Human Resource Management

Author – Sweni Jain

Chapter 1

Functions

1. Planning:
The process by which managers ensure that they have the right number and kinds of people in the right
places, and at the right times, who are capable of effectively and efficiently performing their tasks.

HRM Objectives
• Help organization reach its goal
o The HRM function is evolving to meet the current and future needs of the organizations they serve.
o Some of the value-added contributions that HRM can make include managing talent for the short-
and long-term; helping align human resources with the goals and strategies of the organization; and,
facilitating change to keep pace with the changing environments in which organizations find
themselves
• Efficiently employing the skills & abilities of the workforce
o With the new generation Y entering the workforce, managing their skills & abilities require some
preparation and consideration of their similarities & differences with other generations.
• Providing well trained & well motivated employees
o HRM effectiveness measure is to provide the right people at the right phase of performing a job, at
the right time for the organization.
o If one wants to improve the performance of the employees, one must reward good results, but not
to people who don’t perform.
o Make the goals clear, and how they are measured, with no room for side issues like whether
someone’s a nice person.
• Increasing employee’s job satisfaction & self-actualization
o For employees to be productive, they must feel that the job is right for their abilities and that they
are being treated in a fair manner.
o Satisfied employees are not automatically more productive. However, unsatisfied employees do
tend to quit more often, be absent more frequently, and produce lower-quality work than satisfied
workers.
o Nevertheless, both satisfied and dissatisfied employees may perform equally in quantitative terms.
• Achieving quality of work life
o Sound quality of work life program assumes that a job and the work environment should be
structured to meet as many of the worker’s needs as possible
o People need to have a stake in their work and that employees will respond when employers pay
attention to their personal needs and their work situations
• Communicating HRM policies to all employees
o HRM’s responsibility is to communicate in the fullest possible sense both in tapping ideas, opinions,
and feelings of customers, non-customers, regulators, and other external publics, and in
understanding the views of internal human resources
• Maintaining ethical policies & social responsible behaviour
o Any activity engaged in by the HRM area should be fair, truthful, and honourable; people will not be
discriminated against, and all their basic rights will be protected. These ethical principles should
apply to all activities in the HRM area
• Managing Change
o In the past decade, there have been rapid, turbulent, and often strained developments in the
relationship between employers and employees.
o New trends and changes have occurred in telecommuting, outsourcing, HRM practices, family
medical leave, child care, spousal relocation assistance, pay for skills, benefit cost-sharing, union–
management negotiations, testing, and many other HRM areas of interest.
 o Flexible approaches must be initiated and used effectively without jeopardizing the survival of the
organization. HR managers must cope with trends and changes while still contributing to the
organization.
• Managing Increased Urgency and Faster Cycle Time
o Faster cycle time to train, educate, and assign managers; solve sexual harassment complaints; recruit
and select the most talented people; and improve the firm’s image are becoming important
milestones for organizations.

Different Theories of HRM

Balridge Model of HRM

• Balridge or quality model of HRM helps organizations in focusing their attention on attaining global
standards in quality of products or services.

• In quality modelling, HR function needs to develop a new vision for itself as a customer focused service
provider, in other words, setting 100% customer satisfaction as HRM’s goal which means, defining who
the customers are and determining their precise needs.
• To implement quality model in the organization, companies must work upon following categories of HRM
and need to answer all the questions with their unique strategy to handle each area of HRM mentioned
below;
o HR Planning & Management
▪ How are the companies’ overall HR plans and practices integrated with their overall
performance goals, and how does HR address the needs and development of the entire work
force?
o Employee involvement
▪ What are the means available for workers to contribute effectively to meeting the companies’
performance goals and plans?
o Employee education & training
▪ How do organizations determine what kind of education and training employees need, and how
does the training support organization plan and employee growth?
o Employee performance & recognition
▪ How do the companies’ employee-performance, recognition, promotion, compensation, reward
and feedback approaches support the attainment of the companies’ quality goals?
o Employee well-being & satisfaction
▪ How do the companies maintain a work environment conducive to the well-being and growth of
all workers?
• In assessing HR function using the Baldrige criteria, HR professionals must adopt the perspective that HR is
an independent contractor serving the organization.

