with the company. This is called orientation or indoctrination.
Their Inter-relationship
The above are the four steps taken in the order given before a person starts his training for the
job to which he is assigned. First he is recruited, that is, his attention is drawn to the existence of
a possible opening for him and he is invited to apply for it. In the next stage of selection all the
applicants are screened to find their suitability for the job and the best one is selected. The third
step of placement follows selection and a particular job is assigned to the selected person. After
that he is introduced to his job and to his organization so that he may understand the environment
in which he has to work. Having defined these four processes, we shall describe them in some
detail in the following paragraphs.
1.2 THE PROCESS OF RECRUITMENT
Preparation for Recruitment

Before you think of inviting people to apply for a job you have to decide what types of persons
are to be invited and what their characteristics should be. This calls for fixing the job
specifications which may also be called man specifications. Job specifications are based on job
description which is dependent upon the nature and requirements of a job. Thus, job specification
will be different for each job. We shall explain below the various elements of job specification.
Physical Specifications: For certain jobs some special physical features may be required. For
example, for assembly of a TV set or some other electronic equipment good vision is required,
for a typing job you need finger dexterity, for a heavy job you need a strong, heavy and thick-set
body. The particular physical abilities and skills necessary for a given job have to be specified.
These may refer to height, weight, vision, finger dexterity, voice, poise, hand and foot
coordination, motor coordination, colour discrimination, age-range, etc.
Mental Specifications: These include intelligence, memory, judgment, ability plan, ability to
estimate, to read, to write, to think and concentrate, scientific faculties, arithmetical abilities, etc.
Different jobs require different degrees of such abilities and the more important ones should be
specified.
Emotional and Social Specifications: These include characteristics which will affect his
working with others, like personal appearance, manners, emotional stability, aggressiveness, or
submissiveness, extroversion or introversion, leadership, cooperativeness, initiative and drive,
skill in dealing with others, socia1 adaptability, etc.
Behavioral Specifications: Certain management personnel at higher levels of management are
expected to behave in a particular manner. These are not formally listed but have to be kept in
mind during the process of recruitment, selection and placement.
1.3 Sources of Manpower
There are two categories of sources of supply of manpower Internal and External.
Internal Sources: These include personnel already on the pay-roll of the organization as also
those who were once on the pay-roll of the company but who plan to return, or whom the
company, would like to rehire. These include those who quit voluntarily or those on production
lay-offs.
External Sources: These sources lie outside the organization, like the new entrants to the labour
force without experience. These include college students, the unemployed with a wider range of
skills and abilities, the retired experienced persons, and others not in the labour force, like
married women. A policy of preferring people from within is advantageous as it improves the
morale of the employees and promotes loyalty among them towards the organization. This also
helps employers as they are in a better position to evaluate those already with them and as these
people require no induction. The policy of preferring internal candidates, however, suffers from
some disadvantages. It may lead to inbreeding, discouraging new blood from entering an
organization. If promotion is based on seniority, the real capable hands may be left out.
Likewise, there are good and bad points about external sources. These sources provide a wide
market and the best selection considering skill, training and education. It also helps to bring new
ideas into the organization. Moreover, this source never dries up. In respect of people selected
under this system, however, one has to take chances with the selected persons regarding their
loyalty and desire to continue. The organization has to make larger investments in their training
and induction.

You will realize now that dependence on just one of the sources is not in the interest of an
organization. It must depend on both in a ratio to be fixed considering various factors.
Some of these factors are described below.
1) Effect of the policy on the attitude and actions of all employees: Employees, no doubt, feel
more secure and identify their own long-term interest with that of the organization when they can
anticipate first charge at job opportunities. The general application of the promotion from
within policy may encourage mediocre performance. The point to be considered here by the
organization is, how important is the loyalty of the employees to it, balancing the risk of
mediocre performance.
2) The level of specialization required of employees: The principal source in many
organizations may be the ranks of the present employees who have received specialized training.
3) The degree of emphasis on participation by employees at all levels: New employees from
outside, with no experience in the firm, may not know enough about its service or product or
processes to participate effectively, for some time at least.
4) The need for and availability of originality and initiative within the organization: If the
organization feels that it is training its people for these qualities it may prefer its own people; if
not, new people with different ideas may be taken from outside.
5) Acceptance of seniority principle: The policy or promotion from within will succeed only if
management and employees accept the seniority principle with or without suitable modifications
for promotion. If it is not accepted, selection may better be done on an open basis.
1.4 LABOR SUPPLY / DEMAND ANALYSES METHODOLOGY
Workforce Strategy

Driving Toward Optimized Labor Supply/Demand Balance

Supply/Demand Analysis and GAP Analysis Process

1.5 METHODS OF RECRUITMENT

All methods of recruitment can be put into three categories: (a) Direct Methods, (b) Indirect
Methods, and (c) Third-Party Methods.
a) Direct Methods include sending recruiters to educational and professional institutions,
employee contacts with public, manned exhibits and waiting lists.
Schools and Colleges: For clerical, labour and apprenticeship help, high schools can be
extensively used. For technical, managerial and professional jobs, colleges, university
departments and specialized institutes, like the IITs and IIMs, are used. These institutions usually
have a placement officer a teacher-in-charge of placement, who normally provides help in
attracting employers arranging interviews, furnishing space and other facilities and providing
student resumes. The companies maintain a list of such institutions, keep in touch with them,
send their brochures indicating job openings, future prospects, etc. On the basis of these students
who want to be considered for the given job (s) are referred to the company recruiter.
Employees Contact with the Public: The employees of the organization are told about the
existence of particular vacancies and they bring this to the notice of their relatives, friends and
acquaintances.
Manned Exhibits: The organizations send recruiters to conventions and seminars, setting up
exhibition at fairs, and using mobile offices to go to the desired centres.
Waiting Lists: Many firms lean heavily on their own application files. These records list
individuals who have indicated their interest in jobs, either after visiting the organizations
employment office or making enquiries by mail or phone. Such records prove a very useful
source if they are kept up-to-date.
b) Indirect Methods cover advertising in newspapers, on the radio, in. trade and professional
journals, technical journals and brochures. When qualified and experienced persons are not
available through other sources, advertising in newspapers and professional and technical
journals is made. Whereas all types of advertisements can be made in newspapers and
magazines, only particular types of posts should be advertised in the professional and technical
journals; for example, only engineering jobs should be inserted in journals of engineering.
A well thought-out and planned advertisement for an appointment reduces the possibility of
unqualified people applying. If the advertisement is clear and to the point, candidates can assess
their abilities and suitability for the position and only those who possess the requisite
qualifications will apply.
c) Third-Party Methods: Various agencies are used for recruitment under these methods. These
include commercial and private employment agencies, state agencies, placement offices of
schools, colleges and professional associations, recruiting firms, management consulting firms,
indoctrination seminars for college professors, friends and relatives.
Private Employment Agencies specialize in specific occupation like general office help,
salesmen, technical workers, accountants, computer staff, engineers and executives, etc. These
agencies bring together the employers and suitable persons available for a job. Because of their
specialization, they can interpret the needs of their clients and seek out particular types of
persons.

State or Public Employment Agencies, also known as Employment or Labour Exchanges, are
the main agencies for public employment. They also provide a wide range of services, like
counseling, assistance in getting jobs, information about the labour market, labour and wage
rates, etc.
Executive Search Agencies maintain complete information records about employed executives
and recommend persons of high caliber for managerial, marketing and production engineers
posts. These agencies are looked upon as head hunters, raiders, and pirates.
Indoctrination Seminars for College Professors: These are arranged to discuss the problems of
companies to which professors are invited. Visits and banquets are arranged so that professors
may be favorably impressed and later speak well of the company and help in getting required
personnel.
Friends and Relatives of Present Employees constitute a good source from which employees
may be drawn. This, however, is likely to encourage nepotism, i.e. persons of ones own
community or caste may only be employed. This may create problems for the organization.
Trade Unions are often called on by the employers to supply whatever additional employees
may be needed. Unions may be asked for recommendations largely as a matter of courtesy and
an evidence of good will and cooperation.
Professional Societies may provide leads and clues in providing promising candidates for
engineering, technical and management positions. Some of these maintain mail order placement
services.
Temporary Help Agencies employ their own labour force, both full-time and part-time and make
them available to their client organizations for temporary needs.
Casual Labour Source is one which presents itself daily at the factory gate or employment
office. Most industrial units rely to some extent on this source. This source, you will realise, is
the most uncertain of all sources.
Deputation: Persons possessing certain abilities useful to another organization are sometimes
deputed to it for a specified duration. Ready expertise is available but, as you can guess, such
employees do not easily become part of the organization.
1.6 Recruitment Cost: Worth Calculating?
The below figure depicts how companys calculate costs incurred while undergoing the
recruitment process. The basic heads that are commonly included in the calculation are
mentioned here, but the important question that arises is, is it required to calculate the
recruitment cost and does it help?

Recruitment and Selection Cost Analysis

No. of Ad
Station
Inductio
Cost
Positi No. of
Job
Oth Interiv
Traini Total
positi . Consult
ary Conveya Telephone/Inte
n&
per
on Positi
porta
er
ew
ng Expens
on co ant Cost
expense nce Cost rnet Expenses
Orientati
Employ
Title on
ls
Cost Cost
cost
es
filled st
s
on cost
ee

Teste
rs

2 0 70,000

25

500

70525

0 70,525

35262.
5

CASE STUDY
BATA INDIA'S HR PROBLEMS
Case code- HROB001
Published-2003
INTRODUCTION
For right or wrong reasons, Bata India Limited (Bata) always made the headlines in the financial
dailies and business magazines during the late 1990s. The company was headed by the 60 year
old managing director William Keith Weston (Weston). He was popularly known as a
'turnaround specialist' and had successfully turned around many sick companies within the Bata
Shoe Organization (BSO) group.
By the end of financial year 1999, Bata managed to report rising profits for four consecutive
years after incurring its first ever loss of Rs 420 million in 1995. However, by the third quarter
ended September 30, 2000, Weston was a worried man. Bata was once again on the downward
path. The company's nine months net profits of Rs 105.5 million in 2000 was substantially lower
than the Rs 209.8 million recorded in 1999. Its staff costs of Rs 1.29 million (23% of net sales)
was also higher as compared to Rs 1.18 million incurred in the previous year. In September
2000, Bata was heading towards a major labour dispute as Bata Mazdoor Union (BMU) had
requested West Bengal government to intervene in what it considered to be a major downsizing
exercise.
BACKGROUND NOTE
With net revenues of Rs 7.27 billion and net profit of Rs 304.6 million for the financial year
ending December 31, 1999, Bata was India's largest manufacturer and marketer of footwear
products. As on February 08, 2001, the company had a market valuation of Rs 3.7 billion. For
years, Bata's reasonably priced, sturdy footwear had made it one of India's best known brands.
Bata sold over 60 million pairs per annum in India and also exported its products in overseas
markets including the US, the UK, Europe and Middle East countries. The company was an
important operation for its Toronto, Canada based parent, the BSO group run by Thomas Bata,
which
owned
51%
equity
stake.
The company provided employment to over 15,000 people in its manufacturing and sales
operations throughout India. Headquartered in Calcutta, the company manufactured over 33
million pairs per year in its five plants located in Batanagar (West Bengal), Faridabad (Haryana),
Bangalore (Karnataka), Patna (Bihar) and Hosur (Tamil Nadu). The company had a distribution
network of over 1,500 retail stores and 27 wholesale depots. It outsourced over 23 million pairs
per year from various small-scale manufacturers.
Throughout its history, Bata was plagued by perennial labor problems with frequent strikes and
lockouts at its manufacturing facilities. The company incurred huge employee expenses (22% of
net sales in 1999). Competitors like Liberty Shoes were far more cost-effective with salaries of
its
5,000
strong
workforce
comprising
just
5%
of
its
turnover.

When the company was in the red in 1995 for the first time, BSO restructured the entire board
and sent in a team headed by Weston. Soon after he stepped in several changes were made in the
management. Indians who held key positions in top management, were replaced with expatriate
Weston taking over as managing director. Mike Middleton was appointed as deputy managing
director and R. Senonner headed the marketing division. They made several key changes,
including a complete overhaul of the company's operations and key departments. Within two
months of Weston taking over, Bata decided to sell its headquarter building in Calcutta for Rs
195 million, in a bid to stem losses. The company shifted wholesale, planning & distribution, and
the commercial department to Batanagar, despite opposition from the trade unions. Robin
Majumdar, president, co-ordination committee, Bata Trade Union, criticized the move, saying:
"Profits
may
return,
but
honor
is
difficult
to
regain."
The management team implemented a massive revamping exercise in which more than 250
managers and their juniors were asked to quit. Bata decided to stop further recruitment, and
allowed only the redundant staff to fill the gaps created by superannuation and retirements. The
management offered its staff an employment policy that was linked to sales-growth performance.
ASSAULT CASE
More than half of Bata's production came from the Batanagar factory in West Bengal, a state
notorious for its militant trade unions, who derived their strength from the dominant political
parties, especially the left parties. Notwithstanding the giant conglomerate's grip on the shoe
market in India, Bata's equally large reputation for corruption within, created the perception that
Weston would have a difficult time. When the new management team weeded out irregularities
and turned the company around within a couple of years, tackling the politicized trade unions
proved to be the hardest of all tasks.
On July 21, 1998, Weston was severely assaulted by four workers at the company's factory at
Batanagar, while he was attending a business meet. The incident occurred after a member of
BMU, Arup Dutta, met Weston to discuss the issue of the suspended employees. Dutta
reportedly got into a verbal duel with Weston, upon which the other workers began to shout
slogans. When Weston tried to leave the room the workers turned violent and assaulted him. This
was the second attack on an officer after Weston took charge of the company, the first one being
the
assault
on
the
chief
welfare
officer
in
1996.
Soon after the incident, the management dismissed the three employees who were involved in
the violence. The employees involved accepted their dismissal letters but subsequently provoked
other workers to go in for a strike to protest the management's move. Workers at Batanagar went
on a strike for two days following the incident. Commenting on the strike, Majumdar said: "The
issue of Bata was much wider than that of the dismissal of three employees on grounds of
indiscipline. Stoppage of recruitment and continuous farming out of jobs had been causing
widespread
resentment
among
employees
for
a
long
time."
Following the incident, BSO decided to reconsider its investment plans at Batanagar. Senior
vice-president and member of the executive committee, MJZ Mowla, said[1]: "We had chalked
out a significant investment programme at Batanagar this year which was more than what was

invested

last

year.

However,

that

will

all

be

postponed."

The incident had opened a can of worms, said the company insiders. The three men who were
charge-sheeted, were members of the 41-member committee of BMU, which had strong political
connections with the ruling Communist Party of India (Marxist). The trio it was alleged, had in
the past a good rapport with the senior managers, who were no longer with the organization.
These managers had reportedly farmed out a large chunk of the contract operations to this trio.
Company insiders said the recent violence was more a political issue rather than an industrial
relations problem, since the workers had had very little to do with it. Seeing the seriousness of
the issue and the party's involvement, the union, the state government tried to solve the problem
by setting up a tripartite meeting among company officials, the labor directorate and the union
representatives. The workers feared a closedown as the inquiry proceeded.
INDUSTRIAL RELATIONS
For Bata, labor had always posed major problems. Strikes seemed to be a perennial problem.
Much before the assault case, Bata's chronically restive factory at Batanagar had always plagued
by labor strife. In 1992, the factory was closed for four and a half months. In 1995, Bata entered
into a 3-year bipartite agreement with the workers, represented by the then 10,000 strong BMU,
which also had the West Bengal government as a signatory.
On July 21, 1998, Weston was severely assaulted by four workers at the company's factory at
Batanagar, while he was attending a business meet. The incident occurred after a member of
BMU, Arup Dutta, met Weston to discuss the issue of the suspended employees. Dutta
reportedly got into a verbal duel with Weston, upon which the other workers began to shout
slogans. When Weston tried to leave the room the workers turned violent and assaulted him. This
was the second attack on an officer after Weston took charge of the company, the first one being
the
assault
on
the
chief
welfare
officer
in
1996.
In February 1999, a lockout was declared in Bata's Faridabad Unit. Middleton commented that
the closure of the unit would not have much impact on the company's revenues as it was catering
to lower-end products such as canvas and Hawaii chappals. The lock out lasted for eight months.
In October 1999, the unit resumed production when Bata signed a three-year wage agreement.
On March 8, 2000, a lockout was declared at Bata's Peenya factory in Bangalore, following a
strike by its employee union. The new leadership of the union had refused to abide by the wage
agreement, which was to expire in August 2001. Following the failure of its negotiations with the
union, the management decided to go for a lock out. Bata management was of the view that
though it would have to bear the cost of maintaining an idle plant (Rs. 3 million), the effect of
the closures on sales and production would be minimal as the footwear manufactured in the
factory could be shifted to the company's other factories and associate manufacturers. The
factory had 300 workers on its rolls and manufactured canvas and PVC footwear.
In July 2000, Bata lifted the lockout at the Peenya factory. However, some of the workers
opposed the company's move to get an undertaking from the factory employees to resume work.
The employees demanded revocation of suspension against 20 of their fellow employees. They
also demanded that conditions such as maintaining normal production schedule, conforming to
standing orders and the settlement in force should not be insisted upon.

In September 2000, Bata was again headed for a labour dispute when the BMU asked the West
Bengal government to intervene in what it perceived to be a downsizing exercise being
undertaken by the management. BMU justified this move by alleging that the management has
increased outsourcing of products and also due to perceived declining importance of the
Batanagar unit. The union said that Bata has started outsourcing the Power range of fully
manufactured shoes from China, compared to the earlier outsourcing of only assembly and
sewing line job. The company's production of Hawai chappals at the Batanagar unit too had
come down by 58% from the weekly capacity of 0.144 million pairs. These steps had resulted in
lower income for the workers forcing them to approach the government for saving their interests.

What is meant by RPO?

Recruitment Procedure Outsourcing.

Recruitment Process Output.
Recruitment Process Outsourcing.
Retirement Process Outsourcing.

Which of the following refer to the characteristics of a 'loose'

labour market? Select all that apply.
Organisational power to keep salaries constant.
Low competition for work.
Organisational access to appropriate skills.
Longer job search times for applicants.
An over-supply of labour relative to the demand.
Selective hiring.

Which of the following refer to a 'tight' labour market? Select all

that apply.
More creative recruitment.
Firms offer additional incentives and benefits.
Firms have difficulty finding staff.
High turnover of staff.
Firms find it easy finding staff.

What is meant by a skills deficit? Select all that apply.

Where supply of skills is not keeping pace with the jobs created.
Where skills supplied do not match those demanded.
Where skills supplied match those demanded.
Where supply of skills is keeping pace with the jobs created.

Which of the following are current trends in the UK employment

market? Select all that apply.
Immigration.

Ageing workforce.
Low graduation rate.
High graduation rate.
More women seeking employment.

Which of the following are characteristics of a McJob? Select all that

apply.
High skill.
High security.
Low security.
Poorly paid.
Low skill.

In a recent survey, what was the top attraction for employees to

jobs and organisations?
Workplace culture.
Location of work.

Flexible working hours.

Holiday entitlement.

How long have anti-discrimination laws relating to race and sex

been in place in the UK?
Over 40 years.
Over 30 years.
Over 10 years.
Over 20 years.

How long have anti-discrimination laws relating to sexual

orientation, religion and age been in place in the UK?
Less than 20 years.
Less than 25 years.
Less than 10 years.
Less than 15 years.

Which of the following statements are true? Select all that apply.
Equal opportunities and practices are more common in small workplaces.
Equal opportunities and practices are more common in private sector
organisations.
Equal opportunities and practices are more common in public sector
organisations.
Equal opportunities and practices are more common in large workplaces.
Equal opportunities and practices are more common in workplaces with HR
specialist.
Equal opportunities and practices are more common in workplaces without HR
specialists.

Which of the following statements about referrals are true? Select

all that apply.
Employees who are referred may have unrealistic expectations about their job.
Candidates may have a better understanding of the business.
Employees will generally only refer high quality candidates as their reputation is
at stake.
Candidates have already been vetted and are usually a better fit.

What is meant by a 'golden hello'?

Cash lump sum promised to employees who stay on in the organisation.
Cash lump sums offered to new recruits.
Cash lump sums offered to people leaving the organisation.
Cash lump sum promised to people who refer a friend.

Which of the following 'organisational' factors may affect

recruitment? Select all that apply.
Organisation sector.
Social change.
Location.
HR strategy.
Size.

What are the external environmental

recruitment? Select all that apply.
Social change.

factors

affecting

Economy.
Labour market.
Legislation.
HR strategy.

According to Bates et al. (2008), what is the top attribute

employers are looking for?
Number of years of work experience.
Motivation/attitude.
Generic skills.
Specific technical skills.
Qualification.

