COMPOSED BY MOHIT

HRM

PEOPLE CAN MOVE MOUNTAINS

Americas Erick Weihen Mayer created history on May 25, 2001 by becoming the first blind person to scale Mount Everest. Erick at, 32, who lost his eyesight due to a degenerative disease at the age of 13, set a foot on 8,848 meter peak along with 17 other members of an expedition team after an unsuccessful attempt earlier due to bad weather conditions. An hour before Erick, Bradford Bull earned a distinction of being the oldest climber to set foot atop the worlds highest peak at the age of 65along with his son.
(source: Times of India, 26/5/2001)

Among the various factors of production, which are used in an organization, human resource is the most important. This is because effective use of physical resources such as land, machinery, materials, etc. ultimately depends on how the human factor is put to good use on various operations. The most effective and efficient machinery in the world will not produce optimum level unless the people who operate the machinery know how to make it perform at its best and most importantly, are motivated to make their equipment produce efficiently.

1.1 DEFINATION OF HRM: Human Resource Management (HRM) is a process of bringing

people and organizations together so that the goal of each one is met, effectively and efficiently.

1.2 NATURE OF HRM:

The principle scope of HRM can be listed as, Pervasive force Action oriented Individually oriented People oriented Future oriented Development oriented Integrating mechanism Comprehensive function Auxiliary services Inter-disciplinary function

Continuous function

1.3 OBJECTIVES OF HRM:

The principle objectives of HRM can be listed as, To help the organization reach its goals. To employ the skills and abilities of the workforce efficiently. To provide the organization with well-trained and well- motivated employees. To increase the fullest the employees job satisfaction and selfactualization. To develop and maintain a quality of work life. To communicate HR policies to all employees. To be ethically and socially responsive to the needs of the society.

1.4 IMPORTANCE OF HRM:

People have always been central to the organization and an organizations success increasingly depends on the knowledge, skills and abilities of employees, particularly they establish a set of core competencies that distinguish an organization from its competitors. With appropriate HR policies and practices an organization can hire, develop and utilize best brains at work place, retain talent Attract and realize its professed goals and deliver better results than others. Train people for challenging roles Develop skills and competencies Promote team spirit Develop loyalty and commitment Increase productivity and profits Improve job satisfaction

GOOD HR PRACTICES HELP

1.7 GROWTH OF HR IN HR IN INDIA:

Since the evolution of HR, the field has seen a lot of changes, which can listed as,

PERIOD 1920-1930 1940-1960

EMPHASIS
Welfare management Paternalistic practices Expanding the role to cover labor, welfare, industrial relations and personnel administration Efficiency, effectiveness dimensions added Emphasis on human values, aspirations, dignity, usefulness Incremental productivity gains through human assets

STATUS
Clerical

ROLES
Welfare administrator Policeman Appraiser Advisor Mediator Legal advisor Fire fighting Change agent Integrator Trainer Educator Developer Counselor Coach Mentor Problem solver

Administrativ e

1970-1980

Development

1990sonwards

Proactive, growthoriented

1.8 SHIFTS IN HR MANAGEMENT IN INDIA:

TADITIONAL HR PRACTICE
Administrative role Reactive Separate, isolated from company mission Production focus Functional organization Individuals encouraged, singled out for praise, rewards People as expenses

EMERGING HR PRACTICE
Strategic role Proactive Key part of organizational mission Service focus Process based organization Cross-functional teams, teamwork most important People as key investments/assets

1.9 CONTEMPORARY ISSUES IN HRM:

Following can be stated as contemporary issues in HRM,

HR manager as strategists HR professional as change

agent

Managin g diversity

HRM in M&A

Changed employee expectatio ns New organizatio nal forms

CONTEMPORA RY ISSUES IN HRM

Changing workforce demograph ics HRM in high performanc e organizatio ns Attitude towards union Make HR activities ethical

As stated above, one of the challenges faced by HR managers is that of Human Balancin BPO and Globalizati Resource Management is that of attritionworkg of Employees in BPO and KPO industry.

1.10 EMPLOYEE ATTRITION:

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life

on

DEFINING EMPLOYEE ATTRITION AND ATTRITION RATE:

Attrition: A reduction in the number of employees through retirement, resignation or death. Attrition Rate: The rate of shrinkage in size or number. There are numerous reasons for the attrition to be high which can be categorized into two broad classifications. The first can be coined as Drive Attrition which is caused due to employer; the second one can be termed as Drag Attrition which is caused due to the employee. The attrition rate has always been a sensitive issue for all organizations. Calculating employee turnover rate is not that simple as it seems to be. No common formula can be used by all the organizations. A formula had to be devised keeping in view the nature of the business and different job functions. Moreover, calculating attrition rate is not only about devising a mathematical formula. It also has to take into account the root of the problem by going back to the hiring stage.