Harvard Model of HRM

• Harvard model acknowledges the existence of multiple stakeholders within the organization.
• These multiple stakeholders include shareholders various groups of employees, government and the
community at large.
• The recognition of the legitimacy of these multiple stakeholders renders this model a neo - pluralist
model.
• This model emphasizes more on the human/soft side of HRM.
• This is because, this model emphasizes more on the fact that employees like any other shareholder are
equally important in influencing organizational outcomes.
• In fact, the interest of the various groups must be fused and factored in the creation of HRM strategies
and ultimately the creation of business strategies.
• A critical analysis of the model shows that it is deeply rooted in the human relations tradition.
• Employee influence is recognised through people motivation and the development of an organization
culture based on mutual trust and team work.
• The factors above must be factored into the HR strategy which is premised on employee influences, HR
flows, reward system etc.
• The outcomes from such a set up are soft in nature as they include high congruence, commitment,
competencies etc.
• The achievement of the crucial HR outcomes has got an impact on long term consequences, increased
productivity, organizational effectiveness which will in turn influence shareholder interests and situational
factors hence making it a cycle.
• It is thus important to note that the Harvard model is premised on the belief that it is the organization’s
human resources that give competitive advantage through treating them as assets and not costs.

Fombrum, Tichy and Devanna Model of HRM

• Also named as the matching model of HRM
• Precisely, the matching aspect of this model demonstrates that the model is inclined towards the harder
side of HRM.
• This is because the matching model emphasizes more on “tight fit” between the HR strategy and the
business strategy.
• It demands that available human resources must be matched with jobs in the organization.
• The HR strategy must be highly calculative in terms of the quantity of the human resources required to
achieve the objectives enshrined in the business strategy.
• Business strategy takes the central stage in this model hence human resources are taken like any other
resource which must be fully utilised together with the other resources to achieve organizational
objectives.
Guest Model
• Reflects view that a core set of integrated HRM practices can achieve superior individual & organizational
performance
• This model is the fusion of aspects that resemble both a hard & a soft approach of HRM
• Guest proposes 4 crucial components that underpin organizational effectiveness
o Strategic integration
▪ This is the ability of organizations to maintain a fit between the HRM strategy and the business
strategy.
▪ There must be congruence between business strategy and the HR strategy for the organization
to achieve its goals.
▪ Strategic integration shows the harder side of the Guest Model.
▪ This is precisely because human resources are treated in a similar manner like any other
resource with the prime goal of achieving business objectives.
o Flexibility
▪ Flexibility is basically concerned with the ability of the organization and its people to adapt to
the changing business and work environment and to the capacity to manage innovation.
▪ Carries both suggestions of hard & soft HRM
o High commitment
▪ This is concerned with the need to have both behavioural commitment, which is the ability to go
an extra mile, and attitudinal commitment, which is reflected through a strong identification
with the organization.
o Quality
▪ Quality assumes that provision of high quality goods and services results from a quality way of
managing people
Chapter 2

Human Resource Planning

The process by which managers ensure that they have the right number and kinds of people in the right places,
and at the right times, who are capable of effectively and efficiently performing their tasks.

Advantages of Human Resource Planning

• Recruitment – helps companies to prepare in advance for vacancies rather than at the last moment
• Career Development/Succession Planning - when an executive or manager leaves or retires, there is
already someone ready to promote into the position
• Training - Employees, especially new employees, can be developed in time with appropriate plans
• Performance Management - Due care can be taken to align employee performance with organization
objectives
• Other benefits - Compensation Plans, plan of physical space, handle uncertain business situations etc.