CHAPTER II: EMPLOYEE SELECTION

2.1 Introduction
Selection, as you have seen earlier, is the process of securing relevant information about an
applicant to evaluate his qualifications, experience and other qualities with a view to matching
these with the requirements of a job. It is essentially a process of picking out the man or men best
suited for the organizations requirements.
2.2 The Selection Process
You would recall that selection process involves rejection of unsuitable or less suitable
applicants. This may be done at any of the successive hurdles which an applicant must cross.
These hurdles act as screens designed to eliminate an unqualified applicant at any point in the
process. This technique is known as the successive hurdles technique.
Yoder calls these hurdles go, no-go gauges. Those who qualify a hurdle go to the next one;
those who do not qualify, are dropped out. Not all selection processes,however, include these
hurdles. The complexity of the process usually increases with the level and responsibility of the
position to be filled. Moreover, these hurdles need not necessarily be placed in the same order.
Their arrangement may differ from organisation to organization. The process is mentioned
below:
1. Prelimmary Interview
2. Application Form
3. Second Interview
4. Testing
5. Work History
6. References
7. Physical
8. Examination
9. Recommendation
10. Interview with Supervisor
11. Employment
12. Application
13. Rejections
Initial Screening or Preliminary Interview
This is a sorting process in which prospective applicants are given the necessary information
about the nature of the job and also, necessary information is elicited from the candidates about
their education, experience, skill, salary expected, etc. If the candidate is found to be suitable, he
is selected for further process and, if not, he is eliminated. This is a crude screening and can be
done across the counter in the organizations employment offices. This is done by a junior

executive in the personnel department. Due care should be taken so that suitable candidates are
not turned down in a hurry. Since this provides personal contact for an individual with the
company, the interviewer should be courteous, kind, receptive and informal.
When a candidate is found suitable, an application form is given to him to fill in and submit.
Application Scrutiny
You might have seen that sometimes applications are asked on a plain sheet. This is done where
no application forms are designed. The applicant is asked to give details about age, marital
status, educational qualifications, work experience and references. Different types of application
forms may be used by the same organization for different types of employees, e.g., one for
managers, the other for supervisors and a third for other employees. Some forms are simple,
general and easily answerable, while others may require elaborate, complex and detailed
information. Reference to nationality, race, caste, religion and place of birth has been regarded as
evidence of discriminatory attitudes and should be avoided. An application form should be
designed to serve as a highly effective preliminary screening device, particularly, when
applications arc received in direct response to an advertisement and without any preliminary
interview.
The application can be used in two ways: (i) to find out on the basis of information contained
therein as to the chances of success of the candidate in the job for which he is applying, and (ii)
to provide a starting point for the interview. It is often possible to reject candidates on the basis
of scrutiny of the applications as they are found to be lacking in educational standards,
experience or some other relevant eligibility and traits.
Selection Tests
A test is a sample of an aspect of an individuals behavior, performance or attitude. It can also be
a systematic procedure for comparing the behavior of two or more persons.
Purpose of Tests: The basic assumption underlying the use of tests in personnel selection is that
individuals are different in their job-related abilities and skills and that these skills can be
adequately and accurately measured. Tests seek to eliminate the possibility of prejudice on the
part of the interviewer or supervisor. Potential ability only will govern selection decisions. The
other major advantage is that the tests may uncover qualifications and talents that would not be
detected by interviews or by listing of education and job expenence.
Types of Tests: The various tests used in selection can be put in to four categories:
(a) Achievement or Intelligence Tests, (b) Aptitude or Potential Ability Tests, (c) Personality
Tests, and (d) Interest Tests.
These tests and what they measure are described below.
a) Achievement or Intelligence Tests
These are also called proficiency tests. These measure the skill or knowledge which is acquired
as a result of a training programme and on the job experience. These measure what the applicant
can do. These are of two types:

Test for Measuring job Knowledge: These are known as Trade Tests. These are
administered to determine knowledge of typing, shorthand and in operating calculators,
adding machines, dictating and transcribing machines or simple mechanical equipment.
These are primarily oral tests consisting of a series of questions which are believed to be
satisfactorily answered only by those who know and thoroughly understand the trade or
occupation. Oral tests may be supplemented by written, picture or performance types.
Work Sample Tests: These measure the proficiency with which equipment can be
handled by the candidate. This is done by giving him a piece of work to judge how
efficiently he does it. For example, a typing test would provide the material to be typed
and note the time taken and mistakes committed.
b) Aptitude or Potential Ability Tests
These tests measure the latent ability of a candidate to learn a new job or skill. Through these
tests you can detect peculiarity or defects in a persons sensory or intellectual capacity. These
focus attention on particular types of talent such as learning, reasoning and mechanical or
musical aptitude..Instruments used are variously described as tests of intelligence, mental
ability, mental alertness, or simply as personnel tests. These are of three types:
i) Mental Tests: These measure the overall intellectual ability or the intelligence quotient
(I.Q.) of a person and enable us to know whether he has the mental capacity to deal with
new problems. These determine an employees fluency in language, memory, interaction,
reasoning, speed of perception, and spatial visualisation.
ii) Mechanical Aptitude Tests: These measure the capacity of a person to learn a
particular type of mechanical work. These are useful when apprentices, machinists,
mechanics, maintenance workers, and mechanical technicians are to be selected.
iii) Psychomotor or Skill Tests: These measure a persons ability to do a specific job.
These are administered to determine mental dexterity or motor ability and similar
attributes involving muscular movement, control and coordination. These are primarily
used in the selection of workers who have to perform semi-skilled and repetitive jobs,
like assembly work, packing, testing, inspection and so on.
c) Personality Tests
These discover clues to an individuals value system, his emotional reactions, maturity and his
characteristic mood. The tests help in assessing a persons motivation, his ability to adjust
himself to the stresses of everyday life and his capacity for interpersonal relations and for
projecting an impressive image of himself. They are expressed in terms of the relative
significance of such traits of a person as self-confidence, ambition, tact, emotional control,
optimism, decisiveness, sociability, conformity, objectivity, patience, fear, distrust, initiative,
judgment, dominance, impulsiveness, sympathy, integrity, and stability. These tests are given to
predict potential performance and success for supervisory or managerial jobs.
The personality tests are basically of three types:
i) Objective Tests: These measure neurotic tendencies, self-sufficiency, dominance,
submission and self-confidence.

ii) Projective Tests: In these tests, a candidate is asked to project his own interpretation
onto certain standard stimuli. The way in which he responds to these stimuli depends on
his own values, motives and personality.
iii) Situation Tests: These measure an applicants reaction when he is placed in a peculiar
situation, his ability to undergo stress and his demonstration of ingenuity under pressure.
These tests usually relate to a leaderless group situation, in which some problems are
posed to a group and its members are asked to reach some conclusions without the help
of a leader.
d) Interest Tests
These tests are designed to discover a persons areas of interest and to identify the kind of work
that will satisfy him. The interest tests are used for vocational guidance, and are assessed in the
form of answers to a well-prepared questionnaire.
Limitations of Selection Tests
From the basic description of tests described above, one should not conclude that a hundred per
cent prediction of an individuals on-the job success can be made through these tests. These tests,
at best, reveal that candidates who have scored above the predetermined cut-off points are likely
to be more successful than those who have scored below the cut-off point. Tests are useful when
the number of applicants is large. Moreover, tests will serve no useful purpose if they are not
properly constructed or selected or administered.
Precautions in using Selection Tests
Test results can help in selecting the best candidates if the following precautions are taken:
i) Norms should be developed as a source of reference on all tests used in selection and on a
representative sample of people on a given job in the same organization. This is necessary even
though standard tests are available now under each of the above categories. Norms developed
elsewhere should not be blindly used because companies differ in their requirements, culture,
organization structure and philosophy.
ii) Some Warm up should be provided to candidates either by giving samples of test, and/or
answering queries before the test begins.
iii) Tests should first be validated for a given organization and then administered for selection of
personnel to the organization.
iv) Each test used should be assigned a weightage in the selection.
v) Test scoring, administration and interpretation should be done by persons I having technical
competence and training in testing.
Interview
We shall now discuss the post application form interview and not the preliminary interview.
Personal interview is the most universally used tool in any selection process.
Meaning and Purpose
An interview is a conversation with a purpose between one person on one side and another
person or persons on the other. An employment interview should serve three purposes, viz., (i)
obtaining information, (ii) giving information, and (iii) motivation. It should provide an appraisal

of personality by obtaining relevant information about the prospective employees background,

training work history, education and interests. The candidate should be given information about
the company, the specific job and the personnel policies. It should also help in establishing a
friendly relationship between the employer and the applicant and motivate the satisfactory
applicant to want to work for the company or organization. In practice, however, it may turn out
to be a one-sided affair. It helps only in obtaining information about the candidate. The other two
purposes are generally not served.
Types of Interview
Informal Interview: This is may take place anywhere. The employer or a manager in the
personnel department, may ask a few questions, like name, place of birth, previous
experience, etc. It is not planned and is used widely when the labour market is tight and
you need workers very badly. A friend or a relative of the employer may take a candidate
to the house of the employer or manager where this type of interview may be conducted.
Formal Interview: This held in a more formal atmosphere in the employment office by
the employment officer with the help of well-structured questions. The time and place of
the interview are stipulated by the employment office.
Planned Interview: This is a formal interview carefully planned. The interviewer has a
plan of action worked out in relation to time to be devoted to each candidate, type of
information to be sought, information to be given, the modality of interview and so on.
He may use the plan with some amount of flexibility.
Patterned Interview: This is also a planned interview but planned to a higher degree of
accuracy, precision and exactitude. A list of questions and areas are carefully prepared.
The interviewer goes down the list of questions, asking them one after another.
Non-directive Interview: This is designed to let the interviewee speak his mind freely.
The interviewer is a careful and patient listener, prodding whenever the candidate is
silent. The idea is to give the candidate complete freedom to sell himself without
encumbrances of the interviewers questions.
Depth Interview: This is designed to intensively examine the candidates background and
thinking and to go into considerable detail on a particular subject to special interest to the
candidate. The theory behind it is that if the candidate is found good in his area of special
interest, the chances are high that if given a job he would take
serious interest in it.
Stress Interview: This is designed to test the candidate and his conduct and behavior by
putting him under conditions of stress and strain. This is very useful to test the behavior
of individuals under disagreeable and trying situations.
Group Interview: This is designed to see how the candidates react to and against each
other. All the candidates may be brought together in the office and they may be
interviewed. The candidates may, alternatively, be given a topic for discussion and be
observed as to who will lead the discussion, how they will participate in the discussion,
how each will make his presentation and how they will react to each others views and
presentation.

Panel Interview: This is done by members of the interview board or a selection

committee. This is done usually for supervisory and managerial positions.
Outsourcing
Collective judgment and wisdom of members of the panel. The candidate may be asked to meet
the panel individually for a fairly lengthy interview.
Interview Rating: Important aspects of personality can be categorized under the following
seven main headings:
Physical Make-up: Health, physique, age, appearance, bearing, speech.
Attainments: Education, occupational training and experience.
Intelligence: Basic and effective.
Special Aptitudes: Written and oral fluency of expression, numeracy, organizational
ability, administrative skill.
Interests: Intellectual, practical, physically active, social, artistic
Disposition: Self-reliance, nature, motivation, acceptability.
Circumstances: Domestic, social background and experience, future prospects.
This is called The Seven Point Plan. The importance of each of these points will vary from
organization to organization and from job to job. Hence, these should be assigned weightage
according to their degree of importance for the job.
On the basis of information gathered through an interview, each candidate should be rated in
respect of each point given above as: (i) outstanding, (ii) good, (iii) above average, (iv) below
average or (v) unsatisfactory. Marks should be allotted to each of these, and the score for each
point is arrived at by multiplying it by weights and the total of all these will determine the final
position of a candidate at the interview.
Limitations of Interviews
Interviews have their own limitations in matters of selection. Some of these are mentioned
below:
Subjective judgement of the interviewer may be based on his prejudices, likes, dislikes,
biases, etc.
One prominent characteristic of a candidate may be allowed to dominate appraisal of the
entire personality.
The interviewers experience may have created a close association between some
particular trait and a distinctive type of personality.
Some managers believe that they are good at character analysis based on some pseudoscientific methods and are guided by their own abilities at it.

Qualities of Good interviewers

A good interviewer should have the following qualities:
Knowledge of the job or other things with which interviews are concerned.
Emotional maturity and a stable personality.
Sensitivity to the interviewees feelings and a sympathetic attitude.
Extrovert behavior and considerable physical and mental stamina.
Guidelines for Improving Interviews
Not all interviews are effective. Their effectiveness can be improved if the following points are
kept in mind by an interviewer:
An interview should have a definite time schedule with ample time for interview.
It should not be hurried.
The impersonal approach should be avoided.
Interview should have the necessary element of privacy.
The interviewer should listen carefully to what the applicant says and the information
collected should be carefully recorded either while the interview is going on or
immediately thereafter.
Attention should be paid not just to the words spoken, but also to the facial expressions
and mannerisms of the interviewee.
The interview should end when sufficient information has been gathered.
The interviewee should be told where he standswhether he will be contacted later,
whether he is to visit another person, or it appears that the organization will not be able to
use his abilities.
Pseudo-Scientific Methods of Selection: In the past, and to some extent even now, stereotyped
impressions of personality and characteristics were used as a basis of selection. These
impressions were gathered through pseudo-scientific methods, like phrenology, physiognomy
and graphology.
We shall briefly describe below these methods for your background knowledge only:
Phrenology: Here it is believed that the strength of each faculty is indicated by prominent
bumps on certain parts of the skull.
Physiognomy: Here it is believed that there is a definite correlation between facial
features and psychological functions and behaviour, for example, thin lips indicate
determination, broad jaws signify tenacity and so on.
Graphology: Here it is believed that there is a close relationship between handwriting
and personality.

PHYSICAL EXAMINATION
Applicant who get over one or more of the preliminary hurdles are sent for a physical
examination either to the organizations physician or to a medical officer approved for the
purpose.
Purposes: A physical examination serves the following purposes:
i) It gives an indication regarding fitness of a candidate for the job concerned.
ii) It discovers existing disabilities and obtains a record thereof, which may be helpful later in
deciding the companys responsibility in the event of a workmans compensation claim.
iii) It helps in preventing employment of those suffering from some type of contagious diseases.
iv) It helps in placing those who are otherwise employable but whose physical handicaps may
necessitate assignment only to specified jobs.
Contents of Physical Examination: Physical examination covers the following:
The applicants medical history.
His physical measurementsheight, weight, etc.
General examinationskin, musculature and joints.
Specia1 sensesvisual and auditory activity.
Clinical examinationeyes, ears, nose, throat and teeth.
Examination of chest and lungs.
Check-up of blood pressure and heart.
Pathological tests of urine, blood etc.
X-ray examination of chest and other parts of the body.
Neuro-psychiatric examination, particularly when medical histary or a physicians
observations indicate an adjustment problem.
You would realize that the importance of these characteristics varies from job to job and,
therefore, different weight ages have to be given to each far an overall evaluation.
REFERENCE CHECKS
The applicant is asked to mention in his application the names and addresses of three such
persons who usually know him well. These may be his previous employers, friends, or
professional colleagues. They are approached by mail or telephone and requested to furnish their
frank opinion, without incurring any liability, about the candidate either on specified points or in
general. They are assured that all information supplied would be kept confidential. Yet, often
either no response is received or it is generally a favorable response.

Final Decision
Applicants who cross all the hurdles are finally considered. If there are more persons than the
number required far a job the best ones, i.e., those with the highest scores are finally selected.
Placement
Sometimes a particular person is selected for a given jab. Often more than one person may be
selected for the jobs of similar nature. In the second case, individual employees have to be put
under individual supervisors with the approval of the latter. In the first case also his approval is
also necessary but it should be done early in the selection process. A proper placement reduces
employee turnover, absenteeism and accident rates and improves morale.
Induction
This is the last activity in relation to a newly employed person before he is trained for his job. As
explained earlier, it is introduction of an employee to the job and the organization. The primary
purpose is to sell the company to the new employee so that he may feel proud of his association
with the company. An employee has to work with fellow employees and his supervisor. For this
he must know them, the way they work and also the policies and practices of the organization so
that he may integrate himself with the enterprise. Any neglect in the area of induction and
orientation may lead to high labour turnover, confusion, wasted time and expenditure.
Induction Programme
A good induction programme should cover the following:
The company, its history and products, process of production and major operations
involved in his job.
The significance of the job with all necessary information about it including job training
and job hazards.
Structure of the organization and the functions of various departments.
Employees own department and job, and how he fits into the organization.
Personnel policy and sources of information.
Company policies, practices, objectives and regulations.
Terms and conditions of service, amenities and welfare facilities.
Rules and regulations governing hours of work and over-time, safety and accident
prevention, holidays and vacations, methods of reporting, tardiness and, absenteeism.
Grievances procedure and discipline handling.
Social benefits and recreation services.
Opportunities, promotions, transfer, suggestion schemes and job satisfaction.

An induction programme consists primarily of three steps:

General orientation by the staff: It gives necessary general information about the history and
the operations of the firm. The purpose is to help an employee to build up some pride and
interest in the organization.
Specific orientation by the job supervisor: The employee is shown the department and his
place of work; the location of facilities and is told about the organizations specific practices and
customs. The purpose is to enable the employee to adjust with his work and environment.
Follow-up orientation by either the personnel department or the supervisor: This is
conducted within one week to six months of the initial induction and by a foreman or a specialist.
The purpose is to find out whether the employee is reasonably well satisfied with him. Through
personal talks, guidance and counseling efforts are made to remove the difficulties experienced
by the newcomer.
SUMMARY
This unit has helped you to follow the process of selection in an organization right from the
conception of an idea that a suitable person is to be put on a given job to the point of ultimately
selecting the most suitable person for it, putting him at ease and making him feel at home with
his fellow employees, his supervisor and the organization as a whole. It has helped you to
understand the various activities involved in the process and the order in which these are carried
out. It has given you insight into the various alternatives and methods of various activities and
under what circumstances each is advisable. It has also helped you to realize the various
precautions to be taken so that your efforts under each activity bring desired results.

CASE STUDY
SAIL'S VOLUNTARY RETIREMENT SCHEME
Case Code-HROB002
Published-2003
INTRODUCTION
At a meeting of the board of directors in June 1999, the CEOs of Steel Authority of India's
(SAIL) four plants - V. Gujral (Bhilai), S. B. Singh (Durgapur), B.K. Singh (Bokaro), and A.K.
Singh (Rourkela) made their usual presentations on their performance projections. One after the
other, they got up to describe how these units were going to post huge losses, once again, in the
first quarter[1] of 1999-2000. After incurring a huge loss of Rs 15.74 billion in the financial year
1998-99 (the first in the last 12 years), the morale in the company was extremely low. The joke
at SAIL's headquarters in Delhi was that the company's fortunes would change only if a VRS
was offered to its CEOs - not just the workers.
BACKGROUND NOTE
SAIL was the world's 10th largest and India's largest steel manufacturer with a 33% share in the
domestic market. In the financial year 1999-2000, the company generated revenues of Rs. 162.5
billion and incurred a net loss of Rs 17.2 billion. Yet, as on February 23, 2001, SAIL had a
market valuation of just Rs. 340.8 billion, a meager amount considering the fact that the
company
owned
four
integrated
and
two
special
steel
plants.
SAIL was formed in 1973 as a holding company of the government owned steel and associated
input companies. In 1978, the subsidiary companies including Durgapur Mishra Ispat Ltd,
Bokaro Steels Ltd, Hindustan Steel Works Ltd, Salem Steel Ltd., SAIL International Ltd were all
dissolved and merged with SAIL. In 1979, the Government transferred to it the ownership of
Indian Iron and Steel Company Ltd. (IISCO) which became a wholly owned subsidiary of SAIL.
SAIL operated four integrated steel plants, located at Durgapur (WB), Bhilai (MP), Rourkela
(Orissa) and Bokaro (Bihar). The company also operated two alloy/special steel plants located at
Durgapur (WB) and Salem (Tamil Nadu). The Durgapur and Bhilai plants were predominantly1ong products[2] plants, whereas the Rourkela and Bokaro plants had facilities for
manufacturing flat products[3] .
THE JOLT
In February 2000, the SAIL management received a financial and business-restructuring plan
proposed by McKinsey & Co, a leading global management-consulting firm, and approved by
the
government
of
India
(held
85.82%
equity
stake).
The McKinsey report suggested that SAIL be reorganized into two strategic business units
(SBUs) - a flat products company and a long products company. The SAIL management board
too was to be restructured, so that it should consisted of two SBU chiefs and directors of finance,

HRD, commercial and technical. To increase share value, McKinsey suggested a phased
divestment schedule. The plan envisaged putting the flat products company on the block first, as
intense competition was expected in this area, and the long products company at a later date.
Financial restructuring envisaged waiver of Steel Development Fund[4](SDF) loans worth Rs
50.73 billion and Rs 3.8 billion lent to IISCO. The government also agreed to provide guarantee
for raising loans of Rs 15 billion with a 50% interest subsidy for the amount raised. This amount
had to be utilized for reducing manpower through the voluntary retirement scheme. Another
guarantee was given for further raising of Rs 15 billion, for repaying past loans.
Business restructuring proposals included divestment of the following non-core assets:
Power plants at Rourkela, Durgapur & Bokaro, oxygen plant-2 of the Bhilai steel plant
and the fertilizer plant at Rourkela.
Salem Steel Plant (SSP), Salem.
Alloy Steel Plant (ASP), Durgapur.
Visvesvaraya Iron and Steel Plant (VISL), Bhadravati.
Conversion of IISCO into a joint venture with SAIL having only minority shareholding.

THE DILEMMA
The major worry for SAIL's CEO Arvind Pande was the company's 160,000-strong workforce.
Manpower costs alone accounted for 16.69% of the company's gross sales in 1999-2000. This
was the largest percentage, as compared with other steel producers such as Essar Steel (1.47%)
and Ispat Industries (1.34%). An analysis of manpower costs as a percentage of the turnover for
various units of SAIL showed that its raw materials division (RMD), central marketing
organisation (CMO), Research & Development Centre at Ranchi and the SAIL corporate office
in
Delhi
were
the
weak
spots.
There was considerable excess manpower in the non-plant departments. Around 30% of SAIL's
manpower, including executives, were in the non-plant departments, merely adding to the
superfluous
paperwork.
Hindustan Steel, SAIL's predecessor, was modelled on government secretariats, with thousands
of "babus" and messengers adding to the glory of feudal-oriented departmental heads. SAIL had
yet to make any visible effort to reduce surplus manpower.
A senior official at SAIL remarked: "If you walk into any SAIL office anywhere, you will find
people chatting, reading novels, knitting and so on. Thousands of them just do not have any
work. This area has not even been considered as a focus area for the present VRS, possibly
because all orders emanate from and through such superfluous offices and no one wants to think
of himself as surplus." With a manpower of around 60,000 in these offices and non-plant
departments like schools, township activities etc, SAIL could well bring down to less than
10,000.

Reduction of white-collar manpower required a change in the systems of office work and record
keeping, and a very high degree of computerization. Officers across the organization employed
dozens of stenographers and assistants. Signing on note sheets was a status symbol for SAIL
officers.
Another official commented: "Systems have to be result oriented, rather than person oriented and
responsibilities must match rewards and recognition. There is a need to change the mindset of the
management, before specific plans can be drawn out for reduction of office staff."
From the beginning, SAIL had to contend with political intervention and pressure. Many
officials held that SAIL had to overcome these objectives: Many employees do not have
sufficient orders or work on hand to justify their continuance, and yet political pressures keep
them going. It is time that the top management takes a tough stand on such matters. One does not
have to call in McKinsey to decide that many SAIL stockyards and branch offices are
redundant.
THE VOLUNTARY RETIREMENT SCHEME
As a part of the restructuring plan, McKinsey had advised Pande that SAIL needed to cut the
160,000-strong labor force to 100,000 by the end of 2003, through a voluntary retirement
scheme. Pande was banking on natural attrition to reduce the number by 45,000 within two
years, but GOI's decision to increase the retirement age to 60 further delayed the reduction.
Subsequently, SAIL had requested GOI to bail it out with a one-time assistance of Rs 15 billion
and another subsidized loan of the same size for a VRS, to achieve the McKinsey targets.
In a bid to 'rationalize' its huge workforce, SAIL launched a VRS in mid 1998, for employees
who had put in a minimum service of 20 years or were 50 years in age or above. The scheme
provided an income that was equal to 100 per cent of the prevailing basic pay and DA to the
eligible employees. About 5,975 employees opted for the scheme. Of them, 5,317 were
executives and 658 non-executives. Most of those who opted were above 55 years.
On March 31, 1999, SAIL introduced a 'sabbatical leave' scheme, under which employees could
take a break from the company for two years for studies/employment elsewhere, with the option
of rejoining the company (if they wanted to) at the end of the period. The sabbatical allowed the
younger members of the SAIL staff to leave without pay for "self-renewal, enhancement of
expertise/knowledge and experimentation," which broadly translated into higher studies or even
new
employment.
On June 01, 1999, SAIL launched another VRS for its employees. Employees who had
completed a minimum of 15 years of service or were 40 years or above could opt for the scheme.
The new VRS, which was opened to all regular, permanent employees of the company, would be
operational
till
31st
January
2000.
Its
target
groups
included:
Those who were habitual absentees, regularly ill and those who had become surplus
because of the closure of plants and mines;
Poor performers.