1.10.1 CALCULATING ATTRITION RATE:

Attrition rates can be calculated using simple formula:

Attrition = (No. of employees who left in the year/ average employees in the year)*100 Thus, if the company had 1,000 employees in April 2004, 2,000 in March 2005, and 300 quit in the year, then the average employee strength is 1,500 and attrition is 100*(300/1,500)=20%. Besides this, there are various other types of attrition that should be taken into account. These are: Fresher attrition that tells the number of freshers who left the organization within one year. It tells how many are using the company as a springboard or a launch pad. Infant mortality that is the percentage of people who left the organization within one year. This indicates the ease with which people adapt to the company. Critical resource which tell the attrition in terms of key personnel like senior executives leaving the organization. Low performance attrition: It tells the attrition of those who left due to poor performance.

ATTRITION RATE IN DIFFERENT COUNTRIES ROUND THE GLOBE:

ATTRITION US Australia Europe India Global Average

RATE (%) 42% 29% 42% 18% 42%

REASONS WHY EMPLOYEES LEAVE:

Employees do not leave an organization without any significant reason. There are certain circumstances that lead to their leaving the organization. The most common reasons can be: Job is not what employee expected to be: Sometimes the job responsibilities dont come out to be the same as expected by the candidates. Unexpected job responsibilities lead to job dissatisfaction. Job and person mismatch: A candidate may be fit to do a certain type of job which matches his personality. If he is given a job which mismatches his personality, then he wont be able to perform it well and try to find out reasons to leave the job.

No growth opportunities: No or less learning and growth opportunities in the current job will make candidates job and career stagnant. Lack of appreciation: If the work is not appreciated by the supervisor, the employee feels de-motivated and loses interest in job. Lack of trust and support in coworkers, seniors and management: Trust is the most important factor that is required for an individual to stay in the job. Non- supportive coworkers, seniors and management can make office environment unfriendly and difficult to work in. Stress from overwork and work life balance: Job stress can lead to work life imbalance which ultimately many times lead to employee leaving the organization. Compensation: Better compensation packages being offered by other companies may attract employees towards themselves. New job offer: an attractive job offer which employee thinks is good for him with respect to job responsibility, compensation, growth and learning etc. can lead an employee to leave the organization.

1.10.2 TRUTHS ABOUT ATTRITION:

It is difficult to accept when organizations say they have zero attrition rates. Companies may have healthier turnover rates, however, there is no such thing as zero attrition. There are other such facts about turnover, about which most of us are not aware. Some of such facts have been highlighted below:

Turnover always happens: This happens because employees keep on moving due to reason like marriage or further education. Nothing can stop these employees from moving on. So, rather than achieving zero attrition companies should focus on identifying whom they want to keep so that they have healthy attrition rate. Some turnover is desirable: Zero attrition is not desirable mainly because of two reasons; firstly, if all employees continue to stay in the same organization, most of them will be at the top of their pay scale which will result in excessive manpower costs. Secondly, new employees bring new ideas, approaches, abilities and attitudes which can keep the organization from becoming stagnant. Turnover includes costs: Turnover always includes some costs. Consider the cost of replacing the key employee who falls into the category of high performers. This includes the costs of recruitment advertisement, referral bonuses, selection, training costs, etc. Moreover, turnover results in loss of time and efforts, low productivity, loss of morale, loss of knowledge and so on.

High salary doesnt work: Most managers assume that a high salary package is enough to keep employees loyal to their organization. Employees may face other problems like low job satisfaction, low engagement levels, no recognition, poor working conditions, less support from superiors and so on. Salaries are not always the solution to attrition. Managers should try to find out the root cause of the problem and then find a feasible solution. The manager can reduce attrition: Managers should take primary responsibility for retaining their employees. Much of the employees perception of job satisfaction stems from the relationship they share with their immediate supervisor. Managers should try to support their subordinates and give proper feedback on performance. HR managers should work in collaboration to make the key employees last in their organization. Reducing turnover takes commitment: Reducing turnover takes an investment in coaching, developing, motivating, mentoring and listening to people. There should be universal acceptance of the goal of reducing turnover along with top management commitment and dedication.

1.10.3 BENEFITS OF ATTRITION:

Attrition is not always bad, if it happens in a controlled manner. Some attrition is always desirable and necessary for organizational growth. The only concern is how organization differentiates good attrition from bad attrition. The term health attrition signifies the importance of less productive employees voluntarily leaving the organization. This means if the ones who have left fall in the category of low performers, the attrition is being healthy. Attrition rates are considered to be beneficial in some ways: If all employees stay in the same organization for a very long time, most of them will be at the top of their pay scale which will result in excessive manpower costs. When certain employees leave, whose continuation of service would have negatively impacted productivity and profitability of the company is benefited. New employees bring new ideas, approaches, abilities and attitudes which can keep the organization healthy. There are also some people in the organization who have a negative and demoralizing influence on the work culture and team spirit. This, in the long- term, is detrimental to organizational health. Desirable attrition also includes termination of employees with whom the organization does not want to continue a relationship. It benefits the organization in the following ways: It removes bottleneck in the progress of the company. It creates space for the entry of new talents. It assists in evolving high performance teams.

There are people who are not able to balance their performance as per expectations, lack potential for future or need disciplinary action. Furthermore, as the rewards are limited, business pressures do not allow the management to over-reward the performers, but when undesirable employees leave the company, the good employees can be given the share they desire.