Human Resource Planning Process - Important

• HR planning involves four distinct phases/stages;
1. Situation analysis or environmental scanning
2. Forecasting demand for human resources
3. Analysis of the supply of human resources
4. Developments of plan for action
• Situation analysis or environmental scanning
o The strategic plan must adapt to environmental circumstances, and HRM is one of the primary
mechanisms that an organization can use during the adaptation process.
o For example, rapid technological changes in the environment can force an organization to quickly
identify and hire employees with new skills that previously weren’t needed by the organization.
o Without an effective HR plan to support the recruitment and selection functions in the organization,
it would be impossible to move fast enough to stay competitive.
o The top approaches for environmental scanning are
▪ sensing changes early,
▪ interpreting changes in a meaningful way,
▪ communicating the implications of changes,
▪ interacting intensively with customers,
▪ maintaining an outward looking view.
• Forecasting demand for employees
o The next phase of an effective HR planning process is estimating not only how many but also what
kinds of employees will be needed.
o Forecasting yields advance estimates or calculations of the organization’s staffing requirements.
o Although many quantitative tools can help with forecasting, it involves a great deal of human
judgment. In addition, many successful HR planners rely heavily on their “gut instincts” about future
conditions.
o Various techniques for forecasting include expert estimate, trend projection, modelling & multiple
predictive techniques, unit demand forecasting etc.
• Analysing current supply of employees
o The 3rd phase of HR planning is designed to provide the number of employees available currently in
the company with a specific skill set and necessary training for the future.
o Major tool used for keeping a check on the supply of employees is the skills inventory
o This inventory provides skills, abilities, experiences, and training the employees currently have.
o By keeping track of these, the organization can quickly determine whether a skill is available when it
is needed. Skills inventories are also useful in career planning, management development, and
related activities.
• Action decisions in Human Resource Planning
o After the HR planning system has analyzed both the supply of and the demand for future workers,
these two forecasts are compared to determine what, if any, action should be taken.
o Whenever there is a discrepancy between these two estimates, the organization needs to choose a
course of action to eliminate the gap.
o When HR specialists comparing demand with supply find that the supply of workers is less than the
demand, several possibilities are open to the organization.
o If the shortage is small and employees are willing to work overtime, it can be filled with present
employees.
o If there is a shortage of highly skilled employees, training and promotions of present employees,
together with the recruitment of less-skilled employees, are possibilities.
o This decision can also include recalling employees who were previously laid off.
o When comparison of demand for and supply of employees indicates a surplus, the alternative
solutions include attrition, early retirements, demotions, layoffs, and terminations.

Organizational Life-cycle stages & HR activities

Life-Cycle Staffing Compensation Training & Labour/ Employee

Stage development Relations
Introduction Attract best technical Meet or exceed Define future skill Set basic employee
& professional talent labour market rates requirements and relations
to attract the needed begin establishing philosophy of
talent career ladders organization
Growth - Recruit adequate Meet external market Mould effective Maintain labour
numbers & mix of but consider internal management team peace, employee
qualified workers. equity effects. through motivation, and
- Plan management Establish formal management morale.
succession. compensation development &
- Manage rapid structure. organizational
internal labour market development.
movements.
Maturity Encourage sufficient Control Maintain flexibility Control labour
turnover to minimize compensation costs & skills of an aging costs and maintain
layoffs & provide new workforce labour peace.
openings. Encourage Improve
mobility as re- productivity.
 organizations shift
jobs around.
Decline Plan & implement Implement tighter Implement Improve
workforce reductions cost control retraining & career productivity &
& reallocations, consulting services achieve flexibility in
downsizing & work rules.
outplacement may Negotiate job
occur during this stage security &
employment
adjustment policies

Chapter 3

Job Analysis
• Job analysis –
A systematic process of gathering, documenting, and analysing information about the content, context,
and requirements of a job. Systematic process of determining the skills, duties, and knowledge required
for performing jobs in an organization (functional job analysis, position analysis questionnaire)
• Job description –
The principal outcome of a job analysis. It represents a written summary of the job as an identifiable
organizational unit.
• Job specification –
A written explanation of the knowledge, skills, abilities, and other characteristics (KSAOs) necessary for
effective performance on a given job.
• Position –
Consists of the responsibilities and duties performed by an individual. There are as many positions in an
organization as there are employees.
• Job –
Group of positions that are similar in their duties, such as computer programmer or compensation
specialist.