Under the new package, employees who opted for the scheme, depending on their age, would get
a monthly income as a percentage of their prevailing basic salary and dearness allowance (DA)
for the remaining years of their services, till superannuation. Employees above 55 years of age
would be given 105 per cent of the basic pay and dearness allowance (DA) every month. Those
employees who were between the age of 52 and 55 years would receive 95 per cent of the basic
pay and DA while those below 52 years would get 85 per cent of the basic pay and DA. The new
scheme, like the old one was a deferred payment scheme, with extra carrots like a 5% increase in
monthly benefits for each of the three age groups.
By September 1999, over 4,000 employees opted for the new scheme. About 1,700 employees
opted for VRS in the Durgapur steel plant while in the Bhilai, Bokaro and Rourkela steel plants.
The number varied between 400 and 700.
In September 2000, SAIL announced yet another round of VRS, in a bid to remove 10,000
employees by the end of March 2001. The company planned to approach financial institutions
for a credit of Rs 5 billion. Pande said: "We are awaiting the government nod for the VRS
scheme, drawn on the pattern of the standard VRS by department of public enterprises. We
expect to get the clearance by the end of the month."
On February 08, 2001, SAIL ended its four year recruitment freeze by announcing its plans to fill
up more than 250 posts at its various plant sites in both technical and non-technical categories.
According to a senior SAIL official: "This recruitment is being done to ease the vacancies
created due to natural attrition and those that arose after the previous VRS."
THE PERSUASION
In mid 1998, in a bid to convince its employees to accept VRS, SAIL highlighted six 'plus'
points of VRS, in its internal communique, Varta. They were as follows:
During the next 4-5 years, SAIL has to reduce its workforce by 60,000 for its own
survival. Employees with chronic ailments, and habitual absentees, who add to low
productivity, have to go first - maybe, with the help of administrative actions.
The employees may have to be transferred to any other part of the country in the
larger interest of the company.
For those who started their career as healthy young men 25-30 years ago, the VRS
will take care of their financial worries to a great extent, and they can discharge
their domestic duties more comfortably.
VRS can be used for special purposes like paying huge sum of money for getting
one's son admitted to a professional course.
VRS will give many individuals the money and time on pursuing personal dreams.
It can be a good opportunity to do social service.
On December 27, 1999, SAIL initiated a company-wide information dissemination program to
educate the staff on restructuring. The company drafted an internal communication document

entitled "Turnaround and Transformation" and a special team of 66 internal resource persons
(IRP) had been assigned the task of preparing a detailed plan to take this document to a larger
number of people within the company. The 66-member team was constituted in September 1999
and was stationed in Ranchi to undergo a detailed briefing-cum-training course. A generalized
module was presented to the IRP team during the course, which then summarised the root causes
of
SAIL's
crisis
and
the
strategies
to
overcome
it.
According to an official involved with the program: "Initiatives like the power plant hive-off or
the Salem Steel joint venture will hinge on employee concurrence, particularly at the shop floor
level, and therefore there has to be an intensive communication program in place to reassure
employees
that
their
interests
will
be
protected."
The 66-member IRP team conducted half-day workshops across plants and other units based on
three
specific
modules:
A video film conveying a message from the chairman of the company.
A generalized module of the recommendations of the turnaround plan focusing on restoring the
financial foundation, reinforcing marketing initiatives and regaining cost leadership.
A module covering plant-specific or unit-specific issues and strategies for action.
The exercise was expected to cover at least 16,000 SAIL employees by the end of March 2000.
A senior official at SAIL said: "The idea is that the employees covered in this phase would take
the communication process forward to their peer group and fellow colleagues."
The staff education exercise was stressed upon, particularly in view of the power plant hive-off
fiasco, which could not take off as scheduled due to stiff resistance from central trade unions.
The problem, at the time, was that the SAIL top brass had failed to convince the employees that
jobs would not be at risk because of the hive-off.
THE REACTION
The trade unions were on a warpath against the recommendations of McKinsey. Posters put up
by the Centre of Indian Trade Unions (CITU) at SAIL's central marketing office said that the
McKinsey report was meant, not for the revival or survival of SAIL, but for its burial. A senior
TU leader said: "SAIL TUs so far have been extremely tolerant and exercised utmost restraint.
Even in the face of scanty communication by the management of SAIL, they have not lost
patience
in
these
trying
times."
The TU leaders felt that SAIL would try to bolster support for the financial restructuring
proposal based on the recommendations of McKinsey. But being a government-owned company,
SAIL cannot take decisions on such recommendations as the privatization of SAIL or breaking it
up into two product-based companies. Even in relatively small matters the like hiving off of
power plants to a subsidiary company, with SAIL being the major partner, the government had
not cleared SAIL's proposal, even after months of gestation. Therefore, it was futile to think that
SAIL would secure the permission of the government to sell off Salem Steel Plant (SSP) in
Tamil Nadu or close down Alloy Steels Plant (ASP) at Durgapur in West Bengal.

At SSP, all the TUs had joined hands to form a 'Save Salem Steel Committee' and observed a
day's token strike on June 24, 1999, demanding investment in SSP by SAIL, rather than by a
private
partner.
Though TUs had no objection to voluntary retirements, they were not very happy about the
situation. They were worried that employment opportunities were shrinking in the steel industry
and that reduction of manpower would mean increasing the number of contractors and their
workforce. After the Rourkela Steel Plant in Orissa absorbed contractors' workers on Supreme
Court orders, fresh contractors had been appointed to fill up the vacancies.
SAIL'S VOLUNTARY RETIREMENT SCHEME
THE PERSUASION & THE RELATION
SAIL TU leaders were emphatic that the McKinsey recommendations were not the last word
on SAIL. They felt that foreign consultancy firms were unable to appreciate the role played
by major public sector units like SAIL or Indian Oil in the growth of the Indian economy.
They alleged that since large public sector units had shown they could withstand the
onslaught of the multinationals, efforts were being made to weaken them, break them
into
pieces
and
eventually
privatize
them.
On February 17, 2000, workers at SSP went on a strike against the government's
decision to restructure SAIL. The strike was called by eight unions affiliated to CITU,
INTUC, ADMK and PMK. CITU secretary Tapan Sen said: "The unions are going to
serve the ultimatum to the government for indefinite action in the days to come if this
retrograde decision is not reversed. Demonstrations were held against the
government's decision in all steel plants and workers of Durgapur would hold a
daylong dharna. Steel workers all over the country, irrespective of affiliations have
reacted sharply to the disastrous and deceptive decision of the government on the socalled restructuring of SAIL."

QUESTIONS FOR DISCUSSION

1. McKinsey's recommendation is that SAIL cut its workforce to 100,000 by the end of 2003.
SAIL has launched various VR schemes to meet this target. Though every time the company
is comes out with improved schemes there are still not many takers. What according to you
could be the reasons?
2. The staff education exercise on VRS at SAIL seems to be more of a reaction to the power
plant hive-off fiasco than a proactive measure. What other steps can SAIL take to educate
employees about VRS? Explain.
3. According to McKinsey proposals, offering VRS to employees was the part of the
restructuring plan. Do you think VRS is sufficient without restructuring or vice-versa?

Comment.
4. In February 2001, SAIL ended its four-year recruitment freeze by announcing its plans to
fill up more than 250 posts. Do you think this is the right move especially when a VRS is
being offered to its employees? Explain.

'Best practice' employee selection is usually associated with which model?

The psychiatric model.
The physiological model.
The psychometric model.
The psychological model.

Which of the following are cognitive characteristics? Select all that

apply.
Knowledge.
Intellectual processes.
Personality traits.
Motivation.
Academic achievements.

Which of the following are non-cognitive traits? Select all that

apply.
Motivation.
Academic achievements.
Knowledge.
Personality traits.

Which of the 'Big Five' personality dimensions has emerged as a

particularly valid predictor of many aspects of work performance?
Openness to experience.
Extraversion.
Agreeableness.
Conscientiousness.
Emotional stability.

What is the focus of performance-based methods?

Measuring past performance to assess current performance.

Measuring current performance to assess past performance.

Measuring past performance to predict future performance.
Measuring present performance to predict future performance.

Which of the following statements describe current trends in

selection practice? Select all that apply.
Decreasing use of bespoke simulation.
Increasing importance of non-cognitive qualities.
Online delivery of assessment.
More reliable and valid assessment tools.

In which sector are the performance-based and competency tests

most used?
The public sector.
Small and medium size enterprises.
Private sector large enterprises.

According to research, which selection method is perceived to be

fairest by most applicants?

Written ability tests.
CVs.
References.
Interviews.

According to research, which selection method is perceived to be

least fair by most applicants?
Graphology.
CVs.
Written tests.
References.

Which of the following may create negative impressions for

candidates? Select all that apply.
Poor image and employer brand.
Disinterested recruiters.
Long and complicated application processes.

Informative websites.

What is meant by a reliable selection technique?

One which is the same for all applicants groups, and should treat all groups the same.
One which is relevant for the work behaviours it is meant to predict.
One which is accurate and free from contamination.
One which takes into account cost and potential return on investment.

What is meant by a valid selection technique?

One which is accurate and free from contamination.
One which is the same for all applicants groups, and should treat all groups the same.
One which is relevant for the work behaviours it is meant to predict.
One which takes into account cost and potential return on investment.

Which of the following are examples of competencies? Select all

that apply.
Leadership.
Business awareness.

IT skills.
Team working.

What percentage of UK organisations report to have used online

selection in some form?
90%.
5%.
30%.
50%.

CHAPTER III:

3.1 INTRODUCTION
By transformation of economic environment, the information explosion, advances in technology and the
intensely competitive global and domestic markets have created enormous pressure on organisation to
change or perish. Against this challenging scenario, by choice or default a new era of human resource
management practices and philosophy is emerging and assuming significance in modern organisations.
This unit aims at discussing the emerging scenario of human resource management in detail and also the
position of HRM in India.

3.2 MEANING OF HUMAN RESOURCE MANAGEMENT

Human Resource Management (HRM) is a process of bringing people and organizations together so that
the goals of each are met. It is that part of the management process which is concerned with the
management of human resources in an organization. It tries to secure the best from people by winning
their wholehearted cooperation. In short, it may be defined as the art of procuring, developing and
maintaining competent workforce to achieve the goals of an organization in an effective and efficient
manner. According to Invancevich and Glueck, HRM is concerned with the most effective use of people
to achieve organizational and individual goals. It is a way of managing people at work, so that they give
their best to the organization.

3.3 A NEW MANDATE FOR HUMAN RESOURCES

Should we do away with HR? In recent years, a number of people who study and write about business
along with many who run businesses have been debating that question. The debate arises out of serious
and widespread doubts about HRs contribution to organizational performance. It is often ineffective,
incompetent and costly, in a phrase, it is value sapping. Indeed, if HR were to remain configured as it is
today in many companies, the competitive forces that managers face today and will continue to confront
in the future demand organizational excellence.
The efforts to achieve such organizational excellence through a focus on learning, quality, teamwork
and reengineering are driven by the way organizations get things done and how they treat their people.
Those are fundamental HR issues that create an entirely new role and agenda for the field that focuses it
not on traditional HR activities, such as staffing and compensation, but on outcomes HR should not be
defined by what it does but by what it delivers results that enrich the organizations value to customers,
investors, and employees. More specifically, HR can help to deliver organizational excellence in the
following four ways:
I.
II.
III.
IV.

First, HR should become partner with senior and line managers in strategy execution, helping to
move planning form the conference room to the marketplace.
Second, it should become an expert in the way work is organized and executed, delivering
administrative efficiency to ensure that costs are reduced while quality is maintained.
Third, it should become a champion for employees, vigorously representing their concerns to
senior management and at the same time working to increase employee contribution; that is
employees commitment to the organization and their ability to deliver results.
And finally, HR should become an agent of continuous transformation, shaping processes and a
culture that together improve an organizations capacity for change.

3.4 WHY HRM MATTERS NOW MORE THAN EVER

Regardless of their industry, size or location, companies today face five critical business challenges.
Collectively, these challenges require organizations to build new capabilities. Who is currently
responsible for developing those capabilities? everyone and no one. That vacuum is HRs opportunity to
play a leadership role in enabling organizations to meet the following competitive challenges.
Globalization: Gone are the days when companies created products at home and shipped them abroad
as is. With the rapid expansion of global markets, managers are struggling to balance the paradoxical
demand to think globally and act locally. The imperative requires them to move people, ideas, products
and information around the world to meet local needs. They must add new and important ingredients to
the mix when making strategy: volatile political situations, contentious global trade issues, fluctuating
exchange rates, and unfamiliar cultures. They must be more literate in the ways of international
customers, commerce, and competition than ever before. In short, globalization requires that
organizations increase their ability to learn and collaborate and to manage diversity, complexity and
ambiguity.
Profitability Through Growth: During the past decade, most Western companies have been clearing
debris, using downsizing, reengineering, delivering and consolidation to increase efficiency and cut costs.
The gains of such yard work, however, have largely been realized, and executives will now have to pay
attention to the other part of the profitability equation: revenue growth.
Technology: From videoconferencing to the Internet, technology has made out world smaller and faster.
Ideas and massive amounts of information are in constant movement. The challenge for managers is to
make sense and good use of what technology offers. Not all technology adds value. But technology can
and will affect how and where work gets done. In the coming years, managers will need to figure out how
to make technology a viable, productive part of the work setting. They will need to stay ahead of the
information for business results. Otherwise, they risk being swallowed by a tidal wave of data not ideas.
Intellectual Capital: Knowledge has become a direct competitive advantage for companies selling ideas
and relationships (think of professional service, software and technology-driven companies) and an
indirect competitive advantage for all companies attempting to differentiate themselves by how they
service customers. Form now on, successful companies will be the ones that are the most adept at
attracting, developing, and retaining individuals who can drive a global organization that is responsive to
both its customers and the burgeoning opportunities of technology. Thus the challenge for organizations
is making sure they have the capability to find, assimilate, develop, compensate, and retain such talented
individuals.
Change, Change and More Change: Perhaps the greatest competitive challenge companies face is
adjusting to indeed, embracing nonstop change. They must be able to learn rapidly and continuously,
innovate ceaselessly, and take on new strategic imperatives faster and more comfortably. Constant change
means organizations must create a healthy discomfort with the status quo, an ability to detect emerging
trends quicker than the competition, an ability to make rapid decisions, and the agility to seek new ways
of doing business. To thrive, in other words, companies will need to be in a never-ending state of
transformation, perpetually creating fundamental, enduring change.
The five challenges described above have one overarching implication for business: the only competitive
weapon left is organization. Sooner or later, traditional forms of competitiveness-cost, technology,
distribution, manufacturing, and product features can be copied. They have become table stakes. You
must have them to be a player, but they do not guarantee you will be a winner.

3.5 THE CHANGING ROLE OF HRM

In an organization, there are tall people, short people, fat people, thin people, black people, white people,
elderly people,young people and so on. Even within each category there are enormous individual
differences. Some will be intelligent, others not so intelligent, some are committed to jobs, others are not,
some will be outgoing, others reserved and so on. The point is that these differences demand attention so
that each person can maximize his or her potential, so that organizations can maximize their effectiveness
and so that the society as a whole can make the wisest use of its human resources (Cascio).
The challenge of HR managers today is to recognize talent and nurture the same carefully and achieve
significant productivity gains over a period of time. The enterprise is nothing but people. Technological
advances, globalize competition, demographic changes, the information revolution and trends toward a
service society have changed the rules of the game significantly. In such a scenario, organizations with
similar set of resources gain competitive advantage only through effective and efficient management of
human resources (Dessler).
The role of a HR manager is shifting from a protector and screener to the planner and change agent. In
present day competitive world, highly trained and committed employees are often a firms best bet. HR
professionals play a key role in planning and implementing downsizing, restructuring and other costcutting activities. They enable a firm to be more responsive to product innovations and technological
changes. For example, team based work assignments and productivity linked rewards could replace
manufacturing systems. In service enterprises like banking, hotels, insurance firms, etc., discourteous
employee responses may ruin the relationships with customers. Employees who lack the temperament,
maturity, social skills and tolerance for frequent contact should not be selected at all for service-oriented
activities. HR professionals can help an organization select and train employees for such emerging roles.
Employees are the primary pillars of corporate success. Machines neither have new ideas nor can they
solve problems or grasp opportunities. Only people who are involved and thinking can make a difference.
Through open communications, proper feedback and fair treatment of all employees grievances and
discipline matters, HR professionals promote employee commitment at various levels. In such a case
employees perform the assigned tasks willingly and enthusiastically and thus offer a competitive
advantage to the organization. As rightly pointed out by Charles Creer, (Strategy and Human Resources,
1995), in a growing number of organizations human resources are now viewed as a source of
competitive advantage.
Increasingly it is being recognized that competitive advantage can be obtained with a high quality
workforce that enables organizations to compete on the lines of market responsiveness, product and
service quality, differentiated products and technological innovation. In the new economy, winning will
spring form organizational capabilities such as speed, responsiveness, agility, learning capacity and
employee competence. Successful organizations will be those that are able to quickly turn strategy into
action; to manage processes intelligently and efficiently; to maximize employee contribution and
commitment; and to create the conditions of seamless change.
The need to develop those capabilities brings us back to the mandate for HR set forth at the beginning of
this article. Lets take a closer look at each HR imperative in turn. Becoming a Partner in Strategy
Execution. Strategy is the responsibility of the companys executive team of which HR is a member. To
be full-fledged strategic partners with senior management, however, HR executives should impel and
guide serious discussion of how the company should be organized to carry out its strategy. Creating the
conditions for this discussion involves four steps.

First, HR should be held responsible for defining an organizational architecture. In other words, it should
identify the underlying model of the companys way of doing business. Several well-established
frameworks can be used in this process. Jay Galbraiths star model, for example, identifies five essential
organizational component: strategy, structure, rewards, processes and people. The well-known 7-S
framework created by McKinsey & Company distinguishes seven components in a companys
architecture: strategy, structure, systems, staff, style, skills and shared values.
Its relatively unimportant which framework the HR staff uses to define the companys architecture, as
along as its robust. What matters more is that an architecture be articulated explicitly. Without such
clarity managers can become myopic about how the company runs and thus about what drives strategy
implementation and what stands in its way. They might think only of structure as the driving force behind
actions and decisions, and neglect systems or skills. Or they might understand the company primarily in
terms of its values and pay inadequate attention to the influence of systems on how work that is,
strategy execution actually gets accomplished.
In India, the borderless world is shaking the roots of business. While some companies are feeling the
excitement and facing up to the challenges, the demand for a tilted playing field 6 indicates the anxiety
among many Indian business leaders about competition. Increasingly, the mantra of the global economy is
performance and competition.

MANAGING HUMAN RESOURCES IN THE EMERGING SCENARIO

The 21st century would see the following inter-related phenomena emerging, posing challenges to the
corporate world and culminating in Olympian competition:
Borderless world
Diversity
Knowledge Power
The cross-cultural, cross-border mingling has resulted in the creation of a new class of peopleglobal
citizens with global attitudes, tastes and networks. Since it unleashes multiple variables, the borderless
world precludes immense complexitycomplexity in the environment, in inter-organizational
relationships, in modes of conducting business and in socio-cultural diversity.
One of the important duties of the modern HR manager is to get things done through people. He has to
bring employees into contact with the organization in such a way that the objectives of both groups are
achieved. He must be interested in the people, the work and the achievement of assigned objectives. To be
effective, he must balance his concerns for people and work. In other words, he must know how to utilize
human as well as non-human resources while translating goals into action. It is in managing human assets
that the managers capabilities are tested fully, because of the following reasons:
Human resources are heterogeneous. They consist of many different individuals, each of whom
has a unique personality, a combination of different emotional responses to different stimuli and
different values, attitudes, motives and modes of thought.
Human beings behave in widely different and complicated ways. Their reactions to promises,
praise or criticism, for example, can be quite different. It is very difficult to predict their
behaviour especially in an organization where they work in-groups. Their behaviour is neither
consistent nor readily predictable.

Modern employees are better educated, possess greater skills, have more sophisticated technology
available for their use and enjoy higher standards of living than previous generations.
A human being himself determines what he contributes. If he is motivated, he will work for an
organization more efficiently and effectively.
So, it must be recognized by the manager that individuals, not organizations, create excellence.
Recognizing the importance of the human element in the production process, P.F Drucker had remarked
that man, of all the resources available to man, can grow and develop. The problem of establishing the
right climate to maximize employee motivation and commitment is still with us.

The Challenge of Human Resource Management

The most significant resource of any organization is often said to be its people. Such claims appear in
organizations annual reports and mission statements. Of course, an organization is nothing but a group of
people whose activities have been planned and coordinated to meet organizational objectives. An
organization that exists to produce goods and services has a good chance to survive and prosper if it
consists of the Right People. This is true for all organizations. In a similar fashion, people need
organizations. The vast majority of people must work to support themselves and their families. But people
work for many reasons other than economic security. For example, many also work to keep busy and feel
useful, to create and achieve something. They want to gain recognition and achieve status or to test and
stretch their capabilities. To meet these multifarious needs, people and organizations join forces.
Unfortunately, this union seldom approaches perfection. Organizations encounter several obstacles in
meeting their goals and in a similar way all employees report some problems in their attempts to be
productive and efficient in their jobs and to feel satisfied in their work lives. The challenge of human
resource management is to minimize these obstacles and problems.
The central challenge facing society is the continued improvement of our organizations, both private and
public. Another important purpose of human resource management is to improve the contribution made
by people to organizations, through effective and efficient use of resources. Efficient means that it must
use the minimum amount of resources needed to produce results. Effective means producing right things
through right ways. The resultant productivity (ratio of output to input) gains obtained through HR efforts
enable managers to reduce costs, save scarce resources, enhance profits and offer better pay, benefits and
working conditions to employees.
Pervasive force : HRM is pervasive in nature. It is present in all enterprises. It permeates all levels of
management in an organization.
Action oriented : HRM focuses attention an action, rather than on record keeping, written procedures or
rules. The problems of employees at work are solved through rational policies.
Individually oriented : It tries to help employees develop their potential fully. It encourages them to give
out their best to the organization. It motivates employees through systematic process of recruitment,
selection, training and development coupled with fair wage policies.
People oriented : HRM is all about people at work, both as individuals and groups. It tries to put people
on assigned jobs in order to produce good results. The resultant gains are used to reward people and
motivate them toward further improvements in productivity.

Development oriented : HRM intends to develop the full potential of employees. The reward structure is
tuned to the needs of employees. Training is offered to sharpen and improve their skills. Employees are
rotated on various jobs so that they gain experience and exposure. Every attempt is made to use their
talents fully in the service of organizational goals.
Integrating mechanism : HRM tries to build and maintain cordial relations between people working at
various levels in the organization. In short, it tries to integrate human assets in the best possible manner in
the service of an organization.
Comprehensive function : HRM is, to some extent, concerned with any organizational decision which
has an impact on the, workforce or the potential workforce (Bernardin). The term workforce signifies
people working at various levels, including workers, supervisors, middle and top managers. It is
concerned with managing people at work. It covers all types of personnel. Personnel work may take
different shapes and forms at each level in the organizational hierarchy but the basic objective of
achieving organizational effectiveness through effective and efficient utilization of human resources,
remains the same. It is basically a method of developing potentialities of employees so that they get
maximum satisfaction out of their work and give their best efforts to the organization (Pigors and
Myers).
Auxiliary service : HR departments exist to assist and advise the line or operating managers to do their
personnel work more effectively. HR manager is a specialist advisor. It is a staff function.
Inter-disciplinary function : HRM is a multi-disciplinary activity, utilizing knowledge and inputs drawn
from psychology, sociology, anthropology, economics, etc. To unravel the mystery surrounding the
human brain, managers, need to understand the appreciate the contributions of all such soft disciplines.
Continuous function : According to Terry, HRM is not a one short deal. It cannot be practiced only one
hour each day or one day a week. It requires a constant alertness and awareness of human relations and
their importance in every day operations.

MANAGING TALENT: THE NEW Face OF HR MANAGER

Human relation movement was the turning point in the management field that changed the thinking in the
field of management. After the Mayos work on human relation the human being has become a central
point in the organization. Man as a resource now is being treated as a human being and not as machine.
After that several other management thinkers also contributed a lot that how we can motivate, attract and
retain people in an organization. Work of Marry Parker Follet, Maslow, Herzberg, Vroom, and
Macgregor are invaluable in this field. The result of all these theories is the evolution of a new field called
Human Resource Management.
The functions of HRM include human resource planning, recruitment, selection, placement, and
orientation of employees; training and career development; labour relations; management of performance
appraisal, compensation, and benefit programmes and development of personnel policies and procedures.
The issue has been brought into sharper focus over the past few years by the concept of the war for
talent and, more recently, new proposals or reporting on human capital management. There are three
fundamental forces fuelling the war for talent: the irreversible shift from the Industrial Age to the
Information Age, the intensifying demand for highcalibre managerial talent, and the growing propensity
for people to switch from one company to another. Because of above mentioned environment and its
impact on organization, it forces us to give emphasis on understanding the talent management, what type
of challenges it create for HRM and what role human resource management should play in managing the

talented people. The paper starts with highlighting new vistas of talent management, and then moves on to
discuss the new avatar of the HR manager as talent manager, in the next section various strategies used
for attracting and retaining talent have been outlined.

