HRM

• Designing training methods
• Administration of training programmes
• Evaluation of training
• In the following pages, we will discuss them in greater detail.

Identification of Training Needs

We mentioned earlier that training bridges gap between what employee has (in terms
of skills and abilities) and what his/her job demands. This clearly underlines the need for proper
identification of training needs of employee. Identifying training needs is a process that
involves establishing areas where employees lack skills, knowledge, and ability in effectively
performing their jobs. Training needs have to be related both in terms of the organization’s
demands and that of the individual employees.

Many methods have been proposed for identifying training needs of the employees. For
example,

Sinha has listed in rank order the following five methods of identifying training needs:

1. Views of the line manager

2. Performance appraisal

3. Company and departmental plans

4. Views of training manager

5. Analysis of job difficulties
Here our examination is based on McGhee and Thayer’s model 10 of training needs
identification. It consists of the following three components:

1. Organizational analysis

2. Task analysis

3. Man analysis

These are discussed in seriatim.
● Organizational Analysis. It involves a comprehensive analysis of organisation in terms of

its objectives, resources, resource allocation and utilization, culture, environment, and so
on. Such an analysis would help identify deficiencies and mechanisms that would be
needed to make adjustments in those identified deficiencies. Generally, organisatonal
analysis includes the following steps:

(i) Analysis of Objectives: Organizational analysis begins with achieving a clear
understanding of both short and long-run goals and also the order of priorities accorded to
various objectives. Long-run objectives are broken down into specific objectives and strategies
for each of the department/division/unit. Short-run objectives are constantly in need of
adaptation to the changing environment, both external and internal. However, long-run goals,

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if carefully thought out, are expected to be much less subject to modification. General
objectives are also needed to be translated into specific operational targets.

(ii) Resource Utilization Analysis: Once the organisatonal objectives are analyzed, the next
step involved in identifying training needs is to analyse the allocation of human and other
physical resources and evaluate their level of utilization in meeting operational objectives. In
order to examine the flow of the inputs and outputs of the total system, various efficiency
indices can be developed and used. While using these efficiency indices, focus should be on
the contribution of human resources in meeting the organisatonal goals.

(iii) Environmental Scanning: Such an analysis is done to study the organisation as a
subsystem operating in a distinct environment consisting of socio-cultural, economic and
political components. This enables the organisation to identify the environmental factors which
the organisation can influence and the constraints which cannot control.

(iv) Organizational Climate Analysis: The organisatonal climate is a reflection of its
members’ attitudes towards various aspects of work, supervision, company procedure and so
on. These have own bearing on affecting the effectiveness of a training programme in the
organisation.

● Task Analysis: This is also called job or operational analysis. This involves a detailed
analysis of various components of a job, its various operations, and the conditions under
which it has to be performed. Task analysis will indicate the skills and training required to
perform the job at the required standard. For almost all jobs have an expected standard of
performance. If these standards for the performance of the job are known, then it is possible
to know whether the job is being performed at the desired level of output i.e., standard or
not. Knowledge of task as gained through task analysis will help in understanding what
skills, knowledge and attitudes an employee should have to fulfil the expected performance.

● Man Analysis: This is the third component in identifying employee training needs. The
focus of man analysis as on the individual employee, his skills, abilities, knowledge and
attitude. Of the three analyses, this is more complex one because of difficulties in assessing
human contribution. The reason is that the available measures to study man (employee) are
much less objective and suffer from many individual variations. Yet, data on the relevant
aspects such as production, meeting deadlines, quality of performance, personal data such
as work behavior, absenteeism, late-coming etc., can be collected through records,
observations, meeting with employee and others who work with him. Through these it is
possible to get an indication of the training requirements of an employee.

According to Dayal, a detailed study of jobs and skill analysis is absolutely necessary. The
training accordingly imparted would help the employee adjust to their job requirements.

Setting Training Objectives

Having identified the training needs, i.e., the gap between the existing and the desired
repertoire of knowledge, attitude and skills of employee, the next logical step involved in
designing a training programme is to fill in this gap. This is done through setting training
objectives. Thus, basic objective of training is to establish a match between man and his job.
Since need for training may vary from employee to employee at different levels of organisation,
so objectives of training may also vary for employees working at different levels of

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organisation. However, while setting training objectives, only employee’s growth should not
be taken as an end. Recognizing employees growth, a means to organisatonal growth, training
objectives need to be integrated accordingly.

In view of this, the objectives of training can be listed as follows:

(i) To impart induction to new employees the basic knowledge and skills required for efficient
performance of the particular tasks. Dayal12 points out that socialization process through
induction training also helps new employees know more about himself, his hopes, aspirations,
and inclinations. These help new employees settle down in the new environment.

(ii) To help the employees function more effectively in their present positions by updating them
the latest concepts, information, techniques and developing the skills they would require in
their particular fields of activity.

(iii) To prepare a second line of personnel so that they could occupy higher positions with more
responsibilities as and when these arise in future. This is because mobility is a fact of life.
People are not satisfied if they continue to work in the same position for long.

(iv) To develop competency among the employees in newer areas which have been gaining
importance during the period. This is why many agencies are imparting training to their
employees on creativity, innovativeness, and the like to develop varied competencies for the
organisation.

One common element flowing from above objectives is that these objectives of training are
deliberately set from the point of view of their relevance to organisations. As a matter of fact,
little attempt is so far made to study what the participants want from such training programmes.
Here, two attempts made in this regard seem worth mentioning.

S.K. Kalra collected data on participants’ objectives in attending training programmes. His
results show that participants want to attend training programmes to help them develop
technical skills, managerial and communication skills.

In a similar attempt, Srinivasan and Virmani14 also collected data on trainees. While focusing
on the individual participant’s desire for attending training programmes, the study highlighted
two broad areas, namely, (i) career development and (ii) continuing education.

Designing Training Methods

Training methods are means of attaining desired objectives set for a training programme. In
practice, a variety of training methods are employed for achieving these objectives. But, an
organisation cannot use all types of training methods for the reasons like cost involved and also
their relevance to organisatonal needs. Hence, organisation needs to select a method or mix of
methods to meet its training needs. The choice of training methods would depend on a variety
of factors, such as purpose of training, nature of contents, relevance to the participants, level
of trainees, competence of trainers/ instructors, cost, etc.

Depending on the training results and the process employed to attain these, the various training
methods can be broadly categorized into four groups as under:

1. On-the-job oriented training methods

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2. Simulation methods

3. Knowledge-based methods

4. Experiential methods

Now, these are described one by one.

➢ On-the-job oriented training methods. As the name itself denotes, methods included in
this cluster are those whose main objectives are centered around the job, i.e., learning on
the job itself by a variety of methods. The main methods which fall into this category are
discussed here under:

(i) On-the-job Training (OJT). On-the-job training is probably the most common approach
to training which can range from relatively unsophisticated “observe and copy” method to
highly structured courses. In this method, the new employee is placed on a job and taught the
skills necessary to perform it. A trainer or superior teaches the employee. Since trainee learns
by observing and handling the job, this method is also termed as ‘observing, and copying’ or
‘learning by doing’.

(ii) Job Instruction Training (JIT). In this method, a trainer or supervisor gives instructions
to an employee how to perform his job. This method of training is appropriate for acquisition
or improvement of motor skills and routine and repetitive operations. There are four steps
involved in this form of training.

(a) Preparation: Trainee is prepared in terms of his existing skills, securing his interest and
attention.

(b) Presentation: The trainee is presented job operations as a model to copy.

(c) Performance: The trainee is asked to try out the trainer’s instructions.

(d) Follow up: The trainee does the job independently without supervision and gets feedback
on the same.

(iii) Coaching: This is similar to the JIT. In this method, the superior teaches or guides the new
employee about the knowledge and skills of a specifically defined job. The superior points out
the mistakes committed by the new employee and then also gives suggestions to improve upon.
For coaching the trainee or new employee effectively, the superior must have interpersonal
competence and be able to establish helping relationship with the trainee.

(iv) Job Rotation: In this method, a trainee moves from one job to another and from one
department/ division to another. This type of training method is more appropriate for
developing multiskilling, operational flexibility, providing satisfaction from routine jobs and
broadening the overall perspective of the trainee.

➢ Simulation Methods: Simulation is a technique which duplicates, as nearly as possible,
the actual conditions encountered on a job. These methods have been most widely used in
the aeronautical industry15. The methods falling under this category are discussed as
follows:

(i) Role Play: This is just like acting out a given role as in a stage play. In this method of
training, the trainees are required to enact defined roles on the basis of oral or written

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description of a particular situation. This method is mostly used for developing interpersonal
interactions and relations among the employees working in sales, marketing, purchasing and
the supervisors who deal with people.

(ii) Case Method: The case is an actual event or situation on organisatonal problems which is
a written description for discussion purpose. Trainees are asked to analyse the event or
circumstances with an objective to identify the problem, trace out the causes for it and find out
the solution to solve the problems. This method of training is based on this realization that, on
many occasions in the real world, managers may not have all the relevant information with
them before taking a decision. This is also called decision-making under uncertainty.
Therefore, this method is suitable for developing decision-making skills among the top and
senior level managers.

(iii) Management Games: The game is devised on the model of a business situation. Then,
trainees are divided into groups who represent the management of competing companies. They
make decisions just like these are made in real-life situations. Decisions made by the groups
are evaluated and the likely implications of the decisions are fed back to the groups. The game
goes on in several rounds to take the time dimension into account.

(iv) In-Basket Exercise: This is also called ‘In-Tray’ method of training. This is built around
the ‘incoming mail 'of a manager. The trainee is presented with a pack of papers and files in a
tray containing administrative problems and are asked to take decisions on these within a
specified time limit. The decisions taken by the trainees are compared with one another. The
trainees are provided feedback on their decisions. This forces them to reconsider their
administrative actions and behavioural style. Here occurs the learning of trainee.

(v) Vestibule Training: This is a system in which employees learn their jobs on the equipment
they will be using, but the training is conducted away from the actual work floor. This type of
training is commonly used for training personnel of clerical and semi-skilled grades. The
duration of training ranges from a few days to a few weeks. This method relates theory with
practice.

➢ Knowledge-Based Method: In this method, an attempt is made to impart employees
knowledge in any subject area covering the aspects like its concepts and theories, basic
principles and pure and applied knowing of the subject. The common methods that fall into
this category are described hereunder:

(i) Lectures: Lecture is by far the most commonly used direct method of training. In this
method, the trainer provides knowledge to the trainees usually from prepared notes. Notes are
also given to the trainees. This method is found more appropriate in situations where some
information is required to be shared to a large number of audience and which does not require
more participation from the audience. It is a low-cost method. The major limitation of this
method is that it does not provide for active involvement of the trainees.

(ii) Conferences/Seminars: In this method, the trainer delivers a lecture on the particular
subject which is followed by queries and discussions. The conference leader must have the
necessary skills to lead the discussion in a meaningful way without losing sight of the topic or
theme. This method is used to help employees develop problem-solving skills.

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(iii) Programmed Instructions: This is the recently developed technique based on the
principle of positive reinforcement developed by B.F. Skinner16. This technique is used to
teach nonmotor and behavioural skills. The subject matter to be learned is prepared and
condensed into logical sequence from simple to more complex. The trainer monitors trainee’s
independent progress through the programme. The trainee gets instant feedback on his learning.
However, this method is expensive and time consuming also.