Parts of Job: Job description & Job specifications - Important

Job Description
• Job description is one of the primary outputs provided by job analysis.
• A job description is a written description of what the job entails.
• It is, however, difficult to overemphasize how important thorough, accurate, and current job descriptions
are to an organization.
• Many changes occurring in recent years have increased the need for such job descriptions. These changes
include
o incredible number of organizational restructurings that have occurred (e.g., downsizing);
 o need to implement new and creative ways to motivate and reward employees;
o accelerated rate at which technology is changing work environments;
o new, more stringent federal regulation of employment practices through legislation
• While there is no standard format for a job description, almost all well-written, useful descriptions will
include information on:
o Job title –
Title of the job and other identifying information such as its wage and benefits classification.
o Summary –
Brief one- or two-sentence statement describing the purpose of the job and what outputs are
expected from job incumbents.
o Equipment –
Clear statement of the tools, equipment, and information required for effectively performing the
job.
o Environment –
Description of the working conditions of the job, the location of the job, and other relevant
characteristics of the immediate work environment such as hazards and noise levels.
o Activities –
Includes a description of the job duties, responsibilities, and behaviours performed on the job. Also
describes the social interactions associated with the work (for example, size of work group, amount
of dependency in the work).
Job Specification
• Evolves from job description
• Job specification is useful for providing guidance for recruitment & selection
• It provides the personality traits & experience required for performing the job effectively
• Determining what skills, knowledge, or abilities are required for performing a job must be done
systematically.
o All job tasks must be identified and rated in terms of importance using sound job analysis
techniques.
o A panel of experts, incumbents, or supervisors should specify the necessary skills for performing
each of the job tasks identified.
o The importance of each skill must be rated.
o Any other characteristics necessary for performing the job should be identified. These include things
such as physical requirements and professional certification.
o Each skill that has been identified needs to be specifically linked to each job task.

Chapter 4

Difference between training & development

Training
Training is a learning process in which employees
get an opportunity to develop skill, competency and
knowledge as per the job requirement
Short term process
Focuses on present requirements
Trainings are job oriented
Objective is to improve work performances of the
employees
Aims at providing job related knowledge
Development
Development is an educational process which is
concerned with the overall growth of the employees
Long term process
Focuses on the future requirements
Development is career oriented
Objective is to prepare employees for the future
challenges
Aims at providing conceptual & general knowledge

Importance of Training
• Addressing weakness –
Every employee is weak at certain skills and is not perfect. If there are scenarios wherein certain
employees skills match and those skills can be strengthened by providing training, hire such employees or
assign such tasks to them for them to work hard and perform better.
• Improving performance –
 Once the employee gets the desired skills required for the task to execute. Their weakness will turn into
their strengths and they get the better understanding what and how to execute with better ideas.
• Fostering growth –
The main aim of any organization is to get development and growth for the effects they put on. Growth
can be achieved if all the workforce of an organization pays equal attention to development. That
requires the skilled and ambitious employees to handle the situation. By providing training to employees,
organization provides them the space to learn and grow.
• Enhancing satisfaction –
Employees feel confident in gaining skills. Training helps the employees to perform tasks easily and, they
can innovate new strategies to execute the task. This builds some level of satisfaction in employees.
• Reducing turnover –
Once the employee gets skilled in their role they can provide better revenue than before. It reduces the
frustration level of both the employee and the employer. Expertise brings the quality of the work and
development of the organization.
• Increase in productivity
Employee satisfaction, confidence, and retention are built, development of the team of skilled
professionals, team organization & morale.
• Employees quality performance leads to improved customer satisfaction and service.
• Employees get updated on the trending technology and advanced methods. Employees get different
ideas to implement their tasks to reach organizational goals.
• Companies get different ideas to implement and they experience different perspectives of business to
execute the same task.
• The Employee gets the job satisfaction, motivation, and morale. Which reduces employee turnover.
• Process gains efficiency, standardization, and flexibility.