Talent Management: New Vistas

Talent management is a subject that has dominated HR thinking for years, variously described as
manpower-planning modeling, succession planning or high-flyer identification. As a consequence we
have heard the emergence of talent managers within many organizations. So, what is talent? A
definition could be: An identifiable ability that is perceived to add immediate or future value to any
prescribed activity, discipline or enterprise(Maurice, 2003). Identified talent normally requires an
investment of resource to realize its value and a disciplined organizational mindset prepared to wait for
the investment to pay off. As a result, an effective talent-management system or process is both essential
for securing competitive advantage and to produce quick results.
Talent management is a core element of human capital management. People generate capital for an
organization through their competence, their behaviours and their intellectual energy. In a commercial
world increasingly dominated by knowledge intensive organizations, the latter is an ever-more important
requirement for competitive success. Intellectual energy is about innovation and change, about new
thinking and about opportunities developed from problems. Talent management is primarily about
identifying, developing and using those people who can provide those critical intellectual-energy
ingredients. In general, from a successful talent-management system we expect: sustainable commercial
competitiveness; higher levels of focused innovation; improved staff engagement and commitment, low
turnover rates of knowledge and experience, lower external resourcing costs.
After the above analysis we can say that talent management has now become a more challenging job for
an organization. This is also very clear that managing employees in any organization is a job of Human
Resource Department. But as time passes and with reference to above referring environment now there
are more opportunities for talented people in todays world. So because of all these it is very difficult to
manage them with traditional human resource practices, we have to do more than that otherwise we will
lose them, and in this competitive and fast changing environment we will not survive at all. All these
forces are new challenges before the Human Resource Management.
One of HRs most challenging jobs now involves managing talent. Much has changed in recent years to
make this an increasingly critical area for HR. Among the issues that have made the talent management
job more difficult are: frequent restructuring, a growing reliance on outside hiring, flatter organizations
with fewer growth options, a tighter job market (at least in the long term), the aging workforce and the
decline of clear career paths, as we mentioned above that it create a big challenge before the HR.
In order to retain its most valuable stakeholders, an organization must find innovative ways to continually
recruit its own employees. How well do you know and understand your current employees growth path?
Are your employees looking outside your company for advancement opportunities? Retaining top quality
talent is an enormous challenge facing corporations today and it is duty of HR to cope with it. In order to
build effective retention and deployment strategies, companies must maintain visibility into and
communication with their employees.
An organizations capacity to hire, develop and retain talent is the most crucial business process as there
is a definite correlation between intangible assets and market capitalization, according to the protagonists
of talent management. It is due to these intrinsic intangible values that some companies are perceived as
more valuable than others. Infosys (Sachdeva, 2002), for example, is perceived as being worth fifty times
the value of its recorded assets. Talent research company Kenexa paints a worrying picture of HRs

ability to be on top of its game when it comes to talent management. Ninety per cent of the HR
professionals polled strongly agree that recruiting talented people is a key issue, and 93 per cent feel the
same way about retention. Yet 57 per cent of companies have no specific talent management strategy, and
just 37 per cent employees someone whose specific remit is to manage talent (Paton, 2002).
For HR professionals, this sets a challenge. On one hand, effective talent management is an important
feather in the cap of any HR manager. On the other hand, identifying, grooming and retaining talent is a
notoriously nebulous business. Human Resources Department has an important part to play in providing
the backbone for talent management. So at the end we can say that managing the talent means find,
develop and keep the people who keep you in business is the most challengeable job of todays HR
department in any organization.

GUIDELINES FOR BETTER HRM

Following are few guidelines for better HRM.
a) Develop People
Smart employers know that helping employees to manage their career progress will help them to keep
good people. Now more employees are asking what can you do for me, particularly when they see there
peers being provided with development opportunities by their employers. You create opportunities for
employees, then definitely they will work hard for you otherwise not. J.Sterling Livingston rightly
observed and explained the vital role that managers play in developing their subordinates: Although
most executives have not yet diagnosed the problem, industrys greatest challenge by far is to rectify the
under-development, underutilization and ineffective management and use of its most valuable resourceits young managerial and professional talent (Livingston, 1988). So now what the organization is doing
for me is becoming more important. Now every employee wants that company should give them or send
them to different training and development programmes for his/her career developments and have to
arrange and give opportunities to employees for all these.
One solution has been to implement a company-wide project on internal candidates and interviewing
them. Interviews have been made more formal, explaining the reasons behind them and using competency
evidence for not only the role, but also for training and development too. In the past, people were often
promoted rapidly into roles and moved about the company at will. Now, though, there needs to be a
reassessment and a recognition that, as well as moving people about, you need to give them skills and
tools to do the job they are currently doing well even better.

b) Grooming Future Talent

While analytical and communication skills and boosted confidence will often give graduates an edge, HR
across the board is rapidly moving away from the perception that a degree is a mandatory springboard to
greater things, Murphy reckons. There are people who do not go to university for some very good
reasons. It is our job to provide tools to allow them to do the job (Reckons, 2002). In this context
training needs analysis and plotting of career growth paths for employees are important activity of HR
professionals. Instead of conducting it as an annual ritual, the need analysis should really contribute
towards the skill enhancement of the employees resulting in the fulfillment of current and future
organizational requirements.

c) Employees Deployment
As employees move easily between diverse roles, the value of the internal talent market increases because
employees are armed with transferable skills and knowledge that can be applied in many areas of the
organization. This allows companies to become more agile and to rapidly deploy workers to new projects
or locations. This deployment is very useful for employees also because now every employee wants to
become a multi skill person, because now your one skill can become meaningless any time. So if you
have given chance to them for all these than that inspires and motives a lot to any employee. Now this is
the duty of organizations that you move for all these so that you can retain employees in your
organization.

d) Build Employee Communities

Organizations should build high quality internal talent communities through segmentation. This enables
employers to cultivate relationships with employees on the employees terms and to consistently
demonstrate value to the employee through opportunities for internal mobility. This increases job
satisfaction and leads to higher retention rates. Any recruitment opportunity in the organization should be
viewed as a career growth opportunity for the existing employees without compromising efficiency
requirements. This always is very cost effective in all respects and will go a long way in boosting the
morale of existing employees. The direct correlation of morale and higher productivity could be sufficient
for any justification required for these moves when it comes to confronting with the top management.

e) Turn Managers into Coaches

Now time has come that every employee wants to become 24 carrat gold for his future safety point of
view. When a person joins just after his getting degree of MBA, he is totally zero from the point of view
of experience. This demands that intelligent but non-experienced need a personal coach for their
perfection in the job and to cope-up with early entry-level problem. Personal coaches are personal
advocates for their clients, but advocacy is aimed at the client. What great personal coaches are great at is
helping people help themselves. They offer penetrating insight to people about themselves. They give
them good and bad news. They help people believe that they can do better. They give people concrete
solution to help them improve. And coaches are right there with the people they coach, encourage them,
scolding them when necessary, praising them when its appropriate, and constantly helping their clients
move in the right direction.
So implementation of this system in the organization is a duty of HR department with the help of top
management. From this system we can motivate and inspire the people to do extraordinary work.
Coaching style of management is the single greatest factor in improving productivity, moral, and
retention. Day to day coaching creates the kind of trust and confidence, the genuine bond between
managers and individual contribution that cuts through everything.

1.11 SUMMARY
HRM should take on responsibility for elder care, long-term security/care, and other social needs through
cafeteria-style benefits programmes, which are crucial for talent retention in organizations. These benefit
packages allow people to identify their own needs and custom design their own benefits. Employees find
such programmes attractive because they empower the individual to maximize the value of the benefits an
employer offers. For HR, these plans are comparatively easy to set up and, once in place, there is virtually
no additional administration involved. Winning the war for talent requires winning the hearts of
employees and their families, for which, organizations need to go one step ahead of their competitors in
winning the hearts of their families.
Every leading organization is looking at developing their employees into balanced human beings in order
to make them use their real potential, and that offer a new set of opportunities to HR in those
organizations. Greater level of involvement of HR people in the day-to-day life of employees is becoming
the norm of the day for companies, which are looking for greater commitment from employees. An
increasing trend is visible among the young professionals in recent years, by way of giving more and
more emphasis on family and lifes interests, and at several occasions it acts as a critical factor for
employment decisions as well. Increasing instances of talent wedding talent, lead to either of the spouse
working from home providing financial support to the family and thus giving more flexibility to the other
person in selecting organizations that provide increased work flexibility. When it comes to occasions of
personal realignments, HR has to work as a good friend in need.

CASE STUDY:
EMPLOYEE DOWNSIZING
Case Code- HROB016
Publication Date -2002
"Next to the death of a relative or friend, there's nothing more traumatic than losing a job.
Corporate cutbacks threaten the security and self-esteem of survivors and victims alike.
They cause turmoil and shatter morale inside organizations and they confirm the view that
profits always come before people."
- Laura Rubach, Industry Analyst, in 1994.
"The market is going to determine where we stop with the layoffs."
- Tom Ryan, a Boeing spokesman, in August 2002
DOWNSIZING BLUES ALL OVER THE WORLD
The job markets across the world looked very gloomy in the early 21st century, with many
companies having downsized a considerable part of their employee base and many more
revealing plans to do so in the near future. Companies on the Forbes 500 and Forbes
International 800 lists had laid off over 460,000 employees' altogether, during early 2001 itself.
This trend created havoc in the lives of millions of employees across the world, Many people lost
their jobs at a very short or no advance notice, and many others lived in a state of uncertainty
regarding their jobs. Companies claimed that worldwide economic slowdown during the late1990s had had forced them to downsize, cut costs, optimize resources and survive the slump.
Though the concept of downsizing had existed for a long time, its use had increased only
recently, since the late-1990s. (Refer Table I for information on downsizing by major
companies).
Analysts commented that downsizing did more damage than good to the companies as it resulted
in low morale of retained employees, loss of employee loyalty and loss of expertise as key
personnel/experts left to find more secure jobs. Moreover, the uncertain job environment created
by downsizing negatively effected the quality of the work produced. Analysts also felt that most
companies adopted downsizing just as a 'me-too' strategy even when it was not required.
However, despite these concerns, the number of companies that chose to downsize their
employee base increased in the early 21st century. Downsizing strategy was adopted by almost
all major industries such as banking, automobiles, chemical, information technology, fabrics,
FMCG, air transportation and petroleum. In mid-2002, some of the major companies that
announced downsizing plans involving a large number of employees included Jaguar (UK),
Boeing (US), Charles Schwab (US), Alactel (France), Dresdner (Germany), Lucent Technologies
(US), Ciena Corp. (US) and Goldman Sachs Group (US). Even in companies' developing
countries such as India, Indonesia, Thailand, Malaysia and South Korea were going in for
downsizing.
TABLE
DOWNSIZING BY MAJOR COMPANIES (1998-2001)
YEAR

COMPANY

INDUSTRY

I
No. of Employees

Downsized
1998

Boeing

Aerospace

20,000

1998

CitiCorp

Banking

7,500

1998

Chase Manhattan Bank

Banking

2,250

1998

Kellogs

FMCG

1,00

1998

BF Goodrich

Tyres

1,200

1998

Deere & Company

Farm Equipment

2,400

1998

AT&T

Telecommunications

18,000

1998

Compaq

IT

6,500

1998

Intel

IT

3,000

1998

Seagate

IT

10,000

1999

Chase Manhattan Bank

Banking

2,250

1999

Boeing

Aerospace

28,000

1999

Exxon-Mobil

Petroleum

9,000

2000

Lucent Technologies

IT

68,000

2000

Charles Schwab

IT

2,000

2001

Xerox

Copiers

4,000

2001

Hewlett Packard

IT

3,000

2001

AOL Time Warner

Entertainment

2,400

THE FIRST PHASE

Till the late-1980s, the number of firms that adopted downsizing was rather limited, but the
situation changed in the early-1990s. Companies such as General Electric (GE) and General
Motors (GM) downsized to increase productivity and efficiency, optimize resources and survive
competition and eliminate duplication of work after M&As. Some other organizations that made
major job cuts during this period were Boeing (due to its merger with McDonnell Douglas),
Mobil (due to the acquisition of Exxon), Deutsche Bank (due to its merger with Bankers Trust)
and Hoechst AG (due to its merger with Rhone-Poulenc SA).
According to analysts, most of these successful companies undertook downsizing as a purposeful
and proactive strategy. These companies not only reduced their workforce, they also redesigned
their organizations and implemented quality improvement programs. During the early and mid1990s, companies across the world (and especially in the US), began focusing on enhancing the
value of the organization as a whole. According to Jack Welch, the then GE CEO, "The ultimate
test of leadership is enhancing the long-term value of the organization. For leaders of a publicly

held corporation, this means long-term shareholder value." In line with this approach to
leadership, GE abandoned policy of lifetime employment and introduced the concept of
contingent employment. Simultaneously, it began offering employees the best training and
development opportunities to constantly enhance their skills and performance and keep pace with
the changing needs of the workplace.
During this period, many companies started downsizing their workforce to improve the image of
the firm among the stockholders or investors and to become more competitive. The chemical
industry came out strongly in favor of the downsizing concept in the early 1990s. Most chemical
and drug companies restricted their organizations and cut down their employee base to reduce
costs
and
optimize
resources.
As the perceived value of the downsized company was more than its actual value, managers
adopted downsizing even though it was not warranted by the situation. A few analysts blamed
the changes in the compensation system for executive management for the increase in the
number of companies downsizing their workforce in 1990s. In the new compensation system,
managers were compensated in stock options instead of cash. Since downsizing increased the
equity value (investors buy the downsizing company's stocks in hope of future profitability) of
the company, managers sought to increase their wealth through downsizing. Thus, despite
positive economic growth during the early 1990s, over 600,000 employees were downsized in
the
US
in
1993.
However, most companies did not achieve their objectives and, instead, suffered the negative
effects of downsizing. A survey conducted by the American Management Association revealed
that less than half of the companies that downsized in the 1990s saw an increase in profits during
that period. The survey also revealed that a majority of these companies failed to report any
improvements
in
productivity.
One company that suffered greatly was Delta Airlines, which had laid off over 18,000 employees
during the early 1990s. Delta Airlines realized in a very short time that it was running short of
people for its baggage handling, maintenance and customer service departments. Though Delta
succeeded in making some money in the short run, it ended up losing experienced and skilled
workers, as a result of which it had to invest heavily in rehiring many workers.
As investors seemed to be flocking to downsizing companies, many companies saw downsizing
as a tool for increasing their share value. The above, coupled with the fact that senior executive
salaries had increased by over 1000% between 1980 and 1995, even as the layoff percentage
reached its maximum during the same period, led to criticism of downsizing.
In light of the negative influence that downsizing was having on both the downsized and the
surviving employees, some economists advocated the imposition of a downsizing tax (on
downsizing organizations) by the government to discourage companies from downsizing. This
type of tax already existed in France, where companies downsizing more than 40 workers had to
report the same in writing to the labor department. Also, such companies had liable to pay high
severance fees, contribute to an unemployment fund, and submit a plan to the government
regarding the retraining program of its displaced employees (for their future employment). The
tax burden of such companies increased because they were no longer exempt from various

payroll

taxes.

However, the downsizing tax caused more problems than it solved. As this policy restrained a
company from downsizing, it damaged the chances of potential job seekers to get into the
company. This tax was mainly responsible for the low rate of job creation and high rates of
unemployment in many European countries, including France.
THE SECOND PHASE
By the mid-1990s, factors such as increased investor awareness, stronger economies, fall in
inflation, increasing national incomes, decrease in level of unemployment, and high profits,
reduced the need for downsizing across the globe. However, just as the downsizing trend seemed
to be on a decline, it picked up momentum again in the late-1990s, this time spreading to
developing countries as well.
This change was attributed to factors such as worldwide economic recession, increase in global
competition, the slump in the IT industry, dynamic changes in technologies, and increase in the
availability of a temporary employee base. Rationalization of the labor force and wage reduction
took place at an alarming rate during the late 1990s and early 21st century, with increased
strategic alliances and growing popularity of concepts such as lean manufacturing and
outsourcing
.
Criticism of downsizing and its ill-effects soon began resurfacing. Many companies suffered
from negative effects of downsizing and lost some of their best employees. Other problems such
as the uneven distribution of employees (too many employees in a certain division and
inadequate employees in another), excess workload on the survivors, resistance to change from
the survivors, reduced productivity and fall in quality levels also cropped up. As in the early
1990s, many organizations downsized even though it was not necessary, because it appeared to
be the popular thing to do.
Due to the loss of experienced workers, companies incurred expenditure on overtime pay and
employment of temporary and contract workers. It was reported that about half of the companies
that downsized their workforce ended up recruiting new or former staff within a few years after
downsizing because of insufficient workers or lack of experienced people. The US-based global
telecom giant AT&T was one such company, which earned the dubious reputation of frequently
rehiring its former employees because the retained employees were unable to handle the work
load.
AT&T frequently rehired former employees until it absorbed the 'shock' of downsizing. It was
also reported that in some cases, AT&T even paid recruitment firms twice the salaries of laid-off
workers to bring them back to AT&T. A former AT&T manager commented, "It seemed like
they would fire someone and [the worker] would be right back at their desk the next day."
Justifying the above, Frank Carrubba, Former Operations Director, AT&T, said, "It does not
happen that much, but who better to bring back than someone who knows the ropes?" Very few
people bought this argument, and the rationale behind downsizing and then rehiring former
employees/recruiting new staff began to be questioned by the media as well as the regulatory
authorities
in
various
parts
of
the
world.
Meanwhile, allegations that downsizing was being adopted by companies to support the

increasingly fat pay-checks of their senior executives increased. AT&T was again in the news in
this regard. In 1996, the company doubled the remuneration of its Chairman, even as over 40,000
employees were downsized. Leading Internet start-up AOL was also criticized for the same
reasons. The increase in salary and bonuses of AOL's six highest paid executive officers was
between 8.9% to 25.2% during 2000. The average increase in salary and bonus of each officer
was about 16%, with the remuneration of the CEO exceeding $73 million during the period.
Shortly after this raise, AOL downsized 2,400 employees in January 2001.
Following the demand that the executive officers should also share in the 'sacrifice' associated
with downsizing, some companies voluntarily announced that they would cut down on the
remuneration and bonuses of their top executives in case of massive layoffs. Ford was one of the
first companies to announce such an initiative. It announced that over 6,000 of its top executives,
including its CEO, would forgo their bonus in 2001. Other major companies that announced that
their top executives would forgo cash compensations when a large number of workers were laid
off were AMR Corp., Delta, Continental and Southwest Airlines. In addition to the above,
companies adopted many strategies to deal with the criticisms they were facing because of
downsizing.

TACKLING THE EVILS OF DOWNSIZING

During the early 21st century, many companies began offering flexible work arrangements to
their employees in an attempt to avoid the negative impact of downsizing. Such an arrangement
was reported to be beneficial for both employees as well as the organization. A flexible working
arrangement resulted in increased morale and productivity; decreased absenteeism and employee
turnover, reduced stress on employees; increased ability to recruit and retain superior quality
employees improved service to clients in various time zones; and better use of office equipment
and space. This type of arrangement also gave more time to pursue their education, hobbies, and
professional development, and handle personal responsibilities.
The concept of contingent employment also became highly popular and the number of
organizations adopting this concept increased substantially during the early 21st century.
According to the Bureau of Labor Statistics (BLS), US, contingent employees were those who
had no explicit or implicit contract and expected their jobs to last no more than one year. They
were hired directly by the company or through an external agency on a contract basis for a
specific
work
for
a
limited
period
of
time.
Companies did not have to pay unemployment taxes, retirement or health benefits for contingent
employees. Though these employees appeared on the payroll, they were not covered by the
employee handbook (which includes the rights and duties of employers and employees and
employment rules and regulations). In many cases, the salaries paid to them were less than these
given to regular employees performing similar jobs. Thus, these employees offered flexibility
without long-term commitments and enabled organizations to downsize them, when not required,
without much difficulty or guilt. Analysts commented that in many cases HR managers opted for
contingent employees as they offered the least resistance when downsized.

However, analysts also commented that while contingent employment had its advantages, it
posed many problems in the long run. In the initial years, when contingent employment was
introduced, such employees were asked to perform non-critical jobs that had no relation to an
organization's core business. But during the early 2000s, contingent employees were employed
in core areas of organizations. This resulted in increased costs as they had to be framed for the
job. Not only was training time consuming, its costs were recurring in nature as contingent
employees stayed only for their specified contract period and were soon replaced by a new batch
of contingent employees. Productivity suffered considerably during the period when contingent
employees were being trained. The fact that such employees were not very loyal to the
organization
also
led
to
problems.
Analysts also found that most contingent employees preferred their flexible work arrangements
and were not even lured by the carrot (carrot and stick theory of motivation) of permanent
employment offered for outstanding performance. In the words of Paul Cash, Senior Vice
President, Team America (a leasing company), "It used to be that you worked as a temp to
position yourself for a full-time job. That carrot is not there any more for substantial numbers of
temps who prefer their temporary status. They do not understand your rules, and if they are only
going to be on board for a month, they may never understand." With such an attitude to remain
outside the ambit of company rules and regulations, contingent employees reportedly failed to
develop a sense of loyalty toward the organization. Consequently, they failed to completely
commit
themselves
to
the
goals
of
the
organization.
According to some analysts, the contingent employment arrangement was not beneficial to
contingent employees. Under the terms of the contract, they were not eligible for health,
retirement, or overtime benefits. Discrimination against contingent employees at the workplace
was reported in many organizations. The increasing number of contingent employees in an
organization was found to have a negative effect on the morale of regular employees. Their
presence made the company's regular employees apprehensive about their job security. In many
cases regular employees were afraid to ask for a raise or other benefits as they feared they might
lose
their
jobs.
Though contingent employment seemed to have emerged as one of the solutions to the ills of
downsizing, it attracted criticism similar to those that downsizing did. As a result, issues
regarding employee welfare and the plight of employees, who were subject to constant
uncertainty and insecurity regarding their future, remained unaddressed. Given these
circumstances, the best option for companies seemed to be to learn from those organizations that
had been comparatively successful at downsizing.
LESSONS FROM THE 'DOWNSIZING BEST PRACTICES' COMPANIES
In the late 1990s, the US government conducted a study on the downsizing practices of firms
(including major companies in the country). The study provided many interesting insights into
the practice and the associated problems. It was found that the formulation and communication
of a proper planning and downsizing strategy, the support of senior leaders, incentive and
compensation planning and effective monitoring systems were the key factors for successful
downsizing.
In many organizations where downsizing was successfully implemented and yielded positive

results, it was found that senior leaders had been actively involved in the downsizing process.
Though the downsizing methods used varied from organization to organization, the active
involvement of senior employees helped achieve downsizing goals and objectives with little loss
in quality or quantity of service. The presence and accessibility of senior leaders had a positive
impact on employees - those who were downsized as well as the survivors. According to a best
practice company source, "Managers at all levels need to be held accountable for - and need to
be committed to - managing their surplus employees in a humane, objective, and appropriate
manner. While HR is perceived to have provided outstanding service, it is the managers'
behavior that will have the most impact." In many companies, consistent and committed
leadership helped employees overcome organizational change caused by downsizing.
HR managers in these companies participated actively in the overall downsizing exercise. They
developed a employee plan for downsizing, which covered issues such as attrition management
and workforce distribution in the organization. The plan also included the identification of skills
needed by employees to take new responsibilities and the development of training and reskilling
programs for employees. Since it may be necessary to acquire other skills in the future, the plan
also
addressed
the
issue
of
recruitment
planning.
Communication was found to be a primary success factor of effective downsizing programs.
According to a survey conducted in major US companies, 79% of the respondents revealed that
they mostly used letters and memorandums from senior managers to communicate information
regarding restructuring or downsizing to employees. However, only 29% of the respondents
agreed
that
this
type
of
communication
was
effective.
The survey report suggested that face-to-face communication (such as briefings by managers and
small group meetings) was a more appropriate technique for dealing with a subject as traumatic
(to employees) as downsizing. According to best practice companies, employees expected senior
leaders to communicate openly and honestly about the circumstances the company was facing
(which
led
to
downsizing).
These companies also achieved a proper balance between formal and informal forms of
communication. A few common methods of communication adopted by these companies
included small meetings, face to face interaction, one-on-one discussion, breakfast gatherings, all
staff meetings, video conferencing and informal employee dialogue sessions, use of newsletters,
videos, telephone hotlines, fax, memoranda, e-mail and bulletin boards; and brochures and
guides to educate employees about the downsizing process, employee rights and tips for
surviving
the
situation.
Many organizations encouraged employees to voice their ideas, concerns or suggestions
regarding the downsizing process. According to many best practice organizations, employee
inputs contributed considerably to the success of their downsizing activities as they frequently
gave valuable ideas regarding the restructuring, increase in production, and assistance required
by
employees
during
downsizing.
Advance planning for downsizing also contributed to the success of a downsizing exercise. Many
successful organizations planned in advance for the downsizing exercise, clearly defining every
aspect of the process. Best practice companies involved employee union representatives in

planning. These companies felt it was necessary to involve labor representatives in the planning
process
to
prevent
and
resolve
conflicts
during
downsizing.
According to a survey report, information that was not required by companies for their normal
day-to-day operations, became critical when downsizing. This information had to be acquired
from internal as well as external sources (the HR department was responsible for providing it).
From external sources, downsizing companies needed to gather information regarding successful
downsizing processes of other organizations and various opportunities available for employees
outside the organization. And from internal sources, such companies need to gather demographic
data (such as rank, pay grade, years of service, age, gender and retirement eligibility) on the
entire workforce. In addition, they required information regarding number of employees that
were normally expected to resign or be terminated, the number of employees eligible for early
retirement, and the impact of downsizing on women, minorities, disabled employees and old
employees.
The best practice organizations gathered information useful for effective downsizing from all
possible sources. Some organizations developed an inventory of employee skills to help
management take informed decisions during downsizing, restructuring or staffing. Many best
practice organizations developed HR information systems that saved management's time during
downsizing or major restructuring by giving ready access to employee information.
The major steps in the downsizing process included adopting an appropriate method of
downsizing, training managers about their role in downsizing, offering career transition
assistance to downsized employees, and providing support to survivors. The various techniques
of downsizing adopted by organizations included attrition, voluntary retirement, leave without
pay or involuntary separation (layoffs). According to many organizations, a successful
downsizing process required the simultaneous use of different downsizing techniques. Many
companies offered assistance to downsized employees and survivors, to help them cope with
their
situation.
Some techniques considered by organizations in lieu of downsizing included overtime
restrictions, union contract changes, cuts in pay, furloughs, shortened workweeks, and job
sharing. All these approaches were a part of the 'shared pain' approach of employees, who
preferred to share the pain of their co-workers rather than see them be laid-off. Training provided
to managers to help them play their role effectively in the downsizing process mainly included
formal classroom training and written guidance (on issues that managers were expected to deal
with, when downsizing). The primary focus of these training sessions was on dealing with
violence
in
the
workplace
during
downsizing.
According to best practice companies, periodic review of the implementation process and
immediate identification and rectification of any deviations from the plan minimized the adverse
effects of the downsizing process. In some organizations, the progress was reviewed quarterly
and was published in order to help every manager monitor reductions by different categories.
These categories could be department, occupational group (clerical, administrative, secretarial,
general labor), reason (early retirement, leave without pay, attrition), employment equity group
(women, minorities, disabled class) and region. Senior leaders were provided with key indicators

(such as the effect of downsizing on the organizational culture) for their respective divisions.
Some organizations tracked the progress and achievement of every division separately and
emphasized the application of a different strategy for every department as reaction of employees
to
downsizing
varied
considerably
from
department
to
department.
Though the above measures helped minimize the negative effects of downsizing, industry
observers acknowledged the fact that the emotional trauma of the concerned people could never
be eliminated. The least the companies could do was to downsize in a manner that did not injure
the dignity of the discharged employees or lower the morale of the survivors.
QUESTIONS FOR DISCUSSION

1. Explain the concept of downsizing and describe the various downsizing techniques. Critically
evaluate the reasons for the increasing use of downsizing during the late 20th century and the
early 21st century. Also discuss the positive and negative effects of downsizing on organizations
as
well
as
employees
(downsized
and
remaining).
2. Why did contingent employment and flexible work arrangements become very popular during
the early 2000s? Discuss. Evaluate these concepts as alternatives to downsizing in the context of
organizational
and
employee
welfare.
3. As part of an organization's HR team responsible for carrying it through a downsizing
exercise, discuss the measures you would adopt to ensure the exercise's success. Given the
uncertainty in the job market, what do you think employees should do to survive the trauma
caused by downsizing and prepare themselves for it?