➢ Experiential Methods: The objective of these methods is to help an individual understand
oneself and others. This is done through attitudinal change. Such understanding helps an
individual understand the dynamics of human relationships in a work situation, including
at times his managerial style. Some of the methods used for this purpose are:

(i) Sensitivity Training: Sensitivity training is also known by a variety of names such as T-
groups, laboratory training and encounter groups. (The “T” is for training.). The objective of
sensitivity training is to increase participants’ insights into their behavior and the behavior of
others by encouraging an open expression of feelings in the trainer guided T-group. This is
based on this assumption that newly sensitized employees will then find it easier to work
together amicably as a group or team. Sensitivity training seeks to accomplish its aim of
increasing interpersonal openness, greater concern for others, increased tolerance for individual
differences, enhanced listening skills, and increased trust and support. T-group meets
continually for periods as long as 1 or 2 weeks. It is less artificial than role playing in as much
as the trainee plays himself rather than a structured role. The first sensitivity training session
was held in 1946 in the State Teachers College, New Britain, USA.

(ii) Transactional Analysis: It is a technique of training developed by Eric Berne and
popularized by Thomas Harris of U.S.A. It is a tool of improving human relations and
interactions, and of promoting rationale and mature behavior. It identifies three main aspects
of human personality: Parent (taught behavior). Adult (thought behavior), Child (felt behavior).
Its basic proposition is that people have to behave as adults, although sometime parent and
child behavior is also useful depending upon the situations and the individual’s personal need/
goal. Adult behavior is characterized by objectivity, problem-solving orientation, mutual
respect and understanding. Parent behavior takes the form of authoritarianism, protective and
patronizing instances. Child behavior pertains to rebellions, angry, dependence-oriented
moods. Tantrums, though creative, spontaneous, obedient stances, are not ruled out. This
approach is useful for understanding people’s behavior particularly when they are involved in
inter-personal relationships. Development of positive thinking, improvement in inter-personal
relationships, proper motivation of people and organizational development are some of the
important benefits of transactional analysis, as a technique of training.

To conclude, each method of training has some strengths and weaknesses. Given the purpose
of a training programme, the level of participants, the competence of trainers, etc., the
appropriate method has to be chosen to impart training. Carrol et. al. has conducted a study
and measured the effectiveness of various training methods on several dimensions in rank
order. This is shown in Table 10.1.

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Research studies18 indicate that in future the following three methods of training would
possibly be used in greater extent:

1. Business Games and Simulations

2. Case Study

3. Group Discussion

Administration of Training Programmes

Training administration basically refers to consideration of certain matters such as
training contents, types of training programmes, location of training, training budgets, lead
time, etc., before starting actually imparting training to the employees. These are discussed in
greater detail in the following pages.

• Training Contents. The design of training contents depends on the objectives of
training. For example, if the purpose of training is to refresh the engineers, the training
contents would predominantly be related to the technical aspects of the job. On the other
hand, if the purpose of training is to focus on human relations, contents would Centre
around inter-personal competencies, social ability, superior-subordinate and peer
relationship, sensitivity to feelings, etc.

• The training contents are also influenced by the level of participants in a training
programme. In a training programme for the employees working at higher levels, focus
should be more on theories, concepts, frameworks, etc. On the contrary, in a training
for employees at lower levels, emphasis may be on techniques, application, etc. In other
words, at lower levels, thrust should be on ‘how-to-do’ kinds of contents.

• Training contents also need to follow a logical sequence to enable the trainee to
understand the subject in a total integrated manner. If the contents just come in random

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succession, learning becomes piecemeal and the learner may not relate one content to
the other. In addition, the pace of training should neither be too fast nor too slow
because in both extreme cases, the participants may lose interest in the programme.

• Types of Training Programmes: The objectives of training may also influence the
type of training to be imparted to the employees. Chatterjee19 has classified training
programmes into four categories, viz., induction training, supervisory training,
technical training and management development. These are self-explanatory. Hence,
no need to discuss.

• Training Location: Once all the necessary home work is done, the real task before the
trainer is now to implement the training programme. Implementation of training
involves whether the organisation should send its employees to an external programme
or organisation should offer an in-company training programme. Where employees
number to be trained is small, then sponsoring of employees to a programme offered
by external agency would be better. But, if a large number of employees are to be
trained, conducting one’s own in-house programme would be more meaningful. On the
whole, the decision of sponsoring an external programme or Organising an in house
programme will depend on issues such as availability of relevant programmes, number
of people to be trained, duration for which employees could be taken off the job, timings
of training programmes, and cost to be incurred in programme.

➢ Let some actual training experiences of Indian organisations be produced. Sinha 20 in
his study revealed that nearly three-fourth (73 per cent) of firms conducted their in-
house training programmes and also participated in external programmes. However, a
small fraction (6 per cent) organized only in house programmes, whereas 12 per cent
of organisations made exclusive use of programmes offered by external/other
institutions.

➢ Saiyadain highlighted the three major problems in the implementation of training
programmes in the public enterprises: faculty, participants, and administration.

➢ Size of the class is also important. Both large and small size of classes may not be found
useful. In case of a large class, every one may not get the chance to participate or share
ideas with fellow participants. On the other hand, if the size of the class is too small,
some teaching technologies like lectures may not be used. There are several studies
conducted on the size of a training class. Most of these have indicated that the optimum
size of a class consists of 25 to 30 participants. That is possibly the reason why the size
of class even in the educational institutions is usually 30 students like your own class
of MBA, for example.

➢ Training Budget: A training budget for each programme has to be prepared. It would
include cost of facilities like training room, food, transport, lodging, guest faculty, cost
of teaching material, etc. Besides, the wages and salaries of employees participating in
the programme should also be taken into consideration as the cost of training
programme. The underlying justification behind this is that they would not be making
any contribution to the company during the training period and, thus, the payment of
their wages and salaries becomes an additional burden on the company’s financial
position.

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➢ Lead Time: In both the cases, be it an in-house programme or employee nomination to
some external programme a trainer needs sufficient time for the same. For example, in
the case of in-house training programme, the trainer needs to do the necessary
background work in terms of course design, preparation of teaching materials,
announcement of the programme, receiving of nominations, arrangement for
training/class room, teaching aids, transport, food and accommodation.

➢ With regard to external programmes, trainer needs time to take into account
organisatonal factors such as release of the employee from his/her job, replacement for
the same, and ascertainment of benefits the trainee will derive from the programme.
Thus, adequate lead time is required for preparation both for the nominee, i.e.,
employee and the organisation, without disruption of normal work.

Evaluation of Training

Evaluation follows almost all activities of human beings. The significance of evaluation
of activity lies in the fact that the worth of activity is adjudged. From this point of view,
evaluation of training activity is defined as any attempt made to obtain information, or say,
feedback on the effects of training programme and to adjudge the value or worth of the training
in the light of that information. The time and money spent in training underlines the need for
evaluation of training. But, the question is what exactly to evaluate? Evaluation of training
generally consists of an evaluation of various aspects of training immediately after the training
is over and adjudging its utility to achieve the goals of the organisation. As regards the first, it
may be easy to evaluate. But, the assessment of the second is complex one. The reason being
the effect of training on organisatonal performance cannot be isolated from the overall
performance because it is a function of complex forces and distinct motives. These are
discussed, in greater detail, in the following pages.

• Evaluation of Training Aspects: This refers to feedback or reactions of the participants
as to how they found the training programme they underwent. For this, a form containing
pertinent queries is prepared and is distributed among the trainees to fill it at the end of the
last session. The form seeks information from the trainees on various aspects of the training
like contents, reading material, presentation, trainer’s mannerism, etc. Depending on the
evaluator’s choice, this could be done session by session rating or an overall rating on all
aspects. In addition, information on class room, food, lodging, etc., can also be obtained.
In order to seek free and frank opinion on these matters, participants are given the option
not to disclose their identity. Information so obtained from the participants is then tabulated
and analyzed to get ideas and identify weak areas in the training programme and improve
the same if the programme is offered in future also.

• Assessment of Training Utility: It is already stated that isolating the effect of training on
output is difficult because the ultimate output is a function of several forces and motives.
The effectiveness of training also depends on the attitude and perception of the top
management toward trained employees. If the top management is not ready to accept and
allow innovations and experimentation by the employee who have just completed training,
training may have no effect whatsoever, instead it may frustrate the employee. Nonetheless,
behavioural scientists have developed some methods to try out to test the effect of training
on output. These methods are based on observation of employee post-training behavior,

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evaluation by the supervisors, peers, subordinates, self-evaluation by the participant,
quantitative and qualitative improvement in his output.
One commonly used method to test the effect of training on employee performance is by
the use of a control group where two matched groups are identified and their performance
is measured before and after training. Of these, one group goes to the training programme,
while the other does not. Difference in their performance after training is considered as
indicator of learning through training and in turn, effect of training on performance. Sikka
22 used this method and found that training makes dent in employee performance.
• As regards effectiveness of training, different research studies report different things. For
example, Mehta23 in his study points out two considerations on which the effectiveness of
training depends. First, the responsibility for making training effective lies on the trainers.
Second, the kind of atmosphere and culture in which training is imparted also matters in
making a training programme effective. Thus, according to Mehta, training per se is not
the answer to the problem, i.e., improvement in performance. In another study,
Maheshwari24 collected data on 999 respondents working in banking sector. He found that
though the respondents found training programmes less effective with respect to their
contribution to job performance, they endorsed the usefulness of formal training.
• In his study, Bannerji collected data on supervisory training in an Indian engineering
company. The responses indicated that the inputs in industrial relations had little or no
impact on the supervisor’s effectiveness. But, most of them considered that training
improved their self-confidence, motivation, and communication ability.
• Sinha tried to test whether training is effective or not, in a supervisory training programme.
He asked the participants before the commencement of training programme to write what
qualities, in their opinion, should the supervisor possess, and rate them in a ten-point scale.
At the end of the programme, they were asked again to write in a ten-point scale, what
qualities a supervisor should possess. Their responses were classified into personal,
professional and human relations qualities.

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CHAPTER – 12
EXECUTIVE DEVELOPMENT

Meaning
Executive development means not only improvement in job performance, but also

improvement in knowledge, personality, attitude, behaviorism of an executive, etc. It means
that executive development focuses more on the executive’s personal growth.
Definition

Flippo has viewed that “executive / management development includes the process by
which managers and executives acquire not only skills and competency in their present jobs
but also capabilities for future managerial tasks of increasing difficulty and scope”.
Objectives of Executive Development
The main objectives of any programme of executive development are to:
1. Improve the performance of managers at all levels.
2. Identify the persons in the organisation with the required potential and prepare them for
higher positions in future.
3. Ensure availability of required number of executives / managers succession who can take
over in case of contingencies as and when these arise in future.
4. Prevent obsolescence of executives by exposing them to the latest concepts and techniques
in their respective areas of specialisation.
5. Replace elderly executives who have risen from the ranks by highly competent and
academically qualified professionals.
6. Improve the thought processes and analytical abilities.
7. Provide opportunities to executives to fulfill their career aspirations.
8. Understand the problems of human relations and improve human relation skills.
A. Dasgupta4 has given the level wise objectives of the executive/ management development
as follows:
(a) Top Management
1. To improve thought processes and analytical ability in order to uncover and examine
problems and take decisions in the best interests of the country and organisation;
2. To broaden the outlook of the executive in regard to his role, position and responsibilities in
the organisation and outside;
3. To think through problems which may confront the organisation now or in the future;
4. To understand economic, technical and institutional forces in order to solve business
problems; and

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5. To acquire knowledge about the problems of human relations.