Training Process

• 3 major phases of training & development process

o Assessment Phase
▪ Assesses needs of the organization, job, person & demographics
o Training & development phase
▪ Select training media & learning principles
▪ Conduct training
▪ Establish conditions for maintenance
o Evaluation phase
▪ Develop criteria
▪ Pretest
▪ Monitor training
▪ Evaluate
• Phase 1: Assessment Phase
o A needs assessment determines if training is necessary.
o It can also provide information to design the training program.
o Organizational analysis looks at the culture, mission, long and short-term goals, structure of the firm.
o In conducting a task analysis, examine the knowledge, skills and abilities needed to do a job. A
personnel analysis involves identifying which employees need training.
o Need assessment can be conducted through one of the following;
 ▪ Interviews
▪ Surveys
▪ Review of records
▪ Observation
▪ Discuss with management & SMEs
o Information gathering provides details of the type of training required, participants of the training,
time for performing training etc.
o Based on the entire need assessment, trainer and trainee are chosen
• Phase 2: Training & Development Instructional Methods
o This process of instructional design is the most critical in the training process.
o On-the-job training
▪ Employee is placed on real work situation
▪ Job and the tricks of trade are shown by an experienced employee
o Case method
▪ Trainees are asked to read the case and identify the problem, analyze, propose solutions and
chose the best solution and implement it.
▪ Good method for improving and clarifying rational decision making
o Role playing
▪ Each person is assigned a role in a situation and asked to play the role
▪ Places the problem in real life situation
o In-basket technique
▪ Different small situations in a daily work schedule is given
▪ Trainee is analysed on the number of decision, time taken and quality of decision and priority of
choosing them
o Management games
o Behavior modelling
▪ Learning through observation and imitation
▪ It involves:
Showing candidates, the correct way of doing something
Letting them practice
Giving them the feedback
o Outdoor oriented programs
▪ Real life and action oriented
▪ Programs are mainly on leadership, teamwork and risk taking
• Phase 3: Implementation
o Provide active participation
o Increase self-efficacy (trainee’s beliefs about task-specific ability)
o Match techniques to trainee self-efficacy
o Provide opportunities
o Ensure specific, timely, diagnostic and practical feedback
o Provide opportunities for practice of new behaviors
o Incentives encourage employees to participate
o Managers make it easy for employees to attend T and D programs
o Employees encourage each other
o Use of new competencies is rewarded
o No hidden punishments for participating
o Managers who are effective trainers are rewarded
• Phase 4: Evaluation
o Evaluation is the final phase of the training and development program
o Cost-benefit analysis is more feasible for training and development than for many other HRM
functions
o Costs are relatively easy to compute: direct costs + indirect costs
o The evaluation is made by comparing the results (the benefits) with the objectives that were set
Chapter 6

Definition
• Doing all that is required to continuously improve performance of every employee in relation to his/her
role, dyad, team and the entire organization in the context of the short and long-term goals of the
organization.
• The process by which executives, managers, and supervisors work to align employee performance with
the firm’s goals
• An effective performance management process has a precise definition of excellent performance, uses
measurements of performance, and provides feedback to employees about their performance. Thus, it
defines, measures, monitors, and gives feedback.

Appraisal Process
• Objectives of Performance
o Objectives of appraisal include achieving promotions & transfers, assessing training needs, awarding
pay increases and the hike.
o These objectives are appropriate if the approach is individual. Appraisal should also consider system
orientation.
o In the systems approach, appraisal aims at improving the performance instead of merely assessing it.
o Appraisal system seeks to evaluate opportunity factors. Opportunity factors include physical
environment, available resources such as humans & computers; and social processes such as
leadership effectiveness.
• Establish job expectations
o This includes what is expected out of the employee from the job
o Normally a discussion is held with the supervisor to review the major duties contained in the job
description.
o Individuals should not be expected to begin the job until they understand what is expected out of
them.

• Design appraisal program

o Designing an appraisal program poses several questions to be answered.
o They are
▪ Formal vs informal appraisal – formal appraisal usually occurs at specified time periods, once or
twice a year. Formal appraisals are often required for employee evaluation. Informal appraisal
can occur whenever the supervisor feels the need for communication
▪ Whose performance is to be assessed
▪ Who are the raters
▪ What problems are encountered
▪ How to solve the problems
▪ What should be evaluated?
 ▪ When should be evaluated
• Appraise the performance
o The next step of the appraisal process is to measure the performance
o Performance is essentially what an employee does or does not do
o Employee performance common to most jobs include quantity of elements, quality of output,
timelines of output, presence at work, cooperativeness
o In addition to these, other elements include job knowledge, leadership abilities, judgement,
supervision, versatility & health
o Assessment should also include one’s potential to perform & not just actual performance
o Performance measurement needs to be done based on the benchmarks set, which may vary from
job to job.
• Performance Interview
o Once appraisal has been made of employees, the raters should discuss & review the performance
with the ratees, so that they receive feedback about where they stand in the eyes of superiors.
o Feedback is necessary to effect improvement in the performance, especially when it is inadequate.
o Performance interview has 3 goals;
▪ To change behaviour of the employees whose performance does not meet organizational
requirements or their own personal goals
▪ To maintain behaviour of employees who perform in an acceptable manner
▪ To recognise superior performance behaviour so that they will be continued
• Use of appraisal data
o The data & information generated through the performance evaluation must be used by HR
department
o This data can be used by HR for
▪ Remuneration administration
▪ Validation of selection programs
▪ Employee training & development programs
▪ Promotion, transfer, & lay-off decisions
▪ Grievance & discipline programs
▪ HR planning