1. What is the meaning of the acronym HRM?

a) Humanistic Resource Management.
b) Human Resource Management.
c) Humane Resource Management.
d) Human Relations Management.
2. Which of the following statements is false?
a) Organisations have been subject to a raft of organisational change programmes.
b) Organisations are now generally focusing upon domestic rather than international
markets.
c) Organisations are now less hierarchical in nature.
d) Organisations have adopted more flexible forms.

Which of the following terms was also used before the language of modern
HRM? Select all that apply.
a) Personal management.
b) Labour relations.
c) Industrial relations.
d) Personnel management.

CHAPTER IV:
4.1 Introduction
Training is the most important function that directly contributes to the development of human
resources, but training has been the most neglected function in organizations today. If human
resources have to be developed, the organisation should create conditions in which people
acquire new knowledge and skills and develop healthy patterns of behaviour and styles. One of
the main mechanisms of achieving this environment is institutional training.
Training is essential because technology is developing continuously and at a fast rate. Systems
and practices get outdated soon due to new discoveries in technology, including technical,
managerial and behavioural aspects. Organisations that do not develop mechanisms to catch up
with and use the growing technology soon become stale. However, developing individuals in the
organisation can contribute to its effectiveness of the organisation.
Such development, however, should be monitored so as to be purposeful. Without proper
monitoring, development is likely to increase the frustration of employees if when, once their
skills are developed, and expectations raised, they are not given opportunities for the application
of such skills. A good training sub-system would help greatly in monitoring the directions in
which employees should develop in the best interest of the organisation. A good training system
also ensures that employees develop in directions congruent with their career plans.
4.2 Evaluation of Training
Many organisations, especially industries, have been concerned with the difficult but critical
question of evaluation. Training managers or organisers are also concerned with this question.
All books on training have dealt with this issue, but no satisfactory and comprehensive accounts
of evaluation are available.
For the preparation of a comprehensive conceptual framework of training evaluation and an
effective strategy of evaluating training programmes and system, it is necessary to consider
several aspects of evaluation. The basic question in this regard relates to the value of evaluation:
why evaluate training? Hamblin has discussed this question very wellthat evaluation helps in
providing feedback for improvement (and better control) of training. When we discuss feedback
and improvement, two relevant questions are raised: feedback to whom? Improvement of what?
The former question relates to the main client groups, and the latter to the main dimensions and
specific areas of evaluation.
Two additional questions are: how should evaluation be done? What specific ways should be
adopted for it? These questions relate to the design and techniques of evaluation, respectively.
Main Clients
There are several partners in the training act and process, and all of them are the client of
evaluation. Their needs for feedback and use of feedback for improvement (control) will
naturally be different with some overlapping. There are four main partners in training (and
clients for evaluation):
1. The participants or learners (P)
2. The training organisation or institute (I) including

(a) Curriculum planners (CP)

(b) Programme designers (PD)
(c) Programme managers (PM)
3. The faculty or facilitators or trainers (F)
4. The client organisation, the ultimate user and financier of training (O)
Literature on training evaluation has not paid due attention to this respect.
Dimensions of Evaluation
Attention has been given to the main dimensions of training, and most of the suggested models
are based on these. Four main dimensions have usually been suggested: contexts, inputs, outputs,
and reaction. The last dimension is not in the same category as the other three. Reaction
evaluation can be of contextual factors, training inputs, and outcomes of training.
In all discussions of training evaluation the most neglected aspect has been the training process
which cannot be covered by training inputs. The climate of the training organisation, the
relationship between participants and trainers, the general attitudes and approaches of the
trainers, training methods, etc., are very important aspects determining the effectiveness of
training. Evaluation of the training process, therefore, should constitute an important element.
We may thus have four main dimensions of evaluation: evaluation of contextual factors (C),
evaluation of training inputs (I), evaluation of training process (P), and evaluation of training
outcomes (O).
Areas of Evaluation
The various areas of training evaluation need more attention and elaboration. Seven main areas,
with some sub-areas under each, are suggested for consideration. These are shown in Exhibit
13.1 in sequential order; the exhibit also shows the conceptual model of training, by relating the
areas to the dimensions. This model is based on the following assumptions.
Design of Evaluation
The overall design of evaluation helps in planning the evaluation strategy in advance. Evaluation
designs can be classified in various ways. Two important dimensions, however, are the time
when evaluation is done (or data are collected), and the group, or groups involved in evaluation
(or data collection). Data on relevant aspects may either be collected only once after the training
is over, or on two (or several) occasions before training interventions, and later again, after the
training is over. On the other hand, only one or more group that undergoes training may be
involved in evaluation. These methods give us four basic designs of evaluation.
Longitudinal design (L) is one in which data are collected from the same group over a length of
time , usually on several occasions, but at least twice, i.e., before and after training. In the latter
case, it is called before-after design.
In ex post facto design (E), data are collected from the group which has been exposed to training
only after the training is over. Obviously, this design has inherent limitations in drawing
conclusions from evaluation. But in many practical situations this is reality, and is
a challenge for evaluation designers to devise ways of extracting the most in such a design.

Comparative survey design (S) may involve collection of data from many other groups, in
addition to the group exposed to training. In this design also there is no control and there are
limitations in drawing conclusions.
The design with a great deal of control and sophistication is the matched group design (M).
Several variations of this design can be used. Another group, matched on some significant
dimensions with the group being exposed to training, can be identified, and data can be collected
from both, once (ex post facto) or several times (longitudinal). Or, matched sampling can be
selected for a comparative or cross-sectional survey. The design can be made very sophisticated
with several matched groups (one with training treatment, another with a different type of
treatment, and the third with no treatment, combined with E and L designs, and making it a
blind study investigators not knowing which group is of what category). Both experimental
and quasi-experimental designs can be used.
Enough literature on these designs is available. Hamblin has referred to some of these, but not in
a systematic way. He makes a distinction between the scientific approach (rigorous evaluation
to test hypotheses of change) and the discovery approach (evaluation to discover intended and
unintended consequences). This distinction does not serve any purpose and is, in fact,
misleading. There can be variations in the degree of sophistication and rigour. Also, there may be
different objectives of evaluation. Evaluation may be used as part of the training process to
provide feedback and plan for using feedback. Evaluation may be made to find out what changes
have occurred in terms of scope, substance and sustenance in the letter case, the design will be
more complex and more sophisticated. As already discussed, the purpose of evaluation will
began on the main clients of evaluation and what they want to know.
Evaluation Techniques
These can be classified in various ways. One way to classify them into response (reactive)
techniques (R). Techniques requiring some kind of response produce some reaction in those who
are responding. The very act of asking people questions (orally or in a written form) may
produce change. Since they produce reactions they are called response or reactive techniques.
Other techniques can be called unobtrusive measures or secondary source data technique(s); the
word unobstrusive being borrowed from Webb et al. (1970). These make use of available data
or secondary source data. Hamblin calls them keyhole techniques, thereby expressing his
disapproval of such measures. There is no reason to consider such measures as unethical. All
indicators, indexes, etc., are such measures. For example, to measure whether general morale has
improved in a unit, it may be more useful to use secondary source data like examining figures of
absenteeism rather than asking questions. Similarly, an unobtrusive measure or secondary source
data may be much more creative and imaginative and need to be discovered and used more often
for evaluation. However, if some data are collected about individuals behaviour (whether by
asking others or unobtrusively) without their knowledge and approval, which may be unethical.
This applies as much to responsive techniques as to unobtrusive ones, because collecting
information from a third person without the approval or knowledge of the person being studied,
is unethical.

Another non-reactive technique, a very old one, is that of observation (O). Observation can also
become a reactive technique if persons being observed know that they are being observed.
The method of data collection for response or reaction techniques (R) may include interviews,
written reactions (questionnaires, scales, open-ended forms), and projective techniques. One
additional method in this category worth mentioning is group discussion and consensus report. In
many cases, discussion by a small group consisting of individuals having experience and with a
adequate knowledge about it may give better evaluation results than figures calculated from
routine responses.
Advances in scaling techniques have made the greatest contribution to the development of
evaluation techniques. Techniques based on well-prepared instruments to measure various
dimensions are being increasingly used. Various methods of scaling can be used to develop
effective evaluation techniques. The three well-known scaling techniques associated with
Thurstone, Likert, and Guttman, can be imaginatively used in preparing new evaluation tools.
More recent developments have opened new vistas for sophistication in evaluation work.
Hamblin has done as excellent job in discussing the studies in training evaluation to illustrate the
techniques used. His book will be found very useful for this. Whitelaw has also cited some
studies but has not been able to integrate them. At the end of his book, Hamblin has summarised
the various techniques discussed under his five-level model.
Reaction:Session: Reaction scales, reactions notebooks and participation, observers records,
studies of inter-trainee relationships, end-of-course reaction form, post-reactions questionnaires
and interviews, and expectations evaluation.
Learning: Pre-course questionnaires to instructors; programmed instruction; objective tests,
essay-type written or oral examinations, assessment by trainees of knowledge changes; skill and
task analyses, standardised tests of skill; tailor-made techniques for evaluating skill, assessment
by trainees of skill changes; standardised attitude questionnaires; tailor-made attitude
questionnaires; semantic differential scales; and group feedback analysis.
Job Behaviour: Activity sampling; SISCO and Wirdenius techniques; observers diaries; selfdiaries with interview and questionnaires; appraisal and self-appraisal; critical incident
technique; observation of specific incidents, depth interviews and questionnaires; open-ended
depth techniques; and prescription for involving management in the training process.
Organisation: Indexes of productivity, labour turnover, etc., studies of organisational climate;
use of job behavioural objectives to study behaviour of non-trainees; and work flow studies.
Ultimate Value: Cost-benefit analysis and human resources accounting.
The Concept of Human Resource Development
Increasingly, more importance is being given to people in organisations. This is mainly
because organisations are realising that human assets are the most important of all assets. This
emphasis can also be partly attributed to the new emerging values of humanism and
humanisation. Moreover, with the increased emphasis on creativity, and autonomy, which people
are increasingly acquiring and enjoying in the society, the expectations of people are fast
changing. People cannot be taken for granted any more.
In the past, people working in organisations were given attention merely in administering the
necessary conditions of work. The traditional concept of personnel management was based on a

very narrow view of human motivation. The basic assumption underlying that view was that
human beings are primarily motivated by comforts and salary, and necessary attention may be
given to rationalise these, so that people do not get dissatisfied. Most of the attention, therefore,
was on administration of salary and other benefits. It is now being increasingly realised that
people working in organisations are human beings. They have their own needs, motivation and
expectations, and that their contribution to the organisation is much more than that of any other
resource being used.
The concept of Human Resource System (HRS) assumes that human beings are a great asset to
an organisation. They are not merely necessary evils to be reckoned with; in fact they can
contribute a great deal to the achievement of organizational goals. This positive view of people
working in the organisations as an asset with unlimited potential is the core of the concept of the
human resource system.
Another underlying concept of the system is that investment in human beings is necessary.
Investment for increasing the resource is important, and the more an organisation invests in its
human resources, the greater the return from the investment is likely to be. This realisation of the
need for continuous investment, and the possibility of substantial return, is an important concept
of the human resource system. There is also one more reason why investment in human resource
is necessary. It is also being realised that organisations have an obligation to the society, that
they should also contribute to the development of people, and operate with the new values of
treating people as human beings, as well as contribute to this value of creating traditions and
culture of respecting people as human beings.
Human resource development in the organisation context is a process by which the employees of
an organisation are helped, in a continuous and planned way to:
1) Acquire or sharpen capabilities required to perform various functions associated with their
present or expected future roles;
2) Develop their general capabilities as individuals and discover and exploit their own inner
potentials for their own and/or organisational development purposes; and
3) Develop an organisational culture in which supervisor-subordinate relationships, teamwork
and collaboration among sub-units are strong and contribute to the professional well being,
motivation and pride of employees.
This definition of HRD is limited to the organisational context. In the context of a state or nation
it would differ. HRD is a process, not merely a set of mechanisms and techniques. The
mechanisms and techniques such as performance appraisal, counselling, training, and
organization development interventions are used to initiate, facilitate, and promote this process in
a continuous way. Because the process has no limit, the mechanisms may need to be examined
periodically to see whether they are promoting or hindering the process.
Organisations can facilitate this process of development by planning for it, by allocating
organisational resources for the purpose, and by exemplifying an HRD philosophy that values
human beings and promotes their development.
THE NEED FOR HRD

HRD is needed by any organisation that wants to be dynamic and growth-oriented or to succeed
in a fast-changing environment. Organisations can become dynamic and grow only through the
efforts and competencies of their human resources. Personnel policies can keep the morale and
motivation of employees high, but these efforts are not enough to make the organisation dynamic
and take it in new directions. Employee capabilities must continuously be acquired, sharpened,
and used. For this purpose, an enabling organisational culture is essential. When employees
use their initiative, take risks, experiment, innovate, and make things happen, the organisation
may be said to have an enabling culture.
Even an organisation that has reached its limit of growth, needs to adapt to the changing
environment. No organisation is immune to the need for processes that help to acquire and
increase its capabilities for stability and renewal.
HRD FUNCTIONS
The core of the concept of HRS is that of development of human beings, or HRD. The concept of
development should cover not only the individual but also other units in the organisation. In
addition to developing the individual, attention needs to be given to the development of stronger
dyads, i.e., two-person groups of the employee and his boss. Such dyads are the basic units of
working in the organisation. Besides several groups like committees, task groups, etc. also
require attention. Development of such groups should be from the point of view of increasing
collaboration amongst people working in the organisation, thus making for an effective decisionmaking. Finally, the entire department and the entire organisation also should be covered by
development.
Their development would involve developing a climate conducive for their effectiveness,
developing self-renewing mechanisms in the organisations so that they are able to adjust and
proact, and developing relevant processes which contribute to their effectiveness.
Hence, the goals of the HRD systems are to develop:
The capabilities of each employee as an individual.
The capabilities of each individual in relation to his or her present role.
The capabilities of each employee in relation to his or her expected future role(s).
The dyadic relationship between each employee and his or her supervisor.
The team spirit and functioning in every organisational unit (department, group, etc.).
Collaboration among different units of the organisation.
The organisations overall health and self-renewing capabilities which, in turn, increase
the enabling capabilities of individuals, dyads, teams, and the entire organisation.
Such a concept of development will focus on the different units available in the organisation for
different purposes. The individual and his role are important units for some purposes. For others,
groups, departments and the entire organisation are more relevant units. The concept of
development should therefore cover all such possible units.
Development in this sense becomes a massive effort. While training may play the major role in
designing and monitoring development efforts in the organisation, other parts of the organisation
have to share in such an effort. In fact, the person, or the groups for whom the efforts of

development are made, is also a partner in this process of development. The four partners or
agents of development can be identified as: (a) the person or role, (b) the immediate boss of the
person, (c) the human resource management department, and (d) the organisation. The various
foci and the four agents of development are shown in Exhibit 1.
Exhibit 1 The Development Dimensions of the Personnel Function
1) Analysing the Role
a) Task analysis
b) Key performance areas
c) Critical attributes
d) Job evaluation
2) Matching the Role and the Person
a) Selection/recruitment
b) Placement
c) Potential appraisal
d) Promotion
e) Career Development, career and succession planning
3) Developing the Persons in the Role
a) Performance appraisal
b) Feedback and counselling
c) Mentoring
d) Career development
e) Training
4) Developing the Role for the Person
a) Job rotation
b) Job enrichment/ redesigning
c) Role effectiveness and efficacy
5) Developing Equitability
a) Management of salary and amenities
b) Management of incentives and rewards
c) Standardising and administering procedures
6) Developing Self-renewing Capability
a) Communication
b) Organisation development

c) Organisational learning
d) Developing culture and climate
7) Coping with Collective Power

1) Analysing the Role

One of the main aspects of HRM is to analyse the role in terms of responsibilities or key
functions/ performance areas of the role, and the competencies required to perform the role
effectively.
2) Matching the Role and the Person
Once the organisation is clear about the dimensions of the roles or the jobs, it tries to get the best
people for these jobs. After people are recruited they are put in different places. Recruitment and
placement are important aspects of HRM. Placement is useful for giving varied experiences to
people being recruited. Another aspect of matching role and person is reflected in potential
appraisal, finding out who has potential to match the requirement of the job. Unit 10 deals with
potential appraisal.
Obviously, the next step is promotion of people by placing them in appropriate roles for which
the organization is searching people. Promotion is only one part of longterm and succession
planning.
3. Developing the Persons in the Role
Individuals develop not only through training, but, and in fact more through effective
supervision, by helping them to understand their strengths so that they can leverage them for
better performance. Similarly, they are helped to find out in what they have to be more effective
in their jobs. Performance appraisal is not complete unless the performance is properly reviewed
and feedback is given, and people are helped to understand their strengths and weaknesses. We
are discussing this aspect in this block, along with performance coaching or counseling. It is also
important to give opportunity to young and bright persons to deal with their problems; such help
is provided generally by senior persons who are not necessarily related in job with the person
seeking help.
4) Developing the Role for the Person
Very little attention has been given to role, although job rotation is being practiced in most of the
organizations, and some organisations have also tried out job enrichment based on Herzbergs
concept of motivators. Unit 15 discusses development of roles, including role effectiveness and
role efficacy. Traditionally HR function has given attention to individual employees and teams
have been generally neglected. It is evident now that most of the work is done by teams, and
team effectiveness is important for all organizations.
5) Developing Equitability
Satisfaction level of employees depends to a great extent on their perceived justice being done to
them without any discretion, as reflected in practices like management of compensation,
rewards, and various amenities. People have high performance and develop competencies only if

these are rewarded by the organisation. Reward does not mean financial reward only, many
rewards may be non-financial also. Equitability can also be developed by standardising
administrative procedures, so that people do not have any feelings that decisions are subjective.
6) Developing Self-renewing Capability
An organisation should be concerned not only with its growth, but also with its health. It needs to
diagnose its problems from time-to-time and take steps to develop new competencies to cope
with the various problems and challenges it would be facing. This can be done through action
research that is concerned with development of competencies through effective teams to
diagnose the problems and initiate the process of collaborative work to deal with such problems.
In Organisation Development (OD), the focus is on developing process competency to increase
organisation effectiveness.
OD aims at maintaining profiles of organisational health, monitoring organizational health,
assisting sick departments, helping interested units and departments in self-renewal, conflict
management, creation of strong teams and so on, and establishing processes that build a climate
to promote enabling capabilities in the organisation. OD in the earlier years, mainly in the 1960s
(and partly in the 1970s) was team/group-based. Most of the OD interventions in organisations
started with deep process work beginning at the top level. OD has now widened considerably, it
is no more confined to managers, it has been attempted with workers also.
HRD, which means consciously and continually collecting data in order to understand the
various issues, and designing on-going interventions based on such data. For example, data were
collected. and used effectively in L&T on the working of the appraisal system including
counseling. Such data can help to improve implementation of the appraisal system. HRD related
research is important; it helps in analysing data and information generated by the HRD subsystems. HRD in L&T has already established the orientation and several other organisations are
in the process of introducing such Research-orientation. For example, data related to HRD are
being systematically analysed in Eicher on a regular basis.
CHANGE MANAGEMENT
Change happens. And while we can't control much of the world changing around us, we can control
how we respond. We can choose to anticipate and embrace changes or resist them. Resisting change
is like trying to push water upstream. Generally we're quick to point to others who resist change. It's
much harder to recognize or admit to our own change resistance.
Some people call change "progress" and celebrate the improvements that it brings. Others curse
those same changes and wish for the good old days. Same changes, different responses. The choice is
ours: We can be leaders, or we can be followers.
Change Management Definition
Change Management is an organized, systematic application of the knowledge, tools, and resources of
change that provides organizations with a key process to achieve their business strategy.
Change management is the process, tools and techniques to manage the people side of business

change to achieve the required business outcome, and to realize that business change effectively
within the social infrastructure of the workplace.
Operational Definition of Change Management
"Effectively transforming organizations to pursue new directions, goals, or structures." Other words
that speak to effective change are 'evolve, innovate, vision, power'.
What Provokes "Organizational Change"?
Change should not be done for the sake of change - it's a strategy to accomplish some overall goal.
Usually organizational change is provoked by some major outside driving force, e.g., substantial cuts
in funding, address major new markets/clients, need for dramatic increases in productivity/services,
etc. Typically, organizations must undertake organization-wide change to evolve to a different level in
their life cycle, e.g., going from a highly reactive, entrepreneurial organization to more stable and
planned development. Transition to a new chief executive can provoke organization-wide change
when his or her new and unique personality pervades the entire organization.
Why Does Change Need To Be Managed?
You must address the whole business change, not just the individual components. Business change is
complex because of the interdependencies between the business environment, the organisation, its
people and supporting technologies; any change in one aspect will affect one or more of the others.
Cultural change is the most important consideration. For example, about 80% of the effort and
resources required for successful IT-related change are - or should be - deployed on the 'soft' aspects
of business change, such as changing behaviours and providing training at the right time; only 20% is
required for the IT. Similarly, the cost of a new building is only a small part of the total cost of change
required for new ways of working.
Business Dimension of Change
The business dimension of change includes the typical project elements.
*
Business need or opportunity is identified.
*
Project is defined (scope and objectives).
*
Business solution is designed (new processes, systems and organizational structure).
*
New processes and systems are developed.
*

Solution is implemented into the organization.