(b) Middle Line Management

1. To establish a clear picture of executive functions and responsibilities;

2. To bring about an awareness of the broad aspects of management problems, and an
acquaintance with and appreciation of interdepartmental relations.

3. To develop the ability to analyse problems and to take appropriate action;

4. To develop familiarity with the managerial use of financial accounting, psychology, business
statistics;

5. To inculcate knowledge of human motivation and human relationships; and

6. To develop responsible leadership.

(c) Middle Functional Executives and Specialists.

1. To increase knowledge of business functions and operations in specific fields in marketing
production, finance, personnel;

2. To increase proficiency in management techniques such as work study, inventory control,
operations research, quality control;

3. To stimulate creative thinking in order to improve methods and procedures;

4. To understand the functions performed in a company

5. To understand industrial relations problems and
6. To develop the ability to analyse problems in one’s area or functions.

IMPORTANCE OF EXECUTIVE DEVELOPMENT

Executives, or say, managers manage/run organisations. It is managers who plan, organize,
direct and control the resources and activities in every organisation. An organisation is like a
vehicle of which managers are drivers. Without competent managers, other valuable resources
such as men, material, machine, money, technology and others remain of not much significance
for the organisation. Thus, managers are a vital cog in the success of any organisation. That’s
why executive/ management development has become indispensable to modern organisations.

The importance of executive development is appreciated in more orderly manner in the
succeeding paragraphs:

1. Change in organisations has become sine quo non-with rapid changes in the total
environment. A manager, therefore, requires to be imparted training to abreast of and cope with
ongoing changes in his / her organisation. Otherwise, the manager becomes obsolete. In this
context, Dale yoder5 views that “without training, the executives lose their punch and drive
and they die on the vine. Training and development are the only ways of overcoming the
executive dropouts”.

2. With the recognition that managers are made not born, there has been noticeable shift from
owner managed to professionally managed enterprises, even in family business houses like

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Tata. That is also indicated by the lavish expenditure incurred on executive training by most of
the enterprises these days.
3. Given the knowledge era, labour management relations are becoming increasingly complex.
In such situation, managers not only need job skills but also behavioural skills in union
negotiations, collective bargaining, grievance redressal, etc. These skills are learned through
training and development programmes.
4. The nature and number of problems change along with increase in the size and structure of
enterprise from small to large. This underlines the need for developing managerial skills to
handle the problems of big, giant and complex organisations.
Inaugurating the Tata Management Training Centre at Pune in 1965, Mr. J.R. D6. Tata extolled
the importance of management training in these words:

“Trained managers are vital to the economic development of the country... This
business of executive development has been one of the most crucial, essential end, at the same
time, one of the most difficult elements in providing continuity and efficient management”.

As regards the importance of management development, the renowned behavioural
scientist Peter Drucker opines that, “an institution that cannot produce its own managers will
die. From an overall point of view, the ability of an institution to produce managers is more
important than its ability to produce goods efficiently and cheaply”.
In short, the importance of executive/ management development in an organisation can best be
put as: anything minus management development in an organisation mounts to nothing.
THE PROCESS

Like any learning programme, executive development also involves a process
consisting of certain steps. Through sequencing these various steps in a chronological order is
difficult, behavioural scientists have tried to list and sequence them in six steps as shown in
figure 11.1.
These steps are also called the components of the executive development programme have been
discussed in the succeeding paragraphs.

• Identifying Development Needs
Once the launching of an executive development programme (EDP) is decided, its

implementation begins with identifying the developmental needs of the organisation concern.

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For this, first of all, the present and future developmental needs for executives/ managers
ascertained by identifying how many and what type of executives will be required in the
organisation at present and in future. This needs to be seen in the context of organisatonal as
well as individual, i.e. manager needs. While organisatonal needs may be identified by making
organisatonal analysis in terms of organization’s growth plan, strategies, competitive
environment, etc., individual needs to be identified by the individual career planning and
appraisal, discussed in Chapter 10.

• Appraisal of Present Managerial Talent

The second step is an appraisal of the present managerial talent for the organisation.
For this purpose, a qualitative assessment of the existing executives/managers in the
organisation is made. Then, the performance of every executive is compared with the standard
expected of him.

• Inventory of Executive Manpower

Based on information gathered from human resource planning, an inventory is prepared
to have a complete information about each executive in each position. Information on the
executive’s age, education, experience, health record, psychological test results, performance
appraisal data, etc. is collected and the same is maintained on cards and replacement tables. An
analysis of such inventory shows the strengths and also discloses the deficiencies and
weaknesses of the executives in certain functions relative to the future needs of the concern
organisation. From this executive inventory, we can begin the fourth step involved in the
executive development process.

• Developing Development Programmes

Having delineated strengths and weaknesses of each executive, the development
programmes are tailored to fill in the deficiencies of executives. Such tailor made programmes
of development focus on individual needs such as skill development, changing attitudes, and
knowledge acquisition.

• Conducting Development Programmes

At this stage, the manager actually participates in development programmes. It is worth
mentioning that no single development programme can be adequate for all managers. The
reason is that each manager has a unique set of physical, intellectual and emotional
characteristics. As such, there can be different development programmes to uniquely suit to the
needs of an executive/ manager. As we shall see a little later in this chapter, these development
programmes may be on-the-job or off-the-job programmes organized either by the organisation
itself or by some outside agencies.

• Evaluating Development Programmes

Just as with employee training programme, executive development programme is
evaluated to see changes in behavior and executive performance. Evaluation of programme
enables to appraise programmer’s effectiveness, highlight its weaknesses and aids to determine
whether the development should be continued or how it can be improved.

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CHAPTER – 13

INTERNAL MOBILITY AND SEPARATIONS

PROMOTION

Meaning

Promotion refers to the upward movement of an employee from one job to another
higher one, with increase in salary, status and responsibilities. Promotion may be temporary or
permanent, depending upon the needs of the organisation.

Definition
According to Dale Yoder, “Promotion provides incentive to initiative, enterprise and

ambition; minimizes discontent and unrest; attracts capable individuals; necessitates logical
training for advancement and forms an effective reward for loyalty and cooperation, long
service, etc.”.

TYPES OF PROMOTION

Promotion given to employees in an organisation can be classified into three types:

1. Horizontal Promotion: When an employee is shifted in the same category, it is called
‘horizontal promotion’. A junior clerk promoted to senior clerk is such an example. It is
important to note that such promotion may take place when an employee shifts within the same
department, from one department to other or from one plant to another plant.

2. Vertical Promotion: This is the kind of promotion when an employee is promoted from a
lower category to higher category involving increase in salary, status, authority and
responsibility. Generally, promotion means ‘vertical promotion’.
3. Dry Promotion: When promotion is made without increase in salary, it is called ‘dry
promotion’. For example, a lower level manager is promoted to senior level manager without
increase in salary or pay. Such promotion is made either there is resource/fund crunch in the
organisation or some employees hanker more for status or authority than money.

Purposes of Promotion

The following are the purposes or objectives of promotion:

1. To recognize an employees skill and knowledge and utilize it to improve the organisatonal
effectiveness.

2. To reward and motivate employees to higher productivity.

3. To develop competitive spirit and inculcate the zeal in the employees to acquire skill,
knowledge etc.

4. To promote employees satisfaction and boost their morale.

5. To build loyalty among the employees toward organisation.

6. To promote good human relations.

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7. To increase sense of belongingness.

8. To retain skilled and talented people.

9. To attract trained, competent and hardworking people.

10. To impress the other employees that opportunities are available to them too if they also
perform well.

TRANSFER

Meaning

A transfer refers to lateral movement of employees within the same grade, from one
job to another.

Definition
According to Flippo, “a transfer is a change in the job (accompanied by a change in the

place of the job) of an employee without a change in responsibilities or remuneration”.

NEED FOR TRANSFER

The need for making transfer is left for various reasons as listed below:

1. To Meet Organizational Needs: Changes in technology, volume of production, production
schedule, product line, quality of products, organisatonal structure, etc. necessitate an
organisation to reassign jobs among employees so that right employee is placed on the right
job.

2. To Satisfy Employee Needs: Employees may request for transfer in order to satisfy their
desire to work in a particular department, place and under some superior. Personal problems
of employee like health, family circumstances, interpersonal conflicts may also necessitate
transfer.

3. To Better Utilize Employee: When an employee is not performing satisfactorily on one job
and management thinks that his/her capabilities would be utilized better elsewhere, he/she may
be transferred to other job.

4. To Make the Employee More Versatile: In some organisations like banks, employees after
working on a job for a specified period are transferred to other job with a view to widen their
knowledge and skill and also reduce monotony. This is also called ‘job rotation’.

5. To Adjust the Workforce: Work force can be transferred from the departments / plants
where there is less work to the departments/plants where is more work.

6. To Provide Relief: Transfers may be made to give relief to the employees who are
overburdened or doing hazardous work for long period.

7. To Punish Employee: Management may use transfer as an instrument to penalize
employees who are indulged in undesirable activities. As a disciplinary action, employees are
transferred to remote and far-flung areas.

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TYPES OF TRANSFER

Employee transfers may be classified into following types:

1. Production Transfer: Such transfers are made when labour requirements in one division or
branch is declining. The surplus employees from such division are transferred to those divisions
or branches where there is shortage of employees. Such transfers help avoid lay off and stabilize
employment.

2. Remedial Transfer: Such transfers are affected to correct the wrong selection and
placement of employees. A wrongly placed employee is transferred to more suitable job. Such
transfers protect the interest of the employee.

3. Replacement Transfer: Replacement transfers are similar to production transfers in their
inherent, i.e. to avoid layoffs. Replacement transfers are affected when labour requirements are
declining and are designed to replace a new employee by an employee who has been in the
organisation for a sufficiently long time. The purpose of these transfers is to retain long service
employees in the organisation and also give them some relief from the heavy pressure of work.

4. Versatility Transfer: These transfers are also known as ‘job rotation? In such transfers,
employees are made move from one job to another to gain varied and broader experience of
work. It benefits both the employee and organisation. It reduces boredom and monotony and
gives job enrichment to the employee. Also, employees’ versatility can be utilized by the
organisation as and when needed.

5. Shift Transfers: These transfers are affected in the organisations where work progresses for
24 hours or in shifts. Employees are transferred from one shift to another usually on the basis
of mutual understanding and convenience.

6. Penal Transfer: Management may use transfer as an instrument to penalize employees
involved in undesirable activities in the organisation. Employee transfer from one’s place of
convenience to a far-flung and remote area is considered as a penalty to the employee.

DEMOTION

Meaning

Demotion is just the opposite of promotion. It is the downward movement of an
employee in the organisatonal hierarchy with lower rank/status and pay.

Definition

According to D.S. Beach, “Demotion is the assignment of an individual to a job of
lower rank and pay usually involving lower level of difficulty and responsibility”.

SEPARATIONS

Separation is a situation when the service agreement of an employee with his/her
organisation comes to an end and employee leaves the organisation. In other words, separation
is a decision that the individual and organisation part from each other. In practice, employees
may be separated, or say, may move out of organisation for a variety of reasons like retirement,
resignation, suspension, discharge, dismissal and layoff. Be whatever the types/forms of

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separation, separation becomes important and sometimes traumatic event for both the
employee and organisation6.

Various forms of employee separation are discussed now briefly.