Chapter 7

Compensation
• Compensation is the human resource management function that deals with every type of reward
individuals receive in exchange for performing organizational tasks.
• Employees trade labour and loyalty for financial and nonfinancial compensation (pay, benefits, services,
recognition, etc.)
• Financial compensation is either direct or indirect.
• Direct financial compensation consists of the pay an employee receives in the form of wages, salaries,
bonuses, or commissions. Indirect financial compensation, or benefits, consists of all financial rewards
that are not included in direct financial compensation. Typical benefits include vacation, various kinds of
insurance, services like childcare or elder care, and so forth.
• Nonfinancial rewards like praise, respect, and recognition, affect employees’ motivation, productivity,
and satisfaction.
Components of Employee Remuneration

Wages and Salary

• Wages represent hourly rate of pay
• Salary represents monthly rate of pay
• Both salary and wages are subject to annual increment and differ from employee to employee
• Depends on
o Nature of job
o Type of industry
o Seniority
o Merit
Incentives
• Incentives are also called as ‘payment by result’, and paid in addition to salary and wages.
• Incentives depends on;
o Sales
o Profit
o Cost reduction efforts
• Incentives can be individual (applicable to specific employee) as well as group (when a given task requires
group effort)
Fringe Benefits
• Fringe benefits are additional compensation provided to employees above and beyond an agreed-upon
wage or salary
• Besides helping employees, offering fringe benefits helps employers tremendously from a recruiting
perspective. Among similarly focused companies, employers can find it challenging to attract
desired talent based on salary alone.
• By offering fringe benefits, especially those not available through a competitor, an employer stands a
greater chance of attracting the level of talent it needs or wants.
Prerequisites
• An incidental payment, benefit or privilege entitled on account of one’s job position
• Offered to retain competent people
Incentive Schemes

Taylor’s differential piece rate plan

• Taylor prescribed two-piece work rates. One, a higher wage rate for those who reach the standard work.
Second, a lower wage rate whose performance is below the standard.
• The standard work is determined based on time and motion studies.
• This wage plan encourages and rewards the employees who are efficient by giving them wages at a
higher rate.
• At the same time, the plan penalizes those who are slow performers by paying them at a low wage rate.

Halsey plan
• This plan is a combination of the time and the piece wage in a modified form.
• Under this plan, a guaranteed wage based on past experience is determined.
• If a worker saves time, he gets 50% of wages for time saved (called premium) in addition to normal
wages. It is optional for the worker to work on the premium or not. Thus, this plan also provides incentive
to efficient workers.

Rowman efficiency plan

• This plan, to a large extent IS similar to that of Halsey Premium Plan.
• The only difference is in regard to the determination of the premium.
• Unlike a fixed percentage in case of Halsey plan, it considers premium on the basis of the proportion
which the time saved bears to the standard time.

Emersson efficiency plan

• Under this scheme, both standard work and day wage are fixed.
• Bonus is paid on the basis of worker’s efficiency.
• A worker becomes entitled to get bonus only when his/her efficiency reaches to 67%. The rate of bonus
goes on increasing till he achieves 100% effi-ciency.
• Above 100% efficiency, bonus will be 20% of the basic rate plus 1% for each 1% increase in efficiency.
• In this way, at 120% efficiency, a worker receives a bonus of 40% and at 140% efficiency worker gets 60%
of the day wage as bonus.

Gantt Task & Bonus plan

• This plan combines time, piece wage and bonus. Standard time, piece wage and high rate per piece are
determined.
• A worker who cannot complete standard work within standard time is paid only the minimum guaranteed
wage.
• A worker performing up to the standard level of work gets time wage plus a bonus @ 20% of normal time
wage. If the worker exceeds the standard, he is paid a higher piece rate but there is no bonus.

Bedeaux point plan

• Bedeaux system also called units or point system also guarantees a minimum base wage.
• Under this plan, the standard time and time taken for each job is reduced to minutes.
• The workers who complete the job within standard time are paid at a normal time rate.
• Those who complete the job in less time are paid bonus. The bonus paid to the worker is 75% of the
wages for time saved. The time saved is divided between workers and management.