Some companies believe attrition in any form is bad for an organization for it means that a wrong choice was made at the beginning while recruiting. Even good attrition indicates loss as recruitment is a time consuming and costly affair. The only positive point is that the realization has initiated action that will lead to cutting loss.

1.11 EMPLOYEE RETENTION:

Employee retention is a process in which the employees are encouraged to remain with the organization for the maximum period of time or until the completion of the project. Employee retention is beneficial for the organization as well as the employee. Employees today are different. They are not the ones who dont have good opportunities in hand. As soon as they feel dissatisfied with the current employer or the job, they switch over to the next job. It is the responsibility of the employer to retain their best employees. If they dont, they would be left with no good employees. A good employer should know how to attract and retain its employees. Retention involves five major things: Compensation Support Relationship Environment

1.11.1 IMPORTANCE OF EMPLOYEE RETENTION:

So much is being done by organizations to retain its employees, why is retention so important? Is just to reduce the turnover costs? Well, the answer is a definitely NO. Its not the only cost incurred by a company that emphasizes the need of retaining employees but also to retain talented employees from getting poach.

The process of employee retention will benefit an organization in the following ways:

The cost of turnover: The cost of employee turnover adds hundreds of thousands of money to a companys expenses. While it is difficult to fully calculate the cost of turnover (including hiring costs, training costs and productivity loss), industry experts often quote 25% of the average employee salary as a conservative estimate.

Loss of companys knowledge: When an employee leaves, he takes with him valuable knowledge about the company, customers, current projects and past history (sometimes to competitors). Often much time and money has been spent on the employee in expectation of future return. When the employee leaves, the investment is not realized.

Interruption of customer service: Customers and clients do business with a company in part because of the people. Relationships are developed that encourage continued sponsorship of the business. When an employee leaves, the relationships that employee built for the company are served, which could lead to potential customer loss.

Turnover leads to more turnovers: When an employee terminates, the effect is felt throughout the organization. The unspoken negativity often intensifies for the remaining staff.

Goodwill of the company: The goodwill of a company is maintained when the attrition rates are low. Higher retention rates motivate potential employees to join the organization.

Regaining efficiency: If an employee resigns, the good amount of time is lost in hiring a new employee and then training an employee and this goes to the loss of the company directly which many a times goes unnoticed. And even after this companies cannot assure us of the same efficiency from the new employee.

1.11.2 EMPLOYEE RETENTION STRATEGIES:

The basic practices which should be kept in mind the employee retention strategies are: Hire the right people in the first place.

Empower the employees. Give employees the authority to get things done. Make employees realize that they are the most valuable asset of the organization. Nave faith in them, trust them and respect them. Provide them information and knowledge. Keep providing them feedback on their performance. Recognize and appreciate their achievements. Keep their morale high. Create an environment where the employees want to work and have fun.

These practices can be categorized in 3 levels: Low, medium and high level.

1.11.3 RETENTION MYTHS:

The process of retention is not easy as it seems. There are so many tactics and strategies used in retention of employees by the organizations. The basic purpose of these strategies should be to increase employee satisfaction, boost employee morale hence achieve retention. But some times these strategies are not used properly or even worse, wrong strategies are used. Because of which these strategies fail to achieve the desired results. There are many myths related to the employee retention process. These myths exist because the strategies being used are either wrong or are being used from a long time. These myths prevent the employer from successfully implementing the retention strategies. Employees leave an organization for more pay: Money may be the motivating but for many people it is not the most important factor. Money matters more to the low income employees for whom its a survival issue. Money can make an employee stay in an organization but not for long. The factors more important than money are job satisfaction, job responsibilities and individuals skill development. The employers should understand this and work out some other ways to make employee feel satisfied. When employees leave, management tries to retain them by offering more money. Issues that are mainly the cause of dissatisfaction are organizations policies and procedures, working conditions, relationship with the supervisor and salary, etc. For such employees, achievements, growth, recognition, are the main concerns. Incentives can increase productivity: Incentives can surely increase productivity but not for long time. Cash incentives, volume work targets and speed awards are old management beliefs. They can generate work speedily and in volumes but cant boost employee commitment. Rather speed can hamper the quality of work produced. What really glues employees to their work and organization is quality work, meaningful responsibilities, recognition, respect, growth opportunities and friendly supervisors. Employees run away from responsibilities: It is myth that employees run away from responsibilities. In fact employees feel more responsible if they are given extra responsibilities apart from their regular job. Employees look for variety, greater control on the processes and authority to take decisions in their present job. They want opportunities to learn and grow. Management can assign extra responsibilities to their employees and appreciate them on completion of these tasks. This will induce a sense of pride in the employee and will improve the relationship between the management and the employee. Loyalty is a thing of the past: Employees can be loyal but what they need is an employer for whom they can be loyal. There is no reason for the employee to hop job if he is satisfied with the employer. Taking measures to increase employee satisfaction will be expensive for the organizations: The things actually required to improve employee satisfaction like respect, career growth and development, appreciation, etc. cant be bought. They are free of cost. An employee or management reacts well to the employees ideas and suggestions is enough for the employee to be retained.