➢ Retirement

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

Retirement may be of two types:

(i) Compulsory Retirement. This is the retirement when employees retire compulsorily from
service on attaining the age of superannuation. Some organisations like Universities may have
a policy to reappoint professionals and others who possess rare skills and expertise for a limited
time even after attaining superannuation.

(ii) Voluntary Retirement: When organisations give option to its employees to retire even
before superannuation, it is called ‘voluntary retirement’. This scheme is termed as, ‘voluntary
retirement scheme (VRS)’. Of late, in their efforts to downsize the employees, organisations
by providing certain incentives, are trying to encourage their employees to opt for voluntary
retirement. Employees in return of voluntary retirement are given lumpsum payment. This type
of retirement is also called ‘Golden Hand Shake’.

Retirement from service is a significant milestone in the life of an employee. Post-
retirement life requires a great deal of adjustment on the part of (retired) employee. Here,
organisation has a major role in facilitating smooth transition from job state to jobless stage.
Against this background, some organisations like Citi Bank and Bank of America organize
counselling sessions and also offer investment related services. Some organisations also extend
medical and insurance benefits to the retirees.

➢ Resignation

Resignation is termination of service by an employee by serving a notice, called
‘resignation’ on the employer. Resignation may be voluntary or involuntary. A voluntary
resignation is when an employee himself/herself decides to resign on the grounds of ill health,
marriage, better job prospects in other organisations, etc. Resignation is considered involuntary
or compulsory when the employer directs the employee to resign on grounds of duty and
indiscipline or face the disciplinary action. However, in case of involuntary resignation, a
domestic enquiry should be conducted before asking the employee to resign. This is because
otherwise the affected employee can go to the union or court of law and complain that he was
asked to resign under duress.

While some resignations may be advisable and beneficial for the organisation to rectify
the mistakes committed in hiring the employees, excessive turnover may be alarming as well.
In such case, it is appropriate for the organisation to trace out the reasons behind resignations
by conducting ‘exit interviews’ with the employees who are leaving the organisation. Exit

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interviews may enable the organisation to curb the employee turnover before it reaches to the
proportion of exodus.

Death comes without call. Some employees may die in service before attaining the age
of superannuation. When death occurs due to occupational hazards, the employee gets
compensation as per the provisions of Workmen’s Compensation Act, 1923. Some
organisations have provisions to give employment to the spouse/child or dependent of an
employee who dies in service. The normal separation of employees from an organisation owing
to resignation, retirement and death is known as ‘attrition’.

➢ Layoff

Meaning

Layoff implies denial of employment to the employees for reasons beyond the control of
employer. Breakdown of machinery, seasonal fluctuations in demand, shortage of power, raw
materials, etc. are the examples of reasons leading to lay off.

Definition

According to Section 2 (KKK) of the Industrial Disputes Act, 1947, lay off is defined
as “the failure, refusal or inability of an employer, on account of shortage of coal, power or raw
materials or accumulation of stocks or breakdown of machinery or by any other reason, to give
employment to a workman whose name appears on the muster rolls of his industrial
establishment and who has not been retrenched”.

It is important to note that the employee-employer relationship does not come to an end
but is suspended for some time Layoff may be temporary. In seasonal Industries like mines,
sugar, etc., lay off occurs routinely. Layoff also may occur for an indefinite time. When layoff
becomes a permanent one, it is called ‘retrenchment’.

According to the Section 25© of the Industrial Disputes Act, 1947, a laid off worker is
entitled to compensation equal to 50 per cent of the basic wages and dearness allowance that
would have been payable to him had he not been laid off. However, the worker needs to satisfy
the following conditions to be entitled to the compensation:

(i) should not be casual worker

(ii) his name should appear in the muster roll of the establishment.

(iii) Have completed not less than one year of continuous service.

➢ Retrenchment

Retrenchment means permanent termination of an employee’s services for economic
reasons. Retrenchment occurs on account of surplus staff, poor demand for products, general
economic slowdown, etc. It’s worth noticing that termination of services on account of
retirement, winding up of a business, illness or on disciplinary grounds does not constitute
retrenchment. Retrenchment is mainly seen in plantations, agricultural services, forestry and
logging, food products, manufacture of machinery and cotton textile. The reasons pointed out
behind retrenchment were mainly financial stringency and lack of demand for their products.

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The Industrial Disputes Act, 1947 makes it obligatory for organisations employing 100 or more
employees to give three months’ notice to the employee to be retrenched and also seek prior
approval of the Government. In other organisations, employee must be served one month’s
prior notice in writing indicating the reasons for retrenchment. He/she should be paid
compensation equal to 15 days’ wages for every completed year of service. As and when there
is need for employing people in future, the retrenched employee must be given preference.
➢ Dismissal

Dismissal is termination of service of an employee as a punitive measure. This may
occur either on account of unsatisfactory performance or misconduct. Persistent failure on the
part of employee to perform upto the expectations or specified standard is considered as
unsatisfactory performance. Willful violation of rules and regulation by the employee is treated
as misconduct. Dismissal is a drastic step seriously impairing the earnings and image of the
employee. Therefore, dismissal as a measure should be resorted to with great care and caution.
It must be justified and duly supported by the just and sufficient cause. Before an employee is
dismissed, he must be served advance notice to explain his position. The reasons for dismissal
must be clearly made known to the employee.

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CHAPTER – 14
JOB EVALUATION

Meaning
In simple words, job evaluation is the rating of jobs in an organisation. This is the

process of establishing the value or worth of jobs in a job hierarchy. It attempts to compare the
relative intrinsic value or worth of jobs within an organisation. Thus, job evaluation is a
comparative process.
Definition

According to the International Labour Office (ILO), “Job evaluation is an attempt to
determine and compare the demands which the normal performance of a particular job makes
on normal workers, without taking into account the individual abilities or performance of the
workers concerned”.
Difference between Job Evaluation and Job Analysis and Job Description and Job
Specification

OBJECTIVES OF JOB EVALUATION
The main objective of job evaluation is to determine relative worth of different jobs in

an organisation to serve as a basis for developing equitable salary structure. States an ILO
Report, “the aim of the majority of systems of job evaluation is to establish, on agreed logical
basis, the relative values of different jobs in a given plant or machinery i.e. it aims at
determining the relative worth of a job. The principle upon which all job evaluation schemes
are based is that of describing and assessing the value of all jobs in the firms in terms of a
number of factors, the relative importance of which varies from job to job”.
The objectives of job evaluation, to put in a more orderly manner are to:
1. Provide a standard procedure for determining the relative worth of each job in a plant.
2. Determine equitable wage differentials between different jobs in the organisation.
3. Eliminate wage inequalities.
4. Ensure that like wages are paid to all qualified employees for like work.
5. Form a basis for fixing incentives and different bonus plans.

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6. Serve as a useful reference for setting individual grievances regarding wage rates.
7. Provide information for work organisation, employees’ selection, placement, training and
numerous other similar problems.
8. Provide a benchmark for making career planning for the employees in the organisation.
PROCEDURE OF JOB EVALUATION

Though the common objective of job evaluation is to establish the relative worth of jobs
in a job hierarchy, there is no common procedure of job evaluation followed by all
organisations. As such, the procedure of job evaluation varies from organisation to
organisation. For example, a job evaluation procedure may consist of the eight stages 6 as
delineated in Figure 14.1.
1. Preliminary Stage: This is the stage setting for job evaluation programme. In this stage, the
required information's obtained about present arrangements, decisions are made on the need
for a new programme or revision of an existing one and a clear-cut choice is made of the type
of programme is to be used by the organisation.

2. Planning Stage: In this stage, the evaluation programme is drawn up and the job holders to
be affected are informed. Due arrangements are made for setting up joint working parties and
the sample of jobs to be evaluated is selected.
3. Analysis Stage: This is the stage when required information about the sample of jobs is
collected. This information serves as a basis for the internal and external evaluation of jobs.
4. Internal Evaluation Stage: Next to analysis stage is internal evaluation stage. In the internal
evaluation stage, the sample of bench-mark jobs are ranked by means of the chosen evaluation

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scheme as drawn up at the planning stage. Jobs are then graded on the basis of data pending
the collection of market rate data. Relative worth of jobs is ascertained by comparing grades
between the jobs.

5. External Evaluation Stage: In this stage, information is collected on market rates at that
time.

6. Design Stage: Having ascertained grades for jobs, salary structure is designed in this stage.
The types of salary structure and their determinants are discussed in the next Chapter 15.

7. Grading Stage: This is the stage in which different jobs are slotted into the salary structure
as designed in the preceding stage 6.

8. Developing and Maintaining Stage: This is the final stage in a job evaluation programme.
In this stage, procedures for maintaining the salary structure are developed with a view to
accommodate inflationary pressures in the salary levels, grading new jobs into the structure
and regarding the existing jobs in the light of changes in their responsibilities and market rates.

In India, the Indian Institute of Personnel Management, Kolkata has suggested the
following five steps 7 to be taken to develop a job evaluation programme:

1. Analyse and Prepare Job Description

2. Select and Prepare a Job Evaluation Programme/Plan

3. Classify jobs

4. Install the Programme

5. Maintain the Programme

These steps are self-explanatory. Hence are not discussed in detail.

ADVANTAGES OF JOB EVALUATION

According to an ILO publication, job evaluation offers the following advantages:

1. Job evaluation being a logical process and objective technique helps in developing an
equitable and consistent wage and salary structure based on the relative worth of jobs in an
organisation.

2. By eliminating wage differentials within the organisation, job evaluation helps in minimizing
conflict between labour unions and management and, in turn, helps in promoting harmonious
relations between them.

3. Job evaluation simplifies wage administration by establishing uniformity in wage rates.

4. It provides a logical basis for wage negotiations and collective bargaining.

5. In the case of new jobs, job evaluation facilitates spotting them into the existing wage and
salary structure.

6. In the modern times of mechanization, performance depends much on the machines than on
the worker himself/herself. In such cases, job evaluation provides the realistic basis for
determination of wages.

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7. The information generated by job evaluation may also be used for improvement of selection,
transfer and promotion procedures on the basis of comparative job requirements.
8. Job evaluation rates the job, not the workers. Organisations have large number of jobs with
specializations. It is job evaluation here again which helps in rating all these jobs and
determining the wages and salary and also removing ambiguity in them.
METHODS OF JOB EVALUATION

There are four basic methods of job evaluation currently in use which are grouped into
two categories:
1. Non-quantitative Methods:
(a) Ranking or Job Comparison
(b) Grading or Job Classification
2. Quantitative Methods:
(a) Point Rating
(b) Factor Comparison
The basic difference between these two methods lies in the sense that, under non-quantitative
methods, a job is compared as a whole with other jobs in the organisation, whereas in case of
quantitative methods, the key factors of a job are selected and, then, measured.
The four methods of job evaluation are now discussed one by one.
➢ Ranking Method

The ranking method is the simplest form of job evaluation. In this method, each job as
a whole is compared with other and this comparison of jobs goes on until all the jobs have been
evaluated and ranked. All jobs are ranked in the order of their importance from the simplest to
the hardest or from the highest to the lowest. The importance of order of job is judged in terms
of duties, responsibilities and demands on the job holder. The jobs are ranked according to “the
whole job” rather than a number of compensable factors.
The ranking of jobs in a University, based on Ranking Method, may be like this:

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The application of the Ranking Method involves the following procedure:

1. Analyse and describe jobs, bringing out those aspects which are to be used for purpose of
job comparison.

2. Identify bench-mark jobs (10 to 20 jobs, which include all major departments and functions).
The jobs may be the most and least important jobs, a job midway between the two extremes,
and others at the higher or lower intermediate points.