Merrick’s multiple piece rate plan

• To overcome the limitations of Taylor’s differential piece rate system, Merrick suggested a modified plan
in which, three-piece rates are applied for workers with different levels of performance.
• These are:
o Workers producing less than 83% of the standard output are paid at basic rate.
o Workers producing between 83% and 100% of standard output will be paid 110% of basic piece rate.
o Those producing more than 100% of the standard output will be paid 120% of basic piece rate.
• Advantages:
o Efficient workers are rewarded handsomely.
o Minimum wages are guaranteed.
• Disadvantages:
o There is wide gap in slabs of differential wage rate.
o Over emphasis on high production rate.

Challenges faced

Skill based pay

• Workers are paid on the basis of number of jobs they are capable of doing, or on the depth of their
knowledge
• Purpose of this system is to motivate the employees to acquire additional skills so that they become more
useful to the organization

Pay Reviews
• Pay once determined, should not remain constant. It must be reviewed & changed often, but how often
becomes a relevant question
• Pay reviews may be made on predetermined dates, anniversary dates or there could be flexible reviews
• In the fixed date reviews, wages & salaries of all employees are reviewed & raised on a specific date each
year.

Pay Secrecy
• Process by which a remuneration plan is designed & administered is critical for any organization
• One challenge facing HRM concerns the availability of information about remuneration to employees
• The tendency amongst firms is to maintain pay secrecy as this would help avoid pay comparisons likely to
be made by employees

Comparable Worth
• One of the popular principles in employee remuneration is equal pay for equal work
• Beyond the concept of equal wages for equal work, is the idea of comparable worth which implies that if
both a nurse & electrician receive the same number of points under point ranking method of job
evaluation, they have to be paid the same, subject.
• Any bias process is sure to render comparable worth unworkable. Bias is bound to occur in job evaluations

Employee Participation
• When employees are involved in designing of remuneration plan, they show less resistance in accepting it.
Such a plan is more likely to be successful motivator than the one imposed by the management.
• It is appropriate to involve employees in many phases of a reward system.
• The decision to involve employees in designing should not be taken in haste. Employee participation is
unlikely to work well unless the organization has already established an overall philosophy of participative
management, as well as reasonable climate of organizational trust.

Eliticism v/s Egalitarianism

• Firm becomes egalitarian when they place all employees under same remuneration plan ad it becomes
elitist when the organization places all employees under different remuneration plan.
• Egalitarianism gives organizations more flexibility to deploy employees in different areas without having to
change their pay levels
• Elitist pay structures tend to result in a more stable work-force because employees make more money
only by moving up through the company

Below market v/ above market remuneration

• Remuneration involving decision relating to below market or above market pay structure has 2
implications
o A firm’s ability to attract talent from others depends on employee’s pay relative to alternative
employment opportunities
o The choice has an important cost component
• Decision to above going rate adds on to the cost.
• In general, above market pay policies are more prevalent among large companies in less competitive
industries
• Firms paying below market rate, tend to be small & unorganized

Monetary v/s non-monetary rewards

• The issue relating to monetary & non-monetary rewards has primarily tax implications.
• Many non-monetary rewards like medical benefits, housing etc., is fully or partially exempted from taxes
• Employees & employers prefer non-monetary rewards over monetary.

Chapter 8

Strategy
Strategy is a framework for managerial decisions. It reflects a firm’s awareness of how, when & where it
should compete. The focus is on managing competition.
Strategic management
The process of crafting strategies, their implementation and evaluation of their effectiveness.

Strategic Human Resource Management (SHRM)

Process of developing practices, programs, & policies that help achieve organizational objectives.
SHRM involves that –
• HRM is fully integrated with the strategy and the strategic needs of the company
• HR policies cohere both across policy areas & across hierarchies
• HR architecture of the firm results in its above-average financial performance. HR architecture is
composed of the systems, practices, competencies & employee performance behaviors that reflect the
development & management of the firm’s human resource
• HR practices are adjusted, accepted, & used by line managers & employees as part of their daily work