These are the standard elements of a business change that managers feel most comfortable
managing.
People Dimension of Change
The people dimension of change is how employees experience the change process. Research shows
that problems with this dimension of change are the most commonly cited reason for project failures.
In a study with 248 companies, effective change management with employees was listed as one of
the top-three overall success factors for the project. Helping managers be effective sponsors of
change was considered the most critical success factor overall.
Effective management of the people dimension of change requires managing five key phases that
form the basis of the ADKAR model: *
Awareness of the need to change
*
Desire to participate and support the change
*
Knowledge of how to change (and what the change looks like)
*
Ability to implement the change on a day-to-day basis
*
Reinforcement to keep the change in place
Successful change happens when both dimensions of change occur simultaneously. Since many
change projects experience resistance from managers and employees, their progress on this people
dimension stalls. This is why change management is often cited as the most important success factor
for large change projects. The ADKAR model presented in this article is a tool to understand and
facilitate this people dimension of change.
The Seven Principles of Successful Change
*
Accept your worth and acknowledge others' worth. Accepting and acknowledging worth is the
foundation of successful change.
*
Generate trust. When there is trust between two or more people, change is more readily accepted.

Being trusted and trusting others allows you and others to be positive, productive individuals. Trust is
the centerpiece of successful change.
*
Learn by empathy. Those who continuously learn about themselves, others, work and life have a
greater capacity for change. By observing others, broadening interests and understanding different
perspectives, you can gain an instinctive understanding of change. Connect to change by daily
learning.
*
Embrace change. Change is inevitable and appears to be increasing at exponential rates. You can
either resist change or accept it.
*
Unleash the synergy. Team synergy is the result of two or more people valuing and trusting each
other. When two or more people produce ideas, they ultimately make improvements that are
significantly greater than would have been possible separately.
*
Discover champions, depend on masters and find a sage. Effective change will be steered by more
than a leader. The environment of change will eliminate autocratic supervision. Instead, it will seek
champions, masters and sages to foster change.
*
Liberate decision-making. Change resulting from one person's decisions rarely works. Share decisionmaking with those around you. Empower them. Collective ownership in decisions promotes change.
How Is Organization-Wide Change Best Carried Out?
Successful change must involve top management, including the board and chief executive. Usually
there's a champion who initially instigates the change by being visionary, persuasive and consistent. A
change agent role is usually responsible to translate the vision to a realistic plan and carry out the
plan. Change is usually best carried out as a team-wide effort. Communications about the change
should be frequent and with all organization members. To sustain change, the structures of the
organization itself should be modified, including strategic plans, policies and procedures. This change
in the structures of the organization typically involves an unfreezing, change and re-freezing process.
The best approaches to address resistances are through increased and sustained communications and
education. For example, the leader should meet with all managers and staff to explain reasons for the
change, how it generally will be carried out and where others can go for additional information. A plan
should be developed and communicated. Plans do change. That's fine, but communicate that the plan
has changed and why. Forums should be held for organization members to express their ideas for the
plan. They should be able to express their concerns and frustrations as well.
Skills Needed

Managing the kinds of changes encountered by and instituted within organizations requires an
unusually broad and finely honed set of skills, chief among which are the following.
Political Skills
Organizations are first and foremost social systems. Without people there can be no organization.
Lose sight of this fact and any would-be change agent will likely lose his or her head. Organizations
are hotly and intensely political. And, as one wag pointed out, the lower the stakes, the more intense
the politics. Change agents dare not join in this game but they had better understand it. This is one
area where you must make your own judgments and keep your own counsel; no one can do it for
you.
Analytical Skills
Make no mistake about it, those who would be change agents had better be very good at something,
and that something better be analysis. Guessing won't do. Insight is nice, even useful, and sometimes
shines with brilliance, but it is darned difficult to sell and almost impossible to defend. A lucid,
rational, well-argued analysis can be ignored and even suppressed, but not successfully contested
and, in most cases, will carry the day. If not, then the political issues haven't been adequately
addressed.
People Skills
As stated earlier, people are the sine qua non of organization. Moreover, they come characterized by
all manner of sizes, shapes, colors, intelligence and ability levels, gender, sexual preferences, national
origins, first and second languages, religious beliefs, attitudes toward life and work, personalities, and
priorities - and these are just a few of the dimensions along which people vary. We have to deal with
them all.
System Skills
There's much more to this than learning about computers, although most people employed in today's
world of work do need to learn about computer-based information systems. For now, let's just say
that a system is an arrangement of resources and routines intended to produce specified results. To
organize is to arrange. A system reflects organization and, by the same token, an organization is a
system.
Business Skills
Simply put, you'd better understand how a business works. In particular, you'd better understand how
the business in which and on which you're working works. This entails an understanding of money where it comes from, where it goes, how to get it, and how to keep it. It also calls into play
knowledge of markets and marketing, products and product development, customers, sales, selling,
buying, hiring, firing, EEO, AAP, and just about anything else you might think of.
Basic Change Management Strategies
Empirical-Rational
People are rational and will follow their self-interest - once it is revealed to them. Change is based on
the communication of information and the proffering of incentives.

Normative-Re educative
People are social beings and will adhere to cultural norms and values. Change is based on redefining
and reinterpreting existing norms and values, and developing commitments to new ones.
Power-Coercive
People are basically compliant and will generally do what they are told or can be made to do. Change
is based on the exercise of authority and the imposition of sanctions.
Environmental-Adaptive
People oppose loss and disruption but they adapt readily to new circumstances. Change is based on
building a new organization and gradually transferring people from the old one to the new one.
Ethical Issues in Implementation
Change agents often confront issues of integrity in their interactions with organizations. Five types of
ethical dilemmas include misrepresentation and collusion, misuse of data in change efforts,
manipulation and coercion, value and goal conflict, and technical ineptness.
Some managers may implement their personal change agenda at the expense of solid diagnosis of the
organization's needs. Still others may promise more than they can deliver. Some consultants fail to
build ways of institutionalizing the change into their processes so the organization can continue to rely
on (and pay) them.
Organizational leaders, as well as internal and external consultants, should ensure that the selection
and implementation of change strategies respond to well-documented organizational and individual
needs. They must also ensure that the change process respects the rights of individuals in the
workplace.
Managing Others' Expectations
The argument is that managing change is really managing others' expectations: shareholders and
stakeholders in the firm. Not only do you have to manage those well, but you must be aware of the
limitations of others to manage expectations within their respective organizations. Do not be lulled
into a sense of security because you believe you have managed other party's expectations very well.
You must make sure that they too "can and are" managing others' expectations well.
Whether it is your point of contact at your lending institution or the janitor who cleans your offices,
you must understand that each and every individual inside and outside of your organization is
managing expectations in their own way with their supervisors, peers, and subordinates. You must
understand that they may not be managing expectations well, and in most cases, aren't intentionally.
You must make every effort to communicate up and down the organization as well as outside the
organization to the various constituencies of your stakeholders if you want to minimize the potential
damage from other's inabilities or agendas.
Communicate openly, frequently, and consistently, up and down the various organizations that have

stakeholder expectations of you and your firm, and internally within your own firm. Make sure their
expectations are in line with reality and are connected to what you have put forward. If there is mismanagement or mis-information behind the scenes by others, this will help overcome "smoke and
mirror" problems created by them. Remember, generally, people do not like surprises. Do not
"blindside" others, nor be "blindsided" by them, from expectation variances. Manage expectations well
for success.
The Challenges of Change
The signs of the shifting bedrock of our economic structure appear in the daily challenges faced as we
re-design, re-tool and re-invent ourselves to keep up with uncertain realities.
We understand that there are three conceptual challenges of change. These challenges may manifest
themselves under different names or other guises but are essentially the challenges of: *
Leadership - changing the running of an organization from a command and control nature of
management to the nurturing and motivational nature of leadership.
*
Focus - making business choices to bring alignment and focus to the organization.
*
Commitment - creating commitment to the future of the enterprise throughout the organization.
Each of these challenges is unique, yet they are simultaneously independent and interrelated.
Overcoming any one independently is insufficient for realizing sustainable change. For change to be
successful in the knowledge economy, an organization has to overcome all three challenges.
Case Study
BMW Group
To cope with the huge demand for the new MINI, BMW Group employed contract-manufacturing
professionals to transform the culture of its production plant in Oxford. These manufacturing experts
were engaged as performance enhancement coaches. They helped BMW introduce team working into
the state-of-the-art factory, in a bid to get staff more involved in the decision-making process and
working more effectively together. Nine months on and the figures speak for themselves.
Absenteeism and costs per car have dramatically fallen - and output has increased by 40%.
Conclusion
Recognize that both the engineering and psychological aspects must be considered for successful
business change. Change management is the process, tools and techniques to manage the peopleside of that business change to achieve the most successful business outcome, and to realize that
change effectively within the social infrastructure of the workplace.

Change management is a required competency in business today. The shift in the core values of
employees to empowerment, ownership, and accountability has created a work force that will
embrace change as long as they are part of the process. With the introduction of today's new business
values, employee resistance should be expected. In the absence of change management, this
resistance can cripple a business change.
*************

WHY PEOPLE RESIST CHANGE

It used to be an accepted fact that everyone resists change. We now know that it is not
true. There are many reasons why a person resents (negative attitude) and/or resists
(active opposition to) a particular change. Likewise, there are many reasons why a person
accepts (neutral attitude) and/or welcomes (positive attitude) a particular change.
Why People Resent or Resist Change
There are many reasons why employees of all sizes/ shapes may react negatively to
change.
Personal Loss. People are afraid they will lose something. They might be right or they might
be wrong in their fear. Some of the things they might lose are as follows:
Security. They might lose their jobs through a
reduction in force or elimination of their jobs.
Automation and a decline in sales often bring about
this feeling.
Money. They might lose money through a reduction in salary, pay, benefits, or overtime. Or,
expenses such as travel may be increased because of a move to another location that is
farther from their home.
Pride and satisfaction. They might end up with jobs that
no longer require their abilities and skills.
Friends and important contact. They might be moved to another location where they will no
longer have contact with friends and important people. This loss of visibility and daily
contacts is very serious for people who are ambitious as well as those with a strong need for
love and acceptance.
Freedom.They might be put on a job under a boss who
no longer gives them freedom to do it "their way."
Closer supervision that provides less opportunity
for decision making is a dramatic loss to some
people.
Responsibility.Their jobs might be reduced to menial
tasks without responsibility. This may occur when a
new boss takes over or through changes in methods or
equipment.
Authority. They might lose their position of power and authority over people. This frequently

happens when re-organization takes place or when a new boss decides to usurp some of the
authority that an individual had.
Good working conditions. They might be moved from a large private office to a small one or
to a desk in a work area with only a partition between people.
Status.Their job title, responsibility, or authority
might be reduced from an important one to a lesser
one with loss of status and recognition from others.
This also happens when another layer of management
is inserted between a subordinate and manager.
No Need.
The typical reaction is, "What's the matter with the way things are now?" Or, "I don't see
any reason why we should change."
More Harm Than Good.
This is even stronger than the previously mentioned "No Need". People really feel it is a
mistake - that it will cause more problems that it is worth. Sometimes this reaction is
justified. It is particularly common when people at the "bottom" of an organization feel that
top management makes changes without knowing what is going on "down on the line."
Lack of Respect.
When people have a lack of respect and/or negative attitude toward the person responsible
for making the change, there is a strong tendency to resent and even resist it. Their feelings
do not allow them to look at the change objectively.
Objectionable Manner.
Sometimes change is ordered in such a way that the people resent and/or resist because
they do not like being told what to do.
Negative Attitude.
People with a negative attitude toward the organization, the job and/or the boss are very
apt to resent or resist change no matter what it is.
No Input.
One of the most significant reasons is the fact that the people who felt they should have
been asked were not asked for their ideas concerning the change.
Personal Criticism.
Whether or not the change is actually criticizing the things that were previously done or the
way in which they were done, people may look upon the change as a personal criticism.
Creates Burdens.
Some changes add more work and with it confusion, mistakes and other negative results.
Requires Effort.
The change will obviously require more effort. Much of the effort accomplishes very little, if
anything. Whenever changes require more time and effort, people are apt to resent and
even resist them, particularly if no rewards accompany the extra effort.
Bad Timing.
The timing of a change is very important to its acceptance. If it comes at a time when
people are already having problems, the change is usually resented and probably resisted
by those who are supposed to implement it.
Challenge to Authority.
Some people are testing their power and influence by simply refusing to do it.

Secondhand Information.
Some people are very sensitive about the way they learned of the change. If they found out
about if from a secondhand source, they might resist it until they hear it "from the horses
mouth."
What is the Real Reason for Resentment or Resistance?
Managers often have difficulty in determining the real reason why subordinates resent
and/or resist a change. They may feel that the subordinates are just being stubborn or that
they are afraid they will lose something. The real reason may be entirely different.
-----------------------------------------------------------------WHY PEOPLE ACCEPT OR
WELCOME CHANGE
While some people resent and/or resist change, others accept and welcome it. The degree
to which these opposites occur depends on many factors. Some of the reasons for positive
reaction to change are described in this section.
Personal Gain.
When changes are made, some people may gain such things as the following:
Security.
They feel more secure in their job because of the change. Perhaps more of their skills will be
used.
Money.
They may get a salary increase, more benefits, an incentive or profit-sharing programme, or
more overtime.
Authority
They may be promoted to a position of greater authority, or they may get a new boss who
gives them more authority than they had under the previous boss.
StatuslPrestige.
They may get a new title, a new office, or a new responsibility, their boss may have
assigned more responsibility, or they may have a new boss who assigns more responsibility
than the previous one did.
Better working conditions.
They may get a new working schedule, new equipment, or other conditions that make the
job easier or more enjoyable.
Self-satisfaction.
They may get new satisfaction or feeling of achievement because of the change. Perhaps
the new job gives them more of a change to use their abilities, or the boss may eliminate
some of the obstacles that had prevented them from doing their best.
Better personal contacts.
They might be located in a place where they will have closer contact with influential people.
Their visibility is very important to some people.
Less time and effort.
The change may make their job easier and require less time and effort.
Provides a New Challenge.
While some people look at a change negatively because it requires effort and perhaps risk,
others will be eager for it because it provides a new challenge.
Likes/Respects the Source.

If people have a positive attitude toward the person or the department they represent, they
will probably accept and even welcome the change.
Likes Manner.
People who are asked to do things instead of told to do them may react very positively.
Someone described the most important words in the English language as follows:
Five most important words:"I am proud of you."
Four most important words:"What is your opinion?"
Three most important words:"If you please."
Two most important words:"Thank you."
One most important word:"You (or possibly We)."
The tone may have much to do with resentment or acceptance.
Reduces Boredom.
Changes that are designed to reduce boredom will be welcomed by some.
Provides Input.
One of the most powerful approaches to get acceptance is to ask for input before the final
decision is made.
Desires Change.
Some people will react to change by thinking or saying, "It's about time." In other words,
they have been anxious for the change to occur.
Improves Future.
Some changes will open up new avenues for future success in the organization. People will
be provided with opportunities to show what they can do. Future possibilities include
promotion, more money, more visibility, more recognition and more selfsatisfaction.
Right Time.
Some changes come at just the right time. If more money is needed to pay current bills or
to buy a luxury item like a video recorder or a boat or to take a vacation, the change will be
welcomed.
==============================================
HOW do we INITIATE CHANGE
Often it is easier to carry out a job if there is a specific plan to follow. When major changes
are to be installed, careful planning and preparation are necessary. Strengthening the forces
promoting the change and weakening resistance to it are the main tasks.
CREATE A CLIMATE FOR CHANGE
How people react to proposed changes is greatly influenced by the kind of climate for
change that the manager/supervisor has created in the department.
HOW IS THE RIGHT KIND OF CLIMATE CREATED?
Supervisors and managers who have enthusiasm for progress and change build a healthy
climate.
Creating the right climate is more than just passing on changes. It involves:
Encouraging employees to seek ways of improving their jobs.
Seeking suggestions and ideas from employees.
This requires the manager/supervisor to listen and seriously consider suggestions. It is easy
to see that there is a great deal of ego involvement in coming forth with an idea for
improvement. Change can become an exciting and dynamic way of life. The
manager/supervisor determines the climate in which they initiate change.
GET READY TO SELL

Much of the difficulty in getting co-operation stems from the employees lack of
understanding of how the change will affect them. With a little effort, managers/supervisors
can find most of the answers to employees' questions before they are even asked. Answers
to these questions would be useful.
What is the reason for the change? Whom will it benefit and how? Will it inconvenience
anyone, if so, for how long? Will training or re-training be necessary? When does it go into
effect?
Armed with the answers to these questions a manager/supervisor can head off many
objections and can develop a plan to present the change.
IDENTIFY THE SOURCES OF HELP
Why should you, the managers and supervisors, shoulder the burden alone? Staff can
frequently be a great help in preparing to sell a change by explaining technical aspects and
demonstrating new techniques.
One of the most overlooked sources of help in introducing changes are the informal leaders
in the work group. With their help the job becomes easier. Giving recognition to informal
leaders puts them in a co-operative frame of mind.
Since union stewards are often informal leaders, their co-operation ought to be solicited.
The backing of union stewards makes the job easier.
ANTICIPATE OBJECTIONS
Change that upsets routines, requires new knowledge or skills, or inconveniences people are
bound to meet with some objections or resistance. Looking at a change from the employees
point of view will usually be enough to help determine what their objections are likely to be.
Knowing the objections, we can, with a little creative thought, turn these objections into
advantages.
Showing the staff with reason or logic will not do the job. Managers/supervisors have to
convince people that the change is really best for them and that will not happen until their
objections are dealt with seriously.
SELL BENEFITS
Everyone is concerned with, "What's in it for me?"
"Will the change mean more satisfying work. greater security. opportunity to show what I
can do. more responsibility. more pay. less fatigue. less confusion. greater independence?"
The benefits used to motivate people to co-operate should be put on as personal a level as
possible. It would be dishonest, however, not to recognise any disadvantages that a change
may bring. These can usually be countered with long range benefits.
One of the techniques that is helpful in identifying the characteristics and values of the
proposed changed condition is a "Word Picture". The picture makes the new condition
desirable in the minds of the staff.
A)One of the ways this concept of "word picture" is used, is the physical change in office
layout or new equipment or any other physical changes.
B)To picture or model a change in policy, organization or operation is more difficult than the
physical change. The principle is the same. The picture can help in communicating the
desirability of the change and in fine tuning the change because it makes it possible to
discuss how things will operate. It may take the form of a flow chart, an organization chart
or a description of relationships.
To use this approach for deciding whether to initiate a change, you can take the following
steps:

Describe as clearly as possible the present situation.

Describe as clearly as possible the desired situation.
Analyse what specific changes will have to take place in the key factors involved to produce
the desired situation. Look at such key factors as bosses, employees, equipment, physical
environment, policies and procedures, work methods, materials and time. Identify the
relevant factors.
Assess the strengths of the forces promoting the desired situation and of those resisting it.
Determine what action to take. Choices are:
A)Do nothing, the resistant forces are stronger than the forces promoting change.
B)Act to strengthen the promoting forces and/or to weaken resistance, by concentrating
one's efforts on the key factors.
LISTEN IN DEPTH
Employees have a right to be heard. If employees are treated with respect, they probably
will respond in kind. They will feel better too, if they know their concerns have been
considered.
FOLLOW-UP
After having conscientiously sold the benefits of a change, it is tremendously important that
the managers/supervisors see that their promises have materialized. A sincere interest in
how the change has affected the employee and a willingness to make adjustments, help
build the climate in which future changes will be initiated.
==================================================
============
CHANGES AND COMMUNICATION
The following steps will help you to minimize resistance:
1.Explain why. Provide all the facts about the reason for changing. If there are risks,
acknowledge them but explain why the risk is worth taking.
2.Objectively explain the benefits that could result from the change.
3.Seek questions/clarifications and answer them.
4.Invite participation and ask for suggestions because the people involved know the
situation best.
5.Avoid surprise because this stirs unreasoning opposition more than any other factor.
6.Acknowledge the rough spots and explain how you plan to smooth the change.
7.Set standards and explain your expectations.
8.Contact the informal leaders and use their resources.
9.Acknowledge and reinforce the staff's co-operation and give them feedback on the
progress.
10.Keep the two way communications open for suggestions and corrections.
WHEN YOU MAKE A CHANGE IN YOUR ORGANIZATION, IT SHOULD INCLUDE '' CULTURE
CHANGE'' .
HERE IS A SIMPLE APPROACH/GUIDELINE FOR Creating Culture Change
1. Establish a sense of urgency
Communicate the business situation or reason for implementing the culture change why is
it necessary?

2. Create the guiding coalition

Establish a team with the knowledge to initiate change and the power to make the change
happen.
3. Develop a vision and strategy
Develop the organization s vision for the change and the strategies for implementation.
4. Communicate the change vision
Share the vision and how it will affect the participants
5. Empower broad-based action
Give the CHANGE team the authority to initiate the changes
6. Generate short-term wins
Work with the practice groups that are mostly likely to
accept THE CHANGE and celebrate their achievements
7. Consolidate gains and produce more change
Use success to create more success.
8. Anchor new approaches in the culture
Make the CHANGE initiatives a part of the daily work process of the firm.

THE MOST IMPORTANT POINT TO NOTE IN CHANGING ''CULTURE''

IS THE ''TRANSITION'' .
WHY? because transition occurs in the course of every attempt at change.
Transition is the state that change puts people into.
The change is external (the different policy, practice, or structure that the leader is trying to
bring about),
while transition is internal (a psychological reorientation that people have to go through
before the change can work).
The trouble is, most leaders imagine that transition is automatic -- that it occurs simply
because the change is happening. But it doesn't. Just because the computers are on
everyone's desk doesn't mean that the new individually accessed customer database is
transforming operations the way the consultants promised it would. And just because two
companies are now fully "merged" doesn't mean that they operate as one or that the
envisioned cost savings will be realized.
Even when a change is showing signs that it may work, there is the issue of timing, for
transition happens much more slowly than change. That is why the ambitious timetable that
the leader laid out to the board turns out to have been wildly optimistic: it was based on
getting the change accomplished, not on getting the people through the transition.
Transition takes longer because it requires that people undergo three separate processes,
and all of them are upsetting.
Saying Goodbye. The first requirement is that people have to let go of the way that things - and, worse, the way that they themselves -- used to be. As the folk-wisdom puts it, "You
can't steal second base with your foot on first." You have to leave where you are, and many
people have spent their whole lives standing on first base. It isn't just a personal preference

you are asking them to give up. You are asking them to let go of the way of engaging or
accomplishing tasks that made them successful in the past. You are asking them to let go of
what feels to them like their whole world of experience, their sense of identity, even
"reality" itself.
On paper it may have been a logical shift to self-managed teams, but it turned out to
require that people no longer rely on a supervisor to make all decisions (and to be blamed
when things go wrong). Or it looked like a simple effort to merge two work-groups, but in
practice it meant that people no longer worked with their friends or reported to people
whose priorities they understood.
Shifting into Neutral. Even after people have let go of their old ways, they find themselves
unable to start anew. They are entering the second difficult phase of transition. We call it
the neutral zone, and that in-between state is so full of uncertainty and confusion that
simply coping with it takes most of people's energy. The neutral zone is particularly difficult
during mergers or acquisitions, when careers and policy decisions and the very "rules of the
game" are left in limbo while the two leadership groups work out questions of power and
decision making.
The neutral zone is uncomfortable, so people are driven to get out of it. Some people try to
rush ahead into some (often any) new situation, while others try to back-pedal and retreat
into the past. Successful transition, however, requires that an organization and its people
spend some time in the neutral zone. This time in the neutral zone is not wasted, for that is
where the creativity and energy of transition are found and the real transformation takes
place.
Today, it won't take 40 years, but a shift to self-managed teams, for instance, is likely to
leave people in the neutral zone for six months, and a major merger may take two years to
emerge from the neutral zone. The change can continue forward on something close to its
own schedule while the transition is being attended to, but if the transition is not dealt with,
the change may collapse. People cannot do the new things that the new situation requires
until they come to grips with what is being asked.
Moving Forward. Some people fail to get through transition because they do not let go of
the old ways and make an ending; others fail because they become frightened and confused
by the neutral zone and don't stay in it long enough for it to do its work on them. Some,
however, do get through these first two phases of transition, but then freeze when they face
the third phase, the new beginning. For that third phase requires people to begin behaving
in a new way, and that can be disconcerting -- it puts one's sense of competence and value
at risk. Especially in organizations that have a history of punishing mistakes, people hang
back during the final phase of transition, waiting to see how others are going to handle the
new beginning.
Most leaders come from backgrounds where technical, financial, or operational skills were
paramount, and those skills provide little help when it comes to leading people through
transition. Such leaders may be pushing the limits of their understanding of the future, and
they need perspective and advice. That is where a trusted colleague, confidant, coach, or
consultant can offer valuable counsel to the leader. This person's background or professional
affiliation can vary widely; what matters is that she or he understands how to help people
through transition. It is a role that is far more interpersonal and collaborative than is played
by most consultants or trainers accustomed to teaching a skill or prescribing a solution.
No training program can prepare a leader for managing a transition. Yet no leader can

effectively lead change -- which is what leadership is all about -- without understanding
and, ultimately, experiencing -- the transition process. What leaders need, instead, is
individualized assistance whereby they learn to
Create plans to bring their followers through the particular transition that they face -- not
through generic "change." A trainer can teach leaders a generalized approach ("The Ten
Steps..."), but a good coach can help the leaders to discover their own best approaches.
Work with their own goals, limitations, and concerns to create a development plan that
prepares them for the future.