3. Rank all jobs in the organisation around the bench-mark jobs until all jobs are placed in their
rank order of importance.

4. Finally, divide all the ranked jobs into appropriate groups or classifications by considering
the common features of jobs such as similar duties, skills or training requirements. All the jobs
within a particular group or classification receive the same wage or range of rates.

Ranking method is appropriate for small-size organisations where jobs are simple and few. It
is also suitable for evaluating managerial jobs wherein job contents cannot be measured in
quantitative terms. Ranking method being simple one can be used in the initial stages of job
evaluation in an organisation.

Merits

Ranking method has the following merits:

1. It is the simplest method.

2. It is quite economical to put it into effect.

3. It is less time consuming and involves little paper work.

Demerits

The method suffers from the following demerits:

1. The main demerit of the ranking method is that there are no definite standards of judgement
and also, there is no way of measuring the differences between jobs10.

2. It suffers from its sheer unmanageability when there are a large number of jobs.
➢ Grading Method

Grading method is also known as ‘classification method’. This method of job evaluation
was made popular by the U.S. Civil Service Commission. Under this method, job grades or
classes are established by an authorized body or committee appointed for this purpose. A job
grade is defined as a group of different jobs of similar difficulty or requiring similar skills to
perform them. Job grades are determined on the basis of information derived from job analysis.
The grades or classes are created by identifying some common denominator such as skills,
knowledge and responsibilities. The example of job grades may include, depending on the type
of jobs the organisation offers, skilled, unskilled, account clerk, clerk-cum-typist, steno typist,
office superintendent, laboratory assistant and so on.

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Once the grades are established, each job is then placed into its appropriate grade or
class depending on how well its characteristics fit in a grade. In this way, a series of job grades
is created. Then, different wage/salary rate is fixed for each grade.

Merits

The main merits of grading method of job evaluation are:

1. This method is easy to understand and simple to operate.

2. It is economical and, therefore, suitable for small organisations.

3. The grouping of jobs into classifications makes pay determination problems easy to
administer.

4. This method is useful for Government jobs.

Demerits

The demerits of this method include:

1. The method suffers from personal bias of the committee members.

2. It cannot deal with complex jobs which will not fit neatly into one grade.

3. This method is rarely used in an industry.
➢ Points Rating

This is the most widely used method of job evaluation. Under this method, jobs are
broke down based on various identifiable factors such as skill, effort, training, knowledge,
hazards, responsibility, etc. Thereafter, points are allocated to each of these factors. Weights
are given to factors depending on their importance to perform the job. Points so allocated to
various factors of a job are then summed. Then, the jobs with similar total of points are placed
in similar pay grades. The sum of points gives an index of the relative significance of the jobs
that are rated.

The procedure involved in determining job points is as follows:

1. Determine the jobs to be evaluated. Jobs should cover all the major occupational and levels
of responsibility to be covered by the method.

2. Decide on the factors to be used in analyzing and evaluating the jobs. The number of factors
need to be restricted because too many factors result in an over-complex scheme with overlap
and duplication between factors.

3. Define the factors clearly in written. This is necessary to ensure that different job raters
interpret a particular factor in the same sense.

4. Determine degrees of each factor and assign point value to each degree.

5. Point values are assigned to different degrees on the basis of arithmetic progression.

6. Finally, money values are assigned to points. For this purpose, points are added to give the
total value of a job. Its value is then translated into money terms with a predetermined formula.

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Merits
The method has the following merits:
1. It is the most comprehensive and accurate method of job evaluation.
2. Prejudice and human judgement are minimized, i.e. the system cannot be easily manipulated.
3. Being the systematic method, workers of the organisation favor this method.
4. The scales developed in this method can be used for long time.
5. Jobs can be easily placed in distinct categories.
Demerits
The drawbacks of the method are:
1. It is both time-consuming and expensive method.
2. It is difficult to understand for an average worker.
3. A lot of clerical work is involved in recording rating scales.
4. It is not suitable for managerial jobs wherein the work content is not measurable in
quantitative terms.
➢ Factor Comparison Method

This method is a combination of both ranking and point methods in the sense that it
rates jobs by comparing them and makes analysis by breaking jobs into compensable factors.
This system is usually used to evaluate white collar, professional and managerial positions. The
mechanism for evaluating jobs under this method involves the following steps:
1. First of all, the key or benchmark jobs are selected as standards. The key jobs selected should
have standards contents, well accepted pay rates in the community, and should consist of a
representative cross-section of all jobs that are being evaluated-from the lowest to the highest
paid job, from the most important to the least important—and cover the full range of
requirements of each factor, as agreed upon by a Committee representing workers and
management.
2. The factors common to all jobs are identified, selected and defined precisely. The common
factors to all jobs are usually five, viz., mental requirements, physical requirements, skill
requirements, working conditions and responsibility.
3. Once the key jobs are identified and also the common factors are chosen, the key jobs are,
then, ranked in terms of the selected common factors.
4. The next step is to determine a fair and equitable base rate (usually expressed on an hourly
basis) and, then, allocate this base rate among the five common factors as mentioned earlier.
Following is a specimen of base rate and its allocation scheme:

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5. The final step in factor comparison method is to compare and evaluate the remaining jobs in
the organisation. To illustrate, a ‘toolmaker’ job is to be evaluated. After comparison, it is
found that its skill is similar to electrician (5), mental requirements to welder (10) Physical
requirements to again electrician (12), working conditions to mechanist (24) and responsibility
also to mechanist (3). Thus, the wage rate for the job of toolmaker will be Rs. 54 (Rs.5 + Rs.
10 + Rs.12 + Rs.24 + Rs.3).
Merits:
This method enjoys the following merits:
1. It is more objective method of job evaluation.
2. The method is flexible as there is no upper limit on the rating of a factor.
3. It is fairly easy method to explain to employees.
4. The use of limited number of factors (usually five) ensures less chances of overlapping and
over-weighting of factors.
5. It facilitates determining the relative worth of different jobs.
Demerits:
The method, however, suffers from the following drawbacks:
1. It is expensive and time-consuming method.
2. Using the same five factors for evaluating jobs may not always be appropriate because jobs
differ across and within organisations.
3. It is difficult to understand and operate.

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CHAPTER – 15

WAGE AND SALARY

Meaning
Workers render their services for wages and salary, also called, ‘compensation’. In

other words, workers exchange their work for compensation. The term compensation is an
embracing word that comprises cash payments, which in addition to wages and salary includes
pensions, bonus and shared profits.

OBJECTIVES OF WAGE AND SALARY

The main objective of wage and salary administration is to establish and maintain an
equitable wage and salary system. This is so because only a properly developed compensation
system enables an employer to attract, obtain, retain and motivate people of required calibre
and qualification in his/her organisation. These objectives can be seen in more orderly manner
from the point of view of the organisation, its individual employees and collectively. There are
outlined and discussed as follows:
➢ Organizational Objectives

The compensation system should be duly aligned with the organisatonal need and
should also be flexible enough to modification in response to change. Accordingly, the
objectives of system should be to:

• Enable an organisation to have the quantity and quality of staff it requires.
• Retain the employees in the organisation.
• Motivate employees for good performance for further improvement in performance.
• Maintain equity and fairness in compensation for similar jobs.
• Achieve flexibility in the system to accommodate organisatonal changes as and when

these take place.
• Make the system cost-effective.
➢ Individual Objectives

From individual employee’s point of view, the compensation system should have the
following objectives:

• Ensures a fair compensation.
• Provides compensation according to employee’s worth.
• Avoids the chances of favoritism from creeping in when wage rates are assigned.
• Enhances employee morale and motivation.
➢ Collective Objectives

The objectives include:

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• Compensation in ahead of inflation.
• Matching with market rates.
• Increase in compensation reflecting increase in the prosperity of the company.
• Compensation system free from management discretion.

Beach has listed the five objectives of wage and salary:
• To recruit persons for a firm
• To control pay-rolls
• To satisfy people, reduce the incidence of turnover, grievances, and frictions.
• To motivate people to perform better
• To maintain a good public image.

PRINCIPLES OF WAGE AND SALARY

The main principles that govern wage and salary fixation are three:

1. External Equity

2. Internal Equity

3. Individual Worth.
➢ External Equity

This principle acknowledges that factors/variables external to organisation influence
levels of compensation in an organisation. These variables are such as demand and supply of
labour, the market rate, etc. If these variables are not kept into consideration while fixing wage
and salary levels, these may be insufficient to attract and retain employees in the organisation.

The principles of external equity ensure that jobs are fairly compensated in comparison
to similar jobs in the labour market.
➢ Internal Equity

Organisations have various jobs which are relative in value term. In other words, the
values of various jobs in an organisation are comparative. Within your own Department, pay
levels of the teachers (Professor, Reader, Lecturer) are different as per the perceived or real
differences between the value of jobs they perform. This relative worth of jobs is ascertained
by job evaluation, as we have seen in the previous chapter 14. Thus, an ideal compensation
system should establish and maintain appropriate differentials based on relative values of jobs.
In other words, the compensation system should ensure that more difficult jobs should be paid
more.
➢ Individual Worth

According to this principle, an individual should be paid as per his/her performance.
Thus, the compensation system, as far as possible, enables the individual to be rewarded
according to his contribution to organisation.

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Alternatively speaking, this principle ensures that each individual’s pay is fair in
comparison to others doing the same/similar jobs, i.e., ‘equal pay for equal work’.

In sum and substance, a sound compensation system should encompass factors like
adequacy of wages, social balance, supply and demand, fair comparison, equal pay for equal
work and work measurement.

COMPONENTS OF WAGE AND SALARY

While the objective of wage and salary administration, as mentioned in the beginning
of the chapter, is as simple, the process is not so easy and simple. In fact, it is a complex one,
especially since the ‘fair wages’ is a relative term viewed differently by different parties. For
example, while the employer will be concerned primarily with productivity, the employee’s
concern will be on wage rates that can offset the effects of inflation.

Based on Belcher’s classification of the compensation management, we have for the
purposes of our analysis considered two broad components of wage and salary administration.
These are:

• Determination of Wages and Salary
• Wages/Salary Structures

Both are now discussed one by one.

Determination of Wages and Salary

The starting point of wage and salary administration is the determination of wage and
salary levels. The wage/salary of employee in the organized sector in India is determined by a
variety of factors. These all factors are classified into four categories:

1. Wage Enactments (both Central and State Governments)

2. Prevalent Wage Rates.

3. Influence of Trade Unions.

4. Corporate Philosophy on Wages

Lantham has listed the following five factors that have a bearing on the formulation of wage/
salary levels:

1. Cost of living

2. Productivity

3. Prevailing wage rates

4. Ability to pay

5. Attraction and retention of employees.
• Cost of Living: Workers need to be paid compensation adequate to maintain an acceptable

level of living. The concepts of ‘minimum wage’ is based on the same justification.
However, wage/salary fixed once becomes inadequate to maintain the required level of
living due to inflationary spirals increasing the cost of living. Thus, the increase in cost of

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living calls for fixation of compensation accordingly. In order to offset the increased cost
of living, compensation is, then, fixed by increasing dearness allowance based on the cost
of living index.