Difference between Strategic HRM & Traditional HRM

Parameter Strategic HRM Traditional HRM

Responsibility for The task of managing people is vested on The responsibility of people management
HRM the managers who interact with the program rests with the staff specialist in
people line managers an organization
Focus HRM goes beyond & focuses on The focus is on employee relations,
partnership with internal & external ensuring that employees are motivated &
constituent groups. become productive and the firm follows
the necessary employment laws
Role in HR HR performs transformational role. Here HR performs transactional role. HR is more
the HR is the change leader & imitator of a change follower & respondent
Initiatives Fast, proactive, integrated Slow, reactive, fragmented
Time horizon Short, medium, long (as necessary) Short term
Control Organic-flexible, whatever is necessary to Bureaucratic roles, policies & procedures
succeed
Job design Broad, flexible, cross-training, teams Tight division of labor, independence,
specialization
Key investments People, knowledge Capital, products
Accountability Investment center Cost center

Barriers to Strategic HRM

• The tendency of most organizations adopts a short-term mentality & focus on current performance. This is
no surprise since stakeholders, particularly shareholders, except quick rewards & executives need to live
up to these expectations. Employees expect quick rewards based on their performance but management
might wait.
• Inability of the HR to think strategically. They are unable to go beyond their area of operation. Their
knowledge about general business functioning, their awareness about technological advancements &
their ability to convince colleagues in other departments in very limited
• Most senior managers lack appreciation for the value of HR and its ability to contribute to the organization
from strategic perspective
• Some functional managers see themselves as HR managers as well & are concerned more with technical
aspects of their areas responsibility than human aspect.
• Problem of quantifying many of the outcomes & benefits of HR programs. It is believed that many of the
outcomes of HR functions are abstract-felt, but not seen.
• Human assets are not owned by organization & therefore are perceived as a higher risk investment than
capital assets. Particularly, in a highly competitive environment where the key executives are poached
from rivals, there is a tendency to invest less in employees than in technology & information, which are
more proprietary.
• Strategic HR may be resisted because of the insensitivity towards change that might arise. Taking a
strategic approach to HR may mean making drastic change in the firm’s architecture.
• Non- availability of HR professionals to staff themselves in HR departments, consequent to integration of
HR function with business strategy. HR managers may have to spend more time with top executives, travel
extensively & organize brainstorming sessions to formulate & implement HR strategies
• Failure to understand strategic needs of the business, inadequate assessment of the environmental &
cultural factors that affect the contents of the strategies & the development of ill-conceived irrelevant
initiatives may be because of current fads or because there has been ill-digested analysis of best practices
that do not fit the organization’s requirements
• There is enough disconnect between the HR team and the employees. The disconnect should not be
allowed to escalate by distancing from employees in the guise of bigger role in strategy management

Strategic Management Process

• Scan the environment

o Analysis of the environment provides inputs for decision-making in business, which thus includes
HR decisions too.
o Environment comprises of internal & external forces which impact the organization.
o External forces include political, legal, economic, technological & cultural forces
o Internal environment includes business processes, SWOT of the firm, organizational culture,
organizational structure etc.
• Identify sources of competitive advantage
o Competitive advantage stems from such diverse sources as quality, price, brand positioning,
timely delivery & customer service.
o These sources of competitive advantage reflect the core capabilities of the organization.
• Identify HRM Strategies
o There are 4 major HRM strategies which help an organization build up its employee capabilities

• Implementing HR strategies
o HR strategies are implemented through HR policies, plans & practices. The mix of HR strategic
choices helps execute HR strategies.
o Policies sets the tone for others to make decisions.
o Plan follows policies. It specifies course of actions along with time frame to carry out the plans.
o Practices should follow HR plans. Practices represent set of interventions & activities.
• Monitor & evaluation
o Establishing performance targets, standards and tolerance limits for the objectives, strategies &
implementation plans
o Measuring the performance in relation to the targets at a given time. If outcomes are outside the
limits, inform managers to act
o Analyze the deviations from acceptable tolerance limits
o Execute modifications where necessary & feasible.

Chapter 11

Employee Welfare
• A comprehensive term which means psychical, mental and emotional well-being of an individual.
• Labour welfare is understood to include such services, facilities and amenities as may be established in or
in the vicinity of undertakings to enable the persons employed in them to perform their work in healthy,
congenial surroundings and to provide them with amenities conducive to good health and high morale.

Features of Employee Welfare

• Employee welfare is a comprehensive term including various services, facilities and amenities provided to
employees for their betterment.
• The basic purpose in to improve the lot of the working class.
• Employee welfare is a dynamic concept.
• Employee welfare measures are also known as fringe benefits and services.
• Welfare measures may be both voluntary and statutory