Times of transition are becoming the rule rather than the exception. Yet few leaders know
how to prepare for the changes that lie ahead. Transition leadership skills must be
congruent with, must capitalize and build on, the leader's own strengths and talents. They
cannot be found in a set of theoretical leadership skills.
The transition adviser works collaboratively with each leader to assess the leader's place in
the three-part transition process, the strengths the leader brings and how to leverage them,
and what the current situation demands. It is a personal and completely customized
process.

CASE STUDY
BUILDING AND
CORPORATION

IMPLEMENTING

BALANCED

SCORECARD

UNUM

Summary
Disability and special risk insurer UNUM Corporation has used a balanced scorecard to drive the
company towards its strategic vision. Crucially, the five-year scorecard was devised to meet
specific performance targets to the year 1998. A near-obsessive focus on internal
communications and an innovative compensation scheme have proved intrinsic to the companys
success.
Introduction
Headquartered in Portland, Maine, USA, UNUM Corporation provides disability and special risk
insurance solutions to individuals and businesses. UNUM (which means one in Latin) has
about 7200 employees and operations in the US, Canada, the UK, the Pacific Rim, Europe,
Bermuda and Latin America.
Reporting total revenues of $4,076,700 in 1997 and net income of $370.3 million, the companys
subsidiaries include UNUM Life Insurance Company of America, First UNUM Life Insurance
Company; Commercial Life Insurance Company; Duncanson & Holt, Inc; Colonial Companies,
Inc and Colonial Life & Accident Insurance Company.
61592 Corporate Goal
Founded in 1848 with the principle to find a better way UNUM was listed on the New York
Stock Exchange in November 1986. At that time the company, under the direction of chairman
and chief executive James Orr III, set its first corporate-wide goal, articulated as 61592 - to earn
six dollars a share with 15 per cent return on equity by 1992. This was achieved one year ahead
of schedule, largely because, as Eileen Farrar, vice president, human resources, states, We have
a highly committed and motivated workforce who saw the 61592 goal as a powerful rallying
point.
Setting Balanced Goals
With the goal achieved, and recognizing the power of goals as mechanisms for breakthrough
performance improvement, James Orr and his team set out to Building and Implementing a
Balanced Scorecard develop new goals for the corporation. However, this time there would be a
significant difference in how the goals would be focused and articulated. Farrar explains:
By 1991 we had, through growth and acquisitions become a much more complex organization
and the chairman recognized that a single focus on a financial result would be difficult to
communicate effectively and would not reflect the diverse challenges of the corporation.
Consequently he decided that we needed a set of goals that would be meaningful to all
employees, that would focus their energies on improving customer-facing performance and
would improve further shareholder returns. In short, he wanted a balanced set of measures that
would reflect the interests of all UNUMs stakeholder groups. To achieve this, Orr created an
organizing team of 13 senior managers from throughout the corporation to develop this new set
of balanced goals and measures.
Says Farrar:

The chairman told the team that he wanted financial, customer, employee and productivity
targets, gave it a budget and, most importantly, his whole-hearted support. He made it clear that
this was absolutely vital for the long-term success and growth of the company.
Over the next eight months, the team educated itself on the balanced scorecard and on the
business challenges then and how these may develop through to 1998 (the 150th anniversary of
the company). Farrar commented that this was an intense time as the team did not leave their
regular jobs. Rather it met about twice a month and kept in constant contact through internal
communication mechanisms such as Lotus Notes.To design the scorecard sub-committees were
set up for each focus area, owned by a particular function, for example HR owned the people
perspective. This subcommittee sought input from employees throughout the organization and a
draft set of goals and measures were tested at all levels of the company. Although some outside
experts, such as the well-known academic David Garvin of Harvard University, were used to
facilitate several of the early meetings, it was the team itself which owned the process and chose
the final set of interlocking goals and measures, which were rolled out into the organization in
1993.
Corporate Vision
Before presenting UNUMs balanced scorecard it is worth pointing out that, as with all the best
practice companies profiled for this Report, UNUMs strategic goals and measures are to support
a clearly defined and meaningful corporate vision. As shall be explained later, the corporation
has a specific vision statement for each of its four scorecard perspectives. UNUMs corporate
vision is, We will achieve leadership in our businesses. Although a generic statement which
could be applied to any company in any market, UNUM supports this statement with a clear
description of what this vision means to UNUM. It says:
Leadership does not necessarily mean a dominant market share. Rather, we will achieve
leadership in areas that are meaningful and important to our business and the market (eg
profitability, quality, reputation).
We will focus our business on special risk-relieving products for which we can establish and
sustain profitable positions. Development of these products willbe driven by the needs of the
customer, in both domestic and international markets.
As well as Leadership, UNUMs vision has three other elements. First, We will be a productsoffered company. Supporting this are explanatory statements such as:
Developing products that meet customer needs and leveraging our expertise and strengths.
Our product development efforts will focus on providing the right solutions.
Developing our products in a high quality and efficient manner utilizing existing and new
channels.
Second, there is a vision of what UNUM will be known for. This includes:
Superior knowledge, expertise and risk management.
Being responsive to the needs of customers and intermediaries.
Being reliable, dependable and trustworthy.
Providing the right solutions to current emerging needs.

And finally, UNUMs vision includes We will be a well-managed company.

The definition of which is:
Consistently growing profits, efficient cost-structure, leadership returns and financially sound.
Anticipating, shaping and effectively responding to relevant external forces and events.
Making decisions in the best long-term interests of our stakeholders.
Planning well, making clear and sound business decisions.
The Power of Corporate Values
Furthermore, within UNUM, corporate values play a key part in creating a culture where
employees are motivated towards achieving breakthrough business performance.
These values are clearly articulated and disseminated to all employees.
1. We take pride in ourselves and the organizations leadership position.
Acting with integrity and high ethical standards.
Achieving leadership in performance, the community and the industry.
2. Building and Implementing a Balanced Scorecard
Setting and meeting individual goals consistent with business goals, and owning our
individual performance.
Being motivated and excited about the organization.
Believing in what we are doing.
Emphasizing the positives, celebrating successes and strengths, and constantly
striving to improve our performance.
Delivering results.
3. We value and respect people.
Dealing with each other as individuals and treating each other as we would like to be
treated.
Developing people to their fullest potential.
Working together in a common endeavour; recognizing each other as important
elements to the success of the whole.
Having a common understanding of each others roles and how we fit with corporate
objectives.
Collaboration with each other and having a sense of team.
Recognizing and accepting differences among people, but sharing the same values.
4. We value customers.
Building long-term relationships with our customers and intermediaries.
Maintaining a strong orientation to service and the customer.

Delivering what we promise.

5. We value communication.
Communicating clearly, consistently, and openly with everyone we deal with.
Building an environment that encourages open communication, participation, honesty
and candour.
Listening.
Balanced Scorecard
UNUMs balanced scorecard consists of four perspectives:
UNUM people
Operating effectiveness
Customer satisfaction
Shareholder value.
Each perspective has a vision, quantitative measure and goal. Crucially and what makes the
UNUM scorecard a particularly powerful strategic implementation framework - the scorecard
aims to focus the organization onto time-sensitive achievements. Therefore two of the goals
define measurable results by 1998, and the scorecard itself is referred to as Goals 1998.
Says Farrar, Specifying a year by which we reach our goals worked well for the 61592 goal
because it gave employees something definite to aim for, so it seemed sensible to take the same
approach.
UNUMs balanced scorecard is shown below
UNUM Balanced Scorecard
UNUM people
Vision:
We will have the mind of a customer and the pride of an owner.
Quantifiable measure:
A benchmark survey will integrate the companys employee surveys into a tool for gauging
progress.
Goal:
Our goal is to improve annually on the score established by the
benchmark survey. In addition, we will monitor our progress towards
the goal on an ongoing basis through formal and informal gathering
of employee opinions.
Operating effectiveness

Vision:
We will increase customer value by rethinking, improving and
streamlining our business processes.
Quantifiable measure:
Operating costs will grow at no more than one-half the rate of the
top line.
Goal:
By 1998, our total operating costs ratio will be reduced by approximately
one-third.
Customer satisfaction
Vision:
UNUM will provide the best value in offerings matched to customers needs in the markets we
choose to serve.
Building and Implementing a Balanced Scorecard
Quantifiable measure:
Each UNUM area with an external customer chain will develop a customer value measurement
tool. It will be aimed at determining our customers assessment of the overall value of our
products and services.
Goal:
We will continually improve our customers perception of the value of UNUMs offerings so
that the number of customers who DO NOT rate UNUM as very good will have declined by 40
per cent when we compile our final measurement in 1998.
Shareholder value
Vision:
We will deliver consistently superior long-term value to UNUM shareholders.
Quantifiable measure:
Shareholder value will be measured in terms of total return - ie dividends plus share price
appreciation.
Goal:
We will achieve a total return that consistently places UNUM among the top 125 companies
listed on the Standard & Poors 500.
Internal Communications
An absolute prerequisite, according to Farrar, for achieving corporate goals and for making the
scorecard meaningful to all employees is investing significant energy and time into employee
communications.

Farrar believes that implementing a scorecard is a process of relentless communication and

education, and it must be explained in ways that make sense within the context of the employees
own working environment.
At a corporate level, the company has defined exactly what it means by each of its scorecard
perspective visions. Starting with, We will have the mind of a customer and the pride of an
owner as the vision for the UNUM people perspective, the company has communicated
throughout the organization that this requires UNUM employees to:
think like a customer
be interested in results
discover better ways
live by our word
continuously grow and learn
strive together towards our goals
feel accomplished and recognized
value differences
master change
share and listen.
UNUM is realizing this in a number of ways. First, there is the benchmark survey which
measures employees perception of whether these behaviours are indeed being lived within the
organization. The goal being to increase the number of employees who agree that these
behaviours are being practised at UNUM and decrease the number of employees who disagree or
who are not sure that these behaviours are part of daily life at UNUM.
Second, employees within UNUM America developed a trust workshop which focused on what
barriers existed within the work unit or company to stop employees trusting managers. This
identified the key issues and the findings were shared throughout the organization.
A 360 degree appraisal system, through which managers are appraised by, for example, their
direct reports as well as their superiors, helps further ensure managers are aligned to corporate
behaviours.
1998 Goals Stock Option Plan
However, perhaps the most powerful, and innovative, vehicle by which employees are
encouraged to have the mind of a customer and the pride of an owner, and indeed focus their
minds squarely onto achieving the 1998 goals, is UNUMs 1998 Goals Stock Option Plan.
The 1998 Goals Stock Option Plan was launched in January 1995. Each UNUM employee was
provided with a stock option grant of $18 per share to purchase 300 UNUM shares once the
grant was vested (a decreasing number of shares has been provided to employees hired postlaunch).

The date of vesting of the 1998 Global Stock Option Plan will depend on the level of progress
UNUM has made on its 1998 goals. In the event of the 1998 goals not being met, vesting of the
1998 Goal Stock Option Plan will automatically occur nine years after the grant date.
Farrar commented, This has really helped employees to think like owners. Financial results are
disseminated to all employees quarterly, and how the plan works has been clearly explained.
One communication medium for this is Knowing Your Options: a guide for employees to
UNUMs 1998 Goals Stock Option Plan which outlines how the plan works and offers
employees a telephone number and e-mail address for further information.
Farrar feels that as owners of UNUM, employees can better contribute to and share in UNUMs
success by better understanding how the business works - how UNUM makes money, and how
the money is invested to grow the company.
A further compensation mechanism used to focus employees attention onto the 1998 goals is the
annual bonus, part of which is for achievement against annual goals and part for progress against
the 1998 goals.
To make the vision of the operating effectiveness perspective (We will increase customer value
by rethinking, improving and streamlining our business processes) meaningful, UNUM has
communicated throughout the organization an outline of how employees can contribute to
attaining this goal.
Statements include: Bending Over Backwards, which within a corporate information pack the
company explains as:
Says Farrar:
This is how we achieved the 61592 goal one year ahead of schedule! And, its precisely the way
we will meet our operating effectiveness goal and each of our 98 goals.We will succeed only
with the commitment of every member of the UNUM team. And, we will look to each other every UNUM employee for leadership and creativity in improving our operating processes.
When we talk about operating effectiveness, we are not just talking about taking costs out, but
deploying money and resources in the most effective way and constantly comparing our
performance against that of our competitors.
Chairmans Involvement
To contribute to this perspective, and indeed the other perspectives, the chairman regularly
charges teams to focus on developing some area of best practice, for example within disability
insurance, in order to look at how best this area can be improved and to share information
throughout the organization.
This is just one way that James Orr demonstrates leadership and personal involvement in the
Goals 98 programme. He also holds an annual chairmans review, in which he meets with a
group of employees representing each operating company or function to discuss how the
employees perceive progress towards the goals. Employees are drawn from different
organizational levels each year and, says Farrar, are encouraged to speak candidly.
The chairman has also articulated a set of questions which are used throughout the organization
to ensure that the 1998 strategic goals remain the key focus of employees. These include:

Overall
What is the overall level of understanding of the 98 goals within the organization?
What are the benchmarks for the planned progress towards the 98 goals within the
organization?
What are additional enterprise-wide support needs?
What are the best practices which can be shared with other UNUM organizations?
People goal
What actions are being taken, and what are the results? What are the challenges to employee
understanding?
What are the measures used to assess the progress between corporate surveys (real-time
metrics)?
What is the composition of agreement/disagreement statements, and how is this being
addressed?
Customer satisfaction
What are the current dynamics of the market place? How is this changing UNUMs customer
needs and satisfaction?
How is the voice of the customer being heard? What are the measurements used to track
customer satisfaction?
What efforts are under way to better understand customer needs and provide
best value?
Operating effectiveness
What steps are being taken to grow the top line?
What are the key processes being worked on?
Why were they selected? How do current efforts enhance value from the
customers perspective?
What sharing/leveraging of strengths is taking place across the enterprise?
What economies of scale are being realized?
Shareholder value
Discuss return on equity target trends if appropriate.16
The chairmans belief in the scorecard was clearly shown in UNUMs Annual
Report 1997 where, in his letter to the shareholders, he outlined progress
against each of the scorecard perspectives. For example, regarding the customer
satisfaction perspective, he said:
1997 was a year of profound learning for our organization, particularly in

terms of serving our customers. We know it is not enough to keep our customers
merely satisfied. To keep customers coming back, to remain competitive,
we must earn customers loyalty.
In fact, customer loyalty is one of the greatest growth levers available to
UNUM. For example, typical long-term disability customers create twice as
much value for our organization in the second five years they are with UNUM
than in the first five years... .
As a result of these learnings, and in support of our 1998 Customer
Satisfaction Goal, UNUM employees focused on further developing the Mind
of a Customer in 1997, and the results were outstanding.What started out as
an experiment - to reach out to our customers through our new Customer
Building and Implementing a Balanced Scorecard
Loyalty and Satisfaction Center - turned into a tremendous success and a critical
lever for accelerating growth... .
Customer satisfaction is articulated within UNUM as:
putting our customers first in all that we do
listening carefully to find out what they really want
anticipating what they need
meeting, even exceeding their needs and expectations in all of our contacts
and with all of our products and services.
The Money Machine
For the shareholder value perspective UNUM has communicated to all
employees what investors are looking for and why this perspective is important.
By making Shareholder Value a goal, they have given investors, stockbrokers
and financial analysts a yardstick by which UNUMs progress toward its other
stated goals can be measured. Their attitude is that companies that meet their
goals win favour with investors and therefore enjoy a more favourable capital
position.
To communicate the scorecard holistically UNUMs finance function has
designed an easy to understand presentation entitled Money Machine, which
includes a textual explanation of how UNUM makes money and a graphic that
walks through the whole organization process from sales to customers to the
payment of shareholder dividends.

Says Farrar, The money machine shows where opportunities for making profit
exist and, importantly, people can see themselves in that continuum.
Deployment
For deployment of the corporate scorecard, each operating unit is charged with
finding its own way to achieving the strategic goals.
Farrar maintains that:
It is up to the management of each company to decide on the most effective
way to move that company towards strategic goals. At unit level, it is the
responsibility of the manager to roll the units goals back to company and corporate
goals. However, annual business goals will not be accepted unless they
represent progress towards our corporate goals.
Alignment is further ensured through UNUMs performance contracts, all of
which, from the chairman down, have the same categories as the corporate
scorecard. Says Farrar:
Individual objectives support the scorecard goals, so you can see the line of sight from
employee performance through unit, company and ultimately to corporate performance.
Strategic Successes
So, given the amount of time and energy expended on the 1998 goals, the million dollar question
is has UNUM succeeded against these goals?
At the time of writing this case study, the company was still assessing its final position. However
clues can be found within the UNUM 1997 Annual report. To quote James Orr:
We continue to make solid progress to our 1998 goals - goals that have served UNUM well
over the past five years. Because of these aggressive goals,UNUM is closer than ever to its
vision - and ultimate goal - of world leadership in disability
and special risk insurance.
We exceeded our overall People goal target in 1997, aimed at creating a work environment for
all UNUM employees that supports superior business results.
And our UNUM America business again received national recognition for progress in this area
during 1997. Examples of plaudits that UNUM America has received, include being voted within
the:
100 best companies to work for in America by Fortune magazine
100 best companies for working mothers by Working Mother magazine
top 30 family-friendly companies by Business Week magazine
top 50 employers by Equal Opportunity magazine.

Orr continued:
...We met our Operating Effectiveness goal rule of thumb of growing the top
line at twice the rate or more of operating expenses. On a cumulative basis, we
have improved our operating cost structure by 22 per cent over our 1992 base
year, moving towards our 1998 target of 33 per cent...
...Regarding our five-year annualized rate of return measured in our
Shareholder Value goal, we were ranked in the second quartile of the Standard
& Poors 500 at year end 1997, short of the top-quartile performance that is
our target.We have, however, delivered exceptional returns over the past 10
years, with an annualized total return of 30.2 per cent, ranking us 39th of the
457 current Standard & Poors 500 companies with 10-year stock histories.
And, we continue to make solid progress towards our Customer Satisfaction
goal - progress that is reflected in our 1997 results.While we are still below our
target for this goal, our work in this area has been, again, a source of significant
learning and opportunity for UNUM.
Also at the time of writing a leadership team had been created to co-ordinate
the creation of a new set of corporate goals.
Says Farrar:
We will certainly continue using the balanced scorecard. It is an excellent way to focus
attention on creating value for shareholders and indeed all stakeholder groups.
Building and Implementing a Balanced Scorecard
And as Orr said:
...As we develop our next set of goals we will seek ways to accelerate our progress, grow our
company by building long-term relationships with...our shareholders, by continuing to build
shareholder value.We made great progress in 1997, but we know we are capable of more in 1998
and beyond.
Conclusion
According to Farrar, the five-year experience of using a balanced scorecard has revealed a
number of key learning points. Not least that as the 1998 goals were such long-term goals, the
company had to work hard to constantly balance short-term and long-term goals and to clearly
communicate to employees any trade-offs. She believes management must be vigilant in
explaining how decisions today, such as acquisitions, new product launches or exiting
businesses, impact long-term goals. If you do not do this, she believes, it can cause a lot of
confusion within the organization.
She maintains that there are three things a company must get right if it is to succeed with a
balanced scorecard:

1. First and foremost it is critical to be clear about what the company believes is important to
measure and why it believes this.
2. Understand that the goal is itself a vehicle for getting somewhere. For example, we didnt say
that meeting these four goals would make us the global leader, we said it would make us a
stronger company and significantly closer to that vision. So dont confuse means and ends.
3. Engage all levels of the organization in defining the goals and align the organization behind
the goals.

Multiple Choice Questions

1. The term human resource development reflects the fact that it is no longer appropriate in
modern organisations to focus on just the development of which group?
a)
b)
c)
d)

workers
employees
consultants
part timers

2. Which of the following is most important for HRD?

a)
b)
c)
d)

to be clearly related to the organisations objectives

to be clearly related to the expertise in the department
to be flexible to be able to respond to sudden crisis
to operate as an extension of the HRM department

3. What may be particularly necessary as part of the training process where people are working
in another country?
a)
b)
c)
d)

e-learning
discovery learning
cross-cultural training
activist learning

4. What is the term used to describe the process of helping a new employee to settle quickly
into their job so they become efficient and productive workers?
a)
b)
c)
d)

action learning
discovery learning
sitting by Nellie
induction

5. Which of the following is not a stage in the systematic training cycle?

a) evaluation

b) assessing training needs

c) planning the training
d) job instruction on a one to one basis
6. Which of the following is the best definition of a learning organisation?
a) An organisation which facilitates the learning of all its members and continuously transforms
itself.
b) An organisation in which the managers are encouraged to develop
c) An organisation which facilitates the learning of all its members in order to preserve the
status quo
d) An organisation which does a lot of training on an ad hoc basis
7. Which of the following is the best term to describe people who guide and suggest suitable
learning experiences for their proteges?
a)
b)
c)
d)

human resource directors

line managers
coaches
mentors

8. Which of the following is true of modern apprenticeships?

a) employers had no involvement in developing the national standards
b) employers were involved in developing national standards so they are geared to each industry
sectors requirements
c) different standards are set to meet local needs without any regard to national standards
d) modern apprentice do not have to complete NVQs or any other qualifications while working
9. Which of the following problems may result due to skill gaps? Select all that apply.
a) Quality issues.
b) Increased business.
c) Delays developing new products.
d) Poor customer service.

10. Which of the following statements is false?

a) There are well-established and proven links between training, organisational productivity, and
profit.

b) Training allows organisations to adapt to changes in the business environment.

c) Training and development is a key element of human resource management.
d) Training and development serves an important symbolic function.
e) Training is normally a key aspect of high commitment management strategies.
11. Which of the following statements refer to a 'regulated' approach to training and
development? Select all that apply.

a) Market pressures ensure that firms invest in training.

b) A belief that organisations operate more effectively when unfettered by regulation.
c) A belief that, left to themselves, organisations will only invest in short-term, low-level training.
d) Vocational education and training is supported by the state, e.g. through state levies and
apprenticeships.

12. Which of the following are best described as 'soft' or 'generic' skills? Select all that
apply.
a) Judgement.
b) Leadership.
c) Team working.
d) Motivation.
e) Initiative.
f) IT skills.