• Productivity: Productivity can be expressed as production in relation to time unit.
Productivity increases production and decreases cost. As per the principle of payment by
performance, if the productivity of the worker is high, wage/salary rates will be high.
Conversely, if productivity of the worker is low, wage/salary rates tend to be low. Thus,
any shift in productivity has its impact on the wage level of the worker. Here, it is important
to mention that productivity increases are not due to the worker efforts alone. It may also
be due to better organisation and management, technological development, etc. The results
(profits) of increased productivity available to the employer need to be distributed in a
manner acceptable to the employees, the management, and the customers. However, there
has not been any productivity index that can measure only the productivity of a specific
factor including worker. Though theoretically sound criterion, it is operationally
complicated one.

• Prevailing Wage Rate: In order to attract and retain workers in the organisation,
wage/salary rates are fixed as per the prevailing rate in the region. This is also called the
‘going wage rate’ which is the most widely used criterion of wage/salary fixation. The
prevailing wage rate is, thus, fixed based on inter-firm wage comparisons. This is because
of several reasons. First, various government laws and judicial decisions make the adoption
of uniform wage rates compulsory. Second, trade unions accept and encourage this system
to ensure equal pay for equal work across the industries and regions. Third, all firms
functionally related in an industry require essentially the same quality of employees with
the same or about the same skills and experience. However, if wage/salary are not paid to
the employees what are paid by the other organisations (competitors), it will be difficult for
organisation to attract and retain a sufficient quantity and quality of employees.

• Ability to Pay: This criterion of wage/salary fixation is based on the dictum, “Cut your
coat according to the size of your cloth”. Following this, organisations do also fix wages
what they can afford to pay. The reason being an increased wage cost, better call it ‘wages
beyond one’s affording capacity’, cannot enable the organisation to sustain in a competitive
environment especially in the long run. Such wage cost only pushes up unit cost, thus,
cutting into the market share of the organisation. In such a case, organisations resort to cost
cutting and axe may fall on wage and salary levels. It is mainly the ability to pay criterion,
organisations which earn high profits pay higher wages as compared to those whose profits
are low or are incurring losses. Wage differentials between organisations are due to the
same reason, i.e. ability to pay.

• Attraction and Retention of Employees: The quantity and quality of employees an
organisation needs to employ also determines the levels of wages and salary fixed. For
example, wage/salary rates will be fixed at a higher level if organisation needs quality
people to be employed and retained. If the availability of jobs is scarce, the wages and
salary levels will be low. Wage levels may also be low even lower than the prevailing wage
rate if the firm’s economic situation is such that it cannot afford to pay the prevailing wage
rate in the industry or region. According to Monappa, the following factors determine the
level of wage/salary in the organized sector of the Indian industry.

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Wage/Salary Structure
Jobs offered by an organisation vary in terms of their values. Job value is ascertained

by job evaluation. Job evaluation is a systematic method of appraising the value of each job in
relation to other jobs in an organisation. We have already discussed in detail the methods of
job evaluation in the previous Chapter 14 on ‘Job Evaluation’.

Once all jobs are assigned values, then these are placed in a grade, or say, a rate per job.
These grades are arranged in a hierarchical order starting with lower to higher jobs. Thus,
wage/salary structure consists of the various salary grades and their different levels of single
jobs or group of jobs. This will be more clear from the following salary/pay structure of
teachers at present in a University:

Professor: Rs. 16,400–450–20,900–500–22,400
Reader: Rs. 12,000–420–18,300
Lecturer: Rs. 8,000–275–13,500
• How to devise a salary structure?
Like wage and salary fixation discussed earlier, there might be so many ways to devise a salary
structure. However, the simplest way to devise a salary structure is outlined here as follows:
1. Ascertain and establish, on the basis of market rate surveys and studies of existing salary
structures, the most senior and most junior jobs to be covered by the salary structure.

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2. Based on above, draw up salary grade structure ranging from the lowest limit to the highest
limit along with the width of salary gaps between jobs and the size of overlap between different
grades.

3. Make a job evaluation exercise. This can be done by any method of job evaluation. However,
job evaluation by means of a simple ranking scheme is preferable.

4. Procure market rate data keeping in mind that there is likely to be a range of market rates in
existence in the labour market.

5. Finally, based on the results of job evaluation and market rate surveys and studies, arrange
all jobs in the grades in a hierarchical order. In fact, it is the stage where a good judgement is
required.

There are two more elements involved in a salary structure:

1. Salary Progression

2. Broad banding

A brief description of these follows:

• Salary Progression. As the term itself implies, it refers to a sequence of progress in salary.
In other words, salary progression relates to increases in salary to merit. It relates
compensation/salary to performance on a consistent and equitable manner. The procedure
of salary progression is characterized by the following key features:

(i) The salary grades are divided into defined areas or zones. An employee will pass through
these stages or zones as he/she progresses in experience. For example, a Professor in a
University starts with a basic pay of Rs. 16,400 and touches Rs. 20,900 after 10 years’
experience and Rs. 22,400 after 13 years’ experience.

(ii) There is an incremental rate at which an employee progresses along with the salary
grade. In the above example, the incremental system consists of a rate of Rs. 450 per year
during the first 10 years’ period and Rs. 500 per year during the last 03 years’ period of
experience.

• Broad banding. Broad banding means a process reducing salary grades to a limited one.
In other words, broad banding means collapsing salary grades and ranges into a few broad
and wide levels or ‘bands’ each consisting of a relatively wide range of jobs and salary
levels. As mentioned earlier, in a University, for example, all teaching jobs are reduced to
three broad grades, namely, Professor, Reader and Lecturer. This broad banding of grades
is more popular in industrial organisations employing huge number of employees. For
example, Toyota has broad banded its all jobs into just five grades or bands. Similarly,
General Electricals has been able to restructure its all jobs into three job classifications,
viz., Division I: Production Members, Division II: General. Maintenance Team Managers;
and Division III: All Tie and Dye Members.

The main advantage of broad banding is that it injects greater flexibility into employee
compensation. It is especially sensible where firms flatten their hierarchies and organize
around self-managing teams.

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CHAPTER – 16

INCENTIVES AND BENEFITS

INCENTIVES

Meaning

What is incentive? In simple words, incentive is anything that attracts a worker and
stimulates him to work. The incentives can be financial and non-financial. Both types of
incentives play important role under different conditions. For example, financial incentives are
considered to be more valued under the work conditions where wages are at low levels. On the
contrary, non-financial incentives are more preferable where wage levels are high and the rate
of tax is progressive. However, a review of research evidences indicates that there is a shift in
emphasis in the demands of employees and their unions from financial to non-financial
benefits.

Definition
According to the National Commission on Labour, “Wage incentives are extra financial

motivation. They are designed to stimulate human effort by rewarding the person, over and
above the time rated remuneration, for improvements in the present or targeted results”.

Types of Incentive Schemes

The various types of incentives are classified into two broad categories: financial and
nonfinancial.

Here, we are concerned with financial incentives only. Financial incentives may further be
classified as individual incentives and group incentives. Both are discussed here one by one.
➢ Individual Incentive (PBR) Schemes

Under this plan, employees are paid on the basis of results13. The chief incentive plans
included in this category are discussed in seriatim.
• Taylor’s Differential Piece Rate Plan: This plan was developed by F. W. Taylor, the

father of scientific management. Under this 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 on the basis of
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 Premium Plan: This plan, originated by F. A. Halsey, an American engineer, 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.

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• Rowan Premium Plan: This plan was developed by D. Rowan in 1901. 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.

• Emerson 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% efficiency. 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 and Bonus Plan: This plan is devised by H. L. Gantt. 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 upto 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.

The above mentioned various incentive schemes indicate that the incentive may vary along
with variation in earning with changes in performance or output. Thus, based on linkages
between performance and incentive, the various incentive schemes (PBR) may be classified
into the four types as follows:

1. Incentives in the same proportion as performance.

2. Incentives varying proportionately less than performance.

3. Incentives varying in proportionately more than performance.

4. Incentives varying in proportions that vary with levels of performance.

The first of the above-mentioned schemes is called the straight proportional scheme while
the rest are nomenclature as differential or geared incentive scheme.

An employee’s performance, or say, output is not exclusively due to his own efforts but is
influenced by some other factors also. For example, quality of raw material and
equipment's, their costs, timeliness of completion of job, etc. do also matter and count in
one’s performance. Therefore, one’s performance must be measured in a holistic sense,
taking all the factors into account. It has also been felt, over the years, that incentives should
be given on the basis of performance measured over an extended period of time (e.g. week,
fortnight, month or longer) rather than by hour or day. The underlying rationale is to sustain
higher levels of productivity over a period of time and also maintain a measure of stability
of employee performance and earnings. But, the duration between performance duration
and incentive, i.e. reward should not be unduly lengthened, otherwise it may dampen
employee motivation. Therefore, it has been suggested that incentives should be given to
the employees at least on a monthly basis.

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➢ Group Incentive Schemes

The incentive schemes discussed earlier can be applied on a group basis also. Group incentive
schemes are appropriate where jobs are interdependent. It is difficult to meaningfully measure
individual performance and group pressures affect the performance of the members of the
group. The chief group incentive schemes are discussed here.

• Profit-sharing: The concept of profit-sharing emerged towards the end of the nineteenth
century. Profit-sharing, as the name itself suggests, is sharing of profit of organisation
among employees. The International Co-operative Congress15 held in Paris in 1889
considered the issue of profit-sharing and defined it as “an agreement (formal or informal)
freely entered into by which an employee receives a share fixed in advance of the profits”.
The basic rationale behind profit-sharing is that the organisatonal profit is an outcome of
the co-operative efforts of various parties, therefore, employees should also share in profits
as shareholders share by getting dividend on their investment, i.e. share capital. The very
purpose of introducing profit-sharing is to strengthen the loyalty of employees to the
organisation. Thus, profit-sharing is regarded as a stepping stone to industrial democracy.

Both the share(percentage) of profit to be shared by employees and mechanism for its
distribution are determined in advance and also made known to the employees. In order to
be eligible to participate in profit-sharing. An employee needs to serve for a certain number
of years and, thus, earn some seniority. As regards the forms of profit-sharing, Metzger16
has classified these into three categories, namely, (i) current, (ii) deferred and (iii)
combination.

(i) Current: Under this form, profits are paid to the employees in cash or by cheque or in
the form of stock option immediately after the determination of profits.

(ii) Deferred: Profits are credited to employees’ accounts to be paid at the time of
retirement or at a time of his dissociation from organisation due to reasons like disability,
death, severance, withdrawal from employment, etc.

(iii) Combination: In this case, a part of employee share of profit is paid in cash or cheque
or stock and the remaining part is deferred and credited to his/her account.

Employees receive their share in the organisatonal profit in the form of bonus. In India, the
employee bonus is governed by the payment of Bonus Act, 1965.

The major apprehensions expressed against profit-sharing is that management may dress
up profit figures, as is often done for tax evasion purposes, and deprive employees of their
shares in profit. It is also commented that profit-sharing, being a long-term scheme, does
not work as incentive due to the absence of immediate feedback about the efforts and
rewards.

• Co-partnership: In a way, co-partnership is an improvement over profit-sharing. In this
scheme, employees also participate in the equity capital of a company. They can have
shares either on the basis of cash payment or in lieu of other incentives payable in cash like
bonus. Thus, under copartner ship scheme, employees become shareholders also by having
company shares. Now, employees participate in both —profits and management of the
company. The finer points of this scheme are that it recognizes the dignity of labour and
also of a partner in the business. This would, in turn, develop a sense of belongingness

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among the employees and encourage them to contribute their best for the development of
the organisation.