CHAPTER V: Retaining Human Resources

5.1 Introduction
Effective employee retention is a systematic effort by employers to create and foster an
environment that encourages current employees to remain employed by having policies and
practices in place that address their diverse needs. A strong retention strategy becomes a
powerful recruitment tool. Retention of key employees is critical to the long-term health and
success of any organization. It is a known fact that retaining your best employees ensures
customer satisfaction, increased product sales, satisfied colleagues and reporting staff, effective
succession planning and deeply imbedded organizational knowledge and learning.
Employee retention matters as organizational issues such as training time and investment; lost
knowledge; insecure employees and a costly candidate search are involved. Hence failing to
retain a key employee is a costly proposition for an organization. Various estimates suggest that
losing a middle manager in most organizations costs up to five times of his salary. Intelligent
employers always realise the importance of retaining the best talent. Retaining talent has never
been so important in the Indian scenario; however, things have changed in recent years. In
prominent Indian metros at least, there is no dearth of opportunities for the best in the business,
or even for the second or the third best. Retention of key employees and treating attrition
troubles has never been so important to companies.
In an intensely competitive environment, where HR managers are poaching from each other,
organisations can either hold on to their employees tight or lose them to competition. For gone
are the days, when employees would stick to an employer for years for want of a better choice.
Now, opportunities abound.
It is a fact that, retention of key employees is critical to the long-term health and success of any
organisation. The performance of employees is often linked directly to quality work, customer
satisfaction, and increased product sales and even to the image of a company. Whereas the same
is often indirectly linked to, satisfied colleagues and reporting staff, effective succession
planning and deeply embedded organisational knowledge and learning.
Employee retention matters, as, organisational issues such as training time and investment, costly
candidate search etc., are involved. Hence, failing to retain a key employee is a costly
proposition for any organisation. Various estimates suggest that losing a middle manager in most
organisations, translates to a loss of up to five times his salary. This might be worse for BPO
companies where fresh talent is intensively trained and inducted and then further groomed to the
successive stages. In this scenario, the loss of a middle manager can often prove dear.
In fact, some reports suggest that attrition levels in IT companies are as high as 40 per cent. The
only way out is to develop appropriate retention strategies.
Though BPO industry shoots ahead at 40 to 50 per cent a year, it is now losing 35 to 40 per cent
of its 350,000-odd employees as well.
In India there are few sectors where the attrition level is much larger compared to other sectors.
For example: IT sector and BPO. Where as there are organizations like Air India, HAL, DRDO,
BARC where the attrition is nearly 5% or less than that.

Employee Retention Strategies helps organizations provide effective employee communication

to improve commitment and enhance workforce support for key corporate initiatives. Companies
have now realized the importance of retaining their quality workforce. Retaining quality
performers contributes to productivity of the organization and increases morale among
employees.
Four basic factors that play an important role in increasing employee retention include salary and
remuneration, providing recognition, benefits and opportunities for individual growth. But are
they really positively contributing to the retention rates of a company? Basic salary, these days,
hardly reduces turnover. Today, employees look beyond the money factor.
Figure 1:

Source: Naukri hub

Why People Leave

Philosophically, employee retention is important; in almost all cases, it is senseless to allow good
people to leave your organization. When they leave, they take with them intellectual property,
relationships, investments (in both time and money), an occasional employee or two, and a
chunk of your future. Employee Retention Strategies helps organizations provide effective
employee communication to improve commitment and enhance workforce support for key
corporate initiatives. We also provide full support for your marketing-communication efforts by
helping you build customer loyalty by distinguishing and positioning your organizations unique
products and services in todays crowded marketplace.
The key drivers of employee turnover can be divided into two categories: push factors and pull
factors. While some perfectly satisfied employees may be tempted away by the pull of an offer
so fantastic that they just have to accept, the large majority of departures do involve an element
of push.
It is a mistake to assume that all departures occur for the same reasons. One persons priorities
may not match anothers. There may be considerable differences in what different employees are
prepared to tolerate before they start looking elsewhere.
There are surveys and studies that detail the most common push factors such as poor people
management, and a lack of career development opportunities but these are rarely the only push
factors in play. A retention plan must take into consideration the relevant push factors and find a
way to minimise their effect. A good starting point is discovering what they are. A sensible
approach to adopt is described below.

Factors affecting retention of employees

It is a burning problem today that most of the employees are leaving the organizations as they
like on account of taking up employments elsewhere. Even in some of the cases, the employees
are not even informing the organizations about their intention to leave. However, some of them
are giving prior notices to leave the organizations and firms as per the norms of the organization
and taking better prospects. This will create a great disturbance to the organizations for want of
suitable substitutes immediately due to sudden relief of its employees. Organizations and firms
are taking up Programmes for recruitment of the employees to fill up the consequential
vacancies. Because of the new employees appointed from time to time in the place of the
employees left, the organizations suffers a lot to stimulate the new employees for desired
objectives and goals. This will affect badly on the HR policies of the Organization/firm. To
overtake this problem, major steps have to be undertaken for the retention of the employees in an
organization for the better sustainability and cognitive involvement. Some of the factors which
definitely cause for retention of employees are embodied below:
Brand Name
Many of the employees consider the brand name of the organization for taking up assignments.
Employees feel prestige of the institution as their personal to run with the organization. Working
in a famous company or organization, generally makes people to adore with commitment.
Dignity of the institution is one of the major factors for attachment of the employees all along
without any fear for future. It gives maximum satisfaction to the employees and diversification
of their ideas towards the Institutional Development. Employees naturally inclined to generate
their future plans and prospects with the existing organization and tend towards their
sustainability and regularity in their firm. This will lead to the Employees retention more.
Employees may not think to leave the organization because of its brand name and familiarity in
the pubic eye and wanted to stay with the Organization for ever not only for the sake of the
Company but also for their future prospects.
Wage Policy
The wage policy of the any organization definitely attracts the employees a lot. Many employees
look forward for monetary benefits and Social security measures adopted by the organization or
firm. Adoption of a regular time scale of pay with proper Efficiency Bars including adoption of
Grade Pay System, for various categories of posts existed in an organization from top to bottom
is much more importance for the retention of employees. Employees naturally observe the salary
structure of each category of post and fringe benefits extended by the organization or company.
A systematic wage policy, revision of pay scales in the convenience intervals, provisions for
additional allowances, rewards for extra-ordinary work of the employees from time to time, will
definitely catch the employees and more retention is possible.

Career Advancement Schemes

Career Advancement Scheme is one of its kinds to introduce for the regular promotions,
professional growth and development of an employee in any firm. Every employee expects
advancement in his career by way of promotions, grades, and relocation to next higher category
or grade for furtherance of his interests. A lucrative policy on Career Advancements of
employees is much more than enough for retention of employees in a firm. Automatic
Advancement of the Career is also to be thought of by the firms for the benefit of its employees.
For every 5/10/15 years of service of an employee, automatically, the employee should be placed
in the next higher category or scale of pay or Grade with monetary benefits so that the
Employees would be in a greater satisfactory mood to work for the promotion of the
Institution/Firm/Concern. If such a systematic policy on promotions and career growth is
implemented, employees retention will be reduced and experienced persons will be continued in
a firm for its growth.
Social Security Measures
Social Security measures are very much obligatory on the part of any concern to adopt for the
welfare of their employees. Employees Welfare Schemes, Health Schemes, Group Insurance
Policies, Payments of Bonus, Ex-gratia, Incentives, Awards, will render much security to its
employees in the Society, and the employees will not leave any institution if it implemented such
social security measures to its employees. Retention is possible greatly if any organization/firm
adopts suitable Social Security Measures.
Transparent Recruitment Policy
The Recruitment policy of an organization or Institution must be transparent. It should not be
biased on any means. A plain recruitment procedure keeps the Institution at top level among
other co-institutions. Talented peoples will be aspired to take placements in such an organization
and wanted to retain in the same organization for years together. The prestige of the Institution or
organization reflects on account of the transparent recruitment policy. Specific guidelines should
be framed to meet the various parameters in the recruitment section. Service Rules inclusive of
the regulation of the employees, the method of selection, written tests, Interviews etc., should be
broadly defined in the rules.
Judicious Disciplinary Rules
Disciplinary rules should framed in such a way that they should not be in any way contrary to the
Law. Every employee must be treated with equal treatment in a justified manner for which a set
of rules called Disciplinary Rules should be framed and adopted. There should be a
classification of category of posts, grades, Controlling authorities duly specified in a clear terms,
quantum of punishments right from Censure to Removal from service should be specified,
and provision for making appeals to the Appellate authorities be included. A detailed procedure
for conducting Inquiries against the employees committed irregularities, frauds;
misappropriations etc. should be categorically prescribed. This will strengthen the employees
caliber and dedicated employees will be formed in any institution without fear and favour
leading to much retention in the concerns.

Conduct Rules
It is also necessary to frame certain Conduct Rules for the interest of the Institution. The conduct
rules must specify the attitude, behavior and conduct of each and every employee while
discharging their duties. Employees tend to discharge their duties utmost care and devotion.
Violation of conduct rules attracts the provisions of the Disciplinary rules. Hence Employees
regularity and sincerity will be developed and sustained. This can be termed as one of the causes
for retention of employees.
Organizational Culture
There is emphatically need to formulate organizational culture in every organization. The
organization must resort to plan where it wants to go before trying to make any changes in the
organization culture. The organization must choose for Mission, Vision, and Values to provide a
frame work for the assessment and evaluation of the current organizational culture.
Organizational culture grows over time. People are comfortable with the current organizational
culture. They need strategic changes to suit to the present day needs. People in every work place
talk about organizational culture. They need to expect some sort of convenient organizational
culture. Culture is the environment that surrounds us at work all of the time. Culture is a
powerful element that shapes our work, enjoyment, relationships and work processes. A
congenial Organizational Culture makes people happy and retain for ever. It leads to definitely
Employees retention.
Terminal benefits
Providing terminal benefits at the end of the service of an employee will be a added advantage
now a days for future secure. Each and every employee must expect some quantum of money at
the end of his service to lead a peaceful life after retirement. However there are statutory
obligations on the part of the organizations to provide EPF, Gratuity, etc. Apart from that,
Organizations must plan for creation of further monetary benefits as a retirement plans for the
welfare of its employees. This will give much relief to its employees to retain in any organization
till the end of his service. This may also cause for retention of employees.
KEis Employee Retention Wheel
The first step to improving your employee retention is to understand why employees stay with
their current employer. Many "experts" dwell on the reasons employees leave, which is not as
important or revealing as the reasons they stay. Companies have tried many different programs
and perks to hold onto good employees. However, studies show that these efforts are not enough
to retain good employees when the support that is needed to achieve job success is not adequate.
Don't Waste Your Money on Things That Don't Make a Difference...

Among the countless inducements offered, only those identified in the center of KEi's Employee
Retention Wheel are truly what give employees a consistent reason for saying "no thank you"
when tempted with a "sweeter offer." After years of study and experience, KEi has determined,
and presented in the Retention Wheel, what factors do have the greatest impact on keeping
employees.
KEi has used this information to give employers the tools to meet the core needs that keep
employees successful at their jobs, thus reducing the high costs associated with unwanted
employee turnover.

Using the Wheel to Improve Employee Retention

KEi's Employee Retention Strategy is based upon two primary beliefs:
(1) It is difficult for employers to retain good employees if they don't have a process to hire
the right people in the first place.
(2) Retention processes must directly support the reasons that successful, satisfied
employees stay.
KEi's concentration on the center of the Employee Retention Wheel provides employers with
Internet-based tools that give employees systematic, ongoing support to be successful in their
work and satisfied with their employment.
The Center of KEi's Employee Retention Wheel: EIGHT FACTORS
Definition of successful: my job is helping me to grow personally, professionally and
financially.
Definition of satisfied: my employer is providing what I need to perform my job successfully.
These eight central processes of the Employee Retention Wheel are the factors that are most
critical to an employee's job performance success.

ATTITUDE FOR EMPLOYING

A process to clearly define the way supervisors are expected to interact with employees; a
process to give employees a way to express what is most important to achieve job
success; and a process to give employers a way to demonstrate "Employing Values"
through employment policies.
This "Employer Mission Statement" is about how and who you hire, how you treat them,
and the organization's values as an employer. It is about making sure that the Values for
Employing are communicated to your employees and consistently implemented
throughout your organization. It is about the total employment package that goes beyond
salary and traditional benefits.

FINDING CANDIDATES
A process that gives employers a comprehensive way to communicate to job seekers
what it takes to achieve short-term and long-term job success, and to attract the
candidates who fit this criteria.
SORTING APPLICANTS
A process that gives employers a way to confirm whether the attitudes and behaviors of
job seekers are a match for their work environment.
CHOOSING EMPLOYEES
A process that gives employers a way to define the specific interview questions that
prove job seeker abilities to successfully perform the target skills; and a process that
gives employers a way to verify the accuracy of resume/application data and interview
responses.
STARTING EMPLOYEES
A process that provides a way for new employees (before performing the job) to
understand "why the employers business exists;" "what makes the business organization
successful;" "why the employee's job exists;" and "what it will take for the employee to
achieve job success."
INFORMING EMPLOYEES
A process that gives employers a way to provide essential information (from five critical
information sources) that is needed by employees to make daily work decisions.
IMPROVING EMPLOYEES
A process that gives supervisors and employees a way to work together to build
personalized plans for improving each employee's priority job skills; and a process that
gives the employer a way to "deliver skills-improving training curriculum" and to
"measure the learning effectiveness" from the training experiences.
REWARDING EMPLOYEES
A process that gives employers a way to define and communicate exactly how individual
employee salaries are determined; and a process that gives employers a way to provide

employees with extra incentive income that is earned through the achievement of cash
generating business goals.

What can be done to improve retention?

FINDING THE CAUSE OF ATTRITION

Have a survey among employees to find the reasons for attrition. If possible, have exit
interviews to know the reasons for resignations. If a key employee resigns, it should be taken up
on a priority basis and the senior management should meet the employee to discuss his reasons
for leaving and evaluate whether his issues bear merit and whether they can be resolved. Steps
can be taken to avoid similar reasons from occurring in the case of others, in similar positions.
What can be done?
Though, it is impossible to scrap problems totally, there are certain ways by which BPO
managements can tackle attrition. Since the every organisation is unique, these companies need
to develop innovative ways to tackle their problems. Human Resources department of companies
must address these issues, and along with the management need to evolve strategies to retain
employees at all levels.
At the time of Recruitment
Select the right people through competency screening.
Use psychometric tests to get people who can work at night and handle the monotony.
Offer an attractive, competitive, benefits package.
Make clear of performance enhanced incentives and other benefits. Keep these promises,
later.
BPOs can set up offices in smaller towns, or recruit from there, where opportunities are
few.

At the office

An employees work must be communicated to him clearly and thoroughly. The details
of the job, its importance, the way it should be done, maximum time that can be allotted
to complete it etc., must be made clear. If there are changes to any of these, let the
employee know at the earliest
Give the employees necessary tools, time and training. The employee must have the
tools, time and training necessary to do their job well - or they will move to an employer
who provides them.
Have a person to talk to each employee at regular intervals. Listen and solve employee
complaints and problems, as much as possible. Fairness and impartial treatment by
seniors is important. Help employees manage stress, both at work and if possible, off
work too. Give them special concessions, when in need. Treat the employees well &
provide dignity of job.
The quality of the supervision an employee receives is critical to employee retention.
Frequent employee complaints arise on this issue.
Provide the employees a stress free work environment. People want to enjoy their work.
Make work and work place cheerful and fun-filled as possible.
Make sure that employees know that their work is important for the organisation. Feeling
valued by their employer is key to high employee motivation and morale. Recognize their
strengths and help them to improve those they lack.
Employees must feel rewarded, recognized and appreciated. Giving periodical raise in
salary or position helps to retain staff.
Offer excellent career growth prospects. Encourage & groom employees to take up
higher positions/openings. If they dont get opportunity for growth within the
organisation, they will look elsewhere for it.
Work-life balance initiatives are important. Innovative and practical employee policies
pertaining to flexible working hours and schemes, granting compassionate and urgency
leave, providing healthcare for self, family and dependants, etc. are important for most
people. Work-life balance policies would have a positive impact on retaining skilled
employees, as well as on attracting high-caliber recruits.

Implement competency models, which are well integrated, with HR processes like
selection & recruitments, training, performance appraisal and potential appraisal.
Night shifts
1. Have doctors to advise them about health problems and the ways and means to deal with
them. Provide dietary advice: - Dos and donts. Help them to maintain their health.
2. Organize programmes where people from other professions, who have night shifts talk to
BPO employees about their experiences. Other organisations like Army, Railways,
Hospitals and various government services etc., also have night shifts.
3. Organize training, counselling and development programmes for employees. Tell them
that their work is important. Encourage the best performers to share their experiences
with others and guide others. The emphasis is to create the desire to
learn, enjoy and be passionate about the work they do.
4. If needed, provide special lights in the office/workplace to ensure that their bodies get
sufficient vitamin D.

One distinct disadvantage of night shifts is the sense of disorientation with friends and family
members. Concentrate on this problem and develop innovative solutions and ways to deal
with it. Additional holidays for work on national holidays and festivals, holidays for family
functions etc., can go a long way.

Employee Recognition Increases Retention

It seems that now more than ever employee recognition is limited at best in many organizations.
Unfortunately many managers don't understand the importance of recognizing a team member's
hard work and a job well done. Many might even ask why they should recognize their employees
when they are "just doing their job."
The truth is that recognizing employees for their hard work is one of the least expensive and
easiest ways to improve the level of employee retention in your organization. The return on
investment for a manager's time and limited expenses can be incredible.
Recognizing an employee's performance reinforces positive behavior and encourages additional
positive behavior. If a team member feels that he or she is appreciated they will be much more
likely to repeat their behaviors in the future and even put out more effort than before. When a
business leader understands the power of recognizing his or her employees the culture of an
organization reacts to this recognition and moves in a positive direction helping to retain more
employees.
Employee recognition can be as simple or as extravagant as one desire. The following is a short
list of simple ways to recognize team members for a job well done and improve retention in your
organization.
A simple "thank you" or "nice job" given in regular frequency can significantly boost
team morale. Often times a team member will greatly appreciate the time you spent to
find him at his desk and deliver the message in person.
Send a thank you card or e-card. Also photocopy the thank you and document the reason
for the recognition in the employee's file. Let the employee know you did this - it will let
her know that her hard work will not be forgotten.
Movie tickets, gift certificates, or an engraved gift are excellent rewards for an employee
who has excelled or put in the extra effort to make a project happen.

Recognize the team member's contribution in front of members of management. This can
reduce the tendency for employees to feel that their supervisors take all the credit for
their hard work.

Recognize loyalty and exceeding expectations. Mention the team member's hire
anniversary, large contract won, or surpassing of a sales goal in the company newsletter
or at a staff meeting.
Know how to recognize your staff. Not all staff members want to be singled out at a
gathering of hundreds of fellow team members, while for others it would make their
week. The approach to recognizing team members can vary greatly by generational
cohort. You might seriously embarrass a baby boomer by having them stand up in front a
Group of their peers and discuss their recent success, while a Gen X-er will relish this
opportunity.
Employee Retention can be increase by inculcating the following practices:
1. Open Communication: A culture of open communication enforces loyalty among
employees. Open communication tends to keep employees informed on key issues. Most
importantly, they need to know that their opinions matter and that management is 100%
interested in their input.
2. Employee Reward Program: A positive recognition for work boosts the motivational
levels of employees. Recognition can be made explicit by providing awards like best
employee of the month or punctuality award. Project based recognition also has great
significance. The award can be in terms of gifts or money.
3. Career Development Program: Every individual is worried about his/her career. He is
always keen to know his career path in the company. Organizations can offer various
technical certification courses which will help employee in enhancing his knowledge.
4. Performance Based Bonus: A provision of performance linked bonus can be made
wherein an employee is able to relate his performance with the company profits and
hence will work hard. This bonus should strictly be productivity based.

5. Recreation facilities: Recreational facilities help in keeping employees away from stress
factors. Various recreational programs should be arranged. They may include taking
employees to trips annually or bi-annually, celebrating anniversaries, sports activities, et
al.
6. Gifts at Some Occasions: Giving out some gifts at the time of one or two festivals to the
employees making them feel good and understand that the management is concerned
about them.

CASE STUDY
Retention Strategies Help to Drive Revenue Growth
Employee satisfaction is essential to any effective employee retention strategy - any good HR
manager knows that. However few managers think of the impact that employee satisfaction has
on their customers and ultimately company profits. One can assume that happier, more
productive employees will make more sales, treat customers better, and ultimately make more
money for the company, but few companies have analyzed this assumption to the extent that
Sears, Roebuck and Company has. Sears has put this common assumption to the numbers test
and the results are intriguing to say the very least.
1992 was the worst year on record for Sears, losing almost 4 billion dollars on over 52 billion
dollars in retail sales. The early and mid 1990s were truly trying times for the retail giant and
tested the will and resolve of managers and employees alike. During this time the company was
in near shambles, morale was low, revenues were suffering, and the bottom line was
hemorrhaging red ink. This was in stark contrast to nearly a century of stellar results that Sears
had comfortably enjoyed. For Sears, something needed to be done, and fast!

Sears began their turnaround by identifying three key objectives: Creating a compelling place to
work, a compelling place to shop, and lastly creating a compelling place to invest. One of the
tools used to establish these objectives was the employee-customer-profit chain. The employeecustomer-profit chain is essentially a flow chart that diagrams revenue creation starting with
employee attitudes and satisfaction, followed by its effect on customer satisfaction, and
ultimately the effect on revenue and bottom line profit generation.
One thing Sears realized it needed to do was exert a greater effort focusing on the customer. This
is often times easier said than done for many organizations. However Sears took an innovative
approach to increasing customer focus. Based on the employee-customer-profit chain, it realized
that it could not better focus on the customer without first focusing on its employees.

For Sears 70% of its workforce was part-time status and turnover among its part-time workforce
had become alarmingly high. Sears suspected that low morale and poor employee attitudes
towards the company were to blame. Sears began a rigorous process of measuring employee
attitudes and satisfaction via a 70 question employee survey. The results of this survey were then
juxtaposed to customer satisfaction surveys and ultimately compared to revenue and profit trends
for the company. The correlations drawn from the data were greater than Sears could have ever
imagined.
Undoubtedly Sears expected to see some positive correlation between employee and customer
satisfaction and ultimately revenue and profit generation; however they were amazed to see just
how great an impact employee satisfaction levels had on the bottom line. The data revealed that
for each five point improvement on the employee attitude scale, there was a subsequent 1.3%
improvement in customer satisfaction, and a 0.5% increase in revenue growth.
A 0.5% increase in revenue might sound miniscule, however when it is based on revenues of
over 50 billion dollars it adds up quickly and significantly. For Sears this would equate to a 250
million dollar increase in revenues a year! This revenue increase does not require investments
into advertising, new facilities, or improved operations, only an investment into the satisfaction
and happiness of employees.
There are also cost savings that can be attributed to improved levels of employee satisfaction. It
should come as no surprise that happy employees stay in their jobs longer than unhappy
employees. By focusing on increasing employee satisfaction Sears was able to concurrently
increase revenues and reduce the costs associated with employee turnover. Sears was also able to
determine that employees with greater levels of satisfaction and a favorable attitude towards the
company were more likely to speak positively about the company and recommend shopping
there to friends and family members.
By increasing employee satisfaction Sears was able to generate free word of mouth advertising
spread by its employees, thus in a way reducing the reliance on paid advertising to generate
revenue. Sears realized the importance of its employees and their levels of satisfaction and made
it a corporate goal to increase levels of employee satisfaction throughout the company.

Sears feels that employee satisfaction levels are so important to the company's health and vitality
that it treats attitude and satisfaction numbers the same as "hard" financial numbers. Sears is so
committed to these numbers that it has them audited by an accounting team to ensure validity
and reliability just as it does with all of its internal financial measures.
For Sears its turnaround did not take place overnight. It took several years of hard work and
dedication from managers and employees at all levels. Improving levels of employee satisfaction
was not the sole contributing factor to Sears' remarkable turnaround. However it is fair to assume
that without the focus on the employee as a base to better focus on the customer the turnaround
at Sears would not have been as quick or amazing as it was.
As business leaders we should all pay careful attention to the approach that Sears took to
improving its bottom line. The urge to drastically cut costs through outsourcing, layoffs,
reducing benefits, and streamlining operations might well be overly complex solutions to a
relatively simple problem. In lieu of cost cutting initiatives to preserve profit margins, a customer
focused approach might be a better solution. As we can learn from Sears focusing on the
customer ultimately begins by focusing on the employees who serve the customer.