• Scanlon Plan: The Scanlon plan was developed by Joseph N. Scanlon, a Lecturer at the
Massachusetts Institute of Technology in USA in 1937. The plan is essentially a suggestion
scheme designed to involve the workers in making suggestions for reducing the cost of
operation and improving working methods and sharing in the gains of increased
productivity.

• The plan is characterized by two basic features. First, both employees and managers can
participate in the plan by submitting their suggestions for cost-cutting methods. Second,
increase in efficiency on account of cost-cutting is shared by the employees of the unit.

• The Scanlon plan, wherever adopted, has been successful to encourage a sense of
partnership among employees, improved employee-employer management relations, and
increased motivation to work16.

• The criticism labelled against group incentive is that the incentive benefits being similar to
all members of the group, the best performers may loose incentive. However, this can be
overcome if group incentive scheme generates peer-level pressure for superior performance
and also reduces the need for supervision. Stability in group may be a necessary condition
to make the group incentive scheme successful.

• As regards the ultimate impact of incentives on organisatonal performance, the research
studies conducted in India report that incentive schemes have a positive impact on
productivity, labour cost, and industrial relations. It is concluded that “money” has a
“salutary” impact on production.

BENEFITS

Meaning

In simple words, benefits means membership-based non-financial rewards given to
employees. What is benefit? The term ‘benefit’ has been in vogue in Indian industry since long.
This is called by various names such as fringe benefits, wage supplements, supplementary
compensation, nonwage benefits, indirect benefits, hidden payment, etc. However, the term
‘fringe benefits’ has become a catch word and has been more common in practice. Here, the
two terms ’benefits’ and ‘fringe benefits’ have been taken as interchangeable and synonymous.

Definition

Cockman describes employee benefits as “those benefits which are supplied by an
employer to or for the benefits of an employee, and which are not in the form of wages, salaries,
and time rated payments”.

Types of Benefits

Various benefits provided to the employees may be classified on different bases. One
classification may be in terms of statutory and voluntary benefits. Various benefits provided to
employees under these two categories are discussed hereunder.

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Statutory Benefits. These benefits are mandatory provided under the provisions of various
Acts as discussed below:

(i) The Factories Act, 1948: This Act covers areas including health, welfare, safety, working
hours, leave with wages, etc. The various benefits provided under the Act include: (i) No
worker (adult) shall be required to work in a factory for more than 48 hours in any week (section
51); (ii) The working hours shall be kept restricted to 9 hours on any day (Section 54); (iii) An
adult worker shall have weekly paid holidays, preferably Sunday; (iv) A worker deprived of
weekly holidays, is eligible for compensatory holiday of the same number in the same month;
(v) Provision for double salary to the workers working during holidays; and (vi) Provision for
canteen employing more than 250 workers and creches where more than 30 women employees
are working.

(ii) The Mines Act, 1952: Apart from provision for canteen and creches, the Mines Act, 1952
specifies that there should be provision for first-aid boxes and first-aid rooms in mines
employing more than 150 workers and appointment of a welfare officer in mines employing
more than 500 workers.

(iii) The Plantation Labour: Act, 1951. The Act makes provision for canteen in plantations
employing 150 or more workers, educational arrangements in the estate for the children of
workers, where there are 25 workers’ children between the age of 6 and 12, and provision for
umbrellas, blankets, raincoats, or other such amenities for the protection of workers from rain
or cold as may be prescribed. Appointment of a Welfare Officer in Plantations employing 300
or more workers is also specified in the Act. Besides, workers who worked for 240 days during
a calendar year are eligible for paid vacation at the rate of one day for every 20 days worked in
case of adult works and at the rate of one day for every 15 days worked in case of child workers.

(iv) The Motor Transport Workers Act, 1961: Under this Act also, provisions for canteen,
rest rooms, uniform, raincoats, medical facilities, etc., are made. First-aid facilities equipped
with the prescribed contents are to be provided in every transport vehicle.

(v) Employees’ State Insurance Act, 1948: This Act deals comprehensively about the health
benefits to be provided to the employees working in factories, establishments running with
power and employing 20 or more workers. The main benefits provided under this Act include
sickness benefit for 56 days in a year, maternity benefit, disablement benefit, dependent's
benefit, medical benefit, etc.

(vi) Workmen’s Compensation Act, 1923: In addition to safety and health measures,
provision for the payment of compensation has also been made under this Act. The Act covers
the employees whose wages are less than Rs. 500 per month. Amount of compensation depends
on nature of injury and the monthly wages of employee. In case of death of the employee, his
dependents are eligible for compensation.

• Voluntary Benefits: Voluntary benefits are determined and provided by the individual
organisations at their own. These benefits may include educational facilities, transportation
facilities, housing facilities, recreational facilities, consumer cooperative societies,
subsidized lunch/refreshment, child care, etc. Since providing these facilities is obligatory
on the part of employers, hence the level and degree of facilities provided vary across the
organisations.

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U.S. Chamber of Commerce has classified employee benefits into five categories as follows:
1. Legally - required payments:
(i) Old age pension
(ii) Disability pension
(iii) Unemployment insurance
(iv) Worker’s compensation
2. Contingent and deferred benefits:
(i) Pension Plans
(ii) Group life insurance
(iii) Maternity leave
3. Payment for time not worked:
(i) Vacation
(ii) Holidays
(iii) Voting Pay Allowance
4. Paid rest periods:
(i) Waste-up time
(ii) Lunch periods.
5. Christmas Bonus.
Before we close this chapter, one last mention how to make incentives and benefits more
effective.
MAKING INCENTIVES AND BENEFITS MORE EFFECTIVE
Evidences indicate that the employee incentives and benefits, however, could not make
expected headway in altruistically fulfilling their basic rationale due to more than one reasons.
Hence, the need for making these more effective. Following are some measures that may help
make incentives and benefits programme's more effective.
1. Both incentives and benefits should be treated as an instrument in human resource
management.
2. These benefits should be aligned with the basic requirements of the workers. Benefits should
also be comparable with benefits provided by other organisations both at the national and
international levels.
3. The package should be flexible one as per the requirements of a given perspective. That
inflexibility breeds stagnation needs to be recognized.
4. Employees should be involved in the process of devising incentive and benefit packages.

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5. Last but no means the least, additional incentive and benefit be introduced after a thorough
evaluation of the same. It is better not to provide any benefit than to provide a poorly
administered one.

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CHAPTER – 17
WORKER’S PARTICIPATION IN MANAGEMENT (WPM)

Meaning

Like other behavioural terms, WPM means different things to different people
depending upon their objectives and expectations. Thus, WPM is an elastic concept. For
example, for management it is a joint consultation prior to decision making, for workers it
means co-determination, for trade unions it is the harbinger of a new order of social relationship
and a new set of power equation within organisations, while for government it is an association
of labour with management without the final authority or responsibility in decision making.

Definition
According to Keith Davis, “Workers’ participation refers to the mental and emotional

involvement of a person in a group situation which encourages him to contribute to group goals
and share in responsibility of achieving them”.

CHARACTERISTICS OF WPM

The following are the main characteristics of WPM:
1. Participation implies practices which increase the scope for employees’ share of influence
in decision-making process with the assumption of responsibility.

2. Participation presupposes willing acceptance of responsibility by workers.

3. Workers participate in management not as individuals but as a group through their
representatives.
4. Worker’s participation in management differs from collective bargaining in the sense that
while the former is based on mutual trust, information sharing and mutual problem solving, the
latter is essentially based on power play, pressure tactics and negotiations.
5. The basic rationale for worker’s participation in management is that workers invest their
labour and tie their fates to their place of work. Thus, they contribute to the outcomes of
organisation. Hence, they have a legitimate right to share in decision-making activities of
organisation.

OBJECTIVES OF WPM

The objectives of WPM are closely netted to the rationable for WPM. Accordingly, the
objectives of WPM vary from country to country depending on their levels of socio-economic
development, political philosophies, industrial relations scenes, and attitude of the working
class. To quote, the objective of WPM is to co-determine at the various levels of enterprises in
Germany, assign the final authority to workers over all matters relating to an undertaking in
Yugoslavia, promote good communication and understanding between labour and management
on the issues of business administration and production in Japan, and enable work-force to
influence the working of industries in China4, for example.

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In India, the objective of the government in advocating for workers’ participation in
management, as stated in the Industrial Policy Resolution 1956, is a part of its overall
endeavour to create a socialist society, wherein the sharing of a part of the managerial powers
by workers is considered necessary.

The objective of WPM, as envisaged in the Second Five Year Plan of India is to ensure:

1. Increase in productivity for the benefit of all concerned to an enterprise, i.e., the employer,
the employees and the community at large.
2. Satisfaction of worker’s urge for self-expression in the matters of enterprise management.

3. Making employees better understood of their roles in the organisation.

In ultimate sense, the objective of WPM in India is to achieve organisatonal effectiveness and
the satisfaction of the employees. Accordingly, the objectives of WPM in India are to:

1. Promote mutual understanding between management and workers, i.e., industrial harmony.

2. Establish and encourage good communication system at all levels.

3. Create and promote a sense of belongingness among workers.

4. Help handle resistance to change.

5. Induce a sense among workers to contribute their best for the cause of organisation.

6. Create a sense of commitment to decisions to which they were a party

Levels of Participation: Having known the objectives of WPM, the question then is to what
extent workers can participate in decision-making process. In other words, it is important to
know the extents/levels of co-determination in an organisation. Viewed from this angle,
Mhetras5, has suggested five levels of workers’ participation ranging from the minimum to the
maximum. Since these levels of participation influence the process and quality of decision
making in an organisation. We are, therefore, highlighting here these levels briefly ranking
them from the minimum to the maximum level of participation.
• Informative Participation: This refers to management’s information sharing with workers

on such items those are concerned with workers. Balance Sheet, production, economic
conditions of the plants, etc., are the examples of such items. It is important to note that
here workers have no right of close scrutiny of the information provided and management
has its prerogative to make decisions on issues concerned with workers.
• Consultative Participation: In this type of participation, workers are consulted in those
matters which relate to them. Here, the role of workers is restricted to give their views only.
However, the acceptance and non-acceptance of these views depends on management.
Nonetheless, it provides an opportunity to the workers to express their views on matters
involving their interest. Associative Participation: Here, the role of the workers’ council is
not just advisory unlike. In a way, this is an advanced and improved form of consultative
participation. Now, the management is under a moral obligation to acknowledge, accept
and implement the unanimous decision of the council.

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• Administrative Participation: In the administrative participation, decisions already taken
are implemented by the workers. Compared to the former three levels of participation, the
degree of sharing authority and responsibility by the workers is definitely more in this
participation. Decisive Participation: Here, the decisions are taken jointly by the
management and the workers of an organisation. In fact, this is the ultimate level of
workers’ participation in management

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CHAPTER – 18

EMPLOYEE DISCIPLINE

Meaning

In simple words, the word discipline connotes orderly behaviour by the
members/employees. In other words, discipline implies behaving in a desired manner. By that
we mean that employees confirm to the rules and regulations framed by the organisation for an
acceptable behaviour.

Definition
According to Richard D. Calhoon, “Discipline may be considered as a force that

prompts individuals or groups to observe the rules, regulations and procedures which are
deemed to be necessary for the effective functioning of an organisation”.

FEATURES OR CHARACTERISTICS OF DISCIPLINE
1. Discipline is self-discipline: It refers to one’s efforts at self-control to conform to
organisatonal rules, regulations and procedures which have been established to ensure the
successful attainment of organisatonal goals.

2. It is a negative approach: It means discipline encourages people to undertake some
activities, on the one hand, and restrains them from undertaking others, on the other.

3. It is a punitive approach: It means that discipline also imposes penalty or punishment if
the rules and regulations framed by the organisation are not obeyed or ignored by the members.
Punishment is imposed not to change past behaviour but to prevent its recurrence in future4.

OBJECTIVES OF DISCIPLINE

The objectives of discipline are to:
1. Motivate an employee to comply with the company’s performance standards: An
employee receives discipline after failing to meet some obligation of job. The failure could be
either directly related to the tasks performed by the employee or ignoring rules and regulations
that define proper conduct at work.

2. Maintain respect and trust between the supervisor and employee: Discipline if not
properly administered can create problems like low morale, resentment, and ill will between
the supervisor and employee. In such case, improvement in employee’s behaviour, if any, will
be relatively short-lived and the supervisor will need to discipline the employee again and
again. On the contrary, properly administered discipline will not only improve employee
behaviour but will also minimize future disciplinary problems through good relationship
between the supervisor and the employee.

3. Improve the performance of the employee: Discipline for poor task performance should
not be applied while employees are on training or learning the job. Nor should employees be
disciplined for problems beyond their control, for example, failure to meet output standards

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due to the lack of raw materials5. Yes, discipline should be exercised when employees are
found responsible for unsatisfactory performance.

4. Increase the morale and working efficiency of the employees.

5. Foster industrial peace which is the very foundation of industrial democracy.

TYPES OF DISCIPLINE

The need for disciplinary action is felt everywhere-be it at home, in the school,
university or an organisation whenever one breaks the rules. Remember, either your own or
some other children’s behaviour in the shopping centre. You would have observed the various
ways the parents use to discipline their rambunctious children in the shopping centers. The
three prominent ways are discussed below:

1. Some children well understand the proper behaviour expected of them in the shopping center
and behave accordingly. They remain all the time stick to their parents. They neither touch,
pull, push any item nor demand instantly for ice cream, toy, etc. Obviously, such children do
not need to be disciplined. They gracefully accept no for an answer. Perhaps you were one of
them.

2. You might have seen other children also treating the supermarket a place for fun and play,
screaming and hollering, running up and down, here and there, and, thus, creating trouble for
everyone concerned. Faced and annoyed with such behaviour, some parents react angrily,
subjecting the child publicly to verbal and physical abuse. These parents by shaking their
fingers and fits try to sternly warn the sobbing child repeated rowdiness will result in further
stern punishments. The child has, thus, been struck with the fear of punishment, at least for the
time being till in the shopping center.

3. Like your parents, other parents apply a different approach to discipline their children
showing such inappropriate behaviour. They take calmly their child aside and clearly explain
what type of behaviour is expected of them and how their such misconduct creates problems
and inconvenience to other customers and shopkeepers. Remember, they do not react to their
children with charged emotions, threats, or abuse but speak to the children with love and
respect. Result is both parents and their children walk away with a mutual understanding about
what’s right and what’s wrong.

Just as parents apply disciplinary techniques to correct misconduct of their children at the
shopping centres, so are applied by managers in organisations to discipline their employees.
The disciplinary actions taken by managers are broadly classified into two types:

Types of Discipline

Action applied by managers.

1. Positive Discipline

2. Negative Discipline

These are discussed one by one.

• Positive Discipline. This is also called ‘self-imposed discipline’. It involves creation of an
atmosphere in the organisation through rewards, appreciation, incentive payment,

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promotion, constructive support etc. to motivate employees to work willingly to
accomplish the set goals. In essence, positive discipline emphasises the concept of self-
discipline or self-control. Thus, it reduces the need for personal supervision to make
employees conform to organisatonal rules, regulations, procedures and standards.
According to William R. Spriegel7, “Positive discipline does not replace reason but applies
reason to the achievement of a common objective. Positive discipline does not restrict the
individual but enables him to have a greater freedom in that he enjoys a greater degree of
self-expression in striving to achieve the group objective, which he identifies as his own”.

Evidences suggest that self-disciplined person tends to be a better worker than one who is
not8, self- discipline, when developed from within, leads to building up morale and esprit
de corps that is the desideratum of the time to run organisations successfully.

• Negative Discipline. It is also called ‘enforced discipline’. In case of negative discipline,
employees are forced to obey orders and abide by rules and regulations that have been laid
down, failing which penalties and punishment would be imposed on them. Thus, the
objective of using punitive or coercive discipline is to ensure that employees do not violate
rules and regulations formed by the organisation. In other words, the purpose of negative
discipline is to scare other employees and to ensure that they do not indulge in undesirable
behaviour. It is worth mentioning here that negative discipline cannot eliminate the
undesirable behaviour of the employees, but can merely suppress it.

Punishment is not pleasant. It causes resentment and hostility on the part of employees.
That is why this kind of discipline results in only the minimum standards of performance
on the part of employees. This is precisely the reason why it is rarely used in the
organisations. Because punitive discipline leads to resentment, it needs to be exercised in a
progressive, sequential and chronological manner. A progressive system of discipline
generally contains five steps, viz., an oral reprimand, a written reprimand, a second written
warning, temporary suspension and dismissal or discharge.

PROCEDURE OF DISCIPLINARY ACTION

Positive discipline is not just a simple act of supervisor discussing performance
problems with an employee. Rather, it is a procedure comprising a number of steps. Important
steps in that procedure are:

1. Location of Responsibility

2. Define Performance Expectations

3. Communication of Policy, Procedures and Rules.

4. Collection of Performance Data

5. Framing Charges and Intimation

6. Consideration of Explanation

7. Awarding Punishment

8. Follow up

These are briefly discussed in seriatim.

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1. Location of Responsibility: The question: who should administer discipline is a subject to
some debate. In one view, the responsibility for administering discipline should fall on the
shoulders of immediate supervisor of the employee. The reason being the immediate supervisor
is responsible for employee’s output. He/she also knows better about employee’s performance
problems. The contrary opinion expressed in this regard is that discipline should be
administered on an equitable and uniform basis by the H R department. However, this approach
has its drawbacks: first, the H R department must spend inordinate amounts of time on
disciplinary matters, second, the supervisor will lose some control over subordinates.

In order to overcome the problem of where to place the responsibility for discipline, the
supervisor should be entrusted with the responsibility to administer less severe forms of
discipline, such as an oral warning or a written notice. For serious situations involving
discharge or suspension, the supervisor should consult with H R representatives in order to
administer such disciplines.

2. Define Performance Expectations: A core ingredient in every disciplinary procedure to
clearly define the standard of behaviour that management expects from its employees.
Employee standards of performance or behaviour must be in conformity with the organisatonal
objectives. Obviously, these standards need to be revised along with change in organisatonal
goals and objectives. Many organisations provide their employees with written principles of
behaviour in the form of ‘Employee Manuals.’

3. Communication of Policy, Procedures and Rules: In order to maintain satisfactory levels
of employee performance, the disciplinary policy, procedures and rules formulated by the
organisation need to be clearly communicated to the employees. Employees about their
expected behavior should be communicated through employee handbooks/manuals, orientation
programmes, rules and regulations distributed in writing to employees or posted on bulletin
boards.

4. Collection of Performance Data: Before an employee is disciplined, it is of the utmost
importance to prove that some rule, regulation or standard is violated and, thus, unsatisfactory
performance has taken place. Here, one problem is while collection of some performance data
is easy, others are difficult. For example, an employee’s absence routinely recorded is rarely
subject to misinterpretation. However, there are some measures of performance such as
‘horseplay’, ‘insubordination’, and abusive language to supervisors’, which are somewhat
subjective and difficult to record.

Knowledge about concrete records of unsatisfactory performance of employees is
considered important for three reasons. First, the burden of proof lies with the manager or
employer. This is based on the common law that a person is innocent until proven guilty.
Second, an employee if convinced with proof about his unsatisfactory performance, is more
likely to improve his/her behavior or performance. Third, if the accused employee questions
the punishment awarded to him/her and the grievance reaches arbitration, the arbitrator may
ask the employer to supply the proof of employee misconduct or undesirable behavior.

5. Framing Charges and Intimation: Once the prima fascie case of employee’s misconduct
is established, the employer then issues a notice to employee stating charges labelled against
him. Such a notice is generally known as a ‘show cause notice’. In the notice, each charge

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needs to be clearly specified. Also, the accused employee should be given an opportunity to
explain his/her position.
6. Consideration of Explanation: On receipt of explanation from the accused employee, the
management may consider any one of the three types of options available to it:
1. If the accused employee confesses the charge labelled against him/her, the management can
dispense any further enquiry and award punishment to the accused employee.
2. In case the management is satisfied with the explanation given by the accused, the charged
against him/her can be cancelled and quashed.
3. If the management is not satisfied with the explanation given by the accused, the
management can proceed to further probing of the matter so that the fact is established and an
appropriate action can be taken.
7. Awarding Punishment: Once the unsatisfactory performance of the accused is well
established, the management then awards punishment to the accused employee. As already
mentioned, while awarding punishment, the management should follow a procedure of
‘progressive discipline’. The progressive discipline is characterized by either a penalty
commensurate with the offense or a series of increasing serious penalties for continued
unsatisfactory performance. These in that order are discussed in the subsequent section.
8. Follow Up: The last step in the procedure of positive discipline is follow-up. It means, once
the punishment is awarded, it is necessary to keep vigil whether the punishment has any
salutary effect on the behaviour and performance of the accused employee or not. If not the
corrective measures like corrective counseling should be introduced to improve the accused’s
behaviour.

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CHAPTER – 19

COLLECTIVE BARGAINING

Meaning

Collective bargaining is a process of negotiating between management and workers
represented by their representatives for determining mutually agreed terms and conditions of
work which protect the interest of both workers and the management.
Why is it called collective bargaining? It is called “collective” because both the employer and
the employee act collectively and not individually in arriving at an agreement. It is known as
‘bargaining’ because the process of reaching an agreement involves proposals and counter
proposals, offers and counter offers.

Definition
According to Dale Yoder, “Collective bargaining is essentially a process in which

employees act as a group in seeking to shape conditions and relationships in their employment”.

OBJECTIVES OF COLLECTIVE BARGAINING

The basic objective of collective bargaining is to arrive at an agreement between the
management and the employees determining mutually beneficial terms and conditions of
employment. This major objective of collective bargaining can be divided into the following
sub-objectives:

• To foster and maintain cordial and harmonious relations between the
employer/management and the employees.

• To protect the interests of both the employer and the employees.
• To keep the outside, i.e., the government interventions at bay.
• To promote industrial democracy.

Importance of collective bargaining

The need for and importance of collective bargaining is felt due to the advantages it offers to
an organisation. The chief ones are as follows:

1. Collective bargaining develops better understanding between the employer and the
employees: It provides a platform to the management and the employees to be at par on
negotiation table. As such, while the management gains a better and deep insight into the
problems and the aspirations of the employees, on the one hand, the employees do also become
better informed about the organisatonal problems and limitations, on the other. This, in turn,
develops better understanding between the two parties.

2. It promotes industrial democracy: Both the employer and the employees who best know
their problems, participate in the negotiation process. Such participation breeds the democratic
process in the organisation.

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